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Cover image: Eucalyptus bark at
Barrington Tops National Park, Australia.
RPS has been working on Groundwater Impact
Assessments at Barrington Tops National
Park, New South Wales.
REPORT & ACCOUNTS 2014
RPS Group Plc
20 Western Avenue, Milton Park
Abingdon, Oxon OX14 4SH
T +44 (0)1235 863206
rpsgroup.com
Registered in England No. 2087786
40143
rpsgroup.com
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Strategic Review
Strategy and Business Model
Group Activities and Management
2014 Results and Key Performance Indicators
Risk Management
Employees
Corporate Responsibility
Management & Governance
The Board
Report of the Directors
Corporate Governance
Remuneration Report
Report of the Auditors
Notes to Remuneration Committee Annual Report
Accounts
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Parent Company Balance Sheet
Notes to the Parent Company Financial Statements
Five Year Summary
2
Report and Accounts 2014
Strategic Review
Strategy and Business Model
Market Position
RPS is an international consultancy strategically positioned to provide independent advice upon:
n
n
n
the exploration and production of oil and gas and other natural resources;
the development and management of the built and natural environment and
the development of infrastructure to ensure the supply of energy resources to market and to enable the world’s population to
have available appropriate transport, water and power resources.
Strong Long Term Demand
The long term drivers of our business model are fundamental to the development of the global economy:
n
n
n
n
the world’s growing need to secure adequate supplies of energy and other natural resources as a result of population and
economic growth;
the commercial and technical expertise required to support sustainable development of land and buildings;
the need to provide adequate infrastructure such as airports, power stations, public transport, water treatment plants and to
deliver energy to market;
the need to ensure regulatory compliance and to manage environmental, health and safety risks, including climate change, against a
background of increasingly complex legislation and regulation.
Strategic Objectives
Our strategic objectives are to:
n build on our existing reputation in being recognised as a market leader in the “energy and environment” markets;
n
focus on delivering value added services which generate good fee levels and margins;
n grow our existing businesses organically;
n
extend our range of services and geographical cover by bringing high quality specialist companies into the Group and then support
them to achieve further growth and;
n achieve the above with manageable balance sheet risk, whilst continuing to provide a growing return to shareholders.
Acquisitive Growth
Acquisitions broaden and deepen the services that we offer our clients. They have played an important part in our growth and will
continue to be a key element of our strategy. We acquire businesses that are well managed, deliver sound results and enjoy good
reputations in their markets. They may be in sectors where we are already operating or offer services that are closely related to our
own. We view non-dilutive, acquisitive growth, funded by cash, as being as valuable as organic growth.
Our acquisition model is structured to operate on a low risk basis. This is achieved through an incremental approach focusing on small
to medium sized enterprises which are adjacent and complementary to our existing areas of operation. The emphasis placed upon
retention of directors and employees as well as the extent of due diligence undertaken and a clear single brand integration process are
also important in keeping risks to a minimum.
During 2014 we successfully completed acquisitions in Australia, USA and the United Kingdom. We are seeking to acquire further high
quality small to medium sized businesses in North America, Australia and Europe. The Board occasionally considers larger acquisitions
and acquisitions in countries in which we do not currently operate if they are consistent with our overall strategy. Increasing Group
scale and diversity by means of acquisitions leads to greater resilience in the Group’s performance, as demonstrated in 2014.
3
rpsgroup.com Key Competences
As a result of implementing our strategy over the last three decades we have developed the following strong core competences:
n managing complex, intellectual consultancy businesses;
n
identifying high value, premium margin markets;
n developing and operating businesses internationally;
n
recruiting and retaining high quality staff;
n managing client relationships: over 85% of work derives from long term clients;
n maintaining strong cash flow and
n
Identifying, delivering and successfully integrating “bolt on” acquisitions.
The development of this expertise has been possible through a strong and stable central management team supported by developing
senior managers within our businesses.
Strategic Opportunities
The Board sees its strategy as providing significant opportunities for growth across the Group.
In respect of Energy these derive from:
n
strategic long term demand for oil and gas; this results each year in substantial spend on exploration and production by our clients;
n pressure on international oil companies to replace and develop reserves;
n
n
n
n
pressure on national oil companies to realise assets in order to be able to invest in the social infrastructure necessary to support
their populations and domestic economic growth;
the need our clients have for high quality technical advice;
the increasing scale and frequency of asset based transactions and financing;
increased awareness of health and safety and risk management issues.
In respect of BNE they derive from:
n
n
n
n
long term demand for improvement to and extension of the urban fabric of towns and cities;
long term demand for urban, inter urban, transport, water energy/power and communications infrastructure;
the increasing importance of stakeholder consultation and engagement in the planning and design phases of these projects;
the increasing importance of environmental and climate change issues in the decision making around these projects.
Our significant market profile and presence in both these markets enables us to take advantage of these opportunities.
Shareholder Value
Since the Group’s IPO in July 1987 we have raised only £60 million from our shareholders and distributed £100 million in dividends.
Our last fund raising, of £40 million, was in 2001; since then we have paid £80 million in dividends.
4
Report and Accounts 2014 Strategic Review
Group Activities and Management
As indicated above our business is an international consultancy providing independent advice that relates to oil and gas and natural
resources as well as to the built and natural environment. The Group’s services in relation to the development of infrastructure draw
upon expertise from within both of these areas.
Energy
We provide advice to our clients upon the exploration and production of oil, gas and other natural resources which comprises
technical, commercial and project management support and training in the fields of geoscience, engineering, health, safety and
environment. It may be provided on a multi-disciplinary and integrated basis anywhere in the world. We aim to assist clients’
development of their energy resources across the complete life cycle, combining technical and commercial skills with an extensive
knowledge of environmental and safety issues.
The business has regional offices in the UK, USA, Canada, Australia, Norway, Singapore and Malaysia and undertakes projects in many
other countries. During the year under review, with the exception of our Australian and Asia Pacific offices, they were managed by a
single Board supported by a number of operating Boards and their results reported as a single segment. With effect from 1 January
2015 this business has been split into two sub-segments one covering our activities in Europe, Africa and the Middle East (‘EAME’) and
the other our activities in North America. These sub-segments are now being managed by separate Boards.
Our Australian and Asian offices have been and will continue to be managed on a regional basis by a Board that has responsibility for
both our Energy and our Built and Natural Environment offices in this region.
During 2014 our Norwegian business was within that part of the Energy business which is now EAME. Due to the changing balance of
energy and environmental activities consideration is now being given to consolidating its results within the BNE Europe segment.
Built and Natural Environment
This is the advice we provide to our clients upon the built and natural environment which includes planning, urban design and
regeneration, environmental assessment and management, transport and infrastructure, architecture and landscape, engineering and
surveying. We also provide services in the areas of environmental science, the management of water resources, health safety and risk
management, laboratory testing, asbestos consulting, air quality, noise, property and oceanography. Our services are provided on a
regional basis from offices in Europe, Australia and North America.
Our regional businesses in Europe and North America are each managed by a single board supported by a number of operating
boards. We present the results of each of these two businesses as separate reporting segments. As noted above and due to the
integrated nature of the environmental and energy infrastructure markets in that area, the Built and Natural Environment business in
Australia Asia Pacific is managed with the Energy business in that region by a single Board. The results of this combined business are
presented as single reporting segment covering all of our operations in Australia Asia Pacific (‘AAP’).
During the year it was announced that the results of HMA Land Services which had previously been included within the Energy
segment would be consolidated within the Built and Natural Environment segment.
Infrastructure
We operate multi-disciplinary teams drawing on expertise of each of the segments to focus on development of Energy and Urban
Infrastructure. In the former we provide advice on the development of infrastructure for developing energy from renewable sources,
storing and transporting hydrocarbons and transmitting energy and power. With regard to urban infrastructure we develop projects
through planning, design and construction support including hospitals, schools, residential development and manufacturing facilities as
well as the planning and design of transport schemes.
Further Information
A sample of the projects and activities that we undertake is described on our website at www.rpsgroup.com.
5
rpsgroup.com 2014 Results
Summary of results
The Group’s results for the year to 31 December 2014 are summarised in the table below.
Business performance
Revenue (£m)
Fee income (£m)
PBTA(1) (£m)
Adjusted earnings per share(2) (basic) (p)
Total dividend per share (p)
Statutory reporting
Profit before tax (£m)
Earnings per share (basic) (p)
Notes
2014
2013
572.1
505.0
66.1
22.04
8.47
567.6
492.1
63.0
20.22
7.36
2013
(constant
currency)
540.3
468.3
60.2
19.32
7.36
46.3
15.20
43.6
13.11
41.9
12.72
(1) Profit before tax, amortisation of acquired intangibles and transaction related costs.
(2)
Based on earnings before amortisation of acquired intangibles and transaction related costs.
The strength of sterling had a significant adverse effect on our consolidated profit growth. This was offset by the contribution from
acquisitions. Adjusted basic earnings per share were 22.04 pence (2013: 20.22 pence; 19.32 pence on a constant currency basis).
At the segment level we focus on underlying profit; all segments grew on a constant currency basis; the contribution from each
segment was:
Underlying Profit* (£m)
Energy
Built and Natural Environment: Europe
Built and Natural Environment: North America
Australia, Asia Pacific
Total
*As defined in note 1g to the consolidated financial statements.
2013
(constant
currency)
35.3
18.8
7.8
9.0
70.9
2013
36.4
19.2
8.3
10.0
73.9
2014
39.0
21.3
9.1
9.6
79.1
Our Energy activities are conducted on a worldwide basis. In combination with our Built and Natural Environment (“BNE”) business in
North America and our Australia, Asia Pacific (“AAP”) business, we now have over three quarters of our underlying profit generated
outside the UK. Although this diversity exposes us to currency fluctuations, it enables the Group to deliver good results, even when
confronted with challenging conditions.
The Group’s key performance indicators are shown below:
Group Key Performance Indicators
Fee income (£m)
PBTA (£m)
Conversion of profit to cash (%)(3)
Net debt (£m)
Notes
2014
505.0
66.1
89.0
73.2
2013
492.1
63.0
96.0
32.4
2013
(constant
currency)
468.3
60.2
96.0
32.4
(3)
Based on operating profit adjusted for depreciation, share scheme costs, amortisation of acquired intangibles, deferred consideration treated as remuneration and non-
cash transaction related costs.
6
Report and Accounts 2014 Strategic Review
Cash Flow, Funding and Dividend
Our cash flow in the year was good and our balance sheet remains strong. Our year end net bank borrowings were £73.2m (2013:
£32.4m) after paying out £17.4 million in dividends (2013: £15.0 million) and £64.7 million (2013: £46.7 million) in respect of initial
and deferred payments for acquisitions, including acquired net debt. Net bank borrowings include a £51.8 million loan from Pricoa,
due for repayment in 2021. We have a £125 million committed revolving credit facility with Lloyds available until July 2016 which
had headroom of about £87 million at the year end. The Board intends to refinance the Lloyds facility during the course of the next
few months, which is likely to involve an additional bank providing part of our total facilities.
The Board is recommending a final dividend of 4.42 pence per share payable on 22 May 2015 to shareholders on the register on
24 April 2015. If approved, the total dividend for the full year would be 8.47 pence per share, an increase of 15% (2013: 7.36 pence
per share).
We remain well positioned to continue funding the Group’s growth strategy.
Markets and Trading
Energy
The Energy business continued to grow, with an improved result in the second half supported by acquisitions made in 2013, managing
well the rapid decline in oil price and political unrest in the Middle East. The strong margin was also maintained.
We provide internationally recognised consultancy services to the oil and gas sector from our main bases in the UK, USA and Canada.
These act as regional centres for projects undertaken in many other countries. The Energy component of our AAP business, with
offices in Perth, Singapore and Kuala Lumpur, provides an integral part of the service offering to our international oil and gas clients.
Our range of clients and services and geographical diversity of our business provides opportunity for us throughout the investment
cycle in this industry.
Fee income (£m)
Underlying profit* (£m)
Margin %
*As defined in note 1g to the consolidated financial statements. Reorganisation costs: 2014 £0.2m; 2013 £0.1m.
2014
2013
205.1
39.0
19.0
186.9
36.4
19.5
2013
(constant
currency)
180.7
35.3
19.5
We continued to benefit from our excellent reputation and prominent position in the oil and gas sector in many parts of the world.
In particular, we experienced good demand for our consultancy advice, including transaction and asset valuation support. During the
second quarter some of our clients began to manage expenditure more tightly, particularly in their operational activities. Against the
background of a rapidly falling oil price, this trend continued through the second half. Our trading was also affected by the political
disruption in the Middle East, which caused clients to delay investment in Kurdistan/Iraq.
Despite these adverse conditions our profit in the year grew. This, in part, reflects the flexible nature of our business model which
enables us to execute much of our operations support with experts recruited for specific assignments. Our global reach enables us
to support a wide range of long term clients, for whom we undertake many projects of varying scale. We are not, in consequence,
dependent on a small number of clients or projects.
Recent market conditions have been unusually volatile. As a result, clients are likely, in the short term, to continue focusing on cost
management; we are, therefore, reducing our cost base and concentrating on those parts of the market and projects likely to receive
investment. There are, however, already some signs of stabilisation. With the global economy set to grow substantially in coming years,
we are well positioned in what continues to be an attractive, long term market.
Built and Natural Environment (BNE)
Within this business we provide a wide range of consultancy services to many aspects of the property and infrastructure development
and management sectors. These include: environmental assessment, the management of water resources, due diligence, oceanography,
health and safety, risk management, town and country planning, building, landscape and urban design, surveying and transport planning.
It is split into two segments: Europe and North America.
7
rpsgroup.com BNE: Europe
This business performed well, with an improved margin, and was supported by two high quality acquisitions. It also benefited from
strong growth of our UK planning and development activities, which experienced significantly improved market conditions and client
confidence.
Fee income (£m)
Underlying profit* (£m)
Margin %
2014
2013
156.7
21.3
13.6
149.3
19.2
12.8
2013
(constant
currency)
146.5
18.8
12.9
*As defined in note 1g to the consolidated financial statements. Reorganisation costs: 2014 £0.3m; 2013 £0.5m.
Those of our activities exposed to operational environments, such as providing environmental management advice, continued to need
to offer an efficient, cost effective service to assist clients manage tight budgets. Even in these markets we secured good performances,
particularly from our Dutch business and our UK businesses providing support to the nuclear and defence industries.
The acquisition of Clear Environmental Consultants (announced on 10 April) has extended the range of our UK water activities. It will
assist the strategic development of this business in 2015; this will be important at a time when we will be seeking to renew and win a
significant number of contracts with the UK water utilities. The acquisition of CgMs (announced on 11 August) has extended the range
of our UK planning activities and will assist the strategic development of this fast growing business. Both businesses have integrated well
and should add materially to our result in 2015.
We anticipate this business should show further good growth this year.
BNE: North America
This business delivered a good result and remains well positioned in attractive sectors of the expanding North American market. It
is primarily focussed on providing environmental management support to our clients and undertaking projects in the energy
infrastructure market.
Fee income (£m)
Underlying profit* (£m)
Margin %
2014
2013
41.3
9.1
22.0
32.7
8.3
25.4
2013
(constant
currency)
30.9
7.8
25.2
*As defined in note 1g to the consolidated financial statements.. Reorganisation costs: 2014 £nil; 2013 £nil..
The acquisition of GaiaTech (announced on 20 May) was an important step in the development of this business, giving us access to
new markets and geography particularly in relation to environmental due diligence, a high margin activity. It has integrated well and has
already begun to make an important contribution. Those parts of the BNE business closest to oil and gas E&P activities experienced
only modest expenditure tightening from clients. Staff retention became difficult in the part of the business involved in permitting and
licensing of industrial facilities. This significantly reduced the anticipated performance. The oceanography businesses performed well.
We announced on 13 February 2015 the acquisition of a leading water and transportation consultancy in Texas. Klotz Associates Inc
(“KAI”) has 116 staff and is headquartered in Houston with other offices in the main cities of Texas. In the year ended 31 December
2014 it had revenue of $26.2 million (£17.2 million), and profit before tax of $3.6 million (£2.4 million) adjusted for non-recurring
items. It was acquired for $24.1 million (£15.9 million) all payable in cash, of which $16.9 million (£11.1 million) was paid at closing,
with the balance payable over two years.
Adding GaiaTech and KAI to our North American business gives us confidence about the performance in 2015.
Australia Asia Pacific (“AAP”)
This business is a combination of the former BNE: AAP and the AAP component of Energy. They were brought together in 2013 to
take advantage of the opportunities in the integrated energy and energy infrastructure market; this has helped counter the significant
impact of the severe slow down in investment in the resources sector in this region on our business during the year. The acquisition
of Point, (announced on 18 September), together with Whelans (announced on 27 February), both property consultants, enabled the
business as a whole to grow its profit on a constant currency basis.
8
Report and Accounts 2014 Fee income (£m)
Underlying profit* (£m)
Margin %
Strategic Review
2014
2013
103.6
9.6
9.3
127.2
10.0
7.9
2013
(constant
currency)
114.0
9.0
7.9
*As defined in note 1g to the consolidated financial statements. Reorganisation costs: 2014 £1.4m; 2013 £1.2m.
Throughout this year our mining and energy clients in AAP have remained focused on operational efficiency rather than capital
expenditure on new project development. As a result a significant number of projects have been delayed or cancelled, with this trend
continuing until the year end. We have, therefore, continued to reduce our cost base. This is helping stabilise our performance ahead
of market recovery.
As we reposition the business we are benefiting from increased client investment in urban development and public sector
infrastructure projects. State funding in Queensland and Victoria has been slowed by recent changes of Government, but they remain
attractive markets. Our position in this sector, particularly in respect of Federal agencies, has been significantly reinforced with the
acquisition of Point.
Overall we are expecting an improved performance in 2015.
Group Strategy and Prospects
RPS is well positioned in markets of importance to the global economy. Our strategy of building multi-disciplinary businesses in each
of the regions in which we operate continues to be both attractive and successful. Despite currency headwinds and uncertainty
across the resources sectors our flexible business model, diversity of operations and experienced management enabled us to deliver
further growth in 2014. We intend to develop organically, whilst continuing to seek further acquisition opportunities. Our balance
sheet is strong and supports this strategy.
The acquisitions made in 2014 have integrated extremely well and will make a significant contribution this year. We have already built
on this with the recent acquisition of KAI and expect further transactions during the course of the year.
We believe our positioning and business model should deliver a successful outcome and further growth in the current year.
9
rpsgroup.com Risk Management
The Group supplies a wide range of services in many markets and countries. This gives rise to a range of risks that need to be
identified, assessed and managed. The Group’s system of planning, budgeting and performance review assists with this process.
The management of risk is not separated from the business, but is treated as an integral part of our culture and the way we operate.
Each of our businesses is expected to identify and take appropriate steps to mitigate risks associated with its operations. An element
of this risk management is the maintenance of an appropriate portfolio of insurance policies with suitable limits of indemnity. These
include policies in respect of physical assets as well as liabilities to third parties and employees. Professional indemnity insurance is
also maintained in appropriate parts of the Group to safeguard against losses arising from litigation associated with any shortfall in
performance. The Executive Committee oversees the management of risk to which the Group is exposed and reports those of a
material nature to the Board together with recommendations for their mitigation. The principal risks to which the Group is currently
exposed are outlined below.
Health and Safety
The Group’s activities require the monitoring and management of the health and safety of its employees as well as sub-contractors,
client personnel and the general public. A failure to manage this risk correctly could expose our employees and these other groups to
dangers as well as exposing the Group to significant potential liabilities and reputational damage.
Detailed health and safety policies and procedures are in place to minimise such risk. The Group’s approach to the management of
health and safety is described on pages 15 and 16.
Economic Environment
Economic uncertainty may cause the Group’s clients to cancel, postpone or reduce existing or future projects. Continuing projects may
be subject to greater cost pressures. The consequence is that we could have staff levels that exceed current workload and therefore
incur the cost of unproductive time.
Although market factors are beyond our control, our exposure to a wide range of markets across the world mitigates the impact of
downturn in any single market. Our contractual order book is monitored regularly in comparison to the productive capacity of our fee
earning staff. Economic conditions in our various markets are closely monitored in order that pre-emptive action can, as far as possible,
be taken as circumstances change.
Uncertainties continue in the Eurozone and in particular may affect performance of our businesses in The Netherlands and the
Republic of Ireland, whilst the continued slowdown in the Australian natural resources sector has continued to affect our trading
performance in that territory. In addition the reduction in global oil prices and resultant project delays has had an impact on the
performance of our Energy business. We remain attuned to potential reductions in workload and take the necessary actions to
reduce costs as and when this is required.
Political Events
The change and uncertainty arising from political events may have an impact upon the markets in which we operate and our ability
to deliver our services to clients. Our operations in Kurdistan and Iraq were affected by conflict in the Middle Eastern region, whilst
sanctions imposed on the Russian Federation may affect our business in that part of the world. In addition recent State election results
in Australia, as well as an indecisive outcome to forthcoming general election in the United Kingdom, may both reduce the demand for
our services in those countries.
Whilst the wholesale avoidance of risks of this sort is impossible, in so far as they can be anticipated measures can be taken to match
costs to anticipated workload. The wide range of countries and markets that we serve will mitigate the effect of adverse political
developments in particular countries.
Environmental and Health Risks
Adverse occurrences of this type may affect our ability to deliver our services and our clients’ demand for them. Our operations have
previously been affected by environmental events such as Macondo oil spill in the Gulf of Mexico. Although no events of this type
have materially affected us in 2014, the possible spread of the Ebola virus into areas in Africa in which we operate could have an
impact upon our operations and is kept under close review.
Whilst it is impossible to predict events of this type the wide range of markets that we serve will limit the impact of adverse
occurrences in any specific country or region.
10
Report and Accounts 2014 Strategic Review
Information Systems
A lengthy failure or discontinuity in our IT systems could have a significant impact upon our operations.
The Group’s IT systems are centrally managed with certain specific functions carried out locally. An annual Group plan is produced
which includes measures designed to ensure reliability and resilience of the Group’s systems as well as appropriate disaster planning.
The Group has operations in a large number of locations, which would enhance its ability to withstand any individual failure or
malfunction. The Group has never experienced a significant failure of its systems.
A cyber-attack upon our systems could result in loss of data, disruption to operations or direct financial loss. The Group has previously
suffered attacks of this nature but has never experienced any significant loss due to the effective operation of the systems and controls
in place. These systems as well as guidance given to employees remain under regular review.
Recruitment and Retention of Key Personnel
The Group’s services are performed by well-qualified and professional employees with expertise across a wide range of areas. A
failure to recruit and retain employees of appropriate calibre will, accordingly, impact our ability to meet our clients’ requirements and
correspondingly to maintain and develop our business. As previously reported, staff retention and recruitment issues had significant impact
on our operations in North America during the year. As a result of this we have reviewed and tightened our restrictive covenants.
As described on pages 13 and 14 the Group maintains competitive remuneration and incentive structures which are reviewed on a
regular basis. It also maintains an environment that is supportive of professional development through training and career opportunity.
Market Position and Reputation
The Group’s reputation for project delivery relies upon its public portrayal and the perception of existing and prospective clients.
A major failure of project management or delivery could, accordingly, impact our ability to win future work.
The Group operates quality control systems, many of which are externally accredited and are designed to enable our employees to
provide a consistently high standard of work.
Litigation
A failure to deliver our services in accordance with our contractual obligations may lead to a risk of the Group becoming involved in
litigation. In addition, as the contracting environment has evolved, clients in some of our businesses have sought to transfer certain risks
to the consultants it engages.
The internal review processes operated by the Group seeks to ensure that contractual risks are properly scrutinised and mitigated as
far as possible, whilst the management and quality control systems highlighted above minimise the risk of shortfalls in performance that
may give rise to litigation. The Group maintains professional indemnity insurance across appropriate parts of its businesses.
From time to time the Group receives claims from clients and suppliers some of which result in compensatory payments being
made by the Group and its insurers. The Board reviews significant claims at all meetings and is currently satisfied that the Group
has provisions in its balance sheet the total of which is sufficient to meet all uninsured liabilities.
Compliance
The Group is subject to a range of taxation and legal requirements. A failure to comply with these obligations could give rise to legal
liability, financial loss and reputational damage.
The Group has in place appropriate internal controls to deal with such matters and employs appropriately qualified employees through
whom it monitors and responds to the regulatory requirements of the countries in which it operates.
Business Acquisitions
As in the past the Group intends to develop and grow the business, in part, by making acquisitions. A failure to identify acquired
liabilities or to integrate acquired businesses could have an adverse impact on the Group’s performance and prospects.
