16 March 2022
‘Delivering strong growth, improved margins, robust balance sheet.
Contracted order book up 14% on 2020, positive outlook’
RPS, a leading multi-sector global professional services firm, today announces its Final Results for the year ended 31 December 2021 (‘2021’).
|Alternative performance measures (1)|
|Fee revenue (£m)||476.1||457.3||454.3||4||5|
|Adjusted operating profit (£m)||28.3||20.5||20.2||38||40|
|Adjusted operating profit margin||5.9%||4.5%||4.4%|
|Adjusted profit before tax (£m)||21.5||13.4||13.2||60||63|
|Adjusted earnings per share (diluted) (p)||5.61||4.29||4.13||31||36|
|Cash and debt measures|
|Conversion of profit into cash (%) (1)||73%||239%||239%|
|Net bank borrowings (£m) (1)||13.5||10.8||11.9|
|Gross profit (£m)||220.1||203.8||202.2||8||9|
|Operating profit/(loss) (£m)||19.2||(24.2)||(23.3)|
|Statutory profit/(loss) before tax (£m)||12.4||(31.3)||(30.3)|
|Statutory earnings/(loss) per share (diluted) (p)||2.14||(12.83)||(12.55)|
|Dividend per share (p)||0.70||-||-|
- Strong Fee Revenue growth of 5% at constant currency as markets recovered from the global pandemic
- Adjusted Operating Profit growth of 40% and margin improved to 5.9% (2020: 4.5%, 4.4% at constant currency) with all segments delivering improved margins
- Improved segment performance and reduction in exceptional items delivered statutory profit before tax of £12.4m (2020: loss £31.3m)
- Excellent cash performance and lock up days at 31 December 2021 of 49 days (31 December 2020: 48 days). Fee Revenue growth and repayment of £9.4m of the £10.0m COVID-19 related tax deferrals, resulted in a cash conversion of 73% (2020: 239%), 91% excluding repayment of tax deferrals
- Net bank borrowings of £13.5m at 31 December 2021 (31 December 2020: £10.8m), and successful refinancing provides ability to make investment decisions for the medium term
- Net debt to EBITDAS leverage of 0.6x at 31 December 2021 (31 December 2020: 0.7x), below the bottom end of our target range of 1.0x to 2.0x
- In line with our new capital allocation policy, a final dividend of 0.44 pence per share is proposed (2020: nil pence per share) bringing the total dividend for the year to 0.70 pence per share (2020: nil pence per share)
- Trading to date in 2022 is in line with management expectations
A quality business with significant opportunity
- Increased demand for our services driven by our three thematics of urbanisation, natural resources and sustainability - delivering growth in four out of our six segments in 2021
- Improving total contracted order book (COB); up 14% (at constant currency) on December 2020
- Whilst COVID-19 lock down restrictions impacted the business at the start of 2021 these impacts are reducing and now confined to a few geographies
- Private sector sentiment is improving and creating growth opportunities in those segments with a greater exposure to private sector, notably Consulting UK & Ireland
- Continued focus on renewables which now accounts for 19% of Fee Revenue of our Energy Segment (2020: 15%), 24% growth in 2021. Other segments also work extensively in renewables, and this now represents 5% of RPS’ overall Fee Revenue, 55% growth in 2021
- Having retained capability through the pandemic, the business is now focused on recruitment and retention to drive further Fee Revenue growth
Proven ESG credentials
- Proven ESG credentials that are embedded in our purpose, promise and behaviours
- RPS is at the forefront of a global and complex shift in resource supply and consumption. The momentum towards greater renewable energy development is proving to be an exciting and rewarding opportunity for RPS with increasing Fee Revenue deriving from renewables in all segments.
- On 1 September 2021 appointed a Global Director of ESG and Sustainability
- Set ambitious path to Net Zero position in 2021 backed by verified and approved science-based targets, ensuring RPS plays its own part in delivering a low-carbon future
- Work to set out our sustainability strategy has started and will continue throughout 2022
Update on Ukraine
RPS has been closely monitoring the situation in Ukraine, including the sanctions being imposed on Russia, and are mindful of the potential impact on the economies we operate within. Our Energy segment is the only one that would have exposure to Russia or Ukraine. The business does not have any employees or offices in these locations and is not currently working in Russia. We have no plans to pursue opportunities in Russia at this time.
