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Cover Image: Brisbane, Queensland, Australia
RPS is working on Brisbane’s largest urban regeneration project.
REPORT & ACCOUNTS 2015
REPORT & ACCOUNTS 2015
COVER DESIGN TBC
RPS Group Plc
20 Western Avenue, Milton Park
Abingdon, Oxon OX14 4SH
T +44 (0)1235 863206
rpsgroup.com
Registered in England No. 2087786
43694
rpsgroup.com
rpsgroup.com
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Strategic Report
Strategy and Business Model
Group Activities and Management
2015 Results and Key Performance Indicators
Risk Management
Employees
Corporate Responsibility
Management & Governance
The Board
Report of the Directors
Corporate Governance
Remuneration Committee Report
Report of the Auditor
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
Parent Company Statement of Changes in Equity
Notes to the Parent Company Financial Statements
Five Year Summary
2
Report and Accounts 2015
Strategic Report
Strategy
RPS is a consultancy focused on providing its clients high quality and added value advice. Our businesses are based primarily in Europe,
North America and Australia, although we undertake projects in many other parts of the world. We have developed a range of skills
and services which enable us to provide independent advice upon:
n
n
n
the development and management of the built and natural environment;
the exploration and production of oil and gas and other natural resources; and
the development of infrastructure to enable the world’s population to have access to, in particular, appropriate transport, water
and power resources.
Our experience of trading for over 40 years had enabled us to develop a clear understanding of how to manage technical consultancy
businesses successfully. Our key objectives are to:
n build on our existing reputation in being recognised as a market leader in a wide range of markets;
n
n
n
n
focus on delivering value added services which generate good fee levels and margins;
grow our existing businesses organically;
attract and retain staff capable of attracting projects from our clients and managing them successfully;
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 manage our cash and balance sheet prudently, whilst continuing to provide a growing dividend to shareholders.
The Group’s businesses continually focus on understanding how their markets are developing and shifting their activities and marketing
accordingly. However, the Board believes there are long term fundamentals underpinning our business. These are:
n
n
n
n
long term demand for improvement to and extension of the urban fabric of towns and cities;
long term demand for oil and gas and other sources of energy/power;
long term demand for urban, inter urban, transport, water energy/power and communications infrastructure;
the increasing importance of environmental and climate change issues.
Our significant market profile and presence in the markets related to these opportunities enables us to benefit from them.
Business Model
The Group operates in a wide range of markets and offers a broad range of services. However, the approach to metrics which enable
our businesses to be managed effectively apply across the Group as a whole. As a result we operate and measure our businesses with
a common set of systems focused around annual targets developed from an understanding of market conditions (top down), together
with the return expected from the staff complement and overhead structure we employ (bottom up). Most individual offices are
separate profit centres with their own targets; larger offices may contain more than one profit centre. Offices are grouped functionally
or geographically for management and marketing purposes. Those groupings then form part of the four reported Group segments.
Each segment has a Board responsible for its operation and performance.
Marketing and business development are devolved to these segment Boards although the Board maintains a Group website and
Business Information Unit. IT is managed centrally, with support from local staff around the Group as necessary.
Achieving organic growth is a key requirement of each business. The deliverability of this, however, is influenced significantly by
economic and market conditions.
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 an important element of our strategy. We endeavour to 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.
3
rpsgroup.com 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 2015 we successfully completed acquisitions in Australia, USA and Norway. Over the long term we will seek 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.
Increasing Group scale and diversity by means of acquisitions leads to greater resilience in the Group’s performance, as demonstrated
when the Global Financial Crisis began in 2007 and, in 2015, through the major downturn in the mining and oil and gas industries.
As a result of developing the Group over four decades we now have important strong core competences throughout the business:
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 maintaining good client relationships:
n maintaining strong cash flow; and
n
identifying, delivering and successfully integrating “bolt on” acquisitions.
Shareholder Value
The Group’s intense focus on converting profit into cash has enabled us to provide our shareholders with significant and predictable
returns for over 20 years. In each of the last 22 years we have increased the dividend payable to our shareholders by 15%.
Since the Group’s IPO in July 1987 we have raised only £60 million from our shareholders and distributed £145 million in dividends
including the recommended 2015 final dividend. Our last fund raising, of £40 million, was in 2001; since then we have paid £140 million
in dividends. This has been achieved at the same time as investing in acquisitions and keeping debt at modest levels. We have not
diluted the equity base of the business by using shares to make acquisitions.
4
Report and Accounts 2015 Strategic Report
Group Activities and Management
Our business is an international consultancy providing independent advice that relates to the built and natural environment as well as
to oil and gas and other natural resources. The Group’s services in relation to the development of infrastructure draw upon expertise
from within both of these areas.
The advice we provide to our clients upon the built and natural environment (‘BNE’) includes urban planning, urban design
and regeneration, environmental assessment and management, transport and infrastructure, architecture and landscape, project
management support, 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 BNE services are provided on a regional basis from offices in Europe, Australia and North America. All BNE
activities in Europe are managed by a single Board with the exception of those in Norway which, at present, are managed separately.
Following the recent acquisition of the Metier business in Norway its activities are being integrated with those of our existing business
in that country. Our regional BNE business in North America is managed by a single Board. We present the results of the European
and North American businesses as separate reporting segments. 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 a single reporting segment covering
all of our operations in Australia Asia Pacific (‘AAP’).
We also provide advice to our clients upon the exploration and production of oil, gas and other natural resources. This involves supplying
technical, commercial and training experts in the fields of geoscience, engineering, health, safety and environment. This advice 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, Singapore and Malaysia and undertakes projects in
many other countries. Separate Boards are responsible for the management of our Energy related activities in Europe, the Middle
East and Africa (‘EAME’) and those in North America respectively, with their combined results being presented as a single accounting
segment. As noted above our Energy activities within AAP are managed and reported together with the BNE business in that region.
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.
A sample of the projects and activities that we undertake is described on our website at www.rpsgroup.com.
5
rpsgroup.com 2015 Results
Summary of results
The Group’s results for the year to 31 December 2015 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
2015
2014
567.0
506.1
51.8
16.57
9.74
572.1
505.0
66.1
22.04
8.47
2014
(constant
currency)
554.7
489.6
65.0
21.67
8.47
9.9
3.11
46.3
15.20
45.7
15.03
(1) Profit before tax, amortisation and impairment of acquired intangibles and transaction related costs.
(2)
Based on earnings before amortisation and impairment of acquired intangibles and transaction related costs.
PBTA for the full year was £51.8 million (2014: £66.1 million; £65.0 million on a constant currency basis). This reduction was caused
by a significant downturn in our Energy business, resulting from the substantial global contraction in expenditure by our oil and gas
clients, responding to a collapse in the oil price. In addition, a provision for doubtful debts totalling £7.0 million was made at the
year end in respect of this business, due to the non-payment of debts due from a small number of clients. Primarily as a result of
significantly reduced Energy earnings in the UK, the Group tax charge on PBTA increased to 29.6% (2014: 26.9%). Adjusted basic
earnings per share were 16.57 pence (2014: 22.04 pence; 21.67 pence on a constant currency basis).
We have taken a non-cash impairment charge against the book value of certain intangible assets held on the balance sheet of £20.0
million as a result of the reduced level of activity from oil and gas clients. This reduced PBT for the full year which, as a result, was £9.9
million (2014: £46.3 million; £45.7 million on a constant currency basis).
The contribution of the Group’s four segments was:
Segment Profit* (£m)
Built and Natural Environment: Europe
Built and Natural Environment: North America
Energy
Australia Asia Pacific (“AAP”)
Total
*after reorganisation costs.
2015
2014
24.9
30.3
10.6
9.1
10.9 35.0
8.2
12.1
77.2
63.9
2014
(constant
currency)
23.7
9.5
35.5
7.3
75.9
During the year we experienced a significant change in the mix of our business. Energy contributed 45% of segment profit in 2014.
This reduced to 17% in 2015 as a result of the downturn in the oil and gas sector and growth in our other businesses. BNE:Europe,
which now includes Norway, has become the Group’s largest business (having grown organically and by acquisition) contributing 47%
of segment profit.
Following the acquisition of Everything Infrastructure Group Pty Ltd (“EIG”) (October 2015) our non resources businesses in AAP
now contribute about 80% of the annualised AAP profit. When we created this segment in 2013 this contribution was about 25%.
Both our BNE businesses remain exposed to oil and gas client projects. The oil and gas component in Europe is small (about 5%)
and primarily focussed in Norway. In North America the exposure is greater (about 40%); we have in place a strategy to diversify this
business further, as has been achieved in AAP. Both, however, remain exposed to further deterioration in the resources market.
In recent years our acquisitions in both Norway and Australia have been directed towards project management consultancy,
particularly in respect of large scale infrastructure projects. We see this as an important new activity for the Group; it also reduces our
dependency on the resources sectors.
6
Report and Accounts 2015 The Group’s key performance indicators are shown below:
Fee income (£m)
PBTA (£m)
Conversion of profit to cash (%)(1)
Net debt (£m)
Notes
Strategic Report
2015
506.1
51.8
140.7
78.8
2014
505.0
66.1
89.0
73.2
2014
(constant
currency)
489.6
65.0
89.0
73.2
(1)
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.
Cash Flow, Funding and Dividend
Our cash flow in the year was excellent. Net cash from operating activities was £75.1 million (2014: £44.0 million). There was a
reduction in working capital of £26.8 million (2014: absorption £8.5 million) in part due to the collection of some older debts. Our
year end net bank borrowings were £78.8 million (2014: £73.2 million) after paying out £20.0 million in dividends (2014: £17.4 million)
and £51.9 million (2014: £64.7 million) in respect of initial and deferred payments for acquisitions, net of acquired cash and debt. Net
bank borrowings include £53.1 million of US private placement notes, due for repayment in 2021. In July 2015, we arranged a £150
million committed revolving credit facility with Lloyds Bank Plc and HSBC Bank Plc. This is available until July 2020 and had headroom
of about £107.1 million at the year end.
As a result of the downturn in the Energy business and its reduced prospects for 2016, we have taken a non-cash impairment charge
of £16.6 million against the value of intangible assets on the balance sheet. We have also taken impairment charges in respect of
intangible assets of £2.9 million in BNE: North America and £0.5 million in AAP, both in relation to businesses with exposure to the
oil and gas sector.
The Board is recommending a final dividend of 5.08 pence per share payable on 20 May 2016 to shareholders on the register on
22 April 2016. If approved, the total dividend for the full year would be 9.74 pence per share, an increase of 15% (2014: 8.47 pence
per share). The Board intends to continue to grow the dividend in a manner which reflects the performance and needs of the
business.
Markets and Trading
Built and Natural Environment (BNE)
BNE: Europe
Within this business we provide a wide range of consultancy services to many aspects of the property and infrastructure sectors. It
had a successful year achieving growth in fee income, profit and margin. This segment now includes the Group’s Norwegian business,
reported last year in Energy. The process of integrating OEC (acquired September 2013) with Metier AS (acquired May 2015) to form
Norway’s leading project management consultancy has progressed encouragingly.
Fee income (£m)
Segment profit* (£m)
Margin %
*after reorganisation costs: 2015 £0.5m; 2014 £0.3m.
2015
2014
222.4
30.3
13.6
186.3
24.9
13.4
2014
(constant
currency)
177.3
23.7
13.3
The acquisitions made in 2014 (Clear and CgMs) have been integrated successfully and assisted the growth of the UK water and
planning and development businesses respectively. Those activities which assist clients develop new capital projects, particularly our
planning and development business in the UK, continued to benefit both from improving market conditions and client confidence.
Those exposed to operational environments, such as providing environment management advice, continued to need to offer an
efficient, cost effective service to assist clients in managing tight budgets. However, our water business in the UK, achieved this and,
in consequence, performed particularly well in the period.
Our business in Norway has a modest direct exposure to the oil and gas market. The other parts of the business traded well,
including Metier AS.
We currently anticipate this segment of the Group should show further growth this year.
7
rpsgroup.com BNE: North America
This business evolved from our North American Energy business and, as a result, still has significant exposure to the provision of
environmental services to the oil and gas sector. This has held back progress throughout the year as those clients reduced and
delayed expenditure, although both fee income and profit grew helped by the contribution from acquisitions.
The acquisition of Klotz Associates Inc. (February 2015) and Iris Environmental (October 2015) continued the process of diversifying
into more traditional planning and environmental consultancy activities. These businesses, in conjunction with GaiaTech (acquired in
2014), have enabled the North American business as a whole to secure year on year growth. Once they have been fully integrated we
intend to develop further our planning and environmental capability with additional acquisitions.
Fee income (£m)
Segment profit* (£m)
Margin %
*after reorganisation costs: 2015 £0.2m; 2014 £nil.
2015
2014
58.7
10.6
18.0
41.3
9.1
22.0
2014
(constant
currency)
43.4
9.5
21.9
We currently anticipate further growth in this business in 2016, although this is likely to be driven largely by the recent acquisitions.
Energy
We provide internationally recognised services to the oil and gas industry from bases in the UK, USA and Canada. These act as
regional centres for projects undertaken in many other countries. The business undertakes projects globally and manages its resources
internationally.
During the course of the year, our experienced management team had to respond to a significant reduction in our clients’ spend and
the uncertainty about whether and when specific projects might commence. In these circumstances, the maintenance of a margin
well into double figures, before doubtful debt provisions totalling £7.0 million made at the year end, confirms both the quality of this
business and its management, as well as the added value it provides to our clients.
Fee income (£m)
Segment profit* (£m)
Margin %
*after reorganisation costs: 2015 £0.9m; 2014 £0.2m.
2015
2014
123.0
10.9
8.9
175.5
35.0
19.9
2014
(constant
currency)
177.5
35.5
20.0
Our Energy activities can be broadly divided into 2 components: consultancy and operations. Consultancy provides a broad range
of advisory and training services and includes the asset evaluation work and training we undertake for clients. It is predominantly an
employee based business. The operations business provides technical support to clients in their day to day exploration and production
activities. It generates income primarily with the use of sub-consultants. The performance of the business can be seen in the declining
trend of fee income for both components:
(£m)
Consultancy
Operations
Total
H1
34.5
54.3
88.8
2014
H2
34.0
52.7
86.7
Total
68.5
107.0
175.5
H1
26.5
40.8
67.3
2015
H2
23.3
32.4
55.7
Total
49.8
73.2
123.0
In response, the operating costs of the business have been reduced by about £36 million on an annualised basis since the beginning
of 2015. This includes about £25 million for the year on year reduction in the cost of sub-consultants, almost entirely related to the
operations business.
The oil price remains volatile and expenditure by our clients is likely to reduce materially again this year. In consequence, further cost
saving measures are being taken. The costs of these will be incurred in the first half, with the benefit of the consequent savings arising
largely in the second half. As a result the first half is likely to produce a reduced performance compared with the same period in 2015.
Assuming reasonably stable market conditions, the second half should show an improvement over the first half. However, our current
expectation is that the full year Energy result for 2016 is likely to show a further decline in both fee income and profit.
