Q4 2019 Earnings Call

<unk> conference call and webcast.

Well now I'd like to certain meeting over to you said that <unk> senior Vice President Investor Relations and communication I thought it might that might change.

Thank you and good morning, everyone. That's what they can you just time to join the discourse during which we wouldn't be discussing our Q4 and it's good fortune Nike performance.

A tradition, we have today or unexplained over a pretty doesn't feel and I'd be sure. Our CFO. Please note that can be scored its access you, but on the website a jet west coast.

The board, we may be making some for one of these segments and actually results would be different from expressed or implied we undertake no obligation to update or revise any of these fitments driven factors that could cause actual results could differ materially from these forward looking statements.

Listed in our most recent MDN it we've got no summed up whatever to what extent going.

Thank you Isabel and good morning, everyone as we complete the first year over 2019 2021 global strategic plan. We are pleased with our 2019 performance, which provide us provides us with a solid basis for continued growth.

We're particularly pleased with the fact that with the exception of acquisition integration and restructuring costs, we met or surpassed all of our 2019 <unk> targets.

Our three points I would like to specifically highlight on this call and they are as follows.

Firstly as we were beginning to shortly we delivered solid performance with organic growth in net revenues across all reportable segment. In addition to posting solid backlog adjusted EBITDA and cash flow generation into for 19 and for the year as a whole this puts us on solid footing.

As we enter 2020.

Secondly, we continued to strengthen or <unk> or sector expertise and extended our geographical footprint by completing these acquisitions during 2019 totaling approximately 200 million in acquired revenues and 1800 professionals.

Thirdly, we continued to take our accountability for sustainable leadership very seriously not only in the advice, we provide to our clients, but also in our own operations. We are proud trip receive an a minus score for our latest response to the Cdps annual climate change questionnaire and even.

In prouder to be the first professional services firm in the Americas to secure sustainability link terms for our syndicated credit facility.

If we look at the progress made on each of our.

2019, 2021 global strategic plan metrics I'm happy to report that we are tracking favorably towards achieving or exceeding each of them.

Let's discuss these achievements.

First clients, bringing the best of WSP to our clients is at the center of everything we do as an example, we have expanded our key account programs for both our global private sector clients and public sector clients currency all of our global sectors have diamond pipeline program in place with an emphasis on.

Management engagement and opportunity identification further solidifying the role we have to play as our clients strategic partner.

On the EPS employee front, we have continued to develop our people by delivering training and development programs. For example, we continue to push forward our global project Management Academy, a six months program tailored program management training project management is that one common element across all of our function.

And that binds the many operational disciplines together, which is why it is important to invest in our program a project managers I'm, sorry, and drive our talent to the next level.

It's also support operational excellence pillar as investing in our project management capability will not only allow us to manage our resources and inefficient matter, but to operate effectively to achieved the highest standards of client service and project delivery.

We also continued to focus our efforts on reducing and removing to health and safety risks associated with our activities.

This initiatives were carried out regionally and globally to ensure that health and safety remand remained.

Front of mind for employees by means of visible safety leadership regular communications and training, resulting in a few fewer employees being exposed to harm in our business on our journey to zero zero harm.

Our ethics and compliance team also helps sustain our continuous spotlight on ethics by working to embedded.

Principal decision, making into key processes and initiatives.

Last on the expected expertise front our teams have continued to challenge the status grow to transform the built environment through innovative forward thinking advice, an unparalleled expertise.

Where do we are designing the next iconic building into by providing strategic insights on a complex large scale rail project, providing access to Britons busiest airport. Our experts are committed to finding solutions that help our clients and communities to thrive in an ever changing work.

Yes.

In conclusion, all of this favorably position us to meet our 2019 2021 global strategic plan targets and I would like to thank all of our leaders and employees for performance and for their continued dedication to WSP.

We are especially proud to have delivered such a performance while delivering good returns to our shareholders.

Let me now take a moment to discuss our operational and financial performance in greater detail.

Organically 2019 as seen growth in net revenues across all of our reportable operating segments. This past year, we have completed projects of varying sizes and complexities, allowing us to provide lasting solution for the development and the betterment of the communities within which we operate.

Great.

This growth has also been nurtured by our ability to seize various opportunities for clients as a result of our capacity to cross sell expertise translating into improved project delivery. This proves not only that we are trust a trusted advisor to our clients, but also a strategic partner.

Fiscal 2019, net revenues were 6.9 billion up 14.4% year over year, while organic growth in net revenues stood at 3.5%.

Adjusted EBITDA was 1 billion, but the adjusted EBITDA margin of 15.1% 410 basis points higher than last year, mainly resulting from the adoption I FRS 16.

Excluding IRS 16, adjusted EBITDA margins would have been would allow us to that.

7.4% hired and 11% reported last year.

Lastly, our backlog continues to increase.

And reach 8.1 billion, representing 10.6 months of revenues. The backlog included organic growth of 3.6%, which is a positive indicator of expected future revenues.

Let me now turn to operational performance.

