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2020

Half Year Results for the six months ended 30 June 2013

01 August 2013

Half Year Results for the six months ended 30 June 2013

PBTA slightly ahead. Financial position remains strong. Interim dividend increased 15% for 20th consecutive year. Acquisition pipeline encouraging. On track for full year.

2013 2012
Business Performance H1 H1
Revenue (£m) 280.9 276.1
Fee income (£m) 241.8 238.3
PBTA (1) (£m) 30.2 30.0
Adjusted earnings per share (2)(basic) (p) 9.81 9.80
Adjusted operating cash flow (£m) (3) 33.8 31.2
Dividend per share (p) 3.52 3.06
Profit before tax (£m) 21.0 19.9
Earnings per share (basic) (p) 6.53 5.68
Operating cash flow (£m) 29.6 25.0

(1) PBTA is profit before tax, amortisation of acquired intangibles and transaction related costs.
(2) Adjusted earnings per share is before amortisation of acquired intangibles and transaction related costs and the related tax.
(3) Adjusted operating cash flow is before deferred consideration treated as remuneration.

Brook Land, Chairman, commenting on the results, said:

"RPS has delivered a creditable result for the first half of 2013. Once again our conversion of profit into cash has been strong. We have increased the Interim dividend by 15% for the 20th consecutive year.

With our flexible and robust business model, the Board believes RPS is likely to deliver growth for the full year. Our acquisition pipeline also gives us further cause for optimism.".

1 August 2013

 

ENQUIRIES
RPS Group plc Today: 020 7457 2020
Dr Alan Hearne, Chief Executive Thereafter: 01235 863206
Gary Young, Finance Director
College Hill
Matthew Smallwood Tel: 020 7457 2020
Justine Warren

 

RPS is an international consultancy providing advice upon the development of natural resources, land and property, the management of the environment and the health and safety of people. We have offices in the UK, Ireland, the Netherlands, the Americas and Australia Asia Pacific ("AAP") 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.

 

Results

Profit (before tax, amortisation of acquired intangibles and transaction related costs) was £30.2 million (2012: £30.0 million). Basic earnings per share (before amortisation and transaction related costs) were 9.81 pence (2012: 9.80 pence). The contribution of the 2 segments was:

Underlying Profit(£m)* 2013 2012
H1 H1
Energy 21.5 19.1
Built and Natural Environment 14.1 16.1
Total 35.7 35.2

* as defined in note 3, stated before reorganisation costs of £1.1m (2012: £0.4m)

Group central costs were £3.4 million, a reduction of 13% over the same period last year. Finance charges remained constant at £1.0 million.

Cash Flow, Funding and Dividend

Our conversion of profit into cash continued at an encouraging level and our balance sheet remains strong. After funding acquisition investment of £15.4 million in the period, net bank borrowings at 30 June were £20.7 million (30 June 2012: £20.5 million). Following the period end we funded the initial consideration of £2.6 million related to the acquisition of Asia Pacific ASA Pty Ltd ("APASA").

We have in place a £125 million facility with Lloyds Banking Group until July 2016. This comprises £75 million of committed revolving credit facility, with an additional £50 million available as required.

The Board remains confident about the Group's financial strength and has, for the 20th consecutive year, increased the interim dividend by about 15% to 3.52 pence per share (2012: 3.06 pence) payable on 17 October 2013 to shareholders on the register on 20 September 2013.

Acquisitions

On 16 January 2013 we announced the acquisition of PEICE, a Canadian based training business in the oil and gas sector, for a maximum consideration of £7.4 million. We have made good progress integrating PEICE with our existing training activities in the energy market.

On 19 April 2013 we announced the acquisition of Knowledge Reservoir Inc ("KR"), a reservoir engineering and geosciences consulting firm headquartered in Houston, for a maximum consideration of £12.0 million net of cash inherited. The US element of the business has traded well and we are close to finalising the reorganisation of the KR businesses in London, Oman and Kuala Lumpur.

On 18 July 2013 we announced the acquisition of APASA for a maximum consideration of £5.2 million. This is the sister company of ASA, the international oceanographic consultancy business we brought into the Group in 2011. Our international oceanographic capability has grown steadily in recent years, serving a market which remains buoyant.

Our acquisition pipeline is encouraging at the moment and we anticipate extending the Group's capabilities further in the next few months.

Markets and Trading

Energy

We provide internationally recognised consultancy services to the oil and gas exploration and production industry from bases in the UK, USA, Canada and AAP. These act as regional centres for projects undertaken in many other countries.

The first half delivered good growth, once again with a strong margin.

2013 2012
H1 H1
Fee income (£m) 121.7 108.0
Profit* (£m) 21.5 19.1
Margin % 17.7 17.7

*as defined in note 3, stated before reorganisation costs of £0.1m (2012: £nil) costs.

Planned expenditure in the oil and gas exploration and production sector for 2013 is encouraging, in respect of both conventional and unconventional resources. Given the uncertain global economic backdrop, some clients have been understandably cautious about starting new projects, but our international presence and reputation has enabled us to benefit from the investment which has been committed in many parts of the world.

Our EAME business performed particularly well, with the US producing a solid performance, after strong growth in 2012. Our profile in the financial services sector continued to enable us to benefit from valuation and transaction related activity.

Client spend in the AAP region slowed significantly in the early months of the year, as a number dealt with both demand and cost pressures. More recently it seems to have improved. We also experienced a slow down in Canada as major potash projects moved into a phase of the development cycle in which we have less involvement. New opportunities in this sector are, however, now emerging.

Overall, this business remains on track to deliver a strong performance this year.

Built and Natural Environment ("BNE")

Within these businesses we provide a wide range of consultancy services to many aspects of the property and infrastructure development and management sectors. In recent years we have developed extensive experience in respect of the infrastructure projects necessary to bring energy resources, both conventional and renewable, to market.

Australia Asia Pacific

In BNE Australia Asia Pacific ("BNEA") we remain well positioned in both the traditional infrastructure and development markets, as well as the more recently developed energy infrastructure market. Our successful move into the offshore gas and coal seam gas/LNG market enabled this business to double in size in recent years, despite the global financial crisis.

In the second half of last year a number of natural resources projects, particularly mining and offshore gas, were delayed, whilst our clients reviewed product demand, production costs and operating efficiencies. Further delays in significant projects have been announced by our clients in the first half of this year. As a result the BNEA results for the first half of the year were significantly below the same period last year.

2013 2012
H1 H1
Fee income (£m) 46.4 47.9
Profit* (£m) 4.6 6.3
Margin % 9.9 13.1

*as defined in note 3, stated before reorganisation costs of £0.8m (2012: £0.1m)

In other sectors our clients have had to deal with the economic uncertainty resulting from the resources slowdown, as well as political volatility in the run up to the Federal election. Many have remained reasonably positive and continued to invest, but it seems clear the Australian economy is now on a lower growth trajectory.

In response to these difficult trading conditions we continue to reduce capacity and costs. These reductions have made us more efficient and competitive and should result in a better performance in the second half, provided the market does not deteriorate further.

Once recovery in resources investment gets underway, it will offer an opportunity for us to create a further period of growth. In the meantime the weakening Australian currency and lower interest rates should help deliver a rebalancing of the economy. We should benefit from this in terms of trading, although the weak dollar will adversely affect our results on consolidation. Exposure to the expected long term growth in the AAP region remains an important part of Group strategy.

Europe

Our BNE business in Europe ("BNEE") performed well, even though economic uncertainty continued to hold back some of our clients' investment. Fee and profit growth was affected by the exceptionally good performance we experienced in our UK water activities in the first half of 2012, which could not be replicated this year. The improved efficiencies resulting from actions taken previously gave rise to an increased margin, despite continuing fee rate pressure.

2013 2012
H1 H1
Fee income (£m) 74.7 83.3
Underlying Profit* (£m) 9.6 9.8
Margin % 12.8 11.8

* as defined in note 3, stated before reorganisation costs of £0.3m (2012 £0.3m)

Our strong position in the energy infrastructure market (conventional, nuclear and renewable) enabled us to win work at rates which reflect our market leading position. Some of our UK commercial development clients, particularly in the house building sector, seemed more confident than in recent years. The investment we made in relocating and expanding our laboratories in the Netherlands in 2012 is proving worthwhile, more than compensating for continuing weakness in the Dutch property development sector. Our health, safety and risk management businesses are well positioned and continued to perform well.

We still expect BNEE to deliver a 2013 result broadly the same as in 2012, although there may now be some modest upside opportunity.

Group Prospects

Our flexible and robust business model has demonstrated in recent years it is capable of producing good results in challenging circumstances. The Board remains of the view that RPS is likely to meet market expectations in 2013 and continue to deliver strong cash flow. Our acquisition pipeline also gives us cause for optimism.

Board of Directors
RPS Group plc

1 August 2013

 

Condensed consolidated income statement

Notes Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Revenue 3 280,850 276,143 555,863
Recharged expenses 3 (39,006) (37,817) (77,028)
Fee income 3 241,844 238,326 478,835
Operating profit before amortisation of acquired intangibles and transaction related costs 3,4 31,179 30,981 62,069
Amortisation of acquired intangibles and transaction related costs 4 (9,174) (10,161) (19,925)
Operating profit 22,005 20,820 42,144
Finance costs (1,006) (1,059) (2,128)
Finance income 48 95 158
Profit before tax, amortisation of acquired intangibles and transaction related costs 30,221 30,017 60,099
Profit before tax 21,047 19,856 40,174
Tax expense 5 (6,807) (7,534) (14,263)
Profit for the period attributable to equity holders of the parent 14,240 12,322 25,911
Basic earnings per share (pence) 6 6.53 5.68 11.94
Diluted earnings per share (pence) 6 6.50 5.65 11.87
Adjusted basic earnings per share (pence) 6 9.81 9.80 19.48
Adjusted diluted earnings per share (pence) 6 9.76 9.74 19.36

 

Condensed consolidated statement of comprehensive income

Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Profit for the period 14,240 12,322 25,911
Exchange differences (1,706) (2,634) (5,545)
Total recognised comprehensive income for the period attributable to equity holders of the parent 12,534 9,688 20,366

* may be reclassified subsequently to profit or loss in accordance with IFRS.

 

Condensed consolidated balance sheet

As at 30 June As at 30 June As at 31 December
£000's Notes 2013 2012 2012
Assets
Non-current assets
Intangible assets 340,408 320,911 328,440
Property, plant and equipment 7 30,200 29,925 30,632
370,608 350,836 359,072
Current assets
Trade and other receivables 162,064 172,678 159,381
Cash at bank 12,713 17,909 14,804
174,777 190,587 174,185
Liabilities
Current liabilities
Borrowings 1,474 1,554 748
Deferred consideration 11,369 8,427 7,842
Trade and other payables 98,102 103,891 101,921
Corporation tax liabilities 1,638 3,883 3,582
Provisions 2,560 4,315 2,633
115,143 122,070 116,726
Net current assets 59,634 68,517 57,459
Non-current liabilities
Borrowings 31,973 36,822 27,557
Deferred consideration 6,910 - 3,543
Other creditors 3,022 1,784 1,745
Deferred tax liabilities 6,578 10,053 8,436
Provisions 1,469 2,089 1,436
49,952 50,748 42,717
Net assets 380,290 368,605 373,814
Equity
Share capital 9 6,600 6,571 6,587
Share premium 106,922 105,140 106,198
Other reserves 10 34,839 39,631 36,070
Retained earnings 231,929 217,263 224,959
Total shareholders' equity 380,290 368,605 373,814

 

Condensed consolidated cash flow statement

Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's Notes 2013 2012 2012
Adjusted cash generated from operations 12 33,831 31,185 76,045
Deferred consideration treated as remuneration (4,204) (6,214) (9,969)
Cash generated from operations 29,627 24,971 66,076
Interest paid (1,091) (908) (2,204)
Interest received 48 95 158
Income taxes paid (11,381) (9,910) (18,162)
Net cash from operating activities 17,203 14,248 45,868
Cash flows from investing activities
Purchases of subsidiaries net of cash acquired (11,178) - (9,774)
Deferred consideration - (165) (4,130)
Purchase of property, plant and equipment (4,722) (4,661) (9,909)
Sale of property, plant and equipment 272 150 713
Dividends received - - 298
Net cash used in investing activities (15,628) (4,676) (22,802)
Cash flows from financing activities
Proceeds from issue of share capital 211 190 240
Purchase of own shares - (400) (400)
Proceeds from/(repayments of) bank borrowings 2,935 (9,050) (17,409)
Payment of finance lease liabilities (353) (579) (1,350)
Dividends paid (7,308) (6,325) (13,007)
Payment of pre-acquisition dividend (87) - (399)
Net cash used in financing activities (4,602) (16,164) (32,325)
Net (decrease)/increase in cash and cash equivalents (3,027) (6,592) (9,259)
Cash and cash equivalents at beginning of period 14,804 24,458 24,458
Effect of exchange rate fluctuations (12) (414) (395)
Cash and cash equivalents at end of period 12 11,765 17,452 14,804
Cash and cash equivalents comprise:
Cash at bank 12,713 17,909 14,804
Bank overdraft (948) (457) -
Cash and cash equivalents at end of period 11,765 17,452 14,804

 

Consolidated statement of changes in equity

£000's Share capital Share premium Retained earnings Other reserves Total equity
Changes in equity during 2013
At 1 January 2013 6,587 106,198 224,959 36,070 373,814
Total comprehensive income for the period - - 14,240 (1,706) 12,534
Issue of new ordinary shares 13 724 (1,003) (281) (547)
Release of own shares - - - 756 756
Share based payment expense - - 1,041 - 1,041
Dividends - - (7,308) - (7,308)
At 30 June 2013 6,600 106,922 231,929 34,839 380,290
Changes in equity during 2012
At 1 January 2012 6,544 103,717 210,890 43,299 364,450
Total comprehensive income for the period - - 12,322 (2,634) 9,688
Issue of new ordinary shares 27 1,423 (625) (634) 191
Purchase of own shares - - - (400) (400)
Share based payment expense - - 1,001 - 1,001
Dividends - - (6,325) - (6,325))
At 30 June 2012 (see note 1) 6,571 105,140 217,263 39,631 368,605

An analysis of other reserves is provided in Note 10.

 

Notes to the condensed consolidated financial statements

1. Basis of preparation

RPS Group Plc (the "Company") is a company domiciled in England. The condensed consolidated interim financial statements of the Company for the six months ended 30 June 2012 comprise the Company and its subsidiaries (together referred to as the "Group").

The condensed interim financial statements have been prepared using accounting policies set out in the Report and Accounts 2011 and in accordance with IAS 34. They are unaudited but have been reviewed by the Company's auditor. The results for the year end 31 December 2011 and the balance sheet as at that date are abridged from the Company's Report and Accounts 2011 which have been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters for which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.

The condensed interim financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.

In assessing the going concern basis, the directors considered the Group's business activities, the financial position of the Group and the Group's financial risk management objectives and policies. The directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future and that it is, therefore, appropriate to adopt the going concern basis in preparing the Group's interim financial statements.

Restatement

As reported in the Group's Report and Accounts 2011, our auditor at that time, Ernst & Young LLP, indicated that it did not agree with the Group's interpretation of IFRS 3 "Business Combinations" in respect of deferred consideration. They advised the Group that the deferred consideration that was contingent on continuing employment should be recognised as a remuneration charge through the Consolidated Income Statement rather than be capitalised.

The Group agreed to this revised treatment of deferred consideration which impacted the results for the six months ended 30 June 2011 in the following ways:

1. In respect of 2010 acquisitions the Group has derecognised the deferred consideration payable that was previously shown in the balance sheet on the date of acquisition of subsidiaries. The value of goodwill has been reduced by a corresponding amount since deferred consideration is no longer considered part of the cost of investment;

2. For those acquisitions in 2010 and 2011 where the fair value of the net assets acquired is greater than the consideration transferred, the Group has recognised negative goodwill through the consolidated income statement; and

3. A remuneration charge has been recognised through the consolidated income statement within "amortisation of acquired intangibles and transaction related costs" and a corresponding accrual has been recognised in the balance sheet under "deferred consideration".

The Group explained the restatement of the results for the six months ended 30 June 2011 by means of an announcement to the London Stock Exchange dated 3 May 2012. This announcement details the restatement of the income statement and the segment results for the six months ended 30 June 2011 and the balance sheet at that date.

The condensed consolidated cash flow statement for the six months ended 30th June 2011 and the year ended 31st December 2011 have been restated so that deferred consideration treated as remuneration is included within cash generated from operating activities rather than cash flows from investing activities. In addition, the total comprehensive income in the condensed consolidated statement of changes in equity in this release has been restated to reflect the above.

2. Responsibility Statement

The directors confirm that, to the best of their knowledge this condensed set of financial statements has been prepared in accordance with IAS 34 and that this Interim Report includes a fair review of the information required by DTR 4.2.4R, DTR 4.2.7R and DTR 4.2.8R.

On behalf of the Board

A. S. Hearne - Chief Executive
G. R. Young - Group Finance Director

3. Business segments

Segment information is presented in respect of the Group's business segments which are reported to the Chief Operating Decision Maker, which is identified as the main Board of Directors of RPS Group Plc. The business segment reporting format reflects the Group's management and internal structure. Inter-segment pricing is determined on an 'arm's length' basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

As announced on 3 November 2011 the Group merged Planning and Development (UK and Ireland) and Environmental Management. The 30 June 2011 results are therefore shown below on this revised basis. The Group comprises the following business segments:

Built and Natural Environment ("BNE") - consultancy services advising on all aspects of the built and natural environment including the provision of energy infrastructure, planning and development, engineering, design and surveying, environmental assessment and management and risk management. Consulting services are provided on a regional basis in Europe and Australia Asia Pacific ("AAP").

Energy ? the provision of integrated technical, commercial and project management support in the fields of geo-science, engineering and health, safety and environment on a global basis to the energy sector.

Segment results for the period ended 30 June 2013:

£000's Fees Recharged Expenses Intersegment revenue External Revenue
Built and Natural Environment
Europe 74,682 9,504 (265) 83,921
AAP 46,413 8,829 (272) 54,970
Intra BNE eliminations (52) - 52 -
Total BNE 121,043 18,333 (485) 138,891
Energy 121,738 20,834 (613) 141,959
Group eliminations (937) (161) 1,098 -
Total 241,844 39,006 - 280,850

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 9,550 (259) 9,291
APP 4,584 (759) 3,825
Total BNE 14,134 (1,018) 13,116
Energy 21,539 (126) 21,413
Total 35,673 (1,144) 34,529

Segment results for the period ended 30 June 2012:

£000's Fees Recharged expenses Intersegment revenue External revenue
Built and Natural Environment:
Europe 83,323 10,151 (719) 92,755
AAP 47,940 11,090 (101) 58,929
Intra BNE eliminations (104) (3) 107 -
Total BNE 131,159 21,238 (713) 151,684
Energy 108,024 16,646 (211) 124,459
Group eliminations (857) (67) 924 -
Total 238,326 37,817 - 276,143

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 9,825 (307) 9,518
APP 6,286 (56) 6,230
Total BNE 16,111 (363) 15,748
Energy 19,119 (43) 19,076
Total 35,230 (406) 34,824

Segment results for the year ended 31 December 2012:

£000's Fees Recharged expenses Intersegment revenue External revenue
Built and Natural Environment:
Europe 157,200 21,433 (1,301) 177,332
AAP 98,300 19,827 (786) 117,341
Intra BNE eliminations (193) (41) 234 -
Total BNE 255,307 41,219 (1,853) 294,673
Energy 225,875 36,017 (702) 261,190
Group eliminations (2,347) (208) 2,555 -
Total 478,835 77,028 - 555,863

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 18,874 (754) 18,120
APP 12,974 (920) 12,054
Total BNE 31,848 (1,674) 30,174
Energy 39,709 (72) 39,637
Total 71,557 (1,746) 69,811

Group reconciliation

£000's 30 June 2013 30 June 2012 31 Dec 2012
Revenue 280,850 276,143 555,863
Recharged expenses (39,006) (37,817) (77,028)
Fees 241,844 238,326 478,835
Underlying profit 35,673 35,230 71,557
Reorganisation costs (1,144) (406) (1,746)
Unallocated expenses (3,350) (3,843) (7,742)
Operating profit before amortisation of acquired intangibles and transaction related costs 31,179 30,981 62,069
Amortisation of acquired intangibles and transaction related costs (9,174) (10,161) (19,925)
Operating profit 22,005 20,820 42,144
Net finance costs (958) (964) (1,970)
Profit before tax 21,047 19,856 40,174

Total segment assets were as follows:

£000's 30 June 2013 30 June 2012 31 December 2012
Build and Natural Environment
Europe 229,401 233,338 226,861
AAP 116,032 121,357 124,908
Total BNE 345,433 354,695 351,769
Energy 197,004 182,898 179,163
Unallocated 2,948 3,830 2,325
Total 545,385 541,423 533,257

4. 4. Amortisation of acquired intangibles and transaction related costs

£000's 30 June 2013 30 June 2012 31 December 2012
Amortisation of acquired intangibles 5,337 5,117 10,636
Contingent deferred consideration treated as remuneration 3,470 4,674 8,593
Negative goodwill - - (266)
Loss on disposal of business - 112 135
Third party advisory costs 367 258 827
Total 9,174 10,161 19,925

5. Income taxes

The tax charge for the period has been calculated using an estimate of the effective annual rate of tax for each taxing jurisdiction for the full year. These rates have been applied to the pre-tax profits for each jurisdiction for the six months ended 30 June 2013. The Group has separately calculated the tax rates applicable to amortisation of intangibles and transaction related costs for the period. Tax rate changes that were substantively enacted at the balance sheet date have been factored into the calculation of the effective tax rates.

30 June 2013 30 June 2012 31 December 2012
£000's
Current tax expense 8,332 9,207 18,347
Deferred tax credit (1,525) (1,673) (4,084)
Total tax expense in the income statement 6,807 7,534 14,263
Add back:
Tax on amortisation of acquired intangibles and acquisition related costs 2,033 1,234 3,569
Adjusted tax charge on PBTA for the period 8,840 8,768 17,832
Tax rate on PBT 32.3% 37.9% 35.5%
Tax rate on PBTA 29.3% 29.2% 29.7%

6. Earnings per share

The calculations of earnings per share are based on the profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding during the period as shown below:

Six months
ended
30 June
Six months
ended
30 June
Year ended ;31 Dec
£000's 2013 2012 2012
Profit attributable to ordinary shareholders 14,240 12,322 25,911
000's
Weighted average number of ordinary shares for the purposes of basic earnings per share 217,953 216,835 216,980
Effect of employee share schemes 1,034 1,406 1,313
Weighted average number of ordinary shares for the purposes of diluted earnings per share 218,987 218,241 218,293
Basic earning per share (pence) 6.53 5.68 11.94
Diluted earnings per share (pence) 6.50 5.65 11.87

The directors consider that earnings per share before amortisation of acquired intangibles and transaction related costs provides a more meaningful measure of the Group's performance than statutory earnings per share. The calculations of adjusted earnings per share were based on the number of shares as above, and are shown in the table below:

£000's Six months ended 30 June 2013 Six months ended 30 June 2012 Year ended 31 Dec 2012
Profit attributable to ordinary shareholders 14,240 12,322 25,911
Amortisation of acquired intangibles and transaction related costs 9,174 10,161 19,925
Tax on amortisation of acquired intangibles and transaction related costs (2,033) (1,234) (3,569)
Change in Australian tax law - - (238)
Adjusted profit attributable to ordinary shareholders 21,381 21,249 42,267
Adjusted basic earnings before per share (pence) 9.81 9.80 19.48
Adjusted diluted earnings per share (pence) 9.76 9.74 19.36

7. Property, plant and equipment

During the six months ended 30 June 2013, the Group acquired assets with a cost of £4,732,000 (six months to 30 June 2012: £4,628,000), which includes £89,000 acquired through business combinations (six months to 30 June 2012: £nil). Assets with a net book value of £86,000 were disposed of during the six months ended 30 June 2013 (six months ended 30 June 2012: £171,000).

8. Acquisitions

The Group has completed the following acquisitions to strengthen and broaden the skill base of the Group, during the first half of 2013:

Entity Business Segment Date of Acquisition Place of incorporation Percentageof entity acquired Nature of business acquired
Petroleum Institute for Continuing Education Inc. (PEICE) Energy 16th Jan 2013 Canada 100% Training
Knowledge Reservoir Group (KR) Energy 19th Apr 2013 USA 100% Reservoir engineering

Their contributions to the Group's results for the period is given below:

£000's Revenue Fees Operating profit before amortisation Operating profit
EHI 2,084 2,084 460 77
Nautilus 2,995 2,950 280 (19)

Had the Group acquired these entities on the first day of the period, the Group estimates revenue would have been £285,470,000 and operating profit would have been £21,843,000.

The Group has allocated provisional fair values to the net assets acquired as follows:

£000's Order book Customer relationships Brand IP PPE Cash Other assets Other liabilities Net assets acquired
PEICE 120 4,119 164 500 1 612 59 (1,949) 3,626
KR 745 6,314 719 425 88 1,956 5,123 (2,338) 13,032
865 10,433 883 925 89 2,568 5,182 (4,287) 16,658

 

£000's Initial cash consideration Deferred cash consideration Total consideration Net assets acquired Goodwill acquired Tax deductible goodwill
PEICE 3,637 3,574 7,211 3,626 3,585 -
KR 9,651 4,327 13,978 13,032 946 -
13,288 7,901 21,189 16,658 4,531 -

Provisional values are given in the table above as information about facts or circumstances that existed at the acquisition date is incomplete.

Goodwill represents the value of the accumulated workforce and synergies with RPS associated with these acquisitions.

The total fair value of receivables acquired was £3,390,000. The gross contractual receivables acquired were £3,431,000 and £41,000 was estimated to be irrecoverable.

The vendors of the acquired companies have entered into indemnity arrangements with the Group. The total undiscounted cash flow that could be receivable by the Group is between £nil and £3,390,000. As the Group does not expect that these warranties will become receivable, it has not recognised an indemnification asset on acquisition.

Deferred consideration is payable on the first and second anniversaries of the acquisitions of PEICE and KR, dependent on key vendors remaining employed. If they leave, the deferred consideration will be paid on the tenth anniversary of completion including a market rate of interest.

The Group incurred acquisition-related costs of £314,000 (6 months to 30 June 2012: £nil), which have been expensed through the consolidated income statement and included within "amortisation of acquired intangibles and transaction related costs".

A reconciliation of the goodwill movement in 2013 in respect of acquisitions completed in 2012 and 2013 is given below.

£000's Manidis Roberts PEICE KR
Goodwill at 1 January 2013 11,943 - -
Additions through acquisition - 3,585 946
Foreign exchange gains and losses (658) (39) 8
Goodwill at 30 June 2013 11,285 3,546 954

There were no accumulated impairment losses at the beginning or the end of the period.

Commitments and contingencies

The Group completed a number of acquisitions between 1 January 2010 and 31 December 2011 where deferred consideration payments to vendors are contingent on the vendor's continued employment with the Group and so are required to be recognised as employment costs over the deferred consideration period. The Group considers it probable that the remaining deferred consideration payments will be settled.

The total cash commitments at 30 June 2013 in respect of contingent deferred consideration treated as remuneration that the Group expects to settle and the estimated remuneration charge for each financial year assuming exchange rates remain constant are disclosed in the table below:

£000's Cash commitment Remuneration charge
July - December 2013 3,653 2,585
2014 3,693 1,213
7,346 3,798

The balance sheet at 30 June 2013 includes, within deferred consideration current liabilities, contingent deferred consideration remuneration expense accrued but not paid totalling £3,549,000 (31 December 2012: £4,157,000).

9. Share capital

2013 Number 000's 2013 £000's 2012 Number 000's 2012 £000's
Authorised
Ordinary shares of 3p each at 30 June 240,000 7,200 240,000 7,200
Issued and fully paid
Ordinary shares of 3p each at 1 January 219,566 6,587 218,138 6,544
Issued under employee share schemes 424 13 911 27
At 30 June 219,990 6,600 219,049 6,571

10. Other reserves

£000's Merger reserve Employee trust Translation reserve Total
Changes in equity during 2013
At 1 January 2013 21,256 (9,059) 23,873 36,070
Exchange differences - - (1,706) (1,706)
Issue of new shares - (281) - (281)
Purchase of own shares - 756 - 756
At 30 June 2013 21,256 (8,584) 22,167 34,839
Changes in equity during 2012
At 1 January 2012 21,256 (7,375) 29,418 43,299
Exchange differences - - (2,634) (2,634)
Issue of new shares - (634) - (634)
Purchase of own shares - (400) - (400)
At 30 June 2012 21,256 (8,409) 26,784 39,631

11. Dividends

The following dividends were recognised as distributions to equity holders in the period:

£000's Six months ended 30 June 2013 Six months ended 30 June 2012 Year ended 31 Dec 2012
Final dividend for 2012 3.34p per share 7,308 - -
Interim dividend for 2012 3.06p per share - - 6,682
Final dividend for 2011 2.90p per share - 6,325 6,325
7,308 6,325 13,007

An interim dividend in respect of the six months ended 30 June 2013 of 3.52 pence per share, amounting to a total dividend of £7,723,000 was approved by the Directors of RPS Group Plc on 30 July 2013. These condensed consolidated interim financial statements do not reflect this dividend payable.

12. Note to the condensed consolidated cash flow statement

Six months
ended
30 June
Six months
ended
30 June
Year ended 31 Dec
£000's 2013 2012 2012
Operating profit 22,005 20,820 42,144
Adjustments for:
Depreciation 5,051 4,248 8,950
Amortisation of acquired intangibles 5,337 5,117 10,636
Contingent deferred consideration treated as remuneration 3,470 4,674 8,593
Share based payment expense 1,041 1,001 2,070
Loss on disposal of business - 112 135
Negative goodwill - - (266)
(Profit)/loss on sale of property, plant and equipment (186) 31 (119)
36,718 36,003 72,143)
Decrease/(increase) in trade and other receivables 1,604 (1,634) 12,491
Decrease in trade and other payables
(4,491) (3,184) (8,589)
Adjusted cash generated from operations 33,831 31.185 76.045

* Adjusted cash generated from operations is before payment of deferred consideration treated as remuneration.

The table below provides an analysis of net bank borrowings, comprising cash and cash equivalents, interest bearing bank loans and finance leases, during the six months ended 30 June 2013.

£000's At 1 January 2013 Cash flow Foreign exchange At 30 June 2013
Cash and cash equivalents 14,804 (3,027) (12) 11,765
Bank loans (27,098) (2,935) (1,645) (31,678)
Finance lease creditor (1,207) 353 33 (821)
Net bank borrowings (13501) (5,609) (1,624) (20,734)

The cash balance includes £1,624,000 (31 December 2012: £3,566,000) that is restricted in its use.

13. Events after the balance sheet date

On 18th July 2013 RPS completed the acquisition of the entire issued share capital of Asia-Pacific ASA Pty Ltd, an oceanographic consultancy firm based in Australia for a maximum consideration of A$8.7 million (£5.2 million) all payable in cash.

Consideration paid at completion was A$4.4 million (£2.6 million). Subject to certain operational conditions being met, further sums of A$1.7 million (£1.1 million), A$1.7 million (£1.1 million) and A$0.9 million (£0.5 million), will be paid on the first, second and third anniversaries of the transaction. Due to the proximity of the acquisition date to the date of approval of this announcement, it is impracticable to provide further information.

14. Principal risks and uncertainties

The nature of the principal risks and uncertainties faced by the Group have not changed significantly since the 2011 Report and Accounts was published. These risks, together with a description of the approach to mitigate them, are set out on page 9 of the 2011 Report and Accounts (available on the Group's web-site at www.rpsgroup.com) and are summarised as follows:

  • Economic environment
  • Material adverse events
  • Recruitment and retention of key personnel
  • Market position and reputation
  • Compliance and litigation
  • Business acquisitions
  • Funding
  • Health and safety

From time to time the Group receives claims from clients and suppliers. Some of these result in payments to the claimants by the Group and its insurers. The Board reviews all significant claims at each board meeting and more regularly if required. The Board is currently satisfied that the Group has sufficient provisions in its balance sheet to meet all likely uninsured liabilities.

The Board keeps under review the potential effect of economic circumstances. The continuing uncertainty in the global economic outlook inevitably increases the trading and balance sheet risks to which the Group is exposed.

15. Related party transactions

There are no significant changes in the nature and size of related party transactions for the period to those reported in the 2012 Report and Accounts.

16. Forward-looking statements

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 the year to date are based upon unaudited management accounts for the period January to June 2013. The Board considers market expectations for 2013 are best defined by taking the range of forecasts of PBTA for the full year published by analysts who consistently follow the Group. The current range of forecasts of which the Board is aware is £61.0 to £64.5 million. Nothing in this announcement should be construed as a profit forecast.

17. Publication

A copy of this announcement will be posted on the Company's website at www.rpsgroup.com.

INDEPENDENT REVIEW REPORT TO RPS GROUP PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013, which comprises the Condensed consolidated income statement, the Condensed consolidated statement of comprehensive income, the Condensed consolidated balance sheet, the Condensed consolidated cash flow statement, the Condensed consolidated statement of changes in equity and the related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 ";Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Finance Conduct Authority.

Deloitte LLP
Chartered Accountants and Statutory Auditor
Reading, United Kingdom
1 August 2013

 

2019

Half Year Results for the six months ended 30 June 2013

01 August 2013

Half Year Results for the six months ended 30 June 2013

PBTA slightly ahead. Financial position remains strong. Interim dividend increased 15% for 20th consecutive year. Acquisition pipeline encouraging. On track for full year.

2013 2012
Business Performance H1 H1
Revenue (£m) 280.9 276.1
Fee income (£m) 241.8 238.3
PBTA (1) (£m) 30.2 30.0
Adjusted earnings per share (2)(basic) (p) 9.81 9.80
Adjusted operating cash flow (£m) (3) 33.8 31.2
Dividend per share (p) 3.52 3.06
Profit before tax (£m) 21.0 19.9
Earnings per share (basic) (p) 6.53 5.68
Operating cash flow (£m) 29.6 25.0

(1) PBTA is profit before tax, amortisation of acquired intangibles and transaction related costs.
(2) Adjusted earnings per share is before amortisation of acquired intangibles and transaction related costs and the related tax.
(3) Adjusted operating cash flow is before deferred consideration treated as remuneration.

Brook Land, Chairman, commenting on the results, said:

"RPS has delivered a creditable result for the first half of 2013. Once again our conversion of profit into cash has been strong. We have increased the Interim dividend by 15% for the 20th consecutive year.

