MONTREAL — Investors have welcomed WSP Global’s new strategic plan, while the engineering firm’s management says it will be able to protect its margins, despite inflation and rising wages.
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WSP announced on Wednesday, after the markets closed, the implementation of a new strategic plan for the period 2022 to 2024, which aims to accelerate the global green transition and to diversify the company’s platform with acquisitions and its internal growth.
During this period, the company expects to generate revenue growth from ordinary activities of more than 30%, an increase in adjusted earnings before taxes, interest and amortization of 40% and an increase in adjusted net earnings per share of 50%.
The targets of the Montreal company are “ambitious”, but achievable, believes Mark Neville, of Scotiabank. “We believe the plan will be well received, especially given that the company has been successful in meeting and exceeding its targets in the past.”
Benoit Poirier, of Desjardins Capital Markets, said he was impressed by the profitability expected by the company. Management wants to post adjusted margins before interest, taxes and amortization of between 17.5% and 18.5% by 2024. “That implies an impressive improvement of 30 to 50 basis points per year, while we in a range of 20 to 30 basis points in the past.”
Despite an inflationary environment that is putting pressure on business costs, WSP President and CEO Alexandre L’Heureux believes that margins can improve as of fiscal 2022. “I am confident that despite wage inflation, we will be able to improve our margins in 2022,” he said Thursday during a conference call to discuss fourth quarter results.
Mr. L’Heureux believes that the expertise of the firm’s professionals offers protection for margins, even if the remuneration of its employees increases more rapidly. “If I go back as far as our 2012 strategic plan, you see a steady increase in billing per employee,” he says. For ten years, we have consistently managed to do much more with much less.”
WSP is in a position where it is able to charge its customers more, relative to the numbers of employees delivering the service. “We are able to charge more for our services per employee. We are able to use technology to our advantage and we are more efficient along the way.”
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In early trading, the stock gained $2.91, or 1.8%, to $167.84 on the Toronto Stock Exchange.
Results and end of mandates in Russia
WSP Global on Wednesday posted fourth-quarter net profit attributable to shareholders up 83.9% from the same period a year earlier, in addition to announcing that it had ended its mandates in Russia, at light of the conflict in Ukraine.
Montreal society said it was “deeply troubled” by the conflict in Ukraine. Although it does not have offices and employees in Russia, Ukraine or Belarus, the company has a limited number of mandates in Russia, which it has decided to terminate. Her exposure is expected to be “less than $1 million,” she said.
In the fourth quarter ended Dec. 31, WSP earned net income of $126.7 million, or $1.08 per share, which compared to a profit of $68.9 million, or 61 cents per share, for the same period in 2020.
Net revenue, which excludes sub-consultant and direct costs, was $2.15 billion in the most recent quarter, compared to net revenue of $1.69 billion a year earlier .
Excluding one-time items, WSP earned adjusted earnings of $171.7 million, or $1.46 per share, from $93 million, or 82 cents per share, a year earlier.
Analysts on average had expected adjusted earnings of $1.31 per share, as well as revenue of $2.08 billion, according to financial data firm Refinitiv.
WSP’s Board of Directors has authorized the payment on April 15 of a dividend of 37.5 cents per share to shareholders of record as of March 31.
Company in this story: (TSX:WSP)
Stephane Rolland, The Canadian Press