Report & Accounts
2016
rpsgroup.com
Local Knowledge
INTERNATIONAL EXPERTISE
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87
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Strategic Report
Chairman’s Statement
Strategy, Business Model and Activities
2016 Results and Key Performance Indicators
Risk Management
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 2016
Strategic Report
Chairman’s Statement
Introduction
I was appointed as Chairman of the Board of RPS Group plc on 1 November 2016, a role which I was delighted to accept.
My predecessor Brook Land stepped down from the Board having served 20 years as the Chairman. Over the period of
his chairmanship Brook provided tireless and continuing support to Alan Hearne, the Chief Executive, and to the executive
management. He gave great direction and leadership to the Board and during his tenure RPS flourished into the strong business
it is today. The Board is grateful for the long service he provided to RPS and wishes him well in his future endeavours.
Trading and strategy
Given the recent commencement of my tenure it is inevitable that I have a lot to learn about our business. In that regard I
have already started visiting the business locations to gain a greater understanding. From what I have seen we have a sound
and broadly based multi-disciplinary consultancy and services group which has been assembled over several years by a series
of strategic acquisitions. Except for the energy related businesses, which were inevitably impacted during the year by an oil
price which in January 2016 was at its lowest level for 12 years, the businesses in the Group have largely fared well with a
number showing organic revenue and profit growth in growing markets. The macro drivers of the Group’s markets such as the
population growth, climate change, infrastructure development, the growing need for energy and water and the importance of
maintaining and protecting the environment are all favourable and should provide opportunities for growth going forward. The
Group has a high-quality client list and there is potential to derive revenue synergies from cross selling of services. There is also
scope to achieve further synergies from the integration of businesses and sharing of good practice.
Although the Group has been highly cash generative over the years the reduction in cash flow from the energy business
coupled with investment in acquisitions and a steadily growing dividend had increased the level of net debt as reported at the
half-year. Cash generation in the second half of the year, which has been good due to improved cash from trading and a pause
in acquisition activity, has resulted in a stronger year-end balance sheet position. Further progress is anticipated in 2017.
Given that acquisitions over the years have been people businesses, it is inevitable that much of the acquisition consideration is
attributed to goodwill and intangible assets. The key to supporting the continuing carrying value of intangible assets is the cash
generation from the businesses acquired. The review of goodwill and intangible assets at the year-end has confirmed continuing
strong cash flows and that no impairment of goodwill and intangible assets is required at this time.
The Group has had an excellent record of continued dividend growth over the years. At the half-year results announcement,
the combination of the challenged trading performance of the energy business and the higher level of net debt suggested
that a pause to this growth might be appropriate. Whist the cash performance in the second half has been strong, the
recommendation of the Board to hold the dividend at the same level as last year is prudent with the expectation that dividend
growth will be resumed in the future provided that debt levels, liquidity and trading circumstance allow.
Inevitably the challenges of 2016 have placed significant pressures on our executive management. In the circumstances, they
have coped extremely well in taking the necessary cost management action and strategic decisions to protect the profitability
of the Group. This has been achieved whilst retaining a strong platform for a resumption of growth which the Board anticipates
should occur in 2017. To achieve this growth, we will continue to evaluate the attractiveness of the markets in which we are
present and our competitive position within those markets so that Group strategy focuses resources into those areas where we
can achieve good long term return on investment.
Governance
Major demands have been placed on the Non-Executive members of the Board in 2016. As Chairman of the Nomination
and Remuneration Committees, Robert Miller-Bakewell, our Senior Independent Director, led the process to secure the
appointment of a new Chairman and the development of the new remuneration policy recently approved by Shareholders.
This has inevitably demanded heavy involvement from the Nomination and Remuneration Committees. Whilst it made sense
for Robert to Chair the Nomination and Remuneration Committees during the Chairman succession process, I have now taken
on the role as Chairman of the Nomination Committee. Robert will continue as Chairman of the Remuneration Committee.
The Nomination Committee continues to progress the succession planning initiative which encompasses the Board Executive
and Non-Executive Directors and the next tier of executive management.
Phil Williams who previously headed up our energy business retired on 30 September 2016. Phil led the growth and
development of our energy business following the acquisition of Hydrosearch in 2003. Although Phil left the Board before I
joined RPS, I know that he contributed enormously to our business over the 13 years he was with the Group. Following Phil’s
retirement Alan Hearne took over Phil’s Board responsibilities in conjunction with an enlarged Executive Committee which now
includes the leaders of the regional businesses.
3
rpsgroup.com John Bennett returned to Chair the Audit Committee following the decision by Andrew Page to not seek re-election to the
Board at the last Annual General Meeting. John had previously chaired the Audit Committee prior to stepping down from the
Board in 2014. His reappointment for a temporary period was expedient and pragmatic in the circumstances and the Board
is grateful that John stepped in at short notice. John will step down as a Non-Executive Director and Chairman of the Audit
Committee as soon as an appropriate successor is identified.
It is approaching nine years since Louise Charlton joined the Board as a Non-Executive Director. Louise has made an excellent
contribution particularly in helping to shape internal and external Group communications. Louise will also step down from the
Board as soon as an appropriate successor is identified.
All of our Directors will therefore be offering themselves for election or re-election at the forthcoming Annual General Meeting.
As a part of my appointment process I performed an initial assessment of the effectiveness of the Board and its committees
through discussions with the Executive and Non-Executive Directors on the Board. There were no material matters of
immediate concern. With the changing composition of the Board it is my intention to undertake an external review towards the
end of 2017 once the replacement Non-Executive Directors referred to above have had the opportunity to settle into their
new roles. Each of the Board committees has operated independently throughout the period.
As reported last year the process of reviewing and reporting risks and internal control systems has been formalised. Towards
the end of the year our activities in this area were further strengthened by the appointment of a Group Assurance Manager.
Health and safety performance continues to be regularly reported to the Board.
We are, of course, a people business and so much of the value of our business is in our people. Despite the difficult market
circumstances of our oil and gas related businesses the Group has remained focussed on the importance of recruiting, retaining,
developing and rewarding our key talent. The Board expresses its thanks for the commitment and dedication shown by all
our employees.
2016 has without doubt had its challenges and the Group has responded well. The creation of our three regional businesses
enables us to look confidently to the future.
Ken Lever
Chairman
2 March 2017
4
Report and Accounts 2016 Strategic Report
Strategy
RPS is an international 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
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the development and management of the built and natural environment;
the planning and development of strategic infrastructure; and
the evaluation and development of energy, water and other 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 of 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 as and when markets allow;
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 an attractive 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:
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n
long term demand for improvement to and extension of the urban fabric of towns and cities;
long term demand for urban, inter urban, transport, water energy/power and communications infrastructure;
long term demand for oil and gas and other sources of energy/power;
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.
During the first half of the year the continuing downturn in the oil and gas sector and related industries caused a significant
reduction in our profitability and this, coupled with investment in a new acquisition, DBK, meant that our leverage for bank
purpose at the end of June had increased to 2.2 times. As a result we paused our investment in new acquisitions and held our
dividend at the 2015 level. During the second half of the year our profitability and cash flow improved considerably and the
leverage at the year-end had reduced to 1.6 times, the same as at the end of 2015. RPS remains highly cash generative and
the Board expect the Group leverage to reduce significantly during 2017, providing more flexibility in respect of investment in
acquisitions and dividends.
In recent years our acquisitions in both Norway and Australia have been directed towards project management, particularly
in respect of large scale infrastructure projects. We see this as an important new activity for the Group; it reduces our
dependency on the resources sectors and provides a more flexible business model than some of our technical businesses
in other sectors. This strategy can be developed further in all the territories in which we operate.
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 reported Group segments.
Due to the decline in the Group’s Energy business, the Board has, as explained under Group Activities below, decided that, with
effect from 1 January 2017, the Group will operate and report in three regional segments with Energy related activities included
within each. A separate announcement will be made providing a restatement of the 2016 Results and Interim Results in the
new regional segments. The 2017 Results and Interim Results will be published including a comparison with the restated 2016
Results and Interim Results.
5
rpsgroup.com 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.
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 maintaining good client relationships:
n
identifying high value, premium margin markets;
n maintaining strong cash flow; and
n developing and operating businesses internationally;
n
recruiting and retaining high quality staff;
n
identifying, delivering and successfully integrating
“bolt on” acquisitions.
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, once our leverage has been reduced. 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 an important element of our business model.
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.
Increasing Group scale and diversity by means of acquisitions leads to resilience in the Group’s performance, as demonstrated
when the Global Financial Crisis began in 2007 and, in 2015 and 2016 , through the major downturn in the mining and oil and
gas industries.
Shareholder Value
The Group’s intense focus on converting profit into cash has enabled us to provide our shareholders with significant returns
for almost 30 years.
Since the Group’s IPO in July 1987 we have raised only £60 million from our shareholders and distributed £165 million in
dividends including the recommended 2016 final dividend. Our last fund raising, of £40 million, was in 2001; since then we
have paid £160 million in dividends. We have not significantly diluted the equity base of the business by using shares to
make acquisitions.
Group Activities and Management
The reduction in expenditure by our clients in the oil and gas sector and related industries has been dramatic and has had a
fundamental impact on the nature and mix of our activities. Our 2011 Report and Accounts was published in the aftermath
of the global financial crisis and subsequent recessions. The impact of these events on our built and natural environment
business was severe. Our Energy business fared much better as oil and gas companies maintained a high level of investment
in exploration and production as well as the infrastructure necessary to get their product to market. The balance of our
business activities shifted significantly and we disclosed that: “70% of our underlying profit is now earned in the global Energy
and associated markets”. As the world’s economies recovered our non Energy business grew again. However, the oil and gas
downturn of 2015/2016 has, like the global financial crisis, shifted the balance of our activities dramatically again. In 2016 only
18% of the Group’s underlying profit was generated by the wider oil and gas sector.
Although the Board expects a modest recovery in Energy profit in 2017 we anticipate that the overall balance of the business
will not change materially. We have, therefore, decided to change the management structure of the business. In 2013 in AAP
we merged the BNE and Energy components of the AAP business to create one regional multi-disciplinary segment. This was
successful and we have now done the same in Europe and North America and as noted above, have since 1 January 2017 been
trading through three multi-disciplinary regional segments. Each of these segments is managed by a separate Board with clear
devolved responsibilities. The leaders of each of these Boards are now part of an enlarged Executive Committee.
A sample of the projects and activities that we undertake is described on our website at www.rpsgroup.com.
6
Report and Accounts 2016 2016 Results
Summary of results
The Group’s results for the year to 31 December 2016 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
Strategic Report
2016
2015
2015
(constant
currency)(3)
594.5
534.3
50.7
16.60
9.74
32.8
11.35
567.0
506.1
51.8
16.57
9.74
611.1
545.6
57.2
18.31
9.74
9.9
3.11
10.4
3.32
1) PBTA is profit before tax, amortisation and impairment of acquired intangibles and transaction related costs.
(2) Adjusted earnings per share is before amortisation and impairment of acquired intangibles and transaction related costs and the related tax.
(3) 2015 results restated at 2016 currency rates.
PBTA for the full year was £50.7 million (2015: £51.8 million; £57.2 million on a constant currency basis). Energy and other
businesses exposed to the oil and gas sector suffered a significant downturn, resulting from a further substantial contraction in
expenditure by our clients, responding to the collapse in the oil price early in the year. However, our businesses not involved
in that sector generally performed well and enabled the Group as a whole to produce a result well above expectations. The
Group tax rate on PBTA was 27.7% (2015: 29.6%). Adjusted basic earnings per share were 16.60 pence (2015: 16.57 pence;
18.31 pence on a constant currency basis).
Sterling weakened during the year, particularly following the UK referendum in June 2016. This provided a significant benefit
when our overseas earnings were consolidated into the Group results. PBTA in 2016 would have been £3.7m lower had 2015
exchange rates been repeated.
Segment Contribution
The acquisitions made in recent years have contributed materially to a shift of emphasis in the Group’s performance away
from the Energy sector. The scale of the downturn in this sector is unprecedented and the impact on our Energy business and,
consequently, the Group has been dramatic. Energy contributed £35 million segment profit in 2014, £11 million in 2015, and
only £5.4 million in 2016.
We committed c.£126 million to acquisitions in 2014-2016, none with direct exposure to oil and gas markets. This brought
new activities and geographies into the Group with an aggregate run rate profit at time of completion of each transaction of
£22 million. Whilst it is difficult to establish precisely their contribution, because these businesses have been integrated with
appropriate parts of the Group, they have continued to grow, contributing an estimated £29 million of segment profit in the
year. This move away from oil and gas sector activities materially assisted the Group maintain its profit and demonstrates clearly
the value of this part of our strategy.
The contribution of the Group’s four segments in 2016 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
(constant
currency)
31.7
12.0
11.9
13.9
69.5
2015
30.3
10.6
10.9
12.1
63.9
2016
35.1
7.9
5.4
14.2
62.6
7
rpsgroup.com Both our BNE businesses were exposed to oil and gas client projects. The oil and gas component in Europe was small
contributing about 2% of fees and segment profit in the year and primarily focussed in Norway. In North America the
contribution was greater, about 30% of fees and 17% profit; we have in place a strategy to diversify this business further, as has
been achieved in AAP. Our resources businesses in AAP contributed about 20% of total AAP fees in the year and 5% segment
profit. The contribution from these markets to total Group segment results in 2016 was about 23% in respect of fees and 12%
in respect of segment profit. In 2014 the equivalent proportions were 54% and 62%. Despite this reduction we retain effective
capability in the oil and gas and resources sectors and should benefit from any sustained recovery in these markets.
The Group’s key performance indicators are shown below:
Fee income (£m)
PBTA (£m)
Conversion of profit to cash (%)(1)
Net debt (£m)
Notes
2016
534.3
50.7
117.0
83.4
2015
506.1
51.8
141.0
78.8
2015
(constant
currency)
545.6
57.2
141.0
78.8
(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 conversion of profit into cash was again strong at 117%. We funded acquisition investment of £35.1 million in the period,
including £23.7 million deferred consideration from acquisitions made in prior years. Net bank borrowings at 31 December
2016 were £83.4 million (31 December 2015: £78.8 million). Deferred consideration of up to £13.4 million is payable in 2017,
leaving only £1.6 million remaining to be paid, in 2018.
Since July 2015 we have had in place a five year £150 million revolving credit facility with Lloyds Bank plc and HSBC Bank plc.
In addition, over 4 years remain on the £30.0 million and $34.1 million fixed term, fixed rate notes issued through Pricoa in
2014. Our interest cover at 31 December was 11.8 times, well above the bank covenant of 4.0 times. The Board indicated in
the 2016 Interim Results announcement that it had decided to take a more cautious approach to investment in acquisitions
because leverage, (being the ratio of net bank debt plus deferred consideration to annualised EBITDAS), had reached 2.2, even
though it was well below the bank covenant of 3.0. Our leverage at 31 December had reduced to 1.6 (December 2015: 1.6).
Assuming this position can be maintained or further reduced, as seems likely, during 2017, the Board would be comfortable
about making further investments in suitable businesses.
The Board remains confident about the Group’s financial strength and is recommending a final dividend of 5.08 pence (2015:
5.08 pence), payable on 19 May 2017 to shareholders on the register on 21 April 2017. If approved by shareholders this would
result in a full year dividend of 9.74 pence, unchanged from 2015.
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
development and management sectors and also have a modest exposure to the oil and gas sector in Norway. It delivered a
very good result in the period, with an improved performance in the second half.
Fee income (£m)
Segment profit* (£m)
Margin %
*after reorganisation costs: 2016 £0.5m; 2015 £0.5m.
2016
2015
269.0
35.1
13.1
222.4
30.3
13.6
2015
(constant
currency)
234.6
31.7
13.5
Those activities which assist clients develop new capital projects, particularly our planning and development business in the
UK and Ireland, continued to benefit both from good market conditions and client confidence. Our clients’ investment activity
did not appear to change materially in the second half as a result of the UK EU referendum. The integration of DBK, project
management consultants, (acquired in April 2016) into this part of the business has been successful.
8
Report and Accounts 2016 Strategic Report
Those activities exposed to operational environments continued to need to offer an efficient, cost effective service to assist clients
in managing tight budgets. This was particularly the case in the Netherlands, where our businesses experienced significant pricing
pressure. Our water business in the UK, however, benefited from its strong market presence and once again performed well.
This segment includes the Group’s Norwegian business: the process of integrating OEC (acquired November 2013) and Metier
(acquired April 2015) to form that country’s leading project management consultancy has moved forward significantly. This
helped the business manage the adverse impact from the downturn in the oil and gas sector in that country.