With our flexible and robust business model, the Board believes RPS is likely to deliver growth for the full year. Our acquisition pipeline also gives us further cause for optimism.".

1 August 2013

 

ENQUIRIES
RPS Group plc Today: 020 7457 2020
Dr Alan Hearne, Chief Executive Thereafter: 01235 863206
Gary Young, Finance Director
College Hill
Matthew Smallwood Tel: 020 7457 2020
Justine Warren

 

RPS is an international consultancy providing advice upon the development of natural resources, land and property, the management of the environment and the health and safety of people. We have offices in the UK, Ireland, the Netherlands, the Americas and Australia Asia Pacific ("AAP") 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.

 

Results

Profit (before tax, amortisation of acquired intangibles and transaction related costs) was £30.2 million (2012: £30.0 million). Basic earnings per share (before amortisation and transaction related costs) were 9.81 pence (2012: 9.80 pence). The contribution of the 2 segments was:

Underlying Profit(£m)* 2013 2012
H1 H1
Energy 21.5 19.1
Built and Natural Environment 14.1 16.1
Total 35.7 35.2

* as defined in note 3, stated before reorganisation costs of £1.1m (2012: £0.4m)

Group central costs were £3.4 million, a reduction of 13% over the same period last year. Finance charges remained constant at £1.0 million.

Cash Flow, Funding and Dividend

Our conversion of profit into cash continued at an encouraging level and our balance sheet remains strong. After funding acquisition investment of £15.4 million in the period, net bank borrowings at 30 June were £20.7 million (30 June 2012: £20.5 million). Following the period end we funded the initial consideration of £2.6 million related to the acquisition of Asia Pacific ASA Pty Ltd ("APASA").

We have in place a £125 million facility with Lloyds Banking Group until July 2016. This comprises £75 million of committed revolving credit facility, with an additional £50 million available as required.

The Board remains confident about the Group's financial strength and has, for the 20th consecutive year, increased the interim dividend by about 15% to 3.52 pence per share (2012: 3.06 pence) payable on 17 October 2013 to shareholders on the register on 20 September 2013.

Acquisitions

On 16 January 2013 we announced the acquisition of PEICE, a Canadian based training business in the oil and gas sector, for a maximum consideration of £7.4 million. We have made good progress integrating PEICE with our existing training activities in the energy market.

On 19 April 2013 we announced the acquisition of Knowledge Reservoir Inc ("KR"), a reservoir engineering and geosciences consulting firm headquartered in Houston, for a maximum consideration of £12.0 million net of cash inherited. The US element of the business has traded well and we are close to finalising the reorganisation of the KR businesses in London, Oman and Kuala Lumpur.

On 18 July 2013 we announced the acquisition of APASA for a maximum consideration of £5.2 million. This is the sister company of ASA, the international oceanographic consultancy business we brought into the Group in 2011. Our international oceanographic capability has grown steadily in recent years, serving a market which remains buoyant.

Our acquisition pipeline is encouraging at the moment and we anticipate extending the Group's capabilities further in the next few months.

Markets and Trading

Energy

We provide internationally recognised consultancy services to the oil and gas exploration and production industry from bases in the UK, USA, Canada and AAP. These act as regional centres for projects undertaken in many other countries.

The first half delivered good growth, once again with a strong margin.

2013 2012
H1 H1
Fee income (£m) 121.7 108.0
Profit* (£m) 21.5 19.1
Margin % 17.7 17.7

*as defined in note 3, stated before reorganisation costs of £0.1m (2012: £nil) costs.

Planned expenditure in the oil and gas exploration and production sector for 2013 is encouraging, in respect of both conventional and unconventional resources. Given the uncertain global economic backdrop, some clients have been understandably cautious about starting new projects, but our international presence and reputation has enabled us to benefit from the investment which has been committed in many parts of the world.

Our EAME business performed particularly well, with the US producing a solid performance, after strong growth in 2012. Our profile in the financial services sector continued to enable us to benefit from valuation and transaction related activity.

Client spend in the AAP region slowed significantly in the early months of the year, as a number dealt with both demand and cost pressures. More recently it seems to have improved. We also experienced a slow down in Canada as major potash projects moved into a phase of the development cycle in which we have less involvement. New opportunities in this sector are, however, now emerging.

Overall, this business remains on track to deliver a strong performance this year.

Built and Natural Environment ("BNE")

Within these businesses we provide a wide range of consultancy services to many aspects of the property and infrastructure development and management sectors. In recent years we have developed extensive experience in respect of the infrastructure projects necessary to bring energy resources, both conventional and renewable, to market.

Australia Asia Pacific

In BNE Australia Asia Pacific ("BNEA") we remain well positioned in both the traditional infrastructure and development markets, as well as the more recently developed energy infrastructure market. Our successful move into the offshore gas and coal seam gas/LNG market enabled this business to double in size in recent years, despite the global financial crisis.

In the second half of last year a number of natural resources projects, particularly mining and offshore gas, were delayed, whilst our clients reviewed product demand, production costs and operating efficiencies. Further delays in significant projects have been announced by our clients in the first half of this year. As a result the BNEA results for the first half of the year were significantly below the same period last year.

2013 2012
H1 H1
Fee income (£m) 46.4 47.9
Profit* (£m) 4.6 6.3
Margin % 9.9 13.1

*as defined in note 3, stated before reorganisation costs of £0.8m (2012: £0.1m)

In other sectors our clients have had to deal with the economic uncertainty resulting from the resources slowdown, as well as political volatility in the run up to the Federal election. Many have remained reasonably positive and continued to invest, but it seems clear the Australian economy is now on a lower growth trajectory.

In response to these difficult trading conditions we continue to reduce capacity and costs. These reductions have made us more efficient and competitive and should result in a better performance in the second half, provided the market does not deteriorate further.

Once recovery in resources investment gets underway, it will offer an opportunity for us to create a further period of growth. In the meantime the weakening Australian currency and lower interest rates should help deliver a rebalancing of the economy. We should benefit from this in terms of trading, although the weak dollar will adversely affect our results on consolidation. Exposure to the expected long term growth in the AAP region remains an important part of Group strategy.

Europe

Our BNE business in Europe ("BNEE") performed well, even though economic uncertainty continued to hold back some of our clients' investment. Fee and profit growth was affected by the exceptionally good performance we experienced in our UK water activities in the first half of 2012, which could not be replicated this year. The improved efficiencies resulting from actions taken previously gave rise to an increased margin, despite continuing fee rate pressure.

2013 2012
H1 H1
Fee income (£m) 74.7 83.3
Underlying Profit* (£m) 9.6 9.8
Margin % 12.8 11.8

* as defined in note 3, stated before reorganisation costs of £0.3m (2012 £0.3m)

Our strong position in the energy infrastructure market (conventional, nuclear and renewable) enabled us to win work at rates which reflect our market leading position. Some of our UK commercial development clients, particularly in the house building sector, seemed more confident than in recent years. The investment we made in relocating and expanding our laboratories in the Netherlands in 2012 is proving worthwhile, more than compensating for continuing weakness in the Dutch property development sector. Our health, safety and risk management businesses are well positioned and continued to perform well.

We still expect BNEE to deliver a 2013 result broadly the same as in 2012, although there may now be some modest upside opportunity.

Group Prospects

Our flexible and robust business model has demonstrated in recent years it is capable of producing good results in challenging circumstances. The Board remains of the view that RPS is likely to meet market expectations in 2013 and continue to deliver strong cash flow. Our acquisition pipeline also gives us cause for optimism.

Board of Directors
RPS Group plc

1 August 2013

 

Condensed consolidated income statement

Notes Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Revenue 3 280,850 276,143 555,863
Recharged expenses 3 (39,006) (37,817) (77,028)
Fee income 3 241,844 238,326 478,835
Operating profit before amortisation of acquired intangibles and transaction related costs 3,4 31,179 30,981 62,069
Amortisation of acquired intangibles and transaction related costs 4 (9,174) (10,161) (19,925)
Operating profit 22,005 20,820 42,144
Finance costs (1,006) (1,059) (2,128)
Finance income 48 95 158
Profit before tax, amortisation of acquired intangibles and transaction related costs 30,221 30,017 60,099
Profit before tax 21,047 19,856 40,174
Tax expense 5 (6,807) (7,534) (14,263)
Profit for the period attributable to equity holders of the parent 14,240 12,322 25,911
Basic earnings per share (pence) 6 6.53 5.68 11.94
Diluted earnings per share (pence) 6 6.50 5.65 11.87
Adjusted basic earnings per share (pence) 6 9.81 9.80 19.48
Adjusted diluted earnings per share (pence) 6 9.76 9.74 19.36

 

Condensed consolidated statement of comprehensive income

Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Profit for the period 14,240 12,322 25,911
Exchange differences (1,706) (2,634) (5,545)
Total recognised comprehensive income for the period attributable to equity holders of the parent 12,534 9,688 20,366

* may be reclassified subsequently to profit or loss in accordance with IFRS.

 

Condensed consolidated balance sheet

As at 30 June As at 30 June As at 31 December
£000's Notes 2013 2012 2012
Assets
Non-current assets
Intangible assets 340,408 320,911 328,440
Property, plant and equipment 7 30,200 29,925 30,632
370,608 350,836 359,072
Current assets
Trade and other receivables 162,064 172,678 159,381
Cash at bank 12,713 17,909 14,804
174,777 190,587 174,185
Liabilities
Current liabilities
Borrowings 1,474 1,554 748
Deferred consideration 11,369 8,427 7,842
Trade and other payables 98,102 103,891 101,921
Corporation tax liabilities 1,638 3,883 3,582
Provisions 2,560 4,315 2,633
115,143 122,070 116,726
Net current assets 59,634 68,517 57,459
Non-current liabilities
Borrowings 31,973 36,822 27,557
Deferred consideration 6,910 - 3,543
Other creditors 3,022 1,784 1,745
Deferred tax liabilities 6,578 10,053 8,436
Provisions 1,469 2,089 1,436
49,952 50,748 42,717
Net assets 380,290 368,605 373,814
Equity
Share capital 9 6,600 6,571 6,587
Share premium 106,922 105,140 106,198
Other reserves 10 34,839 39,631 36,070
Retained earnings 231,929 217,263 224,959
Total shareholders' equity 380,290 368,605 373,814

 

Condensed consolidated cash flow statement

Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's Notes 2013 2012 2012
Adjusted cash generated from operations 12 33,831 31,185 76,045
Deferred consideration treated as remuneration (4,204) (6,214) (9,969)
Cash generated from operations 29,627 24,971 66,076
Interest paid (1,091) (908) (2,204)
Interest received 48 95 158
Income taxes paid (11,381) (9,910) (18,162)
Net cash from operating activities 17,203 14,248 45,868
Cash flows from investing activities
Purchases of subsidiaries net of cash acquired (11,178) - (9,774)
Deferred consideration - (165) (4,130)
Purchase of property, plant and equipment (4,722) (4,661) (9,909)
Sale of property, plant and equipment 272 150 713
Dividends received - - 298
Net cash used in investing activities (15,628) (4,676) (22,802)
Cash flows from financing activities
Proceeds from issue of share capital 211 190 240
Purchase of own shares - (400) (400)
Proceeds from/(repayments of) bank borrowings 2,935 (9,050) (17,409)
Payment of finance lease liabilities (353) (579) (1,350)
Dividends paid (7,308) (6,325) (13,007)
Payment of pre-acquisition dividend (87) - (399)
Net cash used in financing activities (4,602) (16,164) (32,325)
Net (decrease)/increase in cash and cash equivalents (3,027) (6,592) (9,259)
Cash and cash equivalents at beginning of period 14,804 24,458 24,458
Effect of exchange rate fluctuations (12) (414) (395)
Cash and cash equivalents at end of period 12 11,765 17,452 14,804
Cash and cash equivalents comprise:
Cash at bank 12,713 17,909 14,804
Bank overdraft (948) (457) -
Cash and cash equivalents at end of period 11,765 17,452 14,804

 

Consolidated statement of changes in equity

£000's Share capital Share premium Retained earnings Other reserves Total equity
Changes in equity during 2013
At 1 January 2013 6,587 106,198 224,959 36,070 373,814
Total comprehensive income for the period - - 14,240 (1,706) 12,534
Issue of new ordinary shares 13 724 (1,003) (281) (547)
Release of own shares - - - 756 756
Share based payment expense - - 1,041 - 1,041
Dividends - - (7,308) - (7,308)
At 30 June 2013 6,600 106,922 231,929 34,839 380,290
Changes in equity during 2012
At 1 January 2012 6,544 103,717 210,890 43,299 364,450
Total comprehensive income for the period - - 12,322 (2,634) 9,688
Issue of new ordinary shares 27 1,423 (625) (634) 191
Purchase of own shares - - - (400) (400)
Share based payment expense - - 1,001 - 1,001
Dividends - - (6,325) - (6,325))
At 30 June 2012 (see note 1) 6,571 105,140 217,263 39,631 368,605

An analysis of other reserves is provided in Note 10.

 

Notes to the condensed consolidated financial statements

1. Basis of preparation

RPS Group Plc (the "Company") is a company domiciled in England. The condensed consolidated interim financial statements of the Company for the six months ended 30 June 2012 comprise the Company and its subsidiaries (together referred to as the "Group").

The condensed interim financial statements have been prepared using accounting policies set out in the Report and Accounts 2011 and in accordance with IAS 34. They are unaudited but have been reviewed by the Company's auditor. The results for the year end 31 December 2011 and the balance sheet as at that date are abridged from the Company's Report and Accounts 2011 which have been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters for which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.

The condensed interim financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.

In assessing the going concern basis, the directors considered the Group's business activities, the financial position of the Group and the Group's financial risk management objectives and policies. The directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future and that it is, therefore, appropriate to adopt the going concern basis in preparing the Group's interim financial statements.

Restatement

As reported in the Group's Report and Accounts 2011, our auditor at that time, Ernst & Young LLP, indicated that it did not agree with the Group's interpretation of IFRS 3 "Business Combinations" in respect of deferred consideration. They advised the Group that the deferred consideration that was contingent on continuing employment should be recognised as a remuneration charge through the Consolidated Income Statement rather than be capitalised.

The Group agreed to this revised treatment of deferred consideration which impacted the results for the six months ended 30 June 2011 in the following ways:

1. In respect of 2010 acquisitions the Group has derecognised the deferred consideration payable that was previously shown in the balance sheet on the date of acquisition of subsidiaries. The value of goodwill has been reduced by a corresponding amount since deferred consideration is no longer considered part of the cost of investment;

2. For those acquisitions in 2010 and 2011 where the fair value of the net assets acquired is greater than the consideration transferred, the Group has recognised negative goodwill through the consolidated income statement; and

3. A remuneration charge has been recognised through the consolidated income statement within "amortisation of acquired intangibles and transaction related costs" and a corresponding accrual has been recognised in the balance sheet under "deferred consideration".

The Group explained the restatement of the results for the six months ended 30 June 2011 by means of an announcement to the London Stock Exchange dated 3 May 2012. This announcement details the restatement of the income statement and the segment results for the six months ended 30 June 2011 and the balance sheet at that date.

The condensed consolidated cash flow statement for the six months ended 30th June 2011 and the year ended 31st December 2011 have been restated so that deferred consideration treated as remuneration is included within cash generated from operating activities rather than cash flows from investing activities. In addition, the total comprehensive income in the condensed consolidated statement of changes in equity in this release has been restated to reflect the above.

2. Responsibility Statement

The directors confirm that, to the best of their knowledge this condensed set of financial statements has been prepared in accordance with IAS 34 and that this Interim Report includes a fair review of the information required by DTR 4.2.4R, DTR 4.2.7R and DTR 4.2.8R.

On behalf of the Board

A. S. Hearne - Chief Executive
G. R. Young - Group Finance Director

3. Business segments

Segment information is presented in respect of the Group's business segments which are reported to the Chief Operating Decision Maker, which is identified as the main Board of Directors of RPS Group Plc. The business segment reporting format reflects the Group's management and internal structure. Inter-segment pricing is determined on an 'arm's length' basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

As announced on 3 November 2011 the Group merged Planning and Development (UK and Ireland) and Environmental Management. The 30 June 2011 results are therefore shown below on this revised basis. The Group comprises the following business segments:

Built and Natural Environment ("BNE") - consultancy services advising on all aspects of the built and natural environment including the provision of energy infrastructure, planning and development, engineering, design and surveying, environmental assessment and management and risk management. Consulting services are provided on a regional basis in Europe and Australia Asia Pacific ("AAP").

Energy ? the provision of integrated technical, commercial and project management support in the fields of geo-science, engineering and health, safety and environment on a global basis to the energy sector.

Segment results for the period ended 30 June 2013:

£000's Fees Recharged Expenses Intersegment revenue External Revenue
Built and Natural Environment
Europe 74,682 9,504 (265) 83,921
AAP 46,413 8,829 (272) 54,970
Intra BNE eliminations (52) - 52 -
Total BNE 121,043 18,333 (485) 138,891
Energy 121,738 20,834 (613) 141,959
Group eliminations (937) (161) 1,098 -
Total 241,844 39,006 - 280,850

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 9,550 (259) 9,291
APP 4,584 (759) 3,825
Total BNE 14,134 (1,018) 13,116
Energy 21,539 (126) 21,413
Total 35,673 (1,144) 34,529

Segment results for the period ended 30 June 2012:

£000's Fees Recharged expenses Intersegment revenue External revenue
Built and Natural Environment:
Europe 83,323 10,151 (719) 92,755
AAP 47,940 11,090 (101) 58,929
Intra BNE eliminations (104) (3) 107 -
Total BNE 131,159 21,238 (713) 151,684
Energy 108,024 16,646 (211) 124,459
Group eliminations (857) (67) 924 -
Total 238,326 37,817 - 276,143

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 9,825 (307) 9,518
APP 6,286 (56) 6,230
Total BNE 16,111 (363) 15,748
Energy 19,119 (43) 19,076
Total 35,230 (406) 34,824

Segment results for the year ended 31 December 2012:

£000's Fees Recharged expenses Intersegment revenue External revenue
Built and Natural Environment:
Europe 157,200 21,433 (1,301) 177,332
AAP 98,300 19,827 (786) 117,341
Intra BNE eliminations (193) (41) 234 -
Total BNE 255,307 41,219 (1,853) 294,673
Energy 225,875 36,017 (702) 261,190
Group eliminations (2,347) (208) 2,555 -
Total 478,835 77,028 - 555,863

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 18,874 (754) 18,120
APP 12,974 (920) 12,054
Total BNE 31,848 (1,674) 30,174
Energy 39,709 (72) 39,637
Total 71,557 (1,746) 69,811

Group reconciliation

£000's 30 June 2013 30 June 2012 31 Dec 2012
Revenue 280,850 276,143 555,863
Recharged expenses (39,006) (37,817) (77,028)
Fees 241,844 238,326 478,835
Underlying profit 35,673 35,230 71,557
Reorganisation costs (1,144) (406) (1,746)
Unallocated expenses (3,350) (3,843) (7,742)
Operating profit before amortisation of acquired intangibles and transaction related costs 31,179 30,981 62,069
Amortisation of acquired intangibles and transaction related costs (9,174) (10,161) (19,925)
Operating profit 22,005 20,820 42,144
Net finance costs (958) (964) (1,970)
Profit before tax 21,047 19,856 40,174

Total segment assets were as follows:

£000's 30 June 2013 30 June 2012 31 December 2012
Build and Natural Environment
Europe 229,401 233,338 226,861
AAP 116,032 121,357 124,908
Total BNE 345,433 354,695 351,769
Energy 197,004 182,898 179,163
Unallocated 2,948 3,830 2,325
Total 545,385 541,423 533,257

4. 4. Amortisation of acquired intangibles and transaction related costs

£000's 30 June 2013 30 June 2012 31 December 2012
Amortisation of acquired intangibles 5,337 5,117 10,636
Contingent deferred consideration treated as remuneration 3,470 4,674 8,593
Negative goodwill - - (266)
Loss on disposal of business - 112 135
Third party advisory costs 367 258 827
Total 9,174 10,161 19,925

5. Income taxes

The tax charge for the period has been calculated using an estimate of the effective annual rate of tax for each taxing jurisdiction for the full year. These rates have been applied to the pre-tax profits for each jurisdiction for the six months ended 30 June 2013. The Group has separately calculated the tax rates applicable to amortisation of intangibles and transaction related costs for the period. Tax rate changes that were substantively enacted at the balance sheet date have been factored into the calculation of the effective tax rates.

30 June 2013 30 June 2012 31 December 2012
£000's
Current tax expense 8,332 9,207 18,347
Deferred tax credit (1,525) (1,673) (4,084)
Total tax expense in the income statement 6,807 7,534 14,263
Add back:
Tax on amortisation of acquired intangibles and acquisition related costs 2,033 1,234 3,569
Adjusted tax charge on PBTA for the period 8,840 8,768 17,832
Tax rate on PBT 32.3% 37.9% 35.5%
Tax rate on PBTA 29.3% 29.2% 29.7%

6. Earnings per share

The calculations of earnings per share are based on the profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding during the period as shown below:

Six months
ended
30 June
Six months
ended
30 June
Year ended ;31 Dec
£000's 2013 2012 2012
Profit attributable to ordinary shareholders 14,240 12,322 25,911
000's
Weighted average number of ordinary shares for the purposes of basic earnings per share 217,953 216,835 216,980
Effect of employee share schemes 1,034 1,406 1,313
Weighted average number of ordinary shares for the purposes of diluted earnings per share 218,987 218,241 218,293
Basic earning per share (pence) 6.53 5.68 11.94
Diluted earnings per share (pence) 6.50 5.65 11.87

The directors consider that earnings per share before amortisation of acquired intangibles and transaction related costs provides a more meaningful measure of the Group's performance than statutory earnings per share. The calculations of adjusted earnings per share were based on the number of shares as above, and are shown in the table below:

£000's Six months ended 30 June 2013 Six months ended 30 June 2012 Year ended 31 Dec 2012
Profit attributable to ordinary shareholders 14,240 12,322 25,911
Amortisation of acquired intangibles and transaction related costs 9,174 10,161 19,925
Tax on amortisation of acquired intangibles and transaction related costs (2,033) (1,234) (3,569)
Change in Australian tax law - - (238)
Adjusted profit attributable to ordinary shareholders 21,381 21,249 42,267
Adjusted basic earnings before per share (pence) 9.81 9.80 19.48
Adjusted diluted earnings per share (pence) 9.76 9.74 19.36

7. Property, plant and equipment

During the six months ended 30 June 2013, the Group acquired assets with a cost of £4,732,000 (six months to 30 June 2012: £4,628,000), which includes £89,000 acquired through business combinations (six months to 30 June 2012: £nil). Assets with a net book value of £86,000 were disposed of during the six months ended 30 June 2013 (six months ended 30 June 2012: £171,000).

8. Acquisitions

The Group has completed the following acquisitions to strengthen and broaden the skill base of the Group, during the first half of 2013:

Entity Business Segment Date of Acquisition Place of incorporation Percentageof entity acquired Nature of business acquired
Petroleum Institute for Continuing Education Inc. (PEICE) Energy 16th Jan 2013 Canada 100% Training
Knowledge Reservoir Group (KR) Energy 19th Apr 2013 USA 100% Reservoir engineering

Their contributions to the Group's results for the period is given below:

£000's Revenue Fees Operating profit before amortisation Operating profit
EHI 2,084 2,084 460 77
Nautilus 2,995 2,950 280 (19)

Had the Group acquired these entities on the first day of the period, the Group estimates revenue would have been £285,470,000 and operating profit would have been £21,843,000.

The Group has allocated provisional fair values to the net assets acquired as follows:

£000's Order book Customer relationships Brand IP PPE Cash Other assets Other liabilities Net assets acquired
PEICE 120 4,119 164 500 1 612 59 (1,949) 3,626
KR 745 6,314 719 425 88 1,956 5,123 (2,338) 13,032
865 10,433 883 925 89 2,568 5,182 (4,287) 16,658

 

£000's Initial cash consideration Deferred cash consideration Total consideration Net assets acquired Goodwill acquired Tax deductible goodwill
PEICE 3,637 3,574 7,211 3,626 3,585 -
KR 9,651 4,327 13,978 13,032 946 -
13,288 7,901 21,189 16,658 4,531 -

Provisional values are given in the table above as information about facts or circumstances that existed at the acquisition date is incomplete.

Goodwill represents the value of the accumulated workforce and synergies with RPS associated with these acquisitions.

The total fair value of receivables acquired was £3,390,000. The gross contractual receivables acquired were £3,431,000 and £41,000 was estimated to be irrecoverable.

The vendors of the acquired companies have entered into indemnity arrangements with the Group. The total undiscounted cash flow that could be receivable by the Group is between £nil and £3,390,000. As the Group does not expect that these warranties will become receivable, it has not recognised an indemnification asset on acquisition.

Deferred consideration is payable on the first and second anniversaries of the acquisitions of PEICE and KR, dependent on key vendors remaining employed. If they leave, the deferred consideration will be paid on the tenth anniversary of completion including a market rate of interest.

The Group incurred acquisition-related costs of £314,000 (6 months to 30 June 2012: £nil), which have been expensed through the consolidated income statement and included within "amortisation of acquired intangibles and transaction related costs".

A reconciliation of the goodwill movement in 2013 in respect of acquisitions completed in 2012 and 2013 is given below.

£000's Manidis Roberts PEICE KR
Goodwill at 1 January 2013 11,943 - -
Additions through acquisition - 3,585 946
Foreign exchange gains and losses (658) (39) 8
Goodwill at 30 June 2013 11,285 3,546 954

There were no accumulated impairment losses at the beginning or the end of the period.

Commitments and contingencies

The Group completed a number of acquisitions between 1 January 2010 and 31 December 2011 where deferred consideration payments to vendors are contingent on the vendor's continued employment with the Group and so are required to be recognised as employment costs over the deferred consideration period. The Group considers it probable that the remaining deferred consideration payments will be settled.

The total cash commitments at 30 June 2013 in respect of contingent deferred consideration treated as remuneration that the Group expects to settle and the estimated remuneration charge for each financial year assuming exchange rates remain constant are disclosed in the table below:

£000's Cash commitment Remuneration charge
July - December 2013 3,653 2,585
2014 3,693 1,213
7,346 3,798

The balance sheet at 30 June 2013 includes, within deferred consideration current liabilities, contingent deferred consideration remuneration expense accrued but not paid totalling £3,549,000 (31 December 2012: £4,157,000).

9. Share capital

2013 Number 000's 2013 £000's 2012 Number 000's 2012 £000's
Authorised
Ordinary shares of 3p each at 30 June 240,000 7,200 240,000 7,200
Issued and fully paid
Ordinary shares of 3p each at 1 January 219,566 6,587 218,138 6,544
Issued under employee share schemes 424 13 911 27
At 30 June 219,990 6,600 219,049 6,571

10. Other reserves

£000's Merger reserve Employee trust Translation reserve Total
Changes in equity during 2013
At 1 January 2013 21,256 (9,059) 23,873 36,070
Exchange differences - - (1,706) (1,706)
Issue of new shares - (281) - (281)
Purchase of own shares - 756 - 756
At 30 June 2013 21,256 (8,584) 22,167 34,839
Changes in equity during 2012
At 1 January 2012 21,256 (7,375) 29,418 43,299
Exchange differences - - (2,634) (2,634)
Issue of new shares - (634) - (634)
Purchase of own shares - (400) - (400)
At 30 June 2012 21,256 (8,409) 26,784 39,631

11. Dividends

The following dividends were recognised as distributions to equity holders in the period:

£000's Six months ended 30 June 2013 Six months ended 30 June 2012 Year ended 31 Dec 2012
Final dividend for 2012 3.34p per share 7,308 - -
Interim dividend for 2012 3.06p per share - - 6,682
Final dividend for 2011 2.90p per share - 6,325 6,325
7,308 6,325 13,007

An interim dividend in respect of the six months ended 30 June 2013 of 3.52 pence per share, amounting to a total dividend of £7,723,000 was approved by the Directors of RPS Group Plc on 30 July 2013. These condensed consolidated interim financial statements do not reflect this dividend payable.

12. Note to the condensed consolidated cash flow statement

Six months
ended
30 June
Six months
ended
30 June
Year ended 31 Dec
£000's 2013 2012 2012
Operating profit 22,005 20,820 42,144
Adjustments for:
Depreciation 5,051 4,248 8,950
Amortisation of acquired intangibles 5,337 5,117 10,636
Contingent deferred consideration treated as remuneration 3,470 4,674 8,593
Share based payment expense 1,041 1,001 2,070
Loss on disposal of business - 112 135
Negative goodwill - - (266)
(Profit)/loss on sale of property, plant and equipment (186) 31 (119)
36,718 36,003 72,143)
Decrease/(increase) in trade and other receivables 1,604 (1,634) 12,491
Decrease in trade and other payables
(4,491) (3,184) (8,589)
Adjusted cash generated from operations 33,831 31.185 76.045

* Adjusted cash generated from operations is before payment of deferred consideration treated as remuneration.

The table below provides an analysis of net bank borrowings, comprising cash and cash equivalents, interest bearing bank loans and finance leases, during the six months ended 30 June 2013.

£000's At 1 January 2013 Cash flow Foreign exchange At 30 June 2013
Cash and cash equivalents 14,804 (3,027) (12) 11,765
Bank loans (27,098) (2,935) (1,645) (31,678)
Finance lease creditor (1,207) 353 33 (821)
Net bank borrowings (13501) (5,609) (1,624) (20,734)

The cash balance includes £1,624,000 (31 December 2012: £3,566,000) that is restricted in its use.

13. Events after the balance sheet date

On 18th July 2013 RPS completed the acquisition of the entire issued share capital of Asia-Pacific ASA Pty Ltd, an oceanographic consultancy firm based in Australia for a maximum consideration of A$8.7 million (£5.2 million) all payable in cash.

Consideration paid at completion was A$4.4 million (£2.6 million). Subject to certain operational conditions being met, further sums of A$1.7 million (£1.1 million), A$1.7 million (£1.1 million) and A$0.9 million (£0.5 million), will be paid on the first, second and third anniversaries of the transaction. Due to the proximity of the acquisition date to the date of approval of this announcement, it is impracticable to provide further information.

14. Principal risks and uncertainties

The nature of the principal risks and uncertainties faced by the Group have not changed significantly since the 2011 Report and Accounts was published. These risks, together with a description of the approach to mitigate them, are set out on page 9 of the 2011 Report and Accounts (available on the Group's web-site at www.rpsgroup.com) and are summarised as follows:

  • Economic environment
  • Material adverse events
  • Recruitment and retention of key personnel
  • Market position and reputation
  • Compliance and litigation
  • Business acquisitions
  • Funding
  • Health and safety

From time to time the Group receives claims from clients and suppliers. Some of these result in payments to the claimants by the Group and its insurers. The Board reviews all significant claims at each board meeting and more regularly if required. The Board is currently satisfied that the Group has sufficient provisions in its balance sheet to meet all likely uninsured liabilities.

The Board keeps under review the potential effect of economic circumstances. The continuing uncertainty in the global economic outlook inevitably increases the trading and balance sheet risks to which the Group is exposed.

15. Related party transactions

There are no significant changes in the nature and size of related party transactions for the period to those reported in the 2012 Report and Accounts.

16. Forward-looking statements

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 the year to date are based upon unaudited management accounts for the period January to June 2013. The Board considers market expectations for 2013 are best defined by taking the range of forecasts of PBTA for the full year published by analysts who consistently follow the Group. The current range of forecasts of which the Board is aware is £61.0 to £64.5 million. Nothing in this announcement should be construed as a profit forecast.

17. Publication

A copy of this announcement will be posted on the Company's website at www.rpsgroup.com.

INDEPENDENT REVIEW REPORT TO RPS GROUP PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013, which comprises the Condensed consolidated income statement, the Condensed consolidated statement of comprehensive income, the Condensed consolidated balance sheet, the Condensed consolidated cash flow statement, the Condensed consolidated statement of changes in equity and the related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 ";Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Finance Conduct Authority.

Deloitte LLP
Chartered Accountants and Statutory Auditor
Reading, United Kingdom
1 August 2013

 

2018

Half Year Results for the six months ended 30 June 2013

01 August 2013

Half Year Results for the six months ended 30 June 2013

PBTA slightly ahead. Financial position remains strong. Interim dividend increased 15% for 20th consecutive year. Acquisition pipeline encouraging. On track for full year.

2013 2012
Business Performance H1 H1
Revenue (£m) 280.9 276.1
Fee income (£m) 241.8 238.3
PBTA (1) (£m) 30.2 30.0
Adjusted earnings per share (2)(basic) (p) 9.81 9.80
Adjusted operating cash flow (£m) (3) 33.8 31.2
Dividend per share (p) 3.52 3.06
Profit before tax (£m) 21.0 19.9
Earnings per share (basic) (p) 6.53 5.68
Operating cash flow (£m) 29.6 25.0

(1) PBTA is profit before tax, amortisation of acquired intangibles and transaction related costs.
(2) Adjusted earnings per share is before amortisation of acquired intangibles and transaction related costs and the related tax.
(3) Adjusted operating cash flow is before deferred consideration treated as remuneration.

Brook Land, Chairman, commenting on the results, said:

"RPS has delivered a creditable result for the first half of 2013. Once again our conversion of profit into cash has been strong. We have increased the Interim dividend by 15% for the 20th consecutive year.

With our flexible and robust business model, the Board believes RPS is likely to deliver growth for the full year. Our acquisition pipeline also gives us further cause for optimism.".

1 August 2013

 

ENQUIRIES
RPS Group plc Today: 020 7457 2020
Dr Alan Hearne, Chief Executive Thereafter: 01235 863206
Gary Young, Finance Director
College Hill
Matthew Smallwood Tel: 020 7457 2020
Justine Warren

 

RPS is an international consultancy providing advice upon the development of natural resources, land and property, the management of the environment and the health and safety of people. We have offices in the UK, Ireland, the Netherlands, the Americas and Australia Asia Pacific ("AAP") 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.

 

Results

Profit (before tax, amortisation of acquired intangibles and transaction related costs) was £30.2 million (2012: £30.0 million). Basic earnings per share (before amortisation and transaction related costs) were 9.81 pence (2012: 9.80 pence). The contribution of the 2 segments was:

Underlying Profit(£m)* 2013 2012
H1 H1
Energy 21.5 19.1
Built and Natural Environment 14.1 16.1
Total 35.7 35.2

* as defined in note 3, stated before reorganisation costs of £1.1m (2012: £0.4m)

Group central costs were £3.4 million, a reduction of 13% over the same period last year. Finance charges remained constant at £1.0 million.

