RPS Group Plc (“RPS” or “the Group”) today announces results for the six months ended 30 June 2009 and completion of the acquisition of Conics Ltd (“Conics”).

	2009	2008
Revenue (£m)	221.5	225.9
Fee income (£m)	185.9	189.9
Operating profit* (£m)	30.2	30.7
Profit before taxation* (£m)	29.2	28.5
Earnings per share* (basic) (pence)	9.5	9.49
Net bank borrowings (£m)	14.4	38.8
Dividend per share (pence)	2.01	1.75
Statutory profit before tax (£m)	27.5	27.4
Statutory earnings per share (basic) (pence)	8.93	9.10

*before amortisation of intangible assets of £1.7 million (2008: £1.1 million)

 

Key Points

profits and earnings maintained despite unfavourable economic and market conditions;

reorganisation costs of £2.2 million absorbed;

high level of conversion of profit into cash;

net bank borrowings significantly reduced to £14.4 million;

dividend increased 15%;

strategic acquisition completed in Australia.

Brook Land, Chairman, commenting on the results, said:

“RPS has a diverse range of activities and a resilient business model, which has enabled us to deliver good results in a range of circumstances for many years.  This has been confirmed again during the first half of 2009, when a number of our markets were adversely affected by the economic downturn.  We still won a significant volume of new business and the steps we took to deal with these conditions enabled the Group to maintain its level of profitability in this period.

“We have been identified as Britain’s third best employer for 2009 by the Corporate Research Foundation.  Our staff at all levels deserve considerable praise and thanks for the businesslike and effective way they have adjusted to circumstances which have changed significantly, often quite rapidly.  Our skill base remains intact; this wealth of experience will enable the company to move forward and all staff to benefit as economic circumstances improve. 

“The acquisition of Conics strategically advances the development of our business in Australia, where we see opportunities to achieve important expansion.  Beyond that we are well positioned to assist in finding the solutions to the related problems of energy security, supply and climate change which continue to move centre stage in the global political and economic debate.”

ENQUIRIES
RPS Group plc	Today: 020 7457 2020
Dr Alan Hearne, Chief Executive	Thereafter: 01235 863206
Gary Young, Finance Director
College Hill
Justine Warren	Tel: 020 7457 2020
Matthew Smallwood

 

RPS is an international consultancy providing advice upon the development of natural resources, land and property, the management of the environment and the health and safety of people. We have offices in the UK, Ireland, the Netherlands, North America, Eastern Europe, South East Asia and Australia and undertake projects in many other parts of the world. The Group is a constituent of both the FTSE 250 and FTSE 4 Good Indices.

Introduction

RPS is an international consultancy providing advice upon the development of natural resources, land and property, the management of the environment and the health and safety of people.   We are leaders in a range of significant markets from which we are able to secure good returns.  However, the economies in which our businesses are located have not grown during the first part of 2009 and most have contracted significantly.  This has inevitably caused clients across many of our activities to review their investment programmes, as well as to seek cost savings.  Our strong market position, in combination with the focus and experience of our management, has, however, enabled us to produce good results in the first half of the year.  Whilst global economic prospects remain uncertain we will continue to be cautious about investing and will focus our resources on markets showing most resilience. The Board remains confident that RPS will continue to perform well whatever economic circumstances we face in the coming months and is set to benefit as economies stabilise and as new government policies to deal with the related issues of energy supply and security and climate change turn into action and investment.

Results and Funding

Profit (before tax and amortisation of acquired intangibles) was £29.2 million (2008: £28.5 million).  Basic earnings per share (before amortisation) were 9.50 pence (2008: 9.49 pence).  Our balance sheet remains strong.  Cash generated from operations was £34.5 million (2008: £29.0 million).  After funding acquisition deferred consideration of £7.4 million, the Group reduced net bank borrowings substantially to £14.4 million at 30 June (2008: £38.8 million). We have increased our committed bank facilities, which do not expire until 2013, from £100 million to £125 million.

These results were achieved after absorbing costs of £2.2 million which were incurred in the reorganisation of parts of the Group’s business in response to the economic downturn.

