MONTREAL — WSP Global Inc. is eyeing larger acquisitions once again after working to integrate its sprawling operations as it snapped up smaller companies over the past 18 months, says CEO Alexandre L’Heureux.
"The last year was a year of consolidation," he told analysts on a conference call Wednesday.
Following a spate of takeovers, the engineering company has worked to scrap digital barriers between offices scattered across some 60 countries. Three-quarters of the firm now operates on a single software platform — known as an enterprise resource planning (ERP) system — reducing inefficiencies that emerged as 15 more companies have come under the WSP umbrella over the past two and a half years.
The buying streak included four consulting firms this year, adding 800-plus employees for a total headcount of 69,300.
But the latest acquisitions were small compared with some earlier purchases — the U.K.-based John Wood Group's environment and infrastructure business for US$1.81 billion in 2022, for example — leaving the Montreal-based company ready for bigger fare amid a 22 per cent year-over-year boost in profit last quarter to $184.1 million.
"Now that I feel we have significantly de-risked our transformation and the ERP conversion, I can tell you now that we're open for business," L’Heureux said.
He sees opportunities for growth in continental Europe, Australia and the United States — where the outcome of a presidential election later this year will have little bearing on WSP's prospects, he said.
"Remember that WSP performed well under the Trump administration and we have performed very well also under the Biden administration," the chief executive said.
"Whether it's a Republican president or a Democrat president, we feel that WSP is very well positioned to take advantage of what will take place over the next few years."
He noted that Congress still has until the end of 2026 to award the majority of the US$1.2 trillion in transportation and infrastructure spending — a boon for legions of engineers — under a bipartisan bill signed in 2021.
WSP revenues rose 8.5 per cent year-over year to $3.93 billion last quarter, driven by organic growth in the U.S., Canada, the United Kingdom and New Zealand.
Offices in East Asia remain one of the company's few laggards.
"Asia is going through a rough patch," L’Heureux said. But the area accounts for a thin slice of its income, he added.
Elsewhere, contracts are piling up. When its second quarter ended on June 29, WSP's backlog stood at a record high of $14.7 billion.
In May, the company won a bid to provide engineering services for an advanced medical research centre at the University of Ottawa slated to sprawl across 350,000 square feet covering seven storeys.
In the U.S., WSP nabbed a contract to lead the design of an industrial wastewater treatment plant at the Seattle-Tacoma International Airport.
In France, WSP is slated to design the tunnels and branches on one line of the Grand Paris Express project, which aims to build 200 kilometres of new subway tracks by 2030.
“We conclude the first half of 2024 in a position of strength,” L'Heureux said.
The full pipeline of work has helped limit WSP's ratio of net debt to adjusted earnings at 1.7, within the target range despite numerous acquisitions.
The company raised its financial forecast for the year, revising its net revenue outlook to between $11.4 billion and $11.8 billion versus $11.2 billion to $11.7 billion previously.
"Management's body language ... seems to be even more confident given the supportive macro backdrop, internal improvements and leveraging of tech tools and design centre capabilities," said National Bank analyst Maxim Sytchev in a note to investors.
"With that, the capacity to do larger M&A has also been elevated on top of an accelerating organic growth profile."
This report by The Canadian Press was first published July 31, 2024.
Companies in this story: (TSX:WSP)
Christopher Reynolds, The Canadian Press
