Good morning, ladies and gentlemen. Welcome to the Dexterra Group's First Quarter Results Conference Call. I would like to turn the meeting over to Drew Knight, Chief Financial Officer. Please go ahead.
Thank you, Marie, good morning. My name is Drew Knight, and I am the Chief Financial Officer of Dexterra Group Inc. With me today on the call are Mark Becker, CEO, and our Board Chair, Bill McFarland, who will provide some brief introductory comments. After a brief presentation, we will take questions, with call ending by 9:50 A.M. Eastern Time. We will be commenting on our Q1 2023 results with the assumption that you have read the Q1 earnings press release in MD&A and financial statements. We will be discussing our longer-term vision at the AGM meeting later this morning, so please join us at 11:00 A.M. The slide presentation, which supports today's comments, is posted on our website, and we encourage participants to access the slides and follow along with our presentation. Before we begin, I would like to make some comments about forward-looking information.
In yesterday's news release and on slide two of the presentation that we have posted to our website, you will find cautionary notes in that regard. I won't read the content of the cautionary notes. Excuse me. I won't read the content of the cautionary notes in their entirety. We do claim their protection for any forward-looking information that we might disclose on this conference call today. I will now turn it over to Bill McFarland for his introductory comments.
Thank you, Drew. Good morning. I'd like to start by welcoming Mark Becker in his new role as CEO, effective March first, to the call. The board is very pleased that the CEO transition has gone smoothly over the past few months. Our results show the team hasn't missed a beat. Q1 was an important step in executing our 2023 full year business plan. It included continued success and growth in WAFES, a step change with improved IFM profitability. A significant portion of the BC-based modular fixed-price contracts were completed. The modular business is now on the pathway towards better results. Dexterra is also in a very strong financial position, with good prospects for the rest of 2023 and beyond as we execute on our plan.
Taking all of these factors into account, the board announced yesterday that the company will file a normal course issuer bid as both management and the major shareholder believe Dexterra shares are significantly undervalued in the market. Mark, with that introduction and welcome, I'll pass things over to you.
Thanks very much, Bill. First and foremost, let me say I'm very excited to be speaking here today as the Dexterra Group CEO. As Bill said in his remarks, Q1 is the first quarter of our 2023 business plan, which had a goal to significantly improve our profitability. I'm happy to say we achieved that. Tactically speaking, we completed much of what we set out to do, which is itemized on slide five, producing strong results with improved profitability. It's generally a quiet quarter, just the way we like it, with a few unusual items. I'll speak to each business unit specifically, but suffice it to say, it was overall a very good start to the year. Starting with IFM on slide six.
The IFM team is focused on margin improvement through contract rationalization, effective execution, and inflation management. Our 2022 acquisitions drove significant new revenue growth, including recent new win contract wins, but now with improved profitability, thus demonstrating their creative acquisition thesis. For example, the Dana Food Service business benefited from the lack of COVID restrictions in Q1 than what we saw in Q1 of 2022, with educational contracts now returning to normal capacity levels. The 2022 acquisitions are expected to deliver about CAD 130 million of revenue in 2023 at good margins. Across the business, rationalization of lost contracts has improved margins in IFM. Proactive inflation management continues to yield results, managing the impacts and getting ahead of or minimizing the impact of the timing gap to recover cost increases from clients.
Our Q1 results yielded margin improvement of 6.4% compared to 5.9% in Q4, excluding the impact of lost contracts, which are near to being fully rationalized at this point. Margin optimization and expansion continues to be a focus going forward in 2023, as well as continued organic growth. In Q1, we completed the acquisition of VCI Controls. This acquisition adds to our building and automation controls capability, which is a key proficiency for us as clients focus on ESG requirements, energy efficiency, and carbon footprint reductions. New sales in the quarter was strong in IFM, providing good momentum to start the year and revenue growth that will take effect in the back half of the year.
