Cover image: Dublin Port, Ireland.
RPS assisted Dublin Port Company to
secure planning permission for the
Alexandra Basin Redevelopment.
REP ORT & A CCO UNTS
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Contact:
RPS Group Plc
20 Western Avenue, Milton Park
Abingdon, Oxon OX14 4SH
T +44 (0)1235 863206
Registered in England No. 2087786
rpsgroup.com
49191
Secure & Stable
ADDING VALUE
2017
Secure & Stable
ADDING VALUE
RPS has grown into one of the world’s pre-eminent consultancies by
underpinning our local connections with the resources and knowledge of
an international business. We employ around 5,500 people across Europe,
North America and Australia Asia Pacific.
CONTENTS
SUMMARY INFORMATION
04 Performance Highlights
STRATEGIC REPORT
06 Chairman’s Statement
08 Business Model
10 Group Strategy
12 Risk and Risk Management
16 Corporate Social Responsibility
20 Chief Executive’s Review
23 Finance Review
DIRECTORS
26 The Board
28 Report of the Directors
CORPORATE GOVERNANCE
32 Chairman’s Introduction
33 Corporate Governance Report
36 Nomination Committee Report
38 Audit Committee Report
41 Remuneration Committee Report
ACCOUNTS
57 Independent Auditor’s Report
64 Consolidated Income Statement
64 Consolidated Statement of Comprehensive Income
65 Consolidated Balance Sheet
66 Consolidated Cash Flow Statement
67 Consolidated Statement of Changes in Equity
68 Notes to the Consolidated Financial Statements
103 Parent Company Balance Sheet
104 Parent Company Statement of Changes in Equity
105 Notes to the Parent Company Financial Statements
114 FIVE YEAR SUMMARY
rpsgroup.com
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3
Secure & Stable
ADDING VALUE
RPS has grown into one of the world’s pre-eminent consultancies by
underpinning our local connections with the resources and knowledge of
an international business. We employ around 5,500 people across Europe,
North America and Australia Asia Pacific.
rpsgroup.com
PeRFORMance highlights
Financial highlights
n
n
n
n
n
n
n
n
Fee income £562.3m (2016 £534.3m); 5% growth; 2% growth at
constant currency
PBTA £53.9m (2016 £50.7m); 6% growth; 3% growth at constant currency
EPS (adjusted, basic) 17.13p (2016 16.60p); 3% growth; 3% growth at
constant currency
Goodwill impairment of £40.0m (2016 £nil) in Energy
Statutory loss before tax £1.6m (2016 profit £32.8m)
Strong cash conversion 91% (2016 117%)
Year-end net bank borrowings £80.6m (2016 £83.4m); leverage 1.3x
(2016 1.6x)
Final dividend proposed 5.08p (2016: 5.08p) making full year dividend 9.88p
(2016: 9.74p).
Business highlights
n
n
n
n
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Conditions in markets, other than Energy, generally positive
Energy trading improved in the second half but was not as good as expected
despite the increased oil price
Profit growth achieved in all four business segments
Appointment of new Chief Executive. Initial review of Group
strategy concluded
Renewed emphasis to be placed on organic growth supported by
targeted acquisitions
n
Five strategic priorities established to support future growth
4
4
REPORT AND A CCOUNTS 2017 | SUMMARY INFORMATION
2017
2016
REVENUE (£m) 630.6
594.5
FEE INCOME(1) (£m) 562.3
534.3
PBTA (1) (£m) 53.9
STATUTORY (LOSS)/
PROFIT BEFORE TAX
(£m) (1.6)
50.7
32.8
ADJUSTED EARNINGS
PER SHARE (basic)(1) (p) 17.13
16.60
TOTAL DIVIDEND
PER SHARE (p) 9.88
9.74
(1) Alternative Performance Measures are used consistently throughout the Report and Accounts.
These include PBTA, fee income, items prefaced “adjusted” such as adjusted EPS, segment profit,
underlying profit, underlying operating profit, amounts labelled “at constant currency”, EBITDAS,
conversion of profit into cash, net bank borrowings and leverage. For further details of their
purpose, definition and reconciliation for the equivalent statutory measures see note 3 to the
financial statements.
rpsgroup.com
5
5
rpsgroup.com chaiRMan’s stateMent
A year of transition in which steady improvement in trading performance
has been combined with progress in developing Group strategy.
PeRFORMance
During 2017 RPS Group Plc (‘the
Group’) has steadily built on the
recovery of trading profits and cash
flow which commenced in the final
quarter of 2016.
Fundamentally the Group’s markets
in the various regions are driven by
the impact of population growth on
infrastructure, the built and natural
environment and the needs for energy
and water. The rate of growth can
vary in the short term and across the
markets and geographic regions in which
the Group operates. The reduction in
the market for energy services due to
the decline in the oil price significantly
impacted the Group’s financial
performance in 2015 and 2016. This
market has remained subdued despite
the overall improvement of the price of
oil, but the Group’s other markets have
generally remained robust.
Overall, excluding the impact of
the costs associated with the Board
and management changes as well as
goodwill impairment in the Group’s
Energy business, the Group has seen
steady growth in revenue and profit.
The performance of the Energy
business remained challenging in a
subdued market and so the Board
made the prudent decision to impair
goodwill. The Group retains a strong
competitive position in the market for
energy services which should enable a
resumption of revenue and profit growth
as and when this market recovers.
The performance of the Group in 2017
is described in more detail in the Chief
Executive’s and Financial Reviews on
pages 20 to 25.
tRansitiOn
anD stRategY
It has been a year of transition for the
executive leadership of the Group.
John Douglas has now settled in as the
Group’s Chief Executive following Alan
Hearne’s retirement. Alan was the Chief
Executive of the Group at the time of
the initial stock market listing in 1987
and had contributed significantly to the
growth and development of the Group
since that time.
Following his appointment, John has
devoted his time to initial familiarisation
with the Group’s activities including
consideration of the strategy for the
Group. Although the strategy process
remains work in progress, five strategic
priorities have been established which
are described in greater detail in the
strategy statement on pages 10 and 11.
Overall the Group will seek to achieve
revenue and profit growth through a
combination of carefully targeted bolt-
on acquisitions in our chosen markets
and an increased emphasis on top line
organic growth driven by a greater focus
on business development activities and
our people. The revenue and profit
growth will be supported by greater
central leadership of human resources
and marketing and communication
activities.
It has also been a year of transition
for the Board. In addition to the
appointment of a new Chief Executive,
the Board has been joined by Allison
Bainbridge as Chair of the Audit
Committee and Liz Peace, following
the rotation off the Board of John
Bennett and Louise Charlton. We plan
to appoint one further non-executive
Ken leVeR chaiRMan
6
RepoRt and accounts 2017 | stRategic RepoRt director during the first half of 2018. On
behalf of the Board I would like to thank
John and Louise for their commitment,
energy and enthusiasm during their time
with the Group.
shaRe PRice
anD DiViDenD
The share price increased from 225p
at the start of 2017 to close the year at
272p. This was a strong reversal of the
downward trend experienced in 2016
primarily driven by the stock market’s
recognition of the stabilisation of the
Energy business and improving cash flow.
The share price has, however, fallen back
significantly since the year-end.
The Board increased the dividend at
the interim results announcement
by 3 per cent and is proposing an
unchanged final dividend of 5.08p per
share. Overall total shareholder return
was 26.9 per cent for the year.
PeOPle
As a services and consulting group,
the ongoing growth, development and
success of RPS is very much driven by
the significant contribution made by
our consultants, operatives and support
employees. The increased focus we
are placing on our people is described
elsewhere in this report. The Board is
extremely grateful for their continuing
commitment, dedication and support.
Ken leVeR
Chairman
1 March 2018
RPs gROuP heaD OFFice, aBingDOn
rpsgroup.com
7
rpsgroup.com Business MODel
The impact of population growth on infrastructure, the built and
natural environment and the need for energy remain as strong drivers
of our business.
The primary objective of the Group
is to deliver value for shareholders by
growing profit and generating cash. The
key components of the business model
through which we achieve this are
described below. The strategy through
which the Group will develop its
business is described overleaf.
What We DO
RPS is an international consultancy
providing professional services to clients
in the built and natural environment and
the oil and gas markets. As a planning,
environmental, design and project
management consultancy we assist
clients in the resolution of technical
issues, compliance with regulatory
obligations and the management
of projects.
Within the built and natural
environment markets we provide a
broad range of services:
n
n
Planning and environment – this
includes planning, urban design
and regeneration, environmental
assessment, transport, landscape
architecture, archaeology and
surveying.
Infrastructure and design – this
incorporates civil and mechanical
engineering design, architecture,
water network management and
engineering support services.
n
Health, safety and risk management
– this covers asbestos management,
health and safety, environmental
risk and management, occupational
health, occupational hygiene,
laboratory services, safety cases.
Services provided to the oil and gas
markets include reserves evaluation,
operational support, geoscience,
engineering, training, health and safety,
and oceanography.
An important part of our offering is
a full range of project management
services to help clients successfully
execute their projects in a wide range of
sectors including infrastructure, buildings
and construction, defence, oil and gas.
We focus on providing cost effective
and value added solutions. We employ
professionals across a wide range of
technical disciplines which enables us
to service a broad range of clients,
small and large, private and public in
many different sectors. The majority of
our work is undertaken at a local level,
although in some cases, the breadth
of our international expertise can be
brought to bear on specific projects to
provide comprehensive solutions.
The foregoing represents a broad
summary. The types of projects
that the Group undertakes are more
fully described on our website at
www.rpsgroup.com.
JOhn DOuglas chieF eXecutiVe
& Ken leVeR chaiRMan
8
RepoRt and accounts 2017 | stRategic RepoRt line with this, the results of the Group’s
Energy business in 2017 has been
reported as a separate segment.
The restatement of the 2017 half year
results is presented in note 4 to the
Financial Statements.
The structures through which the
Group is managed and reported are
kept under review and may change as
the Group grows and in line with its
developing strategy.
DRiVeRs OF OuR Business
The demand for our services is
underpinned by population and
economic growth as well as a
background of increasingly complex
legislation and regulation. These are long
term drivers that contribute to:
n
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the continuing need for sustainable
development of land and buildings;
the expanding need to provide
adequate infrastructure such as
airports, power stations, public
transport, water treatment plants
and to deliver energy to market;
the requirement to secure adequate
supplies of energy and other natural
resources; and
the need to manage environmental
and health and safety risks, including
climate change.
PROFessiOnal staFF
RPS solves clients’ problems and adds
value to their activities. We generate
income by selling the specialist skills
and output of our professional teams
to clients to resolve their technical
problems. The ability to deliver this
breadth of specialist technical expertise
and services is therefore dependent on
the skills of the professionals we employ.
The recruitment, retention and
motivation of high calibre employees
are therefore crucial elements of
our business.
The Group’s principal cost is the people
it employs and the matching of this
cost to the workload within its various
business units is also a key component
of operations. This is coupled with the
careful management of projects to
ensure that the Group’s profitability is
matched by strong cash flow.
ManageMent
The Group Board has overall
responsibility for the stewardship
of the Group. At the operational
level, the Group Chief Executive has
overall responsibility for the executive
management of the Group and is
supported by the Group Leadership
Team. This team may change in line
with developing strategy but currently
comprises the Group Chief Executive,
the Group Finance Director, the Group
Marketing Director and the Group’s four
principal business leaders.
During the first half of the year RPS
operated with three regional segments
for management and financial reporting
purposes. Operations in Europe, North
America and Australia Asia Pacific were
each managed by a separate local
board. During the latter part of the year
and consistent with emerging strategy
the links between the Group’s Energy
businesses in Europe and North America
were progressively strengthened and
information was presented to the Group
Board on these businesses in total. In
9
rpsgroup.com gROuP stRategY
RPS has established five strategic priorities to support our ambition of
delivering long term shareholder value. Future growth will be driven by an
increased focus on organic performance coupled with targeted acquisitions.
histORY
The Group has a strong record of
delivering shareholder value over a
long period, driven by service and
geographical expansion supported by
corporate acquisitions.
This progress has been periodically
interrupted by significant downturns
in certain markets caused by macro
events such as the global financial crisis,
the collapse in the Australian resource
markets and the recent oil price slump.
Due, however, to the wide diversity of
sectors and geographies in which the
Group operates, together with strong
cash generation which has enabled
acquisitions to be made, performance
has proved relatively resilient.
ReVieW PROcess
Following the appointment of a new
Chief Executive and other recent
changes at Board level a review of the
Group’s strategic priorities has been
undertaken. This process was conducted
by the Group Leadership Team led by
the Chief Executive, following which
recommendations were reviewed and
endorsed by the Group Board.
aMBitiOn
The Group joined the FTSE 250
index in 2006, although following the
downturn in the oil and gas industry,
which in 2014 accounted for c. 40%
of group turnover, was relegated from
this index in May 2015. Whilst changes
in key markets may always present a
challenge, the Board and the Group
Leadership Team believe that, with
correct focus in key areas and with
the underlying drivers described in
the Group’s Business Model remaining
strong, the Group can enter a renewed
period of growth. Against that backdrop
the Group has established a target of
achieving a sustainable return to the
FTSE 250.
stRategic PRiORities
The pursuit of this target will see an
increased focus on improvement in the
Group’s organic performance, whilst
carefully targeted acquisitions will
support this ambition. In that context
five strategic priorities as set out below
have been identified.
To be rated by our people as a
great place to work
The Group’s Business Model recognises
that the skills of the people it employs
are fundamental to its success, whilst
their recruitment and retention is
identified as a principal risk. The Group
has therefore set the objective of being
rated by its people as a great place to
do great work. This will be achieved
by improving practices across a range
of areas including career development,
training, performance appraisal, reward
and communication. Change will ensure
consistent practice throughout the
Group and in the context of a clearly
articulated sense of the Group’s identity,
vision and values. This process is to be
led by a soon to be recruited Group
Director of People who will join the
Group Leadership Team.
To develop a clearly recognised
and respected international brand
The Group operates mainly under a
single RPS brand identity, but recognises
the need to present itself to markets
and the Group’s stakeholders, including
its people, in a more coherent and
consistent manner incorporating a clear
sense of identity, vision and behaviours.