Commenting on the Final Results, John Douglas, Chief Executive, said:
“I am pleased with the strong financial and operational progress delivered in 2021 with the much-improved momentum in our business driving these results. Our alignment with the key thematics of urbanisation, natural resources and sustainability has driven strong demand for our services and we have continued to benefit from operating in favourable markets which are seeing significant government and private sector investment.
“As highlighted at our Capital Markets Day in November, there are significant growth opportunities where we can link our circa 5,000 colleagues with their deep expertise in high-value niche services to our areas of focus – including renewables, project management, transport infrastructure and sustainability. Previous investment has built a tighter, better business. Alongside a robust cash position and significant available debt facilities, we are well positioned to drive further growth in line with our ambition to deliver mid-single digit rates of organic revenue growth and a double-digit operating margin. Therefore, creating sustainable shared value for all our stakeholders.
”I would like to take this opportunity to thank our employees for their focus and hard work in 2021. As we move ahead, we remain committed to making RPS a great place to do great work.”
(1) 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, adjusted operating profit, amounts labelled ‘at constant currency’, EBITDAS, conversion of profit into cash, net bank borrowings, leverage, and contracted order book. For further details of their purpose, definition and reconciliation to the equivalent statutory measures see note 2.
An analyst presentation will be held via video webcast at 9.30am today. To participate, please contact Buchanan via [email protected] to request joining details. A recording of the presentation will be available later today at the RPS website, www.rpsgroup.com.
|RPS Group plc|
|John Douglas, Chief Executive||Today: +44 (0) 20 7466 5000|
|Judith Cottrell, Group Finance Director||Thereafter: +44 (0) 1235 863 206|
|Henry Harrison-Topham / Chris Lane / Tilly Abraham||Tel: +44 (0) 20 7466 5000|
Founded in 1970 and built on a legacy of environmental and social engagement, RPS is a diversified global professional services firm of circa 5,000 consultants, designers, planners, engineers, and technical specialists.
As an established technology enabled consultancy, RPS provides specialist services to government and private sector clients.
RPS creates shared value for all stakeholders. Focusing on natural resources, urbanisation, and sustainability, RPS concentrates its expertise on the parts of project lifecycles that have the biggest impact on project outcomes. Solving problems that matter in a complex, urbanising, resource-scarce world.
Listed on the Main Market of the London Stock Exchange (LSE: RPS.L), RPS is classified within the Professional Business Support Services subsector.
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.
The above announcement contains inside information for the purpose of Article 7 of the Market Abuse Regulation.
Next trading update: RPS will announce a Q1-2022 trading update in late April 2022.
Revenue for 2021 grew by 4% at constant currency to £560.4m (2020: £542.1m, £537.8m at constant currency). Our key performance measure of Fee Revenue for 2021 was £476.1m (2020: £457.3m, £454.3m at constant currency). The growth in Revenue is being driven by the Fee Revenue growth as discussed below. The Group made a statutory operating profit of £19.2m (2020: loss £24.2m) and a statutory profit before tax of £12.4m (2020: loss £31.3m, £30.3m at constant currency) as business performance improved and exceptional items reduced on 2020. The profit performance of the business is measured using Adjusted Operating Profit. During 2021, the growth in Fee Revenue and recovering margins meant Adjusted Operating Profit grew by 40% at constant currency to £28.3m (2020: £20.5m, £20.2m at constant currency). The trading performance of the Group by segment is summarised in the tables below.
The effective tax rate for the year on adjusted profit before tax (PBT) is 27.9% (2020: 22.4%). In 2020 the tax rate was distorted by the impacts of COVID-19, including carry back of losses and a change in mix of profit by tax jurisdiction with different jurisdictions facing differing COVID-19 impacts. The tax rate is now returning to more normal levels. The increase in effective tax rate is mainly due to the impact of carrying back US losses in 2020 under the US CARES Act and an increase in tax provisions for potential overseas tax exposures. The increase was partly offset by updating the rate used for UK deferred balances to the rate that is effective from April 2023. Our underlying tax rate prior to these adjustments reduced in the year due to a reduction in the proportion of taxable profit from higher rate tax jurisdictions, mainly Australia.
