6th Mar 2007 07:02
RPS Group PLC06 March 2007 RPS GROUP PLC Preliminary Announcement for the year ended 31 December 2006 RPS Group Plc ("RPS" or "the Group") today announces record results for the yearended 31 December 2006 with profit before tax up 43% and earnings per share up33%. 2006 2005 Revenue (£m) 296.8 217.8 +36% Fee Income (£m) 246.0 183.5 +34% Profit before taxation (£m) 34.6 24.3 +43% Earnings per share (basic) (pence) 11.94 9.01 +33% Highlights • strong performance from Energy • continued development of Planning and Development in UK and internationally • further growth from Environmental Management • improved operating margins • excellent conversion of profit to cash • balance sheet remains strong • the energy and the environment debate provides significant opportunities for future growth • acquisition of quality businesses continues. Brook Land, Chairman, commenting on the results, said: "RPS has had a very successful year. An outstanding performance from the Energydivision and good results in our other two businesses have resulted in the Groupdelivering further strong growth. Our staff have shown the highest levels of commitment and performance in marketsthat remain buoyant. The acquisitions made in recent months will support ourcontinued growth. Further acquisitions are likely. The Board anticipates thatthe momentum we currently have will enable RPS to deliver another good result in2007. Trading in the early weeks of the year supports this view." 6 March 2007 ENQUIRIES RPS Group plc Today: 020 7457 2020Dr Alan Hearne, Chief Executive Thereafter: 01235 863206Gary Young, Finance Director College HillMatthew Smallwood Tel: 020 7457 2020 RPS is an international consultancy providing advice upon the development ofnatural resources, land and property, the management of the environment and thehealth and safety of people. We trade in the UK, Ireland, the Netherlands,North America and Australia and undertake projects in many other parts of theworld. Introduction RPS is an international consultancy providing advice upon the development ofnatural resources, land and property, the management of the environment and thehealth and safety of people. The Group was added to the FTSE 250 on 28 July2006, a reflection of our continuing development. The good growth we have achieved in recent years has been recognised by therecent KPMG survey of fast growing European companies.(1) Our growth in 2006reflects both the continuing successful implementation of our strategy as wellas the increasing importance of the issues with which we deal on behalf of ourclients. We have maintained momentum in our trading whilst enhancing ourreputation as a top quality employer. (2) The Group seeks to ensure continuous improvement in the range and quality of ourservices and our financial performance by: • operating in markets where we can add value to our clients' activities; • endeavouring to achieve leadership in those markets; and • making acquisitions of quality businesses in order to extend our expertise and geographical presence. The Board remains confident that this strategy will continue to offer our staffchallenging and rewarding careers, whilst delivering growth and good returns forour shareholders. 2006 Results Profit before tax was £34.6 million (2005: £24.3 million). Basic earnings pershare were 11.94 pence (2005: 9.01 pence). Operating cash flow was £40.7million (2005: £28.1 million). The Group had net borrowings of £30.1 million at31 December (2005: £25.9 million). Dividend The Board is recommending a final dividend of 1.44 pence per share payable on 31May 2007 to shareholders on the register on 10 April 2007. The total dividendfor the full year will be 2.76 pence, an increase of 15% (2005: 2.40 pence).Our dividend has risen at this rate for a number of years, providingshareholders with a significant increase in real income. Operations and Markets Planning and Development Within this business we provide consultancy services in respect of town andcountry planning, building, landscape and urban design, transport planning andhighway design and environmental assessment. We remain leaders in this market inthe UK, Ireland and Western Australia, operating for blue chip clients in boththe public and private sectors. 