WSP Global Inc. (TSX: WSP) (“WSP” or the “Corporation”) today
announced financial and operating results for the first quarter of
fiscal 2020 ended on March 28, 2020.
FIRST QUARTER 2020 FINANCIAL
HIGHLIGHTS
Operational performance in line with
Management's expectations during the first quarter of 2020. Net
earnings were mainly impacted by non-cash items resulting from
extreme market volatility.
- Revenues and net revenues* for the
quarter reached $2.2 billion and $1.7 billion, up 1.7% and 4.4%,
respectively, compared to Q1 2019. Organic growth in net revenues
achieved 1.1% for the quarter. Excluding the impact of one less
billable day in Q1 2020 compared to Q1 2019, our performance in
Western Canada affected by the impact of the depressed oil and gas
industry and the performance of our Asian operations affected by
the COVID-19 pandemic, organic growth in net revenues is in-line
with Management’s expectations.
- Strong backlog* as at
March 28, 2020 stood at $8.5 billion, representing a record
high of 11.1 months of revenues, up $349.2 million or 4.3%
from $8.1 billion as at December 31, 2019 and up $607.9
million or 7.7% when compared to March 30, 2019. Backlog
organic growth reached 3.7% compared to December 31, 2019 and
5.3% compared to March 30, 2019.
- Adjusted EBITDA* in the quarter of
$218.4 million, up $1.5 million or 0.7%, compared to $216.9 million
in Q1 2019. Adjusted EBITDA margin* for the quarter reached 12.6%,
compared to 13.0% in Q1 2019. Adjusted EBITDA is in line with
Management's expectations despite one less billable day in Q1 2020
compared to Q1 2019 and severances recorded in the quarter
resulting from the continuous optimization of our operations.
- Earnings before net financing
expense and income taxes in the quarter of $88.0 million, down
$7.9 million, or 8.2%, compared to Q1 2019, mainly due to
higher amortization and depreciation related to recent
acquisitions.
- Net earnings attributable to
shareholders for the quarter of $14.2 million, or $0.13 per share,
down from $63.6 million, or $0.61 per share, in Q1 2019. The
decrease is mainly attributable to extreme market volatility
resulting in a non-cash reduction in value of investments related
to a US employees' deferred compensation plan and the reduction in
value of foreign exchange forward contracts existing at the end of
the quarter which will be used to hedge future transactions, as
well as higher amortization and depreciation related to recent
acquisitions.
- Adjusted net earnings* for the
quarter of $47.5 million, or $0.45 per share, down $8.9 million and
$0.09, respectively, compared to Q1 2019. The decrease is mainly
due to higher amortization and depreciation related to recent
acquisitions.
- DSO* as at March 28, 2020
stood at 77 days, compared to 78 days as at March 30,
2019.
- Cash inflows from operating
activities of $3.2 million in the three-month period ended
March 28, 2020, compared to $27.7 million in the
comparable period in 2019.
- Free cash outflow* of
$90.3 million for the quarter. Trailing twelve-months of free
cash flow amounted to $409.5 million, representing 173% of net
earnings attributable to shareholders.
- Incorporating a full twelve-month
adjusted EBITDA for all acquisitions, net debt to adjusted EBITDA
ratio* stood at 1.3x, within Management's target range, and
slightly higher than 1.1x as at December 31, 2019 due mainly
to non-cash foreign exchange impacts resulting from market
volatility in March 2020.
- Quarterly dividend declared of $0.375 per share, with a 34.1%
Dividend Reinvestment Plan (“DRIP”) participation.
In December 2019, a novel strain of coronavirus,
COVID-19, was reported in China and has now spread globally. In
March 2020, the World Health Organization officially declared
COVID-19 a pandemic. Containment efforts implemented by governments
around the world have intensified, causing broad disruptions in the
global economy.
In response to the pandemic, the Corporation has
implemented business continuity plans with most of its people
currently working remotely. Leveraging technology investments, our
people are collaborating to deliver projects and pursue new
assignments. In most of WSP’s major hubs, many of the services or
projects are considered as essential services and the Corporation
has, to date, maintained good productivity levels and our clients
have thus far generally remained committed to their projects,
particularly in the public sector. In Hong Kong and mainland China,
the Corporation has, since early March, seen an improvement in its
operations. Lastly, the first quarter of 2020 has seen a high level
of volatility and uncertainty in the oil and gas sector.
The Corporation has proactively implemented
measures to adjust its cost structures and has postponed
non-essential capital expenditures. WSP is closely following
developments in each of the regions in which it operates and will
consider additional initiatives if warranted.