The statutory tax charge for the year was £6.5m (2020 credit: £0.2m) on a profit before tax of £12.4m (2020 loss before tax: £31.3m). The effect of tax on the impairment of goodwill incurred in 2020 of £25.9m was £nil.
Adjusted diluted EPS was 5.61p (2020: 4.29p, 4.13p at constant currency), an increase of 36% over last year at constant currency. The Board considers that adjusted EPS, which is statutory EPS excluding exceptional items and amortisation of intangible assets and transaction-related costs and the tax thereon, provides a useful indication of performance and trends over time. Statutory diluted EPS was 2.14p (2020: loss per share 12.83p, 12.55p at constant currency).
Profit in 2021 saw a marginal impact from exchange movements on the conversion of overseas results in comparison to 2020. Adjusted profit before tax (PBT) in 2021 would have been £0.3m higher than reported had 2020 exchange rates been repeated in 2021. The Adjusted PBT in 2020 would have been £0.2m lower than reported if 2021 exchange rates had prevailed in 2020. The statutory loss before tax in 2020 would have been £1.0m lower than reported if 2021 exchange rates had prevailed in 2020.
Contracted order book up 14% on 2020, well positioned for growth
Good momentum in the business as the year progressed was supported by the structural tailwinds and the retention of the workforce through COVID-19. Total contracted order book (COB) was up 14% on December 2020 at constant currency with good growth in three out of our six segments. Of the remaining three segments, both Energy and North America secured some key wins in December 2021, which are being converted into COB as contracts are signed in early Q1 2022. As a result, in Energy COB at the end of January 2022 was up 20% on December 2020 and in North America the COB plus won not yet in contract at end of December 2021 was broadly flat on December 2020. In Services UK & Netherlands, COB is growing with the exception of Water Operations where the business contracts through long-term contracts and hence COB reduces as these contracts are worked and experiences large increases when new contracts are awarded. The COB growth, coupled with a 5% increase in available headcount compared to December 2020, ensures we are well positioned to deliver future Fee Revenue growth.
|COB growth (compared to December 2020 at constant currency)||Headcount growth (compared to December 2020)|
|Consulting UK & Ireland||27%||5%|
|Services UK & Netherlands||-8%||-6%|
|Australia Asia Pacific||24%||13%|
Fee Revenue recovering as markets emerge from the global pandemic, Fee Revenue up 5% on 2020
|Consulting UK & Ireland||115.1||108.0||107.0|
|Services UK & Netherlands||87.3||85.7||84.5|
|Australia Asia Pacific||104.7||92.9||94.2|
Performance for the period under review was in line with the Board’s expectations, with Fee Revenue growth and adjusted operating profit margins improving. The positive trends in our markets and improved business momentum that we signalled in the H1-2021 results continued into H2-2021.
Full year Fee Revenue of £476.1m was up 5% (at constant currency) on the prior year. Whilst the impact of COVID-19 diminished in 2021 compared to 2020 some markets in which we operate continue to be impacted by lockdown restrictions. RPS generates circa 55% of Fee Revenue from government or quasi-government organisations, which provided some resilience to the ongoing impact of COVID-19 in our segments.
Urbanisation trends continue to drive strong demand for our services. Increased UK private sector confidence, buoyant property markets and government spending on urbanisation and transport infrastructure projects is driving demand for our services and good Fee Revenue growth in Consulting UK & Ireland and Australia Asia Pacific. Growth in these segments is also being supported by increased market demand for our environmental and ESG offerings.
With an increase in government and private sector funded projects in urbanisation, transport infrastructure and sustainability we are delivering good growth in Fee Revenue in project management in Norway and Australia Asia Pacific.
Demand for natural resources is supporting growth in parts of our Energy and Services UK & Netherlands segments. In Energy, Fee Revenue from renewables grew by 24% while activity in gas and oil remains subdued despite oil price increases. However, demand for conventional energy is expected to continue and we expect activity levels in this area to pick up. The UK AMP cycle has continued to ramp up during 2021 and underpinned Fee Revenue growth in the UK part of our Services UK & Netherlands business. Whilst demand remains strong for our service offerings in Netherlands, increased COVID-19 restrictions at various times during 2021 impacted our property and laboratory businesses.
