WSP Global Inc

TSX:WSP

Earnings Call Transcript 2020-Q4

[Operator]

[Foreign Language] Good morning, ladies and gentlemen. [Foreign Language] Welcome to WSP's Fourth Quarter and Fiscal 2020 Results Conference Call. I would like to now turn the meeting over to Quentin Weber, Adviser, Investor Relations. [indiscernible] Please go ahead, Mr. Weber.

[Quentin Weber, Investor Relations Advisor]

Good morning. We hope that you're all safe and doing well. Thank you for taking the time to join the call during which we will be discussing our Q4 and fiscal 2020 performance, our outlook for 2021, followed by a Q&A session. With us today are Alexandre L'Heureux, our President and Chief Executive Officer; and Alain Michaud, our Chief Financial Officer. Please note that this call is also accessible on our website via webcast. During the call, we will be making some forward-looking statements and actual results could be different from those expressed or implied. We undertake no obligation to update or revise any of these statements. Relevant factors that could cause actual results to differ materially from those forward-looking statements are listed in our most recent management discussion and analysis. Also, during the call, we may refer to certain non-IFRS measures. These measures are defined in our management discussion and analysis for the year ended December 31, 2020, which can be found on SEDAR and on our website. Our MD&A also includes reconciliations of non-IFRS measures to the most directly comparable IFRS measures. Management believes that these non-IFRS measures provide useful information to investors regarding the corporation's financial condition and results of operations as they provide additional key metrics of its performance. These non-IFRS measures are not recognized under IFRS, do not have any standardized meaning described under IFRS and may differ from similarly main measures as reported by other issuers and accordingly, may not be comparable. These measures should not be viewed as a substitute for the related information prepared in accordance with IFRS. With that, I will now turn the call over to Alex L.

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

Thank you, Quentin, and good morning, everyone. Let me first start by saying that despite unprecedented circumstances, I am really proud of our accomplishment in 2020. Thanks to the dedication and resilience of our teams, we demonstrated our ability to rise to the challenge, the agility of our platform and the strength of our foundation. Above all, we ensured the safety of our employees while staying focused on our strategic objectives. Looking back at the last 12-months' results, we are reporting solid year-end results that are in line with our expectations. We maintained good margins and a healthy backlog and safeguarded our financial position. We also delivered above expectations in terms of adjusted EBITDA, adjusted EBITDA margin and DSO. Our ability to stay focused on our strategic objectives also materialized at the end of the year with the announcement of WSP agreement to acquire Golder. A global leader in earth sciences and environmental services with approximately 7,000 people. Together, we are creating the leading global environmental consulting firm with approximately 14,000 of our 54,000 professionals, which will be dedicated to accelerating the world's green transition. In connection with the equity financing of the Golder acquisition, we established long-term relationships with new strategic investors being GIC, one of the world's largest sovereign wealth fund and British Columbia Investment Management Corporation, one of Canada's largest institutional investor. As we are expecting the transaction to close in the first half of Q2, our current focus is planning for successful integration across functions and regions and the smooth transitions for Golder's people as they join the WSP family. Our combined strength will uniquely position us on the rapidly growing ESG trends to driving demand for environmental services and sustainable infrastructure development, and we are eager to start winning projects and working together. Additionally, on the M&A front, we recently announced 3 strategic acquisitions totaling approximately 500 people, bringing new client relationships, market-leading positions and an increased geographic footprint in the United States. First, we acquired KW Mission Critical Engineering, which expands our complex building sector capabilities in the high-growth data center and [ health care ] and science technology markets in the United States, while also significantly increasing our presence on the West Coast and providing a platform to expand our data center capabilities in Europe and in Asia with our global clients. We also acquired tk1, a mechanical, electrical engineering firm based in Irvine, California, which reinforce our U.S. property and building business in the health care, science and technology markets. Finally, this week, we just announced the acquisition of EarthCon, which strengthened our capabilities in strategic, environmental engineering and consulting services while further expanding our geographic presence in southern eastern United States. M&A is an integral part of our strategy and so is our commitment to ESG. For example, at the beginning of the year, WSP became the first professional services firm in the Americas to secure sustainability-linked terms for a syndicated credit facility. This year, we will be disclosing data using guidance from the task force and climate-related financial disclosures, or TCFD, and the framework issued by the Sustainability Accounting Standards Board, or SASB, and we are planning to update our climate ambitions to align with current science as we recently committed to align our future ambitions with science-based target initiatives or SBTI. We look forward to providing more details on our progress later in 2021. I would now like to highlight a few of the major wins during Q4, showcasing a sample of our expertise from across the globe. Starting with a key win in the U.S., I am thrilled to share that we were just awarded a significant multiyear program management services contract with the U.S. Postal Service, building on a 30-year established business relationship. Our team of seasoned professionals will support USPS and their strategy, which includes a focus on the retail of the future as well as a variety of services to their delivery platform and systems across USPS 32,000 facilities nationwide to enhance the efficiency of their operation at the end of close to half of the world's mail volume. Moving on to Canada. At our Q3 2017 results presentation, I announced we had won the Centre Block rehabilitation project, and I am delighted today to announce the extension of this significant contract. This is not only our largest project in Canada, but also our largest buildings project in our portfolio. We expect our involvement will likely continue until at least 2028. Under this agreement, we have the responsibility to rehabilitate and expand the most recognized and valued building in Canada, Centre Block, the home of Parliament and a symbol of Canadian democracy. In addition to providing building engineering design services, a considerable part of our work relates to earth and environmental science services, including archeology, designated substances, geotechnical and sustainability. As a flagship project for the government of Canada, this project offers a unique opportunity to update and improve the sustainable performance of one of the most culturally significant sites in Canada, shipping one of the most recognizable and symbolic Canadian building. The project will demonstrate leadership in alignment with the government's priority for low carbon and enhanced sustainable performance. Moving on the highly growing mission-critical market. We grew our pipeline with many data-centered projects wins during Q4 2020 in Norway, France, Switzerland, Hong Kong and Taiwan, demonstrating yet again our global reach. The pandemic has accelerated a boom in the creation of new data center facilities to cope with the rising demand from online shopping, remote working, online education and online events among other things. Latest forecast from research and market predict the global data center construction with growth from CAD 27 billion in 2020 to CAD 36 billion by 2027. With the recently announced acquisition of KW Mission Critical Engineering, WSP is uniquely placed and positioned to further take advantage of this rapidly growing market. Combining KW expertise with WSP global footprint means we can now offer best-in-class mission-critical services to our clients throughout the U.S. and worldwide. We now have 3 centers of expertise in the U.S., U.K., Hong Kong, having the ability to serve this market worldwide. We are already seeing revenue synergies from KW in respect of the U.S. clients investing in Europe and through increased capacity to lead the largest mission-critical facility projects for cloud service providers. In summary, I am very pleased with the way we finished the year. In addition, we seized many opportunities in 2020 by completing 3 key -- I'm sorry, strategic acquisition, expanding our exposure to promising markets and securing exciting projects. Alain will now review our financial results in more details and discuss our 2021 outlook. Alain, over to you.

