WSP Global Continues Expansion with Focus on Green Projects
Key Highlights :
MONTREAL — WSP Global continued its years-long expansion this year, acquiring companies and securing contracts with an eye to the growing market for green projects. Since late January, the engineering firm has completed three more acquisitions in Australia, Switzerland and Quebec, adding 900-plus employees to the payroll. A fourth pending purchase of Australian engineering outfit Calibre will boost its headcount by another 800 and entrench WSP's prospects as a player in mine rehabilitation, said CEO Alexandre L'Heureux.
"It's built on the 2021 acquisition of Golder" — a 7,000-employee environmental consulting firm based in Toronto — "and aims to further position WSP as a leader in the mining industry's green transition in Australia and across the globe," L'Heureux told analysts on a conference call Thursday.
A global shift toward renewable energy over the next two decades will foster growing reliance on critical minerals as well as a push toward decarbonization in mining, boosting that sector's potential for WSP, he added. The Montreal-based company is also part of a consortium selected last month to build the $4.9-billion first phase of Calgary's Green Line, a light-rail transit system comprising the largest infrastructure project in the city's history.
WSP has closed at least seven acquisition deals in the past 12 months — including the 35,000-strong British environment and infrastructure business of John Wood Group — and more than 120 since 2006. Once a boutique firm called Genivar, the 64-year-old company has more than doubled its head count over the past decade, swelling to about 67,100 employees, including an additional 10,900 in 2022.
In its latest quarter, WSP boosted net earnings 18.4 per cent to $112.5 million from $95 million a year earlier. Revenues for the quarter ended April 1 rose nearly 29 per cent to $3.5 billion from $2.7 billion.
However, WSP's rosy financial outlook includes a couple clouds, according to one analyst. "The quarter was definitely stronger than expected. But organic growth in the backlog was quite low. And you did maintain guidance, which does imply a slowdown in organic growth for the remainder of the year," Yuri Lynk of Canaccord Genuity told the chief executive.
L'Heureux replied that if two recent contracts, including the Green Line LRT, had been included in the quarterly results, the backlog within Canada would have reached double-digit growth rather than falling three per cent. "So actually I'm not worried at this point at all ... It's more timing than anything," he said. “We have 2,000 live projects at the moment, so you’ve got to look at the margin evolution over a longer period than 90 days," he added, referring to the adjusted earnings margin of 15.5 per cent, which remained flat year over year.
The engineering outfit has projected revenue growth of 19 per cent this year to between $10 billion and $10.6 billion. It has also forecasted an 18 per cent jump in adjusted earnings.
WSP Global has made a concerted effort to focus its growth strategy on green projects, with a particular emphasis on the mining industry. The acquisition of Golder and the pending purchase of Calibre are indicative of this focus, as are the contracts secured for the Green Line LRT project in Calgary. This strategy has allowed the company to double its headcount over the past decade, and its financial performance in the most recent quarter was strong.
The company's outlook, however, is not without some cautionary notes. Organic growth in the backlog was low, and the guidance implies a slowdown in organic growth for the remainder of the year. L'Heureux is optimistic that this slowdown is more a matter of timing than anything else, and that the margin evolution over a longer period than 90 days will be more indicative of WSP Global's performance.
Overall, WSP Global's focus on green projects and its commitment to the mining industry have served it well in recent years, and the company is optimistic that this trend will continue in the future.
