RPS Group plc RPS or the Group

Transcription

1 RPS Group plc RPS or the Group Interim Management Statement First quarter trading in line with expectations. Cash flow good; balance sheet strong. Introduction 2012 marks the 25 th anniversary of RPS s introduction to the public markets. Those who acquired an RPS share for 70 pence at our IPO in July 1987 and held it until now have received over 250 pence in dividends. Taking account of a share split in 2000, the value of that share has increased well over 20 times. Our market capitalisation at listing was 4.5 million; this has been increased over 100 times, whilst receiving total contributions from our shareholders of less than 50 million. Throughout this 25 year period our growth has only been disrupted by the deep recession of the early 1990 s and the recent global financial crisis. Between those 2 events our growth averaged over 20% each year and was achieved whilst maintaining a strong balance sheet and consistent dividend growth. The Board is confident that, as global economic conditions allow, the Group s business model will be able to produce another period of good growth. Trading The Group s results for the first quarter were significantly better than in the same period in Each of the 3 reported businesses improved their profit contribution. Trading in Energy in the first quarter showed the significant improvement anticipated. Our clients investment in conventional oil and gas exploration and production continued to grow, whilst our activity in the unconventionals market increased further, with a shift from gas to liquids. We continued to see a strong performance in North America based on both domestic and international projects. We also experienced an uplift in activity in the Australia Asia Pacific region. Following last year s political disturbances our activity in North Africa remains subdued, although prospects elsewhere in Africa and the Middle East are encouraging. Our training and oceanographic businesses performed well. We continue to look for good growth this year. Our Built and Natural Environment ( BNE ) business in Europe made some progress compared with the same period last year. As planned, at the end of March, we completed the sale of the bulk of our small facilities management business in Ireland. Many of our traditional commercial development clients remained cautious about investing in capital projects. We have, therefore, used our reorganisation in 2011 to provide further support to those clients developing energy infrastructure. Investment potential is greater in this market, although a clearer policy framework is needed in the UK to realise this fully. We also provide support to our clients operations in the water, health and safety and risk management sectors, in order to enable them to comply with legislation and regulation. We continued to see reasonable levels of activity in these markets, although some UK water clients have recently begun to reduce requirements from the unexpectedly high levels experienced over the last 9 months. The current political uncertainty in the Netherlands is unlikely to be helpful. Despite our market leading position in this segment, continuing poor economic conditions confirm that improving upon our 2011 performance in 2012 is likely to be a challenge. Our BNE business in Australia Asia Pacific produced significantly better results than in the same period in We continue to benefit from the high levels of investment in the infrastructure necessary to deliver coal seam gas and associated LNG projects, particularly in Queensland. The recovery from the floods in Queensland in 2011 is now complete. Some of the traditional gas projects offshore Western Australia have, however, moved into the development phase, which has reduced demand for our higher margin planning and environmental assessment input. Outside the natural resources sector the Australian economy seems to have come under further pressure in the early part of this year, as global concerns have reduced consumer confidence. As a result conditions in the commercial development market seem to have deteriorated a little further. Our re-positioning away from this part of the economy to public sector and energy infrastructure projects has provided us with significant protection from the effects of Page 1 of 9

