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RPS constrained by energy markets

Underlying figures paint a brighter picture for the consultancy
March 2, 2018

The precipitous drop in RPS's (RPS) statutory pre-tax profits shouldn’t come as a surprise to investors. Rather than drop the bombshell on results day, the energy and environmental consultancy informed shareholders about its decision to downgrade forecasts for its misfiring energy business in a profit warning in February.

IC TIP: Buy at 234p

Strip out that £40m write-down, together with a £2.7m loss offloading its Canadian pipeline approval unit, and a £12.8m devaluation of previously acquired intangible assets, and pre-tax profit climbed 3 per cent at constant currencies. Fee income also barely nudged upwards on these metrics, although it did ensure that RPS delivered underlying organic growth for the first time since 2012. “Steady progress,” was how chief executive John Douglas described it.

Like most new bosses, Mr Douglas was keen to talk about the future. He reckons “good progress” has been made addressing his five strategic priorities and plans to use better cash generation and changes to the dividend policy to continue financing them. Dividends will no longer increase until payouts represent 40 per cent of adjusted EPS – they currently eat into 58 per cent of earnings.

Peel Hunt expects adjusted pre-tax profit of £55.3m and EPS of 17.5p for 2018, up from £54m and 17.1p in 2017.

RPS (RPS)    
ORD PRICE:234pMARKET VALUE:£526m
TOUCH:233-234p12-MONTH HIGH:308pLOW: 225p
DIVIDEND YIELD:4.2%PE RATIO:na
NET ASSET VALUE:164p*NET DEBT:23%
Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201356843.613.17.36
201457246.315.28.47
20155679.93.19.74
201659432.811.49.74
2017631-1.6-7.59.88
% change+6--+1
Ex-div:19 Apr   
Payment:18 May   
*Includes intangible assets of £396m, or 176p a share