[Alain Michaud, Chief Financial Officer]

Thanks, Alex. For the quarter, revenues and net revenue reached $2.2 billion and $1.7 billion, up 1.8% and down 4.1%, respectively, compared to Q4 2019. Organically, net revenues contracted 5.9% for the quarter. The increase in the Americas, stemming from organic growth and acquisition growth, was offset by organic contraction in the other reportable segment. Revenues and net revenues for the year reached $8.8 billion and $6.9 billion, down 1.3% and 0.4%, respectively, compared to 2019. Organically, net revenues contracted 3.6% for the year, in line with our expectations. Let's move on to profitability. For the fourth quarter, adjusted EBITDA reached $262 million representing an adjusted EBITDA margin of 15.5% compared to 15.1% in Q4 2019. The increase in margin is attributable to the Americas, APAC and Canada reportable segment, partially offset by lower margin in EMEA. For the full year, adjusted EBITDA reached $1.054 billion, up $16.9 million or 1.6% compared to $1.037 billion in 2019. Adjusted EBITDA slightly surpassed our expectation. Backlog, as of December 31, 2020, stood at $8.4 billion, representing 11.5 months of revenue. We're glad to report that our backlog grew organically in each of our reportable segment in 2020, representing an overall organic growth of 2.4%. Adjusted net earnings stood at $81 million or $0.71 per share in the fourth quarter of 2020 compared to $55 million or $0.52 per share in Q4 2019. The increase in these metrics are mainly attributable to the fact that in 2019, the write-offs of leasehold improvements was taken following the renovation of our New York office. Adjusted net earnings stood at $339 million or $3.08 per share for the year ended December 31, 2020, compared to $306 million or $2.91 per share for the corresponding period in 2019. The increase in these metrics is attributable to higher EBITDA contribution and lower interest expense due to lower long-term debt. I will now review a few cash flow metrics. For the year, cash inflows from operating activities stood at $1.1 billion compared to $814 million in 2019. Our free cash flow for the year came in at $735 million, a record high of 266% of our net earnings, well beyond our cash flow conversion target of 100%. Our days sales outstanding reached 63 days at the end of 2020, an 11-day improvement as compared to 2019. This improvement is mainly the result of our team continued focus on cash collection. Lastly, our net debt to adjusted EBITDA ratio stands at 0.1x, significantly lower than the 1.1x as of December 31, 2019, due mainly to the repayment of a portion of our debt following strong free cash flow generated in 2020 and the equity financing completed during the second quarter. Net debt to adjusted EBITDA ratio is expected to increase to approximately 1.3x following the closing of the Golder transaction. During the quarter, we also declared a dividend $0.375 per share for the shareholders on record as of December 31, 2020, which was paid on January 15, 2021 with a 54.1% DRIP participation, the net cash outlay was $19.5 million. In conclusion, we've delivered on all of our 2020 financial outlook metrics issued in Q2 2020. I will now comment on the 2021 financial outlook. But before I do so, I'd like to remind you that the outlook for our anticipated 2021 performance is aimed at assisting analysts and shareholders in refining their perspective on our performance. It has been prepared based on foreign exchange rates effective February 24, 2021. Also, please do bear in mind that we have not considered any acquisitions, disposal or any other transaction that may occur after today's date except for the Golder transaction. We anticipate net revenues to be in the $7.5 billion to $8 billion range and to post organic growth in net revenues in the 2% to 5% range. We expect a different seasonality pattern in 2021 as we ramp up our workforce to adapt to gradually increasing demand into the second half of the year. We, therefore, anticipate low to mid-single-digit contraction in our net revenue for first quarter and sequential increases quarter-over-quarter for the rest of the year. Adjusted EBITDA is expected to range between $1.22 billion and $1.29 billion. We also anticipate our quarterly adjusted EBITDA to range between 18% and 29% of the total annual adjusted EBITDA with Q1 being the lowest, excuse me, and Q3, the highest. Turning to tax. We expect our tax effective rate for fiscal 2021 to be in the range of 26% to 30%, and we anticipate net capital expenditures to range between $150 million to $170 million. CapEx, mainly pertains to property and equipment and intangible assets, net of proceeds on disposal and lease incentives received. Turning to debt. The corporation will continue to manage its capital structure to target a net debt to adjusted EBITDA ratio between 1 and 2. Lastly, we anticipate between $55 million and $65 million in acquisition, integration and restructuring costs, and we also anticipate that head office costs will range between $90 million and $100 million in 2021. By reportable segment, we anticipate mid-single-digit organic growth in net revenues for Canada and the Americas and low to mid-single-digit organic growth for EMEA and APAC. This concludes my remark. On that, back to you, Alex.

