03 September 2020
‘Diversified global offering
provides resilience to COVID-19 and a platform for long term sustainable growth’
RPS, a leading multi-sector global professional services firm, today announces its Interim Results for the six months ended 30 June 2020 (‘H1 2020’).
These Results are available in PDF format
|H1 2020||H1 2019
|H1 2019 at
|% change||% change
|Alternative performance measures (1)|
|Fee Revenue (£m) (2)||232.4||266.0||261.4||(13%)||(11%)|
|Adjusted operating profit (£m) (2)||7.7||22.0||21.6||(65%)||(64%)|
|Adjusted profit before tax (£m) (2)||4.3||19.0||18.7||(77%)||(77%)|
|Adjusted earnings per share (diluted) (p) (2)||2.03||6.38||6.25||(68%)||(68%)|
|Cash and debt measures|
|Conversion of profit into cash||346%||50%|
|Net bank borrowings (£m)||57.8||101.3||102.0||(43)%||(43)%|
|Statutory (loss)/profit before tax (£m)||(34.1)||13.1||12.9||(360%)||(364%)|
|Statutory (loss)/earnings per share (diluted) (p)||(14.06)||4.35||4.28||(423%)||(429%)|
|Dividend per share (p)||-||2.42||2.42||(100%)||(100%)|
- After a promising start to the year, trading was impacted by COVID-19 and Fee Revenue and adjusted operating profit ended down on the previous year
- RPS remained profitable on an adjusted profit basis due to cost reductions
- The statutory loss is after £35.4 million of exceptional items, of which £31.2m are non-cash relating to impairment of goodwill and other assets largely as a result of COVID-19
- Strong cash performance on the back of disciplined billing and cash collections and COVID-19 related tax deferrals, delivering a cash conversion of 346% (H1 2019: 50%); last twelve months cash conversion 203% (June 2019: 98%)
- Significantly lower net bank borrowings reduced the net debt to EBITDA ratio to 1.7x from 2.0x at 30 June 2019 and 31 December 2019
- No interim dividend proposed (H1 2019: 2.42 pence per share)
- Responded quickly to COVID-19 and took prudent and proactive steps to reduce costs and contain cash outflows while still matching capacity to market activity and retaining our operating capability
- The diversity of RPS’ sectors and services and exposure to government and quasi-government organisations provided resilience to COVID-19 impact
- Government exposed business streams in Australia, Ireland, Northern Ireland and the US delivered growth in Fee Revenue and/or Adjusted Operating Profit
- Action taken to reduce costs in private sector exposed business streams impacted by COVID-19 lock downs and travel restrictions
- Adapted service offerings and utilised technology to manage COVID-19 impact and capitalise on longer term opportunities as we emerge from the pandemic
- Improving Q3 2020 Contracted Order Book (COB) and relaxation of lock down restrictions will have a positive impact on performance in H2 2020
Post period end headlines
- Trading across the Group in July 2020 was in line with expectations. Net bank borrowings reduced further to £53.4 million at 31 July 2020
- COB is improving with key wins including a major rail infrastructure advisory project in Australia and new water projects in Services UK
- RPS also separately announces today a proposed Placing and Subscription of shares, which together will not exceed 19.99% of the Group’s existing share capital, as well as proposed amendments to its banking facilities which are conditional on the equity raise
- The revised banking facilities, amendments to its covenants and equity placing, will provide RPS with the flexibility to continue to appropriately match capacity to the longer-term market opportunities. Maintaining key capability will position the Group to capitalise on future growth opportunities
Commenting on the Interim Results, John Douglas, Chief Executive, said
“Q1 2020 started well. We continued to make solid progress against our strategic priorities in building a resilient, sustainable business with significant upside. In March we acted quickly and decisively to counter the impact of the COVID-19 pandemic. As a result, we had a strong H1 cash performance and have significant headroom on our debt facilities.
“Looking ahead, our businesses serving government and quasi-government organisations have strong order books. Those servicing the private sector are well positioned to recover as lockdown and travel restrictions ease. We will continue to demonstrate the resilience of our business and take advantage of opportunities as they arise.
