WSP Global Inc

TSX:WSP

Earnings Call Transcript 2018-Q4

[Operator]

[Foreign Language] Good afternoon, ladies and gentlemen. [Foreign Language] Welcome to WSP's Fourth Quarter and Fiscal 2018 Results Conference Call. I would now like to turn the meeting over to Adjahi, Senior Vice President, Investor Relations and Communications. [Foreign Language] Please go ahead, Ms. Adjahi.

[Isabelle Adjahi]

Good afternoon, and thanks for taking the time to join the call during which we will be discussing our Q4 and the fiscal 2018 performance. We will first make a few remarks and then we would follow this by a Q&A session. Joining me today are Alexandre L'Heureux, our President and CEO; and Bruno Roy, our CFO.Please note that this call is also available on Internet via webcast. During the call, we may be making some forward-looking statements and actual results could be different from those expressed or implied, and we undertake no obligation to update or revise any of these statements. With that, I will now turn the call over to Alexandre L'Heureux. Alex?

[Alexandre J. L'Heureux, President, CEO & Director]

Thank you, Isabelle, and hello, everyone. We are pleased with our 2018 performance, and before we get into the details, I would like to outline the main highlights for the year.First, we posted organic growth in net revenues of 3.5%, spanning across all of our reportable segments. Second, we met our key 2015-2018 Global Strategic Plan objectives. Adjusted EBITDA margin reached 11%, headcount reached approximately 48,000 people, and free cash flow hit $547.4 million or approximately 221% of net earnings attributable to shareholders.Lastly, on the strength of our 2018 reported financials, we recently presented our ambitions 2019-2021 Global Strategic Plan to our different stakeholders.Let me now elaborate on these points further and make a few comments on our overall 2018 financial performance, which Bruno will discuss in greater detail shortly.For the year, we generated net revenues of $6 billion, in line with our expectation. This represented a 12.4% increase compared to 2017. Adjusted EBITDA was $660 million, with adjusted EBITDA margin of 11%, hitting our target for the year.Lastly, our backlog grew from $6.4 billion last year to $7.7 billion at the end of '18, increasing 4.2% organically year-over-year and remaining stable at 10.1 months. During the year, we acquired 4 companies, adding over 5,000 employees to our workforce, expanding our geographical presence in the United States, Continental Europe and Australia, while strengthening our expertise in other regions. These acquisitions were financed using our balance sheet.And before I continue, I would like to take this opportunity to, once again, welcome all of our new colleagues to the WSP family.Looking at the performance of our regions, Canada posted organic net revenue growth of 3.5% and 14% adjusted EBITDA margin before global corporate costs for the year. This performance was a result of a steady utilization rates, improved project delivery and cost containment efforts.Shortly after the close of the year, East West Connectors, a consortium we are part of, along with Kiewit, Vinci and Hatch was officially selected by the city of Ottawa as the preferred proponent for the $2.6 billion consideration line extension project.This project include 27 kilometers of new LRT tracks, several new bridge structures, 16 stations, tunneling, lining of several new road and construction of a new road. We will be the lead designer for this project.As you know, we do not press release projects win. But this iconic award is a testimonial of our multidisciplinary expertise. I would like to congratulate all of our experts involved in this project.With an expanding pipeline of opportunities, we expect further momentum and are optimistic about the long-term prospect in the Canadian markets.The Americas reportable segment posted 0.7 organic growth -- 0.7%, I'm sorry, organic growth in net revenues for the year, in line with our expectation. Recall that in 2017, our U.S. operations derived a significant amount of FEMA-related revenues, which were in excess of our expectations.Adjusted for these 2017 FEMA-related revenue, the Americas reportable segment would have reported mid-single-digit organic growth in net revenues.This region delivered adjusted EBITDA and adjusted EBITDA margin before global corporate costs of $257.3 million and 14.6%, respectively, once