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RPS Group PLC  -  RPS   

Interim Results

Released 07:00 04-Aug-2017

RNS Number : 0754N
RPS Group PLC
04 August 2017
 

RPS GROUP PLC

("RPS" or "the Group")

 

 

Interim Results for the six months ended 30 June 2017 

 

Significant profit improvement over H1 2016, resulting from organic growth, margin improvement, reduced re-organisation costs and currency benefit.  New regional structure delivering.   Interim dividend increased 3%.

 

 

 

 

H1

H1

H1

 

2017

 

2016

 

2016

(constant currency) 3

 

 

 

 

 

Revenue (£m)

314.5

291.4

312.6

Fee income (£m)

281.1

260.8

279.9

PBTA 1 (£m)

27.2

20.2

22.0

Adjusted earnings per share (basic) (p) 2

8.71

6.44

7.03

Dividend per share (p)

4.80

4.66

4.66

Statutory profit before tax (£m)

20.4

10.9

11.8

Statutory earnings per share (basic) (p)

6.55

3.93

4.26

 

PBTA is profit before tax, amortisation of acquired intangibles and transaction related costs

2  Adjusted earnings per share is before amortisation of acquired intangibles and transaction related costs

   and the related tax

 3 2016 results restated at 2017 currency rates

 

 

Key Points

 

·      PBTA up 35% to £27.2m (2016: £20.2m)

 

·      Adjusted EPS (basic) up 35% to 8.71p (2016: 6.44p)

 

·      Statutory profit before tax up 88% to £20.4m (2016: £10.9m)

 

·      Net bank borrowings £93.4m (June 2016: £95.0m)

 

·      Leverage reduced to 1.5 times (June 2016: 2.2 times)

 

·      Cash conversion 62% (2016: 101%)

 

·      Dividend increased 3% to 4.80 pence (2016: 4.66 pence)

 

·      Three regional segments working well

 

·      Platform established to return to growth in 2017.

 

   

 

Alan Hearne, Chief Executive, commenting on the results, said:

 

"The Group's strategy of building a diverse international business has enabled RPS to emerge rapidly and effectively from the severe oil and gas downturn of the last two years.  The creation of our three regional businesses enables us to look confidently to the future."

In recent years our acquisitions in both Norway and Australia have been directed towards project management consultancy, particularly in respect of large scale infrastructure projects.  These businesses performed well.  We see this as an important new activity for the Group, reducing our dependency on the resources sectors and providing a more flexible business model.

The reduction in our dependence upon the oil and gas market, the continuing impact of good cost management and the strong results for the first half of the year enable us to anticipate modestly exceeding market expectations for the full year".

 

 

 

4 August 2017

 

 

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 an international consultancy providing independent 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, the United States, Canada and Australia/Asia Pacific and undertake projects in many other parts of the world.  The Group has been a constituent of the FTSE4Good index since its inception in 2001.

 

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. Nothing in this announcement should be construed as a profit forecast.

 

 

Results

 

Profit (before tax, amortisation of acquired intangibles and transaction related costs) was £27.2 million (2016: £20.2 million; £22.0 million on a constant currency basis).  Statutory profit before tax was £20.4 million (2016: £10.9 million; £11.8 million on a constant currency basis). Adjusted earnings per share (basic) were 8.71 pence (2016: 6.44 pence; 7.03 pence on a constant currency basis). Statutory earnings per share (basic) were 6.55 pence (2016: 3.93 pence; 4.26 pence on a constant currency basis).

 

Group segment profit increased to £34.5 million (2016: £25.8 million; £27.8 million on a constant currency basis).  Group unallocated expenses increased to £4.9 million (2016: £3.1 million), largely reflecting the cost of Board changes. Finance charges were unchanged at £2.5 million (2016: £2.5 million).