“With a strong cash position and significant available debt facilities, RPS is well placed to deal with the challenges that the continuing effect of COVID-19 will bring. The diverse nature of RPS, coupled with our expertise and global reach, positions us well for any recovery in our end markets. We remain focused on building a business that can deliver mid-single digit rates of organic growth and a double-digit operating margin in the medium term and are confident about our ability to do so.”
- Alternative Performance Measures are used consistently throughout this announcement: these include adjusted profit before tax, fee Revenue, items prefaced ‘adjusted’ such as adjusted EPS, segment profit, underlying profit, adjusted operating profit, amounts labelled ‘at constant currency’, EBITDAS, conversion of profit into cash, net bank borrowings, leverage. For further details of their purpose, definition and reconciliation to the equivalent statutory measures see note 2.
- Fee Revenue, adjusted operating profit and adjusted profit before tax have been restated - see note 3 for further information
An analyst presentation will be held via video webcast at 9.30am. To participate please contact Buchanan for details. After which, a recording of the presentation will be available on our website.
|RPS Group plc|
|John Douglas, Chief Executive||Today: +44 (0) 20 7466 5000|
|Judith Cottrell, Finance Director||Thereafter: +44 (0) 1235 863 206|
|Henry Harrison-Topham / Chris Lane / Tilly Abraham||Tel: +44 (0) 20 7466 5000|
Founded in 1970, RPS is a leading global professional services firm of 5,000 consultants and service providers. Having operated in 125 countries across six continents RPS defines, designs and manages projects that create shared value for a complex, urbanising and resource scarce world.
RPS delivers a broad range of services in six sectors: property, energy, transport, water, defence and government services and resources. Services provided across RPS' six sectors cover twelve service clusters: project and programme management, design and development, water services, environment, advisory and management consulting, exploration and development, planning and approvals, health, safety and risk, oceans and coastal, laboratories, training and communications, creative & digital services.
RPS stands out for its clients by using its deep expertise to solve problems that matter, making them easy to understand. Making complex easy.
RPS’ London Stock Exchange ticker is RPS.L. For further information, please visit www.rpsgroup.com
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 many 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.
Response to COVID-19
During the COVID-19 pandemic, RPS’ priority has been the welfare of colleagues and clients. It continues to monitor government guidance in all the countries in which it operates to ensure the safety of colleagues around the world, as it continues to satisfy ongoing client demand for its services.
Throughout the pandemic, RPS has continued to operate safely, supporting client projects and onsite activities in accordance with Government guidance, public health advice and its own internal processes.
With Government restrictions easing in some regions, there has been a gradual increase in the level of carefully managed reoccupation of its offices. RPS’ Health & Safety teams have worked collaboratively with senior leaders to establish and implement robust measures for remobilisation, including risk assessments for its offices and client site work, and return to work protocols.
Cost saving and cash management
RPS took prudent steps to reduce costs and contain the cash outflow. These included:
- cancelling the 2019 final dividend
- suspending planned work on the ERP system
- deferring 2020 salary increases and 2019 senior leadership bonuses
- temporary reductions in pay or hours or placing employees on furlough
- ceasing all non-essential capex and discretionary operating expenditure
- accessing government grants and other financial support mechanisms where available
Proposed equity placing and subscription and amendments to banking facilities
Separately, RPS has today announced the launch of a Placing and Subscription to issue New Shares, as well as proposed amendments of our Revolving Credit Facility (RCF) and US private placement notes, which are subject to final documentation and completion of the equity placing. The revised banking facilities, amendments to its covenants and equity placing, will provide RPS flexibility to continue to appropriately match capacity to the longer-term market opportunities. Maintaining key capability will position the Group to capitalise on future growth opportunities.
The Group continues to make strategic progress on its priorities of people, clients, and connectivity. During the period:
- continued with our people strategy with a focus on performance and development
- connectivity and cross selling improved
- in Energy, the refocusing of the business into renewables continued
- the North American strategy review was completed, and we move forward with a reinvigorated business
- recent acquisitions performed well
The Group’s performance in H1 2020 was impacted by the COVID-19 pandemic. After a promising start in Q1, COVID-19 impacted from late March and in Q2 2020 Fee Revenue reduced by 18% at constant currency. The decline in fees resulted in a reduced Adjusted Profit Before Tax (PBT) for the six months to 30 June 2020 of £4.3 million, (H1 2019: £19.0 million, £18.7 million at constant currency), on Fee Revenue of £232.4 million (H1 2019: £266.0 million, £261.4 million at constant currency). The Group generated a loss before tax of £34.1 million (H1 2019: profit £13.1 million, £12.9 million at constant currency), after exceptional items of £35.4 million (H1 2019: £0.9 million).