again, the highest among all of our reportable segments. The pipeline of opportunities for the Americas remain healthy, with a book-to-burn ratio above 1.2 for the year.Shortly after the close of the Louis Berger transaction, we were selected, in collaboration with LB, by the Europe District of the U.S. Army Corps of Engineers for 5-year contract of general engineering and design work to be performed in various European countries. It is the direct result of a collaborative effort between our U.S. and -- U.S. team and U.S. Berger team.Across the ocean, the EMEIA reportable segment delivered organic net revenue growth of 5.1%, slightly above our expectations.The Nordics delivered organic growth in net revenues of approximately 6%, led by our Swedish operation. Our U.K. operation, despite the uncertainty surrounding Brexit, delivered organic growth in net revenues slightly over 7% for the year, and I would like to commend the entire team for this achievement.We have been reappointed by the North and Mid-Wales Trunk Road Agency on a 4-year transport framework to provide consultancy services in support of projects to maintain and improve capacity, resilience and safety across the 680 miles of strategic trunk road in the region. The contract will involve utilizing a wide range of expertise across our 2,500 strong Transport & Infrastructure business, which includes highways and intelligent transport systems, ground, civil as well as bridge experts.Continuing in our EMEIA for both the Middle East and South Africa, most performance metrics were in line with our expectation. In December 2018, our Middle East operation obtained a 2-year contract extension from the Public Work Authority of Qatar pertaining to the local roads and drainage program initiated in '11. The capital cost of the entire project is estimated to be approximately $30 billion.The EMEIA region as a whole delivered adjusted EBITDA and adjusted EBITDA margin before global corporate costs of $225.4 million and 10.3%, respectively.Our APAC reportable segment posted organic net revenue growth of 5.6% for the year. But thanks specifically to Australia, operation performed -- the operations performed ahead of expectation with a 16% organic net revenue growth, while our Asian operation continued to be impacted by a slowdown in the private property market.Subsequent to our fiscal year-end, we were appointed as colead designer of the West Connex Rozelle Interchange Project, considered as one of the most complex infrastructure projects ever undertaken in Australia. At peak, we anticipate this projects to require over 200 WSP employees.We continue to be pleased with the performance of our New Zealand operation, which benefited from our Opus acquisition. Results were slightly above our expectations.Overall, 2018 was a fruitful year during which we strengthened our business around the globe and pursued our acquisition strategy, leading us to attain our key 2015-2018 Global Strategic Plan objectives. I would like to thank all of our leaders and employees for this outstanding performance and for their continued dedication. Speaking of people, we continue to strengthen our leadership team with 4 key executive appointments during the first quarter of '19. And these includes: First, Ryan Brain, as President and CEO of our Canadian operation; second, Ivy Kong, as a Managing Director of our Asian Operation; and lastly, Alain Michaud, who recently came on board as Senior Vice President, Operational Performance and Strategic Initiatives.In parallel, André-Martin Bouchard was promoted to Global Director Environment and Resources.I would like to, once again, welcome each of them to WSP global leadership team, where their talent and expertise would be a great asset to support our continued growth in the next strategic cycle. It is also with mixed feelings and emotion to inform you that Steeve Robitaille, Chief Legal Officer, Executive Vice President Merger and Acquisition and Secretary of the Corporation, will leave his position in the next few weeks to assume a new role at another firm. On behalf of the Board of Directors and the management team, I would like to thank Steeve for his contribution to the Corporation and wish him the very best in his future endeavors. The search process to identify a successor will begin soon.I will now turn the call over to Bruno, who will review our fiscal financial results in more detail and share 2019 outlook. Bruno?

