8th Aug 2006 07:01
RPS Group PLC08 August 2006 RPS GROUP PLCInterim Results for the six months ended 30 June 2006 RPS Group Plc ("RPS" or "the Group") today announces record results for the sixmonths ended 30 June 2006 with profit before tax up 56% and earnings per shareup 45%. 2006 2005 Fee income (£m) 117.4 82.3 +43%Operating profit (£m) 17.3 11.4 +52%Profit before taxation (£m) 15.9 10.2 +56%Earnings per share (basic) (p) 5.54 3.83 +45%Interim dividend (p) 1.32 1.15 +15% HIGHLIGHTS • continuing rapid development of our Energy business; • acquisition of Burks Green in July gives significant impetus to our Planning and Development business; • improved operating margins and organic growth in all business segments; • operating cash flow increased substantially; • one of Europe's 20 fastest growing companies - 2001-2005 (KPMG); • one of "Britain's Top Employers" (Corporate Research Foundation); • admitted to FTSE250 (31 July 2006). Brook Land, Chairman, commenting on the results, said: "The continuing growth from the Energy division and good performances in ourother two businesses have resulted in the Group performing strongly in the firsthalf. Our staff have shown the highest levels of commitment and performance inmarkets that remain busy. The Board anticipates that 2006 as a whole will seeRPS achieve a very satisfactory result. The recent acquisition of the marketleading architectural firm, Burks Green, will support our continued growth into2007." 8 August 2006 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. ENQUIRIESRPS Group plc Today: 020 7457 2020Dr Alan Hearne, Chief Executive Thereafter: 01235 863206Gary Young, Finance Director College HillJustine Warren Tel: 020 7457 2020 CHAIRMAN'S STATEMENT IntroductionRPS 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 admitted to the FTSE 250 on 31 July2006. The good growth we have achieved over a long period has been recognised bythe recent KPMG survey of fast growing European companies. This is continuingin 2006 and reflects both the increasing importance of the issues with which wedeal on behalf of our clients and the successful implementation of our strategy.We have achieved this growth whilst maintaining our reputation as a topquality employer, as recognised in the recent Corporate Research Foundationsurvey. The Board remains confident that our strategy will continue to offerour staff challenging and rewarding careers and deliver growth and good returnsto our shareholders. ResultsProfit before tax was £15.9 million (2005: £10.2 million). Basic earnings pershare were 5.54 pence (2005: 3.83 pence). Operating cash flow was £19.0 million(2005: £9.6 million). The Group had net bank debt of £21.5 million at 30 June(2005: £18.6 million). DividendThe Board has increased the interim dividend by 15% to 1.32 pence (2005: 1.15pence). This will be paid on 25th October 2006 to shareholders on the registeron 29th September 2006. Operations and Markets Planning and Development 2006 2005 Fee income ( £m's) 56.5 48.6 +16%Segment result (£m's) 10.9 8.7 +25%Margin 19.2% 17.9% We remain leaders in this market in both the UK and Ireland, operating for bluechip clients in the public and private sectors. In the UK our ability to adviseupon the full range of issues relevant to the development of sustainablecommunities and secure planning permission for large complex schemes remainsattractive to clients. In consequence, we continue to work on some of the UK'slargest regeneration projects. We are also involved in both the waste andminerals sectors, in which securing planning permission has become more complex. As climate change, energy efficiency and other environmental issues continue togrow in importance in local and national government decision making, ourcompetitive advantage in this market should continue to increase. Our planningbusiness is also able to assist clients in other parts of the Group, forexample, in respect of the need to secure planning permissions for capitalprojects in the energy and water sectors. We have focussed successfully onachieving organic growth over the last year, however, the recent acquisition ofBurks Green (18 July 2006), which provides architectural and engineering adviceto the property development