A number of new contracts won recently are in the educational sector, that will also tend to marginally increase our business seasonality in IFM. We continue to review and explore acquisition targets for possible consideration in the back half of 2023 or into 2024. Moving now to WAFES on slide seven. We continued to win market share and capitalize on high activity levels in the mining and energy sectors in Q1. Occupancy across our network of workforce accommodations is strong at about 66% of about 19,000 total beds under management. Asset utilization energy services, which is really access matting and relocatable rentals, remains high at over 70%. The energy services division proceeded with a special access matting investment in Q1 of CAD 5.9 million, which is supporting a rental agreement to a key client under an advantage multi-year contract.
The Kitimat Crossroads Lodge our occupancy is increasing with LNG Canada now moving into the lodge in May, which will be ramping up and is contracted for the balance of the year. Forestry activity is also expected to be slightly higher this year, with 30 million trees, total trees expected to be planted. Our wildfire support activity in Q2 is off to a very strong start with dry conditions and heavy fire activity in Alberta, as everybody's been seeing on the news. The Q1 adjusted EBITDA as a percentage of revenue is 14% for our WAFs business, which is consistent with Q1 of 2022. It is lower than 17% in Q4 of 2022. It is consistent once Q4 is normalized for the retroactive price increases of CAD 2.8 million that we had in Q4.
Similar to IFM, we're also having a strong start to the year in new sales opportunities in WAFs, particularly focused around oil sands, as well as Ontario and Quebec mining projects in workforce accommodations. A key focus for WAFs going forward is replacing major projects like Coastal GasLink that have been tapering off to scheduled completion this year. With the new sales momentum we are seeing on significant good margin opportunities in WAFs, we're making good progress towards that goal. Lastly, modular on slide eight. The modular solution business delivered expected revenue and improved profitability over the quarter as a result of the continued execution of our four-point business turnaround plan. Efforts around commercial contract improvement, stronger project and supply chain management are creating better cost certainty on our projects with the further diversification of the business progressing as our remaining medium-term initiative.
We continue to work through the backlog of BC Housing fixed-price affordable housing projects. The business completed about $13 million of that backlog in Q1 with no margin contribution. The remaining $35 million of that backlog is expected to be substantially completed by Q3 or perhaps into Q4. The provision booked in Q4 to cover higher costs to complete these projects remains reasonable based on current project status and negotiations. Revenue in the quarter outside of the BC Housing projects had roughly a 4% EBITDA margin. The demand for affordable housing in Canada also continues to grow. Our pipeline and backlog of modular projects and business activities we expect to expand over the course of the summer as federal and municipal governments approve funding on new projects. We put in a substantial number of quotes and proposals for new projects in Q1.
Award of new projects is expected in the summer into the fall of this year. The timeline of these projects may result in some temporary slowdowns in manufacturing capacity at our plants and overall project activity in Q2 and Q3. However, we still expect to exceed CAD 200 million in modular revenue in 2023. The modular diversification plan with our US supply-only projects has been impacted by the higher interest rate environment as clients are deferring or slowing down projects with weakening demand for new project starts. Building the backlog is a priority. In spite of the challenges I described, we are seeing other areas of opportunities in industrial and indigenous housing projects, as well as an active educational portables market. With that, I'll turn it now back to Drew for comments on our financial position.
Thank you, Mark. I'll speak about our financial position and capital markets on slide 10. Our financial position and liquidity remain strong with CAD 78.1 million of unused capacity on our credit lines at March 31st. Debt was at CAD 110.6 million at March 31st. The increase of CAD 16 million in Q1 versus Q4 is due to three things. First, the cash paid on the VCI acquisition of CAD 3.2 million. Second, the special access matting investment of CAD 5.9 million. Third, additional working capital investments related to the growth of the business in the quarter. Our leverage is well less than 1.5x go forward EBITDA at March 31st, and we expect leverage to be below 1x EBITDA by the end of this year in the absence of any acquisitions.
We've started work to renew our debt facilities and expect to be able to conclude the renewal in Q3 on favorable or similar terms. The debt facility renewal terms will incorporate our working capital needs for organic growth and seasonality with dry powder available for acquisitions. I'm pleased to say there was little impact from non-recurring items in Q1, which made my job easier as the quarter was much cleaner to report. The real benefit is having reliable results which translate to EPS and cash. More reliable results and improved forecasting are also important as we have assessed the impact of a recession. We expect currently that any recession will be mild and short in duration and have minimal impact on our business.