Segmentation and Services

 

As previously announced, the Group began operating two new regional, multi-disciplinary businesses in addition to our existing AAP business with effect from 1 January 2017.  The contribution of the three regional businesses in the period was:

 

 

Segment profit (£m)

H1

2017

 

H1

2016 restated ¹

 

H1

2016

(constant currency) ²

 

 

 

 

Europe

21.2

14.6

15.2

 

 

 

 

Australia Asia Pacific ("AAP")

 8.0

 6.3

7.1

 

 

 

 

North America

 5.4

 4.9

5.5

 

 

 

 

Total ³

34.5

25.8

27.8

 

 

 

 

¹   restated for segment changes (see note 4)

²   2016 results restated at 2017 currency rates

³   after reorganisation costs of £0.7 million (2016: £3.9 million, £4.2m at constant currency)

 

 

Each segment provides a broad range of services across many sectors of the economy, serving both the public and private sectors. They each remain exposed to oil and gas projects in varying degrees, with North America having the greatest exposure.  The contribution from oil and gas and Australian natural resources projects to total Group segment results in the first half as a whole was about 18% in respect of fees and 10% in respect of segment profit, significantly reduced from the top of the oil and gas cycle in 2014. 

 

We committed c. £126 million to acquisitions in 2014-2016, none with direct exposure to oil and gas markets. These broadened the Group's activities and geographical footprint and materially assisted the Group maintain its profits as the effects of the oil and gas downturn were felt, clearly demonstrating the value of this part of our strategy.

 

 

Funding and Dividend

 

Net bank borrowings at 30 June 2017 were £93.4 million (30 June 2016: £95.0 million). We settled £7.4 million of deferred consideration in respect of acquisitions made in prior years. Deferred consideration of up to £5.6 million is payable in the second half of 2017, leaving only £1.7 million remaining to be paid in 2018.  Our conversion of profit into cash in the period was modest, due to the timing of annual payments and the un-winding of prepayments made by clients in 2016; we expect a much improved performance in the second half.

 

Since July 2015 we have had in place a five year £150 million revolving credit facility with Lloyds Bank plc and HSBC Bank plc.  In addition, about 4 years remain on the £30.0 million and $34.1 million fixed term, fixed rate notes issued through Pricoa in 2014.  Our interest cover at 30 June was 14 times, well above the bank covenant of four times.  The Board indicated in the 2016 Interim Results announcement that it had decided to take a more cautious approach to investment in acquisitions because leverage (defined in note 3) had reached 2.2 at 30 June 2016, even though it was well below the bank covenant of 3.0. Our leverage at 30 June 2017 has reduced to 1.5 and the search for suitable investment opportunities has recommenced.

 

The Board remains confident about the Group's financial strength and will distribute an increased interim dividend of 4.80 pence (2016: 4.66 pence), payable on 13 October 2017 to shareholders on the register on 15 September 2017.

 

 

Markets and Trading

 

Europe

 

Within this business we provide a wide range of services to many aspects of the property and infrastructure development and management sectors.  From 1 January 2017 it also includes the Energy: EAME business, which undertakes oil and gas projects globally.  Overall, this is our largest business and it has delivered a good performance in the period.

 

 

H1

2017

 

H1

2016 restated ¹

 

H1

2016

(constant currency) ²

 

 

 

 

Fee income (£m)

164.4

151.4

  156.8

Segment profit (£m) ³

21.2

14.6

    15.2

Margin %

12.9

9.7

     9.7

 

¹   restated for segment changes (see note 4)

²   2016 results restated at 2017 currency rates

³   after reorganisation costs of £0.2 million (2016: £2.5 million, £2.5m at constant currency)

 

 

Our planning and development businesses in the UK and Ireland, continued to benefit both from good market conditions and client confidence in respect of both private sector development, as well as public infrastructure projects.

 

Our activities exposed to operational environments continued to need to offer an efficient, cost effective service to assist clients in managing tight budgets, but generally traded well, particularly our water business in the UK, which continues to benefit from its strong market presence.

 

The oil and gas activities remain confronted by a difficult market.  However, as a result of effective cost management our Energy businesses returned a profit contribution significantly better than in the same period last year.

 

In Norway the business performed very well, transitioning away from oil and gas to the buoyant infrastructure markets.

 

This segment is capable of delivering good growth in 2017.

 

 

AAP

 

We continue to benefit from the development of our project management capability, which was expanded significantly by the acquisition of Point in 2014 and EIG in 2015.

