TIDMRPS
RNS Number : 5403W
RPS Group PLC
02 August 2018
2 August 2018
RPS Group plc
('RPS' or the 'Group')
Interim Results
RPS today announces its Interim Results for the six months ended
30 June 2018.
Steady overall result; Energy improvement
H1 2017 at
constant
H1 2018 H1 2017 currency(1)
------------------------------------- ------- ------- ------------
Revenue (GBPm) 321.1 314.5 306.6
Fee income (1) (GBPm) 289.1 281.1 273.8
PBTA(1) (GBPm) 27.4 27.2 26.4
Adjusted earnings per share (1)
(basic) (p) 8.77 8.71 8.43
Total dividend per share (p) 4.80 4.80 4.80
Statutory profit before tax (GBPm) 22.6 20.4 19.8
Statutory earnings per share (basic)
(p) 7.35 6.55 6.35
------------------------------------- ------- ------- ------------
Financial key points
-- Fee income GBP289.1m (H1 2017 GBP281.1m); 3% growth; 6% at constant currency
-- PBTA GBP27.4m (H1 2017 GBP27.2m); 1% growth; 4% growth at constant currency
-- EPS (adjusted, basic) 8.77p (H1 2017 8.71p); 1% growth; 4% growth at constant currency
-- Statutory profit before tax GBP22.6m (H1 2017: GBP20.4m)
-- Cash conversion was 48% (H1 2017: 62%)
-- Net bank borrowings were GBP90.5m (30 June 2017: GBP93.4m, 31
December 17: GBP80.6m); leverage (1) was 1.4x (30 June 17: 1.5x, 31
December 2017: 1.3x)
-- Interim dividend proposed 4.80p per share (H1 2017: 4.80p)
Business highlights
-- Energy markets improving
-- Market conditions elsewhere generally good
-- Strengthened leadership team
-- Segmentation changes provide solid platform and transparency
-- Progress made against strategic priorities
Commenting on the Interim Results, John Douglas, CEO, said: "The
performance in the first half of the year has been steady overall,
benefiting from a strong improvement in Energy. We have made good
progress in respect of our strategic priorities including the
re-organisation of the business that will provide a solid platform
for growth."
(1) Alternative Performance Measures are used consistently
throughout this announcement: these include PBTA, fee income, items
prefaced "adjusted" such as adjusted EPS, segment profit,
underlying profit, underlying operating profit, amounts labelled
"at constant currency", EBITDAS, conversion of profit into cash,
net bank borrowings, leverage. For further details of their
purpose, definition and reconciliation to the equivalent statutory
measures see note 2.
A meeting for analysts will be held at the office of Buchanan,
107 Cheapside, London, EC2V 6DN commencing at 9.30am. Attendance is
strictly limited.
An audio webcast of the meeting will be available from 12 noon
via the following link:
http://webcasting.buchanan.uk.com/broadcast/5b50a71e557f244eca53b1ca
Enquiries:
RPS Group plc
John Douglas, Chief Executive Today: +44 (0) 20 7466 5000
Gary Young, Finance Director Thereafter: +44 (0) 1235 863
206
Buchanan
Henry Harrison-Topham / Chris Lane Tel: +44 (0) 20 7466 5000
/ Maddie Seacombe
RPS@buchanan.uk.com www.buchanan.uk.com
RPS is an international consultancy providing advice upon the
development and management of the built and natural environment;
the planning and development of strategic infrastructure, and the
evaluation and development of energy, water and other resources. We
have offices in the UK, Ireland, the Netherlands, Norway, the
United States, Canada, Australia, Malaysia, New Zealand and
undertake projects in many other parts of the world. The Group has
been a constituent of the FTSE4Good index since its inception in
2001.
This announcement contains certain forward-looking statements
with respect to the financial condition, results of operations and
businesses of RPS Group plc. These statements involve risk and
uncertainty because they relate to events and depend upon
circumstances that will occur in the future. There are many factors
that could cause actual results or developments to differ
materially from those expressed or implied by these forward-looking
statements. Nothing in this announcement should be construed as a
profit forecast.
Next trading update
RPS will announce a Q3-2018 trading update in early November
2018.
Results
PBTA was GBP27.4m, (H1 2017: GBP27.2m, GBP26.4m at constant
currency), on fee income of GBP289.1m (H1 2017: GBP281.1m,
GBP273.8m at constant currency). Profit before tax was GBP22.6m (H1
2017: GBP20.4m, GBP19.8m at constant currency). The effective tax
rate for the period on PBTA is estimated to be 28.7% (H1 2017:
29.1%). Adjusted basic EPS was 8.77p (H1 2017: 8.71p, 8.43p at
constant currency). Statutory basic earnings per share was 7.35p
(H1 2017 6.55p, 6.35p at constant currency).
Sterling was stronger on average in H1 this year versus the US
and Australian dollars and the Norwegian Krone, but it was weaker
versus the Euro. PBTA in H1 2018 would have been GBP0.9m higher had
H1 2017 exchange rates been repeated in 2018. PBTA in H1 2017 would
have been GBP0.9m lower than reported if 2018 exchange rates
prevailed in H1 2017.
Segment reporting
On 2 July 2018 we announced new segmentation reflecting the way
our business is being managed. The changes are (1) our businesses
in Europe that previously comprised Built and Natural Environment
Europe have been presented separately as Consulting - UK and
Ireland, Services - UK and Netherlands, and Norway; and (2) our
businesses in Australia Asia Pacific, North America and Norway that
are directly exposed to the oil and gas sector have been
transferred to Energy and are included in that segment's results.
Full details of the changes can be found in note 4.
Trading performance
H1 2017
at
constant
GBPm H1 2018 H1 2017 currency
------------------------------ ------- ------- ---------
Energy 4.7 3.2 3.1
Consulting - UK and Ireland 8.1 9.1 9.2
Services - UK and Netherlands 6.8 6.7 6.7
Norway 3.3 3.6 3.6
North America 3.4 4.1 3.7
AAP 7.1 7.8 7.3
Total segment profit 33.5 34.5 33.6
Unallocated costs (4.1) (4.9) (4.9)
------------------------------ ------- ------- ---------
Underlying operating profit 29.4 29.7 28.8
------------------------------ ------- ------- ---------
Overall, at constant currency, the Group generated similar
segment profit in the first half of this year compared to last
year. The improved performance of Energy and better Services - UK
and Netherlands offset lower profit generated in other segments.
