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WSP to Acquire RPS Further Accelerating the Execution of Its 2022-2024 Global Strategic Action Plan

·35-min read
Groupe WSP Global Inc.
Groupe WSP Global Inc.

$400 MILLION BOUGHT DEAL PUBLIC OFFERING AND
$400 MILLION CONCURRENT PRIVATE PLACEMENTS FROM GIC, CDPQ AND CPP INVESTMENTS

Not for distribution to U.S. Newswire services or for dissemination in the United States

Leading UK-based consulting firm with 5,000 employees globally generating approximately $875 million in revenue and immediately accretive1,3 to WSP’s adjusted net earnings per share2

  • Strong sustainability focus with approximately 2/3 of revenues from environmental work and water services

  • Significantly increases WSP’s services in advisory, planning and program management

  • Serves growing renewable energy clientele expanding WSP’s scale to support energy transition

  • Reinforces WSP’s presence in OECD countries and creates a leading consulting firm in the UK and Australia6

Recently announced acquisitions provide for a swift and disciplined execution on WSP’s 2022-2024 Global Strategic Action Plan

  • Strong platform of ~70,000 professionals generating approximately $10 billion of estimated pro forma net revenues1,2,3,9,12 (approximately $13 billion in revenue)

  • Mid- to high-teens accretion1,3 to WSP’s adjusted net earnings1,2,3 per share once synergies from pending acquisitions are fully realized3,5

  • Solid capital structure providing flexibility for future growth

MONTREAL, Aug. 08, 2022 (GLOBE NEWSWIRE) -- WSP Global Inc. (TSX:WSP) (“WSP” or the “Corporation”) is pleased to note that earlier today it announced that it has reached an agreement with RPS Group plc (“RPS”) on the terms of a cash acquisition pursuant to which a wholly-owned subsidiary of WSP will acquire the entire issued and to be issued share capital of RPS for £2.06 per share in cash (the “Acquisition”).

Founded in 1970 and built on a legacy of environmental and social engagement, RPS is a diversified and well-recognized global professional services firm of approximately 5,000 talented employees. As an established technology-enabled consultancy that operates across a range of sectors, RPS provides specialist services to government and private sector clients with a focus on front-end consulting. RPS has been widely recognized for its strong sustainability agenda, having been ranked number one in the UK for climate change and energy consulting by the Environment Analysis for 2019/2020, a top 200 environmental firm by Engineering News-Record in 2021 and recognized in 2021 as one of the first “carbon champions” by the Institution of Civil Engineers.

“We are pleased to announce the proposed acquisition of RPS as it will enable us to rapidly deliver on our Global Strategic Action Plan and create value for all our stakeholders,” commented Alexandre L’Heureux, President and Chief Executive Officer of WSP. “RPS is a perfect fit as it adds depth to our current platform and is highly complementary, in terms of geographies and sectors, to our recently announced agreement to acquire the Environmental and Infrastructure (E&I) business (the “Wood E&I Business”) of the John Wood Group plc (the “Wood Acquisition” and together with the Acquisition, the “Pending Acquisitions”). When completed, our recently announced transactions will bring our workforce to approximately 70,000, with approximately 23,000 environmental experts across the globe. We are proud that we are building a strong ESG leader with significant capabilities in water and energy and contributing significantly towards the transition to a greener and low-carbon world,” he added.

FINANCIAL HIGHLIGHTS

  • Acquisition of RPS reflects an enterprise value of approximately £625 million (approximately $975 million), representing approximately 14.9x RPS’s pre-IFRS 16 adjusted EBITDA1 for the twelve months ended June 30, 2022 (“LTM”) or 10.1x once the full benefit of expected synergies is taken into account3,5,11. RPS’s LTM Adjusted EBITDA1 was £52.9 million (LTM Adjusted operating profit/(loss)10 of £33.7 million).

  • Under UK regulations, we have been constrained from publishing forward-looking valuation multiples in the absence of a Reporting Accountant’s report to support such a statement. However, we note the trading update published on June 24, 2022 by RPS which confirmed that following the strong performance in the first half of 2022 and the growing contracted order book, RPS expected the momentum to continue in the second half of 2022.

  • Expected to be immediately accretive1,3 to WSP’s adjusted net earnings2 before synergies. Expected mid to high teen accretion1,3 to adjusted net earnings per share1,2 when also giving effect to the Wood Acquisition and synergies are fully realized3,5.

  • Anticipated cost synergies of approximately £20 million (approximately $30 million) expected to be realized over a 24-month period, with 50% to be realized within the first twelve months after the closing date. Costs required to realize such cost synergies estimated at approximately £20 million (approximately $30 million) in the aggregate3.