2006 2005 Fee income (£m's) 121.5 100.9 +20%Segment result (£m's) 22.8 18.9 +21%Margin (%) 18.8 18.7 In the UK our ability to advise upon the full range of issues relevant to thedevelopment of sustainable communities and secure planning permission for largecomplex schemes remains attractive to clients. In consequence, we continue towork on some of the UK's largest regeneration and infrastructure projects. Ourstrong urban design skills help us to secure this work. We are also involvedin both the waste and minerals sectors, in which securing planning permissionhas become more complex. Our relationships with the UK's largest housebuildersremain good. Whilst we have continued to focus successfully on achievingorganic growth, the acquisition of Burks Green (July 2006), which providesarchitectural and engineering advice to the property development sector,strengthens this business significantly. Its small but growing operation inPoland provides us with an opportunity in this expanding market. The Irish Government continues to invest in ambitious plans for theinfrastructure development made necessary by the economic growth alreadyexperienced and that anticipated. The recently published National DevelopmentPlan 2007-2013 targets "Economic Infrastructure" as its main priority, with€54.6bn identified for expenditure on roads, public transport and energyinfrastructure. We benefit significantly from this investment. Our work in thecommercial sector in Ireland also remains buoyant, as private investment followsthis public expenditure. Our activities in the planning and development market in Australia continue toflourish. The long term potential of this market has encouraged us to develop aplan to expand these activities substantially. The acquisitions of Ecos (March2006) and HSO (October 2006) are part of that plan. As climate change, energy efficiency and other environmental issues continue togrow in importance, our competitive advantage in these markets should continueto increase. Our planning business is also able to assist clients in other partsof the Group, for example, in respect of the need to secure planning permissionsfor capital projects in the energy and water sectors. Energy We provide consultancy services on an international basis to the oil and gasindustries from bases in the UK, USA, Canada, Australia and Malaysia. In the UKwe also provide advice to the renewables and nuclear sectors. The business hadan outstanding year; fee income, profit and margin all grew substantially. 2006 2005 Fee income (£m's) 79.0 43.8 +80%Segment result (£m's) 13.0 5.7 +128%Margin (%) 16.5 13.1 Demand for our services from oil and gas exploration and production companiesgrew significantly during the year. This reflects both buoyant marketconditions and our position as a world leader in this market. Pressure on thedeveloped world to identify and secure long term supplies of energy, coupledwith the increasing energy needs of developing nations, suggest that activity inthis market will remain at a high level for the foreseeable future. Theacquisition of Ecos also added to our ability to provide environmental supportto our oil and gas clients in Australia and Asia, whilst the acquisition of TSAin the UK (October 2006) strengthened our health and safety expertise. Theacquisition of APA (January 2007) increases the range of our services in NorthAmerica. We see increasing interest from clients in the combination of theenergy, environmental and safety expertise that we provide and our strategyaccommodates this trend. We have a significant and growing reputation within the financial community inrespect of determination of oil and gas reserves for reporting purposes and insupport of corporate activity. The oil and gas companies and their advisorsvalue the breadth and depth of our expertise, including our environmentalexperience. Skilled staff have been and will remain in short supply, but our position inthis market has enabled us to operate successful recruitment and retentionstrategies, whilst also improving our margins to a higher and, we believe, agenerally sustainable level. The growing controversy in respect of a number of UK wind farm schemesillustrates the complexity involved in securing approval for energy supplyschemes. We are well positioned to assist our clients achieve the necessarypermissions, licences and consents for all such facilities, including new powerstations. Environmental Management This business provides consultancy services in respect of health, safety, riskand environmental management in the UK and the Netherlands and the management ofwater resources in the UK and Ireland. 2006 2005 Fee income (£m's) 48.0 40.7 +18%Segment result (£m's) 5.3 4.3 +23%Margin (%) 11.1 10.7 Our business servicing the UK water industry has progressed well. We areworking on significant network management commissions for the majority of thewater companies. RPS's specific strengths in the water industry coupled with ourenvironmental credentials position us well to help with problems created bywater shortages and legislation seeking to improve water quality. The UK market in health & safety consultancy has generally remained strong,driven by increasing statutory obligations as awareness of the importance ofmanaging these matters more carefully has heightened. The asbestos market has,as predicted, slowed, but we anticipate that new