Interim Results

RNS Number : 1134Q

RPS Group PLC

29 July 2010

 

RPS GROUP PLC

("RPS" or "the Group")

 

 

Interim Results for the six months ended 30 June 2010

 

Group results for the period represent a continuation of trends from the second half of 2009 and are in line with expectations. The Group's financial position remains strong and the interim dividend has been increased 15%.

 

	2010	2009
	H1	H2	H1
Revenue (£m)	226.0	222.4	221.5
Fee income (£m)	192.5	188.4	185.9
Operating profit* (£m)	25.4	25.1	30.2
Profit before taxation* (£m)	23.4	23.3	29.2
Earnings per share* (basic) (p)	7.52	7.58	9.50
Bank borrowing (£m)	40.9	32.8	14.4
Dividend per share (p)	2.31	2.19	2.01
Statutory profit before tax (£m)	21.0	21.1	27.5
Statutory earnings per share (basic) (p)	6.75	6.85	8.93

 

*before amortisation of intangible assets of £2.3 million (2009 H1: £1.7 million, 2009 H2: £2.2 million)

 

Brook Land, Chairman, commenting on the results, said:

 

"This is a creditable set of results which reflects well on the management and staff of the business who are continuing to deal with challenging conditions in an effective manner.

 

"Our April IMS indicated that we expected the timing of recovery would vary from market to market and that it would be reasonable to expect an earlier and stronger upturn in our Energy business.

 

"This has proved to be the case and there have been early signs of improvement in the oil and gas market and in our risk management activities in the UK. Improvement in other markets is generally not yet discernible and in Ireland the expected level of infrastructure investment suggests we will experience further contraction before achieving stability. The fiscal tightening now underway on an international basis makes predicting immediate future trends more uncertain, but the Board remains of the view that a modest improvement in the second half is achievable. We are continuing with our acquisition strategy, which should assist the growth of the Group.

 

"RPS is well positioned in markets of fundamental importance to the global economy and with significant long term growth potential. Increasing attention is being focussed on rebuilding economic activity in an efficient, sustainable way, powered by energy resources from safe, secure and environmentally acceptable sources. These trends play to RPS's core strengths and will drive renewed growth once more of our markets begin to improve."

 

29 July 2010 

 

 

ENQUIRIES
RPS Group plc	Today: 020 7457 2020
Dr Alan Hearne, Chief Executive	Thereafter: 01235 863206
Gary Young, Finance Director
College Hill
Justine Warren	Tel: 020 7457 2020
Matthew Smallwood

 

 

RPS is an international consultancy providing advice upon the development of natural resources, land and property, the management of the environment and the health and safety of people. We have offices in the UK, Ireland, the Netherlands, the Americas, Australia and 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.

 

Introduction

 

RPS is an international consultancy providing advice upon the development of natural resources, land and property, the management of the environment and the health and safety of people. We are leaders in a range of markets which are strategically important at a global level. Our diverse range of activities and strong market position, in combination with the focus and experience of our management, has enabled us to produce creditable results in the first half of the year.

 

Results and Funding

 

RPS has traded effectively during another period when economic, political and financial conditions have dictated that many of our clients remain cautious and cost conscious. Conditions in all our main business areas deteriorated during the latter part of 2009. As a result our profits in the first half of that year significantly exceeded those in the second period. The conditions we have faced so far in 2010 broadly reflect those experienced towards the end of 2009. In consequence, as anticipated in our April IMS, the results reported here are similar to those in the second half of 2009.

 

Profit (before tax and amortisation of acquired intangibles) was £23.4 million (2009: £29.2 million). Basic earnings per share (before amortisation) were 7.52 pence (2009: 9.50 pence). These results were achieved after absorbing costs of £1.9 million (2009: £2.2 million) which were incurred in the reorganisation of parts of the Group's business in response to the continuing uncertain economic conditions, as well as the integration of Conics and consolidation of a number of offices in Perth.

 

Our balance sheet remains strong. After funding acquisition consideration of £8.2 million, net bank borrowings were £40.9 million at 30 June (31 December 2009: £32.8 million). Our committed bank facilities, which do not expire until 2013, are £125 million.