However, we have also run scenarios and prepared action plans to be quickly executed if the recession is deeper and for a longer period. Our prime focus is building a portfolio of profitable businesses. The conversion of EBITDA to free cash flow for 2023 is expected to be approximately 50%, excluding any non-recurring items. This cash flow will easily cover our dividend payments of CAD 22 million per year. The strength of our financial position and excess free cash flow in conjunction with the strength of IFM, the IFM robust and growing business and stabilization of modular results have resulted in Dexterra making a normal course issuer bid commencing May 15th. The NCIB will allow us to repurchase 1.3 million shares. That number will keep Fairfax's ownership interest below 50%, which will preserve our tax losses, which total roughly CAD 90 million.
Fairfax does not intend to tender any shares under the NCIB. The share repurchases will help support the share price. More importantly, the Dexterra shares currently trade at a large discount to their real value, so this is a good investment for our capital. The maximum investment will be less than CAD 10 million, which will be quickly recovered from free cash flow. We have declared a dividend for Q2 2023 of CAD 0.0875 per share for shareholders of record at June 30, 2023 to be paid July 17, 2023. I will now turn it over to Mark for closing comments.
Great. Thanks, Drew. I won't cover all the points on slide 11 in detail. They're effectively a recap of our comments in the presentation, and I encourage everyone to use that as a summary. Suffice it to say, my focus and the focus of the Dexterra team in upcoming quarters is driving strong execution, continuing to improve profitability, and capture profitable new sales across all the business units. We have a talented team of focused people and plans in place to deliver these outcomes. Big picture, we know our company is undervalued in the market. As we continue to execute, improve, and sustain our profitability and grow, we believe the market will recognize our value over time.
I'm confident and energized about our plans and excited about the future ahead for our company, a future that will deliver strong stakeholder value to shareholders, employees, customers, suppliers, and in our communities. This concludes our prepared remarks, and I'll turn the call back to Marie, sorry, for the Q&A portion of the call.
Thank you. We will now take questions from the telephone lines. If you have a question and you are using a speakerphone, please lift the handset before making your selection. If you have a question, please press star one on your device's keypad. You may cancel your question at any time by pressing star two. Please press star one at this time if you have a question. There will be a brief pause while the participant register for questions. Thank you for your patience. The first question is from Chris Murray from ATB Capital Markets. Please go ahead. Your line is now open.
Yeah. Thanks, guys. Good morning. Mark, you know, first congratulations on taking over the CEO role. I know you've only been in the, in the seat, officially for a few weeks, but I know you've been with the company for some time. With that being said, can you talk a little bit about your thoughts around strategy for the company? I know there's always been this big push on trying to make IFM the growth driver, you know, maybe just, you know, operate WAFES the way it's been and try to do something with modular. Any thoughts around, you know, the strategy and then any opinion you may have on ways that it may, shift or morph over the, over the coming couple years?
Yeah. Thanks, Chris, good morning. I encourage you to dial into the AGM later this morning. Check my time zones here. I know you're in Alberta. Oh, no, you're in Toronto. You know, we will talk more about the strategy and kind of our broader path forward, at the AGM, we've got a prepared presentation at that time. You know, suffice it to say, you know, we are building on the foundation. You know, our near-term goal of CAD 1 billion and CAD 100 million EBITDA, we're very close to achieving that, we're confident we're gonna achieve that in the short term. Then our broader goal to take us to a CAD 2 billion, you know, profitable growth to a CAD 2 billion company.
you know, with strong growth still in IFM, we see growth. We've had 25% growth in IFM in the three years since merger. We see, as we'll say this afternoon, you know, kinda getting that business to a CAD 500 million-CAD 600 million business as very achievable. Getting modular, you know, more profitable and a growing business unit is a key part of that part of that strategy. As you mentioned, you know, we really do see IFM as our growth engine for our overall broader target of CAD 2 billion and, you know, driven by organic growth as well as acquisitions.
