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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Rps Group Plc | LSE:RPS | London | Ordinary Share | GB0007594764 | ORD 3P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 221.00 | 221.00 | 222.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMRPS
RNS Number : 1945G
RPS Group PLC
04 August 2016
RPS GROUP PLC
("RPS" or "the Group")
Interim Results for the six months ended 30 June 2016
Group performance impacted significantly by continuing severe downturn in global oil and gas sector. Other businesses performed well. Recent investment in Project Management capability successfully broadening skills. Strong operating cash flow. Consequences of UK referendum outcome unclear.
Hot Features
Premium
H1 H1 H1
2016 2015 2015
(constant
currency)
(3)
------ ------ ------------
Revenue (GBPm) 291.4 284.1 292.2
Fee income (GBPm) 260.8 253.4 260.6
PBTA (1) (GBPm) 20.2 28.8 29.9
Adjusted earnings per share (2)
(basic) (p) 6.44 9.50 9.89
Dividend per share (p) 4.66 4.66 4.66
Statutory profit before tax (GBPm) 10.9 17.9 18.6
Statutory earnings per share
(basic) (p) 3.93 6.00 6.23
------------------------------------ ------ ------ ------------
(1) PBTA is profit before tax, amortisation and impairment of acquired intangibles and transaction related costs.
(2) Adjusted earnings per share is before amortisation and impairment of acquired intangibles and transaction related costs
and the related tax.
(3) 2015 results restated at 2016 currency rates.
Brook Land, Chairman, commenting on the results, said:
"The Group's long term strategy of building a diverse international business has enabled us to produce a creditable result despite the impact of the worst downturn the global oil and gas sector has experienced. Our operating cash flow was once again strong.
"Our cost reduction programme coupled with apparently emerging market stability, gives the Board a reasonable expectation that our Energy business is likely to perform better in the second half. Our BNE:Europe and AAP businesses also have the potential for growth in the rest of the year.
"It is too soon to be able to anticipate the impact of the UK referendum vote on the Group. Our Europe business is diverse and strong and has an experienced management team. I am confident that they will respond effectively to the consequences of Brexit, whatever they may be."
4 August 2016
ENQUIRIES RPS Group plc Dr Alan Hearne, Chief Executive Tel: 01235 863206 Gary Young, Finance Director Instinctif Partners Matthew Smallwood Tel: 020 7457 2020 Justine Warren
RPS is a multi-disciplinary international consultancy providing advice upon the development and management of the built and natural environment, the planning and development of strategic infrastructure and the evaluation and development of Energy, Water and other resources. We have offices in the UK, Ireland, the Netherlands, Norway, North America and Australia Asia Pacific and undertake projects in many other parts of the world.
Results
Profit (before tax, amortisation and impairment of acquired intangibles and transaction related costs) was GBP20.2 million (2015: GBP28.8 million; GBP29.9 million on a constant currency basis). Statutory profit before tax was GBP10.9 million (2015: GBP17.9 million; GBP18.6 million on a constant currency basis). Basic earnings per share (before amortisation, impairment and transaction related costs) were 6.44 pence (2015: 9.50 pence; 9.89 pence on a constant currency basis).
The contribution of the Group's four segments was:
H1 H1 H1
Segment Profit (GBPm) 2016 2015 2015
(constant
currency)((1)
--------------------------------------- ------ --- ------ ----------------
Built and Natural Environment: Europe 16.4 14.3 14.6
: North America 4.6 5.3 5.8
Energy (1.4) 9.6 9.9
Australia Asia Pacific ("AAP") 6.3 5.8 6.0
Total(2) 25.8 35.0 36.2
--------------------------------------- ------ --- ------ ----------------
(1) 2015 results restated at 2016 currency rates.
(2) after reorganisation costs of GBP3.9 million (2015: GBP0.9 million).
The relative change in contribution from the four segments has been rapid and significant; BNE: Europe comprised almost two thirds of Group profit in the period. Each of the non-Energy segments has some degree of oil and gas sector exposure. This held back their growth and impacted margins. Sterling was weaker on average in the first half of this year in comparison to last year, particularly, in respect of USD, Euro and AUD. The fall in sterling since the Brexit referendum, unless reversed, will provide a benefit in the second half when consolidating the results of overseas earnings. The provision for doubtful debts totalling GBP7.0m made in respect of Energy at the year-end remains sufficient.
Group central costs reduced to GBP3.1 million (2015: GBP3.6 million). Finance charges reduced to GBP2.5 million (2015: GBP2.7 million), reflecting the better terms of the revolving credit facility, additional debt taken on to fund acquisitions and the Group's strong cash generation.
Funding and Dividend
Our conversion of profit into cash was again strong. We funded acquisition investment of GBP19.2 million in the period, including GBP7.8 million deferred consideration from acquisitions made in prior years. Net bank borrowings at 30 June 2016 were GBP95.0 million (31 December 2015: GBP78.8 million).
Since July 2015 we have had in place a five year GBP150 million revolving credit facility with Lloyds Bank plc and HSBC Bank plc. In addition, about five years remain on the GBP30.0 million and $34.1 million fixed term, fixed rate notes issued through Pricoa in 2014. Our interest cover at 30 June was 10.0 times well above the bank covenant of 4.0 times. Our leverage at 30 June was 2.2, well below the bank covenant of 3.0. We anticipate our good operating cash flow to continue in the remainder of the year and leverage to reduce by the year end.