 

Dividend

 

The Board remains confident about the Group's financial strength and has, therefore, increased the interim dividend by 15% to 2.31 pence per share (2009: 2.01 pence) payable on 21 October 2010 to shareholders on the register on 24 September 2010.

 

Acquisitions

 

During the course of the first half we completed two acquisitions, the details of which have been announced previously. Aquaterra adds significantly to our business in Australia with its water resource and environmental skills and enables us to begin developing our presence in the international mining sector. Health in Business complements and strengthens our existing UK occupational health business, which is operating in a market with encouraging prospects. Further opportunities are under consideration and we are hopeful of completing transactions in Australia and North America in the second half.

 

Markets and Trading

 

Energy

 

We provide internationally recognised consultancy services to the oil and gas industries from bases in the UK, USA, Canada, Australia and Asia Pacific, which act as regional hubs for projects undertaken in many other countries. In the UK we are also market leaders in the provision of environmental and engineering advice to the offshore wind energy industry.

 

 

	2010	2009
	H1	H2	H1
Fee income (£m)	76.9	72.4	76.6
Underlying profit* (£m)	13.5	12.0	16.0
Margin %	17.5	16.6	20.8

 

*before amortisation of acquired intangible assets of £0.8 million (2009 H1: £0.9 million, 2009 H2: £0.9 million) and reorganisation costs of £0.1 million (2009 H1: £0.2 million, 2009 H2: £0.1 million)

 

 

Market conditions in the first part of 2010 showed modest improvement over the latter part of 2009. Although the Macondo oil spill in the Gulf of Mexico created uncertainty towards the end of the period, its impact on our results was not material. A number of the projects in which we are involved are of a long term nature, reflecting the complexity of identifying and securing sources of oil and gas in increasingly challenging environments. These continued to provide a solid underpin for our business, along with our work for National Oil Companies, which maintained investment at a relatively high level. Asset transactions and reserves determination remained a good source of income and we also benefited from a strong performance from our specialist metocean and marine environmental activities. Pricing pressure from our clients continued and recruitment issues have begun to re-emerge. Nonetheless, our operating margin held up well, which reflects both our market prominence and high quality management.

 

A number of clients we assisted in 2009 to bid for Round 3 licences from the Crown Estate to develop wind farms off the UK coast were successful. In consequence, we remain involved at a significant level in this aspect of the development of UK energy capacity.

 

Planning and Development

 

Within these businesses we provide consultancy services in respect of town and country planning, building, landscape and urban design, transport planning and environmental assessment. We remain leaders in this market in the UK, Ireland, Northern Ireland and Australia. The acquisition of Conics in 2009 materially strengthened our market position in Australia.

 

 

2010 H1	GB	Ireland	Australia	Total
Fee income+ (£m)	29.1	25.7	28.7	83.4
Profit* (£m)	4.4	2.2	5.2	11.7
Margin (%)	15.1	8.5	17.9	14.1

 

+fee income total is after intra-segment eliminations of £0.1 million

*before total amortisation of acquired intangibles assets of £1.3 million and total reorganisation costs of £1.6million

 

 

 

2009 H2	GB	Ireland	Australia	Total
Fee income+ (£m)	29.9	30.3	25.2	85.6
Profit* (£m)	4.5	2.3	5.9	12.7
Margin (%)	15.1	7.5	23.3	14.8

 

+ fee income total is after intra-segment eliminations of £0.1 million

* before total amortisation of acquired intangible assets of £1.1 million and total reorganisation costs of £1.0 million

 

 

2009 H1	GB	Ireland	Australia	Total
Fee income+ (£m)	34.6	33.2	8.0	75.4
Profit* (£m)	7.9	3.7	2.4	14.0
Margin (%)	22.7	11.2	30.2	18.6

 

+ fee income total is after intra-segment eliminations of £0.4 million

* before total amortisation of acquired intangible assets of £0.6 million and total reorganisation costs of £1.8 million

 

The economic downturn has had a severe impact on private sector development in Britain. It began to be felt in the second half of 2008. We moved quickly to reduce capacity and costs, a process which continued throughout 2009. The market remained affected by a low level of investment in the first part of 2010, although we experienced greater stability at this reduced level.

