Q3-2018 Trading Update

RPS Group plc

('RPS' or the 'Group')

Q3-2018 Trading Update

Outlook for FY-2018 and FY-2019

Required investment impacting short term profitability but driving longer term sustainable growth

RPS, a leading multi-sector global professional services firm, today announces its third quarter trading update for the three months ended 30 September 2018 ('Q3-2018' or the 'period'). RPS also provides updated guidance on the outlook for the Group for the financial years ending 31 December 2018 ('FY-2018') and 31 December 2019 ('FY-2019').

Q3-2018 trading summary

Group fee income for Q3-2018 was £139 million (Q3-2017: £141 million, at constant currency £138 million) and was marginally below Board expectations. For the nine months ended 30 September 2018 fee income was £428 million (nine months ended 30 September 2017: £422 million, at constant currency £412 million) and in line with Board expectations.

Profit before tax and amortisation ('PBTA') for the Group in Q3-2018 was £12.8 million (Q3-2017; £14.3 million, at constant currency £13.9 million) and below Board expectations. For the nine months ended 30 September 2018 PBTA was £40.1 million (nine months ended 30 September 2017: £41.5 million, at constant currency £40.2 million) and below Board expectations.

Net bank debt at 30 September and cash conversion

The Group's net bank debt at 30 September 2018 was £86.2 million (30 September 2017: £90.6 million; 31 December 2017: £80.6 million). RPS' conversion of profit into cash from operations improved during Q3-2018 and for the year to date is 58%, (year to date September 2017: 58%). For the twelve months ended 30 September 2018 cash conversion was 93% (last twelve months ended 30 September 2017: 82%).

Outlook for FY-2018

The Board's expectations for FY-2018 are that fee income will be slightly above FY-2017 at constant currency, and PBTA will be slightly below. The Board anticipates that fee income will be marginally below market expectations*; whilst PBTA will be below market expectations. The Board reiterates the previously stated dividend policy and accordingly expects the dividend for the full year to be in line with the previous year.

Outlook for FY-2019

The current view of the Board is that Group fee income will be slightly higher in FY-2019 than in FY-2018 and total segment profit will be higher. However, necessary investment in the business will impact Group PBTA in 2019. Group level costs in FY-2019 are likely to be higher compared to FY-2018 in the order of £2.5 million. The majority of these will be ongoing. Additionally, we will incur one-off global brand relaunch expense totaling approximately £2.0 million. Taking into account the additional costs, the current view is that PBTA will be broadly similar to FY-2018.

Investment and strategic priorities

The Board continues to invest in RPS in support of its strategic priorities that are essential to improve the longer-term performance of the Group.

· Our people: The loss of key staff from recently acquired businesses after the settlement of deferred consideration is affecting business performance this year. Investing in our people is vital for the future long-term health of the business. Following the appointment of RPS' first Group People Director the business has made considerable headway in developing an HR structure that supports growth, attracts high calibre talent, engages our people and builds on our high-performance culture which enables staff to build meaningful careers.

· Telling our story better and exploiting revenue synergies where they exist: The Group is making good progress in respect of its priority to improve the coherence and connectivity of our brand across sectors where RPS has deep expertise and capability. We are transforming the way we penetrate the market and differentiate ourselves from our competitors. By so doing we will improve Group performance and increase profit.

· Energy: The recovery in the oil price and in the wider industry has helped us grow and reinvigorate the business and further improvement is possible in 2019.

· Selective acquisitions: The Group is focused on achieving organic growth, but the Board continue to consider selective acquisitions to add depth to the services that RPS already provides. Our strategy is to fund potential acquisitions through existing bank facilities.

As reported at the interim results, investment in the Group's IT systems is required to underpin these strategic priorities. We have appointed a new Chief Information Officer ('CIO') who will commence imminently. A major component of this investment will be in a global ERP system that will be developed by the end of 2019 and with deployment completed in 2021. Our new CIO will review the project before significant funds are committed to it, but the Board anticipates a total capital investment of approximately £14 million which will be mainly incurred in 2019 and 2020.