The Board remains confident about the Group's financial strength. However, given the markets we experienced in the first half, as well as the uncertainty created by the UK vote to leave the EU, it has decided to hold the Interim dividend at the 2015 level and review the appropriate level for the full year when it recommends the final dividend. The interim dividend will, therefore, be 4.66 pence (2015: 4.66 pence), payable on 14 October 2016 to shareholders on the register on 16 September 2016. The Board has also decided to take a more cautious approach to investment in acquisitions until the future becomes clearer.
Markets and Trading
Built and Natural Environment ("BNE")
Europe
Within this business we primarily provide a wide range of consultancy services to many aspects of the property and infrastructure development and management sectors. The business delivered a good performance in the period.
H1 H1 H1
2016 2015 2015
(constant
currency)(1)
----------------------- ------ ------ ---------------
Fee income (GBPm) 131.2 106.1 108.2
Segment profit (GBPm)
(2) 16.4 14.3 14.6
Margin % 12.5 13.4 13.5
----------------------- ------ ------ ---------------
(1) 2015 results restated at 2016 currency rates
(2 ) after reorganisation costs of GBP0.4 million (2015: GBP0.1 million).
Those activities which assist clients develop new capital projects, particularly our planning and development business in the UK, continued to benefit both from good market conditions and client confidence through most of the period. Some softness became apparent, however, towards the end of the half year, possibly linked to the EU referendum. The integration of DBK (acquired in April 2016) into this part of the business has begun encouragingly.
Those activities exposed to operational environments continued to need to offer an efficient, cost effective service to assist clients in managing tight budgets. Our water business in the UK, in particular, achieved this and performed well in the period.
This segment includes the Group's Norwegian business: the process of integrating OEC (acquired November 2013) and Metier (acquired April 2015) to form that country's leading project management consultancy has moved forward significantly in recent months. Nonetheless, these businesses experienced an adverse impact from the downturn in the oil and gas sector in that country. They have responded by focussing on those sectors of the economy which are benefiting from increased investment, particularly private sector IT and public sector infrastructure.
The Board continues to believe this segment is capable of delivering good growth in the full year. However, the UK decision to leave the EU could cause disruption if our clients, particularly those in the UK property development and infrastructure sectors, decide to change their investment plans. The scale and impact of this cannot yet be determined.
North America
This business was formed from parts of our North American Energy business in 2013 and, as a result, still has a significant exposure to the oil and gas sector. Although other parts of the business have performed well, this exposure held back progress, particularly in the first part of the year, as oil and gas clients reduced and delayed expenditure. This impacted both fee income and margin.
H1 H1 H1
2016 2015 2015
(constant currency)(1)
----------------------- ------ ------ ------------------------
Fee income (GBPm) 32.0 28.6 30.5
Segment profit (GBPm)
(2) 4.6 5.3 5.8
Margin % 14.4 18.7 18.9
----------------------- ------ ------ ------------------------
(1) 2015 results restated at 2016 currency rates
(2) after reorganisation costs of GBP0.2 million (2015: GBP0.1 million)
The acquisition of Iris, based in San Francisco, in October 2015 continued the process of diversifying into more traditional environmental consultancy activities. It is working successfully with GaiaTech (acquired May 2014), which operates from Chicago in a similar market. Klotz (acquired February 2015) also continues to perform well in the infrastructure market in Texas.
We expect full year growth to be achieved in our non oil and gas activities, but those exposed to oil and gas clients will probably remain under pressure. The overall outcome for the full year still seems likely to show a modest decline in contribution.
Energy
We provide internationally recognised consultancy services to the oil and gas industry from bases in the UK, USA and Canada. The activity levels in this market declined at an unexpected pace in the first few months of the year, although some signs of stability have emerged recently. A significant reorganisation cost was incurred in further headcount reduction and office closures. The scale of the downturn in this sector is unprecedented and the impact on our Energy business and, consequently, the Group has been dramatic. Energy contributed GBP35 million segment profit in 2014 and GBP11 million in 2015. In the 12 months ended June 2016 it broke even, after reorganisation costs of GBP2.4 million in that period.
H1 H1 H1
2016 2015 2015
(constant currency)(1)
----------------------- ------ ------ ------------------------
Fee income (GBPm) 35.3 67.3 69.0
Segment profit (GBPm)
(2) (1.4) 9.6 9.9
Margin % (4.1) 14.3 14.3
----------------------- ------ ------ ------------------------
(1) 2015 results restated at 2016 currency rates.
(2) after reorganisation costs of GBP2.4m (2015: GBP0.4m).
The collapse in the oil price towards the end of 2015 and the early weeks of 2016 coincided with the period caused many of our clients in the oil and gas sector to review spending plans for the current year. Subsequently, we saw announcements of major reductions in their expenditure plans. These came on top of significant cuts in 2015 and materially affected the level of new commissions in our Energy business. We, therefore, continued to reduce our cost base, including a further 25% reduction in permanent headcount in the first half, on top of the 19% reduction in 2015. At the same time staff were grouped into a small number of core offices. Reorganisation costs of GBP2.4 million were incurred in the first half. We also further and significantly reduced our use of external sub-consultants. The scale of these changes inevitably caused significant disruption to day to day operations.
