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MarketScreener Homepage  >  Equities  >  Toronto Stock Exchange  >  WSP Global Inc.    WSP   CA92938W2022

WSP GLOBAL INC.

(WSP)
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WSP Global : Reports Fourth Quarter and Fiscal 2020 Results

02/24/2021 | 05:01pm EDT

MONTREAL, Feb. 24, 2021 (GLOBE NEWSWIRE) -- WSP Global Inc. (TSX: WSP) (“WSP” or the “Corporation”) today announced financial and operating results for the fiscal year and fourth quarter ended on December 31, 2020.

WSP is very pleased with its performance throughout 2020, delivering on its ambitions with an improved adjusted EBITDA margin and record cash flows. WSP completed the year in a robust financial position with a healthy backlog, providing a solid platform for continued success in 2021.

FOURTH QUARTER 2020 FINANCIAL HIGHLIGHTS

  • Revenues and net revenues* for the quarter reached $2.2 billion and $1.7 billion, up 1.8% and down 4.1%, respectively, compared to Q4 2019. Organically, net revenues contracted 5.9% for the quarter. The increase in the Americas, stemming from organic growth and acquisition growth, was offset by organic contraction in the other reportable segments.
  • Adjusted EBITDA* in the quarter of $262.1 million, down $4.2 million or 1.6%, compared to $266.3 million in Q4 2019. Adjusted EBITDA margin* for the quarter reached 15.5%, compared to 15.1% in Q4 2019. The increase in margin is attributable to the Americas, APAC and Canada reportable segments, partially offset by lower margins in EMEIA.
  • Earnings before net financing expense and income taxes in the quarter of $105.3 million, up $22.6 million, or 27.3%, compared to Q4 2019, mainly due to write-off of leasehold capital assets following office renovation recorded in 2019, partially offset by severance costs in 2020 recorded in acquisition, integration and restructuring costs.
  • Net earnings attributable to shareholders for the quarter of $68.9 million, or $0.61 per share, up 70.1% and 60.5%, respectively, when compared to Q4 2019. The increase is mainly attributable to higher earnings before net financing expense and income taxes, as well as lower net financing expense.
  • Adjusted net earnings* for the quarter of $81.1 million, or $0.71 per share, up $25.8 million and $0.19, respectively, compared to Q4 2019. The increase in these metrics are mainly attributable to write-off of leasehold capital assets following office renovation recorded in 2019.
  • Quarterly dividend declared of $0.375 per share, with a 54.1% Dividend Reinvestment Plan (“DRIP”) participation.
  • In December 2020, WSP entered into an arrangement agreement (the “Arrangement Agreement”) providing for the acquisition of all the issued and outstanding shares of Enterra Holdings Ltd., the holding company of Golder Associates (“Golder”). Under the terms of the Arrangement Agreement, WSP will acquire Golder for an aggregate cash consideration of US$1.14 billion (approximately $1.5 billion). In January 2021, the approval of the shareholders of Golder was obtained and the Golder Acquisition is expected to be completed in the first half of the second quarter of 2021.

FISCAL YEAR 2020 FINANCIAL HIGHLIGHTS

  • Revenues and net revenues* for the year reached $8.8 billion and $6.9 billion, down 1.3% and 0.4%, respectively, compared to 2019. Organically, net revenues contracted 3.6% for the year, in line with Management's expectations. The organic growth in APAC and acquisition growth across segments were offset by organic contraction in Canada, EMEIA and the Americas.
  • Backlog* as at December 31, 2020 stood at $8.4 billion, representing 11.5 months of revenues, up $289.5 million or 3.6% from $8.1 billion as at December 31, 2019, including an organic growth of 2.4%.
  • Earnings before net financing expense and income taxes in 2020 of $459.4 million, down $28.4 million, or 5.8%, compared to 2019, mainly due to higher acquisition, integration and restructuring costs.
  • Adjusted EBITDA* in the year of $1,053.7 million, up $16.9 million or 1.6%, compared to $1,036.8 million in 2019. Adjusted EBITDA slightly surpassed Management's expectation.
  • Adjusted EBITDA margin* for 2020 increased to 15.4%, compared to 15.1% in 2019. The increase is largely due to a continued focus on margin improvement including lower costs mainly stemming from cost-containment measures, office lock-downs and travel restrictions during the COVID-19 pandemic.
  • Net earnings attributable to shareholders of $276.0 million in 2020, or $2.51 per share, down $10.5 million and $0.21, respectively, compared to 2019. The decrease was mainly due to higher acquisition, integration and restructuring costs, partially offset by lower net financing expense.
  • Adjusted net earnings* for 2020 of $338.9 million, or $3.08 per share, up $32.5 million compared to 2019. The increase in these metrics is mainly attributable to lower net financing expense.
  • DSO* as at December 31, 2020 reached a record low of 63 days, compared to 74 days as at December 31, 2019. This level of DSO came in well below Management's outlook range of 73 to 78 days.
  • Cash inflows from operating activities of $1,125.1 million in the year ended December 31, 2020, compared to $814.3 million in the comparable period in 2019.
  • Free cash flow* of $735.3 million, representing 266% of net earnings attributable to shareholders.
  • The net debt to adjusted EBITDA ratio* stood at 0.1x. The ratio is significantly lower than 1.1x as at December 31, 2019 due mainly to the repayment of a portion of indebtedness under credit facilities following strong free cash flow in 2020 and the equity financing completed in the second quarter of 2020.
  • Full year dividends declared of $1.50 per share, or $167.2 million, with cash payout of $84.9 million or 50.8%.

