WSP Global Inc. (TSX: WSP) (“WSP” or the “Corporation”) today
announced financial and operating results for the second quarter of
fiscal 2020 ended on June 27, 2020.
SECOND QUARTER 2020 FINANCIAL HIGHLIGHTS
Solid performance in the second quarter of 2020
exceeded management’s ambitions resulting in strong free cash flow
and an increased adjusted EBITDA margin.
- Revenues and net revenues* for the quarter reached $2.2 billion
and $1.7 billion, down 4.5% and 1.2%, respectively, compared to Q2
2019. Organically, net revenues contracted 5.3% for the quarter.
Good organic growth in the APAC reportable segment was offset by
organic contraction in the other segments.
- Backlog* as at June 27, 2020 stood at $8.6 billion,
another record high of 11.5 months of revenues, up
$479.2 million or 5.9% from $8.1 billion as at
December 31, 2019 and up $658.3 million or 8.3% when
compared to June 29, 2019. Backlog organic growth reached 4.3%
compared to December 31, 2019 and 5.2% compared to
June 29, 2019.
- Adjusted EBITDA* in the quarter of $276.1 million, up $10.7
million or 4.0%, compared to $265.4 million in Q2 2019. Adjusted
EBITDA margin for the quarter reached 15.8%, compared to 15.0% in
Q2 2019. Improved margins in the APAC and EMEIA reportable segments
were partially offset by lower margins in Canada.
- Earnings before net financing expense and income taxes in the
quarter of $121.9 million, down $18.6 million, or 13.2%,
compared to Q2 2019, mainly due to severance costs of $13.7 million
included in the acquisition, integration and restructuring
costs.
- Net earnings attributable to shareholders for the quarter of
$88.6 million, or $0.83 per share, stable when compared to Q2
2019.
- Net financing expense for the second quarter ended
June 27, 2020 was $20.2 million lower than the second quarter
of 2019, mainly attributable to non-cash increases in value of
investments related to a US-employees' deferred compensation plan
and foreign exchange forward contracts used to hedge future cash
transactions, as well as lower interest expense on long-term
debt.
- Adjusted net earnings* for the quarter of $92.1 million, or
$0.86 per share, down $1.9 million and $0.04, respectively,
compared to Q2 2019. The decrease is mainly due to higher
amortization and depreciation, which offset improvements in
adjusted EBITDA.
- DSO* as at June 27, 2020 stood at 72 days, a historical
best, compared to 80 days as at June 29, 2019.
- Cash inflows from operating activities of $509.9 million in the
six-month period ended June 27, 2020, compared to
$124.3 million in the comparable period in 2019.
- Gross proceeds of $572.7 million from the successful equity
financing completed in June 2020.
- Free cash flow* of $410.8 million for the quarter.
Trailing twelve-months of free cash flow amounted to
$805.9 million, representing 340% of net earnings attributable
to shareholders.
- The net debt to adjusted EBITDA ratio stood at 0.4x. 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 and the issuance of
common shares in the second quarter of 2020.
- Quarterly dividend declared of $0.375 per share, with a 53.7%
Dividend Reinvestment Plan (“DRIP”) participation.
In response to the pandemic, the Corporation has
implemented business continuity plans and most of its people are
continuing to work remotely. Leveraging technology investments, our
people are collaborating to deliver projects and pursue new
assignments. In most of the countries in which the
Corporation operates, the collective focus has evolved to develop
plans to gradually re-open offices considering our employees
feedback and local governmental guidelines and regulations. As the
situation continues to evolve, WSP’s primary objective remains to
ensure the health and safety of its employees and their families,
of its clients and of the communities in which it operates.
The Corporation has proactively implemented
measures to adjust its cost structures and has postponed
non-essential expenditures. WSP is closely following developments
in each of the regions in which it operates and will consider
additional initiatives if warranted.
“As COVID-19 reached pandemic status, I
reaffirmed our commitment to being operationally resilient to
continue meeting the needs of our clients and communities during
these unprecedented times. I am pleased with our Q2 performance as
we achieved solid results in addition to exceeding our cash flow
and margin objectives set last quarter,” said Alexandre L’Heureux,
WSP’s President and CEO. “As the initial shock of the pandemic is
behind us, and our regions and markets are redefining their new
normal in view of the lingering uncertainty, we are updating our
outlook for the year ending December 31, 2020. Founded on the
objectives set in the second quarter, this outlook is being
provided as we continue to rigorously monitor the developments
across our regions,” he added.