This will provide a better understanding
of the Group in the markets in which
it operates that will in turn enhance
its overall standing, improve market
penetration and enable delivery of a
wider range of services to clients.
The Group has therefore set the
objective of developing a clearly
recognised and respected international
brand. The initial phases of this work
involve achieving a better overall
understanding of the means by which
markets are currently penetrated and
the Group’s competitive advantages.
It also requires internal and external
research to test current perceptions.
From this work it is envisaged that a
Group wide ‘go to market’ approach
can be established. This process is being
led by a recently appointed Group
Marketing Director who has joined the
Group Leadership Team.
To develop internationally
connected services
The Group has wide ranging expertise
which, with the notable exception of the
oil and gas business, are mostly engaged
at local or national level to serve local
or national markets. The potential to
leverage Group-wide capabilities which
10
RepoRt and accounts 2017 | stRategic RepoRt to lower risk and lower cost exploration
and production, greater emphasis on
unconventional oil and gas and advanced
technology. The Group has, however,
retained the core capabilities to continue
to service changing hydrocarbon markets
as well as emerging alternatives. The
revitalisation of the Group’s international
oil and gas business has therefore been
established as a strategic priority. An
exercise is being undertaken to evaluate
available skills, emerging technologies and
client views to ensure that capabilities
are harnessed to best effect.
leaDeRshiP
The Group Leadership Team will drive
these priorities and work on the further
development of strategy. The Group’s
overall strategy will remain subject
to Board oversight and approval and
ongoing progress will be reported
to shareholders.
can be harnessed to serve markets
across a range of jurisdictions has
accordingly remained relatively
undeveloped. The Group has therefore
set the objective of establishing an
internationally connected approach to
the development and delivery of
services in relevant markets and sectors.
To achieve this, a process to identify
pertinent capabilities and markets
sectors is underway, from which specific
market sector and client growth
initiatives will be produced and
implemented.
To substantially increase the
scale of our operations in
North America
The USA is world’s largest economy
with strong underlying demand for
the services that RPS can provide.
Whilst RPS was established in the
region in 2003 and has a strong
understanding of the commercial
environment, the size of its business is,
due in part to the recent collapse in
the oil sector, relatively modest. Against
this backdrop the Group has set the
objective of increasing the scale of its
operations relevant to emerging market
opportunities within North America.
In pursuing this ambition focus will be
placed on current core service offerings.
Whilst as part of general Group strategy
emphasis will be placed on organic
growth, an expansion of the scale
envisaged will only be achieved with the
benefit of carefully targeted acquisitions.
Development will be targeted in Texas,
California and the Boston-Chicago
corridor, being areas in which RPS is
already established and where economic
fundamentals are strong. In recognising
the likely priority of acquisitions in this
region the Group does not preclude the
making of acquisitions in other territories.
To revitalise our international
oil and gas business
The Group’s oil and gas business
operates on an international basis with
seamless sharing of clients and resources.
Notwithstanding the regionalisation of
the Group at the start of 2017, which
has now been reversed, the four main
operational centres in London, Houston,
Calgary and Perth maintained strong
marketing and operational links. The
substantial and sustained downturn in
global oil and gas prices has, however,
seen fees from this area of the Group’s
business decline from £176m in 2014 to
£65m in 2017. This has in turn required
a substantial downsizing of operations
and, regrettably, reduction in headcount.
It appears that the industry is through
the worst of the downturn and the
Group is firmly of the view that
demand for hydrocarbon products will
remain substantial for the foreseeable
future. In addition the characteristics of
markets may change, with a likely shift
11
rpsgroup.com RisK anD RisK ManageMent
The continued management of the risks to which RPS is exposed will be
integral to delivery of performance and strategic priorities.
RisK ManageMent
The Group’s business model and the
nature of the activities that it undertakes
are described on pages 8 and 9. This
gives rise to a range of risks consistent
with a commercial organisation of its
type and which require identification
and management. The Group’s formal
system of Risk Management and Internal
Control is described on page 35 and
is a key component in this area. Given
the nature of the Group’s activities,
however, the effective management of
risk requires collective responsibility and
engagement across the business. The
management of risk is not therefore
separated from the business and is
treated as an integral part of our culture
and the way we operate.
Our operational Boards consider
the risks to which their component
businesses are exposed and their
mitigation on an ongoing basis and
at each of their regular meetings. A
structured reporting framework is in
place to support this activity. This rates
and analyses key risks to provide clear
understanding and enable identification
of mitigating actions. Against the
background of reporting from this level,
the Group Leadership Team oversees
the operational management of the key
risks to which the Group as a whole is
exposed. Reporting to the Group Board
incorporates the principal risks to which
the Group is exposed and the specific
manifestation of those risks from time to
time. In considering and challenging this
information the Group Board undertakes
robust assessment of the principal risks
facing the Group including those that
would threaten its business model,
future performance, solvency or liquidity.
This process is integral to consideration
of the Group’s Long Term Viability
Statement which is shown below.
PRinciPal RisKs
The principal risks to which the Group
is exposed as well as the measures to
taken to achieve their mitigation and
in each case any change that has
happened in the year are detailed
in the table below.
RisK
eXPOsuRe
MitigatiOn
change in the YeaR
Economic
Environment
Changes in the economic
environment have historically
proved to be the greatest risk
to which the Group is exposed.
The global financial crisis of 2008
and ensuing recession as well
as the collapse of oil prices in
2015/16 both had substantive
impact on parts of the Group.
Adverse economic changes may
cause clients to cancel, postpone
or downsize projects as well as
increasing risk associated with
recovery of debts and work-in-
progress.
Exposure to a wide range of
markets and geographies serves
to mitigate overall risk. As far as
practicable, economic conditions
affecting our markets are monitored
in order that swift action can
be taken. The contracted order
book is monitored relative to the
productive capacity of fee earning
staff and actions taken to match
costs with anticipated workload.
There was no overall change
in the year. There appears to
be some recovery and sign of
stability in global oil prices, and
correspondingly profits in our
Energy business seen to have
stabilised. Global economic
conditions have, however, been
broadly favourable for our other
businesses. The economic risks
associated with Brexit have had no
material impact on the Group to
date, although our businesses in the
UK and Europe may be affected by
this process.
12
12
RepoRt and accounts 2017 | stRategic RepoRt RisK
eXPOsuRe
MitigatiOn
change in the YeaR
Recruitment
and Retention
of Staff
The Group’s ability to manage and
service its clients is dependent
upon the skills of well-qualified
and professional employees.
A failure to recruit and retain
employees of appropriate calibre
will therefore affect our ability
to meet client expectations and
develop the business. Linked to this
a failure to adequately consider
management succession may lead
to discontinuity in operations.
Political
Events
The changes and uncertainties
arising from political events may
have an impact upon the markets
in which we operate and the plans
of our clients. This may cause the
cancellation, postponement or
downsizing of projects.
As outlined on pages 16 to 18 the
Group’s businesses seek to provide
an attractive benefit structure and
to operate an open culture which
is supportive of professional and
career development. As a key
plank of strategy the Group has
set itself a strategic objective of
being recognised by its people as a
great place to do great work. This
will focus on an improvement in
the key areas indicated on pages
17 and 18 which, if successfully
implemented, should serve to
mitigate overall risk in this area.
The substantial majority of the
Group’s services are provided in
relatively stable and predictable
liberal democracies. In addition
the factors serving to mitigate
economic risks also operate in this
area whereby the wide range of
markets and geographies in which
we operate serves to reduce
the impact of political change in
any particular region. As far as is
practicable, risks in this area are
monitored and plans adjusted
accordingly.
Business
Acquisitions
Whilst the Group has not
completed any acquisitions this
year, they will continue to be an
important element in support
of our strategy. A failure to
understand the market conditions
affecting an acquired business, to
identify acquired liabilities, or to
retain and motivate key employees
within acquired business can all
result in a business failing to deliver
anticipated profit and cash flow.
The Group’s strategy will in general
dictate that acquisitions are only
made in market areas with which
senior management are familiar.
Detailed commercial, financial and
legal due diligence is undertaken
prior to completing any acquisition
and clear corporate integration
plans are agreed.
There was no overall change in the
year. The competition for talent in
a number of the Group’s markets
has remained intense. Initiatives
taken to mitigate risks in this area
will therefore be of continuing
importance.
Overall risk increased in the
year. The UK’s anticipated
departure from the European
Union continues to constitute a
significant risk and uncertainty.
Whilst markets in the UK have
remained relatively strong and the
weakness of sterling has continued
to be of benefit, the longer term
impact upon the UK and other
European markets is unknown.
The 2017 general election and
resulting hung parliament has
added to this uncertainty. A degree
of uncertainty also remains with
regard the direction of the Trump
administration and its related
impact on US and global markets.
There was no change in overall
risk in the year. The Group retains
considerable acquisition experience
and as activity in this area resumes,
risks are unlikely to change materially.
rpsgroup.com
13
rpsgroup.com RisK ManageMent CONTINUED
RisK
eXPOsuRe
MitigatiOn
change in the YeaR
Health and
Safety
The Group has a legal and moral
obligation to ensure the safety of
its employees and others whom
its activities may affect. A failure
to discharge these obligations
could expose individuals to risk
of injury or other harm as well
as leaving the Group liable to
related damages, regulatory
penalty and reputational harm.
Regulatory
and
Compliance
The Group is subject to a range
of legal, taxation and regulatory
requirements at corporate level and
within each of the jurisdictions within
which it operates and does business.
A failure to comply with these
obligations could give rise to financial
penalty, regulatory intervention and
reputational damage.
Service
Failures
A failure to deliver our services
in accordance with contractual
obligations may lead to
compensatory claims against the
Group and damage to reputation as
well as possible loss of future work.
There was no overall change
during the year. The scope of the
Group’s activities and the risks
they present has not changed in
any significant way.
There was no overall change
during the year. Whilst the detail of
applicable law and regulation will
continue to evolve there have been
no changes anticipated within the
Group’s current jurisdictions which
are likely to have any material
effect upon overall risks in this area.
The range of jurisdictions in which
project work is undertaken may
change, although will remain subject
to scrutiny as highlighted above.
There was no overall change in
the year. The nature of Group’s
activities and the environments in
which they are conducted have
not changed materially.
Detailed health and safety
policies and procedures are in
place throughout the Group
and focus on the differing and
emerging risks within the Group’s
various businesses. A structured
reporting process is in place to
ensure that any incidents are
identified and appropriate action
taken to investigate and mitigate
future risk. The Group’s approach
to health and safety is described
more fully in the Corporate
Social Responsibility report on
page 18.
Whilst the Group is subject to
the corporate law and regulation
affecting most groups of its size and
complexity, the activities that the
Group undertakes are, in general,
not subject to industry specific
regulation. Overseas projects
that may carry elevated risk are
scrutinised on a case by case basis.
The Group has appropriate internal
controls to support regulatory
compliance and employs suitably
qualified professionals to monitor
and manage regulation within its
various jurisdictions.
The Group operates quality
control systems many of which
are externally accredited and
which are designed to mitigate
the risk of failures. In addition
the Group operates contract
management systems to
ensure that contractual risks
are identified, risk assessed
and as far as practicable
mitigated. The Group maintains
professional indemnity insurance
throughout the large majority
of its businesses at a level
commensurate with risks. Subject
to applicable policy limits and
excesses this will indemnify the
Group against claims in the large
majority of situations.
14
14
RepoRt and accounts 2017 | stRategic RepoRt RisK
eXPOsuRe
MitigatiOn
change in the YeaR
Financial Risks An inability to secure adequate
funding for the Group will limit
the ability to invest in growth.
In addition a failure to manage
risks related to foreign exchange,
interest rates, credit and liquidity
could lead to a significant
deterioration in the Group’s
financial position.
Information
Technology
and Security
Risks
A prolonged lack of availability
of critical IT systems could
cause significant discontinuity in
operations. A cyber-related attack
on our systems could lead to
infection by viruses, loss of personal
data and sensitive data, theft or
fraud. Either eventuality could lead
to operational disruption, affecting
our ability to deliver client services,
leading to financial loss and
reputational damage.
There was no overall change in the
year. The Group has an adequate
committed facility until 2020 and
will continue to manage financial
risks on a prudent basis. Renewal
of the Group’s revolving credit
facility will need to be considered
in the medium term, although
at present this seems unlikely to
present undue difficulty.
There was no overall change in
the year. The ongoing programme
of systems development should
serve to improve the resilience
and reliability of systems.
Notwithstanding additional
measures highlighted above the
level of threat from cyber-attacks
of an increasingly sophisticated
nature is unlikely to diminish.
The Group has in place a multi-
currency revolving credit facility
of £150m provided by Lloyds and
HSBC and which expires in 2020.
The Group has also issued seven
year US private placement notes
of US$34m and £30m repayable
in 2021 under a facility provided
by Prudential Management
Inc. Funding and investment
requirements are monitored by
the Group Finance function which
also oversees the management of
financial risks on a prudent basis
and as more fully described in note
27 to the financial statements on
page 98.
The Group continues to
manage its IT systems on a
centralised basis with annual
planning which incorporates
measures designed to maximise
reliability and resilience as well
as disaster planning. Systems
are reviewed and upgraded
on a rolling basis. The Group
employs a Security Officer and
policies, procedures and security
measures are reviewed and
enhanced on a regular basis. A
number of additional policies and
procedures were put in place
during the year aimed at higher
risk users and finance staff.
lOng teRM ViaBilitY
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 to March 2021
taking account of the above risks as
well as the Group’s current position, its
strategy and the Board’s risk appetite.
A three year period was chosen as
it covers the period supported by
strategic review work undertaken, giving
greater certainty over the forecasting
assumptions used. The Board considered
cash flow models over that period based
upon a range of assumptions relating
to trading performance, expenditure on
acquisitions and other outflows including
those associated with the principal risks
the Group faces; this modelling included
severe but reasonable 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 March 2021.
In making this statement the Directors
have also made the key assumption that
the Group’s revolving credit facility, that
expires in July 2020, will be renewed
in all plausible market conditions.
