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After more than 20 years, RPS dividend policy under threat

The energy and building consultancy has been hit hard by the oil price drop and there is some uncertainty over Brexit, too
August 8, 2016

RPS (RPS) has been left licking its wounds after what it called an "unprecedented" downturn in the oil and gas industry. A collapse in the oil price late last year triggered huge cuts in oil and gas spending plans; the impact was writ large over the energy and building consultancy's first-half results.

IC TIP: Hold at 164p

Fee income in the energy business slumped 49 per cent at constant currency to £35m. After hefty restructuring costs, the division slid into the red with a £1.4m loss against a £9.9m profit last year. Although the reduced cost base and early signs of market stabilisation have management hoping for a return to profit in the second half.

Divisions orientated towards property and infrastructure fared better. The European built and natural environment business reported fee income up a fifth to £131m driven by solid market conditions. RPS does note, however, that there was some softening at the back end of the first half, which could be related to the EU referendum result.

RPS held its half-year dividend flat and says it will review prospects for the full-year payout. Freezing the full-year dividend would end an unbroken record of dividend growth stretching back more than 20 years. Broker Numis expects adjusted pre-tax profit of £44.6m, giving EPS of 14.2p for the full year (from £51.8m and 16.5p in 2015).

RPS (RPS)
ORD PRICE:164pMARKET VALUE:£365m
TOUCH:164-165p12-MONTH HIGH:247pLOW: 159p
DIVIDEND YIELD:6%PE RATIO:159
NET ASSET VALUE:176pNET DEBT:24%

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201528417.96.04.66
201629110.93.94.66
% change+3-39-35-

Ex-div: 15 Sep

Payment: 14 Oct

*Includes intangible assets of £450m, or 202p a share