sector, strengthens this business significantly.Its small but growing base in Poland provides us with exposure to this expandingmarket. The Irish Government continues to invest in ambitious plans for infrastructuredevelopment. The new National Development Plan due at the end of the year islikely to continue this strategy. We benefit from this investment in both atraditional consultancy role and also as promoting authorities increasingly usepartnership arrangements, although the latter can give rise to a morechallenging commercial environment. Our work in the private sector in Irelandalso remains buoyant. Our activities in this market in Australia continue to flourish. The long termpotential of this market has encouraged us to consider further acquisitions. Energy 2006 2005 Fee income (£m's) 39.0 15.7 +148%Segment result (£m's) 5.8 1.8 +228%Margin 14.9% 11.3% Demand for our services from oil and gas exploration and production companiescontinues to grow significantly. This reflects both buoyant market conditionsand our position, following the acquisition of ECL in September 2005, as a worldleader in this market. Pressure on the developed world to identify and securelong term supplies of energy, coupled with the increasing energy needs ofdeveloping nations, suggest that activity in this market will remain at a highlevel for the foreseeable future. The acquisition of Ecos during the first halfadded to our ability to provide environmental support to our oil and gas clientsin Australia and Asia. We have a significant and growing reputation within the financial community inrespect of oil and gas reserves as part of the listing process and in support ofM&A activity. The oil and gas companies themselves value the breadth and depthof our expertise, including our environmental experience. Skilled staff havebeen and will remain in short supply, but our position in this market hasenabled us to operate successful recruitment and retention strategies, whilstalso improving our margins. The growing controversy around a number of UK wind farm schemes illustrates thecomplexity involved in securing approval for energy supply schemes. We are wellpositioned to assist our clients achieve the necessary permissions, licences andconsent for all such facilities, including nuclear power stations. Environmental Management 2006 2005 Fee income (£m's) 23.1 18.9 +22%Segment result (£m's) 2.4 1.9 +28%Margin 10.5% 10.1% Our business servicing the UK water industry has progressed well. We areworking on significant commissions for the majority of the water companies.RPS's specific strengths in the water industry coupled with our environmentalcredentials position us well to help with problems created by water shortagesand legislation seeking to improve water quality. This gives us optimism aboutour medium term prospects. The UK market in health & safety consultancy has generally remained strong,driven by increasing awareness of the importance of managing these matters morecarefully. The asbestos market has, as predicted, slowed, but we anticipate thatnew fire safety regulations will provide attractive opportunities. In 2005 weextended our range of services with the acquisition of Business Healthcare Ltd,which provides occupational health services. As anticipated this is proving tobe a growth market. We are also investing in the development of our presence inScotland in these markets. The economy in the Netherlands is improving. The steps we took to reduce ourexposure to the more vulnerable parts of the economy and invest in stablemarkets have continued to produce benefit. Our Dutch business is also benefitingfrom increased activity in the energy sector. FundingOur balance sheet remains strong. Bank interest cover in the period was over 18times. Following the acquisition of Burks Green, which involved an initial cashconsideration of £9.9 million, we have maximum cash commitments in respect ofdeferred consideration and outstanding loan notes related to acquisitions of£5.6 million in the remainder of 2006, £11.0 million in 2007, £2.7 million in2008 and £3.2 million in 2009. The Group's operating cash flow normally fundsits working capital requirements. Our cash generation, in conjunction with bankfacilities