WSP ends year with better-than-expected profits, record-high backlog

Dive Brief:

WSP said late Wednesday it earned $98.8 million ($126.7 million Canadian dollars), or 84 cents per share, in the fourth quarter last year, up 75% over the year-ago quarter as the company invests in green building, technology and its own staff.
The company booked revenue of $2.25 billion in the fourth quarter, up almost 29% from the fourth quarter 2020. WSP told investors it expects net revenues this year of between $6.44 billion to $6.83 billion, and net capital expenditures of between $124.8 million and $140.4 million.
Importantly, WSP's backlog of new projects not started totaled $8.1 billion at the end of the year, "with substantial order intake" of $2.6 billion in the last three months of the year, and up almost 24% from the end of 2020. The company also declared a quarterly dividend of about 29 cents a share with a $51.5% dividend reinvestment plan.

Dive Insight:

WSP saw growth across its financial metrics and record-high backlog, including a large uptick in awards in the fourth quarter. Recent project wins include conducting permitting for almost 8,700 miles of cable from the East Coast of the U.S. to Argentina for Google, and building electrification and charging infrastructure for the Toronto Transit Commission's electric buses.

"Last year when we went into 2021, I felt we were flying pretty blind, where now I think we are going into 2022 with our eyes wide open and we see clearly. There’s not a whole lot of fog ahead," said WSP CEO and President Alexandre L'Heureux. "What you’ve seen in Q4 is the conversion of soft backlog into hard backlog, and that’s a great comfort … We could not have hoped for a better finish to 2021."

WSP said it would end its "limited number of ongoing assignments for projects in Russia" because of the war in Ukraine, but expected its financial impact would be less than $780,000. The company also said it would donate a total of $78,000 to UN agencies helping for relief efforts.

WSP posted full-year profits of $369.4 million, or $3.17 a share, up almost 62% from 2020. Revenue totaled $8 billion versus $6.9 billion. According to L’Heureux, WSP’s April acquisition of environmental consulting firm Golder drove some of that growth.

"Our 2019/2020 success demonstrates the strength of our diversified platform, the relevancy of our services for our clients and our strong alignment with market trends driving the world economy," said L'Heureux. "We now have a robust backlog and a healthy balance sheet that can support growth."

Looking ahead

Going forward, WSP aims to grow its clean revenues and invest in technology. For example, in September the company started moving to an enterprise resource planning (ERP) software system in order to facilitate its global collaboration.

"Over the next three years we intend notably to make significant progress towards achieving our previously announced 2030 science-based [greenhouse gas] emission reduction targets and continue to grow our clean revenues to more than half of our business," said L'Heureux. "We innovate because the world doesn’t stand still."

There’s growing demand in the company’s core sectors of infrastructure, urban environment, transportation (such as the California high-speed train project pictured above) and properties and buildings, L'Heureux said.

"[The] company's strategy is very consistent with ethos of being the leading engineering company," said Maxim Sytchev, analyst with National Bank Financial, in an email. "When layering on digital capabilities, scale [and its] much more efficient revenue/EBITDA generation per employee, WSP also generates a compounding effect that leads to enhanced margin generation. As the company becomes larger, it also evolves into a more efficient and more profitable entity. M&A will further bolster the company's capabilities over the strategic cycle."

L'Heureux said he doesn’t expect to see impacts from the Infrastructure Investment and Jobs Act on the 2022 balance sheet. However, he said the company is seeing double-digit growth in backlog in regions across the map, and sees steady improvement ahead.

"Our long term vision sets our destination for WSP to be the undisputed leader in our industry and puts us on a trajectory with aspiration to double in size, achieve sustainable industry-leading organic growth and realize margins above 20%," said L'Heureux. "Our power is diversity and diversification."