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

Thank you, Alain. And before opening the line for questions, I would like to thank our employees across the globe, our Board of Directors as well as our clients and shareholders for their continued support during this huge year. Looking back at 2020, I'm proud of what we accomplished. We delivered on our financial objectives, we announced a highly strategic acquisition opening a world of possibilities and we set the stage for 2021, entering the year with confidence supported by a strong financial position and a very healthy backlog. And as we start this year in support of our strategic cycle, we feel confident to meet the ambitions that we accept for ourselves in our 2019-2021 global strategic plan. As such, our solid operating plan, combined with the successful closing of the Golder transaction, will position us well to deliver on our ambitions to reach between $8 billion and $9 billion in net revenues and to exceed the higher end of our projected EBITDA margin of 16%. Lastly, we also look forward to developing our 2022, 2024 global strategic plan. This will be a great opportunity for us to further embrace our ambitions. I would now like to open the line for questions.

[Operator]

[Foreign Language][Operator Instructions] Your first question comes from the line of Mona Nazir from Laurentian Bank.

[Mona Nazir, Director of Research & Industrials Analyst]

When I think about the business, your diversified strategy has fared well. You've had challenges in the past. And looking back a number of years ago, I remember Germany's performance was lower. You changed the country head and second in command there following the Focus acquisition and the low oil price environment that followed, there was some rightsizing about 5 years ago. But when I think about 2020, I feel like COVID challenges and macro headwinds seem to flow through to nearly all geographies. And so I'm just wondering, would that be a fair statement that 2020 has been your most challenging period? And then I understand that you took swift steps in rightsizing the headcount largely in the back half of the year. I'm just wondering your confidence level that steps taken should alleviate headwinds and bring improvements from here and that surprises should be de minimis?

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

Good question. Look, it's -- without a doubt, this has been -- I'm not prepared to say it's been the most challenging, but it's certainly high up there in terms of challenging years. Of course, we started the year with great conditions and very quickly returning to Q2, revising our ambition and say, look, we need to maintain our margin profile, and we need to safeguard our financial position at all cost. Meanwhile, while we were doing that, we said we need to have a longer view on this pandemic and need to take long-term measures to safeguard the business and making sure that we deliver the year. And you will recall, Mona, that at the beginning of the crisis, in the middle of the crisis, and I just reiterated the third time now, I said that we were not prepared to revise our ambitions, our strategic plan. In my mind, that the underlying principle of the strategic plan and the strategic cycle were very relevant with or without the pandemic. And the marching order within the business is going to remain resilient, and we're going to deliver on that plan. And what I said this morning is I feel very confident now assuming that 2021 is progressing the way we believe it will progress. And combine this with the closing of Golder that we will not only meet most of our, if not all, of our financial ambitions but our EBITDA margin will exceed them. So yes, it's been challenging. But what I'm proud of is we didn't wait for the events to dictate our action. I feel that we dictated actions ahead of what was happening. And I feel that the team was very agile and very proactive and that's why I feel we are in a very good position. And if I could add to that as well that yes, we've had relatively low organic growth contraction for the year. But on net revenue, combined with the acquisition growth, we finished the year flat. This is a great outcome, I believe, when you look back over 12 months. And on top of it, our backlog grew organically in a very, very challenging year. So I look at the year 2020, which was the second year of a 3-year cycle. I look at the work that was awarded. I look at the way we reshaped the business, and I look at the acquisition that we announced on December 4, which we haven't benefited from yet. And I'm just looking in the future, and I have to admit that I'm cautiously optimistic but also very excited.

