RPS GROUP RPS GROUP PLC
("RPS" or "the Group")
Results for the Year Ended 31 December 2014
10% PBTA growth and 14% eps growth on constant currency basis. Dividend increased 15%. £58 million of investment committed to acquisitions, further increasing strength of international platform. Recently completed first acquisition of
2015, in BNE: North America.
Summary of ResultsBusiness performance
2014 2013 2013
(constant
currency)
Revenue (£m) 572.1 567.6 540.3
Fee income (£m) 505.0 492.1 468.3
PBTA(1)(£m) 66.1 63.0 60.2
Adjusted earnings per share (2)(basic) (p) 22.04 20.22 19.32
Total dividend per share (p) 8.47 7.36 7.36
Statutory reporting
Profit before tax (£m) 46.3 43.6 41.9
Earnings per share (basic) (p) 15.20 13.11 12.72
Highlights successful execution of strategy produced 10% PBTA growth (constant currency).
reduced tax rate and charge; 14% eps growth (constant currency).
Energy business continued to grow, managing well the declining oil price and political unrest in the Middle East.
£58m total consideration committed to new acquisitions which will enhance performance in 2015.
balance sheet remains strong with year end net bank borrowings at £73.2m and facility headroom of £87m at the year end.
proposed full year dividend increased by 15%.
Notes:
(1) Profit before tax, amortisation of acquired intangibles and transaction related costs.
(2) Based on earnings before amortisation of acquired intangibles and transaction related costs.
Brook Land, Group Chairman, commented:
"Once again our business model delivered good results, with a number of high quality acquisitions making a significant contribution and positioning us well for 2015. This was achieved despite a number of factors outside our control, notably the strength of sterling, the rapid fall in the oil price and unrest in the Middle East. RPS generates good cash flow and is financially strong. We have the resources necessary to continue our buy and build strategy. We have completed our first acquisition of 2015 in the US and anticipate further transactions during the course of the year. We believe our positioning and business model should deliver a successful outcome and further growth in the current year." 26 February 2015 ENQUIRIES RPS Group plc Today: 020 7457 2020
Dr Alan Hearne, Chief ExecutiveThereafter: 01235 863206
Gary Young, Finance Director
Justine Warren Tel: 020 7457 2020
Matthew Smallwood
RPS is an international consultancy providing independent advice upon: the exploration and production of oil and gas and other natural resources, and the development and management of the built and natural environment. We have offices in the UK, Ireland, the Netherlands, Norway, the United States, Canada, the Middle East and Australia/Asia Pacific and undertake projects in many other parts of the world. The Group is a constituent of both the FTSE 250 and FTSE4Good Indices.
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.
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Results
PBTA for the full year grew to £66.1 million (2013: £63.0 million; £60.2 million on a constant currency basis), with all four segments contributing to this growth, on a constant currency basis. Margins in
the businesses remained good.
The strength of sterling had a significant adverse effect on our consolidated profit growth. This was offset by the contribution from acquisitions. Adjusted basic earnings per share were 22.04 pence (2013: 20.22 pence; 19.32 pence on a constant currency basis).
PBT for the full year was £46.3 million (2013: £43.6 million; £41.9 million on a constant currency basis).
At the segment level we focus on underlying profit; all segments grew on a constant currency basis;
the contribution from each segment was:
Underlying Profit* (£m) 2014 2013 2013
(constant
currency)
Energy 39.0 36.4 35.3
Built and Natural Environment: Europe 21.3 19.2 18.8
: North America 9.1 8.3 7.8
Australia Asia Pacific ("AAP") 9.6 10.0 9.0
Total 79.1 73.9 70.9
*As defined in note 2.
Our Energy activities are conducted on a worldwide basis. In combination with our Built and Natural Environment ("BNE") business in North America and our Australia, Asia Pacific ("AAP") business, we now have over three quarters of our underlying profit generated outside the UK. Although this diversity exposes us to currency fluctuations, it enables the Group to deliver good results, even when confronted with challenging conditions.
Cash Flow, Funding and Dividend
Our cash flow in the year was good and our balance sheet remains strong. Our year end net bank borrowings were £73.2m (2013: £32.4m) after paying out £17.4 million in dividends (2013: £15.0 million) and £64.7 million (2013: £46.7 million) in respect of initial and deferred payments for acquisitions, including acquired net debt. Net bank borrowings include a £51.8 million loan from Pricoa, due for repayment in 2021. We have a £125 million committed revolving credit facility with Lloyds available until July 2016 which had headroom of about £87 million at the year end. The Board intends to refinance the Lloyds facility during the course of the next few months, which is likely to involve an additional bank providing part of our total facilities.