 

Our direct exposure to Central and Local Government expenditure in Britain is limited. The public/private finance projects with which we are involved continued. A number of our larger private sector clients are involved in the provision of infrastructure particularly in the energy, waste management and transport sectors. Their investment continued through the uncertainty of the election and change of Government.

 

In the Republic of Ireland our strategy of maintaining market leadership despite very difficult markets is proving successful. However, our business depends significantly on projects financed by Government agencies and public finances continued to be under pressure. As a result resources allocated to capital projects was significantly below that planned in the Government's budget in December 2009. This had an adverse impact on our business and required further cost cutting. Our business in Northern Ireland has a larger proportion of private sector work and trading conditions in the first part of 2010 were reasonably stable.

 

In Australia clients developing substantial indigenous gas reserves continued investing at a high level, but sought to take advantage of economic circumstances by imposing pricing pressure. The proposed resources tax temporarily delayed the progression of a number of major projects in the mining sector in Queensland. Commercial development clients have better end user demand than in much of the rest of the developed world, but became increasingly constrained by credit availability. The high margin of the business driven by the exceptionally strong market in earlier years has now come back to a more normal level.

 

The integration of Conics began early in the year and will continue into the third quarter. The business has been rebranded and new systems introduced. Most of our offices in Perth have been co-located into one office, which has, in consequence, become the Group's largest individual office and will shortly also house the local Aquaterra staff.

 

Environmental Management

 

This business provides consultancy services in respect of health, safety, risk, water and property management in the UK and the Netherlands.

 

 

	2010	2009
	H1	H2	H1
Fee income (£m)	33.9	32.0	35.1
Underlying profit* (£m)	5.0	4.9	5.5
Margin %	14.7	15.3	15.6

 

*before amortisation of acquired intangible assets of £0.2m (2009 H1: £0.2 million, 2009 H2: £0.2 million)

and reorganisation costs of £0.3m (2009 H1: £0.2 million, 2009 H2: £0.2 million)

 

Our UK activities are largely driven by regulatory requirements placed upon our clients, are tightly managed and, in consequence, performed well. The business we have producing safety cases for the nuclear industry remained busy and produced good returns. Our water activities in the UK continued to operate efficiently at the level of activity to be expected at this stage of the regulatory cycle. Our Health & Safety and Occupational Health activities performed well, albeit under pricing pressure. In the Netherlands, as anticipated, public sector activity held up well, but our private sector property clients, apparently concerned about financial problems in the eurozone, reduced investment levels. The overall margin of the business remains good for the sector.

 

Prospects

 

RPS remains a leading operator in a range of markets with long term attractions. Continuing uncertain economic conditions and the advent of significant fiscal tightening on an international scale means that the immediate future of these markets remains difficult to predict. The efficiencies and reduced cost base throughout our business will enable us to benefit relatively quickly as clients become more active.

 

In the UK our private sector development clients providing infrastructure generally remain positive, but would benefit from a positive policy framework emerging from the new Government in respect of such projects and how they will achieve the permissions necessary to enable construction. Other development clients would benefit from stronger end user demand and are inevitably concerned about the effects of the reductions in public expenditure being planned.

 

It seems likely that our Energy business could further improve its performance in the second half. Events at the Macondo well have created general uncertainty about projects in the Gulf of Mexico, although this does not seem likely to lead to significant changes in short term investment plans elsewhere. In the medium term increased focus in exploration and production activities on risk, safety and environmental management issues is likely to benefit us, as should growing investment in the development of unconventional forms of gas. We gain exposure to the buoyant Asian economies with this business and the initiatives we have taken to develop our activities in Brazil and the Middle East are beginning to have a positive effect.

 

The Irish economy has recently emerged from recession. It will probably take some while for this export led recovery to feed through in to stronger domestic demand and increased tax revenue. In the meantime Government expenditure on capital projects will remain under significant pressure. We continue to monitor closely the prospects for this business and the carrying value of acquired assets. In Northern Ireland we wait to see the effect of any reductions in public expenditure.

 

In Australia the economy is generally performing well and the recent resolution of the resources tax issue should see an increase in mining activity. Investment in energy projects is likely to remain robust, although pricing pressures will remain. Private sector developer clients may not have sufficient finance available to increase activity until global economic recovery has progressed further.