8
Report and Accounts 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 help counter the impact of the slowdown in the resources sector by focusing more upon the buoyant infrastructure sector. This
strategy is proving successful. The business grew its profit significantly in 2015 and improved its margin, primarily as a result of this
repositioning strategy and, in particular, the acquisition of Point the project management consultancy (September 2014).
Strategic Report
Fee income (£m)
Segment profit* (£m)
Margin %
*after reorganisation costs: 2015 £0.4m; 2014 £1.4m.
2015
2014
104.2
12.1
11.6
103.6
8.2
7.9
2014
(constant
currency)
93.1
7.3
7.8
Following elections in New South Wales, Victoria and Queensland in the first half of 2015, the pace of investment in infrastructure has
increased and we are assisting clients develop a number of high profile projects. We also have involvement in a number of large projects
for various departments of the Federal Government. Such projects are likely to remain important to the Australian economy, although
the reduction in levels of tax revenue from the resources sector is focusing attention on those able to deliver value for money.
In order to expand this increasingly important component of our business we acquired EIG, a project management business with a
strong involvement in the infrastructure market. (October 2015). We see considerable opportunity in infrastructure related markets
and are now well positioned to take advantage of this.
Overall, we are currently expecting an improved performance in 2016, although a further contraction in the remaining resources
element of the business is, again, likely to moderate the organic growth achievable.
Group Prospects and Strategy
The acquisitions made in 2015 are integrating well and will make an important contribution this year. The Board is currently expecting a
further reduction in Energy profit in 2016. The other three segments are expected to grow.
Our strategy of building multi-disciplinary businesses in each of the regions in which we operate continues to be attractive. Our flexible
business model, diversity of operations and experienced management enabled us to withstand a substantial contraction in Energy
during the year, as well as delivering strong cash flow. We intend to maintain this strategy, securing organic growth where possible and
containing costs where not, whilst continuing to seek further acquisition opportunities.
9
rpsgroup.com Risk Management
The Group supplies a wide range of consultancy 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 systems of planning, budgeting, performance review and internal control assist with
this process.
The management of risk is not separated from the business and is treated as an integral part of our culture and the way we operate.
Our operating Boards consider the risks to which they are exposed and their mitigation on a continuous basis and at each of their
regular meetings. Against the background of reporting from this level, the Group Executive Committee oversees the operational
management of the principal risks to which the Group as a whole is exposed. In turn the Group Board receives regular reporting from
the Executive Committee in relation to principal risks and their mitigation. In considering and challenging this information the Group
Board has undertaken a robust assessment of the principal risks facing the Group including those that would threaten its business
model, future performance, solvency or liquidity.
Economic Environment
The history of the Group demonstrates that by far the greatest negative impact on performance results from external events, normally
related to significant economic changes. This was well demonstrated following the “global financial crisis” in 2008 and the international
recessions which followed it and currently by the effect of the collapsing oil price and the volume of work available to our Energy
businesses. Adverse economic changes may cause clients to cancel, postpone or reduce projects as well as increasing risks associated
with the recovery of debt and work-in-progress.
Although these macro-economic changes are beyond our control our exposure to a wide range of markets and geographies serves
to mitigate overall risk. Economic conditions in our various markets are closely reviewed in order that pre-emptive action can, as far
as possible, be taken as circumstances change. Our contracted order book is monitored regularly in comparison to the productive
capacity of our fee earning staff and necessary actions are taken to reduce costs as and when required.
Retention of Key Personnel
Internally, experience shows that the biggest risk we face is from losing the personnel who are responsible for managing both client
relationships and teams of staff. 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, affect our ability to meet
our clients’ expectations and correspondingly to maintain and develop our business. In addition a failure to anticipate management
succession issues adequately may lead to discontinuity in the Group’s operations and a corresponding diminution in performance.
As described on pages 13 and 14 the Group maintains competitive remuneration and incentive structures which are reviewed and
adjusted on a regular basis. It also maintains an environment that is supportive of professional development through training and career
opportunity. Board level succession planning remains under review by the Nomination Committee.
Business Acquisitions
The development of the Group’s business continues to be supported by acquisitions. The risks here can be of a different nature as
was demonstrated in 2015. Acquisitions in the oil and gas sector which had performed well following integration into the Group
suffered the effect of the contraction of expenditure by oil gas clients. As this is expected to continue impairments have had to be
made to related assets held on the balance sheet. Additionally 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 designed to
prevent this. This will include an assessment of the ability to integrate the acquired business within the Group and its control
environment. It cannot, however, identify macro events which occur some years later. The integration of the acquisitions made in
2014 has been successful and work in relation to those made during 2015 is proceeding well.
The other principal risks faced by the Group, as listed below, are of significantly less importance in terms of the scale of impact they
might have on profit.
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.
As previously highlighted our operations in Kurdistan and Iraq have been affected by conflict in the Middle Eastern region, whilst
sanctions imposed on the Russian Federation have had an impact on our business in that part of the world. Uncertainties associated
with the outcome of the UK general election have, however, been resolved helpfully since the last time of reporting.
10
Report and Accounts 2015 Strategic Report
The significant majority of the Group’s services are provided in relatively stable and predictable liberal democracies. This coupled
with the range of markets and geographies that we serve operates to limit the impact of adverse political developments in particular
countries. In so far as changes can be foreseen, measures can be taken to match costs to anticipated workload.
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. No events of this type
have materially affected us in 2015 and the risks associated with the Ebola virus that were identified at last time of reporting have
since receded.
Whilst it is impossible to predict events of this type, the wide range of geographies and markets that we serve should limit the impact
of adverse occurrences in any specific country or region.
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 suffered
a number of 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.
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 potential liabilities and reputational damage.
Detailed health and safety policies and procedures are in place throughout the Group which are designed to identify and mitigate risk.
These are subject to regular review to ensure that any emerging risks are identified and managed. Policies and procedures incorporate
a structured reporting process which aims to ensure that when incidents do occur they are properly investigated and appropriate
corrective action taken. The Group’s approach to the management of health and safety is described in more detail on pages 15 and 16.
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.
Claims and 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 claims against the Group. Notwithstanding this, from time to time the group receives claims from clients against which
appropriate professional indemnity insurance is maintained. The Board reviews claims of significance on a regular basis and is satisfied
that adequate financial provision has been made in respect of any uninsured liabilities.
Compliance
The Group is subject to a range of taxation and legal requirements across the various jurisdictions in which it operates. A failure to
comply with these obligations could give rise to regulatory intervention, financial penalty 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.
11
rpsgroup.com Funding
The availability of sufficient and appropriate funding through the Group’s bank facilities is important to support the Group’s acquisitions.
The Group’s principal bank facility was renegotiated and renewed in July 2015. This now consists of a total committed sum of
£150m for a five year period jointly funded by HSBC and Lloyds. The long term private shelf facility with Prudential Investment
Management Inc. in the sum of $150m remains in place and against which sums of £30m and US$34.1m, repayable in September
2021, have been drawn.
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.
Long Term Viability Statement
In accordance with the requirements of the UK Governance Code the Board has assessed the long term viability of the Company.
This was done over a three year period taking account of the above risks as well as the Company’s current position, its strategy and
the Board’s risk appetite. A three year period was chosen as a realistic term over which to assess viability. The Board considered cash
flow models based upon a range of assumptions relating to trading performance, expenditure on acquisitions and other outflows
including those associated with the principal risks the Group faces; this included severe but reasonable scenarios. These models took
account of the possible scale of downturn in the Group’s Energy business over the three year period. Based on this assessment the
directors have a reasonable expectation that the Company will continue in operation and be able to meet its liabilities as they fall due
over the period to 31 December 2018.
12
Report and Accounts 2015
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 Report
Group
Average number of employees
Built and Natural Environment – Europe
Built and Natural Environment – North America
Energy
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.
2015
2014
restated
3,045
2,572
445
521
926
117
352
613
882
111
5,054
4,530
3
7
11
83
1,516
3,538
30
70
%
8
14
54
24
2
6
11
81
1,621
2,909
35
65
%
7
15
55
23
The recruitment, retention and motivation of high calibre employees is of strategic importance for the Group and as highlighted
above represents an area of principal risk. Each of the Group’s businesses therefore maintains appropriate and flexible 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’
projects These arrangements may differ according to the nature of the specific business but work within an overall framework that
is overseen at Group level. Human resource professionals are employed throughout the Group to support the objectives of each
business and ensure that best practice is followed wherever possible. 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. 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. We operate largely in sectors which are male
dominated. Our ability, therefore, to recruit female fee earning staff is severely curtailed by the employment applications we receive.
We do not envisage this changing in the short or medium term and intend to maintain a policy of employing the best available staff
regardless of gender.
Building an environment in which employees feel engaged with their business and the Group as a whole is of great importance and in
particular to ensure the successful integration of newly acquired businesses. The Group intranet is used as a means to communicate
developments and achievements from within the group as well as policies and procedures. Corporate newsletters also facilitate this
flow of information. New employees receive an induction and staff appraisals facilitate open communication between employer and
employee as well as identifying developmental needs.
13
rpsgroup.com
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 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 personally 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 professional and technical areas in which the Group is engaged this involves supporting training schemes
and continuing professional development across a range of disciplines both ‘in-house’ and through professional bodies. Within the
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 Australia our Infrastructure
Solutions business operates a Manager Development Programme aimed at developing broad based project management, business and
leadership skills. Our global Energy business also provides training to the oil and gas sector through RPS Training and which also assists
in providing technical training within the Group. In addition our project management business in Norway provides both classroom
based and e-learning training in all aspects of project management. During 2015 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.
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 2015 Strategic Report
Corporate Responsibility
Commitment
The Group’s corporate governance policies are described in detail elsewhere in this document and provide a framework within which
it seeks to achieve attractive levels of return for its shareholders whilst balancing this objective with a recognition of its obligations to
its employees, clients and society in general. The Board takes account of any significant environmental, social and governance (‘ESG’)
matters in assessing the risks that the Group faces. The Executive Committee supports the Board in exercising general oversight in
relation to ESG matters including the assessment of the opportunities to which such issues give rise. Within this framework the Group
has adopted a general approach and specific policies in relation to its employees and their health and safety, the standards through
which it conducts business, the environment and the wider community. These are outlined below as well as elsewhere within this
report and are detailed more fully on the Company’s website. 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. It also the Board’s view that the
challenges, risks and opportunities created by ESG issues as outlined herein 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 acts
of 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.
Employment
The policies adopted by the Group in relation to employees are described on pages 13 and 14 of this report. The risks associated
with failures in this area as well as in relation to the management of health and safety are described in the Risk Management section
on page 11.
Health and Safety
The health and safety of employees and others it may affect is of paramount importance to the Group and it remains 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
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. 40% (2014: 30%) of employees across the Group work in
offices that now have third party accreditation to the OHSAS 18001 standard.
15
rpsgroup.com During the year neither the Group nor any Group company was prosecuted for the breach of health safety regulations. The reportable
accident rate in the year was 2.2 accidents per 1,000 employees (2014: 2.0). Accidents that do occur most commonly relate to field
staff and involve manual handling activities, slips and falls.
Reportable Accident Rates
Group
Reportable injuries
Reportable injuries incident rate per 1,000 employees
2015
12
2.2
2014
11
2.0
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 2015 the Group and its staff gave or raised £873,000 in charitable contributions (2014: £882,000). Taking into
account the £221,000 (2014: £175,000) spent on academic bursaries and educational initiatives, the total contribution of the Group
and its employees to the communities in which it operates was £1,094,000 (2014: £1,057,000).
At Group level the work of Tree Aid has continued to be the main area of focus. 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 made a direct contribution of £104,000 towards projects
in Ghana in 2015. In addition the company’s employees have through their own fund-raising and volunteering contributed a value
of approximately £18,000 to Tree Aid. This has continued to include a number of our specialists providing technical support across
a number of disciplines on a ‘pro bono’ basis. The Group is pleased to have continued this association and that its employees have
contributed in such a direct and positive way.
Environmental Management and Climate Change
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 its trading. Whilst given the nature of its activities the Group’s own impact on the environment
is comparatively modest, policies, standards and targets are in place which aim to minimise this impact wherever 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. It 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 Group endeavours to:
n
n
comply with all relevant national and regional legislation as a minimum standard;
comply with relevant codes of practice and other requirements such as those specified by regulators and our clients;
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 reduces business travel.
To achieve these objectives appropriate training is provided where required 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 2015 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 2015
Strategic Report
Greenhouse Gas Reporting
For the reporting year 1 January to 31 December 2015 we have followed the 2015 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
2015
8,122
4,516
12,638
2014
6,881
4,724
11,605
The increase in Scope 1 emissions is largely attributable to a significant growth in the UK based RPS Water business and a
corresponding growth in the size of its vehicle fleet.
The Group has set a target to reduce per capita office energy consumption by 2.5% on a five year rolling average basis. Using this
approach the five year rolling average up to 2014 was 3.56 MWh per capita which decreased to 3.5 MWh per capita for the five year
rolling average to 2015. Although a decrease of 1.1% was achieved this was below the target 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
3 March 2016
17
rpsgroup.com The Board
Brook Land
Non-Executive Chairman
Aged 66. 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 63. 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 and
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 56. 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 63. 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 63. 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 Chairman
of the Nomination Committee and the
Remuneration Committee, a member
of the Audit Committee and Senior
Independent Director.
Louise Charlton
Independent Non-Executive Director
Aged 55. 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.
Andrew Page
Independent Non-Executive Director
Aged 57. 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 as Senior Vice President with
InterContinental Hotels and as Senior
Independent Director of Arena Leisure
plc. Andrew qualified as a Chartered
Accountant with KPMG and then spent
several years with Kleinwort Benson’s
Corporate Finance division. He is currently
Chairman of Northgate plc, and Senior
Independent Director of Carpetright plc
as well as being a director of The
Schroder UK Mid Cap Fund plc and The
JP Morgan Emerging Markets Investment
Trust plc. Andrew is Chairman of the
Audit Committee and a member of the
Remuneration Committee.
18
Report and Accounts 2015 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 2015.
Directors
The Directors of the Company as at 31 December 2015 were those listed on page 18. John Bennett retired as a Director on 1 May
2015 and Tracey Graham resigned on 3 September 2015; there were no other changes to the Board during the year. The Directors’
interests in the share capital of the Company are as shown in the Annual Report on Remuneration on page 86.
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 5.08p (2014: 4.42p) per share. This together with the interim dividend of 4.66p (2014: 4.05p) per share paid on 15
October 2015 gives a total dividend of 9.74p (2014: 8.47p) per share for the year ended 31 December 2015.
Strategic Report
The Group’s Strategic Report can be found on pages 3 to 17 and includes information as to the likely future development of the
Group. Financial key performance indicators can be found on page 7. 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 Report 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 Report includes information as to likely future developments
in the business of the Group. Nothing in the Strategic Report 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 Group’s
subsidiary undertakings are listed in note 6 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 1 March 2016.
