WSP CEO 'absolutely' sees company in same league as McKinsey as growth spree persists

MONTREAL — The head of WSP Global Inc. says it aims to keep growing apace following the latest spate of acquisitions, as he looks to vault it into the same competitive arena as the world's largest professional services firms.

Asked by an analyst Thursday whether he could envision a time when WSP competes more with the likes of global consulting giants Deloitte and McKinsey than pure-play engineering firms, CEO Alexandre L'Heureux replied unequivocally: "Absolutely."

"In my mind, we're not competing against peers in our industries; we're competing against all the management consulting firms, all of the engineering firms, all the IT firms.

"I don't like to put WSP into a box. And we are already competing with the Big Four firms in many instances," he said, referring to Deloitte, KPMG, PricewaterhouseCoopers and Ernst & Young.

"We bump into them all the time."

The engineering outfit projects revenue growth of 19 per cent this year to between $10 billion and $10.6 billion. It also forecasts an 18 per cent jump in adjusted earnings.

McKinsey's annual revenue exceeds US$15 billion. Its head count stands at 38,000, versus WSP's 66,000-plus. Deloitte's 410,000-plus workers drew in revenue of nearly US$28 billion last year.

L'Heureux said the broader WSP footprint will come from more acquisitions as well as organic net revenue growth, which it pegs at three to six per cent this year following a record 7.3 per cent organic growth in 2022.

The CEO's comments came on a conference call to discuss the company's latest results. WSP reported a profit of $120 million for the quarter ended Dec. 31, down 5.3 per cent from the same period a year earlier.

Nonetheless, the expected boost in net revenue this year reflects "strong prospects for the U.S. and Canadian operations, coupled with a more cautious outlook" in the U.K. and Europe, Raymond James analyst Frederic Bastien said in a note to investors.

WSP has closed six acquisition deals since June — including the 35,000-strong British environment and infrastructure business of John Wood Group — and more than 120 since 2006.

Once a boutique firm called Genivar, the 64-year-old company has more than doubled its head count over the past decade, swelling to 66,200 employees with an additional 10,900 in 2022.

Earnings last quarter came not just from new purchases but from organic revenue growth, which jumped a better-than-expected 4.8 per cent. "But growth from M&A was below expectations, leading to a modest revenue miss," Bastien said.

The company projected between $1.76 billion and $1.84 billion in adjusted earnings this year, versus $1.53 billion in 2022.

L'Heureux exuded confidence despite uncertain economic forecasts.

"It's a bit of a schizophrenic environment. You watch the news, you look at the data ... you wonder how on the ground it's being felt in our industry. But I must admit that at this point in time we are not seeing any area of weakness," he said, pointing to WSP's environmental, transportation, and property and building segments.

The three areas made up 42 per cent, 32 per cent and 17 per cent, respectively, of its net revenues last year.

This report by The Canadian Press was first published March 9, 2023.

Companies in this story: (TSX:WSP)

Christopher Reynolds, The Canadian Press