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WSP Global foresees potential to become top 3 engineering consultants by 2020

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MONTREAL - WSP Global says industry consolidation could pave the way for it to become one of the world's top three engineering consultancy firms by 2020 and more than double its workforce to 45,000.

The Montreal-based company, formerly called Genivar, made a huge leap in the global rankings in 2012 with the US$438 million purchase of the larger U.K. engineering firm WSP. As of 2013, it was the world's 17th largest firm providing engineering services, but no construction work.

Among its major shareholders are Canada's two largest pension fund managers — the Canada Pension Plan Investment Board and the Caisse de depot et placement du Quebec.

Industry analysts say the company's (TSX:WSP) outlook reinforces its ongoing appetite to grow, primarily from acquisitions.

"This type of long-term strategic vision should also assuage investors' fears that something WSP can run out of growth opportunities in the still extremely fragmented pure engineering consulting space," said Maxim Sytchev of Dundee Securities.

Increasing its workforce from the current level of 17,000 could boost revenues to $5.68 billion by 2020 from nearly $2 billion currently, and raise its pre-tax operating earnings to $748 million from $225 million, he wrote in a report.

"While it is still too early to have any certainty about future acquisitions we were encouraged by the outlook," added Ben Vendittelli of Laurentian Bank Securities.

Its current official plan foresees having 20,000 employees in 2015.

WSP hopes to substantially increase its presence in several markets by 2020, including the United States, Australia, China and the Nordic countries.

It currently has a 0.2 per cent market share in the United States, which accounted for 10 per cent of WSP's net revenues in 2013. It hopes to grow the transportation part of its business, add capability to service the oil and gas sector and become more established in public private partnerships. Its U.S. workforce would increase 10-fold to about 10,000 employees.

"We need to be 10,000 in the U.S. to be relevant because our competition continues to grow," CEO Pierre Shoiry told analysts during an investor day on Thursday.

In Sweden, the goal is to double its operations in the next five years.w

WSP also sees Canada, which accounts for 40 per cent of its global revenues, regaining momentum on energy opportunities and increased government infrastructure spending following elections in Quebec and Ontario.

In Quebec, there seem to be reduced challenges from a provincial corruption inquiry, lack of mining work and project delays that reduced revenues by 20 to 25 per cent.

"We definitely are seeing better days ahead and sunshine starting to break out and the opportunities...are steadily starting to increase," added David Ackert, the new CEO of WSP's Canadian operations.

WSP said it was selected to work on the $1 billion McInnis cement plant to be built in Gaspe, Que., but provided few details.

Shoiry added there's some "slow momentum" from the new Liberal government's relaunch of Quebec's northern development plan. But he said the election of majority governments in Ontario and Quebec will bring political stability for four years.

"Both these two government have expressed a desire to invest heavily in infrastructure, so I think we can expect a positive momentum going into 2015."

WSP said its Canadian workforce could increase more than 30 per cent to reach 8,000 by 2020.

He said WSP is focused on remaining a pure play consultancy rather than adding construction or concession activities.

"We think that we can build something that doesn't really exist out there."

On the Toronto Stock Exchange, WSP's shares closed at $37.25, down 97 cents or 2.54 per cent in Friday trading.

Follow @RossMarowits on Twitter

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