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Executives

Isabelle Adjahi – Director, Communications and IR

Pierre Shoiry – President and CEO

Alexandre L’Heureux – CFO

Analysts

Mona Nazir – Laurentian Bank Securities

Frederic Bastien – Raymond James

Yuri Lynk – Canaccord Genuity

Sara O’Brien – RBC Capital Markets

Paul Lechem – CIBC

Bert Powell – BMO Capital Markets

Sami Hazboun – Investors Group

Genivar Inc. (OTC:GNVUF) Q2 2014 Earnings Conference Call August 6, 2014 4:30 PM ET

Operator

Good afternoon, ladies and gentlemen. Welcome to the WSP Second Quarter of 2014 Conference Call.

I would now like to turn the meeting over to Isabelle Adjahi, Director, Communications and Investor Relations. Please go ahead, Ms. Adjahi.

Isabelle Adjahi

Thanks Simone and good afternoon everyone. I first want to thank you for taking the time to attend this conference call.

Today, we intend to discuss our Q2 financial and operational performance and we will follow our remarks by a Q&A session. Joining me today are Pierre Shoiry, our President and CEO and Alexandre L’Heureux, our CFO. Please note that this call will be recorded and that we will post recording on our website tomorrow.

Before I turn it over to Pierre, I just want to put out some statements made during the call will be forward-looking and our results will be different from this expressed or implied. And we as per Regulation G disclaim any intent to obtain or revise any of these forward-looking statements except as required by law.

I would now like to turn the call over to Pierre Shoiry, our President and CEO. Pierre?

Pierre Shoiry

Thank you, Isabelle. Good afternoon everyone and welcome to this conference call.

We are pleased with our second quarter results as almost all of our regions with the exception of Canada were stable and posted solid organic growth, particularly in the US, the UK and the rest of the world.

Globally, net revenues were up 20.2% positively impacted by the acquisitions we closed during the quarter and which we are partially concluded in Q2 results. We also continued to benefit from the favorable currency gains in several countries which contributed 3.3% of the total organic growth of 5.3%.

EBITDA was up 28.5% year-over-year with improvements in our DSO and backlog. And Alex will discuss these numbers with you in a few minutes.

Let me first give you a brief overview of the highlights of our operations. In Canada, growth in net revenues and EBITDA was primarily due to the acquisition of Focus and the good performance of Western Canada.

We are particularly pleased with the strong financial results of Focus and our various service offerings in the oil and gas sectors. In terms of integration Focus and WSP were awarded their first joint win for the Highway 43 project, a mandate that entails rehabilitating over 30 kilometers of highway in Alberta.

Our Eastern Canadian operations have stabilized and has started to see encouraging trends late in the quarter mainly for the province of Quebec.

We are working on two major alternative delivery proposals. One for the Turcot interchange, large scale project with a value of $2 billion and the other one for the projected $5 billion with New Bridge over the St. Lawrence River, one of the most significant – we are cautiously optimistic for a better performance in Eastern Canada in 2015 after two more quarters of recovery and backlog building in 2014.

The US strong performance for the quarter was due mainly to good organic growth in the private sector building market where we have high utilization. The environmental market segment continued to see increased opportunities in the [general] services. Particularly with redevelopment petroleum and chemical clients and our transportation business was also good. This resulted in both revenues, net revenues and EBITDA increases of approximately 10% year-over-year.

In the UK, on a constant currency basis, organic growth was 13.2% representing another strong quarter. In addition to continued activity in London, the resurgence and the rest of the UK market has had a significant positive impact on the performance in that country. Margins were up and we expect a positive momentum to continue in the next quarters.

In Northern Europe, our Swedish operations performance was better than last year and in line with our expectations. Several important new mandates were awarded to WSP in Stockholm which bodes well for the future in this country.

Germany continued to struggle due to a legacy contracts which we anticipate will be concluded by the end of 2014 while our finished operations continue to be resilient in a very difficult economic environment.

Our Norwegian subsidiary, multi-consultant also had good solid growth and good financial performance in the quarter and year-to-date.

Last but not least, strong 20.5% organic growth for the rest of the world was led by our operations in the Middle East, China, Hong Kong and finally Colombia which performed particularly very well with organic growth in excess of 30%.

Australia had slight positive growth and recent wins and the acquisition of Winward should provide for better second half of the year.

South Africa continued to be challenging and we divested our small Mauritius and Seychelles activities during the second quarter.