The effective tax rate for the period on Adjusted PBT is estimated to be (7.0%) (H1 2019: 24.2%). Adjusted diluted earnings per share (EPS) was 2.03p (H1 2019: 6.38p, 6.25p at constant currency). Statutory diluted loss per share was 14.06p (H1 2019: EPS 4.35p, 4.28p at constant currency). The impact of retranslating H1 2019 results at H1 2020 rates was a reduction of £4.6 million on Fee Revenue and a reduction of £0.3 million on adjusted profit before tax.
|H1 2020||H1 2019||H1 2019
|Consulting - UK and Ireland||55.6||63.9||64.1|
|Services - UK and Netherlands||41.1||50.9||51.1|
|Australia Asia Pacific||45.1||44.1||42.0|
Q1 2020 started well with good growth in Energy, North America and Australia Asia Pacific. As expected, the level of activity in Water Services was lower in Q1 2020 ahead of the new AMP cycle, and early impacts of COVID-19 were experienced by our Consulting UK and Ireland and Norway segments. In Q2 2020 COVID-19 impacted Fee Revenue in all segments, in line with management’s COVID-19 impact modelling undertaken in March 2020. With RPS generating over 55% of Fee Revenue from government or quasi-government organisations, this has provided resilience to the impact of COVID-19 and enabled Australia Asia Pacific to continue to deliver Fee Revenue growth in Q2 2020.
Adjusted operating profit
|£m||H1 2020||H1 2019||H1 2019
|Consulting - UK and Ireland||2.9||7.1||7.1|
|Services - UK and Netherlands||1.8||6.1||6.1|
|Australia Asia Pacific||3.5||2.6||2.5|
|Total segment profit||13.8||25.9||25.5|
|Adjusted operating profit||7.7||22.0||21.6|
Actions taken in response to COVID-19 reduced segment costs by 7% in the period, versus an 11% lower Fee Revenue at constant currency. Segment profit margin was 5.9% (H1 2019 at constant currency: 9.8%). Unallocated costs are higher this year as a result of continued investment in the strategic initiatives of People and Connectivity and an accrual of the retirement package for the Group Finance Director. The investment in People and Connectivity includes investment in an online performance development tool, operating costs of the new ERP system and strategic hires within the technology team.
Exceptional items of £35.4 million have been recognised in the period (H1 2019: £0.9 million), of which £31.2 million are non-cash. The exceptional items are detailed in note 7 and include:
- goodwill impairment charge of £25.9 million after revising our view on the assumptions used for impairment modelling given the market uncertainty caused by the COVID-19 pandemic
- restructuring costs of £3.8 million as a result of the cost mitigating actions taken in light of the impact of COVID-19 on the Group
- ERP stabilisation activities of £1.5 million and an impairment of the ERP of £2.9 million in respect of those parts of the system which have needed to be redeveloped or are no longer part of the global design for future implementations
- further legal fees of £1.3 million investigating potential issues regarding the administration of US government contracts and/or projects.
In H1 2019, the Group invested £0.9 million in a global rebranding of RPS. This project was completed in 2019 and no further costs have been incurred in 2020.
Borrowings and cash flow
Net bank borrowings were £57.8 million (30 June 2019: £101.3 million; 31 December 2019: £94.1 million).
Net cash inflow from operating activities was £48.6 million (H1 2019: £6.8 million). Our conversion of profit into operating cash flow was 346% (H1 2019: 50%) while for the last twelve months it was 203% (12 months ended June 2019: 98%). This reflects unwinding working capital, disciplined billing and cash collection, the impact of COVID-19 government support mechanisms (tax deferrals £8.1 million and €1.5m support from the Dutch government which will be repaid in H2 2020) and tight cost control measures. Lock up days at 30 June 2020 were 68 days (30 June 2019: 67 days, December 2019: 69 days).
