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Fast-growing WSP Global boosts Q1 profit after Louis Berger purchase

MONTREAL - WSP Global Inc. bolstered revenues and profit in its first full quarter with Louis Berger Holdings Inc. under its umbrella, as the Quebec engineering giant aims to continue its rapid expansion.

The company saw its net earnings jump more than 10 per cent from a year ago to $62 million.

The gain came largely due to its $400-million purchase, completed in December, of the New-Jersey-based Louis Berger engineering and design firm.

WSP chief executive Alexandre L'Heureux said the Montreal-based company has started to integrate Louis Berger's 5,000 employees.

"In the first quarter it was quite hard to (realize) some of those revenue synergies or cost synergies from the transaction," he said on a conference call with investors Tuesday. "I can tell you the integration is going very well. The U.S. team is already working closely with the Louis Berger team."

L'Heureux said it would take "a bit of time" to bring Louis Berger's "skewed" cost base -- "its people, its real estate...its project management" -- in line with WSP's standard.

Once a boutique firm, the 60-year-old WSP has swelled to 48,000 employees from 17,000 in 2014, and aims to exceed rival SNC-Lavalin Group Inc. with 65,000 workers in the next three years.

Beefed up by 29 company acquisitions since 2015, WSP's ongoing expansion has not come at the cost of excessive leverage, which positions the company to complete additional acquisitions," said RBC Dominion Securities analyst Derek Spronck.

"And as Louis Berger more fully integrates in the back-half of the year, we expect increasingly strong results to be delivered and further margin expansion as costs are taken out with Louis Berger further optimized," Spronck said in a research note.

Frederic Bastien, an analyst at Raymond James, said he was bullish "over and beyond our forecast horizon" for WSP, which reiterated its sunny 2019 outlook of between $950 million and $1 billion in adjusted earnings.

"In our opinion, this low-risk, fee-based business has grown so diverse that no one sector or region can veer it off course," Bastien said in a note to clients.

WSP's strategic plan, unveiled in January, forecasts double-digit annual revenue growth through 2021, when it expects to rake in up to $9 billion.

The engineering firm said its $62-million profit -- up from $49.7 million in the same quarter last year -- amounted to 61 cents per diluted share for the quarter ended March 30, compared with a profit of 48 cents a year earlier.

Revenue totalled $2.17 billion, up from $1.91 billion in the first three months of 2018.

On an adjusted basis, WSP said it earned 67 cents per share in its latest quarter.

Analysts on average had expected a profit of 65 cents per share, according to Thomson Reuters Eikon.

The company's $7.87-billion backlog was up by $194.4 million, or 1.4 per cent, compared with the fourth quarter of 2018 and up 17 per cent from a year ago.

Companies in this story: (TSX:WSP, TSX:SNC)


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