[Mona Nazir, Director of Research & Industrials Analyst]

That's great. I just have one more question, given the number of participants. I understand that the Golder acquisition has not yet closed. But when I think about your leverage -- loan existent leverage at year-end and what Golder does to the balance sheet, there's significant dry powder available. I'm just wondering, Golder does achieve some of this 3-year strategic plan target. But I'm wondering about near-term larger-size acquisition. And ultimately, do you have any desire to be on another conference call going through another large significant transaction?

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

Look, Mona, you know me and you know WSP. Of course, we've -- if we can be opportunistic and if I believe we can show -- we can create shareholder value. We -- this management team doesn't work in sequence, we work in parallel. So if there's a way for us to create shareholder value, you can rest assure that we'll work towards that goal. Having said all that, we essentially announced this transaction on December 4. We haven't closed the transaction yet. And right now, what I'm busy doing is really to engage with our people at WSP, but also where possible, engage with the people at Golder to really make this a real success. I feel that personally, and I can vouch for that now even more than on December 4. The amount of collaboration that I believe we'll have between the 2 workforce will be quite extraordinary, and I actually believe that we will be in a position to create a lot of revenue synergies together. So I think our focus right now -- my focus certainly is really to make sure that this integration is a success. And I want also to make sure that we deliver a good operating year and a good operating plan for our shareholders. But as you know, those deals don't happen overnight. You need to entertain discussions. You need to have informal discussions, more formal discussions then -- and as I said to my Board this week, I cannot take a step back and wait a year to entertain discussions again. I have to keep going. And if there is a possibility to create value. Certainly, I think we have now the balance sheet to do that, and I'll leave it to that at the moment.

[Operator]

Your next question comes from the line of Jacob Bout from CIBC.

[Jacob Jonathan Bout]

Had a question. So on your implied EBITDA margin guidance. So the number that I'm backing into the midpoint is [ 16.2%. ] So a meaningful step-up from 2020. And so Golder does provide a lift, but that's pretty much second half. Can you talk about some of the buckets of what else is driving this?

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

I'd say, Jacob, we are -- I'm going to start by saying that it has nothing to do with reduced footprint and floor footprint. I just want to get this out of the way right away. If we were to reduce our footprint, this would be beyond and above what we are guiding right now. And might as well addressing that now before I get the question. I believe it is premature. As far as I'm concerned to announce a whatever percentage of reduced footprint. I care about our culture, I care about our brand. And I think that -- and I care about our young professionals. And you need guidance and leadership and in my personal opinion, announcing now, the pandemic not done yet, a significant reduced footprint for employees. I think it's not my strategy. I tend to be contrarian anyway. And I'll wait and see to determine what's best for our employees and our clients before making a call. So the reason why I believe we've seen strong margin improvement is over the last few years, Jacob, we worked extremely hard. And over the last 5 years, we've worked extremely hard to work on many, many levers to increase our margin profile. And frankly, in the last 5 years, we increased our margin profile by 20%. This is not de minimis. It's part of our DNA. We've always been like that. And certainly, where we are pushing the hardest right now, of course, with the exception in addition to cost optimization around our corporate costs. We are making tremendous effort around digitalization of our services, making tremendous efforts in having better project managers, attracting the best talent in the industry to deliver better project. The heart of what we do is to deliver good project at the lowest cost possible. And certainly, if I look at utilization, if I look at technology, if I look at project delivery, I'd say that, that's where we made most of our effort, and it's certainly paying off. And I certainly have no intention to stop there. We're going to continue to work hard to try to increase our margin profile in the years to come.

[Jacob Jonathan Bout]

So ultimately, where do you think you can get with EBIT margin?

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

Let's discuss this when we announce our next plan. Obviously, I will take the next few months to work with the team, our clients, our investor base actually to determine where we want to take the company forward. But if your question is, do I still see some margin improvement potential? The answer is yes.

[Jacob Jonathan Bout]

The second question is, when you look at net revenue as a percentage of overall revenues dropped in fourth quarter this year versus fourth quarter last year, increased subconsultants typically buried in there. How should we think about that on a go-forward basis? Is this a one-off or what's going on?

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

You talk about the organic contraction?

[Jacob Jonathan Bout]

No, I'm talking about net revenues as a percentage of overall revenues.

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

Yes. Alain, you want to take this one?

[Alain Michaud, Chief Financial Officer]

Sure. So you're right, in Q4, we see -- although, we see a contraction of our net revenue when you look at it. When you look at it at the gross revenue level, it's essentially flat or there's less contraction. So there's an increased level of subconsultant used. It's just a question of mix, Jacob, it's -- there's nothing much to read into this. I think that one of the key takeaway is that when you look at the portfolio of project we manage and the volume of work that we generate. Looking at it at the gross level, we've seen a good level of work. And I think on Q4, we're pleased where we ended the year, and it's a variety of reasons on specific projects. It comes mostly from the U.S. But there's nothing specific to read from the situation on a go-forward basis.