[Bruno Roy, Chief Financial Officer]

Thanks, Alex. I'm pleased to share results for the fourth quarter and for fiscal 2018. Before I jump in, let me highlight a few items. First, we posted organic growth and net revenues of 3.5% for fiscal 2018. Adjusted EBITDA margin reached 11%, in line with our expectations. Our DSO has improved to 76 days, reflecting continuous process improvement in both billings and collections.Our free cash flow for the full year was nearly $550 million, for a net earnings conversion ratio of 221%.Our balance sheet remained strong at 1.8x net debt-to-EBITDA. As Alex mentioned earlier, all 2018 acquisitions were financed with available cash and credit facilities.All-in, we are entering this year and our 2019-2021 Global Strategic Plan on the front foot. Let me know get into the details.For the quarter, revenues and net revenues were $2 billion and $1.5 billion, up 4.6% and 4.2%, respectively, compared to the same period in 2017.Organic growth in net revenue was negative 2.4% on a constant currency basis.Adjusted for 2017's FEMA-related revenues in excess of expectations, organic growth in net revenues would have been 2.6% for the quarter.For the full year, revenue and net revenue were $7.9 billion and $6 billion, growing 13.9% and 12.4%, respectively.Organic growth amounted to 3.5%, in line with our disclosed outlook.Let's move to adjusted EBITDA. For the fourth quarter, adjusted EBITDA was $169.5 million, up $29.5 million or 21%.Our adjusted EBITDA margin was 11% as compared to 9.5% last year.For the full year, adjusted EBITDA was $660 million, up by 18.9%, with adjusted EBITDA margin also at 11%, up 10.4% in 2017.Now turning to adjusted net earnings. For the fourth quarter, adjusted net earnings and adjusted net earnings per share were $59 million or $0.50 per share, both metrics up 50% compared to Q4 '17.For fiscal '18, our adjusted net earnings were $295.2 million or $2.83 per share, up 26% and 24%, respectively, compared to 2017.Noncash finance expenses had a negative impact of approximately $0.14 per share and $0.12 per share for the fourth quarter and for the full year, respectively. I will now review a few key cash flow metrics.For the year, cash flow from operating activities stood at $669.7 million compared to $395.4 million in 2017. Our free cash flow for the year came at $547.4 million or 221% of net earnings above our cash flow conversion target of 100% of net earnings.At 1.8x, our net debt to adjusted EBITDA ratio remain within our target range of 1.5 to 2x. We remain below the 2x threshold while making acquisitions requiring over $500 million without the need for equity. The upper range of the net debt to adjusted EBITDA ratio was increased to 2.5x percent in our -- sorry, 2.5x in our 2019-2021 Global Strategic Plan, which is reflective of our increased resiliency.Lastly, our DSO was strong at 76 days at the end of 2018 as compared to 79 days at the end of '17. Sustained collection efforts during the year were the heart of this improvement.During the quarter, we also declared a dividend of $0.375 per share to shareholders on record as of December 31, 2018, which was paid on January 15, 2019. With 50.1% DRIP participation, the net cash outlay was $19.6 million.In conclusion, we've delivered, in many cases over delivered, on all our key 2018 financial outlook metrics.I'd like now to take a few minutes to discuss our 2019 financial outlook, which is aimed at assisting analysts and shareholders in defining their perspective on our performance. This outlook has been prepared based on the foreign exchange rates effective yesterday, March 13, 2019.We anticipate net revenues to be in the $6.6 billion to $6.9 billion range and to post organic growth in net revenues in the 2% to 5% range.Adjusted EBITDA is expected to range between $740 million and $790 million.This adjusted EBITDA range does not take into consideration the adoption of IFRS 15 -- IFRS 16, sorry, effective January 1, 2019, in order to provide a common base comparison with our 2018 results.While noncash in nature, the adoption and application of IFRS 16 will impact the presentation of our financial statements. On our balance sheet, it will result in an increase to our asset and liabilities to the recognition of right-to-use assets and lease liabilities.On our P&L, our operating lease expenses will be replaced by depreciation expense on the right-to-use assets and in the interest expense on our lease liability.We will update our 2019 outlook to take into consideration the adoption of IFRS 16 on May 14 with the release of our Q1 2019 results.On the same date, we'll also provide an update for our 2019-2021 Strategic Plan financial ambitions to take into account the adoption of IFRS 16.As in past years, we provide the market with a quarterly adjusted EBITDA range of our anticipated full year adjusted EBITDA. For 2019, we anticipate our quarterly adjusted EBITDA to range between 18% to 30% of the total annual adjusted EBITDA. Given the proximity to the first quarter 2019 reporting calls, we are forecasting that our Q1 2019 adjusted EBITDA will range between 18% and 20% of the full year adjusted EBITDA guidance provided.Turning to tax. We expect our net -- the expected effective tax rate for fiscal 2018 (sic) [ 2019 ] to be in the 26% to 28% range.In 2019, we are targeting a net debt to adjusted EBITDA ratio ranging between 1.5 to 2.5x, excluding potential 2019 acquisitions, and we anticipate capital expenditures to range between $120 million and $135 million.Lastly, we anticipate between $30 million and $40 million in acquisitions, integration and reorganization costs, driven by the integration-based operational optimization, real estate consolidation and restructuring related to our Louis Berger acquisition as announced at the time of the acquisition.Global corporate costs in 2018 will range between $90 million and $95 million compared to $87.3 million in 2018, mainly due to the acquisition of Louis Berger in Q4 2018.Alex will now comment on the operational outlook for each of the regions. Alex, over to you.