 

Those environmental management businesses driven by our clients' need to comply with regulation continue to have a stable outlook. Prospects with our private sector clients in the Netherlands are uncertain, but we have recently secured significant new contracts with water utilities across the UK and expect to see volumes of work resulting from these contracts pick up steadily over the next year.

 

Modest improvement in the second half remains achievable and our balance sheet is able to support further expansion of the Group. Once economic recovery is more robust, we are well placed to re-establish our growth momentum.

 

  

Board of Directors

RPS Group plc

29 July 2010

 

Condensed consolidated income statement
		Notes	Six months ended 30 June	Six months ended 30 June	Year ended 31 December
			2010	2009	2009
			unaudited	unaudited	audited
			£000's	£000's	£000's
	Revenue	3	225,966	221,530	443,909
	Recharged expenses	3	(33,438)	(35,581)	(69,558)
	Fee income	3	192,528	185,949	374,351
	Operating profit	3	23,086	28,515	51,448
	Finance costs		(2,137)	(1,206)	(3,113)
	Finance income		73	180	268
	Profit before tax and amortisation of acquired intangibles		23,355	29,198	52,472
	Amortisation of acquired intangibles		(2,333)	(1,709)	(3,869)
	Profit before tax		21,022	27,489	48,603
	Tax expense	4	(6,559)	(8,522)	(14,997)
	Profit for the period attributable to equity holders of the parent		14,463	18,967	33,606
	Basic earnings per share (pence)	5	6.75	8.93	15.78
	Diluted earnings per share (pence)	5	6.68	8.83	15.59
	Basic earnings per share before amortisation of acquired intangibles (pence)	5	7.52	9.50	17.08
	Diluted earnings per share before amortisation of acquired intangibles (pence)	5	7.44	9.40	16.87

 

Condensed consolidated statement of comprehensive income
		Six months ended 30 June			Six months ended 30 June	Year  ended 31 December
		2010			2009	2009
		unaudited			unaudited	audited
		£000's			£000's	£000's
Profit for the period		14,463			18,967	33,606
Other comprehensive income:
Exchange differences		(4,357)			(12,022)	(3,804)
Tax recognised directly in equity				(42)	97	188
Total recognised comprehensive income for the period attributable to equity holders of the parent		10,064			7,042	29,990

Condensed consolidated balance sheet

			As at 30 June	As at 30 June	As at 31 December
			2010	2009	2009
			unaudited	unaudited	audited
		Notes	£000's	£000's	£000's
Assets
	Non-current assets
	Intangible assets		297,848	255,920	293,943
	Property, plant and equipment	6	27,870	21,545	28,226
	Investments in associates		190	-	204
			325,908	277,465	322,373
	Current assets
	Trade and other receivables		153,882	138,825	139,247
	Cash at bank		11,620	11,889	13,691
			165,502	150,714	152,938
Liabilities
Current liabilities
Borrowings			1,615	139	1,802
Deferred consideration			12,324	14,644	15,652
Trade and other payables			74,277	72,066	68,678
Corporation tax liabilities			5,305	7,557	6,135
Provisions			1,010	1,264	1,324
			94,531	95,670	93,591
Net current assets			70,971	55,044	59,347
Non-current liabilities
Borrowings			50,942	26,164	44,652
Deferred consideration			10,250	4,757	9,289
Other creditors			1,718	411	1,301
Deferred tax liabilities			10,361	5,274	9,791
Provisions			2,626	2,896	3,219
			75,897	39,502	68,252
Net assets			320,982	293,007	313,468
	Equity
	Share capital	8	6,494	6,434	6,457
	Share premium		100,375	96,771	98,238
	Other reserves	9	34,900	31,815	39,519
	Retained earnings		179,213	157,987	169,254
	Total shareholders' equity		320,982	293,007	313,468

 