[Operator]

Your next question comes from the line of Yuri Lynk from Canaccord.

[Yuri Lynk]

Alex, just wondering if you can touch on what you're seeing from your clients in terms of their willingness to move forward with -- with projects, specifically in the U.S., maybe on the federal side, wondering if the election has caused any pause in the near term and perhaps might lead to a better second half as some of the spending measures come through? Just updated thoughts there?

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

Yes. Yuri, I think -- and it's something I haven't addressed in my commentary. But certainly, if you look at the U.K., for instance, the bidding activity has never been so good in recent years. We need to remember that U.K. is coming off a very tough 2, 3 years with Brexit, with elections, with the cooling off of the private sector a few years ago. I look at January, for instance, the month of January for us was slightly better than expected across all of our regions. And the bidding activity is better than what we were all anticipating in the U.K., for instance. Now your question is more directed to the U.S. I just talked about the U.S. postal office and postal client that we have. It's a relationship that we've had for 30 years. This is [ USD 500 million to USD 600 million ] job that we were just awarded, and that is not included in the Q4 backlog. So I don't see any major delays in project. And I actually posted a positive outlook as it relates to the U.S. and certainly, the Biden election. As you can imagine, when we consummated this transaction and work to complete this transaction, we didn't do this with Biden being elected in mind. But it's fair to say that it was a very good timing for us. And sometimes you lose luck in life, and I feel that our investment was quite timely. And the timing was quite good. So of course, I feel good about the momentum in North America.

[Yuri Lynk]

Okay. That's helpful. Alain, maybe just a knit picky one for you on the guidance. The wage subsidy was a pretty big component in Q4. Just wondering what, if anything, is in your EBITDA guidance on the wave subsidy side?

[Alain Michaud, Chief Financial Officer]

We don't anticipate anything, Jacob, so there's none in the guidance.

[Yuri Lynk]

Yuri.

[Alain Michaud, Chief Financial Officer]

Yuri. Sorry. Sorry about that. But there's nothing in there.

[Yuri Lynk]

Okay. Is that because you don't anticipate getting anything in Q1? Or are you just taking a conservative approach?

[Alain Michaud, Chief Financial Officer]

We don't anticipate. There might be small amount here and there, but there's certainly nothing large that we see on the horizon.

[Operator]

Your next question comes from the line of Benoit Poirier from Desjardins Capital.

[Benoit Poirier]

Congrats for the strong finish toward 2020. Just in terms of M&A, obviously, Golder provides you a great ESG foothold. But now looking forward, are there any geographic areas or expertise you would look at in terms of M&A now that Golder provides you a great foothold on the ESG front.

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

Well, Benoit, If any, I think the last 4 or 5 acquisitions we've announced or 3 or 4 we've announcement since December 4, we added another 500 people. And I mentioned it in prior calls, I think I see the investment community making, I believe, general statements and they tend to over generalize -- they tend in my personal thing to overgeneralize the idea that the building sector is going to be a tough sector for years to come. If you're smart about it, I see incredible opportunities in the building sector, and that's why we are now aggressively growing our mission-critical data center expertise. Now we have 3 centers of excellence in the U.K., in the U.S. and in Hong Kong, and we are now working as a team with the largest [ tech ] firm in the world without naming names. I think it can name the 2 or 4 that I'm thinking about, and we work with all of them, and we follow them globally. And you look at what the work -- the remote work has done and the need for cloud computing. And I think we are seeing some opportunities there. So clearly, as I said before. But no, we don't think in sequence, we think in parallel. And while I was very focused in creating the leading firm on earth sciences and environmental consulting, we're not taking a break on other end markets, and we're going to continue to capitalize on our strength in those. So clearly, there's so much room and other ways for us to grow in the U.S., in Europe and even in Asia Pacific. So I feel quite good that we'll find the right opportunities to continue to strengthen that platform.

[Benoit Poirier]

Okay. That's great color. And to come back on the potential opportunity coming out from the U.S. election. I would be curious to get more color about the timing. And wondering if you have all the capacity to deal with this great opportunity or we should expect that count probably to increase in the U.S. at one point in time, Alex?

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

Well, I think, Benoit, this should not come as a surprise to our investor base that we expect a slower Q1 with ramp up in Q2, Q3 and Q4 for a variety of different reasons, right? Q1 last year, the pandemic has not hit. So of course, we're going to be comparing to higher standards. But indeed, you are right that I expect a ramp-up in headcount as we progress in the year. And again, to add to the point of question that you just made. If the question or indirect question was, did we include and incorporated potential uplift that the Biden election would provide to the market and our platform, the answer is no. It was too late in the game for us to incorporate that. And frankly, I don't plan to take political events as upside. You never quite know. So we focus on what we control and what we control is the conversion of our backlog and our win rate, and I'm very pleased about that. So that's essentially what we can to be doing.

