WSP reports lower profits but higher revenue, adds RPS Group to buying spree

Dive Brief:

  • Engineering and design giant WSP saw revenues rise and profits slump in Q2 as it posted a record-high backlog, according to a company release. The Montreal-based firm posted profits of $69.3 million ($89.3 CAD), down 26% year over year on revenue of $2.14 billion, a 5% increase from last year. The results missed analysts’ expectations, per stock analysis site Seeking Alpha.
  • WSP also announced the acquisition of RPS Group, a U.K.-based environmental consulting firm with about 5,000 employees, for $714 million. RPS’s sustainability expertise will help WSP advance its goal of building a leading ESG consulting firm to help clients transition to a low-carbon world, WSP leaders said. 
  • The firm’s backlog, which encompasses jobs won but not started, increased to $8.88 billion, up 19% from this period last year. “I’m confident that the momentum we have built in the first half of the year will carry us through the rest of 2022 and beyond,” WSP CEO and President Alexandre L’Heureux said during a Tuesday webcast.

Dive Insight:

Despite economic headwinds, the company continues to see growth across its markets, according to L’Heureux. 

“While there is much discussion about the global macroeconomic environment following the widespread rise of inflation and interest rates, our firm continues to witness strong market conditions,” said L’Heureux. 

Big buyer

WSP also recently announced it would acquire the environmental and infrastructure arms of UK-based John Wood Group for $1.81 billion, Australian hazardous materials and risk management firm Greencap Holdings, Spain-based architecture and engineering firm BOD Arquitectura e Ingeniería as well as two U.K.-based Capita businesses focused on real estate, infrastructure and environment. 

L’Heureux said RPS provides a valuable international network of sustainability experts with knowledge of carbon capture and more, which should enable WSP to expand its front-end environmental consulting services. WSP is growing its climate-related work as part of its 2022-2024 Global Strategic Action Plan, and the company is on a buying spree to meet strong demand for environmental services.

L’Heureux said the acquisitions will bring 12,000 new professionals on board in the coming quarters, and that its workforce also saw strong organic growth Q2, with 1,700 new staff.

The company posted a quarterly dividend of 29 cents per share, or $34.38 million. Its total liabilities stand at $4.98 billion.

Looking ahead

Matt Arnold, analyst with St. Louis, Missouri-based financial services firm Edward Jones, said there were few surprises in the call as growth persists for WSP, but its acquisition of RPS Group is notable.

“[RPS has] a big focus on environmental consulting and water, which is going to be an area that should do really, really well as businesses raise their ESG game,” Arnold said. “So strategically, this seems to be really good. This is a company that has done a really good job of acquiring businesses and integrating them and getting a lot out of them.”

Stock prices for WSP stood at $122.27 yesterday at market close, and fell to $117.45 this morning before showing slight recovery as the day progressed

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