Condensed consolidated cash flow statement

			Six months ended 30 June	Six months ended 30 June	Year ended 31 December
			2010	2009	2009
		Notes	unaudited £000's	unaudited £000's	audited £000's
Cash generated from operations		11	21,071	34,452	70,583
Interest paid			(2,080)	(1,541)	(3,839)
Interest received			73	180	268
Income taxes paid			(8,479)	(4,865)	(12,550)
Net cash from operating activities			10,585	28,226	54,462
Cash flows from investing activities
Purchases of subsidiaries net of cash acquired			(2,465)	(14)	(20,616)
Deferred consideration			(5,688)	(7,399)	(15,075)
Purchase of property, plant and equipment			(3,713)	(1,760)	(4,061)
Sale of property, plant and equipment			122	39	86
Net cash used in investing activities			(11,744)	(9,134)	(39,666)
Cash flows from financing activities
Proceeds from issue of share capital			72	144	381
(Repayments)/proceeds from bank borrowings			5,682	(17,164)	(9,023)
Payment of finance lease liabilities			(739)	(30)	(599)
Dividends paid			(4,722)	(4,076)	(8,410)
Payment of pre-acquisition dividend			-	-	(1,511)
Net cash used in financing activities			293	(21,126)	(19,162)
Net (decrease)/increase in cash and cash equivalents			(866)	(2,034)	(4,366)
Cash and cash equivalents at beginning of period			13,691	16,707	16,707
Effect of exchange rate fluctuations			(1,205)	(2,885)	1,350
Cash and cash equivalents at end of period		11	11,620	11,788	13,691
Cash and cash equivalents comprise:
Cash at bank			11,620	11,889	13,691
Bank overdraft			-	(101)	-
Cash and cash equivalents at end of period			11,620	11,788	13,691

 

Condensed consolidated statement of changes in equity

  

	Share capital	Share premium	Retained earnings	Other reserves (Note 9)	Total equity
	£000's	£000's	£000's	£000's	£000's
Changes in equity during 2010
At 1 January 2010	6,457	98,238	169,254	39,519	313,468
Total comprehensive income for the period	-	-	14,421	(4,357)	10,064
Issue of new ordinary shares	37	2,142	(1,257)	(262)	660
Share based payment expense	-	-	1,517	-	1,517
Expenses of issue of equity shares	-	(5)	-	-	(5)
Dividends	-	-	(4,722)	-	(4,722)
At 30 June 2010	6,494	100,375	179,213	34,900	320,982
Changes in equity during 2009
At 1 January 2009	6,399	95,531	142,126	43,551	287,607
Total comprehensive income for the period	-	-	19,064	(12,022)	7,042
Issue of new ordinary shares	35	1,249	(795)	286	775
Share based payment expense	-	-	1,668	-	1,668
Expenses of issue of equity shares	-	(9)	-	-	(9)
Dividends	-	-	(4,076)	-	(4,076)
At 30 June 2009	6,434	96,771	157,987	31,815	293,007

 

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 2010 comprise the Company and its subsidiaries (together referred to as the "Group").

 

The IASB has issued the following revised and updated standards that are applicable to the Group and that resulted in changes in presentation for this accounting period; IAS 27 (amended) "Consolidated and separate financial statements" and IFRS 3 (revised) "Business Combinations".

 

Since the 2009 Annual Report the IASB has also issued a variety of IFRIC amendments and interpretations that have no impact on the Group's reporting.

 

Otherwise, the condensed interim financial statements have been prepared using accounting policies set out in the Report and Accounts 2009. They are in accordance with IAS 34. The condensed interim financial statements are unaudited but have been reviewed by the Company's auditors. The results for the year end 31 December 2009 and the balance sheet as at that date are abridged from the Company's Report and Accounts 2009 which have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not contain references to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain a statement under sections 498 (2) or 498 (3) of the Companies Act 2006.

 

The condensed interim financial statements do not constitute full accounts within the meaning of Section 434 of the Companies Act 2006.

 

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

  

 

A. S. Hearne G. R. Young

Chief Executive Group Finance Director

 

 

3. Business segments

 

Segment information is presented in respect of the Group's business segments which are reported to the Chief Operating Decision Maker (CODM). The business segment reporting format reflects the Group's management and internal structure. Inter-segment pricing is determined on an 'arm's length' basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

 

The Group comprises the following business segments:

 

Planning and Development - consultancy services in the GB, Ireland (comprising the Republic of Ireland and Northern Ireland) and Australia relating to town and country planning, landscape and urban design, architecture, transport planning and highway design, environmental impact assessment and provision of water and waste utilities and energy infrastructure.