So overall we are optimistic for most of our regions and markets given our continued growing backlog level now standing at 1.8 million.

Before I ask Alex to comment on our Q2 financial performance, let me provide an update on our three year 2015 strategic plan that we have rolled out in early 2013. We are now halfway in our 2015 operational and financial objectives and I have to say we are pleased with our accomplishments to-date.

As you may recall our 2015 year end objective is to grow our top-line to 2.3 billion in net revenues including 500 million coming from acquisitions. We also intent to increase margins to 11.5% and headcount to 20,000. To-date thanks to our solid performance in most regions and to our disciplined acquisition strategically we have made significant progress on each of these objectives.

Since 2013 we have acquired and are successfully integrating firms in Canada, France, Australia, Colombia and Sweden adding over 2,000 people to our pool of experts. All these acquisitions have allowed us to diversify our presence both from a geographic and market segment perspective.

We had targeted organic growth of 11.5% over this three year period and we on track to meet this goal on a constant currency basis and well ahead including foreign exchange variances.

From a net revenues perspective we posted revenues of 1.8 billion for trailing 12 months with a 196.5 million EBITDA which represents a margin of 11% on track to our 11% to 11.5% target while our headcount is at 17,500 employees worldwide 2,500 short of our objective.

So, we are in a good position as over the last two years following our merger with WSP we had significantly strengthen our systems our processes and our team. You have the opportunity to meet with several of our leaders during our Analyst and Investor Day in June and what you saw was a team of solid experts knowledgeable of their market and industries.

On the M&A front as you have seen lately activity has been buoyant in our industry and we continue to see numerous opportunities for us. What I can assure you is that we will as in the past continue to be opportunistic and disciplined in what we do. Not only do we look at strategic and financial fit but also a cultural fit.

Our M&A strategy has been consistent with our game plan and we have successfully integrated acquisitions of small, medium and large sizes with the objective to build a stronger and better diversified business that creates value for our employee our clients as well as our stakeholders.

Our pipeline for acquisitions is quite strong and we will remain focused in our approach to building the best global pure play consultancy firm sort of built in natural environments.

In conclusion, we intend to continue on our current 2015 strategic path supplementing organic growth with selected M&A and staying alert to strategic opportunities.

Before I pass on to Alex, from time-to-time you may hear reports of our potential involvement in M&A transactions, it has always been our policy not to comment on such information and or rumors and therefore no questions will be answered on this topic.

So, I will now ask Alex to comment on our Q2 financial performance.

Alexandre L’Heureux

Thanks Pierre. Overall we are pleased with our quarterly financial performance as all key performance metrics were up for the quarter.

EPS funds from operation and EBITDA per share are higher than a year ago. Our balance sheet continued to strengthen with improved DSO as our EBITDA margin. I will discuss about our DSO in more details in a few moment.

For the quarter, we generated revenues and net revenues of 602.5 million and 513.1 million, up 16.7% and 20.2% respectively compared to Q2 2013. We generated global organic growth of 5.3% or 2% on a constant rate basis coupled with a 14.9% of acquisition growth. It should be noted that Focus Group is now part of the organic growth computation in Canada. EBITDA came in at 55 million, or 10.7% of net revenue for the quarter, compared to 42.8 million or 10% of net revenues for the same period last year. As mentioned in the past, the contribution of each quarter to the total annual EBITDA varies due to seasonality with the first quarter being the lowest and the third quarter being the highest.

Diluted net earnings excluding the Focus transaction fee as well as integration cost totaled 26.3 million or $0.43 per share up, 49.4% and 26.5% respectively as compared to Q2 2013. Backlog stood at a record level of approximately 1.8 billion or 9.1 months of revenues up 6.3% compared to last quarter. The increase in backlog came mostly from Canada as a result of the Focus transaction.

Finally, our DSO stood at 82 days compared to 88 days a year ago under restated basis. This decrease can be divided and explained into two parts. First, operationally we decreased DSO by six days which is in line with our corporate goals and strategy. In addition, this quarter we modify our method of calculating DSO to exclude sales tax from our calculation. This resulted in an additional seven days improvement.

On the balance sheet front following our various acquisitions we ended the quarter with the solid position and their low leverage with amount to 1.13 times EBITDA. As mentioned in the past this positions us strongly to pursue our growth strategy and increase the net debt to EBITDA ratio to fund a potential M&A activities.