[Alexandre J. L'Heureux, President, CEO & Director]

Thanks, Bruno, and let's start our 2019 operational outlook with Canada, with a solid 2018 performance and a strong Transportation & Infrastructure sector pipeline, we do anticipate organic growth in net revenues to range in the low to mid-single-digit. We also anticipate a strong year for the Americas and expanding -- an expanding Transportation & Infrastructure market sector in the U.S. should provide a solid base for continued growth.As far as Latin America is concerned, after the acquisition of ConCol, Poch and the recent addition of Louis Berger operation in region, we are entering the final stages of integration. Organic growth in net revenue for the region is anticipated to be flat with some improvement in operating margins.On a consolidated basis, we anticipated mid -- we anticipate mid- to high single digits organic growth in net revenues for the Americas reportable segments.For the EMEIA regions as a whole, we anticipate delivering organic growth in net revenue in the low single digits, mirroring the expectations for our U.K. and Nordics operation.After several years of strong organic growth in net revenues in the Nordics regions, economic indicators now point towards somewhat of a cooling-off period for Sweden and Scandinavia.In light of the numerous acquisitions made over the last few years, focus in the Nordics for 2019 will be on operating margin improvement.In the U.K, prospects for the public sector remains solid. However, concerns over Brexit and its potential negative impact on private sector activity level have led us to a slightly more cautious outlook when compared to 2018. We therefore anticipate organic growth in net revenues in the low single digits.Turning to APAC, we anticipate another solid year from our Australian operation, with organic growth in net revenues to range in the mid- to high single digits, stemming from several large project wins in the Transportation & Infrastructure sector obtained earlier in '19 and a strong pipeline.Our New Zealand operation now representing approximately 1/4 of our APAC's net revenue, are anticipated to post organic growth in net revenues in the mid-single digits, derived mainly from the Transportation & Infrastructure sector.In Asia, we anticipate organic growth in net revenues for 2019 to range in the flat to single-digit range as we continue to focus our efforts on profitable business development.On a consolidated basis, we anticipate the APAC region to deliver organic growth in net revenues in the mid-single digits.Now I would like to open the line for questions.

[Operator]

[Operator Instructions] [Foreign Language] Your first question comes from the line of Jacob Bout of CIBC.

[Jacob Jonathan Bout]

So just going back to your outlook. So it sounds like your pipeline is pretty strong. So the softness that you're seeing is primarily in the U.K. and Nordics?

[Alexandre J. L'Heureux, President, CEO & Director]

Look, the pipeline is pretty strong. The book-to-burn is good. I think in the U.K, what I just said, there's -- we are taking a more cautious approach to it. Having said all that, you know that the Brexit issue has been there now for 24 months. And last year, we posted 7% organic growth. So we could be pleasantly surprised. But given that the current environment -- all I'm saying is we're taking a more cautious approach to it. But so far, I mean, our backlog is good, the beginning of this year is also good. So I would like the investors to keep that in mind. In the Nordics, look, Sweden has been delivering now for 19 -- 18 consecutive years. They've been posting great results since the early 2000, way before we acquired WSP. So all I'm saying is that the region has been doing very well for many, many years now, and we are also taking a bit of a more cautious approach to it. But that doesn't mean that the performance is not going to be good.

