RPS announces Preliminary Results for the year ended 31 December 2006

RPS Group Plc today announces record results for the year ended 31 December 2006 with profit before tax up 43% and earnings per share up 33%.

Highlights

• strong performance from Energy
• continued development of Planning and Development in UK and internationally
• further growth from Environmental Management
• improved operating margins
• excellent conversion of profit to cash
• balance sheet remains strong
• the energy and the environment debate provides significant opportunities for future growth
• acquisition of quality businesses continues

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

“RPS has had a very successful year. An outstanding performance from the Energy division and good results in our other two businesses have resulted in the Group delivering further strong growth. Our staff have shown the highest levels of commitment and performance in markets that remain buoyant. The acquisitions made in recent months will support our continued growth. Further acquisitions are likely. The Board anticipates that the momentum we currently have will enable RPS to deliver another good result in 2007. trading in the early weeks of the year supports this view.”, 6 March 2007.


Enquiries

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 trade in the UK, Ireland, The Netherlands, North America and Australia and undertake projects in many other parts of the world.

Introduction
The Group was added to the FTSE 250 on 28 July 2006, a reflection of our continuing development.

The good growth we have achieved in recent years has been recognised by the recent KPMG survey of fast growing European companies.(1) Our growth in 2006 reflects both the continuing successful implementation of our strategy as well as the increasing importance of the issues with which we deal on behalf of our clients. We have maintained momentum in our trading whilst enhancing our reputation as a top quality employer. (2)

The Group seeks to ensure continuous improvement in the range and quality of our services and our financial performance by:

operating in markets where we can add value to our clients’ activities;
endeavouring to achieve leadership in those markets; and
making acquisitions of quality businesses in order to extend our expertise and geographical presence.

The Board remains confident that this strategy will continue to offer our staff challenging and rewarding careers, whilst delivering growth and good returns for our shareholders.

2006 Results
Profit before tax was £34.6 million (2005: £24.3 million). Basic earnings per share were 11.94 pence (2005: 9.01 pence). Operating cash flow was £40.7 million (2005: £28.1 million). The Group had net borrowings of £30.1 million at 31 December (2005: £25.9 million).

Dividend
The Board is recommending a final dividend of 1.44 pence per share payable on 31 May 2007 to shareholders on the register on 10 April 2007. The total dividend for the full year will be 2.76 pence, an increase of 15% (2005: 2.40 pence). Our dividend has risen at this rate for a number of years, providing shareholders with a significant increase in real income.

Operations and Markets


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 and environmental assessment. We remain leaders in this market in the UK, Ireland and Western Australia, operating for blue chip clients in both the public and private sectors.

In the UK our ability to advise upon the full range of issues relevant to the development of sustainable communities and secure planning permission for large complex schemes remains attractive to clients. In consequence, we continue to work on some of the UK's largest regeneration and infrastructure projects. Our strong urban design skills help us to secure this work. We are also involved in both the waste and minerals sectors, in which securing planning permission has become more complex. Our relationships with the UK’s largest housebuilders remain good. Whilst we have continued to focus successfully on achieving organic growth, the acquisition of Burks Green (July 2006), which provides architectural and engineering advice to the property development sector, strengthens this business significantly. Its small but growing operation in Poland provides us with an opportunity in this expanding market.

The Irish Government continues to invest in ambitious plans for the infrastructure development made necessary by the economic growth already experienced and that anticipated. The recently published National Development Plan 2007-2013 targets “Economic Infrastructure” as its main priority, with €54.6bn identified for expenditure on roads, public transport and energy infrastructure. We benefit significantly from this investment. Our work in the commercial sector in Ireland also remains buoyant, as private investment follows this public expenditure.

Our activities in the planning and development market in Australia continue to flourish. The long term potential of this market has encouraged us to develop a plan to expand these activities substantially. The acquisitions of Ecos (March 2006) and HSO (October 2006) are part of that plan.

As climate change, energy efficiency and other environmental issues continue to grow in importance, our competitive advantage in these markets should continue to increase. Our planning business is also able to assist clients in other parts of the Group, for example, in respect of the need to secure planning permissions for capital projects in the energy and water sectors.

Energy

We provide consultancy services on an international basis to the oil and gas industries from bases in the UK, USA, Canada, Australia and Malaysia. In the UK we also provide advice to the renewables and nuclear sectors. The business had an outstanding year; fee income, profit and margin all grew substantially.

Demand for our services from oil and gas exploration and production companies grew significantly during the year. This reflects both buoyant market conditions and our position as a world leader in this market. Pressure on the developed world to identify and secure long term supplies of energy, coupled with the increasing energy needs of developing nations, suggest that activity in this market will remain at a high level for the foreseeable future. The acquisition of Ecos also added to our ability to provide environmental support to our oil and gas clients in Australia and Asia, whilst the acquisition of TSA in the UK (October 2006) strengthened our health and safety expertise. The acquisition of APA (January 2007) increases the range of our services in North America. We see increasing interest from clients in the combination of the energy, environmental and safety expertise that we provide and our strategy accommodates this trend.

We have a significant and growing reputation within the financial community in respect of determination of oil and gas reserves for reporting purposes and in support of corporate activity. The oil and gas companies and their advisors value the breadth and depth of our expertise, including our environmental experience.