Last but not least the dividend. During the quarter closed to 50% of shareholders participated in the drip and net of the drip to cash dividend pay to dividend declare last quarter was approximately 11.5 million representing a net payout of our EPS of approximately 48% as compared to 65% a year ago.

Once again this quarter we declared a quarterly dividend of $37.5 per share payable on or about October 15, 2014 to shareholders on record on September 30, 2014.

This concludes my remarks.

Pierre Shoiry

So, thank you. We will now open the line for questions.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of [Mark Liddell] with Deutsche Bank. Your line is open.

Unidentified Analyst

Hi, good afternoon. It looks like you added 2,000 employees in Canada this quarter is that all Focus because the past Focus is about 1700?

Pierre Shoiry

Focus since the acquisition date had good organic growth so, that added about 1800 people and let’s say the rest is don’t forget that this time of the year and this quarter is not a seasonal hires and so, the rest would be organic in other regions and seasonal hires.

Unidentified Analyst

Okay. So, on the Focus the 25% so, obviously you have the extra 100 employees. Was there anything else in the quarter and just the shorter spring break up much of an impact sort of speak to that?

Pierre Shoiry

No, not really Mark.

Unidentified Analyst

Okay, I guess go ahead.

Pierre Shoiry

And let their items and the either as a results of the spring break-up now.

Unidentified Analyst

And just going forward how do we think about that 25% I mean because it sort of stay here do we see a double-digits expectations going forward?

Pierre Shoiry

Well right now we’re integrating our teams and we’re looking to grow organically through organic cross-selling initiatives and so that should provide for some momentum that going forward in Western Canada as well as expanding our services, the new services we brought from Focus such as dramatics throughout our network in Canada. So, you should be able to generate some revenue synergies over the next years with recent acquisition.

Unidentified Analyst

I’m not sure if you can touch on this but just maybe on the seasonality in Focus?

Pierre Shoiry

I think it’s very similar to the pattern, verbally if you look at the seasonality over the past several years ago, we have a pretty consistent trend and Focus is no different to that.

Unidentified Analyst

Okay. Thank you.

Operator

Your next question comes from the line Mona Nazir with Laurentian Bank Securities. Your line is open.

Mona Nazir – Laurentian Bank Securities

Good afternoon.

Pierre Shoiry

Hello. Good afternoon.

Mona Nazir – Laurentian Bank Securities

Hi. So your legacy business in Canada has had some issues and last fall when you took on some restructuring in an effort to turn it around. It’s obvious that Canada is overshadowing your results and even if I assume that Canada revenues up flat, your organic growth rate in the quarter increases to like 5.9%. I’m just wondering your take on win the situation in Canada will abate and we could start seeing some growth instead of contraction, is it more short term or is it about a longer term issue?

Pierre Shoiry

Mona when you, that’s what I tried to explain when we still had two other quarters of recovery.

Mona Nazir – Laurentian Bank Securities

Yeah.

Pierre Shoiry

Clearly when you downsize your business, you downsize your revenue base and then you start to growing from the lower revenue base and that’s what we did in 2013 as we downsized and right-sized our organization to be able to adjust to the slower economy in Quebec and the mining downturn. So I’d say for the remainder of the year we’re going to be working off this lower base with hopefully building up backlogs so that in 2015 we can grow off this lower revenue base and there show some organic growth. And you are right in saying that this if you exclude this 10% or 10%, 11% contraction in mostly in Eastern Canada, the rest of the world was posting some pretty solid numbers.

Mona Nazir – Laurentian Bank Securities

Okay. And just going into the Focus acquisition, when do you expect the integration to be completed, is there a specific timeframe or?

Pierre Shoiry

Well there is two integration I divide integration in two buckets. First bucket is systems and then structure and processes and I think I’d leave it this here. Second bucket is cross-selling and building momentum between the teams and trust that’s ongoing and that never stops.

Mona Nazir – Laurentian Bank Securities

Okay. And is there specific geographies where you want to expand or you’re sticking within Canada right now?

Pierre Shoiry

Right now we are looking at potential M&A tuck in acquisitions in the several countries and different opportunities in different regions and I’d say every region now has a plan to grow their business and both organically and through selected M&A. So we have a very strong pipeline and people were at the Analyst and Investor Day they’ve got a flavor of meeting and we’re able to meet five or six of our regional heads and each one of those guys has a local plan for their business in those regions and on top of that you have a market segment leaders that are looking at opportunities globally and to enhance our expertise in our markets.

