WSP Global CEO says coronavirus a minor concern as M&A remains top of mind

WSP Global CEO says coronavirus a minor concern as M&A remains top of mind
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MONTREAL — The CEO of WSP Global Inc. says the engineering company is not immune to fallout from the novel coronavirus epidemic.

The Montreal-based company has asked employees in China, where the outbreak originated, to work from home and expects a slowdown in WSP productivity in the region.

Alexandre L’Heureux said he doesn’t expect the virus to alter its profit forecast for the year, with less than five per cent of net revenues stemming from Asia.

“Clearly the fact that we have people at home — I don’t think it would be reasonable to assume that things are exactly the same as if everybody were working full steam in the office…but this is clearly mitigated by the fact that this is a very, very small piece of our business,” L’Heureux said on a conference call with analysts Thursday.

“We’re not changing our outlook as a result of it.”

The virus known as COVID-19, which has now spread from the Chinese manufacturing city of Wuhan to about 40 countries, has shut down large swathes of China amid mass quarantines and infected more than 82,000 people worldwide, causing at least 2,800 deaths.

WSP has been on a buying spree recently, acquiring eight engineering and consulting firms in 2019 and a ninth in January as part of its goal of rapid expansion over the next couple years.

The purchases in the second half of last year tilt green, and include Danish Orbicon A/S — a 500-employee environmental consulting firm — and U.S.-based Ecology and Environment Inc., a 775-employee environmental consulting firm acquired for US$65.1 million.

“We are really looking to grow, and frankly not just in the environmental sector,” L’Heureux said. “We’re looking to grow in all sorts of advisory services from project program management to water science.”

Despite the acquisitions, WSP sports a “rock-solid balance sheet,” said Raymond James Ltd. analyst Frederic Bastien. Because of them, it enjoys a more “globally diversified footprint” that can balance dips in any one market.

Once a boutique firm called Genivar, the 61-year-old company has swelled to about 50,000 employees from 31,700 at the end of 2014. It aims to eclipse rival SNC-Lavalin Group Inc.’s roughly 50,000 employees with 65,000 workers by 2021, a goal for which WSP remains on track, L’Heureux said.

On Thursday WSP forecasted net revenue of $7.1 billion to 7.4 billion for 2020, and adjusted earnings of $1.07 billion to $1.12 billion.

WSP missed expectations as it capped 2019 with a weaker fourth quarter than in the previous year.

The engineering consultant said its net income attributable to shareholders was $40.5 million for the period ended Dec. 31, down from $43.3 million a year earlier.

Excluding one-time items, adjusted profits fell 4.2 per cent to $56.6 million or 53 cents per diluted share, compared with $59.1 million or 57 cents per share in the prior year.

Net revenues grew 14.3 per cent to $1.76 billion.

WSP was expected to earn 86 cents per share in adjusted profits on $1.77 billion of revenues, according to financial markets data firm Refinitiv.

Its full-year net income increased to $286.5 million from $248.1 million in 2019. Adjusted profits rose 10.7 per cent to $326.7 million or $3.10 per share, up from $295.2 million or $2.83 per share in 2018.

Revenues increased to $6.89 billion from $6 billion.

Analysts had expected adjusted earnings of $3.44 per share on $6.9 billion of revenues.

This report by The Canadian Press was first published Feb. 26, 2020.

Companies in this story: (TSX:WSP, TSX:SNC)

Christopher Reynolds, The Canadian Press


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