15
rpsgroup.com cORPORate sOcial ResPOnsiBilitY
In pursuing its strategic priorities RPS will balance achievement of attractive
returns for shareholders with obligations to its people, its clients and society
in general.
OVeRVieW
The Group’s corporate governance
policies are described in detail
on pages 32 to 56 and provide a
framework within which it seeks to
achieve attractive levels of return for
its shareholders whilst recognising 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 Group Leadership Team supports
the Board in exercising general oversight
in relation to ESG matters including
the assessment of the opportunities to
which such issues give rise.
As a leading consultancy in the areas
of the environment, infrastructure
development and energy RPS makes
an important contribution to society’s
economic, social and environmental
fabric. In addition, and within the
framework outlined above, 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 the Annual
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 is 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.
PeOPle
Overview
Recruitment, retention and motivation
of employees is of vital importance for a
professional services organisation and is
identified as one of the Group’s principal
risks. The Group Leadership team,
working through the Group’s businesses,
has therefore assumed responsibility
to maintain and develop employment
practices to address this area. At Group
Board level the Chief Executive retains
overall responsibility for employment
policy and ensures that key issues are
reported for consideration as required.
Our approach to people centres on
recruiting, developing and retaining
highly qualified professional staff from
a wide range of disciplines across
multiple sectors. Given the number of
markets and jurisdictions in which the
Group operates these issues have to be
addressed with reasonable flexibility. The
Group has, however, recognised the key
importance of this area and, as detailed
in the Group Strategy on pages 10 and
11, has set the strategic priority of being
rated by its people as ‘a great place to
do great work’. The key components
of this initiative are described under
‘Looking Forward in 2018’ below, but
will entail stronger central leadership
in this area and more consistent
approaches to the application of good
practice across the Group as a whole.
Employee Profile
As indicated in the table below,
presented in line with current
segmentation, average staff numbers
in 2017 showed an increase of 5%
compared with 2016.
Investing in Our People
The training and development of our
staff is of great importance and we
continued to invest in this area during
2017. In Australia Asia Pacific, we ran our
highly successful in-house seven module
gROuP eMPlOYees
2017
2016
aVeRage nuMBeR OF eMPlOYees
Built and Natural Environment – Europe
3,583
3,266
Built and Natural Environment – North America
Australia Asia Pacific
Energy
Central
Group total
396
975
310
76
425
970
364
74
5,340
5,099
16
RepoRt and accounts 2017 | stRategic RepoRt Consultancy School programme and a
Management Development Programme.
The latter enables newly promoted
managers to work on pro-bono projects
with external clients to develop skills
as managers of highly qualified staff. We
continued the technical development of
our staff in all geographies. In Norway,
our Metier business operates a highly
acclaimed Academy, offering high quality
training to clients and also uses this
facility to train our own Norwegian
staff. In our UK Design & Development
business, we have invested in a leading
edge 3-D modelling tool, Building
Information Modelling (BIM), and are
training architects and engineers in how
to use it to efficiently plan, design and
construct buildings and infrastructure.
Communication and Engagement
Building an environment in which
employees feel valued and engaged
with their business and the Group as
a whole are key elements in support
of our strategy for growth. Following
his in-depth induction, which involved
visiting and meeting people in all
business areas, John Douglas utilises
a system to engage with the Group’s
senior business leaders through global
conferencing. He also communicates
directly to all RPS colleagues. Feedback
from staff has been highly positive and
more regular engagement of this sort
is therefore planned as well as the
continued use of the Group Intranet as
a means to communicate the Group’s
achievements and policies.
Employee Benefits
Whilst certain elements of employee
benefits such as pension and welfare
schemes are set at a national level,
salary and incentive structures are
required to operate with a reasonable
degree of flexibility to reflect diversity
of geographies and sectors. All, however,
aim to provide packages which are
competitive and incentivising. Share
plans are operated at Group level which,
notwithstanding local arrangements,
endeavour to foster a common interest
in the success of the Group as a whole.
Share purchase plans are open to the
overwhelming majority of employees
and enable the purchase of shares in
the Company with benefit of a matching
contribution from the Company.
A performance share plan is operated
for more senior employees and offers
the potential to build a personally
significant interest in the Company
over a number of years.
Diversity
The Group values diversity generally
and is committed to the creation of
an environment in which people are
treated fairly and equally regardless of
age, gender, race, sexual orientation,
disability, religion or beliefs.
During 2017 progress was made in
the appointment of women at senior
level. Allison Bainbridge and Liz Peace
both joined the Board thus meeting
the Group’s target of 25% female
representation at this level. In addition
following the appointment of John
Douglas and a review of resource
required to support future growth
Chantalle Meijer was appointed to
the Group Leadership Team as Group
Marketing Director and is the first
woman appointed at this level. These
appointments are important signals
within the business and we will develop
ways to increase diversity more
generally within RPS.
The table below shows gender profile at
a number of levels within the Group.
leaDeRshiP leVel
Board Directors
Group Leadership Team
Directors of Consolidated Entities*
Looking Forward in 2018
The Group works on important and
interesting projects with high quality
clients, offering consultancy and services
in a wide range of geographies and
sectors. Fundamental to our success is
our ability to attract, develop and retain
high quality individuals who choose to
develop long term careers with us. To
reflect its importance, one of our agreed
strategic priorities will be for
RPS to be rated by our employees
as ‘a great place to do great work’.
To enable the achievement of this, we
will be appointing a Group People
Director, a new position reporting to the
Group Chief Executive. He or she will
lead an annual People Plan, of which the
following key deliverables will form part:
n
n
n
n
n
introducing a common approach to
performance across all businesses,
setting stretching goals and having
high quality appraisal discussions;
conducting our first global
employee survey, seeking feedback
to inform our people and brand
strategy work;
a review of talent and succession
planning, focussed in its first year on
the global senior leadership group;
networking technical development
programmes between geographies
and piloting management
development programmes in our
Australian business;
reviewing reward and incentive
schemes, specifically moving to a
philosophy of pay for performance
and rewarding sustained growth;
and
Male
Female
total
% Female
4
6
31
2
1
2
6
7
33
All Employees
3,684
1,656
5,340
* legal corporate entities included within the Group consolidation
33%
14%
6%
31%
17
rpsgroup.com cORPORate sOcial ResPOnsiBilitY CONTINUED
n
further engaging with staff,
developing a cadence of
communications, to keep
colleagues up to date on business
performance, achievements and
progress.
The Group is embarking on a major
investment programme for staff and
in the HR function to support its
plan. Return on this investment will
be measured through a number of
indicators including staff retention and
attraction rates for high calibre recruits.
health anD saFetY
We have a moral and legal responsibility
to safeguard our employees and others
affected by our operations and services.
Health and Safety is also recognized as
one the Group’s principal risks. Whilst
the Group sets an overall policy for
management of Health and Safety,
operational responsibility lies within the
Group’s operating businesses which
are closest to and best positioned to
manage their risks. The nature of risks is
dependent on the activities of particular
businesses and health and safety systems
vary accordingly to ensure that key
areas are addressed. All, however, have in
common clear policies and procedures
and appropriate risk assessment
techniques backed by training and clear
communication. Training is focused not
only on specific hazards but also the
wider obligations of management. These
activities are overseen by appropriately
qualified and experienced health and
safety advisers and systems are subject
to regular audit both internally and by
external agencies. Where accidents, near-
misses or dangerous occurrences occur
these are investigated in order that they
are fully understood and appropriate
action can be taken to minimise risk
of occurrence.
Health and Safety performance is
monitored at business and segment
Board level. This incorporates analysis of
incidents, dangerous occurrences and
near-misses in order that appropriate
remedial action can be taken where
required. For its part the Group
Board receives a regular report which
incorporates these elements and any
emerging issues. Any material issues
or concerns identified at Group level
are considered by the Chief Executive
and Company Secretary to ensure that
appropriate steps are taken as required.
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. 66% (2016:
61%) 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 2.1 accidents per 1,000 employees
(2016: 1.8). Accidents that do occur
most commonly relate to field staff and
involve manual handling activities, slips
and falls.
REPORTABLE ACCIDENT RATES
gROuP
2017
2016
Reportable injuries
12
10
Reportable injuries
incident rate per
1,000 employees
2.1
1.8
Business RelatiOnshiPs
The Group looks to conduct business
relationships in a transparent and fair
manner and correspondingly expects
its employees to behave in a fashion
consistent with these values. The
standards expected are specified in
codes of conduct to which employees
are required to adhere. Employees
are 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
are expected to avoid any personal or
professional interests that could conflict
with their responsibilities to the Group
and, should such a situation arise, are
expected to report it promptly. The
Group has a clearly stated and zero
tolerance policy in relation to acts of
bribery and corruption and supports
the UN Global Compact and the UN
Convention on Anti-Corruption. No
incidents of bribery or corruption have
been identified within the Group’s
operations.
The Group also supports the Universal
Declaration of Human Rights and 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 it interacts
and employees are expected to
conduct themselves in a commensurate
manner. In particular RPS supports
the objectives of the Modern Slavery
Act and will not tolerate modern
slavery or human trafficking within its
own supply chain. During the year the
Group, having conducted a review of its
supply chain, published its first modern
slavery statement. As far as is reasonably
ascertainable none of the Group’s
activities have directly or indirectly given
rise to the abuse of human rights.
cOMMunitY inVOlVeMent
Many of our locations across the world
engage with their local communities
through support of charitable
organisations and initiatives. This
consists of financial contributions or
contributions in kind, provided directly
by RPS or through the endeavors of
employees. The estimated value of this
contribution in 2017 was £973,000
(2016:£944,000).
Taking into account the £276,000 (2016:
£368,000) spent on academic bursaries
and educational initiatives, the total
18
18
RepoRt and accounts 2017 | stRategic RepoRt
contribution of the Group and
its employees to the communities in
which it operates was £1,249,000
(2016: £1,312,000).
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. Having previously supported a
project in Ghana, the Group is now
supporting a project in Ethiopia. A total
of c. £375,000 over a three year period
has been committed to this project of
which c. £66,000 was expended during
2017. The Group continues to be this
charity’s largest corporate sponsor
and will continue to provide technical
support through a number of its own
specialists on a ‘pro-bono’ basis.
enViROnMental
ManageMent anD
cliMate change
As indicated above the Group’s greatest
contribution to the environment
is 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. Whilst given the nature of its
activities the Group’s direct impact
on the environment is comparatively
modest, policies and standards are in
place, which aim to minimise this impact
wherever possible. These incorporate
the following:
n
n
n
n
n
compliance with all relevant
national and regional legislation as a
minimum standard;
compliance with relevant codes of
practice and other requirements
such as those specified by
regulators and our clients;
employment of practical energy
efficiency and waste minimisation
measures;
policies in relation to the purchase
and use of vehicles to minimise
environmental impact and
provision of an inter-office
IT network together with
communications and video
conferencing technology in order to
reduce 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 2017 many of
our offices continued to recycle waste
paper, spent toner and ink cartridges,
obsolete computer hardware, printers
and mobile phones.
RPS is a participating member of the
Carbon Disclosure Project to which it
provides data on an annual basis.
gReenhOuse gas
RePORting
For the reporting year to 31 December
2017 the Group has used the 2017
UK Government Conversion Factors
for Company Reporting and the
International Energy Agency CO2
Emissions from Fuel Combustion,
OECD/IEA, Paris, 2017 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
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.
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
2017
2016
9,435
9,399
3,655
4,106
Total
13,050 13,505
The decrease in Scope 2 emissions
is largely attributable to office
rationalisations in parts of the world.
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 2016 was
3.43 MWh per capita which decreased
to 3.34 MWh per capita for the five
year rolling average to 2017. This
equates to a 2.6% reduction with the
result that the Group’s target was met.
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.
19
rpsgroup.com chieF eXecutiVe’s ReVieW
2017 has been a year of steady progress for the Group in terms of overall
trading performance and good progress in establishing strategic priorities.
We intend to build on this to by improving our business and our offerings to
clients in order to deliver long-term shareholder value.
I am delighted to be presenting my first
annual review, having joined in June last
year and having taken over the Chief
Executive role in September. These are
a good set of results and I would like to
thank all our people for the hard work
that has made this possible.
My main role is to lead our 5,500
colleagues who deliver successful
projects, great service and solutions
to our clients. By doing this well we
will generate growth and long-term
shareholder value. Our people and
our brand are our greatest assets and
I intend to strengthen both in the
coming years.
I have visited many offices throughout
RPS and spoken to numerous
colleagues. It is clear we have many
talented, energetic and enthusiastic
staff who do great work for our clients
and want to see RPS develop into an
even better business than it is today.
The establishment of a close Group
Leadership Team has given a stronger
voice to business segments and service
functions. This forum is in its early days
but is already working well and bearing
fruit. The strategic priorities we identify
on pages 10 and 11 are each in process
and gaining momentum.
PRiORities
Significant work has been undertaken in
developing Group strategy. Our growth
will be driven by an increased focus
on organic performance coupled with
targeted and complimentary acquisitions.
We intend to deliver long term
shareholder value and have an ambition
to return to the FTSE 250. We have set
ourselves five strategic parameters in
pursuit of this ambition.
A key priority is to be rated by our
people as ‘a great place to do great
work.’ Our staff turnover has been
historically higher than we would like.
We are therefore investing in our HR
function, including the creation of a
new role of Group People Director and
will roll out best practices throughout
the Group.
RPS offers a tremendous range
of services and benefits would be
derived from presenting the Group
to our markets and internally in a
more coherent, interconnected and
consistent manner. We need to convey
a clear sense of our identity and our
behaviours. We have recently appointed
a Group Marketing Director, a new role
for the Group.
Better connectivity between our
businesses drives revenue. A priority is
the focus to improve that connectivity
across sectors where we have deep
expertise and capabilities.
The USA is our largest single market
for the services we offer. We have had
a strong North American business
for some years but recognise that it
can be better and stronger still. It is
the intention to further increase our
presence in North America by making
carefully targeted acquisitions in sectors
in which we have strength and familiarity.