The high level of uncertainty felt across the sector in the first quarter reduced a little in the second quarter. This seems to be an early sign the market is beginning to stabilise. The Board currently envisages a lower level of reorganisation costs in the second half. The business will also benefit from a significantly reduced cost base. The Board currently believes that, unless the market deteriorates again, the second half should see an improved performance, with the business returning to profit.
AAP
This business is a combination of the former BNE:AAP and the AAP component of Energy. They were brought together in 2013 to help counter the impact of the slowdown in the resources sector by focusing more upon the buoyant infrastructure sector. This strategy is working, although the rate of decline in our Western Australian businesses, which supply services to the mining and oil and gas industries, increased in the first half.
H1 H1 H1
2016 2015 2015
(constant currency)(1)
----------------------- ------ ------ ------------------------
Fee income (GBPm) 63.2 52.3 53.8
Segment profit (GBPm)
(2) 6.3 5.8 6.0
Margin % 10.0 11.0 11.1
----------------------- ------ ------ ------------------------
(1) 2015 results restated at 2016 currency rates
(2) after reorganisation costs of GBP1.0 million (2015: GBP0.3 million)
The business had an excellent 2015 and performed well in the first half of 2016. We are benefiting from our repositioning strategy and, in particular, the acquisition of our third project management consultancy in Australia, EIG, in October 2015. Our resources businesses in Western Australia were again faced with a shrinking market and, as a result, produced a significantly reduced contribution in the first half compared with the same period in 2015. We further reduced our cost base and were able to relocate from our main office in Perth to smaller premises. This involved a significant cost, which reduced the operating margin, but which will be largely offset by reduced rent in the second half.
We see the markets in Western Australia remaining difficult in the second half. However, compensating for this, our recent investment on the east coast and particularly in the management of major infrastructure projects, particularly in New South Wales and Victoria as well as for the Federal Government, is proving successful. This investment supported the first half result and provides the structure to deliver growth in the full year.
Strategy and Segmentation
In 2013 we merged the AAP component of Energy with the BNE: AAP business. The creation of this multi-disciplinary business has helped the Group combat the major downturn in the resources sector in Australia. As a result of the severe downturn in the oil and gas sector, the Board has decided to adopt a similar strategy in both Europe and North America by creating single multi-disciplinary businesses in both these regions also.
Energy is currently managed by two regional boards, in EAME and North America. With effect from 1 January 2017 the EAME element is likely to be merged with our BNE:Europe business and Energy:North America is likely to be merged with our BNE: North America business. In those circumstances we would trade and report three regional segments: Europe, AAP and North America.
This potential new structure will be developed during the course of the second half. The 2016 Results will be presented in the current segments. The regional Boards will be responsible for identifying future acquisition opportunities as circumstances allow.
Succession
Our Senior Independent Director is responsible for succession, along with the Nomination Committee, of which he is Chair. Our current succession plan was developed some time ago and is updated as circumstances require.
We remain on track to achieve the orderly transfer of responsibilities from Dr Phil Williams before he retires at the end of September to our CEO, Dr Alan Hearne. The enlarged Executive Committee, described in the 2015 Annual Report, will be in place by the beginning of 2017.
Having set these actions in motion, our Chairman believes this is an appropriate time to step down from the Board and recently announced his intention to retire when a suitable replacement is found. Recruitment for that position is underway. We anticipate the new Chair will, in conjunction with the SID and Nomination Committee, review the appropriate composition of the Board for the next stage in the Group's development and update the succession plan accordingly.
Second Half Prospects
Conditions in the oil and gas sector are likely to remain challenging, although the market is showing some signs of stabilising. Our Energy business will benefit in the second half from the steps we have taken to reduce our cost base and should incur lower reorganisation costs. As a result it should move back into profit. This and the potential for growth in BNE:Europe and AAP should underpin an improvement in Group profit in the second half. Following the UK Brexit vote, we are benefitting from the weakness of sterling when consolidating overseas earnings. It is, however, too soon to judge whether the consequences of the referendum vote will, overall, influence our second half performance in any material way.
Board of Directors
RPS Group plc
4 August 2016
Condensed consolidated income statement
Notes Six months Six months Year
ended ended ended 31
30 June 30 June December
GBP000's 2016 2015 2015
Revenue 3 291,431 284,088 566,972
Recharged expenses 3 (30,627) (30,648) (60,862)
---------------------------------------- ----- ---------- ---------- ----------
Fee income 3 260,804 253,440 506,110
Operating profit before amortisation
and impairment of acquired intangibles
and transaction related costs 3 22,691 31,434 56,845
---------------------------------------- ----- ---------- ---------- ----------
Amortisation and impairment of
acquired intangibles and transaction
related costs 4 (9,278) (10,873) (41,940)
---------------------------------------- ----- ---------- ---------- ----------
Operating profit 3 13,413 20,561 14,905
Finance costs (2,574) (2,746) (5,232)
Finance income 44 93 182
---------------------------------------- ----- ---------- ---------- ----------
Profit before tax, amortisation
and impairment of acquired intangibles
and transaction related costs 20,161 28,781 51,795
---------------------------------------- ----- ---------- ---------- ----------
Profit before tax 10,883 17,908 9,855
Tax expense 5 (2,215) (4,698) (3,013)
---------------------------------------- ----- ---------- ---------- ----------
Profit for the period attributable
to equity
holders of the parent 8,668 13,210 6,842
---------------------------------------- ----- ---------- ---------- ----------
Basic earnings per share (pence) 6 3.93 6.00 3.11
---------------------------------------- ----- ---------- ---------- ----------
Diluted earnings per share (pence) 6 3.91 5.98 3.09
---------------------------------------- ----- ---------- ---------- ----------
Adjusted basic earnings per share
(pence) 6 6.44 9.50 16.57
Adjusted diluted earnings per
share (pence) 6 6.41 9.46 16.47
---------------------------------------- ----- ---------- ---------- ----------
Condensed consolidated statement of comprehensive income
Six months Six months Year
ended ended ended
30 June 30 June 31 December
GBP000's 2016 2015 2015
------------------------------------------------- ---------- ---------- ------------
Profit for the period 8,668 13,210 6,842
Exchange differences* 28,516 (13,933) (9,181)
Remeasurement of net defined benefit
liability - (176) 234
Tax on remeasurement of defined benefit
liability - - (63)
Total recognised comprehensive (expense)/income
for the period attributable to equity
holders of the parent 37,184 (899) (2,168)
------------------------------------------------- ---------- ---------- ------------
*may be reclassified subsequently to profit or loss in accordance with IFRS.