Dividend

The Board continues to be confident about the Group’s financial strength and has increased the interim dividend by 15% to 2.01 pence per share (2008: 1.75 pence) payable on 22nd October 2009 to shareholders on the register on 25th September 2009.  Our dividend has risen at about this rate for 16 consecutive years.

Acquisitions

On 1 July we announced that RPS had entered into an agreement to acquire the entire share capital of Conics.  That transaction has now completed on the terms set out in that announcement.

The acquisition of Conics represents a significant step forward in the development of the RPS’s strategy and our business in Australia.  Our existing strength in Western Australia will be complemented by a business with considerable presence in Queensland and which will also assist us create strong market positions in New South Wales and Victoria.  We continue to find our combination of energy and environmental skills is well suited to the Australian market.  For example, in Queensland, where Conics is primarily based, the opportunity exists to be at the forefront of the development of coal bed methane, which is likely to be a significant new source of energy in the future.

The Australian economy remains strong relative to those of other developed nations around the world and has excellent links with many parts of Asia.  Against this background, the combination of our existing businesses with Conics gives us a considerable platform from which to deliver growth.

The acquisitions made in 2008 have been successfully integrated, whilst interesting new opportunities continue to present themselves.  In current circumstances, we are cautious about committing to further investments, but our strategy of continuing to build a multi-disciplinary RPS on an international basis remains appropriate and achievable. 

Our good cash generation, in conjunction with our committed bank facilities, enables us to continue to fund this strategy.

Markets and Trading in the First Half

Energy

We provide internationally recognised consultancy services to the oil and gas industries from bases in the UK, USA, Canada, Australia and SE Asia.  Projects are undertaken in many other countries including China, India and Brazil.   In the UK we are market leaders in the provision of environmental and engineering advice to the offshore wind energy industry. 

	2009	2008
Fee income (£m)	64.7	64.9
Underlying profit* (£m)	12.4	12.5
Margin %	19.1	19.2

*before amortisation of acquired intangible assets of £0.6m (2008: £0.2m)
 and reorganisation costs of £0.1m (2008: £nil)

We continued to benefit from our Energy clients’ investment in major oil and gas exploration and production programmes.  National Oil Companies were increasingly active and have become a more important part of our portfolio of clients.  However, the overall pace of investment in new projects slowed progressively during the second quarter.  This was apparently in response to continuing uncertainty in economic outlook and short term energy demand, as well as oil price volatility and had a material impact on our trading.  The cost inflation seen in the sector in recent years has, however, subsided, making it easier to manage our own costs and accommodate clients’ increased focus on cost containment.
 
Planning and Development

Within this business we provide consultancy services in respect of town and country planning, building, landscape and urban design, transport planning and highway design, environmental assessment and energy use and efficiency.  We remain leaders in this market in the UK, Ireland, and Western Australia, acting for blue chip clients in both the public and private sectors.  The acquisition of Conics gives us a strong presence on the east coast of Australia.

	2009	2008
Fee income (£m)	77.0	80.9
Underlying profit* (£m)	14.3	15.1
Margin %	18.5	18.6

*before amortisation of acquired intangible assets of £0.8m (2008: £0.4m)
 and reorganisation costs of £1.8m (2008: £nil)

Our activities in Australia continued to prosper, supporting, in particular, major gas exploration and infrastructure projects.  The Governments of Ireland and Northern Ireland continued to invest in infrastructure and social developments from which we benefited.  The Irish Government has sought to protect this investment, although pricing pressure has become significant as individual departments manage tight budgets.  During the period we closed our business in Poland, reflecting its inability to make a material contribution in current economic circumstances.  There were some signs of confidence returning to the UK commercial development market in the second quarter.   Private sector infrastructure providers in the UK remained relatively busy, but in common with all clients are increasingly cost conscious.

Environmental Management

This business provides consultancy services in respect of health, safety, risk and water management in the UK, Australia and the Netherlands.

