WSP revenue, backlog up but profits sag
- Montreal-based engineering and design giant WSP reported higher revenues but lower profits during the fourth quarter, as higher acquisition and integration costs ate into its bottom line. The firm reported a profit attributable to shareholders of CA$120 million ($87.1 million USD) in Q4, down 5.3% from last quarter. For all of 2022, it posted a profit of CA$431.8 million, down 8.8% from 2021.
- Revenues for the quarter reached CA$3.56 billion — up 23.2% compared to Q4 2021 and beating analysts’ expectations, according to Seeking Alpha. That number was also up year over year: Revenues reached CA$11.93 billion for 2022, up 16.1% from 2021. Backlog as of Dec. 31, 2022 stood at CA$13 billion, representing 11.8 months of revenues, up 24.8% in the year.
- When asked about the overall economic climate, WSP CEO and President Alexandre L’Heureux said on a Thursday investor call“It’s a bit of a schizophrenic environment. You watch the news, you look at the data … you wonder how on the ground it’s being felt in our industry. But I must admit that at this point in time we are not seeing any area of weakness.” L’Heureaux said WSP’s environmental, transportation and property segments are all strong, though turnover continues to be an expensive challenge.
WSP, like many companies, is still dealing with high rates of turnover, but L’Heureux said on the call that this decreased in the last two quarters of 2022, attributable in part to higher wages. L’Heureux said he felt WSP managed wage increases without going too far, and while turnover is not yet at pre-pandemic levels, that metric is moving in the right direction.
L’Heureux said he sees growth opportunities in markets around the world, including infrastructure in France (especially with the 2024 Summer Olympics coming up in Paris) and in Canada, the U.K., Asia Pacific, Australia and New Zealand. The firm also sees potential for growth in the central part of the U.S., in the west and the southeast. L’Heureux cited Texas as the fastest growing state with Florida hot on its heels, and said WSP could double or triple its presence in the latter.
WSP’s adjusted EBITDA in Q4 stood at CA$446.4 million, up 16% year over year, and it saw net revenue organic growth of 7.3% in the past year.
The firm is using an ERP system to best integrate its many acquisitions from the past yearWSP CFO Alain Michaud said on the call. It is now live in Canada, and the firm is preparing to deploy it in the U.S. and U.K. next.
Better use of tech is another area of opportunity L’Heureux identified for the firm. Investment in digital tools will enable WSP to be more precise and efficient in design, to optimize its own costs and improve work for clients, he said. Contech is also a key part of AECOM’s strategy.
Infrastructure expected to drive growth
L’Heureux expects the Infrastructure Investment and Jobs Act and the CHIPS Act to drive more growth in the U.S. this year. Infrastructure projects and design work are becoming more complex, and WSP is positioning itself to take on megaprojects and mission critical projects by focusing both on its design and engineering capabilities, according to L’Heureux.
“We are going to keep evolving as a firm, but it’s important to recognize that what made us successful is our design work,” L’Heureux said.
WSP also plans to continue to expand its advisory services, especially in the environmental and ESG sectors. L’Heureux cited several recent projects as symbolic of its focus on sustainability and the green transition. They include:
- Star of the South wind farm in Victoria, Australia marks the country’s first offshore wind project.
- The Croisettethe legendary boulevard in Cannes, France, is being revamped and WSP is providing engineering services on the project.
- The Irvine Campus Medical Center at the University of California is one of the world’s first all-electric hospitals.
L’Heureux said he is seeing a great deal of refurbishing work at the moment, and sees “tremendous opportunity” in the years ahead in rehabilitating buildings and converting real estate into data centers and housing. The nature and look of megacities is evolving, he said, and WSP is positioned to tackle that change.