[Jacob Jonathan Bout]

Okay. And then the flip in organic growth from being negative in 2018 to being flat to positive in '19, what is that a function of?

[Bruno Roy, Chief Financial Officer]

That's a function of FEMA, Jacob. If you adjust for FEMA, our organic growth was very positive, 3.5% [ in results and 2.6% ]

[Jacob Jonathan Bout]

Sorry, I was asking specifically about Asia.

[Alexandre J. L'Heureux, President, CEO & Director]

Okay. Asia, I mean, well, look, I mean, a lot of work has gone into the business over the last few years. And so we worked tirelessly to really streamline the operation, to reduce costs, to lift up our book of business, to perhaps do a better job at the client selection, project selection, such that, we run a tighter ship with a better business in a difficult environment. And that's why this year, we believe that we should hopefully be generating organic growth for '19.

[Jacob Jonathan Bout]

You're not taking on any more additional risk?

[Alexandre J. L'Heureux, President, CEO & Director]

No. Absolutely not.

[Jacob Jonathan Bout]

Okay. And then on FEMA. Is there any -- so obviously, large impact in the fourth quarter for year-on-year. But is there any impact in the first half of the year?

[Alexandre J. L'Heureux, President, CEO & Director]

No. Not at this time. I mean, FEMA, it's -- the work we do with FEMA, mostly it's inspection. So it's extremely difficult to -- it's actually it's tied to determining when the weather -- the winter will end in Montréal. It's extremely difficult to predict. So we don't know when -- and how many inspection and inspection work we'd be doing in any given year. Every year is different. So it's a bit different than the type of work we typically do in our business. So that's why we tend to try to give you a bit of an outlook on FEMA -- not an outlook, but I mean, to give you a bit more granular details around FEMA because sometimes it tends to the numbers in the quarter when that happen.

[Bruno Roy, Chief Financial Officer]

Keep in mind, Jacob, that in 2017, during the quarter, we had hurricanes Harvey, Irma and Maria. And that's what truly spiked the results for '17. We've had nothing of the sort in 2018 so as such you can expect a more normal first half of this year.

[Jacob Jonathan Bout]

Yes. I don't mean that, so basically, what I was getting at, so there was no bleed from fourth quarter '17 and this work didn't continue in the first quarter 2018?

[Alexandre J. L'Heureux, President, CEO & Director]

Oh, sorry, actually you meant the first half of '18. I thought you were -- you meant the first half of '19. Sorry about that. I misunderstood. No, there's no -- there's no particular effect.

[Operator]

Our next question comes from the line of Benoit Poirier from Desjardins.

[Benoit Poirier]

My question is on the free cash flow. You finished the year with a very strong free cash flow conversion, obviously, driven by the -- especially by working cap. So I was wondering if you could provide more details about the conversion, whether we should expect a reversal from the working capital standpoint? Or if there's something nonrecurring going forward on the free cash flow side?

[Bruno Roy, Chief Financial Officer]

Thanks, Benoit. Bruno here. The -- so the big driver in our improved free cash flow as you indicated was working capital, specifically our DSOs have improved 3 days year-on-year. Very pleased with the results there and mostly due to better collection. And look, at the end of the day, when your teams do good work, it's always easier to go out and collect your clients. So clients are happy to pay them. So this is a testimony not only for the finance teams globally but for all the teams that are doing terrific work. Going back to the conversion ratio, our target remains to be above 100% and that target is the same for this year.

[Benoit Poirier]

Okay. And do you still expect a lot of improvement from the DSO? Or would you say that you're at a more sustainable level right now, Bruno?

[Bruno Roy, Chief Financial Officer]

I wake up every morning trying to improve it, Benoit.

[Alexandre J. L'Heureux, President, CEO & Director]

But if you look at the outlook...