Detailed due diligence is performed on all potential acquisitions drawing upon both internal and external resources. This will include
an assessment of the ability to integrate the acquired business within the Group and its control environment. The integration of the
acquisitions made in 2013 has been successful and work in relation to those made during 2014 is proceeding well.
Funding
The availability of sufficient and appropriate funding through the Group’s bank facilities is important to support the Group’s growth and
in particular to fund acquisitions.
rpsgroup.com
11
The Group’s principal bank facility will expire in July 2016 and currently consists of a committed revolving credit facility with Lloyds of
£125m. It is anticipated that this facility will be replaced with a new facility, possibly involving other banks, during the middle part of
2015. During the year the Group’s position has been strengthened by the successful negotiation and completion of a $150m long term
private shelf facility with Prudential Investment Management Inc. Initial sums of £30m and US$34.1m repayable in September 2021
have been drawn against this facility. A fixed interest rate of 4% is payable on this loan.
Financial Risk Management
In addition to ensuring the availability of sufficient funding the Group faces a number of other financial risks which are fully described in
note 30 to the Group Financial Accounts on page 69.
12
Report and Accounts 2014 Employees
The current profile of the Group’s employees presented in accordance with the Group’s segmentation during the year and the
changes over that period are as detailed below.
Strategic Review
Group
Average number of employees
Energy
Built and Natural Environment – Europe
Built and Natural Environment – North America
Australia Asia Pacific
Central
Group total
Employment statistics
Days absent (%)
Average length of service (years)
Working part time (%)
Retention rate (%)*
Female
Male
Female (%)
Male (%)
Age profile
Employees aged under 25
Employees aged 25-29
Employees aged 30-49
Employees aged 50+
* Excluding redundancies.
2014
2013
809
2,452
276
882
111
620
2,403
228
947
108
4,530
4,306
2
6
11
81
1,621
2,909
35
65
%
7
15
55
23
2
7
11
82
1,456
2,850
33
67
%
8
15
55
22
The attraction, retention and motivation of high calibre employees is of strategic importance for the Group. To achieve this, businesses
maintain appropriate remuneration structures as well as an environment in which employees are able to develop their skills in a way
that can be applied to our clients’ requirements. Each of the businesses has the remit to put in place arrangements that meet their
specific demands whilst working within a framework of structures and systems that are overseen at Group level. Human resource
professionals are employed throughout the Group to support the achievement of this objective. The Executive Directors have overall
accountability for the development of human resource practice within the businesses for which they are individually responsible.
The gender profile of the Group’s employees is shown above. As noted in the Corporate Governance Report two of the members
of the Group Board are female. This currently represents slightly less than 25% of the directors, although on retirement of John
Bennett from the Board later this year this will increase to 25%. Of the senior management group that is comprised of directors of the
companies that are included in the Group consolidation, 44 are male and 3 are female.
Building an environment in which employees feel engaged with their business and the Group as a whole is of great importance in
particular to ensure the successful integration of newly acquired businesses. We use the Group intranet as a means to communicate
the Group’s business developments and achievements as well as policies and procedures. Corporate newsletters also facilitate this flow
of information. New employees receive an induction and regular staff appraisals facilitate open communication between employer and
employee as well as identifying developmental needs.
rpsgroup.com
13
The Group operates share plans across all its businesses aimed at giving employees a tangible interest in the Group’s overall
performance. Share purchase plans are accordingly open to the vast majority of our employees and enable them to purchase shares
in the Company with the benefit of a matching share contribution from the Company. A performance share plan is also operated for
more senior employees, which offers the potential to build a significant interest in the Company over a number of years.
The Group is committed to the training and development of its employees to enable them to realise their potential and effectiveness.
Divisional directors and project managers are responsible for the management of training and verification of technical competence
for project personnel in accordance with our quality management systems. Continuing professional development is of particular
importance for our professional employees who are required to demonstrate technical competence within their specific sectors.
Given the wide range of technical areas in which we are engaged this involves supporting training schemes across a range of disciplines
both ‘in-house’ and through professional bodies. Within our UK water business, for example, customer service training is delivered in
conjunction with the Institute of Customer Services, whilst a post graduate certificate in urban drainage is supported and accredited
through Derby University. In The Netherlands in-house training courses include project management, customer relationships and team
leadership. The Group also provides training to the oil and gas sector through its Training Unit and which assists in providing technical
training within the Group. During 2014 RPS continued its long-term practice of supporting staff in pursuing relevant higher education
courses. This involved sponsoring courses at universities and colleges across the United Kingdom, Ireland, The Netherlands, USA and
Australia. Vacant positions within the Group are, wherever possible, filled from within and our developmental and training programmes
support this objective.
RPS provides equal opportunities for all its employees and potential employees regardless of their sex, sexual orientation, trans-gender
status, religion or belief, marital status, civil partnership status, pregnancy, age, disability, race, colour, nationality, national or ethnic
origins. The policy applies to the process of recruitment and selection, promotion, training and development, conditions of work, pay
and benefits and to every other aspect of employment.
The Group’s policies in relation to health and safety are described on pages 15 and 16.
14
Report and Accounts 2014 Strategic Review
Corporate Responsibility
Commitment
The Group’s corporate governance policies are described in detail elsewhere in this document and provide a framework within which
it can look to achieve attractive levels of return for its shareholders whilst striking a balance between this objective and recognition of
its obligations to its employees, clients and society in general. The Corporate Governance Committee supports the Board in exercising
general oversight in relation to environmental, social and governance (‘ESG’) matters although in the normal course of business
the Board and the Executive Committee assess the risks and opportunities to which such issues give rise. In the Board’s view it has
adequate information to enable the proper assessment of these issues and where required training in such matters will be provided to
directors.
As noted in the Risk Management section of this review, environmental issues are most likely to affect the Group through the impact
material adverse events may have on the Group’s trading. Whilst given the nature of its activities the Group’s own impact on the
environment is comparatively modest, its performance is monitored as outlined below and appropriate action to minimise impact
taken where possible. The Group can, however, make a greater contribution to the environment through its own expertise and many
of the projects with which it is involved. The Group advises international bodies, governments, local authorities and companies on
the improvement of environmental performance. Projects include the development of strategies to reduce carbon emissions and the
adaptation of buildings and infrastructure to anticipate climate change as well as the preparation of Environmental Impact Assessments
across several sectors.
The policies adopted by the Group in relation to employees as well as health and safety are described elsewhere within this review
whilst the risks associated with failures in both of these areas are described in the Risk Management section on pages 10 to 12. The
Group recognises the importance of maintaining high standards of business conduct and contributing to the communities with which
it is involved as detailed below. In the Board’s view the challenges, risks and opportunities created by ESG issues as outlined in the
Report and Accounts are unlikely to change significantly in the foreseeable future.
The Group remains a constituent member of the FTSE4Good Index, which consists of those companies that satisfy a set of globally
recognised standards in the area of corporate responsibility. It is also a participating member of the Carbon Disclosure Project to
which it provides data on an annual basis.
Standards of Business
The Group aims to be honest and fair in all aspects of its business. Through codes of conduct employees are required to adopt high
standards of behaviour in their professional roles. Employees are also required to be sympathetic to the cultures of and comply with
the laws and regulations of the countries in which they operate, as well as giving due regard to the safety and well-being of all project
personnel and relevant local communities. All RPS employees must avoid personal or professional activities and financial interests that
could conflict with their responsibilities to the Group. If a conflict of interest does arise then this must be acknowledged and reported.
Employees must not abuse their position for personal gain; the Group has a clearly stated and zero tolerance policy in relation to bribery.
RPS supports the Universal Declaration of Human Rights as well as the International Labour Organisation’s Declaration on
Fundamental Principles and Rights at Work. We understand our responsibility to respect the human rights of the communities
and workforces with whom we interact and our employees are expected to conduct themselves in a manner that is respectful of
such rights.
Health and Safety
The health and safety of the Group’s employees and others we affect is of paramount importance and we remain committed to
good practice that as a minimum complies with the requirements of law. The Board sets the overall framework and standards for the
management of health and safety, the implementation of which is overseen by the Company Secretary. Within this context each of
the Group’s businesses is responsible for the development of appropriate safe working conditions and systems to protect employees,
contractors, visitors and others who may be affected by the Group’s activities. Where appropriate, work activities are assessed for
health and safety risks and appropriate mitigation measures and controls put in place. Employees are trained to ensure that they have
the appropriate skills to carry out their job safely and senior management are trained to ensure that obligations to employees for
whom they are responsible are properly discharged. The Group’s businesses have appropriately qualified health and safety advisors to
develop and implement these systems. Health and safety systems are also subject to regular review and audit.
Health and safety issues and performance are reported to and reviewed by all operating Boards at each meeting. This incorporates a
system for reporting all near misses, accidents, dangerous occurrences and work-related diseases. All such incidents are investigated
to determine the root cause and wherever possible action is taken to mitigate the risk of recurrence. The Group Board receives and
15
rpsgroup.com reviews a report at every meeting which summarises health and safety performance across the Group as well as detailing any significant
incidents and emerging issues.
OHSAS 18001 is an internationally recognised standard for health and safety management that is aligned with the ISO 9000 (Quality
Management) and ISO 14000 (Environmental Management) standards. 30% (2013: 27%) of employees across the Group work in
offices that now have third party accreditation to the OHSAS 18001 standard.
During the year neither the Group nor any Group company was prosecuted for the breach of health safety regulations or subject to
any investigation by regulatory authority. The reportable accident rate in the year was 2.1 accidents per 1,000 employees (2013: 3.0).
Accidents that do occur most commonly effect field staff and involve manual handling activities, slips and falls.
Reportable Accident Rates
Group
Reportable injuries
Reportable injuries incident rate per 1,000 employees
2014
11
2.1
2013
15
3.0
Community Involvement
RPS has supported a range of community and charitable initiatives with gifts in kind and financial contributions throughout the year,
mostly at office level. In 2014 the Group and its staff gave or raised £882,000 in charitable contributions (2013: £740,000). Taking into
account the £175,000 spent on academic bursaries and educational initiatives (2013: £233,000), the total contribution of the Group
and its employees to the communities in which it operates was £1,057,000 (2013: £973,000).
Tree Aid
The Group has continued to focus much of its charitable contribution upon the work of Tree Aid. This is in support of Tree Aid’s
programme of education, tree planting and woodland conservation programmes to assist some of the poorest communities in sub-
Saharan Africa. The Group continues to be this charity’s largest corporate sponsor, having contributed a total of £140,000 towards
projects in Ghana and Mali in 2014. In addition to financial support the Group continues to offer the skills of its staff on a ‘pro bono’
basis to provide important technical support for Tree Aid’s work. Work undertaken during the year has included topographical
surveying, soil erosion studies and GIS field surveying.
The Group is pleased to have continued this association and that some of its employees have been able to contribute in such a direct
and positive way.
Environmental Management and Climate Change
Although as a consultancy organisation our impact on the environment is small, the Group seeks to keep this to a minimum through
the adoption of appropriate standards and the setting of specific targets.
The Group endeavours to:
n comply with all relevant national and regional legislation as a minimum standard;
n comply with codes of practice and other requirements such as those specified by regulators and our clients;
n
utilise suppliers that offer products which are sustainable, recyclable or environmentally sensitive wherever practicable
and economic;
n employ practical energy efficiency and waste minimisation measures; and
n
provide an inter-office IT network together with communications and video conferencing technology that significantly reduces
business travel.
To achieve these objectives appropriate training is provided to enable activities to be conducted in an environmentally sensitive
manner and sufficient management resources are allocated to enable effective implementation of policies. A number of the Group’s
operating businesses have achieved ISO14001, the internationally recognised environmental management system standard. During
2014 many of our offices continued to recycle waste paper, spent toner and ink cartridges, obsolete computer hardware, printers
and mobile phones.
16
Report and Accounts 2014
Strategic Review
Greenhouse Gas Reporting
For the reporting year 1 January to 31 December 2014 we have followed the 2013 UK Government environmental reporting
guidance and used 2014 UK Government’s Conversion Factors for Company Reporting. Greenhouse gas emissions are reported using
the following parameters to determine what is included within the reporting boundaries in terms of RPS energy consumption.
n
Scope 1 – direct emissions includes any gas data and fuel use for company owned vehicles. Fugitive emissions from air conditioning
are included where it is RPS’s responsibility within the tenanted buildings.
n
Scope 2 – indirect energy emissions includes purchased electricity throughout the company operations.
Greenhouse gas emissions (tCO2e) are set out in the table below.
Scope 1: Direct emissions
Scope 2: Indirect emissions
Total
2013
7,223*
4,458
11,681
2014
6,881
4,724
11,605
*Scope I data for 2013 has been restated to reflect the inclusion of additional data that was not available last year.
Targets and Emission Intensity
In 2013 it was decided that the specific target set by the Board of a 5% decrease year on year decrease was unrealistic given the
difficulties inherent in sustaining improvement as economic circumstances fluctuate and as the structure of the Group changes. Instead
a target was set of a five year rolling average to reduce energy consumption per capita by 2.5% for office energy consumption. Using
this approach the five year rolling average up to 2013 was 3.6 MWh per capita which decreased to 3.56 MWh per capita for the five
year rolling average to 2014. Although a decrease was achieved this was below the target reduction of 2.5%.
The Group’s policies and objectives for environmental management are reviewed from time to time in the light of changes within the
Group’s businesses, new legislation and emerging practice.
On behalf of the Board
Alan Hearne
Chief Executive
26 February 2015
17
rpsgroup.com The Board
Brook Land
Non-Executive Chairman
Aged 65. Brook Land was formerly a
senior partner of and is now a consultant
to Nabarro. He is a director of a number
of private companies. Until 2008 he was
Senior Independent Director of Signet
Group plc. He was appointed to the
Board in 1997 and is a member of the
Nomination Committee.
Dr Alan Hearne
Chief Executive
Aged 62. Alan Hearne holds a degree
in economics and a doctorate in
environmental planning. Following
a period of academic research into
environmental planning he joined RPS in
1978, becoming a Director in 1979 and
Chief Executive in 1981. Alan was the plc
Entrepreneur of the Year in 2001, was
made a Companion of the Institute of
Management in 2002. He also became a
member of the Board of the Companions
in 2007, a fellow of Aston Business School
in 2006 and an honorary Doctor of the
University of Kent in 2011.
Gary Young
Finance Director
Aged 55. Gary Young graduated from
Southampton University in 1982 and
qualified as a Chartered Accountant in
1986 with Price Waterhouse. Before
joining RPS he held a number of finance
director roles including positions within
Rutland Trust plc and AT&T Capital. He
joined RPS in 2000 and was appointed
to the Board later that year.
Dr Phil Williams
Executive Director
Aged 62. Phil Williams joined the
Group in 2003 through the acquisition
of Hydrosearch Associates Limited
where he held the position of Managing
Director. Phil had joined Hydrosearch
in 1981 and was appointed Managing
Director in 1983. Over the next 20 years
he led Hydrosearch as the company
developed into one of the world’s largest
energy sector consulting groups. Phil was
appointed to the Board in 2005.
Robert Miller-Bakewell
Independent Non-Executive Director
Aged 62. Robert joined the Board in
2010 and is serving a second three-year
term. Robert was a Senior Director of
Investment Research at Merrill Lynch from
1998 to 2008 and prior to this worked
as an investment analyst with NatWest
Markets and its predecessor companies.
Over the previous twenty years his focus
was on analysing and advising water,
waste, transport and environmental
infrastructure companies both in the UK
and internationally. He has also served as
a member of OFWAT’s Future Regulation
Panel. Robert is a member of the Audit
and Chairman of the Nomination
Committee as well as being Senior
Independent Director.
John Bennett
Independent Non-Executive Director
Aged 67. John was appointed to the
Board in 2006. He is a Chartered
Accountant with 30 years experience
in the house building industry. He was
Finance Director of Westbury plc, until
it was acquired early in 2006. He has
wide experience of financial management,
capital and debt raising, acquisitions and
investor relations having played a leading
role in the strategic development of
Westbury into a top ten volume house
builder in the UK. John is serving a third
three-year term and will be stepping
down from the Board at this year’s annual
general meeting. He is Chairman of the
Audit Committee and a member of the
Remuneration Committee.
Louise Charlton
Independent Non-Executive Director
Aged 54. Louise was appointed to the
Board in 2008 and is serving a third
three-year term. She is Vice-Chairman of
Brunswick Group LLP, the international
corporate communications group of
which she was a co-founder. Louise also
serves on the Board of Brunswick Arts,
an international strategic communications
consultancy specialising in the cultural
sector and Merchant Cantos, a leading
creative communications agency. She has
also served as a Director and Trustee
of the Natural History Museum. She
is a member of the Remuneration and
Nomination Committees.
Tracey Graham
Independent Non-Executive Director
Aged 49. Tracey Graham joined the Board
in 2011 having been Chief Executive of
Talaris Limited, an international cash
management business, until 2010. Tracey
led the management buy-out of Talaris
from De La Rue Plc, backed by private
equity house Carlyle in 2008. Tracey is also
an independent Non-Executive Director of
Dialight Plc and the Royal London Group.
She is serving a second three year term
and continues to chair the Remuneration
Committee as well as being a member of
the Audit Committee.
Andrew Page
Independent Non-Executive Director
Aged 56. Andrew Page joined the Board
in September 2014. He retired as Chief
Executive Officer of the Restaurant Group
plc in September 2014 having spent over
thirteen years with that company. Prior to
that he held a number of senior positions
in the leisure and hospitality industry,
including Senior Vice President with
InterContinental Hotels. Andrew qualified
as a Chartered Accountant with KPMG
and then spent several years with
Kleinwort Benson’s Corporate Finance
division. He is currently a non-executive
director at Carpetright plc, Northgate plc,
The Schroder UK Midcap Fund plc and JP
Morgan Emerging Markets Investment
Trust plc. Andrew is a member of the
Audit and Remuneration Committees.
18
Report and Accounts 2014 Management & Governance
Report of the Directors
The Directors present their report together with the audited financial statements of RPS Group Plc and its subsidiary undertakings (the
‘Group’) for the year ended 31 December 2014.
Directors
The Directors of the Company as at 31 December 2014 were those listed on page 18. The only change to the composition of the
Board during the year was the appointment of Andrew Page as Non-Executive Director with effect from 15 September 2014. The
Directors’ interests in the share capital of the Company are as shown in the Annual Report on Remuneration on page 85.
None of the Directors was materially interested in any significant contract to which the Company or any of its subsidiaries were party
during the year.
Results and dividend
The Consolidated Income Statement is set out on page 35 and shows the profit for the year. The Directors recommend a final
dividend of 4.42p (2013: 3.84p) per share. This together with the interim dividend of 4.05p (2013: 3.52p) per share paid on 16
October 2014 gives a total dividend of 8.47p (2013: 7.36p) per share for the year ended 31 December 2014.
Strategic Review
The Group’s Strategic Review can be found on pages 3 and 4 and includes information as to the likely future development of the
Group. Financial key performance indicators can be found on page 6. The Directors review performance using these non-statutory
measures as well as segmental and underlying profit, as they consider these to be more meaningful measures of performance. These
performance measures are defined in note 1(g) of the Consolidated Financial Statements. Note 3 includes a ‘Group Reconciliation’ of
the adjusted measures to the statutory results. The Board does not use non-financial key performance indicators to assess the Group
as a whole, although parts of the Group do use such indicators from time to time.
The Strategic Review contains certain forward looking statements with respect to the financial condition, results of operations and
businesses of RPS. These statements involve risk and uncertainty because they relate to events and depend upon circumstances that
may occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those
expressed or implied by these forward looking statements. The Strategic Review includes information as to likely future developments
in the business of the Group. Nothing in the Strategic Review should be construed as a profit forecast.
Consistent with its size and complexity, the Group has a large number of contractual relationships with clients and suppliers. In the
Directors’ view, however, there is no single contract or client relationship, which is essential to the Group’s business. The principal
operating subsidiary undertakings are listed in note 5 to the Parent Company Financial Statements.
Corporate Governance
The Directors’ report on corporate governance can be found on pages 22 to 27 and incorporates other parts of the Report and
Accounts as detailed therein.
Employees
The Group’s policies in relation to employees are disclosed on pages 13 and 14.
Corporate Responsibility
The Group’s corporate responsibility statement is included on pages 15 to 17. This includes the disclosures concerning greenhouse gas
emissions that are required pursuant to part 7 of The Companies Act (Strategic Report and Directors’ Report) Regulations 2013. The
Group made no contribution to political organisations during the year.
Substantial shareholdings
The Company is aware of the following interests in excess of 3% of the ordinary share capital of the Company as at 25 February 2015.
Aberforth Partners
Black Rock
Standard Life Investments
UBS Global Asset Management
Franklin Templeton Fund Management
Montonaro Investment Managers
SEB Asset Management
Threadneedle Investments
Columbia Wanger Asset Management
No. of shares
15,933,860
14,757,190
13,618,311
10,980,088
9,000,000
8,555,000
7,759,393
7,376,570
6,673,209
Percentage
7.19
6.66
6.15
4.96
4.07
3.86
3.50
3.33
3.01
19
rpsgroup.com Going concern
The Group’s business activities, a review of the 2014 results together with factors likely to affect its future development and prospects
are set out on pages 6 to 9. Note 16 to the Consolidated Financial Statements sets out the borrowings of the Group and considers
liquidity risk, whilst note 30 describes the Group’s approach to capital management, and financial risk management in general.
The Group has had good cash flow for a number of years and operates well within the financial covenants applying to the main
bank facility. The Group’s banking facilities which were renewed in 2012 and expire in July 2016, will be renegotiated during 2015.
The Group’s position was strengthened in 2014 on entering into a $150m long term private shelf facility with Prudential Investment
Management Inc.
The Group has a diverse range of businesses in a spread of geographies and as a consequence the Directors believe that the Group is
well placed to manage its business risks successfully.
The Directors have a reasonable expectation that the company has adequate resources to continue in operational existence
for the foreseeable future. They therefore continue to adopt the going concern basis of accounting in preparing the annual
financial statements.
Directors’ responsibilities statement
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law
and regulations. Each of the persons who is a director at the time of this report confirms that so far as he or she is aware there is
no relevant audit information of which the Company’s auditors are unaware and that he or she has taken all the steps that he or she
ought to make himself or herself aware of any relevant audit information and to establish that the Company’s auditors are aware of
that information.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required
to prepare the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by
the European Union and Article 4 of the IAS Regulation and have elected to prepare the parent company financial statements in
accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).
Under company law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the
state of affairs of the company and of the profit or loss of the company for that period.
Group Financial Statements
In preparing the group financial statements, International Accounting Standard 1 requires that Directors:
n
properly select and apply accounting policies;
n
n
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial
performance; and
n make an assessment of the company’s ability to continue as a going concern.
Parent Company Financial Statements
In preparing the parent company financial statements, the Directors are required to:
n select suitable accounting policies and then apply them consistently;
n make judgments and accounting estimates that are reasonable and prudent;
n
n
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained
in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue
in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s
transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company
and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
20
Report and Accounts 2014 Management & Governance
Responsibilities pursuant to DTR4
We confirm that to the best of our knowledge:
n
n
the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as
a whole;
the strategic report includes a fair review of the development and performance of the business and the position of the company
and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and
uncertainties that they face; and
n
the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company’s performance, business model and strategy.
Financial instruments
Details on the use of financial instruments and financial risk are included in note 16 to the Consolidated Financial Statements.
Post balance sheet events
On 13 February 2015 the Company announced the acquisition of Klotz Associates Inc. for a maximum consideration of US $24.1m.
Takeover Directive
The following additional information is provided for shareholders as a result of the implementation of the Takeover Directive into
UK Law.
As at 31 December 2014 the Company’s issued share capital consisted of 221,347,707 ordinary shares of 3p each. At a general
meeting of the Company every holder of ordinary shares present in person is entitled to vote on a show of hands and on a poll every
member present in person or by proxy and entitled to vote has one vote for every ordinary share held. There are no shares in issue
that carry special rights with regard to control of the Company. There are no restrictions on the transfer of ordinary shares in the
Company other than those that may be imposed by law or regulation from time to time. The Company’s Articles of Association may
be amended by special resolution at a general meeting of the shareholders. Directors are appointed by ordinary resolution at a general
meeting of the shareholders. The Board can appoint a Director but anyone so appointed must be elected by an ordinary resolution
at the next general meeting. Under the Articles of Association any Director who has held office for more than three years since their
last appointment must offer themselves for re-election at the next annual general meeting. It Is the Company’s policy, however, that all
Directors should stand for annual re-election.