Condensed consolidated balance sheet
As at As at As at
30 June 30 June 31 December
GBP000's Notes 2016 2015 2015
------------------------------ ----- -------- -------- ------------
Assets
Non-current assets:
Intangible assets 450,367 420,311 416,658
Property, plant and equipment 7 27,973 25,388 26,504
Deferred tax asset 5,225 4,174 4,281
483,565 449,873 447,443
------------------------------- ----- -------- -------- ------------
Current assets:
Trade and other receivables 173,376 170,521 157,430
Cash at bank 18,878 17,227 17,801
------------------------------ ----- -------- -------- ------------
192,254 187,748 175,231
------------------------------- ----- -------- -------- ------------
Liabilities
Current liabilities:
Borrowings 2,054 246 525
Deferred consideration 22,273 19,893 20,383
Trade and other payables 122,928 111,668 112,309
Corporation tax 2,872 5,890 4,014
Provisions 1,584 1,272 1,161
------------------------------- ----- -------- -------- ------------
151,711 138,969 138,392
------------------------------- ----- -------- -------- ------------
Net current assets 40,543 48,779 36,839
------------------------------- ----- -------- -------- ------------
Non-current liabilities :
Borrowings 111,862 89,668 96,055
Deferred consideration 6,652 13,941 9,890
Other creditors 2,442 2,973 2,162
Deferred tax 9,993 15,119 10,043
Provisions 1,669 1,798 1,642
------------------------------- ----- -------- -------- ------------
132,618 123,499 119,792
------------------------------- ----- -------- -------- ------------
Net assets 391,490 375,153 364,490
------------------------------- ----- -------- -------- ------------
Equity
Share capital 9 6,686 6,660 6,667
Share premium 113,352 111,533 112,026
Other reserves 10 28,871 (3,163) 1,149
Retained earnings 242,581 260,123 244,648
------------------------------ ----- -------- -------- ------------
Total shareholders' equity 391,490 375,153 364,490
------------------------------ ----- -------- -------- ------------
Condensed consolidated cash flow statement
Six months Six months Year
ended 30 ended 30 ended 31
June June December
GBP000's Notes 2016 2015 2015
Cash generated from operations 12 28,257 47,774 92,628
Interest paid (2,054) (2,340) (6,021)
Interest received 44 93 182
Income taxes paid (8,088) (4,857) (11,737)
Net cash from operating activities 18,159 40,670 75,052
---------------------------------------- ----- ---------- ---------- ---------
Cash flows from investing activities:
Purchases of subsidiaries net of
cash acquired (6,557) (23,319) (35,354)
Deferred consideration (7,784) (3,628) (16,568)
Purchase of property, plant and
equipment (3,641) (3,345) (7,963)
Sale of property, plant and equipment 116 267 465
Net cash used in investing activities (17,866) (30,025) (59,420)
---------------------------------------- ----- ---------- ---------- ---------
Cash flows from financing activities:
Proceeds from/(repayment of) bank
borrowings 8,420 (562) 4,831
Payment of finance lease liabilities (23) (45) (66)
Dividends paid 11 (11,267) (9,668) (19,973)
Payment of pre-acquisition dividend - (70) (169)
---------------------------------------- ----- ---------- ---------- ---------
Net cash used in financing activities (2,870) (10,345) (15,377)
---------------------------------------- ----- ---------- ---------- ---------
Net (decrease)/increase in cash
and cash equivalents: (2,577) 300 255
Cash and cash equivalents at beginning
of period 17,322 17,046 17,046
Effect of exchange rate fluctuations 2,079 (321) 21
---------------------------------------- ----- ---------- ---------- ---------
Cash and cash equivalents at end
of period 16,824 17,025 17,322 ---------------------------------------- ----- ---------- ---------- --------- Cash and cash equivalents comprise: Cash at bank 18,878 17,227 17,801 Bank overdraft (2,054) (202) (479) ---------------------------------------- ----- ---------- ---------- --------- Cash and cash equivalents at end of period 16,824 17,025 17,322 ---------------------------------------- ----- ---------- ---------- ---------
Condensed consolidated statement of changes in equity
Share Share Retained Other Total
GBP000's capital premium earnings reserves equity
------------------------------ ---------- ---------- ----------- ----------- ---------
At 1 January 2016 6,667 112,026 244,648 1,149 364,490
Total comprehensive income
for the period - - 8,668 28,516 37,184
Issue of new ordinary shares 19 1,326 (555) (794) (4)
Share based payment expense - - 1,087 - 1,087
Dividends - - (11,267) - (11,267)
At 30 June 2016 6,686 113,352 242,581 28,871 391,490
------------------------------ ---------- ---------- ----------- ----------- ---------
At 1 January 2015 6,640 110,100 256,386 11,551 384,677
Total comprehensive expense
for the period - - 13,034 (13,933) (899)
Issue of new ordinary shares 20 1,433 (672) (781) -
Share based payment expense - - 1,043 - 1,043
Dividends - - (9,668) - (9,668)
At 30 June 2015 6,660 111,533 260,123 (3,163) 375,153
------------------------------ ---------- ---------- ----------- ----------- ---------
An analysis of other reserves is provided in Note 10.