[Bruno Roy, Chief Financial Officer]

Yes, so -- yes, and if you look at our outlook, so again, it's ranging between 78 to 83 days. But again, we'll be trying to do better than that as we do all of that.

[Benoit Poirier]

Yes, okay. Perfect, very good color. And there's been a recent budget proposed by the U.S. President over the last few days. I was wondering if you could provide any color, how do you read the recent budget proposed for the U.S. for the Department of Transportation? If you see any read through for your Transportation business in the U.S.?

[Alexandre J. L'Heureux, President, CEO & Director]

Well, see Benoit, any time governments are talking about investing infrastructure it's good news for WSP. So I'll leave it at that. Because I just don't know how this would translate into the marketplace just yet. But it's always good to hear that governments are mindful about reinvesting in the country -- in their respective countries. So obviously, from what we heard, hopefully, it would translate into a positive outcome. But who knows? So I'll leave it at that for the time being.

[Benoit Poirier]

Okay. And from a booking standpoint, you ended up with 1x book-to-burn ratio in 2018 and got, also, some major contracts in Canada and APAC early in 2019. So I was wondering if you could provide some color about the expectation in terms of book-to-rate for 2019?

[Alexandre J. L'Heureux, President, CEO & Director]

Look, I mean, so far it's looking good. That's all I can say. You will recall, when we lost -- we didn't get the assignment on the [ RAM ] I mean, I -- if you all recall, I said, sometimes you lose some and you win some. I mean, I'm extremely pleased and delighted by the recent win in Ottawa. That's not something we could disclose before, but I'm very pleased about this. This is a major win for WSP in Canada. So obviously, the backlog is doing better today than it was at the end of December, given the 2, 3 recent big wins that I just talked about. Definitely.

[Bruno Roy, Chief Financial Officer]

So our book-to-burn was 104% Benoit last year. So 1 0 4.

[Operator]

Your next question comes from the line of Michael Tupholme of TD Securities.

[Michael Tupholme, Research Analyst]

In the outlook, you have talked about aiming to improve margins in Canada, and we've actually already seen some pretty healthy improvements over the last couple of years. Just wondering if you can talk a little bit about how much more room you think there is to go there? And maybe help us understand what sort of degree of improvement we could be thinking about in Canada.

[Alexandre J. L'Heureux, President, CEO & Director]

Look, Michael, I mean, typically, we are not providing an outlook country by country. I mean that would be a bit too granular at this point in time. All I can tell you is that -- and we talked about this when we unveiled our strategic plan. We have a defined operating plan between now and 2021, to get to the 11.5% and 12.5% EBITDA margin. That's globally on the aggregate. And in order to achieve that, every country will have to be aligned and push in the same direction, and that's not different -- that is no different for Canada. So clearly, this year, we are aiming and hoping for margin improvement in Canada. You will recall that not too long ago, we were posting close and slightly below 10% EBITDA margin, like 24 months ago, and I mentioned back then that we would steer the ship in a different direction and really work hard to improve our margin and generate quality organic growth in Canada. And that's what we've done, but that's unfinished business. We have the aspiration to bring Canada higher, and I will continue to do that this year to work to achieve that.

[Michael Tupholme, Research Analyst]

Okay. I noticed, it looks like you stopped disclosing a soft backlog, which was a metric you had been giving us previously. Just wondering what the rationale for that -- for no longer disclosing that was.

[Alexandre J. L'Heureux, President, CEO & Director]

Because the hard backlog is a better and smaller number. Simple as that. The soft backlog is -- could be useful. And I know most of our competitors, they like to release and provide a bigger number. I'd rather take a more conservative stand -- stance personally, Michael. What we know for sure, we're going to be working with is a hard backlog that's signed and approved, and personally, I think that's the best measure for you to measure the future trend of the company. Soft backlog, often time our master service agreement that we have with a large client to approve for millions and millions and millions, but they approved a bit at a time. So that may sound and look sexy to hear that we have a big soft backlog. So in effect, I cannot guarantee you that we -- that will translate into hard backlog. So I'm not sure that this is a measure that we'd put a lot of weight in, despite what others may say.

