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WSP Global’s acquisition hunt isn’t over yet after its ‘consolidation’ phase: CEO

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

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

Since mid-March, the engineering firm has purchased four consulting firms in four countries – Canada, Finland, Spain and the United States – adding more than 800 employees and “reopening the M&A valve,” in the words of one analyst.

These purchases follow five other acquisitions since September 2022, when WSP acquired the environmental and infrastructure business of UK-based John Wood Group for $1.81 billion.

As of March 31, the Montreal-based company employed 67,200 people, down 100 from a year earlier, despite a surge in purchases as WSP seeks to “deliver more with less,” said CEO Alexandre L’Heureux . The decline reflected August sales at the 1,400-employee engineering and design firm Louis Berger, but the company said the number has already exceeded 2023 levels.

The CEO said that after the company’s period of “consolidation” in 2023, the stage is set for further growth both in terms of existing businesses and companies yet to be acquired.

“All the ingredients are in place for us to continue our inorganic and organic growth,” L’Heureux said during a conference call on Thursday.

“Thanks to mergers and acquisitions, we are off to a very good start,” he continued. “The pipeline is in good condition, so I’m sure the rest of the year should bear fruit.”

Since 2012, the Montreal-based company, then known as Genivar, has transformed from a boutique engineering firm with 15,000 employees into a global giant with a presence in approximately 60 countries.

Healthy organic revenue growth helped deliver a 13 percent increase in net earnings to $126.8 million in the first quarter, the company said. Backlogs rose three percent to $14.23 billion.

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

“While some may point to a flat backlog in Canada and a decline in the Asia-Pacific region, we remind investors that infrastructure infrastructure in Canada remains solid.”

In the United States – WSP’s largest segment, where net revenues exceeded $1 billion last quarter – the company recently signed a $100 million program management agreement for a 24-kilometer light rail expansion in the Los Angeles area, L’Heureux reports.

“Transport, real estate and buildings, land and environment – ​​we see growth in these sectors,” he said.

The company had previously cited the spending tsunami triggered by the US government’s $1 trillion infrastructure bill passed in November 2021 as a business driver.

China, where a deteriorating real estate market continues to negatively impact the economy, was one of the few dark spots on WSP’s profit and loss account. In the first quarter, organic growth in the Asia-Pacific segment was virtually flat year-on-year.

“Asia is a challenge, there is no doubt about it,” L’Heureux said. “It has been a challenge and I believe it will be a challenge for some time.

“That said, for us, mainland China is 300 of the 67,000 people.”

Revenue for the quarter ended March 30 rose three percent to $3.58 billion, beating analyst expectations by 30 percent, according to LSEG Data & Analytics.

On an adjusted basis, net income rose to $1.55 per share compared to $1.37 per share a year earlier.

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

Companies in this story: (TSX:WSP)

Christopher Reynolds, Canadian Press