OUTLOOK FOR 2020This updated
outlook is provided as at August 5, 2020 to assist analysts and
shareholders in formalizing their respective views on the year
ending December 31, 2020. 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 could differ and such differences may be material. Please
refer to section 16, "Forward-looking statements", of the
Corporation's MD&A for the quarter ended June 27, 2020 for the
full disclaimer.
Management expects that the Corporation's
results for the year ending December 31, 2020 will fall within the
following ranges:
|
2020 UPDATED TARGET RANGE |
Net revenues* |
Between $6.7 billion and $7.0 billion |
Adjusted EBITDA* |
Between $1,000 million and $1,050 million |
DSO* |
73 to 78 days |
Net capital expenditures** |
Between $100 million and $110 million |
Acquisition, integration and restructuring
costs |
Between $90 million and $100 million |
*Non-IFRS measures. These measures are defined
in section 22, “Glossary of non-IFRS measures and segment reporting
measures” of the Corporation's amended management's discussion and
analysis for the year ended December 31, 2019.** Capital
expenditures pertaining to property and equipment and intangible
assets, net of proceeds from disposal and lease incentives
received.
Underlying AssumptionsThe
Corporation cautions that the assumptions used to prepare the
updated 2020 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 were prepared assuming no fluctuations in foreign exchange
rates in markets in which the Corporation operates. In the updated
2020 forecasts, the Corporation did not consider any dispositions,
mergers, business combinations and other transactions that may
occur after the publication of this press release. In the updated
2020 target ranges, the Corporation considered numerous economic
and market assumptions regarding the competition, political
environment, economic performance and the anticipated COVID-19
pandemic impact in each region where it operates. In preparing its
updated 2020 forecasts, the Corporation also assumed that economic
factors and market competition in regions where it operates would
remain stable and that no further deterioration of the COVID-19
pandemic would occur.
For 2020, the Corporation anticipates organic
contraction in net revenues on a constant currency basis, in the
range of 1% to 5%.
The forecasts were prepared using tax rates
enacted as of June 27, 2020, in the countries in which the
Corporation currently operates. The Corporation anticipates the
effective tax rate in 2020 will range between 26% to 30%. Head
office corporate costs for 2020 are expected to range between $85
million and $90 million.
Management expects acquisition, integration and
restructuring costs to range between $90 million and
$100 million for 2020, including anticipated expenses related
to adjustments to our cost structures resulting from the COVID-19
pandemic.
Although, the Corporation continues to manage
its capital structure to achieve a net debt to adjusted EBITDA
ratio between 1.0 and 2.0, it is anticipated that the Corporation
will achieve a net debt to adjusted EBITDA ratio between 0.25 and
0.75 by the end of December 31, 2020.
Overall, our operations are and will continue to
be impacted by the COVID-19 pandemic and while the impact on our
operations follows a broadly consistent theme across the world,
variances exist across each of our reportable segments and market
sectors.
CanadaThe Corporation anticipates mid-single
digit organic contraction in net revenues in Canada resulting from
the combined impact of the COVID-19 pandemic and the depressed oil
and gas industry.
AmericasThe Corporation
anticipates low-single digit organic contraction in net revenues
for the Americas reportable segment. In our US operations, we
continue to anticipate our Transportation & Infrastructure
market sector to perform well and softness in the private
sector.
EMEIA (Europe, Middle-East, India and
Africa)For the EMEIA reportable segment, the Corporation
anticipates mid-single digit organic contraction in net revenues.
We anticipate the Nordics’ performance, which has been better than
anticipated in the first half of 2020, to continue to partially
offset more softness in the UK and the Middle East.
APACGiven the strength of our
market sectors in Australia and New Zealand and the limited impact
of the COVID-19 pandemic in these countries, the Corporation
anticipates mid-single digit organic growth in net revenues for the
APAC reportable segment.
DIVIDENDThe Board of WSP
declared a dividend of $0.375 per share. This dividend will be
payable on or about October 15, 2020, to shareholders of
record at the close of business on September 30, 2020.
FINANCIAL REPORTThis release
includes, by reference, the 2020 second quarter financial reports,
including the unaudited interim condensed consolidated financial
statements and the Management’s Discussion & Analysis
(“MD&A”) of the Corporation.