Cash Flow, Funding and Dividend

Our conversion of profit into cash continued at an encouraging level and our balance sheet remains strong. After funding acquisition investment of £15.4 million in the period, net bank borrowings at 30 June were £20.7 million (30 June 2012: £20.5 million). Following the period end we funded the initial consideration of £2.6 million related to the acquisition of Asia Pacific ASA Pty Ltd ("APASA").

We have in place a £125 million facility with Lloyds Banking Group until July 2016. This comprises £75 million of committed revolving credit facility, with an additional £50 million available as required.

The Board remains confident about the Group's financial strength and has, for the 20th consecutive year, increased the interim dividend by about 15% to 3.52 pence per share (2012: 3.06 pence) payable on 17 October 2013 to shareholders on the register on 20 September 2013.

Acquisitions

On 16 January 2013 we announced the acquisition of PEICE, a Canadian based training business in the oil and gas sector, for a maximum consideration of £7.4 million. We have made good progress integrating PEICE with our existing training activities in the energy market.

On 19 April 2013 we announced the acquisition of Knowledge Reservoir Inc ("KR"), a reservoir engineering and geosciences consulting firm headquartered in Houston, for a maximum consideration of £12.0 million net of cash inherited. The US element of the business has traded well and we are close to finalising the reorganisation of the KR businesses in London, Oman and Kuala Lumpur.

On 18 July 2013 we announced the acquisition of APASA for a maximum consideration of £5.2 million. This is the sister company of ASA, the international oceanographic consultancy business we brought into the Group in 2011. Our international oceanographic capability has grown steadily in recent years, serving a market which remains buoyant.

Our acquisition pipeline is encouraging at the moment and we anticipate extending the Group's capabilities further in the next few months.

Markets and Trading

Energy

We provide internationally recognised consultancy services to the oil and gas exploration and production industry from bases in the UK, USA, Canada and AAP. These act as regional centres for projects undertaken in many other countries.

The first half delivered good growth, once again with a strong margin.

2013 2012
H1 H1
Fee income (£m) 121.7 108.0
Profit* (£m) 21.5 19.1
Margin % 17.7 17.7

*as defined in note 3, stated before reorganisation costs of £0.1m (2012: £nil) costs.

Planned expenditure in the oil and gas exploration and production sector for 2013 is encouraging, in respect of both conventional and unconventional resources. Given the uncertain global economic backdrop, some clients have been understandably cautious about starting new projects, but our international presence and reputation has enabled us to benefit from the investment which has been committed in many parts of the world.

Our EAME business performed particularly well, with the US producing a solid performance, after strong growth in 2012. Our profile in the financial services sector continued to enable us to benefit from valuation and transaction related activity.

Client spend in the AAP region slowed significantly in the early months of the year, as a number dealt with both demand and cost pressures. More recently it seems to have improved. We also experienced a slow down in Canada as major potash projects moved into a phase of the development cycle in which we have less involvement. New opportunities in this sector are, however, now emerging.

Overall, this business remains on track to deliver a strong performance this year.

Built and Natural Environment ("BNE")

Within these businesses we provide a wide range of consultancy services to many aspects of the property and infrastructure development and management sectors. In recent years we have developed extensive experience in respect of the infrastructure projects necessary to bring energy resources, both conventional and renewable, to market.

Australia Asia Pacific

In BNE Australia Asia Pacific ("BNEA") we remain well positioned in both the traditional infrastructure and development markets, as well as the more recently developed energy infrastructure market. Our successful move into the offshore gas and coal seam gas/LNG market enabled this business to double in size in recent years, despite the global financial crisis.

In the second half of last year a number of natural resources projects, particularly mining and offshore gas, were delayed, whilst our clients reviewed product demand, production costs and operating efficiencies. Further delays in significant projects have been announced by our clients in the first half of this year. As a result the BNEA results for the first half of the year were significantly below the same period last year.

2013 2012
H1 H1
Fee income (£m) 46.4 47.9
Profit* (£m) 4.6 6.3
Margin % 9.9 13.1

*as defined in note 3, stated before reorganisation costs of £0.8m (2012: £0.1m)

In other sectors our clients have had to deal with the economic uncertainty resulting from the resources slowdown, as well as political volatility in the run up to the Federal election. Many have remained reasonably positive and continued to invest, but it seems clear the Australian economy is now on a lower growth trajectory.

In response to these difficult trading conditions we continue to reduce capacity and costs. These reductions have made us more efficient and competitive and should result in a better performance in the second half, provided the market does not deteriorate further.

Once recovery in resources investment gets underway, it will offer an opportunity for us to create a further period of growth. In the meantime the weakening Australian currency and lower interest rates should help deliver a rebalancing of the economy. We should benefit from this in terms of trading, although the weak dollar will adversely affect our results on consolidation. Exposure to the expected long term growth in the AAP region remains an important part of Group strategy.

Europe

Our BNE business in Europe ("BNEE") performed well, even though economic uncertainty continued to hold back some of our clients' investment. Fee and profit growth was affected by the exceptionally good performance we experienced in our UK water activities in the first half of 2012, which could not be replicated this year. The improved efficiencies resulting from actions taken previously gave rise to an increased margin, despite continuing fee rate pressure.

2013 2012
H1 H1
Fee income (£m) 74.7 83.3
Underlying Profit* (£m) 9.6 9.8
Margin % 12.8 11.8

* as defined in note 3, stated before reorganisation costs of £0.3m (2012 £0.3m)

Our strong position in the energy infrastructure market (conventional, nuclear and renewable) enabled us to win work at rates which reflect our market leading position. Some of our UK commercial development clients, particularly in the house building sector, seemed more confident than in recent years. The investment we made in relocating and expanding our laboratories in the Netherlands in 2012 is proving worthwhile, more than compensating for continuing weakness in the Dutch property development sector. Our health, safety and risk management businesses are well positioned and continued to perform well.

We still expect BNEE to deliver a 2013 result broadly the same as in 2012, although there may now be some modest upside opportunity.

Group Prospects

Our flexible and robust business model has demonstrated in recent years it is capable of producing good results in challenging circumstances. The Board remains of the view that RPS is likely to meet market expectations in 2013 and continue to deliver strong cash flow. Our acquisition pipeline also gives us cause for optimism.

Board of Directors
RPS Group plc

1 August 2013

 

Condensed consolidated income statement

Notes Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Revenue 3 280,850 276,143 555,863
Recharged expenses 3 (39,006) (37,817) (77,028)
Fee income 3 241,844 238,326 478,835
Operating profit before amortisation of acquired intangibles and transaction related costs 3,4 31,179 30,981 62,069
Amortisation of acquired intangibles and transaction related costs 4 (9,174) (10,161) (19,925)
Operating profit 22,005 20,820 42,144
Finance costs (1,006) (1,059) (2,128)
Finance income 48 95 158
Profit before tax, amortisation of acquired intangibles and transaction related costs 30,221 30,017 60,099
Profit before tax 21,047 19,856 40,174
Tax expense 5 (6,807) (7,534) (14,263)
Profit for the period attributable to equity holders of the parent 14,240 12,322 25,911
Basic earnings per share (pence) 6 6.53 5.68 11.94
Diluted earnings per share (pence) 6 6.50 5.65 11.87
Adjusted basic earnings per share (pence) 6 9.81 9.80 19.48
Adjusted diluted earnings per share (pence) 6 9.76 9.74 19.36

 

Condensed consolidated statement of comprehensive income

Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Profit for the period 14,240 12,322 25,911
Exchange differences (1,706) (2,634) (5,545)
Total recognised comprehensive income for the period attributable to equity holders of the parent 12,534 9,688 20,366

* may be reclassified subsequently to profit or loss in accordance with IFRS.

 

Condensed consolidated balance sheet

As at 30 June As at 30 June As at 31 December
£000's Notes 2013 2012 2012
Assets
Non-current assets
Intangible assets 340,408 320,911 328,440
Property, plant and equipment 7 30,200 29,925 30,632
370,608 350,836 359,072
Current assets
Trade and other receivables 162,064 172,678 159,381
Cash at bank 12,713 17,909 14,804
174,777 190,587 174,185
Liabilities
Current liabilities
Borrowings 1,474 1,554 748
Deferred consideration 11,369 8,427 7,842
Trade and other payables 98,102 103,891 101,921
Corporation tax liabilities 1,638 3,883 3,582
Provisions 2,560 4,315 2,633
115,143 122,070 116,726
Net current assets 59,634 68,517 57,459
Non-current liabilities
Borrowings 31,973 36,822 27,557
Deferred consideration 6,910 - 3,543
Other creditors 3,022 1,784 1,745
Deferred tax liabilities 6,578 10,053 8,436
Provisions 1,469 2,089 1,436
49,952 50,748 42,717
Net assets 380,290 368,605 373,814
Equity
Share capital 9 6,600 6,571 6,587
Share premium 106,922 105,140 106,198
Other reserves 10 34,839 39,631 36,070
Retained earnings 231,929 217,263 224,959
Total shareholders' equity 380,290 368,605 373,814

 

Condensed consolidated cash flow statement

Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's Notes 2013 2012 2012
Adjusted cash generated from operations 12 33,831 31,185 76,045
Deferred consideration treated as remuneration (4,204) (6,214) (9,969)
Cash generated from operations 29,627 24,971 66,076
Interest paid (1,091) (908) (2,204)
Interest received 48 95 158
Income taxes paid (11,381) (9,910) (18,162)
Net cash from operating activities 17,203 14,248 45,868
Cash flows from investing activities
Purchases of subsidiaries net of cash acquired (11,178) - (9,774)
Deferred consideration - (165) (4,130)
Purchase of property, plant and equipment (4,722) (4,661) (9,909)
Sale of property, plant and equipment 272 150 713
Dividends received - - 298
Net cash used in investing activities (15,628) (4,676) (22,802)
Cash flows from financing activities
Proceeds from issue of share capital 211 190 240
Purchase of own shares - (400) (400)
Proceeds from/(repayments of) bank borrowings 2,935 (9,050) (17,409)
Payment of finance lease liabilities (353) (579) (1,350)
Dividends paid (7,308) (6,325) (13,007)
Payment of pre-acquisition dividend (87) - (399)
Net cash used in financing activities (4,602) (16,164) (32,325)
Net (decrease)/increase in cash and cash equivalents (3,027) (6,592) (9,259)
Cash and cash equivalents at beginning of period 14,804 24,458 24,458
Effect of exchange rate fluctuations (12) (414) (395)
Cash and cash equivalents at end of period 12 11,765 17,452 14,804
Cash and cash equivalents comprise:
Cash at bank 12,713 17,909 14,804
Bank overdraft (948) (457) -
Cash and cash equivalents at end of period 11,765 17,452 14,804

 

Consolidated statement of changes in equity

£000's Share capital Share premium Retained earnings Other reserves Total equity
Changes in equity during 2013
At 1 January 2013 6,587 106,198 224,959 36,070 373,814
Total comprehensive income for the period - - 14,240 (1,706) 12,534
Issue of new ordinary shares 13 724 (1,003) (281) (547)
Release of own shares - - - 756 756
Share based payment expense - - 1,041 - 1,041
Dividends - - (7,308) - (7,308)
At 30 June 2013 6,600 106,922 231,929 34,839 380,290
Changes in equity during 2012
At 1 January 2012 6,544 103,717 210,890 43,299 364,450
Total comprehensive income for the period - - 12,322 (2,634) 9,688
Issue of new ordinary shares 27 1,423 (625) (634) 191
Purchase of own shares - - - (400) (400)
Share based payment expense - - 1,001 - 1,001
Dividends - - (6,325) - (6,325))
At 30 June 2012 (see note 1) 6,571 105,140 217,263 39,631 368,605

An analysis of other reserves is provided in Note 10.

 

Notes to the condensed consolidated financial statements

1. Basis of preparation

RPS Group Plc (the "Company") is a company domiciled in England. The condensed consolidated interim financial statements of the Company for the six months ended 30 June 2012 comprise the Company and its subsidiaries (together referred to as the "Group").

The condensed interim financial statements have been prepared using accounting policies set out in the Report and Accounts 2011 and in accordance with IAS 34. They are unaudited but have been reviewed by the Company's auditor. The results for the year end 31 December 2011 and the balance sheet as at that date are abridged from the Company's Report and Accounts 2011 which have been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters for which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.

The condensed interim financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.

In assessing the going concern basis, the directors considered the Group's business activities, the financial position of the Group and the Group's financial risk management objectives and policies. The directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future and that it is, therefore, appropriate to adopt the going concern basis in preparing the Group's interim financial statements.

Restatement

As reported in the Group's Report and Accounts 2011, our auditor at that time, Ernst & Young LLP, indicated that it did not agree with the Group's interpretation of IFRS 3 "Business Combinations" in respect of deferred consideration. They advised the Group that the deferred consideration that was contingent on continuing employment should be recognised as a remuneration charge through the Consolidated Income Statement rather than be capitalised.

The Group agreed to this revised treatment of deferred consideration which impacted the results for the six months ended 30 June 2011 in the following ways:

1. In respect of 2010 acquisitions the Group has derecognised the deferred consideration payable that was previously shown in the balance sheet on the date of acquisition of subsidiaries. The value of goodwill has been reduced by a corresponding amount since deferred consideration is no longer considered part of the cost of investment;

2. For those acquisitions in 2010 and 2011 where the fair value of the net assets acquired is greater than the consideration transferred, the Group has recognised negative goodwill through the consolidated income statement; and

3. A remuneration charge has been recognised through the consolidated income statement within "amortisation of acquired intangibles and transaction related costs" and a corresponding accrual has been recognised in the balance sheet under "deferred consideration".

The Group explained the restatement of the results for the six months ended 30 June 2011 by means of an announcement to the London Stock Exchange dated 3 May 2012. This announcement details the restatement of the income statement and the segment results for the six months ended 30 June 2011 and the balance sheet at that date.

The condensed consolidated cash flow statement for the six months ended 30th June 2011 and the year ended 31st December 2011 have been restated so that deferred consideration treated as remuneration is included within cash generated from operating activities rather than cash flows from investing activities. In addition, the total comprehensive income in the condensed consolidated statement of changes in equity in this release has been restated to reflect the above.

2. Responsibility Statement

The directors confirm that, to the best of their knowledge this condensed set of financial statements has been prepared in accordance with IAS 34 and that this Interim Report includes a fair review of the information required by DTR 4.2.4R, DTR 4.2.7R and DTR 4.2.8R.

On behalf of the Board

A. S. Hearne - Chief Executive
G. R. Young - Group Finance Director

3. Business segments

Segment information is presented in respect of the Group's business segments which are reported to the Chief Operating Decision Maker, which is identified as the main Board of Directors of RPS Group Plc. The business segment reporting format reflects the Group's management and internal structure. Inter-segment pricing is determined on an 'arm's length' basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

As announced on 3 November 2011 the Group merged Planning and Development (UK and Ireland) and Environmental Management. The 30 June 2011 results are therefore shown below on this revised basis. The Group comprises the following business segments:

Built and Natural Environment ("BNE") - consultancy services advising on all aspects of the built and natural environment including the provision of energy infrastructure, planning and development, engineering, design and surveying, environmental assessment and management and risk management. Consulting services are provided on a regional basis in Europe and Australia Asia Pacific ("AAP").

Energy ? the provision of integrated technical, commercial and project management support in the fields of geo-science, engineering and health, safety and environment on a global basis to the energy sector.

Segment results for the period ended 30 June 2013:

£000's Fees Recharged Expenses Intersegment revenue External Revenue
Built and Natural Environment
Europe 74,682 9,504 (265) 83,921
AAP 46,413 8,829 (272) 54,970
Intra BNE eliminations (52) - 52 -
Total BNE 121,043 18,333 (485) 138,891
Energy 121,738 20,834 (613) 141,959
Group eliminations (937) (161) 1,098 -
Total 241,844 39,006 - 280,850

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 9,550 (259) 9,291
APP 4,584 (759) 3,825
Total BNE 14,134 (1,018) 13,116
Energy 21,539 (126) 21,413
Total 35,673 (1,144) 34,529

Segment results for the period ended 30 June 2012:

£000's Fees Recharged expenses Intersegment revenue External revenue
Built and Natural Environment:
Europe 83,323 10,151 (719) 92,755
AAP 47,940 11,090 (101) 58,929
Intra BNE eliminations (104) (3) 107 -
Total BNE 131,159 21,238 (713) 151,684
Energy 108,024 16,646 (211) 124,459
Group eliminations (857) (67) 924 -
Total 238,326 37,817 - 276,143

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 9,825 (307) 9,518
APP 6,286 (56) 6,230
Total BNE 16,111 (363) 15,748
Energy 19,119 (43) 19,076
Total 35,230 (406) 34,824

Segment results for the year ended 31 December 2012:

£000's Fees Recharged expenses Intersegment revenue External revenue
Built and Natural Environment:
Europe 157,200 21,433 (1,301) 177,332
AAP 98,300 19,827 (786) 117,341
Intra BNE eliminations (193) (41) 234 -
Total BNE 255,307 41,219 (1,853) 294,673
Energy 225,875 36,017 (702) 261,190
Group eliminations (2,347) (208) 2,555 -
Total 478,835 77,028 - 555,863

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 18,874 (754) 18,120
APP 12,974 (920) 12,054
Total BNE 31,848 (1,674) 30,174
Energy 39,709 (72) 39,637
Total 71,557 (1,746) 69,811

Group reconciliation

£000's 30 June 2013 30 June 2012 31 Dec 2012
Revenue 280,850 276,143 555,863
Recharged expenses (39,006) (37,817) (77,028)
Fees 241,844 238,326 478,835
Underlying profit 35,673 35,230 71,557
Reorganisation costs (1,144) (406) (1,746)
Unallocated expenses (3,350) (3,843) (7,742)
Operating profit before amortisation of acquired intangibles and transaction related costs 31,179 30,981 62,069
Amortisation of acquired intangibles and transaction related costs (9,174) (10,161) (19,925)
Operating profit 22,005 20,820 42,144
Net finance costs (958) (964) (1,970)
Profit before tax 21,047 19,856 40,174

Total segment assets were as follows:

£000's 30 June 2013 30 June 2012 31 December 2012
Build and Natural Environment
Europe 229,401 233,338 226,861
AAP 116,032 121,357 124,908
Total BNE 345,433 354,695 351,769
Energy 197,004 182,898 179,163
Unallocated 2,948 3,830 2,325
Total 545,385 541,423 533,257

4. 4. Amortisation of acquired intangibles and transaction related costs

£000's 30 June 2013 30 June 2012 31 December 2012
Amortisation of acquired intangibles 5,337 5,117 10,636
Contingent deferred consideration treated as remuneration 3,470 4,674 8,593
Negative goodwill - - (266)
Loss on disposal of business - 112 135
Third party advisory costs 367 258 827
Total 9,174 10,161 19,925

5. Income taxes

The tax charge for the period has been calculated using an estimate of the effective annual rate of tax for each taxing jurisdiction for the full year. These rates have been applied to the pre-tax profits for each jurisdiction for the six months ended 30 June 2013. The Group has separately calculated the tax rates applicable to amortisation of intangibles and transaction related costs for the period. Tax rate changes that were substantively enacted at the balance sheet date have been factored into the calculation of the effective tax rates.

30 June 2013 30 June 2012 31 December 2012
£000's
Current tax expense 8,332 9,207 18,347
Deferred tax credit (1,525) (1,673) (4,084)
Total tax expense in the income statement 6,807 7,534 14,263
Add back:
Tax on amortisation of acquired intangibles and acquisition related costs 2,033 1,234 3,569
Adjusted tax charge on PBTA for the period 8,840 8,768 17,832
Tax rate on PBT 32.3% 37.9% 35.5%
Tax rate on PBTA 29.3% 29.2% 29.7%

6. Earnings per share

The calculations of earnings per share are based on the profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding during the period as shown below:

Six months
ended
30 June
Six months
ended
30 June
Year ended ;31 Dec
£000's 2013 2012 2012
Profit attributable to ordinary shareholders 14,240 12,322 25,911
000's
Weighted average number of ordinary shares for the purposes of basic earnings per share 217,953 216,835 216,980
Effect of employee share schemes 1,034 1,406 1,313
Weighted average number of ordinary shares for the purposes of diluted earnings per share 218,987 218,241 218,293
Basic earning per share (pence) 6.53 5.68 11.94
Diluted earnings per share (pence) 6.50 5.65 11.87

The directors consider that earnings per share before amortisation of acquired intangibles and transaction related costs provides a more meaningful measure of the Group's performance than statutory earnings per share. The calculations of adjusted earnings per share were based on the number of shares as above, and are shown in the table below:

£000's Six months ended 30 June 2013 Six months ended 30 June 2012 Year ended 31 Dec 2012
Profit attributable to ordinary shareholders 14,240 12,322 25,911
Amortisation of acquired intangibles and transaction related costs 9,174 10,161 19,925
Tax on amortisation of acquired intangibles and transaction related costs (2,033) (1,234) (3,569)
Change in Australian tax law - - (238)
Adjusted profit attributable to ordinary shareholders 21,381 21,249 42,267
Adjusted basic earnings before per share (pence) 9.81 9.80 19.48
Adjusted diluted earnings per share (pence) 9.76 9.74 19.36

7. Property, plant and equipment

During the six months ended 30 June 2013, the Group acquired assets with a cost of £4,732,000 (six months to 30 June 2012: £4,628,000), which includes £89,000 acquired through business combinations (six months to 30 June 2012: £nil). Assets with a net book value of £86,000 were disposed of during the six months ended 30 June 2013 (six months ended 30 June 2012: £171,000).

8. Acquisitions

The Group has completed the following acquisitions to strengthen and broaden the skill base of the Group, during the first half of 2013:

Entity Business Segment Date of Acquisition Place of incorporation Percentageof entity acquired Nature of business acquired
Petroleum Institute for Continuing Education Inc. (PEICE) Energy 16th Jan 2013 Canada 100% Training
Knowledge Reservoir Group (KR) Energy 19th Apr 2013 USA 100% Reservoir engineering

Their contributions to the Group's results for the period is given below:

£000's Revenue Fees Operating profit before amortisation Operating profit
EHI 2,084 2,084 460 77
Nautilus 2,995 2,950 280 (19)

Had the Group acquired these entities on the first day of the period, the Group estimates revenue would have been £285,470,000 and operating profit would have been £21,843,000.

The Group has allocated provisional fair values to the net assets acquired as follows:

£000's Order book Customer relationships Brand IP PPE Cash Other assets Other liabilities Net assets acquired
PEICE 120 4,119 164 500 1 612 59 (1,949) 3,626
KR 745 6,314 719 425 88 1,956 5,123 (2,338) 13,032
865 10,433 883 925 89 2,568 5,182 (4,287) 16,658

 

£000's Initial cash consideration Deferred cash consideration Total consideration Net assets acquired Goodwill acquired Tax deductible goodwill
PEICE 3,637 3,574 7,211 3,626 3,585 -
KR 9,651 4,327 13,978 13,032 946 -
13,288 7,901 21,189 16,658 4,531 -

Provisional values are given in the table above as information about facts or circumstances that existed at the acquisition date is incomplete.

Goodwill represents the value of the accumulated workforce and synergies with RPS associated with these acquisitions.

The total fair value of receivables acquired was £3,390,000. The gross contractual receivables acquired were £3,431,000 and £41,000 was estimated to be irrecoverable.

The vendors of the acquired companies have entered into indemnity arrangements with the Group. The total undiscounted cash flow that could be receivable by the Group is between £nil and £3,390,000. As the Group does not expect that these warranties will become receivable, it has not recognised an indemnification asset on acquisition.

Deferred consideration is payable on the first and second anniversaries of the acquisitions of PEICE and KR, dependent on key vendors remaining employed. If they leave, the deferred consideration will be paid on the tenth anniversary of completion including a market rate of interest.

The Group incurred acquisition-related costs of £314,000 (6 months to 30 June 2012: £nil), which have been expensed through the consolidated income statement and included within "amortisation of acquired intangibles and transaction related costs".

A reconciliation of the goodwill movement in 2013 in respect of acquisitions completed in 2012 and 2013 is given below.

£000's Manidis Roberts PEICE KR
Goodwill at 1 January 2013 11,943 - -
Additions through acquisition - 3,585 946
Foreign exchange gains and losses (658) (39) 8
Goodwill at 30 June 2013 11,285 3,546 954

There were no accumulated impairment losses at the beginning or the end of the period.

Commitments and contingencies

The Group completed a number of acquisitions between 1 January 2010 and 31 December 2011 where deferred consideration payments to vendors are contingent on the vendor's continued employment with the Group and so are required to be recognised as employment costs over the deferred consideration period. The Group considers it probable that the remaining deferred consideration payments will be settled.

The total cash commitments at 30 June 2013 in respect of contingent deferred consideration treated as remuneration that the Group expects to settle and the estimated remuneration charge for each financial year assuming exchange rates remain constant are disclosed in the table below:

£000's Cash commitment Remuneration charge
July - December 2013 3,653 2,585
2014 3,693 1,213
7,346 3,798

The balance sheet at 30 June 2013 includes, within deferred consideration current liabilities, contingent deferred consideration remuneration expense accrued but not paid totalling £3,549,000 (31 December 2012: £4,157,000).

9. Share capital

2013 Number 000's 2013 £000's 2012 Number 000's 2012 £000's
Authorised
Ordinary shares of 3p each at 30 June 240,000 7,200 240,000 7,200
Issued and fully paid
Ordinary shares of 3p each at 1 January 219,566 6,587 218,138 6,544
Issued under employee share schemes 424 13 911 27
At 30 June 219,990 6,600 219,049 6,571

10. Other reserves

£000's Merger reserve Employee trust Translation reserve Total
Changes in equity during 2013
At 1 January 2013 21,256 (9,059) 23,873 36,070
Exchange differences - - (1,706) (1,706)
Issue of new shares - (281) - (281)
Purchase of own shares - 756 - 756
At 30 June 2013 21,256 (8,584) 22,167 34,839
Changes in equity during 2012
At 1 January 2012 21,256 (7,375) 29,418 43,299
Exchange differences - - (2,634) (2,634)
Issue of new shares - (634) - (634)
Purchase of own shares - (400) - (400)
At 30 June 2012 21,256 (8,409) 26,784 39,631

11. Dividends

The following dividends were recognised as distributions to equity holders in the period:

£000's Six months ended 30 June 2013 Six months ended 30 June 2012 Year ended 31 Dec 2012
Final dividend for 2012 3.34p per share 7,308 - -
Interim dividend for 2012 3.06p per share - - 6,682
Final dividend for 2011 2.90p per share - 6,325 6,325
7,308 6,325 13,007

An interim dividend in respect of the six months ended 30 June 2013 of 3.52 pence per share, amounting to a total dividend of £7,723,000 was approved by the Directors of RPS Group Plc on 30 July 2013. These condensed consolidated interim financial statements do not reflect this dividend payable.

12. Note to the condensed consolidated cash flow statement

Six months
ended
30 June
Six months
ended
30 June
Year ended 31 Dec
£000's 2013 2012 2012
Operating profit 22,005 20,820 42,144
Adjustments for:
Depreciation 5,051 4,248 8,950
Amortisation of acquired intangibles 5,337 5,117 10,636
Contingent deferred consideration treated as remuneration 3,470 4,674 8,593
Share based payment expense 1,041 1,001 2,070
Loss on disposal of business - 112 135
Negative goodwill - - (266)
(Profit)/loss on sale of property, plant and equipment (186) 31 (119)
36,718 36,003 72,143)
Decrease/(increase) in trade and other receivables 1,604 (1,634) 12,491
Decrease in trade and other payables
(4,491) (3,184) (8,589)
Adjusted cash generated from operations 33,831 31.185 76.045

* Adjusted cash generated from operations is before payment of deferred consideration treated as remuneration.

The table below provides an analysis of net bank borrowings, comprising cash and cash equivalents, interest bearing bank loans and finance leases, during the six months ended 30 June 2013.

£000's At 1 January 2013 Cash flow Foreign exchange At 30 June 2013
Cash and cash equivalents 14,804 (3,027) (12) 11,765
Bank loans (27,098) (2,935) (1,645) (31,678)
Finance lease creditor (1,207) 353 33 (821)
Net bank borrowings (13501) (5,609) (1,624) (20,734)

The cash balance includes £1,624,000 (31 December 2012: £3,566,000) that is restricted in its use.

13. Events after the balance sheet date

On 18th July 2013 RPS completed the acquisition of the entire issued share capital of Asia-Pacific ASA Pty Ltd, an oceanographic consultancy firm based in Australia for a maximum consideration of A$8.7 million (£5.2 million) all payable in cash.

Consideration paid at completion was A$4.4 million (£2.6 million). Subject to certain operational conditions being met, further sums of A$1.7 million (£1.1 million), A$1.7 million (£1.1 million) and A$0.9 million (£0.5 million), will be paid on the first, second and third anniversaries of the transaction. Due to the proximity of the acquisition date to the date of approval of this announcement, it is impracticable to provide further information.

14. Principal risks and uncertainties

The nature of the principal risks and uncertainties faced by the Group have not changed significantly since the 2011 Report and Accounts was published. These risks, together with a description of the approach to mitigate them, are set out on page 9 of the 2011 Report and Accounts (available on the Group's web-site at www.rpsgroup.com) and are summarised as follows:

  • Economic environment
  • Material adverse events
  • Recruitment and retention of key personnel
  • Market position and reputation
  • Compliance and litigation
  • Business acquisitions
  • Funding
  • Health and safety

From time to time the Group receives claims from clients and suppliers. Some of these result in payments to the claimants by the Group and its insurers. The Board reviews all significant claims at each board meeting and more regularly if required. The Board is currently satisfied that the Group has sufficient provisions in its balance sheet to meet all likely uninsured liabilities.

The Board keeps under review the potential effect of economic circumstances. The continuing uncertainty in the global economic outlook inevitably increases the trading and balance sheet risks to which the Group is exposed.

15. Related party transactions

There are no significant changes in the nature and size of related party transactions for the period to those reported in the 2012 Report and Accounts.

16. Forward-looking statements

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 the year to date are based upon unaudited management accounts for the period January to June 2013. The Board considers market expectations for 2013 are best defined by taking the range of forecasts of PBTA for the full year published by analysts who consistently follow the Group. The current range of forecasts of which the Board is aware is £61.0 to £64.5 million. Nothing in this announcement should be construed as a profit forecast.

17. Publication

A copy of this announcement will be posted on the Company's website at www.rpsgroup.com.

INDEPENDENT REVIEW REPORT TO RPS GROUP PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013, which comprises the Condensed consolidated income statement, the Condensed consolidated statement of comprehensive income, the Condensed consolidated balance sheet, the Condensed consolidated cash flow statement, the Condensed consolidated statement of changes in equity and the related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 ";Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Finance Conduct Authority.

Deloitte LLP
Chartered Accountants and Statutory Auditor
Reading, United Kingdom
1 August 2013

 

2017

Half Year Results for the six months ended 30 June 2013

01 August 2013

Half Year Results for the six months ended 30 June 2013

PBTA slightly ahead. Financial position remains strong. Interim dividend increased 15% for 20th consecutive year. Acquisition pipeline encouraging. On track for full year.

2013 2012
Business Performance H1 H1
Revenue (£m) 280.9 276.1
Fee income (£m) 241.8 238.3
PBTA (1) (£m) 30.2 30.0
Adjusted earnings per share (2)(basic) (p) 9.81 9.80
Adjusted operating cash flow (£m) (3) 33.8 31.2
Dividend per share (p) 3.52 3.06
Profit before tax (£m) 21.0 19.9
Earnings per share (basic) (p) 6.53 5.68
Operating cash flow (£m) 29.6 25.0

(1) PBTA is profit before tax, amortisation of acquired intangibles and transaction related costs.
(2) Adjusted earnings per share is before amortisation of acquired intangibles and transaction related costs and the related tax.
(3) Adjusted operating cash flow is before deferred consideration treated as remuneration.

Brook Land, Chairman, commenting on the results, said:

"RPS has delivered a creditable result for the first half of 2013. Once again our conversion of profit into cash has been strong. We have increased the Interim dividend by 15% for the 20th consecutive year.

With our flexible and robust business model, the Board believes RPS is likely to deliver growth for the full year. Our acquisition pipeline also gives us further cause for optimism.".

1 August 2013

 

ENQUIRIES
RPS Group plc Today: 020 7457 2020
Dr Alan Hearne, Chief Executive Thereafter: 01235 863206
Gary Young, Finance Director
College Hill
Matthew Smallwood Tel: 020 7457 2020
Justine Warren

 

RPS is an international consultancy providing advice upon the development of natural resources, land and property, the management of the environment and the health and safety of people. We have offices in the UK, Ireland, the Netherlands, the Americas and Australia Asia Pacific ("AAP") 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.

 

Results

Profit (before tax, amortisation of acquired intangibles and transaction related costs) was £30.2 million (2012: £30.0 million). Basic earnings per share (before amortisation and transaction related costs) were 9.81 pence (2012: 9.80 pence). The contribution of the 2 segments was:

Underlying Profit(£m)* 2013 2012
H1 H1
Energy 21.5 19.1
Built and Natural Environment 14.1 16.1
Total 35.7 35.2

* as defined in note 3, stated before reorganisation costs of £1.1m (2012: £0.4m)

Group central costs were £3.4 million, a reduction of 13% over the same period last year. Finance charges remained constant at £1.0 million.

Cash Flow, Funding and Dividend

Our conversion of profit into cash continued at an encouraging level and our balance sheet remains strong. After funding acquisition investment of £15.4 million in the period, net bank borrowings at 30 June were £20.7 million (30 June 2012: £20.5 million). Following the period end we funded the initial consideration of £2.6 million related to the acquisition of Asia Pacific ASA Pty Ltd ("APASA").

We have in place a £125 million facility with Lloyds Banking Group until July 2016. This comprises £75 million of committed revolving credit facility, with an additional £50 million available as required.

The Board remains confident about the Group's financial strength and has, for the 20th consecutive year, increased the interim dividend by about 15% to 3.52 pence per share (2012: 3.06 pence) payable on 17 October 2013 to shareholders on the register on 20 September 2013.

Acquisitions

On 16 January 2013 we announced the acquisition of PEICE, a Canadian based training business in the oil and gas sector, for a maximum consideration of £7.4 million. We have made good progress integrating PEICE with our existing training activities in the energy market.

On 19 April 2013 we announced the acquisition of Knowledge Reservoir Inc ("KR"), a reservoir engineering and geosciences consulting firm headquartered in Houston, for a maximum consideration of £12.0 million net of cash inherited. The US element of the business has traded well and we are close to finalising the reorganisation of the KR businesses in London, Oman and Kuala Lumpur.

On 18 July 2013 we announced the acquisition of APASA for a maximum consideration of £5.2 million. This is the sister company of ASA, the international oceanographic consultancy business we brought into the Group in 2011. Our international oceanographic capability has grown steadily in recent years, serving a market which remains buoyant.