JOhn DOuglas chieF eXecutiVe
20
RepoRt and accounts 2017 | stRategic RepoRt Our final priority is to renew growth in our international oil
and gas business in such RPS has a very strong reputation as
an independent professional advisor and service provider. The
collapse in the oil price has challenged our business in recent
years but we intend to reinvigorate it and develop a leading,
global and innovative energy business in oil and gas and the
broader energy market.
Business PeRFORMance
We delivered a strong set of results this year. We have
grown our fee income to £562.3m (2016 £534.3m), PBTA
to £53.9m (2016 £50.7m), delivered strong cash flow and
reduced our leverage. The contribution of the Group’s
segments and unallocated costs was:
BNE Europe
BNE NA
Energy
AAP
Total segment profit
Unallocated costs
Underlying operating profit
2016 at
constant
currency
35.7
8.3
5.4
15.1
64.4
(6.7)
57.7
2016
35.1
7.9
5.4
14.2
62.6
(6.7)
55.9
2017
37.0
8.3
6.4
15.3
67.0
(8.5)
58.5
Each segment grew or maintained profit at constant currency,
whilst central unallocated costs increased, mainly due to board
changes during the year.
Built and Natural Environment - Europe
2017
2016
2016 at
constant
currency
Fee income (£m)
287.6
269.0
275.0
Segment profit * (£m)
Margin (%)
37.0
12.9
35.1
13.1
35.7
13.0
* after reorganisation costs: 2017 £nil, 2016 £0.5m
Market conditions were generally good for all our businesses.
Our planning and development businesses in UK and Ireland
benefited both from good market conditions and client
confidence in respect of both private sector development
as well as public infrastructure projects. However, this
business suffered from a troubled engineering design
project. This project incurred a loss of £2.1m in the year.
Our water business, which has a strong market presence,
traded particularly well in what is the mid period of the
current Asset Management Plan regulatory cycle. Our other
operationally focussed businesses, in the Netherlands and our
environmental risk and management businesses in the UK also
traded well.
In Norway we have two leading project management
businesses. In total they grew year-on-year and have
progressed their integration that impacted results in the
second half of the year.
The UK decision to leave the EU could cause disruption to
activities if clients change their investment plans. We are seeing
little sign of this yet. Subject to market conditions remaining
supportive, this business is capable of further growth in 2018.
Built and Natural Environment - North America
Fee income (£m)
Segment profit * (£m)
Margin (%)
2017
76.2
8.3
10.9
2016
65.4
7.9
12.0
2016 at
constant
currency
67.9
8.3
12.2
* after reorganisation costs: 2017 £0.2m, 2016 £0.3m
The strong economic fundamentals of the US market
supported fee growth in our infrastructure and our
environmental risk business. Our ocean science business, which
is oil and gas exposed, benefited from an increase in activity in
the second half. However, margins remain under duress from
increased cost pressure in all our markets and were adversely
impacted by Hurricane Harvey that led to some lost
productivity in our businesses in Texas. Generally good market
conditions will be supportive in 2018 although the costs of
investing in people will temper growth.
21
rpsgroup.com chieF eXecutiVe’s ReVieW CONTINUED
The reduction in fees on a constant currency basis was due
mainly to a reduced level of activity at our oil and gas related
businesses in Western Australia. Government infrastructure
and land development markets were buoyant and provided
good workload for most of our East coast businesses. Our
project management business performed well benefiting
from an active Australian defence sector. In the second half
we provided £0.6m in respect of a loss making “gain share/
pain share” project. The energy and resources sectors, mainly
serviced by our west coast businesses, continued to struggle.
Market conditions in non-resource markets are generally good
in our east coast businesses. However, our smaller west coast
businesses face weak resource markets. Overall, this business
is capable of further growth in 2018.
gROuP PROsPects
2017 has been a year of steady progress for the Group in
terms of overall trading performance and good progress in
establishing strategic priorities. The Board anticipates further
growth in 2018. Trading conditions in our markets other
than energy are generally good. Our investment in strategic
priorities will drive performance in 2019 and beyond. Our
strong cash flow and reduced leverage will enable us to make
carefully targeted acquisitions to deepen the services we offer
clients. The new strategic priorities provide a foundation to
build on our strong existing platform and deliver long term
shareholder value.
JOhn DOuglas
Chief Executive
1 March 2018
Energy
Fee income (£m)
Segment profit * (£m)
Margin (%)
2017
65.4
6.4
9.7
2016
71.5
5.4
7.5
2016 at
constant
currency
72.7
5.4
7.4
* after reorganisation costs: 2017 £0.4m, 2016 £3.6m
We provide internationally recognised consultancy services to
the oil and gas industry from bases in the UK, US and Canada.
We continued to match our costs to our workload whilst
retaining multi-disciplinary capability. In 2017 we reversed
£1.8m of debtor provisions (2016 £4.2m).
Although fees declined in 2017 our profits appear to have
stabilised. Nevertheless, our Energy business performed
less well than we expected at the start of the year and
as previously mentioned the Board concluded that an
impairment of its goodwill was appropriate. Energy has been
a significant contributor to Group performance since we
entered the market in 2003. We remain committed to the
oil and gas market and have a strategic aim of revitalising
our Energy business in oil and gas and in the broader
energy market.
Markets remained difficult throughout the year although the
rise in oil price in the second half of the year suggests that
activity levels in our key upstream sectors may not decline
any further and some fee growth is possible. A similar level
of provision reversals is unlikely and therefore profit growth
is uncertain.
Australia Asia Pacific
2017
2016
2016 at
constant
currency
Fee income (£m)
135.0
130.1
138.7
Segment profit * (£m)
Margin (%)
15.3
11.3
14.2
10.9
15.1
10.9
* after reorganisation costs: 2017 £0.6m, 2016 £1.2m
22
22
RepoRt and accounts 2017 | stRategic RepoRt Finance ReVieW
The Group delivered a good trading performance in 2017 with PBTA of
£53.9m showing a 6% increase over last year.
PeRFORMance suMMaRY
We have had a good year and I am pleased with the progress made. Our PBTA
was £53.9m, an increase of 6% over last year (2016: £50.7m), on fee income that
increased by 5% to £562.3m (2016; £534.3m). After taking into account a goodwill
impairment charge of £40.0m (2016: £nil) in respect of our Energy business,
amortisation of acquired intangibles and loss on disposal, we realised a loss before
tax of £1.6m (2016: profit £32.8m). We believe that PBTA and underlying operating
profit are more representative measures of performance than statutory measures
as the inclusion of amortisation and impairment of intangible assets and transaction
related costs (“A”) may give a distorted view of performance.
The Group’s results for the year are summarised in the table below:
gaRY YOung Finance DiRectOR
KeY Financial PeRFORMance MetRics
2017
2016
2016
(constant
currency)
Revenue
Fee income
£630.6m £594.5m £614.8m
£562.3m £534.3m £552.5m
Underlying operating profit
£58.5m
£55.9m
£57.7m
Underlying operating margin
10.4%
10.5%
10.4%
PBTA
£53.9m
£50.7m
£52.4m
Adjusted basic earnings per share
17.13p
16.60p
16.58p
Amortisation and impairment of intangible
assets and transaction related costs
£55.5m
£17.9m
£18.7m
statutORY RePORting
Operating profit
PBT
£2.9m
£38.0m
£38.9m
£(1.6)m
£32.8m
£33.7m
Statutory basic earnings per share
(7.52)p
11.35p
11.29p
Underlying operating profit was £58.5m
(2016 £55.9m) at a similar margin on
fees of 10.4% (2016 10.5%). Each of
our businesses performed well during
the year and grew segment profit.
Unallocated expenses were £8.5m,
substantially higher than in 2016 (£6.7m)
due to costs associated with board
changes in the year.
net Finance cOsts
Net finance costs were £4.5m (2016
£5.2m). The year on year decrease was
primarily the result of less interest on
deferred consideration that reduced
significantly during the year.
23
rpsgroup.com Finance ReVieW CONTINUED
taX
The effective tax rate for the year
on profit before tax, amortisation of
acquired intangibles and transaction
related costs is 29.6% (2016: 27.7%). The
increase is due to a lower level of tax
relief available on intercompany funding
provided to the US from the UK.
The income tax expense for the year
was £15.1m (2016: £7.7m) on a loss
before tax of £1.6m (2016: profit
£32.8m). The loss before tax was
significantly distorted by the impairment
of goodwill which was not deductible
for tax purposes. When the impact of
this is excluded the rate was 39.2%
(2016: 23.6%).
Significant changes to tax rules have
been made in the US which came into
effect on 1 January 2018. The main
changes of relevance to us are the
reduction in the Federal tax rate from
35% to 21%, the requirement to pay
a one-off repatriation tax of between
8%-15.5% of undistributed profits in US
foreign subsidiaries and the introduction
of a restriction in the amount of
interest expense relief available. The
impacts in 2017 are a c. £2.4m charge
relating to the reduction in the Federal
tax rate which reduced US deferred
assets mainly relating to future goodwill
deductions and a c. £0.2m charge
relating to the repatriation tax. On an
ongoing basis, all other things being
equal, the net impact of the tax changes
in the US will be a small reduction in
the effective tax rate.
ePs
Adjusted basic EPS was 17.13p, an
increase of 3% over last year (2016
16.60p). Adjusted diluted EPS was
17.01p (2016 16.51p). The Board
consider that adjusted EPS, which is
statutory EPS excluding the amortisation
and impairment of intangible assets
and transaction related costs and the
tax thereon, provides a more useful
indication of performance and trends
over time. Statutory basic EPS was
(7.52)p (2016 11.35p).
aMORtisatiOn anD
iMPaiRMent OF intangiBle
assets anD tRansactiOn
RelateD cOsts
Amortisation and impairment of
intangible assets and transaction related
costs totalled £55.5m (2016 £17.9m).
Included in this total is goodwill
impairment of £40.0m (2016 £nil), in
respect of our Energy businesses in
EAME and North America amortisation
of acquired intangibles £12.8m (2016
£17.5m), loss on disposal of business
£2.7m (2016 £nil) and other items £nil
(2016 £0.4m).
The goodwill impairment charge of
£40.0m relates to the impairment
of our oil and gas exposed energy
businesses in Europe and North
America. They performed close to
budget during the first half of 2017 and
whilst trading improved in the second
half it was less good than expected
despite the increased oil price. The
Board has reviewed the prospects
for the oil industry and the potential
demand for our services and considers
them to be lower than at the last
review. Accordingly, our impairment
review at the year-end incorporated a
lower forecast for cash generation than
at the last review, which has resulted in
the goodwill impairment.
Since 2003, when we made our first
acquisition, we have acquired Energy
businesses for total consideration of
c £130m, generated segment profit in
excess of £300m and significant post tax
cash flows. Energy acquisitions were the
first investments RPS made in Australia
and North America and provided the
platform for expansion into the built
and natural environment markets in
those regions.
We remain committed to the oil and
gas sector and we have a strategic
objective to develop a leading, global
and innovative oil and gas business.
The loss on disposal relates to the sale
just before the year end of our pipeline
approval business in Canada. Proceeds
were £0.2m and the largest component
of the loss being a provision for an
onerous property lease of £2.4m.
FOReign eXchange
Approximately 67% of underlying
operating profit was derived from
operations other than in UK, mainly
in Australia, US, Norway, Netherlands,
Ireland and Canada. The Group’s
consolidated results are therefore
significantly exposed to the effect of
exchange rates when translating the
results of non-UK operations into
sterling.
The results in 2017 benefited from
favourable currency movements on the
conversion of overseas results. PBTA
in 2017 would have been £2.2m lower
had 2016 exchange rates been repeated
in 2017. The PBTA in 2016 would have
been £1.7m higher than reported if
2017 exchange rates have prevailed in
2016. Statutory profit in 2016 would
have been £0.9m higher than reported if
2017 exchange rates prevailed in 2016.
BORROWings anD
cash FlOW
Net bank borrowings at the year-end
were £80.6m (31 Dec 2016 £83.4m).
Net cash from operating activities
remained strong at £43.7m (2016
£62.3m) albeit down on the previous
year. This reduction was largely the result
of a working capital increase in the year
of £6.1m compared to a decrease of
£11.5m in 2016. The Group continues
to focus on its management of working
capital, and our conversion of profit into
cash was good at 91% (2016: 117%).
24
24
RepoRt and accounts 2017 | stRategic RepoRt Net cash used in investing activities
was £21.1m (2016 £38.1m), mainly
comprising expenditure on deferred
consideration for acquisitions of £12.9m
(2016 £23.7m), net capital expenditure
of £8.4m (2016 £7.9m) and new
acquisitions in the year £nil (2016
£6.6m). The amount paid in respect of
dividends was £22.0m (2016 £22.5m).
Deferred consideration outstanding at
the year-end was £1.8m (31 December
2016 £15.0m), the lowest for many
years. Our leverage (being net bank
debt plus deferred consideration
expressed as a ratio of adjusted
EBITDA) calculated in accordance with
our bank’s financial covenants was 1.3x
at the year end, down from 1.6x at the
end of 2016.
BanK Facilities
The Group’s main bank facility is a
committed multi-currency revolving
credit facility totalling £150m which
expires in July 2020. £41.4m was drawn
at the year-end resulting in headroom
of £108.6m. The margin payable on
the drawn funds is variable dependent
on the leverage of the Group which is
tested at 31 December and 30 June.
The loans drawn at the year-end have
tenors of up to one month.
The Group issued 7 year US private
placement notes of $34.1m and £30.0m
in September 2014. They are non-
amortising and carry fixed interest of
3.84% pa and 3.98% pa respectively.
These notes represent the Group’s
core debt.
DiViDenDs
The total (paid and proposed) dividend
for the year is 9.88p per ordinary share
(2016 9.74p) and amounts to £22.1m.
The proposed final dividend of 5.08p
(2016 5.08p) will be paid on 18 May
2018 to shareholders on the register of
members at the close of business on
20 April 2018 subject to approval at the
Annual General Meeting on 1 May 2018.
caPital stRuctuRe
As at 31 December 2017 the Group
had shareholders’ funds of £369.8m
(2016 £411.3m). The Company had
shareholders’ funds of £283.6m (2016
£331.7m) and 224.8m fully paid
ordinary shares in issue at 31 December
2017 (2016 223.4m).
caPital allOcatiOn
POlicY
We intend to create long term
shareholder value by growing organically
and through prudent, selective
acquisition in due course. To support
organic growth we plan to re-invest
capital in our business. We are currently
modernising and improving our HR and
marketing functions as described further
in the strategy section.