The UK decision to leave the EU could cause disruption to Group activities if our clients decide to change their investment
plans. It currently appears, however, that there will be no significant short term effect. The Board believes this segment is
capable of delivering further growth in 2017.
BNE: North America
This business was formed in 2013 from parts of our North American Energy business providing advice in respect of
infrastructure required by Energy clients. As a result, it still has a significant exposure to the oil and gas sector. This exposure
held back progress as clients reduced and delayed expenditure. This impacted both fee income and margin.
Fee income (£m)
Segment profit* (£m)
Margin %
** after reorganisation costs: 2016 £0.3m; 2015 £0.2m.
2016
2015
65.4
7.9
12.0
58.7
10.6
18.0
2015
(constant
currency)
66.4
12.0
18.1
The acquisition of Iris, based in San Francisco, in October 2015 continued the process of diversifying into more traditional
environmental consultancy activities. Following integration, it is now working successfully with GaiaTech (acquired May 2014),
which operates from Chicago in a similar market. Klotz (acquired February 2015) performed well in the infrastructure market in
Texas. This shows the strength and value of our diversification strategy and the speed at which it can reposition our activities.
A low level of activity and continuing uncertainty in our energy focussed businesses is likely to hold back the performance
in 2017, particularly in Canada where the market is particularly sluggish. However, our non-oil and gas activities now form
the majority of our business, giving us a platform from which to achieve growth. This may over time be supported by the
additional infrastructure investment being proposed by the new administration. Developing our business in the environmental,
infrastructure and project management markets remains a Group priority and is likely to be a focus of attention when we
resume acquisition activity.
Energy
We continue to provide internationally recognised consultancy services to the oil and gas industry from bases in the UK, USA
and Canada. The activity levels in this market declined at an unexpected pace in the first few months of 2016 and remained
uncertain during much of the rest of the year. Some stability seemed to emerge towards the end of the period. The 2015 result
included a £7.0 million provision for doubtful debts. Towards the end of 2016 a significant proportion of the debt provided was
recovered, resulting in the reversal of provisions totalling approximately £4.2 million.
Fee income (£m)
Segment profit* (£m)
Margin %
*after reorganisation costs: 2016 £3.6m; 2015 £0.9m.
2016
2015
71.5
5.4
7.5
123.0
10.9
8.9
2015
(constant
currency)
129.3
11.9
9.2
Responding to the reduction in the volume of work available we reduced permanent headcount a further 33%, on top of the
19% reduction in 2015. At the same time staff were grouped into a smaller number of core offices. Reorganisation costs of £3.6
million were incurred in the year, mainly in the first half (£2.6 million). We also significantly reduced our use of external sub-
consultants. This enabled the business to perform far better in the second half producing a profit of £7.8 million, after a recovery
of £4.2 million of debts previously provided for. Excluding both bad debt recovery and reorganisation costs, in the second half,
the business produced a trading margin of 10.7%.
On 1 January 2017 the EAME component of Energy was merged with BNE: Europe and the North American component
merged with BNE: North America. Although the oil and gas markets remain uncertain the second half performance suggests the
regional Energy businesses will contribute positively to both these new segments.
9
rpsgroup.com 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 working well. We also continue to benefit from the development of our project management capability,
supported by the acquisition of Point in 2014 and EIG in 2015, both of which performed well in 2016.
Fee income (£m)
Segment profit* (£m)
Margin %
*after reorganisation costs: 2016 £1.2m; 2015 £0.4m.
2016
2015
130.1
14.2
10.9
104.2
12.1
11.6
2015
(constant
currency)
117.5
13.9
11.8
Our resources businesses in Western Australia were faced with a shrinking market that deteriorated further in the second half.
As a result, it produced a significantly reduced contribution compared with 2015. We further reduced our cost base and were
able to relocate from our main office in Perth to smaller premises. This involved a significant, but non recurring, reorganisation
cost. Our businesses on the east coast, particularly those involved in the management of major infrastructure projects and
private sector development continued to operate successfully. Our work for a growing number of Federal Government agencies
also continued to expand.
Our activities on the east coast give us confidence that the business as a whole has a good platform to achieve further growth.
Strategy and Group Prospects
As a result of the further significant change in the relative scale and contribution of the Group’s businesses, and the changing
nature of the global energy market, the Board has, as outlined under Group Activities and Management above, decided that
from 1 January 2017 the Group would operate and report three multi-disciplinary regional segments.
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 reduces
our dependency on the resources sectors and provides a more flexible business model than some of our technical businesses
in other sectors. This strategy can be developed further in all the territories in which we operate. DBK, acquired in April 2016 in
the UK, is an illustration of this. Further expansion in this market internationally is an attractive opportunity.
The Board believes the Group’s new regional structure provides the platform to enable RPS to return to growth in 2017.
Assuming such growth and leverage remaining at the current level or reducing further, as seems likely, there would be flexibility
to consider resuming progressive dividends and investments in “bolt on” acquisitions to provide additional growth in 2018.
10
Report and Accounts 2016 Strategic Report
Risk Management
The Group supplies a wide range of consultancy services in many markets and countries, which gives rise to a range of risks
that need to be identified, assessed and managed.
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 at
each of their regular meetings and for which purpose a structured reporting framework is in place. 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. The Group’s systems of planning, budgeting, performance review and internal control assist
with this process. 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
which are normally related to significant economic changes. This was clearly demonstrated following the global financial crisis in
2008 and the international recessions which followed it and the 2015/16 oil price collapse and the reduced volume of work
available to our Energy and oil and gas exposed 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 or increase 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 15 and 16 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 main risk is the failure of the acquired
business to deliver the profit and cash flow anticipated. This could occur if we fail to understand market conditions and potential
changes in the sector, or to identify liabilities. There is also a risk that we fail in motivating or retaining staff, especially key staff
and that integration takes longer or is more expensive than anticipated.
Detailed due diligence is performed on all potential acquisitions drawing upon both internal and external resources and
designed to prevent the above. 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 2015 has been successful and work in relation to that made in 2016 is proceeding well.
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. The most significant political risk we have faced for many years arises from the popular
vote to leave the European Union. During 2016 we benefited from the weakness in sterling that the leave vote caused, although
the impacts we might experience in 2017 and 2018 seem more likely to be negative if inflation or uncertainty take hold. It is
not, however, possible to provide any meaningful assessment of the likely impact on Group profits and cash flow.
The US presidential election in 2016 also appeared to produce a significant change of direction. How this will impact the markets
in which we operate in the US or internationally is also unclear; again this could produce both positive and negative impacts.
11
rpsgroup.com 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. The
other principal risks faced by the Group, as listed below, are usually of significantly less importance in terms of the scale of
impact they might have on profit.
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 2016.
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 successful cyber-attack upon our system could result in loss of data, disruption to operations or direct financial loss. The
Group regularly experiences attempts of this nature but has never suffered any significant loss due to the effective operation of
systems and controls in place. We continue to invest in better IT systems, adjust our processes in response to perceived threats
and have recruited a Security Officer. The vigilance of our finance staff is important and we regularly communicate with them
about our experience of attack and the importance of undertaking basic checks such as identity verification and checking to
hard copy data.
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 page 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..
12
Report and Accounts 2016 Strategic Report
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.
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 is a committed multi-currency revolving credit facility of £150m expiring in 2020 as provided
by Lloyds and HSBC. In 2014 the Group issued seven year US private placement notes of US$34m and £30m repayable in
2021 under a facility provided by Prudential Investment Management Inc.
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 29 to the Group Financial Accounts on page 72.
Long Term Viability Statement
In accordance with the requirements of the UK Governance Code the Board has assessed the long term viability of the Group.
This was done over a three year period taking account of the risks above as well as the Group’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 profit and cash flow models based upon a range of assumptions relating to trading performance and other outflows
including those associated with the principal risks the Group faces occurring individually and in combination; this included severe
but plausible scenarios. Based on this assessment the Directors have a reasonable expectation that the Group will continue in
operation and be able to meet its liabilities as they fall due over the period to 31 December 2019.
13
rpsgroup.com 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. The Group understands its 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. The Group supports the objectives of the Modern Slavery Act and will not tolerate modern slavery
or human trafficking within its own supply chain. In that regard, it has been reviewing its UK supply chain and conducting an
appropriate due diligence exercise. The Group will shortly publish its first modern slavery statement in respect of the year to 31
December 2016.
Community Involvement
RPS has supported a wide range of community and charitable initiatives with gifts in kind and financial contributions throughout
the year, mostly at office level. In 2016 the Group and its staff gave or raised £944,000 in charitable contributions (2015:
£873,000). Taking into account the £368,000 (2015: £221,000) spent on academic bursaries and educational initiatives, the total
contribution of the Group and its employees to the communities in which it operates was £1,312,000 (2015: £1,094,000).
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 £72,000
towards projects in Ghana in 2016. 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. During the year RPS and Tree Aid received a joint
business charity award from Third Sector Magazine for their collaboration on the Bongo River Trees restoration project.
The Group continues to be proud of its association with Tree Aid and the valuable contribution made by its employees.
14
Report and Accounts 2016 Employment
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.
2016
2015
3,220
3,045
425
364
970
120
445
521
926
117
5,099
5,054
2
7
11
82
1,530
3,569
30
70
8
15
53
24
3
7
11
83
1,516
3,538
30
70
%
8
14
54
24
The recruitment, retention and motivation of high calibre employees is of strategic importance for the Group and as highlighted
in the Risk Management section 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 clients’ projects. These arrangements may differ according to jurisdiction and the nature of the
specific business but work within a framework that is set by each of the Segmental Boards and overseen at Group level. The
Chief Executive has overall responsibility for the development of human resource practice at Group Board 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 gender profile of the Group’s employees is shown in the table above. Of the senior management group that is comprised
of Directors of the companies that are included in the Group consolidation, 34 are male and 2 are female. As the Group
largely operates in sectors which are male dominated, its ability to recruit female fee earning staff is significantly limited by the
employment applications it receives. This is not expected to change in the short or medium term and the Group intends to
maintain a policy of employing the best available staff irrespective 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.
15
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 professional employees who are required to demonstrate technical competence
within their specific sectors. Given the breadth 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. During 2016 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.
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 Group sets the overall framework
and standards for the management of health and safety. 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. These will differ within various parts of the Group depending on the nature
of the activities being undertaken. 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. 61% (2015: 40%) of employees across the
Group work in offices that now have third party accreditation to the OHSAS 18001 standard.
The reportable accident rate in the year was 1.8 accidents per 1,000 employees (2015: 2.2). 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
2016
10
1.8
2015
12
2.2
16
Report and Accounts 2016
Strategic Report
Environmental Management and Climate Change
As noted in the Risk Management section of this report, 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 and standards 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.
Greenhouse Gas Reporting
For the reporting year to 31 December 2016 the Group has used the 2016 UK Government Conversion Factors for Company
Reporting and for international offices the International Energy Agency CO2 Emissions from Fuel Combustion, OECD/IEA, Paris,
2016 guidance. 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 include any gas data and fuel use for company owned vehicles. Fugitive emissions from air
conditioning are included where it is the Group’s responsibility within tenanted buildings.
n Scope 2 – indirect energy emissions include 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
2016
9,399
4,106
13,505
2015
8,122
4,516
12,638
The increase in Scope 1 emissions is largely attributable to the year on year 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% per annum on a five year rolling average
basis. Using this approach the five year rolling average up to 2015 was 3.45 MWh per capita which decreased to 3.12 MWh per
capita for the five year rolling average to 2016, equating to a decrease of 2.1% per annum.
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.
The Strategic Report was approved by
the Board and signed on its behalf by
Alan Hearne
Chief Executive
2 March 2017
17
rpsgroup.com The Board
Ken Lever
Non-Executive Chairman
Ken Lever joined the Board in
November 2016 as Group Chairman.
Ken is a Chartered Accountant and
his previous experience includes
spells as Finance Director of Alfred
McAlpine Plc, Albright and Wilson
Plc and Tomkins Plc. Prior to that he
was a partner at Arthur Andersen. He
was Chief Executive of XChanging Plc
between 2010 and 2015 and currently
holds Non-Executive positions at Biffa
Plc, Blue Prism Group Plc, Gresham
House Strategic Plc and Vertu
Motors Plc. Ken is Chairman of the
Nomination Committee.
Dr Alan Hearne
Chief Executive
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
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.
Robert Miller-Bakewell
Independent Non-Executive Director
Robert joined the Board in 2010 and
is serving a third 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
Remuneration Committee as well
as being a member of the Audit and
Nomination Committees and Senior
Independent Director.
Louise Charlton
Independent Non-Executive Director
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. Louise
is a member of the Remuneration and
Nomination Committees.
John Bennett
Independent Non-Executive Director
John served as a Non-Executive
Director between 2006 and 2015 and
was re-appointed in that role in April
2016. He is a Chartered Accountant
with 30 years’ experience in the house
building industry. He was Finance
Director of Westbury plc, until it was
acquired in early 2006. He has wide
experience of financial management,
capital and debt raising, acquisitions and
investor relations, having played a
leading role in the strategic
development of Westbury into a top
ten volume house builder in the UK.
John was re-appointed to the Board for
a maximum period of two years. He is
Chairman of the Audit Committee and
a member of the Nomination and
Remuneration Committees.
18
Report and Accounts 2016 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 2016.
Directors
The Directors of the Company as at 31 December 2016 were those listed on page 18. Andrew Page, Phil Williams and
Brook Land retired as Directors on 26 April 2016, 30 September 2016 and 31 October 2016 respectively. John Bennett was
appointed as a Director on 27 April 2016 and Ken Lever was appointed on 1 November 2016. 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 92.
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 37 and shows the profit for the year. The Directors recommend a final
dividend of 5.08p (2015: 5.08p) per share. This together with the interim dividend of 4.66p (2015: 4.66p) per share paid on 14
October 2016 gives a total dividend of 9.74p (2015: 9.74p) per share for the year ended 31 December 2016.
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 8. The Directors review performance using these non-
statutory measures as well as segmental and underlying profit, as they consider the former to be more reflective of the way the
business is managed and viewed by the investment community. 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 23 to 28 and incorporates other parts of the Report
and Accounts as detailed therein.
Employees
The Group’s policies in relation to employees are disclosed on page 15.
Corporate Responsibility
The Group’s corporate responsibility statement is included on pages 14 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.
19
rpsgroup.com Substantial shareholdings
The Company is aware of the following interests in excess of 3% of the ordinary share capital of the Company as at
28 February 2017.
Aberforth Partners
Schroder Investment Management
UBS Asset Management
Neptune Investment Management
Majedie Investment Management
BlackRock
Going concern
No. of shares
22,521,818
12,429,589
12,386,481
11,338,430
8,561,725
6,892,301
Percentage
10.08
5.56
5.54
5.07
3.83
3.08
The Group’s business activities, a review of the 2016 results together with factors likely to affect its future development and
prospects are set out on pages 7 to 10. Note 16 to the Consolidated Financial Statements sets out the borrowings of the
Group and considers liquidity risk, whilst note 29 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 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 13.
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. This confirmation is given and should be interpreted in accordance with the provisions of s.418 of
the Companies Act 2006.
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) including FRS102 “The Financial Reporting Standard Applicable in the UK and Republic of Ireland.”
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;
20
Report and Accounts 2016 Management & Governance
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.
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 29 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 2016 the Company’s issued share capital consisted of 223,435,014 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
92. Substantial shareholder interests of which the Company is aware are shown on page 20.
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.
21
rpsgroup.com Annual General Meeting
The Annual General Meeting will be held on 2 May 2017. 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
2 March 2017
Registered Office:
20 Western Avenue
Milton Park
Abingdon
Oxfordshire OX14 4SH
Registered in England No. 02087786
22
Report and Accounts 2016 Management & Governance
Corporate Governance
UK Corporate Governance Code
The Board is pleased to report that throughout the year the Company complied with all provisions of the UK Corporate
Governance Code (the ‘Code’) as applicable to a small market capitalisation company. The Chairman’s Statement which appears
on pages 3 and 4 includes a section relating to Corporate Governance and provides context to this detailed report.
Board Responsibilities
The Board has a schedule of matters that are reserved for its decision, including:
n determination of 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 two Executive Directors, three Non-Executive Directors and the Chairman.
Andrew Page retired as a Non-Executive Director on 26 April 2016 and Phil Williams retired as an Executive Director on
30 September 2016. John Bennett was appointed as Non-Executive Director on 27 April 2016. Ken Lever was appointed
as Group Chairman on 1 November at which time Brook Land stood down from the Board. 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. In particular the Board is
of the view that John Bennett, who having previously served for nine years and was reappointed as a Non-Executive Director
during the year, satisfies this test of independence. The Chairman and the Non-Executive Directors are generally appointed
for three-year terms, which may subsequently be extended. John Bennett was re-appointed to the Board on the basis that he
would serve for a maximum term of two years. Any term beyond six years for a Non-Executive is rigorously reviewed, taking
account of the requirement to refresh the Board. Ken Lever and John Bennett having both been appointed during the year
will be subject to election at the forthcoming Annual General Meeting. All Directors are subject to annual re-election
by shareholders.