Aberforth Partners
Schroder Investment Management
UBS Global Investment Management
Newton Investment Management
Montanaro Investment Managers
No. of shares
17,956,375
17,445,965
12,284,548
9,108,803
7,750,000
Percentage
8.08
7.85
5.53
4.10
3.49
19
rpsgroup.com Going concern
The Group’s business activities, a review of the 2015 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 a diverse range of businesses in a spread of geographies which serve to limit the overall impact of adverse conditions
in any particular market. In this regard and notwithstanding the possible scale of the downturn in the Group’s Energy business, the
Group continues to enjoy strong cash flow and operates well within the financial covenants applying to its main bank facility. The
Group’s bank facilities were renewed during 2015 and will not expire until July 2020.
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. The Group’s Long Term Viability Statement is shown on page 12.
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 auditor is 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 auditor is 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
n
n
properly select and apply accounting policies;
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 2015 Management & Governance
Responsibilities pursuant to DTR4
We confirm that to the best of our knowledge:
n
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
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 and note 30 to the Consolidated Financial
Statements.
Post balance sheet events
There are no significant post balance sheet events to report.
Takeover Directive
The following additional information is provided for shareholders pursuant to the requirement of the Takeover Directive.
As at 31 December 2015 the Company’s issued share capital consisted of 222,234,251 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 86. 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 26 April 2016. 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 Auditor.
By order of the Board
Nicholas Rowe
Secretary
3 March 2016
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 the role and effectiveness of the Board during 2015. This is the first year in respect of which
we have reported under the revised version of the UK Governance Code (‘the Code’) as published in September 2014. In June
2015 the Company ceased to be a member of the FTSE 250, following which some restructuring took place and our complement of
Non-Executive Directors reduced by one. We have, however, remained in full compliance with the Code throughout the year and
now satisfy its requirements as applicable to smaller market capitalisation companies. Notwithstanding this change, the processes and
disciplines to which our Board adheres, as well as its generally open and co-operative style have remained unchanged. The Group
has faced significant challenges particularly in relation to the market conditions that have led to a significant downturn in our Energy
business. I believe that the Board remains well equipped to face these challenges, as well as the other key issues and risks that we face.
Notwithstanding the reduction in our complement, I believe that the Board possesses an appropriate balance of skills and experience
drawn from the corporate, City and professional worlds. The Chairmanship of both our Audit and Remuneration Committees has changed
during the year, but in each case has brought fresh thought and approach. In particular, the common Chairmanship of our Nomination and
Remuneration Committees is assisting with the succession process to which I refer below. All of our Committees operate with independence
and with the benefit of professional advice where required and report on a regular basis to the Board as a whole.
Our Nomination Committee led by our Senior Independent Director has continued to develop our succession planning. This is well
advanced as far as the Group Board is concerned, but also extends to our next tier of senior management. The revised segment
Boards have been in operation throughout 2015.
Dr Phil Williams who heads up our energy business intends to retire by 30 September 2016. Since the acquisition of Hydrosearch in
2003, Phil has spearheaded the dynamic growth of our energy business as well as having Board level responsibility for other activities.
RPS owes a very great deal to Phil; his experience and unflappability will be much missed by us all when he finally steps down. I would
like to thank Phil publicly for his hard work in developing the RPS energy business over the last twelve years.
During the year the Board has devoted attention to developing our corporate management structure to make it more robust and
flexible. Following Phil’s retirement the Chief Executive, Dr Alan Hearne, will take over his Board responsibilities in conjunction with
an enlarged Executive Committee which will include the regional business leaders. We believe that this will strengthen Group decision
making. As previously reported Alan has indicated his intention to remain in office until at least the end of 2017. I am satisfied that we
now have the plans in place to deal with senior management succession in the future.
In recognition of the increasing overlap between the Remuneration and Nomination Committees, we decided to move to a single
Chairman of these committees. Robert Miller-Bakewell, the Senior Independent Director, has taken on these roles. This summer we
will consult shareholders on the executive remuneration package for 2017 onwards.
During the year we undertook our normal annual performance review. This consisted of a questionnaire encompassing key areas
of the effectiveness of our Board and its Committees which our directors completed. Although no major issues arose, one or two
detailed areas were identified for attention. As a small market capitalisation company we are no longer required to undertake an
externally facilitated review every three years and I anticipate that we will utilise our internal review system again in 2016, when an
external review would otherwise have been due.
In line with additional obligations now imposed by the Code, but also as a means to enhance our performance, the Audit Committee
and Board have overseen the development and formalisation of the way in which we review and report risks and internal control issues
within the Group. These issues have always been on the Board’s agenda but are now considered more regularly and in a more structured
manner. We also continue to prioritise health and safety issues and review this topic at every Board meeting.
Robert Miller-Bakewell’s second three year term as a Non-Executive Director will expire in April 2016 and I am pleased to report that
he has agreed to serve another three year term. As Senior Independent Director as well as being Chairman of the Nomination and
Remuneration Committees, Robert has a key role in the management transition to which I refer above.
In accordance with best practice, all our directors, including myself, offer themselves for re-election at every AGM. As previously
announced Andrew Page has informed the Company he is not seeking re-election and will leave the Board at this AGM.
We are a people based business and notwithstanding the challenges we have faced in parts of the Group, our employees continue to
respond very well. I am pleased to thank all of them for their important contributions to RPS Group.
Brook Land
Chairman
22
Report and Accounts 2015 Management & Governance
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. In May 2015 the Company ceased to be a member of the FTSE 250 Index and since that time has complied
with the provisions of the Code as applicable to a small market capitalisation company. Corporate governance has previously been
considered by a separate Corporate Governance Committee, but the activities of this Committee have now been absorbed by the
other Board Committees with the Board as a whole maintaining an overall responsibility for this subject.
Board Responsibilities
The Board has a schedule of matters that are reserved for its decision, including:
n determining the Group’s overall strategy
n
n
the approval of annual targets and financial reporting including
annual and half year results and interim
management statements
the recommendation and approval of dividends and other
capital distributions
n
n
n
n
n
the approval of significant acquisitions and disposals
the approval of policies and systems for risk management
and assurance
the appointment of key advisers to the Group
the approval of major items of capital expenditure
the settlement of major litigation.
Board Structure
At the date of this report the Board comprised three Executive Directors, three Non-Executive Directors and the Chairman. John
Bennett retired as a Non-Executive Director in May 2015 and Tracey Graham ceased to be a Non-Executive Director in September
2015. 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
and 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 and Nomination 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
* served for part year only
Full
Board
7
8
8
8
4 *
7
8
5 *
8
8
Audit
Committee
–
–
–
–
3 *
–
4
4 *
5
5
Remuneration
Committee
–
–
–
–
2 *
4
2 *
2 *
4
4
Nomination
Committee
2
–
–
–
–
2
2
–
–
2
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 the Chief Executive, the Finance Director and the Company Secretary. These regular 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 Committee, which consists of the three Executive Directors supported by the Company Secretary, meets at least once
a month and has overall responsibility for all operational matters within the Group, subject to those matters that remain reserved for
the Board. As outlined on page 22, during 2016 the Executive Committee will be enlarged to include the regional business leaders.
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. During 2015 directors were asked to complete a review relating to
the general operation and effectiveness of the Board and its Committees, following which results were reviewed with the Chairman.
No major issues arose. 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 periodically 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 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. An 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 2015 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 33 and the statement of the Directors in respect of going concern appears on page 20. The long term viability statement
is set out on page 12.
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 ‘Guidance on Risk Management , Internal Control and Related Financial and Business Reporting”. 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. This subject is kept under ongoing review and the Board receives
and considers regular reports relating to the Group’s system of risk management and internal control. In addition a detailed review of
the Group’s system of internal control and risk management was undertaken by the Audit Committee during the year, the outcome
of which was reported to and discussed with the Board. The Audit Committee and the Board were satisfied that the systems in place
remained appropriate and effective.
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 at key centres within the Group to ensure that policies and procedures are being followed as well as to
identify any control weaknesses or failings.
Capital investment: The Group has clearly defined guidelines for capital expenditure. These include detailed appraisal and review
procedures as well as 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.
Delegated Authorities: A system of delegated authorities, whereby the incurring of expenditure and assumption of contractual
commitment can only be approved by specified individuals and within pre-defined limits, is in place throughout the Group.
Review and reporting: Internal controls and in particular any failures are reported to and reviewed at Group and operating Board
meetings in order that changes to systems can be implemented where required. In addition the Audit Committee maintains a brief to
keep the overall systems of internal control under review.
Audit Committee
The Audit Committee comprises two Independent Non-Executive Directors; Andrew Page and Robert Miller-Bakewell. John Bennett
and Tracey Graham both ceased to be Committee members upon leaving the Group. 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
both members of the Committee have experience that is relevant to the role, during the year under review Andrew Page, who is a
Chartered Accountant, was the member of the Committee specifically identified as having recent and relevant financial experience.
At its annual planning meeting in September the Committee reviews and approves plans with the Auditors including the locations to
be audited as well as the scope and 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 category of assets, which comprises goodwill and other intangible assets is by far the largest on the Group
balance sheet. It therefore receives careful attention from the Committee which needs to be satisfied that its carrying value is
appropriate. As part of its year end procedures the Group Finance function performed a detailed impairment review of other
intangible assets based upon approved targets. A number of businesses that hold other intangible assets have been affected by the
downturn in oil and gas markets which has in turn reduced their prospects. This review indicated that impairments totalling £20.0m
were necessary. The Audit Committee considered papers prepared by the Group Finance Director that included details of the testing
25
rpsgroup.com undertaken and the assumptions used. The Committee agreed that it was appropriate to provide this impairment charge. The Audit
Committee also received reports from the Group Finance Director on the appropriateness of cash generating units for the purposes
of goodwill impairment testing and on the goodwill impairment testing undertaken. The modelling performed was based on approved
targets and indicated that no impairment of goodwill was required. The report explained the cash flow modelling undertaken, the
assumptions used and the conclusions reached. The Committee agreed that no impairment of goodwill was necessary.
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 presented the valuation process and
judgements made to the Committee. 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: The risk that trade debtors and accrued income may not be collected and
therefore may be overstated in the accounts is considered by the Board at its regular meetings when it reviews business performance.
The reports prepared for those meetings contain age profile information on debtors and accrued income by segment and consider
specific issues in more detail as necessary. During the second half of the year in particular it became apparent that certain Energy
clients were missing payment promises and that exposure to them was increasing. The Group Finance Director prepared a paper
for the Audit Committee in September that considered the recoverability of trade debtors and accrued income. No provision was
considered appropriate at that time, although the difficulty of collecting from some clients was noted. The situation did not improve by
the year-end or thereafter. Following the year-end The Group Finance Director prepared reports for the Board and Audit Committee
that considered the recoverability of trade debtors and accrued income at the year-end. The Board and Committee confirmed it
appropriate to impair the carrying value of trade debtors in the Energy segment by £7.0m as at the year-end. Attempts to recover the
debts will continue.
Following the review conducted by the Audit Committee and its own consideration, the Board was able to conclude that the Report
and Accounts for 2015, taken as a whole, is fair, balanced and understandable as well as providing 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 was 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. The Company’s policy is that Group auditors should remain in office for no more
than ten 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
n
n
bookkeeping services
preparation of financial statements
design and implementation of financial systems
n
n
n
valuation services
investment advisory, broker and dealing services
general management services
The split between audit and non-audit fees for the year under review appears in note 8 on page 50. Certain limited scope compliance
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. 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. In conjunction with this exercise the Committee
also reviewed the possible need to establish an internal audit function. In considering this point the Committee was cognisant of the
detailed review work undertaken by members of the Group Finance Department whilst visiting various parts of the Group’s operations
and that the volume of such work increased during the year. Taking account of this and its general level of confidence in the Group’s
systems of internal control it concluded that the establishment of an internal audit department was not appropriate at this time but
that this will be kept under regular review.
26
Report and Accounts 2015 Management & Governance
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. At the start of the year Robert Miller-Bakewell assumed the Chairmanship
of the Committee in place of Brook Land. 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 Nomination Committee led by its Chairman who is also Senior Independent Director has
responsibility for the succession process referred to in the Chairman’s Introductory Statement on page 22 and has a detailed plan in
place to deliver this.
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 following changes to the structure of the Board during the
year this target is not at present being met.
Robert Miller Bakewell’s second three year term will expire in April 2016 and following careful review by the Committee and the
Board it was concluded that, subject to shareholder approval, his tenure as Non-Executive Director should be extended for a further
three year period.
Remuneration Committee
The membership and activities of the Remuneration Committee are described in the Remuneration Committee Report on pages 28
and 29 together with the accompanying notes on pages 83 to 89.
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 2015, 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 29 and notes 1 to 13 on pages 83 to 89
incorporates the remuneration disclosures required in respect of the year.
The Company’s Directors’ Remuneration Policy (the “Policy”) was approved by shareholders at the 2014 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 83 and 84. The full Policy was set out in the
2013 Report and Accounts, a copy of which is available on the Company’s website.
Strategy, Performance and Remuneration outcomes for 2015
The Company’s strategy is set out in detail on pages 3 and 4 of the Strategic Report. The success of this strategy is partly measured by
reference to the Company’s key performance indicators as detailed on page 7. The key performance indicators include PBTA and
conversion of profit to cash. The RPS Group Plc Bonus Plan (the ‘Plan’) has continued to be the only incentive arrangement for the
Executive Directors in respect of which for 2015, the main financial performance condition was PBTA and the secondary conditions
were cash conversion and personal objectives. No bonus can be earned under the Plan unless a minimum PBTA threshold is achieved.
Notwithstanding good performance in relation to conversion of profit to cash and the achievement of a number of personal objectives,
as the PBTA for the year at £51.8 was below the minimum PBTA threshold of £63m set for the Plan in 2015, no bonus was payable in
respect of the year. The forfeiture threshold, which is the level of Group PBTA below which some or all of the awards previously
deferred in the form of shares under the Plan may be forfeited was set at £59m for 2015. At the level of reported PBTA for the year
and as more fully detailed in note 3 to the Annual Report on Remuneration, all of those deferred share awards will be forfeited.
Other Remuneration Decisions
The Executive Directors’ salaries were all increased by 2% with effect from 1 January 2015. The more significant difference between the
base salaries paid in 2014 and 2015 as shown in the table on page 29, reflect the fact that increases in base salaries awarded during 2014
were implemented with effect from 1 July in that year. In respect of 2016, the Executive Directors’ salaries will be unchanged.
It is our intention to consult with shareholders with regard a new remuneration policy to take effect in 2017 and seek formal approval
for such a policy during the course of this year.
Robert Miller-Bakewell
Chair of the Remuneration Committee
3 March 2016
28
Report and Accounts 2015 Management & Governance
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
Executive
Alan Hearne
Phil Williams
Gary Young
Non–Executive
Brook Land
John Bennett †
Louise Charlton
Robert Miller–Bakewell *
Tracey Graham †
Andrew Page
Total
Base Salary
or Fees
Benefits
Bonus
Long Term
Incentives
Pensions
All Employee
Share Plan
Total
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
581
428
289
526
392
264
136
18
43
64
36
50
130
53
41
63
51
13
1,645 1,533
19
16
16
–
–
–
–
–
–
51
19
16
16
–
–
–
–
–
–
51
–
–
–
–
–
–
–
–
–
–
243
157
91
–
–
–
–
–
–
491
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
145
75
43
–
–
–
–
–
–
263
132
69
40
–
–
–
–
–
–
241
3
3
3
–
–
–
–
–
–
9
2
2
2
748
522
351
922
636
413
130
136
–
53
18
–
41
43
–
63
64
–
51
36
–
–
13
50
6 1,968 2,322
*The fees payable to Robert Miller-Bakewell included a sum of £15,000 in addition to the regular fee and in respect of additional work in connection
with succession planning.