 

 

H1

2017

 

H1

2016

 

H1

2016

(constant currency) ¹

 

 

 

 

Fee income (£m)

67.0

63.2

71.7

Segment profit  (£m) ²

8.0

6.3

7.1

Margin %

11.9

10.0

10.0

 

¹   2016 results restated at 2017 currency rates

²   after reorganisation costs of £0.3 million (2016: £1.0 million, £1.2m at constant currency)

 

Our resources business in Western Australia continued to face sluggish markets and produced a significantly reduced underlying contribution compared with the first half of 2016.  Our businesses on the east coast, particularly those involved in the management of major infrastructure projects and private sector development, had a successful first half. Our work for a growing number of Australian Federal Government agencies also continued to expand.

 

Our activities on the east coast give us confidence that the AAP business has a good platform to achieve further growth in 2017. The Federal budget in May allocated significant funds to infrastructure projects and underpinned this confidence.

 

 

North America

 

This business was created by the merger of our Built and Natural Environment: North America and Energy: North America businesses at the beginning of 2017.  The BNE business had a significant exposure to clients operating in the oil and gas sector.  In consequence, the new business as a whole remains significantly exposed to this sector.  However, our non-energy activities now form the majority of this business, providing a platform from which to achieve long term growth, both organic and by acquisition.

 

 

 

H1

2017

 

H1

2016 restated ¹

 

H1

2016

(constant currency) ²

 

 

 

 

Fee income (£m)

50.3

47.3

52.5

Segment profit (£m) ³

5.4

4.9

5.5

Margin %

10.7

10.3

10.5

 

¹   restated for segment changes (see note 4)

²   2016 results restated at 2017 currency rates

³    after reorganisation costs of £0.1 million (2016: £0.4m, £0.5 million at constant currency)

 

The acquisition of Iris, based in San Francisco, in October 2015 continued the process of diversifying into more traditional environmental consultancy activities.  Following integration, it is working successfully with our other environmental risk businesses.

 

Although growth remains possible in the second half, the continuing low level of activity in the energy sector is likely to hold back the performance of this segment overall in 2017.  This is particularly the case in Canada where the energy market is extremely sluggish. Developing our US business in the environmental, infrastructure and project management markets remains a Group priority.

 

 

Board Composition

 

There have been a number of changes to the Board.  On 18 May 2017 it was announced that Alan Hearne is to step down as Chief Executive and retire from the Board by the end of August.  John Douglas has been appointed as Chief Executive designate and will assume the role of Chief Executive when Alan steps down.  We have also announced the appointment of Allison Bainbridge (1 June 2017) and Liz Peace (11 July 2017) as non-executive directors and John Bennett's retirement from the Board (1 June 2017).  With the release of these Interim results Louise Charlton has also retired from the Board.

 

 

Prospects

 

The Group's strategy of building a diverse international business has enabled RPS to emerge rapidly and effectively from the severe oil and gas downturn of the last two years.  The creation of our three regional businesses enables us to look confidently to the future. 

In recent years our acquisitions in both Norway and Australia have been directed towards project management consultancy, particularly in respect of large scale infrastructure projects.  These businesses performed well.  We see this as an important new activity for the Group, reducing our dependency on the resources sectors and providing a more flexible business model. 

The reduction in our dependence upon the oil and gas market, the continuing impact of good cost management and the strong results for the first half of the year enable us to anticipate modestly exceeding market expectations for the full year.

 

 

 

Board of Directors

RPS Group plc

4 August 2017

 

 

 

Condensed consolidated income statement (unaudited)

 

 

 

 

 

 

 

 

Notes

Six months

ended

30 June

Six months

ended

30 June

Year

ended 31

December

 

£000's

 

2017

2016

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue             

4

314,516

291,431

594,471

 

Recharged expenses   

4

(33,461)

(30,627)

(60,175)

 

Fee income                 

4

281,055

260,804

534,296

 

 

 

 

 

 

 

Operating profit  before amortisation of acquired intangibles and transaction related costs        

4

29,681

22,691

55,877

 

 

 

 

 

 

 

Amortisation of acquired intangibles and transaction related costs

 

5

 

(6,807)

 

(9,278)

 

(17,890)

 

 

 

 

 

 

 

Operating profit

4

22,874

13,413

37,987

 

 

 

 

 

 

 

Finance costs        

 

(2,493)

(2,574)

(5,331)

 

Finance income

 

39

44

158

 

 

 

 

 

 

 

Profit before tax and amortisation of acquired intangibles and transaction related costs

 

 

27,227

 

20,161

50,704

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit before tax

 