“Despite the unprecedented challenges we faced in 2020, we illustrated the agility of our platform and the strength of our foundation, while delivering on many of our 2019-2021 strategic ambitions,” commented Alexandre L'Heureux, WSP's President and Chief Executive Officer. “Thanks to the tremendous contribution of our teams, we also delivered on the financial objectives we set at the beginning of the global health crisis, which were to maintain our margins and to safeguard our financial position. We are focused on sustaining our momentum and look forward to joining forces with Golder to become the global leading earth sciences and environmental consulting firm. As we enter 2021, we will continue to embrace change and strive to expand possibilities,” he added.

OUTLOOK FOR 2021

This outlook is provided as at February 24, 2021, to assist analysts and shareholders in formalizing their respective views on the year ending December 31, 2021. The reader is cautioned that using this information for other purposes may be inappropriate. This information constitutes forward-looking information, based on multiple estimates and assumptions about future events. Actual results will differ, and such differences may be material. Please refer to section 19, "Forward-looking statements", of the Corporation's MD&A for the year ended December 31, 2020 for the full disclaimer.

Management expects the Corporation's results for the year ending December 31, 2021 will fall within the following ranges:

 2021 TARGET RANGE(1)
Net revenues*Between $7.5 billion and $8.0 billion
Adjusted EBITDA*Between $1.22 billion and $1.29 billion
Seasonality and adjusted EBITDA* fluctuationsBetween 18.0% and 29.0%, Q1 being the lowest and Q3 being the highest
DSO*73 to 77 days
Net capital expenditures**Between $150 million and $170 million
Acquisition, integration and restructuring costsBetween $55 million and $65 million

Underlying Assumptions
The Corporation cautions that the assumptions used to prepare the 2021 outlook could be incorrect or inaccurate. Accordingly, the Corporation’s actual results could differ materially from the Corporation’s expectations as set out in this press release.

The target ranges presented in the preceding table include the effect of the Golder acquisition assuming it closes in the first half of the second quarter of 2021. The Golder acquisition remains subject to closing conditions, including the receipt of regulatory approvals. Until such conditions are met, there can be no assurance that the Golder acquisition will be consummated. Also, the target ranges were prepared assuming no fluctuations in foreign exchange rates in markets in which the Corporation operates. The Corporation did not consider any dispositions, mergers, business combinations and other transactions that may occur after the publication of this press release except for the Golder acquisition. In the 2021 target ranges, the Corporation considered numerous economic and market assumptions regarding the competition, political environment and economic performance of each region where it operates.

The forecasts were prepared using tax rates enacted as of December 31, 2020, in the countries in which the Corporation currently operates. The Corporation anticipates the effective tax rate in 2021 will range between 26% to 30%.

The Corporation manages it capital structure to achieve a net debt to adjusted EBITDA ratio between 1.0 and 2.0.

The Corporation generated exceptionally strong free cash flow in 2020 resulting from, among other things, record-low DSO. Although the Corporation will maintain the same focus on cash management, it is anticipated that for 2021, DSO will return to a normal level.

