WSP Opus International Consultants delivered strong top line growth in 2014 with revenue up 17% on 2013 to $539.6m. NPAT was up 15% to $26.2m and Return on Equity was 18.4%, compared with the NZX 50 average of 11.5%. Operating cash flow remained strong at $32.1m, up 29%, and the full-year dividend increased by 13% on the prior year.
“However, this result was significantly impacted by accounting adjustments and a previously reported significant project loss of $4.5m,” said Chairman Kerry McDonald.
EBIT was $37.4m, up 9%, but underlying EBIT of $32.6m was down 2.8% on the prior year; affected by weaker performances in New Zealand and Australia.
The difference between EBIT and underlying EBIT reflects a deferred consideration release of $11.5m in Canada and an impairment of goodwill adjustment of $6.7m in Australia.
The deferred consideration release in Canada relates to the recent Stewart Weir acquisition, which is performing well after the difficult winter weather conditions early in the year. Importantly, the gain is not simply an accounting windfall but reflects the benefits of having excellent people in key roles and an astute approach to risk management in negotiating the acquisition agreement.
In Canada, revenue increased by 133% to $137.3m and underlying EBIT increased by 41% to $7.5m. “Despite adverse weather conditions that impacted WSP Opus Stewart Weir in the first half of the year, the business performed in line with expectations,” said Chief Executive, Dr David Prentice. “WSP Opus Stewart Weir delivered revenue of $111.8m and underlying EBIT of $5.3m. We also saw substantial improvement across the existing Canadian business with EBIT up 21% on the previous year. Looking forward, growth in this market is likely to be affected by oil and gas prices, which are being very closely monitored.”
The UK business had its best financial performance to date with revenue up 26% to $49.3m and EBIT up 80% to $1.1m. “The results are underpinned by a recovering UK economy and opportunities in core growth sectors, including rail, asset management and highways work,” said Dr Prentice. “The UK result is pleasing and we are well placed to leverage our position in 2015, and build on the market penetration gained in 2014.”
The New Zealand business experienced challenging market conditions as a result of increased competition, tighter margins and a reduction in government spending. While revenue increased by 1% to $287.5m, EBIT decreased by 8.1% to $28.5m mainly as a result of a large project loss.
“Despite the challenging environment, we have secured a number of strategic commissions, including six out of nine significant long term Network Outcome Contracts for the NZ Transport Agency and we are leveraging new opportunities in the Pacific,” said Dr Prentice. “The Christchurch earthquake rebuild continues to be a key component of near-term economic activity but other sections of the economy have some momentum.”
The Australian performance reflected a slowdown in the resource and infrastructure sectors with revenue reduced by 15% to $64.4m which equated to an EBIT loss of $675k. “Market conditions are expected to remain challenging for some time,” said Dr Prentice. “The impairment is a pragmatic reflection of a continuing weak economic outlook. In addition, we are pursuing a number of strategic project opportunities as well as driving greater efficiencies throughout the business.”
Mr McDonald says the outlook across markets is mixed, presenting challenges and opportunities for 2015. “The level of economic uncertainty is a key consideration but our strategy of market diversification is proving prudent in managing risk and leveraging new opportunities.”
WSP Opus has confirmed a final interim dividend of 4.9 cents per share, which is fully imputed taking the full year dividend to 8.9c up 13% on prior year.