  • Concurrently with the announcement of the Acquisition, WSP has secured a new fully committed “certain funds” £600 million (approximately $935 million) credit facility (the “New Credit Facility”), which includes commitments for the full amount of the purchase price for the Acquisition.

  • WSP also announced a $400 million public bought deal and concurrent $400 million private placement equity financing, from three existing institutional shareholders of WSP. WSP intends to use the net proceeds of the equity financing to fund in part the purchase price payable in respect of the Acquisition (and related costs and expenses) and accordingly reduce amounts to be advanced, or repay amounts advanced, under the New Credit Facility to fund the purchase price for the Acquisition.

  • WSP expects its pro forma net debt to adjusted EBITDA ratio1,12 to be approximately 1.9x3, 4 upon closing of the Acquisition, in accordance with WSP’s objective to maintain net debt to adjusted EBITDA1,2,3,4 between 1.0x and 2.0x and significant financial flexibility assuming completion of the equity financing as well as completion of the Wood Acquisition. WSP 2021 Adjusted EBITDA1 and 2021 Earnings before net financing expense and income taxes were $1,322.5 million and $724.6 million, respectively. WSP’s Net debt to adjusted EBITDA ratio1 was 0.8x on July 2, 2022.

  • The Acquisition is expected to be completed by the end of the fourth quarter of 20223.

For further details regarding this announcement, readers are referred to the firm offer announcement in respect of the Acquisition (the “Announcement”) previously released in the United Kingdom on the date hereof in accordance with Rule 2.7 of the UK City Code on Takeovers and Mergers and which can be found on WSP’s website at www.wsp.com/investors. This news release should be read in conjunction with, and is subject to, the full text of the Announcement.

CONDITIONS TO THE ACQUISITION AND TIMETABLE

It is intended that the Acquisition will be implemented by means of a Court-sanctioned scheme of arrangement (the “Scheme”) under Part 26 of the U.K. Companies Act 2006. The purpose of the Scheme is to provide for WSP to indirectly become the owner of the entire issued and to be issued share capital of RPS.

Details of the proposed Acquisition will be sent to RPS shareholders within 28 days of the date of this announcement (unless the Panel on Takeovers and Mergers under the U.K. City Code on Takeovers and Mergers agrees otherwise). Subject, amongst other things, to the satisfaction or waiver of the conditions, the approval of the Scheme by the RPS shareholders, the receipt of applicable regulatory approvals and the Court’s sanction of the scheme of arrangement, it is expected that the Acquisition will be completed by the end of the fourth quarter of 2022.

All relevant documentation will be made available on WSP’s website at www.wsp.com/investors.

ACQUISITION FINANCING

Equity Financing

The equity financing comprises:

  • approximately $400 million bought deal public offering (the “Offering”) of common shares (“Common Shares”) of the Corporation (the “Offering Common Shares”) at a price of $151.75 per share (the “Offer Price”); and

  • approximately $400 million private placements (the “Concurrent Private Placement”) of Common Shares (the “Placement Common Shares”) at the Offer Price to three existing shareholders, (i) GIC Pte. Ltd or one of its affiliates (“GIC”), (ii) Caisse de dépôt et placement du Québec (“CDPQ”), and (iii) a subsidiary of Canada Pension Plan Investment Board (“CPP Investments” and collectively with GIC and CDPQ, the “Investors”).

WSP intends to use the net proceeds from the equity financing to fund in part the purchase price payable in respect of the Acquisition (and related costs and expenses) as a means of re-balancing the Corporation’s capital structure and accordingly reduce amounts to be advanced, or repay amounts advanced, under the New Credit Facility to fund the purchase price for the Acquisition.

Public Offering of Common Shares on a Bought Deal Basis

In connection with the offer for RPS, WSP has entered into an agreement with CIBC Capital Markets, National Bank Financial and RBC Capital Markets, acting as joint bookrunners, on behalf of a syndicate of underwriters (collectively, the “Underwriters”), pursuant to which the Corporation will issue from treasury, and the Underwriters shall purchase on a “bought deal” basis, 2,636,000 Offering Common Shares at the Offer Price for gross proceeds to the Corporation of approximately $400 million.

In addition, the Underwriters have been granted an over-allotment option (the “Over-Allotment Option”), exercisable in whole or in part on the same terms as the Offering for a period of 30 days from the closing of the Offering, to issue additional Offering Common Shares, representing up to 15% of the size of the Offering, for additional gross proceeds of up to $60 million.