The Board is recommending a final dividend of 4.42 pence per share payable on 22 May 2015 to shareholders on the register on 24 April 2015. If approved, the total dividend for the full year would be 8.47 pence per share, an increase of 15% (2013: 7.36 pence per share).
We remain well positioned to continue funding the Group's growth strategy.
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Markets and Trading Energy
The Energy business continued to grow, with an improved result in the second half supported by acquisitions made in 2013, managing well the rapid decline in oil price and political unrest in the Middle East. The strong margin was also maintained.
We provide internationally recognised consultancy services to the oil and gas sector from our main bases in the UK, USA and Canada. These act as regional centres for projects undertaken in many other countries. The Energy component of our AAP business, with offices in Perth, Singapore and Kuala Lumpur, provides an integral part of the service offering to our international oil and gas clients. Our range of clients and services and geographical diversity of our business provides opportunity for us throughout the investment cycle in this industry.
2014 | 2013 | 2013 | |
(constant currency) | |||
Fee income (£m) | 205.1 | 186.9 | 180.7 |
Underlying profit* (£m) | 39.0 | 36.4 | 35.3 |
Margin (%) | 19.0 | 19.5 | 19.5 |
*As defined in note 2. Reorganisation costs: 2014 £0.2m; 2013 £0.1m.
We continued to benefit from our excellent reputation and prominent position in the oil and gas sector in many parts of the world. In particular, we experienced good demand for our consultancy advice, including transaction and asset valuation support. During the second quarter some of our clients began to manage expenditure more tightly, particularly in their operational activities. Against the background of a rapidly falling oil price, this trend continued through the second half. Our trading was also affected by the political disruption in the Middle East, which caused clients to delay investment in Kurdistan/Iraq.
Despite these adverse conditions our profit in the year grew. This, in part, reflects the flexible nature of our business model which enables us to execute much of our operations support with experts recruited for specific assignments. Our global reach enables us to support a wide range of long term clients, for whom we undertake many projects of varying scale. We are not, in consequence, dependent on a small number of clients or projects.
Recent market conditions have been unusually volatile. As a result, clients are likely, in the short term, to continue focusing on cost management; we are, therefore, reducing our cost base and concentrating on those parts of the market and projects likely to receive investment. There are, however, already some signs of stabilisation. With the global economy set to grow substantially in coming years, we are well positioned in what continues to be an attractive, long term market.
Within this business we provide a wide range of consultancy services to many aspects of the property and infrastructure development and management sectors. These include: environmental assessment, the management of water resources, due diligence, oceanography, health and safety, risk management, town and country planning, building, landscape and urban design, surveying and transport planning. It is split into two segments: Europe and North America.
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BNE: EuropeThis business performed well, with an improved margin, and was supported by two high quality acquisitions. It also benefited from strong growth of our UK planning and development activities, which experienced significantly improved market conditions and client confidence.
2014 | 2013 | 2013 | |
(constant currency) | |||
Fee income (£m) | 156.7 | 149.3 | 146.5 |
Underlying profit* (£m) | 21.3 | 19.2 | 18.8 |
Margin (%) | 13.6 | 12.8 | 12.9 |
*As defined in note 2. Reorganisation costs: 2014 £0.3m; 2013 £0.5m.
Those of our activities exposed to operational environments, such as providing environmental management advice, continued to need to offer an efficient, cost effective service to assist clients manage tight budgets. Even in these markets we secured good performances, particularly from our Dutch business and our UK businesses providing support to the nuclear and defence industries.
The acquisition of Clear Environmental Consultants (announced on 10 April) has extended the range of our UK water activities. It will assist the strategic development of this business in 2015; this will be important at a time when we will be seeking to renew and win a significant number of contracts with the UK water utilities. The acquisition of CgMs (announced on 11 August) has extended the range of our UK planning activities and will assist the strategic development of this fast growing business. Both businesses have integrated well and should add materially to our result in 2015.
We anticipate this business should show further good growth this year.
This business delivered a good result and remains well positioned in attractive sectors of the expanding North American market. It is primarily focussed on providing environmental management support to our clients and undertaking projects in the energy infrastructure market.