We intend to operate with a leverage
up to 2.0x unless immediately following
an acquisition, which provides substantial
headroom compared to our current
facilities limit of 3.0x. The full year
dividend represents 58% (2016: 59%) of
adjusted basic earnings per share. Prior
to 2015 the dividend pay-out ratio was
less than 40%. The Board’s view is that
the current ratio is too high and future
pay-out should be more in line with
this previous norm. Considering the
above, whilst the Board has no current
intention of reducing the future full year
dividend, increases are only likely when
earnings grow and the pay out ratio is at
or around this level.
Basis OF PRePaRatiOn
anD neW accOunting
stanDaRDs
The financial statements have
been prepared in accordance with
International Financial Reporting
Standards (IFRS) adopted by the EU
and International Financial Reporting
Standards Interpretations Committee
(IFRS IFRIC) interpretations issued
and effective at the time of preparing
the financial statements. The Group’s
principal accounting policies are detailed
in note 1 to the accounts on pages 68
and 69.
Two new accounting standards are
applicable to the Group from 1 January
2018. The impact of IFRS 15 “Revenue
from contracts with customers” on
revenue recognition is expected to
be immaterial. The impact of IFRS
9 “Financial Instruments” will be
immaterial as well. Further details are
provided in note 2 on page 72.
IFRS 16 “Leases” is applicable from
1 January 2019. We have commenced
work on this standard and expect that
most of our operating lease obligations
will be capitalised and included in the
balance sheet.
gaRY YOung
Finance Director
1 March 2018
The Strategic Report was approved by
the Board and signed on its behalf by
JOhn DOuglas
Chief Executive
1 March 2018
25
25
rpsgroup.com the BOaRD
26
L - R:
allisOn BainBRiDge
ROBeRt MilleR-BaKeWell
JOhn DOuglas
gaRY YOung
Ken leVeR
liz Peace
RepoRt and accounts 2017 | dIRectoRs
Ken leVeR
Non-Executive Chairman
JOhn DOuglas
Chief Executive
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.
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.
John Douglas joined the Board on
1 June 2017 and assumed the role of
Chief Executive with effect from
1 September 2017.
John was previously Chief Executive of
Coffey International Limited, a business
listed on the Australian Stock Exchange
which operated in markets similar to
RPS. Prior to that he worked with
Boral, an international building material
group, latterly as Divisional Managing
Director. John had previously worked
as a consultant with Boston consulting
Group as well as for a number of
engineering companies. John is a civil
engineer from Adelaide University
and has a MBA from London
Business School.
ROBeRt MilleR-BaKeWell
Independent Non-Executive
Director
allisOn BainBRiDge
Independent Non-Executive
Director
liz Peace
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.
Robert is Chairman of the Remuneration
Committee as well as being a member of
the Audit and Nomination Committees
and Senior Independent Director.
Allison was appointed to the Board on
1 June 2017 and is serving an initial three
year term. She is the Group Finance
Director of Vp plc (“Vp”), a quoted
specialist in the equipment rental business
serving international markets including rail,
water, construction, civil engineering, house
building and oil and gas. Prior to that she
was Finance Director at Yorkshire Water
and Kelda Group, having initially trained
and qualified as a Chartered Accountant
with Price Waterhouse. Allison graduated
in economics from Birmingham University
and went on to take an MA in economics
at Leeds University.
Allison is Chairman of the Audit
Committee and a member of the
Nomination Committee.
Liz Peace was appointed in July 2017 and
is serving an initial three year term. She has
extensive senior level experience spanning
both public and private sectors. Between
2002 and 2014 she was Chief Executive
of the British Property Federation having
previously served for 12 years as Company
Secretary and Director of Corporate
Affairs for QinetiQ plc. Prior to that Liz
held various senior positions within the
Ministry of Defence. She was awarded the
CBE in 2008. Liz currently holds a number
of other non-executive, voluntary and
advisory positions including Chair of the
Shadow Government Property Agency
and Chair of Old Oak and Park Royal
Development Corporation.
Liz is a member of the Audit,
Remuneration and Nomination
Committees.
27
rpsgroup.com RePORt OF the DiRect ORs
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 2017.
Certain matters that would otherwise
be disclosed in the Report of Directors
are reported elsewhere in the Annual
Report and Accounts. The Report of
Directors’ should therefore be read in
conjunction with the Strategic Report
on pages 6 to 25, the Corporate
Governance Report on pages 32 to
56 and other parts of the Report and
Accounts as referred to below.
DiRectORs
The Directors of the Company as at
31 December 2017 were those listed
on page 27. The changes to the Board
that occurred in the year are as detailed
on page 33. The Directors’ interests
in the share capital of the Company
are as shown in the Annual Report on
Remuneration on page 47.
None of the Directors was materially
interested in any significant contract
to which the Company or any of its
subsidiaries were party to during
the year.
Results anD DiViDenD
The Consolidated Income Statement is
set out on page 64 and shows the profit
for the year. The Directors recommend
a final dividend of 5.08p (2016: 5.08p)
per share which, subject to approval at
the Annual General Meeting to be held
on 1 May, will be paid to shareholders
on 18 May 2018. This together with the
interim dividend of 4.80p (2016: 4.66p)
per share paid on 13 October 2017
gives a total dividend of 9.88p (2016:
9.74p) per share for the year ended
31 December 2017.
stRategic RePORt
The Group’s Strategic Report can be
found on pages 6 to 25 This report is
required to contain a fair review of the
Company’s business and a description of
the principal risks and uncertainties that
it faces. The Strategic Report contains
certain forward looking statements with
respect to the financial condition, results
of operations and businesses of RPS as
well as likely future developments. 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.
Nothing in the Strategic Report should
be construed as a profit forecast.
Financial key performance indicators
can be found on page 23. The Directors
review performance using these
Alternative Performance Measures
(APMs) as defined in Note 3 to the
Consolidated Financial Statements. The
APMs used exclude certain items that
the Board believes distort the trading
performance of the Group. These items
are either acquisition and disposal
related or they are non-cash items. The
Board does not at present 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.
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.
The Group develops and delivers
innovative technical solutions to its
clients, the costs of which are expensed
to the Consolidated Income Statement.
The Group obtains enhanced tax relief
for these costs in the United Kingdom
and has adopted the RDEC (research
and development expenditure
credit) regime.
cORPORate gOVeRnance
The Directors’ report on corporate
governance can be found on pages 32
to 56 and incorporates other parts of
the Report and Accounts as detailed
therein.
eMPlOYees
The Group’s policies in relation to
employees are disclosed on pages 16
to 18.
cORPORate ResPOnsiBilitY
The Group’s corporate responsibility
statement is included on pages 16 to 19.
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.
28
RepoRt and accounts 2017 | dIRectoRs suBstantial shaRehOlDings
The Company is aware of the following interests in excess of 3% of the ordinary
share capital of the Company as at 22 February 2018.
Aberforth Partners
UBS Asset Management
Neptune Investment Management
NBIM
Dimensional Fund Advisors
Montonoro Investment Managers
no. of shares
Percentage
22,130,041
11,826,682
10,782,847
8,281,957
7,847,980
6,792,574
9.84
5.26
4.79
3.68
3.49
3.02
gOing cOnceRn
The Group’s business activities, a
review of the 2017 results together
with factors likely to affect its future
development and prospects are set
out on pages 20 to 25. Note 17 to
the Consolidated Financial Statements
sets out the borrowings of the Group
and considers liquidity risk, whilst note
27 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 continuation of
difficult conditions within its 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 at least twelve
months from the date of approval of
the financial statements. 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 15.
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.
29
rpsgroup.com RePOR t OF the DiRect ORs CONTINUED
Parent Company
Financial Statements
In preparing the parent company
financial statements, the Directors are
required to:
n
n
n
n
select suitable accounting policies
and then apply them consistently;
make judgments and accounting
estimates that are reasonable
and prudent;
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 27 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 requirements of the Takeover
Directive.
Share Capital
As at 31 December 2017 the
Company’s issued share capital consisted
of 224,817,001 ordinary shares of
3p each. Substantial shareholder
interests of which the Company is
aware are shown above on page 29.
Shareholder Rights
and Restrictions
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. Holders of
ordinary shares may receive interim
dividends approved by the Directors
and dividends declared in general
meetings. On liquidation and subject to
a special resolution, the liquidator may
divide among members in specie the
whole or any part of the assets of the
Company. There are no shares in issue
that carry special rights with regard
to control of the Company and 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
Directors are appointed by ordinary
resolution at a general meeting of the
shareholders. The Board can appoint a
Director but any Director 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
30
RepoRt and accounts 2017 | dIRectoRs 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 47.
Change of Control
The Company’s debt facilities include
provisions that take effect on a change
of control and which provide that the
Company may be unable to draw
down any further amounts and/or that
such facilities may be cancelled, thus
restricting the Company’s ability
to operate.
listing Rule 9.8.4c
Pursuant to listing rule 9.8.4C the
Company is required to disclose that
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.
DiRectORs’ inDeMnities
Directors and Officers of the Company
benefit from directors’ and officers’
liability insurance cover in respect of
legal actions brought against them.
In addition Directors are indemnified
under the Company’s articles of
association to the maximum extent
permitted by law, such indemnities being
qualifying third party indemnities.
annual geneRal Meeting
The Annual General Meeting will be
held on 1 May 2018.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
1 March 2018
Registered Office:
20 Western Avenue
Milton Park
Abingdon
Oxfordshire OX14 4SH
Registered in England No. 02087786
31
rpsgroup.com cORPORate gOVeRnance
Introduction
Following a period of significant change the Board possesses an
appropriate balance of skills and experience and is performing with
increasing effect.
performing with increasing effect. The
review of effectiveness, which I led
towards the end of the year, and which
was then considered by the Board, is
described in the Annual Governance
Report. No major issues of concern
were identified, although some areas for
improvement were noted which will be
addressed in 2018. Overall the exercise
confirmed that progress has been made.
Whilst we had previously contemplated
undertaking an external review of
performance we concluded that against
the backdrop of the major changes of
Board membership such an exercise
would be premature. We will give
further consideration to undertaking an
externally facilitated review during 2018.
gOVeRnance FRaMeWORK
The opportunity was also taken
to review and clarify the overall
governance framework within which the
Board operates. The Board considered
and adopted a charter within which
the key elements of this framework are
captured. The opportunity was taken to
clarify the respective roles Chairman,
Chief Executive and Non-Executives, as
well as reviewing and updating Board
Committee terms of reference. In
addition the schedule of those matters
that are reserved for the Board’s
decision was reviewed and updated to
ensure that the Board has oversight in
appropriate areas whilst vesting sufficient
authority in the executive to enable
effective day to day management of the
Group. The Board will review its charter
and the terms of reference on an
annual basis.
The Board’s agenda strikes an
appropriate balance between review of
performance as well as strategy, planning
and the management of risk. Whilst in a
people business risk management and
internal control needs to remain an
integral part of our culture the Group’s
formal systems of risk management and
internal control continue to develop as
outlined in the Annual Corporate
Governance Report.
engageMent
Notwithstanding the formal framework
within which the Board operates, it is
important that it remains connected
with and understands the wider
business. The strategy review that was
conducted in the year is described
elsewhere in the Annual Report, but it
is pleasing that at the time the Board
discussed the recommendations of the
Executive, the Board actively engaged
not only with the Executive Directors
but also with the Group’s principal
business leaders. During 2018 the Board
intends to meet at a number of the
Group’s business locations where the
opportunity will be taken to fully engage
with local management.
We will continue to strive to ensure
that the Board achieves an appropriate
balance of its corporate governance,
business performance evaluation and
strategy assessment activities.
Ken leVeR
Chairman
1 March 2018
Ken leVeR chaiRMan
chaiRMan’s
intRODuctiOn
The Group’s detailed Annual Corporate
Governance Report together with
supporting reports from the Chairman
of each of the Board’s three principal
committees and can be found on the
following pages. These are intended
to give shareholders an understanding
of the Group’s corporate governance
arrangements and how they operated
during the period. As Group Chairman
it is, however, appropriate for me to
provide some general overview and pick
up on a number of key points.
change anD
PeRFORMance
The changes at Board level are
detailed in the Annual Report of the
Nomination Committee. The Board
as now constituted incorporates a
strong and appropriate balance of skills
and experience. With such significant
changes a period of adjustment
is required, however, the Board is
32
RepoRt and accounts 2017 | coRpoRate GoVeRnance
cORPORate gOVeRnance
Annual Report
OVeRVieW anD
cOMPliance
The Chairman’s statement which
appears on page 32 incorporates
comments relating to the governance of
the Group and provides a backdrop to
this detailed report. During the year the
Board considered and then adopted a
charter incorporating the key aspects of
the Group’s governance arrangements.
This includes the definition of roles,
responsibilities and authorities as
applicable to Board, its Committees and
individual directors. The Board is pleased
to report that throughout the year the
Company complied with all provisions
of the UK Corporate Governance Code
2016 (the ‘Code’) as applicable to a
small market capitalisation company.
This report and the following report of
the Committee Chairmen describe the
structures, processes and events through
which compliance is achieved.
BOaRD stRuctuRe
At the date of this report the Board
comprised two Executive Directors,
three Non-Executive Directors and the
Chairman. Whilst this general structure
has remained unchanged, a number
of personnel changes occurred during
the year. On 1 June 2017 John Bennett
stood down as a Director with Allison
Bainbridge being appointed with effect
from the same date. Liz Peace joined
the Board on 11 July 2017 and Louise
Charlton retired as a director on
4 August 2017. In addition John Douglas
joined the Board as Chief Executive
Designate on 1 June 2017 and assumed
the role as Chief Executive on 31
August 2017, at which time Alan Hearne
retired as a Director.