During the course of 19, we acquired eight companies three of which were completed in the fourth quarter through these acquisitions. We added approximately 2000 employees to our workforce, mainly attributable to our environmental sector and area. We have targeted for growth in art 1921 global strategic.

Glenn.

We also entered new geographies, Denmark, and Netherlands, and in addition to building bench trained and environmental sector, we reinforce our expertise and buildings and strategic advisory services.

Early this year, we closed the acquisition of LT environmental into United States further expanding our presence in the us and expertise and the environmental sector.

All these acquisitions were finance using our cash on hand and credit facilities.

Let me take this opportunity to once again welcome all of our new colleagues to the WSP family.

Regarding the performance over regions, Canada posted organic net revenue growth of 1.2% and delivered segmented adjusted EBITDA and adjusted EBITDA margin of 207 million and 19.4% respectively. The highest margin among all of our reportable operating segment.

Yes.

We are pleased with this performance as it was achieved despite project delays and transportation projects in Ontario.

When compared to the same period last year, our backlog in Canada grew 7.5% organically significant project wins, such as the Twining of Highway 104 project in Nova Scotia, as the result of combining a local presence with our global expertise and transportation.

With an expanded pipeline of opportunities, especially in the infrastructure sector. We expect this momentum to continue and are optimistic about the long term prospects and the keyed in markets.

The Americas operating segment posted 3.1% organic growth in net revenues and overall strong net revenue rose a growth of 31.2% for the year stemming mainly from the acquisition of was Burger the.

The region delivered segmented adjusted EBITDA and adjusted EBITDA margin of 460 million, an 18% respectively.

The pipeline of opportunities for the Americas remained high in Q4 and as previously mentioned during our last conference call. We have started to work on the Preconstruction phase of the multibillion dollar, Texas High speed rail project, providing civil and structural works engineering.

Now turning to the EMEA operating segments WSP delivered organic net revenue growth of 2.1% inline with our expectation.

We had a strong year in Sweden, which delivered organic growth in net revenue of 3.3%.

While Brexit continued to create some uncertainty in the UK. The team delivered a solid performance at 3% organic growth in net revenues for the entire year. Following the yearend. Following the end of the quarter next network rail appointed WSP on the multi discipline national framework and on three single disciplined reach.

Final frameworks for the next five years, highlighting our expertise in the rail sector and adding to our backlog.

As part of this mandate, we will deliver Multidiscipline national design services, as well as electrification and plant services and the southeast northwest and Scott, Scotland regions, and civil and structural services and the southwest.

In EMEA as a whole adjusted EBITDA and related margin reached 326.8 million and 10.6% for the year, respectively, mainly as a result of the election, which took place in the UK and because of a strike and Finland.

Last our APAC operating segment posted organic net revenues of 9.3 for the year exceeding our mid single digit growth expectation. This was driven by mid teens growth in Australia and mid single digit growth in both New Zealand and Asia adjusted EBITDA unrelated margin for the APAC region.

Total 172.9 million and 15.5% for the year respectively.

Let me pause here to provide a brief update on the situation in China.

We are closely following the situation and our health and safety team. This focus on the well being of our people in the region.

During the last few weeks, we are proactively pass some of our employees across a greater China region to work from home to slow down the region could have had a could have an impact on Chinese operation.

However, we do not expect this drop in material impact as Asia represent less than 5% of our 2019 net revenues.

And some 2019 was that rewarding year and as we strengthen our business around the globe by focusing on both our organic growth and our acquisition strategy.

Alain will now review our financial results in more details and discuss our Twentytwenty outlook I'd have to you.

Thanks, Fedex and Hello, everyone for the fourth quarter revenues and net revenues were 2.2 billion and 1.8 billion, respectively, representing a solid growth of 8.1% and 14.3% compared to the same period in 2018.

Organic growth in net revenues were 4% on a constant currency basis.

For the full year revenues and net revenues were 8.9 billion and 6.9 billion growing at 12.7% and 14.4% respectful, respectively organic growth amounted to 3.5%, which marks our 10th consecutive year of organic growth.

Let's move onto adjusted EBITDA for the fourth quarter. Adjusted EBITDA was two to 66.3 million up 96.8 million or 57.1%, mainly as a result of the adoption of Biopharmas 16.

Excluding the impact of IRS 16, adjusted EBITDA would have amounted to 207.9 million.

And our adjusted EBITDA margin was 15.1%.

Or 11.8% pre IPO as far as as compared to 11% last year.

For the full year adjusted EBITDA was 1.04 billion up 57.1%.

Adjusted EBITDA margin that 15.1% up from 11% in 2018 on a pre I as far as 16 comparative basis. These number would have been 786.7 million and 11.4% respectfully respectively compared to 11.

Then last year.

Backlog stood at 8.1 billion at the end of the quarter, we're presenting approximately 10.6 months of revenues our backlog grew organically by 3.6% when compared to Q4 of 2018.

Adjusted net earnings for the quarter were 56.6 million or 53 cents per share down 2.5 million or or four cents per share respectively compared to Q4 2018.

For the full year adjusted net earnings for 2019 of 326.7 million or three dollar and 10 cents per share up 31.5 million compared to 2018.