Strong market drivers of sustainability and ESG, alongside ongoing Private Equity transactions, have driven organic Fee Revenue growth in our North American Environmental Risk business and Consulting UK and Ireland. Overall, Fee Revenue in our North America segment is down due to the closure of less profitable business streams in 2020 and some delay in the year of the activation of government projects awarded to our Infrastructure division.
Adjusted Operating Profit up 38% on 2020, adjusted operating profit margin improving
|£m||2021||2020||2020 at constant currency|
|Consulting UK & Ireland||9.0||6.3||6.2|
|Services UK & Netherlands||6.9||5.4||5.4|
|Australia Asia Pacific||10.8||8.2||8.2|
|Total segment profit||40.1||31.8||31.5|
|Adjusted operating profit||28.3||20.5||20.2|
Improving Fee Revenue, recovering gross margins and benefits from the restructuring we undertook in 2020 are delivering improving margins across all segments. In Energy, our flexible associate cost base enables us to manage costs and mitigate the impact of lower revenue. At constant currency, Segment profit increased by £8.6m at constant currency to £40.1m (2020: £31.8m, £31.5m constant currency) and profit margin improved from 7.0% in 2020 to 8.4%.
Unallocated costs were higher in 2021 due to continued investment in functions and the relaxing of COVID-19 cost reduction measures initiated in 2020 but remain at 2.5% of Fee Revenue.
Exceptional items of £5.3m have been recognised in 2021 (2020: £39.2m), of which £2.8m are non-cash. The exceptional items are detailed in note 5 to the financial statements and include:
|Restructuring costs||2.8||6.0||Costs arising from actions taken in light of the pandemic to align our operating model to the new environment. These include closure of offices with surplus space resulting in an impairment of right-of-use assets and onerous contract provisions for associated property costs and, in 2020, limited redundancy costs. Offsetting the costs in 2021 is the release of property provisions made in 2020 where the property was successfully sublet in 2021.|
|ERP costs||1.7||2.2||Change management and data migration costs for ongoing roll-out of the ERP plus costs of stabilising the 2019 pilot rollouts including removal of the Hitachi Essentials solution.|
|Legal fees||0.8||1.8||Legal fees investigating potential issues regarding the administration of US government contracts and/or projects. The investigation is ongoing. This matter is disclosed as a contingent liability in note 16 to the financial statements.|
|Loss on divestment||-||0.4||Divestment of Specialist Geology in 2020.|
|Impairment of goodwill||-||25.9||Impairment of goodwill in 2020 in Consulting UK and Ireland and North America due to the impact of the COVID-19 pandemic.|
|Impairment of ERP||-||2.9||Impairment in 2020 in respect of those parts of the system that are no longer part of the global design following the removal of Hitachi Essentials.|
We anticipate that exceptional costs will be incurred in 2022 associated with the continued rollout of the ERP system and ongoing legal fees in respect of the US government contracts investigation.
Amortisation of intangible assets and transaction-related costs
Amortisation of intangible assets and transaction-related costs totalled £3.8m (2020: £5.5m). Included in this total is amortisation of acquired intangibles £3.8m (2020: £5.5m), and acquisition related third-party transaction costs of £nil (2020: £nil).
Robust balance sheet, net bank borrowings at 31 December 2021 of £13.5m and low leverage at 0.6 times EBITDAS
During the 12-month period, as the business emerged out of COVID-19, investment recommenced in capital projects and in growing revenues. This investment, alongside the payment of £9.4m of sales and payroll taxes deferred in 2020 under government COVID-19 schemes, resulted in net bank borrowings rising by £2.7m to £13.5m at 31 December 2021 (31 December 2020: £10.8m).
Net cash from operating activities was £24.7m (2020: £84.0m). Our conversion of operating profit into operating cash was lower than historic norms at 73% (2020: 239%). Despite the significant focus on billing and collections, working capital increased as revenue grew 3% and we also paid £9.4m of sales and payroll taxes that had been deferred under government COVID-19 schemes. Lock-up days at the end of December 2021 remained low at best-in-class levels of 49 days compared to 48 days at the end of 2020 and 69 days at the end of 2019. Our continued focus on billing and collections is demonstrated by average lock-up days for the year of 57 days for 2021 compared to 65 days for 2020.