Unallocated costs in 2018 are lower than in 2017 due to reduced
costs associated with board changes, leading to an improvement in
underlying operating profit at constant currency.
Borrowings and cash flow
Net bank borrowings were GBP90.5m (30 June 2017: GBP93.4m; 31
Dec 2017: GBP80.6m). Net cash from operating activities was GBP9.1m
(H1 2017: GBP11.5m). Our conversion of profit into operating cash
flow was 48% (H1 2017: 62%), due to an increase in working capital.
The Group continues to focus on this area and expects improvement
by the year end. Net cash used in investing activities was GBP6.5m
(H1 2017: GBP11.2m). The amount paid in respect of dividends was
GBP11.4m (H1 2017: GBP11.3m).
Deferred consideration outstanding at the end of June was
GBP0.7m (30 June 2017: GBP7.3m; 31 December 2017 GBP1.8m). Our
leverage (being net bank debt plus deferred consideration expressed
as a ratio of adjusted EBITDA) calculated in accordance with our
bank's financial covenants was 1.4x at the period end (30 June
2017: 1.5x; 31 December 2017: 1.3x).
Net finance costs were GBP2.0m (H1 2017: GBP2.5m), reflecting a
lower level of average borrowings this half.
Dividends
The proposed interim dividend of 4.80p (2017: 4.80p) will be
paid on 12 October 2018 to shareholders on the register of members
at the close of business on 14 September 2018. We are holding our
interim dividend in accordance with our capital allocation policy
that we announced as part of our 2017 full year results
announcement, whereby dividend increases are only likely when
earnings increase and the pay-out ratio is at or around 40%.
Markets and trading
Energy
H1 2017 at
H1 2018 H1 2017 constant currency
------------------------- -------- -------- -------------------
Fee income (GBPm) 48.6 45.6 44.1
Segment profit * (GBPm) 4.7 3.2 3.1
Margin (%) 9.7 7.1 7.1
* after reorganisation costs: 2018 GBP0.4m, 2017 GBP0.3m
This business now comprises our direct oil and gas exposed
business in Europe, Africa and the Middle East ('EAME'), North
America and Australia Asia Pacific ('AAP'). The management team for
this global business is fully in place and performing effectively.
Activity in oil and gas markets has increased although pressure on
rates remains and our main service lines, Exploration and
Development, Oceans and Coastal, and Advisory and Management
Consulting have each posted good profit growth. Additionally,
performance in the half benefited from GBP1.0m in bad debt
provision reversals (H1 2017: GBP0.8m).
As oil and gas markets improve we anticipate that retention and
recruitment will become more of a challenge. However, this business
can deliver good growth in 2018.
Consulting - UK and Ireland
H1 2017 at
H1 2018 H1 2017 constant currency
------------------------- -------- -------- -------------------
Fee income (GBPm) 61.0 61.1 61.4
Segment profit * (GBPm) 8.1 9.1 9.2
Margin (%) 13.3 14.9 14.9
* after reorganisation costs: 2018 GBP0.1m, 2017 GBPnil
Our Design and Development businesses in Ireland and Northern
Ireland performed steadily, benefiting from strong public
infrastructure spending. In Great Britain market conditions in our
Planning and Approvals, Environment and Project and Program
Management businesses were generally good although the business has
been held back by recruitment challenges, especially in London. We
anticipate similar market conditions in H2 although any Brexit
impact will be felt more keenly by this segment.
Services - UK and the Netherlands
H1 2017 at
H1 2018 H1 2017 constant currency
------------------------- -------- -------- -------------------
Fee income (GBPm) 54.4 48.3 48.7
Segment profit * (GBPm) 6.8 6.7 6.7
Margin (%) 12.5 13.8 13.7
* after reorganisation costs: 2018 GBP0.1m, 2017 GBPnil
Our UK Water business grew fees and profit, benefiting from poor
weather. Our Netherlands business grew fees, however because of
organic initiatives in its Design and Development and Laboratories
service lines its profit declined.
In April the UK Water business entered the fourth year of the
current Asset Management Plan regulatory cycle. At this stage
client demand for the services we provide traditionally becomes
more uncertain than in the earlier part of the cycle. We anticipate
a return on our organic initiatives in Netherlands. Overall, we
anticipate a similar performance in 2018 to that in 2017.
Norway
2017 at constant
H1 2018 H1 2017 currency
------------------------- -------- -------- -----------------
Fee income (GBPm) 35.0 35.1 34.6
Segment profit * (GBPm) 3.3 3.6 3.6
Margin (%) 9.4 10.3 10.3
* after reorganisation costs: 2018 GBPnil, 2017 GBPnil
This business provides Project and Program Management, Advisory
and Management Consulting and Training to public and private sector
clients in Norway. The integration of our two business, Metier and
OEC, has created a strong presence in its market. The new
management structure is bedding in and the main integration task
remaining is to co-locate the businesses in Oslo that will complete
next year. Market conditions have generally been good although
there was pressure on rates in the Property sector. We anticipate
similar market conditions in the second half of the year although
seasonal holiday effects may impact performance.
North America
H1 2017 at
H1 2018 H1 2017 constant currency
------------------------- -------- -------- -------------------
Fee income (GBPm) 29.8 33.3 31.0
Segment profit * (GBPm) 3.4 4.1 3.7
Margin (%) 11.6 12.3 12.1
* after reorganisation costs: 2018 GBPnil, 2017 GBP0.1m
General economic conditions in the US are good, with buoyant
demand. This has put pressure on our cost base particularly in
Texas, where our Design and Development business has suffered
retention and recruitment issues resulting in lower profit than in
the prior period. We have addressed these issues through investment
in our people and retention has improved. Our Environment business
in California also suffered from recruitment and retention issues
that are being addressed. Our Oceans and Coastal business, that is
indirectly exposed to oil and gas markets, benefited from greater
client expenditure and grew half on half.
The outlook is broadly positive, with solid market fundamentals
that will drive demand for our services. Overall, we anticipate
some improvement in performance in the second half.
AAP
H1 2017 at
H1 2018 H1 2017 constant currency
------------------------- -------- -------- -------------------
Fee income (GBPm) 62.1 59.4 55.7
Segment profit * (GBPm) 7.1 7.8 7.3
Margin (%) 11.5 13.2 13.1
* after reorganisation costs: 2018 GBP0.1m, 2017 GBP0.3m
Fees grew strongly in our Project and Program Management
business, largely from greater use of lower margin sub-consultants.