“In addressing the complex and evolving
challenges created by the COVID-19 pandemic, our top priority
remains to ensure the health and safety of our employees, clients,
and the communities in which we operate. The resilience our
people have demonstrated as they transitioned almost immediately to
a new way of working has been remarkable,” said Alexandre
L’Heureux, WSP’s President and CEO. “I am pleased with the
operational performance of our regions for the first quarter, which
is in line with our expectations. As for the second quarter, we
have two objectives. The first is to maintain our free cash flow in
excess of net earnings for the trailing twelve-month period ending
with the second quarter. The second is to maintain an adjusted
EBITDA margin profile similar to the second quarter of 2019,
excluding any non-recurring expenses related to the adjustments to
our cost structures. For the third and fourth quarters, we
expect to have similar ambitions and will reassess these in light
of future developments. Moreover, our April results are better than
we had expected going into the month. We have entered this crisis
in a strong position and I am confident that, with our diversified
business model, our engaged people and the disciplined management
of our global business, we will come out of this pandemic on the
other side an equally strong organization,” he added.
OUTLOOK FOR 2020As announced on
April 15, 2020, WSP recognized the unprecedented uncertainty it is
facing and withdrew the 2020 financial outlook provided on February
26, 2020.
DIVIDENDThe Board of WSP
declared a dividend of $0.375 per share. This dividend will be
payable on or about July 15, 2020, to shareholders of record at the
close of business on June 30, 2020.
FINANCIAL REPORTThis release
includes, by reference, the 2020 first quarter financial reports,
including the unaudited interim consolidated financial statements
and the Management’s Discussion & Analysis (“MD&A”) of the
Corporation.
For a copy of our 2020 first quarter financial
results, including the MD&A and the unaudited interim
consolidated financial statements, please visit our website at
www.wsp.com.
CONFERENCE CALLWSP will hold a
conference call at 8 a.m. (Eastern Time) on May 7, 2020 to discuss
these results.To participate in the conference call, dial
1-647-427-2309 or 1-866-521-4907 (toll free).A presentation of the
2020 first quarter results and fiscal highlights will be available
on the same day at www.wsp.com in the Investors section, under
Presentations & Events.The conference call and slide show
presentation will also be broadcast live and archived in the
Investors section of the WSP website.
RESULTS OF OPERATIONS
|
Three months
ended |
(in millions of dollars, except number of shares and per share
data) |
March 28, 2020 |
March 30, 2019 |
Revenues |
$2,210.0 |
$2,173.6 |
Less: Subconsultants and
direct costs |
$473.9 |
$510.2 |
Net revenues* |
$1,736.1 |
$1,663.4 |
Earnings before net
financing expense and income taxes |
$88.0 |
$95.9 |
Net financing expense |
$68.3 |
$10.7 |
Earnings before income taxes |
$19.7 |
$85.2 |
Income tax expense |
$5.4 |
$23.2 |
Net earnings |
$14.3 |
$62.0 |
Net earnings
attributable to: |
|
|
Shareholders of WSP Global
Inc. |
$14.2 |
$63.6 |
Non-controlling interests |
$0.1 |
$(1.6) |
Basic net earnings per share |
$0.13 |
$0.61 |
Diluted net earnings
per share |
$0.13 |
$0.61 |
Basic weighted average number of shares |
106,086,809 |
104,768,837 |
Diluted
weighted average number of shares |
106,291,753 |
105,031,582 |
*Non-IFRS measures. These measures are defined in section 20,
“Glossary of non-IFRS measures and segment reporting measures” and
reconciliations to IFRS measures can be found in section 9,
"Financial Review" and section 10, "Liquidity" of the Management's
Discussion & Analysis for the quarter ended
March 28, 2020.