fire safety regulations willprovide attractive opportunities. In 2005 we extended our range of services withthe acquisition of Business Healthcare Ltd, which provides occupational healthservices. As anticipated this is proving to be a growth market. The economy in the Netherlands continues to improve. The steps we took to reduceour exposure to the more vulnerable parts of the economy and invest in stablemarkets have continued to produce benefit. Funding The conversion of profit into cash during this year continued at a high leveland our balance sheet remains strong. Following the acquisitions made in 2006and the early part of 2007, we have maximum cash commitments in respect ofdeferred consideration and outstanding loan notes related to acquisitions of£11.8 million in 2007, £4.2 million in 2008 and £4.2 million in 2009. TheGroup's operating cash flow normally funds its working capital requirements.Our cash generation, in conjunction with bank facilities of £72 million and anability to use equity in transactions, means that we are well positioned tocontinue our acquisition strategy, in respect of which we have a number of goodprospects. Review of Business Prospects 2006 was an exceptionally good year for RPS. Our staff numbers grew and, asever, those staff produced valuable advice for and support to our clients. Thisin turn enabled us to deliver an excellent financial performance. Ourinvestment in developing a substantial Energy business has proved to bewell-timed and effectively managed. We believe this and our other twobusinesses will continue to grow. In addition, the way they can operate incombination provides opportunities to secure further strategic growth. The last year has seen a dramatic increase in the profile given to thepotentially severe effect of climate change and what actions are necessary tocontain and eventually reverse the global warming process. Balancing the wayenergy is secured from various sources, managing its use to limit furtherenvironmental damage and planning further economic growth and urban developmenthas become a fundamental challenge of this century. It is one which RPS isextremely well positioned to advise upon and will enable us to build furthermomentum. Our investment in the energy sector has enabled RPS to internationalise itsactivities in a measured way. Consequently, we now have strong businesses inthe USA, Canada and Australia as well as substantial contracts in many parts ofthe developing world, including India and China. We have successfully begun theprocess of expanding our activities in Australia into planning and developmentand environmental management. This process is, however, in the early stages andcan be extended substantially. Australia is also a good base from which toextend our activities in Asia. In a similar fashion, there are large scaleopportunities to build all of our activities in both the US and Canada. As inEurope and Australia, the planning and development and environmental managementsectors in North America are highly fragmented. RPS has developed good skillsin bringing together teams of high quality professionals from a range ofdisciplines and helping them work together. In the coming years we are likelyto deploy these skills on an increasingly international basis. The opportunities available to us are substantial. In consequence we haveconsiderable confidence about continuing the growth record of our business in2007 and beyond. Brook Land Chairman 6 March 2007 Consolidated income statement Notes year ended 31 year ended 31 December December 2006 2005 audited audited £000's £000's Revenue 2 296,843 217,830Recharged expenses 2 (50,832) (34,310)Fee income 2 246,011 183,520 Operating profit 2 37,482 26,900 Interest payable and similar charges 3 (3,052) (2,757) Interest receivable 3 160 110 Profit before tax 34,590 24,253 Tax expense 4 (10,508) (6,436) Profit for the year attributable to equity holders of the parent 24,082 17,817 Basic earnings per share (pence) 5 11.94 9.01 Diluted earnings per share (pence) 5 11.68 8.82 Consolidated statement of recognised income and expense year year ended 31 ended 31 December December 2006 2005 audited audited £000's £000's Exchange differences on translation of foreign (1,939) (1,042) operations recognised in translation reserveActuarial loss on defined benefit pension scheme (88) (197)Tax recognised directly in equity 1,690 1Income and expense recognised directly in equity (337) (1,238) Profit for the year 24,082 17,817 Total recognised income and expense for the year attributable to equity holders of the parent 23,745 16,579 Consolidated balance sheet Notes as at as at 31 December 31 December 2006 2005 audited audited £000's £000's Assets Non-current assets Intangible assets 176,929 155,471 Property, plant and equipment 18,344 17,947 Deferred tax assets 