This business continues to benefit from an active Defence and
Government Services sector. The Transport and Property sectors have
been generally strong although some restructuring in the businesses
that serve these sectors has tempered performance. We have invested
in essential support services including IT and finance to provide a
strong platform for future growth.
The outlook is generally positive, and this segment is capable
of delivering growth in 2018.
Strategy
We have made progress towards achieving our five strategic
priorities in support of our ambition to return to the FTSE
250.
In respect of our priority to be rated by our people as a great
place to do great work we have strengthened our HR leadership and
recruited a Group People Director, who joined us in April 2018. We
are focused on investing in our people and their development and
reducing turnover. We are rolling-out best practice across the
Group and recently conducted our first ever all employee survey and
are currently analysing the results.
The recent changes to our segmentation means we can better
manage our business and will be able to better leverage our brand
and tell our story in a more compelling way to investors, clients,
staff and other stakeholders.
Our recently appointed Group Marketing Director has led an
exercise to redefine our global sectors and consolidate our
services into distinct clusters to help us identify where revenue
synergies exist to exploit.
The inclusion of all our directly exposed oil and gas businesses
in Energy enables us to provide globally recognised consultancy and
services to this important global market. This, together with the
appointment of a new, experienced global management team is
enabling us to reinvigorate our Energy business in markets that are
showing greater levels of activity.
We have examined several opportunities to acquire businesses in
North America to increase the depth of our business there. However,
due, partly to high vendor valuations, none of these are being
taken further. We continue to seek acquisitions that will reinforce
our businesses in North America and our other segments, in sectors
in where we have strength and familiarity.
Group prospects
The Group performance in the first half of the year has been
steady and we expect this to continue in the second half of the
year. We will continue to focus on generating organic growth while
also seeking acquisitions that are aligned with our current core
offerings. The increased activity in oil and gas markets is
encouraging and should support progress in our global Energy
business. We will also build on the good progress we have made on
our other strategic priorities which will provide a solid
foundation for growth in the coming years.
Board of Directors
RPS Group Plc
2 August 2018
Condensed consolidated income statement (unaudited)
Notes Six months Six months Year
ended ended ended
30 June 30 June 31 December
GBP000's 2018 2017 2017
Revenue 4 321,090 314,516 630,636
Recharged expenses 4 (32,021) (33,461) (68,316)
---------------------------------------- ----- ---------- ---------- ------------
Fee income 4 289,069 281,055 562,320
Operating profit before amortisation
and impairment of acquired intangibles
and transaction related costs 4 29,410 29,681 58,467
---------------------------------------- ----- ---------- ---------- ------------
Amortisation and impairment of
acquired intangibles and transaction
related costs 5 (4,809) (6,807) (55,541)
---------------------------------------- ----- ---------- ---------- ------------
Operating profit 4 24,601 22,874 2,926
Finance costs (2,099) (2,493) (4,639)
Finance income 83 39 113
---------------------------------------- ----- ---------- ---------- ------------
Profit before tax, amortisation
and impairment of acquired intangibles
and transaction related costs 27,394 27,227 53,941
---------------------------------------- ----- ---------- ---------- ------------
Profit / (loss) before tax 22,585 20,420 (1,600)
Tax expense 6 (6,212) (5,911) (15,072)
---------------------------------------- ----- ---------- ---------- ------------
Profit / (loss) for the period
attributable to equity
holders of the parent 16,373 14,509 (16,672)
---------------------------------------- ----- ---------- ---------- ------------
Basic earnings / (loss) per share
(pence) 7 7.35 6.55 (7.52)
---------------------------------------- ----- ---------- ---------- ------------
Diluted earnings / (loss) per
share (pence) 7 7.29 6.50 (7.47)
---------------------------------------- ----- ---------- ---------- ------------
Adjusted basic earnings per share
(pence) 7 8.77 8.71 17.13
Adjusted diluted earnings per
share (pence) 7 8.70 8.65 17.01
---------------------------------------- ----- ---------- ---------- ------------
Condensed consolidated statement of comprehensive income
(unaudited)
Six months Six months Year
ended ended ended
30 June 30 June 31 December
GBP000's 2018 2017 2017
------------------------------------------ ---------- ---------- ------------
Profit / (loss) for the period 16,373 14,509 (16,672)
Exchange differences* (2,244) (1,105) (5,867)
Re-measurement of net defined benefit
liability - - (66)
Tax on re-measurement of defined benefit
liability - - 15
Total recognised comprehensive income
/ (loss) for the period attributable
to equity holders of the parent 14,129 13,404 (22,590)
------------------------------------------ ---------- ---------- ------------
*may be reclassified subsequently to profit or loss in
accordance with IFRS.