2014 | 2013 | 2013 | |
(constant currency) | |||
Fee income (£m) | 41.3 | 32.7 | 30.9 |
Underlying profit* (£m) | 9.1 | 8.3 | 7.8 |
Margin (%) | 22.0 | 25.4 | 25.2 |
*As defined in note 2. Reorganisation costs: 2014 £nil; 2013 £nil.
The acquisition of GaiaTech (announced on 20 May) was an important step in the development of this business, giving us access to new markets and geography particularly in relation to environmental due diligence, a high margin activity. It has integrated well and has already begun to make an important contribution. Those parts of the BNE business closest to oil and gas E&P activities experienced only modest expenditure tightening from clients. Staff retention became difficult in the part of the business involved in permitting and licensing of industrial facilities. This significantly reduced the anticipated performance. The oceanography businesses performed well.
We announced on 13 February 2015 the acquisition of a leading water and transportation consultancy in Texas. Klotz Associates Inc ("KAI") has 116 staff and is headquartered in Houston with other
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offices in the main cities of Texas. In the year ended 31 December 2014 it had revenue of $26.2 million (£17.2 million), and profit before tax of $3.6 million (£2.4 million) adjusted for non-recurring items. It was acquired for $24.1 million (£15.9 million) all payable in cash, of which $16.9 million (£11.1 million) was paid at closing, with the balance payable over two years.
Adding GaiaTech and KAI to our North American business gives us confidence about the performance in 2015.
This business is a combination of the former BNE: AAP and the AAP component of Energy. They were brought together in 2013 to take advantage of the opportunities in the integrated energy and energy infrastructure market; this has helped counter the significant impact of the severe slow down in investment in the resources sector in this region on our business during the year. The acquisition of Point, (announced on 18 September), together with Whelans (announced on 27 February), both property consultants, enabled the business as a whole to grow its profit on a constant currency basis.
2014 | 2013 | 2013 | |
(constant currency) | |||
Fee income (£m) | 103.6 | 127.2 | 114.0 |
Underlying profit* (£m) | 9.6 | 10.0 | 9.0 |
Margin (%) | 9.3 | 7.9 | 7.9 |
*As defined in note 2. Reorganisation costs: 2014 £1.4m; 2013 £1.2m.
Throughout this year our mining and energy clients in AAP have remained focused on operational efficiency rather than capital expenditure on new project development. As a result a significant number of projects have been delayed or cancelled, with this trend continuing until the year end. We have, therefore, continued to reduce our cost base. This is helping stabilise our performance ahead of market recovery.
As we reposition the business we are benefiting from increased client investment in urban development and public sector infrastructure projects. State funding in Queensland and Victoria has been slowed by recent changes of Government, but they remain attractive markets. Our position in this sector, particularly in respect of Federal agencies, has been significantly reinforced with the acquisition of Point.
Overall we are expecting an improved performance in 2015.
RPS is well positioned in markets of importance to the global economy. Our strategy of building multi- disciplinary businesses in each of the regions in which we operate continues to be both attractive and successful. Despite currency headwinds and uncertainty across the resources sectors our flexible business model, diversity of operations and experienced management enabled us to deliver further growth in 2014. We intend to develop organically, whilst continuing to seek further acquisition opportunities. Our balance sheet is strong and supports this strategy.
The acquisitions made in 2014 have integrated extremely well and will make a significant contribution this year. We have already built on this with the recent acquisition of KAI and expect further transactions during the course of the year.
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We believe our positioning and business model should deliver a successful outcome and further growth in the current year.