The Offering Common Shares to be issued pursuant to the Offering and Over-Allotment Option will be offered in all provinces and territories of Canada by way of a prospectus supplement to the short form base shelf prospectus of the Corporation dated July 7, 2022 (collectively, the “Shelf Prospectus”). The Offering Common Shares will also be offered in the United States by way of private placement to “qualified institutional buyers” in reliance upon the exemption from registration provided by Rule 144A under the U.S. Securities Act of 1933 (the “U.S. Securities Act”).

The issuance of the Offering Common Shares is subject to customary approvals of applicable securities regulatory authorities, including the Toronto Stock Exchange (the “TSX”). Closing of the Offering and the Concurrent Private Placement are expected to occur concurrently on or about August 16, 2022. The Offering is conditional upon the concurrent completion of the Concurrent Private Placement.

No securities regulatory authority has either approved or disapproved the contents of this press release. The Offering Common Shares have not been, and will not be, registered under the U.S. Securities Act, or any state securities laws. Accordingly, the Offering Common Shares may not be offered or sold within the United States unless registered under the U.S. Securities Act and applicable state securities laws or pursuant to exemptions from the registration requirements of the U.S. Securities Act and applicable state securities laws. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Offering Common Shares in any jurisdiction in which such offer, solicitation or sale would be unlawful.

Concurrent Private Placements of Common Shares

Concurrently with the announcement of the Offering, WSP has also entered into subscription agreements under which the Corporation will complete the Concurrent Private Placement at the Offer Price with (i) GIC for aggregate gross proceeds to the Corporation of approximately $200 million, (ii) CDPQ for aggregate gross proceeds to the Corporation of approximately $150 million, and (iii) CPP Investments for aggregate gross proceeds to the Corporation of approximately $50 million.

Each of the Investors has also been granted an option (the “Additional Subscription Option”) to purchase a number of additional Placement Common Shares representing up to 15% of the number of shares subscribed by each of them on closing, subject to, and in the same proportion as, the Over-Allotment Option being exercised by the Underwriters.

The issuance of the Placement Common Shares under the Concurrent Private Placement is subject to the approval of the TSX. Closing of the Concurrent Private Placement is scheduled to occur concurrently with the closing of the Offering and is conditional on the concurrent completion of the Offering.

Assuming completion of the Concurrent Private Placement and the Offering and the issuance of the Placement Common Shares and Offering Common Shares, but not the exercise of the Over-Allotment Option or the Additional Subscription Option, CDPQ will beneficially own, or exercise control or direction over, directly or indirectly, an aggregate of 22,335,372 Common Shares representing approximately 18.1% of the issued and outstanding Common Shares. Under the same assumptions, CPP Investments will beneficially own, or exercise control or direction over, directly or indirectly, an aggregate of 18,217,889 Common Shares representing approximately 14.8% of the issued and outstanding Common Shares.

All Common Shares issued pursuant to the Concurrent Private Placement will be subject to a statutory hold period. In accordance with the terms of the Subscription Agreements, all Common Shares issued pursuant to the Concurrent Private Placement will also be subject to contractual lockups for a period of six (6) months following closing of the Concurrent Private Placement.

Moreover, each of the Investors have undertaken for a 12-month period following closing to have all of the Placement Common Shares (and the additional Placement Common Shares subscribed pursuant to the Additional Subscription Option, as applicable), participate in the Corporation's dividend reinvestment plan (the “DRIP”) and to have such shares enrolled in the DRIP for all dividends.

Upon the closing of the Concurrent Private Placement and any exercise of the Additional Subscription Option, each of the Investors (or their designee) will be entitled to a capital commitment fee equal to 4% of the aggregate purchase price for the Placement Common Shares for which each of them has subscribed (and the additional Placement Common Shares each of them has subscribed pursuant to the Additional Subscription Option, as applicable).

New Credit Facility

Concurrently with the announcement of the Acquisition, WSP has obtained a “certain funds” £600 million (approximately $935 million) New Credit Facility, which includes commitments for the full amount of the purchase price for the Acquisition. Canadian Imperial Bank of Commerce and HSBC are acting as co-lead arrangers and joint bookrunners with respect to the New Credit Facility.

The New Credit Facility is designed to ensure compliance with the “certain funds” requirements from announcement of the Acquisition under the UK City Code on Takeovers and Mergers. Further, the Acquisition financing plan has been designed and structured with a view to preserving WSP’s investment grade profile.

The New Credit Facility contains representations, warranties, conditions precedent, covenants, a leverage ratio and events of default that are customary for a transaction of this nature.

APPROVALS AND RECOMMENDATION

The board of directors of RPS intends to recommend unanimously the Acquisition.

WSP has also received undertakings from each of the RPS directors and other RPS major shareholders to vote for the transaction at the RPS shareholder meetings to be convened in connection with the Scheme, in respect of a total number of RPS shares representing in the aggregate approximately 18% of the existing issued share capital of RPS on August 8, 2022.