[Benoit Poirier]

Okay. That's great color. And last one for Alain. In terms of net CapEx, obviously, the end growth is $150 million to $170 million and you finish 2020 with a number that was below what was targeted previously. So I was just wondering if you could provide some color on whether there is some catch-up versus the amount that was not spent in 2020? Or is it -- probably it reflects a portion towards Golder. And if we can use the $150 million to $170 million as a good base going forward?

[Alain Michaud, Chief Financial Officer]

Yes. No, Benoit, it's a good base going forward. For sure, there's a little bit of everything you've said in the answer. It's catching up on some spending, and Golder is included in there as well. So that's a good way of looking at what to expect next year.

[Operator]

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

[Michael Tupholme, Research Analyst]

My first question is about Golder. And I know you reiterated the timing for expected closing in the materials you've put out is consistent with what you originally talked about. But I'm just wondering if there is any update just in terms of status of approvals or any other aspects of the transaction as you work toward closing? And then as a follow-on to that, wanted -- I know you can't formally begin the integration process until the acquisition closes. But also hoping to get your thoughts now that you've had a few more months to think about the transaction, thoughts on integration. And also, Alex, you had mentioned you're feeling better about cross-selling benefits and potential cross-selling synergies? Any further details on that front?

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

I'll let Alain answer the first question around closing, and then I can pick up after Michael.

[Alain Michaud, Chief Financial Officer]

Yes. So Michael, on the regulatory approval question, things are progressing well. No red flags and it's as expected. So we're still expecting to close the transaction in the first half of Q2. So that's the status. It's no red flags.

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

So yes, I think we are working with the deadline we provided in December 9 and hopefully, by the time we speak next the transaction will be behind us, at least the closing of that, Michael. As it relates to integration, of course, until we're closed and we have regulatory approval, we have to be mindful Michael of -- from a competitive point of view to not share sensitive information. So you'll understand that we are -- both firms are quite careful about that. Having said all that, of course, we've had a number of discussions around operation, around leadership. Around -- of course, when you do due diligence, you draw overall conclusion on the potential synergistic benefits and also the potential duplication on clients. But once the dust settles and you have the time to breath a little bit, you take a closer look at it. And frankly, I'm quite excited by the combination of the footprints. I look at Canada, for instance, we are a driving force in the province of Quebec. They are driving 4 Southwest. Together in Ontario, the combined forces will make us the undisputed #1, which I'm extremely excited by. You look at the leadership as well and the way things are essentially folding together. I'd say that right now, for instance, the plan around integration in Canada is essentially very, very well advanced. And this is perhaps the biggest integration we have to do in the group. So I'd say that, that as far as I'm concerned is essentially derisked. And in the U.S., we're probably 80% there. In Australia, which is next, I believe, in the next few weeks that will be in a fairly good place. And of course, in Europe, Golder has a smaller size presence. But I see tremendous opportunities. They have a strong team in Sweden. We are one of the largest in Sweden, and they are bringing to the table an incredible mining team in London, which will tag along very well with our U.K. business, which is essentially doing nothing around mining. So I look at this, and I feel that the integration is doing well under the leadership of André-Martin and Tom Logan, the Chief Operating Officer of Golder. And then when I look at -- I've done enough acquisition, Michael, to know when the recipient of the news are welcoming the news or not. And I can tell you that there is tremendous excitement on both sides of this transaction. And I know when you feel it when employees are definitely looking forward to start engaging with the other side to start working on projects. I mentioned it on December 4 on our analyst call that I think we will be able to bring over on infrastructure project. And if you take mining, for instance. Of course, Golder is the leading firm in underground design around the world, especially in the mining sector. But they have very limited capabilities around all of the CapEx and the infrastructure outside or aboveground on the mining sector, and that's one of our strengths. So if we can access those Fortune 500 clients, I am confident that we're going to be able to drive a lot of good synergistic benefits. And on top of it, I'd finish by saying that you never quite know what the client's reaction will be until you announce, right? And I don't think I can think of one client who said that this was not good news for them. I feel that the combination of the 2 firms together we'll be able to expand the scope of services and we'll be able to better serve their clients and our clients. So these are only words, and now we have to deliver for you. But I think this is a good start.

[Michael Tupholme, Research Analyst]

Okay. That's very helpful. And then just in terms of my second question or to ask about a question, I guess, related to the organic growth expectations you've put out there 2% to 5% for 2021. Part of that is predicated on your ability to ramp up your headcount in certain regions where, I guess, headcount has come down in certain instances, you want to ramp that back up to achieve that growth. I'm just wondering about your comfort level with your ability to hire and attract employees. In the past, you've talked about how competitive it is. And I mean, I suspect you feel comfortable because you put the guidance out there. But just any thoughts around your ability to attract the talent you need?