20,420

10,883

32,814

 

 

 

 

 

 

 

Tax expense              

6

(5,911)

(2,215)

(7,733)

 

 

Profit for the period attributable to equity

holders of the parent

 

 

 

14,509

 

 

8,668

25,081

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share (pence)

7

6.55

3.93

11.35

 

 

 

 

 

 

 

Diluted earnings per share (pence)

7

6.50

3.91

11.29

 

 

 

 

 

 

 

Adjusted basic earnings per share (pence)

7

8.71

6.44

16.60

 

 

 

 

 

 

 

Adjusted diluted earnings per share (pence)

7

8.65

6.41

16.51

 

 

Condensed consolidated statement of comprehensive income (unaudited)

 

 

 

 

Six months

ended

30 June

Six months ended

30 June

Year

 ended

31 December

£000's

2017

2016

2016

 

 

 

 

Profit for the period

14,509

8,668

25,081

Exchange differences*

(1,105)

28,516

41,429

Re-measurement of net defined benefit liability

-

-

(261)

Tax on re-measurement of defined benefit liability

-

-

65

 

 

 

 

Total recognised comprehensive income for the period attributable to equity holders of the parent

13,404

37,184

66,314

           

 

*may be reclassified subsequently to profit or loss in accordance with IFRS.

 

 

Condensed consolidated balance sheet (unaudited)

 

 

 

 

 

 

 

 

 

As at

30 June

As at

30 June

As at

31 December

 

£000's

Notes

2017

2016

2016

 

 

 

 

 

 

 Assets

 

 

 

 

 

Non-current assets:

 

 

 

 

 

Intangible assets

 

446,482

450,367

455,508

 

Property, plant and equipment

8

28,278

27,973

28,448

 

Deferred tax asset

 

6,962

5,225

5,953

 

 

481,722

483,565

489,909

 

Current assets:

 

 

 

 

 

Trade and other receivables

 

174,187

173,376

165,604

 

Cash at bank

 

13,026

18,878

16,503

 

 

187,213

192,254

182,107

 Liabilities

 

 

 

 

   Current liabilities:

 

 

 

 

   Borrowings

 

306

2,054

36

   Deferred consideration

 

6,806

22,273

13,376

   Trade and other payables

 

119,610

122,928

125,165

   Corporation tax

 

4,604

2,872

4,472

   Provisions

 

2,624

1,584

1,809

 

 

133,950

151,711

144,858

   Net current assets

 

53,263

40,543

37,249

   Non-current liabilities: 

 

 

 

 

   Borrowings

 

106,077

111,862

99,886

   Deferred consideration

 

523

6,652

1,634

   Other creditors

 

2,391

2,442

2,496

   Deferred tax

 

9,489

9,993

10,045

   Provisions

 

1,670

1,669

1,790

 

 

120,150

132,618

115,851

   Net assets

 

414,835

391,490

411,307

 

 

 

 

 

 

Equity

 

 

 

 

 

Share capital       

10

6,721

6,686

6,703

 

Share premium             

 

115,962

113,352

114,353

 

Other reserves

11

38,974

28,871

40,898

 

Retained earnings

 

253,178

242,581

249,353

 

 

Condensed consolidated cash flow statement (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months

ended 30

June

Six months

ended 30

June

Year

ended 31 December

 

£000's   

Notes

2017

2016

2016

 

 

 

 

 

Cash generated from operations

13

21,766

28,257

78,253

Interest paid

 

(2,633)

(2,054)

(5,077)

Interest received

 

39

44

158

Income taxes paid

 

(7,716)

(8,088)

(11,057)

Net cash from operating activities

 

11,456

18,159

62,277

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of subsidiaries net of cash acquired

 

-

(6,557)

(6,557)

Deferred consideration

 

(7,378)

(7,784)

(23,672)

Purchase of property, plant and equipment

 

(3,992)

(3,641)

(8,130)

Sale of property, plant and equipment

 

147

116

225

Net cash used in investing activities

 

(11,223)

(17,866)

(38,134)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Cost of issue of share capital

 

(8)

-

(5)

Proceeds from/(repayment of) bank borrowings

 

7,625

8,420

(6,921)

Payment of finance lease liabilities

 

(24)

(23)

(47)

Dividends paid        

12

(11,308)