The Directors have power to manage the Company’s business subject to the provision of the Company’s Articles of Association,
law and applicable regulations. The Directors have power to issue and buy back shares in the Company pursuant to the terms and
limitations of resolutions passed by shareholders at each annual general meeting of the Company. No such power was exercised
during the year under review. Directors’ interests in the share capital of the Company are shown in the table on page 85. Substantial
shareholder interests of which the Company is aware are shown on page 19.
Listing Rule 9.8.4C
The following disclosure is required pursuant to listing rule 9.8.4C. An arrangement is in place whereby the trustee of the Company’s
employee benefit trust has agreed to waive present and future dividend rights in respect of certain shares that it holds. There are no
other matters requiring disclosure required pursuant to this listing rule.
Annual General Meeting
The Annual General Meeting will be held on 1 May 2015. The Notice of Annual General Meeting circulated with this Report and
Accounts contains a full explanation of the business to be conducted at that meeting. This includes a resolution to re-appoint Deloitte
LLP as the Company’s Auditors.
By order of the Board
Nicholas Rowe
Secretary
26 February 2015
Registered Office:
20 Western Avenue
Milton Park
Abingdon
Oxfordshire OX14 4SH
Registered in England No. 02087786
21
rpsgroup.com Corporate Governance
Chairman’s Introduction
As Group Chairman, I am reporting on how the principles relating to the role and effectiveness of the Board have been applied in
our company. This is the final year in which we will report against the version of UK Governance Code (‘the Code’) published in
September 2012 and from next year we will be benchmarked against the revised version of the Code published in September 2014.
During the year under review we have been fully compliant with the provisions of the current version of the Code and the report
below explains this in detail, as well as the processes and disciplines to which the Board adheres. In addition to meeting the specified
requirements, I am satisfied that the Board is well informed and has a clear understanding of the challenges we face. This, coupled with
an open and cooperative style enables risks to be clearly identified and managed.
I have previously commented on the wide range of skills and experience that the members of our Board possess and the value we
derive from this. The year has inevitably brought its challenges, but all of our directors have contributed in different ways as we have
navigated through them. Whilst this has again been assisted by the stability of the Board over the year, Andrew Page has now joined
the Board as a new Non-Executive Director. Andrew’s achievement as Chief Executive and Finance Director of a successful public
company as well as his previous experience in the City will, I believe, serve us well as we move forward.
The Board continues to examine the significant risks that we face and as part of this process the systems and controls necessary to
manage these risks in a multi-national environment are reviewed and developed. We continue to prioritise the health and safety of
our employees and this subject is considered as the first item on the agenda at all of our meetings. There was an overall reduction
in reportable incidents during 2014. As I remarked last year I believe that the Board’s agenda continues to strike the right balance
between strategy, priorities, performance and risk management.
Although operating independently the general activities of our Committees are reported to the Board on a regular basis.
Notwithstanding this the Board Committees continue to operate independently and with the benefit of professional advice where
required as they continue to work through the changing regulatory environment.
Having undertaken our first externally facilitated Board performance review in 2013, for the year under review we reverted to an
internal review process. This was managed by our Senior Independent Director who engaged with all of our directors on a range
of issues relating to the structure and operation of the Board. This process is referred to in the report below; although it is pleasing
to note that no major issues arose. We have also continued with our programme of Non-Executive Directors visiting operating
companies and attending their Board meetings either in person or by video-link. Although this fell away a little during 2014, I intend
to ensure that the Non Executives resume a full programme this year as it provides a greater understanding of the Group and
encourages well informed discussions at Board meetings.
I reported last year that the Chief Executive had indicated his intention to remain in office until at least until 2017. The Nomination
Committee is now actively engaged in more detailed planning to consider not only the position of Chief Executive but also across the
Group’s senior executive management as a whole. This process is addressing both the timing and the sequencing of the proposed
changes, as this is of critical importance for the future of the Group. The revised segmentation that has now been adopted and the
management structures around that will greatly assist in developing senior level talent. A priority for 2015 is the bedding down of the
new segment Boards. I am confident that plans are developing to deal with anticipated senior level retirements over the next few
years. In the interim we continue to have agreed arrangements to deal with any emergency scenario. As I have previously written, I
hold the strong view that over planning accelerates unwanted change. I will continue to keep shareholders informed in relation to this
important topic.
During 2014 both Tracey Graham and Louise Charlton agreed to continue to serve for further three year terms. Louise serves on the
Nomination and Remuneration Committees whilst Tracey chairs our Remuneration Committee and serves on the Audit Committee.
John Bennett, who chairs the Audit Committee, completes 9 years as a NED at the 2015 AGM and in accordance with best practice
will be retiring at that time. I would like to take this opportunity to thank John for his very substantial contribution to the Board and
the Company and, in particular, for the skill with which he has led the Audit Committee.
In accordance with best practice all our Directors (both Executive and Non-Executive), including myself, will offer themselves for
re-election at every AGM.
The success of our Group has been dependent on the endeavour and skills of the people we employ throughout the world. I am
pleased to thank them for their past contribution and have confidence that they will rise to the challenges ahead.
Brook Land
Chairman
22
Report and Accounts 2014 Management & Governance
Corporate Governance Committee
The Corporate Governance Committee is responsible for overseeing the Group structure and organisation and evaluating these in the
context of developments in standards of corporate governance. The Committee keeps the Board and its other committees appraised
of developments that may impact their structure and activities. It also oversees the policies described in the Corporate Responsibility
Statement and the Group’s environmental policies. The Committee consists of the Chairman, Chief Executive and Company Secretary.
UK Corporate Governance Code
The Board is pleased to report that the Company complied with all provisions of the UK Corporate Governance Code (the ‘Code’)
throughout the year. With effect from next year the Company will report against the revised version of the Code as published in
September 2014.
Board Responsibilities
The Board has a schedule of matters that are reserved for its decision, including:
n determining the Group’s overall strategy
n
the approval of significant acquisitions and disposals
n
the approval of annual targets and financial reporting including
annual and half year results and interim
management statements
n
the recommendation and approval of dividends and other
capital distributions
n
the approval of policies and systems for risk management
and assurance
n
the appointment of key advisers to the Group
n
the approval of major items of capital expenditure
n
the settlement of major litigation.
Board Structure
At the date of this report the Board comprised three Executive, five Non-Executive Directors and the Chairman. Andrew Page
was appointed to the Board as a Non-Executive Director in September 2014 at which time he joined the Audit and Remuneration
Committees. John Bennett will step down from the Board in May 2015 at which time Andrew Page will become Chairman of the
Audit Committee. The Executive Directors are responsible for the day-to-day management of all the Group’s business activities.
The Non-Executive Directors are, in the opinion of the Board, all independent of management and contribute independent judgement
as well as bringing extensive knowledge and experience to the proceedings of the Board. The Chairman was independent on
appointment. The Non-Executive Directors are appointed for three-year terms, which may subsequently be extended. Any term
beyond six years for a Non-Executive is rigorously reviewed, taking account of the requirement to refresh the Board. All directors are
subject to annual re-election by shareholders.
The Chairman and Chief Executive have clear and distinct roles. The key functions of the Chairman are to conduct Board meetings
and to ensure that all Directors are properly briefed in order to take a full and constructive part in Board discussions. The Chairman
also meets regularly with major shareholders and in order to understand their views and seek their input on specific matters. The Chief
Executive‘s role is to develop and lead business strategies and processes to enable the Group to meet the requirements of its clients
as well the needs of its employees.
The Senior Independent Director is available to shareholders who wish to raise concerns that cannot be resolved through the
Chairman, Chief Executive or Finance Director. Robert Miller-Bakewell acted as the Senior Independent Director throughout the year.
The Board is assisted by the Audit, Remuneration, Nomination and Corporate Governance Committees. The Chairman of each
Committee provides updates as to its activities at Board meetings.
The table below shows the number of Board and Committee meetings attended by each of the Directors during the year.
Brook Land
Alan Hearne
Gary Young
Phil Williams
John Bennett
Louise Charlton
Robert Miller-Bakewell
Tracey Graham
Andrew Page*
Number of meetings held
*Appointed 15 September 2014.
Full
Board
8
Audit
Committee
–
Remuneration
Committee
–
Nomination
Committee
1
Corporate
Governance
1
8
8
8
8
5
8
8
2
8
–
–
–
3
–
3
3
–
3
–
–
–
6
4
–
6
2
6
–
–
–
–
1
1
–
–
1
1
–
–
–
–
–
–
–
1
23
rpsgroup.com Board Operations
The Board generally meets eight times annually, although additional meetings may be held should circumstances require. The Board
agenda gives significant focus to business performance and strategy balanced by consideration of emerging risks and the control
environment. Comprehensive papers are circulated well in advance of Board meetings which include general updates and briefings on
significant issues from each of the Executive Directors and the Company Secretary. These reports and other matters of immediate
importance are discussed at each meeting. The Company Secretary assists the Chairman in ensuring that Board procedures are
followed and advises on matters of Corporate Governance. The services of the Company Secretary are available to Directors
generally. Outside of Board meetings the Chairman has regular individual discussions with all Directors.
The Executive Directors meet formally at least once a month. The Executive Committee, which consists of the three Executive
Directors supported by the Company Secretary, is responsible for all operational matters within the Group subject to those matters
that remain reserved for the Board. The minutes of all Executive Committee meetings are circulated to the Non-Executive Directors.
Where Directors have concerns that cannot be resolved regarding the management of the Company or a proposed action, these
concerns are recorded in the Board minutes. In accordance with Company policy any concerns expressed by a Director on resignation
are provided, in a written statement, to the Chairman for circulation to the Board. No matters of this nature have arisen during
the year.
The Company’s Articles of Association contain provisions that allow Directors to authorise conflicts in accordance with the Companies
Act 2006. These provisions enable the Directors to authorise a conflict, subject to such terms as they may think fit, which may include
exclusion from voting in respect of the relevant issue and exclusion from information and discussion relating to the matter. The
procedure approved by the Board for authorising conflicts reminds Directors of the need to consider their duties as Directors and not
grant an authorisation unless they believe, in good faith, that this would be likely to promote the success of the Company. A potentially
conflicted Director cannot vote on such an authorising resolution or be counted in a quorum for that purpose. Any authority granted
may be terminated at any time and the Director is informed of his obligation to inform the Company without delay should there
be any change in the nature of the conflict previously authorised. In addition, the Board requires the Nomination Committee to
check that any individual it nominates for appointment to the Board is free of any potential conflict of interest. No actual or potential
conflicts of interest arose during the year under review.
There is an agreed procedure for Directors to take independent professional advice and training at the Company’s expense. The
Company maintains Directors and Officers liability insurance with a current limit of indemnity of £20m.
The Group’s strategy and its business model are described on pages 3 and 4.
Board Performance
The Board undertakes an annual appraisal of its performance. Having conducted its first externally facilitated performance review in
2013 the Board reverted to an internal review for 2014. As part of the exercise that the Senior Independent Director undertook
in relation to succession planning he engaged with all directors in relation to the structure and operation of the Board and its
Committees. In addition all directors were given the opportunity to raise any issues of concern directly with the Chairman. No major
issues arose out of this exercise. The Non-Executive Directors hold meetings with the Chairman without the Executives present
at least twice a year and the Non-Executives, led by the Senior Non-Executive Director, meet on an annual basis to appraise the
Chairman’s performance.
On appointment directors receive information on the Company as well as the Board and its procedures. They also meet other
members of the Board to be briefed on strategy, financial matters and other key issues. Advice is available from the Company’s
solicitors, auditors and brokers if required. During the year updates are provided on key technical issues as required including those
relating to corporate governance and corporate social responsibility. Non-Executive Directors undertake visits to operating companies
and attend their Board meetings in order to improve their understanding of the issues facing the Group’s businesses.
Communication
The Company attaches great importance to communication with its shareholders and other stakeholders. In addition to regular
financial reporting the Group website provides up-to-date information about its organisation, the services it offers and newsworthy
subjects. The Company also responds to letters and enquiries from shareholders and others with an interest in the Group.
In addition to presentations of full and half-year results, senior executives led by the Chief Executive hold meetings with the Company’s
principal shareholders to discuss the Company’s strategy and performance. The Chairman and Senior Independent Director are also
available to discuss issues with major shareholders. A detailed investor relations report is presented at all regular Board meetings to
ensure that the Board is kept aware of the views of larger shareholders and the investment community generally.
The Chairman of each of the Board Committees attends the Annual General Meeting and is available to answer questions.
24
Report and Accounts 2014 Management & Governance
Audit and internal controls
The respective responsibilities of the Directors and the independent auditors in connection with the accounts are explained on pages
20 to 21 and 31 to 34 and the statement of the Directors in respect of going concern appears on page 20.
The Board has throughout the year and up to the date of approval of the financial statements had procedures in place as
recommended in the guidance in the UK Corporate Governance Code and the supporting document issued by the Financial Reporting
Council ,“Internal Control: Guidance for Directors on the Combined Code”. The principal risks to which the Group is exposed and
the measures to mitigate such risks are described on pages 10 to 12.
The Board is responsible for the Group’s systems of risk management and internal control, which are designed to provide reasonable
but not absolute assurance against material misstatement or loss. The Board reviews from time to time the effectiveness of the system
of internal control and risk management from information provided by management and the Group’s external auditors. Such a review
was undertaken by the Audit Committee and the Board during 2014 the outcome of which was satisfactory. The key procedures that
the Directors have established to provide effective internal financial controls are as follows:
Financial reporting: The results for the Group are reported to and reviewed at each Board meeting. A detailed formal budgeting
process for all Group businesses culminates in an annual Group budget which is approved by the Board.
Financial and accounting principles and internal financial controls assurance: The Group’s accounting policies, principles and minimum
standards required for effective financial control are communicated to all accounting teams. The Group Finance function undertakes
periodic detailed reviews to ensure compliance and to follow up any weaknesses previously identified.
Capital investment: The Group has clearly defined guidelines for capital expenditure. These include detailed appraisal and review
procedures, levels of authority and due diligence procedures in respect of potential business acquisitions.
Treasury: the Group operates a central treasury function that undertakes required borrowing and foreign exchange transactions as well as the
daily monitoring of bank balances and cash receipts. Appropriate payment authorisation processes are in place in all parts of the Group.
Audit Committee
The Audit Committee comprises four Independent Non-Executive Directors; John Bennett, Robert Miller-Bakewell, Tracey Graham
and Andrew Page. As noted above John Bennett will leave the Committee on his retirement from the Board in May 2015. The
Committee has written terms of reference which are available on the Company’s website and on request from the Company
Secretary. Although the Board considers that all current members of the Committee have experience that is relevant to the role,
during the year under review John Bennett, who is a Chartered Accountant, was the member of the Committee specifically identified
as having recent and relevant financial experience. On retirement of John Bennett from the Committee, Andrew Page will be identified
in this role. At its annual planning meeting in September the Committee reviews and approves plans with the Auditors including the
locations to be audited and the key areas of audit focus. At the conclusion of the audit the Committee reviews the integrity of the
Group’s financial statements and the report and accounts as a whole prior to their submission to the Board. This review includes
ensuring that statutory and associated legal and regulatory requirements are met as well as considering significant reporting judgements,
the adoption of appropriate accounting policies and practices and compliance with accounting standards. In respect of the year under
review the Committee considered the following significant issues in relation to the financial statements and in each case addressed
these as indicated.
Intangible assets: This classification of assets, which comprises goodwill and other intangible assets, is by far the largest on the Group
balance sheet and therefore receives careful attention from the Audit Committee. The Committee needed to be satisfied that no
impairment of its carrying value was appropriate. To achieve this it carefully reviewed a report from the Group Finance Director which
included the results of detailed modelling of the Group’s cash generating units using assumptions and budgets that had been approved
by the Board. Based upon this report the Committee was able to satisfy itself that no impairment was required.
Acquisition accounting: A number of acquisitions were completed in the year and judgements are made with respect to the fair value
of the net assets acquired and the consideration transferred. The Group Finance Director explained to the Committee the valuation
process and the judgements made. The valuation of intangibles uses a spreadsheet model that was constructed with the help of
external valuation experts. Inputs to the model are obtained from the acquired entity and the assumptions used are derived from
recognised sources or using previous experience.
Recoverability of Trade Debtors and Accrued Income and Revenue Recognition: The risk that accrued income and trade debtors
may not be collected and therefore may be overstated in the accounts is discussed and considered by the Board at its regular board
meetings when it considers monthly results. The finance reports prepared for those meetings contain age profile information on
debtors and accrued income by segment. Operational reports presented by Executive Directors’ at those meeting discuss specific
issues in more detail as necessary. The Group Finance Director prepared a paper for the Audit Committee that considered the
recoverability of trade debtors and accrued income at the year-end and the controls in respect of revenue recognition that applied
throughout the year.
25
rpsgroup.com Following the review conducted by the Audit Committee and its own consideration, the Board was able to conclude that the Report
and Accounts for 2014, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders
to assess the Group’s performance, business model and strategy. In reaching this conclusion the Board was satisfied that the Group’s
performance across its segments, as well as its business model, strategy and the key risks that it faces are clearly explained in the
relevant sections of the Report and Accounts.
The Audit Committee keeps the scope, cost and effectiveness of the external audit under review. The Committee reviews the
effectiveness of the annual audit prior to making recommendations as to the annual re-appointment of Auditors. To facilitate this
process the Group Finance Director canvasses the views of the Group’s operating companies on the conduct of the audit. He then
reports this feedback to the Committee as well as the performance of the Auditors at Group level. Deloitte LLP were appointed as
Group Auditors in June 2012 following a tender process. The independence of the external auditor is also reviewed each year and
audit partners are rotated at least every five years. As part of its responsibility to ensure independence and objectivity the Committee
has adopted a policy to determine the circumstances in which Auditors may be permitted to undertake tax compliance work for the
Group. Under the terms of this policy the provision of certain services are prohibited and include those listed below:
n
bookkeeping services
n
valuation services
n
preparation of financial statements
n
investment advisory, broker and dealing services
n
design and implementation of financial systems
n
general management services
The split between audit and non-audit fees for the year under review appears in note 8 on page 49. Taxation work undertaken by
Deloitte LLP during the year was handled by teams that were separate and independent from the external audit team and were led
by different senior partners. The Committee was satisfied that appropriate safeguards were in place and that the provision of these
additional services by Deloitte LLP did not affect their independence as external auditor. The taxation work undertaken by Deloitte is
compliance based. Advisory work is undertaken by other firms.
The Committee also monitors the effectiveness of the Group’s internal financial controls and risk management processes; this included
assisting the Board in conducting the review of internal controls described above. The Audit Committee regularly reviews the need for
an internal audit function. It remains of the view that at present the financial controls operating throughout the Group and the reviews
undertaken by the Group Finance function are adequate without requiring a dedicated internal audit department.
The Committee also keeps under review the means by which staff may, in confidence, raise concerns about financial improprieties
relating to financial reporting, internal control or other matters. The Company’s procedure allows for any such matters to be reported
to the Company Secretary who will ensure that they are properly investigated and reported to the Audit Committee and the Board.
An individual raising a concern need not disclose their identity and if such identity is disclosed it will not be passed on without the
consent of that individual.
Nomination Committee
The Committee meets as required and comprises the Non-executive Chairman, Brook Land and two Independent Non-Executive
Directors, Louise Charlton and Robert Miller-Bakewell. Brook Land acted as Chairman of the Committee throughout the year,
although Robert Miller-Bakewell has subsequently assumed this role. The Committee’s key responsibilities include reviewing the Board
structure, size and composition as well as evaluating the balance of skills, knowledge and experience which may be required in the
future and making recommendations to the Board accordingly. It is also responsible for nominating candidates to the Board when
vacancies arise, recommending Directors who are retiring to be put forward for re-election and where appropriate considering any
issues relating to the continuation in office of any Director. It has written terms of reference which are available on the Company’s
website and on request from the Company Secretary.
The range of skills and experience offered by the current directors is highlighted in the Chairman’s Statement above and the
Committee is satisfied with the balance and membership of the current Board. The Committee does, however, remain mindful of the
need to ensure its periodic refreshment. The Committee also keeps succession planning under continuous review and has, at all times,
a clear plan which is designed to ensure a smooth transition, whenever that is needed, for all posts. During the year an exercise to
consider succession planning in the Group generally was undertaken. This was led by the Senior Independent Director who is also a
member of the Nomination Committee.
Account is also taken of the need to ensure that the Non-Executive Directors continue to provide the range and balance of skills
required. The Committee and the Board recognise the importance of diversity. The Group’s previously announced target is that a
minimum of 25% of the members of the Board should be female. Although as temporarily constituted the Board is slightly short of this
target, on retirement of John Bennett from the Board in May 2015 it will be met again.
26
Report and Accounts 2014 Management & Governance
Prior to appointment of Andrew Page, the Company consulted with its professional advisers and interviewed a number of candidates.
Although an external search agency was not engaged the Nomination Committee was satisfied that the procedure followed was
sufficiently formal, rigorous and transparent.
As noted above, Louise Charlton’s second three year term as a Non-Executive Director and Tracey Graham’s first term were due to
expire in May 2014 and September 2014 respectively. Following review both have agreed to continue for a further three year term.
Remuneration Committee
The membership and activities of the Remuneration Committee are described in the Remuneration Report on pages 28 to 30
together with the accompanying notes on pages 82 to 88.
Takeover Directive
Disclosures required under the Takeover Directive are included on page 21 and form part of the Group’s Corporate
Governance report.
27
rpsgroup.com Remuneration Committee Report
Annual Statement
I am pleased to present the Remuneration Committee report for 2014, which consists of two parts. In my Annual Statement I outline
the links between remuneration and the Company’s strategy as well as summarising the main decisions made by the Committee during
the year. The Annual Report on Remuneration which consists of the information on page 30 and notes 1 to 16 on pages 82 to 88
incorporates the remuneration disclosures required in respect of the year.
The Company’s policy statement was approved by shareholders at last year’s Annual General Meeting for a period of three years and
is not, therefore, presented on this occasion. The principal terms of the policy together with any planned changes to their
implementation in 2015 are, however, set out in notes 1 and 2 on pages 82 and 83. The full policy statement was set out in last year’s
report and accounts a copy of which is available on the Company’s website.
Strategy, Performance and Remuneration
The Company’s strategy is set out in detail on pages 3 and 4 of the Strategic Report. The success of this strategy partly is measured by
reference to the Company’s key performance indicators as detailed on page 6. The Board also operates a series of annual priorities
against which it measures progress. The key performance indicators include PBTA and conversion of profit to cash. The only incentive
arrangement for the Executive Directors is the RPS Group Plc Bonus Plan in respect of which for 2014, the main performance condition
was PBTA and the secondary condition was cash conversion. By focusing on two of the Group’s key performance indicators the
Committee has sought to ensure that reward and incentive are linked to and supportive of the Company’s strategy as well as being
aligned with shareholder interests. The Company’s performance against these indicators in 2014 is repeated below.
PBTA (£m)
Conversion of profit to cash (%)
2014
66.1
89
2013
63.0
96
Against the backdrop of this performance the Bonus Plan operated such that the bonus contributions for each of the Executive
Directors as a percentage of their salaries were as follows:
Executive Director
Alan Hearne
Phil Williams
Gary Young
Bonus % salary
64
56
48
Part of the bonus earned is deferred in shares for two years with these shares at risk of forfeiture if minimum PBTA thresholds are not
met in subsequent years. This ensures a longer term focus on sustainable performance and alignment with shareholder interests.
Details of the bonus payments are set out in note 3 of the Annual Remuneration Report on pages 83 and 84.
Basic Salaries
In March 2014, having consulted with PwC, the Group’s remuneration advisers, the Committee initiated a review of the salaries paid
to the Executive Directors. The geographic scale and complexity of the Group’s operations have increased significantly over a number
of years and has manifested itself in a number of ways.
n
n
The pattern of the Group revenues has changed significantly as the Group has become increasingly international and
correspondingly more complex. Approximately 60% of the Group’s revenues are derived from the overseas operating companies
and given the international nature of the Energy business approximately 90% of Group revenues are earned from clients based
overseas. The Group does business in over 100 countries throughout the world.
Growth has and will continue to be significantly driven by the successful implementation of the Group’s acquisition strategy. The
Group does not incur the expense of an in-house acquisition team with the result that in addition to their line management
responsibilities, the Executive Directors assume direct responsibility for the identification of suitable acquisition targets across a
range of jurisdictions, the negotiation of terms and the subsequent integration of acquired companies. During 2014 the Group
invested £58m in the completion of five acquisitions in four jurisdictions.