FINANCIAL AND LEGAL ADVISORS

HSBC is acting as financial advisor to WSP on the Acquisition. Legal advice is being provided to WSP by Linklaters LLP in the United Kingdom and Stikeman Elliott LLP in Canada.

WEBCAST

WSP will host a webcast today at 4:45 p.m. (Eastern Daylight Time) to discuss this transaction and its 2022 second quarter results. Given the concurrent equity offering, exceptionally, there will be no question-and-answer session.

To join the webcast, please register on https://www.icastpro.ca/kzyv0x or access www.wsp.com/investors. Presentations of the 2022 second quarter results and the Acquisition are accessible on the webcast platform and under the “Investors” section of WSP website.

ABOUT WSP

As one of the world’s leading professional services firms, WSP exists to future-proof our cities and environment. We provide strategic advisory, engineering, and design services to clients in the transportation, infrastructure, environment, building, power, energy, water, mining, and resources sectors. Our 57,500 trusted professionals are united by the common purpose of creating positive, long-lasting impacts on the communities we serve through a culture of innovation, integrity, and inclusion. Sustainability and science permeate our work. WSP derived about half of its $10.3B (CAD) 2021 revenues from clean sources. The Corporation’s shares are listed on the Toronto Stock Exchange (TSX: WSP). To find out more, visit wsp.com

ABOUT RPS

RPS is a public limited company registered in England and Wales. RPS’s shares are listed on the Official List of the London Stock Exchange.

Founded in 1970 and built on a legacy of environmental and social engagement, RPS is a diversified and well recognized global professional services firm of approximately 5,000 talented employees.

As an established technology enabled consultancy that operates across a range of sectors, RPS provides specialist services to government and private sector clients with a focus on front-end consulting.

RPS creates shared value for all stakeholders by solving problems that matter in a complex, urbanizing, resource-scarce world and concentrates its expertise on the parts of project lifecycles that have the biggest impact on project outcomes with a strong sustainability agenda. RPS has been widely recognized in this respect, having been ranked number one in the UK for climate change and energy consulting by the Environment Analysis for 2019/2020, a top 200 environmental firm by Engineering News-Record in 2021 and recognized in 2021 as one of the first “carbon champions” by the Institution of Civil Engineers.

RPS operates across approximately 100 offices in 12 countries, with more than 99% of its net revenue during the 2021 financial year generated from its operations in OECD countries. The majority of its net revenue during the 2021 financial year was generated from its operations in the United Kingdom, Australia and the United States.

ABOUT GIC

GIC is a leading global investment firm established in 1981 to secure Singapore’s financial future. As the manager of Singapore’s foreign reserves, GIC takes a long-term, disciplined approach to investing and is uniquely positioned across a wide range of asset classes and active strategies globally. These include equities, fixed income, real estate, private equity, venture capital and infrastructure. Its long-term approach, multi-asset capabilities and global connectivity enable it to be an investor of choice. GIC seeks to add meaningful value to its investments. Headquartered in Singapore, GIC has a global talent force of over 1,900 people in 11 key financial cities and has investments in over 40 countries. For more information on GIC, please visit www.gic.com.sg

ABOUT CDPQ

At CDPQ, we invest constructively to generate sustainable returns over the long term. As a global investment group managing funds for public retirement and insurance plans, we work alongside our partners to build enterprises that drive performance and progress. We are active in the major financial markets, private equity, infrastructure, real estate and private debt. As at December 31, 2021, CDPQ’s net assets totalled CAD 419.8 billion. For more information, visit cdpq.com, follow us on Twitter or consult our Facebook or LinkedIn pages. CDPQ is a registered trademark owned by Caisse de dépôt et placement du Québec and licensed for use by its subsidiaries.

ABOUT CPP INVESTMENTS

Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the 21 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At March 31, 2022, the Fund totalled $539 billion.

For more information, please visit www.cppinvestments.com or follow CPP Investments on LinkedIn, Facebook or Twitter.