(11,267)

(21,613)

Payment of pre-acquisition dividend

 

-

-

(850)

Net cash used in financing activities

 

(3,715)

(2,870)

(29,436)

 

 

 

 

 

Net decrease in cash and cash equivalents:    

 

(3,482)

(2,577)

(5,293)

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

16,503

17,322

17,322

 

 

 

 

 

Effect of exchange rate fluctuations

 

(289)

2,079

4,474

 

 

 

 

 

Cash and cash equivalents at end of period    

 

12,732

16,824

16,503

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents comprise:

 

 

 

 

Cash at bank

 

13,026

18,878

16,503

Bank overdraft

 

(294)

(2,054)

-

 

 

 

 

 

Cash and cash equivalents at end of period

 

12,732

16,824

16,503

 

 

 

 

 

 

 

Condensed consolidated statement of changes in equity (unaudited)

 

 

 

£000's

 

Share capital

 

Share premium

 

Retained earnings

 

Other reserves

 

Total equity

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2017

6,703

114,353

249,353

40,898

411,307

Total comprehensive income for the period

-

-

14,509

(1,105)

13,404

Issue of new ordinary shares

18

1,609

(816)

(819)

(8)

Share based payment expense

-

-

1,440

-

1,440

Dividends

-

-

(11,308)

-

(11,308)

 

 

 

 

 

 

At 30 June 2017

6,721

115,962

253,178

38,974

414,835

 

 

 

 

 

 

At 1 January 2016

6,667

112,026

244,648

1,149

364,490

Total comprehensive expense 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

 

An analysis of other reserves is provided in Note 11.

 

 

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 2017 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 2016 and in accordance with IAS 34 as adopted by the European Union.  They are unaudited but have been reviewed by the Company's auditor.  The results for the year end 31 December 2016 and the balance sheet as at that date are abridged from the Company's Report and Accounts 2016 which have been delivered to the Registrar of Companies.  The auditor's report on those accounts was unqualified and did not draw attention to any matters by way of emphasis 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.

 

The Group is undertaking a detailed review of the potential impact of IFRS 15 "Revenue from Contracts" and IFRS 9 "Financial Instruments" that will both be first applied to the Group's financial statements for the year ended 31 December 2018. At this stage we do not believe that either standard will significantly affect the Group's results.

 

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 4.2.7R and DTR 4.2.8R.

 

On behalf of the Board

 

 

A. S. Hearne    

G. R. Young

Chief Executive

Group Finance Director

 

 

4 August 2017

 

 

3.  Alternative Performance Measures

 

The Group defines and presents various non-GAAP performance measures in this results announcement. The measures presented are those adopted by management and analysts who follow us in assessing the performance of the business. Our principal non-GAAP measure is profit before tax, amortisation of acquired intangibles and transaction related costs (PBTA). We adjust for amortisation of acquired intangible assets as these are non-cash item and their measurement is based on estimates of asset lives and fair values at acquisition where underlying assumptions are subjective in nature. We adjust for acquisition related costs as they are not dependent on the performance of the business and are only incurred when acquisitions arise. The alternative performance measures and adjusting items are defined below and these have been applied consistently throughout the interim results:

 

 

Fee income and recharged expenses

Revenue is classified into fee income and recharged expenses. Fee income represents the Groups' personnel, subcontractor and equipment time and expertise sold to clients. Recharged expenses is the revenue recognised on the recharge of costs incidental to fulfilling the Group's contracts, for example mileage, flights, subsistence and accommodation

 

Operating profit before amortisation of acquired intangibles and transaction related costs

 

Statutory operating profit before amortisation of acquired intangibles and transaction related costs

Profit before tax and amortisation of acquired intangibles and transaction related costs (PBTA)

Statutory profit before tax and amortisation of acquired intangibles and transaction related costs

Amortisation of acquired intangibles and transaction related costs

Amortisation of acquired intangibles, plus third party costs related to business combinations, plus adjustments to book values of deferred consideration (note 5)

 

Segment profit

Statutory profit before tax before interest, amortisation of acquired intangibles, transaction related costs and unallocated expenses (note 4)

 

Underlying profit

Segment profit before reorganisation costs (note 4)

 

Reorganisation costs

Cost arising from reorganisation including redundancy costs, profit or loss on disposal of plant, property and equipment, the costs of consolidating office space and rebranding (note 4)