The Committee is also conscious of the value of a highly experienced and stable executive team and the vital role it plays in ensuring
long term performance and delivery of value to shareholders. The Executive Directors have collective experience of 59 years at Group
Board level. The continued retention of this experience is considered vital to the Group’s future performance and smooth succession
planning. In conducting its review the Committee also considered salaries of comparable listed consultancies and Energy companies.
28
Report and Accounts 2014 Management & Governance
Having taken account of these factors the Committee concluded that the salaries of the Executive Directors did not fully reflect the
extent of their roles in the Group as it has evolved and that a repositioning of their salaries was therefore appropriate. In making the
adjustments shown below the Committee ensured through a benchmarking exercise that the proposed new salaries were within the
Remuneration Policy as approved by shareholders. This review was not completed until the middle of the year with the changes being
implemented as at 1 July. As a result the salaries paid in 2014 were as follows.
Executive Director
Alan Hearne
Phil Williams
Gary Young
Salary paid in 2013
£459,400
£350,200
£238,700
Salary paid in 2014
£526,200
£392,100
£264,400
Percentage Changes
14.5%
12.0%
11.0%
It is our intention that following this repositioning of base salaries any future rises will, during the Company’s current policy period
(ie for 2015 to 2017), be in line with inflation or increases awarded to employees generally. In accordance with this the Executive
Directors salaries were reviewed as at 1 January 2015 and increased by 2%. As a result the salaries payable in 2015 will be as follows.
Executive Director
Alan Hearne
Phil Williams
Gary Young
Salary payable 2015
£581,400
£428,400
£288,600
The adjustments made to basic salaries need to be placed in the context of the overall remuneration policy which is to provide up to
median level of total reward for target performance. The following table demonstrates the position of the Executive Directors in relation
to those companies in the FTSE 250 Support Services Sector that generate more than 50% of their revenues from overseas markets.
Executive Director
Alan Hearne
Phil Williams
Gary Young
Target Total Reward
2014
£000s
1,513
1,012
622
Actual Total Reward
2013
£000s
863
605
389
Actual Total Reward
2014
£000s
903
620
397
Median Target Total Reward
Comparator 2014
£000s
1,604
1,108
1,086
* Target total reward is the total of salary, pension contribution, on target bonus and fair value of share incentive grants.
Notwithstanding the increases in salaries awarded during the year, the overall Actual Total Reward Payments for 2014 increased by
only 3%.
Malus, Clawback and Vesting
During the year the Committee also considered the provisions of the new UK Governance Code relating to the inclusion of malus and
clawback provisions into executive incentive arrangements. It concluded that the introduction of such provisions within the RPS Group
Plc Bonus Plan was appropriate and these should apply to all awards made under that plan from 2015 onwards. The possibility of
introducing a post vesting holding period under the Company’s incentive arrangements was also considered. The Committee
concluded that it was satisfied with the current provisions of the RPS Group Plc Bonus Plan as approved by shareholders in 2013
and the current shareholding guidelines for Directors.
Tracey Graham
Chair of the Remuneration Committee
26 February 2015
29
rpsgroup.com Annual Report
Audited Information
The following table sets out the total of the remuneration received by each of the Directors during the year under review.
Director
£000s
Year
Base Salary
or Fees
Benefits
Bonus
Long Term
Incentives
All Employee
Share Plan
Pensions
Total
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
Executive
Alan Hearne
Phil Williams
Gary Young
Non–Executive
Brook Land
John Bennett
Louise Charlton
Robert Miller–Bakewell
Tracey Graham
Andrew Page
Total
526
392
264
459
350
239
113
130
52
53
41
36
63 * 42
44
51
–
13
1,533 1,335
19
16
16
–
–
–
–
–
–
51
20
17
17
–
–
–
–
–
–
54
243
157
91
–
–
–
–
–
–
491
287
192
112
–
–
–
–
–
–
591
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
2
2
–
–
–
–
–
–
6
2
2
2
–
–
–
–
–
–
6
132
69
40
–
–
–
–
–
–
241
115
61
36
922
636
413
883
622
406
–
–
–
–
–
–
113
52
36
42
44
130
53
41
63
51
13
212 2,322 2,198
*The fees payable to Robert Miller-Bakewell included a sum of £15,000 in addition to the regular fee and in respect of the preparation of a succession
planning report.
The following table shows the relationship between total remuneration received by the Directors and reported Group profits.
£000s
2013
2013 (constant currency)
2014
Total Remuneration
2,198
2,198
2,322
PBTA
63,000
60,500
66,100
Remuneration received as % of PBTA
3.5
3.6
3.5
The additional information that is required under the Regulations which form part of the annual report for the year ended
31 December 2014 has been included in notes 1 to 16 on pages 82 to 88. This additional information is unaudited with
the exception of notes 3 to 9.
30
Report and Accounts 2014
Management & Governance
Independent auditor’s report to the members of RPS Group Plc
Opinion on financial statements of RPS Group Plc
In our opinion:
n
n
n
n
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31
December 2014 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union;
the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the
group financial statements, Article 4 of the IAS Regulation.
The financial statements comprise Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the
Consolidated and Parent Company Balance Sheets, the Consolidated Cash Flow Statement, the Consolidated Statement of Changes
in Equity, the Parent Company Reconciliation of Movement in Shareholders’ Funds and the related notes 1 to 32 for the Consolidated
financial statements and 1 to 13 to the Parent Company financial statements. The financial reporting framework that has been applied
in the preparation of the group financial statements is applicable law and IFRSs as adopted by the European Union. The financial
reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United
Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
Going concern
As required by the Listing Rules we have reviewed the directors’ statement contained within the directors’ report on page 20 that the
group is a going concern. We confirm that:
n
n
we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements
is appropriate; and
we have not identified any material uncertainties that may cast significant doubt on the group’s ability to continue as a
going concern.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group’s ability to
continue as a going concern.
Our assessment of risks of material misstatement
The assessed risks of material misstatement described below, which are the same risks identified as in the prior year, are those that
had the greatest effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team:
How the scope of our audit responded to the risk
Our audit work assessed the adequacy of the design and
implementation of controls over the recognition of revenue
through performing walkthrough procedures. We tested in detail
a sample of contracts, including new contracts, by reviewing the
contract terms, the related time records, the estimated costs
to complete, the stage of completeness and other assumptions
used to determine revenue to be recognised for these contracts.
Risk
Revenue recognition
The Group is engaged in the provision of consultancy services
through contractual arrangements with its customers.
Accordingly, the risk in revenue recognition focusses on the
judgment involved in determining the extent of revenue to
be recognised on fixed price contracts. There is significant
management judgement in determining the revenue to be
recognized and in particular in estimating the stage of completion
and the costs to complete the contract at the balance sheet date.
There is a key focus around revenue recognised on contracts
which span the year end.
The Group’s revenue recognition policy is disclosed in note 1(c)
and is included in the key accounting estimates and judgements
in note 1(h).
31
rpsgroup.com Risk
Accounting for acquisitions
There were 6 acquisitions in the year with a total consideration
of £58m. Details of the acquisitions are disclosed in note 28
to the accounts. The Audit Committee has included their
assessment of this risk on page 25 and it is included in the key
accounting estimates and judgements in note 1 (h).
The key judgements in respect of the Group’s accounting
for acquisitions are the measurement of the fair value of
acquired intangible assets, the estimation of their useful lives
and the measurement of the consideration, including deferred
consideration. In determining the fair value of intangible
assets acquired management use a valuation model based on
assumptions in respect of forecast revenues and margins and
discount rates.
These acquisition accounting judgements are key as the fair
values are included in the balance sheet and the residual goodwill
balance is not amortised.
Assessment of the carrying value of goodwill and
intangible assets
At 31 December 2014, the net book value of goodwill and
intangible assets was £405m (2013: £375m). The associated
disclosure is included in note 11 and accounting policy is
disclosed in note 1(e). The Audit Committee has included their
assessment of this risk on page 25 and it is included in the key
accounting estimates and judgements in note 1 (h).
Assessment of the carrying value of goodwill and intangible
assets is a significant risk due to the quantum of the balance
recorded on the consolidated balance sheet, the number of
judgements involved in assessing impairment and the continuing
challenging economic conditions.
The Group’s assessment of the carrying values of goodwill and
intangible assets is based on assumptions of future segmental
cash flows, including assumptions on, short and long-term
revenue and profit growth growth rates and the selection of
appropriate discount rates.
Recoverability of trade receivables and accrued income
At 31 December 2014 trade receivables were £131m (2013:
£118m) net of the provision for impairment and accrued
income was £26m (2013: £30m) net of the provision for
impairment. The trade receivables provision for impairment was
£4.5m (2013: £4.7m) and the accrued income provision for
impairment was £4.1m (2013: £5.6m).
Recoverability of trade receivables and accrued income is a
significant risk due to the material nature of these balances
and the economic and political instability in certain geographic
locations where the Group is exposed to the risk of bad
debt. The movements in the impairment provisions for trade
receivables and accrued income are disclosed in note 14. The
Audit Committee has included their assessment of this risk on
page 25.
How the scope of our audit responded to the risk
Our audit work assessed the adequacy of the design and
implementation of controls over management review of the
accounting for acquisitions.
We reviewed management’s papers and audited the workings
underlying the business combination accounting for all 6
acquisitions in the year.
We used our internal valuation specialists to challenge and review
the valuation method and discount rates applied to value each
intangible asset. We considered and, where necessary challenged,
management’s key assumptions and judgements underpinning
the valuations, such as the forecast revenues and margins used
to determine the value of acquired customer relationships. We
benchmarked the discount rates applied to the forecast by
management with external peer group published rates and we
compared the estimated future customer revenues and margins
with the historical performance of the respective businesses.
We considered the treatment of deferred payment
arrangements against the requirements of IFRS 3 to confirm
whether they represented consideration rather than
remuneration.
Our audit work assessed the adequacy of the design and
implementation of controls over management review of
the goodwill and intangible asset impairment assessment.
We evaluated the adequacy and reasonableness of
management’s assumptions and the appropriateness of their
judgements and forecasts used as part of their value in
use calculations.
We used our valuation specialists within the audit team to
calculate an acceptable range of discount rates and compared
our range with that determined by management. We examined
the short term growth rates by using market data and a review
of historic growth rates. We benchmarked the long-term growth
rates against external peer group published rates and market data.
We also performed sensitivity analysis on the amount and timing
of cash flows.
We also considered the adequacy of the associated disclosure.
Our audit work assessed the adequacy of the design and
implementation of controls over management review of aged
trade receivables and accrued income.
We assessed the adequacy and reasonableness of the
assumptions used in management’s calculations and the
appropriateness of judgements on the completeness of the
provisions against trade receivables and accrued income.
This included a review of the cash received post year end on
a sample of customer debts and a review of the ageing analysis
for trade receivables and accrued income by entity and
customer, specifically challenging amounts significantly past-due
but not impaired.
We discussed these risks with the Audit Committee. Their report on those matters that they considered to be significant issues in
relation to the Financial Statements is set out on page 25.
32
Report and Accounts 2014 Management & Governance
Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole, and
not to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respect
to any of the risks described above, and we do not express an opinion on these individual matters.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions
of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit
work and in evaluating the results of our work.
We determined materiality for the Group to be £3.3m (2013: £3.0m), which is 5% (2013: 5%) of adjusted pre-tax profit (profit before
tax, amortisation of acquired intangibles and transaction-related costs), 7% of profit before tax (2013: 7%) and 1% (2013: 1%) of
equity. Pre-tax profit is adjusted as this is the key performance measure reviewed by the market.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £66,000 (2013:
£60,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to
the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the group and its environment, including Group-wide controls, and
assessing the risks of material misstatement at the Group level. Based on that assessment, we focused our Group audit scope primarily
on the audit work on the business units in 7 (2013: 6) locations. In addition to the UK, USA, Australia, Canada, Ireland and the
Netherlands, in the current year we also included Norway. Within the 7 (2013:6) locations, 22 (2013:21) business units were subject
to full audits and 13 (2013: 12) business units were subject to specified audit procedures where the extent of our testing was based
on our assessment of the risks of material misstatement and of the materiality of the Group’s operations at those locations. These
locations account for 94% (2013: 92%) of the Group’s net assets, 93% (2013: 95%) of the Group’s revenue and 99% (2013: 99%) of
the Group’s profit before tax. They were also selected to provide an appropriate basis for undertaking audit work to address the risks
of material misstatement identified above. Our audit work of the business units in the 7 locations was executed at levels of materiality
applicable to each individual entity which were lower than group materiality and ranged from £0.1m to £1.4m (2013: £0.1m to £1.5m).
At the parent entity level we also tested the consolidation process and carried out analytical procedures to confirm our conclusion
that there were no significant risks of material misstatement of the aggregated financial information of the remaining components not
subject to audit or audit of specified account balances.
The Group audit team continued to follow a programme of planned visits that has been designed so that the Senior Statutory Auditor
and/or another senior member of the Group audit team visits in-scope overseas components on a rotational basis. Every year,
regardless of whether we have visited or not, we include the component audit partner and other senior members of the component
audit team in our team briefing, discuss their risk assessment and review documentation of the findings from their work.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
n
n
the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act
2006; and
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
n we have not received all the information and explanations we require for our audit; or
n
adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
n
the Parent Company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
33
rpsgroup.com Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have
not been made or the part of the Directors’ Remuneration Report to be audited is not in agreement with the accounting records and
returns. We have nothing to report arising from these matters.
Corporate Governance Statement
Under the Listing Rules we are also required to review the part of the Corporate Governance Statement relating to the company’s
compliance with ten provisions of the UK Corporate Governance Code. We have nothing to report arising from our review.
Our duty to read other information in the Annual Report
Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion, information in the
annual report is:
n materially inconsistent with the information in the audited financial statements; or
n
apparently materially incorrect based on, or materially inconsistent with, our knowledge of the group acquired in the course
of performing our audit; or
n otherwise misleading.
In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the
audit and the directors’ statement that they consider the annual report is fair, balanced and understandable and whether the annual
report appropriately discloses those matters that we communicated to the audit committee which we consider should have been
disclosed. We confirm that we have not identified any such inconsistencies or misleading statements.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. We also comply with International Standard
on Quality Control 1 (UK and Ireland). Our audit methodology and tools aim to ensure that our quality control procedures are
effective, understood and applied. Our quality controls and systems include our dedicated professional standards review team and
independent partner reviews.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the
opinions we have formed.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report
to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become
aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
John Clennett FCA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
Reading, UK
26 February 2015
34
Report and Accounts 2014 Report of the Independent Auditors continued
Consolidated Income Statement
£000s
Revenue
Recharged expenses
Fee income
Operating profit before amortisation of acquired intangibles
and transaction related costs
Amortisation of acquired intangibles and transaction related costs
Operating profit
Finance costs
Finance income
Profit before tax, amortisation of acquired intangibles
and transaction related costs
Profit before tax
Tax expense
Year ended
31 Dec
2014
Year ended
31 Dec
2013
572,126
(67,167)
504,959
567,614
(75,493)
492,121
Note
3
3
3
1(g),3,4,5
70,244
65,305
1(g),4
6
6
(19,842)
50,402
(4,242)
112
(19,425)
45,880
(2,430)
157
66,114
63,032
46,272
43,607
9
(12,925)
(14,987)
Profit for the year attributable to equity holders of the parent
33,347
28,620
Basic earnings per share (pence)
Diluted earnings per share (pence)
Adjusted basic earnings per share (pence)
Adjusted diluted earnings per share (pence)
10
10
10
10
15.20
15.12
22.04
21.92
13.11
13.05
20.22
20.14
Consolidated Statement of Comprehensive Income
£000s
Profit for the year
Actuarial gains and losses on remeasurement of defined benefit pension scheme
Tax on remeasurement of defined benefit provision liability
Exchange differences*
Total recognised comprehensive income for the year
attributable to equity holders of the parent
*May be reclassified subsequently to profit or loss in accordance with IFRS.
The notes on pages 39 to 73 form part of these financial statements.
Year ended
31 Dec
2014
Year ended
31 Dec
2013
33,347
(601)
112
(4,602)
28,620
–
–
(18,200)
28,256
10,420
35
rpsgroup.comAccountsReport and Accounts 2014 Consolidated Balance Sheet
£000s
Assets
Non-current assets:
Intangible assets
Property, plant and equipment
Deferred tax asset
Current assets:
Trade and other receivables
Cash at bank
Liabilities
Current liabilities:
Borrowings
Deferred consideration
Trade and other payables
Corporation tax liabilities
Provisions
Net current assets
Non-current liabilities:
Borrowings
Deferred consideration
Other payables
Deferred tax liability
Provisions
Net assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Total shareholders’ equity
As at
31 Dec
2014
As at
31 Dec
2013
Note
11
12
20
14
16
18
15
19
16
18
20
19
21
22
404,996
27,371
4,043
436,410
170,905
17,521
188,426
542
17,170
101,825
2,213
1,206
122,956
65,470
90,159
9,540
2,734
12,874
1,896
117,203
384,677
6,640
110,100
11,551
256,386
384,677
375,279
27,785
2,018
405,082
161,741
18,699
180,440
1,465
20,919
103,260
3,058
2,134
130,836
49,604
49,602
14,923
2,471
13,645
2,007
82,648
372,038
6,619
108,307
17,652
239,460
372,038
These financial statements were approved and authorised for issue by the Board on 26 February 2015.
The notes on pages 39 to 73 form part of these financial statements.
Dr Alan Hearne, Director
Gary Young, Director
On behalf of the Board of RPS Group Plc (company number 2087786).
36
Report and Accounts 2014
Consolidated Cash Flow Statement
£000s
Adjusted cash generated from operations
Deferred consideration treated as remuneration
Cash generated from operations
Interest paid
Interest received
Income taxes paid
Net cash from operating activities
Cash flows from investing activities:
Purchases of subsidiaries net of cash acquired
Deferred consideration
Purchase of property, plant and equipment
Sale of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issue of share capital
Proceeds from bank borrowings
Payment of finance lease liabilities
Dividends paid
Payment of pre-acquisition dividend
Net cash generated in financing activities
Net (decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of exchange rate fluctuations
Cash and cash equivalents at end of year
Cash and cash equivalents comprise:
Cash at bank
Bank overdraft
Cash and cash equivalents at end of year
The notes on pages 39 to 73 form part of these financial statements.
Year ended
31 Dec
2014
Year ended
31 Dec
2013
70,772
(3,635)
67,137
(3,771)
112
(19,503)
43,975
(36,959)
(19,722)
(7,698)
471
(63,908)
1
36,406
(645)
(17,379)
–
18,383
72,030
(7,714)
64,316
(1,991)
157
(19,829)
42,653
(31,174)
(3,466)
(8,034)
523
(42,151)
555
18,609
(580)
(15,034)
(247)
3,303
(1,550)
3,805
17,791
805
17,046
17,521
(475)
17,046
14,804
(818)
17,791
18,699
(908)
17,791
Note
26
28
23
26
26
37
rpsgroup.comAccountsReport and Accounts 2014 Consolidated Statement of Changes in Equity
£000s
At 1 January 2013
Changes in equity during 2013:
Total comprehensive income
Issue of new ordinary shares
Share based payment expense
Tax recognised directly in equity
Dividends paid
At 31 December 2013
Changes in equity during 2014:
Total comprehensive income
Issue of new ordinary shares
Share based payment expense
Tax recognised directly in equity
Dividends paid
At 31 December 2014
Share
capital
6,587
–
32
–
–
–
6,619
–
21
–
–
–
6,640
Share
premium
106,198
–
2,109
–
–
–
108,307
–
1,793
–
–
–
110,100
Retained
earnings
224,959
28,620
(1,370)
1,938
347
(15,034)
239,460
32,858
(228)
2,027
(352)
(17,379)
256,386
Other
reserves
36,070
(18,200)
(218)
–
–
–
17,652
(4,602)
(1,499)
–
–
–
11,551
Total
equity
373,814
10,420
553
1,938
347
(15,034)
372,038
28,256
87
2,027
(352)
(17,379)
384,677
An analysis of other reserves is provided in note 22 and details of dividends paid are provided in note 23.
The notes on pages 39 to 73 form part of these financial statements.
38
Report and Accounts 2014
Notes to the Consolidated Financial Statements
1. Significant accounting policies
RPS Group Plc (the “Company”) is a company domiciled in the UK under the Companies Act. The consolidated financial statements
of the Company for the year ended 31 December 2014 comprise the Company and its subsidiaries (together referred to as the
“Group”).
The consolidated financial statements were authorised for issuance on 26 February 2015.
(a) Basis of preparation
The Group has prepared its annual financial statements in accordance with International Financial Reporting Standards (IFRS) as
endorsed by the European Union and implemented in the UK. The financial statements are presented in pounds sterling, rounded to
the nearest thousand. The financial statements have been prepared on the historical cost basis.
These financial statements have been prepared using the accounting policies set out in the Report and Accounts 2014.
During the year, the Group has applied IFRS10 “Consolidated Financial Statements”, IFRS 11 “Joint Arrangements”, IFRS 12 “Disclosure
of Interests in Other Entities”, IAS 27 (as revised in 2011) “Separate Financial Statements”, IAS 28 (as revised in 2011) “Investment
in Associates and Joint Ventures”, IFRS 7 “Financial Instruments: Disclosures”, IAS 32 “Financial Instruments: Presentation” and IAS 39
“Financial Instruments: Recognition and Measurement”.
Their adoption has not had a material impact on the disclosures or amounts reported in these accounts. Otherwise the accounting
policies set out below have been applied consistently to both years presented in these consolidated financial statements.
(b) Basis of consolidation
Where the company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or
business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the
results of the company and its subsidiaries as if they formed a single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full. The consolidated financial statements incorporate the results of business combinations using
the purchase method. In the Consolidated Balance Sheet, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of
comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases.
(c) Revenue
Revenue is stated net of sales tax. Revenue is recognised only when the outcome of a transaction can be measured reliably and it is
probable that economic benefits will flow to the Group.
i Fees / expenses
Revenue is classified into Fee revenue and Expense revenue. Fee revenue represents the Group’s personnel, subcontractor and
equipment time and expertise sold to clients. Expense revenue is the revenue recognised on the recharge of costs incidental to
fulfilling the Group’s contracts, for example mileage, flights, subsistence and accommodation.
ii Time and materials
In the case of time and materials projects, revenue represents the fair value of services provided using time spent at agreed rates as
the basis.
iii Fixed price
In the case of fixed price contracts, revenue is recognised in proportion to the stage of completion of the transaction at the balance
sheet date measured by reference to the milestones achieved or cost incurred as a proportion of the total forecast cost. No revenue
is recognised if there are significant uncertainties regarding the recovery of the consideration due or associated costs. An expected loss
on a contract is recognised immediately in the income statement.
iv Tuition
Tuition fees in respect of courses run by RPS are recognised over the period of instruction.
v Agency agreements
The Group enters into certain agreements with clients where it manages client expenditure as an agent. It is obliged to purchase third
party services and recharges those costs, plus a management fee, to the client. In these cases only the management fee is recognised as
revenue. Receivables, payables and cash related to these transactions are included in the consolidated balance sheet.
39
rpsgroup.comAccountsReport and Accounts 2014 1. Significant accounting policies continued
Accrued revenue is booked as a receivable in the consolidated balance sheet when the amount of revenue recognised on a contract
exceeds the amount invoiced. Where the amount invoiced exceeds the amount of revenue recognised, the difference is booked as a
payable on the balance sheet in deferred income.
(d) Deferred consideration
Deferred consideration arises when settlement of all or part of the cost of a business combination falls due after the date the
acquisition was completed.
Where the payment of deferred consideration is not contingent upon continuing employment of the vendors by the Group, deferred
consideration is stated at the fair value of the total consideration outstanding. In these cases all deferred consideration has been
treated as part of the cost of investment. At each balance sheet date deferred consideration comprises the fair value of the remaining
deferred consideration valued at acquisition.
Where the payment of deferred consideration is contingent upon the continuing employment of vendors by the Group, it is treated as
a remuneration expense and accounted for as an employment benefit under IAS 19. A charge is made through the consolidated income
statement as a cost of employment. The cost associated with each payment is accrued over the period it is earned. At each balance sheet
date the contingent deferred consideration balance comprises the accrual for unsettled remuneration which has been expensed to the
balance sheet date.
(e) Intangible assets
i Goodwill
All business combinations are accounted for by applying the purchase method. Goodwill has been recognised on acquisitions of
subsidiaries and the business, assets and liabilities of partnerships. Goodwill represents the difference between the cost of the
acquisition and the fair value of the identifiable assets acquired.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to groups of cash-generating units and is
tested annually for impairment.
ii Other intangible assets
Intangible assets other than goodwill that are acquired by the Group are stated at cost less accumulated amortisation and
impairment losses.