Really driven, you know, not only by the things that we know we do well already, you know, in the scope of IFM services, but also continuing to develop, you know, our foundation that we have around integrated IFM, which is really getting into, you know, healthy buildings, you know, ESG. A lot of clients are looking to optimize, you know, building carbon footprint. You know, with our VCI acquisition and other things we're looking at, we're continuing to build our capability around that as we see a significant market growth.
With, you know, that focus in IFM and IFM growth, both organic and through likely acquisitions, you know, we see us rounding out that business, you know, as potentially up to a billion-dollar business in of itself. Chris, I would urge you to dial into the AGM. We'll have a little more detail for you on that later today.
Okay, that's great. Maybe turning to IFM, which is the growth engine. I mean, the expectation was between contract wins and acquisitions. At least the indication was that we'd be looking at something kind of call it high teens growth rates, maybe margins in that 7%-8% range. You know, we saw margins this quarter maybe a little bit below that. I know you were doing some contract adjustments and rightsizing in Q4. With that being said, like are those numbers still kind of feasible longer-term targets? Maybe I'm getting ahead of myself, you know, certainly it's an important part of the business, maybe even near term, can we get there?
Yeah, I mean, you know, we still see, as I said, you know, the IFM part and the IFM growth, you know, be an advantageous part of the business. Of course, 2022, you know, inflation impacts the things that we saw that impacted us, and we're seeing a good recovery from that in our margins. You know, you do get a range of margins within the IFM business. You know, we see, you know, kind of the soft FM services, which are good services and good foundations for us, you know, around food service and, you know, industrial or cleaning and those kinds of things in that kind of 6%-7% range.
You know, we would see, Chris, you know, the more integrated services. We see that in the integrated services and contracts that we have currently, you know, at higher margins than that. In fact, you know, we find the more we do for a client, the more comprehensive a scope we have for a client, the more opportunity for us, you know, to deliver to our clients, but also to build margin within those opportunities. We see that time and again. We continue to, you know, believe, and that is our strategy to pursue that approach kind of as we go forward and, you know, kind of review that kind of or build that balance of business that kind of gives us a range of margins.
you know, suffice it to say we wanna be at least 7% and higher depending how much we get in terms of the integrated business that will tend to bring our margins up even higher than that.
Thank you. The next question is from Michael Doumet from Scotiabank. Please go ahead. Your line is now open.
Hey, good morning, guys. maybe sticking to IFM. I believe maybe go a year back, maybe a little bit more, but you guys used to provide a pipeline in which you were bidding on, and I think you used to highlight the track record of closing about 40% of the bids, correct me if I'm wrong there. I wonder if you can talk about the pipeline today, maybe some of the drivers behind it, you know, your confidence in terms of executing on that pipeline, and maybe a little bit of a commentary on the expectations for the 2nd half growth as well?
Yeah, I think, you know, good question, Michael. You know, I would say our pipeline, we monitor it fairly carefully. You know, it's similar to what we had talked about that you're referencing. You know, I'd say certainly post-pandemic, we would say, you know, that, you know, we're seeing a lot even more activity and, you know, we're ways out of the pandemic that people are still bringing more and more work to the table. You know, call it CAD 300 million pipeline is kind of an active number for us if we kind of look at what we have in our in our roster of pursuits, and that would be similar to what we had talked to you about before.
Just continuing to figure out, you know, where we, again, you know, focusing on the things that we know we have a good presence, we know we have a good value offering, we know we have a good win rate. Then building on that IFM strategy, we are seeing those coming forward, and just work on kind of building our hit rate higher than it currently is. You know, it's currently around 30%. We'd like to see that higher. It's a very competitive environment out there, but, you know, kind of as we build our repertoire and our capabilities, you know, we see a strong capability to do that. And again, things like VCI and our sales focus is driving some of that.
Okay, thanks for the color. Maybe flipping to Modular. I'm wondering how you think about the potential risks there of additional one-time costs related to the lost projects in Modular, 'cause I think this quarter you ran effectively 0 EBITDA through the P&L on the CAD 14 million of revenues. Have costs eased, or do you think that the accrual is sufficient? I'm just wondering again for the balance of the CAD 35 million. Again, commentary on how the CAD 35 million splits in Q2 versus Q3 as well too.