of £72 million and an ability to use equity in transactions, meansthat we are well positioned to continue our acquisition programme, in respect ofwhich we have a number of good prospects. Prospects Our excellent first half results demonstrate that our strategy is well conceivedand well executed. The opportunities for both organic and acquisitive growthwhich exist in our business make us confident about maintaining good progress.The RPS Board anticipates that the Group's performance for the year as a wholewill deliver a very satisfactory result. Brook Land Chairman 8 August 2006 Condensed Consolidated Interim Income Statement Notes Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 unaudited unaudited audited £000's £000's £000's Revenue 2 143,022 97,788 217,830Recharged expenses 2 (25,584) (15,446) (34,310)Fee income 2 117,438 82,342 183,520 Operating profit 2 17,280 11,398 26,900 Interest payable and similar charges (1,435) (1,213) (2,757) Interest receivable 90 54 110 Profit before tax 15,935 10,239 24,253 Tax expense 3 (4,844) (2,713) (6,436) Profit for the period attributable to the equity holders 11,091 7,526 17,817of the parent Basic earnings per share (pence) 5 5.54 3.83 9.01 Diluted earnings per share (pence) 5 5.40 3.79 8.82 Condensed Consolidated Interim Statement of Recognised Income and Expense Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 unaudited unaudited audited £000's £000's £000's Exchange differences on translation of foreign (311) (2,515) (1,042) operations recognised in translation reserveActuarial gain/(loss) on defined benefit pension scheme 504 (230) (197)Tax on items taken directly to equity 271 - 1Income and expense recognised directly in equity 464 (2,745) (1,238) Profit for the period 11,091 7,526 17,817 Total recognised income and expense for the period 11,555 4,781 16,579attributable to equity holders of the parent Condensed Consolidated Interim Balance Sheet Notes As at As at As at 30 June 30 June 31 December 2006 2005 2005 unaudited unaudited audited £000's £000's £000's Assets Non current assets Intangible assets 156,193 131,607 155,471 Property, plant and equipment 17,467 17,375 17,947 Deferred tax assets 1,530 1,181 1,565 175,190 150,163 174,983 Current assets Trade and other receivables 84,679 66,896 79,961 Cash at bank 6,846 6,133 10,370 91,525 73,029 90,331Total assets 266,715 223,192 265,314 Equity and liabilities Equity attributable to equity holders of the parent Share capital 7 6,067 5,938 6,048 Share premium 8 88,909 87,563 88,043 Merger reserve 9 5,738 - 5,738 Employee trust shares 9 (2,591) (2,081) (2,400) Share schemes reserve 9 2,855 1,354 2,394 Shares to be issued 9 3,307 - 3,307 Translation reserve 9 (915) (2,077) (604) Retained earnings 8 68,701 51,290 59,345Total equity attributable to equity holders 172,071 141,987 161,871of the parent Liabilities Non-current liabilities Deferred consideration 4,319 6,700 7,988 Bank loans 28,277 22,745 35,472 Retirement benefit obligation 11 1,640 1,997 2,050 Provisions 1,781 2,187 1,951 36,017 33,629 47,461 Current liabilities Bank loans and overdrafts 61 2,035 838 Trade and other payables 43,603 31,618 39,991 Corporation tax liabilities 4,942 3,741 4,632 Deferred consideration 9,674 9,614 10,082 Provisions 347 568 439 58,627 47,576 55,982Total liabilities 94,644 81,205 103,443Total equity and liabilities 266,715 223,192 265,314 Condensed Consolidated Interim Cash Flow Statement Notes Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 unaudited unaudited audited £000's £000's £000's Cash generated from operations 10 19,028 9,551 28,149 Interest paid (1,046) (803) (1,872) Interest received 91 54 110 Income taxes paid (4,036) (2,925) (5,612)Net cash generated from operating activities 14,037 5,877 20,775 Cash flows from investing activitiesPurchases of subsidiary undertakings and businesses (737) - (15,740)Net cash acquired with subsidiary undertakings 22 - 1,734Proceeds from sale of property, plant & equipment 709 136 198Deferred consideration paid (4,699) (4,369) (8,756)Purchase of property, plant and equipment 6 (2,064) (1,991) (3,906) Net cash used in investing activities (6,769) (6,224) (26,470) Cash flows from financing activitiesProceeds from issue of share