	2009	2008
Fee income (£m)	46.7	46.3
Underlying profit* (£m)	8.8	6.8
Margin %	18.8	14.8

*before amortisation of acquired intangible assets of £0.4m (2008: £0.5m)
  and reorganisation costs of £0.2m (2008: £nil)

Overall, this business again performed well.  The significant margin improvement was driven by notably high margin contributions from our metocean and regulatory activities in Australia and the US.  The advice we provide to the UK water industry remained in demand as a result of our strong market position.  Our Dutch business performed well in markets which remained resilient.  Activity levels in the nuclear safety sector remained buoyant.  Demand for health, safety and environmental management support from the oil and gas sector also boosted our performance. 

Prospects

With the stimulus of the international climate change conference in Copenhagen at the end of this year, political attention is shifting back to the related issues of energy supply and security and global warming.  The UK Government has recently published a Low Carbon Transition Plan, which is designed to help achieve ambitious carbon reduction targets by 2020.  Its particular focus upon wind energy and waste to energy schemes plays to two of our strengths.    Other countries are also producing low carbon strategies.  We are well positioned to provide advice in respect of these matters and anticipate this should help us deliver the next phase of our growth.  In the short term a wide range of variables, a number of which are outside our control and some of which remain difficult to predict, will influence our performance.  Factors within our control are being closely managed.

Private sector clients generally appear to have resources sufficient to enable them to proceed with their strategies.  However, continuing economic uncertainty inevitably means that they remain cautious and cost conscious when making specific project investment decisions.   As a result, we may continue to experience pricing pressure and delays to some projects, until economic prospects become clearer.  Limited confidence has returned to the commercial property sector although it may take further economic progress before activity levels increase materially.

Energy clients currently need to balance the conflicting pressures of relatively weak short term demand with the investment needed to meet long term oil and gas supply requirements as world economic growth resumes.  Our pipeline of new projects will grow as emphasis switches more to the second of these drivers.  As the volatility of the oil price suggests, the timing of this is uncertain and will vary between our client companies.  Overall, it is not likely that we will see an early pick up from the subdued position that developed in the second quarter, although, we would expect visibility to improve as economic prospects become clearer.  The demand for health, safety and environmental management services for ongoing exploration and production projects remains encouraging. 

In respect of public sector clients, particularly in Ireland, the full effect of increased public finance deficits on investment in infrastructure has yet to become clear and will probably not do so for some time.  Clients in the privatised sector in the UK remain well positioned.  The current Ofwat review is likely to support the activities of our water business over the next 5 years.  Transitional effects as water companies wind down current activities in preparation for the new investment cycle, which begins in April 2010, are more likely in the second half, but should be short term.  The Dutch and Australian markets continue to offer relatively encouraging signs.

Our balance sheet remains strong and interest costs on our debt are at relatively low levels and seem likely to remain so.  An intense focus on working capital management is achieving good results and helping to keep our debt level low.  The risk of bad debts will, however, remain at a relatively high level until economic recovery is well underway. 

We remain focussed on efficiencies and cost management in order to be able to meet our clients’ requirement for more cost effective services.  During the course of the first half we further reduced employment, office and travel costs and stepped up a process of consolidating our office networks in various locations around the world.  We will continue to manage resources closely during the second half, at the same time as we are integrating Conics into our Australian operations, where we see significant, long term opportunities. 

RPS has a diverse range of activities, a resilient business model and a proven track record.  Our leading position in many markets has and should continue to protect us from the worst effects of recession.  The Board believes that the Group will continue to demonstrate that it is well equipped to deal with the uncertainties the current economic circumstances inevitably creates and is set to benefit once economies have stabilised and as the new policies related to energy supply and security and climate change turn into action and investment.

Board of Directors
RPS Group plc
30 July 2009

Condensed consolidated income statement

	Notes	Six months ended 30 June	Six months ended 30 June	Year ended 31 December
		2009	2008	2008
		unaudited	unaudited	audited
		£000’s	£000’s	£000’s
Revenue	3	221,530	225,867	470,465
Recharged expenses	3	(35,581)	(35,944)	(78,369)
Fee income	3	185,949	189,923	392,096
Operating profit	3	28,515	29,526	58,862
Finance costs		(1,206)	(2,299)	(4,424)
Finance income		180	172	384
Profit before tax and amortisation of acquired intangibles		29,198	28,536	57,512
Amortisation of acquired intangibles		(1,709)	(1,137)	(2,690)
Profit before tax		27,489	27,399	54,822
Tax expense	4	(8,522)	(8,302)	(16,933)
Profit for the period attributable to equity holders of the parent		18,967	19,097	37,889
Basic earnings per share (pence)	5	8.93	9.10	18.00
Diluted earnings per share (pence)	5	8.83	8.97	17.75
Basic earnings per share before amortisation of acquired intangibles (pence)	5	9.50	9.49	18.92
Diluted earnings per share before amortisation of acquired intangibles (pence)	5	9.40	9.36	18.66