Net cash used in investing activities was £13.2m (2020: £9.7m), with the increase due to higher capital expenditure of £10.4m (2020: £7.8m) and the proceeds on the divestment of Specialist Geology received in 2020. The capital expenditure figure includes £0.9m (2020: £2.5m) invested in our new ERP system.
Deferred consideration outstanding at the year end reduced to £2.6m (31 December 2020: £5.8m).
The amount paid in respect of dividends was £0.7m (2020: £nil) reflecting the reinstatement of dividends with the 2021 interim dividend. In 2020, included within financing activities were the £19.4m net proceeds of the September 2020 share placing.
Our leverage (being net bank borrowings plus deferred consideration expressed as a percentage of adjusted EBITDAS) at the year end was 0.6x (31 December 2020: 0.7x) compared to our target operating range of 1.0x to 2.0x. We expect this will increase during 2021 to within our target operating range of 1.0x to 2.0x as we invest in growing the business. The bank covenant limit that applies to all our facilities is 3.0x.
Net finance costs were £6.8m (2020: £7.1m), which includes £1.7m in respect of IFRS 16 (2020: £1.9m). The reduction in net financing costs reflects the lower levels of net bank borrowings over the year and a reduction in the margins on our recently secured long term debt.
Total borrowings net of cash of £50.4m at 31 December 2021 (31 December 2020: £59.7m) comprised cash and cash equivalents of £40.1m (2020: £43.2m), borrowings and overdrafts net of capitalised debt issuance costs of £53.6m (2020: £54.0m), and IFRS 16 lease liabilities of £36.9m (2020: £48.9m).
In September 2021 the Group secured new 7-year term loans of £25.0m from Aviva Investors and £30.0m from Legal and General Investment Management. These loans represent the Group’s core debt with £42.5m at fixed interest rates between 3.56% and 3.57% and the remainder at 2.75% above SONIA.
The Group’s main banking facility is a committed multi-currency revolving credit facility (RCF) with Lloyds, HSBC, and NatWest totalling £100m which expires in July 2024. This attracts interest at variable rates, depending on the Group’s leverage.
The amount drawn under the facility at the year end was £nil resulting in headroom of £100m.
In response to COVID-19 the Group suspended dividend payments in 2020 and cancelled the 2019 final dividend. With the improving market conditions and growth in the business, the Group reinstated dividends in 2021 with a modest interim dividend of 0.26p per share (£0.7m was paid on 8 October 2021).
The Board has declared a final dividend of 0.44p per share (£1.2m) (2020: nil) which will be paid on 20 May 2022 to holders of ordinary shares on the Company’s register of members at the close of business on 22 April 2022, subject to approval at the Annual General Meeting on 26 April 2022. This aligns with the Group’s recently announced capital allocation policy and reflects the Board’s desire to return to paying dividends to shareholders balanced with the need to retain capital in the business to capitalise on organic and acquisitive growth opportunities. In the medium term, the Board intends to return to a sustainable dividend pay-out of circa 30% of earnings pre amortisation.
Sustainability at RPS
To better respond to emerging global challenges and stakeholder requirements, an internal Environmental-Social-Governance (ESG) and Sustainability team was appointed in 2021. The team is responsible for setting Group strategy, engagement, and direction on operational sustainability, ESG and reporting.
RPS is taking a fresh look and re-evaluating our position with a view to strengthening our ESG credentials. An accelerated climate change action plan for our own operations has been drawn up and an ambitious Net Zero position and science-based targets marking out our path in delivering a low-carbon future are in place.
|2021||2020||2020 at constant currency|
|Fee Revenue (£m)||71.5||75.7||74.5|
|Segment profit (£m)||4.8||4.5||4.3|
|Profit margin (%)||6.7||5.9||5.8|
Fee Revenue in Energy was down 4% at constant currency against a backdrop of a very strong Q1-2020, but margins improved, which delivered a 12% growth in segment profit at constant currency. From Q2-2021 onwards Fee Revenue has grown on the prior year and improved quarter on quarter. Activity in gas and oil was subdued despite the increased oil prices with weakness in conventional met ocean programmes and seismic exploration services. However, the diverse nature of our operations business, with strong demand in protected species observations and unexploded ordnance activities, coupled with our variable associates model, delivered improved profitability.