Condensed consolidated balance sheet (unaudited)
As at As at As at
30 June 30 June 31 December
GBP000's Notes 2018 2017 2017
------------------------------------ ----- -------- -------- ------------
Assets
Non-current assets:
Intangible assets 390,096 446,482 395,730
Property, plant and equipment 9 29,475 28,278 28,344
Deferred tax asset 3,766 6,962 3,312
423,337 481,722 427,386
------------------------------------ ----- -------- -------- ------------
Current assets:
Trade receivables 118,235 118,058 114,653
Contract assets 49,381 42,490 39,001
Other financial assets at amortised
cost 5,239 4,344 5,533
Other current assets 10,513 9,295 10,568
Cash and cash equivalents 20,430 13,026 15,588
------------------------------------ ----- -------- -------- ------------
203,798 187,213 185,343
------------------------------------ ----- -------- -------- ------------
Liabilities
Current liabilities:
Borrowings 2,084 306 212
Deferred consideration 496 6,806 1,608
Trade and other payables 96,650 95,452 101,207
Contract liabilities 24,277 24,158 22,199
Corporation tax 4,402 4,604 3,415
Provisions 2,278 2,624 2,953
------------------------------------ ----- -------- -------- ------------
130,187 133,950 131,594
------------------------------------ ----- -------- -------- ------------
Net current assets 73,611 53,263 53,749
------------------------------------ ----- -------- -------- ------------
Non-current liabilities:
Borrowings 108,826 106,077 96,008
Deferred consideration 249 523 148
Other payables 2,507 2,391 2,543
Deferred tax 7,720 9,489 8,340
Provisions 4,551 1,670 4,312
------------------------------------ ----- -------- -------- ------------
123,853 120,150 111,351
------------------------------------ ----- -------- -------- ------------
Net assets 373,095 414,835 369,784
------------------------------------ ----- -------- -------- ------------
Equity
Share capital 10 6,763 6,721 6,745
Share premium 119,197 115,962 117,790
Retained earnings 209,763 253,178 205,143
Merger reserve 21,256 21,256 21,256
Employee Trust (9,092) (14,496) (8,602)
Translation reserve 25,208 32,214 27,452
------------------------------------ ----- -------- -------- ------------
Total shareholders' equity 373,095 414,835 369,784
------------------------------------ ----- -------- -------- ------------
Condensed consolidated cash flow statement (unaudited)
Six months Six months Year
ended ended ended
30 June 30 June 31 December
GBP000's Notes 2018 2017 2017
Net cash from operating activities 12 9,086 11,456 43,744
Cash flows from investing activities:
Purchases of subsidiaries net
of cash acquired (165) - -
Deferred consideration (1,178) (7,378) (12,879)
Purchase of property, plant and
equipment (5,197) (3,992) (8,651)
Proceeds from sale of business - - 234
Proceeds from sale of property,
plant and equipment 82 147 221
Net cash used in investing activities (6,458) (11,223) (21,075)
--------------------------------------- ----- ---------- ---------- ------------
Cash flows from financing activities:
Cost of issue of share capital (9) (8) (8)
Proceeds from issue of share capital - - 382
Proceeds from/(repayment of) bank
borrowings 11,710 7,625 (1,424)
Payment of finance lease liabilities - (24) (36)
Dividends paid 11 (11,358) (11,308) (22,007)
Net cash used in financing activities 343 (3,715) (23,093)
--------------------------------------- ----- ---------- ---------- ------------
Net increase/(decrease) in cash
and cash equivalents: 2,971 (3,482) (424)
Cash and cash equivalents at beginning
of period 15,376 16,503 16,503
Effect of exchange rate fluctuations (1) (289) (703)
--------------------------------------- ----- ---------- ---------- ------------
Cash and cash equivalents at end
of period 18,346 12,732 15,376
--------------------------------------- ----- ---------- ---------- ------------
Cash and cash equivalents comprise:
Cash at bank 20,430 13,026 15,588
Bank overdraft (2,084) (294) (212)
--------------------------------------- ----- ---------- ---------- ------------
Cash and cash equivalents at end
of period 18,346 12,732 15,376
--------------------------------------- ----- ---------- ---------- ------------
Condensed consolidated statement of changes in equity
(unaudited)
Share Share Retained Merger Employee Translation Total
GBP000's capital premium earnings reserve Trust reserve equity
---------------------- -------- -------- --------- -------- -------- ----------- ---------
At 31 December
2017 6,745 117,790 205,143 21,256 (8,602) 27,452 369,784
Effect of changes
in accounting
standards - - (521) - - - (521)
---------------------- -------- -------- --------- -------- -------- ----------- ---------
At 1 January 2018 6,745 117,790 204,622 21,256 (8,602) 27,452 369,263
Profit for the
period - - 16,373 - - - 16,373
Other comprehensive
income - - - - - (2,244) (2,244)
Total comprehensive
income for the
period - - 16,373 - - (2,244) 14,129
Issue of new ordinary
shares 18 1,407 (944) - (490) - (9)
Share based payment
expense - - 1,070 - - - 1,070
Dividends - - (11,358) - - - (11,358)
At 30 June 2018 6,763 119,197 209,763 21,256 (9,092) 25,208 373,095
---------------------- -------- -------- --------- -------- -------- ----------- ---------
At 1 January 2017 6,703 114,353 249,353 21,256 (13,677) 33,319 411,307
Profit for the
period - - 14,509 - - - 14,509
Other comprehensive
income - - - - - (1,105) (1,105)
---------------------- -------- -------- --------- -------- -------- ----------- ---------
Total comprehensive
income for the
period - - 14,509 - - (1,105) 13,404
Issue of new ordinary
shares 18 1,609 (816) - (819) - (8)
Share based payment
expense - - 1,440 - - - 1,440
Dividends - - (11,308) - - - (11,308)
At 30 June 2017 6,721 115,962 253,178 21,256 (14,496) 32,214 414,835
---------------------- -------- -------- --------- -------- -------- ----------- ---------
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 2018 comprise the Company
and its subsidiaries (together referred to as the "Group").
The Group first applied IFRS 9 "Financial Instruments" and IFRS
15 "Revenue from contracts with customers" as at 1 January 2018.
Adjustments to the 1 January 2018 opening retained earnings have
been made as a result of adopting IFRS 9. In addition, accounting
policy changes have been made as a result of the adoption of both
IFRS 9 and IFRS 15 "Revenue from contracts with customers". The
impact of the new standards is not material and is described more
fully in Note 13 below.
Otherwise the condensed interim financial statements have been
prepared using accounting policies set out in the Report and
Accounts 2017 and in accordance with IAS 34 as adopted by the
European Union. They are unaudited but have been reviewed by the
Company's auditor. The results for the year end 31 December 2017
and the balance sheet as at that date are abridged from the
Company's Report and Accounts 2017 which have been delivered to the
Registrar of Companies. The auditor's report on those accounts was
unqualified and did not draw attention to any matters by way of
emphasis 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.
IFRS 16 "Leases" was issued in January 2016. It will result in
almost all leases being recognised on the balance sheet, as the
distinction between operating and finance leases is removed. Under
the new standard, a right of use asset and a financial liability to
pay rentals are recognised. There are exemptions for short term and
low value leases. The Group is undertaking a detailed review of the
potential impact of the new standard and expects the impact on the
balance sheet to be material. The standard is mandatory for periods
beginning on or after 1 January 2019. The Group does not intend to
adopt the standard before its effective date.
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, despite
the current uncertain economic environment, 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.
2. Alternative performance measures
Throughout this document the Group presents various non-GAAP
performance measures ('alternative performance measures'). The
measures presented are those adopted by the Chief Operating
Decision Maker and analysts who follow us in assessing the
performance of the business.
Group Profit and earnings measures
PBTA
Profit before tax and amortisation and impairment of acquired
intangibles and transaction related costs (PBTA) is used by the
Board to monitor and measure the trading performance of the Group.
It excludes certain items which the Board believes distort the
trading performance of the Group. These items are either
acquisition and disposal related or they are non-cash items.
Delivering the Group's strategy includes investment in selected
acquisitions that enhance the depth and breadth of services that
the Group offers in the territories in which it operates. In
addition, from time to time the Group chooses to exit a particular
market or service offering because it is not offering the desired
returns. By excluding acquisition and disposal related items from
PBTA, the Board has a clear and consistent view of the performance
of the Group and is able to make informed operational decisions to
support its strategy.