2,465 1,565 197,738 174,983 Current assets Trade and other receivables 93,296 79,961 Cash at bank 9,964 10,370 103,260 90,331Total assets 300,998 265,314 Equity and liabilities Shareholders' equity Share capital 6 6,163 6,048 Share premium 6 89,836 88,043 Merger reserve 7 10,642 5,738 Employee trust shares 7 (3,042) (2,400) Share schemes reserve 7 4,053 2,394 Shares to be issued 7 1,997 3,307 Translation reserve 7 (2,543) (604) Retained earnings 6 79,828 59,345 Total equity attributable to equity 6 186,934 161,871 holders of the parent Liabilities Non-current liabilities Borrowings 39,683 35,472 Deferred consideration 6,895 7,988 Other creditors 330 2,050 Provisions 1,633 1,951 48,541 47,461 Current liabilities Borrowings 410 838 Deferred consideration 11,559 10,082 Trade and other payables 48,863 39,991 Corporation tax liabilities 4,330 4,632 Provisions 361 439 65,523 55,982Total liabilities 114,064 103,443 Total equity and liabilities 300,998 265,314 Consolidated cash flow statement Notes year year ended ended 31 December 31 December audited audited 2006 2005 £000's £000's Cash generated from operations 8 40,663 28,149Interest paid (2,930) (1,872)Interest received 160 110Income taxes paid (10,291) (5,612)Net cash generated from operating activities 27,602 20,775 Net cash used in investing activitiesPurchases of subsidiary undertakings and businesses in the (13,695) (15,740)current periodNet cash acquired with subsidiary undertakings 1,511 1,734Proceeds from sale of fixed assets 712 198Deferred consideration (10,220) (8,756)Purchase of property, plant and equipment (4,481) (3,906)Net cash used in investing activities (26,173) (26,470) Cash flows from financing activitiesProceeds from issue of share capital 1,030 217Proceeds from bank borrowings 4,504 14,670Payment of finance lease liabilities (109) (45)Dividends paid (5,201) (4,404) Payment of pre-acquisition dividend (500) -Net cash from financing activities (276) 10,438 Net increase in cash and cash equivalents 1,153 4,743 Cash and cash equivalents at beginning of period 9,593 4,701 Effect of exchange rate fluctuations (941) 149 Cash and cash equivalents at end of period 8 9,805 9,593 Cash and cash equivalents comprise: Cash at bank 9,964 10,370 Bank overdraft (159) (777) Cash and cash equivalents at end of period 9,805 9,593 Notes to the consolidated financial statements 1. Basis of preparation The consolidated financial statements, as well as comparatives for 2005, havebeen prepared under International Financial Reporting Standards (IFRS) adoptedby the EU. They are presented in pounds sterling, rounded to the nearestthousand. The accounting policies used have been applied consistently to all periodspresented in these financial statements. The accounting policies used are thesame as set out in detail in the Report and Accounts 2005. 2. Business segments The Group comprises the following business segments: Planning and Development - consultancy services in the UK, Ireland and Australiarelated to town and country planning, urban design, transport planning andhighway design, environmental impact assessment and provision of water and wasteutilities and energy infrastructure. Environmental Management - consultancy services in the UK, Ireland and theNetherlands related to health, safety and risk management; and the management ofwater services. Energy - the provision of consultancy services, on an international basis, tothe oil and gas, renewable energy and nuclear sectors. Business segment results for the year ended 31 December 2006 Planning and Environmental Energy Eliminations Consolidated Development Management 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 £000's £000's £000's £000's £000's £000's £000's £000's £000's £000's Segment revenue 145,832 122,133 56,134 46,276 97,392 51,354 (2,515) (1,933) 296,843 217,830Recharged expenses (24,372) (21,196) (8,103) (5,557) (18,357) (7,557) - - (50,832) (34,310) Segment fee income 121,460 100,937 48,031 40,719 79,035 43,797 (2,515) (1,933) 246,011 183,520 Segment result 22,805 18,885 5,332 4,349 13,039 5,723 - - 41,176 28,957 Unallocated expenses (3,694) (2,057) Operating profit 37,482 26,900 Net financing costs (2,892) (2,647) Profit before tax 34,590 24,253 Income tax expense (10,508) (6,436) Profit for the year 24,082 17,817 3. Net financing costs year ended year ended 31 Dec 31 Dec 2006 2005 £000's £000'sInterest payable and similar charges Interest on loans and overdraft (2,234) (1,849)Interest imputed on deferred consideration (629) (885)Interest payable on deferred consideration (165) -Finance lease (24) (23) (3,052) (2,757) Interest receivable Deposit interest receivable 160 110 Net financing costs (2,892) (2,647) 4. Income taxes year ended year ended 31 Dec 31 Dec 2006 2005 £000's £000'sCurrent tax UK corporation tax 6,716 5,274 Foreign