Intangible assets identified in a business combination are capitalised at fair value at the date of acquisition if they are separable from
the acquired entity or give rise to other contractual or legal rights. The fair values ascribed to such intangibles are arrived at by using
appropriate valuation techniques.
Expenditure on internally generated goodwill and brands is recognised in income as an expense as incurred.
iii Amortisation
Amortisation is charged to profit or loss in proportion to the timing of the benefits derived from the related asset from the date that
the intangible assets are available for use over their estimated useful lives unless such lives are indefinite. The estimated useful lives of
the Group’s intangible assets are as follows:
Customer relationships
Trade names
Order backlog
Non compete agreements
Software
Intellectual property rights
3 to 10 years
1 to 5 years
1 to 4 years
3 years
10 years
10 years
40
Report and Accounts 2014 (f) Impairment of non financial assets
The carrying amounts of the Group’s non financial assets, other than deferred tax assets, are reviewed at each balance sheet date to
determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.
For goodwill the recoverable amount is estimated at each annual balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount.
Impairment losses are recognised in the income statement unless the asset is recorded at a revalued amount in which case it is treated
as a revaluation decrease to the extent that a surplus has previously been recorded.
Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying value of goodwill allocated to
the cash generating unit and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis.
i Calculation of recoverable amount
The recoverable amount is the greater of the net selling price and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset.
ii Reversals of impairment
An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed if there has been a
change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets’
carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
(g) Non statutory performance measures
The Board uses six non statutory performance measures. These are “Operating profit before amortisation of acquired intangibles
and transaction related costs”, “Profit before tax, amortisation of acquired intangibles and transaction related costs”, “Adjusted basic
earnings per share”, “Adjusted diluted earnings per share”, “Segment profit” and “Underlying profit”.
The Board considers these to be more reflective of the way the business is managed than the statutory measures “Operating profit”,
“Profit before tax”, “Basic earnings per share” and “Diluted earnings per share”.
“Segment profit” is defined as profit before interest, tax, amortisation of acquired intangibles, transaction related costs and
unallocated expenses.
“Underlying profit” is defined as segment profit before reorganisation costs.
i Amortisation of acquired intangibles and transaction related costs (note 4)
This classification of income and expense comprises amortisation of acquired intangibles (see note 1 (e) iii), deferred consideration
payments that are contingent on continuing employment and are treated as remuneration (see note 1 (d)), and third party transaction
related costs.
ii Reorganisation costs
This classification of income and expense comprises costs arising as a consequence of reorganisation including redundancy costs, the
costs of consolidating office space and rebranding costs.
An explanation of adjusted earning per share is given in note 10.
(h) Key accounting estimates and judgements
The Group considers that the accounting policies above all require judgement to be exercised.
Judgements that could have a material effect on the Group’s financial statements include the following:
1.
2.
3.
Revenue recognition – judgement is required to identify when it is appropriate to recognise revenue on contracts,
particularly with respect to fixed price contracts.
Acquisition accounting – judgements are made with respect to the fair value of the net assets acquired. See note 28 for
details of the acquisitions completed in 2014.
Impairment of non-financial assets – when impairment reviews of goodwill and intangible assets are undertaken, judgements
are made with respect to the discount rates applicable to the Group’s cash generating units, along with the expected cash
flows of those cash generating units and the growth rates applied to them. Detail of the results of the impairment reviews
performed in 2014 can be found in note 11 along with the judgements applied.
41
rpsgroup.comAccountsReport and Accounts 2014
Notes to the Consolidated Financial Statements continued
1. Significant accounting policies continued
4.
Impairment of financial assets – management considers in detail when it is appropriate to recognise impairment reserves
against specific financial assets including debtors and accrued income. This judgement will take into account our previous
experience with the client in question, their particular circumstances and the markets that they work in. Details of the
impairment reserves held for financial assets can be found in note 14.
2. Other accounting policies
(a) Foreign currency
i Foreign currency transactions
Transactions in foreign currency are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the balance sheet date are translated to pounds sterling at the foreign exchange rate
ruling at that date. Foreign exchange differences arising on translation are recognised in income.
ii Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated
to pounds sterling at the exchange rate ruling at the balance sheet date. The revenues and expenses of foreign operations are
translated to pounds sterling at rates approximating the foreign exchange rates ruling at the dates of the transactions. Foreign exchange
differences arising on retranslation are recognised directly in the translation reserve.
iii Net investment in foreign operations
Exchange differences arising from the translation of the net investment in foreign operations are taken to the translation reserve. They
are recycled and taken to income upon disposal of the operation.
iv Foreign currency forward contracts
Foreign currency forward contracts are initially recognised at nil value, being priced-at-the-money at origination. Subsequently they are
measured at fair value (determined by price changes in the underlying forward rate, the interest rate, the time to expiration of the
contract and the amount of foreign currency specified in the contract). Changes in fair value are recognised in the income statement
as they arise.
(b) Property, plant and equipment
i Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses (see
accounting policy 1 (f) above).
ii Leased assets
Leases which contain terms whereby the Group assumes substantially all the risks and rewards incidental to ownership of the leased
item are classified as finance leases. Assets acquired under a finance lease are capitalised at the inception of the lease at fair value of
the leased assets, or if lower, the present value of the minimum lease payments.
Obligations under finance leases are included in liabilities net of finance costs allocated to future periods.
All other leases are classified as operating leases and are not capitalised.
iii Subsequent costs
The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item
when that cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the Group and the
cost of the item can be measured reliably. All other costs are recognised in the income statement as incurred.
42
Report and Accounts 2014
iv Depreciation
Depreciation is charged to income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and
equipment. The estimated useful lives are as follows:
Freehold buildings
Alterations to leasehold premises
Motor vehicles
Fixtures, fittings, IT and equipment
(c) Trade and other receivables
50 years
Life of lease
4 years
3 to 8 years
Trade and other receivables are recognised at cost and carried at cost less impairment losses. Trade and other receivables are
subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.
Impairment losses are taken to the income statement as incurred.
(d) Cash and cash equivalents
Cash at bank comprises cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are
repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash
equivalents for the purposes of the consolidated cash flow statement.
(e) Employee benefits
i Defined contribution plans
Obligations for contributions to defined contribution retirement benefit plans are recognised as an expense in the income statement
as incurred.
ii Defined benefit plans
The cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at
the end of each reporting period. Remeasurement gains and losses are recognised immediately in the balance sheet with a charge or
credit to the Statement of Comprehensive income in the period in which they occur. These remeasurement gains and losses are not
recycled to the income statement. Defined benefit costs are split into three categories:
–
–
–
current service cost, past service cost and gains and losses on curtailments and settlements (recognised in administrative expenses)
net interest expense or income (recognised in finance costs); and
remeasurement (recognised in other comprehensive income).
The retirement benefit obligation recognised in the Consolidated Balance Sheet represents the deficit in the Group’s defined
benefit scheme.
iii Share-based payments
The Group operates share based payment arrangements with employees. The fair value of equity settled awards for share based
payments is determined at grant and expensed straight line over the period from grant to the date of earliest unconditional exercise.
The Group has calculated the fair market value of options using a binomial model and for whole share awards the fair value has been
based on the market value of the shares at the date of grant adjusted to take into account some of the terms and conditions upon
which the shares were granted.
Those fair values were charged to the income statement over the relevant vesting period adjusted to reflect actual and expected
vesting levels.
The Group also incentivises employees through the grant of conditional share awards under the bonus Banking Plan (“BBP”) for
Executive Directors and other senior directors; the Performance Share Plan (“PSP”), for senior managers and staff, and the Share
Incentive Plan (“SIP”), available to staff. Under these arrangements shares are granted at no cost to the employee. The release
of shares granted under the BBP and PSP are subject to the satisfaction of corporate performance conditions and continuity of
employment provisions. The release of shares under the SIP are subject to continuity of employment provisions.
iv Accrued holiday pay
Provision is made at each balance sheet date for holidays accrued but not taken, to the extent that they may be carried forward,
calculated at the salary of the relevant employee at that date.
43
rpsgroup.comAccountsReport and Accounts 2014 Notes to the Consolidated Financial Statements continued
2. Other accounting policies continued
(f) Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event
and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value
of money and, when appropriate, the risks specific to the liability.
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower
than the unavoidable cost of meeting its obligations under the contract.
(g) Trade and other payables
Trade and other payables are stated at cost. Trade payables with a short useful life are not discounted.
(h) Borrowings
Bank overdrafts and interest bearing loans are initially measured at cost. Borrowings are not discounted.
(i) Reserves
The description and purpose of the Group’s reserves are as follows:
Share premium
Premium on shares issued in excess of nominal value, other than on shares issued in respect of acquisitions
when merger relief is taken.
Merger reserve
Premium on shares issued in respect of acquisitions when merger relief is taken.
Employee trust
Own shares held by the SIP and ESOP trusts.
Translation reserve
Cumulative gains and losses arising on retranslating the net assets of overseas operations into sterling.
Retained earnings
Cumulative net gains and losses recognised in the consolidated statement of comprehensive income and
consolidated statement of changes in equity.
(j) Expenses
i Operating lease payments
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease.
Lease incentives received are recognised as an integral part of the total lease expense.
ii Finance lease payments
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance
charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance
of the liability.
(k) Income tax
Income tax on the income for the periods presented comprises current and deferred tax. Income tax is recognised in the income
statement except to the extent that it relates to items recognised in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the
balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary
differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit and the differences relating to investments in subsidiaries to the extent that they will probably
not reverse in the foreseeable future. In accordance with IAS12, deferred tax is taken directly to equity to the extent that the intrinsic
value of the outstanding share awards (based on the closing share price) is greater than the share based payment expense already
charged to the income statement. The amount of deferred tax provided is based on the expected manner of realisation or settlement
of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the
asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will
be realised.
44
Report and Accounts 2014 (l) Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when they
are paid. In the case of final dividends, this is when approved by the shareholders at the Annual General Meeting.
(m) Employee Share Ownership Plan (ESOP)
As the Company is deemed to have control of its ESOP trust, it is treated as a subsidiary and consolidated for the purpose of the
Group accounts. The ESOP’s assets (other than investments in the Company’s shares), liabilities, income and expenses are included on
a line-by-line basis in the Group financial statements. The ESOP’s investment in the Company’s shares is deducted from shareholders’
funds in the Group balance sheet as if they were treasury shares.
(n) Accounting standards issued but not adopted
At the date of authorisation of these financial statements, the following standards and relevant interpretations, which have not been
applied in these financial statements, were in issue but not yet effective (and some of which were pending endorsement by the EU):
n
n
n
n
IFRS 9 “Financial Instruments”
IFRS 10 (amended), IFRS 12 (amended) and lAS 18 (amended)
“Investment Entities”
IFRS 11 (amended) “Joint Operations”
IFRS 15 “Revenue from Contracts”
n
n
n
n
lAS 1 (amended) “Disclosure Initiatives”
lAS 16 and IAS 38 (amended) “Depreciation and Amortisation “
lAS 19 (amended) “Employee Contributions”
lAS 27 (amended) “Separate Financial Statements”
A full assessment of the impact of these standards has not been undertaken yet. It is not practical to provide a reasonable estimate of
their impact until a detailed review has been completed.
3. Business and geographical segments
Segment information is presented in the financial statements in respect of the Group’s business segments, as reported to the Chief
Operating Decision Maker. The business segment reporting format reflects the Group’s management and internal reporting structure.
Inter-segment pricing is determined on an arm’s length basis. Segment results include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis.
Business segments
The segment results for the year ended 31 December 2013 were restated following the transfer of a business into the BNE North
America segment from the Energy segment as noted in the Interim Management Statement issued on 1 May 2014.
The business segments of the Group are as follows:
Energy - the provision of integrated technical, commercial and project management support and training in the fields of geoscience,
engineering and health, safety and environment on a global basis to the energy sector.
Built and Natural Environment (“BNE”) - consultancy services to many aspects of the property and infrastructure development and
management sectors. These include: environmental assessment, the management of water resources, oceanography, health and safety,
risk management, town and country planning, building, landscape and urban design, surveying and transport planning. Consulting
services are provided on a regional basis in Europe and North America.
Australia Asia Pacific (“AAP”) - In the AAP region there is a single board that manages the BNE and Energy services we provide in that
region. Accordingly the results of this business are reported as a separate segment.
Certain central costs are not allocated to the segments because either they predominantly relate to the running of the Group head
office function or could only be allocated to the segments on an arbitrary basis, such costs include the remuneration and support costs
of the main board and the costs of the Group finance and marketing functions. These costs are included in the category “unallocated
expenses”.
“Segment profit” and “Underlying profit” are defined in note 1(g)
45
rpsgroup.comAccountsReport and Accounts 2014
Notes to the Consolidated Financial Statements continued
3. Business and geographical segments continued
Segment results for the year ended 31st December 2014
£000s
Energy
BNE - Europe
BNE - North America
AAP
Group eliminations
Total
£000s
Energy
BNE - Europe
BNE - North America
AAP
Segment results for the year ended 31st December 2013 (restated)
£000s
Energy
BNE - Europe
BNE - North America
AAP
Group eliminations
Total
£000s
Energy
BNE - Europe
BNE - North America
AAP
Total
Fees
Expenses
Intersegment
revenue
External
revenue
205,055
156,737
41,322
103,615
(1,770)
504,959
29,492
21,735
5,916
10,557
(533)
67,167
(680)
(817)
(639)
(167)
2,303
–
Underlying
profit
Reorganisation
costs
38,973
21,328
9,112
9,639
79,052
(167)
(253)
–
(1,419)
(1,839)
Fees
Expenses
Intersegment
revenue
186,915
149,292
32,664
127,194
(3,944)
492,121
33,224
20,171
5,117
17,380
(399)
75,493
(1,141)
(603)
(1,111)
(1,488)
4,343
–
Underlying
profit
Reorganisation
costs
36,403
19,164
8,287
10,020
73,874
(78)
(487)
–
(1,192)
(1,757)
233,867
177,655
46,599
114,005
–
572,126
Segment
profit
38,806
21,075
9,112
8,220
77,213
External
revenue
218,998
168,860
36,670
143,086
–
567,614
Segment
profit
36,325
18,677
8,287
8,828
72,117
46
Report and Accounts 2014 Group Reconciliation
£000s
Revenue
Recharged expenses
Fees
Underlying profit
Reorganisation costs
Segment profit
Unallocated expenses
Operating profit before amortisation of acquired intangibles and transaction related costs
Amortisation of acquired intangibles and transaction related costs
Operating profit
Finance costs
Profit before tax
Year ended
31 Dec
2014
Year ended
31 Dec
2013
572,126
(67,167)
504,959
79,052
(1,839)
77,213
(6,969)
70,244
(19,842)
50,402
(4,130)
46,272
567,614
(75,493)
492,121
73,874
(1,757)
72,117
(6,812)
65,305
(19,425)
45,880
(2,273)
43,607
£000s
Energy
BNE - Europe
BNE - North America
AAP
Unallocated
Group total
Carrying amount of
segment assets
Year ended
31 Dec
2013
Year ended
31 Dec
2014
Segment depreciation
and amortisation
Year ended
31 Dec
2013
Year ended
31 Dec
2014
197,954
239,882
52,276
126,890
7,834
624,836
214,631
219,112
27,430
117,769
6,580
585,522
9,464
5,038
3,540
7,231
789
26,062
The table below shows revenue and fees to external customers based upon the country from which billing took place:
Year ended
31 Dec
2014
247,516
106,786
91,783
31,600
31,413
30,082
24,518
8,428
572,126
Revenue
Year ended
31 Dec
2013
240,065
131,174
86,135
33,076
31,733
4,720
28,349
12,362
567,614
£000s
UK
Australia
USA
Netherlands
Canada
Norway
Ireland
Other
Total
£000s
UK
Australia
USA
Ireland
Norway
Canada
Netherlands
Other
Total
Year ended
31 Dec
2014
212,045
96,909
83,987
27,190
26,922
29,543
20,502
7,861
504,959
As at
31 Dec
2014
200,775
92,113
47,071
37,701
22,272
18,284
18,155
39
436,410
7,128
3,766
2,266
7,670
819
21,649
Fees
Year ended
31 Dec
2013
205,044
114,418
77,594
28,204
27,728
4,569
22,083
12,481
492,121
Carrying amount of
non current assets
As at
31 Dec
2013
185,341
81,236
31,490
39,892
28,244
21,019
17,806
54
405,082
47
rpsgroup.comAccountsReport and Accounts 2014
Notes to the Consolidated Financial Statements continued
4. Amortisation of acquired intangibles and transaction related costs
£000s
Amortisation of acquired intangibles
Contingent deferred consideration treated as remuneration
Transaction costs
5. Operating profit - by nature of expense
£000s
Revenue
Staff costs (see note 7)
Subconsultants costs
Other employment related costs
Depreciation of owned assets
Depreciation of assets held under finance leases
Profit on disposal of fixed assets
Operating lease rentals payable - property
Operating lease rentals payable - equipment and motor vehicles
Travel costs
Office costs
Amortisation of acquired intangibles
Other transaction related costs
Other costs
Operating profit
6. Net financing costs
£000s
Finance costs:
Interest on loans, overdraft and finance leases
Interest payable on deferred consideration
Finance income:
Deposit interest receivable
Net financing costs
48
Year ended
31 Dec
2014
Year ended
31 Dec
2013
17,605
1,077
1,160
19,842
12,217
6,009
1,199
19,425
Year ended
31 Dec
2014
Year ended
31 Dec
2013
572,126
567,614
(233,169)
(129,483)
(16,815)
(8,396)
(62)
249
(11,990)
(4,386)
(12,560)
(17,582)
(17,605)
(2,237)
(67,688)
50,402
(214,317)
(132,788)
(15,609)
(9,219)
(213)
241
(12,562)
(4,469)
(12,909)
(17,220)
(12,217)
(7,208)
(83,244)
45,880
Year ended
31 Dec
2014
Year ended
31 Dec
2013
(3,107)
(1,135)
(4,242)
112
(4,130)
(1,593)
(837)
(2,430)
157
(2,273)
Report and Accounts 2014 7. Employee benefit expense
£000s
Wages and salaries
Social security costs
Pension costs - defined contribution plans
Pension costs - defined benefits plans
Share based payment expense - equity settled
Average number of employees (including Executive Directors) was:
Fee earning staff
Support staff
Year ended
31 Dec
2014
Year ended
31 Dec
2013
201,592
18,982
10,281
288
2,027
233,169
3,573
957
4,530
184,238
17,615
10,526
–
1,938
214,317
3,370
936
4,306
In addition to statutory staff costs, contingent deferred consideration treated as remuneration amounts to £1,077,000
(2013: £6,009,000).
The Group considers the Directors to be the key management personnel and details of directors’ remuneration are included in the
Remuneration Report from page 28. The share based payment charge in respect of key management personnel was £167,000
(2013: £153,000).
8. Auditors’ remuneration
During the year, the Group (including its overseas subsidiaries) obtained the following services from the Group’s auditors at costs as
detailed below:
£000s
Statutory audit of the Company's annual accounts
Statutory audit of the Group's subsidiaries
Total audit fees
Interim review
Total assurance services
Tax compliance services
Tax advisory services
Services in relation to taxation
Other services
Total fees
Year ended
31 Dec
2014
Year ended
31 Dec
2013
47
372
419
27
446
104
6
110
24
580
47
330
377
35
412
90
12
102
19
533
49
rpsgroup.comAccountsReport and Accounts 2014
Notes to the Consolidated Financial Statements continued
9. Income taxes
Analysis of tax expense/(credit) in the income statement for the year:
£000s
Current tax:
UK Corporation tax
Overseas tax
Adjustments in respect of prior years
Deferred tax:
Origination and reversal of timing differences
Effect of change in tax rate
Adjustments in respect of prior years
Year ended
31 Dec
2014
Year ended
31 Dec
2013
5,359
11,564
230
17,153
(3,276)
–
(952)
(4,228)
4,834
10,922
692
16,448
(514)
(490)
(457)
(1,461)
Total tax charge to income for the year
12,925
14,987
Analysis of tax expense/(credit) not included in income for the year:
Current tax
Deferred tax (credit)/charge in other comprehensive income
Deferred tax charge/(credit) in equity for the year
–
(112)
352
–
–
(347)
The effective tax rate for the year on profit before tax is 27.9% (2013: 34.4%). The effective tax rate for the year on profit before tax,
amortisation of acquired intangibles and transaction related costs is 26.9% (2013: 29.9%) as shown in the table below:
£000s
Total tax expense in Income Statement
Add back:
Tax on amortisation of acquired intangibles and transaction related costs
Adjusted tax charge on the profit for the year
Profit before tax, amortisation of acquired intangibles and transaction related costs
Adjusted effective tax rate
Year ended
31 Dec
2014
Year ended
31 Dec
2013
12,925
14,987
4,838
17,763
66,114
26.9%
3,889
18,876
63,032
29.9%
50
Report and Accounts 2014 The UK rate of corporate tax was reduced from 23% to 21% from 1 April 2014. The UK tax expense for the group’s UK companies
is 21.5% (2013: 23.25%) representing the weighted average annual corporate tax rate for the full financial year.
The actual tax expense for 2014 is different from 21.5% (2013: 23.25%) of profit before tax for the reasons set out in the
following reconciliation:
£000s
Profit before tax
Tax at the standard rate of 21.5% (2013: 23.25%)
Effect of:
Overseas tax rates
Non deductible acquisition consideration treated as remuneration
Expenses not deductible for tax purposes
Non taxable income
Effect of change in tax rates
Adjustments in respect of prior years
Total tax charge on the profit for the period
Year ended
31 Dec
2014
Year ended
31 Dec
2013
46,272
43,607
9,948
10,139
3,534
247
673
(755)
–
(722)
12,925
3,432
1,401
403
(133)
(490)
235
14,987
The UK government has announced a future decrease in the UK corporation tax rate from 21% to 20% from April 2015. This change
has resulted in a deferred tax credit arising from the reduction in the balance sheet carrying value of deferred tax liabilities to reflect the
anticipated rate of tax at which those liabilities are expected to reverse. This change was reflected in the 2013 Report and Accounts.
51
rpsgroup.comAccountsReport and Accounts 2014 Notes to the Consolidated Financial Statements continued
10. Earnings per share
The calculations of basic and diluted earnings per share were based on the profit attributable to ordinary shareholders and a weighted
average number of ordinary shares outstanding during the related period as shown in the table below:
£000s/000s
Profit attributable to ordinary shareholders
Weighted average number of ordinary shares for the purposes of basic earnings per share
Effect of employee share schemes
Weighted average number of ordinary shares for the purposes of diluted earnings per share
Basic earnings per share (pence)
Diluted earnings per share (pence)
Year ended
31 Dec
2014
Year ended
31 Dec
2013
33,347
28,620
219,399
1,135
220,534
15.20
15.12
218,355
909
219,264
13.11
13.05
The directors consider that earnings per share before amortisation of acquired intangible and transaction related costs provides a more
meaningful measure of the Group’s performance than statutory earnings per share. The calculations of adjusted earnings per share
were based on the number of shares as above and are shown in the table below:
£000s
Profit attributable to ordinary shareholders
Amortisation of acquired intangibles and transaction related costs (note 4)
Tax on amortisation of acquired intangibles and transaction related costs (note 9)
Adjusted profit attributable to ordinary shareholders
Adjusted basic earnings per share (pence)
Adjusted diluted earnings per share (pence)
Year ended
31 Dec
2014
Year ended
31 Dec
2013
33,347
19,842
(4,838)
48,351
22.04
21.92
28,620
19,425
(3,889)
44,156
20.22
20.14
52
Report and Accounts 2014 11. Intangible assets
£000s
Cost:
At 1 January 2014
Additions
Adjustments to prior year estimates
Exchange differences
At 31 December 2014
Aggregate amortisation and impairment losses:
At 1 January 2014
Amortisation
Exchange differences
At 31 December 2014
Net book value at 31 December 2014
Intellectual
property
rights
Customer
relationships
Order
backlog
Trade
names
Non
compete
agreements
Software
Goodwill
Total
2,978
–
–
150
3,128
828
305
39
1,172
1,956
91,260
15,326
–
(926)
105,660
32,355
10,957
(73)
43,239
62,421
10,617
4,332
–
(288)
14,661
7,816
3,552
(60)
11,308
3,353
4,809
1,704
–
(185)
6,328
2,355
2,543
(149)
4,749
1,579
543
–
–
17
560
513
30
17
560
–
1,536
–
–
56
1,592
343
218
19
580
1,012
319,967
32,723
(41)
(5,753)
346,896
431,710
54,085
(41)
(6,929)
478,825
12,221
–
–
12,221
334,675
56,431
17,605
(207)
73,829
404,996
Intangible asset additions in 2014 have been recognised at their provisional fair values (see note 28).