†The fees payable to John Bennett and Tracey Graham in 2015 were for part of the year only.
The following table shows the relationship between total remuneration received by the Directors and reported Group profits.
£000s
2014
2015
Total Remuneration
2,322
1,968
PBTA
66,100
51,800
Remuneration received as % of PBTA
3.5
3.8
The additional information that is required under the Regulations which form part of the annual report for the year ended
31 December 2015 has been included in notes 1 to 13 on pages 83 to 89. This additional information is unaudited with the exception
of notes 3 to 7.
29
rpsgroup.com
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
2015 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, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”; 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 the 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. 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),
including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”.
Going concern and the directors’ assessment of the principal risks that would threaten the solvency or liquidity of
the group
As required by the Listing Rules we have reviewed the directors’ statement regarding the appropriateness of the going concern basis
of accounting contained within the directors report on page 20 and the directors’ statement on the longer-term viability of the group
contained within the strategic report on page 12.
We have nothing material to add or draw attention to in relation to:
n
n
n
n
the directors’ confirmation on page 10 that they have carried out a robust assessment of the principal risks facing the group,
including those that would threaten its business model, future performance, solvency or liquidity;
the disclosures on pages 10-12 that describe those risks and explain how they are being managed or mitigated;
the directors’ statement in the directors report about whether they considered it appropriate to adopt the going concern basis of
accounting in preparing them and their identification of any material uncertainties to the group’s ability to continue to do so over a
period of at least twelve months from the date of approval of the financial statements;
the director’s explanation on page 12 as to how they have assessed the prospects of the group, over what period they have done
so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation
that the group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any necessary qualifications or assumptions.
We agree with the directors’ adoption of the going concern basis of accounting and we did not identify any such material uncertainties.
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.
Independence
We are required to comply with the Financial Reporting Council’s Ethical Standards for Auditors and we confirm that we are
independent of the group and we have fulfilled our other ethical responsibilities in accordance with those standards. We also confirm
we have not provided any of the prohibited non-audit services referred to in those standards.
Our assessment of risks of material misstatement
The assessed risks of material misstatement described below 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.
30
Report and Accounts 2015 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 contracts open at year end. There is significant
management judgement in determining the revenue to be
recognised and in particular in estimating the stage of completion
of, and the costs to complete, open contracts at the balance
sheet date.
The Group’s revenue recognition policy is disclosed in note
1(c) and is also included in the key accounting estimates and
judgements in note 1(h).
Accounting for acquisitions
There were four acquisitions in the year with a total
consideration of £61.3m. Details of the acquisitions are disclosed
in note 28 to the accounts. The Audit Committee has included
their assessment of this risk on page 26 and it is also 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 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, 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 2015, the net book value of goodwill
and intangible assets was £415m (2014: £405m) after
impairments. The associated disclosure is included in note 11
and the accounting policy is disclosed in note 1(e). The Audit
Committee has included their assessment of this risk on page
25 and it is also 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, the
number of judgements involved in assessing impairment, and the
continuing challenging economic conditions particularly in those
businesses with significant exposure to the oil and gas market.
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. The Group determined that, as a
result of current trading conditions, particularly in the Energy
segment, that an impairment of £20m was required largely in
respect of customer relationship intangible assets at
31 December 2015.
Management & Governance
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
for all full scope components. We tested in detail a sample of
contracts, by comparing them to the signed contract terms,
agreeing inputs to the related time records, and understanding
and challenging the estimated costs to complete. Based on our
findings from this, we recalculated the stage of completion to
determine the revenue recognised for these contracts.
Our audit work assessed the adequacy of the design and
implementation of controls over management’s review of the
accounting for acquisitions, by reviewing management’s papers
which set out their approach to determining the fair value of the
acquired businesses.
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 determine
whether they represent consideration rather than remuneration.
Our audit work assessed the adequacy of the design and
implementation of controls over management’s review of the
goodwill and intangible asset impairment process.
Our work focused on challenging management’s assumptions
including specifically the determination of cash-generating units,
the forecast cash flow projections for each cash-generating unit
and the discount rates.
We considered management’s revenue forecasts in the light
of current trading conditions. We compared management’s
forecasts against current and historical results with particular
focus on the oil and gas sector.
We used our valuation specialists to calculate an acceptable
range of discount rates both for CGUs and for individual
intangible assets and compared our range with that determined
by management. We examined the short term growth rates by
using market data and a review of historical 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 and considered the adequacy of the associated
disclosure of both the approach to the impairment review and
the resulting impairment charge.
31
rpsgroup.com Recoverability of trade receivables and accrued income
At 31 December 2015 trade receivables were £113m (2014:
£131m) net of the provision for impairment. At 31 December
2015 accrued income was £29m (2014: £26m) net of the
provision for impairment. The trade receivables provision for
impairment was £10.9m (2014: £4.5m) and the accrued income
provision for impairment was £3.6m (2014: £4.1m).
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. In
2015, there has been an increase to the provision of £7m in the
Energy business, due to the risk of bad debts from oil and gas
clients. The Audit Committee has included their assessment of
this risk on page 26.
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 assumptions used in management’s calculations
and the appropriateness of judgements on the completeness of
the provisions against trade receivables and accrued income by
reviewing cash received post year end on a sample of customer
debts and the overall ageing analysis for trade receivables
and accrued income by entity and customer. In additions, we
challenged specific balances which were significantly past-due but
not impaired and reviewed for cash received post year end.
The description of risks above should be read in conjunction with the significant issues considered by the Audit Committee discussed
on pages 25-26.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these 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 £2.5m (2014: £3.3m), which is 5% (2014: 5%) of profit before tax, amortisation and
impairment of acquired intangible assets and transaction related costs (PBTA) and below 1% (2014: 1%) of equity. This has reduced
year on year due to the reduction in underlying results. We chose this measure as it is the Group’s key profit performance indicator.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £125,000 (2014:
£66,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. This is a change
from the prior year where we said we would report all misstatements above £66,000 following us reassessing what we consider to be
clearly inconsequential. 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 and work
on the business units at 7 locations (2014: 7). Within the 7 locations, 24 (2014:22) business units were subject to a full audit, whilst
the remaining 12 (2014: 13) 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, incorporating
those covered by specified audit procedures, account for 92% (2014: 94%) of the group’s net assets, 93% (2014: 93%) of the group’s
revenue and 93% (2014: 92%) of the group’s profit before tax, amortisation and transaction-related costs. 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
at the 7 locations was executed at levels of materiality applicable to each individual entity which were lower than group materiality and
ranged from £0.1 to £1.25m (2014: £0.1m to £1.4m).
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 a 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.
32
Report and Accounts 2015 Management & Governance
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.
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 part of the Corporate Governance Statement relating to the company’s
compliance with certain 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
n
n
n
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:
materially inconsistent with the information in the audited financial statements; or
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). 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.
33
rpsgroup.com 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
3 March 2016
34
Report and Accounts 2015 Report of the Independent Auditors continued
Consolidated Income Statement
£000s
Revenue
Recharged expenses
Fee income
Year ended
31 Dec
2015
Year ended
31 Dec
2014
566,972
(60,862)
506,110
572,126
(67,167)
504,959
Note
3
3
3
Operating profit before amortisation and impairment of acquired intangibles
and transaction related costs
1(g),3,4,5
56,845
70,244
Amortisation and impairment of acquired intangibles and transaction related costs
Operating profit
Finance costs
Finance income
Profit before tax, amortisation and impairment of acquired intangibles
and transaction related costs
Profit before tax
Tax expense
1(g),4
6
6
(41,940)
14,905
(5,232)
182
(19,842)
50,402
(4,242)
112
51,795
66,114
9,855
46,272
9
(3,013)
(12,925)
Profit for the year attributable to equity holders of the parent
6,842
33,347
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
3.11
3.09
16.57
16.47
15.20
15.12
22.04
21.92
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 (loss)/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
2015
Year ended
31 Dec
2014
6,842
234
(63)
(9,181)
33,347
(601)
112
(4,602)
(2,168)
28,256
35
rpsgroup.comAccountsReport and Accounts 2015 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
2015
As at
31 Dec
2014
Note
11
12
20
14
16
18
15
19
16
18
20
19
21
22
416,658
26,504
4,281
447,443
157,430
17,801
175,231
525
20,383
112,309
4,014
1,161
138,392
36,839
96,055
9,890
2,162
10,043
1,642
119,792
364,490
6,667
112,026
1,149
244,648
364,490
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
These financial statements were approved and authorised for issue by the Board on 3 March 2016.
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 2015
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 increase /(decrease) 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
2015
Year ended
31 Dec
2014
92,628
–
92,628
(6,021)
182
(11,737)
75,052
(35,354)
(16,568)
(7,963)
465
(59,420)
–
4,831
(66)
(19,973)
(169)
(15,377)
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
255
(1,550)
17,046
21
17,322
17,801
(479)
17,322
17,791
805
17,046
17,521
(475)
17,046
Note
26
28
23
26
26
37
rpsgroup.comAccountsReport and Accounts 2015 Consolidated Statement of Changes in Equity
£000s
At 1 January 2014
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
Changes in equity during 2015:
Total comprehensive loss
Issue of new ordinary shares
Share based payment expense
Tax recognised directly in equity
Dividends paid
At 31 December 2015
Share
capital
6,619
–
21
–
–
–
6,640
–
27
–
–
–
6,667
Share
premium
108,307
–
1,793
–
–
–
110,100
–
1,926
–
–
–
112,026
Retained
earnings
239,460
32,858
(228)
2,027
(352)
(17,379)
256,386
7,013
(730)
1,889
63
(19,973)
244,648
Other
reserves
17,652
(4,602)
(1,499)
–
–
–
11,551
(9,181)
(1,221)
–
–
–
1,149
Total
equity
372,038
28,256
87
2,027
(352)
(17,379)
384,677
(2,168)
2
1,889
63
(19,973)
364,490
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 2015
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 2015 comprise the Company and its subsidiaries (together referred to as the
“Group”).
The consolidated financial statements were authorised for issuance on 3 March 2016.
(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 2015.
During the year, the Group has applied IAS 19 (as amended in 2014) “Employee Benefits” and IAS 27 (as amended in 2014) “Separate
Financial Statements”. 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.
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.
39
rpsgroup.comAccountsReport and Accounts 2015 Notes to the Consolidated Financial Statements continued
(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
Software
Intellectual property rights
5 to 10 years
1 to 5 years
1 to 6 years
5 to 10 years
10 years
(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.
40
Report and Accounts 2015 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 and impairment of acquired
intangibles and transaction related costs”, “Profit before tax, amortisation and impairment 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 and impairment 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), impairment of acquired
intangibles, 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.
4.
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 2015.
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 2015 can be found in note 11 along with the judgements applied.
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.
41
rpsgroup.comAccountsReport and Accounts 2015
Notes to the Consolidated Financial Statements continued
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.
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.
42
Report and Accounts 2015 (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.
(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.
43
rpsgroup.comAccountsReport and Accounts 2015 Notes to the Consolidated Financial Statements continued
2. Other accounting policies continued
(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.
(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.
44
Report and Accounts 2015 (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
IAS 12 (amended) “Recognition of Deferred Tax Asset for
Unrealised Losses””
IFRS 16 “Leases”
IFRS 10 (amended), IFRS 12 (amended) and IAS 28
“Investment Entities: Applying the Consolidation Exception”
lAS 1 (amended) “Disclosure Initiatives”
n Annual improvements to IFRSs: 2012-2014 Cycle
n
n
n
lFRS 9 “Financial Instruments”
lFRS 15 “Revenue from Contracts”
lAS 16 (amended) and IAS 38 (amended) “Depreciation
and Amortisation”
n
lFRS 11 (amended) “Joint Operations”
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. The Group is undertaking a detailed review of the potential impact of
IFRS 15. At this stage we do not believe this standard will significantly affect the Group’s revenue recognition.
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 2014 were restated following the transfer of the Group’s Norwegian business
into the BNE Europe segment from the Energy segment as noted in the Group’s April Trading Update.
The business segments of the Group are as follows:
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.
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.
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 they predominantly relate to the stewardship of the Group. They
include the costs of the main board, and the Group finance and marketing functions and related IT costs. 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 2015
Notes to the Consolidated Financial Statements continued
3. Business and geographical segments continued
Segment results for the year ended 31 December 2015
£000s
BNE - Europe
BNE - North America
Energy
AAP
Group eliminations
Total
£000s
BNE - Europe
BNE - North America
Energy
AAP
Segment results for the year ended 31 December 2014 (restated)
£000s
BNE - Europe
BNE - North America
Energy
AAP
Group eliminations
Total
£000s
BNE - Europe
BNE - North America
Energy
AAP
Total
Fees
Expenses
Intersegment
revenue
External
revenue
222,437
58,672
122,971
104,153
(2,123)
506,110
30,503
7,713
13,931
9,045
(330)
60,862
(808)
(343)
(938)
(364)
2,453
–
Underlying
profit
Reorganisation
costs
30,871
10,741
11,810
12,539
65,961
(549)
(166)
(904)
(409)
(2,028)
252,132
66,042
135,964
112,834
–
566,972
Segment
profit
30,322
10,575
10,906
12,130
63,933
Fees
Expenses
Intersegment
revenue
External
revenue
186,288
41,322
175,504
103,615
(1,770)
504,959
22,274
5,916
28,953
10,557
(533)
67,167
(817)
(639)
(680)
(167)
2,303
–
Underlying
profit
Reorganisation
costs
25,170
9,112
35,131
9,639
79,052
(253)
–
(167)
(1,419)
(1,839)
207,745
46,599
203,777
114,005
–
572,126
Segment
profit
24,917
9,112
34,964
8,220
77,213
46
Report and Accounts 2015 Group Reconciliation
£000s
Revenue
Recharged expenses
Fees
Underlying profit
Reorganisation costs
Segment profit
Unallocated expenses
Operating profit before amortisation and impairment of acquired intangibles and transaction related costs
Amortisation and impairment of acquired intangibles and transaction related costs
Operating profit
Net finance costs
Profit before tax
Year ended
31 Dec
2015
Year ended
31 Dec
2014
566,972
(60,862)
506,110
65,961
(2,028)
63,933
(7,088)
56,845
(41,940)
14,905
(5,050)
9,855
572,126
(67,167)
504,959
79,052
(1,839)
77,213
(6,969)
70,244
(19,842)
50,402
(4,130)
46,272
£000s
BNE - Europe
BNE - North America
Energy
AAP
Unallocated
Group total
Year ended
31 Dec
2015
Carrying amount of
segment assets
Year ended
31 Dec
2014
(restated)
Year ended
31 Dec
2015
Segment depreciation
and amortisation
Year ended
31 Dec
2014
(restated)
298,159
74,821
114,440
131,009
4,245
622,674
247,633
52,276
190,203
126,890
7,834
624,836
8,848
6,355
5,219
7,354
816
28,592
The table below shows revenue and fees to external customers based upon the country from which billing took place:
Year ended
31 Dec
2015
231,094
106,167
102,290
48,587
28,955
23,766
18,516
7,597
566,972
Revenue
Year ended
31 Dec
2014
247,516
106,786
91,783
30,082
31,600
24,518
31,413
8,428
572,126
£000s
UK
Australia
USA
Norway
Netherlands
Ireland
Canada
Other
Total
£000s
UK
Australia
USA
Ireland
Norway
Canada
Netherlands
Other
Total
Year ended
31 Dec
2015
198,876
97,317
93,180
47,255
24,231
20,186
17,637
7,428
506,110
As at
31 Dec
2015
190,772
96,477
56,684
36,169
38,741
11,628
16,960
12
447,443
7,812
3,540
6,690
7,231
790
26,063
Fees
Year ended
31 Dec
2014
212,045
96,909
83,987
29,543
27,190
20,502
26,922
7,861
504,959
Carrying amount of
non current assets
As at
31 Dec
2014
200,775
92,113
47,071
37,701
22,272
18,284
18,155
39
436,410
47
rpsgroup.comAccountsReport and Accounts 2015
Notes to the Consolidated Financial Statements continued
4. Amortisation and impairment of acquired intangibles and transaction related costs
£000s
Amortisation of acquired intangibles
Impairment of acquired intangibles
Contingent deferred consideration treated as remuneration
Adjustments to consideration payable
Transaction costs
Year ended
31 Dec
2015
Year ended
31 Dec
2014
20,491
20,040
–
249
1,160
41,940
17,605
–
1,077
–
1,160
19,842
The impairment of acquired intangibles arose in the following segments as a result of reduced prospects of businesses with exposure to
the oil and gas sector:
£000s
Energy
BNE - North America
AAP
Total
Year ended
31 Dec
2015
Year ended
31 Dec
2014
16,612
2,927
501
20,040
–
–
–
–
The charge is in respect of customer relations, intellectual property, software and brand. We have used the higher of the value in use
or fair value less costs to sell to estimate the recoverable amounts of the assets. Where these assets are domiciled in the UK or
Australia, fair value less costs to sell gives a higher recoverable amount. Our FVLCTS model is based on discounted cash flows and the
key inputs are the Group’s targets for 2016, the estimated remaining lives of the assets and the discount rates applied (which are in the
range 16% -18% depending on the asset and territory). Where the assets are domiciled in the USA or Canada, value in use gives a
higher recoverable amount. The discount rates used for these tests was 12%.
