WSP Global Inc.
TSX : WSP

WSP Global Inc.

November 08, 2016 08:00 ET

WSP Reports Strong Q3 2016 Financial Results

MONTREAL, QUEBEC--(Marketwired - Nov. 8, 2016) - WSP Global Inc. (TSX:WSP) ("WSP" or the "Corporation") today announced its financial and operating results for the third quarter of fiscal 2016 ended September 24, 2016.

THIRD QUARTER FINANCIAL HIGHLIGHTS

Solid financial performance for the quarter. Consolidated organic growth in net revenues of 1.7% and adjusted EBITDA margin of 12.4%.

  • Revenues and net revenues of $1,552.5 million and $1,189.8 million, up 3.3% and 5.8%, respectively, compared to Q3 2015, mainly due to acquisition growth. Consolidated organic growth in net revenues for the period stood at 1.7%, and was flat year-over-year, in line with expectations.
  • Adjusted EBITDA of $147.2 million, up $21.0 million or 16.6%, compared to Q3 2015.
  • Adjusted EBITDA margin at 12.4%, compared to 11.2% in Q3 2015.
  • Net earnings attributable to shareholders of $63.3 million, or $0.63 per share, compared to $50.4 million or $0.55 per share in Q3 2015.
  • Adjusted net earnings excluding amortization of intangible assets relating to acquisitions of $77.2 million, or $0.77 per share, compared to $74.0 million, or $0.81 per share in Q3 2015.
  • Backlog at $5,371.2 million, representing 10.3 months of revenues, down $296.2 million or 5.2% compared to Q2 2016, mainly due to timing of contract awards, and up $479.6 million or 9.8% compared to Q3 2015.
  • DSO stood at 87 days, compared to 82 days in Q2 2016, and was stable when compared to Q3 2015.
  • Quarterly dividend declared of $0.375 per share, with a 56.8% Dividend Reinvestment Plan ("DRIP") participation.
  • Net debt to adjusted EBITDA ratio at 1.9x; incorporating full 12-month adjusted EBITDA for all acquisitions, the ratio stands at 1.8x, in line with our target range.
  • Full year 2016 outlook updated as follows: net revenues and adjusted EBITDA ranges narrowed to $4,700.0-$4,900.0 million and $485.0-$505.0 million, respectively; capital expenditures and acquisition & integration costs slightly increased.

Commenting on the performance for the quarter, Alexandre L'Heureux, President and CEO of WSP said: "I am pleased with our performance in the third quarter as we achieved overall positive organic growth and continued to increase our adjusted EBITDA margin, which stands at 12.4% for the quarter and 10.2% for the first nine months of the year. This performance once again demonstrates the strength of our business model based on geographical and sector diversification, and was accomplished despite the challenges in the Canadian region. On the M&A front, we will aim to continue to expand our global presence and deepen our technical expertise, in the same way as we have successfully achieved this year, with the addition of 2,500 employees across the globe. The recent acquisition of Mouchel Consulting is consistent with this objective and we are pleased to welcome our new colleagues to the team."

DIVIDEND

The Board of WSP declared a dividend of $0.375 per share. This dividend will be payable on or about January 15, 2017, to shareholders of record at the close of business on December 31, 2016.

FINANCIAL REPORT

This release includes, by reference, the 2016 third 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 full financial results for the third quarter of 2016, including the MD&A and the unaudited interim consolidated financial statements, please visit our Website at www.wsp-pb.com.

CONFERENCE CALL

WSP will hold a conference call at 4 p.m. (Eastern Time) on November 8, 2016, to discuss these results. The telephone numbers to access the conference call are 1-647-788-4922 or 1-877-223-4471 (toll-free).

A presentation of the third quarter of 2016 highlights and results will be available on the same day at www.wsp-pb.com in the Investors section, under Presentations & Events.

A replay of the call will be available until November 18, 2016. The telephone numbers to access the replay of the call are 1-416-621-4642 or 1-800-585-8367 (toll-free), access code 77044178. The replay of the conference call will also be available in the Investor section of the WSP website under Presentations & Events, in the days following the event.