Segment performance and outlook

· In Energy trading in Q3-2018 was encouraging, with fee income and segment profit both growing well and maintaining the momentum exhibited in H1-2018. These conditions are expected to continue for the rest of this year and in 2019. This may result in FY-2019 showing good fee and profit growth before bad debt recovery. Significant bad debt recoveries are unlikely in FY-2019.

· Consulting UK and Ireland's market conditions in Q3-2018 were comparable to those in H1-2018, although its performance continued to be held back by recruitment challenges, especially in the UK. We anticipate fee and segment profit growth in FY-2019.

· Services UK and Netherlands performed ahead of management's expectations due to good performance in its Water Services business in the UK. The current Asset Management Plan ('AMP') applicable to the England and Wales water industry ends in March 2020 and it is anticipated that demand for the Water Services business will reduce in 2019 before rising again. This will temper the performance of this segment in FY-2019, but we expect recovery in 2020 when the new AMP cycle commences.

· The co-location of the businesses in Norway will complete in early 2019. One-off costs of approximately £0.8 million will be incurred in FY-2018 suppressing segment profit this year. Management anticipates fee growth next year and a much-improved profit performance following the completion of the integration of our businesses.

· The Group's North America segment had a difficult Q3-2018 following a disappointing first half suffering project overruns in our Design & Development business. Management anticipates this business will recover during FY-2019 and for the growth of our Oceans and Coastal business to continue. However, due to recent senior staff departures there is some risk that growth in our Environmental business may be tempered in FY-2019.

· Australia Asia Pacific ('AAP') performance was below Board's expectations in Q3-2018. In 2019 we anticipate conditions to remain strong in private and public infrastructure markets and defence spending to remain high. Overall, fee and profit growth in this segment is anticipated in FY-2019.

Commenting on the outlook, John Douglas, Chief Executive, said:

"RPS is going through a fundamental shift from being a conglomerate of small consulting and service businesses providing local expertise, to a truly global firm that uses its expertise to deliver professional services around the world. We are developing a clear sense of purpose and identity in our chosen markets and have a greater focus on organic growth and embracing technology. Inevitably this shift has consequences for shorter term financial performance as it requires investment, but it will drive longer term, sustainable growth, for the future. We are confident that these changes will drive increased shareholder returns in the medium term. We will provide an update on our progress at the time of the Group's final results in February 2019."

* The Board considers market expectations to be the consensus fee income and PBTA published in the notes of those analysts who regularly follow and interact with the Group. For FY-2018 consensus fee income is £582 million and PBTA is £55.4 million. For FY-2019 consensus fee income is £603 million and PBTA is £59.6 million.

The financial information given in respect of Q3-2018 is derived from management accounts that are unaudited.

Conference call

A conference call for analysts will be held at 9.30am this morning, which will be accessible via the details below.

A recording of the conference call and a transcript will be available in due course at www.ir.rpsgroup.com.

- Ends -

The above announcement contains inside information for the purpose of Article 7 of the Market Abuse Regulation.

For further information:

Media enquiries:

Notes to Editors

Founded in 1970, RPS is a leading global professional services firm of 5,600 consultants and service providers. Located in 125 countries across all six continents RPS defines, designs and manages projects that create shared value for a complex, urbanising and resource scarce world.

The Group delivers a broad range of services in six sectors: property, energy, transport, water, defence & government services and resources. Services provided across RPS' six sectors cover twelve service clusters: project & programme management, design & development, water services, environment, advisory & management consulting, exploration & development, planning & approvals, heath, safety & risk, oceans & coastal, laboratories, training and communication & creative services.

RPS stands out for its clients by using its deep expertise to solve problems that matter, making them easy to understand. Making complex easy.

RPS's London Stock Exchange ticker is RPS.L. For further information, please visit www.rpsgroup.com.