Condensed consolidated statement of comprehensive income

			Six months ended 30 June	Six months ended 30 June	Year  ended 31 December
			2009	2008	2008
			unaudited	unaudited	audited
			£000’s	£000’s	£000’s
Profit for the period			18,967	19,097	37,889
Other comprehensive income:
Exchange differences			(12,022)	5,839	23,811
Tax recognised directly in equity			97	10	(573)
Total recognised comprehensive income for the period attributable to equity holders of the parent			7,042	24,946	61,127

Condensed consolidated balance sheet

			As at 30 June	As at 30 June	As at 31 December
			2009	2008	2008
			unaudited	unaudited	audited
		Notes	£000’s	£000’s	£000’s
Assets
	Non-current assets
	Intangible assets		255,920	245,828	264,733
	Property, plant and equipment	6	21,545	22,779	24,575
			277,465	268,607	289,308
	Current assets
	Trade and other receivables		138,825	146,.462	157,607
	Cash at bank		11,889	13,584	17,088
			150,714	160,046	174,695
Liabilities
Current liabilities
Borrowings			139	204	456
Deferred consideration			14,644	12,753	16,585
Trade and other payables			72,066	78,842	87,868
Corporation tax liabilities			7,557	6,907	2,688
Provisions			1,264	1,279	1,417
			95,670	99,985	109,014
Net current assets			55,044	60,061	65,681
Non-current liabilities
Borrowings			26,164	52,171	45,187
Deferred consideration			4,757	15,293	11,463
Other creditors			411	1,511	417
Deferred tax liabilities			5,274	3,844	6,746
Provisions			2,896	3,623	3,569
			39,502	76,442	67,382
Net assets			293,007	252,226	287,607
	Equity
	Share capital	8	6,434	6,359	6,399
	Share premium		96,771	94,337	95,531
	Other reserves	9	31,815	24,804	43,551
	Retained earnings		157,987	126,726	142,126
	Total shareholders’ equity		293,007	252,226	287,607

Condensed consolidated cash flow statement

			Six months ended 30 June	Six months ended 30 June	Year ended 31 December
			2009	2008	2008
		Notes	unaudited £000’s	unaudited £000’s	audited £000’s
Cash generated from operations		11	34,452	28,993	67,386
Interest paid			(1,541)	(2,009)	(3,770)
Interest received			180	172	384
Income taxes paid			(4,865)	(5,513)	(15,574)
Net cash from operating activities			28,226	21,643	48,426
Cash flows from investing activities
Purchases of subsidiaries net of cash acquired			(14)	(17,555)	(22,332)
Deferred consideration			(7,399)	(4,539)	(8,854)
Purchase of property, plant and equipment			(1,760)	(3,338)	(5,935)
Sale of property, plant and equipment			39	1,112	1,094
Net cash used in investing activities			(9,134)	(24,320)	(36,027)
Cash flows from financing activities
Proceeds from issue of share capital			144	171	464
(Repayments)/proceeds from bank borrowings			(17,164)	8,366	(2,174)
Payment of finance lease liabilities			(30)	(98)	(117)
Dividends paid			(4,076)	(3,498)	(7,211)
Payment of pre-acquisition dividend			-	(115)	(1,471)
Net cash used in financing activities			(21,126)	4,826	(10,509)
Net (decrease)/increase  in cash and cash  equivalents			(2,034)	2,149	1,890
Cash and cash equivalents at beginning of period			16,707	10,884	10,884
Effect of exchange rate fluctuations			(2,885)	551	3,933
Cash and cash equivalents at end of period		11	11,788	13,584	16,707
Cash and cash equivalents comprise:
Cash at bank			11,889	13,584	17,088
Bank overdraft			(101)	-	(381)
Cash and cash equivalents at end of period			11,788	13,584	16,707

