Interim Management Statement
29 April 2010
Well Positioned; Strong Balance Sheet; Signs of Markets Stabilising.
RPS remains well positioned in markets of fundamental importance to the global economy and with significant long term growth potential. As developed economies around the world begin to recover more attention is being focussed on rebuilding economic activity in an efficient, sustainable way, powered by energy resources from safe, secure and environmentally acceptable sources. These trends play to RPS's core strengths.
As anticipated, trading in the first quarter has been at a lower level than in the same period last year when conditions in important markets were materially better. In the early part of this year our businesses in Europe and Queensland were also adversely affected by exceptionally bad weather. Despite these disruptions there have been signs recently that, unless there is another economic downturn, the worst effects of recession on the Group may be over.
Our clients, whilst showing signs of being a little more positive about investment generally, remained cost conscious about specific project expenditure during the first part of 2010. In consequence, the pricing pressure which developed during the course of last year is not yet easing. Staff remuneration pressures have, however, begun to reappear. Redundancy and other reorganisation costs have reduced compared to last year, although the bulk of the Conics integration costs will be incurred in the first half of the year.
The timing of recovery will vary from market to market. In the UK the impending election has delayed investment decisions by some of our clients. Management of the economy after the election will, however, have a more material effect on our prospects. The recession in the Republic of Ireland has not yet ended. Continued good management of their deficit by the Irish Government is necessary to ensure further investment in the infrastructure projects which support our business. Even with this we are likely to experience further contraction. In the Netherlands, as we anticipated, some of our private clients seem to be cutting back on their level of investment, although public sector activity has remained stable. On the back of growing demand for natural resources the Australian economy seems likely to continue expanding, opening up further opportunities for us, although credit availability still constrains some clients. In our Energy business it is reasonable to anticipate an earlier and stronger upturn.
Our balance sheet remains strong. During the course of the first quarter we made payments in respect of deferred consideration in cash of £5.3 million. Net bank debt at the end of March was £44.1 million. Our facility of £125 million with Lloyds Banking Group remains in place until 2013.
On 15 March 2010 we completed the acquisition of Health in Business Ltd ('HiB') from its two shareholder directors, for a total of £0.95 million, in cash. Of this £0.7 million was paid at completion, with the balance payable over the next two years. The acquisition of HiB complements and strengthens our existing UK occupational health business, which is operating in a market with encouraging prospects. Even though we remain cautious about the earnings prospects of potential targets, we anticipate completing further transactions this year, whilst maintaining a progressive dividend policy.
Brook Land, Group Chairman, commented:
Whilst we have yet to experience a meaningful upturn in activity there is some evidence in most of our markets that the worst effects of recession may be over. The efficiencies and reduced cost base within our business mean that as clients become more active we will be able to benefit relatively quickly. As previously indicated, the first half of the current year will show significantly reduced profit compared to the same period last year, when trading conditions were generally better. However, the prospect of an improvement in the second half remains realistic.
29 April 2010
|RPS Group plc|
|Dr Alan Hearne, Chief Executive||
Tel: 01235 863 206
|Gary Young, Finance Director|
|Justine Warren/Matthew Smallwood||
Tel: 020 7457 2020
RPS is an international consultancy providing advice upon the development of natural resources, land and property, the management of the natural and built environments and the health and safety of people. We have offices in the UK, Ireland, the Netherlands, North America 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 FTSE 4 Good 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. The continuing uncertainty in global economic outlook inevitably increases the risks to which the Group is exposed. Statements in respect of the Group's performance in 2010 in the year to date are based upon unaudited management accounts for the period January to March 2010. The Board considers market expectations for 2010 are best defined by taking the range of forecasts of profit before tax and amortisation for the full year published by analysts who consistently follow the Group. The current range of forecasts of which the Board is aware is £48.6 to £54.0 million. Nothing in this announcement should be construed as a profit forecast.