5. Operating profit - by nature of expense
£000s
Revenue
Staff costs (see note 7)
Subconsultant costs
Other employment related costs
Depreciation of owned assets
Depreciation of assets held under finance leases
(Loss)/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
Impairment of acquired intangibles
Adjustments to consideration payable
Bad debt provision
Other transaction related costs
Other costs
Operating profit
48
Year ended
31 Dec
2015
Year ended
31 Dec
2014
566,972
572,126
(248,296)
(127,660)
(18,621)
(8,086)
(15)
(151)
(12,339)
(4,636)
(12,411)
(18,101)
(20,491)
(20,040)
(249)
(8,329)
(1,160)
(51,482)
14,905
(233,169)
(129,483)
(16,815)
(8,396)
(62)
249
(11,990)
(4,386)
(12,560)
(17,582)
(17,605)
–
–
(807)
(2,237)
(66,881)
50,402
Report and Accounts 2015 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
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
2015
Year ended
31 Dec
2014
(4,146)
(1,086)
(5,232)
182
(5,050)
(3,107)
(1,135)
(4,242)
112
(4,130)
Year ended
31 Dec
2015
Year ended
31 Dec
2014
214,977
20,847
10,303
280
1,889
248,296
4,094
960
5,054
201,592
18,981
10,281
288
2,027
233,169
3,573
957
4,530
In addition to statutory staff costs, contingent deferred consideration treated as remuneration amounts to £nil (2014: £1,077,000).
The Group considers the Directors to be the key management personnel and details of directors’ remuneration are included in the
Remuneration Committee Report from page 28. The share based payment credit in respect of key management personnel was
£245,000 (2014: charge of £167,000).
49
rpsgroup.comAccountsReport and Accounts 2015
Notes to the Consolidated Financial Statements continued
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
Other services
Total assurance services
Tax compliance services
Tax advisory services
Services in relation to taxation
Other services
Total fees
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
2015
Year ended
31 Dec
2014
50
461
511
27
27
565
61
–
61
4
630
47
372
419
27
–
446
104
6
110
24
580
Year ended
31 Dec
2015
Year ended
31 Dec
2014
1,656
11,300
(364)
12,592
(9,332)
(826)
579
(9,579)
5,359
11,564
230
17,153
(3,276)
–
(952)
(4,228)
Total tax charge to income for the year
3,013
12,925
Analysis of tax expense/(credit) not included in income for the year:
Current tax
Deferred tax charge/(credit) in other comprehensive income
Deferred tax (credit)/charge in equity for the year
–
63
(63)
–
(112)
352
50
Report and Accounts 2015
The effective tax rate for the year on profit before tax is 30.6% (2014: 27.9%). The effective tax rate for the year on profit before tax,
amortisation and impairment of acquired intangibles and transaction related costs is 29.6% (2014: 26.9%) as shown in the table below:
£000s
Total tax expense in Income Statement
Add back:
Tax on amortisation and impairment of acquired intangibles and transaction related costs
Adjusted tax charge on the profit for the year
Profit before tax, amortisation and impairment of acquired intangibles and transaction related costs
Adjusted effective tax rate
Year ended
31 Dec
2015
Year ended
31 Dec
2014
3,013
12,925
12,304
15,317
51,795
29.6%
4,838
17,763
66,114
26.9%
The UK rate of corporate tax was reduced from 21% to 20% from 1 April 2015. The UK tax rate for the group’s UK companies
is 20.25% (2014: 21.5%) representing the weighted average annual corporate tax rate for the full financial year.
The actual tax expense for 2015 is different from 20.25% (2014: 21.5%) of profit before tax for the reasons set out in the
following reconciliation:
£000s
Profit before tax
Tax at the standard rate of 20.25% (2014: 21.5%)
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
2015
Year ended
31 Dec
2014
9,855
1,996
1,370
–
1,156
(768)
(769)
28
3,013
46,272
9,948
3,534
247
673
(755)
–
(722)
12,925
At Summer Budget 2015, the government announced legislation setting the corporation tax main rate at 19% for the year starting
April 2017, 2018 and 2019 and at 18% for the year starting April 2020. 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.
51
rpsgroup.comAccountsReport and Accounts 2015 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
2015
Year ended
31 Dec
2014
6,842
33,347
220,166
1,269
221,435
3.11
3.09
219,399
1,135
220,534
15.20
15.12
The directors consider that earnings per share before amortisation and impairment 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 and impairment of acquired intangibles and transaction related costs (note 4)
Tax on amortisation and impairment 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
2015
Year ended
31 Dec
2014
6,842
41,940
(12,304)
36,478
16.57
16.47
33,347
19,842
(4,838)
48,351
22.04
21.92
52
Report and Accounts 2015 11. Intangible assets
£000s
Cost:
At 1 January 2015
Additions
Adjustments to prior year estimates
Exchange differences
At 31 December 2015
Aggregate amortisation and impairment losses:
At 1 January 2015
Amortisation
Impairment
Exchange differences
At 31 December 2015
Net book value at 31 December 2015
Intellectual
property
rights
Customer
relationships
Order
backlog
Trade
names
Non
compete
agreements
Software
Goodwill
Total
3,128
–
–
141
3,269
1,172
333
1,672
80
3,257
12
105,660
13,990
–
(2,142)
117,508
43,239
12,999
18,077
(566)
73,749
43,759
14,661
3,689
–
(469)
17,881
11,308
4,371
–
(210)
15,469
2,412
6,328
2,347
–
(274)
8,401
4,749
2,316
181
(150)
7,096
1,305
560
–
–
16
576
560
–
–
16
576
–
1,592
1,362
–
(136)
2,818
346,896
40,580
92
(7,844)
379,724
478,825
61,968
92
(10,708)
530,177
580
472
110
(11)
1,151
1,667
12,221
–
–
–
12,221
367,503
73,829
20,491
20,040
(841)
113,519
416,658
Intangible asset additions in 2015 have been recognised at their provisional fair values (see note 28).
Acquisitions in 2014 were originally stated at provisional values. These fair values have now been finalised.
£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
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. The carrying amount of goodwill has been allocated as follows:
53
rpsgroup.comAccountsReport and Accounts 2015 Notes to the Consolidated Financial Statements continued
11. Intangible assets continued
£000s
BNE: Europe (UK and Ireland)
BNE: Europe (Netherlands)
BNE: Europe (Norway)
BNE: North America
AAP
Energy (global)
As at
31 Dec
2015
149,116
9,118
27,361
40,064
76,523
65,321
367,503
As at
31 Dec
2014
150,725
9,358
15,277
23,865
68,925
66,525
334,675
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 10.4% to 13.6% (2014: 10.6% to 12.3%).
Growth rates
The growth rates applied reflect management’s judgement regarding the potential future performance of the business. These incorporate
the effects of the decline in the Energy sector, 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 2017 to 2020. The average real growth rate used during this period is between 0% and 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 (2014: 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
10.9%
13.6%
12.3%
3.0%
0.0%
0.0%
2.1%
2.5%
2.2%
During the year, all goodwill was tested for impairment with no impairment charge resulting (2014: £nil).
The Energy CGU grouping has the lowest percentage headroom. An increase in the discount rate of 3%, a 2016 target miss of 23% or
a reduction in the medium term growth rate of 10% would reduce the headroom to zero. The AAP CGU grouping has the next lowest
percentage headroom. An increase in the discount rate of 3%, a 2016 target miss of 29% or a reduction in the medium term growth
rate of 11% would reduce the headroom to zero.
54
Report and Accounts 2015
12. Property, plant and equipment
£000s
Cost:
At 1st January 2015
Additions
Disposals
Transfers
Additions through acquisition
Foreign exchange differences
At 31 December 2015
Depreciation:
At 1st January 2015
Charge for the year
Disposals
Transfers
Foreign exchange differences
At 31 December 2015
Net book value at 31 December 2015
Freehold
land and
buildings
Alterations
to leasehold
premises
9,576
14
(220)
–
–
(453)
8,917
2,600
194
(175)
–
(105)
2,514
6,403
7,114
621
(285)
375
64
(306)
7,583
3,735
1,078
(282)
150
(180)
4,501
3,082
Fixtures,
fittings,
IT and
equipment
61,401
6,844
(5,685)
(375)
632
(1,536)
61,281
45,630
6,283
(5,181)
(150)
(1,103)
45,479
15,802
Motor
vehicles
2,906
630
(593)
–
17
(136)
2,824
1,661
546
(530)
–
(70)
1,607
1,217
At 31 December 2015 the Group held under finance lease contracts equipment with a net book value of £27,000.
£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 £45,000.
Total
80,997
8,109
(6,783)
–
713
(2,431)
80,605
53,626
8,101
(6,168)
–
(1,458)
54,101
26,504
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
55
rpsgroup.comAccountsReport and Accounts 2015
Notes to the Consolidated Financial Statements continued
13. Subsidiaries
A list of the Group’s subsidiaries, including the name, country of incorporation and proportion of ownership interests is given in Note 6
to the Parent Company’s financial statements on page 79.
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
2015
123,593
(10,875)
112,718
32,105
(3,572)
28,533
10,716
5,463
157,430
As at
31 Dec
2014
135,563
(4,464)
131,099
30,481
(4,062)
26,419
9,117
4,270
170,905
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
As at
31 Dec
2015
11,407
9,009
20,416
As at
31 Dec
2014
14,140
22,278
36,418
56
Report and Accounts 2015
Movements in impairment
£000s
As at 1 January 2015
Impairment charge
Receivables written off during the year as uncollectible
Recoveries
Additions through acquisitions
Exchange differences
As at 31 December 2015
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
Trade receivables Accrued income
4,464
8,838
(2,081)
(509)
146
17
10,875
4,665
1,532
(1,180)
(725)
214
(42)
4,464
4,062
2,878
(1,681)
(1,711)
175
(151)
3,572
5,557
3,360
(4,017)
(916)
95
(17)
4,062
31 Dec
2015
50,107
40,455
23,538
24,578
5,376
11,598
1,778
157,430
Total
8,526
11,716
(3,762)
(2,220)
321
(134)
14,447
10,222
4,892
(5,197)
(1,641)
309
(59)
8,526
31 Dec
2014
58,788
42,952
30,019
24,767
7,068
5,107
2,204
170,905
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
2015
30,375
36,781
20,597
15,695
8,861
112,309
As at
31 Dec
2014
27,986
32,647
17,543
15,705
7,944
101,825
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 2015
Notes to the Consolidated Financial Statements continued
16. Borrowings
£000s
Bank loans
US loan notes
Bank overdraft
Finance lease creditor
As at
31 Dec
2015
42,902
53,116
479
83
96,580
As at
31 Dec
2014
38,227
51,849
475
150
90,701
£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 2015
as at 31 December 2014
Bank loans,
notes and
overdraft
Finance
lease
creditor
479
–
42,902
53,116
96,497
(479)
96,018
46
37
–
–
83
(46)
37
Bank
loans and
overdraft
Finance
lease
creditor
475
38,227
–
51,849
90,551
(475)
90,076
67
46
37
–
150
(67)
83
Total
525
37
42,902
53,116
96,580
(525)
96,055
Total
542
38,273
37
51,849
90,701
(542)
90,159
The principal features of the Group’s borrowings are as follows:
(i) An uncommitted £3,000,000 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 one principal bank loan: a revolving credit facility of £150,000,000 with Lloyds Bank plc, the Group’s principal bank
and HSBC Bank plc, expiring in 2020. 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 £42,902,000 (2014: £38,227,000) at 31 December 2015.
The facility is guaranteed by the Company and certain subsidiaries but no security over the Group’s assets exists.
(iv) In addition, the Group has drawn 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 exists.
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.
58
Report and Accounts 2015
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
2015
2,849
2,849
51,083
54,667
111,448
2014
3,029
40,789
6,099
55,398
105,315
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 2015
Present
value of
minimum
lease
payments
Less
future
interest
charges
Minimum
lease
payments
as at 31 December 2014
Present
value of
minimum
lease
payments
Less
future
interest
charges
Minimum
lease
payments
50
38
88
(4)
(1)
(5)
46
37
83
75
88
163
(8)
(5)
(13)
67
83
150
For the year ended 31 December 2015, the average effective borrowing rate was 6.82%. 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
Amount due between two and five years
Total deferred consideration payable
As at
31 Dec
2015
20,383
9,708
182
30,273
As at
31 Dec
2014
17,170
9,540
–
26,710
59
rpsgroup.comAccountsReport and Accounts 2015
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 2015
Additional provision in the year
Utilised in year
Released
Arising on acquisition of subsidiary
Exchange difference
As at 31 December 2015
£000s
Due as follows:
Within one year
After more than one year
Property
Warranty
Dilapidations
102
–
(53)
–
–
–
49
823
394
(702)
–
–
(29)
486
2,177
436
(187)
(140)
33
(51)
2,268
As at
31 Dec
2015
1,161
1,642
2,803
Total
3,102
830
(942)
(140)
33
(80)
2,803
As at
31 Dec
2014
1,206
1,896
3,102
The carrying value of the provisions disclosed above is a reasonable approximation of their fair value.