Board of Directors RPS Group plc 26 February 20157
Consolidated income statementNotes year ended
31
December
year ended
31
December
£00 0' s 2014 2013
Revenue 2572,126 567,614
Recharged expenses 2(67,167) (75,493)
Fee income 2504,959 492,121
Operating profit before amortisation of acquired intangibles and transaction related costs
2 70,244 65,305
Amortisation of acquired intangibles and transaction related costs 3(19,842) (19,425) Operating profit 50,402 45,880
Finance costs 4(4,242) (2,430)
Finance income 4112 157
Profit before tax, amortisation of acquired intangibles and transaction related costs
66,114 63,032
Profit before tax 46,272 43,607
Tax expense 5(12,925) (14,987)
Profit for the year attributable to equity
33,347 28,620
holders of the parent
Basic earnings per share (pence) | 6 | 15.20 | 13.11 |
Diluted earnings per share (pence) | 6 | 15.12 | 13.05 |
Adjusted basic earnings per share (pence) | 6 | 22.04 | 20.22 |
Adjusted diluted earnings per share (pence) | 6 | 21.92 | 20.14 |
year ended
31
December
year ended
31
December
£00 0' s 2014 2013
Profit for the year 33,347 28,620
Exchange differences* (4,602) (18,200)
Actuarial gains and losses on re-measurement of defined benefit pension liability
(601) -
Tax on re-measurement of defined benefit pension liability 112 -
Total recognised comprehensive income for the year attributable to
equity holders of the parent 28,256 10,420
* May be reclassified to profit or loss in accordance with IFRS
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Consolidated balance sheet
as at
31 December
as at
31 December
£000's Notes2014 2013
Assets
Non-current assets:
Intangible assets 404,996 375,279
Property, plant and equipment 27,371 27,785
Deferred tax asset 4,043 2,018
436,410 405,082
Current assets:
Trade and other receivables 170,905 161,741
Cash at bank 17,521 18,699
188,426 180,440
Liabilities
Current liabilities:
Borrowings 542 1,465
Deferred consideration 1017,170 20,919
Trade and other payables 101,825 103,260
Corporation tax liabilities 2,213 3,058
Provisions 1,206 2,134
122,956 130,836
Net current assets 65,470 49,604
Non-current liabilities:
Borrowings 90,159 49,602
Deferred consideration 109,540 14,923
Other payables 2,734 2,471
Deferred tax liability 12,874 13,645
Provisions 1,896 2,007
117,203 82,648
Net assets 384,677 372,038
Equity
Share capital 6,640 6,619
Share premium 110,100 108,307
Other reserves 711,551 17,652
Retained earnings 256,386 239,460
Total shareholders' equity 384,677 372,038
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Consolidated cash flow statement
year ended 31
December
year ended 31
December
£00 0' s Notes2014 2013
Adjusted cash generated from operations 8 70,772 72,030
Deferred consideration treated as remuneration (3,635) (7,714)
Cash generated from operations 67,137 64,316
Interest paid (3,771) (1,991) Interest received 112 157
Income taxes paid (19,503) (19,829)
Net cash from operating activities 43,975 42,653
Cash flows from investing activities:
Purchases of subsidiaries net of cash acquired (36,959) (31,174) Deferred consideration (19,722) (3,466) Purchase of property, plant and equipment (7,698) (8,034) Proceeds from sale of property, plant and equipment 471 523
Net cash used in investing activities (63,908) (42,151)
Cash flows from financing activities:
Proceeds from issue of share capital 1 555
Proceeds from bank borrowings 36,406 18,609
Payment of finance lease liabilities (645) (580) Dividends paid (17,379) (15,034)
Payment of pre-acquisition dividend - (247)
Net cash used in financing activities 18,383 3,303
Net (decrease)/increase in cash and cash equivalents (1,550) 3,805
Cash and cash equivalents at beginning of year 17,791 14,804
Effect of exchange rate fluctuations 805 (818)
Cash and cash equivalents at end of year 17,046 17,791
Cash and cash equivalents comprise:
Cash at bank 8 17,521 18,699
Bank overdraft 8 (475) (908)
Cash and cash equivalents at end of year 17,046 17,791
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Consolidated statement of changes in equity
£000's
Share capital
Share premium
Retained earnings
Other reserves
Total equity
At 1 January 2013 6,587 106,198 224,959 36,070 373,814
Total comprehensive income - - 28,620 (18,200) 10,420
Issue of new ordinary shares 32 2,109 (1,370) (218) 553
Share based payment expense - - 1,938 - 1,938
Tax recognised directly in equity - - 347 - 347
Dividends paid - - (15,034) - (15,034) At 31 December 2013 6,619 108,307 239,460 17,652 372,038
Total comprehensive income - - 32,858 (4,602) 28,256
Issue of new ordinary shares 21 1,793 (228) (1,499) 87
Share based payment expense - - 2,027 - 2,027
Tax recognised directly in equity - - (352) - (352) Dividends paid - - (17,379) - (17,379)
At 31 December 2014 6,640 110,100 256,386 11,551 384,677
An analysis of other reserves is provided in note 7.
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