FORWARD-LOOKING STATEMENTS

This press release contains information or statements that are or may be “forward-looking statements” within the meaning of applicable Canadian securities laws. When used in this press release, the words “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “forecast”, “project”, “intend”, “target”, “potential”, “continue” or the negative of these terms or terminology of a similar nature as they relate to the Corporation, an affiliate of the Corporation or the combined firm following the Pending Acquisitions, are intended to identify forward-looking statements. Forward-looking statements in this press release include, without limitation, those information and statements related to the Offering and the Concurrent Private Placement, including in respect of the use of proceeds therefrom, the closing of the Offering and the Concurrent Private Placement; statements relating to the Pending Acquisitions, the conditions precedent to the closing of the Pending Acquisitions, the New Credit Facility, available liquidities, the attractiveness of the Pending Acquisitions from a financial perspective and expected accretion in various financial metrics; expectations regarding anticipated cost savings and synergies; the strength, complementarity and compatibility of the RPS’s business and the Wood E&I Business (collectively, the “Acquired Businesses”) with WSP’s existing business and teams; other anticipated benefits of the Pending Acquisitions and their impact on the Corporation’s delivery of its 2022-2024 Global Strategic Action Plan and its long-term vision, future growth, results of operations, performance, business, prospects and opportunities, WSP’s business outlook, objectives, development, plans, growth strategies and other strategic priorities, and WSP’s leadership position in its markets; and statements relating to the Corporation’s future growth, results of operations, performance business, prospects and opportunities, the expected synergies to be realized and certain expected financial ratios and other statements that are not historical facts. Although the Corporation believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements since no assurance can be given that they will prove to be 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, including risks and uncertainties relating to management’s broad discretion in the application of the net proceeds of the Offering; the dilutive effect of the Offering on holders of Common Shares; WSP’s inability to successfully integrate the Acquired Businesses upon completion of the Pending Acquisitions; the possible delay or failure to close the Pending Acquisitions; the potential failure to realize anticipated benefits from the Pending Acquisitions; the potential failure to obtain the regulatory approvals in a timely manner, or at all; the currency exchange risk and foreign currency exposure related to the purchase price of the Pending Acquisitions; the transitional services to be provided by Wood following completion of the Wood Acquisition; WSP’s reliance upon information provided by RPS and Wood in connection with the Pending Acquisitions and publicly available information; risks associated with historical and pro forma financial information; potential undisclosed costs or liabilities associated with the Pending Acquisitions; WSP or the Acquired Businesses being adversely impacted during the pendency of the Pending Acquisitions; and change of control and other similar provisions and fees, and other factors discussed or referred to in the “Risk Factors” section of WSP’s Management’s Discussion and Analysis for the year ended December 31, 2021, and WSP's Management’s Discussion and Analysis for the six-month period ended July 2, 2022 (together, the “MD&As”), which are available under WSP’s profile on SEDAR at www.sedar.com. The foregoing list is not exhaustive and other unknown or unpredictable factors could also have a material adverse effect on the performance or results of WSP, the Wood E&I Business or RPS.

Forward-looking statements made by the Corporation are based on a number of assumptions believed by the Corporation to be reasonable as at the date of this news release or MD&As, as applicable, including assumptions about the satisfaction of all closing conditions and the successful completion of the Offering and the Concurrent Private Placement within the anticipated timeframe; the expected timing of completion of the Pending Acquisitions and the conditions precedent to the closings of the Pending Acquisitions; WSP’s ability to retain and attract new business, achieve synergies and maintain market position arising from successful integration plans relating to the Pending Acquisitions; WSP’s ability to otherwise complete the integration of the Acquired Businesses within anticipated time periods and at expected cost levels; WSP’s ability to attract and retain key employees in connection with the Pending Acquisitions; management’s estimates and expectations in relation to future economic and business conditions and other factors in relation to the Pending Acquisitions and resulting impact on growth and accretion in various financial metrics; the realization of the expected strategic, financial and other benefits of the Pending Acquisitions in the timeframe anticipated; the accuracy and completeness of public and other disclosure (including financial disclosure) by RPS and Wood; the absence of significant undisclosed costs or liabilities associated with the Pending Acquisitions; and other factors discussed or referred to in the “Risk Factors” section of WSP’s MD&As, which are available under WSP’s profile on SEDAR at www.sedar.com. If any of these assumptions prove to be inaccurate, the Corporation’s actual results could differ materially from those expressed or implied in forward-looking statements.

WSP’s forward-looking statements are expressly qualified in their entirety by this cautionary statement. For additional information on this 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, reference is made to the MD&As, 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 except as required under applicable securities laws, WSP does not undertake to update or revise these forward-looking statements, whether written or verbal, that may be made from time to time by itself or on its behalf, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this press release are expressly qualified by these cautionary statements.

Underlying Assumptions

The Corporation cautions that the assumptions used to prepare the estimated 2022 RPS pre-IFRS 16 adjusted EBITDA, 2022 Wood E&I pre IFRS-16 adjusted EBITDA and WSP Pro forma adjusted EBITDA could prove to be incorrect or inaccurate. Accordingly, the actual results could differ materially from the Corporation’s expectations as set out in this press release. The Corporation considered numerous economic and market assumptions regarding the foreign exchange rate, competition, political environment and economic performance of each region where the Corporation and the Acquired Businesses operate.