The Board Charter referred to above
incorporates descriptions of the distinct
roles of the Chairman and Chief
Executive. The Chairman provides
leadership to the Board of Directors,
sets its agenda and is responsible for its
overall effectiveness and performance.
This includes ensuring that all Directors
are in receipt of timely information in
order to take a full and constructive
part in Board discussions. The Chairman,
with the involvement of the Executive
Directors, also seeks to ensure effective
communication with shareholders and
will meet with major shareholders
as reasonably required. The Chief
Executive is responsible for all executive
management matters within the Group.
This incorporates the development of
Group strategy, budgets and business
plans as well as providing effective
executive leadership and developing
a culture which strikes an appropriate
balance between entrepreneurship and
the management of risk.
The role of the Non-Executive
Directors is to provide independent
and considered advice to the Board in
matters of strategy, risk and performance,
whilst providing governance oversight
through operation of the Board’s
Committees. The Board is satisfied that
all Non-Executives are independent
and that there are no circumstances or
relationships that may affect judgements.
In particular none of the circumstances
detailed in provision B.1.1 of the
Code apply. The Chairman and the
Non-Executive Directors are generally
appointed for three-year terms, which
may subsequently be extended. Any
term beyond six years for a Non-
Executive is rigorously reviewed, taking
account of the requirement to refresh
the Board.
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. Separate reports from
each of these Committees can be
found on pages 36 to 56.The Chairman
of each Committee provides regular
updates at Board meetings.
John Douglas, Allison Bainbridge and Liz
Peace having been appointed during the
year will all be subject to election at the
forthcoming Annual General Meeting.
All Directors are subject to annual
re-election by shareholders.
BOaRD ResPOnsiBilities
The Board Charter incorporates a
comprehensive schedule of matters that
are reserved for its decision and which
include the following.
n
n
n
n
n
n
n
n
n
determination of the Group’s
overall strategy
the approval of annual budgets and
business plans
financial reporting including annual
and half year results and market
updates
the recommendation and approval
of dividends and other capital
distributions
the approval of material corporate
transactions including all acquisitions
the approval of policies and systems
for risk management and internal
control
the appointment of key advisers to
the Group
the approval of major items of
capital expenditure
any substantive change in the nature
of the Group’s activities
Matters falling outside of the Board’s
reserved list are delegated to the
Group executive under the leadership
of the Chief Executive. Responsibilities
are, subject to clear written limits,
delegated further to the Group’s
Business segments and in turn within
each segment. The Group Leadership
Team, which meets regularly throughout
the year, retains operational oversight
of the Group’s activities. This team
currently consists of the Chief Executive,
the Group Finance Director, the Group
Marketing Director and the Group’s
four principal business leaders.
BOaRD OPeRatiOn
The Board has eight scheduled meetings
during the year, but will meet on
other occasions should circumstances
require. The Board’s agenda seeks to
achieve a balance between review
33
rpsgroup.com cORPORate gOVeRnance RePOR t CONTINUED
of performance, the development of
strategy, the management of risk and
regulatory obligations. During the year
the following items were considered at
each meeting.
n Safety performance
n
Financial and business performance
n Strategic priorities
n Emerging risks
n Material employment issues
n Significant litigation
n
Investor and City relations
In addition and at the appropriate point
the Board also considered.
n The Group’s Annual Budget
n Significant Market Announcements
n
Group results and the Annual
Report and Accounts
n Board Performance
n
n
n
n
Review of internal control and
risk management
Dividends and Dividend Policy
Reports from Board Committee
Chairmen
Other matters reserved for
Board approval
The Board also conducted a two day
strategy workshop in conjunction with
the Group’s principal business leaders
following which the strategic priorities
described on pages 10 and 11 were
endorsed.
Detailed papers are made available in
of advance of meetings in support of
relevant agenda items. During the year
a Board portal through which papers
are provided was adopted to improve
speed and efficiency. The Company
Secretary assists the Chairman in
ensuring that Board procedures are
followed and is available to assist
directors generally as well as advising on
matters of corporate governance.
Outside of Board meetings the
Chairman has discussions with all
Directors. The Chairman and Non-
Executives meet without the Executive
Directors present at least twice a year
and the Non-Executives meet without
the Chairman present at least one a year.
Each Director is required, in accordance
with the Companies Act 2006, to
declare any interests that may give
rise to a conflict of interest with
the Company on appointment and
subsequently as they may arise. Where
such a conflict, or potential conflict,
arises the Board is empowered under
the Company’s articles of association to
consider and authorise such conflicts as
appropriate and subject to such terms
as they think fit. No such conflict arose
during the year under review.
There is an agreed procedure for
Directors to take independent
professional advice at the Company’s
expense. The Company maintains
Directors and Officers liability insurance
with a current limit of indemnity of £20m.
Ken Lever
Alan Hearne*
John Douglas*
Gary Young
Robert Miller-Bakewell
John Bennett*
Louise Charlton*
Allison Bainbridge*
Liz Peace*
Number of meetings held
*served for part year only
34
Full
Board
9
6
5
9
9
4
5
4
3
9
audit
committee
–
–
–
–
3
1
–
2
1
3
Remuneration
committee
–
–
–
–
8
6
7
–
1
8
nomination
committee
5
–
–
–
5
5
5
–
–
5
BOaRD PeRFORMance
The Board undertakes an annual
appraisal of its performance. As indicated
above, 2017 has been a year of significant
Board change and transition. Against
that background it was concluded that
a highly structured evaluation process
would be of limited value at this point.
A process was, however, undertaken
whereby the Chairman engaged with
all of the Company’s Directors across
a range of topics to ascertain any areas
of concern and suggestions. The results
of this exercise were then reported to
and discussed with the Board as a whole.
A number of priorities and notably the
following were identified from
this process:
n
n
n
n
more timely production of Board
papers linked to accelerated
financial reporting;
more engagement with businesses
through visits and management
presentations;
reviewing the knowledge and
training needs of the Non-Executive
Directors and
improved process and
communication protocol between
the Board and its Committees.
The Board will keep progress in these
areas under review. A more structured
review, which may involve the use of an
external facilitator, will be undertaken
during 2018.
tRaining
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. The foregoing
applied to all Directors appointed
during the year. Advice is available
from the Company’s solicitors, auditors
and brokers if required. Updates are
provided on key technical issues as
required including those relating to
corporate governance and corporate
social responsibility. During the year the
Chairman and Non-executive Directors
met with and received presentations
RepoRt and accounts 2017 | coRpoRate GoVeRnance from the Managing Directors of three
of the Group’s operating segments
and engaged with the Group’s various
businesses more generally.
The Non-Executive Directors have
access to a training academy managed
by Deloitte LLP.
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 responds to
enquiries from shareholders and others
with an interest in the Group
as required.
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 from time to time. An
investor relations update is provided 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.
RisK ManageMent anD
inteRnal cOntROls
Overview
The Board retains overall responsibility
for setting the Group’s risk appetite
as well as risk management and
internal control systems. In accordance
with this obligation 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 12 to 15.
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 Assurance Manager
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. Trading in financial
instruments is not permitted.
Base Controls
During the year the Group Assurance
Manager commenced the introduction
of an internal control self-assessment
system throughout the Group. This
requires the Finance Directors of the
Group’s operating units to regularly
assess the controls they operate against
a standard set of base controls and to
ensure that any shortcomings identified
are mitigated or new controls put in
place. The process of assessment and
implementation of controls is underway
and preliminary assessment indicates
that appropriate controls are in place.
Delegated Authorities
A system of delegated authorities,
whereby the incurring of expenditure
and assumption of contractual
commitments can only be approved
by specified individuals and within pre-
defined limits, is in place throughout
the Group.
Review and reporting
Internal controls and in particular any
failures are reported to and reviewed
at Group and operating Board meetings
in order that changes to systems can
be implemented where required. The
Audit Committee also maintains a brief
to keep the overall systems of internal
control under review. During the year a
detailed review of the Group’s system
of internal control and risk management
was undertaken and reviewed by
the Board. The Board and the Audit
Committee were satisfied that the
systems in place are appropriate
and effective.
The respective responsibilities of the
Directors and the independent auditors
in connection with the accounts are
explained on pages 29 to 30 and 62
and the statement of the Directors
in respect of going concern appears
on page 29. The long term viability
statement is set out on page 15.
taKeOVeR DiRectiVe
Disclosures required under the Takeover
Directive are included on pages 30
and 31 and form part of the Group’s
Corporate Governance report.
35
rpsgroup.com nOMinatiOn cOMMittee RePOR t
The Nomination Committee ensures that membership of the Board and its
Committees remains appropriate for the delivery of value to shareholders
and other stakeholders.
I am pleased to report to shareholders
in my capacity as Chairman of the
Nomination Committee. The report
outlines the key responsibilities of the
Committee and activities during the year.
As outlined below 2017 has been a year
of significant change at Board level.
MeMBeRshiP
anD Meetings
In addition to me as Chairman, all of
our Non-executives directors, Allison
Bainbridge, Robert Miller-Bakewell and
Liz Peace are current members of the
Committee. Allison and Liz both joined
the Committee on their respective
appointments to the Board as at
1 June and 11 July 2017. John Bennett
and Louise Charlton served on the
Committee for part of the year with
both standing down at the time of
their retirements from the Board. The
Company Secretary acts as Secretary
of the Committee whilst Executive
Directors and external agents may be
asked to attend as required. Given the
significant Board changes that occurred,
the Committee met on a total of five
times during the year.
ResPOnsiBilities
anD actiVities
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. The Committee also
maintains an ongoing brief to consider
succession planning at Board and Senior
Executive level.
All of these activities were undertaken
during the year, a number of which
are described in more detail below.
The Committee has written terms of
reference which are available on the
Company’s website.
BOaRD changes
During the year the Committee led the
process to appoint a new Group Chief
Executive as successor to Alan Hearne.
For this purpose a detailed specification
for the role was prepared and Spencer
Stuart were appointed to undertake
an international search process. Spencer
Stuart has no other connections with
the Group. A number of credible
candidates were identified who were
interviewed by the Committee and
undertook a structured assessment
process managed by Spencer Stuart.
John Douglas was then identified as the
favoured candidate and was given the
opportunity to meet with the Executive
Directors. Following this process
the Board discussed and accepted a
recommendation from the Nomination
Committee that John Douglas be
Ken leVeR chaiRMan OF the
nOMinatiOn cOMMittee
36
RepoRt and accounts 2017 | coRpoRate GoVeRnance appointed to the Board and, following
a brief period of transition, be appointed
as the Group’s new Chief Executive.
During the year and with the retirement
of John Bennett and Louise Charlton,
Allison Bainbridge and Liz Peace were
both appointed as new Non-Executive
Directors. Detailed specifications were
also prepared for these roles and a
search process conducted through
Spencer Stuart, following which
recommendations were made to and
accepted by the Board. In selecting
new Non-Executives the Committee
was mindful of the need to retain
an appropriate balance of skills and
experience on the Board. Allison
Bainbridge as a Chartered Accountant
and Finance Director of a listed
company was an appropriate candidate
to assume Chairmanship of the Audit
Committee. Liz Peace has extensive
corporate and commercial experience
including within the areas of property
and infrastructure development.
electiOn anD Re-electiOn
OF DiRectORs
As in previous years and in accordance
with the UK Governance Code all
directors will stand for election or
re-election at the Annual General
Meeting. The range of skills and
experience offered by the current
Board is highlighted on page 27. The
Committee and the Board consider the
performance of each of the Directors
standing for election or re-election to
be fully satisfactory and that they have
demonstrated ongoing commitment to
their roles. The Board therefore strongly
supports the election or re-election
of all directors and recommends that
shareholders vote in favour of the
relevant resolutions at the Annual
General Meeting.
BOaRD MeMBeRshiP
anD DiVeRsitY
In considering appointments to the
Board the Committee evaluates the
skills, experience and knowledge
required for a particular role with due
regard to the benefit of diversity. Whilst
the Committee will look to recruit the
best available candidate for any role,
the Company has previously set and
announced a target that a minimum
of 25% of its Board should be female.
Following the appointment of Allison
Bainbridge and Elizabeth Peace to
the Board, the Committee is pleased
that this target is currently satisfied.
The Committee will continue to take
account of diversity generally in its
future deliberations. Diversity within the
Group more generally is referred to in
the Corporate Responsibility Report
on page 17.
Ken leVeR
Chairman of the
Nomination Committee
1 March 2018
37
rpsgroup.com auDit cOMMittee RePOR t
The Audit Committee provides an independent overview of the
effectiveness of the internal financial control systems and financial
reporting processes.
I am pleased to present our Audit
Committee report for the year-ended
31 December 2017. The report below
describes the Committee’s ongoing
responsibilities as well as the major
activities undertaken in the year and its
policies in a number of key areas.
MeMBeRshiP anD Meetings
There have been a number of changes
in Committee membership during the
year. On 1 June 2017, being the time
of his retirement from the Board, John
Bennett stood down as Chairman
of the Committee and I joined in his
place. Additionally Liz Peace joined the
Committee on her appointment as a
Director as at 11 July 2017. Although
the Board considers that all members
of the Committee have experience
that is relevant to the role, as the
serving Finance Director of a fully listed
public company I am identified as the
Committee member having recent
and relevant financial experience. The
Company Secretary acts as secretary of
the Committee.
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. The Group
Chairman, Group Chief Executive and
Group Finance Director all attend the
Committee’s meetings and members
of the Group Finance team are asked
to attend from time to time. The
Deloitte audit partner and director
also attend meetings and with whom
the Committee has a private session,
at least once a year, without executive
management present.
ResPOnsiBilities
anD actiVities
The Audit Committee provides
an independent overview of the
effectiveness of the financial reporting
process and internal financial control
systems. This incorporates the
appointment of the external auditors
including agreeing their terms of
engagement at the start of each audit,
the audit scope and the audit fee.
At the conclusion of the full-year audit
and interim review the Committee
receives a detailed report from the
Auditors. The Committee reviews this
report, as well as the integrity of the
accounting statements. This includes
ensuring that statutory and associated
legal and regulatory requirements are
met as well as considering significant
reporting judgements and estimates,
the adoption of appropriate accounting
policies and practices and compliance
with accounting standards. It also
incorporates consideration of significant
accounting issues as detailed below and
advising the Board in relation to the
fairness, balance and understandability
of the annual report.
