May 21st, 2024

WSP Global’s acquisition hunt far from over after ‘consolidation’ phase: CEO

By Christopher Reynolds, The Canadian Press on May 9, 2024.

The WSP Global Inc. logo is seen in this undated handout photo. THE CANADIAN PRESS/HO-WSP Global Inc. *MANDATORY CREDIT*

MONTREAL – WSP Global expects to continue its acquisition spree after snapping up several more companies in the first part of the year.

Since mid-March, the engineering firm has bought four consulting outfits in four countries – Canada, Finland, Spain and the United States – adding more than 800 employees to its roster as it opened “up the M&A valve again,” in the words of one analyst.

The purchases follow five other acquisitions since September 2022, when WSP absorbed U.K.-based John Wood Group’s environment and infrastructure business for US$1.81-billion.

The Montreal-based company’s headcount sat at 67,200 as of March 31, actually down by 100 from a year earlier despite the buying binge as WSP tries to “deliver more with less,” said CEO Alexandre L’Heureux. The decrease reflected the sale of the 1,400-person Louis Berger engineering and design firm in August, but the number has since surpassed 2023 levels, according to the company.

After a period of “consolidation” at the firm in 2023, the stage is set for more growth through its existing businesses as well as companies yet to be acquired, the chief executive said.

“All of the ingredients are now in place for us to continue to grow inorganically and organically,” L’Heureux said on a conference call Thursday.

“With M&A, we have a very good start,” he continued. “The pipeline is healthy, so I’m confident that the remainder of the year should bear fruits.”

Since 2012, the Montreal-based company then known as Genivar has ballooned from a boutique engineering firm with 15,000 workers to a global giant with a presence in about 60 countries.

Healthy organic revenue growth helped drive a 13 per cent jump in net earnings to $126.8 million in its first quarter, the company said. Its backlog grew three per cent to $14.23 billion.

“WSP continued its tradition of strong execution … with solid growth across all regions,” said National Bank analyst Maxim Sytchev in a note to investors.

“While some might point out flat Canadian backlog and a decline in Asia-Pacific, we remind investors that the infrastructure backdrop in Canada remains robust.”

In the United States – WSP’s biggest segment with net revenues topping $1 billion last quarter – the company recently signed a US$100-million program management contract for a 24-kilometre light rail extension in the Los Angeles area, L’Heureux said.

“Transportation, property and buildings, earth and environment – we are seeing growth in those sectors,” he said.

The company has previously highlighted as a business driver the spending tsunami unleashed by the U.S. government’s US$1-trillion infrastructure bill passed in November 2021.

China, where a declining real estate market continues to weigh on the economy, marked one of the few dark spots on WSP’s income statement. Organic growth in its Asia-Pacific segment was effectively flat year-over-year in the first quarter.

“Asia is challenging, there’s no doubt about that,” L’Heureux said. “It’s been challenging and I believe will continue to be challenging for some time.

“Having said all that, mainland China for us, it’s 300 people out of 67,000.”

Revenues for the quarter ended March 30 rose three per cent to $3.58 billion, beating analysts’ expectations by 30 per cent, according to LSEG Data & Analytics.

On an adjusted basis, net earnings increased to $1.55 per share versus $1.37 per share the year before.

This report by The Canadian Press was first published May 9, 2024.

Companies in this story: (TSX:WSP)

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