60
Report and Accounts 2015 20. Deferred taxation
£000s
At 1 January 2014
Credit/(charge) to income for the year
Credit to equity for the year
Owned by subsidiaries acquired
Exchange differences
At 31 December 2014
Disclosed within liabilities
Disclosed within assets
Credit/(charge) to income for the year
(Charge)/credit to income due to change in tax rate
(Charge)/credit to equity for the year
Owned by subsidiaries acquired
Exchange differences
At 31 December 2015
Disclosed within liabilities
Disclosed within assets
Fixed asset
timing
differences
Goodwill and
intangible
assets
Employment
benefits
Share based
payments
Provisions
and other
timing
differences
(738)
760
–
21
(316)
(273)
620
(893)
201
(77)
–
12
(31)
(168)
678
(846)
(13,239)
3,167
–
(2,509)
710
(11,871)
(16,188)
4,317
9,676
990
–
(6,993)
1,003
(7,195)
(13,314)
6,119
2,366
(59)
–
–
92
2,399
2,305
94
(166)
(21)
–
216
(164)
2,264
2,235
29
467
4
(352)
–
(1)
118
(157)
275
(230)
16
63
–
–
(33)
(33)
–
(483)
356
112
980
(169)
796
546
250
(728)
(82)
(63)
(620)
67
(630)
391
(1,021)
Total
(11,627)
4,228
(240)
(1,508)
316
(8,831)
(12,874)
4,043
8,753
826
–
(7,385)
875
(5,762)
(10,043)
4,281
No deferred tax liability is recognised on temporary differences of £36,964,000 (2014: £40,428,000) related to the unremitted
earnings of overseas subsidiaries as the Group is able to control the timing of the reversal of these temporary differences and it is
probable that they will not reverse in the foreseeable future. The temporary differences as at 31 December 2015 represent only the
unremitted earnings of those overseas subsidiaries where remittance to the UK of these earnings 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 amount of tax that would
be payable on the unremitted earnings is £7,370,000 (2014: £6,930,000).
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.
61
rpsgroup.comAccountsReport and Accounts 2015
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 2015
Authorised
£000s
Authorised
Number
as at 31 December 2014
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
221,347,707
–
552,368
334,176
222,234,251
2015
£000s
6,640
–
17
10
6,667
Number
220,631,930
750
546,329
168,698
221,347,707
2014
£000s
6,619
–
5
16
6,640
As at
31 Dec
2015
2,211,269
4,103,643
As at
31 Dec
2014
2,104,690
3,823,034
The ESOP Trust has elected to waive any dividend on the unallocated ordinary shares held.
The table below shows options outstanding at 31 December 2015:
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 2015 22. Other reserves
£000s
At 1 January 2014
Exchange differences
Issue of new shares
At 31 December 2014
Exchange differences
Issue of new shares
At 31 December 2015
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 2014 of 4.42p (2013: 3.84p) per share
Interim dividend for the year ended 31 December 2015 of 4.66p (2014: 4.05p) per share
Employee
trust
Translation
reserve
(9,277)
–
(1,499)
(10,776)
–
(1,221)
(11,997)
5,673
(4,602)
–
1,071
(9,181)
–
(8,110)
Year
ended
31 Dec
2015
9,668
10,305
19,973
Total
17,652
(4,602)
(1,499)
11,551
(9,181)
(1,221)
1,149
Year
ended
31 Dec
2014
8,453
8,926
17,379
Proposed final dividend for the year ended 31 December 2015 of 5.08p (2014: 4.42p) per share
11,260
9,766
The proposed final dividend for the year ended 31 December 2015 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 2015 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 2015
Other
Property
as at 31 December 2014
Other
Property
10,500
19,148
4,268
33,916
2,102
3,189
6
5,297
11,872
23,470
4,498
39,840
2,807
3,338
6
6,151
63
rpsgroup.comAccountsReport and Accounts 2015 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 Committee 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
Impairment of acquired intangibles
Consideration fair value adjustments
Contingent consideration treated as remuneration
Share based payment expense
Loss/(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
2015
Year ended
31 Dec
2014
14,905
50,402
8,101
20,491
20,040
249
–
1,889
151
65,826
29,320
(2,518)
92,628
8,458
17,605
–
–
1,077
2,027
(249)
79,320
2,956
(11,504)
70,772
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 2015.
£000s
Cash at bank
Overdrafts
Cash and cash equivalents
Bank loans and notes
Finance lease creditor
At 31 Dec
2014
17,521
(475)
17,046
(90,076)
(150)
(73,180)
Cash flow
Acquisition
Foreign
Exchange
At 31
Dec 2015
(4,281)
(17)
(4,298)
(4,831)
66
(9,063)
4,553
–
4,553
–
–
4,553
8
13
21
(1,111)
1
(1,089)
17,801
(479)
17,322
(96,018)
(83)
(78,779)
The cash balance at 31 December 2015 includes £3,640,000 (2014: £4,139,000) 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
Impairment of acquired intangibles
Share based payment expense
64
Year ended
31 Dec
2015
Year ended
31 Dec
2014
8,101
20,491
20,040
1,889
50,521
8,458
17,605
–
2,027
28,090
Report and Accounts 2015
28. Acquisitions
During 2015 the Group completed four acquisitions. Each of these broadens and strengthens the services the Group offers.
Entity acquired
Date of acquisition
Place of
incorporation
Percentage
of entity
acquired
Nature of business acquired
13 February 2015
Klotz Associates Inc.
29 April 2015
Metier Holding AS
14 October 2015
Iris Environmental
Everything Infrastructure Group Pty Ltd 28 October 2015
USA
Norway
USA
Australia
100%
100%
100%
100%
Water and transportation consultancy
Project management and training services
Environmental due dilligence
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
Software
PPE
Cash
Other assets
Other liabilities
Net assets acquired
Satisfied by:
Initial cash consideration
Fair value of deferred consideration
Total consideration
Klotz
Metier
Iris
EIG
Total
1,767
3,423
611
–
63
1,354
4,643
(5,340)
6,521
1,122
4,945
1,193
1,362
449
817
9,293
(12,372)
6,809
11,106
4,490
15,596
14,384
7,795
22,179
–
2,495
176
–
53
1,355
1,406
(2,069)
3,416
5,277
3,369
8,646
800
3,127
367
–
148
1,027
2,229
(3,698)
4,000
3,689
13,990
2,347
1,362
713
4,553
17,571
(23,479)
20,746
9,140
5,765
14,905
39,907
21,419
61,326
Goodwill
9,075
15,370
5,230
10,905
40,580
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 £11,374,000. The breakdown between gross receivables and amounts estimated
irrecoverable was as follows:
£000s
Klotz
Metier
Iris
EIG
Gross
receivables
Estimated
irrecoverable
Fair value of
assets acquired
2,532
6,232
883
2,114
11,761
(99)
(116)
(126)
(46)
(387)
2,433
6,116
757
2,068
11,374
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 £15,947,000. 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.
65
rpsgroup.comAccountsReport and Accounts 2015 Notes to the Consolidated Financial Statements continued
28. Acquisitions continued
The contribution of the acquisitions to the Group’s results for the year is given below.
£000s
Klotz
Metier
Iris
EIG
Segment
Revenue
BNE: NA
BNE: Europe
BNE: NA
AAP
17,493
23,102
1,447
2,659
44,701
Operating
Profit before
Amortisation Operating profit
3,035
1,950
296
503
5,784
822
(81)
129
257
1,127
Fees
17,439
22,580
1,392
2,429
43,840
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 £598,418,000 and £15,274,000 respectively.
A reconciliation of the goodwill movement in 2015 in respect of acquisitions made in 2014 and 2015 is given in the table below.
£000s
Whelans
Clear
GaiaTech
CgMs
Delphi
Point
Klotz
Metier
Iris
EIG
Goodwill at
1 January 2015
Additions
through acquisition
Adjustments to prior
year estimates
Foreign exchange
movement
Goodwill at
31 December 2015
741
3,240
11,975
7,623
439
8,946
–
–
–
–
–
–
–
–
–
–
9,075
15,370
5,230
10,905
55
(67)
–
(152)
12
244
–
–
–
–
(50)
–
694
–
(48)
(560)
297
(1,708)
216
526
746
3,173
12,669
7,471
403
8,630
9,372
13,662
5,446
11,431
There were no accumulated impairment losses at the beginning or end of the period.
No negative goodwill was recognised in 2014 or 2015.
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 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 2015 The most recent full actuarial valuations of the plans’ assets and present value of the defined benefit liabilities were carried out in
September 2015 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
2015
2.50%
2.50%
2.50%
2014
3.00%
3.25%
3.00%
There are two defined benefit schemes in Norway; with the exception of the rates of pension increase in 2014 all principal assumptions
are the same for both schemes. In 2015 both schemes have assumptions of 3.0% (2014: 3.0% and 0.1%).
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
2015
21.8
25.0
2015
280
25
305
2014
21.8
25.0
2014
288
27
315
The service charge for the year of £280,000 has been included in the income statement in administrative expenses. The net interest
expense has been included within finance costs 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 (gains)/losses arising from:
Changes in financial assumptions
Movements in payroll tax
Remeasurement of the net defined benefit liability
2015
2014
(205)
(29)
(234)
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
2015
(3,553)
2,888
(665)
2014
(4,158)
2,930
(1,228)
67
rpsgroup.comAccountsReport and Accounts 2015 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 arising from changes in demographic assumptions
Actuarial (gains) and losses arising from changes in financial assumptions
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 losses arising from changes in demographic assumptions
Actuarial losses arising from changes in financial assumptions
Exchange differences
Contributions from the employer
Benefits paid
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
Term bonds
Property
Total
2015
4,158
280
112
(9)
(405)
(522)
(61)
3,553
2015
2,930
87
–
(181)
(323)
442
(61)
(6)
2,888
2015
9.8%
2.0%
35.4%
38.0%
14.8%
100.0%
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%
68
Report and Accounts 2015 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 £150 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 300%. 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 and other receivables
Financial assets
Borrowings
Deferred consideration
Trade and other payables
Financial liabilities
As at
31 Dec
2015
17,801
146,714
164,515
96,580
30,273
80,982
207,835
As at
31 Dec
2014
17,521
157,518
175,039
90,701
26,710
74,413
191,824
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 2015 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
2014
2015
2015
Fixed rate
2014
Non interest bearing
2014
2015
479
–
–
–
–
–
–
479
–
–
475
–
–
–
–
475
69,927
–
9,084
868
31,261
15,234
–
126,374
59,484
–
6,618
4,056
30,784
14,838
–
115,780
31,006
6,093
14,403
4,849
13,761
10,445
425
80,982
32,707
6,643
12,520
5,970
11,837
5,265
627
75,569
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
2014
2015
2015
Fixed rate
2014
Non interest bearing
2014
2015
479
–
–
–
479
475
–
–
–
475
20,429
9,745
43,084
53,116
126,374
16,081
47,813
36
51,850
115,780
77,178
1,191
1,472
1,141
80,982
70,939
1,482
1,764
1,384
75,569
The weighted average interest rate and term for interest bearing financial liabilities is shown below:
2015
101,412
6,093
23,487
5,717
45,022
25,679
425
207,835
2015
98,086
10,936
44,556
54,257
207,835
Total
2014
92,191
6,643
19,613
10,026
42,621
20,103
627
191,824
Total
2014
87,495
49,295
1,800
53,234
191,824
Fixed and floating rate
financial liabilities
Weighted average interest rate %
2014
2015
Fixed rate
financial liabilities
Weighted average period for
which rate is fixed – months
2014
2015
Sterling
Australian Dollar
Canadian Dollar
US Dollar
Norwegian Krone
Cash balances at year end:
£000s
Sterling
Euro
US Dollar
Australian Dollar
Canadian Dollar
Norwegian Krone
Malaysian Ringgit
Other
2.7
3.9
4.0
3.9
3.1
3.2
3.3
4.2
4.0
3.5
3.8
3.5
36
14
8
53
6
35
As at
31 Dec
2015
161
1,189
5,391
2,968
3,285
3,273
906
628
17,801
44
14
9
58
4
40
As at
31 Dec
2014
1,654
733
4,015
2,245
4,935
2,608
836
495
17,521
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.
70
Report and Accounts 2015
Borrowing facilities
The Group has an undrawn revolving credit facility that expires in 2020. The amount undrawn under this facility at 31 December 2015
was £107,098,000 (2014: £86,773,000).
The Group also has 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 £607,000. A 1.0% increase in interest rates would decrease Group profit before tax
by £607,000.
(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 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. 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 2015 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
2012
2013
2014
2015
Year of grant
2011
2012
2013
2014
PSP
Year of grant
2006
2007
2009
2011
2012
2013
2014
2015
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
New grants
–
–
–
674,260
674,260
New grants
–
–
–
521,051
521,051
New grants
–
–
–
–
–
–
–
523,380
523,380
Releases
(385,033)
(24,285)
(24,633)
(12,618)
(446,569)
Releases
(409,317)
(19,705)
(16,835)
(6,042)
(451,899)
Releases
(2,148)
(1,828)
(10,777)
(14,009)
(287,811)
(10,362)
(6,187)
(1,054)
(334,176)
Forfeits
(15,953)
(30,797)
(35,909)
(24,243)
(106,902)
Forfeits
(25,818)
(43,333)
(48,346)
(20,075)
(137,572)
Lapses
–
–
(9,444)
(3,465)
(1,276)
(5,862)
(2,110)
(11,343)
(33,500)
Year ended
31 Dec
2015
Year ended
31 Dec
2014
1,220
918
–
(249)
1,889
1,067
787
10
163
2,027
Number
outstanding
31 Dec 2015
–
364,360
434,392
637,399
1,436,151
Number
outstanding
31 Dec 2014
–
400,986
419,442
494,934
1,315,362
Number
outstanding
31 Dec 2015
–
–
85,027
70,638
86,132
309,482
406,481
510,983
1,468,743
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
1, 2 or 3 years
72
Report and Accounts 2015
Year of grant
2006
2007
2009
2011
2012
2013
2014
Number
outstanding
31 Dec 2013
2,148
4,343
131,740
226,167
397,388
343,931
–
1,105,717
New grants
–
–
–
–
–
–
446,646
446,646
Releases
–
(2,515)
(26,492)
(137,949)
(1,742)
–
–
(168,698)
Lapses
–
–
–
(106)
(20,427)
(18,225)
(31,868)
(70,626)
Number
outstanding
31 Dec 2014
2,148
1,828
105,248
88,112
375,219
325,706
414,778
1,313,039
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
188.20p - 342.69p
244.98p
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
228.55p
1, 2 or 3 years
0.99% - 3.92%
32. Events after the balance sheet date
There were no events arising after the balance sheet date requiring adjustment to the year end results or disclosure.