Mona Nazir – Laurentian Bank Securities

Thanks. But I think my question was misleading, sorry about that. I was. When I was talking about specific geographies, I was thinking more where you want to take focus and capitalize on their strength so?

Pierre Shoiry

So the natural, the first objective is to drive the expertise in Focus in Canada and to grow it in Canada, we still see a lot of opportunity to expand the services across Canada. Then clearly in geographies where we already have a presence such as the Caribbean, Trinidad or Colombia, oil producing countries we’ve already had some small wins where the dramatics teams in the Australia where they have resources. So we’re going to really focus on the regions where we have a local presence.

Mona Nazir – Laurentian Bank Securities

Okay. Just one last question and then I’ll jump back in queue. I’m not going to ask on any particular acquisition or new surrounding such, but maybe you could comment on your strategy when you do look at acquisitions, Focus was very much Canadian company rooted in Western Canada. And is this kind of what you look for an establish player in a specific geography that you deem as an area that you want to grow or you’re looking to maybe look at something that’s spread out in different geography. Is there a specific formula in regard to structure or you’re open and if the opportunity presents itself?

Pierre Shoiry

We could talk for a long time on this topic, but as per our strategic plan we’re very focused on our core markets and very focused on our existing geographies. And clearly we’re looking for established and well run businesses that both complement us, that both fill in our gaps in terms of our markets and our geographies but also who share our vision and our business model and our culture. So it’s very always been very aligned with these principals and that’s what we intend to do in going forward.

Mona Nazir – Laurentian Bank Securities

Perfect. Thank you. I’ll jump back in queue.

Operator

Your next question comes from the line of Frederic Bastien with Raymond James. Your line is open.

Frederic Bastien – Raymond James

Good afternoon all.

Pierre Shoiry

Hi Frederic.

Frederic Bastien – Raymond James

Just wanted to touch on your margins in the UK obviously they are improving significantly, you are seeing lots of volumes, you are seeing better pricing and such, but it’s still well below the company average. Is there anything structural in the business that’s keeping WSP from meeting the company average in UK?

Pierre Shoiry

Well the UK has always been traditionally a very competitive market and I think we’re going to be able to assess this better not quarter-to-quarter but year-over-year Frederic, because you are always, you know your backlog is always moving with new wins and new projects and I think we’ll be able to have a clear picture on the margin trend in the UK on that, on a year-to-year basis. But clearly the business is better over there, we are very strong in the private sector and there is a lot of private sector business going on and we’re seeing increased investment in the public markets right now so I think it bodes well for the future.

Frederic Bastien – Raymond James

A question related to the UK it sounds like you hired, you increased your headcount by 10% in the first half alone, do you have as aggressive plan to hire more people in the second half?

Pierre Shoiry

I think we’re hiring our strategy right now and the UK has always been to be we had right-sized of the business and right now we’re moving positively and I think there is a current over there to hire cautiously and then not get excited, but clearly there is a positive momentum and what’s encouraging also is the turnover and rate is lower and our business over there. And so we have a, we are seeing a lot of good stability and good momentum in our UK business.

Frederic Bastien – Raymond James

Okay. Thanks. Now acquisition growth I look at the table it was minimal outside Canada yet you had TPS and Winward contributing for two months and one month respectively. Were there any timing issues in the revenue recognition or am I missing something for that perhaps?

Pierre Shoiry

I don’t understand your question Frederic is it on the TPS and Winward.

Frederic Bastien – Raymond James

Yeah. Well you show your revenue breakdown, your net revenues breakdown 8.2 it’s on page 11 your MD&A.

Pierre Shoiry

I think the answer to your question TPS in this quarter is reported in Canada as trends was reported in Canada was a smaller business before and starting next quarter we’re going to be reporting trends in the European operations because now we have more robust business. So that’s why you see, you will see the contributions of TPS and the TPS we only had like six weeks of contributions and Winward just one month.

Frederic Bastien – Raymond James

Okay. I know that makes sense. Also I would have expected the foreign currency impact to have been more material in the quarter especially in the US Alex perhaps you can discuss that or quantify that?

Alexandre L’Heureux

It’s within all said by the Swedish count really like well as you can see the depreciated or that benefited us, Swedish kroner depreciated and it’s a significant part of our business profit and revenue. So superbly that’s why you’ve seen a lower than expected impact on trends.