In addition to the impacted by as far as 16. It is important to point that noncash or nonrecurring items affected our adjusted net earning in Q4 2019.

Removing the effect of these item adjusted EPS would have been three dollar and 63 cents and 90 cents.

For the full year end Q4, representing increases of 28% and 58% respect respectively. Over 2018. This performance is consistent with our adjusted EBITDA growth.

Let me explain briefly the difference.

First I FRS 16 add an impact of 5.9 million on the quarter or six cents per share or 23.2 million dollar for the full year or 22 cents per share.

Second in 2019, we renovated our largest office into United States to optimize our workspace and improve efficiency. It has resulted in a write off of accumulated leasehold improvement of 18.5 million or 18 cents per share after tax it's important to note that.

We were fully reimbursed by the landlord, which is evidenced in the cash flow statement.

Simon has been accounted for on our balance sheet and has not affected earnings.

Thirdly, we have 12 month to finalize purchase price allocation for our acquisition, which we did for as we benefit in Q4, resulting in higher intangible assets as dividends and no five to our financial statement and an amortization catch up of 10 million dollar or 10 cents per share after.

Our tax.

Lastly, we took a noncash write down a goodwill in South Africa for 3.7 million or three cents per share.

I will now review a few cash flow metrics.

For the year cash inflows from operating activities stood at 814.3 million compared to 669.7 million in 2018, our free cash flow for the year came at 441.6 million or 154% of net earning.

On our cash flow conversion target of 100% those net earnings.

At 1.1 time, our net debt to adjusted EBITDA ratio remained within our target range of one to two times and this despite us making eight acquisition without raising any equity in 2019. This provides us with sufficient leverage to continue investing inorganic and other growth initiatives.

Lastly, our days sales outstanding continue to decrease and reach 74 days at the end of 2019, a two days an improvement as compared to 2018, this improvement which was better than our expectation was the result of our team continues focus on cash collection.

During the quarter. We also declared dividend of 37.5 cents per share for shareholders of record on record as of December 31, 2019, which was paid on January 15 2020.

A 42.3% drip participation.

Net cash outlay was 22.9 million.

In conclusion, we have delivered and in many cases over delivered on all our 2019 financial outlook metrics.

I will now comment on the 2020 financial and operational outlook for each of the region.

Before I do so I'd like to remind you that the outlook for our anticipated 2020 performance is aim at assisting analysts and shareholders and refining their perspective on our performance.

It has been prepared base on foreign exchange rate effective February 26 2020.

Also please do bear in mind that we have not considered any acquisition disposal or any other transactions that may occur after today's date.

We anticipate net revenues to be in to 7.1 to 7.4 billion dollar range and to post organic growth in net revenues into too.

To 5% range adjusted EBITDA is expected to range between 1.7, and one point $12 billion. We also anticipate our quality adjusted EBITDA to range between 18.5% and 30.5% of the total annual adjusted EBITDA Q1 being the Lois.

And Q3 being the highest.

Turning to tax we expect that our effective tax rate for fiscal 2020 will be in the 26, and 30% range and we anticipate net capital expenditure to range between 140, and $150 million Capex, mainly pertains to property and equipment and intangible assets net proceeds.

Disposal and lease incentive receipts.

Turning to that we will continue to manage our capital structure to achieve a net debt to EBITDA ratio between one and two times.

Lastly, we anticipate between 40, and 50 million dollar and acquisition integration and restructuring costs driven by the end crate integration bays operational optimization real estate consolidation and restructuring related to our risk recent acquisition.

And office corporate costs in 2020 will range between 90, and 95 million compared to 85.6 million in 2019, let's now turn to the operational outlook for each of the region.

In Canada with the positive trend in the 2019 end of year performance and strengthening of our backlog. We anticipate may mid single digit organic growth in net revenue.

We also anticipate organic growth in net revenue for the Americas as the integration with merger is now complete and starting to translate into revenue synergies opportunity.

As far as Latin America is concerned we have completed the integration of multiple acquisition, which are expected to drive net revenue growth for 2020 organic growth in net revenue for the region is anticipated to be in the low to mid single digit range with some improvement in operating margin.

On a consolidated basis, we anticipate mid single digit organic growth in net revenues for the Americas reportable segment.

But the EMEA regions, we anticipate delivering organic growth in net revenue in the low single digit.

Yes. After several years a strong net revenue net revenue organic growth in the Nordic economic indicators now point towards them.

Somewhat cooling off period for Scandinavia on a positive note in the UK prospects the public sector remains solid and diminishing concern over Brexit leads us to be more optimistic than at the beginning of 2019.

We therefore anticipate organic growth in net revenues in the low to mid single digits for UK and the Nordics combined.

Other EMEA countries region, namely Central Europe, Middle East and South Africa, our to our anticipated to deliver low single digit organic growth in net revenue.

Turning to a pack we anticipate another solid year for our Australia, New Zealand operations with organic growth in net revenues to range in the mid to high single digit steaming from several large project win and a strong pipeline.

In Asia, we anticipate low single digit organic growth in net revenues for 2020 as various concerns remain in the region, particularly the economic slowdown, resulting from the current a virus infection.