Acquisitions in 2013 were originally stated at provisional values. These fair values have now been finalised and the tax liability on
one acquisition was found to be overstated by £41,000. No adjustments have been made to the prior year balance sheet or income
statement on grounds of immateriality in accordance with IFRS 3.
£000s
Cost:
At 1 January 2013
Additions
Exchange differences
At 31 December 2013
Aggregate amortisation and impairment losses:
At 1 January 2013
Amortisation
Exchange differences
At 31 December 2013
Net book value at 31 December 2013
Intellectual
property
rights
Customer
relationships
Order
backlog
Trade
names
Non
compete
agreements
Software
Goodwill
Total
2,673
425
(120)
2,978
559
311
(42)
828
2,150
68,479
28,992
(6,211)
91,260
6,954
4,262
(599)
10,617
25,242
9,333
(2,220)
32,355
58,905
6,806
1,382
(372)
7,816
2,801
2,322
2,787
(300)
4,809
1,719
774
(138)
2,355
2,454
548
–
(5)
543
335
186
(8)
513
30
1,107
499
(70)
1,536
293,368
38,505
(11,906)
319,967
375,451
75,470
(19,211)
431,710
129
231
(17)
343
1,193
12,221
–
–
12,221
307,746
47,011
12,217
(2,797)
56,431
375,279
Goodwill
Goodwill acquired in a business combination is allocated at acquisition to the groups of cash generating units (CGUs) that are
expected to benefit from that business combination. As described in note 3, the 2013 results have been restated. Accordingly goodwill
has been reallocated between the Energy and BNE: North America CGU groups. The carrying amount of goodwill has been allocated
as follows:
53
rpsgroup.comAccountsReport and Accounts 2014 Notes to the Consolidated Financial Statements continued
11. Intangible assets continued
£000s
BNE: Europe (UK and Ireland)
BNE: Europe (Netherlands)
BNE: North America
AAP
Energy (global)
Energy (Norway)
As at
31 Dec
2014
150,725
9,358
23,865
68,925
66,525
15,277
334,675
As at
31 Dec
2013
(restated)
141,855
9,702
18,191
60,969
59,756
17,273
307,746
The Group tests annually for impairment or more frequently if there are indications that goodwill might be impaired. Management
have not identified any impairment triggering events in the period since the last annual review.
The determination of whether or not goodwill has been impaired requires an estimate to be made of the value in use of the CGU
groups to which goodwill has been allocated.
The value in use calculation includes estimates about the future financial performance of the CGUs. In all cases the approved budget
for the following financial year forms the basis for the cash flow projections for a CGU. The cash flow projections in the four financial
years following the budget year reflect management’s expectations of the medium-term operating performance of the CGU and the
growth prospects in the CGU’s market. Thereafter, a perpetuity is applied to the final year’s cash flows.
Key assumptions
The key assumptions in the value in use calculations are the discount rates applied, the growth rates and margins assumed over the
forecast period.
Discount rate applied
The discount rate applied to a CGU represents a pre-tax rate that reflects the market assessment of the time value of money at
the end of the reporting period and the risks specific to the CGU. The Group bases its estimate for the pre-tax discount rate on its
weighted average cost of capital (WACC). The inputs to this calculation are derived from market and industry data.
The discount rates applied to the CGUs are in the range 10.6% to 12.3% (2013: 10.3% to 11.7%).
Growth rates
The growth rates applied reflect management’s judgement regarding the potential future performance of the business. These incorporate
the effects of the global recession over the last three years, the expected recovery of the CGUs affected and the past experience of the
Group as it emerged from previous recessions.
The medium term comprises the years 2016 to 2019. The average real growth rate used during this period is 3.0%, although particular
years may be higher or lower than this rate reflecting market conditions.
The long term growth rate applied to the perpetuity calculations was between 2.0% and 2.5% per annum (2013: 2.0% and 2.5%)
reflecting the average long term EBIT growth rates of the economies in which the CGUs are based.
The assumptions used for the most significant groups of CGUs by amount of goodwill are as follows:
BNE: E (UK and Ireland)
AAP
Energy (global)
Summary of results
Post tax discount rate
Medium term real growth rate
excluding inflation
Long term growth rate
10.6%
11.5%
11.9%
3.0%
3.0%
3.0%
2.1%
2.5%
2.2%
During the year, all goodwill was tested for impairment with no impairment charge resulting (2013: £nil).
The BNE: Europe UK and Ireland CGU grouping has the lowest percentage headroom. An increase in the discount rate of 3.0%, a 2015
budget miss of 30% or a reduction in the medium term growth rate of 10.0% would reduce the headroom to zero. The AAP CGU
grouping has the next lowest percentage headroom. An increase in the discount rate of 3.4%, a 2015 budget miss of 26% or a reduction
in the medium term growth rate of 12.0% would reduce the headroom to zero.
54
Report and Accounts 2014 12. Property, plant and equipment
£000s
Cost:
At 1 January 2014
Additions
Disposals
Additions through acquisition
Foreign exchange differences
At 31 December 2014
Depreciation:
At 1 January 2014
Charge for the year
Disposals
Foreign exchange differences
At 31 December 2014
Net book value at 31 December 2014
Freehold
land and
buildings
Alterations
to leasehold
premises
8,641
1,552
–
–
(617)
9,576
2,477
259
–
(136)
2,600
6,976
7,436
222
(490)
129
(183)
7,114
3,278
1,034
(489)
(88)
3,735
3,379
Fixtures,
fittings,
IT and
equipment
59,924
5,704
(4,354)
1,291
(1,164)
61,401
44,250
6,489
(4,189)
(920)
45,630
15,771
Motor
vehicles
3,469
143
(702)
64
(68)
2,906
1,680
676
(656)
(39)
1,661
1,245
At 31 December 2014 the Group held under finance lease contracts equipment with a net book value of £44,829.
£000s
Cost:
At 1 January 2013
Additions
Disposals
Additions through acquisition
Foreign exchange differences
At 31 December 2013
Depreciation:
At 1 January 2013
Charge for the year
Disposals
Foreign exchange differences
At 31 December 2013
Net book value at 31 December 2013
Freehold
land and
buildings
Alterations
to leasehold
premises
8,396
31
–
–
214
8,641
2,229
191
–
57
2,477
6,164
7,598
602
(162)
66
(668)
7,436
2,554
1,209
(158)
(327)
3,278
4,158
Fixtures,
fittings,
IT and
equipment
61,091
6,816
(5,845)
588
(2,726)
59,924
44,176
7,200
(5,645)
(1,481)
44,250
15,674
Motor
vehicles
4,198
503
(694)
–
(538)
3,469
1,692
832
(616)
(228)
1,680
1,789
Total
79,470
7,621
(5,546)
1,484
(2,032)
80,997
51,685
8,458
(5,334)
(1,183)
53,626
27,371
Total
81,283
7,952
(6,701)
654
(3,718)
79,470
50,651
9,432
(6,419)
(1,979)
51,685
27,785
At 31 December 2013 the Group held under finance lease contracts alterations to leasehold properties and equipment with net book
values of £406,000 and £18,000 respectively.
55
rpsgroup.comAccountsReport and Accounts 2014 Notes to the Consolidated Financial Statements continued
13. Subsidiaries
A list of the significant subsidiaries, including the name, country of incorporation and proportion of ownership interests is given in Note
5 to the Parent Company’s financial statements on page 78.
14. Trade and other receivables
£000s
Trade receivables
Provision for impairment
Trade receivables net
Accrued income
Provision for impairment
Accrued income net
Prepayments
Other receivables
As at
31 Dec
2014
135,563
(4,464)
131,099
30,481
(4,062)
26,419
9,117
4,270
170,905
As at
31 Dec
2013
122,267
(4,665)
117,602
35,692
(5,557)
30,135
9,530
4,474
161,741
All amounts shown under trade and other receivables fall due within one year.
The carrying value of trade and other receivables is considered a reasonable approximation of fair value due to their short term nature
and the provisions for impairment recorded against them. The individually impaired balances mainly relate to items under discussion
with customers.
Certain trade receivables are past due but have not been impaired. These relate to customers where we have no history of default and
no concerns over their financial situation. The age of financial assets past due but not impaired is as follows:
£000s
Not more than three months
More than three months
Since year end some older debts have been received, notably €10 million from a National Oil Company.
As at
31 Dec
2014
14,140
22,278
36,418
As at
31 Dec
2013
13,784
13,515
27,299
56
Report and Accounts 2014
Movements in impairment
£000s
As at 1 January 2014
Impairment charge
Receivables written off during the year as uncollectible
Recoveries
Additions through acquisitions
Exchange differences
As at 31 December 2014
As at 1 January 2013
Impairment charge
Receivables written off during the year as uncollectible
Recoveries
Additions through acquisitions
Exchange differences
As at 31 December 2013
Trade receivables Accrued income
4,665
1,532
(1,180)
(725)
214
(42)
4,464
8,820
1,108
(2,996)
(2,116)
22
(173)
4,665
5,557
3,360
(4,017)
(916)
95
(17)
4,062
5,621
3,083
(2,437)
(133)
–
(577)
5,557
31 Dec
2014
58,788
42,952
30,019
24,767
7,068
5,107
2,204
170,905
Total
10,222
4,892
(5,197)
(1,641)
309
(59)
8,526
14,441
4,191
(5,433)
(2,249)
22
(750)
10,222
31 Dec
2013
53,911
37,007
28,290
24,283
6,700
8,671
2,879
161,741
The carrying amounts of the Group’s trade and other receivables are denominated as follows:
£000s
UK Pound Sterling
US Dollar
Euro
Australian Dollar
Canadian Dollar
Norwegian Krone
Other
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivable mentioned above.
15. Trade and other payables
£000s
Trade payables
Accruals
Deferred income
Creditors for taxation and social security
Other payables
As at
31 Dec
2014
27,986
32,647
17,543
15,705
7,944
101,825
As at
31 Dec
2013
26,893
32,779
19,236
15,064
9,288
103,260
All amounts shown under trade and other payables fall due for payment within one year. The carrying values of trade and other
payables are considered to be a reasonable approximation of fair value due to the short term nature of these liabilities.
57
rpsgroup.comAccountsReport and Accounts 2014
Notes to the Consolidated Financial Statements continued
16. Borrowings
£000s
Bank loans
Bank overdraft
Finance lease creditor
As at
31 Dec
2014
90,076
475
150
90,701
As at
31 Dec
2013
49,637
908
522
51,067
£000s
The borrowings are repayable as follows:
On demand or in not more than one year
In the second year
In the third to fifth years inclusive
Over five years
Less amount due for settlement within 12 months
Amount due for settlement after 12 months
as at 31 December 2014
as at 31 December 2013
Bank
loans and
overdraft
Finance
lease
creditor
475
38,227
–
51,849
90,551
(475)
90,076
67
46
37
–
150
(67)
83
Bank
loans and
overdraft
Finance
lease
creditor
967
–
49,578
–
50,545
(967)
49,578
498
24
–
–
522
(498)
24
Total
542
38,273
37
51,849
90,701
(542)
90,159
Total
1,465
24
49,578
–
51,067
(1,465)
49,602
The principal features of the Group’s borrowings are as follows:
(i) An uncommitted £1,000,000 bank overdraft facility, repayable on demand.
(ii) An uncommitted Australian Dollar denominated overdraft facility of AUD 3,000,000 repayable on demand.
(iii) The Group has two principal bank loans:
(a) A revolving credit facility of £125,000,000 with Lloyds Bank plc, the Group’s principal bank, expiring in 2016. Term loans drawn
down under this facility carry interest fixed for the term of the loan equal to LIBOR plus a margin determined by reference to
the total bank borrowing of the Group.
There were loans drawn totalling £38,227,000 (2013: £49,578,000) at 31 December 2014.
The facility is guaranteed by the Company and certain subsidiaries but no security over the Group’s assets exists.
(b) Seven year US private placement notes of $34,070,000 and £30,000,000 with fixed interest chargeable at 3.84% and 3.98%
respectively. These notes were drawn on 30 September 2014 and are repayable on 30 September 2021. The notes are
guaranteed by the Company and certain subsidiaries but no security over the Group’s assets exist.
The carrying amounts of short term borrowings approximate their fair values, as the impact of discounting is not significant.
The carrying amounts of our long term borrowings approximate fair value.
Liquidity risk
The Group has strong cash flow and the funds generated by operating companies are managed on a country basis. The Group also
considers its long-term funding requirements as part of the annual business planning cycle.
Loan liquidity risk profile
£000s
<1 year
1-2 years
>2 but <5 years
>5 years
58
2014
3,029
40,789
6,099
55,398
105,315
2013
1,196
1,133
50,711
–
53,040
Report and Accounts 2014
The liquidity risk profile above shows the expected cashflows in respect of the Group’s loan facilities comprising payments of capital
and interest assuming that the loan balance at year end remains constant until expiry of the facilities and foreign exchange rates remain
constant at the rates existing at the year end.
17. Obligations under finance leases
Amounts payable under finance leases:
£000s
Within one year
In two to five years
as at 31 December 2014
Present
value of
minimum
lease
payments
Less
future
interest
charges
Minimum
lease
payments
as at 31 December 2013
Present
value of
minimum
lease
payments
Less
future
interest
charges
Minimum
lease
payments
75
88
163
(8)
(5)
(13)
67
83
150
527
25
552
(29)
(1)
(30)
498
24
522
For the year ended 31 December 2014, the average effective borrowing rate was 7.33%. Interest rates are fixed at the contract date.
All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The Group’s obligations under finance leases are secured by interlocking guarantees between certain Group entities, the lessors’ rights
over the leased assets and a letter of credit provided by Lloyds Bank Plc.
The carrying amount of obligations under finance leases is considered to be a reasonable approximation of fair value.
18. Deferred consideration
£000s
Amount due within one year
Amount due between one and two years
Total deferred consideration payable
As at
31 Dec
2014
17,170
9,540
26,710
As at
31 Dec
2013
20,919
14,923
35,842
The amount due within one year as at 31 December 2013 included contingent deferred consideration treated as remuneration
expense accrued but not paid totalling £2,457,000. All contingent deferred consideration treated as remuneration was settled by
31 December 2014.
59
rpsgroup.comAccountsReport and Accounts 2014 Notes to the Consolidated Financial Statements continued
19. Provisions
Property
The provision for property costs relates to onerous operating lease rentals and related costs on vacated property and will be utilised
within one year.
Warranty
This provision is in respect of contractual obligations and is expected to be utilised within one to five years.
Dilapidations
The dilapidations provision is in respect of reinstatement obligations related to leasehold properties and will be utilised within 11 years.
£000s
As at 1 January 2014
Additional provision in the year
Utilised in year
Released
Arising on acquisition of subsidiary
Exchange difference
At 31 December 2014
£000s
Due as follows:
Within one year
After more than one year
Property
Warranty
Dilapidations
377
3
(177)
(102)
–
1
102
1,600
158
(477)
(414)
–
(44)
823
2,164
62
(144)
(49)
176
(32)
2,177
As at
31 Dec
2014
1,206
1,896
3,102
Total
4,141
223
(798)
(565)
176
(75)
3,102
As at
31 Dec
2013
2,134
2,007
4,141
The carrying value of the provisions disclosed above is a reasonable approximation of their fair value.
60
Report and Accounts 2014 20. Deferred taxation
£000s
At 1 January 2013
(Charge)/credit to income for the year
(Charge)/credit to income due to change in tax rate
Credit to equity for the year
Owned by subsidiaries acquired
Exchange differences
At 31 December 2013
Disclosed within liabilities
Disclosed within assets
Credit/(charge) to income for the year
(Charge)/credit to equity for the year
Owned by subsidiaries acquired
Exchange differences
At 31 December 2014
Disclosed within liabilities
Disclosed within assets
Fixed asset
timing
differences
Goodwill
and
intangible
assets
Foreign
exchange
on
investments
Employment
benefits
Share based
payments
Provisions
and other
timing
differences
(921)
399
(122)
–
(26)
(68)
(738)
208
(946)
760
–
21
(316)
(273)
620
(893)
(10,560)
2,190
638
–
(5,961)
454
(13,239)
(15,649)
2,410
3,167
–
(2,509)
710
(11,871)
(16,188)
4,317
(528)
528
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,815
(665)
(8)
–
84
140
2,366
2,237
129
(59)
–
–
92
2,399
2,305
94
227
(111)
4
347
–
–
467
10
457
4
(352)
–
(1)
118
(157)
275
531
(1,371)
(21)
–
300
78
(483)
(451)
(32)
356
112
980
(169)
796
546
250
Total
(8,436)
970
491
347
(5,603)
604
(11,627)
(13,645)
2,018
4,228
(240)
(1,508)
316
(8,831)
(12,874)
4,043
Temporary differences arise when there are earnings in overseas subsidiaries where their remittance to the UK may result in a tax
liability, principally as a result of dividend withholding taxes levied by the overseas tax jurisdiction in which they operate.
The total temporary difference is £40,428,000 (2013: £34,953,000). No deferred tax liability is recognised on these differences as the
group is able to control the timing of the reversal of these temporary differences and it is not probable that they will reverse in the
foreseeable future.
Deferred income tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets against current
tax liabilities and when the deferred income taxes relate to the fiscal authority.
Included within the closing balance of £795,000 for provisions and other timing differences are deferred tax assets of £647,000 relating
to UK trading losses and £331,000 relating to the defined benefit pension scheme deficit.
61
rpsgroup.comAccountsReport and Accounts 2014
Notes to the Consolidated Financial Statements continued
21. Share capital
Ordinary shares of 3p each
240,000,000
7,200
240,000,000
7,200
as at 31 December 2014
Authorised
£000s
Authorised
Number
as at 31 December 2013
Authorised
£000s
Authorised
Number
Issued and fully paid
Ordinary shares of 3p each
At 1 January
Issued under share option schemes
Issued under the Share Incentive Plan
Issued in respect of the Performance Share Plan
At 31 December
Number
Ordinary shares held by the ESOP Trust
Ordinary shares held by the SIP Trust
Number
220,631,930
750
546,329
168,698
221,347,707
2014
£000s
6,619
–
5
16
6,640
Number
219,566,269
352,252
382,630
330,779
220,631,930
2013
£000s
6,587
11
11
10
6,619
As at
31 Dec
2014
2,104,690
3,823,034
As at
31 Dec
2013
2,021,707
3,592,678
The ESOP Trust has elected to waive any dividend on the unallocated ordinary shares held.
The table below shows options outstanding at 31 December 2014:
Period exercisable
2011 - 2018
2013 - 2020
2014 - 2021
Number
165,000
60,000
175,000
400,000
Exercise price (p)
295.25
194.60
212.01
62
Report and Accounts 2014 22. Other reserves
£000s
At 1 January 2013
Exchange differences
Issue of new shares
At 31 December 2013
Exchange differences
Issue of new shares
At 31 December 2014
23. Dividends
£000s
Merger
reserve
21,256
–
–
21,256
–
–
21,256
Amounts recognised as distributions to equity holders during the year:
Final dividend for the year ended 31 December 2013 of 3.84p (2012: 3.34p) per share
Interim dividend for the year ended 31 December 2014 of 4.05p (2013: 3.52p) per share
Employee
trust
Translation
reserve
(9,059)
–
(218)
(9,277)
–
(1,499)
(10,776)
23,873
(18,200)
–
5,673
(4,602)
–
1,071
Year
ended
31 Dec
2014
8,453
8,926
17,379
Total
36,070
(18,200)
(218)
17,652
(4,602)
(1,499)
11,551
Year
ended
31 Dec
2013
7,308
7,726
15,034
Proposed final dividend for the year ended 31 December 2014 of 4.42p (2013: 3.84p) per share
9,766
8,463
The proposed final dividend for the year ended 31 December 2014 is subject to approval by shareholders at the Annual General
Meeting and has not been included as a liability in the financial statements.
24. Operating lease arrangements
At 31 December 2014 the Group’s total remaining commitments as lessee under non-cancellable operating leases were as follows:
£000s
Within one year
In two to five years
After five years
as at 31 December 2014
Other
Property
as at 31 December 2013
Other
Property
11,872
23,470
4,498
39,840
2,807
3,338
6
6,151
12,202
29,176
6,225
47,603
2,263
2,750
2
5,015
63
rpsgroup.comAccountsReport and Accounts 2014 Notes to the Consolidated Financial Statements continued
25. Related party transactions
Related parties, following the definitions within IAS 24, are the subsidiary companies and members of the Board and their families.
Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note.
The Group considers the Directors to be the key management personnel. There were no transactions within the year in which the
Directors had any interest. The Remuneration Report contains details of Board emoluments.
26. Notes to the Consolidated Cash Flow Statement
£000s
Operating profit
Adjustments for:
Depreciation
Amortisation of acquired intangible assets
Contingent consideration treated as remuneration
Share based payment expense
Profit on sale of property, plant and equipment
Decrease in trade and other receivables
Decrease in trade and other payables
Adjusted cash generated from operations
Year ended
31 Dec
2014
Year ended
31 Dec
2013
50,402
45,880
8,458
17,605
1,077
2,027
(249)
79,320
2,956
(11,504)
70,772
9,432
12,217
6,009
1,938
(241)
75,235
8,838
(12,043)
72,030
Adjusted cash generated from operations is before payment of deferred consideration treated as remuneration.
The table below provides an analysis of net bank borrowings, comprising cash and cash equivalents, interest bearing loans and finance
leases, during the year ended 31 December 2014.
£000s
Cash at bank
Overdrafts
Cash and cash equivalents
Bank loans
Finance lease creditor
At 31 Dec
2013
18,699
(908)
17,791
(49,637)
(522)
(32,368)
Cash flow
Acquisition
Foreign
Exchange
At 31
Dec 2014
(8,944)
409
(8,535)
(36,406)
645
(44,296)
6,985
–
6,985
(4,003)
(271)
2,711
781
24
805
(30)
(2)
773
17,521
(475)
17,046
(90,076)
(150)
(73,180)
The cash balance at 31 December 2014 includes £4,139,000 (2013: £6,028,000) that is restricted in its use either as security or
client deposits.
27. Major non-cash transactions
Major non cash transactions during the year are as follows:
£000s
Depreciation
Amortisation of acquired intangibles
Share based payment expense
Year ended
31 Dec
2014
Year ended
31 Dec
2013
8,458
17,605
2,027
28,090
9,432
12,217
1,938
23,587
64
Report and Accounts 2014
28. Acquisitions
During 2014 the Group completed six acquisitions. Each of these broadens and strengthens the services the Group offers.
Entity acquired
Date of acquisition
Place of
incorporation
Percentage
of entity
acquired
Whelans Corporation Pty Ltd
Clear Environmental Consultants Limited
GaiaTech Holdings Inc
CgMs Holdings Limited
Delphi AS
Point Project Management Pty Ltd
Australia
5th February 2014
UK
9th April 2014
USA
15th May 2014
UK
8th August 2014
19th August 2014
Norway
17th September 2014 Australia
100%
100%
100%
100%
100%
100%
Nature of business acquired
Surveying
Water consultancy
Environmental consultancy
Project management
Oil and gas consultancy
Project management
The Group has allocated provisional fair values to the net assets of these acquisitions as it did not have complete information at the
balance sheet date. Detail of the carrying values of the acquired net assets, the provisional fair values assigned to them by the Group,
the fair value of consideration and the resulting goodwill are as follows:
£000s
Intangible assets:
Order book
Customer relations
Trade names
PPE
Cash
Other assets
Borrowings
Other liabilities
Net assets acquired
Satisfied by:
Initial cash consideration
Contingent cash consideration
Fair value of deferred consideration
Total consideration
Whelans
Clear
GaiaTech
CgMs
Delphi
Point
Total
142
186
104
365
396
1,264
(124)
(1,044)
1,289
1,443
–
619
2,062
480
2,660
200
274
1,943
1,221
–
(2,021)
4,757
6,841
1,156
–
7,997
143
4,477
327
411
1,702
5,431
(4,003)
(1,681)
6,807
17,894
–
–
17,894
580
3,210
560
224
1,913
4,653
(147)
(5,839)
5,154
7,000
–
5,777
12,777
–
–
–
–
226
930
–
(915)
241
384
–
358
742
2,987
4,793
513
210
805
3,521
–
(5,577)
7,252
4,332
15,326
1,704
1,484
6,985
17,020
(4,274)
(17,077)
25,500
10,382
–
6,369
16,751
43,944
1,156
13,123
58,223
Goodwill
773
3,240
11,087
7,623
501
9,499
32,723
The consideration payable in future for Clear is contingent upon renewal of a key contract. The payment made will be in the range of
£nil to £1,500,000 and the fair value has been determined by estimating the likelihood of payment.