For a copy of our 2020 second quarter financial
results, including the MD&A and the unaudited interim condensed
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 August 6,
2020 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 second quarter
highlights and results will be accessible on August 5, 2020 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.
RESULTS OF OPERATIONS
|
Second
quarters ended |
Six month
periods ended |
(in millions of dollars, except number of shares and per share
data) |
June 27, 2020 |
June 29, 2019 |
June 27, 2020 |
June 29, 2019 |
Revenues |
$2,207.8 |
$2,311.7 |
$4,417.8 |
$4,485.3 |
Less: Subconsultants and
direct costs |
$460.7 |
$543.1 |
$934.6 |
$1,053.3 |
Net revenues* |
$1,747.1 |
$1,768.6 |
$3,483.2 |
$3,432.0 |
Earnings before net financing expense and income
taxes |
$121.9 |
$140.5 |
$209.9 |
$236.4 |
Net financing expense |
$1.2 |
$21.4 |
$69.5 |
$32.1 |
Earnings before income taxes |
$120.7 |
$119.1 |
$140.4 |
$204.3 |
Income tax expense |
$32.4 |
$29.9 |
$37.8 |
$53.1 |
Net earnings |
$88.3 |
$89.2 |
$102.6 |
$151.2 |
Net earnings attributable to: |
|
|
|
|
Shareholders of WSP Global
Inc. |
$88.6 |
$88.7 |
$102.8 |
$152.3 |
Non-controlling interests |
$(0.3) |
$0.5 |
$(0.2) |
$(1.1) |
Basic net earnings per share |
$0.83 |
$0.84 |
$0.96 |
$1.45 |
Diluted net earnings
per share |
$0.83 |
$0.84 |
$0.96 |
$1.45 |
Basic weighted average number of shares |
107,006,730 |
105,006,741 |
106,554,478 |
104,858,255 |
Diluted
weighted average number of shares |
107,205,566 |
105,299,746 |
106,763,220 |
105,135,285 |
*Non-IFRS measure. This measure is defined in section 19,
“Glossary of non-IFRS measures and segment reporting measures” of
the Corporation's Management's Discussion & Analysis for the
second quarter ended June 27, 2020.
INTERIM
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION |
References to
notes refer to notes in the financial statements |
|
As at |
June 27, 2020 |
December 31, 2019 |
|
$ |
$ |
Assets |
|
|
Current assets |
|
|
Cash and cash equivalents (note 14) |
711.8 |
255.6 |
Trade receivables and other receivables |
1,715.0 |
1,767.8 |
Cost and anticipated profits in excess of billings |
1,104.0 |
995.7 |
Other financial assets |
114.2 |
114.5 |
Prepaid expenses |
121.0 |
104.2 |
Income taxes receivable |
26.3 |
18.8 |
|
3,792.3 |
3,256.6 |
Non-current assets |
|
|
Right-of-use assets |
966.2 |
913.4 |
Property and equipment |
344.2 |
347.7 |
Intangible assets |
315.1 |
355.4 |
Goodwill (note 10) |
3,714.8 |
3,568.8 |
Deferred income tax assets |
168.9 |
145.8 |
Other assets |
95.6 |
88.4 |
|
5,604.8 |
5,419.5 |
Total assets |
9,397.1 |
8,676.1 |
|
|
|
Liabilities |
|
|
Current liabilities |
|
|
Accounts payable and accrued liabilities |
1,770.1 |
1,650.7 |
Billings in excess of costs and anticipated profits |
715.8 |
629.0 |
Income taxes payable |
139.9 |
125.3 |
Provisions |
51.1 |
71.8 |
Dividends payable to shareholders (note 13) |
42.4 |
39.7 |
Current portion of lease liabilities |
255.3 |
211.7 |
Current portion of long-term debt (note 11) |
292.4 |
307.8 |
|
3,267.0 |
3,036.0 |
Non-current liabilities |
|
|
Long-term debt (note 11) |
867.8 |
1,091.9 |
Lease liabilities |
853.9 |
838.9 |
Provisions |
83.6 |
72.8 |
Retirement benefit obligations |
223.5 |
213.4 |
Deferred income tax liabilities |
93.1 |
91.2 |
|
2,121.9 |
2,308.2 |
Total liabilities |
5,388.9 |
5,344.2 |
|
|
|
Equity |
|
|
Equity attributable to shareholders of WSP Global Inc. |
4,007.4 |
3,330.8 |
Non-controlling interests |
0.8 |
1.1 |
Total equity |
4,008.2 |