Consolidated basis, we anticipate the APAC region to deliver organic growth in net revenue in the mid to high single digit this conclude our regional outlook Alex back to you.

Thank you and I am before we open the lines for questions I would like to give you a brief updates on our M&A strategy I.

I would like to make it clear however that we are not going to comment on market speculations about potential acquisitions has often mentioned in the past them and is a key element of our growth strategy and we intend to be active puts discipline discipline player in our industry really continued focus on identifying possible target.

Yes across various sectors and geographies entering that their strategy and culture, a complementary two hours.

In conclusion 2019 was a good year and the good start of our strategic plan. We therefore remain confident in our ability to meet our strategic ambitions by the end of the three year cycle.

Realized that this was a loan script. So thank you for your patience, but this was the end of the year and now I would like to open the line for questions. Thanks very much.

It seems that.

Yes.

Kevin.

Kevin can be funny.

Okay. Yes. Please go ahead.

At best topic can you Coffeyville today guest count.

We'd like to ask the question Press Star one on your telephone keypad to withdraw your question. Please.

Please hold while the composite county roster.

Your first question comes from the line of Jacob bout with RBC. Please go ahead.

Good morning.

Welcome.

Go back to your commentary on the corner virus and.

How how how are you thinking about this.

Basis, and what have you baked in here or.

Mark.

Well I talked about this already I said Jacobs that this is less than 5% those are net fees.

But that doesn't mean that because it's less than 5% net fees that we were not.

Ed.

Or not.

King.

You know.

From a health and safety point of view, where we're not taking does very seriously.

We want to make sure our people are safe we want to disrupt.

Yes.

To a minimum operation.

Clearly the fac and the matter that we have employees working from home.

Thank you would be.

I think it I don't think it would be reasonable to assume that things are exactly the same as if everybody was working full steam.

In the office with utilization is a bit down but at the same time as I said before but this is clearly mitigated by the fact that this is very very small piece of our business. So we're not changing our outlook as a result of it.

And then the ROI for 16.

Good.

I think a little higher than what you initially forecasted.

Thank you ranges to 30 to 40 to 44 for the year or how should we be thinking about that for 2020.

The first here obviously its takes time and just to adjust send that to make sure that the Oliver.

My first adjustment were were made properly so we came a bit higher.

Then from what we had the earlier estimated I think where we'd like to draw your attention. The fact that.

Year over year, we've increased almost our margin profile pre on as far as bio most about 9.5% or 0.4%.

So we're quite pleased with the progress that we've made in this year. We are clearly tracking in line with our plan and that's why I'm quite pleased about the results in this year.

In the year I'm sorry.

Last question here just on the organic growth from the in the Americas I know a little worse then.

Commentary, you made about being a little disappointing pointing to lower growth in northeast you us in Latin America.

Is this lower growth and northeast you asked is that kind of a new normal is that how we should be thinking about it.

No actually we are entering 2020 and believe it with a in a stronger position and we were at the beginning of 19.

Northeast last year, they were and for those of our peer group that are working in the northeast Theres, a very very large client that.

Reduce.

The pricing and fee by significant amount.

I think all of US were impacted by that so this is certainly had an impact in the in 19.

But I don't believe that this is the new reality.

2020 is better and we're still expecting mid single digits for the year in the U.S.

We'll leave it there. Thank you thank you Jessica.

Your next question comes on line of Monotonous Thier Laurentian Bank. Please go ahead.

Good morning, and thank you for taking my question.

Good morning, good morning.

First question with Jeff surrounding that 29 million write off I'm. Just wondering if you could further details such I believe Alan touched on.

Some renovations to the U.S. office, which drove the early termination of the lease.

Is that onetime in nature or do you expect further.

Early lease terminations or any write off.

Yes, we.

As you know and I know I've discussed this in prior calls probably not in 19, but in previous years, we've completely transform our workplace environment.

And as a result of it I lost my office.

Space and this is true for everybody.

We're trying to be more disciplined we're trying to create the collaborative environment for all of our employees and as a result of it we did transform our largest office in the World, which is New York City, and we had as a result of it to write off our old leasehold improvement. This is not a cash item.

But the good news as we will reimburse by the.

The landlord and we had an equal cash inflow for new leasehold improvements, we negotiated a very good transaction with the with.

The landlord.

And therefore, we had a cash inflow, but actually no impact on earnings.

As a result of this year. So it's to answer your question. This is a one off but this really specific to our New York office nothing more nothing less.

Okay, that's very helpful.

And then I appreciate your comments on the krona virus and your Asian operations I would just wondering as we see the virus and impact right across the globe have you experienced any contract delays bidding activity pushed out our work stoppages in Asia for outside.

No the answer is no.

So the business as usual.

And we need to remember as I said before and I wish to reiterate that at this is.

This is a very small piece of our business and it's not touching China as a whole I mean from from where we're sitting in the west we think that the entire China shutdown, but there are many places.

Our workforce is still at work there are working it's just it's part of location.

Clearly.

From a health and safety point of view, we're taking this very seriously.

But I think it would be unfair also to think that our entire Asian businesses stop that's really not the case.