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
References to notes
refer to notes in the financial statements
As at |
March 28, 2020 |
December 31, 2019 |
|
$ |
$ |
Assets |
|
|
Current
assets |
|
|
Cash and cash equivalents
(note 13) |
902.6 |
255.6 |
Trade receivables and other
receivables |
1,842.8 |
1,767.8 |
Cost and anticipated profits
in excess of billings |
1,174.8 |
995.7 |
Other financial assets |
103.3 |
114.5 |
Prepaid expenses |
106.8 |
104.2 |
Income taxes receivable |
22.8 |
18.8 |
|
4,153.1 |
3,256.6 |
Non-current
assets |
|
|
Right-of-use assets |
944.2 |
913.4 |
Property and equipment |
348.1 |
347.7 |
Intangible assets |
350.4 |
355.4 |
Goodwill (note 9) |
3,729.3 |
3,568.8 |
Deferred income tax
assets |
169.8 |
145.8 |
Other assets |
93.3 |
88.4 |
|
5,635.1 |
5,419.5 |
Total assets |
9,788.2 |
8,676.1 |
|
|
|
Liabilities |
|
|
Current
liabilities |
|
|
Accounts payable and accrued
liabilities |
1,693.8 |
1,650.7 |
Billings in excess of costs
and anticipated profits |
685.1 |
629.0 |
Income taxes payable |
130.5 |
125.3 |
Provisions |
63.5 |
71.8 |
Dividends payable to
shareholders (note 12) |
39.8 |
39.7 |
Current portion of lease
liabilities |
236.9 |
211.7 |
Current portion of long-term
debt (note 10) |
309.8 |
307.8 |
|
3,159.4 |
3,036.0 |
Non-current
liabilities |
|
|
Long-term debt (note 10) |
1,965.1 |
1,091.9 |
Lease liabilities |
852.0 |
838.9 |
Provisions |
83.5 |
72.8 |
Retirement benefit
obligations |
207.4 |
213.4 |
Deferred income tax liabilities |
94.5 |
91.2 |
|
3,202.5 |
2,308.2 |
Total liabilities |
6,361.9 |
5,344.2 |
|
|
|
Equity |
|
|
Equity attributable to
shareholders of WSP Global Inc. |
3,425.2 |
3,330.8 |
Non-controlling interests |
1.1 |
1.1 |
Total equity |
3,426.3 |
3,331.9 |
Total liabilities and equity |
9,788.2 |
8,676.1 |
INTERIM CONSOLIDATED STATEMENTS OF CASH
FLOWSReferences to notes refer to notes in the financial
statements
For the three-month periods ended |
March 28, 2020 |
March 30, 2019 |
|
$ |
$ |
Operating
activities |
|
|
Net earnings |
14.3 |
62.0 |
Adjustments (note
13) |
97.3 |
94.7 |
Net financing expense (note
7) |
68.3 |
10.7 |
Income tax expense |
5.4 |
23.2 |
Income taxes paid |
(25.1) |
(20.4) |
Change in non-cash working
capital items (note 13) |
(157.0) |
(142.5) |
Cash inflows from operating activities |
3.2 |
27.7 |
Financing
activities |
|
|
Net proceeds of long-term
debt |
803.1 |
64.0 |
Lease payments |
(70.4) |
(65.4) |
Net financing expenses
paid |
(23.5) |
(11.8) |
Dividends paid to shareholders
of WSP Global Inc. |
(22.9) |
(19.6) |
Dividends paid to a
non-controlling interest |
(0.1) |
— |
Issuance of common shares, net
of issuance costs |
— |
0.1 |
Cash inflows (outflows) from financing
activities |
686.2 |
(32.7) |
Investing
activities |
|
|
Net disbursements related to
business acquisitions |
(44.8) |
(4.7) |
Additions to property and
equipment, excluding business acquisitions |
(16.5) |
(22.6) |
Additions to identifiable
intangible assets, excluding business acquisitions |
(6.9) |
(4.4) |
Dividends received from
associates |
3.8 |
— |
Additional investment in
associates and joint ventures |
— |
— |
Proceeds from disposal of
property and equipment |
0.3 |
6.5 |
Cash outflows from investing activities |
(64.1) |
(25.2) |
Effect
of exchange rate change on cash and cash equivalents |
27.9 |
(6.4) |
Change in net cash and
cash equivalents |
653.2 |
(36.6) |
Cash and cash equivalents, net of bank overdraft –
beginning of the period |
237.3 |
253.9 |
Cash and cash equivalents, net of bank overdraft - end of
period (note 13) |
890.5 |
217.3 |
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 first quarter ended March 28, 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.
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 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, objective for second quarter to maintain
the Corporation’s free cash flow in excess of net earnings and an
adjusted EBITDA margin profile similar to same quarter last year
and WSP's expectation regarding timing of a revised outlook.
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 May 6, 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
COVID-19 on the Corporation’s businesses, operating results, cash
flows and/or financial condition, including the effect of measures
implemented as a result of COVID-19.
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 Management’s Discussion and
Analysis for the year ended December 31, 2019 and for the quarter
ended March 28, 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.comPhone: 438-843-7317
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