Notes to the condensed consolidated financial statements
1. Basis of preparation
RPS Group Plc (the "Company") is a company domiciled in England. The condensed consolidated interim financial statements of the Company for the six months ended 30 June 2016 comprise the Company and its subsidiaries (together referred to as the "Group").
The condensed interim financial statements have been prepared using accounting policies set out in the Report and Accounts 2015 and in accordance with IAS 34. They are unaudited but have been reviewed by the Company's auditor. The results for the year end 31 December 2015 and the balance sheet as at that date are abridged from the Company's Report and Accounts 2015 which have been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters for which the auditor drew attention by way of emphasis without qualifying the report and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.
The condensed interim financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.
In assessing the going concern basis, the directors considered the Group's business activities, the financial position of the Group and the Group's financial risk management objectives and policies. The directors have a reasonable expectation that, despite the current uncertain economic environment, the Company and Group have adequate resources to continue in operational existence for the foreseeable future and that it is, therefore, appropriate to adopt the going concern basis in preparing the Group's interim financial statements.
2. Responsibility Statement
The directors confirm that, to the best of their knowledge this condensed set of financial statements has been prepared in accordance with IAS 34 and that this Interim Report includes a fair review of the information required by DTR 4.2.4R, DTR 4.2.7R and DTR 4.2.8R.
On behalf of the Board
A. S. Hearne G. R. Young Chief Executive Group Finance Director
4 August 2016
3. Business segments
Segment information is presented in respect of the Group's business segments which are reported to the Chief Operating Decision Maker. The business segment reporting format reflects the Group's management and internal structure. Inter-segment pricing is determined on an arm's length basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
The business segments of the Group are as follows:
Built and Natural Environment ("BNE") - consultancy services to many aspects of the property and infrastructure development and management sectors. These include: environmental assessment, the management of water resources, oceanography, health and safety, risk management, town and country planning, building, landscape and urban design, surveying and transport planning. Consulting services are provided on a regional basis in Europe and North America.
Energy - the provision of integrated technical, commercial and project management support and training in the fields of geoscience, engineering and health, safety and environment on a global basis to the energy sector.
Australia Asia Pacific ("AAP") - in the AAP region there is a single board that manages the BNE and Energy services we provide in that region. Accordingly, the results of this business are reported as a separate segment.
Certain central costs are not allocated to the segments because either they predominantly relate to the running of the Group Head Office function or could only be allocated to the segments on an arbitrary basis, such costs include the remuneration and support costs of the main board and the costs of the Group Finance and marketing functions.
"Segment profit" is defined as profit before interest, tax, amortisation of acquired intangibles, transaction related costs and unallocated expenses.
"Underlying profit" is defined as segment profit before reorganisation costs.
"Reorganisation costs" comprises costs and income arising as a consequence of reorganisation such as redundancy costs, profit or loss of disposal of plant, property and equipment, the costs of consolidating office space and rebranding costs.