Our acquisition pipeline is encouraging at the moment and we anticipate extending the Group's capabilities further in the next few months.

Markets and Trading

Energy

We provide internationally recognised consultancy services to the oil and gas exploration and production industry from bases in the UK, USA, Canada and AAP. These act as regional centres for projects undertaken in many other countries.

The first half delivered good growth, once again with a strong margin.

2013 2012
H1 H1
Fee income (£m) 121.7 108.0
Profit* (£m) 21.5 19.1
Margin % 17.7 17.7

*as defined in note 3, stated before reorganisation costs of £0.1m (2012: £nil) costs.

Planned expenditure in the oil and gas exploration and production sector for 2013 is encouraging, in respect of both conventional and unconventional resources. Given the uncertain global economic backdrop, some clients have been understandably cautious about starting new projects, but our international presence and reputation has enabled us to benefit from the investment which has been committed in many parts of the world.

Our EAME business performed particularly well, with the US producing a solid performance, after strong growth in 2012. Our profile in the financial services sector continued to enable us to benefit from valuation and transaction related activity.

Client spend in the AAP region slowed significantly in the early months of the year, as a number dealt with both demand and cost pressures. More recently it seems to have improved. We also experienced a slow down in Canada as major potash projects moved into a phase of the development cycle in which we have less involvement. New opportunities in this sector are, however, now emerging.

Overall, this business remains on track to deliver a strong performance this year.

Built and Natural Environment ("BNE")

Within these businesses we provide a wide range of consultancy services to many aspects of the property and infrastructure development and management sectors. In recent years we have developed extensive experience in respect of the infrastructure projects necessary to bring energy resources, both conventional and renewable, to market.

Australia Asia Pacific

In BNE Australia Asia Pacific ("BNEA") we remain well positioned in both the traditional infrastructure and development markets, as well as the more recently developed energy infrastructure market. Our successful move into the offshore gas and coal seam gas/LNG market enabled this business to double in size in recent years, despite the global financial crisis.

In the second half of last year a number of natural resources projects, particularly mining and offshore gas, were delayed, whilst our clients reviewed product demand, production costs and operating efficiencies. Further delays in significant projects have been announced by our clients in the first half of this year. As a result the BNEA results for the first half of the year were significantly below the same period last year.

2013 2012
H1 H1
Fee income (£m) 46.4 47.9
Profit* (£m) 4.6 6.3
Margin % 9.9 13.1

*as defined in note 3, stated before reorganisation costs of £0.8m (2012: £0.1m)

In other sectors our clients have had to deal with the economic uncertainty resulting from the resources slowdown, as well as political volatility in the run up to the Federal election. Many have remained reasonably positive and continued to invest, but it seems clear the Australian economy is now on a lower growth trajectory.

In response to these difficult trading conditions we continue to reduce capacity and costs. These reductions have made us more efficient and competitive and should result in a better performance in the second half, provided the market does not deteriorate further.

Once recovery in resources investment gets underway, it will offer an opportunity for us to create a further period of growth. In the meantime the weakening Australian currency and lower interest rates should help deliver a rebalancing of the economy. We should benefit from this in terms of trading, although the weak dollar will adversely affect our results on consolidation. Exposure to the expected long term growth in the AAP region remains an important part of Group strategy.

Europe

Our BNE business in Europe ("BNEE") performed well, even though economic uncertainty continued to hold back some of our clients' investment. Fee and profit growth was affected by the exceptionally good performance we experienced in our UK water activities in the first half of 2012, which could not be replicated this year. The improved efficiencies resulting from actions taken previously gave rise to an increased margin, despite continuing fee rate pressure.

2013 2012
H1 H1
Fee income (£m) 74.7 83.3
Underlying Profit* (£m) 9.6 9.8
Margin % 12.8 11.8

* as defined in note 3, stated before reorganisation costs of £0.3m (2012 £0.3m)

Our strong position in the energy infrastructure market (conventional, nuclear and renewable) enabled us to win work at rates which reflect our market leading position. Some of our UK commercial development clients, particularly in the house building sector, seemed more confident than in recent years. The investment we made in relocating and expanding our laboratories in the Netherlands in 2012 is proving worthwhile, more than compensating for continuing weakness in the Dutch property development sector. Our health, safety and risk management businesses are well positioned and continued to perform well.

We still expect BNEE to deliver a 2013 result broadly the same as in 2012, although there may now be some modest upside opportunity.

Group Prospects

Our flexible and robust business model has demonstrated in recent years it is capable of producing good results in challenging circumstances. The Board remains of the view that RPS is likely to meet market expectations in 2013 and continue to deliver strong cash flow. Our acquisition pipeline also gives us cause for optimism.

Board of Directors
RPS Group plc

1 August 2013

 

Condensed consolidated income statement

Notes Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Revenue 3 280,850 276,143 555,863
Recharged expenses 3 (39,006) (37,817) (77,028)
Fee income 3 241,844 238,326 478,835
Operating profit before amortisation of acquired intangibles and transaction related costs 3,4 31,179 30,981 62,069
Amortisation of acquired intangibles and transaction related costs 4 (9,174) (10,161) (19,925)
Operating profit 22,005 20,820 42,144
Finance costs (1,006) (1,059) (2,128)
Finance income 48 95 158
Profit before tax, amortisation of acquired intangibles and transaction related costs 30,221 30,017 60,099
Profit before tax 21,047 19,856 40,174
Tax expense 5 (6,807) (7,534) (14,263)
Profit for the period attributable to equity holders of the parent 14,240 12,322 25,911
Basic earnings per share (pence) 6 6.53 5.68 11.94
Diluted earnings per share (pence) 6 6.50 5.65 11.87
Adjusted basic earnings per share (pence) 6 9.81 9.80 19.48
Adjusted diluted earnings per share (pence) 6 9.76 9.74 19.36

 

Condensed consolidated statement of comprehensive income

Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Profit for the period 14,240 12,322 25,911
Exchange differences (1,706) (2,634) (5,545)
Total recognised comprehensive income for the period attributable to equity holders of the parent 12,534 9,688 20,366

* may be reclassified subsequently to profit or loss in accordance with IFRS.

 

Condensed consolidated balance sheet

As at 30 June As at 30 June As at 31 December
£000's Notes 2013 2012 2012
Assets
Non-current assets
Intangible assets 340,408 320,911 328,440
Property, plant and equipment 7 30,200 29,925 30,632
370,608 350,836 359,072
Current assets
Trade and other receivables 162,064 172,678 159,381
Cash at bank 12,713 17,909 14,804
174,777 190,587 174,185
Liabilities
Current liabilities
Borrowings 1,474 1,554 748
Deferred consideration 11,369 8,427 7,842
Trade and other payables 98,102 103,891 101,921
Corporation tax liabilities 1,638 3,883 3,582
Provisions 2,560 4,315 2,633
115,143 122,070 116,726
Net current assets 59,634 68,517 57,459
Non-current liabilities
Borrowings 31,973 36,822 27,557
Deferred consideration 6,910 - 3,543
Other creditors 3,022 1,784 1,745
Deferred tax liabilities 6,578 10,053 8,436
Provisions 1,469 2,089 1,436
49,952 50,748 42,717
Net assets 380,290 368,605 373,814
Equity
Share capital 9 6,600 6,571 6,587
Share premium 106,922 105,140 106,198
Other reserves 10 34,839 39,631 36,070
Retained earnings 231,929 217,263 224,959
Total shareholders' equity 380,290 368,605 373,814

 

Condensed consolidated cash flow statement

Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's Notes 2013 2012 2012
Adjusted cash generated from operations 12 33,831 31,185 76,045
Deferred consideration treated as remuneration (4,204) (6,214) (9,969)
Cash generated from operations 29,627 24,971 66,076
Interest paid (1,091) (908) (2,204)
Interest received 48 95 158
Income taxes paid (11,381) (9,910) (18,162)
Net cash from operating activities 17,203 14,248 45,868
Cash flows from investing activities
Purchases of subsidiaries net of cash acquired (11,178) - (9,774)
Deferred consideration - (165) (4,130)
Purchase of property, plant and equipment (4,722) (4,661) (9,909)
Sale of property, plant and equipment 272 150 713
Dividends received - - 298
Net cash used in investing activities (15,628) (4,676) (22,802)
Cash flows from financing activities
Proceeds from issue of share capital 211 190 240
Purchase of own shares - (400) (400)
Proceeds from/(repayments of) bank borrowings 2,935 (9,050) (17,409)
Payment of finance lease liabilities (353) (579) (1,350)
Dividends paid (7,308) (6,325) (13,007)
Payment of pre-acquisition dividend (87) - (399)
Net cash used in financing activities (4,602) (16,164) (32,325)
Net (decrease)/increase in cash and cash equivalents (3,027) (6,592) (9,259)
Cash and cash equivalents at beginning of period 14,804 24,458 24,458
Effect of exchange rate fluctuations (12) (414) (395)
Cash and cash equivalents at end of period 12 11,765 17,452 14,804
Cash and cash equivalents comprise:
Cash at bank 12,713 17,909 14,804
Bank overdraft (948) (457) -
Cash and cash equivalents at end of period 11,765 17,452 14,804

 

Consolidated statement of changes in equity

£000's Share capital Share premium Retained earnings Other reserves Total equity
Changes in equity during 2013
At 1 January 2013 6,587 106,198 224,959 36,070 373,814
Total comprehensive income for the period - - 14,240 (1,706) 12,534
Issue of new ordinary shares 13 724 (1,003) (281) (547)
Release of own shares - - - 756 756
Share based payment expense - - 1,041 - 1,041
Dividends - - (7,308) - (7,308)
At 30 June 2013 6,600 106,922 231,929 34,839 380,290
Changes in equity during 2012
At 1 January 2012 6,544 103,717 210,890 43,299 364,450
Total comprehensive income for the period - - 12,322 (2,634) 9,688
Issue of new ordinary shares 27 1,423 (625) (634) 191
Purchase of own shares - - - (400) (400)
Share based payment expense - - 1,001 - 1,001
Dividends - - (6,325) - (6,325))
At 30 June 2012 (see note 1) 6,571 105,140 217,263 39,631 368,605

An analysis of other reserves is provided in Note 10.

 

Notes to the condensed consolidated financial statements

1. Basis of preparation

RPS Group Plc (the "Company") is a company domiciled in England. The condensed consolidated interim financial statements of the Company for the six months ended 30 June 2012 comprise the Company and its subsidiaries (together referred to as the "Group").

The condensed interim financial statements have been prepared using accounting policies set out in the Report and Accounts 2011 and in accordance with IAS 34. They are unaudited but have been reviewed by the Company's auditor. The results for the year end 31 December 2011 and the balance sheet as at that date are abridged from the Company's Report and Accounts 2011 which have been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters for which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.

The condensed interim financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.

In assessing the going concern basis, the directors considered the Group's business activities, the financial position of the Group and the Group's financial risk management objectives and policies. The directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future and that it is, therefore, appropriate to adopt the going concern basis in preparing the Group's interim financial statements.

Restatement

As reported in the Group's Report and Accounts 2011, our auditor at that time, Ernst & Young LLP, indicated that it did not agree with the Group's interpretation of IFRS 3 "Business Combinations" in respect of deferred consideration. They advised the Group that the deferred consideration that was contingent on continuing employment should be recognised as a remuneration charge through the Consolidated Income Statement rather than be capitalised.

The Group agreed to this revised treatment of deferred consideration which impacted the results for the six months ended 30 June 2011 in the following ways:

1. In respect of 2010 acquisitions the Group has derecognised the deferred consideration payable that was previously shown in the balance sheet on the date of acquisition of subsidiaries. The value of goodwill has been reduced by a corresponding amount since deferred consideration is no longer considered part of the cost of investment;

2. For those acquisitions in 2010 and 2011 where the fair value of the net assets acquired is greater than the consideration transferred, the Group has recognised negative goodwill through the consolidated income statement; and

3. A remuneration charge has been recognised through the consolidated income statement within "amortisation of acquired intangibles and transaction related costs" and a corresponding accrual has been recognised in the balance sheet under "deferred consideration".

The Group explained the restatement of the results for the six months ended 30 June 2011 by means of an announcement to the London Stock Exchange dated 3 May 2012. This announcement details the restatement of the income statement and the segment results for the six months ended 30 June 2011 and the balance sheet at that date.

The condensed consolidated cash flow statement for the six months ended 30th June 2011 and the year ended 31st December 2011 have been restated so that deferred consideration treated as remuneration is included within cash generated from operating activities rather than cash flows from investing activities. In addition, the total comprehensive income in the condensed consolidated statement of changes in equity in this release has been restated to reflect the above.

2. Responsibility Statement

The directors confirm that, to the best of their knowledge this condensed set of financial statements has been prepared in accordance with IAS 34 and that this Interim Report includes a fair review of the information required by DTR 4.2.4R, DTR 4.2.7R and DTR 4.2.8R.

On behalf of the Board

A. S. Hearne - Chief Executive
G. R. Young - Group Finance Director

3. Business segments

Segment information is presented in respect of the Group's business segments which are reported to the Chief Operating Decision Maker, which is identified as the main Board of Directors of RPS Group Plc. The business segment reporting format reflects the Group's management and internal structure. Inter-segment pricing is determined on an 'arm's length' basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

As announced on 3 November 2011 the Group merged Planning and Development (UK and Ireland) and Environmental Management. The 30 June 2011 results are therefore shown below on this revised basis. The Group comprises the following business segments:

Built and Natural Environment ("BNE") - consultancy services advising on all aspects of the built and natural environment including the provision of energy infrastructure, planning and development, engineering, design and surveying, environmental assessment and management and risk management. Consulting services are provided on a regional basis in Europe and Australia Asia Pacific ("AAP").

Energy ? the provision of integrated technical, commercial and project management support in the fields of geo-science, engineering and health, safety and environment on a global basis to the energy sector.

Segment results for the period ended 30 June 2013:

£000's Fees Recharged Expenses Intersegment revenue External Revenue
Built and Natural Environment
Europe 74,682 9,504 (265) 83,921
AAP 46,413 8,829 (272) 54,970
Intra BNE eliminations (52) - 52 -
Total BNE 121,043 18,333 (485) 138,891
Energy 121,738 20,834 (613) 141,959
Group eliminations (937) (161) 1,098 -
Total 241,844 39,006 - 280,850

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 9,550 (259) 9,291
APP 4,584 (759) 3,825
Total BNE 14,134 (1,018) 13,116
Energy 21,539 (126) 21,413
Total 35,673 (1,144) 34,529

Segment results for the period ended 30 June 2012:

£000's Fees Recharged expenses Intersegment revenue External revenue
Built and Natural Environment:
Europe 83,323 10,151 (719) 92,755
AAP 47,940 11,090 (101) 58,929
Intra BNE eliminations (104) (3) 107 -
Total BNE 131,159 21,238 (713) 151,684
Energy 108,024 16,646 (211) 124,459
Group eliminations (857) (67) 924 -
Total 238,326 37,817 - 276,143

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 9,825 (307) 9,518
APP 6,286 (56) 6,230
Total BNE 16,111 (363) 15,748
Energy 19,119 (43) 19,076
Total 35,230 (406) 34,824

Segment results for the year ended 31 December 2012:

£000's Fees Recharged expenses Intersegment revenue External revenue
Built and Natural Environment:
Europe 157,200 21,433 (1,301) 177,332
AAP 98,300 19,827 (786) 117,341
Intra BNE eliminations (193) (41) 234 -
Total BNE 255,307 41,219 (1,853) 294,673
Energy 225,875 36,017 (702) 261,190
Group eliminations (2,347) (208) 2,555 -
Total 478,835 77,028 - 555,863

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 18,874 (754) 18,120
APP 12,974 (920) 12,054
Total BNE 31,848 (1,674) 30,174
Energy 39,709 (72) 39,637
Total 71,557 (1,746) 69,811

Group reconciliation

£000's 30 June 2013 30 June 2012 31 Dec 2012
Revenue 280,850 276,143 555,863
Recharged expenses (39,006) (37,817) (77,028)
Fees 241,844 238,326 478,835
Underlying profit 35,673 35,230 71,557
Reorganisation costs (1,144) (406) (1,746)
Unallocated expenses (3,350) (3,843) (7,742)
Operating profit before amortisation of acquired intangibles and transaction related costs 31,179 30,981 62,069
Amortisation of acquired intangibles and transaction related costs (9,174) (10,161) (19,925)
Operating profit 22,005 20,820 42,144
Net finance costs (958) (964) (1,970)
Profit before tax 21,047 19,856 40,174

Total segment assets were as follows:

£000's 30 June 2013 30 June 2012 31 December 2012
Build and Natural Environment
Europe 229,401 233,338 226,861
AAP 116,032 121,357 124,908
Total BNE 345,433 354,695 351,769
Energy 197,004 182,898 179,163
Unallocated 2,948 3,830 2,325
Total 545,385 541,423 533,257

4. 4. Amortisation of acquired intangibles and transaction related costs

£000's 30 June 2013 30 June 2012 31 December 2012
Amortisation of acquired intangibles 5,337 5,117 10,636
Contingent deferred consideration treated as remuneration 3,470 4,674 8,593
Negative goodwill - - (266)
Loss on disposal of business - 112 135
Third party advisory costs 367 258 827
Total 9,174 10,161 19,925

5. Income taxes

The tax charge for the period has been calculated using an estimate of the effective annual rate of tax for each taxing jurisdiction for the full year. These rates have been applied to the pre-tax profits for each jurisdiction for the six months ended 30 June 2013. The Group has separately calculated the tax rates applicable to amortisation of intangibles and transaction related costs for the period. Tax rate changes that were substantively enacted at the balance sheet date have been factored into the calculation of the effective tax rates.

30 June 2013 30 June 2012 31 December 2012
£000's
Current tax expense 8,332 9,207 18,347
Deferred tax credit (1,525) (1,673) (4,084)
Total tax expense in the income statement 6,807 7,534 14,263
Add back:
Tax on amortisation of acquired intangibles and acquisition related costs 2,033 1,234 3,569
Adjusted tax charge on PBTA for the period 8,840 8,768 17,832
Tax rate on PBT 32.3% 37.9% 35.5%
Tax rate on PBTA 29.3% 29.2% 29.7%

6. Earnings per share

The calculations of earnings per share are based on the profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding during the period as shown below:

Six months
ended
30 June
Six months
ended
30 June
Year ended ;31 Dec
£000's 2013 2012 2012
Profit attributable to ordinary shareholders 14,240 12,322 25,911
000's
Weighted average number of ordinary shares for the purposes of basic earnings per share 217,953 216,835 216,980
Effect of employee share schemes 1,034 1,406 1,313
Weighted average number of ordinary shares for the purposes of diluted earnings per share 218,987 218,241 218,293
Basic earning per share (pence) 6.53 5.68 11.94
Diluted earnings per share (pence) 6.50 5.65 11.87

The directors consider that earnings per share before amortisation of acquired intangibles and transaction related costs provides a more meaningful measure of the Group's performance than statutory earnings per share. The calculations of adjusted earnings per share were based on the number of shares as above, and are shown in the table below:

£000's Six months ended 30 June 2013 Six months ended 30 June 2012 Year ended 31 Dec 2012
Profit attributable to ordinary shareholders 14,240 12,322 25,911
Amortisation of acquired intangibles and transaction related costs 9,174 10,161 19,925
Tax on amortisation of acquired intangibles and transaction related costs (2,033) (1,234) (3,569)
Change in Australian tax law - - (238)
Adjusted profit attributable to ordinary shareholders 21,381 21,249 42,267
Adjusted basic earnings before per share (pence) 9.81 9.80 19.48
Adjusted diluted earnings per share (pence) 9.76 9.74 19.36

7. Property, plant and equipment

During the six months ended 30 June 2013, the Group acquired assets with a cost of £4,732,000 (six months to 30 June 2012: £4,628,000), which includes £89,000 acquired through business combinations (six months to 30 June 2012: £nil). Assets with a net book value of £86,000 were disposed of during the six months ended 30 June 2013 (six months ended 30 June 2012: £171,000).

8. Acquisitions

The Group has completed the following acquisitions to strengthen and broaden the skill base of the Group, during the first half of 2013:

Entity Business Segment Date of Acquisition Place of incorporation Percentageof entity acquired Nature of business acquired
Petroleum Institute for Continuing Education Inc. (PEICE) Energy 16th Jan 2013 Canada 100% Training
Knowledge Reservoir Group (KR) Energy 19th Apr 2013 USA 100% Reservoir engineering

Their contributions to the Group's results for the period is given below:

£000's Revenue Fees Operating profit before amortisation Operating profit
EHI 2,084 2,084 460 77
Nautilus 2,995 2,950 280 (19)

Had the Group acquired these entities on the first day of the period, the Group estimates revenue would have been £285,470,000 and operating profit would have been £21,843,000.

The Group has allocated provisional fair values to the net assets acquired as follows:

£000's Order book Customer relationships Brand IP PPE Cash Other assets Other liabilities Net assets acquired
PEICE 120 4,119 164 500 1 612 59 (1,949) 3,626
KR 745 6,314 719 425 88 1,956 5,123 (2,338) 13,032
865 10,433 883 925 89 2,568 5,182 (4,287) 16,658

 

£000's Initial cash consideration Deferred cash consideration Total consideration Net assets acquired Goodwill acquired Tax deductible goodwill
PEICE 3,637 3,574 7,211 3,626 3,585 -
KR 9,651 4,327 13,978 13,032 946 -
13,288 7,901 21,189 16,658 4,531 -

Provisional values are given in the table above as information about facts or circumstances that existed at the acquisition date is incomplete.

Goodwill represents the value of the accumulated workforce and synergies with RPS associated with these acquisitions.

The total fair value of receivables acquired was £3,390,000. The gross contractual receivables acquired were £3,431,000 and £41,000 was estimated to be irrecoverable.

The vendors of the acquired companies have entered into indemnity arrangements with the Group. The total undiscounted cash flow that could be receivable by the Group is between £nil and £3,390,000. As the Group does not expect that these warranties will become receivable, it has not recognised an indemnification asset on acquisition.

Deferred consideration is payable on the first and second anniversaries of the acquisitions of PEICE and KR, dependent on key vendors remaining employed. If they leave, the deferred consideration will be paid on the tenth anniversary of completion including a market rate of interest.

The Group incurred acquisition-related costs of £314,000 (6 months to 30 June 2012: £nil), which have been expensed through the consolidated income statement and included within "amortisation of acquired intangibles and transaction related costs".

A reconciliation of the goodwill movement in 2013 in respect of acquisitions completed in 2012 and 2013 is given below.

£000's Manidis Roberts PEICE KR
Goodwill at 1 January 2013 11,943 - -
Additions through acquisition - 3,585 946
Foreign exchange gains and losses (658) (39) 8
Goodwill at 30 June 2013 11,285 3,546 954

There were no accumulated impairment losses at the beginning or the end of the period.

Commitments and contingencies

The Group completed a number of acquisitions between 1 January 2010 and 31 December 2011 where deferred consideration payments to vendors are contingent on the vendor's continued employment with the Group and so are required to be recognised as employment costs over the deferred consideration period. The Group considers it probable that the remaining deferred consideration payments will be settled.

The total cash commitments at 30 June 2013 in respect of contingent deferred consideration treated as remuneration that the Group expects to settle and the estimated remuneration charge for each financial year assuming exchange rates remain constant are disclosed in the table below:

£000's Cash commitment Remuneration charge
July - December 2013 3,653 2,585
2014 3,693 1,213
7,346 3,798

The balance sheet at 30 June 2013 includes, within deferred consideration current liabilities, contingent deferred consideration remuneration expense accrued but not paid totalling £3,549,000 (31 December 2012: £4,157,000).

9. Share capital

2013 Number 000's 2013 £000's 2012 Number 000's 2012 £000's
Authorised
Ordinary shares of 3p each at 30 June 240,000 7,200 240,000 7,200
Issued and fully paid
Ordinary shares of 3p each at 1 January 219,566 6,587 218,138 6,544
Issued under employee share schemes 424 13 911 27
At 30 June 219,990 6,600 219,049 6,571

10. Other reserves

£000's Merger reserve Employee trust Translation reserve Total
Changes in equity during 2013
At 1 January 2013 21,256 (9,059) 23,873 36,070
Exchange differences - - (1,706) (1,706)
Issue of new shares - (281) - (281)
Purchase of own shares - 756 - 756
At 30 June 2013 21,256 (8,584) 22,167 34,839
Changes in equity during 2012
At 1 January 2012 21,256 (7,375) 29,418 43,299
Exchange differences - - (2,634) (2,634)
Issue of new shares - (634) - (634)
Purchase of own shares - (400) - (400)
At 30 June 2012 21,256 (8,409) 26,784 39,631

11. Dividends

The following dividends were recognised as distributions to equity holders in the period:

£000's Six months ended 30 June 2013 Six months ended 30 June 2012 Year ended 31 Dec 2012
Final dividend for 2012 3.34p per share 7,308 - -
Interim dividend for 2012 3.06p per share - - 6,682
Final dividend for 2011 2.90p per share - 6,325 6,325
7,308 6,325 13,007

An interim dividend in respect of the six months ended 30 June 2013 of 3.52 pence per share, amounting to a total dividend of £7,723,000 was approved by the Directors of RPS Group Plc on 30 July 2013. These condensed consolidated interim financial statements do not reflect this dividend payable.

12. Note to the condensed consolidated cash flow statement

Six months
ended
30 June
Six months
ended
30 June
Year ended 31 Dec
£000's 2013 2012 2012
Operating profit 22,005 20,820 42,144
Adjustments for:
Depreciation 5,051 4,248 8,950
Amortisation of acquired intangibles 5,337 5,117 10,636
Contingent deferred consideration treated as remuneration 3,470 4,674 8,593
Share based payment expense 1,041 1,001 2,070
Loss on disposal of business - 112 135
Negative goodwill - - (266)
(Profit)/loss on sale of property, plant and equipment (186) 31 (119)
36,718 36,003 72,143)
Decrease/(increase) in trade and other receivables 1,604 (1,634) 12,491
Decrease in trade and other payables
(4,491) (3,184) (8,589)
Adjusted cash generated from operations 33,831 31.185 76.045

* Adjusted cash generated from operations is before payment of deferred consideration treated as remuneration.

The table below provides an analysis of net bank borrowings, comprising cash and cash equivalents, interest bearing bank loans and finance leases, during the six months ended 30 June 2013.

£000's At 1 January 2013 Cash flow Foreign exchange At 30 June 2013
Cash and cash equivalents 14,804 (3,027) (12) 11,765
Bank loans (27,098) (2,935) (1,645) (31,678)
Finance lease creditor (1,207) 353 33 (821)
Net bank borrowings (13501) (5,609) (1,624) (20,734)

The cash balance includes £1,624,000 (31 December 2012: £3,566,000) that is restricted in its use.

13. Events after the balance sheet date

On 18th July 2013 RPS completed the acquisition of the entire issued share capital of Asia-Pacific ASA Pty Ltd, an oceanographic consultancy firm based in Australia for a maximum consideration of A$8.7 million (£5.2 million) all payable in cash.

Consideration paid at completion was A$4.4 million (£2.6 million). Subject to certain operational conditions being met, further sums of A$1.7 million (£1.1 million), A$1.7 million (£1.1 million) and A$0.9 million (£0.5 million), will be paid on the first, second and third anniversaries of the transaction. Due to the proximity of the acquisition date to the date of approval of this announcement, it is impracticable to provide further information.

14. Principal risks and uncertainties

The nature of the principal risks and uncertainties faced by the Group have not changed significantly since the 2011 Report and Accounts was published. These risks, together with a description of the approach to mitigate them, are set out on page 9 of the 2011 Report and Accounts (available on the Group's web-site at www.rpsgroup.com) and are summarised as follows:

  • Economic environment
  • Material adverse events
  • Recruitment and retention of key personnel
  • Market position and reputation
  • Compliance and litigation
  • Business acquisitions
  • Funding
  • Health and safety

From time to time the Group receives claims from clients and suppliers. Some of these result in payments to the claimants by the Group and its insurers. The Board reviews all significant claims at each board meeting and more regularly if required. The Board is currently satisfied that the Group has sufficient provisions in its balance sheet to meet all likely uninsured liabilities.

The Board keeps under review the potential effect of economic circumstances. The continuing uncertainty in the global economic outlook inevitably increases the trading and balance sheet risks to which the Group is exposed.

15. Related party transactions

There are no significant changes in the nature and size of related party transactions for the period to those reported in the 2012 Report and Accounts.

16. Forward-looking statements

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 the year to date are based upon unaudited management accounts for the period January to June 2013. The Board considers market expectations for 2013 are best defined by taking the range of forecasts of PBTA for the full year published by analysts who consistently follow the Group. The current range of forecasts of which the Board is aware is £61.0 to £64.5 million. Nothing in this announcement should be construed as a profit forecast.

17. Publication

A copy of this announcement will be posted on the Company's website at www.rpsgroup.com.

INDEPENDENT REVIEW REPORT TO RPS GROUP PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013, which comprises the Condensed consolidated income statement, the Condensed consolidated statement of comprehensive income, the Condensed consolidated balance sheet, the Condensed consolidated cash flow statement, the Condensed consolidated statement of changes in equity and the related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 ";Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Finance Conduct Authority.

Deloitte LLP
Chartered Accountants and Statutory Auditor
Reading, United Kingdom
1 August 2013

 

2016

Half Year Results for the six months ended 30 June 2013

01 August 2013

Half Year Results for the six months ended 30 June 2013

PBTA slightly ahead. Financial position remains strong. Interim dividend increased 15% for 20th consecutive year. Acquisition pipeline encouraging. On track for full year.

2013 2012
Business Performance H1 H1
Revenue (£m) 280.9 276.1
Fee income (£m) 241.8 238.3
PBTA (1) (£m) 30.2 30.0
Adjusted earnings per share (2)(basic) (p) 9.81 9.80
Adjusted operating cash flow (£m) (3) 33.8 31.2
Dividend per share (p) 3.52 3.06
Profit before tax (£m) 21.0 19.9
Earnings per share (basic) (p) 6.53 5.68
Operating cash flow (£m) 29.6 25.0

(1) PBTA is profit before tax, amortisation of acquired intangibles and transaction related costs.
(2) Adjusted earnings per share is before amortisation of acquired intangibles and transaction related costs and the related tax.
(3) Adjusted operating cash flow is before deferred consideration treated as remuneration.

Brook Land, Chairman, commenting on the results, said:

"RPS has delivered a creditable result for the first half of 2013. Once again our conversion of profit into cash has been strong. We have increased the Interim dividend by 15% for the 20th consecutive year.

With our flexible and robust business model, the Board believes RPS is likely to deliver growth for the full year. Our acquisition pipeline also gives us further cause for optimism.".

1 August 2013

 

ENQUIRIES
RPS Group plc Today: 020 7457 2020
Dr Alan Hearne, Chief Executive Thereafter: 01235 863206
Gary Young, Finance Director
College Hill
Matthew Smallwood Tel: 020 7457 2020
Justine Warren

 

RPS is an international consultancy providing advice upon the development of natural resources, land and property, the management of the environment and the health and safety of people. We have offices in the UK, Ireland, the Netherlands, the Americas and Australia Asia Pacific ("AAP") 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.

 

Results

Profit (before tax, amortisation of acquired intangibles and transaction related costs) was £30.2 million (2012: £30.0 million). Basic earnings per share (before amortisation and transaction related costs) were 9.81 pence (2012: 9.80 pence). The contribution of the 2 segments was:

Underlying Profit(£m)* 2013 2012
H1 H1
Energy 21.5 19.1
Built and Natural Environment 14.1 16.1
Total 35.7 35.2

* as defined in note 3, stated before reorganisation costs of £1.1m (2012: £0.4m)

Group central costs were £3.4 million, a reduction of 13% over the same period last year. Finance charges remained constant at £1.0 million.

Cash Flow, Funding and Dividend

Our conversion of profit into cash continued at an encouraging level and our balance sheet remains strong. After funding acquisition investment of £15.4 million in the period, net bank borrowings at 30 June were £20.7 million (30 June 2012: £20.5 million). Following the period end we funded the initial consideration of £2.6 million related to the acquisition of Asia Pacific ASA Pty Ltd ("APASA").

We have in place a £125 million facility with Lloyds Banking Group until July 2016. This comprises £75 million of committed revolving credit facility, with an additional £50 million available as required.

The Board remains confident about the Group's financial strength and has, for the 20th consecutive year, increased the interim dividend by about 15% to 3.52 pence per share (2012: 3.06 pence) payable on 17 October 2013 to shareholders on the register on 20 September 2013.

Acquisitions

On 16 January 2013 we announced the acquisition of PEICE, a Canadian based training business in the oil and gas sector, for a maximum consideration of £7.4 million. We have made good progress integrating PEICE with our existing training activities in the energy market.

On 19 April 2013 we announced the acquisition of Knowledge Reservoir Inc ("KR"), a reservoir engineering and geosciences consulting firm headquartered in Houston, for a maximum consideration of £12.0 million net of cash inherited. The US element of the business has traded well and we are close to finalising the reorganisation of the KR businesses in London, Oman and Kuala Lumpur.

On 18 July 2013 we announced the acquisition of APASA for a maximum consideration of £5.2 million. This is the sister company of ASA, the international oceanographic consultancy business we brought into the Group in 2011. Our international oceanographic capability has grown steadily in recent years, serving a market which remains buoyant.

Our acquisition pipeline is encouraging at the moment and we anticipate extending the Group's capabilities further in the next few months.

Markets and Trading

Energy

We provide internationally recognised consultancy services to the oil and gas exploration and production industry from bases in the UK, USA, Canada and AAP. These act as regional centres for projects undertaken in many other countries.

The first half delivered good growth, once again with a strong margin.

2013 2012
H1 H1
Fee income (£m) 121.7 108.0
Profit* (£m) 21.5 19.1
Margin % 17.7 17.7

*as defined in note 3, stated before reorganisation costs of £0.1m (2012: £nil) costs.

Planned expenditure in the oil and gas exploration and production sector for 2013 is encouraging, in respect of both conventional and unconventional resources. Given the uncertain global economic backdrop, some clients have been understandably cautious about starting new projects, but our international presence and reputation has enabled us to benefit from the investment which has been committed in many parts of the world.

Our EAME business performed particularly well, with the US producing a solid performance, after strong growth in 2012. Our profile in the financial services sector continued to enable us to benefit from valuation and transaction related activity.

Client spend in the AAP region slowed significantly in the early months of the year, as a number dealt with both demand and cost pressures. More recently it seems to have improved. We also experienced a slow down in Canada as major potash projects moved into a phase of the development cycle in which we have less involvement. New opportunities in this sector are, however, now emerging.