Skilled staff have been and will remain in short supply, but our position in this market has enabled us to operate successful recruitment and retention strategies, whilst also improving our margins to a higher and, we believe, a generally sustainable level.

The growing controversy in respect of a number of UK wind farm schemes illustrates the complexity involved in securing approval for energy supply schemes. We are well positioned to assist our clients achieve the necessary permissions, licences and consents for all such facilities, including new power stations.

Environmental Management

This business provides consultancy services in respect of health, safety, risk and environmental management in the UK and The Netherlands and the management of water resources in the UK and Ireland.

Our business servicing the UK water industry has progressed well. We are working on significant network management commissions for the majority of the water companies. RPS's specific strengths in the water industry coupled with our environmental credentials position us well to help with problems created by water shortages and legislation seeking to improve water quality.

The UK market in health & safety consultancy has generally remained strong, driven by increasing statutory obligations as awareness of the importance of managing these matters more carefully has heightened. The asbestos market has, as predicted, slowed, but we anticipate that new fire safety regulations will provide attractive opportunities. In 2005 we extended our range of services with the acquisition of Business Healthcare Ltd, which provides occupational health services. As anticipated this is proving to be a growth market.

The economy in The Netherlands continues to improve. The steps we took to reduce our exposure to the more vulnerable parts of the economy and invest in stable markets have continued to produce benefit.

Funding
The conversion of profit into cash during this year continued at a high level and our balance sheet remains strong. Following the acquisitions made in 2006 and the early part of 2007, we have maximum cash commitments in respect of deferred consideration and outstanding loan notes related to acquisitions of £11.8 million in 2007, £4.2 million in 2008 and £4.2 million in 2009. The Group’s operating cash flow normally funds its working capital requirements. Our cash generation, in conjunction with bank facilities of £72 million and an ability to use equity in transactions, means that we are well positioned to continue our acquisition strategy, in respect of which we have a number of good prospects.

Review of Business Prospects
2006 was an exceptionally good year for RPS. Our staff numbers grew and, as ever, those staff produced valuable advice for and support to our clients. This in turn enabled us to deliver an excellent financial performance. Our investment in developing a substantial Energy business has proved to be well-timed and effectively managed. We believe this and our other two businesses will continue to grow. In addition, the way they can operate in combination provides opportunities to secure further strategic growth.

The last year has seen a dramatic increase in the profile given to the potentially severe effect of climate change and what actions are necessary to contain and eventually reverse the global warming process. Balancing the way energy is secured from various sources, managing its use to limit further environmental damage and planning further economic growth and urban development has become a fundamental challenge of this century. It is one which RPS is extremely well positioned to advise upon and will enable us to build further momentum.

Our investment in the energy sector has enabled RPS to internationalise its activities in a measured way. Consequently, we now have strong businesses in the USA, Canada and Australia as well as substantial contracts in many parts of the developing world, including India and China. We have successfully begun the process of expanding our activities in Australia into planning and development and environmental management. This process is, however, in the early stages and can be extended substantially. Australia is also a good base from which to extend our activities in Asia. In a similar fashion, there are large scale opportunities to build all of our activities in both the US and Canada. As in Europe and Australia, the planning and development and environmental management sectors in North America are highly fragmented. RPS has developed good skills in bringing together teams of high quality professionals from a range of disciplines and helping them work together. In the coming years we are likely to deploy these skills on an increasingly international basis.

The opportunities available to us are substantial. In consequence we have considerable confidence about continuing the growth record of our business in 2007 and beyond.

Consolidated income statement

Consolidated statement of recognised income and expense.

Consolidated balance sheet

Consolidated income statement

Notes to the consolidated financial statements

1. Basis of preparation

The consolidated financial statements, as well as comparatives for 2005, have been prepared under International Financial Reporting Standards (IFRS) adopted by the EU. They are presented in pounds sterling, rounded to the nearest thousand.

The accounting policies used have been applied consistently to all periods presented in these financial statements. The accounting policies used are the same as set out in detail in the Report and Accounts 2005.

2. Business segments

The Group comprises the following business segments:

Planning and Development – consultancy services in the UK, Ireland and Australia related to town and country planning, urban design, 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, Ireland and The Netherlands related to health, safety and risk management; and the management of water services.

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

Business segment results for the year ended 31 December 2006

3. Net financing costs

4. Income Taxes

5. Earnings per share

The calculations of basic and diluted earnings per share were based on the profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding during the related period as shown in the tables below:

6. Statement of changes in equity

7. Other reserves

8. Notes to the consolidated cash flow statement

9.
The table below provides an analysis of net borrowings, comprising cash and cash equivalents, interest bearing bank loans and finance leases, during the year ended 31 December 2006.

10.
The financial information set out above does not constitute the company’s full statutory accounts for the year ended 31 December 2006 for the purposes of section 240 of the Companies Act 1985, but it is derived from those accounts that have been audited. Statutory accounts for 2005 have been delivered to the Registrar of Companies. The auditors have reported on those accounts; their report was unqualified and did not contain statements under the Companies Act 1985, S237 (2) or (3).

11.
It is expected that the annual report and accounts will be posted to shareholders on or before 23 April 2007. Further copies may be obtained after that date from the Company Secretary, RPS Group Plc, Centurion Court, 85 Milton Park, Abingdon, Oxfordshire OX14 4RY.