 

Environmental Management - consultancy services in the UK and the Netherlands related to property management, environmental science, the management of water resources and health, safety and risk management other than to the oil and gas sector.

 

Energy - the provision of a wide range of consultancy services including those related to health, safety and risk management, on an international basis, to the upstream oil and gas and offshore renewable energy sectors.

 

Segment results for the period ended 30 June 2010:
£000's	Fees		Recharged  expenses	Intersegment revenue	External  revenue
Planning and Development:
GB	29,136		3,068	(848)	31,356
Ireland	25,671		5,158	(85)	30,744
Australia	28,733		8,967	(425)	37,275
Intra P&D eliminations	(118)		-	118	-
Total Planning and Development	83,422		17,193	(1,240)	99,375
Energy	76,911		12,447	(197)	89,161
Environmental Management	33,868		3,937	(375)	37,430
Group eliminations	(1,673)		(139)	1,812	-
Total	192,528		33,438	-	225,966
£000's	Underlying profit		Reorganisation  costs	Amortisation of acquired intangibles	Segment result
Planning and Development:
GB	4,403		(250)	(418)	3,735
Ireland	2,181		(285)	-	1,896
Australia	5,154		(1,030)	(909)	3,215
Total Planning and Development	11,738		(1,565)	(1,327)	8,846
Energy	13,456		(98)	(824)	12,534
Environmental Management	4,980		(253)	(182)	4,545
Total	30,174		(1,916)	(2,333)	25,925
Segment results for the period ended 30 June 2009:
£000's	Fees	Recharged  expenses		Intersegment  revenue	External  revenue
Planning and Development:
GB	34,649	4,388		(868)	38,169
Ireland	33,154	9,206		(78)	42,282
Australia	7,991	4,118		-	12,109
Intra P&D eliminations	(433)	-		433	-
Total Planning and Development	75,361	17,712		(513)	92,560
Energy	76,610	13,290		(225)	89,675
Environmental Management	35,136	4,579		(420)	39,295
Group eliminations	(1,158)	-		1,158	-
Total	185,949	35,581		-	221,530

 

£000's	Underlying  profit	Reorganisation  costs	Amortisation of acquired intangibles	Segment  result
Planning and Development:
GB	7,866	(1,319)	(468)	6,079
Ireland	3,712	(494)	-	3,218
Australia	2,417	(10)	(131)	2,276
Total Planning and Development	13,995	(1,823)	(599)	11,573
Energy	15,965	(168)	(926)	14,871
Environmental Management	5,472	(180)	(184)	5,108
Total	35,432	(2,171)	(1,709)	31,552
Group reconciliation
£000's	30 June 2010	30 June 2009
Revenue	225,966	221,530
Recharged expenses	(33,438)	(35,581)
Fees	192,528	185,949
Underlying profit	30,174	35,432
Reorganisation costs	(1,916)	(2,171)
Unallocated expenses	(2,839)	(3,037)
Operating profit before amortisation	25,419	30,224
Amortisation	(2,333)	(1,709)
Operating profit	23,086	28,515
Finance costs	(2,064)	(1,026)
Profit before tax	21,022	27,489
Total segment assets were as follows:
£000's	30 June 2010	31 December 2009
Planning and Development:
GB	104,504	107,356
Ireland	84,088	87,660
Australia	92,029	76,432
Total Planning and Development	280,621	271,448
Energy	145,389	138,310
Environmental Management	60,737	58,886
Unallocated	4,663	6,667
Total	491,410	475,311

 

 

4. Income taxes

The Group's consolidated effective tax rate for the six months ended 30 June 2010 was 31.2% (for the year ended 31 December 2009: 30.9%; for the six months ended 30 June 2009: 31.0%).

