Interim Results

RPS GROUP PLC

("RPS" or "the Group")

Interim Results for the six months ended 30 June 2017

Significant profit improvement over H1 2016, resulting from organic growth, margin improvement, reduced re-organisation costs and currency benefit. New regional structure delivering. Interim dividend increased 3%.

1 PBTA is profit before tax, amortisation of acquired intangibles and transaction related costs

2  Adjusted earnings per share is before amortisation of acquired intangibles and transaction related costs

and the related tax

 3 2016 results restated at 2017 currency rates

Key Points

· PBTA up 35% to £27.2m (2016: £20.2m)

· Adjusted EPS (basic) up 35% to 8.71p (2016: 6.44p)

· Statutory profit before tax up 88% to £20.4m (2016: £10.9m)

· Net bank borrowings £93.4m (June 2016: £95.0m)

· Leverage reduced to 1.5 times (June 2016: 2.2 times)

· Cash conversion 62% (2016: 101%)

· Dividend increased 3% to 4.80 pence (2016: 4.66 pence)

· Three regional segments working well

· Platform established to return to growth in 2017.

Alan Hearne, Chief Executive, commenting on the results, said:

"The Group's strategy of building a diverse international business has enabled RPS to emerge rapidly and effectively from the severe oil and gas downturn of the last two years. The creation of our three regional businesses enables us to look confidently to the future."

In recent years our acquisitions in both Norway and Australia have been directed towards project management consultancy, particularly in respect of large scale infrastructure projects. These businesses performed well. We see this as an important new activity for the Group, reducing our dependency on the resources sectors and providing a more flexible business model.

The reduction in our dependence upon the oil and gas market, the continuing impact of good cost management and the strong results for the first half of the year enable us to anticipate modestly exceeding market expectations for the full year".

4 August 2017

RPS is an international consultancy providing independent 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 and Australia/Asia Pacific 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 a number of 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.

Results

Profit (before tax, amortisation of acquired intangibles and transaction related costs) was £27.2 million (2016: £20.2 million; £22.0 million on a constant currency basis). Statutory profit before tax was £20.4 million (2016: £10.9 million; £11.8 million on a constant currency basis). Adjusted earnings per share (basic) were 8.71 pence (2016: 6.44 pence; 7.03 pence on a constant currency basis). Statutory earnings per share (basic) were 6.55 pence (2016: 3.93 pence; 4.26 pence on a constant currency basis).

Group segment profit increased to £34.5 million (2016: £25.8 million; £27.8 million on a constant currency basis). Group unallocated expenses increased to £4.9 million (2016: £3.1 million), largely reflecting the cost of Board changes. Finance charges were unchanged at £2.5 million (2016: £2.5 million).

Segmentation and Services

As previously announced, the Group began operating two new regional, multi-disciplinary businesses in addition to our existing AAP business with effect from 1 January 2017. The contribution of the three regional businesses in the period was:

¹ restated for segment changes (see note 4)

² 2016 results restated at 2017 currency rates

³ after reorganisation costs of £0.7 million (2016: £3.9 million, £4.2m at constant currency)

Each segment provides a broad range of services across many sectors of the economy, serving both the public and private sectors. They each remain exposed to oil and gas projects in varying degrees, with North America having the greatest exposure. The contribution from oil and gas and Australian natural resources projects to total Group segment results in the first half as a whole was about 18% in respect of fees and 10% in respect of segment profit, significantly reduced from the top of the oil and gas cycle in 2014.

We committed c. £126 million to acquisitions in 2014-2016, none with direct exposure to oil and gas markets. These broadened the Group's activities and geographical footprint and materially assisted the Group maintain its profits as the effects of the oil and gas downturn were felt, clearly demonstrating the value of this part of our strategy.

Funding and Dividend

Net bank borrowings at 30 June 2017 were £93.4 million (30 June 2016: £95.0 million). We settled £7.4 million of deferred consideration in respect of acquisitions made in prior years. Deferred consideration of up to £5.6 million is payable in the second half of 2017, leaving only £1.7 million remaining to be paid in 2018. Our conversion of profit into cash in the period was modest, due to the timing of annual payments and the un-winding of prepayments made by clients in 2016; we expect a much improved performance in the second half.