Overall, this business remains on track to deliver a strong performance this year.

Built and Natural Environment ("BNE")

Within these businesses we provide a wide range of consultancy services to many aspects of the property and infrastructure development and management sectors. In recent years we have developed extensive experience in respect of the infrastructure projects necessary to bring energy resources, both conventional and renewable, to market.

Australia Asia Pacific

In BNE Australia Asia Pacific ("BNEA") we remain well positioned in both the traditional infrastructure and development markets, as well as the more recently developed energy infrastructure market. Our successful move into the offshore gas and coal seam gas/LNG market enabled this business to double in size in recent years, despite the global financial crisis.

In the second half of last year a number of natural resources projects, particularly mining and offshore gas, were delayed, whilst our clients reviewed product demand, production costs and operating efficiencies. Further delays in significant projects have been announced by our clients in the first half of this year. As a result the BNEA results for the first half of the year were significantly below the same period last year.

2013 2012
H1 H1
Fee income (£m) 46.4 47.9
Profit* (£m) 4.6 6.3
Margin % 9.9 13.1

*as defined in note 3, stated before reorganisation costs of £0.8m (2012: £0.1m)

In other sectors our clients have had to deal with the economic uncertainty resulting from the resources slowdown, as well as political volatility in the run up to the Federal election. Many have remained reasonably positive and continued to invest, but it seems clear the Australian economy is now on a lower growth trajectory.

In response to these difficult trading conditions we continue to reduce capacity and costs. These reductions have made us more efficient and competitive and should result in a better performance in the second half, provided the market does not deteriorate further.

Once recovery in resources investment gets underway, it will offer an opportunity for us to create a further period of growth. In the meantime the weakening Australian currency and lower interest rates should help deliver a rebalancing of the economy. We should benefit from this in terms of trading, although the weak dollar will adversely affect our results on consolidation. Exposure to the expected long term growth in the AAP region remains an important part of Group strategy.

Europe

Our BNE business in Europe ("BNEE") performed well, even though economic uncertainty continued to hold back some of our clients' investment. Fee and profit growth was affected by the exceptionally good performance we experienced in our UK water activities in the first half of 2012, which could not be replicated this year. The improved efficiencies resulting from actions taken previously gave rise to an increased margin, despite continuing fee rate pressure.

2013 2012
H1 H1
Fee income (£m) 74.7 83.3
Underlying Profit* (£m) 9.6 9.8
Margin % 12.8 11.8

* as defined in note 3, stated before reorganisation costs of £0.3m (2012 £0.3m)

Our strong position in the energy infrastructure market (conventional, nuclear and renewable) enabled us to win work at rates which reflect our market leading position. Some of our UK commercial development clients, particularly in the house building sector, seemed more confident than in recent years. The investment we made in relocating and expanding our laboratories in the Netherlands in 2012 is proving worthwhile, more than compensating for continuing weakness in the Dutch property development sector. Our health, safety and risk management businesses are well positioned and continued to perform well.

We still expect BNEE to deliver a 2013 result broadly the same as in 2012, although there may now be some modest upside opportunity.

Group Prospects

Our flexible and robust business model has demonstrated in recent years it is capable of producing good results in challenging circumstances. The Board remains of the view that RPS is likely to meet market expectations in 2013 and continue to deliver strong cash flow. Our acquisition pipeline also gives us cause for optimism.

Board of Directors
RPS Group plc

1 August 2013

 

Condensed consolidated income statement

Notes Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Revenue 3 280,850 276,143 555,863
Recharged expenses 3 (39,006) (37,817) (77,028)
Fee income 3 241,844 238,326 478,835
Operating profit before amortisation of acquired intangibles and transaction related costs 3,4 31,179 30,981 62,069
Amortisation of acquired intangibles and transaction related costs 4 (9,174) (10,161) (19,925)
Operating profit 22,005 20,820 42,144
Finance costs (1,006) (1,059) (2,128)
Finance income 48 95 158
Profit before tax, amortisation of acquired intangibles and transaction related costs 30,221 30,017 60,099
Profit before tax 21,047 19,856 40,174
Tax expense 5 (6,807) (7,534) (14,263)
Profit for the period attributable to equity holders of the parent 14,240 12,322 25,911
Basic earnings per share (pence) 6 6.53 5.68 11.94
Diluted earnings per share (pence) 6 6.50 5.65 11.87
Adjusted basic earnings per share (pence) 6 9.81 9.80 19.48
Adjusted diluted earnings per share (pence) 6 9.76 9.74 19.36

 

Condensed consolidated statement of comprehensive income

Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Profit for the period 14,240 12,322 25,911
Exchange differences (1,706) (2,634) (5,545)
Total recognised comprehensive income for the period attributable to equity holders of the parent 12,534 9,688 20,366

* may be reclassified subsequently to profit or loss in accordance with IFRS.

 

Condensed consolidated balance sheet

As at 30 June As at 30 June As at 31 December
£000's Notes 2013 2012 2012
Assets
Non-current assets
Intangible assets 340,408 320,911 328,440
Property, plant and equipment 7 30,200 29,925 30,632
370,608 350,836 359,072
Current assets
Trade and other receivables 162,064 172,678 159,381
Cash at bank 12,713 17,909 14,804
174,777 190,587 174,185
Liabilities
Current liabilities
Borrowings 1,474 1,554 748
Deferred consideration 11,369 8,427 7,842
Trade and other payables 98,102 103,891 101,921
Corporation tax liabilities 1,638 3,883 3,582
Provisions 2,560 4,315 2,633
115,143 122,070 116,726
Net current assets 59,634 68,517 57,459
Non-current liabilities
Borrowings 31,973 36,822 27,557
Deferred consideration 6,910 - 3,543
Other creditors 3,022 1,784 1,745
Deferred tax liabilities 6,578 10,053 8,436
Provisions 1,469 2,089 1,436
49,952 50,748 42,717
Net assets 380,290 368,605 373,814
Equity
Share capital 9 6,600 6,571 6,587
Share premium 106,922 105,140 106,198
Other reserves 10 34,839 39,631 36,070
Retained earnings 231,929 217,263 224,959
Total shareholders' equity 380,290 368,605 373,814

 

Condensed consolidated cash flow statement

Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's Notes 2013 2012 2012
Adjusted cash generated from operations 12 33,831 31,185 76,045
Deferred consideration treated as remuneration (4,204) (6,214) (9,969)
Cash generated from operations 29,627 24,971 66,076
Interest paid (1,091) (908) (2,204)
Interest received 48 95 158
Income taxes paid (11,381) (9,910) (18,162)
Net cash from operating activities 17,203 14,248 45,868
Cash flows from investing activities
Purchases of subsidiaries net of cash acquired (11,178) - (9,774)
Deferred consideration - (165) (4,130)
Purchase of property, plant and equipment (4,722) (4,661) (9,909)
Sale of property, plant and equipment 272 150 713
Dividends received - - 298
Net cash used in investing activities (15,628) (4,676) (22,802)
Cash flows from financing activities
Proceeds from issue of share capital 211 190 240
Purchase of own shares - (400) (400)
Proceeds from/(repayments of) bank borrowings 2,935 (9,050) (17,409)
Payment of finance lease liabilities (353) (579) (1,350)
Dividends paid (7,308) (6,325) (13,007)
Payment of pre-acquisition dividend (87) - (399)
Net cash used in financing activities (4,602) (16,164) (32,325)
Net (decrease)/increase in cash and cash equivalents (3,027) (6,592) (9,259)
Cash and cash equivalents at beginning of period 14,804 24,458 24,458
Effect of exchange rate fluctuations (12) (414) (395)
Cash and cash equivalents at end of period 12 11,765 17,452 14,804
Cash and cash equivalents comprise:
Cash at bank 12,713 17,909 14,804
Bank overdraft (948) (457) -
Cash and cash equivalents at end of period 11,765 17,452 14,804

 

Consolidated statement of changes in equity

£000's Share capital Share premium Retained earnings Other reserves Total equity
Changes in equity during 2013
At 1 January 2013 6,587 106,198 224,959 36,070 373,814
Total comprehensive income for the period - - 14,240 (1,706) 12,534
Issue of new ordinary shares 13 724 (1,003) (281) (547)
Release of own shares - - - 756 756
Share based payment expense - - 1,041 - 1,041
Dividends - - (7,308) - (7,308)
At 30 June 2013 6,600 106,922 231,929 34,839 380,290
Changes in equity during 2012
At 1 January 2012 6,544 103,717 210,890 43,299 364,450
Total comprehensive income for the period - - 12,322 (2,634) 9,688
Issue of new ordinary shares 27 1,423 (625) (634) 191
Purchase of own shares - - - (400) (400)
Share based payment expense - - 1,001 - 1,001
Dividends - - (6,325) - (6,325))
At 30 June 2012 (see note 1) 6,571 105,140 217,263 39,631 368,605

An analysis of other reserves is provided in Note 10.

 

Notes to the condensed consolidated financial statements

1. Basis of preparation

RPS Group Plc (the "Company") is a company domiciled in England. The condensed consolidated interim financial statements of the Company for the six months ended 30 June 2012 comprise the Company and its subsidiaries (together referred to as the "Group").

The condensed interim financial statements have been prepared using accounting policies set out in the Report and Accounts 2011 and in accordance with IAS 34. They are unaudited but have been reviewed by the Company's auditor. The results for the year end 31 December 2011 and the balance sheet as at that date are abridged from the Company's Report and Accounts 2011 which have been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters for which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.

The condensed interim financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.

In assessing the going concern basis, the directors considered the Group's business activities, the financial position of the Group and the Group's financial risk management objectives and policies. The directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future and that it is, therefore, appropriate to adopt the going concern basis in preparing the Group's interim financial statements.

Restatement

As reported in the Group's Report and Accounts 2011, our auditor at that time, Ernst & Young LLP, indicated that it did not agree with the Group's interpretation of IFRS 3 "Business Combinations" in respect of deferred consideration. They advised the Group that the deferred consideration that was contingent on continuing employment should be recognised as a remuneration charge through the Consolidated Income Statement rather than be capitalised.

The Group agreed to this revised treatment of deferred consideration which impacted the results for the six months ended 30 June 2011 in the following ways:

1. In respect of 2010 acquisitions the Group has derecognised the deferred consideration payable that was previously shown in the balance sheet on the date of acquisition of subsidiaries. The value of goodwill has been reduced by a corresponding amount since deferred consideration is no longer considered part of the cost of investment;

2. For those acquisitions in 2010 and 2011 where the fair value of the net assets acquired is greater than the consideration transferred, the Group has recognised negative goodwill through the consolidated income statement; and

3. A remuneration charge has been recognised through the consolidated income statement within "amortisation of acquired intangibles and transaction related costs" and a corresponding accrual has been recognised in the balance sheet under "deferred consideration".

The Group explained the restatement of the results for the six months ended 30 June 2011 by means of an announcement to the London Stock Exchange dated 3 May 2012. This announcement details the restatement of the income statement and the segment results for the six months ended 30 June 2011 and the balance sheet at that date.

The condensed consolidated cash flow statement for the six months ended 30th June 2011 and the year ended 31st December 2011 have been restated so that deferred consideration treated as remuneration is included within cash generated from operating activities rather than cash flows from investing activities. In addition, the total comprehensive income in the condensed consolidated statement of changes in equity in this release has been restated to reflect the above.

2. Responsibility Statement

The directors confirm that, to the best of their knowledge this condensed set of financial statements has been prepared in accordance with IAS 34 and that this Interim Report includes a fair review of the information required by DTR 4.2.4R, DTR 4.2.7R and DTR 4.2.8R.

On behalf of the Board

A. S. Hearne - Chief Executive
G. R. Young - Group Finance Director

3. Business segments

Segment information is presented in respect of the Group's business segments which are reported to the Chief Operating Decision Maker, which is identified as the main Board of Directors of RPS Group Plc. The business segment reporting format reflects the Group's management and internal structure. Inter-segment pricing is determined on an 'arm's length' basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

As announced on 3 November 2011 the Group merged Planning and Development (UK and Ireland) and Environmental Management. The 30 June 2011 results are therefore shown below on this revised basis. The Group comprises the following business segments:

Built and Natural Environment ("BNE") - consultancy services advising on all aspects of the built and natural environment including the provision of energy infrastructure, planning and development, engineering, design and surveying, environmental assessment and management and risk management. Consulting services are provided on a regional basis in Europe and Australia Asia Pacific ("AAP").

Energy ? the provision of integrated technical, commercial and project management support in the fields of geo-science, engineering and health, safety and environment on a global basis to the energy sector.

Segment results for the period ended 30 June 2013:

£000's Fees Recharged Expenses Intersegment revenue External Revenue
Built and Natural Environment
Europe 74,682 9,504 (265) 83,921
AAP 46,413 8,829 (272) 54,970
Intra BNE eliminations (52) - 52 -
Total BNE 121,043 18,333 (485) 138,891
Energy 121,738 20,834 (613) 141,959
Group eliminations (937) (161) 1,098 -
Total 241,844 39,006 - 280,850

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 9,550 (259) 9,291
APP 4,584 (759) 3,825
Total BNE 14,134 (1,018) 13,116
Energy 21,539 (126) 21,413
Total 35,673 (1,144) 34,529

Segment results for the period ended 30 June 2012:

£000's Fees Recharged expenses Intersegment revenue External revenue
Built and Natural Environment:
Europe 83,323 10,151 (719) 92,755
AAP 47,940 11,090 (101) 58,929
Intra BNE eliminations (104) (3) 107 -
Total BNE 131,159 21,238 (713) 151,684
Energy 108,024 16,646 (211) 124,459
Group eliminations (857) (67) 924 -
Total 238,326 37,817 - 276,143

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 9,825 (307) 9,518
APP 6,286 (56) 6,230
Total BNE 16,111 (363) 15,748
Energy 19,119 (43) 19,076
Total 35,230 (406) 34,824

Segment results for the year ended 31 December 2012:

£000's Fees Recharged expenses Intersegment revenue External revenue
Built and Natural Environment:
Europe 157,200 21,433 (1,301) 177,332
AAP 98,300 19,827 (786) 117,341
Intra BNE eliminations (193) (41) 234 -
Total BNE 255,307 41,219 (1,853) 294,673
Energy 225,875 36,017 (702) 261,190
Group eliminations (2,347) (208) 2,555 -
Total 478,835 77,028 - 555,863

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 18,874 (754) 18,120
APP 12,974 (920) 12,054
Total BNE 31,848 (1,674) 30,174
Energy 39,709 (72) 39,637
Total 71,557 (1,746) 69,811

Group reconciliation

£000's 30 June 2013 30 June 2012 31 Dec 2012
Revenue 280,850 276,143 555,863
Recharged expenses (39,006) (37,817) (77,028)
Fees 241,844 238,326 478,835
Underlying profit 35,673 35,230 71,557
Reorganisation costs (1,144) (406) (1,746)
Unallocated expenses (3,350) (3,843) (7,742)
Operating profit before amortisation of acquired intangibles and transaction related costs 31,179 30,981 62,069
Amortisation of acquired intangibles and transaction related costs (9,174) (10,161) (19,925)
Operating profit 22,005 20,820 42,144
Net finance costs (958) (964) (1,970)
Profit before tax 21,047 19,856 40,174

Total segment assets were as follows:

£000's 30 June 2013 30 June 2012 31 December 2012
Build and Natural Environment
Europe 229,401 233,338 226,861
AAP 116,032 121,357 124,908
Total BNE 345,433 354,695 351,769
Energy 197,004 182,898 179,163
Unallocated 2,948 3,830 2,325
Total 545,385 541,423 533,257

4. 4. Amortisation of acquired intangibles and transaction related costs

£000's 30 June 2013 30 June 2012 31 December 2012
Amortisation of acquired intangibles 5,337 5,117 10,636
Contingent deferred consideration treated as remuneration 3,470 4,674 8,593
Negative goodwill - - (266)
Loss on disposal of business - 112 135
Third party advisory costs 367 258 827
Total 9,174 10,161 19,925

5. Income taxes

The tax charge for the period has been calculated using an estimate of the effective annual rate of tax for each taxing jurisdiction for the full year. These rates have been applied to the pre-tax profits for each jurisdiction for the six months ended 30 June 2013. The Group has separately calculated the tax rates applicable to amortisation of intangibles and transaction related costs for the period. Tax rate changes that were substantively enacted at the balance sheet date have been factored into the calculation of the effective tax rates.

30 June 2013 30 June 2012 31 December 2012
£000's
Current tax expense 8,332 9,207 18,347
Deferred tax credit (1,525) (1,673) (4,084)
Total tax expense in the income statement 6,807 7,534 14,263
Add back:
Tax on amortisation of acquired intangibles and acquisition related costs 2,033 1,234 3,569
Adjusted tax charge on PBTA for the period 8,840 8,768 17,832
Tax rate on PBT 32.3% 37.9% 35.5%
Tax rate on PBTA 29.3% 29.2% 29.7%

6. Earnings per share

The calculations of earnings per share are based on the profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding during the period as shown below:

Six months
ended
30 June
Six months
ended
30 June
Year ended ;31 Dec
£000's 2013 2012 2012
Profit attributable to ordinary shareholders 14,240 12,322 25,911
000's
Weighted average number of ordinary shares for the purposes of basic earnings per share 217,953 216,835 216,980
Effect of employee share schemes 1,034 1,406 1,313
Weighted average number of ordinary shares for the purposes of diluted earnings per share 218,987 218,241 218,293
Basic earning per share (pence) 6.53 5.68 11.94
Diluted earnings per share (pence) 6.50 5.65 11.87

The directors consider that earnings per share before amortisation of acquired intangibles and transaction related costs provides a more meaningful measure of the Group's performance than statutory earnings per share. The calculations of adjusted earnings per share were based on the number of shares as above, and are shown in the table below:

£000's Six months ended 30 June 2013 Six months ended 30 June 2012 Year ended 31 Dec 2012
Profit attributable to ordinary shareholders 14,240 12,322 25,911
Amortisation of acquired intangibles and transaction related costs 9,174 10,161 19,925
Tax on amortisation of acquired intangibles and transaction related costs (2,033) (1,234) (3,569)
Change in Australian tax law - - (238)
Adjusted profit attributable to ordinary shareholders 21,381 21,249 42,267
Adjusted basic earnings before per share (pence) 9.81 9.80 19.48
Adjusted diluted earnings per share (pence) 9.76 9.74 19.36

7. Property, plant and equipment

During the six months ended 30 June 2013, the Group acquired assets with a cost of £4,732,000 (six months to 30 June 2012: £4,628,000), which includes £89,000 acquired through business combinations (six months to 30 June 2012: £nil). Assets with a net book value of £86,000 were disposed of during the six months ended 30 June 2013 (six months ended 30 June 2012: £171,000).

8. Acquisitions

The Group has completed the following acquisitions to strengthen and broaden the skill base of the Group, during the first half of 2013:

Entity Business Segment Date of Acquisition Place of incorporation Percentageof entity acquired Nature of business acquired
Petroleum Institute for Continuing Education Inc. (PEICE) Energy 16th Jan 2013 Canada 100% Training
Knowledge Reservoir Group (KR) Energy 19th Apr 2013 USA 100% Reservoir engineering

Their contributions to the Group's results for the period is given below:

£000's Revenue Fees Operating profit before amortisation Operating profit
EHI 2,084 2,084 460 77
Nautilus 2,995 2,950 280 (19)

Had the Group acquired these entities on the first day of the period, the Group estimates revenue would have been £285,470,000 and operating profit would have been £21,843,000.

The Group has allocated provisional fair values to the net assets acquired as follows:

£000's Order book Customer relationships Brand IP PPE Cash Other assets Other liabilities Net assets acquired
PEICE 120 4,119 164 500 1 612 59 (1,949) 3,626
KR 745 6,314 719 425 88 1,956 5,123 (2,338) 13,032
865 10,433 883 925 89 2,568 5,182 (4,287) 16,658

 

£000's Initial cash consideration Deferred cash consideration Total consideration Net assets acquired Goodwill acquired Tax deductible goodwill
PEICE 3,637 3,574 7,211 3,626 3,585 -
KR 9,651 4,327 13,978 13,032 946 -
13,288 7,901 21,189 16,658 4,531 -

Provisional values are given in the table above as information about facts or circumstances that existed at the acquisition date is incomplete.

Goodwill represents the value of the accumulated workforce and synergies with RPS associated with these acquisitions.

The total fair value of receivables acquired was £3,390,000. The gross contractual receivables acquired were £3,431,000 and £41,000 was estimated to be irrecoverable.

The vendors of the acquired companies have entered into indemnity arrangements with the Group. The total undiscounted cash flow that could be receivable by the Group is between £nil and £3,390,000. As the Group does not expect that these warranties will become receivable, it has not recognised an indemnification asset on acquisition.

Deferred consideration is payable on the first and second anniversaries of the acquisitions of PEICE and KR, dependent on key vendors remaining employed. If they leave, the deferred consideration will be paid on the tenth anniversary of completion including a market rate of interest.

The Group incurred acquisition-related costs of £314,000 (6 months to 30 June 2012: £nil), which have been expensed through the consolidated income statement and included within "amortisation of acquired intangibles and transaction related costs".

A reconciliation of the goodwill movement in 2013 in respect of acquisitions completed in 2012 and 2013 is given below.

£000's Manidis Roberts PEICE KR
Goodwill at 1 January 2013 11,943 - -
Additions through acquisition - 3,585 946
Foreign exchange gains and losses (658) (39) 8
Goodwill at 30 June 2013 11,285 3,546 954

There were no accumulated impairment losses at the beginning or the end of the period.

Commitments and contingencies

The Group completed a number of acquisitions between 1 January 2010 and 31 December 2011 where deferred consideration payments to vendors are contingent on the vendor's continued employment with the Group and so are required to be recognised as employment costs over the deferred consideration period. The Group considers it probable that the remaining deferred consideration payments will be settled.

The total cash commitments at 30 June 2013 in respect of contingent deferred consideration treated as remuneration that the Group expects to settle and the estimated remuneration charge for each financial year assuming exchange rates remain constant are disclosed in the table below:

£000's Cash commitment Remuneration charge
July - December 2013 3,653 2,585
2014 3,693 1,213
7,346 3,798

The balance sheet at 30 June 2013 includes, within deferred consideration current liabilities, contingent deferred consideration remuneration expense accrued but not paid totalling £3,549,000 (31 December 2012: £4,157,000).

9. Share capital

2013 Number 000's 2013 £000's 2012 Number 000's 2012 £000's
Authorised
Ordinary shares of 3p each at 30 June 240,000 7,200 240,000 7,200
Issued and fully paid
Ordinary shares of 3p each at 1 January 219,566 6,587 218,138 6,544
Issued under employee share schemes 424 13 911 27
At 30 June 219,990 6,600 219,049 6,571

10. Other reserves

£000's Merger reserve Employee trust Translation reserve Total
Changes in equity during 2013
At 1 January 2013 21,256 (9,059) 23,873 36,070
Exchange differences - - (1,706) (1,706)
Issue of new shares - (281) - (281)
Purchase of own shares - 756 - 756
At 30 June 2013 21,256 (8,584) 22,167 34,839
Changes in equity during 2012
At 1 January 2012 21,256 (7,375) 29,418 43,299
Exchange differences - - (2,634) (2,634)
Issue of new shares - (634) - (634)
Purchase of own shares - (400) - (400)
At 30 June 2012 21,256 (8,409) 26,784 39,631

11. Dividends

The following dividends were recognised as distributions to equity holders in the period:

£000's Six months ended 30 June 2013 Six months ended 30 June 2012 Year ended 31 Dec 2012
Final dividend for 2012 3.34p per share 7,308 - -
Interim dividend for 2012 3.06p per share - - 6,682
Final dividend for 2011 2.90p per share - 6,325 6,325
7,308 6,325 13,007

An interim dividend in respect of the six months ended 30 June 2013 of 3.52 pence per share, amounting to a total dividend of £7,723,000 was approved by the Directors of RPS Group Plc on 30 July 2013. These condensed consolidated interim financial statements do not reflect this dividend payable.

12. Note to the condensed consolidated cash flow statement

Six months
ended
30 June
Six months
ended
30 June
Year ended 31 Dec
£000's 2013 2012 2012
Operating profit 22,005 20,820 42,144
Adjustments for:
Depreciation 5,051 4,248 8,950
Amortisation of acquired intangibles 5,337 5,117 10,636
Contingent deferred consideration treated as remuneration 3,470 4,674 8,593
Share based payment expense 1,041 1,001 2,070
Loss on disposal of business - 112 135
Negative goodwill - - (266)
(Profit)/loss on sale of property, plant and equipment (186) 31 (119)
36,718 36,003 72,143)
Decrease/(increase) in trade and other receivables 1,604 (1,634) 12,491
Decrease in trade and other payables
(4,491) (3,184) (8,589)
Adjusted cash generated from operations 33,831 31.185 76.045

* Adjusted cash generated from operations is before payment of deferred consideration treated as remuneration.

The table below provides an analysis of net bank borrowings, comprising cash and cash equivalents, interest bearing bank loans and finance leases, during the six months ended 30 June 2013.

£000's At 1 January 2013 Cash flow Foreign exchange At 30 June 2013
Cash and cash equivalents 14,804 (3,027) (12) 11,765
Bank loans (27,098) (2,935) (1,645) (31,678)
Finance lease creditor (1,207) 353 33 (821)
Net bank borrowings (13501) (5,609) (1,624) (20,734)

The cash balance includes £1,624,000 (31 December 2012: £3,566,000) that is restricted in its use.

13. Events after the balance sheet date

On 18th July 2013 RPS completed the acquisition of the entire issued share capital of Asia-Pacific ASA Pty Ltd, an oceanographic consultancy firm based in Australia for a maximum consideration of A$8.7 million (£5.2 million) all payable in cash.

Consideration paid at completion was A$4.4 million (£2.6 million). Subject to certain operational conditions being met, further sums of A$1.7 million (£1.1 million), A$1.7 million (£1.1 million) and A$0.9 million (£0.5 million), will be paid on the first, second and third anniversaries of the transaction. Due to the proximity of the acquisition date to the date of approval of this announcement, it is impracticable to provide further information.

14. Principal risks and uncertainties

The nature of the principal risks and uncertainties faced by the Group have not changed significantly since the 2011 Report and Accounts was published. These risks, together with a description of the approach to mitigate them, are set out on page 9 of the 2011 Report and Accounts (available on the Group's web-site at www.rpsgroup.com) and are summarised as follows:

  • Economic environment
  • Material adverse events
  • Recruitment and retention of key personnel
  • Market position and reputation
  • Compliance and litigation
  • Business acquisitions
  • Funding
  • Health and safety

From time to time the Group receives claims from clients and suppliers. Some of these result in payments to the claimants by the Group and its insurers. The Board reviews all significant claims at each board meeting and more regularly if required. The Board is currently satisfied that the Group has sufficient provisions in its balance sheet to meet all likely uninsured liabilities.

The Board keeps under review the potential effect of economic circumstances. The continuing uncertainty in the global economic outlook inevitably increases the trading and balance sheet risks to which the Group is exposed.

15. Related party transactions

There are no significant changes in the nature and size of related party transactions for the period to those reported in the 2012 Report and Accounts.

16. Forward-looking statements

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 the year to date are based upon unaudited management accounts for the period January to June 2013. The Board considers market expectations for 2013 are best defined by taking the range of forecasts of PBTA for the full year published by analysts who consistently follow the Group. The current range of forecasts of which the Board is aware is £61.0 to £64.5 million. Nothing in this announcement should be construed as a profit forecast.

17. Publication

A copy of this announcement will be posted on the Company's website at www.rpsgroup.com.

INDEPENDENT REVIEW REPORT TO RPS GROUP PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013, which comprises the Condensed consolidated income statement, the Condensed consolidated statement of comprehensive income, the Condensed consolidated balance sheet, the Condensed consolidated cash flow statement, the Condensed consolidated statement of changes in equity and the related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 ";Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Finance Conduct Authority.

Deloitte LLP
Chartered Accountants and Statutory Auditor
Reading, United Kingdom
1 August 2013

 

2015

Half Year Results for the six months ended 30 June 2013

01 August 2013

Half Year Results for the six months ended 30 June 2013

PBTA slightly ahead. Financial position remains strong. Interim dividend increased 15% for 20th consecutive year. Acquisition pipeline encouraging. On track for full year.

2013 2012
Business Performance H1 H1
Revenue (£m) 280.9 276.1
Fee income (£m) 241.8 238.3
PBTA (1) (£m) 30.2 30.0
Adjusted earnings per share (2)(basic) (p) 9.81 9.80
Adjusted operating cash flow (£m) (3) 33.8 31.2
Dividend per share (p) 3.52 3.06
Profit before tax (£m) 21.0 19.9
Earnings per share (basic) (p) 6.53 5.68
Operating cash flow (£m) 29.6 25.0

(1) PBTA is profit before tax, amortisation of acquired intangibles and transaction related costs.
(2) Adjusted earnings per share is before amortisation of acquired intangibles and transaction related costs and the related tax.
(3) Adjusted operating cash flow is before deferred consideration treated as remuneration.

Brook Land, Chairman, commenting on the results, said:

"RPS has delivered a creditable result for the first half of 2013. Once again our conversion of profit into cash has been strong. We have increased the Interim dividend by 15% for the 20th consecutive year.

With our flexible and robust business model, the Board believes RPS is likely to deliver growth for the full year. Our acquisition pipeline also gives us further cause for optimism.".

1 August 2013

 

ENQUIRIES
RPS Group plc Today: 020 7457 2020
Dr Alan Hearne, Chief Executive Thereafter: 01235 863206
Gary Young, Finance Director
College Hill
Matthew Smallwood Tel: 020 7457 2020
Justine Warren

 

RPS is an international consultancy providing advice upon the development of natural resources, land and property, the management of the environment and the health and safety of people. We have offices in the UK, Ireland, the Netherlands, the Americas and Australia Asia Pacific ("AAP") 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.

 

Results

Profit (before tax, amortisation of acquired intangibles and transaction related costs) was £30.2 million (2012: £30.0 million). Basic earnings per share (before amortisation and transaction related costs) were 9.81 pence (2012: 9.80 pence). The contribution of the 2 segments was:

Underlying Profit(£m)* 2013 2012
H1 H1
Energy 21.5 19.1
Built and Natural Environment 14.1 16.1
Total 35.7 35.2

* as defined in note 3, stated before reorganisation costs of £1.1m (2012: £0.4m)

Group central costs were £3.4 million, a reduction of 13% over the same period last year. Finance charges remained constant at £1.0 million.

Cash Flow, Funding and Dividend

Our conversion of profit into cash continued at an encouraging level and our balance sheet remains strong. After funding acquisition investment of £15.4 million in the period, net bank borrowings at 30 June were £20.7 million (30 June 2012: £20.5 million). Following the period end we funded the initial consideration of £2.6 million related to the acquisition of Asia Pacific ASA Pty Ltd ("APASA").

We have in place a £125 million facility with Lloyds Banking Group until July 2016. This comprises £75 million of committed revolving credit facility, with an additional £50 million available as required.

The Board remains confident about the Group's financial strength and has, for the 20th consecutive year, increased the interim dividend by about 15% to 3.52 pence per share (2012: 3.06 pence) payable on 17 October 2013 to shareholders on the register on 20 September 2013.

Acquisitions

On 16 January 2013 we announced the acquisition of PEICE, a Canadian based training business in the oil and gas sector, for a maximum consideration of £7.4 million. We have made good progress integrating PEICE with our existing training activities in the energy market.

On 19 April 2013 we announced the acquisition of Knowledge Reservoir Inc ("KR"), a reservoir engineering and geosciences consulting firm headquartered in Houston, for a maximum consideration of £12.0 million net of cash inherited. The US element of the business has traded well and we are close to finalising the reorganisation of the KR businesses in London, Oman and Kuala Lumpur.

On 18 July 2013 we announced the acquisition of APASA for a maximum consideration of £5.2 million. This is the sister company of ASA, the international oceanographic consultancy business we brought into the Group in 2011. Our international oceanographic capability has grown steadily in recent years, serving a market which remains buoyant.

Our acquisition pipeline is encouraging at the moment and we anticipate extending the Group's capabilities further in the next few months.

Markets and Trading

Energy

We provide internationally recognised consultancy services to the oil and gas exploration and production industry from bases in the UK, USA, Canada and AAP. These act as regional centres for projects undertaken in many other countries.

The first half delivered good growth, once again with a strong margin.

2013 2012
H1 H1
Fee income (£m) 121.7 108.0
Profit* (£m) 21.5 19.1
Margin % 17.7 17.7

*as defined in note 3, stated before reorganisation costs of £0.1m (2012: £nil) costs.

Planned expenditure in the oil and gas exploration and production sector for 2013 is encouraging, in respect of both conventional and unconventional resources. Given the uncertain global economic backdrop, some clients have been understandably cautious about starting new projects, but our international presence and reputation has enabled us to benefit from the investment which has been committed in many parts of the world.

Our EAME business performed particularly well, with the US producing a solid performance, after strong growth in 2012. Our profile in the financial services sector continued to enable us to benefit from valuation and transaction related activity.

Client spend in the AAP region slowed significantly in the early months of the year, as a number dealt with both demand and cost pressures. More recently it seems to have improved. We also experienced a slow down in Canada as major potash projects moved into a phase of the development cycle in which we have less involvement. New opportunities in this sector are, however, now emerging.

Overall, this business remains on track to deliver a strong performance this year.

Built and Natural Environment ("BNE")

Within these businesses we provide a wide range of consultancy services to many aspects of the property and infrastructure development and management sectors. In recent years we have developed extensive experience in respect of the infrastructure projects necessary to bring energy resources, both conventional and renewable, to market.

Australia Asia Pacific

In BNE Australia Asia Pacific ("BNEA") we remain well positioned in both the traditional infrastructure and development markets, as well as the more recently developed energy infrastructure market. Our successful move into the offshore gas and coal seam gas/LNG market enabled this business to double in size in recent years, despite the global financial crisis.

In the second half of last year a number of natural resources projects, particularly mining and offshore gas, were delayed, whilst our clients reviewed product demand, production costs and operating efficiencies. Further delays in significant projects have been announced by our clients in the first half of this year. As a result the BNEA results for the first half of the year were significantly below the same period last year.

2013 2012
H1 H1
Fee income (£m) 46.4 47.9
Profit* (£m) 4.6 6.3
Margin % 9.9 13.1

*as defined in note 3, stated before reorganisation costs of £0.8m (2012: £0.1m)

In other sectors our clients have had to deal with the economic uncertainty resulting from the resources slowdown, as well as political volatility in the run up to the Federal election. Many have remained reasonably positive and continued to invest, but it seems clear the Australian economy is now on a lower growth trajectory.