The Committee monitors the external
auditor’s effectiveness, independence
and objectivity including the nature and
appropriateness of any non-audit fees.
Additionally the Committee assists the
allisOn BainBRiDge chaiR OF the
auDit cOMMittee
38
RepoRt and accounts 2017 | coRpoRate GoVeRnance Board in monitoring and reviewing the
Group’s system of internal control and
risk management as described in the
Corporate Governance Report. As part
of this it reviews the Group’s whistle
blowing policy whereby employees may,
on a confidential basis raise concerns
with regard to improprieties relating to
financial reporting, internal control or
other matters.
All the activities detailed above were
undertaken in the year, a number of
which are described in more detail
below. The Committee’s detailed terms
of reference can be found on the
Company’s website.
signiFicant
accOunting issues
In respect of the year under review and
as part of its role in reviewing estimates
and judgements made by management,
the following significant issues were
reviewed and in each case addressed
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 2018. The conclusion was that no
impairment was necessary across the
Group’s Cash Generating Units (‘CGU’s)
other than in respect of Energy EAME
and Energy North America. In respect
of these CGUs, both of which are
directly exposed to the oil and gas
industry, goodwill impairment provisions
of £33.4m and £6.6m respectively
are 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
such impairment exist.
Recoverability of trade receivables
and accrued income
The risk that trade debtors may not be
collected and accrued income may not
be billable and therefore be overstated
in the accounts is considered by the
Board at its regular meetings as part
of its review of business performance.
The Board also reviewed a detailed
paper presented by the Group Finance
Director on trade receivables and
accrued income as at the end of
September 2017 and concluded that
both were then appropriately stated.
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.
FaiR BalanceD anD
unDeRstanDaBle VieW
Having reviewed the Report and
Accounts, the Committee concluded
and advised the Board that in its view
the Report and Accounts for 2017,
taken as a whole, is fair, balanced
and understandable. The Board then
separately considered this matter and
concurred with the Audit Committee’s
recommendation. In reaching this
conclusion the Committee and the
Board were 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.
tRansitiOn tO iFRs 15
anD iFRs 9
The Committee was kept appraised by
the Group Finance Director of work
being undertaken to ensure compliance
with IFRS 15 “Revenue from Contracts
with Customers” and IFRS 9 “Financial
Instruments”. The impact of these
standards is shown in note 2 on
page 72.
Financial RePORting
Panel
As part of the thematic review of
companies’ reporting, the Financial
Reporting Panel reviewed the 2016
Group disclosures relating to significant
accounting adjustments and sources
of estimation uncertainty. The panel
confirmed that it had no substantive
issues to raise in relation to their
39
rpsgroup.com auDit cOMMittee RePOR t CONTINUED
review, although made two suggestions
as to how accounting disclosures
might be improved for the future in
two detailed unrelated areas. Both
of these disclosures have been dealt
with as suggested in the 2017 financial
statements.
auDitOR inDePenDence
Deloitte LLP were appointed as Group
Auditors in June 2012 following a tender
process. As a matter of general policy
audit partners are rotated at least every
five years and the Group’s policy is that
the Group audit appointment should be
retendered at least every ten years. The
current Group audit partner is Andrew
Bond who assumed this role prior to
the interim review. The Committee
ensures that the Group Auditors remain
independent of the Group and reviews
this on an annual basis. In that regard
Deloitte provide a written report to the
Committee on how they comply with
professional and regulatory
requirements designed to ensure their
independence. The audit partner
responsible for the Group’s Australian
entities is in his sixth year in the role.
The Audit Committee considered the
possible impact on independence
and concluded that given ongoing
re-organisation in Australia a sixth year
could be justified in order not to
compromise audit quality.
In addition and as part of its
responsibility to ensure audit
independence and objectivity, the
Committee has adopted a policy in
relation to the use of the Auditors for
the provision of Non-Audit Services.
Under the terms of this policy the
provision of certain services are
prohibited and include those
listed below:
n
n
n
n
n
n
bookkeeping services
valuation services
investment advisory, broker and
dealing services
general management services
preparation of financial statements
design and implementation of
financial systems
n
taxation services
Notwithstanding the general prohibition
in respect of certain services, any other
Non-Audit service to be provided by
the Auditors requires the approval of
the Group Finance Director who will
in turn refer the matter to the Audit
Committee should any potential for
conflict exist. The split between audit
and non-audit fees for 2017 appears in
note 9 on page 79.
Re-aPPOintMent
OF auDitORs
As noted above 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.
This assessment is based upon the
Committee’s interactions with the
external Auditors and through feedback
from finance teams across the Group.
The Committee is satisfied that Deloitte
continue to provide an effective service
across the Group. and accordingly
recommended to the Board that a
resolution to re-appoint Deloitte as
Auditors be proposed at the Annual
General Meeting.
inteRnal cOntROl
anD auDit
The Committee also monitors the
ongoing effectiveness of the Group’s
internal financial controls and risk
management processes as described
on page 35 as well as assisting the
Board with its annual assessment of this
area. Internal audit within the Group is
undertaken by the Group Assurance
Manager who has a dual reporting
line to the Chairman of the Audit
Committee and the Group Finance
Director. The Group Assurance Manager
undertakes a planned programme of
reviews across the Group’s operations
that is approved in advance by the
Audit Committee. Detailed reports
are produced following each review
and related follow-up actions identified.
Summary reports are provided to the
Audit Committee for consideration.
allisOn BainBRiDge
Chair of the
Audit Committee
1 March 2018
40
RepoRt and accounts 2017 | coRpoRate GoVeRnance
ReMuneRatiOn cOMMittee RePOR t
Remuneration policy is designed to support both annual performance
and the longer term delivery of RPS’ strategic objectives.
ROBeRt MilleR-B aKeWell
chaiRMan OF the ReMuneRatiOn
cOMMittee
I am pleased to present the report of
the Remuneration Committee for 2017.
This consists of my Annual Statement
which is set out immediately below and
the Annual Report on Remuneration
which follows on pages 44 to 56.
MeMBeRshiP
anD Meetings
There have been a number of changes
in Committee membership during
the year. On 1 June and 4 August
2017 respectively being their dates of
retirement from the Board, John Bennett
and Louise Charlton stood down as
members of the Committee. Liz Peace
joined the Committee on 11 July being
the date of her of joining the Board. The
Company Secretary acts as secretary
of the Committee.
The Committee held three regular
meetings in the year timed to ensure
the proper discharge of the activities
described below and a number of other
meetings to discuss specific issues largely
associated with the change of Chief
Executive that occurred during this
period.
The Group Chairman attends the
meetings of the Committee. The Group
Chief Executive also attends, although
will not be present when discussion
relates to his own remuneration.
Representatives from the Committee’s
advisers, PwC, attend meetings as and
when required.
ResPOnsiBilities
anD actiVities
The Remuneration Committee is
responsible for determining the overall
policy for executive remuneration
which is then subject to Board and
shareholder approval. Within the
context of shareholder approved policy
the Committee is then responsible for
determining the specific remuneration
packages for the Executive Directors.
This incorporates review of salaries
as well as determining opportunities
under incentive plans and performance
conditions relating to those plans.
Activities also include the determination
of terms for any Executive leaving or
joining the Board. The Committee’s
remit also provides for oversight of the
level and structure of remuneration
for the Group’s senior executives
immediately below Board level. In
discharging these responsibilities
the Committee takes account of
employment conditions in the
wider Group.
All the activities detailed above were
undertaken in the year, a number of
which are described in more detail
below. The Committee’s detailed terms
of reference can be found on the
Company’s website.
The Committee is regularly updated
by PwC on evolving governance
expectations and anticipates that its
remit will expand.
41
rpsgroup.com ReMuneRatiOn cOMMittee RePOR t CONTINUED
FRaMeWORK
The Company’s current remuneration
policy was approved by shareholders
in November 2016, with 2017 being its
first full year of operation. A summary of
the policy is included within the Annual
Report on Remuneration and the full
policy statement is available on the
Company’s website at www.rpsgroup.
com.Through this policy the Committee
aims to ensure that remuneration is
fair and competitive, whilst operating
to retain and motivate the Company’s
Executive Directors in pursuit of the
Group’s corporate objectives.
The executive incentive plans in
operation, as part of current policy, are
the RPS Group Plc Short Term Annual
Bonus Plan (‘STABP’) and the RPS
Group Executive Long Term Incentive
Plan (‘ELTIP’). The latter operates over a
three year period with the first awards
having been made during the year.
Details of these and the further awards
which will be made to the Executive
Directors in 2018 can be found in the
Annual Report on Remuneration. The
STABP, which operated for the first time
in 2017, is an annual bonus plan linked
to performance in the relevant year.
The operation of the STABP and the
outcomes for 2017 are described below.
As outlined on pages 10 and 11 and
following review, the Board has adopted
a number of strategic priorities. The
Committee believes that the current
structure of remuneration policy
remains appropriate in facilitating
both annual delivery of performance
and achievement of these priorities.
In particular it believes that reward
linked to shorter term performance
of which PBTA forms the largest part,
combined with longer term incentive
linked primarily to growth in EPS and
Total Shareholder Return is an effective
way of measuring success in delivery
of strategic objectives. The Committee
will, however, keep this position under
review as development of strategy and
its execution continues.
PeRFORMance anD
OutcOMes FOR 2017
The bonus opportunities for 2017
under the STABP were set at 150% of
basic salary for John Douglas, 125% for
Gary Young and 100% for Alan Hearne.
The performance conditions for the year
related to PBTA (70%), cash collection
(20%) and personal objectives (10%).
The threshold and maximum targets
in respect of PBTA were set at £52m
and £60m respectively for 2017. Actual
PBTA for 2017 was £53.9m (2016:
£50.7m), with the result that a partial
bonus was earned in respect of this
element. In respect of cash collection
threshold and maximum were set at
85% and 105% respectively. Actual cash
collection for 2017 was 91% (2016:
117%) and with the result that partial
bonus was also earned in respect of
this element.
The personal objectives for the year
which are outlined on page 45 of the
Annual Report on Remuneration related
to operational priorities for the year in
particular taking account of the change
of Chief Executive. The Committee
concluded that, as detailed on page 45,
the objectives of all three participants
had been met in full.
The table which appears on page 44 of
the Annual Report on Remuneration
details the bonus earned in respect
of each element by each Executive
Director and the total bonus payable.
The total bonus earned by John Douglas
and Alan Hearne was, in both cases,
pro-rated to reflect the period served
as a director in the year. Under the
normal terms of the STABP 50% of
bonus earned is payable in cash and
50% deferred in shares over a three
year period. This will apply in respect
of Gary Young, although John Douglas
has elected to take all of his bonus in
the form of deferred shares. In respect
of Alan Hearne, who retired from the
Board during the year, the total bonus
will be paid in cash.
chieF eXecutiVe
aPPOintMent
John Douglas joined the Board on
1 June 2017 and was appointed as Chief
Executive with effect from 1 September
2017. In determining remuneration for a
new Chief Executive the Remuneration
Committee sought to provide a package
which would attract a candidate of high
calibre, whilst also taking account of
relevant benchmarking data to ensure
that remuneration was appropriate and
in line with approved policy limits.
The basic salary for John Douglas
was set at £495,000 which compares
with £581,400 for the outgoing Chief
Executive. John Douglas will participate
42
RepoRt and accounts 2017 | coRpoRate GoVeRnance in the STABP and ELTIP within
prescribed limits. As indicated above
he participated in the STABP in 2017
with, subject to pro-ration for time, a
maximum overall opportunity of 150%
of basic salary. He also received an
initial award under the ELTP with an
opportunity of 150% of basic salary. The
opportunities available to the outgoing
Chief Executive had in both cases been
limited to 100% to take account of his
higher basic salary.
John Douglas was required to relocate
from Australia to assume his new role
and an appropriate package has been
provided to mitigate the additional costs
and disruption entailed. Further details
are included on page 44 of the Annual
Report on Remuneration.
chieF eXecutiVe
RetiReMent
Alan Hearne retired from the Board and
as Chief Executive on 31 August 2017.
At that time he received a total cash
payment of £372,875 equal in value to
six months’ salary, pension allowance
and benefits. As detailed above, he
participated in the STABP until his
retirement in respect of which he will
receive a pro-rated payment in cash
of £127,472. He received an award of
229,956 shares under the ELTIP during
the year which will vest, subject to
performance and pro-ration for time,
on the normal vesting date. Alan Hearne
also had a total of 91,959 shares
deferred under the previous RPS Group
Plc Bonus Plan which, in accordance
with the rules of that plan, vested as at
date of retirement.
In addition to the foregoing and in order
that the Group can continue to have
access to the substantial knowledge and
experience amassed during a 36 year
tenure as Chief Executive, the Company
has entered into a twelve month
consultancy with Alan Hearne at
a fee equal to his previous basic salary
of £581,400.
iMPleMentatiOn OF POlicY
FOR 2018
The basic salaries of the Executive
Directors were reviewed as at
1 January 2018 following which John
Douglas’ salary was unchanged and
Gary Young’s was increased by 2%
to £316,200. John Douglas and Gary
Young will participate in the STABP in
2018 with maximum opportunities at
150% and 125% of salary respectively.
In respect of the ELTIP John Douglas
will receive an award of shares equal
to 150% of salary and Gary Young will
receive an award equal in value to 125%
of his salary. In accordance with what
is now recognised best practice, the
Committee has determined that a two
year post-vesting holding period will
apply to these awards. Further details
of the terms of participation in these
plans for 2018 are shown in the Annual
Report on Remuneration on pages 53
to 55.
ROBeRt MilleR BaKeWell
Chairman of the
Remuneration Committee
1 March 2018
43
rpsgroup.com
annual RePOR t On ReMuneRatiOn
This Report details how the Company’s remuneration policy for Directors was implemented during the financial year ended
31 December 2017. It has been prepared in accordance with the provisions of the Companies Act 2016 and the Large and
Medium-sized Companies and Group’s (Accounts and Reports) Regulations 2008 (as amended in 2013) (the ‘Regulations’).