capital 497 45 217(Repayment)/proceeds from bank borrowings (6,984) 1,947 14,670Payment of finance lease liabilities - (33) (45)Dividends paid (2,510) (2,125) (4,404)Payment of pre-acquisition dividend (500) - -Net cash used in financing activities (9,497) (166) 10,438 Net (decrease)/increase in cash and cash equivalents (2,229) (513) 4,743 Cash and cash equivalents at beginning of period 9,593 4,701 4,701 Effect of exchange rate fluctuations (518) (18) 149 Cash and cash equivalents at end of period 6,846 4,170 9,593 Cash and cash equivalents comprise: Cash at bank 6,846 6,133 10,370 Bank overdraft - (1,963) (777)Cash and cash equivalents at end of period 10 6,846 4,170 9,593 Notes to the Condensed Consolidated Interim Financial Statements 1. Basis of Preparation RPS Group Plc (the "Company") is a company domiciled in England. The condensedconsolidated interim financial statements of the Company for the six monthsended 30 June 2006 comprise the Company and its subsidiaries (together referredto as the "Group"). The condensed consolidated interim financial statements were authorised forissuance on 8 August 2006. The interim statement has been prepared using accounting policies set out in theAnnual Report and Accounts 2005. The interim statement is unaudited but hasbeen reviewed by the Company's auditors. The results for the year end 31December 2005 and the balance sheet as at that date are abridged from thecompany's Annual Report and Accounts 2005 which have been delivered to theRegistrar of Companies. The auditors' report on those accounts was unqualifiedand did not contain a statement under Section 237(2) or (3) of the Companies Act1985. The interim statement does not constitute full accounts within the meaningof Section 240 of the Companies Act 1985. Copies of the Interim Results will bedispatched to shareholders on 29 August 2006. Further copies can be obtainedfrom the Company's registered office, Centurion Court, 85 Milton Park, Abingdon,OX14 4RY. 2. Business segments The Group is comprised of the following main business segments: Planning and Development - consultancy services in the UK, Ireland and Australiarelated to town and country planning, urban design, architecture, transportplanning and highway design, environmental impact assessment and provision ofwater and waste utilities and energy infrastructure. Environmental Management - consultancy services in the UK and the Netherlandsrelated to health, safety and risk management and the management of waterservices. Energy - the provision of consultancy services on an international basis to theoil and gas, renewable energy and nuclear sectors. The segment results for the six months ended 30 June 2006 include the Australianenvironmental business in Planning & Development, previously reported in Energy.The comparative analysis has been restated to be consistent. Business segment results for the six months ended 30 June 2006 Planning and Environmental Energy Eliminations Consolidated Development Management _______________ ________________ _______________ _______________ ______________ 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June 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 68,677 58,901 27,227 21,814 48,261 18,052 (1,143) (979) 143,022 97,788revenueLess:recharged (12,174) (10,315) (4,126) (2,943) (9,284) (2,332) - 144 (25,584) (15,446)expenses Fee income 56,503 48,586 23,101 18,871 38,977 15,720 (1,143) (835) 117,438 82,342 Segment 10,851 8,698 2,432 1,900 5,822 1,773 - - 19,105 12,371result Unallocated (1,825) (973)expenses Operating 17,280 11,398profit 3. Income taxes The Group's consolidated effective tax rate for the six months ended 30 June2006 was 30.4% (for the year ended 31 December 2005: 26.5%; for the six monthsended 30 June 2005: 26.5%). 4. Dividends The following dividends were provided by RPS Group Plc: Six Six Year months months ended 31 ended 30 ended 30 Dec 2005 June 2006 June 2005 £000's £000's £000's 1.25 p per share 2,510 - -1.15 p per share - - 2,2701.08 p per share - 2,134 2,134 2,510 2,134 4,404 An interim dividend in respect of the six months ended 30 June 2006 of 1.32p pershare, amounting to a total dividend of £2,680,000 was approved by the Directorsof RPS Group Plc on 27 July 2006. These condensed consolidated interim accountsdo not reflect this dividend payable. 