Yeah, I mean, we'll. You know, in terms of the, I guess, the progression of it, I mean, you know, you see a CAD 13 million progress there. You know, as the project as we complete projects in that repertoire, that's the remaining CAD 35 million, the amount we do per quarter will taper off. You'll see similar bites, you know, probably Q2 and Q3 as we complete those projects, ideally by the end of Q3, but they may bleed into Q4. You know, we watched that provision that we took. We, you know, we thought through that pretty carefully in Q4. You know, what we've seen so far, you know, we see that we see that provision to be reasonable to cover kind of the additional costs that we're seeing on those projects.
Our focus is really, you know, getting through those projects and, you know, looking forward on the new projects that we're bringing forward. Rob Johnston, that's been part of the team now, is doing, you know, a lot of things to, you know, really better commercialize how we're building contracts, how we're contracting work, how we're subcontracting work, and, you know, kind of build our better sustainability or I guess, let me say it this way, a better reliability in terms of our profitability on new projects going forward. You know, in Q1, we had about 30 proposals and bids that went in, so that's gonna help us with our pipeline going forward. We're also seeing things outside of that as well.
We've won indigenous community housing projects. We're even doing things in the industrial space as well. I think, you know, we view that provision and completion of those challenged BC projects, you know, as being reasonable for the rest of the year. Then really just building our pipeline, winning work that for sure that strength will carry over into 2024. And, you know, just build that reliability of our profitability on that business.
Thank you. The next question is from Zachary Evershed from National Bank Financial. Please go ahead. Your line is now open.
Thank you. Morning, everyone. Congrats on the quarter.
Great. Thanks, Zach.
What kind of revenue contribution can we expect from VCI? How does that ramp up through revenue synergies as it's integrated and the capabilities are spread through the network?
Yeah. Good question, Zach. You know, VCI, you know, initially, you know, will bring about CAD 8 million in revenue to us. That's good work, and they've got a really good, you know, repertoire of clients and, you know, service segments that they work on, you know, and they're now integrated within our business. Really it's about the build. You know, the people that we brought over, their expertise around building controls, building management, energy system management is really what we're looking to leverage there. Like, you know, we like the revenue, we like the EBITDA that they bring, but it's really the expertise that we're leveraging.
you know, as we put in proposals and bids and work actively with our current clients, you know, those folks and those that came across, you know, and their experience, you know, bringing that to bear kind of across our IFM network as we kind of pursue those integrated opportunities that I was talking about.
Thank you. Then still in IFM, any pushback from clients to the way you're approaching pricing? Any chance of losing market share as margins are right-sized?
I mean, it's a challenging business, and I would say, Zach, like in, you know, some of the more commodity style, facility management, like more, you know, some of the cleaning work and that kind of thing, can be pretty unbelievably competitive, and we do look for opportunities. Our hotel rail and leisure group that's got us work now in that space down in the U.S. has been developing some advantage margins. You really got to look for where you're competing and how you're competing on it. Really look for your opportunities where the margins are adequate.
The other thing I would say too as another example is, you know, within food service, you know, with Dana Hospitality, you know, we're doing really well in the educational space. And, you know, we're just looking for those opportunities where, you know, the combination of the service model that the institution's looking for and delivery. I mean, if they're actually looking for the absolute lowest cost, you know, we tend not to focus on those, but we focus on the ones that are looking for kind of fresh from scratch, you know, offering that we see with Dana, and we won a few contracts this year already on that basis, which then tends to give us more of a reasonable margin. I think, Zach, it's a bit of a selectivity model, right?
Looking for the sectors, the clients, the geographies where we know we can make adequate margins and focusing on that and then trying to stay away from, you know, the highly commoditized, highly competitive, segments, if that makes sense.
Thank you. The next question is from Frederic Bastien from Raymond James. Please go ahead. Your line is now open.
Good morning. Sorry, I jumped on the call late, apologies if you've covered this already. Does your intention to buy back stock at the current levels take priority over potential M&A transactions that you may have in the pipeline?