3,331.9 |
Total liabilities and equity |
9,397.1 |
8,676.1 |
INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS |
References to
notes refer to notes in the financial statements |
|
|
Second quarters ended |
Six month periods ended |
|
June 27, 2020 |
June 29, 2019 |
June 27, 2020 |
June 29, 2019 |
|
$ |
$ |
$ |
$ |
Operating
activities |
|
|
|
|
Net earnings |
88.3 |
|
89.2 |
|
102.6 |
|
151.2 |
|
Adjustments (note
14) |
124.5 |
|
85.7 |
|
221.8 |
|
180.4 |
|
Net financing expense (note
7) |
1.2 |
|
21.4 |
|
69.5 |
|
32.1 |
|
Income tax expense |
32.4 |
|
29.9 |
|
37.8 |
|
53.1 |
|
Income taxes paid |
(8.1 |
) |
(26.6 |
) |
(33.2 |
) |
(47.0 |
) |
Change in non-cash working
capital items (note 14) |
268.4 |
|
(103.0 |
) |
111.4 |
|
(245.5 |
) |
Cash inflows from operating activities |
506.7 |
|
96.6 |
|
509.9 |
|
124.3 |
|
Financing activities |
|
|
|
|
Net (repayment) proceeds of
long-term debt |
(1,082.7 |
) |
74.6 |
|
(279.6 |
) |
138.6 |
|
Lease payments |
(72.1 |
) |
(64.6 |
) |
(142.5 |
) |
(130.0 |
) |
Net financing expenses
paid |
(14.6 |
) |
(11.0 |
) |
(38.1 |
) |
(22.8 |
) |
Dividends paid to shareholders
of WSP Global Inc. |
(26.2 |
) |
(19.6 |
) |
(49.1 |
) |
(39.2 |
) |
Dividends paid to a
non-controlling interest |
— |
|
— |
|
(0.1 |
) |
— |
|
Issuance of common shares, net
of issuance costs (note 12) |
549.6 |
|
0.4 |
|
549.6 |
|
0.5 |
|
Cash inflows (outflows) from financing
activities |
(646.0 |
) |
(20.2 |
) |
40.2 |
|
(52.9 |
) |
Investing activities |
|
|
|
|
Net disbursements related to
business acquisitions |
(0.9 |
) |
(50.8 |
) |
(45.7 |
) |
(55.5 |
) |
Additions to property and
equipment, excluding business acquisitions |
(22.3 |
) |
(13.8 |
) |
(38.8 |
) |
(36.4 |
) |
Additions to identifiable
intangible assets, excluding business acquisitions |
(2.3 |
) |
(5.7 |
) |
(9.2 |
) |
(10.1 |
) |
Dividends received from
associates |
— |
|
— |
|
3.8 |
|
— |
|
Proceeds from disposal of
property and equipment |
0.8 |
|
1.9 |
|
1.1 |
|
8.4 |
|
Proceeds from sale of
investments in associates and joint ventures |
0.4 |
|
— |
|
0.4 |
|
— |
|
Cash outflows from investing activities |
(24.3 |
) |
(68.4 |
) |
(88.4 |
) |
(93.6 |
) |
Effect of exchange rate change on cash and cash equivalents |
(16.5 |
) |
(1.0 |
) |
11.4 |
|
(7.4 |
) |
Change in net cash and cash equivalents |
(180.1 |
) |
7.0 |
|
473.1 |
|
(29.6 |
) |
Cash and cash equivalents, net
of bank overdraft – beginning of the period |
890.5 |
|
217.3 |
|
237.3 |
|
253.9 |
|
Cash and cash equivalents, net of bank overdraft - end of
period (note 14) |
710.4 |
|
224.3 |
|
710.4 |
|
224.3 |
|
NON-IFRS MEASURESThe
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 second quarter ended June 27, 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 WSPAs 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
STATEMENTSCertain 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 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
August 5, 2020, 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.
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 as well as a description of the relevant
assumptions and risk factors likely to affect WSP's actual or
projected results are included in the amended Management’s
Discussion and Analysis for the year ended December 31, 2019 and
the Management’s Discussion and Analysis for the quarter ended
June 27, 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 MichaudChief Financial OfficerWSP Global
Inc.alain.michaud@wsp.com Phone: 438-843-7317
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