Since July 2015 we have had in place a five year £150 million revolving credit facility with Lloyds Bank plc and HSBC Bank plc. In addition, about 4 years remain on the £30.0 million and $34.1 million fixed term, fixed rate notes issued through Pricoa in 2014. Our interest cover at 30 June was 14 times, well above the bank covenant of four times. The Board indicated in the 2016 Interim Results announcement that it had decided to take a more cautious approach to investment in acquisitions because leverage (defined in note 3) had reached 2.2 at 30 June 2016, even though it was well below the bank covenant of 3.0. Our leverage at 30 June 2017 has reduced to 1.5 and the search for suitable investment opportunities has recommenced.

The Board remains confident about the Group's financial strength and will distribute an increased interim dividend of 4.80 pence (2016: 4.66 pence), payable on 13 October 2017 to shareholders on the register on 15 September 2017.

Markets and Trading

Europe

Within this business we provide a wide range of services to many aspects of the property and infrastructure development and management sectors. From 1 January 2017 it also includes the Energy: EAME business, which undertakes oil and gas projects globally. Overall, this is our largest business and it has delivered a good performance in the period.

¹ restated for segment changes (see note 4)

² 2016 results restated at 2017 currency rates

³ after reorganisation costs of £0.2 million (2016: £2.5 million, £2.5m at constant currency)

Our planning and development businesses in the UK and Ireland, continued to benefit both from good market conditions and client confidence in respect of both private sector development, as well as public infrastructure projects.

Our activities exposed to operational environments continued to need to offer an efficient, cost effective service to assist clients in managing tight budgets, but generally traded well, particularly our water business in the UK, which continues to benefit from its strong market presence.

The oil and gas activities remain confronted by a difficult market. However, as a result of effective cost management our Energy businesses returned a profit contribution significantly better than in the same period last year.

In Norway the business performed very well, transitioning away from oil and gas to the buoyant infrastructure markets.

This segment is capable of delivering good growth in 2017.

AAP

We continue to benefit from the development of our project management capability, which was expanded significantly by the acquisition of Point in 2014 and EIG in 2015.

¹ 2016 results restated at 2017 currency rates

² after reorganisation costs of £0.3 million (2016: £1.0 million, £1.2m at constant currency)

Our resources business in Western Australia continued to face sluggish markets and produced a significantly reduced underlying contribution compared with the first half of 2016. Our businesses on the east coast, particularly those involved in the management of major infrastructure projects and private sector development, had a successful first half. Our work for a growing number of Australian Federal Government agencies also continued to expand.

Our activities on the east coast give us confidence that the AAP business has a good platform to achieve further growth in 2017. The Federal budget in May allocated significant funds to infrastructure projects and underpinned this confidence.

North America

This business was created by the merger of our Built and Natural Environment: North America and Energy: North America businesses at the beginning of 2017. The BNE business had a significant exposure to clients operating in the oil and gas sector. In consequence, the new business as a whole remains significantly exposed to this sector. However, our non-energy activities now form the majority of this business, providing a platform from which to achieve long term growth, both organic and by acquisition.

¹ restated for segment changes (see note 4)

² 2016 results restated at 2017 currency rates

³ after reorganisation costs of £0.1 million (2016: £0.4m, £0.5 million at constant currency)

The acquisition of Iris, based in San Francisco, in October 2015 continued the process of diversifying into more traditional environmental consultancy activities. Following integration, it is working successfully with our other environmental risk businesses.

Although growth remains possible in the second half, the continuing low level of activity in the energy sector is likely to hold back the performance of this segment overall in 2017. This is particularly the case in Canada where the energy market is extremely sluggish. Developing our US business in the environmental, infrastructure and project management markets remains a Group priority.

Board Composition

There have been a number of changes to the Board. On 18 May 2017 it was announced that Alan Hearne is to step down as Chief Executive and retire from the Board by the end of August. John Douglas has been appointed as Chief Executive designate and will assume the role of Chief Executive when Alan steps down. We have also announced the appointment of Allison Bainbridge (1 June 2017) and Liz Peace (11 July 2017) as non-executive directors and John Bennett's retirement from the Board (1 June 2017). With the release of these Interim results Louise Charlton has also retired from the Board.

Prospects

The Group's strategy of building a diverse international business has enabled RPS to emerge rapidly and effectively from the severe oil and gas downturn of the last two years. The creation of our three regional businesses enables us to look confidently to the future.

In recent years our acquisitions in both Norway and Australia have been directed towards project management consultancy, particularly in respect of large scale infrastructure projects. These businesses performed well. We see this as an important new activity for the Group, reducing our dependency on the resources sectors and providing a more flexible business model.