In response to these difficult trading conditions we continue to reduce capacity and costs. These reductions have made us more efficient and competitive and should result in a better performance in the second half, provided the market does not deteriorate further.

Once recovery in resources investment gets underway, it will offer an opportunity for us to create a further period of growth. In the meantime the weakening Australian currency and lower interest rates should help deliver a rebalancing of the economy. We should benefit from this in terms of trading, although the weak dollar will adversely affect our results on consolidation. Exposure to the expected long term growth in the AAP region remains an important part of Group strategy.

Europe

Our BNE business in Europe ("BNEE") performed well, even though economic uncertainty continued to hold back some of our clients' investment. Fee and profit growth was affected by the exceptionally good performance we experienced in our UK water activities in the first half of 2012, which could not be replicated this year. The improved efficiencies resulting from actions taken previously gave rise to an increased margin, despite continuing fee rate pressure.

2013 2012
H1 H1
Fee income (£m) 74.7 83.3
Underlying Profit* (£m) 9.6 9.8
Margin % 12.8 11.8

* as defined in note 3, stated before reorganisation costs of £0.3m (2012 £0.3m)

Our strong position in the energy infrastructure market (conventional, nuclear and renewable) enabled us to win work at rates which reflect our market leading position. Some of our UK commercial development clients, particularly in the house building sector, seemed more confident than in recent years. The investment we made in relocating and expanding our laboratories in the Netherlands in 2012 is proving worthwhile, more than compensating for continuing weakness in the Dutch property development sector. Our health, safety and risk management businesses are well positioned and continued to perform well.

We still expect BNEE to deliver a 2013 result broadly the same as in 2012, although there may now be some modest upside opportunity.

Group Prospects

Our flexible and robust business model has demonstrated in recent years it is capable of producing good results in challenging circumstances. The Board remains of the view that RPS is likely to meet market expectations in 2013 and continue to deliver strong cash flow. Our acquisition pipeline also gives us cause for optimism.

Board of Directors
RPS Group plc

1 August 2013

 

Condensed consolidated income statement

Notes Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Revenue 3 280,850 276,143 555,863
Recharged expenses 3 (39,006) (37,817) (77,028)
Fee income 3 241,844 238,326 478,835
Operating profit before amortisation of acquired intangibles and transaction related costs 3,4 31,179 30,981 62,069
Amortisation of acquired intangibles and transaction related costs 4 (9,174) (10,161) (19,925)
Operating profit 22,005 20,820 42,144
Finance costs (1,006) (1,059) (2,128)
Finance income 48 95 158
Profit before tax, amortisation of acquired intangibles and transaction related costs 30,221 30,017 60,099
Profit before tax 21,047 19,856 40,174
Tax expense 5 (6,807) (7,534) (14,263)
Profit for the period attributable to equity holders of the parent 14,240 12,322 25,911
Basic earnings per share (pence) 6 6.53 5.68 11.94
Diluted earnings per share (pence) 6 6.50 5.65 11.87
Adjusted basic earnings per share (pence) 6 9.81 9.80 19.48
Adjusted diluted earnings per share (pence) 6 9.76 9.74 19.36

 

Condensed consolidated statement of comprehensive income

Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Profit for the period 14,240 12,322 25,911
Exchange differences (1,706) (2,634) (5,545)
Total recognised comprehensive income for the period attributable to equity holders of the parent 12,534 9,688 20,366

* may be reclassified subsequently to profit or loss in accordance with IFRS.

 

Condensed consolidated balance sheet

As at 30 June As at 30 June As at 31 December
£000's Notes 2013 2012 2012
Assets
Non-current assets
Intangible assets 340,408 320,911 328,440
Property, plant and equipment 7 30,200 29,925 30,632
370,608 350,836 359,072
Current assets
Trade and other receivables 162,064 172,678 159,381
Cash at bank 12,713 17,909 14,804
174,777 190,587 174,185
Liabilities
Current liabilities
Borrowings 1,474 1,554 748
Deferred consideration 11,369 8,427 7,842
Trade and other payables 98,102 103,891 101,921
Corporation tax liabilities 1,638 3,883 3,582
Provisions 2,560 4,315 2,633
115,143 122,070 116,726
Net current assets 59,634 68,517 57,459
Non-current liabilities
Borrowings 31,973 36,822 27,557
Deferred consideration 6,910 - 3,543
Other creditors 3,022 1,784 1,745
Deferred tax liabilities 6,578 10,053 8,436
Provisions 1,469 2,089 1,436
49,952 50,748 42,717
Net assets 380,290 368,605 373,814
Equity
Share capital 9 6,600 6,571 6,587
Share premium 106,922 105,140 106,198
Other reserves 10 34,839 39,631 36,070
Retained earnings 231,929 217,263 224,959
Total shareholders' equity 380,290 368,605 373,814

 

Condensed consolidated cash flow statement

Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's Notes 2013 2012 2012
Adjusted cash generated from operations 12 33,831 31,185 76,045
Deferred consideration treated as remuneration (4,204) (6,214) (9,969)
Cash generated from operations 29,627 24,971 66,076
Interest paid (1,091) (908) (2,204)
Interest received 48 95 158
Income taxes paid (11,381) (9,910) (18,162)
Net cash from operating activities 17,203 14,248 45,868
Cash flows from investing activities
Purchases of subsidiaries net of cash acquired (11,178) - (9,774)
Deferred consideration - (165) (4,130)
Purchase of property, plant and equipment (4,722) (4,661) (9,909)
Sale of property, plant and equipment 272 150 713
Dividends received - - 298
Net cash used in investing activities (15,628) (4,676) (22,802)
Cash flows from financing activities
Proceeds from issue of share capital 211 190 240
Purchase of own shares - (400) (400)
Proceeds from/(repayments of) bank borrowings 2,935 (9,050) (17,409)
Payment of finance lease liabilities (353) (579) (1,350)
Dividends paid (7,308) (6,325) (13,007)
Payment of pre-acquisition dividend (87) - (399)
Net cash used in financing activities (4,602) (16,164) (32,325)
Net (decrease)/increase in cash and cash equivalents (3,027) (6,592) (9,259)
Cash and cash equivalents at beginning of period 14,804 24,458 24,458
Effect of exchange rate fluctuations (12) (414) (395)
Cash and cash equivalents at end of period 12 11,765 17,452 14,804
Cash and cash equivalents comprise:
Cash at bank 12,713 17,909 14,804
Bank overdraft (948) (457) -
Cash and cash equivalents at end of period 11,765 17,452 14,804

 

Consolidated statement of changes in equity

£000's Share capital Share premium Retained earnings Other reserves Total equity
Changes in equity during 2013
At 1 January 2013 6,587 106,198 224,959 36,070 373,814
Total comprehensive income for the period - - 14,240 (1,706) 12,534
Issue of new ordinary shares 13 724 (1,003) (281) (547)
Release of own shares - - - 756 756
Share based payment expense - - 1,041 - 1,041
Dividends - - (7,308) - (7,308)
At 30 June 2013 6,600 106,922 231,929 34,839 380,290
Changes in equity during 2012
At 1 January 2012 6,544 103,717 210,890 43,299 364,450
Total comprehensive income for the period - - 12,322 (2,634) 9,688
Issue of new ordinary shares 27 1,423 (625) (634) 191
Purchase of own shares - - - (400) (400)
Share based payment expense - - 1,001 - 1,001
Dividends - - (6,325) - (6,325))
At 30 June 2012 (see note 1) 6,571 105,140 217,263 39,631 368,605

An analysis of other reserves is provided in Note 10.

 

Notes to the condensed consolidated financial statements

1. Basis of preparation

RPS Group Plc (the "Company") is a company domiciled in England. The condensed consolidated interim financial statements of the Company for the six months ended 30 June 2012 comprise the Company and its subsidiaries (together referred to as the "Group").

The condensed interim financial statements have been prepared using accounting policies set out in the Report and Accounts 2011 and in accordance with IAS 34. They are unaudited but have been reviewed by the Company's auditor. The results for the year end 31 December 2011 and the balance sheet as at that date are abridged from the Company's Report and Accounts 2011 which have been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters for which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.

The condensed interim financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.

In assessing the going concern basis, the directors considered the Group's business activities, the financial position of the Group and the Group's financial risk management objectives and policies. The directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future and that it is, therefore, appropriate to adopt the going concern basis in preparing the Group's interim financial statements.

Restatement

As reported in the Group's Report and Accounts 2011, our auditor at that time, Ernst & Young LLP, indicated that it did not agree with the Group's interpretation of IFRS 3 "Business Combinations" in respect of deferred consideration. They advised the Group that the deferred consideration that was contingent on continuing employment should be recognised as a remuneration charge through the Consolidated Income Statement rather than be capitalised.

The Group agreed to this revised treatment of deferred consideration which impacted the results for the six months ended 30 June 2011 in the following ways:

1. In respect of 2010 acquisitions the Group has derecognised the deferred consideration payable that was previously shown in the balance sheet on the date of acquisition of subsidiaries. The value of goodwill has been reduced by a corresponding amount since deferred consideration is no longer considered part of the cost of investment;

2. For those acquisitions in 2010 and 2011 where the fair value of the net assets acquired is greater than the consideration transferred, the Group has recognised negative goodwill through the consolidated income statement; and

3. A remuneration charge has been recognised through the consolidated income statement within "amortisation of acquired intangibles and transaction related costs" and a corresponding accrual has been recognised in the balance sheet under "deferred consideration".

The Group explained the restatement of the results for the six months ended 30 June 2011 by means of an announcement to the London Stock Exchange dated 3 May 2012. This announcement details the restatement of the income statement and the segment results for the six months ended 30 June 2011 and the balance sheet at that date.

The condensed consolidated cash flow statement for the six months ended 30th June 2011 and the year ended 31st December 2011 have been restated so that deferred consideration treated as remuneration is included within cash generated from operating activities rather than cash flows from investing activities. In addition, the total comprehensive income in the condensed consolidated statement of changes in equity in this release has been restated to reflect the above.

2. Responsibility Statement

The directors confirm that, to the best of their knowledge this condensed set of financial statements has been prepared in accordance with IAS 34 and that this Interim Report includes a fair review of the information required by DTR 4.2.4R, DTR 4.2.7R and DTR 4.2.8R.

On behalf of the Board

A. S. Hearne - Chief Executive
G. R. Young - Group Finance Director

3. Business segments

Segment information is presented in respect of the Group's business segments which are reported to the Chief Operating Decision Maker, which is identified as the main Board of Directors of RPS Group Plc. The business segment reporting format reflects the Group's management and internal structure. Inter-segment pricing is determined on an 'arm's length' basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

As announced on 3 November 2011 the Group merged Planning and Development (UK and Ireland) and Environmental Management. The 30 June 2011 results are therefore shown below on this revised basis. The Group comprises the following business segments:

Built and Natural Environment ("BNE") - consultancy services advising on all aspects of the built and natural environment including the provision of energy infrastructure, planning and development, engineering, design and surveying, environmental assessment and management and risk management. Consulting services are provided on a regional basis in Europe and Australia Asia Pacific ("AAP").

Energy ? the provision of integrated technical, commercial and project management support in the fields of geo-science, engineering and health, safety and environment on a global basis to the energy sector.

Segment results for the period ended 30 June 2013:

£000's Fees Recharged Expenses Intersegment revenue External Revenue
Built and Natural Environment
Europe 74,682 9,504 (265) 83,921
AAP 46,413 8,829 (272) 54,970
Intra BNE eliminations (52) - 52 -
Total BNE 121,043 18,333 (485) 138,891
Energy 121,738 20,834 (613) 141,959
Group eliminations (937) (161) 1,098 -
Total 241,844 39,006 - 280,850

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 9,550 (259) 9,291
APP 4,584 (759) 3,825
Total BNE 14,134 (1,018) 13,116
Energy 21,539 (126) 21,413
Total 35,673 (1,144) 34,529

Segment results for the period ended 30 June 2012:

£000's Fees Recharged expenses Intersegment revenue External revenue
Built and Natural Environment:
Europe 83,323 10,151 (719) 92,755
AAP 47,940 11,090 (101) 58,929
Intra BNE eliminations (104) (3) 107 -
Total BNE 131,159 21,238 (713) 151,684
Energy 108,024 16,646 (211) 124,459
Group eliminations (857) (67) 924 -
Total 238,326 37,817 - 276,143

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 9,825 (307) 9,518
APP 6,286 (56) 6,230
Total BNE 16,111 (363) 15,748
Energy 19,119 (43) 19,076
Total 35,230 (406) 34,824

Segment results for the year ended 31 December 2012:

£000's Fees Recharged expenses Intersegment revenue External revenue
Built and Natural Environment:
Europe 157,200 21,433 (1,301) 177,332
AAP 98,300 19,827 (786) 117,341
Intra BNE eliminations (193) (41) 234 -
Total BNE 255,307 41,219 (1,853) 294,673
Energy 225,875 36,017 (702) 261,190
Group eliminations (2,347) (208) 2,555 -
Total 478,835 77,028 - 555,863

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 18,874 (754) 18,120
APP 12,974 (920) 12,054
Total BNE 31,848 (1,674) 30,174
Energy 39,709 (72) 39,637
Total 71,557 (1,746) 69,811

Group reconciliation

£000's 30 June 2013 30 June 2012 31 Dec 2012
Revenue 280,850 276,143 555,863
Recharged expenses (39,006) (37,817) (77,028)
Fees 241,844 238,326 478,835
Underlying profit 35,673 35,230 71,557
Reorganisation costs (1,144) (406) (1,746)
Unallocated expenses (3,350) (3,843) (7,742)
Operating profit before amortisation of acquired intangibles and transaction related costs 31,179 30,981 62,069
Amortisation of acquired intangibles and transaction related costs (9,174) (10,161) (19,925)
Operating profit 22,005 20,820 42,144
Net finance costs (958) (964) (1,970)
Profit before tax 21,047 19,856 40,174

Total segment assets were as follows:

£000's 30 June 2013 30 June 2012 31 December 2012
Build and Natural Environment
Europe 229,401 233,338 226,861
AAP 116,032 121,357 124,908
Total BNE 345,433 354,695 351,769
Energy 197,004 182,898 179,163
Unallocated 2,948 3,830 2,325
Total 545,385 541,423 533,257

4. 4. Amortisation of acquired intangibles and transaction related costs

£000's 30 June 2013 30 June 2012 31 December 2012
Amortisation of acquired intangibles 5,337 5,117 10,636
Contingent deferred consideration treated as remuneration 3,470 4,674 8,593
Negative goodwill - - (266)
Loss on disposal of business - 112 135
Third party advisory costs 367 258 827
Total 9,174 10,161 19,925

5. Income taxes

The tax charge for the period has been calculated using an estimate of the effective annual rate of tax for each taxing jurisdiction for the full year. These rates have been applied to the pre-tax profits for each jurisdiction for the six months ended 30 June 2013. The Group has separately calculated the tax rates applicable to amortisation of intangibles and transaction related costs for the period. Tax rate changes that were substantively enacted at the balance sheet date have been factored into the calculation of the effective tax rates.

30 June 2013 30 June 2012 31 December 2012
£000's
Current tax expense 8,332 9,207 18,347
Deferred tax credit (1,525) (1,673) (4,084)
Total tax expense in the income statement 6,807 7,534 14,263
Add back:
Tax on amortisation of acquired intangibles and acquisition related costs 2,033 1,234 3,569
Adjusted tax charge on PBTA for the period 8,840 8,768 17,832
Tax rate on PBT 32.3% 37.9% 35.5%
Tax rate on PBTA 29.3% 29.2% 29.7%

6. Earnings per share

The calculations of earnings per share are based on the profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding during the period as shown below:

Six months
ended
30 June
Six months
ended
30 June
Year ended ;31 Dec
£000's 2013 2012 2012
Profit attributable to ordinary shareholders 14,240 12,322 25,911
000's
Weighted average number of ordinary shares for the purposes of basic earnings per share 217,953 216,835 216,980
Effect of employee share schemes 1,034 1,406 1,313
Weighted average number of ordinary shares for the purposes of diluted earnings per share 218,987 218,241 218,293
Basic earning per share (pence) 6.53 5.68 11.94
Diluted earnings per share (pence) 6.50 5.65 11.87

The directors consider that earnings per share before amortisation of acquired intangibles and transaction related costs provides a more meaningful measure of the Group's performance than statutory earnings per share. The calculations of adjusted earnings per share were based on the number of shares as above, and are shown in the table below:

£000's Six months ended 30 June 2013 Six months ended 30 June 2012 Year ended 31 Dec 2012
Profit attributable to ordinary shareholders 14,240 12,322 25,911
Amortisation of acquired intangibles and transaction related costs 9,174 10,161 19,925
Tax on amortisation of acquired intangibles and transaction related costs (2,033) (1,234) (3,569)
Change in Australian tax law - - (238)
Adjusted profit attributable to ordinary shareholders 21,381 21,249 42,267
Adjusted basic earnings before per share (pence) 9.81 9.80 19.48
Adjusted diluted earnings per share (pence) 9.76 9.74 19.36

7. Property, plant and equipment

During the six months ended 30 June 2013, the Group acquired assets with a cost of £4,732,000 (six months to 30 June 2012: £4,628,000), which includes £89,000 acquired through business combinations (six months to 30 June 2012: £nil). Assets with a net book value of £86,000 were disposed of during the six months ended 30 June 2013 (six months ended 30 June 2012: £171,000).

8. Acquisitions

The Group has completed the following acquisitions to strengthen and broaden the skill base of the Group, during the first half of 2013:

Entity Business Segment Date of Acquisition Place of incorporation Percentageof entity acquired Nature of business acquired
Petroleum Institute for Continuing Education Inc. (PEICE) Energy 16th Jan 2013 Canada 100% Training
Knowledge Reservoir Group (KR) Energy 19th Apr 2013 USA 100% Reservoir engineering

Their contributions to the Group's results for the period is given below:

£000's Revenue Fees Operating profit before amortisation Operating profit
EHI 2,084 2,084 460 77
Nautilus 2,995 2,950 280 (19)

Had the Group acquired these entities on the first day of the period, the Group estimates revenue would have been £285,470,000 and operating profit would have been £21,843,000.

The Group has allocated provisional fair values to the net assets acquired as follows:

£000's Order book Customer relationships Brand IP PPE Cash Other assets Other liabilities Net assets acquired
PEICE 120 4,119 164 500 1 612 59 (1,949) 3,626
KR 745 6,314 719 425 88 1,956 5,123 (2,338) 13,032
865 10,433 883 925 89 2,568 5,182 (4,287) 16,658

 

£000's Initial cash consideration Deferred cash consideration Total consideration Net assets acquired Goodwill acquired Tax deductible goodwill
PEICE 3,637 3,574 7,211 3,626 3,585 -
KR 9,651 4,327 13,978 13,032 946 -
13,288 7,901 21,189 16,658 4,531 -

Provisional values are given in the table above as information about facts or circumstances that existed at the acquisition date is incomplete.

Goodwill represents the value of the accumulated workforce and synergies with RPS associated with these acquisitions.

The total fair value of receivables acquired was £3,390,000. The gross contractual receivables acquired were £3,431,000 and £41,000 was estimated to be irrecoverable.

The vendors of the acquired companies have entered into indemnity arrangements with the Group. The total undiscounted cash flow that could be receivable by the Group is between £nil and £3,390,000. As the Group does not expect that these warranties will become receivable, it has not recognised an indemnification asset on acquisition.

Deferred consideration is payable on the first and second anniversaries of the acquisitions of PEICE and KR, dependent on key vendors remaining employed. If they leave, the deferred consideration will be paid on the tenth anniversary of completion including a market rate of interest.

The Group incurred acquisition-related costs of £314,000 (6 months to 30 June 2012: £nil), which have been expensed through the consolidated income statement and included within "amortisation of acquired intangibles and transaction related costs".

A reconciliation of the goodwill movement in 2013 in respect of acquisitions completed in 2012 and 2013 is given below.

£000's Manidis Roberts PEICE KR
Goodwill at 1 January 2013 11,943 - -
Additions through acquisition - 3,585 946
Foreign exchange gains and losses (658) (39) 8
Goodwill at 30 June 2013 11,285 3,546 954

There were no accumulated impairment losses at the beginning or the end of the period.

Commitments and contingencies

The Group completed a number of acquisitions between 1 January 2010 and 31 December 2011 where deferred consideration payments to vendors are contingent on the vendor's continued employment with the Group and so are required to be recognised as employment costs over the deferred consideration period. The Group considers it probable that the remaining deferred consideration payments will be settled.

The total cash commitments at 30 June 2013 in respect of contingent deferred consideration treated as remuneration that the Group expects to settle and the estimated remuneration charge for each financial year assuming exchange rates remain constant are disclosed in the table below:

£000's Cash commitment Remuneration charge
July - December 2013 3,653 2,585
2014 3,693 1,213
7,346 3,798

The balance sheet at 30 June 2013 includes, within deferred consideration current liabilities, contingent deferred consideration remuneration expense accrued but not paid totalling £3,549,000 (31 December 2012: £4,157,000).

9. Share capital

2013 Number 000's 2013 £000's 2012 Number 000's 2012 £000's
Authorised
Ordinary shares of 3p each at 30 June 240,000 7,200 240,000 7,200
Issued and fully paid
Ordinary shares of 3p each at 1 January 219,566 6,587 218,138 6,544
Issued under employee share schemes 424 13 911 27
At 30 June 219,990 6,600 219,049 6,571

10. Other reserves

£000's Merger reserve Employee trust Translation reserve Total
Changes in equity during 2013
At 1 January 2013 21,256 (9,059) 23,873 36,070
Exchange differences - - (1,706) (1,706)
Issue of new shares - (281) - (281)
Purchase of own shares - 756 - 756
At 30 June 2013 21,256 (8,584) 22,167 34,839
Changes in equity during 2012
At 1 January 2012 21,256 (7,375) 29,418 43,299
Exchange differences - - (2,634) (2,634)
Issue of new shares - (634) - (634)
Purchase of own shares - (400) - (400)
At 30 June 2012 21,256 (8,409) 26,784 39,631

11. Dividends

The following dividends were recognised as distributions to equity holders in the period:

£000's Six months ended 30 June 2013 Six months ended 30 June 2012 Year ended 31 Dec 2012
Final dividend for 2012 3.34p per share 7,308 - -
Interim dividend for 2012 3.06p per share - - 6,682
Final dividend for 2011 2.90p per share - 6,325 6,325
7,308 6,325 13,007

An interim dividend in respect of the six months ended 30 June 2013 of 3.52 pence per share, amounting to a total dividend of £7,723,000 was approved by the Directors of RPS Group Plc on 30 July 2013. These condensed consolidated interim financial statements do not reflect this dividend payable.

12. Note to the condensed consolidated cash flow statement

Six months
ended
30 June
Six months
ended
30 June
Year ended 31 Dec
£000's 2013 2012 2012
Operating profit 22,005 20,820 42,144
Adjustments for:
Depreciation 5,051 4,248 8,950
Amortisation of acquired intangibles 5,337 5,117 10,636
Contingent deferred consideration treated as remuneration 3,470 4,674 8,593
Share based payment expense 1,041 1,001 2,070
Loss on disposal of business - 112 135
Negative goodwill - - (266)
(Profit)/loss on sale of property, plant and equipment (186) 31 (119)
36,718 36,003 72,143)
Decrease/(increase) in trade and other receivables 1,604 (1,634) 12,491
Decrease in trade and other payables
(4,491) (3,184) (8,589)
Adjusted cash generated from operations 33,831 31.185 76.045

* Adjusted cash generated from operations is before payment of deferred consideration treated as remuneration.

The table below provides an analysis of net bank borrowings, comprising cash and cash equivalents, interest bearing bank loans and finance leases, during the six months ended 30 June 2013.

£000's At 1 January 2013 Cash flow Foreign exchange At 30 June 2013
Cash and cash equivalents 14,804 (3,027) (12) 11,765
Bank loans (27,098) (2,935) (1,645) (31,678)
Finance lease creditor (1,207) 353 33 (821)
Net bank borrowings (13501) (5,609) (1,624) (20,734)

The cash balance includes £1,624,000 (31 December 2012: £3,566,000) that is restricted in its use.

13. Events after the balance sheet date

On 18th July 2013 RPS completed the acquisition of the entire issued share capital of Asia-Pacific ASA Pty Ltd, an oceanographic consultancy firm based in Australia for a maximum consideration of A$8.7 million (£5.2 million) all payable in cash.

Consideration paid at completion was A$4.4 million (£2.6 million). Subject to certain operational conditions being met, further sums of A$1.7 million (£1.1 million), A$1.7 million (£1.1 million) and A$0.9 million (£0.5 million), will be paid on the first, second and third anniversaries of the transaction. Due to the proximity of the acquisition date to the date of approval of this announcement, it is impracticable to provide further information.

14. Principal risks and uncertainties

The nature of the principal risks and uncertainties faced by the Group have not changed significantly since the 2011 Report and Accounts was published. These risks, together with a description of the approach to mitigate them, are set out on page 9 of the 2011 Report and Accounts (available on the Group's web-site at www.rpsgroup.com) and are summarised as follows:

  • Economic environment
  • Material adverse events
  • Recruitment and retention of key personnel
  • Market position and reputation
  • Compliance and litigation
  • Business acquisitions
  • Funding
  • Health and safety

From time to time the Group receives claims from clients and suppliers. Some of these result in payments to the claimants by the Group and its insurers. The Board reviews all significant claims at each board meeting and more regularly if required. The Board is currently satisfied that the Group has sufficient provisions in its balance sheet to meet all likely uninsured liabilities.

The Board keeps under review the potential effect of economic circumstances. The continuing uncertainty in the global economic outlook inevitably increases the trading and balance sheet risks to which the Group is exposed.

15. Related party transactions

There are no significant changes in the nature and size of related party transactions for the period to those reported in the 2012 Report and Accounts.

16. Forward-looking statements

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 the year to date are based upon unaudited management accounts for the period January to June 2013. The Board considers market expectations for 2013 are best defined by taking the range of forecasts of PBTA for the full year published by analysts who consistently follow the Group. The current range of forecasts of which the Board is aware is £61.0 to £64.5 million. Nothing in this announcement should be construed as a profit forecast.

17. Publication

A copy of this announcement will be posted on the Company's website at www.rpsgroup.com.

INDEPENDENT REVIEW REPORT TO RPS GROUP PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013, which comprises the Condensed consolidated income statement, the Condensed consolidated statement of comprehensive income, the Condensed consolidated balance sheet, the Condensed consolidated cash flow statement, the Condensed consolidated statement of changes in equity and the related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 ";Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Finance Conduct Authority.

Deloitte LLP
Chartered Accountants and Statutory Auditor
Reading, United Kingdom
1 August 2013

 

2014

Half Year Results for the six months ended 30 June 2013

01 August 2013

Half Year Results for the six months ended 30 June 2013

PBTA slightly ahead. Financial position remains strong. Interim dividend increased 15% for 20th consecutive year. Acquisition pipeline encouraging. On track for full year.

2013 2012
Business Performance H1 H1
Revenue (£m) 280.9 276.1
Fee income (£m) 241.8 238.3
PBTA (1) (£m) 30.2 30.0
Adjusted earnings per share (2)(basic) (p) 9.81 9.80
Adjusted operating cash flow (£m) (3) 33.8 31.2
Dividend per share (p) 3.52 3.06
Profit before tax (£m) 21.0 19.9
Earnings per share (basic) (p) 6.53 5.68
Operating cash flow (£m) 29.6 25.0

(1) PBTA is profit before tax, amortisation of acquired intangibles and transaction related costs.
(2) Adjusted earnings per share is before amortisation of acquired intangibles and transaction related costs and the related tax.
(3) Adjusted operating cash flow is before deferred consideration treated as remuneration.

Brook Land, Chairman, commenting on the results, said:

"RPS has delivered a creditable result for the first half of 2013. Once again our conversion of profit into cash has been strong. We have increased the Interim dividend by 15% for the 20th consecutive year.

With our flexible and robust business model, the Board believes RPS is likely to deliver growth for the full year. Our acquisition pipeline also gives us further cause for optimism.".

1 August 2013

 

ENQUIRIES
RPS Group plc Today: 020 7457 2020
Dr Alan Hearne, Chief Executive Thereafter: 01235 863206
Gary Young, Finance Director
College Hill
Matthew Smallwood Tel: 020 7457 2020
Justine Warren

 

RPS is an international consultancy providing advice upon the development of natural resources, land and property, the management of the environment and the health and safety of people. We have offices in the UK, Ireland, the Netherlands, the Americas and Australia Asia Pacific ("AAP") 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.

 

Results

Profit (before tax, amortisation of acquired intangibles and transaction related costs) was £30.2 million (2012: £30.0 million). Basic earnings per share (before amortisation and transaction related costs) were 9.81 pence (2012: 9.80 pence). The contribution of the 2 segments was:

Underlying Profit(£m)* 2013 2012
H1 H1
Energy 21.5 19.1
Built and Natural Environment 14.1 16.1
Total 35.7 35.2

* as defined in note 3, stated before reorganisation costs of £1.1m (2012: £0.4m)

Group central costs were £3.4 million, a reduction of 13% over the same period last year. Finance charges remained constant at £1.0 million.

Cash Flow, Funding and Dividend

Our conversion of profit into cash continued at an encouraging level and our balance sheet remains strong. After funding acquisition investment of £15.4 million in the period, net bank borrowings at 30 June were £20.7 million (30 June 2012: £20.5 million). Following the period end we funded the initial consideration of £2.6 million related to the acquisition of Asia Pacific ASA Pty Ltd ("APASA").

We have in place a £125 million facility with Lloyds Banking Group until July 2016. This comprises £75 million of committed revolving credit facility, with an additional £50 million available as required.

The Board remains confident about the Group's financial strength and has, for the 20th consecutive year, increased the interim dividend by about 15% to 3.52 pence per share (2012: 3.06 pence) payable on 17 October 2013 to shareholders on the register on 20 September 2013.

Acquisitions

On 16 January 2013 we announced the acquisition of PEICE, a Canadian based training business in the oil and gas sector, for a maximum consideration of £7.4 million. We have made good progress integrating PEICE with our existing training activities in the energy market.

On 19 April 2013 we announced the acquisition of Knowledge Reservoir Inc ("KR"), a reservoir engineering and geosciences consulting firm headquartered in Houston, for a maximum consideration of £12.0 million net of cash inherited. The US element of the business has traded well and we are close to finalising the reorganisation of the KR businesses in London, Oman and Kuala Lumpur.

On 18 July 2013 we announced the acquisition of APASA for a maximum consideration of £5.2 million. This is the sister company of ASA, the international oceanographic consultancy business we brought into the Group in 2011. Our international oceanographic capability has grown steadily in recent years, serving a market which remains buoyant.

Our acquisition pipeline is encouraging at the moment and we anticipate extending the Group's capabilities further in the next few months.

Markets and Trading

Energy

We provide internationally recognised consultancy services to the oil and gas exploration and production industry from bases in the UK, USA, Canada and AAP. These act as regional centres for projects undertaken in many other countries.

The first half delivered good growth, once again with a strong margin.

2013 2012
H1 H1
Fee income (£m) 121.7 108.0
Profit* (£m) 21.5 19.1
Margin % 17.7 17.7

*as defined in note 3, stated before reorganisation costs of £0.1m (2012: £nil) costs.

Planned expenditure in the oil and gas exploration and production sector for 2013 is encouraging, in respect of both conventional and unconventional resources. Given the uncertain global economic backdrop, some clients have been understandably cautious about starting new projects, but our international presence and reputation has enabled us to benefit from the investment which has been committed in many parts of the world.

Our EAME business performed particularly well, with the US producing a solid performance, after strong growth in 2012. Our profile in the financial services sector continued to enable us to benefit from valuation and transaction related activity.

Client spend in the AAP region slowed significantly in the early months of the year, as a number dealt with both demand and cost pressures. More recently it seems to have improved. We also experienced a slow down in Canada as major potash projects moved into a phase of the development cycle in which we have less involvement. New opportunities in this sector are, however, now emerging.

Overall, this business remains on track to deliver a strong performance this year.

Built and Natural Environment ("BNE")

Within these businesses we provide a wide range of consultancy services to many aspects of the property and infrastructure development and management sectors. In recent years we have developed extensive experience in respect of the infrastructure projects necessary to bring energy resources, both conventional and renewable, to market.

Australia Asia Pacific

In BNE Australia Asia Pacific ("BNEA") we remain well positioned in both the traditional infrastructure and development markets, as well as the more recently developed energy infrastructure market. Our successful move into the offshore gas and coal seam gas/LNG market enabled this business to double in size in recent years, despite the global financial crisis.

In the second half of last year a number of natural resources projects, particularly mining and offshore gas, were delayed, whilst our clients reviewed product demand, production costs and operating efficiencies. Further delays in significant projects have been announced by our clients in the first half of this year. As a result the BNEA results for the first half of the year were significantly below the same period last year.

2013 2012
H1 H1
Fee income (£m) 46.4 47.9
Profit* (£m) 4.6 6.3
Margin % 9.9 13.1

*as defined in note 3, stated before reorganisation costs of £0.8m (2012: £0.1m)

In other sectors our clients have had to deal with the economic uncertainty resulting from the resources slowdown, as well as political volatility in the run up to the Federal election. Many have remained reasonably positive and continued to invest, but it seems clear the Australian economy is now on a lower growth trajectory.

In response to these difficult trading conditions we continue to reduce capacity and costs. These reductions have made us more efficient and competitive and should result in a better performance in the second half, provided the market does not deteriorate further.

Once recovery in resources investment gets underway, it will offer an opportunity for us to create a further period of growth. In the meantime the weakening Australian currency and lower interest rates should help deliver a rebalancing of the economy. We should benefit from this in terms of trading, although the weak dollar will adversely affect our results on consolidation. Exposure to the expected long term growth in the AAP region remains an important part of Group strategy.

Europe

Our BNE business in Europe ("BNEE") performed well, even though economic uncertainty continued to hold back some of our clients' investment. Fee and profit growth was affected by the exceptionally good performance we experienced in our UK water activities in the first half of 2012, which could not be replicated this year. The improved efficiencies resulting from actions taken previously gave rise to an increased margin, despite continuing fee rate pressure.

2013 2012
H1 H1
Fee income (£m) 74.7 83.3
Underlying Profit* (£m) 9.6 9.8
Margin % 12.8 11.8

* as defined in note 3, stated before reorganisation costs of £0.3m (2012 £0.3m)

Our strong position in the energy infrastructure market (conventional, nuclear and renewable) enabled us to win work at rates which reflect our market leading position. Some of our UK commercial development clients, particularly in the house building sector, seemed more confident than in recent years. The investment we made in relocating and expanding our laboratories in the Netherlands in 2012 is proving worthwhile, more than compensating for continuing weakness in the Dutch property development sector. Our health, safety and risk management businesses are well positioned and continued to perform well.