Okay.

Lastly from me.

As we speak about the M&A pipeline and as per your strategic plan, we're expecting that increase in headcount by about 30% and I understand.

We don't want to comment on recently were rumors, but looking at the acquisition landscape.

Is that increased comfort around potential targets on any thoughts on whether we could see one larger transformational transaction or whether there will be a number of small or medium sized transaction.

Yes, well did this a good question you know as well as I do that timing or to try to time, a large transformational acquisition.

In the strategic plan is impossible.

Those will come.

They will come.

And often time, you don't tying them I mean, how did you ask me back in 14, if we had time in our plan to complete the Parsons Brinckerhoff acquisition I would have said no to use.

Similarly, the with Burger came our way and this was certainly part of the plan that year to acquired was birds are but.

We had identified this assets as a one day potential acquisition.

This was clearly in our and our and our list of potential targets.

Very hard to time larger size acquisitions, but the smaller size I do believe that we have the flow right now to deliver on and Thats why im feeling confident that.

With the right attention and the right discipline and focus, though we are well underway to achieve our 2021 plan.

Thank you I'll step back in queue. Thank you.

Your next question comes on line of Mark NFL with Scotiabank. Please go ahead.

Hi, good morning, guys.

Maybe just.

Questions on the guidance.

The margin it looks about flat year over year for 2020 in the guide at 15.1.

Range for 2021, the targets 15 to 16, Sir at the bottom end and again flat year over year.

Just curious.

Is it sort of just being conservative is there anything sort of in the numbers this year or anything to think about when we think it with our margin.

No. The answer is well you need to look at this in a range.

And you need to look into it.

But certainly I mean, our goal will be tried to improve our margin profile.

As as we progressed the year.

We did take a bit more of a conservative at this point in time and as we progress over the next over the year I mean, we'll see.

These risk adjustment, but for the time being we believe that that's the right approach.

Okay, that's fair.

Maybe the M&A expense and integration the 40 to 50 million.

Similar this year, it's I guess, just sitting here today and sort of what we've done or do the M&A youve done in the last year it sort of feels like a big number for this year just curious if its.

Sort of building a buffer for other smaller deals you might through through the or just any comments on that but this was mainly the result of was merger.

To remember this without being a transformational acquisition. This was a large acquisition.

So so I'd say that year over year, just probably a reasonable number to expect and that's why we dialed in and.

The outlook this year.

Sorry, the LIBOR or that was that was the 2900 number and.

Not the guide right, yes, but theres still some for instance, realestate consolidation there is a number of different cost that will.

You're not generating all of your cost synergies in one year and thought instance, real estate will will fall into the next year.

So.

That's what we're we're expecting for this year.

Maybe just one last one on a quarter the corporate costs again, there was sort of lower than we thought I think lower than your expectations.

But the guide for the share I guess was sort of call and does sorry novel sorry.

Hi is writing something next to me here, but.

That's true also if you recall when we completed a transaction in October of 18.

We had mentioned also.

We will incur some restructuring costs of was burgeon international.

And if you go back to press release, we have detailed the cost than everything related to that and also there will be some of it in 19 as we continue to restructure R&D was Burger international business.

Just wanted I just wanted to provide more color just in case that's helpful.

That's helpful. Thank you.

Again, yeah, sorry, the last question just the corporate costs in Q4.

Sort of the what was behind the increase the decline again, it's sort of feels like it's one time, just given the guidance, but just curious what happened in the quarter back I was less Atlanta as the there was impacted by a onetime FX.

And some expenses that were lower than expected so nothing too much to read about this I think guidance is 90 to 95.

That's a number to keep in mind.

Alright, thank you.

Thank you.

Your next question comes on line have been off plan with dish. Please go ahead.

Good morning, gentlemen.

Yes, with respect to the leverage ratio net EBITDA. Obviously, you you ended the year with a 1.1 well within the range of one to two but.

I would be curious to know what would be your willingness to leverage your balance sheet outside the range, assuming the proper transaction, a very attractive transaction or would you consider a more recent prudent approach given the economy concert to you. So I'm just trying to gauge.

What are you would be willing to go outside of the range for the REIT transaction.

Look we've historically been why we've always been a conservative management team, we guided pre I as far as between one and a half and two and a half time.

But if I take a second to look back at history, you look back and before and for those of you've been following us for for a decade now or more.

If you recall before WSP every time, we were hitting one one onetime leverage we were very quick to do leverage.

Given that we were operating in one country and essentially in one or two end markets and we didn't have the resiliency of evolving.

You know a diversified platform that we completed.

WSP, we came out post transaction that.

One and 1.4 times 1.5 times, if we if you will recall.

And the reason was quite simple we were feeling more comfortable above the resiliency in the diversification of the platform.

Then we did Parsons Brinckerhoff and we came out of this transaction at 2.25.

So the message on trying to two to provide two to all of you today is as we build a more resilient platform in a more diversified platform. The management team has been more willing.

To take a bit more leverage and you can see this throughout our history.

So to answer your question for their rights acquisition would we be willing to go a bit above what we've guided.