Accordingly, transaction related costs including costs of
acquisition and disposal, losses on the closure of businesses and
amortisation and impairment of intangible assets are excluded from
the Group's preferred performance measure, PBTA.
Items are treated consistently year-on-year, and these
adjustments are also consistent with the way that performance is
measured under the Group's incentive plans and its banking
covenants.
Operating profit before amortisation and impairment of acquired
intangible assets is a derivative of PBTA. A reconciliation is
shown below.
GBP000s H1 2018 H1 2017
---------------------------------------- -------- --------
Profit before tax 22,585 20,420
Amortisation and impairment of acquired
intangibles and transaction related
Add: costs 4,809 6,807
---------------------------------------- -------- --------
PBTA 27,394 27,227
Add: Net finance costs 2,016 2,454
---------------------------------------- -------- --------
Operating profit before amortisation
and impairment of acquired intangibles
and transaction related costs 29,410 29,681
============================================== ======== ========
Adjusted profit attributable to ordinary shareholders
It follows that the Group uses adjusted profit attributable to
ordinary shareholders (after tax) as the input to its adjusted EPS
measures.
GBP000s H1 2018 H1 2017
----------------------------------------- --------- ---------
Profit attributable to equity holders
of the parent 16,373 14,509
Amortisation and impairment of acquired
intangibles and transaction related
Add: costs 4,809 6,807
Tax on amortisation and impairment
of acquired intangibles and transaction
Deduct: related costs (1,662) (2,010)
----------------------------------------- --------- ---------
Adjusted profit attributable to equity
holders of the parent 19,520 19,306
================================================== ========= =========
Constant currency
The Group generates revenues and profits in various territories
and currencies because of its international footprint. Those
results are translated on consolidation at the foreign exchange
rates prevailing at the time. These exchange rates vary from year
to year, so the Group presents some of its results on a constant
currency basis. This means that the prior year's results have been
retranslated using current year exchange rates. This eliminates the
effect of exchange from the year on year comparison of results. The
difference between the reported numbers and the constant currency
numbers is the constant currency effect.
Constant H1 2017 at
currency constant
GBP000s H1 2017 effect currency
------------------ ------- --------- ----------
Revenue 314,516 (7,951) 306,565
Fee income 281,055 (7,271) 273,784
PBTA 27,227 (877) 26,350
Profit before tax 20,420 (603) 19,817
Segment profit and underlying profit
Segment profit is presented in our segmental disclosures. This
excludes the effects of financing and amortisation which are
metrics outside of the control of segment management. It also
excludes unallocated costs. Segment profit is then adjusted by
excluding the costs of reorganisation to give underlying profit for
the segment. This reflects the underlying trading of the business.
A reconciliation between segment profit and operating profit is
given in note 4.
Reorganisation costs
This classification comprises costs and income arising as a
consequence of reorganisation such as redundancy costs, profit or
loss on disposal of plant, property and equipment, the costs of
consolidating office space and rebranding costs.
Unallocated expenses
Certain central costs are not allocated to the segments because
they predominantly relate to the stewardship of the Group. They
include the costs of the main board and the Group finance,
marketing and human resource functions and related IT costs.
Revenue measures
The Group disaggregates revenue into Fee Income and Recharged
Expenses. This provides insight into the performance of the
business and our productive output. This is reconciled on the face
of the income statement. Fee income by segment is reconciled in
note 4.
Cash flow measures
EBITDAS
EBITDAS is operating profit adjusted by adding back non-cash
expenses, tax and financing costs. The adjustments include
interest, tax, depreciation, amortisation and impairment and
transaction related costs and share scheme costs. This generates a
cash-based operating profit figure which is the input into the cash
flow statement. A reconciliation between Operating Profit and
EBITDAS is given in note 12.
Conversion of profit into cash
A measure of the Group's cash generation is the conversion of
profit into cash. This is the cash generated from operations
divided by EBITDAS expressed as a percentage. This metric is used
as a measure against which the Group's long and short-term
performance incentive schemes are judged.
Net bank borrowings
Net bank borrowings is the total of cash and cash equivalents,
interest bearing bank loans and finance leases. This measure gives
the external indebtedness of the Group and is an input into the
leverage calculations. This is analysed in note 12.
Leverage
Leverage is the ratio of net bank borrowings plus deferred
consideration to annualised EBITDAS and is one of the financial
covenants included in our bank facilities.
Tax measures
We report one adjusted tax measure, which is the tax rate on
PBTA ('adjusted effective tax rate'). This is the tax charge
applicable to PBTA as a percentage of PBTA and is set out in note
6.
3. 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 4.2.7R and DTR
4.2.8R.
On behalf of the Board:
John Douglas Gary Young
Chief Executive Group Finance Director
2 August 2018 2 August 2018
4. Business segments
Segment information is presented in the financial statements in
respect of the Group's business segments, as reported to the Chief
Operating Decision Maker. The business segment reporting format
reflects the Group's management and internal reporting
structure.
Inter-segment pricing is determined on an arm's length basis.
Segment results include items directly attributable to a segment as
well as an allocation of central costs.
The segment results for the half year ended 30 June 2017 and the
year ended 31 December 2017 were restated following changes to the
Group's management structure and organisation, as announced on 2
July 2018.