The Chairman and Chief Executive have clear and distinct roles. The Chairman provides leadership to the Board of Directors
and is responsible for its overall effectiveness. This will include ensuring that all Directors are properly briefed in order to
take a full and constructive part in Board discussions. The Chairman will meet regularly with major shareholders in order to
understand their views and seek their input on specific matters. The Chief Executive is responsible for all executive management
matters within the Group. This incorporates the development of Group Strategy, financial targets and business plans having
regard to the interests of the Group’s shareholders, clients and 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.
23
rpsgroup.com The table below shows the number of Board and Committee meetings attended by each of the Directors during the year.
Ken Lever*
Brook Land*
Alan Hearne
Gary Young
Phil Williams*
John Bennett*
Louise Charlton
Robert Miller-Bakewell
Andrew Page*
Number of meetings held
* served for part year only
Full
Board
1
7
8
8
6
5
8
8
2
8
Audit
Committee
–
–
–
–
–
2
–
3
1
3
Remuneration
Committee
–
–
–
–
–
4
7
7
2
7
Nomination
Committee
1
2
–
–
–
3
5
5
–
5
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 Non-Executive Directors hold meetings with the Chairman without the Executives present at least twice a year.
The Executive Committee, which has historically consisted of the Executive Directors supported by the Company Secretary,
meets regularly throughout the year and has overall responsibility for all operational matters within the Group, subject to those
matters that remain reserved for the Board. With effect from 1 January 2017 the Executive Committee has been enlarged to
include the Group’s three 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 to 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.
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 5 and 6.
Board Performance
The Board undertakes an annual appraisal of its performance. Following his appointment as Group Chairman, Ken Lever
undertook an initial review of the operation and effectiveness of the Board. For this purpose Mr. Lever engaged with all of the
Company’s Directors across a range of topics to ascertain their opinions. No material matters of immediate concern arose.
Non-Executives, led by the Senior Independent Director, meet on an annual basis to appraise the Chairman’s performance.
24
Report and Accounts 2016 Management & Governance
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, the Executive Directors hold meetings with the Company’s principal
shareholders to discuss the Company’s strategy and performance. The Chairman and Senior Independent Director also meet
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.
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 36 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 13.
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 11 to 13.
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 are 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.
25
rpsgroup.com 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. Although the Group does not at present operate a distinct internal audit
department, it does, through a Group Assurance Manager, undertake a structured programme of control reviews at its various
operating companies.
Audit Committee
The Audit Committee currently comprises two Independent Non-Executive Directors, John Bennett and Robert Miller-Bakewell.
Andrew Page served as a member of the Committee and as its Chairman until his retirement from the Board. John Bennett
assumed the role as Chairman on his appointment to the Committee in April 2016. 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, John Bennett is the member of
the Committee identified as having recent and relevant financial experience.
The Committee holds three regular meetings during the year, one to consider audit planning and one to coincide with each
of the publication of Group’s annual and interim financial results. Other matters which fall within the Committee’s terms of
reference are included on the agendas of these meetings as required.
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 classification of assets is by far the largest on the Group balance sheet and as such receives careful attention from the
Board and Committee which need to be satisfied that its carrying value is appropriate. Goodwill impairment testing was
undertaken on the November balance sheet. The Board and Committee considered the appropriateness of the cash generating
units for goodwill testing and the assumptions and estimates used in the modelling, including approved budgets for 2017. The
conclusion was that no impairment was necessary. Consideration was also given as to whether there were any indicators of
impairment in respect of other intangible assets. The Board and Committee agreed that no indicators of impairment exist.
Acquisition accounting
One acquisition was completed in the year and estimates are made with respect to the fair value of the net assets acquired and
the consideration transferred. The valuation work undertaken uses a spreadsheet model constructed with the help of valuation
experts and the inputs to the model are derived from data provided by the entity acquired and from recognised sources or
using prior experience. The Group Finance Director presented a paper to the Audit Committee on this subject in respect of
the acquisition and the Committee agreed with and approved the valuations made.
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 meeting when it reviews business performance. The reports prepared for those meetings
contain age profile information by segment and consider specific issues in more detail as necessary. The Board reviewed a
detailed paper presented by the Group Finance Director on debtors and accrued income as at the end of September and
concluded that trade receivables were then appropriately stated. The Board received an update paper in respect of trade
receivables within the Energy segment as at the year end and concluded that they were appropriately stated at that point.
The Committee appreciates that there is estimation applied in the recognition of revenue but does not consider this to be
a key area of risk. The number of projects undertaken at any time is large and there are relatively few that are individually
material. The procedures in place for recognising revenue are well established and comprehensive financial review of monthly
results provides a good level of assurance.
26
Report and Accounts 2016 Management & Governance
Following the review conducted by the Audit Committee and its own consideration, the Board was able to conclude that
the Report and Accounts for 2016, 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 audit
appointment should be retendered at least every 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 52. 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 on page 25. 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 a distinct internal
audit department was not appropriate at that time but that this will be kept under regular review. Notwithstanding this the
Group has continued to develop and extend a system whereby members of the Group finance function undertake control
reviews at operating companies. This work has now been given greater focus and further enhanced through the appointment of
a Group Assurance Manager.
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 currently comprises the Group Chairman who also chairs the Committee and the
Company’s three Non-Executive Directors. Robert Miller Bakewell acted as Chairman of the Committee until Ken Lever
assumed that role on his appointment to the Board in November 2016. Brook Land was a member of the Committee until his
retirement from the Board.
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.
27
rpsgroup.com During the year the Nomination Committee led a process to identify and recruit a new Group Chairman. For this purpose
Spencer Stuart was used as an external search consultancy; Spencer Stuart has no other connection with the Company. A
detailed specification for the role was prepared and the time commitment to undertake the role considered. A structured
search, referencing and interview process was then undertaken. This culminated with the Committee recommending the
appointment of Kenneth Lever as a new Group Chairman. The Board then considered this recommendation and concluded that
Mr. Lever should be appointed. The retiring Chairman did not participate in the Committee’s processes or deliberations relating
to its recommendation to the Board.
The range of skills and experience offered by the current Directors is highlighted on page 18 and the Committee was satisfied
with the balance and membership of the Board throughout the year under review. The Committee does, however, remain
mindful of the need to ensure its periodic refreshment and to review the position as Non-Executive Directors terms of office
expire. The Committee also maintains an ongoing brief to consider succession planning at Board and Senior Executive level.
Although the Group’s previously announced target that a minimum of 25% of its Board membership should be female is not
currently being met, the Committee and the Board remain mindful of the importance of diversity and will continue to consider
this in their deliberations.
Louise Charlton’s third three year term as a Non-Executive Director will expire in April 2017 and as noted in the Chairman’s
Statement she will remain in office until such time as a replacement is identified.
Remuneration Committee
The membership and activities of the Remuneration Committee are described in the Remuneration Committee Report on
pages 29 and 30 together with the accompanying notes on pages 87 to 95.
Takeover Directive
Disclosures required under the Takeover Directive are included on page 21 and form part of the Group’s Corporate
Governance report.
28
Report and Accounts 2016 Management & Governance
Remuneration Committee Report
Annual Statement
I am pleased to present the Remuneration Committee Report for 2016, which consists of two parts. In my Annual Statement
I outline the links between remuneration and the Company’s strategy as well as summarising the main decisions made by the
Committee during the year. The Annual Report on Remuneration which consists of the information on page 30 and notes 1 to
12 on pages 87 to 95 incorporates the remuneration disclosures required in respect of the year.
Remuneration Policy
During the year the Remuneration Committee undertook a review a review of the current policy and concluded the following.
n
n
RPS needed a competitive, simple and performance driven Policy aligned to execution of the long-term business strategy.
In the absence of a stand-alone long-term incentive arrangement the Remuneration Committee did not have all the tools
required to incentivise long-term sustainable performance. In addition, the introduction of a more standard long-term
incentive plan would be in line with shareholders’ desire to see an increased proportion of the remuneration package ‘at
risk’ for long-term performance outcomes.
n
The new policy should appropriately reflect evolving corporate governance requirements and best practice.
The Remuneration Committee then consulted with its principal shareholders in connection with the development of a new
remuneration policy and two new incentive plans to form part of that policy. The Committee is grateful to shareholders for the
feedback received and which was taken into account in finalising the new policy.
The new policy was approved at a general meeting of the Company held on 30 November and took effect from 1 January
2017. This was set out in full in the circular sent to shareholders, a copy of which is available on the Company’s website.
A summary of the main elements of the new policy as applicable to the Executive Directors is shown in the notes to
the Remuneration Report on pages 87 to 90. During the consultation exercise the Committee undertook to include the
performance conditions that would apply for 2017 in respect of the RPS Group Plc Executive Long Term Incentive Plan and
these are shown in the notes to the Remuneration Report on page 90.
Performance and Remuneration outcomes for 2016
During 2016 the RPS Group Plc Bonus Plan (the ‘Plan’) was the sole incentive arrangement in place for the Executive Directors
of the Company. The principal financial performance condition for the Plan is PBTA, with conversion of profit to cash and
personal objectives as secondary conditions. The Company’s key performance indicators which are a measure of success in
delivering the Company’s strategy include PBTA and conversion of profit to cash.
In accordance with the above bonus opportunity for 2016 was assessed against PBTA (70%), cash collection (20%) and
personal objectives (10%). As the PBTA performance for the year did not meet the minimum performance level, no bonus
contribution was earned in respect of this element. The Minimum Profit Threshold of £50m set by the Committee before bonus
contributions in respect of cash collection and personal objectives could be earned was, however, exceeded. Cash collection
for the year was very strong at 117% and was above the upper end performance target of 110% set for this element by the
Committee, with the result that the maximum bonus contributions was earned by each Executive Director for this element. In
respect of personal objectives the Committee concluded that although those for Alan Hearne and Phil Williams had not been
satisfied those for Gary Young had been met. Gary Young therefore earned the maximum available contribution in respect of
this element. The bonus contribution in respect of Phil Williams was pro-rated to his service as a Director up to 30 September
2016. Further details in relation to the Plan are set out in note 2 to the Annual Report on pages 90 and 91.
In accordance with the new remuneration policy 2016 was the final year in which the Plan was operated.
Other Remuneration Decisions
The Executive Directors’ salaries were reviewed as at 1 January 2016 and no adjustments were made. A further review was
undertaken as at 1 January 2017 and whilst the salary of Alan Hearne was unchanged the Committee determined to increase
the basic salary of Gary Young from £288, 600 to £310,000. This was to reflect the greater level of responsibility which it has
been necessary for Mr. Young to assume on reduction of the number of Executive Directors on the Board from three to two.
In making this change the Committee also considered relevant benchmarking data and was satisfied that Mr. Young’s basic salary
and level of overall remuneration were no greater than the median of the Company’s comparator groups.
Phil Williams, retired as a Director on 30 September 2016. He is being paid normal contractual benefits until 20 March 2017
and is being treated as a good leaver for the purpose of the RPS Group Plc Bonus Plan.
Robert Miller-Bakewell
Chairman of the Remuneration Committee
2 March 2017
29
rpsgroup.com Annual Report
Audited Information
The following table sets out the total of the remuneration received by each of the Directors during the year under review.
Director
£000s
Year
Executive
Alan Hearne
Phil Williams †
Gary Young
Non–Executive
Ken Lever †
Brook Land †
John Bennett †
Louise Charlton
Robert Miller–Bakewell
Andrew Page †
Tracey Graham †
Total
Base Salary
or Fees
Benefits
Bonus
Long Term
Incentives
Pensions
All Employee
Share Plan
Total
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
581
314
289
581
428
289
23
–
114
136
36
18
43
43
64
64
17
50
36
–
1,481 1,645
19
12
16
–
–
–
–
–
–
–
47
19
16
16
–
–
–
–
–
–
–
51
233
113
130
–
–
–
–
–
–
–
476
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
145
55
43
–
–
–
–
–
–
–
243
145
75
43
–
–
–
–
–
–
–
263
3
2
3
–
–
–
–
–
–
–
8
3
3
3
981
496
481
748
522
351
–
23
–
–
114
136
–
36
18
–
43
43
–
64
64
–
17
50
36
–
–
9 2,255 1,968
† The remuneration payable to Phil Williams and the fees payable to Ken Lever, Brook Land, John Bennett and Andrew Page in 2016 were for part of
the year only. Their respective appointment and leaving dates are shown in the Corporate Governance Statement on page 23. Tracey Graham only
served as Director during part of 2015.
The following table shows the relationship between total remuneration received by the Directors and reported Group profits.
£000s
2015
2016
Total Remuneration
1,968
2,255
PBTA
51,800
50,700
Remuneration received as % of PBTA
3.8
4.4
The additional information that is required under the Regulations which form part of the annual report for the year ended
31 December 2016 has been included in notes 1 to 12 on pages 87 to 95. This additional information is unaudited
with the exception of notes 2 to 6.
The Annual Remuneration Report was approved by
the Board and signed on its behalf by
Robert Miller-Bakewell
Chairman of the Remuneration Committee
2 March 2017
30
Report and Accounts 2016
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 2016 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 that we have audited comprise:
n
n
n
n
n
n
the Consolidated Income Statement;
the Consolidated Statement of Comprehensive Income;
the Consolidated and Parent Company Balance Sheets;
the Consolidated Cash Flow Statement;
the Consolidated and Parent Company Statements of Changes in Equity; and
the related notes 1 to 31 and Parent Company notes 1 to 15.
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”.
Summary of our audit approach
Key risks
The key risks that we identified in the current year and had the greatest effect on our audit strategy were:
n
n
n
revenue recognition;
assessment of the carrying value of goodwill and intangible assets; and
recoverability of trade receivables and accrued income.
Within this report, any new risks are identified with and any risks which are the same as the prior year
identified with .
Materiality
The materiality that we used in the current year was £2,500,000 which was determined on the basis of 5%
of profit before tax, amortisation and transaction related costs (PBTA) as detailed in note 1(g). This equates
to 7.8% of PBT.
Scoping
Significant
changes
in our
approach
We focused our Group audit scope and work on the business units at 6 locations. Within the 6 locations,
23 business units were subject to a full audit scope, whilst the remaining 10 were subject to specified
audit procedures.
The Canadian business has not been included in the current year scope due to its reduced significance in the
context of the Group audit.
Given that there have been no significant acquisitions in the second half of the year and only one small
acquisition (DBK) in the first half of the year, we did not consider acquisition accounting to be a significant
audit risk in the current year.
31
rpsgroup.com 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 Director’s report on page 20 and the Directors’
statement on the longer-term viability of the Group contained within the
strategic report on page 13.
We are required to state whether we have anything material to add or draw
attention to in relation to:
n the Directors’ confirmation on page 11 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;
n the disclosures on pages 11-13 that describe those risks and explain how
they are being managed or mitigated;
n 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; and
n the Directors’ explanation on page 20 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.
Independence
We are required to comply with the Financial Reporting Council’s Ethical
Standards for Auditors and confirm that we are independent of the Group
and we have fulfilled our other ethical responsibilities in accordance with
those standards.
We confirm that we have nothing material to
add or draw attention to in respect of these
matters.
We agreed 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.
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.
Revenue recognition
Risk
description
The Group is engaged in the provision of consultancy services through contractual arrangements with
its customers.
The revenue balance was material at £594m (2015: £567m). The risk in revenue recognition focusses
on the judgement 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. We have therefore specified this risk as relating to the cut-off (recording) of revenue.
The Group’s revenue recognition policy is disclosed in note 1(c).
32
Report and Accounts 2016 How the
scope of
our audit
responded
to the risk
Key
observations
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 determined whether revenue recognition
was appropriate based on management’s assessment of the stage of completion.
Based on our procedures, no issues were identified with the cut off (recording) of revenue.
Assessment of the carrying value of goodwill and intangible assets
Risk
description
At 31 December 2016, the net book value of goodwill and intangible assets was £456m (2015: £417m)
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 26 and it is also included
in the key accounting estimates in note 1 (i).
How the
scope of
our audit
responded
to the risk
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 rates
and the selection of appropriate discount rates.
Our audit work assessed the adequacy of the design and implementation of controls over management
review of goodwill and intangible asset impairment.
Our work focused on challenging management’s assumptions and the appropriateness of their judgements
and forecasts used as part of their value in use calculations, specifically the Energy sector, given the
continued uncertainty in the oil and gas market.
