Q1-2021 Trading Update
28 April 2021
‘Improving trading and continued strong cash management in line with Board expectations.
RPS is well positioned to capitalise on market recovery.’
RPS, a leading multi-sector global professional services firm, provides the following trading update for the quarter ended 2 April 2021 (‘Q1-2021’ or the ‘period’) ahead of its Annual General Meeting being held later today.
Performance for the period was in line with the Board’s expectations with Fee Revenue on an improving trajectory and continued focus on margins. Fee Revenue in Q1-2021 was £117.5 million (Q1-2020: £125.4 million, £127.3 million at constant currency), lower by 8% (at constant currency) against a strong comparator of Q1-2020, which was largely prior to the onset of the impact of COVID-19.
The improving trajectory in Fee Revenue shows a continuing sequential recovery at constant currency from the peak of the pandemic, with Q2-2020 (£107.0 million) 18% below the prior year, Q3-2020 (£109.0 million) 16% below the prior year and
Q4-2020 (£115.8 million) 12% below the prior year.
Commentary on the Group’s segments during Q1-2021, using constant currency comparisons, is provided below:
- Energy – Q1-2021 Fee Revenue, whilst down 34% on an exceptionally strong Q1-2020 (Q4-2020 35% down on the prior year), was in line with management expectations. Current activity remains heavily impacted by continued global travel restrictions and costs continue to be well managed through our variable associate cost structure. Once restrictions lift, the business is well positioned for recovery, supported by an encouraging order book and growing pipeline, which is partly driven by increasing activity in offshore wind
- Consulting UK & Ireland – Fee Revenue continued its positive trajectory with Q1-2021 only 5% down on Q1-2020 (Q4-2020 16% down on the prior year). The pipeline of Carbon Net Zero and Data Centre projects is growing and there is improving market sentiment in UK construction which is starting to drive increasing demand for our services
- Services UK & Netherlands – Fee Revenue up 2% in Q1-2021 versus Q1-2020 (Q4-2020 4% up on the prior year) on the back of an ongoing ramp up of activity under the new AMP cycle in the UK water division. In the Netherlands, recent national elections and lockdown restrictions negatively impacted Fee Revenue
- Norway – Fee Revenue was flat Q1-2021 on Q1-2020, benefitting from good public sector exposure, where activity and investment levels remain strong, alongside increasing wins in renewables and green technology. COVID-19 restrictions continue to apply in Norway
- North America – improving trajectory with Fee Revenue for the period down by 12% on Q1-2020 (Q4-2020 down 15% on the prior year). This was an encouraging result given the strong performance in Q1-2020 and the impact of severe weather conditions in Texas on our Infrastructure division in Q1-2021, as well as the loss of revenue streams arising from reorganisation activity during 2020. Profit margins continue to improve, driven by the reorganisation and increased efficiency
- Australia Asia Pacific (AAP) – continued to perform well in the period with Fee Revenue up 2% against Q1-2020 (Q4-2020 down 4% on the prior year) as a result of our public sector exposure in Defence and Transport Infrastructure and the residential property sector holding up better than expected
Cashflow continues to be strongly managed with net bank borrowings at 2 April 2021 of £31.3 million (31 March 2020: £102.8 million; 31 December 2020: £10.8 million). The increase in the current year is in accordance with expectations outlined in the Group’s 2020 Final Results, as Fee Revenue growth returns, lock up days normalise and tax deferrals are paid. Lock up days at 2 April 2021 were 59 (31 March 2020: 70 days, 31 December 2020: 48 days). Deferred payroll and sales taxes of £3.1 million were repaid in the quarter with £6.9 million outstanding at 2 April 2021.
With continued strong cash management and improved trading, financial leverage of Net Debt/rolling 12-month EBITDA is 1.3x as at 2 April 2021, comfortably within the Group’s target range of 1.0x to 2.0x.
The Group continues to have significant headroom in respect of the committed bank facilities. As at 2 April 2021 headroom was £160.0 million, which is in addition to £22.6 million of cash held on that date.
Despite the impact of ongoing restrictions caused by COVID-19, RPS remains well positioned to benefit as markets continue to recover and restrictions are eased in the coming months. With a healthy Contracted Order Book, the improving trajectory in Fee Revenue demonstrated to date is expected to continue into Q2-2021 and margins are expected to improve on the prior year.
John Douglas, Chief Executive of RPS, said:
“This is a reassuring trading performance with Fee Revenue trajectory improving as expected. Given the limited impact of the pandemic on Q1-2020, which only affected operations from mid-March onwards, we see this quarter as the toughest year on
year comparator for RPS in 2021. Our margin performance is in line with our expectations, and debt continues to be very well managed.
“The performance for the first quarter of 2021 demonstrates the underlying health of the business. RPS remains well placed to benefit from market conditions as they continue to improve and from a growing renewables market. Although, activities in certain areas such as the Netherlands and Energy continue to be impacted by the pandemic, others such as AAP should continue to perform well. We are confident that in the remaining quarters in 2021, the Group will show year on year growth.”
- 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.