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

Yes. Look, what I'm going to tell you, I told our Board this week, unlike any -- unlike years of -- on the back of a recessionary period, I mean, I look back at the last 10, 12 years since I joined this firm. And this is unique circumstances in the sense that we saw our backlog growing. And as I said, the Centre Block assignment, which is a huge -- a big project, Michael. And then I take U.S. Postal which is another very, very large project that are not even in our backlog in Q4. And I look at our backlog, and I sense that we have the backlog to generate that organic growth without a doubt. And the problem is not the backlog, the problem is to convert that backlog in revenue by hiring people. And given that we've been more than a year at home, Obviously, hiring has always been in the back of my mind. And obviously, before putting those guidance together, we spent extensive time talking about our capabilities and our confidence in ramping up and hiring the right individuals and the people to deliver that backlog. And this is perhaps the end result of -- and our conclusion around what we think we can do. So in this instance, and I don't know if you've heard it from others. But as far as I'm concerned, my personal opinion, the problem is not the backlog, it's to make sure that we have the people to deliver it. So -- and I see we have a very good plan around that. And I can tell you that when I meet with a global operating team on a weekly basis, the first question I ask is where are we in ramping up the workforce. So it's good news in some ways, very good news. But you are right. And I believe that's the right question to ask the team. Are you able to ramp up? And that's certainly what we are spending most of our time doing right now.

[Operator]

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

[Frederic Bastien, MD & Equity Research Analyst]

Guys, you've clearly demonstrated year-to-date that the large Golder deal isn't stopping you or your U.S. operations from rolling up small and specialized companies. And given that the Golder integration shouldn't be too much of a distraction for your leadership teams in the EMEA and APAC segments. Can you comment on the readiness for tuck-ins on their end?

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

Yes. I think we are ready in the right circumstances. I think clearly, the team in Europe would be ready. And you are right in saying, Frederic, that this will have limited impact on the EMEA team. Having said all that, I don't feel they have a gun in their head. I think I've been saying for as long as I can remember that we would like to grow our Central European presence. But right now, I think we haven't found the right partner. And until such time that we find our right partner, we're going to remain very disciplined and we continue to deliver on what we have, and we have a very good business. So we'll continue to drive our operation. And one day, if the opportunity present itself, we certainly would like to address this. This is a big population, when we look at the pool in Central Europe, and if we were in a position to grow it, we would.

[Frederic Bastien, MD & Equity Research Analyst]

And do you share the same comments for the APAC region?

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

Yes. Although, the APAC region, Frederic, the integration of Golder is by -- on a relative scale basis, we're adding 1,000 people. So it is transformative for the region. So unlike the EMEA region, this is going to be a bit more sizable integration than it would be on a relative scale basis, for instance, for the U.S. So we have to be mindful of that. But again, we're going to remain opportunistic. And if there is an opportunity, and we feel that it's the right opportunity, we're certainly going to look at it.

[Frederic Bastien, MD & Equity Research Analyst]

Okay. That's very helpful color. And maybe building on that, can we get a sense of the multiples you're now being asked to pay for tuck-ins like Earth Con and KWMCE? I'm not going to try to -- pronounce the third one. But are you seeing upward pressure because of increased competition? Or is actually the pandemic on the contrary alleviating some of that pressure?

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

I'd say, all in all, we are paying multiples that are essentially in line with pre-pandemic multiples essentially, if that makes sense, for those tuck-ins.

[Frederic Bastien, MD & Equity Research Analyst]

No. It does make sense. Just wondering what's the puts and takes behind that? If you had more color but that's fine.

[Operator]

Your next question comes from the line of Sabahat Khan from RBC Capital Markets.

[Sabahat Khan, Analyst]

Just on the commentary around bringing some of the -- or adding employees over the course of this year. I guess, what proportion of that is bringing back folks are you maybe sent home last year? And what proportion is looking for new people? And can you maybe comment on just what you've found? Is it fairly easy? Is there enough good talent out there while people are at home? Just some comments on how that's going?

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

I think good firms attracts good people. So we certainly are not going to sit here finding excuses that we can't hire. I just don't think it would be very credible. So we need to find ways and we need to be creative in the way we attract our professionals. And I'm confident that if we put the right focus and the right attention to these initiatives, we will be able to ramp up. So as it relates to bringing back people to the firm in some instances and actually, in many instances, I see that as positive news to welcome our colleagues back to their home. So if we are in a position to do that and if there's a willingness to do that, of course, we will explore that as it relates to colleagues that were part of the firm in the past.

[Sabahat Khan, Analyst]

Okay. And then the comment earlier around the activity levels being better than expected through January. Is that -- I guess, is the increased activity levels do you think related more to increasing confidence as the vaccine rollouts continue more or better visibility? Or is it some of the dollars that some regions have announced towards infrastructure and so forth being put to use [indiscernible] ?