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 and compared our
range to that determined by management.
We examined the short term growth rates by using market data and considering 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. We have considered the
adequacy of the associated disclosures.
Key
observations
Based on our testing, we deemed the methodology applied by management to be appropriate. We
consider that the forecasts and growth rates applied by management in assessing the carrying value of
goodwill and intangible assets were reasonable. We deemed the discount rates used to be within an
acceptable range. Our sensitivity analysis did not indicate probable impairment factors.
Recoverability of trade receivables and accrued income
Risk
description
At 31 December 2016 trade receivables were £119m (2015:£113m) net of the provision for impairment
and accrued income was £33m (2015: £29m) net of the provision for impairment.
The trade receivables provision for impairment was £6.0m (2015:£10.9m) and the accrued income
provision for impairment was £4.4m (2015:£3.6m) these are disclosed in note 14.
Recoverability of trade receivables and accrued income is a significant risk due to the material nature of
these balances and the uncertain economic environment in certain geographic locations were the Group
operates.
The Audit Committee has included their assessment of this risk on page 26.
33
rpsgroup.com How the
scope of
our audit
responded
to the risk
Our audit work assessed the adequacy of the design and implementation of controls 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:
n understanding the latest facts and circumstances, examining any relevant correspondence and challenging
any conclusion by management regarding provisions for aged receivables;
n reviewing cash received post year end on a sample of customer debts;
n reviewing the overall ageing analysis for trade receivables and accrued income by entity and customer;
and
n challenging specific balances which were significantly past-due but not impaired and reviewed for cash
received post year end.
Key
observations
Based on our procedures, no material issues were identified which raised concerns over the recoverability
of trade receivables and accrued income beyond those provided by management and we concur that the
levels of provisions are appropriate.
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.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group
materiality
£2,500,000 (2015: £2,500,000)
Basis for
determining
materiality
5% (2015: 5%) of adjusted pre-tax profit, adjusted for amortisation and impairment of acquired intangible
assets and transaction related costs (PBTA). This basis is consistent with the prior year. This equates to 7.8%
of PBT.
We chose this measure as it is the Group’s key profit performance indicator.
Rationale
for the
benchmark
applied
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £100,000
(2015: £125,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. The
change in the reporting threshold has been made following our reassessment of what matters require communicating.
We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the
financial statements.
34
Report and Accounts 2016 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 6 locations – UK, Australia, USA, Norway, Netherlands and Ireland (2015: 7). The
Canadian business has not been included in the current year scope, due to its reduced significance in the context of the Group
audit. Within the 6 locations, 23 (2015:24) business units were subject to a full audit scope, whilst the remaining 10 (2015:
12) 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 87% (2015: 92%) of the Group’s net assets, 90% (2015: 93%) of the
Group’s revenue and 87% (2015: 93%) 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 locations was executed at levels of materiality applicable to each individual entity which were
lower than Group materiality and ranged from £0.05m to £1.0m (2015: £0.1m to £1.25m).
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.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
n
n
the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006;
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; and
n
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we
have not identified any material misstatements in the Strategic Report and the Directors’ Report.
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
n
n
we have not received all the information and explanations we require for our audit; or
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
the parent company financial statements are not in agreement with the accounting
records and returns.
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.
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 in
respect of these matters.
We have nothing to report
arising from these matters.
We have nothing to report
arising from our review.
35
rpsgroup.com Our duty to read other information in the Annual Report
Under International Standards on Auditing (UK and Ireland), we are required to report to
you if, in our opinion, information in the annual report is:
n
n
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.
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
2 March 2017
36
Report and Accounts 2016 Report of the Independent Auditors continued
Consolidated Income Statement
£000s
Revenue
Recharged expenses
Fee income
Year ended
31 Dec
2016
Year ended
31 Dec
2015
594,471
(60,175)
534,296
566,972
(60,862)
506,110
Note
3
3
3
Operating profit before amortisation and impairment of acquired intangibles
and transaction related costs
1(g),3,4,5
55,877
56,845
Amortisation and impairment of acquired intangibles and transaction related costs
Operating profit
1(g),4
Finance costs
Finance income
6
6
Profit before tax, amortisation and impairment of acquired intangibles
and transaction related costs
(17,890)
37,987
(5,331)
158
(41,940)
14,905
(5,232)
182
50,704
51,795
Profit before tax
Tax expense
32,814
9,855
9
(7,733)
(3,013)
Profit for the year attributable to equity holders of the parent
25,081
6,842
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
11.35
11.29
16.60
16.51
3.11
3.09
16.57
16.47
Consolidated Statement of Comprehensive Income
£000s
Profit for the year
Actuarial gains and losses on remeasurement of defined benefit pension scheme
Tax on remeasurement of defined benefit provision liability
Exchange differences*
Total recognised comprehensive income/(loss) 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 41 to 76 form part of these financial statements.
Year ended
31 Dec
2016
Year ended
31 Dec
2015
25,081
(261)
65
41,429
6,842
234
(63)
(9,181)
66,314
(2,168)
37
Accountsrpsgroup.com 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
2016
As at
31 Dec
2015
Note
11
12
19
14
16
17
15
18
16
17
19
18
20
21
455,508
28,448
5,953
489,909
165,604
16,503
182,107
36
13,376
125,165
4,472
1,809
144,858
37,249
99,886
1,634
2,496
10,045
1,790
115,851
411,307
6,703
114,353
40,898
249,353
411,307
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
These financial statements were approved and authorised for issue by the Board on 2 March 2017.
The notes on pages 41 to 76 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).
38
Report and Accounts 2016
Consolidated Cash Flow Statement
£000s
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:
Costs of issue of share capital
(Repayment of)/proceeds from bank borrowings
Payment of finance lease liabilities
Dividends paid
Payment of pre-acquisition dividend
Net cash generated in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of exchange rate fluctuations
Cash and cash equivalents at end of year
Cash and cash equivalents comprise:
Cash at bank
Bank overdraft
Cash and cash equivalents at end of year
The notes on pages 41 to 76 form part of these financial statements.
Year ended
31 Dec
2016
Year ended
31 Dec
2015
78,253
(5,077)
158
(11,057)
62,277
(6,557)
(23,672)
(8,130)
225
(38,134)
(5)
(6,921)
(47)
(21,613)
(850)
(29,436)
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)
(5,293)
255
17,322
4,474
16,503
16,503
–
16,503
17,046
21
17,322
17,801
(479)
17,322
Note
25
27
22
25
25
39
Accountsrpsgroup.com Consolidated Statement of Changes in Equity
£000s
At 1 January 2015
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
Changes in equity during 2016:
Total comprehensive income
Issue of new ordinary shares
Share based payment expense
Tax recognised directly in equity
Dividends paid
At 31 December 2016
Share
capital
6,640
–
27
–
–
–
6,667
–
36
–
–
–
6,703
Share
premium
110,100
–
1,926
–
–
–
112,026
–
2,327
–
–
–
114,353
Retained
earnings
256,386
7,013
(730)
1,889
63
(19,973)
244,648
24,885
(688)
2,184
(63)
(21,613)
249,353
Other
reserves
11,551
(9,181)
(1,221)
–
–
–
1,149
41,429
(1,680)
–
–
–
40,898
Total
equity
384,677
(2,168)
2
1,889
63
(19,973)
364,490
66,314
(5)
2,184
(63)
(21,613)
411,307
An analysis of other reserves is provided in note 21 and details of dividends paid are provided in note 22.
The notes on pages 41 to 76 form part of these financial statements.
40
Report and Accounts 2016
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 2016 comprise the Company and its subsidiaries (together
referred to as the “Group”).
The consolidated financial statements were authorised for issuance on 2 March 2017.
(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.
During the year, the Group has applied IFRS 10 (amended), IFRS 12 (amended) and IAS 28 “Investment Entities: Applying the
Consolidation Exception”, IFRS 11 (amended) “Accounting for Acquisitions of Interests in Joint Operations”, IAS 1 (amended)
“Disclosure Initiatives” and IAS 16 (amended) and IAS 38 (amended) “Depreciation and Amortisation”. 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 financial statements 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 income and Recharged expenses. Fee income represents the Group’s personnel, subcontractor
and equipment time and expertise sold to clients. Recharged expenses 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.
41
Accountsrpsgroup.com 1. Significant accounting policies continued
Accrued revenue is booked as a receivable in the consolidated balance sheet when the amount of revenue recognised on a
contract exceeds the amount invoiced. Where the amount invoiced exceeds the amount of revenue recognised, the difference
is booked as a payable on the balance sheet in deferred income.
(d) Deferred consideration
Deferred consideration arises when settlement of all or part of the cost of a business combination falls due after the date the
acquisition was completed.
It is stated at the fair value. 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.
(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 the income statement 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
4 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.
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.
42
Report and Accounts 2016 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 Group defines and presents various non-GAAP performance measures. The measures presented are those adopted by
management and analysts who follow us in assessing the performance of the business. Our principal non-GAAP measure
is profit before tax, amortisation and impairment of acquired intangibles and transaction related costs (PBTA). We adjust
for amortisation and impairment of acquired intangible assets as they are non-cash items and their measurement is based
on estimates of asset lives and fair values at acquisition where underlying assumptions are subjective in nature. We adjust
for acquisition related costs as they not dependent on the underlying performance of the business and only incurred when
acquisitions arise.
The non statutory measures are defined below:
Operating profit before
amortisation and impairment of
acquired intangibles and transaction
related costs (OPBA)
Profit before tax, amortisation and
impairment of acquired intangibles
and transaction related costs (PBTA)
Adjusted basic earnings per share
Adjusted diluted earnings per share
Segment profit
Statutory operating profit before amortisation and impairment of acquired intangibles
and transaction related costs
Statutory profit before tax before amortisation and impairment of acquired intangibles
and transaction related costs
Statutory basic earnings per share before amortisation and impairment of acquired
intangibles, transaction related costs and tax on amortisation and impairment of
acquired intangibles and transaction related costs (see note 10)
Statutory diluted earnings per share before amortisation and impairment of acquired
intangibles, transaction related costs and tax on amortisation and impairment of
acquired intangibles and transaction related costs (see note 10)
Statutory profit before tax before interest, amortisation of acquired intangibles,
transaction related costs and unallocated expenses
Underlying profit
Segment profit before reorganisation costs
Amortisation and impairment of
acquired intangibles and transaction
related costs
Reorganisation costs
EBITDAS
Amortisation of acquired intangibles (see note 1 (e) iii), plus impairment of acquired
intangibles plus third party transaction related costs (see note 4)
Costs and income arising as a consequence of reorganisation including redundancy costs,
profit or loss on disposal of plant, property and equipment, the costs of consolidating
office space and rebranding costs
Earnings before interest, tax, depreciation, amortisation and impairment of intangibles
and share scheme costs
(h) Judgements made in applying accounting policies
In the course of preparing the financial statements, no judgements have been made in the process of applying the Group’s
accounting policies , other than those involving estimations (see 1 (i) below), that have had a significant effect on the amounts
recognised in the financial statements.
(i) Sources of estimation uncertainty
In applying the Group’s accounting policies various transactions and balances are valued using estimates or assumptions. Should
these estimates or assumptions prove incorrect, there may be an impact on the following year’s financial statements. The
only source of estimation uncertainty at the end of 2016, that has a significant risk of resulting in a material adjustment to the
carrying amounts of assets and liabilities during 2017, relates to the assessment of the carrying value of goodwill within the
Energy cash generating unit. A discussion of this estimation uncertainty can be found in note 11.
43
Accountsrpsgroup.com 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 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
50 years
Life of lease
4 years
3 to 8 years
44
Report and Accounts 2016 (c) Trade and other receivables
Trade and other receivables are recognised at cost and carried at cost less impairment losses. Trade and other receivables
are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be
recoverable. Impairment losses are taken to the income statement as incurred.
(d) Cash and cash equivalents
Cash at bank comprises cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that
are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and
cash equivalents for the purposes of the consolidated cash flow statement.
(e) Employee benefits
i Defined contribution plans
Obligations for contributions to defined contribution retirement benefit plans are recognised as an expense in the income
statement as incurred.
ii Defined benefit plans
The cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out
at the end of each reporting period. Remeasurement gains and losses are recognised immediately in the balance sheet with a
charge or credit to the Statement of Comprehensive income in the period in which they occur. These remeasurement gains
and losses are not recycled to the income statement. Defined benefit costs are split into three categories:
–
current service cost, past service cost and gains and losses on curtailments and settlements (recognised in
administrative expenses)
– net interest expense or income (recognised in finance costs); and
–
remeasurement (recognised in other comprehensive income).
The retirement benefit obligation recognised in the Consolidated Balance Sheet represents the deficit in the Group’s defined
benefit scheme.
iii Share-based payments
The Group operates share based payment arrangements with employees. The fair value of equity settled awards for share
based payments is determined at grant and expensed straight line over the period from grant to the date of earliest
unconditional exercise.
The Group has calculated the fair market value of options using a binomial model and for whole share awards the fair value
has been based on the market value of the shares at the date of grant adjusted to take into account some of the terms and
conditions upon which the shares were granted.
Those fair values were charged to the income statement over the relevant vesting period adjusted to reflect actual and
expected vesting levels.
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.
45
Accountsrpsgroup.com Notes to the Consolidated Financial Statements continued
2. Other accounting policies continued
(h) Borrowings
Bank overdrafts and interest bearing loans are initially measured at cost. Borrowings are not discounted.
(i) Reserves
The description and purpose of the Group’s reserves are as follows:
Share premium
Premium on shares issued in excess of nominal value, other than on shares issued in respect of
acquisitions when merger relief is taken.
Merger reserve
Premium on shares issued in respect of acquisitions when merger relief is taken.
Employee trust
Own shares held by the SIP and ESOP trusts.
Translation reserve Cumulative gains and losses arising on retranslating the net assets of overseas operations into sterling.
Retained earnings
Cumulative net gains and losses recognised in the consolidated statement of comprehensive income and
consolidated statement of changes in equity.
(j) Expenses
i Operating lease payments
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the
lease. Lease incentives received are recognised as an integral part of the total lease expense.
ii Finance lease payments
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance
charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining
balance of the liability.
(k) Income tax
Income tax on the income for the years 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. 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.
46
Report and Accounts 2016 (m) Employee Share Ownership Plan (ESOP)
As the Company is deemed to have control of its ESOP trust, it is treated as a subsidiary and consolidated for the purpose of
the Group accounts. The ESOP’s assets (other than investments in the Company’s shares), liabilities, income and expenses are
included on a line-by-line basis in the Group financial statements. The ESOP’s investment in the Company’s shares is deducted
from shareholders’ funds in the Group balance sheet as if they were treasury shares.
(n) Accounting standards issued but not adopted
At the date of authorisation of these financial statements, the following standards and relevant interpretations, which have not
been applied in these financial statements, were in issue but not yet effective (and some of which were pending endorsement
by the EU):
n
n
n
n
IAS 12 (amended) “Recognition of Deferred Tax Asset for
Unrealised Losses””
IFRS 16 “Leases”
IAS 7 Disclosure Initiative
lFRIC 22 Foreign Currency Transactions and
Advance Consideration
n
n
n
n
lFRS 9 “Financial Instruments”
lFRS 15 “Revenue from Contracts”
lFRS 2 (amended) Classification and Measurement of
Share-based Payment Transactions
lFRS 15 Clarification to IFRS 15 Revenue from Contracts
with Customers
n Annual improvements to IFRSs: 2014-2016 Cycle
The Group is undertaking a detailed review of the potential impact of IFRS 15. We do not believe this standard will significantly
affect the Group’s revenue recognition as our accounting practices are generally in accordance with IFR 15. IFRS 15 will be first
applied to the Group’s financial statements for the year end 31 December 2018.
A full assessment of the impact of the other standards has not been undertaken yet. It is not practical to provide a reasonable
estimate of their impact until a detailed review has been completed.
3. Business and geographical segments
Segment information is presented in the financial statements in respect of the Group’s business segments, as reported to
the Chief Operating Decision Maker. The business segment reporting format reflects the Group’s management and internal
reporting structure.
Inter-segment pricing is determined on an arm’s length basis. Segment results include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis.