tax 2,500 1,034 9,216 6,308 Deferred tax expense 1,292 128 Tax expense for the year 10,508 6,436 5. Earnings per share The calculations of basic and diluted earnings per share were based on theprofit attributable to ordinary shareholders and a weighted average number ofordinary shares outstanding during the related period as shown in the tablesbelow: year ended year ended 31 Dec 31 Dec 2006 2005 £000's £000's Profit attributable to ordinary shareholders 24,082 17,817 year ended year ended 31 Dec 31 Dec 2006 2005 000's 000's Weighted average number of ordinary shares for the purposes of basic earnings per share 201,635 197,677 Effect of shares to be issued as deferred consideration 1,059 1,862Effect of employee shares schemes 3,518 2,472Weighted average number of ordinary shares for the purposes of diluted earnings per share 206,212 202,011 Basic earning per share (pence) 11.94 9.01 Diluted earnings per share (pence) 11.68 8.82 6. Statement of changes in equity Share Share Retained Other Total equity capital premium earnings reserves £000's £000's £000's £000's £000's At 1 January 2005 5,933 87,308 46,128 (570) 138,799Changes in equity during 2005Actuarial loss (197) (197)Tax recognised directly in equity 1 1Exchange differences (1,042) (1,042)Net income recognised directly in equity (196) (1,042) (1,238)Profit for the year 17,817 17,817Total recognised income and expense for the 17,621 (1,042) 16,579yearIssue of new ordinary shares 115 735 5,738 6,588Own shares (533) (533)Share based payment expense 1,535 1,535Shares to be issued 3,307 3,307Dividends (4,404) (4,404)At 31 December 2005 6,048 88,043 59,345 8,435 161,871 Changes in equity during 2006Actuarial loss (88) (88)Tax recognised directly in equity 1,690 1,690Exchange differences (1,939) (1,939)Net income recognised directly in equity 1,602 (1,939) (337)Profit for the year 24,082 24,082Total recognised income and expense for the 25,684 (1,939) 23,745yearIssue of new ordinary shares 115 1,793 3,151 5,059Own shares (642) (642)Share based payment expense 1,659 1,659Shares to be issued 443 443Dividends (5,201) (5,201)At 31 December 2006 6,163 89,836 79,828 11,107 186,934 7. Other reserves Merger Employee Share scheme Shares to be Translation Total other reserve trust shares reserve issued reserve reserves £000's £000's £000's £000's £000's £000's At 1 January 2005 (1,867) 859 438 (570)Changes in equity during 2005Exchange differences (1,042) (1,042)Issue of new shares 5,738 5,738Own shares (533) (533)Share based payment expense 1,535 1,535Shares to be issued 3,307 3,307At 31 December 2005 5,738 (2,400) 2,394 3,307 (604) 8,435Changes in equity during 2006Exchange differences (1,939) (1,939)Issue of new shares 4,904 (1,753) 3,151Own shares (642) (642)Share based payment expense 1,659 1,659Shares to be issued 443 443At 31 December 2006 10,642 (3,042) 4,053 1,997 (2,543) 11,107 8. Notes to the consolidated cash flow statement year ended year ended 31 Dec 31 Dec 2006 2005 £000's £000's Profit before tax 34,590 24,253Adjustments for: Interest payable and similar charges 3,052 2,757 Interest receivable (160) (110) Depreciation and amortisation 4,130 3,848 Share based payment expense 1,659 1,535 43,271 32,283 Increase in trade and other receivables (7,422) (4,247) Increase in trade and other payables 4,814 113Cash generated from operations 40,663 28,149 The table below provides an analysis of net borrowings, comprising cash and cashequivalents, interest bearing bank loans and finance leases, during the yearended 31 December 2006. At 31 Dec Cash flow New advances net of Foreign At 31 Dec 2005 capital repaid exchange 2006 £000's £000's £000's £000's £000's Cash and cash equivalents 9,593 1,153 (941) 9,805Bank loans (35,527) (4,504) 407 (39,624)Finance lease creditor (6) (305) 1 (310)Net borrowings (25,940) 1,153 (4,809) (533) (30,129) 10. The financial information set out above does not constitute the company's full statutory accounts for the year ended 31 December 2006 for the purposes of section 240 of the Companies Act 1985, but it is derived from those accounts that have been audited. Statutory accounts for 2005 have been delivered to the Registrar of Companies. The auditors have reported on those accounts; their report was unqualified and did not contain statements under the Companies Act 1985, S237 (2) or (3). 11. It is expected that the annual report and accounts will be posted to shareholders on or before 23 April 2007. Further copies may be obtained after that date from the Company Secretary, RPS Group plc, Centurion Court, 85 Milton Park, Abingdon, Oxfordshire OX14 4RY. -------------------------- (1) "Europe's Top 500 Job Creating companies "(October 2006); RPS placed 36th. (2) "Britain's Top Employers 2007", Corporate Research Foundation. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RPS.L