NON-IFRS AND OTHER FINANCIAL MEASURES

The Corporation reports its financial results in accordance with IFRS. In this press release, the following non-IFRS and other financial measures are used by the Corporation: net revenues, adjusted EBITDA; adjusted net earnings; adjusted net earnings per share; and net debt to adjusted EBITDA ratio. These measures are defined in section 19, “Glossary of segment reporting measures, non-IFRS and other financial measures” of WSP’s Management’s Discussion and Analysis for the six-month period ended July 2, 2022 (the “Q2 MD&A”), which section is incorporated by reference in this news release, as posted on WSP’s website at www.wsp.com, and filed on SEDAR at www.sedar.com. Reconciliations to IFRS measures can be found in section 8, “Financial Review” and section 9, “Liquidity” in WSP’s Management’s Discussion and Analysis (“MD&A”) for the year ended December 31, 2021 and in the Q2 MD&A, which sections are also incorporated by reference in this news release.

In addition, certain non-IFRS and other financial measures are specifically presented in this press release with respect to the Wood E&I Business, including “Wood E&I net revenues”, “Wood E&I pre-IFRS 16 adjusted EBITDA” and “Wood E&I adjusted EBITDA”. Wood E&I Adjusted EBITDA is provided as it is a unit of measurement used by Wood in the management of the Wood E&I Business. Wood E&I Adjusted EBITDA is stated before exceptional items. Exceptional items are those significant items which are separately disclosed by virtue of their size or incidence to enable a full understanding of Wood’s financial performance. Depreciation includes depreciation on right of use assets generated under IFRS 16. These measures are defined as follows:

  • “Wood E&I Pre-IFRS 16 adjusted EBITDA” is defined as the Wood E&I Adjusted EBITDA, less adjustment to exclude the impact of IFRS 16.

  • “Wood E&I Adjusted EBITDA” is operating profit excluding depreciation, amortization and exceptional items.

  • “Wood E&I Net revenues” has the same definition as WSP’s definition of “net revenues”, being revenues less direct costs for subconsultants and other direct expenses that are recoverable directly from clients.

In addition, certain non-IFRS and other financial measures are specifically presented in this news release with respect to RPS, including “RPS net revenues”, “RPS pre-IFRS 16 adjusted EBITDA” and “RPS adjusted EBITDA”. These measures are defined as follows:

  • “RPS Pre-IFRS 16 adjusted EBITDA” is defined as the RPS Adjusted EBITDA, less a charge for operating lease expense to exclude the impact of IFRS 16.

  • “RPS Adjusted EBITDA” is defined as operating profit adjusted by adding back non-cash expenses, tax and financing costs. The adjustments include interest, tax, depreciation, amortization and transaction-related costs and share scheme costs. This generates a cash-based operating profit figure which is the input into the cash flow statement. This definition is consistent with “EBITDAS” as defined by RPS in its 2021 annual report.

  • “RPS net revenues” is revenue from activity where RPS adds value and is RPS’s key measure. Specifically, this is the revenue from the RPS group’s resource pool, that consists of its employees and associates, equipment and software, plus profit on passthrough costs. Passthrough costs represent costs incurred when delivering projects that are not directly related to the RPS group’s resource pool. Such costs are recovered from clients and examples include the cost of subcontractors, travel, accommodation and subsistence. This definition is consistent with “Fee revenues” as defined by RPS in its 2021 annual report.

WSP uses the following non-IFRS and other financial measures in this news release with respect to the Corporation, in each case on a pro-forma basis after giving effect to the Pending Acquisitions, the Offering, the Concurrent Private Placement, advances and funds expected to be drawn under the New Credit Facilities and any Pending Acquisitions related adjustments, as if each had been completed at the beginning of the relevant period, and with results from the Golder acquisition completed on April 7, 2021 having been annualized:

  • “WSP Pro forma adjusted EBITDA” for the trailing twelve-month period ending December 31, 2022 for the purpose of calculating the WSP Pro forma net debt to adjusted EBITDA ratio;

  • “WSP Pro forma net debt to adjusted EBITDA ratio”;

  • “WSP Pro forma net revenues”.

“Accretion” or “accretive” is calculated as the increase in WSP’s forecasted pro forma adjusted net earnings per share for the financial year ending December 31, 2024 after giving effect to the Pending Acquisitions, the Offering, the Concurrent Private Placement, advances and funds expected to be drawn under the New Credit Facilities and any Pending Acquisition-related adjustments, as if each had been completed on January 1, 2023, as compared to WSP’s forecasted adjusted net earnings per share for the financial year ending December 31, 2023 on a stand-alone basis. The difference between the forward-looking measure and the equivalent historical non-IFRS measure is to give effect to the Pending Acquisitions at an earlier date than what IFRS 3 would mandate.

