26th Feb 2015 13:16
LONDON (Alliance News) - RPS Group PLC shares surged on Thursday after the company reported a rise in pretax profit in 2014 and hiked its dividend as its revenue held up in spite of the falling oil price and turmoil in the Middle East.
Shares in the energy consultancy were up 7.5% to 259.13 pence on Thursday early afternoon, the best performer in the FTSE 250.
RPS said its pretax profit for the year to the end of December was GBP46.3 million, up from GBP43.6 million last year.
Revenue rose to GBP572.1 million from GBP567.6 million in 2013, tracking a rise in fee income to GBP505 million from GBP492.1 million. The group said its energy business grew over the year and managed well against a backdrop of a declining oil price and political turmoil in the Middle East.
RPS said the energy business managed to maintain growth in the year and kept its margins broadly unchanged at 19% against 19.5% last year. In the second quarter of 2014, RPS said some of its oil and gas clients started to manage their spending more tightly, particularly in terms of operational activities.
As the oil price declined in the second half, this trend continued, RPS said, adding its trading was also impacted by political disruption in the Middle East which resulted in some of its clients delaying investment in the Kurdistan region of Iraq.
It added that recent market conditions have been "unusually volatile", with clients likely to continue focusing on cost controls. As a result, RPS is reducing its cost base and focusing on the parts of the energy market likely to receive investment. It added, however, that it is seeing signs of some stabilisation in the market.
Fee income also increased in its built and natural environment business, which provides consultancy services to the property and infrastructure development and management sectors, but saw a fall in fees in its Australia Asia Pacific business, with the energy portion of the unit hit by a fall in spending by mining and energy clients.
The group hiked its dividend on the back of the results, up to 8.47 pence per share from 7.36 pence a year earlier. The payout includes a 4.42 pence final dividend.
"Once again our business model delivered good results, with a number of high quality acquisitions making a significant contribution and positioning us well for 2015. This was achieved despite a number of factors outside our control, notably the strength of sterling, the rapid fall in the oil price and unrest in the Middle East," said RPS Chairman Brook Land.
"We believe our positioning and business model should deliver a successful outcome and further growth in the current year," Land added.
Liberum reiterated its Buy rating on RPS Group, saying it expects the energy consultancy will prove to be more resilient than some investors fear.
"We expect growth in all of the divisions, except Energy, where we currently expect a 7% fall in [earnings before interest and taxes] in 2015, due to the expected impact of oil price weakness on some parts of the business," said Liberum analyst Joe Brent.
The analyst also sees long-term structural drivers for the group including population growth, the need for sustainable development, infrastructure investment and the increasing complexity of legislation.
By Sam Unsted; [email protected]; @SamUAtAlliance
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