Net cash used in investing activities was £7.2 million (H1 2019: £18.4 million) including deferred consideration of £2.4 million in respect of the Corview acquisition (H1 2019: £8.6 million). In light of COVID-19 all non-essential capex ceased hence the purchase of property, plant, equipment and intangible assets reduced from £9.9 million in 2019 to £5.1 million. This includes investment in ERP of £2.2 million (H1 2019: £2.1 million). The amount paid in respect of dividends was £nil (H1 2019: £11.4 million).
Deferred consideration outstanding at 30 June 2020 was £6.5 million (30 June 2019: £7.7 million; 31 December 2019: £8.7 million).
Our leverage (as defined in note 2) calculated in accordance with our bank’s financial covenants was 1.7x at the period end (30 June 2019: 2.0x; 31 December 2019: 2.0x). The June 2020 covenant test period was waived as part of the April 2020 facility amendments.
Net finance costs were £3.4 million (H1 2019: £3.0 million), which includes £1.0 million (H1 2019: £0.9 million) interest relating to IFRS 16 leases.
In protecting the Group’s financial position at the start of the COVID-19 pandemic the Board made the decision to cancel the final dividend in respect of 2019, preserving £4.5 million of cash. Due to the ongoing impact of COVID-19 on the Group’s profit and restrictions within the short term £60 million RCF liquidity facility, the Board is not proposing a 2020 interim dividend (H1 2019: 2.42p). Its intention is to re-establish dividend distributions as soon as prudently possible, balancing this against the opportunities that remain to RPS to invest for further growth.
|H1 2020||H1 2019||H1 2019 at
|Fee Revenue (£m)||41.6||47.5||47.5|
|Segment profit (£m)||2.3||4.5||4.5|
Energy started the year with a strong performance in the Operations business and, although activity in Technical Advisory was muted, Fee Revenue in Q1 2020 grew by 8%. In Q2 2020 our Energy Operations and Training businesses were significantly affected by COVID-19 due to the global travel restrictions resulting in segment Fee Revenue down 31% at constant currency. However, our flexible associate-based employee model has enabled us to reduce costs within the Operations business as Fee Revenue has reduced. In addition, we restructured our Technical Advisory business in June 2020, providing the segment with increased flexibility and resilience to offset revenue fluctuations from H2 2020 onwards.
Against a COVID-19-driven backdrop of reduced demand for hydrocarbons and the consequent impact on the oil price, we continued to increase our exposure to renewables, thereby reducing the segment’s dependence on oil. The focus on renewables and offshore wind has been supported in-house with existing expertise, where the skills are easily transferrable.
The oil price is showing signs of stabilising during Q3 2020 and into Q4 2020. The Operations and Training businesses will continue to be impacted while COVID-19 travel restrictions remain in place.
Consulting - UK and Ireland
|H1 2020||H1 2019||H1 2019 at
|Fee Revenue (£m)||55.6||63.9||64.1|
|Segment profit (£m)||2.9||7.1||7.1|
Ireland and Northern Ireland delivered good performances, both of which benefitted from high public sector exposure. The remainder of the segment has greater exposure to private sector work and the property sector. Since March performance here has been significantly affected by COVID-19.
RPS is developing innovative services to operate during the pandemic, and to help our clients emerge from COVID-19. This will put us in a stronger position for any ‘new normal’. In H2 2020, public sector work is expected to remain strong. With a developing private sector workload, the Q3 COB has increased by between 5% and 10% compared to Q2 2020. The focus in H2 2020 will be on core strengths of Residential Property (including Affordable and Modular), Health, Logistics, and Datacentres.
Services - UK and the Netherlands
|H1 2020||H1 2019||H1 2019 at
|Fee Revenue (£m)||41.1||50.9||51.1|
|Segment profit (£m)||1.8||6.1||6.1|
As expected, the level of activity in the Water Services business in Q1 2020 was low ahead of the new AMP cycle. In Q2 2020 key worker status was applied to several contracts in the Water Services business, minimising the impact of COVID-19. RPS is well positioned to win work as the new AMP cycle progresses in H2 2020 and the Q3 2020 COB for Water Services exceeds that for Q2 2020 by nearly 10%. Health and Laboratories and Netherlands have experienced some short-term impact of COVID-19, caused by the impact of lock-down and travel restrictions on our markets and specific client contracts. We expect these markets to improve in H2-2020 as restrictions are eased and people return to work.
