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 AssumptionsThe
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 endedDecember 31,
2021(In millions of GBP) |
Six-months endedJune 30, 2021(In
millions of GBP) |
Six-months endedJune 30, 2022(In
millions of GBP) |
Trailing twelve monthsended 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 andGBP/CAD rate of 1.56) |
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 andGPB/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 OfficerWSP Global
Inc.alain.michaud@wsp.com Phone: 438-843-7317
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