Segment results for the period ended 30 June 2016:
Intersegment
GBP000s Fees Expenses revenue External revenue
--------------------- -------- ----------- --------------- -----------------
BNE - Europe 131,205 17,332 (275) 148,262
BNE - North America 31,957 3,675 (81) 35,551
Energy 35,300 4,327 (329) 39,298
AAP 63,171 5,358 (209) 68,320
Group eliminations (829) (65) 894 -
Total 260,804 30,627 - 291,431
--------------------- -------- ----------- --------------- -----------------
Underlying Reorganisation
GBP000s profit costs Segment profit
--------------------- -------- ----------- --------------- -----------------
BNE - Europe 16,751 (383) 16,368
BNE - North America 4,753 (151) 4,602
Energy 928 (2,366) (1,438)
AAP 7,344 (1,037) 6,307
Total 29,776 (3,937) 25,839
--------------------- -------- ----------- --------------- -----------------
Segment results for the period ended 30 June 2015:
Intersegment
GBP000s Fees Expenses revenue External revenue
--------------------- -------- ----------- --------------- -----------------
BNE - Europe 106,108 14,572 (403) 120,277
BNE - North America 28,586 3,382 (172) 31,796
Energy 67,280 7,409 (239) 74,450
AAP 52,300 5,418 (153) 57,565
Group eliminations (834) (133) 967 -
Total 253,440 30,648 - 284,088
--------------------- -------- ----------- --------------- -----------------
Underlying Reorganisation
GBP000s profit costs Segment profit
--------------------- -------- ----------- --------------- -----------------
BNE - Europe 14,323 (54) 14,269
BNE - North America 5,445 (104) 5,341
Energy 10,045 (400) 9,645
AAP 6,061 (303) 5,758
Total 35,874 (861) 35,013
--------------------- -------- ----------- --------------- -----------------
Segment results for the period ended 31 December 2015:
Intersegment External
GBP000s Fees Expenses revenue revenue
--------------------- -------- ----------- --------------- -----------------
BNE - Europe 222,437 30,503 (808) 252,132
BNE - North America 58,672 7,713 (343) 66,042
Energy 122,971 13,931 (938) 135,964
AAP 104,153 9,045 (364) 112,834
Group eliminations (2,123) (330) 2,453 -
Total 506,110 60,862 - 566,972
--------------------- -------- ----------- --------------- -----------------
Underlying Reorganisation
GBP000s profit costs Segment profit
--------------------- -------- ----------- --------------- -----------------
BNE - Europe 30,871 (549) 30,322
BNE - North America 10,741 (166) 10,575
Energy 11,810 (904) 10,906
AAP 12,539 (409) 12,130
Total 65,961 (2,028) 63,933
--------------------- -------- ----------- --------------- -----------------
Group reconciliation
30 June 30 June 31 Dec
GBP000's 2016 2015 2015
---------------------------------------- -------- -------- --------
Revenue 291,431 284,088 566,972
Recharged expenses (30,627) (30,648) (60,862)
----------------------------------------- -------- --------
Fees 260,804 253,440 506,110
----------------------------------------- -------- -------- --------
Underlying profit 29,776 35,874 65,961
Reorganisation costs (3,937) (861) (2,028)
----------------------------------------- -------- -------- --------
Segment profit 25,839 35,013 63,933
Unallocated expenses (3,148) (3,579) (7,088)
----------------------------------------- -------- -------- --------
Operating profit before amortisation
and impairment of acquired intangibles
and transaction related costs 22,691 31,434 56,845
Amortisation and impairment
of acquired intangibles and
transaction related costs (9,278) (10,873) (41,940)
----------------------------------------- -------- -------- --------
Operating profit 13,413 20,561 14,905
Net finance costs (2,530) (2,653) (5,050)
Profit before tax 10,883 17,908 9,855
----------------------------------------- -------- -------- --------
Total segment assets were as
follows:
30 June 30 June 31 Dec
GBP000's 2016 2015 2015
----------------------------- ------- ------- -------
BNE - Europe 347,808 298,969 298,159
BNE - North America 79,689 66,235 74,821
Energy 97,034 145,718 114,440
AAP 147,732 117,976 131,009
Unallocated 3,557 8,723 4,245
------------------------------ ------- ------- -------
Total 675,820 637,621 622,674
------------------------------ ------- ------- -------
4. Amortisation and impairment of acquired intangibles and transaction related costs
30 June 30 June 31 Dec
GBP000s 2016 2015 2015
---------------------------- -------- -------- -------
Amortisation of acquired
intangibles 9,069 10,244 20,491
Impairment of acquired
intangibles - - 20,040
Deferred consideration
fair value adjustment - - 249
Third party advisory costs 209 629 1,160
---------------------------- -------- -------- -------
Total 9,278 10,873 41,940
---------------------------- -------- -------- -------
5. Income taxes
The tax charge for the period has been calculated using an estimate of the effective annual rate of tax for each taxing jurisdiction for the full year. These rates have been applied to the pre-tax profits for each jurisdiction for the six months ended 30 June 2016. The Group has separately calculated the tax rates applicable to amortisation of intangibles and transaction related costs for the period. Tax rate changes that were substantively enacted at the balance sheet date have been factored into the calculation of the effective tax rates.