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: Six months Six months Year ended ended 30 ended 30 31 Dec June June 2006 2005 2005 £000's £000's £000's Profit attributable to ordinary shareholders 11,091 7,526 17,817 Six months Six months Year ended ended 30 ended 30 31 Dec June June 2006 2005 2005 000's 000's 000'sWeighted average number of ordinary shares for the purposes ofbasic earnings per share 200,340 196,632 197,677 Effect of shares to be issued as deferred consideration 1,862 387 1,862Effect of employee shares schemes 3,325 1,795 2,472Weighted average number of ordinary shares for the purposes ofdiluted earnings per share 205,527 198,814 202,011 Basic earnings per share (pence) 5.54 3.83 9.01Diluted earnings per share (pence) 5.40 3.79 8.82 6. Property, plant and equipment Acquisition and disposals During the six months ended 30 June 2006, the Group acquired assets with a costof £2,064,000 (six months to 30 June 2005: £1,991,000) which includes £44,000acquired through business combinations (six months to 30 June 2005 : £nil).Assets with a net book value of £699,000 were disposed of during the six monthsended 30 June 2006 (six months ended 30 June 2005: £121,000). 7. Share Capital 2006 2006 2005 2005 Number £000s Number £000s 000s 000sAuthorisedOrdinary shares of 3p made at 30 June 240,000 7,200 240,000 7,200 Issued and fully paidOrdinary shares of 3p eachAt 1 January 201,610 6,048 197,732 5,933Issued under share option schemes 409 13 54 1Issued under the Share Incentive Plan 106 3 141 4Issued in respect of the Performance Share Plan 110 3 6 -At 30 June 202,235 6,067 197,933 5,938 8. Statement of changes in equity Share Share Retained Other Total capital premium earnings reserves equity £000s £000s £000s £000s £000s At 1 January 2005 5,933 87,308 46,128 (570) 138,799 Actuarial loss (230) (230)Exchange differences (2,515) (2,515)Net expense recognised directly in equity - - (230) (2,515) (2,745)Profit for the period 7,526 7,526Total recognised income and expense for period - - 7,296 (2,515) 4,781Issue of new ordinary shares 5 255 - - 260Own shares (214) (214)Included in income statement 495 495Dividends (2,134) (2,134)At 30 June 2005 5,938 87,563 51,290 (2,804) 141,987 Share Share Retained Other Total capital premium earnings reserves equity £000s £000s £000s £000s £000s At 1 January 2006 6,048 88,043 59,345 8,435 161,871 Actuarial gain 504 504Tax on items taken directly to equity 271 271Exchange differences (311) (311)Net income and expense recognised directly in - - 775 (311) 464equityProfit for the period 11,091 11,091Total recognised income and expense for period - - 11,866 (311) 11,555Issue of new ordinary shares 19 866 (197) 688Own shares (191) (191)Included in income statement 658 658Dividends (2,510) (2,510)At 30 June 2006 6,067 88,909 68,701 8,394 172,071 9. Other Reserves Merger Employee Share Shares to be Translation Total reserve trust scheme issued reserve other £000s £000s £000s £000s £000s £000s At 1 January 2005 - (1,867) 859 - 438 (570)Exchange differences (2,515) (2,515)Own shares (214) (214)Included in income statement 495 495At 30 June 2005 - (2,081) 1,354 - (2,077) (2,804) Merger reserve Employee Share Shares to be Translation Total other trust scheme issued reserve reserves £000s £000s £000s £000s £000s £000s At 1 January 2006 5,738 (2,400) 2,394 3,307 (604) 8,435Exchange differences (311) (311)Issue of new ordinary shares (197) (197)Own shares (191) (191)Included in income statement 658 658At 30 June 2006 5,738 (2,591) 2,855 3,307 (915) 8,394 10. Note to the cash flow statement Six months Six months Year ended ended ended 31 Dec 30 June 30 June 2006 2005 2005 £000's £000's £000's Profit before tax 15,935 10,239 24,253Adjustments for: Interest payable and similar charges 1,435 1,213 2,757 Interest receivable (90) (54) (110) Depreciation 1,965 1,892 3,848 Gain on disposal of property, plant and (40) - (24) equipment Share based payment expense 658 931 1,535 Increase in trade and other receivables (4,098) (2,714) (4,247) Increase / (decrease) in trade and other 3,263 (1,956) 137 payablesCash generated from operations 19,028 9,551 28,149 