For 2021, the Corporation anticipates consolidated organic growth in net revenues, spanning across all reportable segments, on a constant currency basis, in the range of 2% to 5%. The Corporation expects a different seasonality pattern in 2021 given the gradual ramp up of its workforce to respond to the demand in 2021, which is expected to gain momentum in the second half of the year. Accordingly, the Corporation anticipates low-to-mid single digit organic contraction in net revenues for the first quarter and sequential increases quarter over quarter for the rest of the year. Head office corporate costs for 2021 are expected to range between $90 million and $100 million.

Canada
The Corporation anticipates mid-single-digit organic growth in net revenues by segment for its Canadian operations.

Americas (United States and Latin America)
The Corporation anticipates growth in net revenues for the US and Latin America operations in the mid-single-digit level, driven mainly by the US operations.

EMEIA (Europe, Middle East, India and Africa)
The EMEIA reportable segment is anticipated to deliver low to mid-single-digit organic growth in net revenues by segment in 2021.

APAC (Asia Pacific)
The Corporation anticipates low to mid-single-digit organic growth in net revenues for the APAC reportable segment.

DIVIDEND
The Board of WSP declared a dividend of $0.375 per share. This dividend will be payable on or about April 15, 2021, to shareholders of record at the close of business on March 31, 2021.

FINANCIAL REPORT
This release includes, by reference, the 2020 financial reports, including the consolidated financial statements and the Management’s Discussion & Analysis (“MD&A”) of the Corporation.

For a copy of our 2020 financial results, including the MD&A and the audited consolidated financial statements, please visit our website at www.wsp.com.

CONFERENCE CALL
WSP will hold a conference call and webcast at 8 a.m. (Eastern Time) on February 25, 2021 to discuss these results.
To participate in the conference call, dial 1-647-427-2309 or 1-866-521-4907 (toll free).
A live webcast of the conference call will also be available at www.wsp.com/investors.

A presentation of the 2020 fourth quarter and fiscal highlights and results will be accessible on February 24, 2021 after market close under the “Investors” section of the WSP website. For those unable to attend, a replay will be available within 24 hours following the call.

* Non-IFRS measures. These measures are defined in section 22, “Glossary of non-IFRS measures and segment reporting measures” of the Corporation's Management's Discussion & Analysis for the year ended December 31, 2020. Please refer to "Non-IFRS measures" disclaimer below.

** Capital expenditures pertaining to property and equipment and intangible assets, net of proceeds from disposal and lease incentives received

(1) This information constitutes forward-looking information, based on multiple estimates and assumptions about future events. The reader is cautioned that using this information for other purposes may be inappropriate. Actual results will differ and such differences may be material. Please refer to "Forward-looking statements" disclaimer below.


RESULTS OF OPERATIONS

 Fourth quarters endedYears ended
(in millions of dollars, except number of shares and per share data)December 31, 2020December 31, 2019December 31, 2020December 31, 2019
Revenues$2,248.3$2,209.3$8,803.9$8,916.1 
Less: Subconsultants and direct costs$560.0$448.6$1,944.8$2,029.8 
Net revenues*$1,688.3$1,760.7$6,859.1$6,886.3 
Earnings before net financing expense and income taxes$105.3$82.7$459.4$487.8 
Net financing expense$1.9$28.4$73.5$102.0 
Earnings before income taxes$103.4$54.3$385.9$385.8 
Income tax expense$33.4$13.5$108.5$100.1 
Net earnings$70.0$40.8$277.4$285.7 
Net earnings attributable to:    
Shareholders of WSP Global Inc.$68.9$40.5$276.0$286.5 
Non-controlling interests$1.1$0.3$1.4$(0.8)
Basic net earnings per share$0.61$0.38$2.51$2.72 
Diluted net earnings per share$0.61$0.38$2.50$2.71 
Basic weighted average number of shares 113,472,584 105,885,503 110,020,798 105,235,267 
Diluted weighted average number of shares 113,751,792 106,076,127 110,263,100 105,613,623 

*Non-IFRS measure. This measure is defined in section 22, “Glossary of non-IFRS measures and segment reporting measures” of the Corporation's Management's Discussion & Analysis for the year ended December 31, 2020.


