RPS shares slide on results, finance director resignation

Professional services firm RPS reported a fall in revenue to £612.6m in its final results on Wednesday, from £637.4m.

The London-listed firm also announced that, after serving as group finance director for 20 years, Gary Young has decided to retire from the group.

It said fee income for the year ended 31 December totalled £556.5m, down from £574.2m in 2018, while profit before tax and amortisation of acquired intangibles and transaction-related costs and exceptional items (PBTA) slid to £37.3m from £50.2m.

Adjusted, diluted earnings per share (EPS) was 12.31p, down from 16.34p.

RPS reported exceptional items totalling £23.4m, including goodwill impairment in AAP of £19.8m, both up from nil in 2018.

Statutory profit before tax stood at £4.8m, plunging from £41.0m year-on-year.

The company said it had “strong” cash conversion during the year of 90%, down from 94%, while net bank borrowing was £94.1m, compared to £73.9m year-on-year, as its leverage rose to 2.0x from 1.3x.

During the year, the firm successfully refinanced its revolving credit facility with a committed £100m facility and an uncommitted £60m accordion facility.

The board proposed a final dividend of 2.00p, down from 5.08p, providing a full-year dividend of 4.42p, compared to 9.88p in 2018.

That followed the rebasing of the dividend announced at the interim, and reflected the stated new, sustainable dividend policy of paying out 40% of adjusted earnings.

Looking at its operations, RPS said its energy growth was “strong”, reflecting continuing recovery in oil and gas markets, while the Republic of Ireland and Northern Ireland markets performed well in consulting.

As expected, its services segment was impacted ahead of the new water regulatory cycle in England and Wales, while North America was impacted by retention and recruitment issues.

Market conditions in Australia improved in the second half of the year after a difficult first half.

The company also designed and built a global enterprise resource planning (ERP) software, which was implemented in the Netherlands and part of Australia.

“In 2019 we had to contend with several headwinds which significantly impacted on the results,” said chief executive officer John Douglas.

“We responded to difficult trading conditions, particularly in our Australia Asia Pacific segment.

“Pleasingly, we saw some stabilisation of market conditions in the UK and elsewhere towards the end of the year.”

Despite those headwinds, Douglas said the company made “considerable progress” in respect of its strategic priorities.

“We have revitalised our energy business, launched a bold, client-driven brand delivered effectively with measurable impact, are making RPS a great place to do great work and are increasing the connectivity of our businesses.

“I would like to thank all our people who have worked tirelessly to deliver this progress.

“As we enter 2020, trading conditions in our markets are generally satisfactory and we anticipate more stable results from our segments.”

The company would continue to invest, especially to deliver better connectivity, but would do so in a “measured way”, Douglas explained.

“We remain focused on building a business that in due course is capable of delivering mid-single digit rates of organic growth and a double-digit operating margin.

“The board remains confident in the medium term outlook for the group and anticipates that the year ahead will be broadly in line with 2019 with growth accelerating in 2021.”

On the resignation of Gary Young, RPS said he would step down from the board at the time of its annual general meeting on 30 April, and would not offer himself for re-election.

He would remain available to the business to support with transition, and would be succeeded by Judith Cottrell, who was set to be appointed to the RPS board from the date of the AGM.

Cottrell is currently the company’s group director of strategy, and is a member of its leadership team.

She has more than 20 years of experience in senior finance and operational roles, including as CEO for RPS' consulting segment in the UK and Ireland.

Cottrell started her career qualifying as an accountant with KPMG before joining AEA, which was focused on government work and providing environmental consultancy services.

At AEA, she held several senior finance roles, latterly as group finance director.

RPS said Cottrell had been with the firm since 2015, and had a “deep in-house knowledge” of the company, its business model, operating structure, clients and people.

“Gary has been with RPS as group finance director for 20 years and, during that time, has been instrumental to the success and growth of the business,” said John Douglas.

“Since my appointment two years ago, Gary has provided much needed continuity and has been a trusted adviser over that time.”

Douglas said the company was “pleased” to announce that Young would be succeeded by Judith Cottrell.

“Judith brings with her 20 years' international professional finance and industry experience including five years at RPS.

“Her in-house knowledge of the company gives her a unique perspective which is highly-valued.”

At 1048 GMT, shares in RPS were down 13.33% at 147p.