Frederic Bastien – Raymond James

I was referring more specifically the US you show there was the impact was 0.3% whereas we all know that the Canadian dollar as we can more materially versus the U.S. dollar in the last year?

Alexandre L’Heureux

Now, we need to check year-over-year but I don’t think the impact is...

Pierre Shoiry

It was bigger in first quarter and by the end of June 30, I don’t know if you remember but it strengthened significantly now it’s backed down.

Frederic Bastien – Raymond James

Okay and U.S. I guess the last year of the quarter?

Pierre Shoiry

Yes.

Frederic Bastien – Raymond James

That explains. Okay, thanks guys.

Operator

Your next question comes from the line of [Benoit Plahi] with Desjardins Capital Markets. Your line is open.

Unidentified Analyst

Yes, good afternoon. Just to come back on Focus just wondering if you could provide what was the contribution to the backlog at the end of the quarter.

Pierre Shoiry

120 million Benoit.

Unidentified Analyst

Okay, perfect. Okay, thank you very much. And looking at the geographies obviously Germany and Canada has been having tough challenges over the last three years it seems that there is a nice recovery in Canada Germany. So, what makes you confident that those two business are going to improve?

Pierre Shoiry

There is three countries that basically that if you take Canada and there is Australia there is Germany I think the challenges we had in Austria and in Canada are somewhat similar because a lot of it was based on the downturn in the mining sector whereas Germany but Australia is a smaller business for us so, there wasn’t as big impact as Canada was a larger impact especially in the Northern Ontario, Northern Quebec.

In Germany it has nothing to do with the general economy I think as I explained in the previously calls we just had a business that was not well set up and that needed to restructure and its really I must say that what’s encouraging in Germany is that the market at least is quite robust and also that enable us to minimize in the downturn and to so, we did restructure the business for the new management and now rebuilding the business at least around a more solid economy.

Unidentified Analyst

Okay, very good. And on the M&A front I am not asking any specific details but obviously we saw a lot of transaction I was just wondering if you see some multiple expansion at this point and whether it’s becoming tougher to look at acquisitions these days?

Pierre Shoiry

The metrics remain sensibly the same and so, the multiples as I have said in previous calls the multiple is just part of the equation.

Unidentified Analyst

Yeah, okay.

Pierre Shoiry

You’re buying a company that’s on a strong growth strategy or a company that’s flattish so, there is a lot of – overall I wouldn’t say that metrics are, have been much different so, I must say that some companies are in a better trajectory than they were in a few years backs though.

Unidentified Analyst

Okay, very good and you mentioned the caller obviously we all know about the Simplon Bridge and Turcot exchange in Quebec obviously two nice opportunities so, I was just wondering how the sizable builds a fortunate key could be for WSP and whether it could be a game changer in your Canada segment?

Pierre Shoiry

Well big projects are always important in an organization we’re fortunate to have been shortlisted on both of these projects with very strong partners so, we feel we have a good shot at those projects and those are nice projects they had always you need a good project mix of the larger and smaller projects and these would be nice and it was certainly provide a good momentum going into 2015 that we were to be awarded one of those two.

Unidentified Analyst

Okay. And last question just in terms of tax rate Alex I was just wondering whether we should expect still some seasonality in the tax rate going forward like we saw in the previous years?

Alexandre L’Heureux

It’s very difficult to a bit like margins, quarter-over-quarter to really look at the tax rate I think you need to look at this on an annual basis and I would expect marginal increase in this year compared to last year when you look at our tax rate clearly as a result of our recent acquisitions but for the most part very similar to last year but I were not, I wouldn’t certainly would not want to start trying to predict on any given quarter like the slight movement that you may see around the mean on tax rate.

Unidentified Analyst

Yeah, okay. Perfect, got it. Okay, thanks for the time.

Alexandre L’Heureux

Thank you.

Operator

Your next question comes from the line of Yuri Lynk with Canaccord Genuity. Your line is open.

Yuri Lynk – Canaccord Genuity

Hey, good afternoon guys.

Pierre Shoiry

Good afternoon Yuri.

Alexandre L’Heureux

Good afternoon Yuri.

Yuri Lynk – Canaccord Genuity

Pierre just want to talk about some of the larger trends in the industry on the M&A side you have seen one of your one of the larger pure play design firms just add significant construction capabilities and it seems like at a certain point most of the large design firms kind of reach that point where I guess still in – for likely better term and feel the need that they need to add construction capabilities. How first, what are your thoughts on that and do you think that as you move up and compete more and more with these larger players who can offer a full range of constructions and engineering services. How do you feel you stuck up at present?