Analysis of the tax expense in the income statement for the period:
30 June 30 June 31 Dec
GBP000's 2016 2015 2015
-------------------------------------- -------- -------- ---------
Current tax expense 4,559 6,609 12,592
Deferred tax credit (2,344) (1,911) (9,579)
-------------------------------------- -------- -------- ---------
Total tax expense in the income
statement 2,215 4,698 3,013
Add back:
Tax on amortisation of acquired
intangibles and acquisition related
costs 3,725 3,179 12,304
-------------------------------------- -------- -------- ---------
Adjusted tax charge on PBTA for
the period 5,940 7,877 15,317
Tax rate on PBT 20.3% 26.2% 30.6%
Tax rate on PBTA 29.5% 27.4% 29.6%
6. Earnings per share
The calculations of earnings per share are based on the profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding during the period as shown below:
Six months Six months Year ended
ended 30 ended 30 31 Dec
GBP000's June 2016 June 2015 2015
------------------------------------ ---------- ---------- ----------
Profit attributable to ordinary
shareholders 8,668 13,210 6,842
000's
Weighted average number of ordinary
shares for the purposes of basic
earnings per share 220,748 219,940 220,166
Effect of employee share schemes 1,163 1,135 1,269
------------------------------------ ---------- ---------- ----------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 221,911 221,075 221,435
Basic earnings per share (pence) 3.93 6.00 3.11
------------------------------------ ---------- ---------- ----------
Diluted earnings per share (pence) 3.91 5.98 3.09
------------------------------------ ---------- ---------- ----------
The directors consider that earnings per share before amortisation and impairment of acquired intangibles and transaction related costs provides a more meaningful measure of the Group's performance than statutory earnings per share. The calculations of adjusted earnings per share were based on the number of shares as above, and are shown in the table below:
Six months Six months Year ended
ended ended 30 31 Dec
30 June June 2015
GBP000's 2016 2015
------------------------------------------ ----------- ----------- -----------
Profit attributable to ordinary
shareholders 8,668 13,210 6,842
Amortisation and impairment of
acquired intangibles and transaction
related costs 9,278 10,873 41,940
Tax on amortisation and impairment
of acquired intangibles and transaction
related costs (3,725) (3,179) (12,304)
Adjusted profit attributable
to ordinary shareholders 14,221 20,904 36,478
------------------------------------------ ----------- ----------- -----------
Adjusted basic earnings per share
(pence) 6.44 9.50 16.57
------------------------------------------ ----------- ----------- -----------
Adjusted diluted earnings per
share (pence) 6.41 9.46 16.47
------------------------------------------ ----------- ----------- -----------
7. Property, plant and equipment
During the six months ended 30 June 2016 the Group acquired assets with a cost of GBP3,647,000 (six months to 30 June 2015: GBP3,904,000), which includes GBP131,000 acquired through business combinations (six months to 30 June 2015: GBP511,000). Assets with a net book value of GBP449,000 were disposed of during the six months ended 30 June 2016 (six months ended 30 June 2015: GBP352,000).
8. Acquisitions
The Group completed the following acquisition during the six months ended 30 June 2016, which broadens and strengthens the services the Group offers.
Date of Place of Percentage
Entity acquired acquisition incorporation of entity Nature of business
acquired acquired
------------------- -------------- ---------------- ----------- ---------------------
DBK Partners Ltd 25 April UK 100% Project Management
The Group has allocated provisional fair values to the net assets of DBK as it did not have complete information at the balance sheet date.
Details of the carrying values of these acquired net assets, the provisional fair values assigned to them by the Group, the fair value of consideration and the resulting goodwill are as follows:
GBP000 DBK
----------------------------- --------
Intangible assets:
Order book 620
Customer relations 3,160
Trade names 190
PPE 131
Cash 49
Other assets 3,975
Other liabilities (8,360)
------------------------------- --------
Net assets acquired (235)
Satisfied by:
Initial cash consideration 6,606
Fair value of deferred
consideration 2,438
------------------------------- --------
Total consideration 9,044
Goodwill 9,279
------------------------------- --------
Goodwill arising represents the value of the workforce acquired, potential synergies, future contracts and access to new markets. There is no tax deductible goodwill.
The total fair value of receivables acquired was GBP1,633,000. The breakdown between gross receivables and amounts estimated irrecoverable was as follows:
Gross receivables Estimated irrecoverable Fair value
GBP000s of assets
acquired
----------- ------------------ ------------------------ -----------
DBK 1,918 255 1,663
The vendors of DBK have entered into a warranty agreement with the Group. The total undiscounted cash flow that could be receivable by the Group is between GBPnil and GBP1,663,000. The Group does not expect that this warranty will become receivable and therefore has not recognised an indemnification asset on acquisition.
The Group incurred acquisition related costs of GBP209,000 (six months to 30 June 2015: GBP629,000) which have been expensed through the income statement and are included within amortisation of acquired intangibles and transaction related expenses.
The contribution of the acquisition to the Group's results for the period is given below.
GBP000s Segment Revenue/fees Operating Operating Profit
Profit before amortisation
---------- -------------- ------------- ---------- ---------------------
DBK BNE:Europe 2,589 130 341
The proforma Group revenue and operating profit assuming that all of the acquisitions had been completed on the first day of the year would have been GBP295,666,000 and GBP13,294,000 respectively.
A reconciliation of the goodwill movement in 2016 in respect of acquisitions made in 2015 and 2016 is given in the table below.
GBP000s Goodwill Additions Adjustments Foreign Goodwill
at through to prior exchange at 30/6/16
1/1/16 acquisition year estimates movement
---------- --------- ------------- ---------------- ---------- ------------
Klotz 9,372 - - 960 10,332
Metier 13,662 - 503 2,290 16,455
EIG 11,431 - - 1,468 12,899
Iris 5,446 - - 559 6,005
DBK - 9,279 - - 9,279
There were no accumulated impairment losses at the beginning or end of the period.
No negative goodwill was recognised in 2015 or 2016.