|H1 2020||H1 2019||H1 2019 at
|Fee Revenue (£m)||28.5||36.2||32.6|
|Segment profit (£m)||2.1||3.7||3.3|
Notwithstanding the pressure on the economy due to COVID-19 and its exposure to oil, the business delivered a solid performance in H1 2020, retaining its leading market position within Project and Program Management in Norway. Whilst revenue from private sector clients was lower, it was partially offset by an increasing exposure to the public sector where investment levels are good and stable. The Norwegian economy’s recovery from COVID-19 has started and the segment is well placed to benefit from this recovery.
|H1 2020||H1 2019||H1 2019 at
|Fee Revenue (£m)||20.5||23.4||24.1|
|Segment profit (£m)||1.2||1.9||2.0|
The segment had an encouraging start with a good all-round performance in Q1 2020, during which Fee Revenue was up 3% at constant currency. Q2 2020 was affected by the pandemic with trading mixed. Infrastructure and Ocean Science businesses benefited from high public sector exposure and performed well in the period, delivering growth on H1 2019. In the Environmental Risk business, subdued private equity activity impacted overall Fee Revenue. A strong and growing order book in Ocean Science (up over 25% on June 2019) and Infrastructure should support full year growth, provided recruitment and retention risks remain in check. A streamlined Environmental Risk business is poised to recover with the US private equity market in H2 2020, with the Q3 2020 COB up over 5% on Q2 2020.
Australia Asia Pacific
|H1 2020||H1 2019||H1 2019 at
|Fee Revenue (£m)||45.1||44.1||42.0|
|Segment profit (£m)||3.5||2.6||2.5|
The significant exposure of the segment to the public sector (c.80%), as well as the early implementation of several cost saving measures, enabled the segment to deliver solid growth on the prior year. H1 2020 Fee Revenue increased by 7% at constant currency and profitability increased. Defence and transport infrastructure were strong, and the Group is well placed to benefit from the ongoing increase in government spending in both sectors. Although the COVID-19 pandemic has affected the Australian residential property sector, we expect this market to start to recover in H2 2020 as a result of government stimulus. The Q3 2020 COB is strong in the Project and Program Management business on the back of strong defence wins and is up nearly 20% on June 2019. In Advisory and Management Consulting, the order book is expected to improve in Q3 2020 with outcomes on several large bids due in the quarter.
Current trading and Group Outlook
Q1 2020 started well as we continued to make solid progress against our strategic priorities in building a resilient, sustainable business with significant upside. In March we acted quickly and decisively to counter the impact of the COVID-19 pandemic. As a result, we had a strong H1 cash performance and have significant headroom on our debt facilities.
Looking ahead, our businesses serving government and quasi-government organisations have strong order books. Those servicing the private sector are well positioned to recover when lockdown and travel restrictions ease. The disruption of COVID-19 will continue into the second half of the year but we believe that we will see some recovery. While the pace of recovery is uncertain, we will continue to demonstrate the resilience of our business by managing the uncertainty and taking advantage of opportunities as they arise.
With a strong cash position and significant available debt facilities, RPS is well placed to deal with the challenges that the continuing effect of COVID-19 will bring, although as the working capital benefits of H1 unwind and as the Group returns to growth, it will start to absorb working capital. The diverse nature of RPS, coupled with our expertise and global reach, positions us well for any recovery in our end markets. We remain focused on building a business that can deliver mid-single digit rates of organic growth and a double-digit operating margin in the medium term and are confident about our ability to do so.
The Group expects to update the market at its Q3 2020 trading update in late October/early November.
