Prudence has its own rewards. Full-year results for RPS Group (RPS) benefited from the partial reversal of a provision for doubtful debts in the energy segment, booked in 2015. Towards the end of 2016 the significant proportion recovered allowed a £4.2m boost to segmental profits. Add to that a cash conversion rate of 117 per cent, and you get the impression that the consultancy’s reorganisation measures are accruing benefits beyond a reduction in the cost base.
We pitched this Tip of the Year as a recovery play, based partly on the implied upside from a lowly price-to-forward-sales ratio, combined with a nascent recovery in oil and gas markets. That last point looks to be playing out, but full-year figures still bore the brunt of the industry's downturn. A “substantial contraction in expenditure” by the group’s clients in energy markets meant that adjusted pre-tax profits came in at £50.7m, a 12 per cent decline at constant currencies. The bulk of that decline was attributable to the energy segment, where profits contracted 55 per cent to £5.4m.
Numis expects pre-tax profits and EPS of £53.6m and 17.3p for 2017, against £50.7m and 16.5p in 2016.
| RPS (RPS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 253p | MARKET VALUE: | £566m | |
| TOUCH: | 253p-255p | 12-MONTH HIGH: | 271p | LOW: 159p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 184p* | NET DEBT: | 20% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 556 | 40.2 | 11.9 | 6.40 |
| 2013 | 568 | 43.6 | 13.1 | 7.36 |
| 2014 | 572 | 46.3 | 15.2 | 8.47 |
| 2015 | 567 | 9.9 | 3.1 | 9.74 |
| 2016 | 594 | 32.8 | 11.4 | 9.74 |
| % change | +5 | +233 | +265 | - |
Ex-div:20 Apr Payment:19 May *Includes intangible assets of £456m, or 204p a share | ||||