RESULTS OF OPERATIONS

Q3 YTD
2016 2015 2016 2015
(in millions of dollars, except number of shares and per share data) For the
period from
June 26 to
September 24
For the
period from
June 28 to
September 26
For the
period from
January 1 to
September 24
For the
period from
January 1 to September 26
Revenues $1,552.5 $1,503.0 $4,581.2 $4,403.9
Less: Subconsultants and direct costs $362.7 $378.1 $1,013.8 $1,165.3
Net revenues* $1,189.8 $1,124.9 $3,567.4 $3,238.6
Personnel costs $884.5 $839.7 $2,717.0 $2,484.4
Occupancy costs $56.9 $54.0 $170.9 $158.1
Other operational costs(1) $101.5 $105.1 $318.0 $283.4
Share of earnings of associates $(0.3 ) $(0.1 ) $(2.2 ) $(4.8 )
Adjusted EBITDA* $147.2 $126.2 $363.7 $317.5
Acquisition and integration costs* $5.3 $16.1 $17.8 $(26.4 )
Amortization of intangible assets $20.5 $17.9 $60.7 $54.4
Depreciation of property, plant and equipment $18.5 $16.1 $54.7 $44.6
Financial expenses $10.1 $7.9 $29.2 $32.8
Share of depreciation of associates $0.3 $0.1 $1.1 $1.0
Earnings before income taxes $92.5 $68.1 $200.2 $211.1
Income-tax expense $29.6 $17.4 $57.1 $35.8
Share of tax of associates $- $- $0.4 $1.1
Net earnings $62.9 $50.7 $142.7 $174.2
Attributable to:
- Shareholders $63.3 $50.4 $143.1 $174.1
- Non-controlling interests $(0.4 ) $0.3 ($0.4 ) $0.1
Basic net earnings per share $0.63 $0.55 $1.43 $1.94
Diluted net earnings per share $0.63 $0.55 $1.43 $1.94
Basic weighted average number of shares 100,715,048 90,951,158 100,192,698 89,697,238
Diluted weighted average number of shares 100,751,886 91,010,663 100,222,875 89,733,790
* Non-IFRS measures are described in the 'Glossary' section
(1) Other operational costs include operation exchange loss or gain and interest income

NON-IFRS MEASURES

The 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 EBITDA before Global Corporate costs; adjusted EBITDA margin before Global Corporate costs; adjusted net earnings (loss); adjusted net earnings (loss) per share; adjusted net earnings (loss) excluding amortization of intangible assets related to acquisitions; adjusted net earnings (loss) excluding amortization of intangible assets related to acquisitions per share; acquisition and integration costs; backlog; funds from operations; funds from operations per share; free cash flow; free cash flow per share; days sales outstanding (or DSO) and net debt to adjusted EBITDA. These measures are defined below.

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 meaning 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.

Net revenues

Net revenues are defined as revenues less direct costs for subconsultants and other direct expenses that are recoverable directly from the clients. Net revenues are not an IFRS measure and do not have a standardized definition within IFRS. Therefore, net revenues may not be comparable to similar measures presented by other issuers. Investors are advised that net revenues should not be construed as an alternative to revenues for the period (as determined in accordance with IFRS) as an indicator of the Corporation's performance.

Adjusted EBITDA

Adjusted EBITDA is defined as earnings before financial expenses, income tax expenses, depreciation and amortization and acquisition and integration costs. Adjusted EBITDA is not an IFRS measure and does not have a standardized definition within IFRS. Investors are cautioned that adjusted EBITDA should not be considered an alternative to net earnings for the period (as determined in accordance with IFRS) as an indicator of the Corporation's performance, or an alternative to cash flows from operating, financing and investing activities as a measure of the liquidity and cash flows. The Corporation's method of calculating adjusted EBITDA may differ from the methods used by other issuers and, accordingly, the Corporation's adjusted EBITDA may not be comparable to similar measures used by other issuers.

Adjusted EBITDA margin

Adjusted EBITDA margin is defined as adjusted EBITDA expressed as a percentage of net revenues. Adjusted EBITDA margin is not an IFRS measure.

Adjusted EBITDA before Global Corporate costs

Adjusted EBITDA before Global Corporate costs is defined as adjusted EBITDA excluding Global Corporate costs. Global Corporate costs are expenses and salaries related to centralized functions, such as global finance, human resources and technology teams, which are not allocated to operating segments. This measure is not an IFRS measure. It provides Management with comparability from one region to the other.