The following tables set forth detailed reconciliation, if applicable, of the non-IFRS and other financial measures used in this news release to the nearest or most equivalent IFRS measures.

A reconciliation of 2021 Wood E&I operating profit/(loss) to Wood E&I Adjusted EBITDA and Wood E&I Pre-IFRS 16 Adjusted EBITDA is provided in the table below.

 

2021
(In millions of US dollars)

Operating profit

116

Add back:

Exceptional items - restructuring

4

Amortization

1

Depreciation

28

Total Add back

33

Wood E&I Adjusted EBITDA

149

Adjustment to exclude the impact of IFRS 16

28

Wood E&I Pre IFRS Adjusted EBITDA

121

A reconciliation of 2021 RPS Adjusted operating profit/(loss) to RPS Adjusted EBITDA and RPS Pre-IFRS 16 Adjusted EBITDA is provided in the table below.

 

2021
(In millions of GBP)

Adjusted Operating profit

28.3

Depreciation

18.4

Amortization

0.7

Impairment

1.3

RPS Adjusted EBITDA

48.7

Operating Lease Expenses (IFRS 16 Adjustment)

11.5

RPS Pre-IFRS 16 adjusted EBITDA

37.2

The RPS Group’s pre-IFRS 16 Adjusted EBITDA for the twelve months ended June 30, 2022 of £41.9 million (LTM pre-IFRS 16 Adjusted EBITDA) is derived from: (i) RPS’s audited consolidated financial statements of RPS for the financial year ended December 31, 2021; (ii) the unaudited consolidated financial statements of RPS for the six months ended June 30, 2021 and the six months ended June 30, 2022, (iii) RPS’s final results presentation for the financial year ended December 31, 2021, and (iv) RPS’s interim results presentation for the six months ended June 30, 2021 and the six months ended June 30, 2022 and calculated as follows:

 

Year ended
December 31, 2021

(In millions of GBP)

Six-months ended
June 30, 2021
(In millions of GBP)

Six-months ended
June 30, 2022
(In millions of GBP)

Trailing twelve months
ended June 30, 2022

(In millions of GBP)

Adjusted Operating profit

28.3

13.1

18.5

33.7

Depreciation

18.4

9.3

8.4

17.5

Amortization

0.7

0.3

-

0.4

Impairment

1.3

-

-

1.3

RPS Adjusted EBITDA

48.7

22.7

26.9

52.9

Operating Leases Expenses (IFRS 16 Adjustment)

11.5

5.7

5.2

11.0

RPS Pre-IFRS 16 Adjusted EBITDA

37.2

17.0

21.7

41.9

A reconciliation of WSP’s pro forma pre-IFRS 16 Adjusted EBITDA for the year ended December 31, 2021 is provided in the table below.

 

 

2021
(In millions of Canadian dollars,
USD/CAD rate of 1.
29 and
GBP/CAD rate of 1.5
6)

WSP Pre-IFRS 16 adjusted EBITDA

 

 

WSP Adjusted EBITDA

$1,322.5

 

 

Minus: lease payments

($303.2

)

$1,019.3

RPS Pre-IFRS 16 Adjusted EBITDA

£37.2

 

$58.0

Wood E&I Pre-IFRS 16 Adjusted EBITDA

US$121

 

$156.1

Golder Pre-IFRS 16 Adjusted EBITDA annualization effect

 

$15.3

WSP Pro forma Pre-IFRS 16 Adjusted EBITDA

 

$1,248.7

A reconciliation of 2021 Wood E&I revenues to Wood E&I net revenues is provided in the table below.

 

2021
(In millions of US dollars)

Revenue

1,232.0

 

Less: Subcontracting and other direct costs

(445.1

)

Wood E&I net revenues

786.9

 

A reconciliation of 2021 RPS revenues to RPS net revenues is provided in the table below.

 

2021
(In millions of GBP)

Revenue

560.4

 

Less: Passthrough costs

(84.3

)

RPS net revenues

476.1

 

A reconciliation of WSP’s pro forma net revenues for the year ended December 31, 2021 is provided in the table below.

 

 

2021
(In millions of Canadian dollars,
USD/CAD rate of 1.
29 and
GPB/CAD of 1.
56)

WSP net revenues

 

$7,869.6

RPS net revenues

£476.1

$742.7

Wood E&I net revenues

$786.9

$1,015.1

Golder net revenue annualized effect

 

$278.3

WSP Pro forma net revenues

 

$9,905.7

The non-IFRS and other financial measures used in this press release do not have a standardized meaning as prescribed by IFRS. Management of the Corporation believes that these non-IFRS and other financial measures provide useful information to investors regarding the financial condition and results of operations of the Corporation and the other entities referenced herein as they provide additional key metrics of their performance. Refer to section 19 “Glossary of segment reporting, non-IFRS and other financial measures” of the Q2 MD&A for more information on the usefulness to investors of each such measures. These non-IFRS and other financial measures are not recognized under IFRS and may differ from similarly-named measures 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.