Over the years the answer is yes.

But would you expect us one did to be.

At the closing of the transaction above 3.5 times or 3.6 times I know that's now what we would envision doing we would want to be below that.

Okay perfect.

Assume I like that it's Paul I, FRS 16, which is in line with your new disclosure right.

Yes, so so obvious right now when you look at the leverage I think this is including.

I have for 16, so pre IPO for 16.

If I am not mistaken then I'm looking at Atlanta, we'd be more closer to one and a half time or something like death in terms of leverage.

So, yes closer to that closer to that.

Okay. Okay canceled a 3.5 was referring to the 1.5.

Okay, perfect that they've got it okay, perfect and with respect to Canada. What makes you confident that delays and transportation projects target and Ontario will add in 2021.

Hey, incremental color did you get the with respect to.

Okay, and Canada Alex.

This is this is such a it's a very difficult question to answer definitely in 19.

I have to tell you the team in Canada has to be commended for the great work to Theyve done I mean, they finished the year above.

About flat organic growth, despite having the largest market being you know.

Going through a really rough rough patch.

I'd say that.

No.

We would like to think that we're heading into 2020 thinking that alternative transportation will be better.

We are hopeful of that.

Finally.

But there's a lot of moving parts in the Canadian market.

Now, we're hearing about and you've seen in the news. The rail blockage. This is this is definitely not helpful. Now you have oil and gas, which last year was going very well and now that the southern than Q4 things started to slow down again.

Our many moving parts.

Hi, hopeful for the country into longer term, absolutely our backlog is going up and hasn't been as as gone up 7.5% year over year. So this is not de Minimis. This is good news, but that's one thing to.

The awarded some projects, but we need to they need to we need to get started on them. So so I, what I would say to you as I feel good about the Canadian market I feel good about the long term outlook of the Canadian market.

But then the short term, it's very hard to predict how all of this will transpire.

As I said feeling better and.

And 2020, then how we.

We perform in the 19.

But im not prepared to tell you just shift that this is a slam dunk.

Okay, perfect and warranty northeast region into your West could you maybe provide more color on the key elements that impacted the organic growth in Q4 and also whether this would translate into.

Performance foreign more EBITDA margin as well.

Yes. This was the this was the result of a number of things one I mention one very large client of WSP in 19.

We reduced fees as a result of.

No.

Some of the government governors decision for the state of New York.

Last year, so definitely this impact.

To top line and the bottom line for that matter also we signed 19 fewer design Bill.

And the region for for a bit of spine and also what I would call, we'll probably self inflicted.

Actions that really reduce organic growth and 19 is the fact that we're not as fast as we should have been.

After gates and early 19 to higher and filled the open position that we had.

And in the business and early 19, so slide hold Scott. This is not going to be a repeat them 20 and already I feel going into 2020 that we're feeling a little better about this.

Okay, Okay, perfect and last one for me Electrocute could you talk maybe about the obligation with respect to Oh, we veterinary and whether there's any update on where would you aren't.

The current process.

Look we are we are reviewing this I'm not going to comment anything more.

Then what is about.

Commented to to try and.

The comments Thats should provided to you. We have reviewed this I'd say that sort of time being for US. This is not something that is.

Raising.

Hi level of concern role within the company, that's all I'm going to leave it at that.

He is not going to talk about our strategy over the phone. This is obviously confidential, but all that to tell you that.

We're not quite now concerned by this perfect. Thank you very much fortify.

Thank you Leo.

Your next question comes from the line of credit Mark West Alpha car. Please go ahead.

Yes. Thanks, guys. Good morning, I'm, just very briefly just looking at the.

Leverage levels and Alex I appreciate that you've talked a little bit of out.

About the fact that you're trying to.

Maybe what comes from acquisitions, I forgot what EMEA and the absence of more acquisitions, you are sort of at the bottom many arranged just wondering.

He thought about.

Maybe a balance between share buybacks or something like that just to maintain your software on that one times level or do you feel like you actually have the ability.

The pipeline to to be able to hit some some pretty big acquisition numbers to use that balance sheet.

Look.

On the acquisitions, we don't have.

Hopefully I mean, im sorry, five years and expression that probably is not the politics incorrect, but we haven't gone on our head on acquisitions, we only going to do acquisitions.

If they make sense for the company.

Yes.

Our timely.

If you sit within well within the strategy that we have put together.

The next three years.

I feel that there is a good pipeline of potential acquisitions around the world for us to meet or exceed our ambitions. Yes. The answer is yes, and we're going to work extremely hard to achieve that.

And that's why you know I don't feel compelled right now to talk to you about the share buyback.

We have a good dividends.

And this quarter, we work closely with our two cornerstone investors and given that we have now.

Lower leverage more cash.

For instance, one of our cornerstone investors reduce its drip drip participation by 50%. So I wanted to know that we are monitoring our capital structure very carefully we are working collaboratively with our cornerstone.

And all of our investors for that matter and.

Right now I don't believe we are in a position too.

I feel the pipeline. This so emptied that we would contemplate the share buyback at this point in.

Okay fair enough.

And then Dino I want to exist.