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

No, I think it's just the continuity of what we have seen in -- at the end of Q4. It's almost like -- and frankly, it's but perhaps hopefully, I don't have a crystal ball, please, maybe a reversal of 2019 -- 2020 -- I'm sorry, January 2020. I remember how we finished 2019. And I was like, okay, what will 2020 look like with or without a pandemic, frankly. The year -- the way we had finished 2019, I was slightly concerned on velocity and the traction in the business. And it turned out to be worse than I was anticipating, obviously, in 2020. Now it's probably the reversal. I look at the way we finished Q4, and I said, okay, good traction. And then when I sat now with our leaders -- and Alain and I sat down with our leaders a few weeks ago, looking at the results for January, the team felt fairly upbeat about January. So fingers crossed. Of course, who knows what life will look like 6, 7, 8 months from now. But right now, I think the team is fairly -- is feeling cautiously optimistic.

[Sabahat Khan, Analyst]

Then just one last one for me. I guess your comment around the buildings end market and some of the pessimism you might be hearing from the investment community. I guess, can you maybe provide a little bit of color on, is it some of the new work in buildings, is there simple things like data centers [indiscernible] some encouragement looking ahead, is there some reasons? Or do you expect generally that at some point in the future, we'll be back in that end markets at pr-pandemic level? Just what you're seeing on the ground there globally?

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

Sorry, can you repeat the question? It was breaking up for us.

[Sabahat Khan, Analyst]

It's more about your commentary on the building end market and you're being a little bit more positive there looking ahead. Is there a positive commentary or some more optimism related to some of these new demand areas within buildings that are starting up? Is there certain regions? Where are you seeing the optimism, I guess, on the ground?

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

We say we know a lot of optimism, the digital revolution with bringing shares of opportunities for WSP. When you talk about commercial real estate, you know that we are one of the largest [indiscernible] firm in the world. So as our clients are rethinking the redesign essentially of the floor plant, and we've seen many of our of our competing firms announcing 30% floor plant reduction. Well, that's a real opportunity for us. We're going to have to redesign all of those floor plants around the world. And I see that as a real opportunity. So that for building, we'll be getting those clearly.Am I expecting many high-rise to be built this year, [indiscernible] for design interest will be [ no ]. But then other refurbishing and other redesigning of the workplace of tomorrow, I think, I see great opportunities. Health care. We already need to prepare for the next pandemic. WSP now with their recent acquisitions in recent years, we are, one, if not the leading firm -- design firm in the health care sector in the U.S. Then I just talked about the mission-critical work, data centers, master planning and digital advisory or urban master planning and digital advisory work that we have started to conduct and will continue to conduct as we rethink the world of tomorrow. So the beauty, I believe, of our firm is that -- and I've said that in the past, and I don't know if you heard me saying it, I will repeat it again. But typically, consultants tend to do extremely well in time of huge catalysts in a slow growth market. Typically, clients will not call their advisers to assist, they will be able to do it in-house. They will be able to manage the growth. But when there's a huge catalyst in the market or a huge disruptor, that's when clients will call upon their advisers, their trusted advisers to assist in orchestrating the change. So in good time and bad time, I see WSP in situation of huge catalyst to be in a position to assist clients. So yes, there will be some bumps in the road, perhaps on commercial real estate, for instance. But then you turn and look at the huge opportunities that -- and I'm saying that with all due respect and certainly, we were not hoping for a pandemic, frankly. But when those -- when something like that happens, I see this as a new opportunity for us to assist our clients in orchestrating the change that they will have to orchestrate and that's the beauty of being a consultant and having the expertise to assist essentially.

[Operator]

Your next question comes from the line of Dimitry Khmelnitsky from Veritas.

[Dimitry Khmelnitsky]

So just to dig deeper into the acquisition and restructuring costs. Can you perhaps break that down between the portion related to -- and I'm talking about the 2021 guidance? The portion related to Golder and other deals that you have already announced versus the internal cost realignment in terms of what we've seen in 2020?

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

Dimitry, the vast, vast majority of those costs are related to acquisition and transaction cost.

[Operator]

The next question comes from the line of Maxim Sytchev from National Bank Financial.

[Maxim Sytchev, MD & AEC]

Just a quick question because most of them have been answered. When we look at, obviously, the news flow around the transit projects. I mean, essentially there's no huge change in terms of government's commitment to these verticals. But I'm just wondering if you don't mind providing a couple of maybe key points in terms of what you're hearing from the clients directly on this space?

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

I'm sorry, Max, you said around transit?

[Maxim Sytchev, MD & AEC]

Correct. Yes.

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

Yes. Now I think just closer to us here in Montreal, there are talks about the second ramp line that will be procured in -- in the next year or 2, which represent probably a bigger spend, frankly, than the first one. So I don't see. We hear about Texas high-speed rail, essentially, a replica of what's happening in California. So it's just true the work continuing in the U.K. So frankly, I don't see this stopping anytime soon to the contrary. The mobility of the people around cities will become increasingly important.

[Maxim Sytchev, MD & AEC]

Okay. Yes. No. Agreed. I just wanted to hear this from you as well.

[Operator]

There are no further questions at this time. I'll turn the call over to the presenters.

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

Well, thank you for attending this call today. Thank you for the great questions. I think it's generating a lot of good discussion. We look forward to updating you as we are progressing the year, and I would like to wish you a good day and talk soon.

[Operator]

[Foreign Language] Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.