2 this. However, the full potential of this business will probably not be realised until the economy becomes better balanced. Cash Flow and Debt Our cash conversion was once again good and the balance sheet remains strong. Net bank debt reduced further and at the end of March was 15.2 million (31 December million) after investing 4.5 million in previously announced acquisitions in the first quarter. Deferred Consideration As reported in the Group s 2011 Results, our auditor, Ernst & Young, indicated that it did not agree with the Group s interpretation of the accounting standard (IFRS3) in relation to deferred consideration. The RPS Board, therefore, notes with interest that the International Financial Reporting Standards Interpretations Committee (IFRIC) is considering a request for clarification of IFRS3 as a result of diversity in interpretation by the major audit firms. The Board will consider its position in the light of that review when it is complete. In the meantime one of the consequences of having to change our accounting for deferred consideration in the 2011 Results is that the Group s 2011 Interim Results need to be restated. These were reviewed by Ernst & Young before publication on 28 July 2011 and the accounting treatment used in respect of the three acquisitions made in the first half specifically approved. Nonetheless, we now have to restate them to be consistent with the 2011 Results. Note 2 to this announcement provides that restatement, in advance of the publication of the 2012 Interim Results. Brook Land, chairman, commented: 2012 has started positively for RPS. Our strategic development into the Energy and Energy Infrastructure markets in recent years gives us significant development opportunities. Our more traditional markets generally remain subdued as the economies in which we operate are still affected by continuing uncertainties in the global economy. However, the Group remains on track to produce further growth in May 2012 RPS is an international consultancy providing advice upon the development of natural resources, land and property, the management of the natural and built environments and the health and safety of people. We have offices in the UK, Ireland, the Netherlands, the United States, Canada, Brazil, the Middle East and Australia/Asia Pacific 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. Enquiries: RPS Group plc Tel: Dr Alan Hearne, Chief Executive Gary Young, Finance Director College Hill Tel: Justine Warren Matthew Smallwood Page 2 of 9

3 Note 1: This announcement contains 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 inevitable increases the risks to which the Group is exposed. Statements in respect of the Group s performance in 2012 in the year to date are based upon unaudited management accounts for the period January to March The Board considers market expectations for 2012 are best defined by taking the range of forecasts of PBTA (as defined in the 2011 Results) for the full year, published by analysts who consistently follow the Group. The current range of forecasts of which the Board is aware is 57.7 to 59.6 million. Nothing in this announcement should be construed as a profit forecast. Note 2: The tables below show the restated results for the six months ended 30th June 2011 together with the reported results for this period and a column identifying differences. The results have been restated to conform to the accounting treatment adopted in the results for the year ended 31st December The differences in treatment between the results for the year ended 31st December 2011 and the reported results for the six months ended 30th June 2011 relate to: 1. The effects of applying the Ernst & Young interpretation of IFRS 3 to acquisitions completed in the six months ended 30th June 2011 and in The reclassification of acquisition costs and the revaluation of investment in associate from reorganisation costs to amortisation of acquired intangibles and transaction related costs. In the results for the year ended 31st December 2011 we reported: "IFRS 3 (2008) Business Combinations became applicable to the Group with effect from 1 st January The Group reviewed the requirements of this standard and determined that deferred consideration could continue to be treated as consideration for the acquisition and therefore capitalised. In 2011 the Group s new auditors, who interpret this standard differently, 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." This revised treatment of deferred consideration impacts the results for the six months ended 30 th 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 and a corresponding accrual has been recognised in the balance sheet under deferred consideration. The adjustments have no effect on cash flow and the consolidated cash flow statement has not been restated. Page 3 of 9

4 Condensed consolidated income statement ended ended 30-Jun 30-Jun (restated) (reported) differences notes Revenue 251, ,518 - Recharged expenses (38,663) (38,663) - Fee income 212, ,855 - Operating profit before amortisation of acquired intangibles and transaction related costs 23,676 24,660 (984) a Amortisation of acquired intangibles and transaction related costs (3,369) (4,844) 1,475 b Operating profit 20,307 19, Finance costs (1,365) (1,365) - Finance income Profit before tax, amortisation of acquired intangibles and transaction related costs 22,481 23,465 (984) Profit before tax 19,112 18, Tax expense (5,519) (5,586) 67 Profit for the year attributable to equity holders of the parent 13,593 13, Basic earnings per share (pence) Diluted earnings per share (pence) Adjusted basic earnings per share (pence) (0.46) Adjusted diluted earnings per share (pence) (0.45) Condensed consolidated statement of comprehensive income ended ended 30-Jun 30-Jun (restated) (reported) differences Profit for the period 13,593 13, Other comprehensive income: Exchange differences 4,562 4,738 (176) Tax recognised directly in equity Total recognised comprehensive income for the period attributable to equity holders of the parent 18,343 17, Page 4 of 9