Pierre Shoiry

It’s difficult to comment on our competitor strategies but clearly I can talk about ours. We believe – we like where we are as a pure play consultancy we like the opportunities around this sector right now to be a pure play consultant and we think that we can be a very good partner for global contractors and global construction companies and local construction companies and work with these people to provide services in alternative delivery modes or for clients who wish to have a more integrated approach. We still see a lot of growth in our sector without offering these construction services so, for us there are some adjacencies services that we like to grow such as project management and program management and some construction related services but we right now we really like our pure play model and we have no intent of changing the course.

Yuri Lynk – Canaccord Genuity

Okay. Switching gears to just want to come back to Canada excluding Focus do you feel that you’ve right-sized the business at present in terms of headcount and secondly. How do things get better from here? I mean do we need mining to come back do you need to win some of these large jobs that you’ve talked about. Just any color on how you kind of see it evolving from here?

Pierre Shoiry

On the first part of your question as we believe that we are right sized right now. We have gone to a cost base that supports the workload that we have up there and hopefully as I just said we can enter 2015 with a growth there is some growth. We would hope that mining sector would strengthen and it’s very hard to predict on this side but in terms of as you know both Ontario and Quebec now have a more or less stable governments they seem to have indicated that they wish invest heavily in infrastructure in both of these regions. So, I think we should expect some positive outcomes on that end. So, right now we are right-sized and ready for an increase in volumes and what I think is important also over the past years we’ve worked very hard in Canada in integrating our businesses and to one strong company and right now we have a new leadership team that’s focused on client forward-looking client facing activities and this I believe should translate into new work in the coming year.

Yuri Lynk – Canaccord Genuity

Okay. And so it sounds like you are right sized but not cut to the bone I mean you could take on more volume and just see an increase in utilization and handle that business with roughly the same headcount that you got in place now?

Pierre Shoiry

I think that’s fair to say.

Yuri Lynk – Canaccord Genuity

Okay. And then just last question on Canada. I know some of these large projects in the pursuit phase can incur some significant bid cost. Are we seeing any of that in your Q2 margins in Canada or is that still to come in future quarters?

Pierre Shoiry

Well there is some of it, we work on several of these proposals across Canada, not only in the big ones we have other projects on the go. So we regularly have these types of projects on the go. So we typically work maybe at a lesser fee but there is also some upside when you win you have some fee. So we try to structure our deal so that it’s a risk we award that’s fair with our partners. So I’d say it’s regular, it’s part of the regular right now Yuri.

Yuri Lynk – Canaccord Genuity

Okay. And last one from me just on Northern Europe, did Easter falling into Q2 this year versus Q1 last year, did that have any impact on the numbers out of Europe on the margin or growth side?

Pierre Shoiry

I know maybe you know some of our competitors in Northern Europe have disclosed that I saw I read that but we didn’t go into those details.

Yuri Lynk – Canaccord Genuity

Okay. That’s fair. I’ll turn it over. Thanks guys.

Operator

Your next question, the question gets you comes from the line of Sara O’Brien with RBC. Your line is open.

Sara O’Brien – RBC Capital Markets

Hi. Good afternoon.

Pierre Shoiry

Good afternoon Sara.

Sara O’Brien – RBC Capital Markets

Can you comment on the acquisition front, just you’ve talked about in your Investor Day your strategy to get to kind of 11% to 11.5% EBITDA margin. I just wondered if you would entertain looking at other firms that maybe in lower margin whether it’s geographically or practice area wise and if there could be a shift going forward and how WSP looks that margin objectives?

Pierre Shoiry

Since we’ve looked that, we’ve bought acquisitions, we bought companies that had margin profile. I think it’s about seeing the reasons for this margin profile, look at the fundamentals of the country and look at the fundamentals also of the business and see there is an opportunity to help these companies improve margins and then there is gains, efficiency gains that you can, when you have some scale you can leverage some of the efficiency gains in terms of corporate support. So those factors always come in and so margins is just one piece of the picture.

Sara O’Brien – RBC Capital Markets

Okay. And in terms of integration I mean with WSP there was right an overlap and arguably little overlap is probably makes an easier integration. I just wonder how prepared the team is for looking at acquisitions that may require a lot more integration whether it’s geographic or practice area overlap relative to history?