Business segments
The 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, project management, 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 mainly to the oil and gas 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”, “Underlying profit” and “Reorganisation costs” are defined in note 1(g)
47
Accountsrpsgroup.com
Notes to the Consolidated Financial Statements continued
3. Business and geographical segments continued
Segment results for the year ended 31 December 2016
£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 2015
£000s
BNE - Europe
BNE - North America
Energy
AAP
Group eliminations
Total
£000s
BNE - Europe
BNE - North America
Energy
AAP
Total
Group reconciliation
£000s
Revenue
Recharged expenses
Fee income
Fees
Expenses
Intersegment
revenue
External
revenue
269,029
65,382
71,490
130,140
(1,745)
534,296
36,166
6,398
9,327
8,439
(155)
60,175
(714)
(160)
(485)
(541)
1,900
–
Underlying
profit
Reorganisation
costs
35,598
8,156
8,989
15,481
68,224
(460)
(305)
(3,603)
(1,246)
(5,614)
304,481
71,620
80,332
138,038
–
594,471
Segment
profit
35,138
7,851
5,386
14,235
62,610
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
Year ended
31 Dec
2015
566,972
(60,862)
506,110
65,961
(2,028)
63,933
(7,088)
56,845
(41,940)
14,905
(5,050)
9,855
Year ended
31 Dec
2016
594,471
(60,175)
534,296
68,224
(5,614)
62,610
(6,733)
55,877
(17,890)
37,987
(5,173)
32,814
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
48
Report and Accounts 2016 £000s
BNE - Europe
BNE - North America
Energy
AAP
Unallocated
Group total
Carrying amount of
segment assets
Year ended
31 Dec
2015
Year ended
31 Dec
2016
Segment depreciation
and amortisation
Year ended
31 Dec
2015
Year ended
31 Dec
2016
342,993
80,441
101,459
147,164
373
672,430
298,159
74,821
114,440
131,009
4,245
622,674
9,423
5,303
2,468
8,043
623
25,860
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
2016
220,053
134,935
91,705
69,528
31,759
27,190
15,172
4,129
594,471
Revenue
Year ended
31 Dec
2015
231,094
106,167
102,290
48,587
28,955
23,766
18,516
7,597
566,972
£000s
UK
Australia
USA
Norway
Netherlands
Ireland
Canada
Other
Total
£000s
UK
Australia
USA
Ireland
Norway
Canada
Netherlands
Other
Total
Year ended
31 Dec
2016
186,939
126,366
83,486
68,129
26,803
24,585
13,927
4,061
534,296
As at
31 Dec
2016
202,352
108,309
62,144
40,537
44,672
13,857
18,463
8
490,342
Fees
Year ended
31 Dec
2015
198,876
97,317
93,180
47,255
24,231
20,186
17,637
7,428
506,110
Carrying amount of
non current assets
As at
31 Dec
2015
190,772
96,477
56,684
36,169
38,741
11,628
16,960
12
447,443
49
Accountsrpsgroup.com
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
Adjustments to consideration payable
Transaction costs
Year ended
31 Dec
2016
Year ended
31 Dec
2015
17,470
–
187
233
17,890
20,491
20,040
249
1,160
41,940
The impairment of acquired intangibles in 2015 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
16,612
2,927
501
20,040
The 2015 charge was in respect of customer relations, intellectual property, software and brand. We used the higher of the
value in use or fair value less costs to sell to estimate the recoverable amounts of the assets.
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 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
Year ended
31 Dec
2016
Year ended
31 Dec
2015
594,471
566,972
(290,024)
(129,395)
(20,702)
(8,371)
(19)
(540)
(14,119)
(4,967)
(13,434)
(19,550)
(17,470)
–
(187)
4,294
(233)
(41,767)
37,987
(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
50
Report and Accounts 2016 6. Net financing costs
£000s
Finance costs:
Interest and charges on loans, overdraft and finance leases
Amortisation of prepaid financing costs
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
2016
Year ended
31 Dec
2015
(3,982)
(359)
(990)
(5,331)
158
(5,173)
(3,847)
(299)
(1,086)
(5,232)
182
(5,050)
Year ended
31 Dec
2016
Year ended
31 Dec
2015
251,777
23,714
12,248
101
2,184
290,024
4,235
864
5,099
214,977
20,847
10,303
280
1,889
248,296
4,094
960
5,054
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 charge in respect of key management personnel
was £4,000 (2015: credit of £245,000).
51
Accountsrpsgroup.com
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
2016
Year ended
31 Dec
2015
50
524
574
27
–
601
63
–
63
51
50
461
511
27
27
565
61
–
61
4
715
630
Year ended
31 Dec
2016
Year ended
31 Dec
2015
3,115
7,297
(49)
10,363
(2,589)
(223)
182
(2,630)
1,656
11,300
(364)
12,592
(9,332)
(826)
579
(9,579)
Total tax charge to income for the year
7,733
3,013
Analysis of tax (credit)/expense not included in income for the year:
Deferred tax (credit)/charge in other comprehensive income
Deferred tax charge/(credit) in equity for the year
(65)
63
63
(63)
52
Report and Accounts 2016
The effective tax rate for the year on profit before tax is 23.6% (2015: 30.6%). The effective tax rate for the year on profit
before tax, amortisation and impairment of acquired intangibles and transaction related costs is 27.7% (2015: 29.6%) 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
2016
Year ended
31 Dec
2015
7,733
3,013
6,292
14,025
12,304
15,317
50,704
27.7%
51,795
29.6%
The Group operates in and is subject to income tax in many jurisdictions. The weighted average tax rate is derived by
weighting the rates in those jurisdictions by the profits before tax earnt there. It is sensitive to the statutory tax rates that apply
in each jurisdiction and the geographic mix of profits. The statutory tax rates in our main jurisdictions were UK 20% (2015:
20.25%), Australia 30% (2015: 30%), US 39% (2015: 37%). The 2015 geographic mix of profits was impacted by the
impairment of certain intangible assets which was not repeated in 2016. The impact of the change in the tax rates and mix of
profits was that the weighted average tax rate increased to 25.1% in 2016 from 24.5% in 2015.
The actual tax charge differs from the amount derived by applying the weighted average rate to the profit before tax for the
reasons set out in the following reconciliation:
£000s
Profit before tax
Tax at the weighted average rate of 25.1% (2015: 24.5%)
Effect of:
Irrecoverable witholding tax suffered
Impact of intercompany financing
Effect of change in tax rates
Other differences
Adjustments in respect of prior years
Total tax expense for the year
Year ended
31 Dec
2016
Year ended
31 Dec
2015
32,814
8,240
1,190
(1,664)
(223)
57
133
7,733
9,855
2,417
934
(1,403)
(826)
1,675
216
3,013
The Group operates, mainly through our Energy businesses, in jurisdictions that impose withholding taxes on revenue earned
in those jurisdictions. This tax may be off-set against domestic corporation tax either in the current year or in the future within
certain time limits. To the extent that full recovery is not achieved in the current year or is not considered possible in future
years the withholding tax is charged to the income statement.
The impact of intercompany financing relates to the funding of US operations. New legislation introduced in the UK in response
to the OECD’s Base Erosion and Profit Shifting project (BEPS) will apply from 1 January 2017 which will reduce the impact in
future periods.
During the year new legislation in the UK reduced the corporation tax rate by 1% to 17% from April 2020. In Norway the
rate reduced by 1% to 24% from 1 January 2017. These changes have resulted in an income statement credit arising from the
reduction in the balance sheet carrying value of net deferred tax liabilities to reflect the anticipated rate of tax at which those
liabilities are expected to reverse.
Other differences include expenses not deductible for tax purposes such as entertaining, share scheme charges, depreciation of
fixed assets which do not qualify for capital allowances and transaction related costs. They also include items that are deductible
for tax purposes, such as goodwill and other asset amortisation, but are not included in the income statement. The 2015 other
differences were higher than in 2016 as they included the impact of higher transaction related costs and the impairments of
intangible assets.
53
Accountsrpsgroup.com 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
2016
Year ended
31 Dec
2015
25,081
6,842
220,977
1,237
222,214
11.35
11.29
220,166
1,269
221,435
3.11
3.09
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
2016
Year ended
31 Dec
2015
25,081
17,890
(6,292)
36,679
16.60
16.51
6,842
41,940
(12,304)
36,478
16.57
16.47
54
Report and Accounts 2016 11. Intangible assets
£000s
Intellectual
property
rights
Customer
relationships
Order
backlog
Trade
names
Non
compete
agreements
Software
Goodwill
Total
Cost:
At 1 January 2016
Additions
Adjustments to prior year estimates
Exchange differences
At 31 December 2016
3,269
–
–
590
3,859
117,508
3,160
–
16,985
137,653
Aggregate amortisation and impairment losses:
At 1 January 2016
Amortisation
Exchange differences
At 31 December 2016
Net book value at 31 December 2016
3,257
12
590
3,859
–
73,749
13,073
10,434
97,256
40,397
17,881
620
–
2,686
21,187
15,469
2,275
2,387
20,131
1,056
8,401
190
–
1,298
9,889
7,096
1,329
1,205
9,630
259
576
–
–
58
634
576
–
58
634
–
2,818
–
–
600
3,418
1,151
781
306
2,238
1,180
379,724
9,279
534
35,300
424,837
530,177
13,249
534
57,517
601,477
12,221
–
–
12,221
412,616
113,519
17,470
14,980
145,969
455,508
Intangible asset additions in 2016 have been recognised at their provisional fair values (see note 27).
Acquisitions in 2015 were originally stated at provisional values. These fair values have now been finalised. The £534,000
adjustment relates to adjustments to the valuation of consideration in Metier and property, plant and equipment in EIG.
Intellectual
property
rights
Customer
relationships
Order
backlog
Trade
names
Non
compete
agreements
Software
Goodwill
Total
£000s
Cost:
At 1 January 2015
Additions
Adjustments to prior year estimates
Exchange differences
At 31 December 2015
3,128
–
–
141
3,269
105,660
13,990
–
(2,142)
117,508
14,661
3,689
–
(469)
17,881
Aggregate amortisation and impairment losses:
At 1 January 2015
Amortisation
Impairment
Exchange differences
At 31 December 2015
Net book value at 31 December 2015
1,172
333
1,672
80
3,257
12
43,239
12,999
18,077
(566)
73,749
43,759
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
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:
55
Accountsrpsgroup.com 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
As at
31 Dec
2016
162,549
9,836
34,108
47,789
90,875
67,459
412,616
As at
31 Dec
2015
149,116
9,118
27,361
40,064
76,523
65,321
367,503
The Group tests annually for impairment at year end. 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.
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 10.1% to 11.6% (2015: 10.4% to 13.6%).
Growth rates
The growth rates applied reflect management’s judgement regarding the potential future performance of the business. These
incorporate the expected recovery of CGUs affected by the 2015-16 reduction in oil price and the past experience of the
Group as it emerged from previous recessions. We expect the Group’s Energy businesses to recover in response to the
stabilisation of the oil price and any subsequent expansion of E&P investment.
The medium term comprises the years 2018 to 2021. The average real growth rate used during this period is between 2.5% and
7.5%, 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 (2015: 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
10.2%
11.2%
11.3%
3.0%
2.5%
7.5%
2.1%
2.5%
2.2%
During the year, all goodwill was tested for impairment with no impairment charge resulting (2015: £nil).
56
Report and Accounts 2016
Sensitivity of results to changes in estimates
The Group’s CGUs all have significant headroom with the exception of Energy. Aside from Energy, the Group does not consider
the changes in estimates that would result in a material adjustment to the carrying amounts of assets and liabilities in 2017 to be
reasonably possible.
The valuation of goodwill allocated to the Energy CGU group is most sensitive to the achievement of the 2017 budget. Budgets
comprise forecasts of revenue, staff costs and overheads based on current and anticipated market conditions that have been
considered and approved by the Board. Whilst we are able to manage staff costs, direct costs and overheads, the revenue
projections are inherently uncertain due to the short term nature of our order book and the oil and gas market conditions
which remains unpredictable.
The Energy market has undergone a significant downturn over the past 2 years and has only recently showed signs of
stabilisation. Energy underperformed substantially against its budget in 2016 and whilst not probable, it is possible that further
underperformance may occur in 2017 if the oil price drops back to the lows experienced in 2016 or expenditure by our clients
reduces. It is also reasonably possible that Energy exceeds its budget if market conditions allow.
A 60% underperformance against budget would generate an impairment charge of £28 million. For 2017, we consider it
reasonably possible that Energy goodwill may suffer an impairment charge of up to £28 million if market conditions worsen
significantly. A 34% underperformance against budget would reduce headroom for the Energy CGU group to nil but would not
result in an impairment charge.
57
Accountsrpsgroup.com Notes to the Consolidated Financial Statements continued
12. Property, plant and equipment
£000s
Cost:
At 1st January 2016
Additions
Disposals
Additions through acquisition
Foreign exchange differences
At 31 December 2016
Depreciation:
At 1st January 2015
Charge for the year
Disposals
Foreign exchange differences
At 31 December 2016
Net book value at 31 December 2016
£000s
Cost:
At 1 January 2015
Additions
Disposals
Transfers
Additions through acquisition
Foreign exchange differences
At 31 December 2015
Depreciation:
At 1 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
8,917
19
–
–
1,293
10,229
2,514
217
–
309
3,040
7,189
7,583
1,103
(3,255)
36
893
6,360
4,501
1,017
(2,754)
518
3,282
3,078
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
61,281
6,185
(3,093)
95
4,996
69,464
45,479
6,559
(2,851)
3,206
52,393
17,071
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
2,824
371
(415)
–
364
3,144
1,607
597
(396)
226
2,034
1,110
Motor
vehicles
2,906
630
(593)
–
17
(136)
2,824
1,661
546
(530)
–
(70)
1,607
1,217
Total
80,605
7,678
(6,763)
131
7,546
89,197
54,101
8,390
(6,001)
4,259
60,749
28,448
Total
80,997
8,109
(6,783)
–
713
(2,431)
80,605
53,626
8,101
(6,168)
–
(1,458)
54,101
26,504
58
Report and Accounts 2016
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 82.
14. Trade and other receivables
£000s
Trade receivables
Accrued income
Prepayments
Other receivables
Trade receivables and accrued income net of provision for impairmant are shown below.
£000s
Trade receivables
Provision for impairment
Trade receivables net
£000s
Accrued income
Provision for impairment
Accrued income net
As at
31 Dec
2016
118,664
33,294
9,536
4,110
165,604
As at
31 Dec
2016
124,702
(6,038)
118,664
As at
31 Dec
2016
37,710
(4,416)
33,294
As at
31 Dec
2015
112,718
28,533
10,716
5,463
157,430
As at
31 Dec
2015
123,593
(10,875)
112,718
As at
31 Dec
2015
32,105
(3,572)
28,533
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
2016
10,201
11,735
21,936
As at
31 Dec
2015
11,407
9,009
20,416
59
Accountsrpsgroup.com
Notes to the Consolidated Financial Statements continued
14. Trade and other receivables continued
Movements in impairment
£000s
As at 1 January 2016
Impairment charge
Recoveries
Receivables written off during the year as uncollectible
Additions through acquisitions
Exchange differences
As at 31 December 2016
As at 1 January 2015
Impairment charge
Recoveries
Receivables written off during the year as uncollectible
Additions through acquisitions
Exchange differences
As at 31 December 2015
Trade receivables Accrued income
10,875
2,155
(6,449)
(1,076)
255
278
6,038
4,464
8,838
(509)
(2,081)
146
17
10,875
3,572
3,443
(1,360)
(1,550)
–
311
4,416
4,062
2,878
(1,711)
(1,681)
175
(151)
3,572
31 Dec
2016
58,946
29,112
22,754
31,989
8,563
13,380
860
165,604
Total
14,447
5,598
(7,809)
(2,626)
255
589
10,454
8,526
11,716
(2,220)
(3,762)
321
(134)
14,447
31 Dec
2015
50,107
40,455
23,538
24,578
5,376
11,598
1,778
157,430
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
2016
33,825
42,039
24,389
17,850
7,062
125,165
As at
31 Dec
2015
30,375
36,781
20,597
15,695
8,861
112,309
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.
60
Report and Accounts 2016
16. Borrowings
£000s
Bank loans
US loan notes
Bank overdraft
Finance lease creditor
Arrangement fees
As at
31 Dec
2016
43,312
57,571
–
36
100,919
(997)
99,922
As at
31 Dec
2015
42,902
53,116
479
83
96,580
–
96,580
as at 31 December 2016
as at 31 December 2015
£000s
Bank loans,
notes and
overdraft
Finance
lease
creditor
Arrangement
fee
Bank
loans and
overdraft
Finance
lease
creditor
Total
The borrowings are repayable as follows:
Amounts due for settlement within 12 months
In the second year
In the third to fifth years inclusive
Over five years
Amount due for settlement after 12 months
Arrangement fee previously settled
Total
–
–
100,883
–
100,883
–
100,883
36
–
–
–
–
–
36
–
36
–
–
– 100,883
–
–
100,883
(997)
99,922
(997)
(997)
479
–
42,902
53,116
96,018
–
96,497
46
37
–
–
37
–
83
Total
525
37
42,902
53,116
96,055
–
96,580
The arrangement fees were incurred in 2014 and 2015 and included in prepayments at 31 December 2015.