5 Condensed consolidated balance sheet As at As at 30-Jun 30-Jun (restated) (reported) Differences Assets Non-current assets Intangible assets 331, ,418 (13,932) Property, plant and equipment 29,420 29,417 3 Investments , ,876 (13,929) Current assets Trade and other receivables 169, ,921 (39) Cash at bank 17,855 17, , ,776 (39) Liabilities Current liabilities Borrowings 2,973 2,973 - Deferred consideration 8,635 13,629 (4,994) Trade and other payables 99,518 99,513 5 Corporation tax liabilities 2,785 2,836 (51) Provisions 2,612 2, , ,563 (5,040) Net current assets 71,214 66,213 5,001 Non-current liabilities Borrowings 50,690 50,690 - Deferred consideration 3,872 13,404 (9,532) Other payables 1,247 1,247 - Deferred tax liabilities 14,586 14, Provisions 2,998 2,998-73,393 82,703 (9,310) Net assets 358, , Equity Share capital 6,530 6,530 - Share premium 102, ,911 - Other reserves 49,163 49,339 (176) Retained earnings 200, , Total shareholders' equity 358, , Page 5 of 9

6 Segment results for the period ended 30 June 2011 restated Underlying profit Reorganisation costs Amortisation of intangible assets and transaction related costs Segment result Built and Natural Environment Europe 8,978 (986) (722) 7,270 AAP 4,680 (98) (2,068) 2,514 Total BNE 13,658 (1,084) (2,790) 9,784 Energy 14,324 (3) (579) 13,742 Total 27,982 (1,087) (3,369) 23,526 Group reconciliation ended 30 June 2011 Revenue 251,518 Recharged expenses (38,663) Fees 212,855 Underlying profit 27,982 Reorganisation costs (1,087) Unallocated expenses (3,219) Operating profit before amortisation of acquired intangibles and transaction related costs 23,676 Amortisation of acquired intangibles and transaction related costs (3,369) Operating profit 20,307 Finance costs (1,195) Profit before tax 19,112 Page 6 of 9

7 Segment results for the period ended 30 June 2011 as reported Underlying profit Reorganisation costs Amortisation of intangible assets Segment result Built and Natural Environment Europe 8,978 (986) (612) 7,380 AAP 4,680 1,371 (1,388) 4,663 Total BNE 13, (2,000) 12,043 Energy 14,324 (488) (2,844) 10,992 Total 27,982 (103) (4,844) 23,035 Group reconciliation ended 30 June 2011 Revenue 251,518 Recharged expenses (38,663) Fees 212,855 Underlying profit 27,982 Reorganisation costs (103) Unallocated expenses (3,219) Operating profit before amortisation of acquired intangibles and transaction related costs 24,660 Amortisation of acquired intangibles and transaction related costs (4,844) Operating profit 19,816 Finance costs (1,195) Profit before tax 18,621 Page 7 of 9

8 Differences Underlying profit Reorganisation costs Amortisation of intangible assets and transaction related costs Segment result notes Built and Natural Environment Europe - - (110) (110) AAP - (1,469) (680) (2,149) Total BNE - (1,469) (790) (2,259) Energy ,265 2,750 Total - (984) 1, ended 30 June 2011 Revenue - Recharged expenses - Fees - Underlying profit - Reorganisation costs (984) a Unallocated expenses - Operating profit before amortisation of acquired intangibles and transaction related costs (984) Amortisation of acquired intangibles and transaction related costs 1,475 b Operating profit 491 Finance costs - Profit before tax 491 Page 8 of 9

9 a. Adjustment to Operating profit before amortisation of acquired intangibles and transaction related costs and Re-organisation costs: 000's Revaluation of investment in associate (1,490) Acquisition costs 506 (984) b. Adjustment to Amortisation of acquired intangibles and transaction related costs: 000's Amortisation of acquired intangibles (218) Contingent deferred consideration treated as remuneration (4,828) Negative goodwill 5,537 Revaluation of investment in associate 1,490 Acquisition costs (506) 1,475 Page 9 of 9