TSX:WSP - Post Discussion
Post by
retiredcf on Aug 08, 2023 8:47am
RBC
WSP Global Inc.
Sells a small Services business
TSX: WSP | CAD 179.74 | Outperform | Price Target CAD 199.00
Note: Priced as of 10:02am ET on July 26, 2023.
Sentiment: Neutral
What happened: WSP announced today that it has sold Louis Berger Services Inc. ("LBS") to Versar Inc. (a portfolio company of Kingswood Capital Management), a global engineering, environmental, and security services company. LBS specializes in operations and maintenance services for complex infrastructure assets at mission-essential defense and civilian facilities worldwide and currently employs ~1,400 people (vs. ~67,000 employees in total at WSP as of Q1/23 reporting). Recall that WSP acquired Louis Berger in 2018 and the LBS business came to WSP as part of that broader transaction.
Our view: We view the sale as a disposition of a non-core business that is likely not aligned with WSP's focus going forward. While financial metrics were not disclosed, we believe the revenue/earnings contribution was negligible within the context of WSP. Given the nature of the work described, we estimate LBS generated an Adjusted EBITDA margin well below the WSP company average of 17.1% in 2022 (and likely below 10%, in our view). Overall, we believe this transaction represents WSP pruning the portfolio of a non-core business, which we view as a directional positive (albeit neutral overall given the size of the business).
Recall that WSP will report Q2/23 results tomorrow, August 8, after market close, with the conference call to be held on August 9 at 8am ET.
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