The business segments of the Group are as follows:
- Energy
- Consulting - UK and Ireland
- Services - UK and Netherlands
- Norway
- North America
- AAP
Segment results for the period ended 30 June 2018:
Intersegment External
GBP000s Fee income Expenses revenue revenue
------------------------------ ---------- ---------- -------------- --------
Energy 48,565 6,581 (415) 54,731
Consulting - UK and
Ireland 60,965 15,051 (717) 75,299
Services - UK and Netherlands 54,441 6,520 (417) 60,544
Norway 34,963 369 (78) 35,254
North America 29,784 653 (190) 30,247
AAP 62,080 3,178 (243) 65,015
Group eliminations (1,729) (331) 2,060 -
Total 289,069 32,021 - 321,090
------------------------------ ---------- ---------- -------------- --------
Underlying Reorganisation Segment
GBP000s profit costs profit
------------------------------ ---------- ---------- -------------- --------
Energy 5,164 (443) 4,721
Consulting - UK and
Ireland 8,163 (84) 8,079
Services - UK and Netherlands 6,880 (59) 6,821
Norway 3,287 - 3,287
North America 3,459 (12) 3,447
AAP 7,195 (62) 7,133
Total 34,148 (660) 33,488
------------------------------ ---------- ---------- -------------- --------
Segment results for the period ended 30 June 2017
(restated):
Intersegment External
GBP000s Fee income Expenses revenue revenue
------------------------------ ----------- ---------- -------------- --------
Energy 45,575 8,289 (419) 53,445
Consulting - UK and Ireland 61,106 11,720 (732) 72,094
Services - UK and Netherlands 48,314 7,668 (372) 55,610
Norway 35,066 591 (157) 35,500
North America 33,310 924 (90) 34,144
AAP 59,394 4,533 (204) 63,723
Group eliminations (1,710) (264) 1,974 -
Total 281,055 33,461 - 314,516
------------------------------ ----------- ---------- -------------- --------
Underlying Reorganisation Segment
GBP000s profit costs profit
------------------------------ ----------- ---------- -------------- --------
Energy 3,561 (331) 3,230
Consulting - UK and Ireland 9,128 - 9,128
Services - UK and Netherlands 6,652 - 6,652
Norway 3,621 - 3,621
North America 4,197 (108) 4,089
AAP 8,069 (255) 7,814
Total 35,228 (694) 34,534
------------------------------ ----------- ---------- -------------- --------
Segment results for the period ended 31 December 2017
(restated):
Intersegment External
GBP000s Fee income Expenses revenue revenue
------------------------------ ---------- ---------- -------------- --------
Energy 93,005 13,024 (675) 105,354
Consulting - UK and Ireland 120,767 25,339 (1,388) 144,718
Services - UK and Netherlands 95,699 16,497 (708) 111,488
Norway 67,986 1,192 (212) 68,966
North America 68,274 1,918 (217) 69,975
AAP 119,674 10,939 (478) 130,135
Group eliminations (3,085) (593) 3,678 -
Total 562,320 68,316 - 630,636
------------------------------ ---------- ---------- -------------- --------
Underlying Reorganisation Segment
GBP000s profit costs profit
------------------------------ ---------- ---------- -------------- --------
Energy 8,511 (544) 7,967
Consulting - UK and Ireland 16,615 - 16,615
Services - UK and Netherlands 13,955 - 13,955
Norway 6,378 - 6,378
North America 7,507 (206) 7,301
AAP 15,257 (461) 14,796
Total 68,223 (1,211) 67,012
------------------------------ ---------- ---------- -------------- --------
Group reconciliation
Six Six
months months Year
ended ended ended 31
30 June 30 June December
GBP000's 2018 2017 2017
---------------------------------------- --------- --------- ----------
Revenue 321,090 314,516 630,636
Recharged expenses (32,021) (33,461) (68,316)
---------------------------------------- --------- --------- ----------
Fee income 289,069 281,055 562,320
---------------------------------------- --------- --------- ----------
Underlying profit 34,148 35,228 68,223
Reorganisation costs (660) (694) (1,211)
---------------------------------------- --------- --------- ----------
Segment profit 33,488 34,534 67,012
Unallocated expenses (4,078) (4,853) (8,545)
---------------------------------------- --------- --------- ----------
Operating profit before amortisation
and impairment of acquired intangibles
and transaction related costs 29,410 29,681 58,467
Amortisation and impairment of acquired
intangibles and transaction related
costs (4,809) (6,807) (55,541)
---------------------------------------- --------- --------- ----------
Operating profit 24,601 22,874 2,926
Net finance costs (2,016) (2,454) (4,526)
Profit before tax 22,585 20,420 (1,600)
---------------------------------------- --------- --------- ----------
Total segment assets were as follows:
As at As at
30 June 31 Dec
As at 2017 2017
30 June as as
GBP000's 2018 restated restated
------------------------------ -------- --------- ---------
Energy 79,153 114,129 74,637
Consulting - UK and Ireland 174,295 174,835 169,307
Services - UK and Netherlands 108,917 103,403 103,848
Norway 59,313 59,572 57,372
North America 65,703 69,784 66,194
AAP 129,675 133,612 128,923
Unallocated 10,079 13,600 12,448
------------------------------- -------- --------- ---------
Total 627,135 668,935 612,729
------------------------------- -------- --------- ---------
5. Amortisation and impairment of acquired intangibles and
transaction related costs
Six Six
months months Year
ended ended Ended
30 June 30 June 31 December
GBP000's 2018 2017 2017
------------------------------------- -------- -------- -------------
Amortisation of acquired intangibles 4,795 6,807 12,804
Impairment of goodwill - - 40,024
Loss on sale of business - - 2,695
Third party advisory costs 14 - 18
------------------------------------- -------- -------- -------------
Total 4,809 6,807 55,541
------------------------------------- -------- -------- -------------
6. 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 2018. 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.
Analysis of the tax expense in the income statement for the
period:
Six Six Year
months months ended
ended ended 31
30 June 30 June December
GBP000's 2018 2017 2017
-------------------------------------------- -------- -------- ---------
Current tax expense 7,362 7,823 14,775
Deferred tax (credit) / expense (1,150) (1,912) 297
-------------------------------------------- -------- -------- ---------
Total tax expense in the income statement 6,212 5,911 15,072
Add back:
Tax on amortisation of acquired intangibles
and acquisition related costs 1,662 2,010 885
-------------------------------------------- -------- -------- ---------
Adjusted tax charge on PBTA for the
period 7,874 7,921 15,957
Tax rate on PBT 27.5% 28.9% (942.0%)
Tax rate on PBTA 28.7% 29.1% 29.6%
7. 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 Six
months months Year
ended ended ended 31
30 June 30 June December
GBP000's 2018 2017 2017
------------------------------------------- --------- --------- ---------
Profit / (loss) attributable to ordinary
shareholders 16,373 14,509 (16,672)
000's
Weighted average number of ordinary
shares for the purposes of basic earnings
per share 222,678 221,558 221,804
Effect of employee share schemes 1,781 1,592 1,479
------------------------------------------- --------- --------- ---------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 224,459 223,150 223,283
Basic earnings / (loss) per share
(pence) 7.35 6.55 (7.52)
------------------------------------------- --------- --------- ---------
Diluted earnings / (loss) per share
(pence) 7.29 6.50 (7.47)
------------------------------------------- --------- --------- ---------
The directors consider that earnings per share before
amortisation and impairment of acquired intangibles and transaction
related costs provides a more consistent 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:
Six Six
months months Year
ended ended ended 31
30 June 30 June December
GBP000's 2018 2017 2017
----------------------------------------- -------- -------- ---------
Profit / (loss) attributable to ordinary
shareholders 16,373 14,509 (16,672)
Amortisation and impairment of acquired
intangibles and transaction related
costs 4,809 6,807 55,541
Tax on amortisation and impairment
of acquired intangibles and transaction
related costs (1,662) (2,010) (885)
Adjusted profit attributable to ordinary
shareholders 19,520 19,306 37,984
----------------------------------------- -------- -------- ---------
Adjusted basic earnings per share
(pence) 8.77 8.71 17.13
----------------------------------------- -------- -------- ---------
Adjusted diluted earnings per share
(pence) 8.70 8.65 17.01
----------------------------------------- -------- -------- ---------
8. Acquisition
On 28 April 2018, the Group acquired the trade and assets of
Straight Talk Pty Ltd, an Australian community engagement
consultancy, for GBP317,000. Net liabilities of GBP2,000 were
acquired and goodwill of GBP319,000 was recognised. Consideration
of GBP165,000 was payable on completion, with the remaining
consideration payable in equal amounts on the first, second and
third anniversaries of acquisition.