Goodwill arising represents the value of the workforce acquired, potential synergies, future contracts and access to new markets.
There is no tax deductible goodwill.
The total fair value of receivables acquired was £10,600,000. The breakdown between gross receivables and amounts estimated
irrecoverable was as follows:
£000s
Whelans
Clear
GaiaTech
CgMs
Delphi
Point
Gross
receivables
Estimated
irrecoverable
Fair value of
assets acquired
1,055
1,047
1,824
4,577
459
1,852
10,814
(26)
(7)
(71)
(110)
–
–
(214)
1,029
1,040
1,753
4,467
459
1,852
10,600
65
rpsgroup.comAccountsReport and Accounts 2014 Notes to the Consolidated Financial Statements continued
28. Acquisitions continued
The vendors of the acquired companies have entered into warranty agreements with the Group. The total undiscounted cash flow
that could be receivable by the Group is between £nil and £14,372,000. The Group does not expect that these warranties will
become receivable and therefore has not recognised an indemnification asset on acquisition.
The Group incurred acquisition related costs of £1,160,000 which have been expensed through the income statement and are
included within amortisation of acquired intangibles and transaction related expenses.
The contribution of the acquisitions to the Group’s results for the year is given below.
£000s
Whelans
Clear
GaiaTech
CgMs
Delphi
Point
Segment
Revenue
Operating profit
AAP
BNE: Europe
BNE: NA
BNE: Europe
Energy
AAP
3,861
4,158
7,574
8,109
2,347
5,496
31,545
407
423
1,224
173
13
449
2,689
The proforma Group revenue and operating profit assuming that all of the acquisitions had been completed on the first day of the
year would have been £609,995,000 and £52,989,000 respectively.
A reconciliation of the goodwill movement in 2014 in respect of acquisitions made in 2013 and 2014 is given in the table below.
£000s
PEICE
KR
APASA
HMA
Ichron
OEC
Whelans
Clear
GaiaTech
CgMs
Delphi
Point
Goodwill at
1 January 2014
Additions
through acquisition
Adjustments to prior
year estimates
Foreign exchange
movement
Goodwill at
31 December 2014
3,007
1,399
1,955
6,997
5,538
17,273
–
–
–
–
–
–
–
–
–
–
–
–
773
3,240
11,087
7,623
501
9,499
9
(42)
–
(10)
–
–
–
–
–
–
(78)
88
(57)
(174)
-
(2,425)
(32)
–
888
–
(62)
(553)
2,929
1,496
1,898
6,781
5,538
14,838
741
3,240
11,975
7,623
439
8,946
There were no accumulated impairment losses at the beginning or end of the period.
No negative goodwill was recognised in 2013 or 2014.
29. Defined benefit pension scheme
The Group has two defined benefit pension schemes, arising from the acquisition in 2013 of the OEC Group. These schemes are
closed to new entrants.
The schemes are administered by a separate fund that is legally separated from the company. The trustees of the pension fund are
required by law to act in the interest of the fund and of all relevant stakeholders in the scheme. The trustees are responsible for the
investment policy with regard to the assets of the fund.
Under the plans, the employees are entitled to post-retirement yearly instalments amounting to 66% of pensionable salary on
attainment of a retirement age of 67. The pensionable salary is the difference between the current salary of the employee and the
state retirement benefit.
The schemes expose the company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.
66
Report and Accounts 2014 The most recent full actuarial valuations of the plans assets and present value of the defined benefit liabilities were carried out in
October 2014 and December 2014 for the two schemes by a qualified actuary.
The principal assumptions used for the purposes of actuarial valuation were as follows:
Discount rate
Expected rate of salary increase
Inflation
2014
3.00%
3.25%
3.00%
2013
4.10%
3.75%
1.75%
There are two defined benefit schemes in Norway; all principal assumptions are the same for both schemes other than the expected
rate of pension increase. One scheme has assumptions of 3.0% and the other used 0.10%. (2013: both used 0.6%).
Mortality assumptions
The assumed life expectations on retirement at age 65 are:
Years
Retiring today:
Males
Females
This is based on Norway’s standard mortality table with modifications to reflect expected changes in mortality.
Amounts recognised in income in respect of these defined benefit schemes are as follows:
£000s
Current service cost
Net Interest Expense
Components of defined benefit costs recognised in profit or loss
2014
21.8
25.0
2014
288
27
315
2013
20.4
23.2
2013
–
–
–
The service charge for the year of £288,000 has been included in the income statement in administrative expenses. The net interest
expense has been included within finance costs (see note 6) and the remeasurement of the net defined benefit liability is included in
the statement of comprehensive income.
Amounts recognised in the statement of comprehensive income are as follows:
£000s
Actuarial losses arising from:
Changes in financial assumptions
Movements in payroll tax
Remeasurement of the net defined benefit liability
2014
2013
540
61
601
–
–
–
The amount included in the balance sheet arising from the group’s obligations in respect of its defined benefit retirement benefit
schemes is as follows:
£000s
Present value of defined benefit obligations
Fair value of plan assets
Net liability arising from the defined benefit obligations
2014
(4,158)
2,930
(1,228)
2013
(3,937)
2,931
(1,006)
67
rpsgroup.comAccountsReport and Accounts 2014
2014
3,937
288
155
(9)
462
–
(632)
(43)
4,158
2014
2,931
128
(73)
(12)
(421)
427
(43)
–
(7)
2,930
2014
9.4%
3.9%
35.8%
–
35.9%
15.0%
–
100.0%
2013
–
–
–
–
–
–
3,937
–
–
3,937
2013
–
–
–
–
–
–
–
2,931
–
2,931
2013
6.8%
3.5%
17.0%
22.0%
35.3%
14.3%
1.1%
100.0%
Notes to the Consolidated Financial Statements continued
29. Defined benefit pension scheme continued
Movements in the present value of defined benefit obligations in the year were as follows:
£000s
Defined benefit obligation at 1 January
Current service cost
Interest cost
Remeasurement (gains)/losses:
Actuarial (gains) and losses arising from changes in demographic assumptions
Actuarial (gains) and losses arising from changes in financial assumptions
Liabilities assumed in a business combination
Exchange differences
Benefits paid
Defined benefit obligation at 31 December
Movements in the fair value of plan assets in the year were as follows:
Plan assets at 1 January
Remeasurement gain/(losses):
The return on plan assets (excluding amounts included in net interest expense)
Actuarial gains and (losses) arising from changes in demographic assumptions
Actuarial gains and (losses) arising from changes in financial assumptions
Exchange differences
Contributions from the employer
Benefits paid
Assets acquired in a business combination
Administration costs
Plan assets at 31 December
The major categories and fair values of scheme assets at the end of the reporting period were:
Shares
Other investments
Short term bonds
Money market
Term bonds
Property
Other
Total
68
Report and Accounts 2014 30. Financial Risk Management
(a) Capital management
The capital of the Group consists of debt, which includes the borrowings and facilities disclosed in note 16, cash and cash equivalents
and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in the
consolidated balance sheet and notes 21 and 22. The Group manages its capital to support its strategy, and there were no changes
in approach to capital management during the year.
The borrowings are managed centrally and funds are onward lent to operating subsidiaries as required. There are two main borrowing
facilities. First, the Group has a committed £125 million multi currency revolving credit facility that provides a high degree of flexibility.
There are two financial covenants related to this facility; interest cover must be no less than 400% and the ratio of group net
borrowings (including deferred consideration) to EBITDA should be no greater than 250%. These covenants are tested regularly and
were not breached during the year and have not been since the year end.
Secondly, the Group has a $150m, seven year US private placement shelf facility. Seven year notes with principal of £30.0 million were
drawn in September 2014 bearing fixed interest at 3.98% per annum. Seven year notes with principal of $34.1 million were drawn at
the same time bearing fixed interest at 3.84% per annum. There are two financial covenants associated with this facility; interest cover
must be no less than 400% and leverage must be no greater than 300%. These loan notes represent the Group’s core debt.
The Group’s businesses provide a good level of cash generation which helps fund future growth. The Group seeks to minimise
borrowings by utilising cash generated by operations that is surplus to the immediate operating needs of the business and an objective
is to maintain a minimum level of cash at bank.
(b) Financial instruments
The Group’s financial assets comprise cash and trade and other receivables. The Group’s financial liabilities comprise bank loans,
deferred consideration and trade and other payables. It is, and has been throughout the period under review, the Group’s policy that
no trading in financial instruments shall be undertaken.
Fair values
The fair value of the financial assets and liabilities of the Group are considered to be materially equivalent to their book value. The
classification of financial instruments is shown in the table below.
£000s
Cash
Trade receivables
Financial assets
Borrowings
Deferred consideration
Trade and other payables
Financial liabilities
As at
31 Dec
2014
17,521
157,518
175,039
90,701
26,710
74,413
191,824
As at
31 Dec
2013
18,699
147,737
166,436
51,067
35,842
75,572
162,481
Interest rate and currency risk are the most significant aspects for the Group in the area of financial instruments. It is exposed to a
lesser extent to liquidity risk that is reviewed in note 16. The Board reviews and agrees policies for managing each of these risks and
they are summarised below.
(c) Interest rate risk
The Group draws down term loans, typically between one and three months, against its revolving credit facility in US Dollars, GB
Pounds, Australian Dollars and Norwegian Krone at fixed rates of interest for the term of the loan. The Group has not entered any
contracts to fix interest rates beyond the period of the term loans but will consider doing so if borrowings becomes significantly larger
and longer term. The Group’s overdraft bears interest at floating rates. Surplus funds are placed on short-term deposit or held within
instant access deposit accounts earning floating rate interest.
69
rpsgroup.comAccountsReport and Accounts 2014 Notes to the Consolidated Financial Statements continued
30. Financial Risk Management continued
Interest rate risk and profile of financial liabilities
The interest rate risk profile of the Group’s financial liabilities at 31 December was as follows:
£000s
Sterling
Euro
Australian Dollar
Canadian Dollar
US Dollar
Norwegian Krone
Other
At 31 December
Floating rate
2013
2014
2014
Fixed rate
2013
Non interest bearing
2013
2014
–
–
475
–
–
–
–
475
568
94
192
–
40
14
–
908
59,484
–
6,618
4,056
30,784
14,838
–
115,780
24,680
–
5,867
7,987
24,721
21,630
–
84,885
32,707
6,643
12,520
5,970
11,837
5,265
627
75,569
30,647
9,228
12,631
7,750
9,550
6,050
832
76,688
The maturity profile of financial liabilities at 31 December was as follows:
£000s
Within one year
In one to two years
In two to five years
Over five years
Floating rate
2013
2014
2014
Fixed rate
2013
Non interest bearing
2013
2014
475
–
–
–
475
908
–
–
–
908
16,081
47,813
36
51,850
115,780
20,360
10,864
53,661
–
84,885
70,939
1,482
1,764
1,384
75,569
72,210
1,084
3,394
–
76,688
The weighted average interest rate and term for interest bearing financial liabilities is shown below:
2014
92,191
6,643
19,613
10,026
42,621
20,103
627
191,824
2014
87,495
49,295
1,800
53,234
191,824
Total
2013
55,895
9,322
18,690
15,737
34,311
27,694
832
162,481
Total
2013
93,478
11,948
57,055
–
162,481
Sterling
Australian Dollar
Canadian Dollar
US Dollar
Norwegian Krone
Fixed and floating rate
financial liabilities
Weighted average interest rate %
2013
2014
Fixed rate
financial liabilities
Weighted average period for
which rate is fixed – months
2013
2014
3.3
4.2
4.0
3.5
3.8
3.5
2.6
4.6
4.0
2.2
3.7
3.0
44
14
9
58
4
40
4
10
13
3
7
5
In the table above, the increase in the weighted average period for which the rate is fixed in respect of sterling and US dollar liabilities
is due to the issue of seven year fixed rate US private placement notes in September 2014.
Cash balances at year end:
£000s
Sterling
Euro
US Dollar
Australian Dollar
Canadian Dollar
Norwegian Krone
Malaysian Ringgit
Other
70
As at
31 Dec
2014
1,654
733
4,015
2,245
4,935
2,608
836
495
17,521
As at
31 Dec
2013
1,571
1,146
4,487
1,322
5,369
3,400
924
480
18,699
Report and Accounts 2014
Cash balances are held in either non-interest bearing current accounts or instant access deposit accounts earning floating rate interest.
There are no interest bearing trade and other receivables.
Borrowing facilities
The Group has an undrawn revolving credit facility that expires in 2016. The amount undrawn under this facility at 31 December 2014
was £86,773,000 (2013: £40,422,000).
During 2014, the Group also had an uncommitted overdraft facility, carrying floating rate interest.
Interest rate sensitivity
The Group is mainly exposed to interest rate sensitivity in respect of its revolving credit facility. A 1.0% decrease in interest rates
would increase Group profit before tax by £694,000. A 1.0% increase in interest rates would decrease Group profit before tax
by £694,000.
(d) Foreign currency risk
The Group, which is based in the UK and reports in sterling, has significant investments in overseas operations in the Netherlands,
Ireland, USA, Canada, Australia and Norway that have functional currencies other than sterling. As a result the Group’s balance sheet
and income statement can be affected by movement in the exchange rate between sterling and the functional currencies of overseas
operations. The most important exchange rates as far as the Group is concerned is the GB Pound to Australian Dollar rate and GB
pound to US Dollar.
The fair value of the forward foreign exchange contracts held at year end was not material.
The Group does not hedge balance sheet and income statement translation exposures.
A number of the Group’s operations transact in currencies other than their functional currency. This creates a foreign currency exposure
that is monitored and hedged centrally using a risk based approach.
Foreign currency sensitivity
Since the Group hedges the majority of its transactional foreign currency exposures, the sensitivity of the results to transactional foreign
currency risk is not material.
(e) Credit Risk
It is Group policy, implemented locally, to assess the credit risk of new customers before entering contracts. The Group does not
enter into complex derivatives to manage credit risk. The Group’s exposure to credit risk is limited to the carrying amount of financial
assets recognised at the balance sheet date. The directors consider the Group’s financial assets that are not impaired to be of good
credit quality including those that are past due. See note 14 for further detail on receivables that are past due. The group’s financial
assets are not secured by collateral advanced by counterparties. In respect of trade and other receivables, the Group has a broad
range of clients, the largest being multi-national oil companies, national oil companies or substantial utility companies. Infrequently (and
generally for administrative reasons) there may be a build up of unpaid invoices. At December 2014 there was a material amount
owing from a national oil company that was substantially paid in January 2015. The credit risk for cash and cash equivalents is
considered negligible, since the counterparties are reputable banks with high quality external credit ratings.
71
rpsgroup.comAccountsReport and Accounts 2014 Notes to the Consolidated Financial Statements continued
31. Share-based payments
Share scheme costs
£000s
Share Incentive Plan (“SIP”)
Performance Share Plan (“PSP”)
Share Option Plan
Bonus Plan
The following tables set out details of material share schemes activity:
SIP
Year of grant
2011
2012
2013
2014
Year of grant
2010
2011
2012
2013
PSP
Year of grant
2006
2007
2009
2011
2012
2013
2014
Number
outstanding
31 Dec 2013
435,135
464,024
484,623
–
1,383,782
Number
outstanding
31 Dec 2012
492,285
478,090
510,663
–
1,481,038
Number
outstanding
31 Dec 2013
2,148
4,343
131,740
226,167
397,388
343,931
–
1,105,717
New grants
–
–
–
521,051
521,051
New grants
–
–
–
510,366
510,366
Releases
(409,317)
(19,705)
(16,835)
(6,042)
(451,899)
Releases
(476,513)
(14,639)
(14,172)
(6,675)
(511,999)
New grants
–
–
–
–
–
–
446,646
446,646
Releases
–
(2,515)
(26,492)
(137,949)
(1,742)
–
–
(168,698)
Forfeits
(25,818)
(43,333)
(48,346)
(20,075)
(137,572)
Forfeits
(15,772)
(28,316)
(32,467)
(19,068)
(95,623)
Lapses
–
–
–
(106)
(20,427)
(18,225)
(31,868)
(70,626)
Year ended
31 Dec
2014
Year ended
31 Dec
2013
1,067
787
10
163
2,027
1,142
684
55
57
1,938
Number
outstanding
31 Dec 2014
–
400,986
419,442
494,934
1,315,362
Number
outstanding
31 Dec 2013
–
435,135
464,024
484,623
1,383,782
Number
outstanding
31 Dec 2014
2,148
1,828
105,248
88,112
375,219
325,706
414,778
1,313,039
Vesting
conditions
3 years
3 years
3 years
3 years
Vesting
conditions
3 years
3 years
3 years
3 years
Vesting
conditions
2 or 3 years
1, 2 or 3 years
3 years
3 years
3 years
3 years
3 years
72
Report and Accounts 2014
Year of grant
2006
2007
2009
2010
2011
2012
2013
Number
outstanding
31 Dec 2012
2,148
4,343
309,827
8,987
405,773
419,276
–
1,150,354
New grants
–
–
–
–
–
–
351,742
351,742
Releases
–
–
(176,631)
(6,434)
(146,891)
(823)
–
(330,779)
Lapses
–
–
(1,456)
(2,553)
(32,715)
(21,065)
(7,811)
(65,600)
Number
outstanding
31 Dec 2013
2,148
4,343
131,740
–
226,167
397,388
343,931
1,105,717
Vesting
conditions
2 or 3 years
1, 2 or 3 years
3 years
3 years
3 years
3 years
3 years
SIP
For the purposes of calculating the fair value of conditional shares awarded under the SIP, the fair value was calculated as the market
value of the shares at the date of grant as participants are entitled to receive dividends over the three year holding period.
Fair value at measurement date
Weighted fair value
Holding period
SIP awards
179.60p - 342.69p
249.63p
3 years
The Group assumed a 5% annual lapse rated as at the date of grant for the above schemes and all non-market based performance
conditions would be satisfied in full (see accounting policy 2(e)ii).
PSP
For the purposes of calculating the fair value of conditional shares awarded under the PSP the fair value was calculated as the market
value of the shares at the date of grant adjusted to reflect that participants are not entitled to receive dividends over the performance
period.
Fair value at measurement date
Weighted fair value
Holding period
Expected dividend yield
PSP awards
130.01p - 318.65p
241.87p
3 years
0.99% - 3.41%
32. Events after the balance sheet date
On 12th February 2015 the Group acquired the entire issued share capital of Klotz Associates Inc (KAI), a Texas-based consultancy
providing engineering, planning and environmental services, for a maximum consideration of US $24.1 million (£15.9 million) payable
entirely in cash. Cash paid at completion was US $16.9 million (£11.1 million) and two further sums of US $4.8 million (£3.2 million)
and US $2.4 million (£1.6 million) will be paid to the vendors on the first and second anniversaries of completion.
In the year to 31 December 2014 KAI had revenues of US $26.2 million (£17.2 million) and PBT of US $3.6 million (£2.4 million) after
adjustment for non-recurring items.
73
rpsgroup.comAccountsReport and Accounts 2014
Parent Company Balance Sheet
£000s
Fixed assets:
Intangible assets
Tangible assets
Investments
Current assets:
Debtors:
Amounts due from subsidiary undertakings
Other debtors
Prepayments and accrued income
Cash at bank and in hand
Current liabilities:
Creditors: amounts falling due within one year:
Borrowings
Deferred consideration
Trade creditors
Amounts due to subsidiary undertakings
Other creditors
Accruals and deferred income
Net current assets
Total assets less current liabilities
Borrowings
Deferred consideration
Other payables
Provision for liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Profit and loss reserve
Merger reserve
Employee trust shares
Other reserve
Total shareholders’ equity
Notes
3
4
5
6
7
9,10
10
10
10
10
2,10
As at
31 Dec
2014
As at
31 Dec
2013
514
1,570
429,309
431,393
61,121
1,771
2,093
64,985
–
64,985
527
1,779
1,352
19,713
435
2,794
26,600
38,385
469,778
90,076
–
–
231
379,471
6,640
110,100
109,530
21,256
(10,776)
142,721
379,471
580
2,100
415,426
418,106
41,117
1,800
2,373
45,290
–
45,290
1,409
2,322
1,869
16,850
548
3,010
26,008
19,282
437,388
49,578
1,675
47
321
385,767
6,619
108,307
116,141
21,256
(9,277)
142,721
385,767
These financial statements were approved and authorised for issue by the Board on 26 February 2015.
The notes on pages 75 to 81 form part of these financial statements.
Dr Alan Hearne, Director
Gary Young, Director
On behalf of the Board of RPS Group Plc (company number: 2087786).
74
Report and Accounts 2014
Notes to the Parent Company Financial Statements
1. Accounting policies
The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain assets and
are in accordance with applicable UK accounting standards. The following principal accounting policies have been applied:
Goodwill
Goodwill arising on the acquisition of businesses, representing any excess of the fair value of the consideration given over the fair value
of the identifiable assets and liabilities acquired, is capitalised. Purchased goodwill is written off on a straight line basis over its useful
economic life of up to 20 years.
Valuation of investments
Investments held as fixed assets are stated at cost, less any provision for impairment in value.
Tangible fixed assets
Tangible fixed assets are stated at cost or valuation, net of depreciation and any provision for impairment.
Depreciation is provided to write off the cost, less estimated residual values, of all tangible fixed assets, excluding freehold land, over
their expected useful lives as follows:
Freehold buildings
Alterations to leasehold premises
Motor vehicles
Fixtures, fittings, IT and equipment
50 years
Life of lease
4 years
3 to 8 years
Revaluation of properties
The Company has taken advantage of the transitional arrangements in FRS 15 “Tangible Fixed Assets” and retained the book values of
certain freehold properties that were revalued prior to implementation of that standard. Where an asset that was previously revalued is
disposed of, its book value is eliminated and an appropriate transfer made from the revaluation reserve to the profit and loss reserve.
Leased assets and assets held under hire purchase contracts
Where assets are financed by hire purchase or leasing agreements that give rights approximating to ownership (finance leases), the
assets are treated as if they had been purchased outright. The amount capitalised is the present value of the minimum lease payments
payable during the lease term. The corresponding leasing commitments are shown as amounts payable to the lessor. Depreciation on
the relevant assets is charged to the profit and loss account.
Lease payments are split between capital and interest using the actuarial method and the interest element is charged to the profit and
loss account.
All other leases are treated as operating leases. Their annual rentals are charged to the profit and loss account on a straight line basis
over the lease term.
Foreign currency translation
Foreign currency transactions are translated at the rates ruling when they occurred. Foreign currency monetary assets and liabilities are
translated at the rates ruling at the balance sheet date.
Pension costs
Contributions to the Company’s defined contribution pension schemes are charged to the profit and loss account in the year in which
they become payable.
Share based employee remuneration
The Company has applied FRS 20 “Share-based payment” to all share options and conditional share awards which were granted to
employees and had not vested at 1 January 2005. A charge is recognised on the same basis as that recognised for the Group under
IFRS 2. Where the Company will be issuing shares to satisfy share awards made by its subsidiaries, the Company makes a change to its
subsidiaries equal to the fair value of the share-based payment incurred.
75
rpsgroup.comAccountsReport and Accounts 2014 1. Accounting policies continued
Taxation
Current tax, including UK corporation tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws
that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised in respect of timing differences that have originated but not reversed at the balance sheet date where
transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred
at the balance sheet date. Timing differences are differences between the Company’s taxable profits and its results as stated in the
financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they
are recognised in the financial statements.
A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can
be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing
differences can be deducted.
Deferred tax is not recognised when fixed assets are sold and it is more likely than not that the taxable gain will be rolled over, being
charged to tax only if and when the replacement assets are sold.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are
expected to reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred
tax is measured on a non-discounted basis.
Employee Share Ownership Plan (ESOP)
In accordance with UITF 32, the assets, income and expenditure of the ESOP Trust are incorporated into the Company Financial
Statements.
Financial instruments
Disclosures on financial instruments have not been included in the Company’s financial statements as its consolidated financial statements
include appropriate disclosures.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
Trade debtors and other receivables are financial assets that are recognised at fair value on inception and are subsequently carried at
amortised cost. They are subject to impairment tests whenever events or changes in circumstances indicate that their carrying value
may not be recoverable. Impairment losses are taken to the profit and loss account as incurred.