The reduction in our dependence upon the oil and gas market, the continuing impact of good cost management and the strong results for the first half of the year enable us to anticipate modestly exceeding market expectations for the full year.

RPS Group plc

4 August 2017

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

Condensed consolidated balance sheet (unaudited)

Condensed consolidated cash flow statement (unaudited)

Condensed consolidated statement of changes in equity (unaudited)

An analysis of other reserves is provided in Note 11.

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 2017 comprise the Company and its subsidiaries (together referred to as the "Group").

The condensed interim financial statements have been prepared using accounting policies set out in the Report and Accounts 2016 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 2016 and the balance sheet as at that date are abridged from the Company's Report and Accounts 2016 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.

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.

The Group is undertaking a detailed review of the potential impact of IFRS 15 "Revenue from Contracts" and IFRS 9 "Financial Instruments" that will both be first applied to the Group's financial statements for the year ended 31 December 2018. At this stage we do not believe that either standard will significantly affect the Group's results.

2. Responsibility Statement

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

On behalf of the Board

4 August 2017

3. Alternative Performance Measures

The Group defines and presents various non-GAAP performance measures in this results announcement. The measures presented are those adopted by management and analysts who follow us in assessing the performance of the business. Our principal non-GAAP measure is profit before tax, amortisation of acquired intangibles and transaction related costs (PBTA). We adjust for amortisation of acquired intangible assets as these are non-cash item and their measurement is based on estimates of asset lives and fair values at acquisition where underlying assumptions are subjective in nature. We adjust for acquisition related costs as they are not dependent on the performance of the business and are only incurred when acquisitions arise. The alternative performance measures and adjusting items are defined below and these have been applied consistently throughout the interim results:

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 2016 and the year ended 31 December 2016 were restated following changes to segmentation, as announced on 21 April 2017.

The business segments of the Group are as follows:

EuropeAustralia Asia Pacific ("AAP")North America

Segment results for the period ended 30 June 2017:

5. Amortisation of acquired intangibles and transaction related costs

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 2017. 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:

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:

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

8. Property, plant and equipment

During the six months ended 30 June 2017 the Group acquired assets with a cost of £3,992,000 (six months to 30 June 2016: £3,647,000), which includes nil acquired through business combinations (six months to 30 June 2016: £131,000). Assets with a net book value of £113,000 were disposed of during the six months ended 30 June 2017 (six months ended 30 June 2016: £449,000).

9. Goodwill

A reconciliation of the goodwill movement in 2017 in respect of acquisitions made in 2016 is given in the table below.

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

No negative goodwill was recognised in 2016 or 2017.

10. Share capital

11. Other reserves

12. Dividends

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

An interim dividend in respect of the six months ended 30 June 2017 of 4.80 pence per share, amounting to a total dividend of £10,705,000 was approved by the Directors of RPS Group Plc on 2 August 2017. These condensed consolidated interim financial statements do not reflect this dividend payable.

13. Note to the condensed consolidated cash flow statement

The table below provides an analysis of net bank borrowings, comprising cash and cash equivalents, interest bearing bank loans and finance leases, during the six months ended 30 June 2017.

The cash balance includes £2,545,000 (31 December 2016: £3,036,000) that is restricted in its use.

14. Events after the balance sheet date

There have been no material events since the balance sheet date.

15. Principal risks and uncertainties

The nature of the principal risks and uncertainties faced by the Group have not changed significantly since the 2016 Report and Accounts was published. These risks, together with a description of the approach to mitigate them, are set out on pages 11 to 13 of the 2016 Report and Accounts (available on the Group's website at www.rpsgroup.com) and are summarised as follows:

- Economic environment

- Retention of key personnel

- Business acquisitions

- Political events

- Environmental and health risks

- Information systems

- Health and safety

- Market position and reputation

- Claims and Litigation

- Compliance

- Funding

- Financial risk management

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 2016 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 a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. The continuing uncertainty in global economic outlook inevitably increases the risks to which the Group is exposed 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 2017. 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.

INDEPENDENT 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 June 2017 which comprises the Condensed consolidated income statement, the Condensed consolidated statement of comprehensive income, the Condensed consolidated balance sheet, the Condensed consolidated cash flow statement, the Condensed consolidated statement of changes in equity and the related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

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

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial 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 Auditing Practices Board 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 June 2017 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

4 August 2017