9. Property, plant and equipment
During the six months ended 30 June 2018 the Group acquired
assets with a cost of GBP5,425,000 (six months to 30 June 2017:
GBP3,992,000). Assets with a net book value of GBP46,000 were
disposed of during the six months ended 30 June 2018 (six months
ended 30 June 2017: GBP113,000).
10. Share capital
2018 2017
Number 2018 Number 2017
000's GBP000's 000's GBP000'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 224,817 6,745 223,435 6,703
Issued under employee share
schemes 629 18 614 18
At 30 June 225,446 6,763 224,049 6,721
---------------------------- ------- ---------- ------- ----------
11. Dividends
The following dividends were recognised as distributions to
equity holders in the period:
Six Six
months months Year
ended ended ended 31
30 June 30 June December
GBP000's 2018 2017 2017
------------------------------------ -------- -------- ----------
Final dividend for 2017 5.08p per
share 11,358 - -
Interim dividend for 2017 4.80p per
share - - 10,699
Final dividend for 2016 5.08p per
share - 11,308 11,308
------------------------------------ -------- -------- ----------
11,358 11,308 22,007
------------------------------------ -------- -------- ----------
An interim dividend in respect of the six months ended 30 June
2018 of 4.80 pence per share, amounting to a total dividend of
GBP10,757,000 was approved by the Directors of RPS Group Plc on 31
July 2018. These condensed consolidated interim financial
statements do not reflect this dividend payable.
12. Note to the condensed consolidated cash flow statement
Six Six
months months Year
ended ended ended 31
30 June 30 June December
GBP000's 2018 2017 2017
Operating profit 24,601 22,874 2,926
Adjustments for:
Depreciation 4,058 4,233 8,417
Amortisation of acquired intangibles 4,795 6,807 12,804
Impairment of goodwill - - 40,024
Non-cash movement on provision (226) - -
Share based payment expense 1,070 1,440 2,700
Loss on sale of business assets - - 2,617
(Profit)/loss on sale of property,
plant and equipment (36) (39) 86
EBITDAS 34,262 35,315 69,574
(Increase)/decrease in trade and other
receivables (15,348) (9,256) (7,584)
(Decrease)/ increase in trade and
other payables (2,598) (4,293) 1,521
Cash generated from operations 16,316 21,766 63,511
------------------------------------------ -------- -------- ----------
Interest paid (1,935) (2,633) (4,960)
Interest received 83 39 113
Income taxes paid (5,378) (7,716) (14,920)
----------------------------------- ------- ------- --------
Net cash from operating activities 9,086 11,456 43,744
----------------------------------- ------- ------- --------
The table below provides an analysis of net bank borrowings,
comprising cash and cash equivalents and interest bearing bank
loans, during the six months ended 30 June 2018.
At 1 Prepaid
January Arrangement Foreign At 30 June
GBP000's 2018 Cash flow fees exchange 2018
-------------------------- -------- --------- ------------ --------- ----------
Cash at bank 15,588 4,843 - (1) 20,430
Overdrafts (212) (1,872) - - (2,084)
-------------------------- -------- --------- ------------ --------- ----------
Cash and cash equivalents 15,376 2,971 - (1) 18,346
Bank loans and
notes (96,008) (11,710) (183) (925) (108,826)
Net bank borrowings (80,632) (8,739) (183) (926) (90,480)
-------------------------- -------- --------- ------------ --------- ----------
The cash balance includes GBP2,988,000 (31 December 2017:
GBP2,917,000) that is restricted in its use.
13. Changes in accounting policies
This note explains the impact of the adoption of IFRS 9
'Financial Instruments' and 'IFRS 15 Revenue from Contracts with
Customers' on the Group's financial statements and discloses the
new accounting policies that have been applied from 1 January 2018,
where they are different to those applied in prior periods.
IFRS 9 'Financial Instruments'
Impact of adoption
IFRS 9 was adopted without restating comparative information, in
accordance with the provisions of the standard. The Group does not
account using hedge accounting mechanisms, either under IAS 39 or
under IFRS 9.
The only financial assets that the Group holds are trade
receivables, contract assets, other receivables at amortised cost
and cash, and the only financial liabilities that are held are
borrowings, trade and other payables and deferred consideration.
There is no change to the classification of these assets and
liabilities because of the adoption of IFRS 9; they continue to be
recorded at amortised cost. These assets and liabilities are held
to realise cash flows at maturity. In addition, the Group holds
some forward foreign exchange contracts. These are recorded at fair
value through profit or loss - there is no reclassification for
these contracts either. The business holds these to manage foreign
exchange exposures; it is Group policy not to trade in those
derivatives.
The only adjustments that have arisen on transition to IFRS 9
relate to the recognition of additional provisions against trade
receivables and contract assets which represent the lifetime
expected credit losses on those assets. To measure the expected
credit losses, trade receivables and contract assets have been
grouped based on shared credit risk characteristics, relating to
the markets that we operate in. The Group's history of such losses
has been low so the adjustment is not material. The change in
valuation of those assets has been recorded as an adjustment
through opening reserves.