73
rpsgroup.comAccountsReport and Accounts 2015
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
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
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
4
5
6
7
8
10
10
10
10
10
10
As at
31 Dec
2015
448
1,121
397,435
399,004
59,077
1,916
3,203
64,196
179
–
572
20,694
549
2,096
24,090
40,106
439,110
96,018
257
342,835
6,667
112,026
115,459
21,256
(11,997)
99,424
342,835
As at
31 Dec
2014
514
1,570
429,309
431,393
61,121
1,771
2,093
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
These financial statements were approved and authorised for issue by the Board on 3 March 2016.
The notes on pages 76 to 82 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 2015
Parent Company Statement of Changes in Equity
£000s
At 1 January 2014
Issue of new shares
Share-based payment expense
Retained profit for the year
Dividend paid (note 11)
At 31 December 2014
Issue of new shares
Share-based payment expense
Retained profit for the year
Non-distributable loss
Dividend paid (note 11)
At 31 December 2015
Share
capital
Share
premium
Merger
reserve
Employee
trust shares
Profit and
loss reserve
Other
reserve
6,619
21
–
–
–
6,640
27
–
–
–
–
6,667
108,307
1,793
–
–
–
110,100
1,926
–
–
–
–
112,026
21,256
–
–
–
–
21,256
–
–
–
–
–
21,256
(9,277)
(1,499)
–
–
–
(10,776)
(1,221)
–
–
–
–
(11,997)
116,141
(228)
2,027
8,969
(17,379)
109,530
(730)
1,889
24,743
–
(19,973)
115,459
142,721
–
–
–
–
142,721
–
–
–
(43,297)
–
99,424
Total
385,767
87
2,027
8,969
(17,379)
379,471
2
1,889
24,743
(43,297)
(19,973)
342,835
The notes on pages 76 to 82 form part of these financial statements.
75
rpsgroup.comAccountsReport and Accounts 2015
Notes to the Parent Company Financial Statements continued
Notes to the Parent Company Financial Statements
1. Accounting policies
RPS Group Plc (the “Company”) is a company domiciled in the UK under the Companies Act. The address of the registered office
is given on page 21. The nature of the Company’s operations and its principal activities are set out in the strategic report on pages 3
to 17.
The financial statements have been prepared under the historical cost convention, modified to include certain items at fair value, and in
accordance with Financial Reporting Standard 102 (FRS 102) issued by the Financial Reporting Council.
The prior year financial statements were reviewed for material adjustments on adoption of FRS 102 in the current year. For more
information see note 14.
The functional and presentational currency of RPS Group Plc is considered to be pounds sterling.
RPS Group Plc meets the definition of a qualifying entity under FRS 102 and has therefore taken advantage of the disclosure
exemptions available to it in respect of its financial statements. Exemptions have been taken in relation to share-based payments,
financial instruments, presentation of a cash flow statement, intra-group transactions and remuneration of key management personnel.
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 and is written off on a straight line basis over its useful economic life of up
to 20 years. Provision is made for any impairment.
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, net of depreciation and any provision for impairment.
Depreciation is provided on all tangible fixed assets at rates calculated to write off the cost, less estimated residual value of each asset
on a straight line basis over its expected useful lives as follows:
Alterations to leasehold premises
Fixtures, fittings, IT and equipment
Life of lease
3 to 8 years
All tangible fixed assets are expected to have nil residual value.
Operating leases
Rentals under operating leases are charged on a straight-line basis over the lease term, even if the payments are not made on such a
basis. Benefits received and receivable as an incentive to sign an operating lease are similarly spread on a straight-line basis over the
lease term.
Finance leases
Assets held under finance leases, hire purchase contracts and other similar arrangements, which confer rights and obligations similar
to those attached to owned assets, are capitalised as tangible fixed assets at the fair value of the leased asset (or, if lower, the present
value of the minimum lease payments as determined at the inception of the lease) and are depreciated over the shorter of the lease
terms and their useful lives. The capital elements of future lease obligations are recorded as liabilities, while the interest elements are
charged to the profit and loss account over the period of the leases to produce a constant periodic rate of interest on the remaining
balance of the liability.
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.
76
Report and Accounts 2015 Share based employee remuneration
The Company’s employees may benefit from a Group operated share based payment arrangement. 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.
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 all 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.
Unrelieved tax losses and other deferred tax assets are recognised only to the extent that, 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 measured using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date that
are expected to apply to the reversal of the timing difference.
Where items recognised in other comprehensive income or equity are chargeable to or deductible for tax purposes, the resulting
current or deferred tax expense or income is presented in the same component of comprehensive income or equity as the transaction
or other event that resulted in the tax expense or income.
Employee Share Ownership Plan (ESOP)
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.
i 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.
ii 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.
2. Key accounting estimates and judgements
The Company considers that the accounting policies above all require judgement to be exercised.
Judgements that could have a material effect on the Company’s financial statements include the following:
1.
Impairment of non-financial assets – when impairment reviews of goodwill and investments are undertaken, judgements are
made with respect to the discount rates applicable to the cash generating units, along with the expected cash flows of those cash
generating units and the growth rates applied to them.
77
rpsgroup.comAccountsReport and Accounts 2015 Notes to the Parent Company Financial Statements continued
3. 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
Profit for the year attributable to the shareholders of the Parent Company,
dealt with in the accounts of the Parent Company
The remuneration of the auditors for the statutory audit of the Company was £50,000 (2014: £47,000).
Year
ended
31 Dec
2015
Year
ended
31 Dec
2014
24,743
8,969
Goodwill
2,134
1,620
66
1,686
448
514
Total
7,553
368
(2)
7,919
5,983
816
(1)
6,798
1,121
1,570
Alterations
to leasehold
premises
Fixtures,
fittings,
IT and
equipment
1,027
41
–
1,068
654
206
–
860
208
373
6,526
327
(2)
6,851
5,329
610
(1)
5,938
913
1,197
4. Intangible Assets
£000s
Cost
At 1 January 2015 and at 31 December 2015
Amortisation
At 1 January 2015
Charge for the year
At 31 December 2015
Net book value at 31 December 2015
Net book value at 31 December 2014
5. Tangible Assets
£000s
Cost or valuation
At 1 January 2015
Additions
Disposals
At 31 December 2015
Depreciation
At 1 January 2015
Provided for the year
Disposals
At 31 December 2015
Net book value at 31 December 2015
Net book value at 31 December 2014
78
Report and Accounts 2015
6. Investments
£000s
Subsidiary undertakings
Cost
At 1 January
Additions
At 31 December 2015
Provisions
At 1 January
Impairment
At 31 December 2015
Net book value at 31 December 2015
2015
2014
430,147
25,523
455,670
838
57,397
58,235
397,435
416,264
13,883
430,147
838
–
838
429,309
During 2015 £25,523,000 was invested in the USA sub group to fund the acquisition of Klotz Associates Inc. and Iris Environmental.
As a result of the downturn in the oil and gas sector, the Group’s investment in its US business has been impaired by £57,397,000.
£43,297,000 reverses part of the gain the Group generated on reorganisation in 2013 and has been booked against the non-distributable
reserve. £14,100,000 has been booked to retained profit.
Subsidiary undertakings
The majority of our trading subsidiaries provide consulting services, although we also provide training and laboratory testing.
The following were the 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.
C & B Plant Pty Ltd
Conics (Brisbane) Pty Ltd
Conics (Brisbane) Unit Trust Ltd
Conics (Cairns) Pty Limited
Conics (Gold Coast) Pty Ltd
Conics (Mackay) Pty Ltd
Conics (Mining & Infrastructure) Pty Ltd
Conics (Sunshine Coast) Pty Ltd
Conics (Sunshine Coast) Unit Trust
Conics (Sydney) Pty Ltd
Conics (Townsville) Pty Ltd
Conics Positioning Pty Ltd
Conics Pty Ltd
ECL DM Pty Ltd
ECL Drilling Management Pty Limited
ECL Pty Ltd
EHA Pty Ltd
Everything Infrastructure Consulting Pty Ltd
Everything Infrastructure Group Pty Ltd
Everything Infrastructure Services Pty Ltd
Geo Mapping Technologies Pty Ltd
Intelligent Infrastructure Pty Ltd
Manidis Roberts Employee Benefits Pty Ltd
Massie Cosgrove Pty Ltd
Natural Solutions Environmental Consultants Pty Ltd
Newco (Brisbane) Pty Ltd
Newco (Sunshine Coast) Pty Ltd
Pioneer Surveys Pty Ltd
PMM Global Surveys Pty Ltd
PMM Holdings Pty Ltd
PMM Sydney Pty Ltd
Point Project Management Pty Ltd
RPS APASA Pty Ltd
Country of
registration
and
operation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Proportion
of ordinary
share
capital held
100% * RPS Aquaterra Pty Ltd
100% * RPS Australia East Pty Ltd
100% * RPS Consultants Pty Ltd
100% * RPS ECOS Pty Ltd
100% * RPS Energy Pty Ltd
100% * RPS Energy Services Pty Ltd
100% * RPS Environment and Planning Pty Ltd
100% * RPS Harper Somers O’Sullivan Pty Ltd
100% * RPS HSO Subco Pty Ltd
100% * RPS Manidis Roberts Pty Ltd
100% * RPS Metocean Pty Ltd
100% * Rudall Blanchard Associates Pty Limited
100% * Terranean Mapping Technologies Pty Ltd
100% * Troy Ikoda Australasia Pty Ltd
100% * Urban Blueprint Pty Ltd
100% * Vivo Design Pty Ltd
100% * Whelans Corporation Pty Limited
100% * Whelans Insites Pty Limited
100% * Petroleum Institute for Continuing Education Ltd
100% * Boyd Exploration Consultants Ltd
100% * HMA Land Services Ltd
100% * Maverick Land Consultants 2012 Ltd
100% * Roland Resources 2012 Inc
100% * RPS Canada Ltd
100% * RPS Energy Canada Ltd
100% * Aquaterra International Ltd
100% * Aquaterra UK Limited
100% * Basicshare Limited
100% * Burks Green & Partners Limited
100% * Cambrian Consultants America Limited
100% * Cambrian Consultants Limited
100% * Canadian GaiaTech, B.C. ULC
100% * CgMs Holdings Limited
Country of
registration
and
operation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Canada
Canada
Canada
Canada
Canada
Canada
Canada
England
England
England
England
England
England
England
England
Proportion
of ordinary
share
capital held
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% *
79
rpsgroup.comAccountsReport and Accounts 2015 Notes to the Parent Company Financial Statements continued
CgMs Limited
Clear Environmental Consultants Limited
ECL Group Limited
ECL Resources Management Limited
ECL Technology Limited
Emulous Group Limited
Emulous Ltd
Energy Innovations Limited
Exploration Consultants Limited
Flow Control (Water Conservation) Limited
Geocon Group Services Limited
Geophysical Consultants Limited
Geophysical Safety Resources Limited
Hydrosearch Associates Limited
Ichron Limited
Isochrone Holdings Limited
Knowledge Reservoir (UK) Ltd
Martindale Holdings Limited
Nautilus (SEAA) Limited
Nautilus Limited
Net Admin Limited
Nigel Moor Associates plc
Oil Experience Limited
Paras Consulting Limited
Paras Limited
Probablistic Risk Assessments Limited
Quad Engineering Limited
R W Gregory Limited
RPS Business Healthcare Limited
RPS Chapman Warren Limited
RPS Consultants Ltd
RPS Design Ltd
RPS Ecoscope Limited
RPS Energy Consultants Limited
RPS Energy Limited
RPS Energy Services Limited
RPS Environmental Management Limited
RPS Group US Holdings Limited
RPS Health in Business Limited
RPS Laboratories Limited
RPS Mountainheath Limited
RPS Planning & Development Limited
RPS Timetrax Limited
RPS Trustees Limited
RPS US Holdings Limited
RPS Utilities Limited
RPS Water Services Limited
Rudall Blanchard Associates Group Limited
Rudall Blanchard Associates Limited
Safety and Reliability Consultants Limited
Scott Pickford Limited
Sherwood House Properties Limited
SRC (Consultants) Limited
The Environmental Consultancy Ltd
Town Planning Consultancy Limited
TPK Consulting Limited
Troy Ikoda Limited
Country of
registration
and
operation
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
80
Proportion
of ordinary
share
capital held
100% * Troy-Ikoda Management Limited
100% * Utility Technical Services Limited
100% WTW & Associates Limited
100% * X-IPEC Limited
100% * Metier Academy GmbH
Geocon Asia Limited
100%
100%
RPS Consulting Engineers Limited
100% * RPS Engineering Services Limited
100% * RPS Environmental Consultancy Limited
100%
100%
100% * RPS Planning & Environment Limited
100% * RPS Properties Limited
100%
RPS Group Limited
RPS MMA Limited
Country of
registration
and
operation
England
England
England
England
Germany
Gibraltar
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Malaysia
Proportion
of ordinary
share
capital held
100% *
100%
100%
100% *
100% *
100% *
100% *
100% *
100%
100% *
100% *
100% *
100% *
100% *
Malaysia
100% *
100% *
Metier Vest AS
Metier Holding AS
Cambrian Consultants Asia Sdn. Bhd
Knowledge Reservoir Geoscience & Engineering
Sdn. Bhd
100%
RPS Consultants Sdn Bhd
100% * Aquaterra East Asia LLC
100% * RPS advies-en ingenieursbureau bv
100% * RPS Analyse BV
100% * RPS BV
100% * RPS Detachering BV
100% * RPS Ireland Limited
100% * Delphi AS
100% * Knowledge Reservoir Holding AS
100% * Metier AS
100%
100% * Metier Trondheim AS
100%
100% OEC Gruppen AS
100% * RPS Norway AS
100% * Point Project Management (PNG) Ltd
100% OceanFix International Limited
100%
100%
100%
100%
100%
100%
100% * Espey Consultants, Inc.
100%
100% * GaiaTech Canada, LLC
100%
GaiaTech Holdings, Inc
100% * GaiaTech, Inc
100%
Houston Geoscan Inc
100% * Hydrosearch USA Inc
Iris Environmental
100% *
100%
Klotz Associates Inc.
100% * Knowledge Reservoir Group Inc
100% * Knowledge Reservoir, LLC
100%
100% * Nautilus World LP
100% * Petroleum Institute for Continuing Education USA Inc
100% * RPS America Group Inc
RPS Group, Inc.
100%
RPS JDC Inc.
100%
100%
The Geocet Group LLC
100% * The Scotia Group Inc
Malaysia
Mongolia
Netherlands
Netherlands
Netherlands
Netherlands
Northern Ireland
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Papua New Guinea
Scotland
Scotland
Sweden
Sweden
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
RPS Occupational Health Limited
Metier AB
Metier Academy AB
APA USA, Inc
Applied Science Associates Inc.
Cambrian Consultants America Inc.
Nautilus Holdings LLC
Evans Hamilton, Inc.
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% *
100% *
100% *
100% *
Report and Accounts 2015 7. Borrowings
£000s
Bank loans
US loan notes
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.
