Increased Banking Facilities and Q1-2020 Trading Update
27 April 2020
“Banking facilities increased to provide additional flexibility.
COVID-19 impact partially mitigated through strong public sector exposure”
RPS, a leading multi-sector global professional services firm, provides the following update on its banking facilities and trading for the three months ended 31 March 2020 (‘Q1-2020’).
Financing and liquidity
As well as the actions taken to protect the Group’s operations, the Board has sought additional funding and modified financial covenants applicable to its banking facilities in order to provide further financial flexibility at this time. RPS announces today that it has concluded arrangements with its existing revolving credit facility (‘RCF’) providers, as well as with Pricoa Private Capital, in respect of its US private placement notes in issue.
In addition to its existing £100.0 million committed RCF, a further £60.0 million RCF of 12 months duration has been provided by HSBC, Lloyds and NatWest, significantly increasing the available headroom for the next 12 months. Drawdown against this additional facility requires RPS to provide a number of non-UK subsidiary guarantees to the banks that will be provided shortly. Subject to this administrative matter, which is under RPS’ control, the Group has available £160.0 million of committed RCF that significantly adds to the available headroom.
RPS has also agreed new financial covenant tests that allow operational flexibility during the next 12 months. These are applicable to all RPS’ RCF facilities and US private placement notes in issue and replace existing tests. The new financial covenants include a monthly minimum threshold covenant, leverage and interest cover tests as at 31 December 2020 and 31 March 2021 but none at 30 June 2020.
This new facility and financial covenants will provide increased financial liquidity to enable RPS to navigate the challenges of the COVID-19 pandemic and take advantage of the economic recovery as it comes through.
Q1-2020 Trading Update
Fee Revenue in Q1-2020 was £125.4 million (Q1-2019: £134.3 million, £130.9 million at constant currency). RPS generates over 50% of Fee Revenue from government or quasi-government work. This, together with the rapid deployment of our business continuity plans which enabled our employees to work from home at short notice, meant RPS has moderated the impact of COVID-19 on the Group, the effects of which started to be felt in the last two weeks of March.
The main highlights of each of RPS’ business segments during Q1-2020 are:
- Energy – against a backdrop of oil price volatility, performance was stable overall with a good performance in Exploration and Development, although activity in Advisory was muted
- Consulting UK & Ireland - lower levels of activity in total, with travel restrictions and social distancing measures on client sites impacting trading in March. Northern Ireland and Ireland performed well, both benefiting from high public sector exposure
- Norway - high public sector exposure provided some resilience to COVID-19
- Services UK & Netherlands – as expected, the level of activity in Water was low ahead of the new AMP cycle due in the summer. Trading in the Netherlands was subdued due to social distancing and lower sample collection
- North America - an encouraging start with a good all-round performance. Infrastructure and Ocean Science businesses performed well, benefiting from high public sector exposure, although the Environmental Risk business was impacted by COVID-19
- Australia Asia Pacific (AAP) - Defence spending was stronger than in the prior year. As expected, the property market is at a cyclical low point and transport infrastructure has been impacted by delays in project start-ups as a result of COVID-19, as well as some disruption as staff transitioned to working from home.
Net bank borrowings at 31 March 2020 were £102.8 million (31 March 2019: £89.6 million, 31 December 2019: £94.1 million). The increase in net bank debt since the year-end arises mainly from a working capital outflow which follows the normal pattern for this time of the year, and which normally reverses in the second half of the year, as well as a £1.9 million impact from currency. The headroom in respect of committed bank facilities as at 31 March 2020 was £33.9 million, which is in addition to £20.8 million of cash held on that date and before including the additional 12 month facility of £60.0 million.
Our priority remains the welfare of our colleagues and clients. We continue to monitor government guidance in all the countries in which we operate in order to ensure the safety of our colleagues around the world as we continue to satisfy continuing client demand for our services.
As previously announced on 24 March 2020, RPS has taken prudent steps to reduce costs and contain the cash outflow. These have included cancelling the 2019 final dividend, suspending planned work on the ERP system, deferring 2020 salary increases and 2019 senior leadership bonuses and ceasing all non-essential capex and discretionary operating expenditure.
RPS continues to monitor its operations closely and actively manage its cost base. Additional measures taken since the announcement include the Board, Group Leadership Team and global Senior Leadership Group agreeing to salary reductions of 20%. In addition, a proportion of employees have agreed to either temporary reduced pay, temporary reduced hours or to be placed on furlough. RPS is also accessing government grants and other financial support mechanisms where available.
As RPS enters Q2-2020, the impact of COVID-19 on the business and our markets has increased although at this stage it is not possible to forecast the full extent. Therefore, RPS will not be providing guidance for the 2020 financial year until the duration and extent of this impact is clearer.
John Douglas, Chief Executive of RPS, commented:
“As well as safeguarding colleagues and clients, we continue to evaluate the market landscape during this period of uncertainty to ensure we are well placed to mitigate any negative impact and to be ready for the economic recovery.
“We are continuing with targeted strategic priorities as outlined in our 2020 strategy. These include pursuing our global efforts in renewables, specifically offshore wind, as well as a carefully considered roll-out of ongoing learning and development initiatives that lend themselves to working from home.
“The Board is pleased to have agreed increased committed banking facilities to provide us with more flexibility during this period. With over half of our business exposed to the public sector, we believe that we are well placed to recover in due course and are doing everything we possibly can to protect our business in the interim.”
- Ends -
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.
The above announcement contains inside information for the purpose of Article 7 of the Market Abuse Regulation.
For further information:
|RPS Group plc|
|John Douglas, Chief Executive
Gary Young, Finance Director
|Tel: +44 (0) 1235 863 206
|Henry Harrison-Topham / Chris Lane / Tilly Abraham||Tel: +44 (0) 20 7466 5000|
Notes to Editors
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.