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 1,500,000 repayable on demand.
(iii) The Group has one principal bank facility: a multicurrency revolving credit facility of £150,000,000 with Lloyds Bank plc 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 £43,312,000 (2015: £42,902,000) at 31 December 2016.
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 issued 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.
61
Accountsrpsgroup.com
Notes to the Consolidated Financial Statements continued
16. Borrowings continued
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
2016
3,201
3,201
108,265
–
114,667
2015
2,849
2,849
51,083
54,667
111,448
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. 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
2016
13,376
1,625
9
15,010
As at
31 Dec
2015
20,383
9,708
182
30,273
62
Report and Accounts 2016
18. 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 two years.
Dilapidations
The dilapidations provision is in respect of reinstatement obligations related to leasehold properties and will be utilised within
nine years.
£000s
As at 1 January 2016
Additional provision in the year
Utilised in year
Released
Arising on acquisition of subsidiary
Exchange difference
As at 31 December 2016
£000s
Due as follows:
Within one year
After more than one year
Property
Warranty
Dilapidations
49
586
(157)
(78)
–
–
400
486
552
(228)
–
–
41
851
2,268
706
(680)
(162)
78
138
2,348
As at
31 Dec
2016
1,809
1,790
3,599
Total
2,803
1,844
(1,065)
(240)
78
179
3,599
As at
31 Dec
2015
1,161
1,642
2,803
The carrying value of the provisions disclosed above is a reasonable approximation of their fair value.
63
Accountsrpsgroup.com Notes to the Consolidated Financial Statements continued
19. Deferred taxation
£000s
At 1 January 2015
Credit/(charge) to income for the year
(Charge)/credit to income due to change in
tax rate
Credit/(charge) to equity for the year
Additions through acquisitions
Exchange differences
At 31 December 2015
Disclosed within liabilities
Disclosed within assets
Credit/(charge) to income for the year
(Charge)/credit to income due to change in
tax rate
Credit/(charge) to equity for the year
Additions through acquisitions
Exchange differences
At 31 December 2016
Disclosed within liabilities
Disclosed within assets
Fixed asset
timing
differences
Goodwill and
intangible
assets
Employment
benefits
Share based
payments
Provisions
and other
timing
differences
(273)
201
(77)
–
12
(31)
(168)
678
(846)
968
(37)
–
–
6
769
622
147
(11,871)
9,676
990
–
(6,993)
1,003
(7,195)
(13,314)
6,119
1,691
300
–
(675)
(628)
(6,507)
(12,314)
5,807
2,399
(166)
(21)
–
216
(164)
2,264
2,235
29
(21)
(9)
65
–
449
2,748
2,735
13
118
(230)
16
63
–
–
(33)
(33)
–
(74)
8
(63)
–
2
(160)
(185)
25
796
(728)
(82)
(63)
(620)
67
(630)
391
(1,021)
(157)
(39)
–
–
(116)
(942)
(903)
(39)
Total
(8,831)
8,753
826
–
(7,385)
875
(5,762)
(10,043)
4,281
2,407
223
2
(675)
(287)
(4,092)
(10,045)
5,953
Legislation has been enacted to reduce the rate of corporation tax in the UK to 17% from 1 April 2020 and Norway to 24% from
January 2017. Accordingly deferred tax assets and liabilities in both countries have been calculated at the reduced rates of corporation
tax which materially reflects the rate for the period in which the deferred tax assets and liabilities are expected to reverse.
No deferred tax liability is recognised on temporary differences of £33,130,000 (2015: £36,964,000) 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 amount of tax that would be payable on the unremitted
earnings is £1,876,000 (2015: £7,370,000).
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 same fiscal authority.
64
Report and Accounts 2016
20. Share capital
Ordinary shares of 3p each
240,000,000
7,200
240,000,000
7,200
as at 31 December 2016
Authorised
£000s
Authorised
Number
as at 31 December 2015
Authorised
£000s
Authorised
Number
Issued and fully paid
Ordinary shares of 3p each
At 1 January
Issued under the Share Incentive Plan
Issued in respect of the Performance Share Plan
At 31 December
Number
222,234,251
905,362
295,401
223,435,014
Number
Ordinary shares held by the ESOP Trust
Ordinary shares held by the SIP Trust
2016
£000s
6,667
27
9
6,703
Number
221,347,707
552,368
334,176
222,234,251
As at
31 Dec
2016
2015
£000s
6,640
17
10
6,667
As at
31 Dec
2015
2,497,500
4,428,223
2,211,269
4,103,643
The ESOP Trust has elected to waive any dividend on the unallocated ordinary shares held.
The table below shows options outstanding at 31 December 2016:
Period exercisable
2017 - 2018
2017 - 2020
2017 - 2021
Number
165,000
60,000
175,000
400,000
Exercise price (p)
295.25
194.60
212.01
65
Accountsrpsgroup.com Notes to the Consolidated Financial Statements continued
21. Other reserves
£000s
At 1 January 2015
Exchange differences
Issue of new shares
At 31 December 2015
Exchange differences
Issue of new shares
At 31 December 2016
22. 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 2015 of 5.08p (2014: 4.42p) per share
Interim dividend for the year ended 31 December 2016 of 4.66p (2015: 4.66p) per share
Employee
trust
Translation
reserve
(10,776)
–
(1,221)
(11,997)
–
(1,680)
(13,677)
1,071
(9,181)
–
(8,110)
41,429
–
33,319
Year
ended
31 Dec
2016
11,267
10,346
21,613
Total
11,551
(9,181)
(1,221)
1,149
41,429
(1,680)
40,898
Year
ended
31 Dec
2015
9,668
10,305
19,973
Proposed final dividend for the year ended 31 December 2016 of 5.08p (2015: 5.08p) per share
11,315
11,260
The proposed final dividend for the year ended 31 December 2016 is subject to approval by shareholders at the Annual
General Meeting and has not been included as a liability in the financial statements.
23. Operating lease arrangements
At 31 December 2016 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 2016
Other
Property
as at 31 December 2015
Other
Property
13,911
24,625
3,328
41,864
1,623
2,450
–
4,073
10,500
19,148
4,268
33,916
2,102
3,189
6
5,297
66
Report and Accounts 2016 24. 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.
25. 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
Share based payment expense
Loss on sale of property, plant and equipment
EBITDAS
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Cash generated from operations
Year ended
31 Dec
2016
Year ended
31 Dec
2015
37,987
14,905
8,390
17,470
–
187
2,184
537
66,755
9,522
1,976
78,253
8,101
20,491
20,040
249
1,889
151
65,826
29,320
(2,518)
92,628
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 2016.
£000s
Cash at bank
Overdrafts
Cash and cash equivalents
Bank loans and notes
Finance lease creditor
At 31 Dec
2015
17,801
(479)
17,322
(96,018)
(83)
(78,779)
Cash flow
Acquisition
Prepaid
arrangement
fees
Foreign
exchange
At 31
Dec 2016
(5,821)
479
(5,342)
6,921
47
1,626
49
–
49
(4,900)
–
(4,851)
–
–
–
997
–
997
4,474
–
4,474
(6,886)
–
(2,412)
16,503
–
16,503
(99,886)
(36)
(83,419)
The cash balance at 31 December 2016 includes £3,036,000 (2015: £3,640,000) that is restricted in its use either as security or
client deposits.
26. 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
Year ended
31 Dec
2016
Year ended
31 Dec
2015
8,390
17,470
–
2,184
28,044
8,101
20,491
20,040
1,889
50,521
67
Accountsrpsgroup.com
Notes to the Consolidated Financial Statements continued
27. Acquisitions
On 25 April 2016 the Group completed the acquisition of 100% of the issued share capital of DBK Partners Ltd, a UK
based property project management consultancy that is included in the BNE: Europe segment. This acquisition broadens and
strengthens the services the Group offers.
The Group has allocated provisional fair values to the net assets of DBK as it did not have complete information at the balance
sheet date. The provisional amounts recognised in respect of the identifiable assets acquired and liabilities assumed, the fair value
of consideration and the resulting goodwill are as follows:
£000s
Intangible assets:
Order book
Customer relations
Trade names
Property, plant and equipment
Cash
Other assets
Other liabilities
Net assets acquired
Satisfied by:
Initial cash consideration
Fair value of deferred consideration
Total consideration
Goodwill
DBK
620
3,160
190
131
49
3,975
(8,360)
(235)
6,606
2,438
9,044
9,279
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 £1,663,000. The breakdown between gross receivables and amounts estimated
irrecoverable was as follows:
£000s
Gross recievables
Estimated irrecoverable
Fair value of assets acquired
1,918
(255)
1,663
The vendors of DBK have entered into warranty agreements with the Group. The total undiscounted cash flow that could
be receivable by the Group is between £nil and £1,663,000. 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 £420,000 which have been expensed through the income statement and are
included within amortisation of acquired intangibles and transaction related expenses.
68
Report and Accounts 2016 The contribution of DBK to the Group’s results for the year is given below.
£000s
Revenue
Fees
Operating profit before amortisation
Operating profit
9,501
9,108
1,491
649
The proforma Group revenue and operating profit assuming that the acquisition had been completed on the first day of the
year would have been £598,703,000 and £38,288,000 respectively.
A reconciliation of the goodwill movement in 2016 in respect of acquisitions made in 2015 and 2016 is given in the table
below.
£000s
Klotz
Metier
Iris
EIG
DBK
Goodwill at
1 January 2016
Additions
through acquisition
Adjustments to prior
year estimates
Foreign exchange
movement
Goodwill at
31 December 2016
9,372
13,662
5,446
11,431
–
–
–
–
–
9,279
–
503
–
31
–
1,805
3,141
1,050
2,138
–
11,177
17,306
6,496
13,600
9,279
There were no accumulated impairment losses at the beginning or end of the period.
No negative goodwill was recognised in 2015 or 2016.
28. 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.
69
Accountsrpsgroup.com
Notes to the Consolidated Financial Statements continued
28. Defined benefit pension scheme continued
The most recent full actuarial valuations of the plans’ assets and present value of the defined benefit liabilities were carried out
in November 2016 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
2016
2.10%
2.25%
2.00%
2015
2.50%
2.50%
2.50%
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. One scheme has assumptions of 2.0% and the other used nil % (2015: both used
3.0%).
The assumed life expectations on retirement at age 65 are:
Years
Retiring today:
Males
Females
2016
21.8
25.0
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
2016
101
50
151
The service charge for the year has been included in the income statement in administrative expenses. The net interest
expense has been included within finance costs.
Amounts recognised in the statement of comprehensive income are as follows:
2015
21.8
25.0
2015
280
25
305
£000s
Actuarial losses/(gains) arising from:
Changes in financial assumptions
Movements in payroll tax
Remeasurement of the net defined benefit liability
2016
2015
248
13
261
(205)
(29)
(234)
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
2016
(4,253)
3,475
(778)
2015
(3,553)
2,888
(665)
70
Report and Accounts 2016 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
Liabilities extinguished on settlements
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 financial assumptions
Exchange differences
Contributions from the employer
Assets distributed on settlement
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
2016
3,553
101
91
(293)
163
(168)
858
(52)
4,253
2016
2,888
41
17
268
423
(106)
(52)
(4)
3,475
2016
8.4%
3.2%
28.8%
47.5%
12.1%
100.0%
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%
71
Accountsrpsgroup.com Notes to the Consolidated Financial Statements continued
29. 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. 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 EBITDAS adjusted to include the anualised contribution of acquisitions in the year 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.
Seven year notes with principal of £30.0 million and $34.1 million were issued in September 2014 bearing fixed interest at
3.98% and 3.84% per annum, respectively. There are two financial covenants associated with these notes facility that are the
same as for the revolving credit facility above. 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
2016
16,503
156,068
172,571
99,922
15,010
89,021
203,953
As at
31 Dec
2015
17,801
146,714
164,515
96,580
30,273
80,982
207,835
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 GB Pounds
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 become 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.
72
Report and Accounts 2016 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
2015
(restated)
37,479
–
–
–
–
5,902
–
43,381
2016
33,964
–
–
–
–
8,612
–
42,576
Fixed rate
2015
(restated)
32,927
–
9,084
868
31,261
9,332
–
83,472
2016
32,213
–
3,696
–
31,423
5,024
–
72,356
Non interest bearing
2016
2015
2016
29,506
9,905
18,130
6,553
11,578
13,052
297
89,021
31,006
6,093
14,403
4,849
13,761
10,445
425
80,982
95,683
9,905
21,826
6,553
43,001
26,688
297
203,953
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
2015
(restated)
479
–
42,902
–
43,381
2016
–
–
42,576
–
42,576
Fixed rate
2015
(restated)
20,429
9,745
182
53,116
83,472
2016
13,412
1,625
57,319
–
72,356
Non interest bearing
2016
2015
2016
84,735
1,611
1,628
1,047
89,021
77,178
1,191
1,472
1,141
80,982
98,147
3,236
101,523
1,047
203,953
The weighted average interest rate and term for interest bearing financial liabilities is shown below:
Total
2015
101,412
6,093
23,487
5,717
45,022
25,679
425
207,835
Total
2015
98,086
10,936
44,556
54,257
207,835
Fixed and floating rate
financial liabilities
Weighted average interest rate %
2016
2015
Fixed rate
financial liabilities
Weighted average period for
which rate is fixed – months
2015
(restated)
2016
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
3.0
3.6
–
3.9
3.3
3.3
2.7
3.9
4.0
3.9
3.1
3.2
53
10
–
51
5
47
As at
31 Dec
2016
1,462
1,341
2,817
1,877
2,761
4,607
924
714
16,503
75
14
8
53
9
52
As at
31 Dec
2015
161
1,189
5,391
2,968
3,285
3,273
906
628
17,801
73
Accountsrpsgroup.com
Notes to the Consolidated Financial Statements continued
29. Financial Risk Management continued
Cash balances are held in either non-interest bearing current accounts or instant access deposit accounts earning floating
rate interest.
There are no interest bearing trade and other receivables.
Borrowing facilities
The Group has a committed revolving credit facility that expires in 2020. The amount undrawn under this facility at 31
December 2016 was £106,688,000 (2015: £107,098,000).
The Group also has an uncommitted £3,000,000 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 £728,000. A 1.0% increase in interest rates would decrease Group profit
before tax by £728,000.
(d) Foreign currency risk
The Group, which is based in the UK and reports in sterling, has significant investments in overseas operations in Australia, the
USA, Norway, Netherlands, Ireland and Canada 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.
74
Report and Accounts 2016 30. Share-based payments
Share scheme costs
£000s
Share Incentive Plan (“SIP”)
Performance Share Plan (“PSP”)
Bonus Plan
Total share scheme costs
The following tables set out details of material share schemes activity:
SIP
Year of grant
2013
2014
2015
2016
Year of grant
2012
2013
2014
2015
PSP
Year of grant
2009
2011
2012
2013
2014
2015
2016
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
New grants
–
–
–
851,448
851,448
New grants
–
–
–
674,260
674,260
New grants
–
–
–
–
–
–
526,876
526,876
Releases
(349,577)
(45,828)
(59,677)
(25,495)
(480,577)
Releases
(385,033)
(24,285)
(24,633)
(12,618)
(446,569)
Releases
(1,634)
(9,109)
(13,491)
(224,385)
(19,830)
(26,952)
–
(295,401)
Forfeits
(14,783)
(30,158)
(49,085)
(25,021)
(119,047)
Forfeits
(15,953)
(30,797)
(35,909)
(24,243)
(106,902)
Lapses
(27)
(990)
(3,999)
(2,927)
(35,896)
(42,131)
–
(85,970)
Year ended
31 Dec
2016
Year ended
31 Dec
2015
1,356
828
–
2,184
1,220
918
(249)
1,889
Number
outstanding
31 Dec 2016
–
358,406
528,637
800,932
1,687,975
Number
outstanding
31 Dec 2015
–
364,360
434,392
637,399
1,436,151
Number
outstanding
31 Dec 2016
83,366
60,539
68,642
82,170
350,755
441,900
526,876
1,614,248
Vesting
conditions
3 years
3 years
3 years
3 years
Vesting
conditions
3 years
3 years
3 years
3 years
Vesting
conditions
3 years
3 years
3 years
3 years
3 years
1, 2 or 3 years
3 years
75
Accountsrpsgroup.com
Notes to the Consolidated Financial Statements continued
30. Share-based payments continued
Year of grant
2006
2007
2009
2011
2012
2013
2014
2015
Number
outstanding
31 Dec 2014
2,148
1,828
105,248
88,112
375,219
325,706
414,778
–
1,313,039
New grants
–
–
–
–
–
–
–
523,380
523,380
Releases
(2,148)
(1,828)
(10,777)
(14,009)
(287,811)
(10,362)
(6,187)
(1,054)
(334,176)
Lapses
–
–
(9,444)
(3,465)
(1,276)
(5,862)
(2,110)
(11,343)
(33,500)
Number
outstanding
31 Dec 2015
–
–
85,027
70,638
86,132
309,482
406,481
510,983
1,468,743
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
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
169.50p - 342.69p
215.50p
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
201.67p
1, 2 or 3 years
1.83% - 5.52%
31. 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.