Welcome to the CFO.

Keith.

Looking your Q4 and lots of call at one time adjustments essence aren't that so I'll leave it to that but as you as you sort of take the role now as sort of financial leader of the company any thoughts around to anything that you're looking to accomplish specifically.

I think generally speaking is to continue the good work that has been done over the years I mean, it's.

Continuing to focus on on EBITDA and strong cash flow conversion and.

So we're nodes, leaving a good cash flow conversion as you've seen so my intention is to keep that focus on the so.

And on EBITDA margin.

Okay. Thanks, following with there thank you.

Your next question comes on line of Michaels helpful. With TD Securities. Please go ahead.

Thank you good morning.

Yes.

There was mention of starting to see some revenue synergies from <unk> Louis Berger.

Just wondering if you can provide any further detail.

Around that and and if you've had some success now that you've completed that that integration by the sounds a bit in terms of.

Improving the cost structure, bringing that closer to two your own U.S. cost structure.

Yes, Michael we we have seen a lot of a good revenue synergies examples or over the course of of 19 I didn't mention some of them and the federal space over the course of 19.

If you recall the reason why I thought this acquisition was very strategic to us.

WSP is a very strong design franchise in the US with merger was bringing a lot of bridge expertise, which we were lacking but on top of it you have also strong master planning expertise that they are bringing to the table.

And also important than marine so I would tell you that.

We're very pleased with the way the acquisition.

Evolve over the course of 19, we have work very hard to streamline corporation to.

Bring down within the umbrella of WSP in the U.S., but also in the middle East and the work that is that that that is carrying into 2020 is as we said before during our prior question the restructuring of our with merger international business, which we didn't.

To be undertaking in 2020, but certainly 19 to plan was definitely to streamline the business in the U.S., but also in the middle East and Spain and in Panama Places that we felt were quite strategic to our business.

Okay, perfect and then.

Alex you talked in the past and your plan is to.

To increase the amount of strategic advisory services as a percentage of the company's revenue and.

I Wonder if you can provide a bit of an update on success on that front well exactly I'm glad you're asking this question Michael in 19, we increase our headcount globally.

By 18% in the environmental sector, Yes, there were small smaller in size the acquisition that we completed but you know what is.

Slowly but surely.

We increase our head count by over 1000 people in environmental sector and 19 and this is obviously increasing the scope of advisory services that we can offer to our clients. So all in all I think we've made great progress.

We're very focused on this and I said that.

And our strategy that we would want to capitalize on our design expertise.

And that continued to capitalize on legs design expertise, but also to accelerate.

At a faster rate or advisory piece and I think in 19, we did just that I think we did increase our design.

And the building sector, especially into healthcare sector.

The acquisition of Leach Wallace, we did increase our design capabilities, but I would say 19, we increased at a faster rates.

Our advisory services, and that's something that I wanted to achieve for the first year of deployment.

Okay. Thank you and then just lastly, you've talked about and this is not new but you've talked a little while this.

Economic indicators, suggesting cooling off in the Nordics.

Wondering if you can provide a little bit of an update on not region.

I guess in spite of the fact that you're still pointing to that that cooling off you are calling for.

Mid to.

Low to mid single digit organic growth across the UK and the Nordics combined so is the Nordic still looking positive in spite of that that cooling off.

Well, perhaps its work need providing a business.

Just a visibility on the regions will that to Ken.

A better view of how we're thinking about the region.

Ill start by saying South Africa.

Right now we are operating in poor economic climate. This is this is a tough regions. Thankfully. This is a very small region I think the team is working very hard and again.

They are they should be commended for their good work they are doing and the tough environment. So this is obviously not help billing amping and when when you consolidate the aggregate organic growth of the region.

In the UK I think.

We've talked extensively about.

The nervousness of the market as it relates to Brexit.

The election in December.

And also we consume a lot of good backlog in 19.

If you look back at 18, and the award that was awarded the UK I think we've done a great job at consuming and translating this backlog into revenue in 19, but now you look at the pipeline of.

Opportunities in the USA and the U.S. I'm, sorry in the UK and this now.

And we're quite pleased about this so so this hopefully bodes well for for the future.

When you look at.

EMEA as a whole obviously the middle East is a big piece of this.

And clearly in Dubai, there was a tightening of the real estate.

Supply markets.

And clearly also a slowdown in Dubai as a result of while some projects for the export 2020 that we're coming to completion and 19.

Lets you know, what we pivoted and 19 from.

None of the Debbie you need to do at KFC.

By increasing in 19.

Our total revenue in case say from 7% of our total revenue in the middle East to 20%. So I think thats. The reason why we performed better in the Middle East and we had anticipated into first place in 19, and now finishing off with the Nordics. The nordics It is true.

The real estate market.

The private sector has been cooling off but it's not a cliffs.

I wouldn't go as far as telling you that this is a cliff there's a lot of projects being awarded in the public sector and that's why we're feeling good about organic growth for the Nordics also in 2020.

So thats just a review of the region and the way we consolidate the numbers.

But all in all I think the middle East should be fine.

The UK should also be fine. The Nordics also so and that's why we're always more signaling.