Condensed consolidated statement of changes in equity

	Share capital	Share premium	Retained earnings	Other reserves (Note 9)	Total equity
	£000’s	£000’s	£000’s	£000’s	£000’s
Changes in equity during 2009
At 1 January 2009	6,399	95,531	142,126	43,551	287,607
Total comprehensive income for the period	-	-	19,064	(12,022)	7,042
Issue of new ordinary shares	35	1,249	(795)	286	775
Share based payment expense	-	-	1,668	-	1,668
Expenses of issue of equity shares	-	(9)	-	-	(9)
Dividends	-	-	(4,076)	-	(4,076)
At 30 June 2009	6,434	96,771	157,987	31,815	293,007
Changes in equity during 2008
At 1 January 2008	6,319	93,225	110,474	17,516	227,534
Total comprehensive income for the period	-	-	19,107	5,839	24,946
Issue of new ordinary shares	40	1,112	(705)	1,449	1,896
Share based payment expense	-	-	1,348	-	1,348
Dividends	-	-	(3,498)	-	(3,498)
At 30 June 2008	6,359	94,337	126,726	24,804	252,226

 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 2009 comprise the Company and its subsidiaries (together referred to as the “Group”).

The IASB has issued the following revised and updated standards that are applicable to the Group and that resulted in changes in presentation for this accounting period; IAS 1 (revised) ‘Presentation of financial statements’ and IFRS 8 ‘Operating Segments’.

IAS 1 (revised) updates the presentation of the key statements of performance and position for the Group.

IFRS 8 introduces new requirements for segmental reporting to be based on the information provided to the Chief Operating Decision Maker (CODM).  It also introduces additional disclosure and reconciliation requirements.  The segmental reporting bases used by RPS in previous years are those which are reported to the CODM, hence the changes to the segmental reporting for 2009 are in respect of the additional disclosure only.

In addition, the following IFRIC amendments and IASs have been adopted,  although they have no impact on the Group’s reporting; IFRIC 9 ‘Reassessment of embedded derivatives’, IFRIC 13 ‘Customer loyalty programmes’, IFRIC 14 ‘IAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction’, IFRIC 16 ‘Hedges of a net investment in a foreign operation’ and the amendments to IAS 23 ’Borrowing Costs’, IAS 32 ‘Presentation’, IAS 39 ‘Financial instruments: recognition and measurement’ and IFRS 2 ‘Share-based payment’.  IFRIC 15 ‘Agreements for the construction of real estate’ and various amendments to IAS 39 are still to be endorsed but these are not expected to have any impact on the Group.

Otherwise, the condensed interim financial statements have been prepared using accounting policies set out in the Report and Accounts 2008.  They are in accordance with IAS 34.  The condensed interim financial statements are unaudited but have been reviewed by the Company’s auditors.  The results for the year end 31 December 2008 and the balance sheet as at that date are abridged from the Company’s Report and Accounts 2008 which have been delivered to the Registrar of Companies.  The auditors’ report on those accounts was unqualified, did not contain references to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain a statement under Section 272(2) or (3) of the Companies Act 1985.

The condensed interim financial statements do not constitute full accounts within the meaning of Section 434 of the Companies Act 2006.

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

3. Business segments

The Group comprises the following business segments:

Planning and Development – consultancy services in the UK, Ireland, Australia and the US related to town and country planning, urban design, architecture, transport planning and highway design, environmental impact assessment and provision of water and waste utilities and energy infrastructure.             

Environmental Management – consultancy services in the UK, the Netherlands and Australia related to health, safety and risk management, environmental science and the management of water and energy resources.

Energy – the provision of consultancy services, on an international basis, to the upstream oil and gas and offshore renewable energy sectors.

Conics has revenue in both the Planning and Development and Environmental Management segments as currently defined.  This revenue arises in a way which makes it difficult to split accurately and consistently.  The Board is, therefore, considering whether any changes to the segmentation are necessary.  

Segment results for the six months ended 30 June 2009