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RPS struggles after “difficult” year

The global professional services group saw slower activity in Australia while its consulting business was hindered by Brexit uncertainty
RPS struggles after “difficult” year

RPS’s (RPS) statutory operating profit plunged over three-quarters to £10.9m in 2019, weighed down by a £19.8m impairment on its Australian business. As described at the half-year stage, state elections there disrupted infrastructure spending while the federal election delayed major defence projects. This was in addition to a subdued property market. Conditions improved in the second half, but the rally was weaker than expected.

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Adjusted operating profit from consulting was flat year on year at £15.1m as UK political uncertainty delayed clients’ investment decisions. Lower demand hit higher-margin business lines, pushing the division’s margin down 0.9 percentage points to 11.8 per cent. Although domestic fee income may grow in 2020, the group has warned that profit is likely to fall as it invests in new enterprise resource planning software.

Energy was the only segment to grow earnings as oil and gas markets recover – adjusted operating profit jumped over a fifth to £11.1m. The proportion of revenue derived from advising clients on renewables, especially offshore wind, is increasing.

With £10.1m spent on acquisitions and higher capital expenditure, net debt (excluding £50m in lease liabilities) rose 27 per cent to £94.1m. Equivalent to two times adjusted cash profits (Ebitda), this is at the top of the target leverage range. Meanwhile, free cash flow dropped from £32.8m to £7.7m.

Numis forecasts adjusted pre-tax profit of £37.3m and EPS of 12.1p in 2020, rising to £41m and 13.2p in 2021.

RPS (RPS)    
ORD PRICE:150pMARKET VALUE:£336m 
TOUCH:150-151p12-MONTH HIGH:198pLOW: 93p
DIVIDEND YIELD:2.9%PE RATIO:na 
NET ASSET VALUE:156p*NET DEBT:41%** 
Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20155679.93.19.74
201659432.811.49.74
2017631-1.6-7.59.88
201863741.013.39.88
20196134.8-0.64.42
% change-13-88--55
Ex Div:23 Apr   
Payment:15 May   
*Includes intangible assets of £379m, or 169p a share
**Includes lease liabilities of £49.8m