Yeah. Thanks, Fred. This is Drew. Yeah, absolutely not. The NCIB, as you saw, it's quite small. It's only a maximum of 1.3 million shares, so it will be less than CAD 10 million. As you know, it happens over time. We can only buy 6,000 shares a day, roughly. So it's gonna be CAD 10 million spread over a long period of time, so it will not impact our acquisitions. We're still aggressively targeting acquisitions.
Okay. Thanks for clarifying this. You also mentioned in your prepared remarks that, at least in the press release, I noticed that this lower demand for supply-only projects in the US would impact the pace of modular profitability recovery. Can you please expand on that? From what I recall, that wasn't a big part of the business, but, you know, obviously had potential. Just wondering where your mind is at on this particular opportunity.
Yeah. Good, good question, Fred. I would say, you know, I'd agree with you, like, on the size of the work. You know, the strategic significance of that work, like getting us down into the U.S. You know, some of our clients down there, you know, we were doing kind of multi-unit residential housing supply. They're very happy with what we were doing. They're very happy with our supply. They do tend to continue to develop. They've just kinda slowed down their development profile. You know, we've kinda learned how to build those products and deliver, you know, those products successfully. We also supplied an affordable housing project in Washington State as well, through a business partner that we have in the U.S.
We still see that as a really strong opportunity for us and part of that diversification strategy for modular. you know, it's just a matter of timing and kind of what our clients are seeing, as bringing their new developments online that are going to come. It's just really delayed because of the high interest rate environment. you know, I guess in terms of profitability, you know, we're gonna be profitable on whatever we take on. When we impact our profitability, it's really our kind of our revenue mix and our diversification strategy that's gonna be the foundation for more of a growing business within modular.
Thank you. Once again, please press star one if you have a question. The next question is from Trevor Reynolds from Acumen Capital. Please go ahead. Your line is now open.
Hey, guys. Just building on the modular question, just maybe your guys' target on when you guys expect to kinda return to your target margins in the business. On those new deployments, maybe what sort of margins you're expecting on those new deployments, and if those have changed at all since what has happened over the last two years in the modular division?
Yeah. Morning, Trevor. You know, I'd say around modular, you know, kind of as soon as possible would be where we'd wanna get our, you know, get our profitability to. Obviously, you know, these BC-based projects that we're, you know, kind of working through at a nil margin is kind of balancing us out. You know, as I mentioned, the balance right now is at in Q1 was about 4%. You know, like, we've actually been in this business a while and, you know, we know we can do the types of projects that we're doing currently in modular, turnkey projects, you know, at a 6% margin, and we'd aim to get back to at least that or get back to that for sure, would be our objective.
you know, the challenging thing sometimes about modular is it's a project-based business. The good thing about modular is you can reprice everything, right, as projects come in. it is an opportunity to kinda get back to our, to our margins. you know, the only thing I would say, and I'll make this comment at the AGM later this morning, you know, we are looking to get into some other potential segments within modular that give us a better foundation, so we're not so kind of dependent on the larger turnkey projects, that we get more of a foundational type, productization, market going within our manufacturing plant capacity, which will also kinda give us a more of a foundation as well for those profitability levels I mentioned.
Okay, that's helpful. Thanks. Just on the WAFES business, couple of quick ones there. Just the Coastal GasLink assets you guys mentioned, what opportunities are you seeing for redeployment on that front? Then, what does a, what does a strong year look like for... in terms of the fire assistance business? Obviously it looks like we're off to a strong start on that business. What could that look like in a year that's heavily impacted by forest fires?
Yeah. Good questions, and kudos to you for fitting in three questions. I'll answer them both for you. First of all, Coastal GasLink, Coastal GasLink's a huge project. Everybody knows this. You know, it's been tapering off the last couple of years, and we've had a huge, you know, a pretty large component of work as part of Coastal GasLink. It is finishing, but it is extending as well. We're certainly happy about that. It is gonna complete, and it is gonna complete somewhere towards the end of this year and maybe into next year to some degree. You know, as I mentioned in my comments, you know, WAFES, we're also, in addition...