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
References to notes refer to notes in the financial statements

As at December 31December 31, 2020 December 31, 2019 
 $ $ 
Assets  
Current assets  
Cash and cash equivalents (note 28)437.1 255.6 
Trade receivables and other receivables (note 14)1,598.8 1,767.8 
Cost and anticipated profits in excess of billings (note 15)950.5 995.7 
Other financial assets (note 16)118.1 114.5 
Prepaid expenses168.7 104.2 
Income taxes receivable27.5 18.8 
 3,300.7 3,256.6 
Non-current assets  
Right-of-use assets (note 17)894.3 913.4 
Property and equipment (note 18)314.9 347.7 
Intangible assets (note 19)275.5 355.4 
Goodwill (note 20)3,731.9 3,568.8 
Deferred income tax assets (note 12)169.2 145.8 
Other assets (note 21)150.9 88.4 
 5,536.7 5,419.5 
Total assets8,837.4 8,676.1 
   
Liabilities  
Current liabilities  
Accounts payable and accrued liabilities (note 22)1,718.2 1,650.7 
Billings in excess of costs and anticipated profits (note 15)708.5 629.0 
Income taxes payable119.1 125.3 
Provisions (note 23)71.4 71.8 
Dividends payable to shareholders (note 27)42.5 39.7 
Current portion of lease liabilities (note 17)233.1 211.7 
Current portion of long-term debt (note 24)296.9 307.8 
 3,189.7 3,036.0 
Non-current liabilities  
Long-term debt (note 24)277.3 1,091.9 
Lease liabilities (note 17)785.3 838.9 
Provisions (note 23)180.9 72.8 
Retirement benefit obligations (note 9)232.4 213.4 
Deferred income tax liabilities (note 12)90.4 91.2 
 1,566.3 2,308.2 
Total liabilities4,756.0 5,344.2 
   
Equity  
Equity attributable to shareholders of WSP Global Inc.4,080.4 3,330.8 
Non-controlling interests1.0 1.1 
Total equity4,081.4 3,331.9 
Total liabilities and equity8,837.4 8,676.1 


CONSOLIDATED STATEMENTS OF CASH FLOWS
References to notes refer to notes in the financial statements

 Fourth quarters ended
  Years ended
  
 December 31,
2020
  December 31,
2019
  December 31,
2020
  December 31,
2019
  
 $  $  $  $  
Operating activities    
Net earnings70.0  40.8  277.4  285.7  
Adjustments (note 28)91.2  144.6  416.7  435.4  
Net financing expense (note 11)1.9  28.4  73.5  102.0  
Income tax expense (note 12)33.4  13.5  108.5  100.1  
Income taxes paid(39.6) (11.4) (104.5) (79.8) 
Change in non-cash working capital items (note 28)224.9  209.6  353.5  (29.1) 
Cash inflows from operating activities381.8  425.5  1,125.1  814.3  
Financing activities    
Net repayment of long-term debt(338.5) (95.5) (857.1) (96.6) 
Lease payments(87.6) (67.0) (301.3) (260.7) 
Net financing expenses paid, excluding interest on lease liabilities(9.0) (21.9) (49.8) (69.0) 
Dividends paid to shareholders of WSP Global Inc.(19.7) (19.3) (88.3) (77.6) 
Dividends paid to a non-controlling interest(0.2) (0.5) (0.6) (6.2) 
Issuance of common shares, net of issuance costs (note 25)1.2  0.5  550.8  13.3  
Cash outflows from financing activities(453.8) (203.7) (746.3) (496.8) 
Investing activities    
Net disbursements related to business acquisitions(73.9) (125.9) (124.4) (220.9) 
Lease incentives received  25.3    25.3  
Additions to property and equipment, excluding business acquisitions(21.6) (65.9) (72.1) (122.4) 
Additions to identifiable intangible assets, excluding business acquisitions(9.1) (10.9) (21.0) (26.6) 
Dividends received from associates9.1  10.8  19.4  10.8  
Net proceeds from disposal of businesses9.7    8.2    
Proceeds from disposal of property and equipment1.0  1.1  4.6  11.7  
Proceeds from sale of investments in associates and joint ventures(0.4) (3.8)     
Cash outflows from investing activities(85.2) (169.3) (185.3) (322.1) 
Effect of exchange rate change on cash and cash equivalents(0.3) (3.2) 3.9  (12.0) 
Change in net cash and cash equivalents(157.5) 49.3  197.4  (16.6) 
Cash and cash equivalents, net of bank overdraft – beginning of year592.2  188.0  237.3  253.9  
Cash and cash equivalents, net of bank overdraft - end of the year (note 28)434.7  237.3  434.7  237.3  

NON-IFRS MEASURES

The Corporation reports its financial results in accordance with IFRS. However, in this press release, the following non-IFRS measures are used by the Corporation: net revenues; adjusted EBITDA; adjusted EBITDA margin; adjusted net earnings; adjusted net earnings per share; backlog; free cash flow; days sales outstanding (“DSO”) and net debt to adjusted EBITDA ratio. Additional details for these non-IFRS measures, including a reconciliation of such measures to the most directly comparable IFRS measures, can be found in WSP’s MD&A for the year ended December 31, 2020, which is posted on WSP’s website at www.wsp.com, and filed on SEDAR at www.sedar.com.