Demand for renewables remains strong, but COVID-19-related travel restrictions did impact delivery of projects in 2021. During 2021 we continued to increase our exposure to renewables with 24% growth in Fee Revenue. Renewables now account for 19% of Fee Revenue in 2021 compared to 15% in 2020, thereby continuing to reduce the segment’s dependence on oil and fossil fuels.
Energy maintained its capability through 2020 and 2021 and is well placed to capitalise on the opportunities from energy transition. Renewable energy opportunities now form a consistent share of the segment’s fees and profits and there is an expectation of increased activity in traditional energy exploration projects through 2022. Several awards at the year end provide reliable expectations of improved performance in 2022.
Consulting UK & Ireland
|2021||2020||2020 at constant currency|
|Fee Revenue (£m)||115.1||108.0||107.0|
|Segment profit (£m)||9.0||6.3||6.2|
|Profit margin (%)||7.8||5.8||5.8|
Fee Revenue growth of 8% and strong margin improvement delivered 45% growth in segment profit at constant currency. Strong public sector demand continued into 2021 and improved private sector sentiment drove a significant increase in private sector projects in H2-2021. The market drivers of urbanisation and sustainability are delivering good growth in our sectors, especially in logistics, data centres and health. Planning approvals in the UK residential market are now back to 2019 levels.
With pricing keeping pace with construction inflation, and improved operational leverage and efficiency coming through, the Consulting segment has improved profit margins.
Demand is expected to continue across all sectors, with strong growth expected in our key focus areas of residential, logistics, data centres and health. Recruitment and retention are the key focus to deliver further growth and our talent attraction strategy, which builds on a strong employee value proposition, is increasing application rates.
Services UK & Netherlands
|2021||2020||2020 at constant currency|
|Fee Revenue (£m)||87.3||85.7||84.5|
|Segment profit (£m)||6.9||5.4||5.4|
|Profit margin (%)||7.9||6.3||6.4|
The current AMP7 UK water cycle goals are driving good demand for our consultancy, operational and digital services. The ramp up of the AMP7 water cycle as well as increased activity in our UK Health and Labs businesses as COVID-19 restrictions eased, delivered over 6% Fee Revenue growth within Services UK. The performance in Netherlands, where COVID-19 restrictions have been tighter than in 2020, has been more muted, with lower activity in our property inspection and laboratory businesses. When restrictions eased in Q3-2021 activity levels improved but then subsided in Q4-2021 as tighter lock down restrictions were imposed once more. Overall, Fee Revenue for the segment grew by 3% at constant currency.
Growth in Fee Revenue in our higher margin consultancy and digital services, coupled with strong control of overhead costs, has delivered an improvement in segment profit margins and 28% growth in segment profit at constant currency.
Continued growth is expected across our UK markets and, in Netherlands, demand for our services remains strong with Fee Revenue expected to recover as lock down restrictions ease. The segment is well positioned to exploit growing markets in flooding, pollution, and drainage, with recruitment being the biggest challenge as market demand increases.
|2021||2020||2020 at constant currency|
|Fee Revenue (£m)||61.9||56.0||57.5|
|Segment profit (£m)||5.1||4.5||4.7|
|Profit margin (%)||8.2||8.0||8.2|
Strong demand for our consultancy services has delivered 8% Fee Revenue growth at constant currency, notwithstanding the ongoing impact of COVID-19 lockdown restrictions on the training and software parts of the business. The business has retained its market leading position within Project and Program Management in Norway, enabling it to maintain its position in the stable public sector and increase market share in the private sector.
A strong focus on cost control enabled the business to hold profit margins and deliver good segment profit growth of 9% at constant currency.