76
Report and Accounts 2016
Parent Company Balance Sheet
£000s
Fixed assets:
Intangible assets
Tangible assets
Investments
Current assets:
Debtors:
- due within one year
Cash at bank and in hand
Creditors: amounts falling due within one year:
Net current assets
Total assets less current liabilities
Creditors: Amounts falling due after more than one year
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
As at
31 Dec
2016
4
5
6
7
8
9
10
12
12
12
12
12
12
382
748
397,435
398,565
77,578
327
77,905
44,735
33,170
431,735
99,886
148
331,701
6,703
114,353
103,642
21,256
(13,677)
99,424
331,701
As at
31 Dec
2015
448
1,121
397,435
399,004
64,196
–
64,196
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
These financial statements were approved and authorised for issue by the Board on 2 March 2017.
The notes on pages 79 to 86 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).
77
Accountsrpsgroup.com
Parent Company Statement of Changes in Equity
£000s
At 1 January 2015
Changes in equity during 2015:
Issue of new shares
Share-based payment expense
Retained profit for the year
Non-distributable loss
Dividend paid (note 13)
At 31 December 2015
Changes in equity during 2016:
Issue of new shares
Share-based payment expense
Retained profit for the year
Dividend paid (note 13)
At 31 December 2016
Share
capital
Share
premium
Merger
reserve
Employee
trust shares
Profit and
loss reserve
Other
reserve
Total
6,640
110,100
21,256
(10,776)
109,530
142,721
379,471
27
–
–
–
–
6,667
36
–
–
–
6,703
1,926
–
–
–
–
112,026
2,327
–
–
–
114,353
–
–
–
–
–
21,256
–
–
–
–
21,256
(1,221)
–
–
–
–
(11,997)
(1,680)
–
–
–
(13,677)
(730)
1,889
24,743
–
(19,973)
115,459
(688)
2,184
8,300
(21,613)
103,642
–
–
–
(43,297)
–
99,424
–
–
–
–
99,424
2
1,889
24,743
(43,297)
(19,973)
342,835
(5)
2,184
8,300
(21,613)
331,701
The notes on pages 79 to 86 form part of these financial statements.
78
Report and Accounts 2016
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 22. 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 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 their 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.
Foreign currency translation
Foreign currency transactions are translated at the rates ruling when they occurred. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the balance sheet date.
Pension costs
Contributions to the Company’s defined contribution pension schemes are charged to the profit and loss account in the year in
which they become payable.
Share based employee remuneration
The Company’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.
79
Accountsrpsgroup.com Notes to the Parent Company Financial Statements continued
1. Accounting policies continued
Taxation
Current tax, including UK corporation tax, is provided at amounts expected to be paid (or recovered) using the tax rates and
laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised in respect of 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’s 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 Financial assets
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 Financial liabilities
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. Critical accounting judgements and key sources of estimation uncertainty
In the course of preparing the financial statements, no judgements have been made in the process of applying the Company’s
accounting policies , other than those involving estimations, that have had a significant effect on the amounts recognised in the
financial statements.
Sources of estimation uncertainty
In applying the Company’s accounting policies various transactions and balances are valued using estimates or assumptions.
Should these estimates or assumptions prove incorrect, there may be an impact on the following year’s financial statements.
The only source of estimation uncertainty at the end of 2016, that has a significant risk of resulting in a material adjustment to
the carrying amounts of assets and liabilities during 2017, relates to the testing for impairment of the Company’s investments.
An impairment of the carrying value of RPS Group Plc’s investment in its US subgroup is reasonably possible in 2017 because
some of our businesses there are exposed to the oil and gas market. The valuation of the investment is most sensitive to the
achievement of the 2017 budget. The budget comprises forecasts of revenue, staff costs and overheads based on current and
anticipated market conditions that have been considered and approved by the Board. Whilst we are able to manage staff costs,
direct costs and overheads, revenue projections are inherently uncertain due to the short term nature of our order book and
oil and gas market conditions.
80
Report and Accounts 2016 The US business underperformed against budget in 2016 and whilst not probable, it is possible that further underperformance
may occur in 2017 if the oil price drops back to the lows experienced in 2016 or expenditure by our clients reduces. Our US
business may exceed budget if market conditions allow. An underperformance against target may lead to an impairment of
this asset.
The investment value associated with the US business at 31 December was £144,552,000.
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 (2015: £50,000).
Year
ended
31 Dec
2016
Year
ended
31 Dec
2015
8,300
24,743
4. Intangible Assets
£000s
Cost
At 1 January 2016 and at 31 December 2016
Amortisation
At 1 January 2016
Charge for the year
At 31 December 2016
Net book value at 31 December 2016
Net book value at 31 December 2015
5. Tangible Assets
£000s
Cost or valuation
At 1 January 2016
Additions
Disposals
At 31 December 2016
Depreciation
At 1 January 2016
Provided for the year
Disposals
At 31 December 2016
Net book value at 31 December 2016
Net book value at 31 December 2015
Goodwill
2,134
1,686
66
1,752
382
448
Total
7,919
254
(808)
7,365
6,798
624
(805)
6,617
748
1,121
81
Alterations
to leasehold
premises
Fixtures,
fittings,
IT and
equipment
1,068
–
(559)
509
860
126
(559)
427
82
208
6,851
254
(249)
6,856
5,938
498
(246)
6,190
666
913
Accountsrpsgroup.com
Notes to the Parent Company Financial Statements continued
6. Investments
£000s
Subsidiary undertakings
Cost
At 1 January
Additions
At 31 December 2016
Provisions
At 1 January
Impairment
At 31 December 2016
Net book value at 31 December 2016
2016
2015
455,670
–
455,670
58,235
–
58,235
397,435
430,147
25,523
455,670
838
57,397
58,235
397,435
During 2015 £25,523,000 was invested in the USA subgroup to fund the acquisition of Klotz Associates Inc. and Iris
Environmental.
In 2015 the Group’s investment in its US business was impaired by £57,397,000.
Subsidiary undertakings
The principal activity of the majority of our trading subsidiaries is the provision of consulting services.
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.
Country of
registration
and
operation
Australia
C & B Plant Pty Ltd
Australia
Conics (Brisbane) Pty Ltd
Australia
Conics (Brisbane) Unit Trust Ltd
Australia
Conics (Cairns) Pty Limited
Australia
Conics (Gold Coast) Pty Ltd
Australia
Conics (Mackay) Pty Ltd
Australia
Conics (Mining & Infrastructure) Pty Ltd
Australia
Conics (Sunshine Coast) Pty Ltd
Australia
Conics (Sunshine Coast) Unit Trust
Australia
Conics (Sydney) Pty Ltd
Australia
Conics (Townsville) Pty Ltd
Australia
Conics Positioning Pty Ltd
Australia
Conics Pty Ltd
Australia
ECL DM Pty Ltd
Australia
ECL Drilling Management Pty Limited
Australia
ECL Pty Ltd
Australia
EHA Pty Ltd
Australia
Everything Infrastructure Consulting Pty Ltd
Australia
Everything Infrastructure Group Pty Ltd
Australia
Everything Infrastructure Services Pty Ltd
Australia
Geo Mapping Technologies Pty Ltd
Australia
Intelligent Infrastructure Pty Ltd
Australia
Manidis Roberts Employee Benefits Pty Ltd
Massie Cosgrove Pty Ltd
Australia
Natural Solutions Environmental Consultants Pty Ltd Australia
Australia
Newco (Brisbane) Pty Ltd
Australia
Newco (Sunshine Coast) Pty Ltd
Australia
Pioneer Surveys Pty Ltd
Australia
PMM Global Surveys Pty Ltd
Australia
PMM Holdings Pty Ltd
Australia
PMM Sydney Pty Ltd
Australia
Point Project Management Pty Ltd
Australia
RPS APASA Pty Ltd
Proportion
of ordinary
share
capital held
100% * RPS Aquaterra Pty Ltd
100% * RPS Australia East Pty Ltd
100% * RPS Australia West 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% * 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% * RPS Consultores do Brasil Ltda
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
Country of
registration
and
operation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Brazil
Canada
Canada
Canada
Canada
Canada
Canada
Canada
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% *
82
Report and Accounts 2016 Proportion
of ordinary
share
capital held
CgMs Holdings Limited
CgMs Limited
Clear Environmental Consultants Limited
DBK Partners 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
Country of
registration
and
operation
England
England
England
England
England
England
England
England
England
England
England
England
England
Geocon Asia Limited
100% * Utility Technical Services Limited
100% * WTW & Associates Limited
100% * X-IPEC Limited
100% * Metier Academy GmbH
100%
100% * RPS Consulting Engineers Limited
100% * RPS Engineering Services Limited
RPS Environmental Consultancy Limited
100%
100%
RPS Group Limited
100% * RPS MMA Limited
100% * RPS Planning & Environment Limited
100%
100%
RPS Properties Limited
Cambrian Consultants Asia Sdn. Bhd
Knowledge Reservoir Geoscience & Engineering
Sdn. Bhd
Country of
registration
and
operation
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% *
Malaysia
100% *
Malaysia
100% *
Mexico
100% *
Geophysical Consultants Limited
England
100% *
Geophysical Safety Resources Limited
England
100% * RPS Consultants Sdn Bhd
Hydrosearch Associates Limited
England
100%
Cambrian Consultants CC America, Inc S.de R.L.
de C.V.
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 Consulting Services Limited
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
Town Planning Consultancy Limited
TPK Consulting Limited
Troy Ikoda Limited
Troy-Ikoda Management Limited
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
Metier Trondheim AS
RPS advies-en ingenieursbureau bv
RPS Occupational Health Limited
Delphi Group Asia PTE Limited
Metier AB
Metier Academy AB
APA USA, Inc
Applied Science Associates Inc.
Cambrian Consultants America Inc.
100% * Aquaterra East Asia LLC
100%
100% * RPS Analyse BV
100% * RPS BV
100% * RPS Detachering BV
100% * RPS Consultants NZ Limited
100% * RPS Ireland Limited
100% * Delphi AS
100% * Knowledge Reservoir Holding AS
100% * Metier AS
100% * Metier Holding AS
100%
100% * Metier Vest AS
100% OEC Gruppen AS
100%
RPS Norway AS
100% * K.R. LLC (Oman)
100% * Point Project Management (PNG) Ltd
100% OceanFix International Limited
100%
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
100% *
100%
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%
100%
RPS JDC Inc.
100% * The Geocet Group LLC
100% * The Scotia Group Inc
Mongolia
Netherlands
Netherlands
Netherlands
Netherlands
New Zealand
Northern Ireland
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Oman
Papua New Guinea
Scotland
Scotland
Singapore
Sweden
Sweden
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
Iris Environmental
Klotz Associates 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% *
85% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100%
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
100% *
83
Accountsrpsgroup.com Notes to the Parent Company Financial Statements continued
7. Debtors
£000s
Amounts falling due within one year:
Amounts due from subsidiary undertakings
Other debtors
Prepayments and accrued income
8. Creditors – amounts falling due within one year
£000s
Borrowings
Trade creditors
Amounts due to from subsidiary undertakings
Other creditors
Accruals and deferred income
9. Borrowings
£000s
Bank loans
US loan notes
Arrangement fees
Due as follows:
After two years and within five years
Over five years
Arrangement fee previously settled
Details of the borrowings are disclosed in note 16 to the consolidated accounts.
31 Dec
2016
73,395
2,135
2,048
77,578
31 Dec
2016
–
1,834
40,081
552
2,268
44,735
31 Dec
2016
43,312
57,571
(997)
99,886
100,883
–
(997)
99,886
31 Dec
2015
59,077
1,916
3,203
64,196
31 Dec
2015
179
572
20,694
549
2,096
24,090
31 Dec
2015
42,902
53,116
–
96,018
42,902
53,116
–
96,018
84
Report and Accounts 2016
10. Provision for liabilities
£000s
As at 1 January 2016
Additional provision in the year
Utilised in the year
As at 31 December 2016
The provisions relate to property and dilapidations provisions.
The total provision is expected to be utilised as follows:
£000s
Within one year
After more than one year
11. Deferred taxation
The movement on deferred taxation in the year was as follows:
£000s
Net asset at beginning of year
Credit /(charge) to income for the year
Net asset at year end
The deferred taxation balances comprise:
£000s
Short term timing differences
Depreciation in excess of capital allowances
Deferred tax asset
Deferred tax is included within other debtors in the balance sheet.
Total
257
28
(137)
148
As at
31 Dec
2015
172
85
257
As at
31 Dec
2015
228
(106)
122
As at
31 Dec
2015
(46)
168
122
As at
31 Dec
2016
140
8
148
As at
31 Dec
2016
122
27
149
As at
31 Dec
2016
(58)
207
149
85
Accountsrpsgroup.com
Notes to the Parent Company Financial Statements continued
12. Share capital and reserves
Ordinary shares of 3p each
At 1 January 2016
At 31 December 2016
Authorised
Value
£000s
Number
Allotted and fully paid
Value
£000s
Number
240,000,000
240,000,000
7,200
7,200
222,234,251
223,435,014
6,667
6,703
Full details of the share capital of the Company are disclosed in Note 20 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.
13. Dividends
Details of dividends paid by the Company are disclosed in Note 22 of the Consolidated Financial Statements.
14. 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
2015
31 Dec
2016
272
152
424
535
302
837
31 Dec
2016
96
140
236
Other
31 Dec
2015
79
112
191
15. Directors’ interests in transactions
There were no transactions during the year in which the Directors had any interest.
86
Report and Accounts 2016 Notes to Remuneration Committee Annual Report
1. Remuneration Policy and Implementation in 2017
The Company’s remuneration policy was approved by shareholders at a General Meeting held on 30 November 2016 and will
apply for a three year period from 1 January 2017. The key components of this policy as they apply to the Executive Directors
of the Company including planned implementation for 2017 are set out in the table below. The full policy statement is available
on the Company’s website.
Element, purpose and
link to strategy
Base salary
To provide
competitive fixed
remuneration that will
attract and retain key
employees and reflect
their experience and
position in
the Group.
Operation and maximum opportunity
Performance measures
and assessment
Changes from the previous policy
and implementation for 2017
A broad assessment of individual and
business performance is used as part of the
salary review.
No change to the current policy
other than to the comparator
group which is now organisations
of comparable size and/or sector to
RPS in the FTSE All Share.
With effect from 1 January 2017
Alan Hearne’s salary will be
unchanged at £581,400 and
Gary Young’s has been increased
to £310,000.
An Executive Director’s basic salary
is considered by the Remuneration
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
Remuneration Committee, where it is
relevant, benchmarks the remuneration
against the Company’s comparator group
(organisations of comparable size and or
sector to RPS in the FTSE All Share).
The results of benchmarking will,
however, only be one of a number
of 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 Group;
and
• the economic environment.
The Remuneration Committee policy in
relation to salary is:
• around median salary on appointment
depending on the experience and
background of the new Executive
Director; and
• on promotion, up to the median salary
for the new role.
Annual percentage increases are generally
consistent with the range awarded across
the Group. Percentage increases in
salary above this level may be made in
certain circumstances, such as a change
in responsibility or a significant increase
in the scale of a role or the Group’s size
and complexity.
Individuals who are recruited or
promoted to the Board may, on occasion,
have their salaries set below the targeted
policy level until they become established
in their role. In such cases subsequent
increases in salary may be higher than
the average until the target positioning is
achieved.
87
Accountsrpsgroup.com Notes to Remuneration Committee Annual Report continued
Element, purpose and
link to strategy
Benefits
To provide
competitive benefits
and to attract and
retain high calibre
employees.
Operation and maximum opportunity
Performance measures
and assessment
Changes from the previous policy
and implementation for 2017
Not applicable.
No change to previous benefits
policy.
Benefits for 2017 will be provided
in accordance with the policy.
The Remuneration Committee’s policy is
to provide a market competitive benefits
package.
The Executive Directors may receive the
following benefits:
• healthcare;
• life assurance and dependants’ pensions;
• disability schemes;
• company car or car allowance; and
• other benefits as provided from time
to time, such as relocation allowances on
recruitment.
Benefit values vary year on year
depending on premiums and the
maximum potential value is the cost
of the provision of these benefits.