All dollar figures in this press release are Canadian dollars unless otherwise indicated. Where financial information of RPS or relating to the Wood E&I Business has been converted from British pounds sterling or U.S. dollars, as applicable, to Canadian dollars for purposes of comparison to and combination with, financial information of WSP, (i) British pounds sterling have been converted to Canadian dollars at an exchange rate of $1.56 Canadian dollars per £1.00, and (ii) U.S. dollars have been converted to Canadian dollars at an exchange rate of $1.29 Canadian dollars per US$1.00.

1 Non-IFRS and other financial measures. Please refer to the “non-IFRS and other financial measures” disclaimer above.

2 Non-IFRS and other financial measures. These measures are defined in section 19, “Glossary of segment reporting measures, non-IFRS and other financial measures” of the Q2 MD&A. Please refer to "non-IFRS and other financial measures" disclaimer above.

3 This information constitutes forward-looking information, based on multiple estimates and assumptions about future events. The reader is cautioned that using this information for other purposes may be inappropriate. Actual results may differ and such differences may be material. Please refer to the “forward-looking statements” disclaimer above.

4 The estimated future financial information of the Acquired Businesses and the pro forma financial information included in this news release have been prepared by WSP and derived from the publicly available consolidated financial statements for the year ended December 31, 2021 and unaudited consolidated financial statements for the six-month period ended June 30, 2022 of RPS or Wood, as applicable, and reflect certain significant assumptions, judgments and allocations made by WSP. Such financial information reflects assumptions and adjustments that are based upon preliminary estimates, which may be revised as additional information becomes available and as additional analyses are performed. Accordingly, the final accounting adjustments may differ materially from the adjustments reflected therein. Pending completion of the Wood Acquisition, the Wood E&I Business is a fully integrated business unit of Wood, and separate financial statements historically have not been prepared for the Wood E&I Business.

5 Expected to be realized over a 24-month period, with 50% to be realized within the first twelve months after the closing date. Cost to realize synergies estimated at ~£20 million (~$30 million). Prior to the date of this announcement, consistent with market practice, WSP has been granted limited access to targeted information and RPS’s senior management for the purposes of confirmatory due diligence. As a result, its preliminary assessment of potential synergy opportunities for the Acquisition is primarily based on its own outside-in perspectives, previous acquisition experience and publicly available information.

6 Management's estimate based on the number of employees on a proforma basis for the year ended December 31, 2021 including the Wood Acquisition and the recently announced pending acquisitions by WSP of Capita Real Estate and Infrastructure Ltd and GL Hearn Ltd. based on the number of employees for wholly-owned subsidiaries. Source: UK House of Companies, Australia Workforce Gender Equality Agency and information provided by Wood, RPS, Capita Real Estate and Infrastructure Ltd and GL Hearn Ltd.

7 Based on WSP's estimates derived from the publicly available consolidated financial statements of RPS for the year ended December 31, 2021 and unaudited consolidated financial statements for the six-month period ended June 30, 2022.

8 These measures are, or are derived from, components of revenue as calculated in accordance with the accounting policies used to prepare the revenue figure presented in financial statements of WSP, Wood and RPS, as applicable, under IFRS for the year ended December 31, 2021. WSP does not intend to disclose these measures on a periodic basis.

9 Based on 2021 net revenues for each of WSP, the Wood E&I Business and RPS and derived from the publicly available consolidated financial statements of WSP, Wood and RPS, in each case for the financial year ended December 31, 2021, and reflecting certain significant assumptions, judgements and allocations made by WSP.

10 This definition is consistent with “Adjusted operating profit” as defined by RPS in its consolidated financial statements for the year ended December 31, 2021 and unaudited consolidated financial statements for the six-month period ended June 30, 2022, and as presented in its consolidated income statement.

11 Based on the LTM pre-IFRS 16 EBITDA of £41.9 million and derived from the consolidated financial statements of RPS for the year ended December 31, 2021 and for the six-month period ended June 30, 2022.

12 Assumes results from Golder Acquisition completed on April 7, 2021 are annualized.

FOR ADDITIONAL INFORMATION, PLEASE CONTACT:

Alain Michaud

Chief Financial Officer
WSP Global Inc.
alain.michaud@wsp.com
Phone: 438-843-7317