COVID-19 has continued to impact the business at the start of 2022, but activity and investment levels remain stable in the public sector and growth opportunities exist in the private sector. The segment is well placed to benefit from this as well as from new opportunities in emerging markets such as renewables and green technology.
|2021||2020||2020 at constant currency|
|Fee Revenue (£m)||35.6||39.0||36.6|
|Segment profit (£m)||3.5||2.9||2.7|
|Profit margin (%)||9.8||7.4||7.4|
Streamlining of the portfolio in 2020 resulted in a reduction of Fee Revenue but improved profit margins as the business exited less profitable business streams. With increased government funding in infrastructure there is good demand for our services but delays in the release of projects and public spending in H1-2021 impacted our Infrastructure business, although this began to recover in Q4. Sustainability market drivers leading to growing demand for ESG and compliance services, together with a robust private equity market, benefited our Environment Risk division. In Ocean Science, good growth in renewables partially mitigated the impact on Fee Revenue of subdued gas and oil activity. Overall, Fee Revenue was down 3% at constant currency but segment profit grew by 30% at constant currency.
The US economy has returned to pre-pandemic output with continued growth forecast in 2022, which is providing a favourable environment for private sector investment. Public sector spending on infrastructure is also expected to grow. As a result, demand for our services is expected to remain strong in 2022. However, wage inflation and a tight labour market will result in continued recruitment and retention challenges that will need to be carefully managed.
Australia Asia Pacific
|2021||2020||2020 at constant currency|
|Fee Revenue (£m)||104.7||92.9||94.2|
|Segment profit (£m)||10.8||8.2||8.2|
|Profit margin (%)||10.3||8.8||8.7|
Excellent Fee Revenue growth of 11% at constant currency on the back of continued strong government spending in defence and transport infrastructure and a buoyant property market. There is also growing demand for end to end advisory and project management services in major government programmes and projects. Within the private sector, confidence in renewable energy investments delivered growth in regulatory approval fees and the residential property market was stronger than expected.
Growth in Fee Revenue and a focus on operational efficiency delivered a 32% increase in segment profit at constant currency with segment profit margins now exceeding 10%.
Whilst there is some uncertainty from government elections in 2022, the order book is strong and the key to growth will be the ability to recruit and retain in a constrained and competitive labour market.
Our investment to date in people, clients and connectivity has strengthened the business and provides a stronger platform from which to deliver growth. 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 total COB at 31 December 2021 was up 14% on 31 December 2020. The growth in COB in Australia Asia Pacific, Consulting UK & Ireland, and Norway is encouraging for 2022. The COB remains solid in North America and Energy, with key win notifications in December not reflected in the COB. Since the year end, many of these wins are now in contract with Energy COB up 20% on December 2020. In Services UK & Netherlands, COB is impacted by the nature of the framework agreements in the water sector where COB reduces over the period of the framework, but underlying workload remains good.
The Group will continue to benefit from operating in favourable geographies, government investment and a global sustainability focus as well as the recovering confidence in the UK. There remain significant growth opportunities in our areas of focus – renewables, project management, transport infrastructure and sustainability.
Trading to date in 2022 is in line with management expectations. The key challenges in 2022 will be managing the impact of inflationary pressures on our business and our ability to pass these increases onto clients as well as our focus on recruitment and retention to drive continued Fee Revenue growth. While the disruption of COVID-19 has reduced in most jurisdictions some limited impact may continue into 2022. Nevertheless, we will continue to demonstrate the resilience of our business by managing uncertainty and taking advantage of opportunities as they arise.
With a strong cash position and significant available debt facilities, RPS is well placed to capitalise on the organic growth opportunities that are clearly available and invest in selective acquisitions. Net bank borrowings are expected to increase in 2022 as the working capital benefits of 2020 continue to unwind and as the Group continues to grow organically. However, the recent refinancing will provide significant liquidity and leverage is expected to be comfortably within the target range.