Pension
To provide a
competitive company
contribution that
enables effective
retirement planning.
The Executive Directors are eligible
to participate in defined contribution
pension schemes, or receive a salary
supplement or a combination of
the two.
Not applicable.
Other than basic salary, no element
of the Directors’ remuneration is
pensionable. Salary supplements are not
included in base salary to calculate other
benefits and incentive opportunities.
The maximum employer contribution
either to a pension scheme and/or
provided as a salary supplement is 25% of
basic salary.
The RPS Group Plc Short Term Annual Bonus Plan (the ‘STABP’)
No change to previous pension
policy.
Pension benefits for 2017 will
be provided in accordance with
the policy.
To incentivise
achievement of
annual objectives
which support the
Group’s short-term
performance goals.
Maximum awards each year under the
STABP are equal to 150% of salary.
The performance period is one financial
year with pay-out determined by the
Remuneration Committee following the
year end, based on achievement against a
range of financial and non-financial targets.
50% of the bonus award will be paid out
in cash with the remaining 50% deferred
into shares subject to a further three
year vesting period. There are no further
performance targets applicable to the
deferred amount.
Malus and clawback provisions may apply
at the discretion of the Remuneration
Committee where it considers such
action is reasonable and appropriate.
Performance targets will be set by the
Remuneration Committee annually based
on a range of financial and non-financial
measures.
Financial targets govern the majority
of bonus payments, although non-
financial metrics may also be used. The
Remuneration Committee will determine
the weighting of the various measures and
targets to ensure that they support the
business strategy and objectives for the
relevant year.
Targets are typically structured on a
challenging sliding scale, with zero pay-
out accruing for achieving threshold
performance through to full pay-out for
maximum performance.
The malus period would be up to the
date of the bonus determination and
three years after in respect of deferred
shares under the STABP. The clawback
period will be three years from the date
of the bonus determination for any cash
payments under the STABP.
Participants may be entitled to dividend
equivalents representing the dividends
paid during the deferral period of the
shares.
The Remuneration Committee has the
discretion to adjust targets or performance
measures for any exceptional events that
may occur during the year.
The Remuneration Committee has the
discretion to make downward or upward
movements to the amount of bonus
earned resulting from the application of the
performance measures if it believes that the
bonus outcomes are not a fair and accurate
reflection of business performance.
The previous Bonus Plan has been
replaced by the STABP.
Under the STABP the maximum
award level is 150% which is
a reduction from the 200%
maximum under the Bonus Plan.
The deferral period under the
STABP has increased from two to
three years.
There are no other changes to the
annual incentive.
The bonus opportunity in 2017 will
be 100% of salary for the Group
Chief Executive and 125% of salary
for the Group Finance Director.
The bonus awards in 2017 will
be subject to the achievement
of three measures: PBTA (70%
weighting), cash conversion (20%
weighting) and personal objectives
(10% weighting).
The Committee considers
prospective disclosure of targets to
be commercially sensitive, however
will disclose targets retrospectively
following the financial year end.
88
Report and Accounts 2016 Element, purpose and
link to strategy
The RPS Group Plc Executive Long Term Incentive Plan (the ‘ELTIP’)
Operation and maximum opportunity
Performance measures
and assessment
To incentivise
Executives to achieve
sustainable, strong,
long term performance
for the Company, to
retain key individuals
and to align their
interests with
shareholders.
Under the ELTIP, the Remuneration
Committee may award annual grants of
performance share awards in the form
of nil-cost options or conditional shares
(‘ELTIP awards’).
Maximum ELTIP awards each year are
equal to 150% of base salary (200% of
salary in exceptional circumstances).
Financial and non-financial measures may
be applied to awards under the ELTIP.
Targets are typically structured on a
challenging sliding scale, with no more
than 20% of the maximum award vesting
for achieving the threshold performance
level through to full vesting for maximum
performance.
ELTIP awards will normally vest after a
three year performance period subject
to the achievement of the performance
measures.
The Remuneration Committee has the
discretion to adjust targets or performance
measures for any exceptional events that
may occur during the vesting period.
The Remuneration Committee will retain
the discretion to determine whether to
attach a holding period to a particular
award at the date of each grant.
Malus and clawback provisions may apply
at the discretion of the Remuneration
Committee where it considers such
action is reasonable and appropriate.
The malus period would be up to the
date of vesting (i.e. three years from the
grant date). The clawback period will be
two years from the date of vesting.
Participants may be entitled to dividend
equivalents representing the dividends
paid during the deferral period of
the shares.
The Remuneration Committee has the
discretion to make downward or upward
movements in the vesting of the ELTIP
resulting from the application of the
performance measures if the Remuneration
Committee believes that the outcomes
are not a fair and accurate reflection of
business performance.
The Remuneration Committee will review
the performance measures annually, in
terms of the range of targets, the measures
themselves and weightings applied to each
element of the ELTIP. Any revisions to the
measures and/or weightings in future years
will only take place if it is necessary because
of developments in the Group’s strategy
and, where these are material, following
dialogue with the major shareholders.
Changes from the previous policy
and implementation for 2017
The ELTIP has been introduced
in 2017 in order to provide
an increased focus on long-
term performance. Under the
previous policy the only variable
remuneration provided was the
Bonus Plan.
The ELTIP awards granted in 2017
will be 100% of salary for the
Group Chief Executive and 125%
of salary for the Group Finance
Director.
2017 ELTIP awards will vest subject
to the achievement of three
measures: EPS (25% weighting),
relative TSR (50% weighting) and
cash conversion (25% weighting).
Performance targets will be as
shown in the separate table below.
Not applicable.
No change to previous policy.
Not applicable.
Shareholding guidelines have
increased from 150% of salary
to 200% of salary for the Chief
Executive and from 100% of
salary to 150% of salary for other
Executives.
All-Employee Incentives
To encourage all
employees to become
shareholders and
thereby align their
interests with those of
shareholders.
Shareholding Guidelines
To ensure that
Executive Directors’
interests are aligned
with those of
shareholders over the
longer term.
Eligible employees may participate in
the Share Incentive Plan or country
equivalent. Executive Directors will be
entitled to participate on the same terms.
Maximum participation levels for all staff
are set by reference to the plan rules and
relevant legislation.
Executive Directors are required to build
or maintain (as relevant) the following
minimum shareholding in the Company:
• 200% of base salary for the Chief
Executive; and
• 150% of base salary for other
Executives.
Shares included in this calculation are
those held beneficially by the Executive
Director and his or her spouse/life
partner.
The shareholding requirement is
determined by the Remuneration
Committee and may be up to 200%
of salary.
Executive Directors will be required to
retain 50% of the post-tax number of
shares vesting under the STABP and
ELTIP until their requirement is met
and then maintained.
89
rpsgroup.com Notes to Remuneration Committee Annual Report continued
The following performance targets will apply to the LTIP awards to be made to Executive Directors in 2017.
Performance measure
Measurement period
Performance target
Upper Quantile
Total Shareholder Return
relative to the FTSE All Share
Three financial years
Median to Upper Quartile
Average Annual Growth in
Earnings per share (measured
on a constant currency basis)
Below Median
12% p.a.
Three financial years
Between 4% and 12% p.a.
Below 4% p.a.
105%
Cash collection
Three financial years
Between 85% and 105% p.a.
85%
Vesting level (% maximum)
100%
Pro rata on a straight line basis
between 20% and 100%
0%
100%
Pro rata on a straight line basis
between 20% and 100%
0%
100%
Pro rata on a straight line basis
between 20% and 100%
0%
2. Single figure remuneration table – Notes for financial year ended 31 December 2016
The single figure table is set out on page 30 of this report.
Benefits and pension
The value for benefits for each Executive Director shown in the Single Figure Remuneration 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 2016
For 2016 the Maximum Annual Contributions under the RPS Group Plc 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 (70%), cash collection (20%) and personal
objectives (10%). In addition, for 2016 the Remuneration Committee set a minimum PBTA level of £50m which had to be
reached before any bonus contribution in respect of the cash collection and personal objectives elements could be earned.
The bonus value included within the Single Figure Remuneration for 2016 has been calculated as set out below. This shows the
performance targets for 2016, their level of satisfaction and the corresponding level of bonus earned by each of the Executive
Directors.
PBTA
No bonus contribution was earned in respect of the element relating to PBTA as the threshold level of performance was not
achieved. However, as the PBTA for 2016 was £ 50.7m which is above the underpin set of £50m, the Executive Directors were
eligible to earn bonus contributions in respect of the other elements.
Cash Collection
In respect of cash collection, bonus contribution could be earned at an entry point of 85% with a straight line basis applying up
to 110%, at which point the maximum contribution for this element could be earned. Cash collection for the year was at 117%
with the result that the maximum contribution was earned by each Executive Director for this element.
Personal Objectives
In respect of personal objectives the Remuneration Committee determined that no bonus contribution would be paid to either
Alan Hearne or Phil Williams, but that the maximum contribution would be payable to Gary Young. The personal objectives for
Gary Young related to the development of the Group Finance function.
90
Report and Accounts 2016 Based on the performance described above the bonus contributions for each of the Executive Directors for 2016 were
as follows.
Executive
Director
Bonus attributable
to PBTA (70%)
Bonus attributable
to Cash collection
(20%)
Bonus attributable
to Personal
Objectives (10%)
Total Bonus
contribution
Amount of Bonus
contribution paid
in cash
Amount of Bonus
contribution
deferred shares
(see below)
Alan Hearne
Phil Williams
Gary Young
£0
£0
£0
£232,500
£112,500
£86,500
£0
£0
£43,000
£232,500
£112,500
£129,500
£0
£232,500
£112,500
£64,750
£0
£64,750
In respect of Gary Young and in accordance with the normal terms of the Plan one half of the bonus contribution will be paid
in cash and the balance deferred in shares for a period of two years. In respect of Alan Hearne the Committee determined the
entire bonus contribution should be deferred in shares for a period of two years. The number of deferred shares in respect of
the bonus will be disclosed in next year’s Report following their grant in March 2017.
Phil Williams’ employment with the Company will end on 20 March 2017 and as a good leaver under the rules of the Plan any
shares deferred under the Plan would be released at that time. The Remuneration Committee accordingly determined that
his bonus contribution in respect of 2016 would be paid wholly in cash. In line with the Company’s Remuneration Policy the
amount of bonus earned has been pro-rated to the period of the financial year which he worked as an Executive Director.
3. Incentive grants to Executive Directors made during the financial year ending 31 December 2016
There were no incentive grants made to Executive Directors under the RPS Group Plc Bonus Plan during the year to 31
December 2016. The only share awards made to Executive Directors during the year were in respect of the Company’s all
employee Share Incentive Plan.
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 2016.
Executive Director
Alan Hearne
Phil Williams
Gary Young
Number of shares
Value of shares £
1,657
929
1,858
3,018
1,755
2,668
Shares are valued by reference to their price as at date of award. The shares shown as awarded to Phil Williams are in respect
of the period up to his retirement as a Director.
As noted above an award of deferred shares in respect of bonus earned under the RPS Group Plc Bonus Plan for 2016 will be
made to Alan Hearne and Gary Young in March 2017.
4. Payments to past Directors
Following his retirement from the Board Phil Williams is being paid his normal contractual entitlements being salary, pension and
benefits for the balance of his notice period up to 20 March 2017 and is being treated as a good leaver for the purpose of the
RPS Group Plc Bonus Plan.
91
rpsgroup.com Notes to Remuneration Committee Annual Report continued
5. 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.
6. Total shareholding of Directors
The table below shows the total shareholding for each Director.
Unconditional shares
Conditional Matching shares
under the SIP
Total
Shares held at
31/12/16
Shares held at
24/02/17
Shares held at
31/12/16
Shares held at
24/02/17
Shares held at
31/12/16
Shares held at
24/02/17
Executive Director
Alan Hearne
Gary Young
Phil Williams*
Non-Executive Director
Ken Lever
John Bennett
Louise Charlton
122,019
107,289
290,076
–
–
–
122,204
107,474
n/a
–
–
–
Robert Miller–Bakewell
10,000
10,000
2,015
2,016
1,804
–
–
–
–
2,050
2,051
n/a
–
–
–
–
124,034
109,305
291,880
–
–
–
124,254
109,525
n/a
–
–
–
10,000
10,000
*Interests for Phil Williams are shown as at 30 September 2016 being his date of retirement from the Board.
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 (as applicable from 1 January 2017) and the
extent to which that guideline was met at 31 December 2016.
Alan Hearne
Gary Young
Guideline % salary
Value of shareholding
required £
Value of unconditional
shares £
200
150
1,162,800
432,900
271,492
238,718
The value shown for unconditional shares is based upon the Company’s share price as at 31 December 2016.
92
Report and Accounts 2016 7. 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 eight year period.
Total shareholder return from 1 January 2009
£
350
300
250
200
150
100
50
0
m
a
e
r
t
s
a
t
a
D
n
o
s
m
o
h
T
:
e
c
r
u
o
S
RPS Group
FTSE AllShare
FTSE AllShare Support Services
(all rebased to RPS)
2009
2010
2011
2012
2013
2014
2015
2016
8. 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
2015
748
2016
981
zero
46%
54%
77%
47%
32%
zero
20%
100%
zero
13%
100%
zero
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.
93
rpsgroup.com
Notes to Remuneration Committee Annual Report continued
9. Percentage Change in Remuneration of Chief Executive
The following table shows the percentage change in the Chief Executive’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 2015 Financial Year to 2016 Financial Year
CEO
0%
0%
n/a*
Employees
2.9%
2.5%
13.2%
* As the Chief Executive received a bonus for 2016 but no bonus in 2015, it is not possible to express this change in percentage terms.
10. Relative Importance of Spend on Pay
The chart below shows the total remuneration paid to or receivable by all employees of the Company and total distributions
to shareholders by way of dividends for the current and previous financial years:
£000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
Total employee pay
+16.8%
PBTA
-2.1%
Dividend
+8.2%
2015
2016
Profit before tax and amortisation is a key performance indicator for the Group and was the principal performance measure
used under the RPS Plc Bonus Plan. The significant increase in employee pay resulted in part from the impact of currency
fluctuations. Measured on a constant currency basis this increase would have been 8.5%, although of this increase the substantial
majority reflected the impact of acquisitions made in 2015 being included for the whole year.
11. 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.
94
Report and Accounts 2016
Committee members
The current members of the Committee are Robert Miller-Bakewell (Chairman), Louise Charlton and John Bennett all of whom
are independent Non–Executive Directors. Andrew Page served as a member of the Committee until his retirement as a
Director in April 2016. John Bennett joined the Committee on his appointment as a Director in April 2016. The Chief Executive
of the Company attends meetings by invitation and where this is pertinent to the matters under discussion, but is never present
when his own remuneration is under discussion. Representatives of PricewaterhouseCoopers LLP (‘PwC’) also attend some
meetings of the Committee. The Company Secretary acts as secretary to the Committee.
None of the members of the Committee has any personal financial interest (other than as shareholders), or conflicts of
interests arising from other directorships or day–to–day involvement in running the business of the Company.
Further information on meetings and attendance by the Committee members is disclosed in the Corporate Governance report
on page 24.
External advice
During 2016 the Committee received external advice in relation to executive remuneration from PwC. PwC have acted as
advisors to the Committee for several years, having previously been appointed by the Committee following a review process.
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. PwC has no other connections with the Company.
The total fees paid to PwC in the year for services to the Committee amounted to £110,000. 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. The significant majority of this has related to development of the new remuneration policy which was
approved by shareholders during the year. No contingent fee arrangements were operated.
12. Statement of Shareholder voting
The Remuneration Committee’s Annual Report for 2015 was approved at the Company’s 2016 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
158,006,453
5,900,724
163,907,177
2,308,635
96.4
3.6
100
–
The Company’s new Remuneration Policy was approved at a General Meeting held on 30 November 2016. The voting in
respect of this resolution is as shown below.
Policy statement
Votes for
Votes against
Total
Witheld
Number of Votes Cast
% of Votes Cast
159,064,587
16,607,705
175,672,292
3,167,972
90.55
9.45
100
–
95
Accountsrpsgroup.com Five Year Summary
£000s
2016
2015
2014
2013
2012
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
594,471
534,296
50,704
(83,419)
411,307
78,253
5,099
9.74p
16.60p
16.51p
566,972
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
The Five Year Summary does not form part of the audited financial statements.
96
Report and Accounts 2016 Cover image: Acid crater lake on White Island, New Zealand.
RPS’ expertise in community creation has been called on to
assist urban growth in the Bay of Plenty.
Contact:
RPS Group Plc
20 Western Avenue
Milton Park
Abingdon
Oxfordshire
OX14 4SH
rpsgroup.com
46709