The table below provides an analysis of net bank debt, comprising cash and cashequivalents and interest bearing bank loans, during the six months ended 30 June2006. At 31 Dec 2005 Change in Cash flow Foreign At 30 June loans exchange 2006 £000's £000's £000's £000's £000's Cash and cash equivalents 9,593 - (2,229) (518) 6,846Bank loans (35,533) 6,984 - 211 (28,338)Net bank debt (25,940) 6,984 (2,229) (307) (21,492) 11. Retirement benefit obligations The Group provides employee benefits through a number of pension schemes of thedefined contribution type in the UK and overseas. The Group operates one definedbenefit scheme that is closed to new members. The full details of this schemeare disclosed in the most recent annual financial statements. The amount included in the balance sheet arising from the Group's obligation inrespect of its defined benefit retirement benefit scheme is as follows: As at As at As at 30 June 30 June 31 December 2006 2005 2005 £000's £000's £000's Present value of defined benefit obligations 5,202 4,833 5,416Fair value of scheme assets 3,562 2,836 3,366Deficit in the scheme 1,640 1,997 2,050 Expense recognised in the consolidated interim statement in respect of thedefined benefit plan The expense recognised in the consolidated interim income statement in respectof the Group's defined benefit pension plan consists of the current servicecosts, interest on the obligation for employee benefits and the expected returnon plan assets. For the six months ended 30 June 2006, the Group recognisedexpense of £277,000 (six months ended 30 June 2005: £249,000). Liability for defined benefit obligations Principal actuarial assumptions at the date of the most recent actuarialvaluations: 30 June 2006 30 June 31 December 2005 2005 Discount rate 5.00% 4.30% 4.25%Expected return on plan assets 6.00% 6.07% 6.00%Future salary increases 4.00% 4.00% 4.00%Future pension increases 2.50% 2.50% 2.50% Actuarial gains and losses have been reported in the Statement of RecognisedIncome and Expense. 12. Post balance sheet event On 18 July 2006 RPS Group Plc completed the acquisition of 100% of BasicshareLtd and its subsidiary companies Martindale Holdings Ltd and Burks Green andPartners Ltd (collectively "Burks Green"). The total consideration is a maximumof £21,174,327 and net assets at 31 March 2006 were £2,700,000. Theconsideration paid at completion was £9,948,225 in cash and 1,471,259 new RPSGroup Plc ordinary shares with a total value of £3,225,000. In addition thecompany issued guaranteed loan notes to the value of £8,001,102 that bearinterest at 4.5% per annum. Of these loan notes £2,968,641 can be redeemed onthe first anniversary of completion, £2,366,369 on the second anniversary andthe balance of £2,666,092 on the third anniversary, provided certain operationalconditions are met. Independent Review Report to RPS Group Plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2006 on pages 7 to 18. We have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the financialinformation. Our report has been prepared in accordance with the terms of our engagement toassist the Company in meeting the requirements of the Listing Rules of theFinancial Services Authority and for no other purpose. No person is entitled torely on this report unless such a person is a person entitled to rely upon thisreport by virtue of and for the purpose of our terms of engagement or has beenexpressly authorised to do so by our prior written consent. Save as above, we donot accept responsibility for this report to any other person or for any otherpurpose and we hereby expressly disclaim any and all such liability. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification ofassets, liabilities and transactions. It is substantially less in scope than anaudit performed in accordance with International Standards on Auditing (UK andIreland) issued by the Auditing Practices Board and therefore provides a lowerlevel of assurance than an audit. Accordingly, we do not express an auditopinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. BDO Stoy Hayward LLPChartered AccountantsLondon8 August 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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