Board of Directors
RPS Group plc
15 March 2022
Consolidated income statement
|Less: passthrough costs||2, 3||(84.3)||(84.8)|
|Fee revenue||2, 3||476.1||457.3|
|Cost of sales||(256.0)||(253.5)|
|Adjusted administrative expenses||2||(191.8)||(183.3)|
|Amortisation of acquired intangibles and transaction-related costs||2, 4||(3.8)||(5.5)|
|Exceptional items||2, 5||(5.3)||(39.2)|
|Adjusted operating profit||2, 3||28.3||20.5|
|Adjusted profit before tax||2||21.5||13.4|
|Profit/(loss) before tax||12.4||(31.3)|
|Profit/(loss) for the year attributable to equity holders of the parent||5.9||(31.1)|
|Basic earnings/(loss) per share (pence)||8||2.17||(12.95)|
|Diluted earnings/(loss) per share (pence)||8||2.14||(12.83)|
|Adjusted basic earnings per share (pence)||2, 8||5.70||4.33|
|Adjusted diluted earnings per share (pence)||2, 8||5.61||4.29|
Consolidated statement of comprehensive income
|Profit/(loss) for the year||5.9||(31.1)|
|Actuarial gains and losses on remeasurement of defined benefit pension scheme|| |
|Tax on share schemes||0.2||-|
|Cumulative foreign exchange differences reclassified to profit or loss on cessation of foreign operations|| |
|Foreign exchange differences on translation of foreign operations||(9.0)||8.9|
|Other comprehensive (expense)/income||(8.8)||8.8|
|Total recognised comprehensive expense for the year attributable to equity holders of the parent|| |
Consolidated balance sheet
|As at |
|Property, plant and equipment||27.1||28.5|
|Deferred tax asset||13.0||11.2|
|Trade and other receivables||10||159.8||130.8|
|Corporation tax receivable||0.5||2.4|
|Cash at bank||40.1||43.2|
|Trade and other payables||11||129.9||129.2|
|Corporation tax liability||3.6||3.0|
|Net current assets/(liabilities)||31.7||(29.4)|
|Deferred tax liability||8.4||8.4|
|Total shareholders’ equity||348.6||349.0|
Consolidated cash flow statement
|Net cash from operating activities||13||24.7||84.0|
|Cash flows from investing activities:|
|Purchase of property, plant and equipment||(9.3)||(5.0)|
|Purchase of intangible assets||(1.1)||(2.8)|
|Proceeds from sale of assets||0.3||0.4|
|Proceeds from sale of business||-||0.7|
|Net cash used in investing activities||(13.2)||(9.7)|
|Cash flows from financing activities:|
|Proceeds from issue of share capital||-||19.4|
|Net repayment of bank borrowings||-||(55.4)|
|Repayment of US loan notes||(54.8)||-|
|Proceeds from term loans||55.0||-|
|Payment of bank arrangement fees||(1.6)||(1.0)|
|Payment of lease liabilities||(10.5)||(11.0)|
|Net cash used in financing activities||(12.6)||(48.0)|
|Net (decrease)/increase in cash and cash equivalents||(1.1)||26.3|
|Cash and cash equivalents at beginning of year||43.2||16.4|
|Effect of exchange rate fluctuations||(2.0)||0.5|
|Cash and cash equivalents at end of year||40.1||43.2|
|Cash and cash equivalents comprise:|
|Cash at bank||13||40.1||43.2|
|Cash and cash equivalents at end of year||40.1||43.2|
Consolidated statement of changes in equity
|At 1 January 2020||6.8||121.9||195.7||21.2||(10.1)||13.0||348.5|
|Loss for the year||-||-||(31.1)||-||-||-||(31.1)|
|Other comprehensive (expense)/ income||-||-||(0.1)||-||-||8.9||8.8|
|Total comprehensive (expense)/ income for the year||-||-||(31.2)||-||-||8.9||(22.3)|
|Issue of new ordinary shares||1.5||3.4||(0.9)||17.5||(2.1)||-||19.4|
|Share-based payment expense||-||-||3.4||-||-||-||3.4|
|Transfer on release of shares||-||-||(0.7)||-||0.7||-||-|
|At 31 December 2020||8.3||125.3||166.3||38.7||(11.5)||21.9||349.0|
|Profit for the year||-||-||5.9||-||-||-||5.9|
|Other comprehensive expense||-||-||-||-||-||(8.8)||(8.8)|
|Total comprehensive income/(expense) for the year||-||-||5.9||-||-||(8.8)||(2.9)|
|Issue of new ordinary shares||-||0.8||(0.6)||-||(0.2)||-||-|
|Share-based payment expense||-||-||3.2||-||-||-||3.2|
|Transfer on release of shares||-||-||(0.9)||-||0.9||-||-|
|At 31 December 2021||8.3||126.1||173.2||38.7||(10.8)||13.1||348.6|