Low to mid single digit and up mid single, but that Ms.

MS mid single digit growth for for the region.

Great. Thanks for that color. Thank you.

Your next question comes from the line of seven Dutch with BMO capital markets. Please go ahead.

Alright, Thanks, good morning, guys.

Good morning.

Just wanted to come.

Back to your pack division organic growth there don't really strong from Q4, I think is driven by Australia New Zealand.

These have been strong markets for a while just wondering can you talk about the availability of labor.

In the local market to absorb this type of growth or you're leveraging other pools that capacity across our network.

While it does the beauty of our of our network and our international firm, we are in a position to leverage the expertise wherever it's located clearly.

Most of the work that do we are conducting is very local so clearly it's a very very busy region for us and we've done very well for now for a few years and we expect to continue to do very well so in Australia, New Zealand in 2020 so.

Yes.

The war on talent frankly is not just in Asia Pacific.

We have a similar issue in our right are very good markets such as the west.

And anemia in Canada, and the finding finding a good pool of talent is is obviously a challenge.

And Thats why I mean, we continued to transform the organization and appeals to the younger generation and creates a different workplace environment.

And invest in training because that's what young engineers ones and that's why we've we've been investing a lot of our money internally and developing our peoples.

Okay makes sense nice to maybe to continue on that how its utilization holding up given the sustained high growth.

In the region.

Hi, very high utilization.

But manageable I would say.

Okay excellent and maybe just.

Hi, My question for land, but Youre your stock was up.

15% of Q4, just wondering how much of an impact that housing or stock based comp in the quarter.

Well look obviously.

The provision we're increase.

As a result of it.

Clearly.

But this is only for third quarter and we also you need to remember I'm not sure we've disclosed up before but we are a hedging we will so some of that so that we are.

Hopefully avoiding some volatility in the corporate costs and DLT up costs as a result of movements in the stock price of of the company.

Okay makes sense. Thank you I'll turn it over.

Thanks.

Your next question comes on.

In line.

Hi, Thanks, SK with from James Please go ahead.

Now see able my thanks.

Guys, it's pretty obvious that you are hungry for scale, Andy environmental sector based on the transactions completed in past six month.

How many of those specialized companies would be on your target list right. Now are they are we talking about 310 or potentially 50 companies.

But.

There are many fred them not going to give a number on the call. This morning, I don't think gets.

It's really in assist.

Necessity, but I think there are many on the on our radar screen.

We are clearly looking to diversify our platform, we're really looking to grow and frankly not just in the environmental sector. We're looking to grow and all sorts of advisory services from project program management.

Two.

To also water science to.

All sorts of of advisory services that we are providing.

Right now already but we're looking to grow and sales so.

Clearly environment is clearly an area of focus for us.

But it's not just dot, but you look back at what we completed the in terms of acquisition last year, you Andy was one ecology environments and just recency we acquired.

See environment out of Denver. This is probably the largest and the best firm in our opinion and the state of Colorado. So so slowly but surely we are right now positioning WSP.

True environmental player.

And we'll continue to do that in every country, where we operate.

Okay. Thanks for that and if I go even further back if I look at your two largest acquisition. So they turned out to be home run because they think they really created no overlap whatsoever, I mean that WSP deals complementary.

Geographical standpoint, your own in Canada on I think WSP was in 30 countries and you look at PB.

Very complementary from a discipline standpoint.

But again, it gets harder and harder to find those channels as you continue to be to get bigger and more diversified. So my question to you is how does that dynamic factor into your thinking when you evaluate potentially bigger deal that would potentially introduce.

That kind of overlap.

I'm cautious or at least.

The way the way I would answer this question Fred is.

If there we would find a large acquisition that would create a lot of overlap.

From a.

Discipline point of view.

It's not something that we would want to do I think.

As we grow as a company.

We clearly going to still be looking at the complementing our platform with acquisition that will make us stronger as a result of it them on a pro forma basis would make us more resilient more diversified.

And be the best in the markets in which we operate both both from a geographical point of view, but also from an end markets point of view.

It's true however that as you grow and as we develop our platform and the markets, where we already have a big presence that you will see more cost synergies.

Perhaps on the back office and Thats to be expected, but my worry buyer, probably not actually see it as a real opportunity to strengthening the organization to professionalized affirmed two important best practices and to get better as a result of it and Thats actually part of our plans. So so no.

We're not going to do acquisitions I will.

Create a lot of of of.

Cost cutting on the front office and the client facing side.

But it is true that as we grow as a company if we acquire a large from the west which require large from in Canada. We acquire large from in the UK that we will undeniably the having more cost synergies on the back office.

It's not a problem actually don't see it as a problem I see it as an advantage to get better and our regions.

Okay, that's a great aspect thanks, Alex.

Thank you.

There are no further questions at this time I will turn the call back over to the presenters for closing remarks.

Well, thank you for attending to two for 2019.

The conference call I realize this was a long call, but this was the year end. So I look forward to updating you and the quarters to come and I wish you a great between 20 year. Thank you very much by everyone Bye bye.

This concludes today's conference call you may now disconnect.

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