We still expect BNEE to deliver a 2013 result broadly the same as in 2012, although there may now be some modest upside opportunity.

Group Prospects

Our flexible and robust business model has demonstrated in recent years it is capable of producing good results in challenging circumstances. The Board remains of the view that RPS is likely to meet market expectations in 2013 and continue to deliver strong cash flow. Our acquisition pipeline also gives us cause for optimism.

Board of Directors
RPS Group plc

1 August 2013

 

Condensed consolidated income statement

Notes Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Revenue 3 280,850 276,143 555,863
Recharged expenses 3 (39,006) (37,817) (77,028)
Fee income 3 241,844 238,326 478,835
Operating profit before amortisation of acquired intangibles and transaction related costs 3,4 31,179 30,981 62,069
Amortisation of acquired intangibles and transaction related costs 4 (9,174) (10,161) (19,925)
Operating profit 22,005 20,820 42,144
Finance costs (1,006) (1,059) (2,128)
Finance income 48 95 158
Profit before tax, amortisation of acquired intangibles and transaction related costs 30,221 30,017 60,099
Profit before tax 21,047 19,856 40,174
Tax expense 5 (6,807) (7,534) (14,263)
Profit for the period attributable to equity holders of the parent 14,240 12,322 25,911
Basic earnings per share (pence) 6 6.53 5.68 11.94
Diluted earnings per share (pence) 6 6.50 5.65 11.87
Adjusted basic earnings per share (pence) 6 9.81 9.80 19.48
Adjusted diluted earnings per share (pence) 6 9.76 9.74 19.36

 

Condensed consolidated statement of comprehensive income

Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Profit for the period 14,240 12,322 25,911
Exchange differences (1,706) (2,634) (5,545)
Total recognised comprehensive income for the period attributable to equity holders of the parent 12,534 9,688 20,366

* may be reclassified subsequently to profit or loss in accordance with IFRS.

 

Condensed consolidated balance sheet

As at 30 June As at 30 June As at 31 December
£000's Notes 2013 2012 2012
Assets
Non-current assets
Intangible assets 340,408 320,911 328,440
Property, plant and equipment 7 30,200 29,925 30,632
370,608 350,836 359,072
Current assets
Trade and other receivables 162,064 172,678 159,381
Cash at bank 12,713 17,909 14,804
174,777 190,587 174,185
Liabilities
Current liabilities
Borrowings 1,474 1,554 748
Deferred consideration 11,369 8,427 7,842
Trade and other payables 98,102 103,891 101,921
Corporation tax liabilities 1,638 3,883 3,582
Provisions 2,560 4,315 2,633
115,143 122,070 116,726
Net current assets 59,634 68,517 57,459
Non-current liabilities
Borrowings 31,973 36,822 27,557
Deferred consideration 6,910 - 3,543
Other creditors 3,022 1,784 1,745
Deferred tax liabilities 6,578 10,053 8,436
Provisions 1,469 2,089 1,436
49,952 50,748 42,717
Net assets 380,290 368,605 373,814
Equity
Share capital 9 6,600 6,571 6,587
Share premium 106,922 105,140 106,198
Other reserves 10 34,839 39,631 36,070
Retained earnings 231,929 217,263 224,959
Total shareholders' equity 380,290 368,605 373,814

 

Condensed consolidated cash flow statement

Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's Notes 2013 2012 2012
Adjusted cash generated from operations 12 33,831 31,185 76,045
Deferred consideration treated as remuneration (4,204) (6,214) (9,969)
Cash generated from operations 29,627 24,971 66,076
Interest paid (1,091) (908) (2,204)
Interest received 48 95 158
Income taxes paid (11,381) (9,910) (18,162)
Net cash from operating activities 17,203 14,248 45,868
Cash flows from investing activities
Purchases of subsidiaries net of cash acquired (11,178) - (9,774)
Deferred consideration - (165) (4,130)
Purchase of property, plant and equipment (4,722) (4,661) (9,909)
Sale of property, plant and equipment 272 150 713
Dividends received - - 298
Net cash used in investing activities (15,628) (4,676) (22,802)
Cash flows from financing activities
Proceeds from issue of share capital 211 190 240
Purchase of own shares - (400) (400)
Proceeds from/(repayments of) bank borrowings 2,935 (9,050) (17,409)
Payment of finance lease liabilities (353) (579) (1,350)
Dividends paid (7,308) (6,325) (13,007)
Payment of pre-acquisition dividend (87) - (399)
Net cash used in financing activities (4,602) (16,164) (32,325)
Net (decrease)/increase in cash and cash equivalents (3,027) (6,592) (9,259)
Cash and cash equivalents at beginning of period 14,804 24,458 24,458
Effect of exchange rate fluctuations (12) (414) (395)
Cash and cash equivalents at end of period 12 11,765 17,452 14,804
Cash and cash equivalents comprise:
Cash at bank 12,713 17,909 14,804
Bank overdraft (948) (457) -
Cash and cash equivalents at end of period 11,765 17,452 14,804

 

Consolidated statement of changes in equity

£000's Share capital Share premium Retained earnings Other reserves Total equity
Changes in equity during 2013
At 1 January 2013 6,587 106,198 224,959 36,070 373,814
Total comprehensive income for the period - - 14,240 (1,706) 12,534
Issue of new ordinary shares 13 724 (1,003) (281) (547)
Release of own shares - - - 756 756
Share based payment expense - - 1,041 - 1,041
Dividends - - (7,308) - (7,308)
At 30 June 2013 6,600 106,922 231,929 34,839 380,290
Changes in equity during 2012
At 1 January 2012 6,544 103,717 210,890 43,299 364,450
Total comprehensive income for the period - - 12,322 (2,634) 9,688
Issue of new ordinary shares 27 1,423 (625) (634) 191
Purchase of own shares - - - (400) (400)
Share based payment expense - - 1,001 - 1,001
Dividends - - (6,325) - (6,325))
At 30 June 2012 (see note 1) 6,571 105,140 217,263 39,631 368,605

An analysis of other reserves is provided in Note 10.

 

Notes to the condensed consolidated financial statements

1. Basis of preparation

RPS Group Plc (the "Company") is a company domiciled in England. The condensed consolidated interim financial statements of the Company for the six months ended 30 June 2012 comprise the Company and its subsidiaries (together referred to as the "Group").

The condensed interim financial statements have been prepared using accounting policies set out in the Report and Accounts 2011 and in accordance with IAS 34. They are unaudited but have been reviewed by the Company's auditor. The results for the year end 31 December 2011 and the balance sheet as at that date are abridged from the Company's Report and Accounts 2011 which have been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters for which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.

The condensed interim financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.

In assessing the going concern basis, the directors considered the Group's business activities, the financial position of the Group and the Group's financial risk management objectives and policies. The directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future and that it is, therefore, appropriate to adopt the going concern basis in preparing the Group's interim financial statements.

Restatement

As reported in the Group's Report and Accounts 2011, our auditor at that time, Ernst & Young LLP, indicated that it did not agree with the Group's interpretation of IFRS 3 "Business Combinations" in respect of deferred consideration. They advised the Group that the deferred consideration that was contingent on continuing employment should be recognised as a remuneration charge through the Consolidated Income Statement rather than be capitalised.

The Group agreed to this revised treatment of deferred consideration which impacted the results for the six months ended 30 June 2011 in the following ways:

1. In respect of 2010 acquisitions the Group has derecognised the deferred consideration payable that was previously shown in the balance sheet on the date of acquisition of subsidiaries. The value of goodwill has been reduced by a corresponding amount since deferred consideration is no longer considered part of the cost of investment;

2. For those acquisitions in 2010 and 2011 where the fair value of the net assets acquired is greater than the consideration transferred, the Group has recognised negative goodwill through the consolidated income statement; and

3. A remuneration charge has been recognised through the consolidated income statement within "amortisation of acquired intangibles and transaction related costs" and a corresponding accrual has been recognised in the balance sheet under "deferred consideration".

The Group explained the restatement of the results for the six months ended 30 June 2011 by means of an announcement to the London Stock Exchange dated 3 May 2012. This announcement details the restatement of the income statement and the segment results for the six months ended 30 June 2011 and the balance sheet at that date.

The condensed consolidated cash flow statement for the six months ended 30th June 2011 and the year ended 31st December 2011 have been restated so that deferred consideration treated as remuneration is included within cash generated from operating activities rather than cash flows from investing activities. In addition, the total comprehensive income in the condensed consolidated statement of changes in equity in this release has been restated to reflect the above.

2. Responsibility Statement

The directors confirm that, to the best of their knowledge this condensed set of financial statements has been prepared in accordance with IAS 34 and that this Interim Report includes a fair review of the information required by DTR 4.2.4R, DTR 4.2.7R and DTR 4.2.8R.

On behalf of the Board

A. S. Hearne - Chief Executive
G. R. Young - Group Finance Director

3. Business segments

Segment information is presented in respect of the Group's business segments which are reported to the Chief Operating Decision Maker, which is identified as the main Board of Directors of RPS Group Plc. The business segment reporting format reflects the Group's management and internal structure. Inter-segment pricing is determined on an 'arm's length' basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

As announced on 3 November 2011 the Group merged Planning and Development (UK and Ireland) and Environmental Management. The 30 June 2011 results are therefore shown below on this revised basis. The Group comprises the following business segments:

Built and Natural Environment ("BNE") - consultancy services advising on all aspects of the built and natural environment including the provision of energy infrastructure, planning and development, engineering, design and surveying, environmental assessment and management and risk management. Consulting services are provided on a regional basis in Europe and Australia Asia Pacific ("AAP").

Energy ? the provision of integrated technical, commercial and project management support in the fields of geo-science, engineering and health, safety and environment on a global basis to the energy sector.

Segment results for the period ended 30 June 2013:

£000's Fees Recharged Expenses Intersegment revenue External Revenue
Built and Natural Environment
Europe 74,682 9,504 (265) 83,921
AAP 46,413 8,829 (272) 54,970
Intra BNE eliminations (52) - 52 -
Total BNE 121,043 18,333 (485) 138,891
Energy 121,738 20,834 (613) 141,959
Group eliminations (937) (161) 1,098 -
Total 241,844 39,006 - 280,850

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 9,550 (259) 9,291
APP 4,584 (759) 3,825
Total BNE 14,134 (1,018) 13,116
Energy 21,539 (126) 21,413
Total 35,673 (1,144) 34,529

Segment results for the period ended 30 June 2012:

£000's Fees Recharged expenses Intersegment revenue External revenue
Built and Natural Environment:
Europe 83,323 10,151 (719) 92,755
AAP 47,940 11,090 (101) 58,929
Intra BNE eliminations (104) (3) 107 -
Total BNE 131,159 21,238 (713) 151,684
Energy 108,024 16,646 (211) 124,459
Group eliminations (857) (67) 924 -
Total 238,326 37,817 - 276,143

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 9,825 (307) 9,518
APP 6,286 (56) 6,230
Total BNE 16,111 (363) 15,748
Energy 19,119 (43) 19,076
Total 35,230 (406) 34,824

Segment results for the year ended 31 December 2012:

£000's Fees Recharged expenses Intersegment revenue External revenue
Built and Natural Environment:
Europe 157,200 21,433 (1,301) 177,332
AAP 98,300 19,827 (786) 117,341
Intra BNE eliminations (193) (41) 234 -
Total BNE 255,307 41,219 (1,853) 294,673
Energy 225,875 36,017 (702) 261,190
Group eliminations (2,347) (208) 2,555 -
Total 478,835 77,028 - 555,863

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 18,874 (754) 18,120
APP 12,974 (920) 12,054
Total BNE 31,848 (1,674) 30,174
Energy 39,709 (72) 39,637
Total 71,557 (1,746) 69,811

Group reconciliation

£000's 30 June 2013 30 June 2012 31 Dec 2012
Revenue 280,850 276,143 555,863
Recharged expenses (39,006) (37,817) (77,028)
Fees 241,844 238,326 478,835
Underlying profit 35,673 35,230 71,557
Reorganisation costs (1,144) (406) (1,746)
Unallocated expenses (3,350) (3,843) (7,742)
Operating profit before amortisation of acquired intangibles and transaction related costs 31,179 30,981 62,069
Amortisation of acquired intangibles and transaction related costs (9,174) (10,161) (19,925)
Operating profit 22,005 20,820 42,144
Net finance costs (958) (964) (1,970)
Profit before tax 21,047 19,856 40,174

Total segment assets were as follows:

£000's 30 June 2013 30 June 2012 31 December 2012
Build and Natural Environment
Europe 229,401 233,338 226,861
AAP 116,032 121,357 124,908
Total BNE 345,433 354,695 351,769
Energy 197,004 182,898 179,163
Unallocated 2,948 3,830 2,325
Total 545,385 541,423 533,257

4. 4. Amortisation of acquired intangibles and transaction related costs

£000's 30 June 2013 30 June 2012 31 December 2012
Amortisation of acquired intangibles 5,337 5,117 10,636
Contingent deferred consideration treated as remuneration 3,470 4,674 8,593
Negative goodwill - - (266)
Loss on disposal of business - 112 135
Third party advisory costs 367 258 827
Total 9,174 10,161 19,925

5. Income taxes

The tax charge for the period has been calculated using an estimate of the effective annual rate of tax for each taxing jurisdiction for the full year. These rates have been applied to the pre-tax profits for each jurisdiction for the six months ended 30 June 2013. The Group has separately calculated the tax rates applicable to amortisation of intangibles and transaction related costs for the period. Tax rate changes that were substantively enacted at the balance sheet date have been factored into the calculation of the effective tax rates.

30 June 2013 30 June 2012 31 December 2012
£000's
Current tax expense 8,332 9,207 18,347
Deferred tax credit (1,525) (1,673) (4,084)
Total tax expense in the income statement 6,807 7,534 14,263
Add back:
Tax on amortisation of acquired intangibles and acquisition related costs 2,033 1,234 3,569
Adjusted tax charge on PBTA for the period 8,840 8,768 17,832
Tax rate on PBT 32.3% 37.9% 35.5%
Tax rate on PBTA 29.3% 29.2% 29.7%

6. Earnings per share

The calculations of earnings per share are based on the profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding during the period as shown below:

Six months
ended
30 June
Six months
ended
30 June
Year ended ;31 Dec
£000's 2013 2012 2012
Profit attributable to ordinary shareholders 14,240 12,322 25,911
000's
Weighted average number of ordinary shares for the purposes of basic earnings per share 217,953 216,835 216,980
Effect of employee share schemes 1,034 1,406 1,313
Weighted average number of ordinary shares for the purposes of diluted earnings per share 218,987 218,241 218,293
Basic earning per share (pence) 6.53 5.68 11.94
Diluted earnings per share (pence) 6.50 5.65 11.87

The directors consider that earnings per share before amortisation of acquired intangibles and transaction related costs provides a more meaningful measure of the Group's performance than statutory earnings per share. The calculations of adjusted earnings per share were based on the number of shares as above, and are shown in the table below:

£000's Six months ended 30 June 2013 Six months ended 30 June 2012 Year ended 31 Dec 2012
Profit attributable to ordinary shareholders 14,240 12,322 25,911
Amortisation of acquired intangibles and transaction related costs 9,174 10,161 19,925
Tax on amortisation of acquired intangibles and transaction related costs (2,033) (1,234) (3,569)
Change in Australian tax law - - (238)
Adjusted profit attributable to ordinary shareholders 21,381 21,249 42,267
Adjusted basic earnings before per share (pence) 9.81 9.80 19.48
Adjusted diluted earnings per share (pence) 9.76 9.74 19.36

7. Property, plant and equipment

During the six months ended 30 June 2013, the Group acquired assets with a cost of £4,732,000 (six months to 30 June 2012: £4,628,000), which includes £89,000 acquired through business combinations (six months to 30 June 2012: £nil). Assets with a net book value of £86,000 were disposed of during the six months ended 30 June 2013 (six months ended 30 June 2012: £171,000).

8. Acquisitions

The Group has completed the following acquisitions to strengthen and broaden the skill base of the Group, during the first half of 2013:

Entity Business Segment Date of Acquisition Place of incorporation Percentageof entity acquired Nature of business acquired
Petroleum Institute for Continuing Education Inc. (PEICE) Energy 16th Jan 2013 Canada 100% Training
Knowledge Reservoir Group (KR) Energy 19th Apr 2013 USA 100% Reservoir engineering

Their contributions to the Group's results for the period is given below:

£000's Revenue Fees Operating profit before amortisation Operating profit
EHI 2,084 2,084 460 77
Nautilus 2,995 2,950 280 (19)

Had the Group acquired these entities on the first day of the period, the Group estimates revenue would have been £285,470,000 and operating profit would have been £21,843,000.

The Group has allocated provisional fair values to the net assets acquired as follows:

£000's Order book Customer relationships Brand IP PPE Cash Other assets Other liabilities Net assets acquired
PEICE 120 4,119 164 500 1 612 59 (1,949) 3,626
KR 745 6,314 719 425 88 1,956 5,123 (2,338) 13,032
865 10,433 883 925 89 2,568 5,182 (4,287) 16,658

 

£000's Initial cash consideration Deferred cash consideration Total consideration Net assets acquired Goodwill acquired Tax deductible goodwill
PEICE 3,637 3,574 7,211 3,626 3,585 -
KR 9,651 4,327 13,978 13,032 946 -
13,288 7,901 21,189 16,658 4,531 -

Provisional values are given in the table above as information about facts or circumstances that existed at the acquisition date is incomplete.

Goodwill represents the value of the accumulated workforce and synergies with RPS associated with these acquisitions.

The total fair value of receivables acquired was £3,390,000. The gross contractual receivables acquired were £3,431,000 and £41,000 was estimated to be irrecoverable.

The vendors of the acquired companies have entered into indemnity arrangements with the Group. The total undiscounted cash flow that could be receivable by the Group is between £nil and £3,390,000. As the Group does not expect that these warranties will become receivable, it has not recognised an indemnification asset on acquisition.

Deferred consideration is payable on the first and second anniversaries of the acquisitions of PEICE and KR, dependent on key vendors remaining employed. If they leave, the deferred consideration will be paid on the tenth anniversary of completion including a market rate of interest.

The Group incurred acquisition-related costs of £314,000 (6 months to 30 June 2012: £nil), which have been expensed through the consolidated income statement and included within "amortisation of acquired intangibles and transaction related costs".

A reconciliation of the goodwill movement in 2013 in respect of acquisitions completed in 2012 and 2013 is given below.

£000's Manidis Roberts PEICE KR
Goodwill at 1 January 2013 11,943 - -
Additions through acquisition - 3,585 946
Foreign exchange gains and losses (658) (39) 8
Goodwill at 30 June 2013 11,285 3,546 954

There were no accumulated impairment losses at the beginning or the end of the period.

Commitments and contingencies

The Group completed a number of acquisitions between 1 January 2010 and 31 December 2011 where deferred consideration payments to vendors are contingent on the vendor's continued employment with the Group and so are required to be recognised as employment costs over the deferred consideration period. The Group considers it probable that the remaining deferred consideration payments will be settled.

The total cash commitments at 30 June 2013 in respect of contingent deferred consideration treated as remuneration that the Group expects to settle and the estimated remuneration charge for each financial year assuming exchange rates remain constant are disclosed in the table below:

£000's Cash commitment Remuneration charge
July - December 2013 3,653 2,585
2014 3,693 1,213
7,346 3,798

The balance sheet at 30 June 2013 includes, within deferred consideration current liabilities, contingent deferred consideration remuneration expense accrued but not paid totalling £3,549,000 (31 December 2012: £4,157,000).

9. Share capital

2013 Number 000's 2013 £000's 2012 Number 000's 2012 £000's
Authorised
Ordinary shares of 3p each at 30 June 240,000 7,200 240,000 7,200
Issued and fully paid
Ordinary shares of 3p each at 1 January 219,566 6,587 218,138 6,544
Issued under employee share schemes 424 13 911 27
At 30 June 219,990 6,600 219,049 6,571

10. Other reserves

£000's Merger reserve Employee trust Translation reserve Total
Changes in equity during 2013
At 1 January 2013 21,256 (9,059) 23,873 36,070
Exchange differences - - (1,706) (1,706)
Issue of new shares - (281) - (281)
Purchase of own shares - 756 - 756
At 30 June 2013 21,256 (8,584) 22,167 34,839
Changes in equity during 2012
At 1 January 2012 21,256 (7,375) 29,418 43,299
Exchange differences - - (2,634) (2,634)
Issue of new shares - (634) - (634)
Purchase of own shares - (400) - (400)
At 30 June 2012 21,256 (8,409) 26,784 39,631

11. Dividends

The following dividends were recognised as distributions to equity holders in the period:

£000's Six months ended 30 June 2013 Six months ended 30 June 2012 Year ended 31 Dec 2012
Final dividend for 2012 3.34p per share 7,308 - -
Interim dividend for 2012 3.06p per share - - 6,682
Final dividend for 2011 2.90p per share - 6,325 6,325
7,308 6,325 13,007

An interim dividend in respect of the six months ended 30 June 2013 of 3.52 pence per share, amounting to a total dividend of £7,723,000 was approved by the Directors of RPS Group Plc on 30 July 2013. These condensed consolidated interim financial statements do not reflect this dividend payable.

12. Note to the condensed consolidated cash flow statement

Six months
ended
30 June
Six months
ended
30 June
Year ended 31 Dec
£000's 2013 2012 2012
Operating profit 22,005 20,820 42,144
Adjustments for:
Depreciation 5,051 4,248 8,950
Amortisation of acquired intangibles 5,337 5,117 10,636
Contingent deferred consideration treated as remuneration 3,470 4,674 8,593
Share based payment expense 1,041 1,001 2,070
Loss on disposal of business - 112 135
Negative goodwill - - (266)
(Profit)/loss on sale of property, plant and equipment (186) 31 (119)
36,718 36,003 72,143)
Decrease/(increase) in trade and other receivables 1,604 (1,634) 12,491
Decrease in trade and other payables
(4,491) (3,184) (8,589)
Adjusted cash generated from operations 33,831 31.185 76.045

* Adjusted cash generated from operations is before payment of deferred consideration treated as remuneration.

The table below provides an analysis of net bank borrowings, comprising cash and cash equivalents, interest bearing bank loans and finance leases, during the six months ended 30 June 2013.

£000's At 1 January 2013 Cash flow Foreign exchange At 30 June 2013
Cash and cash equivalents 14,804 (3,027) (12) 11,765
Bank loans (27,098) (2,935) (1,645) (31,678)
Finance lease creditor (1,207) 353 33 (821)
Net bank borrowings (13501) (5,609) (1,624) (20,734)

The cash balance includes £1,624,000 (31 December 2012: £3,566,000) that is restricted in its use.

13. Events after the balance sheet date

On 18th July 2013 RPS completed the acquisition of the entire issued share capital of Asia-Pacific ASA Pty Ltd, an oceanographic consultancy firm based in Australia for a maximum consideration of A$8.7 million (£5.2 million) all payable in cash.

Consideration paid at completion was A$4.4 million (£2.6 million). Subject to certain operational conditions being met, further sums of A$1.7 million (£1.1 million), A$1.7 million (£1.1 million) and A$0.9 million (£0.5 million), will be paid on the first, second and third anniversaries of the transaction. Due to the proximity of the acquisition date to the date of approval of this announcement, it is impracticable to provide further information.

14. Principal risks and uncertainties

The nature of the principal risks and uncertainties faced by the Group have not changed significantly since the 2011 Report and Accounts was published. These risks, together with a description of the approach to mitigate them, are set out on page 9 of the 2011 Report and Accounts (available on the Group's web-site at www.rpsgroup.com) and are summarised as follows:

  • Economic environment
  • Material adverse events
  • Recruitment and retention of key personnel
  • Market position and reputation
  • Compliance and litigation
  • Business acquisitions
  • Funding
  • Health and safety

From time to time the Group receives claims from clients and suppliers. Some of these result in payments to the claimants by the Group and its insurers. The Board reviews all significant claims at each board meeting and more regularly if required. The Board is currently satisfied that the Group has sufficient provisions in its balance sheet to meet all likely uninsured liabilities.

The Board keeps under review the potential effect of economic circumstances. The continuing uncertainty in the global economic outlook inevitably increases the trading and balance sheet risks to which the Group is exposed.

15. Related party transactions

There are no significant changes in the nature and size of related party transactions for the period to those reported in the 2012 Report and Accounts.

16. Forward-looking statements

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 the year to date are based upon unaudited management accounts for the period January to June 2013. The Board considers market expectations for 2013 are best defined by taking the range of forecasts of PBTA for the full year published by analysts who consistently follow the Group. The current range of forecasts of which the Board is aware is £61.0 to £64.5 million. Nothing in this announcement should be construed as a profit forecast.

17. Publication

A copy of this announcement will be posted on the Company's website at www.rpsgroup.com.

INDEPENDENT REVIEW REPORT TO RPS GROUP PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013, which comprises the Condensed consolidated income statement, the Condensed consolidated statement of comprehensive income, the Condensed consolidated balance sheet, the Condensed consolidated cash flow statement, the Condensed consolidated statement of changes in equity and the related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 ";Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Finance Conduct Authority.

Deloitte LLP
Chartered Accountants and Statutory Auditor
Reading, United Kingdom
1 August 2013

 

2013

Half Year Results for the six months ended 30 June 2013

01 August 2013

Half Year Results for the six months ended 30 June 2013

PBTA slightly ahead. Financial position remains strong. Interim dividend increased 15% for 20th consecutive year. Acquisition pipeline encouraging. On track for full year.

2013 2012
Business Performance H1 H1
Revenue (£m) 280.9 276.1
Fee income (£m) 241.8 238.3
PBTA (1) (£m) 30.2 30.0
Adjusted earnings per share (2)(basic) (p) 9.81 9.80
Adjusted operating cash flow (£m) (3) 33.8 31.2
Dividend per share (p) 3.52 3.06
Profit before tax (£m) 21.0 19.9
Earnings per share (basic) (p) 6.53 5.68
Operating cash flow (£m) 29.6 25.0

(1) PBTA is profit before tax, amortisation of acquired intangibles and transaction related costs.
(2) Adjusted earnings per share is before amortisation of acquired intangibles and transaction related costs and the related tax.
(3) Adjusted operating cash flow is before deferred consideration treated as remuneration.

Brook Land, Chairman, commenting on the results, said:

"RPS has delivered a creditable result for the first half of 2013. Once again our conversion of profit into cash has been strong. We have increased the Interim dividend by 15% for the 20th consecutive year.

With our flexible and robust business model, the Board believes RPS is likely to deliver growth for the full year. Our acquisition pipeline also gives us further cause for optimism.".

1 August 2013

 

ENQUIRIES
RPS Group plc Today: 020 7457 2020
Dr Alan Hearne, Chief Executive Thereafter: 01235 863206
Gary Young, Finance Director
College Hill
Matthew Smallwood Tel: 020 7457 2020
Justine Warren

 

RPS is an international consultancy providing advice upon the development of natural resources, land and property, the management of the environment and the health and safety of people. We have offices in the UK, Ireland, the Netherlands, the Americas and Australia Asia Pacific ("AAP") 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.

 

Results

Profit (before tax, amortisation of acquired intangibles and transaction related costs) was £30.2 million (2012: £30.0 million). Basic earnings per share (before amortisation and transaction related costs) were 9.81 pence (2012: 9.80 pence). The contribution of the 2 segments was:

Underlying Profit(£m)* 2013 2012
H1 H1
Energy 21.5 19.1
Built and Natural Environment 14.1 16.1
Total 35.7 35.2

* as defined in note 3, stated before reorganisation costs of £1.1m (2012: £0.4m)

Group central costs were £3.4 million, a reduction of 13% over the same period last year. Finance charges remained constant at £1.0 million.

Cash Flow, Funding and Dividend

Our conversion of profit into cash continued at an encouraging level and our balance sheet remains strong. After funding acquisition investment of £15.4 million in the period, net bank borrowings at 30 June were £20.7 million (30 June 2012: £20.5 million). Following the period end we funded the initial consideration of £2.6 million related to the acquisition of Asia Pacific ASA Pty Ltd ("APASA").

We have in place a £125 million facility with Lloyds Banking Group until July 2016. This comprises £75 million of committed revolving credit facility, with an additional £50 million available as required.

The Board remains confident about the Group's financial strength and has, for the 20th consecutive year, increased the interim dividend by about 15% to 3.52 pence per share (2012: 3.06 pence) payable on 17 October 2013 to shareholders on the register on 20 September 2013.

Acquisitions

On 16 January 2013 we announced the acquisition of PEICE, a Canadian based training business in the oil and gas sector, for a maximum consideration of £7.4 million. We have made good progress integrating PEICE with our existing training activities in the energy market.

On 19 April 2013 we announced the acquisition of Knowledge Reservoir Inc ("KR"), a reservoir engineering and geosciences consulting firm headquartered in Houston, for a maximum consideration of £12.0 million net of cash inherited. The US element of the business has traded well and we are close to finalising the reorganisation of the KR businesses in London, Oman and Kuala Lumpur.

On 18 July 2013 we announced the acquisition of APASA for a maximum consideration of £5.2 million. This is the sister company of ASA, the international oceanographic consultancy business we brought into the Group in 2011. Our international oceanographic capability has grown steadily in recent years, serving a market which remains buoyant.

Our acquisition pipeline is encouraging at the moment and we anticipate extending the Group's capabilities further in the next few months.

Markets and Trading

Energy

We provide internationally recognised consultancy services to the oil and gas exploration and production industry from bases in the UK, USA, Canada and AAP. These act as regional centres for projects undertaken in many other countries.

The first half delivered good growth, once again with a strong margin.

2013 2012
H1 H1
Fee income (£m) 121.7 108.0
Profit* (£m) 21.5 19.1
Margin % 17.7 17.7

*as defined in note 3, stated before reorganisation costs of £0.1m (2012: £nil) costs.

Planned expenditure in the oil and gas exploration and production sector for 2013 is encouraging, in respect of both conventional and unconventional resources. Given the uncertain global economic backdrop, some clients have been understandably cautious about starting new projects, but our international presence and reputation has enabled us to benefit from the investment which has been committed in many parts of the world.

Our EAME business performed particularly well, with the US producing a solid performance, after strong growth in 2012. Our profile in the financial services sector continued to enable us to benefit from valuation and transaction related activity.

Client spend in the AAP region slowed significantly in the early months of the year, as a number dealt with both demand and cost pressures. More recently it seems to have improved. We also experienced a slow down in Canada as major potash projects moved into a phase of the development cycle in which we have less involvement. New opportunities in this sector are, however, now emerging.

Overall, this business remains on track to deliver a strong performance this year.

Built and Natural Environment ("BNE")

Within these businesses we provide a wide range of consultancy services to many aspects of the property and infrastructure development and management sectors. In recent years we have developed extensive experience in respect of the infrastructure projects necessary to bring energy resources, both conventional and renewable, to market.

Australia Asia Pacific

In BNE Australia Asia Pacific ("BNEA") we remain well positioned in both the traditional infrastructure and development markets, as well as the more recently developed energy infrastructure market. Our successful move into the offshore gas and coal seam gas/LNG market enabled this business to double in size in recent years, despite the global financial crisis.

In the second half of last year a number of natural resources projects, particularly mining and offshore gas, were delayed, whilst our clients reviewed product demand, production costs and operating efficiencies. Further delays in significant projects have been announced by our clients in the first half of this year. As a result the BNEA results for the first half of the year were significantly below the same period last year.

2013 2012
H1 H1
Fee income (£m) 46.4 47.9
Profit* (£m) 4.6 6.3
Margin % 9.9 13.1

*as defined in note 3, stated before reorganisation costs of £0.8m (2012: £0.1m)

In other sectors our clients have had to deal with the economic uncertainty resulting from the resources slowdown, as well as political volatility in the run up to the Federal election. Many have remained reasonably positive and continued to invest, but it seems clear the Australian economy is now on a lower growth trajectory.

In response to these difficult trading conditions we continue to reduce capacity and costs. These reductions have made us more efficient and competitive and should result in a better performance in the second half, provided the market does not deteriorate further.

Once recovery in resources investment gets underway, it will offer an opportunity for us to create a further period of growth. In the meantime the weakening Australian currency and lower interest rates should help deliver a rebalancing of the economy. We should benefit from this in terms of trading, although the weak dollar will adversely affect our results on consolidation. Exposure to the expected long term growth in the AAP region remains an important part of Group strategy.

Europe

Our BNE business in Europe ("BNEE") performed well, even though economic uncertainty continued to hold back some of our clients' investment. Fee and profit growth was affected by the exceptionally good performance we experienced in our UK water activities in the first half of 2012, which could not be replicated this year. The improved efficiencies resulting from actions taken previously gave rise to an increased margin, despite continuing fee rate pressure.

2013 2012
H1 H1
Fee income (£m) 74.7 83.3
Underlying Profit* (£m) 9.6 9.8
Margin % 12.8 11.8

* as defined in note 3, stated before reorganisation costs of £0.3m (2012 £0.3m)

Our strong position in the energy infrastructure market (conventional, nuclear and renewable) enabled us to win work at rates which reflect our market leading position. Some of our UK commercial development clients, particularly in the house building sector, seemed more confident than in recent years. The investment we made in relocating and expanding our laboratories in the Netherlands in 2012 is proving worthwhile, more than compensating for continuing weakness in the Dutch property development sector. Our health, safety and risk management businesses are well positioned and continued to perform well.

We still expect BNEE to deliver a 2013 result broadly the same as in 2012, although there may now be some modest upside opportunity.

Group Prospects

Our flexible and robust business model has demonstrated in recent years it is capable of producing good results in challenging circumstances. The Board remains of the view that RPS is likely to meet market expectations in 2013 and continue to deliver strong cash flow. Our acquisition pipeline also gives us cause for optimism.