[Bruno Roy, Chief Financial Officer]

And then the hard backlog, again, for us is approved, signed and funded projects can be -- is our real product.

[Michael Tupholme, Research Analyst]

Okay. And then just, Bruno, with respect to IFRS 16, if I understood correctly, you're going to be providing us with more information when you report Q1. But will you also provide enough information for us to, sort of, disaggregate whatever you do report in Q1 and, sort of, look at it relative to the guidance you've provided now? So without some further guidance at this time, it's a little bit hard to come up with IFRS 16 compliant numbers. So will you provide enough detail to, sort of, break it out and look at it, I guess, on a historical basis as well?

[Bruno Roy, Chief Financial Officer]

So we would do the Modified Retrospective Approach, which means that we will be able to compare what our results would be under IFRS 16 versus what they would've been beforehand. So we'll be able to link that. So 2019 to 2019.

[Alexandre J. L'Heureux, President, CEO & Director]

We'll try, Michael. We realize, for you, our analysts, who are following WSP, that this is a bit of a curveball. So we'll work internally to try to provide you with the best information for you to make the best informed reports. So we'll look at what can be done to make sure that you fully understand the lay of the land with WSP.

[Operator]

[Operator Instructions] Your next question will come from Derek Spronck of RBC.

[Derek Spronck, Analyst]

Okay. Just on the M&A Environment. Have you seen any changes in seller expectations, just with thekind of broader macro uncertainty that, kind of, crept into the marketplace in October?

[Alexandre J. L'Heureux, President, CEO & Director]

Well, I'm going to repeat what I said that when we unveil our strategy, Derek, this is not something that we have control over. And if you recall, what I said that during the last analyst call, I said, look, I'm entering this strategic cycle positively for a very simple reason. If the market is holding on for the next 3 years, I think WSP will do very well. And if, for some reason, that -- we have more control over the market that's turning, I truly believe there will be plenty of opportunities for us to be creative and innovative. And find firms, perhaps, at attractive price for us to take advantage of. So I think that -- and given the support that we have from our long-term shareholders, I feel that -- I don't spend too much time looking at the stock market. We are quite busy, and I believe, I should be and the team should be busy executing on the plan. And not be distracted by what's happening in the stock market and essentially that's what we're doing. So we're going to continue to execute, and we're going to try to find the best available opportunities for us. And I'm confident that they will come our way in the next cycle.

[Derek Spronck, Analyst]

Okay, no, that make sense. I mean, just, kind of, get a sense of whether you're operating right now in a more elevated M&A Environment and perhaps, be the seller, multiple expectations might have come down a little bit here with the recent pullback. And to that point, I'll just ask one more question, kind of, in the same context. With the -- in the U.S, do you see a more elevated M&A opportunity Environment with potential sellers looking to get -- maybe, the company is sold ahead of or during the current tax regime in the U.S, is that providing a more robust M&A Environment in the U.S.?

[Alexandre J. L'Heureux, President, CEO & Director]

Well, you could argue the flip side as well, why selling now when things are quite heated and tax -- and perhaps sellers would like to take advantage of the tax break. But the reality is, I spent most of last year trying to, not trying, but spending most of last year reaching out, meeting a number of different interesting firms and CEOs within the industry. I would continue to do that in 2019. I think the target pipeline is good. But -- and I'm sure I'll sound like a broken record here, but what has made our success or our recipe of success is that we remained disciplined and focused in our M&A approach. So I don't feel we have gun on our head to do something. If the stars are not aligned. So we will action when we see that the -- all -- that the investment criteria in thesis is -- are met. So -- but I can tell you that the dialogues that I had are good, are healthy , I think, but there are some firms out there that will be fitting our strategy at some point in time. We just need to be patient and wait for the right opportunity to come our way.

