Genivar says its global expansion won't be hampered by Quebec corruption cloud

MONTREAL – Genivar Inc. says ambitious plans to expand its engineering and construction consulting business won’t be hampered by the corruption cloud that’s hanging over Quebec’s construction industry.

Chief executive Pierre Shoiry said Thursday that he welcomes efforts by the provincially-appointed Charbonneau commission to help remove the negative public perception that hangs over the industry.

“Anything that the government can do to improve the perception of the public and the confidence of the public towards our industry, I support totally,” he said after the company’s annual meeting.

The inquiry, which was formally launched this week and begins hearings next month, was called to examine alleged links with criminal groups and corruption.

Shoiry said Genivar (TSX:GNV) hasn’t been called upon to testify and has taken all the appropriate measures to ensure its employees “work in an ethical way and according to the laws.”

While the inquiry is expected to expose problems for the Quebec industry, Genivar said the information shouldn’t scare off potential acquisition targets from joining the company.

“The people appreciate what they see at Genivar. We’ve had so far over 50 acquisitions since the IPO and I’d say right now our best references are the acquisitions that we’ve made.”

The Montreal-based engineering and construction consultant wants to boost its annual revenues to $1.5 billion within three years, primarily through acquisitions in Canada and around the world.

That would boost its workforce of 5,500 to nearly 14,000, including half from outside Canada.

Its efforts have attracted the financial support Canada’s two largest pension fund managers. The Canada Pension Plan Investment Board and Caisse de depot et placement du Quebec have each acquired a 10 per cent stake in Genivar for $80 million.

In 2011, Genivar added 10 companies and earned $50 million on $651.9 million of revenues.

Earlier this month, Genivar missed expectations again by reporting that its earnings in the first quarter fell to $10.1 million on higher acquisition-fuelled revenues.

Meanwhile, Shoiry said Genivar hasn’t won contracts at the expense of its larger rival SNC-Lavalin (TSX:SNC), whose reputation has been tarnished by a police investigation and the discovery of $56 million of undocumented payments.

“We’ve never counted on problems with other firms to grow our business,” he said, noting that Genivar’s business model is different since it doesn’t do construction.

It is a “pure play design firm” with a low-risk model.

“You’ll never hit a home run but you’ll never wipe out either,” Shoiry added.

After an independent SNC investigation issued a series of recommendations to improve its internal controls, Genivar said it examined its own policies and found they fully complied.

Genivar expects its Canadian operations will grow by 10 to 15 per cent through organic sales and acquisitions over the next few years.

It is targeting Atlantic Canada, Western Canada and Ontario to further reduce its dependence on Quebec. Its home province accounts for 47 per cent of revenues, down from 90 per cent when it went public in 2006.

It is also targeting opportunities in industrialized countries such as the United States, France and Commonwealth countries such as Australia and Britain.

“We’re looking for industrialized countries that have similar industry models than we have here in Canada and we believe that right now there are good opportunities to do this global expansion,” he said.

Some markets have become depressed, presenting opportunities to buy reputable firms.

It has no interest in Eastern Europe, Portugal or Spain.

“Our strategy has never been to look at turnaround companies or bad companies, we’re looking for good companies and obviously in our international strategy we’re looking for bigger acquisitions.”

The recent acquisition of a Colombian firm with about 400 employees is a good model of its expansion plans.

It is targeting companies in emerging markets that have geopolitical stability but doesn’t want these investments to generate more than 10 per cent of overall revenues.

“Right now our main focus is some emerging markets but mostly industrialized countries.”

On the Toronto Stock Exchange, Genivar shares fell six cents at $24.13 in Thursday trading.