Adjusted EBITDA margin before Global Corporate costs

Adjusted EBITDA margin before Global Corporate costs is defined as adjusted EBITDA before Global Corporate costs expressed as a percentage of net revenues. Adjusted EBITDA margin before Global Corporate costs is not an IFRS measure. It provides Management with comparability from one region to the other.

Adjusted net earnings (loss) and adjusted net earnings (loss) per share

Adjusted net earnings (loss) is defined as net earnings (loss) attributable to shareholders excluding acquisition and integration costs and the income tax effects related to these costs. Adjusted net earnings (loss) is not an IFRS measure. It provides a comparative measure of the Corporation's performance in a context of significant business combinations in which the Corporation may incur significant acquisition and integration costs, which the Corporation believes should be excluded in understanding the underlying operational financial performance achieved by the Corporation.

Adjusted net earnings (loss) per share is calculated using the basic weighted average number of shares.

Adjusted net earnings (loss) excluding amortization of intangible assets related to acquisitions and adjusted net earnings (loss) excluding amortization of intangible assets related to acquisitions per share

Adjusted net earnings (loss) excluding amortization of intangible assets related to acquisitions (net of income taxes) is defined as adjusted net earnings (loss) attributable to shareholders excluding the amortization of backlogs, customer relationships, non-competition agreements and trade names accounted for in business combinations and the income tax effects related to this amortization. Adjusted net earnings (loss) excluding amortization of intangible assets related to acquisitions (net of income taxes) is not an IFRS measure. It provides a comparative measure of Corporation performance in a context of significant business combinations.

Adjusted net earnings (loss) excluding amortization of intangible assets related to acquisitions (net of income taxes) per share is calculated using the basic weighted average number of shares.

Acquisition and integration costs

Acquisition and integration costs pertain to transaction and integration costs related to business acquisitions (up to 24 months from the date of acquisition) as well as any gains or losses made on disposals of non-core assets. In 2015, acquisition and integration costs included gains made on the disposal of equity investments in associates. Acquisition and integration costs is not an IFRS measure. Acquisition and integration costs are items of financial performance which the Corporation believes should be excluded in understanding the underlying operational financial performance achieved by the Corporation.

Backlog

Backlog is not an IFRS measure. It represents future revenues stemming from existing signed contracts to be completed. The Corporation's method of calculating backlog may differ from the methods used by other issuers and, accordingly, may not be comparable to similar measures used by other issuers.

Funds from operations and funds from operations per share

Funds from operations is not an IFRS measure. It provides Management and investors with a proxy for the amount of cash generated from (used in) operating activities before changes in non-cash working capital items.

Funds from operations per share is calculated using the basic weighted average number of shares.

Free cash flow and free cash flow per share

Free cash flow is not an IFRS measure. It provides a consistent and comparable measurement of discretionary cash generated by and available to the Corporation. Free cash flow is defined as cash flows from operating activities as reported in accordance with IFRS, plus discretionary cash generated by the Corporation from other activities (if any), less net capital expenditures.

Free cash flow per share is calculated using the basic weighted average number of shares.

Days Sales Outstanding ("DSO")

DSO is not an IFRS measure. It represents the average number of days to convert our trade receivables and costs and anticipated profits in excess of billings into cash, net of sales taxes. The Corporation's method of calculating DSO may differ from the methods used by other issuers and, accordingly, may not be comparable to similar measures used by other issuers.

Net Debt to adjusted EBITDA

Net Debt to adjusted EBITDA is not an IFRS measure. It is a measure of our level of financial leverage net of our cash and is calculated on our trailing twelve month adjusted EBITDA.

ABOUT WSP

As one of the world's leading professional services firms, WSP provides technical expertise and strategic advice to clients in the Property & Buildings, Transportation & Infrastructure, Environment, Industry, Resources (including Mining and Oil & Gas) and Power & Energy sectors. WSP also offers highly specialised services in project delivery and strategic consulting. Its experts include engineers, advisors, technicians, scientists, architects, planners, surveyors and environmental specialists, as well as other design, program and construction management professionals. With approximately 36,500 people in 500 offices across 40 countries, WSP is well positioned to deliver successful and sustainable projects under its WSP and WSP / Parsons Brinckerhoff brands. www.wsp-pb.com.

Forward-looking statements

Certain information regarding WSP contained herein may constitute forward-looking statements. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. 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. 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, 2015 and the third quarter ended September 24, 2016, 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.

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