 

Unallocated expenses

Certain costs are not allocated to the segments because they predominantly relate to the stewardship of the Group. They include the costs of the main Board, the Group finance and marketing functions and related IT costs (note 4)

 

Adjusted tax charge on PBTA

Tax expense before tax on amortisation of acquired intangibles and acquisition related costs (see note 6)

 

Tax rate on PBT

Tax expense expressed as a percentage of profit before tax for the year (note 6)

 

Tax rate on PBTA

Adjusted tax charge on PBTA as a percentage of PBTA (note 6)

 

Adjusted earnings per share, basic and diluted

Earnings per share before amortisation and impairment of acquired intangibles, transaction related costs and related tax expense (note 7)

 

EBITDAS

Earnings before interest, tax, depreciation, amortisation of intangibles and share scheme costs (note 13)

 

Cash conversion

The ratio of cash from operations to EBITDAS expressed as a percentage

 

Net bank borrowings

The total of cash and cash equivalents, interest bearing bank loans and finance leases (note 13)

 

Leverage

Ratio of net bank borrowings, plus deferred consideration to EBITDAS, adjusted to comply with lender requirements

 

Comparative measures at constant currency

Measures from prior periods that are translated into sterling at current period exchange rates in order to eliminate the effect of exchange differences on translation

 

4.  Business segments

 

Segment information is presented in the financial statements in respect of the Group's business segments, as reported to the Chief Operating Decision Maker. The business segment reporting format reflects the Group's management and internal reporting structure.

Inter-segment pricing is determined on an arm's length basis. Segment results include items directly attributable to a segment as well as an allocation of central costs.

The segment results for the half year ended 30 June 2016 and the year ended 31 December 2016 were restated following changes to segmentation, as announced on 21 April 2017.

The business segments of the Group are as follows:

Europe
Australia Asia Pacific ("AAP")
North America

 

Segment results for the period ended 30 June 2017:

 

 

 

 

 

£000s

Fee income

Expenses

Intersegment revenue

External revenue

Europe

164,449

23,474

(398)

187,525

AAP

66,970

5,593

(219)

72,344

North America

50,335

4,509

(197)

54,647

Group eliminations

(699)

(115)

814

-

Total

281,055

33,461

-

314,516

 

 

 

 

 

£000s

 

Underlying profit

Reorganisation costs

Segment profit

Europe

 

21,432

(229)

21,203

AAP

 

8,302

(349)

7,953

North America

 

5,494

(116)

5,378

Total

 

35,228

(694)

34,534

 

 

 

 

 

Segment results for the period ended 30 June 2016 as restated:

 

 

 

 

 

 

£000s

Fee income

Expenses

Intersegment revenue

External revenue

 

 

 

 

 

Europe

151,363

20,406

(835)

170,934

AAP

63,171

5,358

(209)

68,320

North America

47,312

5,052

(187)

52,177

Group eliminations

(1,042)

(189)

1,231

-

Total

260,804

30,627

-

291,431

 

 

 

 

 

£000s

 

Underlying profit

Reorganisation costs

Segment profit

 

 

 

 

 

Europe

 

17,093

(2,452)

14,641

AAP

 

7,344

(1,037)

6,307

North America

 

5,339

(448)

4,891

Total

 

29,776

(3,937)

25,839

 

 

 

 

 

Segment results for the period ended 31 December 2016 as restated:

 

 

 

 

 

£000s

Fee income

Expenses

Intersegment revenue

External

 revenue

Europe

307,671

42,406

(1,603)

348,474

AAP

130,140

8,439

(541)

138,038

North America

98,560

9,722

(323)

107,959

Group eliminations

(2,075)

(392)

2,467

-

Total

534,296

60,175

-

594,471

 

 

 

 

 

£000s

 

Underlying profit

Reorganisation costs

Segment profit

Europe

 

42,120

(3,289)

38,831

AAP

 

15,481

(1,246)

14,235

North America

 

10,623

(1,079)

9,544

Total

 

68,224

(5,614)

62,610

           

 

 

Group reconciliation

 

 

 

 

 

£000's

 

30 June

2017

30 June

2016

31 Dec

2016

 

 

 

 

 

Revenue

 