Amounts held at amortised cost
Trade creditors and other payables including bank loans are financial liabilities that are recognised at fair value on inception and are
subsequently carried at amortised cost.
The Company meets the definition of a qualifying entity under FRS 100 issued by the Financial Reporting Council (“FRC”). Accordingly,
in the year ending 31 December 2015 the Company intends to transition to reporting under FRS 102 as issued by the FRC.
The Company intends to take advantage of the disclosure exemptions available under that standard. Any shareholder who objects to
this proposal should write to the company secretary at the Registered Office.
2. Profit attributable to shareholders
No profit and loss account is disclosed by the Parent Company as allowed by Section 408 of the Companies Act 2006.
£000s
Year
ended
31 Dec
2014
Year
ended
31 Dec
2013
Profit for the year attributable to the shareholders of the Parent Company,
dealt with in the accounts of the Parent Company
165,743
Of the profit recognised in 2013, £142,721,000 relates to the disposal of the Company’s investment in the USA subgroup to another
Group company. As such, this represents non distributable profit and is included in Other Reserve, (note 10).
8,969
The remuneration of the auditors for the statutory audit of the Company was £47,000 (2013: £46,000).
76
Report and Accounts 2014
3. Intangible Assets
£000s
Cost
At 1 January 2014 and at 31 December 2014
Amortisation
At 1 January 2014
Charge for the year
At 31 December 2014
Net book value at 31 December 2014
Net book value at 31 December 2013
4. Tangible Assets
£000s
Cost or valuation
At 1 January 2014
Additions
Disposals
At 31 December 2014
Depreciation
At 1 January 2014
Provided for the year
Disposals
At 31 December 2014
Net book value at 31 December 2014
Net book value at 31 December 2013
5. Investments
£000s
Subsidiary undertakings
Cost
At 1 January
Additions
Disposals
At 31 December
Provisions
At 1 January and 31 December
Net book value at 31 December
Goodwill
2,134
1,554
66
1,620
514
580
Total
7,307
264
(18)
7,553
5,207
794
(18)
5,983
1,570
2,100
Alterations
to leasehold
premises
Fixtures,
fittings,
IT and
equipment
1,024
3
–
1,027
455
199
–
654
373
569
6,283
261
(18)
6,526
4,752
595
(18)
5,329
1,197
1,531
2014
2013
416,264
13,883
–
430,147
246,992
184,134
(14,862)
416,264
838
429,309
838
415,426
During 2014 £13,883,000 was invested in the USA sub group to fund the acquisition of GaiaTech Holdings Inc.
During 2013, RPS Group PLC invested £14,100,000 in the acquisition of Knowledge Reservoir Group Inc, a reservoir engineering and
geosciences consulting firm based in the USA. It also restructured its USA sub group which led to £157,583,000 being recognised in
additions and £14,862,000 in disposals to investments. A further £12,451,000 was invested in the Australian sub group.
77
rpsgroup.comAccountsReport and Accounts 2014 Notes to the Parent Company Financial Statements continued
5. Investments continued
Subsidiary undertakings
The majority of our trading subsidiaries provide consulting services, although we also provide training and laboratory testing.
The following were the principal operating subsidiaries during the year. Shares are held directly by RPS Group Plc except where
marked by an asterisk where they are held by a subsidiary undertaking.
Country of
registration and operation
Proportion of
ordinary share capital held
The Environmental Consultancy Limited
RPS Environmental Management Limited
RPS Energy Limited
RPS Health in Business Limited
Nautilus Limited
Ichron Limited
RPS Energy Consultants Limited
RPS Ireland Limited
RPS bv
RPS Advies-en ingenieursbureau bv
RPS Analyse bv
RPS Detachering bv
OEC Consulting AS
Hospitalitet AS
RPS Group Limited
RPS Engineering Services Limited
RPS Consulting Engineers Limited
RPS Consultants Pty Limited
RPS Energy Pty Limited
RPS Environment Pty Limited
MetOcean Engineers Pty Limited
RPS Australia East Pty Limited
Aquaterra Consulting Pty Limited
Manidis Roberts Pty Ltd
Asia - Pacific ASA Pty Ltd
Point Project Management Pty Ltd
Cambrian Consultants America Inc
RPS JD Consulting Inc
Nautilus World Limited
Evans Hamilton Inc
Espey Consultants Inc
GaiaTech Inc
Knowledge Reservoir Group LLC
RPS Energy Canada Limited
Geoprojects Canada Limited
Boyd Exploration Consultants Limited
Petroleum Institute for Continuing Education Ltd
HMA Land Services Ltd
OEC Gruppen
England
England
England
England
England
England
England
Northern Ireland
Netherlands
Netherlands
Netherlands
Netherlands
Norway
Norway
Ireland
Ireland
Ireland
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
USA
USA
USA
USA
USA
USA
USA
Canada
Canada
Canada
Canada
Canada
Norway
100%
100%
100%
100% *
100% *
100% *
100% *
100% *
100%
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
The Company has taken advantage of the exemption under Section 410(2) of the Companies Act 2006 by providing information only
in relation to the subsidiary undertakings whose results or financial position, in the opinion of the directors, principally affected the
financial statements.
A full list of the subsidiary undertakings as at 31 December 2014 will be annexed to the Company’s next annual return filed with the
Registrar of Companies.
78
Report and Accounts 2014 6. Borrowings
£000s
Bank loans
Due as follows:
After one year and within two years
After two years and within five years
Over five years
Details of the borrowings are disclosed in note 16 to the consolidated accounts.
7. Provision for liabilities
£000s
As at 1 January 2014
Additional provision in the year
Utilised in the year
As at 31 December 2014
This provision is expected to be utilised as follows:
£000s
Within one year
After more than one year
31 Dec
2014
31 Dec
2013
90,076
49,578
38,227
–
51,849
90,076
–
49,578
–
49,578
Property
Dilapidations
176
–
(102)
74
145
52
(40)
157
As at
31 Dec
2014
107
124
231
Total
321
52
(142)
231
As at
31 Dec
2013
205
116
321
79
rpsgroup.comAccountsReport and Accounts 2014
Notes to the Parent Company Financial Statements continued
8. Deferred taxation
The movement on deferred taxation in the current and prior year was as follows:
£000s
Net asset at beginning of year
Credit/(charge) to income for the year
Net asset at year end
The deferred taxation balances comprise:
£000s
Short term timing differences
Depreciation in excess of capital allowances
Deferred tax asset
As at
31 Dec
2014
140
88
228
As at
31 Dec
2014
60
168
228
As at
31 Dec
2013
281
(141)
140
As at
31 Dec
2013
44
96
140
Deferred tax is included within other debtors in the balance sheet.
9. Share capital
Ordinary shares of 3p each
At 1 January 2014
At 31 December 2014
Authorised
Value
£000s
Number
Allotted and fully paid
Value
£000s
Number
240,000,000
240,000,000
7,200
7,200
220,631,930
221,347,707
6,619
6,640
Full details of the share capital of the Company are disclosed in Note 21 to the Consolidated Financial Statements.
10. Reconciliation of movements in shareholders’ funds
£000s
At 1 January 2013
Issue of new shares
Share-based payment expense
Non distributable profit
Retained profit for the year
Dividend paid
At 31 December 2013
Issue of new shares
Share-based payment expense
Retained profit for the year
Dividend paid
At 31 December 2014
Share
capital
Share
premium
Merger
reserve
Employee
trust shares
Profit and
loss reserve
Other
reserve
6,587
32
–
–
–
–
6,619
21
–
–
–
6,640
106,198
2,109
–
–
–
–
108,307
1,793
–
–
–
110,100
21,256
–
–
–
–
–
21,256
–
–
–
–
21,256
(9,059)
(218)
–
–
–
–
(9,277)
(1,499)
–
–
–
(10,776)
107,585
(1,370)
1,938
–
23,022
(15,034)
116,141
(228)
2,027
8,969
(17,379)
109,530
–
–
–
142,721
–
–
142,721
–
–
–
–
142,721
Total
232,567
553
1,938
142,721
23,022
(15,034)
385,767
87
2,027
8,969
(17,379)
379,471
80
Report and Accounts 2014
11. Dividends
Full details of dividends paid by the Company are disclosed in Note 23 of the Consolidated Financial Statements.
12. Commitments under operating leases
The Company had annual commitments under non-cancellable operating leases as set out below:
£000s
Operating leases which expire:
Within one year
In two to five years
Land and buildings
31 Dec
2013
31 Dec
2014
923
733
1,656
1,005
1,666
2,671
31 Dec
2014
85
89
174
Other
31 Dec
2013
107
104
211
13. Directors’ interests in transactions
There were no transactions during the year in which the Directors had any interest.
81
rpsgroup.comAccountsReport and Accounts 2014 Notes to Remuneration Committee Annual Report
1. Approach to Remuneration
The overall policy of the Remuneration Committee is to set total on target reward at up to median level compared with the
Company’s comparator groups. For the purpose of benchmarking salaries and other remuneration the principal grouping used by the
Company consists of companies within the FTSE 250 with a range of capitalisations such that the company sits within the middle of
that grouping. The Committee wishes to ensure that the fixed element of remuneration is not excessive and that total actual payments
to executives will only exceed the median level within the Company’s comparator groups through the operation of the performance
related element of the package.
As described in the Annual Statement of the Chairman the performance elements of total reward are directly linked to the
achievement of the Company’s strategy.
Changes in Implementation
for 2015
Salaries were increased by
2% as at 1 January 2015 and
are now
•
•
•
A. Hearne - £581,400
P. Williams - £428,400
G. Young - £288,600
2. Remuneration Policy and Implementation
The following table sets out the key elements of policy and any changes in its implementation for 2015:
Element Operation of Element
Potential Value
Performance Metrics
There are no performance
conditions attached to the
payment of salary although
there are a number of
performance based factors both
at the individual and Company
level that influence the level of
salaries provided to Executive
Directors.
Salary
The Committee’s overall policy
is to set total on target reward
at up to median level compared
with the Company’s comparator
groups. Salaries are set as part
of this policy and to achieve
this objective. The Company
is required to provide a basic
salary at this level in order to
be competitive and to maintain
its ability to recruit and retain
executive directors.
The Remuneration Committee
policy in relation to salary is:
•
up to median salary on
appointment depending
on the experience and
background of the new
Executive Director;
•
on promotion up to the
median salary for the new
role.
An Executive Director’s basic
salary is considered by the
Committee on appointment and
normally reviewed once a year or
when there is a significant change
to role or responsibility.
When making a determination as
to the appropriate remuneration,
the Committee where it is
relevant, benchmarks the
remuneration against the
Company’s comparator groups.
The results of benchmarking will,
however only be one of a number
factors taken into account by the
Remuneration Committee and
which will include:
•
•
•
the individual performance and
experience of the Executive
Director;
pay and conditions for
employees across the Group;
the general performance of the
Company; and
•
the economic environment.
Benefits The Committee’s policy is to
Cost of the benefits provided
n/a
No change.
provide a benefits package with
a value up to median level within
the comparator group and in line
with market practice.
The Executive Directors receive
the following benefits:
• healthcare;
•
life assurance and dependents’
pensions;
• disability schemes; and
•
company car or car allowance.
82
Report and Accounts 2014 Element Operation of Element
Potential Value
Performance Metrics
Changes in Implementation
for 2015
The Executive Directors are
eligible to participate in defined
contribution pension schemes,
or receive a salary supplement
or a combination of the two.
The maximum is 25% of salary.
Salary supplements are not
included in base salary to
calculate other benefits and
incentive opportunities.
Maximum is 200% of salary.
Pension
It is the Committee’s policy to
provide pension benefits in line
with market practice.
Other than basic salary, no
element of the Directors’
remuneration is pensionable.
Bonus
Plan
The Executive Directors are
entitled to participate in the
Bonus Plan.
At the end of the financial year
any bonus earned through the
satisfaction of the performance
conditions will be paid as follows:-
• part as a cash bonus; and
•
part as a deferred bonus in
shares which will vest subject
to continued employment at
the end of a two year vesting
period and provided the
forfeiture threshold is met for
each year of the deferral.
n/a
No change.
The Bonus Plan currently has
two performance conditions:-
•
•
the primary performance
condition which is PBTA;
and
a secondary performance
condition which is cash
conversion.
The part of the bonus earned
and deferred in shares will
increase from 33% to 50% for
the 2015 financial year.
The Committee has decided
to incorporate clawback and
malus provisions in respect
of new awards made from
2015 onwards.
3. Bonus payments for year under review
The bonus payment included within the single figure of total remuneration has been calculated as set out in the following tables. These
show the performance conditions for 2014, their level of satisfaction and the corresponding level of bonus earned by each of the
Executive Directors.
Profit & contribution thresholds for year under review
Level
PBTA Threshold
PBTA is net of all bonus costs including the bonus costs
under the Plan for this financial year
Company Contribution Percentage to Bonus Pool
Bonus Pool Deduction Percentage
Forfeiture
Threshold
£63m
–
15%
Level 1
£63m
Level 2
£72m
Actual
£66.1m
zero
3%
1.11%
In the event that the PBTA is below £63m there would be a reduction in the value of shares deferred under the plan equal to 15% of the difference
between £63m and the actual PBTA for the year.
Cash collection targets for year under review
Level
Cash Collection Percentage
Additional Bonus earned (%age of Salary)
Forfeiture
Threshold
80%
zero
Threshold
Maximum
Bonus
90%
zero
110%
20%
1% of salary for each
percentage point above 90%
Actual
89%
–
A deduction of 1% of the profit contribution would be made for each percentile by which conversion of profit to cash is below 80% subject to a lower
threshold of 75%.
83
rpsgroup.comReport and Accounts 2014 Notes to Remuneration Committee Annual Report continued
3. Bonus payments for year under review continued
Contributions to participant’s plan accounts for year under review
Executive
Alan Hearne
Phil Williams
Gary Young
Percentage of PBTA
Bonus Pool Allocated
Value of PBTA Based
Contribution
49.5%
32.0%
18.5%
£364,000
£235,000
£136,000
As indicated above no contribution was made in respect of the cash collection target.
Bonus payments & awards for year under review
Total Value of Company Contribution
to Participant’s Plan Account
Element A Paid
Element B Awarded
£364,000
£235,000
£136,000
£243,000
£157,000
£91,000
£121,000
£78,000
£45,000
Executive
Alan Hearne
Phil Williams
Gary Young
Notes:
1. Element A is paid following the year end and the sign–off of the level of satisfaction of the performance conditions.
2. Element B is awarded following the year end and the sign–off of the level of satisfaction of the performance conditions.
3.
Element B is awarded in the form of deferred shares with a risk of performance based forfeiture over the two year period of deferral and in
accordance with the Regulations is not included in the bonus total.
4. Benefits for the year under review
The value for benefits shown in the single figure of total remuneration is comprised of a company car or company car allowance and
private medical insurance.
5. Long term incentives
There were no payments of multi-year performance awards made in the year under review.
6. Incentive grants to executive directors made during the year
The following table sets out the details of the incentive grants that will be made to the Executive Directors under the RPS Group Plc
Bonus Plan in respect of 2014.
Executive Director
Alan Hearne
Phil Williams
Gary Young
Award
Bonus Plan Element B
Bonus Plan Element B
Bonus Plan Element B
%age of Salary
Awarded
Nature of Interest
Face Value
of Award
Performance Conditions
21%
19%
16%
Nil Cost Shares
£121,000
Forfeiture Threshold
Nil Cost Shares
£78,000
Forfeiture Threshold
Nil Cost Shares
£45,000
Forfeiture Threshold
An Element B award of shares equal to the face value shown above will be made under the Bonus Plan shortly after publication of the
Company’s results for the year–ended 31 December 2014 and based upon the market price of the Company’s shares at that time.
This award will be held conditionally, subject to the rules of the Bonus Plan and the performance conditions described in the Policy
Report above.
The following table sets out the number and value of matching and dividend shares that were awarded to the Executive Directors
under the all employee Share Incentive Plan during 2014.
Executive Director
Alan Hearne
Phil Williams
Gary Young
84
Number of shares
Value of shares £
900
822
1,007
1,882
1,718
2,106
Report and Accounts 2014 7. Payments to past directors
There were no payments made to past Directors of the Company in respect of the year under review.
8. Payment for loss of office
There were no payments for loss of office made to Directors of the Company in respect of the year under review.
9. Total shareholding of directors
The table below shows the total shareholding for each Director.
Director
Executive
Executive
Alan Hearne
Phil Williams
Gary Young
Unconditional Shares
Conditional Shares
under Executive Bonus Plan
Conditional Matching Shares
under the SIP
Total Shares
Shares held
at 31/12/14
Shares held
at 25/02/15
Shares held
at 31/12/14
Shares held
at 25/02/15
Shares held
at 31/12/14
Shares held
at 25/02/15
Number at
31/12/14
Number at
25/02/15
116,454
325,339
101,384
116,515
325,400
101,445
42,202
28,334
16,528
42,202
28,334
16,528
3,231
3,231
3,231
3,295
3,295
3,295
161,887
356,904
121,143
162,012
357,029
121,268
Non–Executive
Brook Land
John Bennett
Louise Charlton
Robert Miller–Bakewell
Tracey Graham
Andrew Page
30,000
30,000
–
–
5,000
5,000
–
–
–
5,000
5,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
30,000
30,000
–
–
5,000
5,000
–
–
–
5,000
5,000
–
Unconditional shares include shares acquired under the Share Incentive Plan being partnership and dividend shares held as well as
matching shares that have been held for longer than three years and are no longer conditional.
The table below shows the shareholding guideline for each Executive Director and the extent to which that guideline was met at
31 December 2014.
Alan Hearne
Phil Williams
Gary Young
Guideline % salary
150
100
100
Value of
shareholding
required £
855,500
420,000
283,000
Value of
unconditional
shares £
239,000
677,000
204,000
Value of
conditional
shares £
100,000
69,000
49,000
Value to be
awarded £
121,000
78,000
45,000
Total £
460,000
824,000
298,000
The value shown for conditional and unconditional shares is based upon the Company’s share price as at 31 December 2014.
The value of shares to be awarded relates to the conditional shares that will be awarded under the RPS Group Plc Bonus Plan shortly
after announcement of the Company’s results for the year ended 31 December 2014 as detailed in note 3 above.
85
rpsgroup.comReport and Accounts 2014 Notes to Remuneration Committee Annual Report continued
10. Total Shareholder Return Performance
The Company has selected the FTSE All Share and the FTSE All Share Support Services as the broad equity market indices against
which to compare the Company’s total shareholder return performance as the Company has been a constituent member of these
indices throughout the six year period.
Total shareholder return from 1st January 2009
RPS Group
FTSE AllShare
FTSE AllShare
Support Services
300
250
200
£
150
100
50
0
Source: Thomson Datastream
2009
2010
2011
2012
2013
2014
11. CEO Remuneration
Element
Total Remuneration
(single figure for the Year - £000s)
Annual Bonus
(%age of Maximum Opportunity)
Long–Term Incentives
(%age of Maximum Number
of Shares capable of vesting)
2009
636
zero
2010
608
46%
2011
793
54%
2012
1,650
77%
2013
883
47%
2014
922
32%
100%
zero
13%
100%
zero
zero
It should be noted that the single figure for 2012 includes the payment of deferred balances under the previous bonus banking plan
from 2010 and 2011. These balances were earned during these years but subject to deferral until the end of 2012 and at risk of
performance based forfeiture.
86
Report and Accounts 2014 12. Percentage Change in Remuneration of CEO
The following table shows the percentage change in the CEO’s salary, benefits and annual bonus between financial years compared to
the percentage change for all employees.
Element
Salary
Taxable Benefits
Annual Bonus
Percentage Change from 2013 Financial Year to 2014 Financial Year
CEO
14.5%
-5%
-15%
Employees
2.1%
1%
-30%
13. Relative Importance of Spend on Pay
The chart below shows the total remuneration paid to or receivable by all employees of the Company and total distributions to
shareholders by way of dividends for the current and previous financial years:
£000
250000
200000
150000
100000
50000
0
Total employee pay
+8.8%
PBTA
+4.9%
Dividend
+15.6%
2013
2014
Profit before tax and amortisation is a key performance indicator for the Group and the principal performance measure used under
the RPS Plc Bonus Plan.
14. Implementation of Policy
Remuneration policy in 2015 will be operated in accordance with the Company’s stated policies. The changes made to the Executive
Directors’ salaries as at 1 January 2015 are set out in note 2 above.
The Committee and its Advisors
Role of the Remuneration Committee (“Committee”)
The Committee is responsible for setting policies relating to remuneration for the Executive Directors as well as determining their
specific remuneration packages. It also monitors the level and structure of remuneration for the Group’s senior management as well
as overseeing the operation of the Group’s share plans. The Committee’s agreed terms of reference are available on the Company’s
website and on request from the Company Secretary.
The Board determines the remuneration of the Non–Executive Directors. No director plays a part in any decision about their
own remuneration.
87
rpsgroup.comReport and Accounts 2014 Notes to Remuneration Committee Annual Report continued
14. Implementation of Policy continued
Committee members
The members of the Committee are Tracey Graham (Chairman), John Bennett, Louise Charlton and Andrew Page all of whom
are independent Non–Executive Directors. Andrew Page joined the Committee in September 2014. The Chief Executive of the
Company attends meetings by invitation and where this is pertinent to the matters under discussion, but is never present when his
own remuneration is under discussion. Representatives of PricewaterhouseCoopers LLP (‘PwC’) also attend some meetings of the
Committee. The Company Secretary acts as secretary to the Committee.
None of the members of the Committee has any personal financial interest (other than as shareholders), or conflicts of interests arising
from other directorships or day–to–day involvement in running the business of the Company.
Further information on meetings and attendance by the Committee members is disclosed in the Corporate Governance report on
page 23.
15. External advice
During 2014 the Committee received external advice in relation to executive remuneration from PwC, with whom it agreed the fees
for such work.
During the year PwC advised the Committee in relation to the operation of the Bonus Plan as well as in relation to a benchmarking
report in respect of the Executive Directors, preparation of the Remuneration Committee report, taxation of incentive plans and
general governance matters relating to remuneration. The total fees paid to PwC in the year amounted to £77,000. This fee was
comprised of an annual retainer to cover certain standard advice and payment for additional services in respect of which fees were
agreed on a case by case basis. No contingent fee arrangements were operated. The Committee has satisfied itself that the advice
received from PwC was objective and independent. PwC provides no other services to the Group as well as being a signatory to and
following the provisions of the Remuneration Consultants Code.
16. Statement of Shareholder voting
The Remuneration Policy Report and Annual Report for 2013 were both approved at the Company’s 2014 Annual General Meeting.
The voting for each resolution is shown below.
Annual Report
Votes for
Votes against
Total
Witheld
Policy Statement
Votes for
Votes against
Total
Witheld
Number of Votes Cast
% of Votes Cast
157,548,323
18,028,309
175,576,632
1,991,697
89.73
10.27
100
Number of Votes Cast
% of Votes Cast
166,067,608
9,490,604
175,558,212
2,010,117
94.6
5.4
100
Given the strength of voting for these resolutions the Committee concluded that no action to amend remuneration policy was required.
88
Report and Accounts 2014 Five Year Summary
£000s
2014
2013
2012
2011
2010
Revenue
Fee income
PBTA
Net bank debt
Net assets
Adjusted cash generated from operating activities
Average number of employees
Dividend per share
Adjusted basic EPS
Adjusted diluted EPS
572,126
504,959
66,114
(73,180)
384,677
70,772
4,530
8.47
22.04p
21.92p
567,614
492,121
63,032
(32,368)
372,038
72,030
4,306
7.36p
20.22p
20.14p
555,863
478,835
60,099
(13,501)
373,814
76,045
4,507
6.40p
19.48p
19.36p
528,710
452,729
50,812
(23,523)
364,450
71,053
4,686
5.56p
16.68p
16.56p
461,830
393,262
47,993
(31,537)
344,993
57,874
4,422
4.83p
15.79p
15.69p
The Five Year Summary does not form part of the audited financial statements.
89
rpsgroup.comReport and Accounts 2014 90
Report and Accounts 2014 91
rpsgroup.comReport and Accounts 2014 R
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Cover image: Eucalyptus bark at
Barrington Tops National Park, Australia.
RPS has been working on Groundwater Impact
Assessments at Barrington Tops National
Park, New South Wales.
REPORT & ACCOUNTS 2014
RPS Group Plc
20 Western Avenue, Milton Park
Abingdon, Oxon OX14 4SH
T +44 (0)1235 863206
rpsgroup.com
Registered in England No. 2087786
40143
rpsgroup.com