5. 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:

 

	Six months  ended 30 June	Six months ended 30 June	Year ended  31 Dec
£000's	2010	2009	2009
Profit attributable to ordinary shareholders	14,463	18,967	33,606
	000's	000's	000's
Weighted average number of ordinary shares for the purposes of basic earnings per share	214,383	212,515	212,943
Effect of shares to be issued as deferred consideration	-	310	286
Effect of employee share schemes	2,285	1,934	2,347
Weighted average number of ordinary shares for the purposes of diluted earnings per share	216,668	214,759	215,576
Basic earning per share (pence)	6.75	8.93	15.78
Diluted earnings per share (pence)	6.68	8.83	15.59

 

 

The directors consider that earnings per share before amortisation provides a more meaningful measure of the Group's performance than statutory earnings per share. The calculation of basic and diluted earnings per share before amortisation is based on the weighted average number of ordinary shares during the period as shown above, the profit attributable to ordinary shareholders before the amortisation on acquired intangible assets and the tax thereon as shown in the table below.

 

 

£000's	Six months ended 30 June 2010	Six months ended 30 June 2009	Year ended 31 Dec 2009
Profit attributable to ordinary shareholders	14,463	18,967	33,606
Amortisation of acquired intangibles	2,333	1,709	3,869
Tax on amortisation of acquired intangibles	(675)	(484)	(1,106)
Adjusted profit attributable to ordinary shareholders	16,121	20,192	36,369
Basic earnings before per share before amortisation (pence)	7.52	9.50	17.08
Diluted earnings per share before amortisation (pence)	7.44	9.40	16.87

 

6. Property, plant and equipment

During the six months ended 30 June 2010, the Group acquired assets with a cost of £4,090,000 (six months to 30 June 2009: £1,760,000), which includes £334,000 acquired through business combinations (six months to 30 June 2009: £nil). Assets with a net book value of £130,000 were disposed of during the six months ended 30 June 2010 (six months ended 30 June 2009: £54,000).

 

 

7. Acquisitions

 

The Group has completed the following acquisitions to strengthen and broaden the skill base of the Group, during the first half of 2010:

 

Entity	Date of Acquisition	Place of incorporation	Percentage of  entity acquired	Nature of business acquired
Health in Business Ltd	15/03/2010	UK	100%	Occupational Health
Aquaterra Consulting Pty Ltd	27/05/2010	Australia	100%	Environmental Consultancy

 

 

Their contributions to the Group's results for the period is given below:

 

£000's	Revenue	Operating profit before amortisation	Operating profit
HIB	519	63	27
Aquaterra	1,045	223	200

 

Had the Group acquired these entities on the first day of the period, the Group Revenue would have been £230,422,000 and the Group operating profit would have been £23,108,000.

 

The Group has allocated the net assets of its acquisitions provisional fair values as it did not have complete information at the date of approval of this interim report. Details of the carrying values of the acquired net assets and the provisional fair values assigned to them by the Group are as follows:

 

Intangible assets
£000's	Customer relationships	Trade  Names	Property, plant and equipment	Cash	Other assets	Other liabilities	Net assets acquired
Provisional fair values:
HIB	520	50	12	60	342	(426)	558
Aquaterra	2,837	-	322	2,284	2,648	(4,243)	3,848
	3,357	50	334	2,344	2,990	(4,669)	4,406

 

 

£000's	Fair value of acquired receivables	Gross contractual amounts receivable	Estimated unreceivable cash flows
HIB	300	300	-
Aquaterra	2,361	2,361	-
	2,661	2,661	-

 

The vendors of Aquaterra and HIB have entered into warranty arrangements with the Group. The total undiscounted cash flow that could be receivable by the Group is between £nil and £2,661,000. As the Group does not expect that these warranties will become receivable, it has not recognised an indemnification asset on acquisition.

 

£000's	Initial cash consideration	Deferred cash consideration	Total consideration	Net assets acquired	Goodwill acquired	Tax deductible Goodwill
HIB	720	217	937	558	379	-
Aquaterra	4,104	3,778	7,882	3,848	4,034	-
	4,824	3,995	8,819	4,406	4,413	-

 

The Group incurred acquisition-related costs of £141,000 (6 months to 30 June 2009: £nil) which have been expensed through the consolidated income statement.

 

Goodwill represents the value of the accumulated workforce associated with these acquisitions.