314,516

291,431

594,471

Recharged expenses

 

(33,461)

(30,627)

(60,175)

Fee income

 

281,055

260,804

534,296

 

 

 

 

 

Underlying profit

 

35,228

29,776

68,224

Reorganisation costs

 

(694)

(3,937)

(5,614)

Segment profit

 

34,534

25,839

62,610

Unallocated expenses

 

(4,853)

(3,148)

(6,733)

Operating profit before amortisation of acquired intangibles and transaction related costs

29,681

22,691

55,877

Amortisation of acquired intangibles and transaction related costs

(6,807)

(9,278)

(17,890)

Operating profit

 

22,874

13,413

37,987

Net finance costs

 

(2,454)

(2,530)

(5,173)

Profit before tax

 

20,420

10,883

32,814

 

 

Total segment assets were as follows:

 

 

 

£000's

 

30 June

2017

30 June

2016

as restated

31 Dec

 2016

as restated

Europe

 

408,082

408,905

401,880

North America

 

110,520

115,626

123,013

AAP

 

149,150

147,732

147,164

Unallocated

 

1,183

3,557

373

Total

 

668,935

675,820

672,430

 

 

5.  Amortisation of acquired intangibles and transaction related costs

 

 

£000s

30 June

2017

30 June

2016

31 Dec

2016

 

 

 

 

Amortisation of acquired intangibles

6,807

9,069

17,470

Adjustments to consideration payment

-

-

187

Third party advisory costs

-

209

233

Total

6,807

9,278

17,890

 

 

6.  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 2017.  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:

 

 

£000's

30 June 2017

30 June 2016

31 Dec 2016

 

Current tax expense

 

7,823

 

4,559

 

10,363

Deferred tax credit

(1,912)

(2,344)

(2,630)

Total tax expense in the income statement

5,911

2,215

7,733

 

 

 

 

Add back:

 

 

 

Tax on amortisation of acquired intangibles and acquisition related costs

2,010

3,725

6,292

Adjusted tax charge on PBTA for the period

7,921

5,940

14,025

 

 

 

 

Tax rate on PBT

28.9%

20.3%

23.6%

Tax rate on PBTA

29.1%

29.5%

27.7%

           

 

7.  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:

 

 

 

£000's

 

30 June

 2017

 

30  June 2016

 

 31 Dec

2016

 

 

 

 

Profit attributable to ordinary shareholders

14,509

8,668

25,081

 

 

 

 

000's

 

 

 

 

 

 

 

Weighted average number of ordinary shares for the purposes of basic earnings per share

221,558

220,748

220,977

Effect  of  employee share schemes

1,592

1,163

1,237

Weighted average number of ordinary shares for the purposes of diluted earnings per share

223,150

221,911

222,214

 

 

 

 

Basic earnings per share (pence)

6.55

3.93

11.35

 

 

 

 

Diluted earnings per share (pence)

6.50

3.91

11.29

 

 

The directors consider that earnings per share before amortisation 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:

 

 

 

 

 

£000's

Six months

ended 30 June

2017

Six months

ended 30 June

2016

Year ended

31 Dec

2016

 

 

 

 

Profit attributable to ordinary shareholders

14,509

8,668

25,081

Amortisation of acquired intangibles and transaction related costs

6,807

9,278

17,890

Tax on amortisation of acquired intangibles and transaction related costs

(2,010)

(3,725)

(6,292)

Adjusted profit attributable to ordinary shareholders

19,306

14,221

36,679

 

 

 

 

Adjusted basic earnings per share (pence)

8.71

6.44

16.60

 

 

 

 

Adjusted diluted earnings per share (pence)

8.65

6.41

16.51

 

 

8.  Property, plant and equipment

 

During the six months ended 30 June 2017 the Group acquired assets with a cost of £3,992,000 (six months to 30 June 2016: £3,647,000), which includes nil acquired through business combinations (six months to 30 June 2016: £131,000).  Assets with a net book value of £113,000 were disposed of during the six months ended 30 June 2017 (six months ended 30 June 2016: £449,000).

 

 

9.  Goodwill

 

A reconciliation of the goodwill movement in 2017 in respect of acquisitions made in 2016 is given in the table below.

 

  £000s

Goodwill at

1/1/17

Additions through acquisition

Adjustments to prior year estimates

Foreign exchange movement

Goodwill at 30/6/17

  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 2016 or 2017.