Management believes that these non-IFRS measures provide useful information to investors regarding the Corporation’s financial condition and results of operations as they provide key metrics of its performance. These non-IFRS measures are not recognized under IFRS, do not have any standardized meanings prescribed under IFRS and may differ from similar computations as reported by other issuers, and accordingly may not be comparable. These measures should not be viewed as a substitute for the related financial information prepared in accordance with IFRS.

ABOUT WSP

As one of the world’s leading professional services firms, WSP provides engineering and design services to clients in the Transportation & Infrastructure, Property & Buildings, Environment, Power & Energy, Resources and Industry sectors, as well as offering strategic advisory services. WSP's global experts include engineers, advisors, technicians, scientists, architects, planners, environmental specialists and surveyors, in addition to other design, program and construction management professionals. Our talented people are well positioned to deliver successful and sustainable projects, wherever clients need us. wsp.com.

FORWARD-LOOKING STATEMENTS

Certain information regarding WSP contained herein may constitute forward-looking statements. Forward-looking statements may include estimates, plans, objectives, expectations, opinions, forecasts, projections, guidance, outlook or other statements that are not statements of fact, including statements regarding the expected timing of completion of the Golder Acquisition, the 2021 target range, the sufficiency of WSP’s liquidity and working capital requirements for the foreseeable future. Forward-looking statements made by the Corporation in this press release are based on a number of assumptions believed by the Corporation to be reasonable as at February 24, 2021, including assumptions about general economic and political conditions; the state of the global economy and the economies of the regions in which the Corporation operates; the state of and access to global and local capital and credit markets; the anticipated impacts of the COVID-19 pandemic on the Corporation’s businesses, operating results, cash flows and/or financial condition, including the effect of measures implemented as a result of the COVID-19 pandemic; the completion of the Golder Acquisition, the expected timing of completion and benefits of the Golder Acquisition, the expected synergies and certain expected financial ratios to be realized as a result of the Golder Acquisition.

Although WSP believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. These statements are subject to certain risks and uncertainties and may be based on assumptions that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements, including risks relating to the COVID-19 pandemic. WSP's forward-looking statements are expressly qualified in their entirety by this cautionary statement. The complete version of the cautionary note regarding forward-looking statements risk factors, which, if realized, could cause the Corporation's actual results to differ materially from those expressed or implied in forward-looking statements, are included in WSP's Management’s Discussion and Analysis for the year ended December 31, 2020, which are available on SEDAR at www.sedar.com. The forward-looking statements contained in this press release are made as of the date hereof and WSP does not assume any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise unless expressly required by applicable securities laws.

FOR ADDITIONAL INFORMATION, PLEASE CONTACT:

Alain Michaud
Chief Financial Officer
WSP Global Inc.
alain.michaud@wsp.com
Phone: 438-843-7317    


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Source: Groupe WSP Global Inc.

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Financials
Sales 2021 7 810 M 6 233 M 6 233 M
Net income 2021 455 M 363 M 363 M
Net Debt 2021 1 309 M 1 045 M 1 045 M
P/E ratio 2021 33,2x
Yield 2021 1,21%
Capitalization 14 468 M 11 544 M 11 547 M
EV / Sales 2021 2,02x
EV / Sales 2022 1,84x
Nbr of Employees 47 100
Free-Float 96,5%
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Mean consensus OUTPERFORM
Number of Analysts 13
Average target price 132,31 CAD
Last Close Price 123,55 CAD
Spread / Highest target 21,4%
Spread / Average Target 7,09%
Spread / Lowest Target -1,25%
EPS Revisions
Managers and Directors
NameTitle
Alexandre J. L'Heureux President, CEO & Non-Independent Director
Alain Michaud Chief Financial Officer
Christopher Cole Non-Executive Chairman
Gino Poulin Chief Information Officer
Jason Kirk Chief Information Security Officer
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