The loss allowances for trade receivables and contract assets as
at 31 December 2017 reconcile to the opening loss allowances as at
1 January 2018 as follows:
Contract Trade
GBP000's assets receivables
--------------------------------------------------- -------- ------------
At 31 December 2017, calculated under IAS 39 5,756 4,847
Amounts restated through opening retained earnings 296 353
--------------------------------------------------- -------- ------------
Opening loss allowance as at 1 January 2018,
calculated under IFRS 9 6,052 5,200
--------------------------------------------------- -------- ------------
The loss allowances reduced by GBP1,420,000 to GBP9,832,000 at
30 June 2018. The reduction would have been GBP57,000 lower under
IAS 39.
Impact of IFRS 9 on retained earnings
GBP000's 2018
---------------------------------------------------------- -------
At 31 December 2017 closing retained earnings, calculated
under IAS 39 205,143
Increase in provision for trade receivables (353)
Increase in provision for contract assets (296)
Increase in deferred tax assets related to impairment
provisions 128
---------------------------------------------------------- -------
Opening retained earnings 1 January 2018, calculated
under IFRS 9 204,622
---------------------------------------------------------- -------
New accounting policies
As a result of the adoption of IFRS 9, the Group's accounting
policies have been amended as follows:
Financial Assets
The Group's financial assets consist of trade receivables,
contract assets and cash. These assets are measured at amortised
cost as the Group's business model for managing these assets is to
hold them until realisation of the asset as cash.
Impairment of Financial Assets
For trade receivables and contract assets, the Group applies the
simplified impairment approach permitted by IFRS 9 which requires
expected lifetime losses to be recognised from initial recognition
of the receivables.
IFRS 15 'Revenue from Contracts with Customers'
Impact of adoption
After a detailed review of contracts across the Group's service
lines and sectors, no IFRS 15 adjustment was identified. However,
the Group has amended its revenue accounting policies to reflect
the requirements of the new standard.
New Accounting Policies
Because of the adoption of IFRS 15, the Group's accounting
policies have been amended as follows:
Revenue
Consultancy
The Group delivers consultancy services to our clients on a time
and materials or fixed fee basis. In both cases, revenue is
recognised over the life of the project, as the services are
performed by our staff. The Group delivers services that have no
alternative use to us (advice to clients, which may take the form
of reports, designs, etc) as the services are specifically tailored
to each client's projects and circumstances. The Group has a right
to payment for work performed to date.
For time and materials projects, revenue is recognised in
proportion to the number of hours worked and the out of pocket
expenses incurred. For fixed fee projects, revenue is recognised
with reference to the cost to complete the project.
In some cases, the group enters into agreements where variable
consideration is due. This may be where contracts have gain/pain
share provisions, or where there are volume rebates. In these
cases, the Group estimates the most likely amount of revenue due,
or a probability weighted amount of revenue due at each reporting
date. That amount is recognised as revenue so long as there is no
significant probability that the variable consideration recognised
will reverse.
Software
The Group sells licences and access to software and
applications. The software may be customised by RPS for each
client, and where we sell customised software we recognise revenue
over the period of customisation. Access to applications is
provided for a period and revenue is recognised evenly over that
period.
Training
The Group provides classroom, field based and online training
services to clients, either on a course by course basis or through
a program specifying the numbers of training days available to the
client. Revenue is recognised as the courses are delivered to the
clients. In some cases, subscriptions give access to training
programmes and in those circumstances, revenue is recognised when
the subscription is sold.
Equipment
From time to time, the Group sells pieces of equipment to
clients. In these cases, revenue is recognised when control of the
asset passes to the customer and we have no remaining rights over
the asset.
Laboratory testing
The Group provides Laboratory testing services and the revenue
generated is recognised as samples are tested.
Agency agreements
The Group enters into certain agreements with clients where it
manages client expenditure as an agent. It is obliged to purchase
third party services and recharges those costs, plus a management
fee, to the client. In these cases only the management fee is
recognised as revenue as it becomes due to the Group. Trade
receivables, trade payables and cash related to these transactions
are included in the consolidated balance sheet.
Payment terms
For all revenue types, payment is typically due between 30 and
60 days after the invoice date, depending on the service, the
client and the territory in which the Group is operating.
Fee income and recharged expenses
Revenue is classified into fee income and recharged expenses.
'Fee income' represents the Group's personnel, subcontractor and
equipment time and expertise sold to clients. 'Recharged expenses'
is the recharge of costs incidental to fulfilling the Group's
contracts, for example mileage, flights, subsistence and
accommodation, and subcontractor costs on which a negligible margin
is earned by the Group.
Contract assets and liabilities
Contract assets are booked when the amount of revenue recognised
on a contract exceeds the amount invoiced. Where the amount
invoiced exceeds the amount of revenue recognised, the difference
is booked in contract liabilities.
Financing components
The Group does not expect to have any contracts where the period
between the transfer of the promised goods or services to the
customer and the payment by the customer exceeds one year.
Consequently, the Group does not adjust any of the transaction
prices for the time value of money.
14. Events after the balance sheet date
There have been no events arising after the balance sheet date
requiring adjustment to the results or disclosure.
15. Principal risks and uncertainties
The nature of the principal risks and uncertainties faced by the
Group have not changed significantly since the 2017 Report and
Accounts was published. These risks, together with a description of
the approach to mitigate them, are set out on pages 12 to 15 of the
2017 Report and Accounts (available on the Group's website at
www.rpsgroup.com) and are summarised as follows:
- Economic environment
- Recruitment and retention of staff
- Political events
- Business acquisitions
- Health and safety
- Regulatory and compliance
- Service failures
- Financial risks
- Information technology and security risks
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 decision of the UK to leave the EU has created
uncertainty, although it is too early to say what the overall
impact on the Group will be.
16. Related party transactions
There are no significant changes to the nature and treatment of
related party transactions for the period to those reported in the
2017 Report and Accounts.
17. 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 numerous
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 and
the 2016 EU referendum vote in UK creates another source of
potentially significant risk. 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 2018. Nothing in this
announcement should be construed as a profit forecast.
18. Publication
A copy of this announcement will be posted on the Company's
website at www.rpsgroup.com.
INDEPENT REVIEW REPORT TO RPS GROUP PLC
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(th) June 2018 which comprises the consolidated
income statement, the consolidated balance sheet, the consolidated
cash flow statement, the consolidated statement of changes in
equity and related notes 1 to 18. 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 Financial
Reporting Council. 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 Conduct 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 Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, 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 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(th)
June 2018 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 Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
Reading, United Kingdom
2 August 2018
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR PBMATMBIMBAP
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August 02, 2018 02:00 ET (06:00 GMT)
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