 

 

10.  Share capital

 

 

2017

Number

000's

 

2017

£000's

2016

Number

000's

 

2016

£000'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

223,435

6,703

222,234

6,667

Issued under employee share schemes

614

18

651

19

At 30 June

224,049

6,721

222,885

6,686

 

 

11.          Other reserves

 

 

 

£000's

 

Merger reserve

 

Employee trust

 

Translation reserve

 

 

Total

 

 

 

 

 

At 1 January 2017

21,256

(13,677)

33,319

40,898

Exchange differences

-

-

(1,105)

(1,105)

Issue of new shares

-

(819)

-

(819)

At 30 June 2017

21,256

(14,496)

32,214

38,974

 

 

 

 

 

 

 

 

 

 

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

 

 

12Dividends

 

The following dividends were recognised as distributions to equity holders in the period:

 

 

 

 

£000's

 

Six months

ended 30

June 2017

 

Six months

ended 30

June 2016

 

Year Ended

31 Dec

2016

 

 

 

 

Final dividend for 2016 5.08p per share

11,308

-

-

Interim dividend for 2016 4.66p per share

-

-

10,346

Final dividend for 2015 5.08p per share

-

11,267

11,267

 

11,308

11,267

21,613

 

An interim dividend in respect of the six months ended 30 June 2017 of 4.80 pence per share, amounting to a total dividend of £10,705,000 was approved by the Directors of RPS Group Plc on 2 August 2017.  These condensed consolidated interim financial statements do not reflect this dividend payable.

 

 

13Note to the condensed consolidated cash flow statement

 

 

 

£000's

Six months ended 30 June

 

Six months ended 30 June

 

Year  ended 31 Dec

2016

 

 

 

 

 

 

Operating profit

22,874

 

13,413

 

37,987

Adjustments for:

 

 

 

 

 

Depreciation

4,233

 

4,081

 

8,390

Amortisation of acquired intangibles

6,807

 

9,069

 

17,470

Consideration fair value adjustment

-

 

-

 

187

Share based payment expense

1,440

 

1,087

 

2,184

(Profit)/loss on sale of property, plant and equipment

(39)

 

333

 

537

EBITDAS

35,315

 

27,983

 

66,755

 

 

 

 

 

 

(Increase)/decrease in trade and other receivables

(9,256)

 

(340)

 

9,522

(Decrease)/ increase in trade and other payables

(4,293)

 

614

 

1,976

 

 

 

 

 

 

Cash generated from operations

21,766

 

28,257

 

78,253

 

 

 

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 2017.

 

 

 

 

£000's

 

At 1 January 2017

 

 

Cash flow

 

 

Prepaid arrangement fees

 

 

Foreign exchange

 

 

At 30 June 2017

 

 

 

 

 

 

Cash at bank

16,503

(3,188)

-

(289)

13,026

Overdrafts

-

(294)

-

-

(294)

Cash and cash equivalents

16,503

(3,482)

-

(289)

12,732

Bank loans and notes

(99,886)

(7,625)

(189)

1,623

(106,077)

Finance lease creditor

(36)

24

-

-

(12)

Net bank borrowings

(83,419)

(11,083)

(189)

1,334

(93,357)

 

 

 

 

 

 

 

The cash balance includes £2,545,000 (31 December 2016: £3,036,000) that is restricted in its use.

 

 

14Events after the balance sheet date

 

There have been no material events since the balance sheet date.

 

 

15Principal risks and uncertainties

 

The nature of the principal risks and uncertainties faced by the Group have not changed significantly since the 2016 Report and Accounts was published.  These risks, together with a description of the approach to mitigate them, are set out on pages 11 to 13 of the 2016 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 management

 

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 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.

 

 

16Related party transactions

 

There are no significant changes to the nature and treatment of related party transactions for the period to those reported in the 2016 Report and Accounts.

 

 

17Forward-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 2016 EU 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 2017.  Nothing in this announcement should be construed as a profit forecast.

 

 

18Publication

 

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 2017 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 Financial 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 inquiries, 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 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 2017 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 Financial Conduct Authority.

 

 

 

Deloitte LLP

Statutory Auditor

Reading, United Kingdom

4 August 2017

 

 


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