Board of Directors
RPS Group plc

1 August 2013

 

Condensed consolidated income statement

Notes Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Revenue 3 280,850 276,143 555,863
Recharged expenses 3 (39,006) (37,817) (77,028)
Fee income 3 241,844 238,326 478,835
Operating profit before amortisation of acquired intangibles and transaction related costs 3,4 31,179 30,981 62,069
Amortisation of acquired intangibles and transaction related costs 4 (9,174) (10,161) (19,925)
Operating profit 22,005 20,820 42,144
Finance costs (1,006) (1,059) (2,128)
Finance income 48 95 158
Profit before tax, amortisation of acquired intangibles and transaction related costs 30,221 30,017 60,099
Profit before tax 21,047 19,856 40,174
Tax expense 5 (6,807) (7,534) (14,263)
Profit for the period attributable to equity holders of the parent 14,240 12,322 25,911
Basic earnings per share (pence) 6 6.53 5.68 11.94
Diluted earnings per share (pence) 6 6.50 5.65 11.87
Adjusted basic earnings per share (pence) 6 9.81 9.80 19.48
Adjusted diluted earnings per share (pence) 6 9.76 9.74 19.36

 

Condensed consolidated statement of comprehensive income

Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Profit for the period 14,240 12,322 25,911
Exchange differences (1,706) (2,634) (5,545)
Total recognised comprehensive income for the period attributable to equity holders of the parent 12,534 9,688 20,366

* may be reclassified subsequently to profit or loss in accordance with IFRS.

 

Condensed consolidated balance sheet

As at 30 June As at 30 June As at 31 December
£000's Notes 2013 2012 2012
Assets
Non-current assets
Intangible assets 340,408 320,911 328,440
Property, plant and equipment 7 30,200 29,925 30,632
370,608 350,836 359,072
Current assets
Trade and other receivables 162,064 172,678 159,381
Cash at bank 12,713 17,909 14,804
174,777 190,587 174,185
Liabilities
Current liabilities
Borrowings 1,474 1,554 748
Deferred consideration 11,369 8,427 7,842
Trade and other payables 98,102 103,891 101,921
Corporation tax liabilities 1,638 3,883 3,582
Provisions 2,560 4,315 2,633
115,143 122,070 116,726
Net current assets 59,634 68,517 57,459
Non-current liabilities
Borrowings 31,973 36,822 27,557
Deferred consideration 6,910 - 3,543
Other creditors 3,022 1,784 1,745
Deferred tax liabilities 6,578 10,053 8,436
Provisions 1,469 2,089 1,436
49,952 50,748 42,717
Net assets 380,290 368,605 373,814
Equity
Share capital 9 6,600 6,571 6,587
Share premium 106,922 105,140 106,198
Other reserves 10 34,839 39,631 36,070
Retained earnings 231,929 217,263 224,959
Total shareholders' equity 380,290 368,605 373,814

 

Condensed consolidated cash flow statement

Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's Notes 2013 2012 2012
Adjusted cash generated from operations 12 33,831 31,185 76,045
Deferred consideration treated as remuneration (4,204) (6,214) (9,969)
Cash generated from operations 29,627 24,971 66,076
Interest paid (1,091) (908) (2,204)
Interest received 48 95 158
Income taxes paid (11,381) (9,910) (18,162)
Net cash from operating activities 17,203 14,248 45,868
Cash flows from investing activities
Purchases of subsidiaries net of cash acquired (11,178) - (9,774)
Deferred consideration - (165) (4,130)
Purchase of property, plant and equipment (4,722) (4,661) (9,909)
Sale of property, plant and equipment 272 150 713
Dividends received - - 298
Net cash used in investing activities (15,628) (4,676) (22,802)
Cash flows from financing activities
Proceeds from issue of share capital 211 190 240
Purchase of own shares - (400) (400)
Proceeds from/(repayments of) bank borrowings 2,935 (9,050) (17,409)
Payment of finance lease liabilities (353) (579) (1,350)
Dividends paid (7,308) (6,325) (13,007)
Payment of pre-acquisition dividend (87) - (399)
Net cash used in financing activities (4,602) (16,164) (32,325)
Net (decrease)/increase in cash and cash equivalents (3,027) (6,592) (9,259)
Cash and cash equivalents at beginning of period 14,804 24,458 24,458
Effect of exchange rate fluctuations (12) (414) (395)
Cash and cash equivalents at end of period 12 11,765 17,452 14,804
Cash and cash equivalents comprise:
Cash at bank 12,713 17,909 14,804
Bank overdraft (948) (457) -
Cash and cash equivalents at end of period 11,765 17,452 14,804

 

Consolidated statement of changes in equity

£000's Share capital Share premium Retained earnings Other reserves Total equity
Changes in equity during 2013
At 1 January 2013 6,587 106,198 224,959 36,070 373,814
Total comprehensive income for the period - - 14,240 (1,706) 12,534
Issue of new ordinary shares 13 724 (1,003) (281) (547)
Release of own shares - - - 756 756
Share based payment expense - - 1,041 - 1,041
Dividends - - (7,308) - (7,308)
At 30 June 2013 6,600 106,922 231,929 34,839 380,290
Changes in equity during 2012
At 1 January 2012 6,544 103,717 210,890 43,299 364,450
Total comprehensive income for the period - - 12,322 (2,634) 9,688
Issue of new ordinary shares 27 1,423 (625) (634) 191
Purchase of own shares - - - (400) (400)
Share based payment expense - - 1,001 - 1,001
Dividends - - (6,325) - (6,325))
At 30 June 2012 (see note 1) 6,571 105,140 217,263 39,631 368,605

An analysis of other reserves is provided in Note 10.

 

Notes to the condensed consolidated financial statements

1. Basis of preparation

RPS Group Plc (the "Company") is a company domiciled in England. The condensed consolidated interim financial statements of the Company for the six months ended 30 June 2012 comprise the Company and its subsidiaries (together referred to as the "Group").

The condensed interim financial statements have been prepared using accounting policies set out in the Report and Accounts 2011 and in accordance with IAS 34. They are unaudited but have been reviewed by the Company's auditor. The results for the year end 31 December 2011 and the balance sheet as at that date are abridged from the Company's Report and Accounts 2011 which have been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters for which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.

The condensed interim financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.

In assessing the going concern basis, the directors considered the Group's business activities, the financial position of the Group and the Group's financial risk management objectives and policies. The directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future and that it is, therefore, appropriate to adopt the going concern basis in preparing the Group's interim financial statements.

Restatement

As reported in the Group's Report and Accounts 2011, our auditor at that time, Ernst & Young LLP, indicated that it did not agree with the Group's interpretation of IFRS 3 "Business Combinations" in respect of deferred consideration. They advised the Group that the deferred consideration that was contingent on continuing employment should be recognised as a remuneration charge through the Consolidated Income Statement rather than be capitalised.

The Group agreed to this revised treatment of deferred consideration which impacted the results for the six months ended 30 June 2011 in the following ways:

1. In respect of 2010 acquisitions the Group has derecognised the deferred consideration payable that was previously shown in the balance sheet on the date of acquisition of subsidiaries. The value of goodwill has been reduced by a corresponding amount since deferred consideration is no longer considered part of the cost of investment;

2. For those acquisitions in 2010 and 2011 where the fair value of the net assets acquired is greater than the consideration transferred, the Group has recognised negative goodwill through the consolidated income statement; and

3. A remuneration charge has been recognised through the consolidated income statement within "amortisation of acquired intangibles and transaction related costs" and a corresponding accrual has been recognised in the balance sheet under "deferred consideration".

The Group explained the restatement of the results for the six months ended 30 June 2011 by means of an announcement to the London Stock Exchange dated 3 May 2012. This announcement details the restatement of the income statement and the segment results for the six months ended 30 June 2011 and the balance sheet at that date.

The condensed consolidated cash flow statement for the six months ended 30th June 2011 and the year ended 31st December 2011 have been restated so that deferred consideration treated as remuneration is included within cash generated from operating activities rather than cash flows from investing activities. In addition, the total comprehensive income in the condensed consolidated statement of changes in equity in this release has been restated to reflect the above.

2. Responsibility Statement

The directors confirm that, to the best of their knowledge this condensed set of financial statements has been prepared in accordance with IAS 34 and that this Interim Report includes a fair review of the information required by DTR 4.2.4R, DTR 4.2.7R and DTR 4.2.8R.

On behalf of the Board

A. S. Hearne - Chief Executive
G. R. Young - Group Finance Director

3. Business segments

Segment information is presented in respect of the Group's business segments which are reported to the Chief Operating Decision Maker, which is identified as the main Board of Directors of RPS Group Plc. The business segment reporting format reflects the Group's management and internal structure. Inter-segment pricing is determined on an 'arm's length' basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

As announced on 3 November 2011 the Group merged Planning and Development (UK and Ireland) and Environmental Management. The 30 June 2011 results are therefore shown below on this revised basis. The Group comprises the following business segments:

Built and Natural Environment ("BNE") - consultancy services advising on all aspects of the built and natural environment including the provision of energy infrastructure, planning and development, engineering, design and surveying, environmental assessment and management and risk management. Consulting services are provided on a regional basis in Europe and Australia Asia Pacific ("AAP").

Energy ? the provision of integrated technical, commercial and project management support in the fields of geo-science, engineering and health, safety and environment on a global basis to the energy sector.

Segment results for the period ended 30 June 2013:

£000's Fees Recharged Expenses Intersegment revenue External Revenue
Built and Natural Environment
Europe 74,682 9,504 (265) 83,921
AAP 46,413 8,829 (272) 54,970
Intra BNE eliminations (52) - 52 -
Total BNE 121,043 18,333 (485) 138,891
Energy 121,738 20,834 (613) 141,959
Group eliminations (937) (161) 1,098 -
Total 241,844 39,006 - 280,850

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 9,550 (259) 9,291
APP 4,584 (759) 3,825
Total BNE 14,134 (1,018) 13,116
Energy 21,539 (126) 21,413
Total 35,673 (1,144) 34,529

Segment results for the period ended 30 June 2012:

£000's Fees Recharged expenses Intersegment revenue External revenue
Built and Natural Environment:
Europe 83,323 10,151 (719) 92,755
AAP 47,940 11,090 (101) 58,929
Intra BNE eliminations (104) (3) 107 -
Total BNE 131,159 21,238 (713) 151,684
Energy 108,024 16,646 (211) 124,459
Group eliminations (857) (67) 924 -
Total 238,326 37,817 - 276,143

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 9,825 (307) 9,518
APP 6,286 (56) 6,230
Total BNE 16,111 (363) 15,748
Energy 19,119 (43) 19,076
Total 35,230 (406) 34,824

Segment results for the year ended 31 December 2012:

£000's Fees Recharged expenses Intersegment revenue External revenue
Built and Natural Environment:
Europe 157,200 21,433 (1,301) 177,332
AAP 98,300 19,827 (786) 117,341
Intra BNE eliminations (193) (41) 234 -
Total BNE 255,307 41,219 (1,853) 294,673
Energy 225,875 36,017 (702) 261,190
Group eliminations (2,347) (208) 2,555 -
Total 478,835 77,028 - 555,863

 

£000's Underlying profit Reorganisation costs Segment result
Built and Natural Environment
Europe 18,874 (754) 18,120
APP 12,974 (920) 12,054
Total BNE 31,848 (1,674) 30,174
Energy 39,709 (72) 39,637
Total 71,557 (1,746) 69,811

Group reconciliation

£000's 30 June 2013 30 June 2012 31 Dec 2012
Revenue 280,850 276,143 555,863
Recharged expenses (39,006) (37,817) (77,028)
Fees 241,844 238,326 478,835
Underlying profit 35,673 35,230 71,557
Reorganisation costs (1,144) (406) (1,746)
Unallocated expenses (3,350) (3,843) (7,742)
Operating profit before amortisation of acquired intangibles and transaction related costs 31,179 30,981 62,069
Amortisation of acquired intangibles and transaction related costs (9,174) (10,161) (19,925)
Operating profit 22,005 20,820 42,144
Net finance costs (958) (964) (1,970)
Profit before tax 21,047 19,856 40,174

Total segment assets were as follows:

£000's 30 June 2013 30 June 2012 31 December 2012
Build and Natural Environment
Europe 229,401 233,338 226,861
AAP 116,032 121,357 124,908
Total BNE 345,433 354,695 351,769
Energy 197,004 182,898 179,163
Unallocated 2,948 3,830 2,325
Total 545,385 541,423 533,257

4. 4. Amortisation of acquired intangibles and transaction related costs

£000's 30 June 2013 30 June 2012 31 December 2012
Amortisation of acquired intangibles 5,337 5,117 10,636
Contingent deferred consideration treated as remuneration 3,470 4,674 8,593
Negative goodwill - - (266)
Loss on disposal of business - 112 135
Third party advisory costs 367 258 827
Total 9,174 10,161 19,925

5. Income taxes

The tax charge for the period has been calculated using an estimate of the effective annual rate of tax for each taxing jurisdiction for the full year. These rates have been applied to the pre-tax profits for each jurisdiction for the six months ended 30 June 2013. The Group has separately calculated the tax rates applicable to amortisation of intangibles and transaction related costs for the period. Tax rate changes that were substantively enacted at the balance sheet date have been factored into the calculation of the effective tax rates.

30 June 2013 30 June 2012 31 December 2012
£000's
Current tax expense 8,332 9,207 18,347
Deferred tax credit (1,525) (1,673) (4,084)
Total tax expense in the income statement 6,807 7,534 14,263
Add back:
Tax on amortisation of acquired intangibles and acquisition related costs 2,033 1,234 3,569
Adjusted tax charge on PBTA for the period 8,840 8,768 17,832
Tax rate on PBT 32.3% 37.9% 35.5%
Tax rate on PBTA 29.3% 29.2% 29.7%

6. Earnings per share

The calculations of earnings per share are based on the profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding during the period as shown below:

Six months
ended
30 June
Six months
ended
30 June
Year ended ;31 Dec
£000's 2013 2012 2012
Profit attributable to ordinary shareholders 14,240 12,322 25,911
000's
Weighted average number of ordinary shares for the purposes of basic earnings per share 217,953 216,835 216,980
Effect of employee share schemes 1,034 1,406 1,313
Weighted average number of ordinary shares for the purposes of diluted earnings per share 218,987 218,241 218,293
Basic earning per share (pence) 6.53 5.68 11.94
Diluted earnings per share (pence) 6.50 5.65 11.87

The directors consider that earnings per share before amortisation of acquired intangibles and transaction related costs provides a more meaningful measure of the Group's performance than statutory earnings per share. The calculations of adjusted earnings per share were based on the number of shares as above, and are shown in the table below:

£000's Six months ended 30 June 2013 Six months ended 30 June 2012 Year ended 31 Dec 2012
Profit attributable to ordinary shareholders 14,240 12,322 25,911
Amortisation of acquired intangibles and transaction related costs 9,174 10,161 19,925
Tax on amortisation of acquired intangibles and transaction related costs (2,033) (1,234) (3,569)
Change in Australian tax law - - (238)
Adjusted profit attributable to ordinary shareholders 21,381 21,249 42,267
Adjusted basic earnings before per share (pence) 9.81 9.80 19.48
Adjusted diluted earnings per share (pence) 9.76 9.74 19.36

7. Property, plant and equipment

During the six months ended 30 June 2013, the Group acquired assets with a cost of £4,732,000 (six months to 30 June 2012: £4,628,000), which includes £89,000 acquired through business combinations (six months to 30 June 2012: £nil). Assets with a net book value of £86,000 were disposed of during the six months ended 30 June 2013 (six months ended 30 June 2012: £171,000).

8. Acquisitions

The Group has completed the following acquisitions to strengthen and broaden the skill base of the Group, during the first half of 2013:

Entity Business Segment Date of Acquisition Place of incorporation Percentageof entity acquired Nature of business acquired
Petroleum Institute for Continuing Education Inc. (PEICE) Energy 16th Jan 2013 Canada 100% Training
Knowledge Reservoir Group (KR) Energy 19th Apr 2013 USA 100% Reservoir engineering

Their contributions to the Group's results for the period is given below:

£000's Revenue Fees Operating profit before amortisation Operating profit
EHI 2,084 2,084 460 77
Nautilus 2,995 2,950 280 (19)

Had the Group acquired these entities on the first day of the period, the Group estimates revenue would have been £285,470,000 and operating profit would have been £21,843,000.

The Group has allocated provisional fair values to the net assets acquired as follows:

£000's Order book Customer relationships Brand IP PPE Cash Other assets Other liabilities Net assets acquired
PEICE 120 4,119 164 500 1 612 59 (1,949) 3,626
KR 745 6,314 719 425 88 1,956 5,123 (2,338) 13,032
865 10,433 883 925 89 2,568 5,182 (4,287) 16,658

 

£000's Initial cash consideration Deferred cash consideration Total consideration Net assets acquired Goodwill acquired Tax deductible goodwill
PEICE 3,637 3,574 7,211 3,626 3,585 -
KR 9,651 4,327 13,978 13,032 946 -
13,288 7,901 21,189 16,658 4,531 -

Provisional values are given in the table above as information about facts or circumstances that existed at the acquisition date is incomplete.

Goodwill represents the value of the accumulated workforce and synergies with RPS associated with these acquisitions.

The total fair value of receivables acquired was £3,390,000. The gross contractual receivables acquired were £3,431,000 and £41,000 was estimated to be irrecoverable.

The vendors of the acquired companies have entered into indemnity arrangements with the Group. The total undiscounted cash flow that could be receivable by the Group is between £nil and £3,390,000. As the Group does not expect that these warranties will become receivable, it has not recognised an indemnification asset on acquisition.

Deferred consideration is payable on the first and second anniversaries of the acquisitions of PEICE and KR, dependent on key vendors remaining employed. If they leave, the deferred consideration will be paid on the tenth anniversary of completion including a market rate of interest.

The Group incurred acquisition-related costs of £314,000 (6 months to 30 June 2012: £nil), which have been expensed through the consolidated income statement and included within "amortisation of acquired intangibles and transaction related costs".

A reconciliation of the goodwill movement in 2013 in respect of acquisitions completed in 2012 and 2013 is given below.

£000's Manidis Roberts PEICE KR
Goodwill at 1 January 2013 11,943 - -
Additions through acquisition - 3,585 946
Foreign exchange gains and losses (658) (39) 8
Goodwill at 30 June 2013 11,285 3,546 954

There were no accumulated impairment losses at the beginning or the end of the period.

Commitments and contingencies

The Group completed a number of acquisitions between 1 January 2010 and 31 December 2011 where deferred consideration payments to vendors are contingent on the vendor's continued employment with the Group and so are required to be recognised as employment costs over the deferred consideration period. The Group considers it probable that the remaining deferred consideration payments will be settled.

The total cash commitments at 30 June 2013 in respect of contingent deferred consideration treated as remuneration that the Group expects to settle and the estimated remuneration charge for each financial year assuming exchange rates remain constant are disclosed in the table below:

£000's Cash commitment Remuneration charge
July - December 2013 3,653 2,585
2014 3,693 1,213
7,346 3,798

The balance sheet at 30 June 2013 includes, within deferred consideration current liabilities, contingent deferred consideration remuneration expense accrued but not paid totalling £3,549,000 (31 December 2012: £4,157,000).

9. Share capital

2013 Number 000's 2013 £000's 2012 Number 000's 2012 £000's
Authorised
Ordinary shares of 3p each at 30 June 240,000 7,200 240,000 7,200
Issued and fully paid
Ordinary shares of 3p each at 1 January 219,566 6,587 218,138 6,544
Issued under employee share schemes 424 13 911 27
At 30 June 219,990 6,600 219,049 6,571

10. Other reserves

£000's Merger reserve Employee trust Translation reserve Total
Changes in equity during 2013
At 1 January 2013 21,256 (9,059) 23,873 36,070
Exchange differences - - (1,706) (1,706)
Issue of new shares - (281) - (281)
Purchase of own shares - 756 - 756
At 30 June 2013 21,256 (8,584) 22,167 34,839
Changes in equity during 2012
At 1 January 2012 21,256 (7,375) 29,418 43,299
Exchange differences - - (2,634) (2,634)
Issue of new shares - (634) - (634)
Purchase of own shares - (400) - (400)
At 30 June 2012 21,256 (8,409) 26,784 39,631

11. Dividends

The following dividends were recognised as distributions to equity holders in the period:

£000's Six months ended 30 June 2013 Six months ended 30 June 2012 Year ended 31 Dec 2012
Final dividend for 2012 3.34p per share 7,308 - -
Interim dividend for 2012 3.06p per share - - 6,682
Final dividend for 2011 2.90p per share - 6,325 6,325
7,308 6,325 13,007

An interim dividend in respect of the six months ended 30 June 2013 of 3.52 pence per share, amounting to a total dividend of £7,723,000 was approved by the Directors of RPS Group Plc on 30 July 2013. These condensed consolidated interim financial statements do not reflect this dividend payable.

12. Note to the condensed consolidated cash flow statement

Six months
ended
30 June
Six months
ended
30 June
Year ended 31 Dec
£000's 2013 2012 2012
Operating profit 22,005 20,820 42,144
Adjustments for:
Depreciation 5,051 4,248 8,950
Amortisation of acquired intangibles 5,337 5,117 10,636
Contingent deferred consideration treated as remuneration 3,470 4,674 8,593
Share based payment expense 1,041 1,001 2,070
Loss on disposal of business - 112 135
Negative goodwill - - (266)
(Profit)/loss on sale of property, plant and equipment (186) 31 (119)
36,718 36,003 72,143)
Decrease/(increase) in trade and other receivables 1,604 (1,634) 12,491
Decrease in trade and other payables
(4,491) (3,184) (8,589)
Adjusted cash generated from operations 33,831 31.185 76.045

* Adjusted cash generated from operations is before payment of deferred consideration treated as remuneration.

The table below provides an analysis of net bank borrowings, comprising cash and cash equivalents, interest bearing bank loans and finance leases, during the six months ended 30 June 2013.

£000's At 1 January 2013 Cash flow Foreign exchange At 30 June 2013
Cash and cash equivalents 14,804 (3,027) (12) 11,765
Bank loans (27,098) (2,935) (1,645) (31,678)
Finance lease creditor (1,207) 353 33 (821)
Net bank borrowings (13501) (5,609) (1,624) (20,734)

The cash balance includes £1,624,000 (31 December 2012: £3,566,000) that is restricted in its use.

13. Events after the balance sheet date

On 18th July 2013 RPS completed the acquisition of the entire issued share capital of Asia-Pacific ASA Pty Ltd, an oceanographic consultancy firm based in Australia for a maximum consideration of A$8.7 million (£5.2 million) all payable in cash.

Consideration paid at completion was A$4.4 million (£2.6 million). Subject to certain operational conditions being met, further sums of A$1.7 million (£1.1 million), A$1.7 million (£1.1 million) and A$0.9 million (£0.5 million), will be paid on the first, second and third anniversaries of the transaction. Due to the proximity of the acquisition date to the date of approval of this announcement, it is impracticable to provide further information.

14. Principal risks and uncertainties

The nature of the principal risks and uncertainties faced by the Group have not changed significantly since the 2011 Report and Accounts was published. These risks, together with a description of the approach to mitigate them, are set out on page 9 of the 2011 Report and Accounts (available on the Group's web-site at www.rpsgroup.com) and are summarised as follows:

  • Economic environment
  • Material adverse events
  • Recruitment and retention of key personnel
  • Market position and reputation
  • Compliance and litigation
  • Business acquisitions
  • Funding
  • Health and safety

From time to time the Group receives claims from clients and suppliers. Some of these result in payments to the claimants by the Group and its insurers. The Board reviews all significant claims at each board meeting and more regularly if required. The Board is currently satisfied that the Group has sufficient provisions in its balance sheet to meet all likely uninsured liabilities.

The Board keeps under review the potential effect of economic circumstances. The continuing uncertainty in the global economic outlook inevitably increases the trading and balance sheet risks to which the Group is exposed.

15. Related party transactions

There are no significant changes in the nature and size of related party transactions for the period to those reported in the 2012 Report and Accounts.

16. Forward-looking statements

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 the year to date are based upon unaudited management accounts for the period January to June 2013. The Board considers market expectations for 2013 are best defined by taking the range of forecasts of PBTA for the full year published by analysts who consistently follow the Group. The current range of forecasts of which the Board is aware is £61.0 to £64.5 million. Nothing in this announcement should be construed as a profit forecast.

17. Publication

A copy of this announcement will be posted on the Company's website at www.rpsgroup.com.

INDEPENDENT REVIEW REPORT TO RPS GROUP PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013, which comprises the Condensed consolidated income statement, the Condensed consolidated statement of comprehensive income, the Condensed consolidated balance sheet, the Condensed consolidated cash flow statement, the Condensed consolidated statement of changes in equity and the related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 ";Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Finance Conduct Authority.

Deloitte LLP
Chartered Accountants and Statutory Auditor
Reading, United Kingdom
1 August 2013

 

2012

Half Year Results for the six months ended 30 June 2013

01 August 2013

Half Year Results for the six months ended 30 June 2013

PBTA slightly ahead. Financial position remains strong. Interim dividend increased 15% for 20th consecutive year. Acquisition pipeline encouraging. On track for full year.

2013 2012
Business Performance H1 H1
Revenue (£m) 280.9 276.1
Fee income (£m) 241.8 238.3
PBTA (1) (£m) 30.2 30.0
Adjusted earnings per share (2)(basic) (p) 9.81 9.80
Adjusted operating cash flow (£m) (3) 33.8 31.2
Dividend per share (p) 3.52 3.06
Profit before tax (£m) 21.0 19.9
Earnings per share (basic) (p) 6.53 5.68
Operating cash flow (£m) 29.6 25.0

(1) PBTA is profit before tax, amortisation of acquired intangibles and transaction related costs.
(2) Adjusted earnings per share is before amortisation of acquired intangibles and transaction related costs and the related tax.
(3) Adjusted operating cash flow is before deferred consideration treated as remuneration.

Brook Land, Chairman, commenting on the results, said:

"RPS has delivered a creditable result for the first half of 2013. Once again our conversion of profit into cash has been strong. We have increased the Interim dividend by 15% for the 20th consecutive year.

With our flexible and robust business model, the Board believes RPS is likely to deliver growth for the full year. Our acquisition pipeline also gives us further cause for optimism.".

1 August 2013

 

ENQUIRIES
RPS Group plc Today: 020 7457 2020
Dr Alan Hearne, Chief Executive Thereafter: 01235 863206
Gary Young, Finance Director
College Hill
Matthew Smallwood Tel: 020 7457 2020
Justine Warren

 

RPS is an international consultancy providing advice upon the development of natural resources, land and property, the management of the environment and the health and safety of people. We have offices in the UK, Ireland, the Netherlands, the Americas and Australia Asia Pacific ("AAP") 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.

 

Results

Profit (before tax, amortisation of acquired intangibles and transaction related costs) was £30.2 million (2012: £30.0 million). Basic earnings per share (before amortisation and transaction related costs) were 9.81 pence (2012: 9.80 pence). The contribution of the 2 segments was:

Underlying Profit(£m)* 2013 2012
H1 H1
Energy 21.5 19.1
Built and Natural Environment 14.1 16.1
Total 35.7 35.2

* as defined in note 3, stated before reorganisation costs of £1.1m (2012: £0.4m)

Group central costs were £3.4 million, a reduction of 13% over the same period last year. Finance charges remained constant at £1.0 million.

Cash Flow, Funding and Dividend

Our conversion of profit into cash continued at an encouraging level and our balance sheet remains strong. After funding acquisition investment of £15.4 million in the period, net bank borrowings at 30 June were £20.7 million (30 June 2012: £20.5 million). Following the period end we funded the initial consideration of £2.6 million related to the acquisition of Asia Pacific ASA Pty Ltd ("APASA").

We have in place a £125 million facility with Lloyds Banking Group until July 2016. This comprises £75 million of committed revolving credit facility, with an additional £50 million available as required.

The Board remains confident about the Group's financial strength and has, for the 20th consecutive year, increased the interim dividend by about 15% to 3.52 pence per share (2012: 3.06 pence) payable on 17 October 2013 to shareholders on the register on 20 September 2013.

Acquisitions

On 16 January 2013 we announced the acquisition of PEICE, a Canadian based training business in the oil and gas sector, for a maximum consideration of £7.4 million. We have made good progress integrating PEICE with our existing training activities in the energy market.

On 19 April 2013 we announced the acquisition of Knowledge Reservoir Inc ("KR"), a reservoir engineering and geosciences consulting firm headquartered in Houston, for a maximum consideration of £12.0 million net of cash inherited. The US element of the business has traded well and we are close to finalising the reorganisation of the KR businesses in London, Oman and Kuala Lumpur.

On 18 July 2013 we announced the acquisition of APASA for a maximum consideration of £5.2 million. This is the sister company of ASA, the international oceanographic consultancy business we brought into the Group in 2011. Our international oceanographic capability has grown steadily in recent years, serving a market which remains buoyant.

Our acquisition pipeline is encouraging at the moment and we anticipate extending the Group's capabilities further in the next few months.

Markets and Trading

Energy

We provide internationally recognised consultancy services to the oil and gas exploration and production industry from bases in the UK, USA, Canada and AAP. These act as regional centres for projects undertaken in many other countries.

The first half delivered good growth, once again with a strong margin.

2013 2012
H1 H1
Fee income (£m) 121.7 108.0
Profit* (£m) 21.5 19.1
Margin % 17.7 17.7

*as defined in note 3, stated before reorganisation costs of £0.1m (2012: £nil) costs.

Planned expenditure in the oil and gas exploration and production sector for 2013 is encouraging, in respect of both conventional and unconventional resources. Given the uncertain global economic backdrop, some clients have been understandably cautious about starting new projects, but our international presence and reputation has enabled us to benefit from the investment which has been committed in many parts of the world.

Our EAME business performed particularly well, with the US producing a solid performance, after strong growth in 2012. Our profile in the financial services sector continued to enable us to benefit from valuation and transaction related activity.

Client spend in the AAP region slowed significantly in the early months of the year, as a number dealt with both demand and cost pressures. More recently it seems to have improved. We also experienced a slow down in Canada as major potash projects moved into a phase of the development cycle in which we have less involvement. New opportunities in this sector are, however, now emerging.

Overall, this business remains on track to deliver a strong performance this year.

Built and Natural Environment ("BNE")

Within these businesses we provide a wide range of consultancy services to many aspects of the property and infrastructure development and management sectors. In recent years we have developed extensive experience in respect of the infrastructure projects necessary to bring energy resources, both conventional and renewable, to market.

Australia Asia Pacific

In BNE Australia Asia Pacific ("BNEA") we remain well positioned in both the traditional infrastructure and development markets, as well as the more recently developed energy infrastructure market. Our successful move into the offshore gas and coal seam gas/LNG market enabled this business to double in size in recent years, despite the global financial crisis.

In the second half of last year a number of natural resources projects, particularly mining and offshore gas, were delayed, whilst our clients reviewed product demand, production costs and operating efficiencies. Further delays in significant projects have been announced by our clients in the first half of this year. As a result the BNEA results for the first half of the year were significantly below the same period last year.

2013 2012
H1 H1
Fee income (£m) 46.4 47.9
Profit* (£m) 4.6 6.3
Margin % 9.9 13.1

*as defined in note 3, stated before reorganisation costs of £0.8m (2012: £0.1m)

In other sectors our clients have had to deal with the economic uncertainty resulting from the resources slowdown, as well as political volatility in the run up to the Federal election. Many have remained reasonably positive and continued to invest, but it seems clear the Australian economy is now on a lower growth trajectory.

In response to these difficult trading conditions we continue to reduce capacity and costs. These reductions have made us more efficient and competitive and should result in a better performance in the second half, provided the market does not deteriorate further.

Once recovery in resources investment gets underway, it will offer an opportunity for us to create a further period of growth. In the meantime the weakening Australian currency and lower interest rates should help deliver a rebalancing of the economy. We should benefit from this in terms of trading, although the weak dollar will adversely affect our results on consolidation. Exposure to the expected long term growth in the AAP region remains an important part of Group strategy.

Europe

Our BNE business in Europe ("BNEE") performed well, even though economic uncertainty continued to hold back some of our clients' investment. Fee and profit growth was affected by the exceptionally good performance we experienced in our UK water activities in the first half of 2012, which could not be replicated this year. The improved efficiencies resulting from actions taken previously gave rise to an increased margin, despite continuing fee rate pressure.

2013 2012
H1 H1
Fee income (£m) 74.7 83.3
Underlying Profit* (£m) 9.6 9.8
Margin % 12.8 11.8

* as defined in note 3, stated before reorganisation costs of £0.3m (2012 £0.3m)

Our strong position in the energy infrastructure market (conventional, nuclear and renewable) enabled us to win work at rates which reflect our market leading position. Some of our UK commercial development clients, particularly in the house building sector, seemed more confident than in recent years. The investment we made in relocating and expanding our laboratories in the Netherlands in 2012 is proving worthwhile, more than compensating for continuing weakness in the Dutch property development sector. Our health, safety and risk management businesses are well positioned and continued to perform well.

We still expect BNEE to deliver a 2013 result broadly the same as in 2012, although there may now be some modest upside opportunity.

Group Prospects

Our flexible and robust business model has demonstrated in recent years it is capable of producing good results in challenging circumstances. The Board remains of the view that RPS is likely to meet market expectations in 2013 and continue to deliver strong cash flow. Our acquisition pipeline also gives us cause for optimism.

Board of Directors
RPS Group plc

1 August 2013

 

Condensed consolidated income statement

Notes Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Revenue 3 280,850 276,143 555,863
Recharged expenses 3 (39,006) (37,817) (77,028)
Fee income 3 241,844 238,326 478,835
Operating profit before amortisation of acquired intangibles and transaction related costs 3,4 31,179 30,981 62,069
Amortisation of acquired intangibles and transaction related costs 4 (9,174) (10,161) (19,925)
Operating profit 22,005 20,820 42,144
Finance costs (1,006) (1,059) (2,128)
Finance income 48 95 158
Profit before tax, amortisation of acquired intangibles and transaction related costs 30,221 30,017 60,099
Profit before tax 21,047 19,856 40,174
Tax expense 5 (6,807) (7,534) (14,263)
Profit for the period attributable to equity holders of the parent 14,240 12,322 25,911
Basic earnings per share (pence) 6 6.53 5.68 11.94
Diluted earnings per share (pence) 6 6.50 5.65 11.87
Adjusted basic earnings per share (pence) 6 9.81 9.80 19.48
Adjusted diluted earnings per share (pence) 6 9.76 9.74 19.36

 

Condensed consolidated statement of comprehensive income

Six months
ended
30 June
Six months
ended
30 June
Year
ended
31 December
£000's 2013 2012 2012
Profit for the period 14,240 12,322 25,911
Exchange differences (1,706) (2,634) (5,545)
Total recognised comprehensive income for the period attributable to equity holders of the parent 12,534 9,688 20,366

* may be reclassified subsequently to profit or loss in accordance with IFRS.

 

Condensed consolidated balance sheet

As at 30 June As at 30 June As at 31 December
£000's Notes 2013 2012 2012
Assets
Non-current assets
Intangible assets 340,408 320,911 328,440
Property, plant and equipment 7 30,200 29,925 30,632
370,608 350,836 359,072
Cu