8. Provision for liabilities
£000s
As at 1 January 2015
Additional provision in the year
Utilised in the year
As at 31 December 2015
This provision is expected to be utilised as follows:
£000s
Within one year
After more than one year
9. Deferred taxation
The movement on deferred taxation in the current and prior year was as follows:
£000s
Net asset at beginning of year
(Charge)/credit 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
Deferred tax is included within other debtors in the balance sheet.
31 Dec
2015
42,902
53,116
96,018
–
42,902
53,116
96,018
Property
Dilapidations
74
–
(26)
48
157
85
(33)
209
As at
31 Dec
2015
172
85
257
As at
31 Dec
2015
228
(106)
122
As at
31 Dec
2015
(46)
168
122
31 Dec
2014
38,227
51,849
90,076
38,227
–
51,849
90,076
Total
231
85
(59)
257
As at
31 Dec
2014
107
124
231
As at
31 Dec
2014
140
88
228
As at
31 Dec
2014
60
168
228
81
rpsgroup.comAccountsReport and Accounts 2015
Notes to the Parent Company Financial Statements continued
10. Share capital and reserves
Ordinary shares of 3p each
At 1 January 2015
At 31 December 2015
Authorised
Value
£000s
Number
Allotted and fully paid
Value
£000s
Number
240,000,000
240,000,000
7,200
7,200
220,631,931
222,234,251
6,619
6,667
Full details of the share capital of the Company are disclosed in Note 21 to the Consolidated Financial Statements.
The Company’s other 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 shares Own shares held by the SIP and ESOP trusts.
Profit on loss reserve Cumulative net gains and losses recognised in the profit and loss account and statement of changes in equity.
Other reserves
Non-distributable profit generated on Group reconstruction.
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
Total future minimum lease payments under non-cancellable operating leases are as follows:
£000s
Within one year
Between one and five years
Land and buildings
31 Dec
2014
31 Dec
2015
535
302
837
923
733
1,656
31 Dec
2015
79
112
191
Other
31 Dec
2014
85
89
174
13. Directors’ interests in transactions
There were no transactions during the year in which the Directors had any interest.
14. Explanation of transition to FRS 102
This is the first year that the Company has presented its financial statements under Financial Reporting Standard 102 (FRS 102) issued
by the Financial Reporting Council. The last financial statements under previous UK GAAP were for the year ended 31 December
2014 and the date of transition to FRS 102 was therefore 1 January 2014. As a consequence of adopting FRS 102, a number of
accounting policies have changed to comply with that standard. None of the accounting policy changes are material.
There have been no changes to the Company’s equity and assets as a result of this conversion.
82
Report and Accounts 2015 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. 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.
2. Remuneration Policy and Implementation
In line with The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2013, the Directors’
Remuneration Policy has not been presented in this report for approval by shareholders as it was approved at the Company’s 2014
Annual General Meeting. For 2016, remuneration policy will be operated in accordance with this previously approved policy as
summarised below. The full Directors’ Remuneration Policy is available to view on the Company’s website.
Executive Directors
The following table sets out the key elements of policy and any changes in its implementation for 2016:
Operation of Element
Maximum Opportunity
Performance Metrics
Changes in Implementation
for 2016
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.
No changes are being made to
salary levels for 2016.
Salaries therefore remain as follows.
• A. Hearne - £581,400
• P. Williams - £428,400
• G. Young - £288,600
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.
The maximum potential value is
the cost of the provision of these
benefits.
There are no performance
conditions attached to the payment
of benefits.
No change for 2016.
Salary
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
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 dependants’
pensions;
• disability schemes; and
• company car or car allowance.
83
rpsgroup.comReport and Accounts 2015 Notes to Remuneration Committee Annual Report continued
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.
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.
There are no performance
conditions attached to the payment
of pension.
No change for 2016.
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:-
• one half as a cash bonus
(Element A); and
• one half as a deferred bonus
in shares (Element B) which
will vest subject to continued
employment at the end of a
two year vesting period, the
operation of malus and clawback
provisions and provided the
forfeiture threshold is met for
each year of the deferral.
Maximum is 200% of salary.
The Bonus Plan currently has three
performance conditions:-
• the primary performance
condition which is PBTA;
• a secondary performance
condition which is cash
conversion; and
• a secondary performance
condition which is linked to
the achievement of personal
objectives.
No change for 2016.
The Remuneration Committee
considers that disclosing precise
targets of profit and strategic
objectives, which are commercially
sensitive, for the Bonus Plan
in advance would not be in
shareholder interests. Actual targets,
performance achieved and awards
made will be published at the end
of the performance periods where
possible without compromising
confidential matters so that
shareholders can fully assess the
basis for any payouts.
Non-Executives Directors
It is the Company’s policy to set fees at up to median level and at a level necessary to attract and retain experienced and skilled
Non-Executive Directors.
Following review it was determined that no adjustment would be made to fees payable to Non-Executive Directors in 2016.
3. Single figure remuneration table – Notes for financial year ended 31 December 2015
Benefits and pension
The value for benefits for each Executive Director shown in the Single Figure Remuneration on page 29 is comprised of a company car
or company car allowance and private medical insurance.
The Executive Directors are eligible to participate in defined contribution pension schemes, or receive a salary supplement or a
combination of the two, the value of which has been shown in the Single Figure Remuneration for each.
Bonus Plan assessment for 2015
For 2015 the Maximum Annual Contributions under the Bonus Plan for Alan Hearne, Phil Williams and Gary Young were 200%, 175%
and 150% of salary respectively. The maximum total contribution that can be earned by all participants under the Bonus Plan is limited
to 3% of the Group’s PBTA. For each Executive Director, performance was assessed against three measures: PBTA, cash collection
and personal objectives. The bonus value included within the Single Figure Remuneration for 2015 has been calculated as set out
below. This shows the performance targets for 2015, their level of satisfaction and the corresponding level of bonus earned by each
of the Executive Directors. Under the operation of the Bonus Plan in 2015, the Threshold PBTA of £63m had to be achieved before
participants were eligible to receive any bonus payment.
84
Report and Accounts 2015 Performance measure
PBTA
Cash Collection
Personal objectives
Target
Contribution as percentage of Maximum Opportunity
Target
Contribution as percentage of Maximum Opportunity
Target
Contribution as percentage of Maximum Opportunity
Total Contribution as percentage of Maximum Opportunity
Threshold
£63m
Maximum
£75m
0%
85%
0%
70%
110%
20%
Actual
£51.8m
0%
127%
0%
See below
See below
See below
0%
0%
10%
100%
0%
0%
Although the Threshold target in respect of cash collection was exceeded, as the Threshold PBTA target of £63m was not achieved, no
contribution was earned in respect of this element. The personal objectives referred to above were specific to each Executive Director
and related to the achievement of various corporate priorities. Although these objectives were met in full or in part, as the threshold
PBTA target of £63m was not achieved, no contribution was earned in respect of this element.
In accordance with the performance assessment summarised above no bonus contribution was earned in respect of 2015. No discretion
was exercised when determining the bonus outcomes.
In line with the operation of the Bonus Plan, each year the Committee sets a PBTA Forfeiture Threshold. If the PBTA Forfeiture
Threshold is not met, the cumulative value of a Participants’ unvested deferred share awards (Element B) is reduced by 15% of the
difference between the actual PBTA for the Plan Year and the minimum Threshold PBTA. Any adjustment will be in proportion to the
Participants’ Maximum Annual Contribution payable as a proportion of the aggregate of all Participants Maximum Annual Contributions.
The PBTA Forfeiture Threshold for 2015 was set at £59m. At the level of the Group’s reported PBTA and in accordance with the
above mechanism the Remuneration Committee has determined that all conditional shares previously awarded in relation to the
operation of the Bonus Plan in 2013 and 2014 and, as shown in the table below, will be forfeited as at 3 March 2016.
Alan Hearne
Phil Williams
Gary Young
Conditional Shares Outstanding
92,589
60,759
35,251
4. Incentive grants to Executive Directors made during the financial year ending 31 December 2015
Bonus Plan awards
The following table sets out the details of the Element B incentive awards that were granted to the Executive Directors during 2015
under the RPS Group Plc Bonus Plan in respect of the 2014 Bonus Plan Year.
Executive Director
Award
% of Salary Awarded
Face Value of Awards
Alan Hearne
Phil Williams
Gary Young
2014 Bonus Plan Element B
2014 Bonus Plan Element B
2014 Bonus Plan Element B
21%
19%
16%
£121,352
£78,404
£45,273
Number of Awards
(Nil Cost Options)
50,187
32,425
18,723
The number of shares awarded was calculated by reference to share price of 241.8p which the average over a 30 day period prior to
the date of grant on 13 April 2015. Subject to the forfeiture conditions set in respect of the Plan all of these shares would have vested
on at 13 April 2017. As noted above the Remuneration Committee has determined that all conditional shares awarded under the Plan
are to be forfeited as at 3 March 2016.
Share Incentive Plan awards
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 2015.
Executive Director
Alan Hearne
Phil Williams
Gary Young
Number of shares
Value of shares £
1,260
1,160
1,399
2,854
2,624
3,175
Shares are valued by reference to their price as at date of award.
85
rpsgroup.comReport and Accounts 2015
Notes to Remuneration Committee Annual Report continued
5. Payments to past directors
There were no payments made to past Directors of the Company in respect of the year under review.
6. 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.
7. Total shareholding of directors
The table below shows the total shareholding for each Director.
Unconditional shares
Conditional shares under
Executive Bonus Plan
Conditional Matching shares
under the SIP
Total
Shares held
at 31/12/15
Shares held
at 26/02/16
Shares held
at 31/12/15
Shares held
at 26/02/16
Shares held
at 31/12/15
Shares held
at 26/02/16
Shares held
at 31/12/15
Shares held
at 26/02/16
Executive Director
Alan Hearne
Phil Williams
Gary Young
Non-Executive Director
Brook Land
Louise Charlton
Robert Miller–Bakewell
Andrew Page
119,867
288,652
104,936
119,990
288,776
105,060
92,589
60,759
35,251
92,589*
60,759*
35,251*
30,000
30,000
–
5,000
–
–
5,000
–
–
–
–
–
–
–
–
–
1,805
1,805
1,805
–
–
–
–
1,822
1,823
1,823
214,261
351,216
141,992
214,401
351,358
142,134
–
–
–
–
30,000
30,000
–
5,000
–
–
5,000
–
Unconditional shares include shares held directly or indirectly by connected persons. They also 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 therefore 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 2015.
Alan Hearne
Phil Williams
Gary Young
Guideline % salary
Value of shareholding
required £
Value of unconditional
shares £
150
100
100
872,100
428,400
288,600
284,085
684,105
248,698
Value of
conditional
shares £
223,713*
148,277*
87,823*
Total (unconditional
& conditional shares)
£
507,798
832,382
336,521
The value shown for conditional and unconditional shares is based upon the Company’s share price as at 31 December 2015.
*As noted above the Remuneration Committee has determined that the conditional shares held through the Bonus Plan will be
forfeited as at 3 March 2016 in accordance with the forfeiture conditions in operation for 2015.
86
Report and Accounts 2015 8. 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 seven year period.
Total shareholder return from 1 January 2009
RPS Group
FTSE AllShare
£
FTSE AllShare
Support Services
350
300
250
200
150
100
50
0
Source: Thomson Datastream
2009
2010
2011
2012
2013
2014
2015
9. 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
2010
608
2011
793
2012
1,650
2013
883
2014
922
zero
46%
54%
77%
47%
32%
2015
748
zero
100%
zero
13%
100%
zero
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.
87
rpsgroup.comReport and Accounts 2015 Notes to Remuneration Committee Annual Report continued
10. 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 2014 Financial Year to 2015 Financial Year
CEO
10.4%
0%
-100%
Employees
2.8%
1.0%
-50%
The percentage increase for the CEO principally reflects the salary increase awarded in respect of 2014 having been implemented as
at 1 July in that year.
11. 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:
300,000
250,000
200,000
£000
150,000
100,000
50,000
0
Total employee pay
+6.7%
PBTA
-21.7%
Dividend
+14.9%
2014
2015
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.
12. 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.
Committee members
The current members of the Committee are Robert Miller-Bakewell (Chairman), Louise Charlton and Andrew Page all of whom are
independent Non–Executive Directors. During the year Robert Miller-Bakewell joined the Committee and Tracey Graham and John Bennett
both ceased to be members. 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.
88
Report and Accounts 2015
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.
External advice
During 2015 the Committee received external advice in relation to executive remuneration from PwC. PwC are members of the
Remuneration Consultants Group and, as such, voluntarily operate under the code of conduct in relation to executive remuneration
consulting in the UK. PwC also undertook some limited tax advisory work for the Company during the year. The Committee reviewed
the nature of the services provided and was satisfied that no conflict of interest exists or existed in the provision of these services and
that the advice the Remuneration Committee received was objective and independent.
The total fees paid to PwC in the year for services to the Committee amounted to £79,000. 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.
13. Statement of Shareholder voting
The Remuneration Committee’s Annual Report for 2014 was approved at the Company’s 2015 Annual General Meeting. The voting
for this resolution is shown below.
Annual Report
Votes for
Votes against
Total
Witheld
Number of Votes Cast
% of Votes Cast
98,865,069
33,636,502
132,501,571
37,276,913
74.61
25.39
100
–
The Committee understands that the lack of support offered by some shareholders in respect of this resolution related to salary
increases awarded to Executive Directors for that year. The Committee considered this position and maintained its view that the salary
increases were appropriate. As this matter related to the implementation of the Committee’s policy rather than the policy itself, the
Committee concluded that it would not make any changes to policy in respect of 2015.
The Company’s remuneration policy was last submitted to shareholders at the 2014 Annual General Meeting at which the voting was
as shown below:
Policy statement
Votes for
Votes against
Total
Witheld
Number of Votes Cast
% of Votes Cast
166,067,608
9,490,604
175,558,212
2,010,117
94.6
5.4
100
–
89
rpsgroup.comReport and Accounts 2015 Five Year Summary
£000s
2015
2014
2013
2012
2011
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
556,972
506,110
51,795
(78,779)
364,490
92,628
5,054
9.74p
16.57p
16.47p
572,126
504,959
66,114
(73,180)
384,677
70,772
4,530
8.47p
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
The Five Year Summary does not form part of the audited financial statements.
90
Report and Accounts 2015 Report and Accounts 2015 REPORT & ACCOUNTS 2015
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Cover Image: Brisbane, Queensland, Australia
Cover image: Eucalyptus bark at
Barrington Tops National Park, Australia.
RPS is working on Brisbane’s largest urban regeneration project.
RPS has been working on Groundwater Impact
Assessments at Barrington Tops National
Park, New South Wales.
RPS Group Plc
RPS Group Plc
20 Western Avenue, Milton Park
20 Western Avenue, Milton Park
Abingdon, Oxon OX14 4SH
Abingdon, Oxon OX14 4SH
T +44 (0)1235 863206
T +44 (0)1235 863206
rpsgroup.com
rpsgroup.com
Registered in England No. 2087786
Registered in England No. 2087786
43694
43694
rpsgroup.com