Board of Directors
RPS Group plc
Condensed consolidated income statement (unaudited)
|Less passthrough costs||5||(40.0)||(43.7)||(84.4)|
|Adjusted operating profit||5||7.7||22.0||43.4|
|Amortisation of acquired intangibles and transaction-related costs||6||(3.0)||(5.0)||(9.1)|
|Adjusted profit before tax||2||4.3||19.0||37.4|
|(Loss)/profit before tax||(34.1)||13.1||4.9|
|(Loss)/profit for the period attributable to equity
holders of the parent
|Basic (loss)/earnings per share (pence)||9||(14.20)||4.39||(0.55)|
|Diluted (loss)/earnings per share (pence)||9||(14.06)||4.35||(0.54)|
|Adjusted basic earnings per share (pence)||9||2.05||6.44||12.43|
|Adjusted diluted earnings per share (pence)||9||2.03||6.38||12.31|
1 See note 3
Condensed consolidated statement of comprehensive income (unaudited)
|(Loss)/profit for the period||(31.9)||9.8||(1.2)|
|Actuarial losses on remeasurement of defined benefit pension scheme||-||-||(0.1)|
|Total other comprehensive income/(expense)||12.5||0.7||(12.4)|
|Total recognised comprehensive (expense)/income for the period attributable to equity holders of the parent||(19.4)||10.5||(13.6)|
*may be reclassified subsequently to profit or loss in accordance with IFRS
Condensed consolidated balance sheet (unaudited)
|Property, plant and equipment||11||31.4||38.4||32.3|
|Deferred tax asset||8.1||3.5||3.8|
|Trade and other receivables||12||142.5||173.8||157.1|
|Corporation tax receivable||4.8||-||0.9|
|Cash and cash equivalents||16.7||20.3||17.7|
|Trade and other payables||13||126.0||109.6||104.9|
|Net current assets||19.9||68.1||55.5|
|Total shareholders’ equity||330.7||376.7||348.5|
Condensed consolidated cash flow statement (unaudited)
|Net cash from operating activities||17||48.6||6.8||37.6|
|Cash flows from investing activities:|
|Purchases of subsidiaries net of cash acquired||-||(8.6)||(10.1)|
|Purchase of property, plant and equipment||(2.8)||(9.9)||(13.3)|
|Purchase of intangible assets||(2.3)||-||(7.8)|
|Proceeds from sale of property, plant and equipment||0.3||0.2||0.4|
|Net cash used in investing activities||(7.2)||(18.4)||(30.9)|
|Cash flows from financing activities:|
|(Decrease)/increase in bank borrowings||(37.7)||32.9||23.5|
|Payment of lease liabilities||(5.0)||(4.0)||(9.2)|
|Bank arrangement fees||(0.4)||-||(0.7)|
|Net cash used in financing activities||(43.1)||17.5||(3.3)|
|Net (reduction)/increase in cash and cash equivalents||(1.7)||5.9||3.4|
|Cash and cash equivalents at beginning of period||16.4||15.4||15.4|
|Effect of exchange rate fluctuations||2.0||(1.0)||(2.4)|
|Cash and cash equivalents at end of period||16.7||20.3||16.4|
|Cash and cash equivalents comprise:|
|Cash at bank||16.7||20.3||17.7|
|Cash and cash equivalents at end of period||16.7||20.3||16.4|
Condensed consolidated statement of changes in equity (unaudited)
|At 1 January 2020||6.8||121.9||195.7||21.2||(10.1)||13.0||348.5|
|Loss for the period||-||-||(31.9)||-||-||-||(31.9)|
|Other comprehensive income||-||-||-||-||-||12.5||12.5|
|Total comprehensive income for the period||-||-||-||-||12.5||12.5|
|Issue of new ordinary shares||0.1||1.7||(0.7)||-||(1.1)||-||-|
|Share-based payment expense||-||-||1.6||-||-||-||1.6|
|Transfer on release of shares||-||-||(0.3)||-||0.3||-||-|
|At 30 June 2020||6.9||123.6||164.4||21.2||(10.9)||25.5||330.7|
|At 1 January 2019||6.8||120.4||212.4||21.2||(9.8)||25.3||376.3|
|Profit for the period||-||-||9.8||-||-||-||9.8|
|Other comprehensive income||-||-||-||-||-||0.7||0.7|
|Total comprehensive income for the period||-||-||9.8||-||-||0.7||10.5|
|Issue of new ordinary shares||-||0.6||(0.5)||-||(0.1)||-||-|
|Share-based payment expense||-||-||1.3||-||-||-||1.3|
|Transfer on release of shares||-||-||(0.4)||-||0.4||-||-|
|At 30 June 2019||6.8||121.0||211.2||21.2||(9.5)||26.0||376.7|
Notes to the condensed consolidated financial statements
The notes are available in the printable pdf of the results. To download it, please click here.