Pierre Shoiry

Well if you look at the Focus acquisition in Canada, once we had a business in Western Canada, they had a business so there was you could argue there was some overlap but it’s not only, there is two aspects to sit there is the corporate back office overlap and there is then the operations we tried to team up with companies that have the least possible operational overlap. We don’t want businesses that do necessary the same thing over the same clients because then it really becomes redundant and you can’t really say that you’re creating value. So we’ve done it in the past in certain regions and yeah we feel that we have all the resources necessary in the various regions to do that because most of that are operating countries have always gone through acquisition processes be it Sweden, in the UK, in Australia and Canada and the U.S so.

Sara O’Brien – RBC Capital Markets

Okay. And just going historically I mean legacy Genivar ran on a bit of more decentralized basis so I just wonder what’s your philosophy going forward, do you see cross sell, you have to be far more integrated in terms of how the businesses operate or can you leave them as kind of standalone entities that get on bidding opportunities only but kind of do their own thing?

Pierre Shoiry

The centralized is something you just mentioned, it’s not about being centralized, it’s centralized it’s about we run a professional service model and we empower our people to run their businesses as they sent professionals but the company, the strategies are all having this global mindset of being part of a larger group and really building off the collaboration and the connectivity within the organization to drop on the best services and the best experts worldwide. So this is a model that we are – I think this is a culture that we have within the organization and when I said they were looking for acquisitions people that there is a cultural fit and the people that share our vision is people that understand this model this professional service model and want to be part of it.

Sara O’Brien – RBC Capital Markets

Okay. And then just switching into the operations in Canada, if we peal our Focus it looks like the EBITDA margin was actually bit softer year-over-year. Just wondering is that really utilization issues on mining staff or infrastructure staff where you think there are large projects coming away or is it more particular problem contracts that you know may linger at this point?

Pierre Shoiry

I’d say it’s mostly related to utilization.

Sara O’Brien – RBC Capital Markets

Okay. Okay. That’s it from me. Thank you.

Pierre Shoiry

Thank you.

Operator

Your next question comes from the line of Paul Lechem with CIBC. Your line is open.

Paul Lechem – CIBC

Thanks. Just a couple of quick question on focus. Again given the 25% organic growth can you give us some sense of what kind of projects was were driving that growth and if there is still an outlook for continued expansion of the current pace I mean were we still seeing more projects coming their way that continue to drive growth above the ground level?

Pierre Shoiry

At this time I can say that the right now the activity is solid, is good. If you are asking me if we are going to see this growth year-over-year that’s very difficult it’s to predict but right now I’d say that the market is good, the prospects are out there, there is a good pipeline of opportunities for our business over there and there is a large client base so we’re looking off our client base of the Focus client base and cross selling services and we had very complementary expertise, so there is good potential Paul to continue to perform well in this region right now.

Paul Lechem – CIBC

Even the growth in Western Canada, how do you actually go about growing 25% are you having problems getting staff and the wage pressures what kind of issues you have been growing the business like that?

Pierre Shoiry

We have all the issues related to a driving economy and good business, but as you can see we’ve been able to manage these challenges and to be able to grow our workforce. So I think we have a good business over there and good leadership which is providing for a solid business.

Paul Lechem – CIBC

And just last one, is there any opportunity to move any of this work around your other offices to try and complement the staffing out?

Pierre Shoiry

Partially in certain sectors and clearly we do this as much as we can, but most of our business is very local business and so you can utilize other parts of the network to support you but I think at the end of the day you have to have that local manpower to service your clients.

Paul Lechem – CIBC

Thank you very much.

Operator

Your next question comes from the line [Jean-Francois] with Bank National. Your line is open.

Unidentified Analyst

Good morning. Just a quick question from me, backlog increased 19% year-over-year. Could you tell what would be the increase without FX?

Pierre Shoiry

On the –

Alexandre L’Heureux

What do you mean by that.

Unidentified Analyst

The increase in the backlog year-over-year.

Alexandre L’Heureux

I would have to on the backlog I don’t have to data in front of me.

Pierre Shoiry

We can get back to you right after the call on this, you want to know the FX the impact on the backlog right?

Unidentified Analyst

Exactly.

Pierre Shoiry

Okay, we’ll do.

Unidentified Analyst

Okay. Thanks. That’s it from me.