Like IFM, you know, we're having a pretty good start to the year on new opportunity, new sales opportunity. Seeing some of that within the oil sands, you know, on operational support type work and then also in workforce accommodations and also in Northern Ontario, Northern Quebec mining, we're seeing some projects there. You know, Coastal GasLink's good margin work and big work, but we're seeing new opportunities that are a good size and good margin. That's given us, you know, probably some good confidence that, you know, on our quest to kind of replace that major projects flow at good margin. You know, we're seeing some good opportunities to replace that and kinda continue our growth profile for WAFES.
Fire situation, very active for us in Alberta. You know, our main focus of efforts around firefighting or wildfire support is Alberta and Ontario. We're kind of on the front of that. We've actually Alberta government's got 21 fire base camps, permanent fire base camps that we operate for them, and support for them. We've got 18 out of 21 fire base camps in Alberta as well. By last count, within the last 24 hours, I think we've got 4 incident camps that are being mobilized to support Alberta wildfires. We like that business because it's a strong, you know, community support, you know, an initiative for us and we're happy to provide that service, be a primary provider in Alberta.
So yeah, it is gonna be a strong year, it looks to be gonna be a strong year in wildfire support in Alberta. You know, we also have to kinda keep it in mind, the size of the business relative to the overall size of WAFES. You know, we will probably see if it does continue the way it looks, you know, an increment to EBITDA related to wildfire. Of course, keeping that in mind, it's, you know, a smaller or moderate increment compared to the overall size of the business, the overall EBITDA delivery.
Thank you. The next question is from Zachary Evershed from National Bank Financial. Please go ahead. Your line is now open.
Hey, guys. Quick follow-up. Could you quantify some of the actions that fall under the recession action plan? How would you react to a deeper recession?
Yeah. Good question, Zach. You know, it kinda, it kind of is a range, you know, across our businesses. You know, the good thing about our business and a lot of our business segments, including things like IFM and others, you know, even in a recessionary environment, a lot of our institutions, a lot of our defense, airports do cut back. You know, we certainly saw that in the pandemic very significantly, but not necessarily we'll see it as heavy in a maybe in a recession environment. We do see some good support because we are an operational support business and, you know, short of a pandemic, you know, a recession, we can tend to do better.
The one we've got to kind of keep our eyes on is just obviously the energy space, very strong for us, you know, especially particularly the oil and gas space. Perhaps the mining space. So it depends what, you know, kind of precious metals and gold does and what oil price does. But, you know, some of our energy-based stuff is pretty high margin work or good margin work, let me say it that way. So we have to watch those sectors because they are pretty strong foundations for things like WAFES business. As Drew talked about, you know, we've kind of looked at across the space and I, you know, I do want to say we've kind of been here before, you know, around energy volatility and cyclic conditions.
It's really a matter of just sort of looking at our workload, making sure we look at our staffing, you know, which kinda has a bit of a direct drive on direct staffing, if I could say it that way, as the workload, you know, as the work kind of ebbs and flows. Also, you know, our overheads as well. You know, we would have plans and again, we've done this before, where we kinda take a careful look at our overheads and, you know, make plans around that to sort of manage our SG&A costs over top of the business. You know, access matting is another piece of the business that can be pretty volatile.
You know, you know, we're making sure like now it's crazy and I mentioned earlier on we did a pretty large investment, capital investment on behalf of a client for a long-term rental contract. We're not overspending in that world because you don't wanna kind of overspend and overcommit and then have something kind of fall off if we get into a significant recession. It's kind of a delicate balance. We are kind of running both sides of that.
Since you brought it up, the special access mat investment, can you give us a little bit more detail around the length of that contract versus the investment that you've made and what kind of return metrics we can expect?
I mean, you know, kind of a 3-year contract. You know, average mat life is kinda 5 years, but, you know, so we'll get substantial amount of life around that. I think you know this, Zach, I mean, margins in, you know, in the access matting business and other energy support businesses are reasonably good. It would be very typical, margins that we would see around that. I guess what we would see, with that particular situation is just, you know, a long-term commitment, which we like, and, an extendable commitment as well.
Thank you. This concludes the question and answer session.
Great. Thank you.
Goodbye.
Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.