[Derek Spronck, Analyst]

Okay, that makes sense. And the recent hiring of Alain Michaud, is that -- does that, kind of, highlight the fact that potentially this could be a Big Four like accounting firm, but in the consultancy space. And eventually, a 100000-employee firm at some point?

[Alexandre J. L'Heureux, President, CEO & Director]

Yes. Are you suggesting that because I am the next Deloitte and you're the next PwC? Now look, when the secret of a -- our first guiding principle Derek, as a company and as a firm is that, our people at our station are great assets -- our greatest assets. And we're going to do both to attract good clients and good projects. If we attract and devote an enormous amount of time and energy attracting and developing the best talents out there. I think Alain was a talent. I've been working with Alain for many years. I knew Alain in prior lives. And I think he's a talent, and I feel very fortunate that we were able to attract them to WSP. So -- but we're not managing an accounting firm or managing a great professional services firm in the E&C space. And we'll continue to do that. That's the goal. And we're not going to change our business model.

[Derek Spronck, Analyst]

Okay, I got you. And on...

[Alexandre J. L'Heureux, President, CEO & Director]

But clearly, the goal is to grow the business. And when I see talent out there that I believe can add value to the business, I try everything I'd do to attract them to the business.

[Derek Spronck, Analyst]

Okay, that's great. Just 1 quick housekeeping and I'll turn it over if I could. The net-debt-to-EBITDA ratio for 2019, you have it at 1.5 to 2.5x. You're at 1.9x now. You said -- like, is there an anticipated cash drawn first half of the year? Or how should we be thinking about that?

[Alexandre J. L'Heureux, President, CEO & Director]

Well, typically, in the first half of the year, typically, our DSO, given our seasonality, tends to go up a little bit. In 2018, this was less true than in years before. I think Bruno did a great job with the finance team, and our project managers worldwide, to actually reduce the standard deviation around the mean. But yet, I do expect working capital still to increase in the first half of the year. And the reversal effect in the second part. But do I expect a significant drawdown on our facility? The answer is probably not.

[Bruno Roy, Chief Financial Officer]

We're at 1.8x, not 1.9. 1.8.

[Operator]

Our next question comes from the line of Frederic Bastien of Raymond James.

[Frederic Bastien, MD & Equity Research Analyst]

Can you share with us whether Steeve has accepted a role in the industry? Or is he switching gears completely?

[Alexandre J. L'Heureux, President, CEO & Director]

Yes. I mean, I don't mind saying it because this is a great plan of ours. But I feel it's been just press release, I think minutes ago, if I'm not mistaken. Steeve is joining one of our clients, Bombardier, as a General [ Counsel ] so he's not going to a competing firm.

[Frederic Bastien, MD & Equity Research Analyst]

Okay, great. Good to hear. We wish him luck. The -- I don't know if you have answered this, and I apologize if you have already. But with respect to this deferred comp plan in the U.S. that increased your interest rate and expense in Q4, is there anything that we should be thinking about for the modeling going forward?

[Bruno Roy, Chief Financial Officer]

So you've got -- hey, it's Bruno. You've got quite a few details in the financial statements in notes 2 and note 17, related to pensions. So in a nutshell, we do have deferred compensation on assets related to the U.S. plans for $120 million. Through IFRS 9, this now leads the variations in the assets that need to be recorded as essential expenses in the P&L. But beforehand it would have been in comprehensive income. So related to the IFRS 9. For this quarter, the delta was worth about $0.06 per share. And again, on a quarterly basis, we will move depending on whether the assets appreciate or depreciate. And we'll clearly describe the impact on our EPS as we go forward. But if you want more details, we've got a bit of leads on Page 23 of the MD&A. And if you're going to financial statements, it's in note 17.

[Operator]

We have no further questions at this time. I'll now turn the call back over to the presenters.

[Alexandre J. L'Heureux, President, CEO & Director]

Okay, thank you, for attending our Q4 2018 results, and I look forward to updating you at our next conference call and our AGM in a few weeks time. So thank you very much, and have a great day.

[Operator]

And this concludes today's conference call. You may now disconnect. [Foreign Language]