Operator

Your next question comes from the line of Bert Powell with BMO Capital Markets. Your line is open.

Bert Powell – BMO Capital Markets

Thanks. Pierre you indicated that you are late in the quarter you are seeing encouraging trends in the problems of Quebec is that are really government intentions and – Turcot or is there other things that are more tangible that you can that that statement?

Pierre Shoiry

Well what allowing me to meet that make that statement is that we have seen a slight backlog increase and when we look at our CRM data on we look at the opportunities ahead in terms of project so, we see encouraging trends there is more activity right now so that’s how we measure this.

Bert Powell – BMO Capital Markets

Are you seeing more in private sector or public sector when you look at that the nature of the person that is looking for?

Pierre Shoiry

The private sector I’d say it’s mostly related to industrial or manufacturing projects or as in the public sector I think we should seeing some renewed spending in the municipal infrastructure and transportation side. I don’t anticipate much activity in the social infrastructure.

Bert Powell – BMO Capital Markets

So, really your comments really relate to funnel more that you know you start to have –

Pierre Shoiry

Bert that’s one of our KPIs that’s the funnel out there and there is backlog you build the backlog on cost opportunities and these translate into backlog and right now I would say that the funnel is better than it was a year ago.

Bert Powell – BMO Capital Markets

When you look at your systems have you got pretty good I mean with all the acquisitions have you got the data to the point where you can look at three years on system your funnel this is our bid universe and this is – we can that’s my probably to outcomes and how that actually be relatively predictive for you?

Pierre Shoiry

That’s the basis of our management system is to have the systems at any book to tell you in real-time what’s the CRM what the pipeline looks like and then managing your projects so, yes we do have those systems in place everywhere.

Bert Powell – BMO Capital Markets

Yeah, that wasn’t the kind of question where – I was wondering as you go through and you start getting experience what happens one quarter can change different quarter till you get enough run way, we understand these data signal means this trend.

Pierre Shoiry

What’s really interesting is that the data is very important and the more data you have and the longer you have been using this data the better you get at forecasting.

Bert Powell – BMO Capital Markets

Yeah exactly.

Pierre Shoiry

So that’s ongoing and you know every year you get better because you have more data to build on.

Bert Powell – BMO Capital Markets

And Alex just a quick question on the non-operating expenses 2.6 million.

Alexandre L’Heureux

Yes.

Bert Powell – BMO Capital Markets

Just want to make sure I have got this right. 1.4 was transaction cost in the quarter related to Focus.

Alexandre L’Heureux

Yes, it is.

Bert Powell – BMO Capital Markets

And the balance?

Alexandre L’Heureux

The balance is in I mean it’s closely tied to the Focus transaction and we’ve done we have gone some organization and within the Canadian operation it’s not right sizing your organization as really redefining the organization now that Focus is part of the Canadian operation so, we’ve encouraged some cost and relation to that.

Bert Powell – BMO Capital Markets

Okay. And when you look at based on new acquisitions aside is there any other more fine tuning that you have to do where we can look for you know non-operating expenses in the near term quarters or substantially you’ve got things where you need them?

Alexandre L’Heureux

Of any significance no.

Bert Powell – BMO Capital Markets

That’s perfect. Thank you Alex

Alexandre L’Heureux

Thank you.

Operator

(Operator Instructions). Your next question comes from the line of Sami Hazboun with Investors Group. Your line is open.

Sami Hazboun – Investors Group

Good afternoon all and thanks for taking my question, it’s a bigger picture question Pierre. Some of the more industry capital goods companies globally have been nothing that with some geopolitical uncertainties and macro uncertainties certain capital investment this has been put off and so it might relate more process industry that I understand you are more on the periphery of but have you noticed anything whether it’d be the middle east things close to the to the Ukraine and northern Europe any sense of slowdown in decision making?

Pierre Shoiry

Not really, no I can’t really comment and Russia and Ukraine because we don’t work in those regions but in the Middle East not all and I’d say in the Central Europe quite to the opposites we are seeing a bit more capital spending right now from the industry.

Sami Hazboun – Investors Group

Okay, that’s all I have for today. Thank you.

Operator

There are no further questions at this time. Presenters I’ll turn the call back over to you.

Pierre Shoiry

So, thank you everybody for being on this call and we will speak at the next conference call. Thank you.

Operator

Ladies and gentlemen, this concludes today’s conference call. You may now disconnect.

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