9. Share capital
2016 2015
Number 2016 Number 2015
000's GBP000's 000's GBP000's
------------------------ -------- ----------- -------- -----------
Authorised:
Ordinary shares of 3p
each at 30 June 240,000 7,200 240,000 7,200
Issued and fully paid:
Ordinary shares of 3p
each at 1 January 222,234 6,667 221,348 6,640
Issued under employee
share schemes 651 19 664 20
At 30 June 222,885 6,686 222,012 6,660
------------------------ -------- ----------- -------- -----------
10. Other reserves
Merger Employee Translation
GBP000's reserve trust reserve Total
---------------------- ---------- ----------- -------------- ---------
At 1 January 2016 21,256 (11,997) (8,110) 1,149
Exchange differences - - 28,516 28,516
Issue of new shares - (794) - (794)
At 30 June 2016 21,256 (12,791) 20,406 28,871
---------------------- ---------- ----------- -------------- ---------
At 1 January 2015 21,256 (10,776) 1,071 11,551
Exchange differences - - (13,933) (13,933)
Issue of new shares - (781) - (781)
At 30 June 2015 21,256 (11,557) (12,862) (3,163)
---------------------- ---------- ----------- -------------- ---------
11. Dividends
The following dividends were recognised as distributions to equity holders in the period:
Six months Six months Year Ended
ended 30 ended 30 31 Dec
GBP000's June June 2015
2016 2015
--------------------------- ----------- ----------- -----------
Final dividend for 2015 11,267 - -
5.08p per share
Interim dividend for 2015
4.66p per share - - 10,305
Final dividend for 2014
4.42p per share - 9,668 9,668
--------------------------- ----------- ----------- -----------
11,267 9,668 19,973
--------------------------- ----------- ----------- -----------
An interim dividend in respect of the six months ended 30 June 2016 of 4.66 pence per share, amounting to a total dividend of GBP10,350,000 was approved by the Directors of RPS Group Plc on 2 August 2016. These condensed consolidated interim financial statements do not reflect this dividend payable.
12. Note to the condensed consolidated cash flow statement
Six months Six months Year ended
ended 30 ended 31 Dec
June 30 June 2015
GBP000's 2016 2015
---------------------------------------- ----------- ----------- -----------
Operating profit 13,413 20,561 14,905
Adjustments for:
Depreciation 4,081 4,051 8,101
Amortisation of acquired intangibles 9,069 10,244 20,491
Impairment of acquired intangibles - - 20,040
Deferred consideration fair value
adjustment - 10 249
Share based payment expense 1,087 1,043 1,889
Loss on sale of property, plant
and equipment 333 85 151
27,983 35,994 65,826
(Increased)/decrease in trade
and other receivables (340) 9,280 29,320
Increase/(decrease) in trade
and other payables 614 2,500 (2,518)
Cash generated from operations 28,257 47,774 92,628
---------------------------------------- ----------- ----------- -----------
The table below provides an analysis of net bank borrowings, comprising cash and cash equivalents, interest bearing bank loans and finance leases, during the six months ended 30 June 2015.
At 1 January Acquisition Foreign Other non-cash At 30 June
GBP000's 2016 Cash cash exchange adjustments 2016
flow
--------------------- --------------- --------- -------------- ----------- ----------------- -------------
Cash at bank 17,801 (1,051) 49 2,079 - 18,878
Overdrafts (479) (1,575) - - - (2,054)
--------------------- --------------- --------- -------------- ----------- ----------------- -------------
Cash and cash
equivalents 17,322 (2,626) 49 2,079 - 16,824
Bank loans and
notes (96,018) (8,420) (4,900) (3,580) 1,116 (111,802)
Finance lease
creditor (83) 23 - - - (60)
Net bank borrowings (78,779) (11,023) (4,851) (1,501) 1,116 (95,038)
--------------------- --------------- --------- -------------- ----------- ----------------- -------------
The cash balance includes GBP2,958,000 (31 December 2015: GBP3,640,000) that is restricted in its use.
13. Events after the balance sheet date
There have been no material non-adjusting events since the balance sheet date.
14. Principal risks and uncertainties
The nature of the principal risks and uncertainties faced by the Group have not changed significantly since the 2015 Report and Accounts was published. These risks, together with a description of the approach to mitigate them, are set out on pages 10 and 11 of the 2015 Report and Accounts (available on the Group's website at www.rpsgroup.com) and are summarised as follows:
- Economic environment
- Retention of key personnel
- Business acquisitions
- Political events
- Environmental and health risks
- Information systems
- Health and safety
- Market position and reputation
- Claims and Litigation
- Compliance
- Funding
- Financial risk
From time to time the Group receives claims from clients and suppliers. Some of these result in payments to the claimants by the Group and its insurers. The Board reviews all significant claims at each Board meeting and more regularly if required. The Board is currently satisfied that the Group has sufficient provisions in its balance sheet to meet all likely uninsured liabilities.
The Board keeps under review the potential effect of economic circumstances. The recent decision of the UK to leave the EU has created uncertainty, although it is too early to say what the overall impact on the Group will be.
15. Related party transactions
There are no significant changes to the nature and treatment of related party transactions for the period to those reported in the 2015 Report and Accounts.
16. Forward-looking statements
This announcement contains certain forward-looking statements with respect to the financial condition, results of operations and businesses of RPS Group plc. These statements involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. The continuing uncertainty in global economic outlook inevitably increases the risks to which the Group is exposed and the recent referendum vote in UK creates another source of potentially significant risk. Statements in respect of the Group's performance in the year to date are based upon unaudited management accounts for the period January to June 2016. Nothing in this announcement should be construed as a profit forecast.
17. Publication
A copy of this announcement will be posted on the Company's website at www.rpsgroup.com.
INDEPENDENT REVIEW REPORT TO RPS GROUP PLC
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2016, which comprises the Condensed consolidated income statement, the Condensed consolidated statement of comprehensive income, the Condensed consolidated balance sheet, the Condensed consolidated cash flow statement, the Condensed consolidated statement of changes in equity and the related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Finance Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Finance Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
Reading, United Kingdom
4 August 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UGURARUPQGQW
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