 

	Acquisitions made in 2010		Acquisition made in 2009
£000's	HIB	Aquaterra	Conics
Goodwill at 1 January 2010	-	-	20,816
Additions through acquisition	379	4,034	-
Foreign exchange gains and losses	-	(150)	272
Goodwill at 30 June 2010	379	3,884	21,088

 

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

 

Prior period acquisitions

 

The Group did not complete any acquisitions in the first half of 2009.

 

8. Share capital

 

	2010 Number 000's	2010 £000's	2009 Number 000's	2009 £000's
Authorised
Ordinary shares of 3p each at 30 June	240,000	7,200	240,000	7,200
Issued and fully paid
Ordinary shares of 3p each at 1 January	215,247	6,457	213,286	6,399
Issued under employee share schemes	925	28	780	22
Issued in respect of deferred consideration related to acquisitions in prior years	314	9	417	13
At 30 June	216,486	6,494	214,483	6,434

 

 

9. Other reserves

£000's	Merger reserve	Employee trust shares	Translation reserve	Total other reserves
Changes in equity during 2010
At 1 January 2010	20,687	(4,419)	23,251	39,519
Exchange differences	-	-	(4,357)	(4,357)
Issue of new shares	569	(831)	-	(262)
At 30 June 2010	21,256	(5,250)	18,894	34,900
Changes in equity during 2009
At 1 January 2009	20,079	(3,583)	27,055	43,551
Exchange differences	-	-	(12,022)	(12,022)
Issue of new shares	608	(322)	-	286
At 30 June 2009	20,687	(3,905)	15,033	31,815

 

10. Dividends

 

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

 

£000's	Six months ended 30 June 2010	Six months ended 30 June 2009	Year Ended 31 December 2009
Final dividend for 2009 2.19p per share	4,722	-	-
Interim dividend for 2009 2.01p per share	-	-	4,317
Final dividend for 2008 1.91p pre share	-	4,093	4,093
	4,722	4,093	8,410

 

An interim divided in respect of the six months ended 30 June 2010 of 2.31 pence per share, amounting to a total dividend of £5,005,000 was approved by the Directors of RPS Group plc on 27 July 2010. These condensed consolidated interim financial statements do not reflect this dividend payable.

 

11. Note to the condensed consolidated cash flow statement

 

	Six months ended  30 June		Six months ended  30 June		Year ended 31 Dec
£000's	2010		2009		2009
Profit before tax	21,022		27,489		48,603
Adjustments for:
Interest payable and similar charges	2,137		1,206		3,113
Interest receivable	(73)		(180)		(268)
Depreciation	3,749		3,164		6,868
Amortisation of acquired intangibles	2,333		1,709		3,869
Share based payment expense	1,517		1,668		3,280
Loss/(profit) on sale of property, plant and equipment	6		15		152
Share of loss/(profit) of associates	23		-		(78)
Decrease/(increase) in trade and other receivables	(12,953)		11,685		31,223
(Decrease)/increase in trade and other payables	3,310		(12,304)		(26,179)
Cash generated from operations	21,071		34,452		70,583

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 2010.

 

£000's	At 1 January 2010	Cash flow	Foreign exchange	At 30 June 2010
Cash and cash equivalents	13,691	(866)	(1,205)	11,620
Bank loans	(41,949)	(5,682)	(1,075)	(48,706)
Finance lease creditor	(4,505)	739	(85)	(3,851)
Net bank borrowings	(32,763)	(5,809)	(2,365)	(40,937)

 

 

12. Principal risks and uncertainties

 

The nature of the principal risks and uncertainties faced by the Group have not changed significantly since the 2009 Report and Accounts was published. The Board keeps under review the potential effect of economic circumstances. The continuing uncertainty in the global economic outlook inevitably increases the trading and balance sheet risks to which the Group is exposed.

 

 

13. Related party transactions

 

There were no related party transactions required to be disclosed in the period.

 

 

14. 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. Nothing in this announcement should be construed as a profit forecast.

 

 

15. 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

 

Introduction

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 2010 which comprise 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.

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.

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 Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (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.

Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

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 enquiries, 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 Ireland) 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 2010 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 Services Authority.

 

BDO LLP

Chartered Accountants and Registered Auditors

55 Baker Street

London

W1U 7EU

United Kingdom

 

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