An advisory resolution to approve this report and the Annual Statement will be put to shareholders at the forthcoming
Annual General Meeting.
DiRectOR ReMuneRatiOn FOR the Financial YeaR enDeD 31 DeceMBeR 2017 (audited)
Executive Director’s total single figure remuneration
The following table sets out the breakdown total of the remuneration received by each of the Executive Directors during the
year under review, with the comparative figures for the prior financial year. Figures provided have been calculated in accordance
with the Regulations.
Executive Director
£000s
Year
Executive
John Douglas
alan hearne
gary Young
Notes:
Base Salary
or Fees
Benefits
Bonus
Long Term
Incentives
Pensions
All Employee
Share Plan
Total
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
289
388
310
–
581
289
124
13
16
–
19
16
142
127
127
–
233
130
–
–
–
–
–
–
58
97
47
–
145
43
1
2
4
–
3
3
614
627
504
–
981
481
1. Benefits - the value for benefits for each Executive Director shown is comprised of a company car or company car allowance and private medical insurance. In the case
of John Douglas this also includes the grossed-up value of relocation assistance provided which is equal to £117,000. The net of tax amounts reimbursed comprised UK
property rental costs (£33,000), air fares for family visits (£18,000), legal costs associated with recruitment (£3,000) and the costs of professional tax advice (£5,000).
With the exception of assistance relating to taxation advice, all relocation assistance provided to John Douglas is time limited to March 2019. The value of assistance to be
provided in 2018 is expected to be at a comparable level to 2017.
2. Pension - 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.
3. John Douglas joined the Board on 1 June 2017 and was appointed as a Chief Executive on 1 September 2017. His remuneration covers the period from the former date.
4. Alan Hearne’s remuneration covers the period until his retirement from the Board and as Chief Executive on 1 September 2017. His remuneration arrangements are
described in further detail on page 46.
Short Term Annual Bonus Plan outcomes for the financial year ending 31 December 2017 (audited)
For 2017 John Douglas, Alan Hearne and Gary Young had a maximum annual bonus opportunity of 150%, 100% and 125% of
basic salary, respectively. For each Executive Director, the 2017 annual bonus determination was based on performance against
PBTA, cash conversion and personal objectives. The annual bonus amounts for John Douglas and Alan Hearne were pro-rated
for their service as directors during the year.
The table below provides information on the targets for each measure, actual performance and resulting bonus payment for
each Executive Director.
Performance required
actual Performance
John Douglas1 gary Young
alan hearne2
Threshold
(0% vesting)
Maximum
(100% vesting)
Actual
% of element
Value £000
Value £000
Value £000
Measure
PBta
cash conversion
Weighting
70%
20%
£52m
85%
£60m
105%
£53.9m
91%
24
30
Personal performance
10% See following page.
Bonus achieved in 2017
Notes
1. Annual bonus has been pro-rated for the 7 month period since joining the Board.
2. Annual bonus has been pro-rated for the 8 month period to retirement from the Board.
44
73
26
43
142
65
23
39
127
65
23
39
127
RepoRt and accounts 2017 | coRpoRate GoVeRnance
Performance against the personal objectives and the Committee’s assessment of performance for each Executive Director is set
out in the table below.
Director
Personal objectives set at the start of the year
assessment against the targets
John Douglas
To (a) undertake a strategic review of the Group
and to make recommendations for discussion with
the Group Board and (b) taking account of the
conclusion of the strategic review to produce a
business plan for 2018.
An initial strategic review was, as detailed on pages
10 and 11, successfully concluded and linked to
2018 plans. The Committee was satisfied that this
objective has been met in full.
gary Young
To provide effective support and assistance with
transition to a new Chief Executive.
alan hearne
To complete an effective handover to a new
Chief Executive.
A successful transition to a new Chief Executive was
achieved in which Gary Young provided effective
linkage and continuity. The Committee was satisfied
that this objective was met in full.
A detailed programme was put in place by Alan
Hearne and implemented to assist John Douglas
following his appointment. This was key to achieving
a successful handover of responsibilities and the
Committee was satisfied that this objective had
been met in full.
The Committee has reviewed the overall bonus outcomes against corporate performance and believes that the bonuses
earned are commensurate with the shareholder experience in 2017. Under the normal terms of the STABP 50% of bonus
earned is payable in cash and 50% deferred in shares over a three year period. This treatment will apply in respect of Gary
Young, although John Douglas has elected to take all of his bonus in the form of deferred shares. Alan Hearne having retired
from the Board and in accordance with the STABP rules will be paid fully in cash.
Executive Long Term Incentive Plan (‘ELTIP’) awards vesting in the financial year ending 31 December 2017
There were no ELTIP awards vesting in the Financial Year ending 31 December 2017.
ELTIP awards granted in the financial year ending 31 December 2017 (audited)
The table below sets out the details of the ELTIP awards granted on 9 March 2017 to Alan Hearne and Gary Young, and on
8 June 2017 to John Douglas, where vesting will be determined according to the achievement of certain performance measures.
type of award
Basis of award
Nil Cost Options
150% of salary
Nil Cost Options
125% of salary
Nil Cost Options
100% of salary
Face value of
award at grant
Date (£)
number of shares
under option
742,500
387,500
581,400
270,324
153,265
229,956
Vesting date
08-Jun-20
09-Mar-20
09-Mar-20
Director
John Douglas
gary Young
alan hearne
Notes
1. The number of shares to constitute these awards was calculated by reference to the average of the Company’s closing share price over the period 6-8 March 2017 in
respect of Gary Young and Alan Hearne, being 252.83p, and over the period of 5-7 June 2017, being 274.67p, in respect of John Douglas.
45
rpsgroup.com
annual RePOR t On ReMuneRatiOn CONTINUED
The awards will vest subject to achievement of the following targets.
Performance measure
Weighting
Measurement period
Performance target
Vesting level (% maximum)
Total Shareholder Return
relative to the FTSE All
Share
50%
Three years from
date of grant
Upper Quartile
100%
Median to Upper Quartile
Pro rata on a straight-line basis
between 20% and 100%
Average Annual Growth
in Earnings Per Share
(measured on a constant
currency basis)
25%
Three financial years
12% p.a.
Below Median
0%
100%
Between 4% and 12% p.a.
Pro rata on a straight-line basis
between 20% and 100%
Cash conversion
25%
Three financial years
105%
Below 4% p.a.
0%
100%
Between 85% and 105%
Pro rata on a straight-line basis
between 20% and 100%
85% and below
0%
Share Incentive Plan (‘SIP’) awards granted in the financial year ending 31 December 2017 (audited)
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 2017.
eXecutiVe DiRectORs
John Douglas
Gary Young
Alan Hearne
number of shares
Value of shares (£)
513
1,326
717
1,499
3,649
1,886
Shares are valued by reference to their price as at date of award. John Douglas and Alan Hearne participated in the SIP during
their respective periods of service as directors.
Payments to past Directors (audited)
No payments were made to past Directors other than those to Phil Williams as reported in last year’s Remuneration Report.
Payments for loss of office (audited)
The following sets out the remuneration entitlements for Alan Hearne as a result of his retirement from the Board on
31 August 2017.
A lump sum payment of £372,875 was paid comprised of the following.
n
n
n
Salary: £290,700 being a 6 months pro-ration of his annual salary
Benefits: £9,500 being a 6 months pro-ration of his benefits
Pension: £72,675 being a 6 months pro-ration of his pension
In addition Alan Hearne earned a bonus payment of £127,000 under the Short Term Annual Bonus Plan this having been pro-
rated to reflect his period of service as a director. The 2017 award made to Alan Hearne under the ELTIP will be pro-rated
for the period 9 March 2017 to 31 August 2017 and will vest, subject to performance on the normal vesting date. The 91,959
deferred shares awarded to Alan Hearne in March 2017 in respect of bonus earned in 2016 under the RPS Group Plc Bonus
Plan vested in full on 31 August 2017 in accordance with the rules of that plan.
In addition, the Company has entered into a consultancy agreement for 12 months with Alan Hearne with the fee being the
same as his previous basic salary of £581,400. The Company has entered into this agreement with Alan Hearne to ensure
access to the substantial historic knowledge, experience and contacts he has built in undertaking his role as Chief Executive of
RPS Group plc over a 36 year period.
46
RepoRt and accounts 2017 | coRpoRate GoVeRnance
Non-Executive Directors total single figure remuneration (audited)
The following table sets out the breakdown total of the remuneration received by each of the Non-Executive Directors
during the year under review, with the comparative figures for the prior financial year. Figures provided have been calculated
in accordance with the Regulations.
non-executive Director £000s
Year
Ken Lever1
Robert Miller-Bakewell
Allison Bainbridge2
Liz Peace2
John Bennett3
Louise Charlton3
Notes:
2017
136
64
32
25
22
26
Fee
2016
23
64
–
–
36
43
1. Ken Lever was appointed to the Board on 1 November 2016.
2. Allison Bainbridge and Liz Peace were appointed to the Board on 1 June and 11 July respectively.
3. John Bennett and Louise Charlton retired from the Board on 1 June and 4 August respectively.
Statement of Directors’ shareholding and share interests (audited)
Directors’ share interests as at 31 December 2017 or at date of retirement from the Board are set out below.
Director
John Douglas
gary Young
alan hearne*3
Ken lever
Robert Miller-Bakewell
allison Bainbridge
liz Peace
John Bennett*3
louise charlton*3
Notes:
number of beneficially
owned shares
interests subject to
performance conditions*1
interests subject to
employment conditions*2
513
109,146
123,267
40,000
10,000
–
–
–
–
270,324
153,265
36,751
–
–
–
–
–
–
513
27,665
93,837
–
–
–
–
–
–
total interests
271,350
290,076
253,855
40,000
10,000
–
–
–
–
1. Interests held under the Executive Long Term Incentive Plan. The interests shown in respect of Alan Hearne is the pro-rated number of shares following his retirement
from the Board.
2. Interests held under the RPS Group Plc Bonus Plan and matching shares held for less than three years under the Share Incentive Plan.
3. Interests shown as at date of retirement.
Between 31 December 2017 and 27 February 2018 the only movement in share interests was in respect of Partnership Shares
purchased and Matching Shares held under the Share Incentive Plan by Gary Young who purchased an additional 93 Partnership
Shares and received 93 Matching shares.
The Company’s Remuneration provides that John Douglas and Gary Young are required to build and maintain shareholdings of
200% and 150% of basic salary respectively. As at 31 December 2017 John Douglas and Gary Young held beneficial shares in
the Company equal in value to 0.1% and 64% of their respective salaries. Executive Directors are required to retain 50% of the
post-tax number of shares vesting under the STABP and the ELTIP until this requirement is met and maintained.
47
rpsgroup.com
annual RePOR t On ReMuneRatiOn CONTINUED
chieF eXecutiVe OFFiceR anD eMPlOYee Pa Y
Total Shareholder Return Performance
The graph below shows the value of £100 invested in RPS over the past nine years compared with the value of £100 invested
in the FTSE All Share and FTSE All Share support services. 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 nine year period.
total shareholder return from 1 January 2009
400
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
2009
2010
2011
2012
2013
2014
2015
2016
2017
RPS Group
FTSE AllShare
FTSE AllShare Support Services (all rebased to RPS)
Chief Executive Officer Remuneration
The table below shows the Group Chief Executive’s total remuneration and percentage of opportunity achieved for variable
remuneration elements.
eleMent
total Remuneration
(single figure for the Year - £000s)
annual Bonus
(% of Maximum Opportunity)
long–term incentives
(%age of Maximum number of
shares capable of vesting)
Notes
2009
2010
2011
20121
2013
2014
2015
2016
20172
20172
A Hearne A Hearne A Hearne A Hearne A Hearne A Hearne A Hearne A Hearne A Hearne
J Douglas
636
608
793
1,650
883
922
748
981
627
351
zero
46%
54%
77%
47%
32%
zero
20%
33%
33%
100%
zero
13%
100%
zero
zero
zero
zero
zero
zero
1. 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.
2. The remuneration shown for Alan Hearne is in respect of the period to 31 August 2017 at which time he retired from the Board. The total remuneration shown for
John Douglas is in respect of the period from 1 September 2017, when he was appointed as Group Chief Executive to 31 December 2017. The remuneration for
John Douglas includes a pro-ration of the annual bonus that was earned from 1 June 2017 being the date at which he joined the Board.
48
RepoRt and accounts 2017 | coRpoRate GoVeRnance
Percentage change in the Chief Executive Officer’s remuneration
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. Remuneration for the Chief Executive consists of that paid to
Alan Hearne up to 31 August 2017 and that paid to John Douglas from 1 September to 31 December 2017. The bonus
paid to John Douglas in respect of 2017 has been pro-rated to the period over which he served as Chief Executive.
Salary
Taxable Benefits
Annual Bonus
Percentage change from 2016 Financial Year
to 2017 Financial Year
ceO
-5%
441%
-11%
employees
2.6%
5.0%
3.8%
The substantial increase in taxable benefits paid to the Chief Executive reflects the value of relocation benefits provided for
John Douglas.
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:
Total employee pay
+6.0%
£000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
2016
2017
PBTA
+6.4%
Dividend
+1.8%
Profit before tax and amortisation is a key performance indicator for the Group and was the principal performance measure
used under the Short Term Annual Bonus Plan.
49
rpsgroup.com
annual RePOR t On ReMuneRatiOn CONTINUED
cOMMittee ORganisatiOn
Role of the Remuneration Committee (“Committee”)
The membership and responsibilities of the Remuneration Committee are described in the Annual Statement on page 41.
Meeting held during 2017 are included in the table shown on page 34.
External advice
During 2017 the Committee received external advice in relation to executive remuneration from PwC. PwC are members
of the Remuneration Consultants Group and, as such, voluntarily operate under the code of conduct in relation to executive
remuneration consulting in the UK. PwC also undertook some tax advisory work for the Company during the year. The
Committee reviewed the nature of the services provided and was satisfied that no conflict of interest exists or existed in the
provision of these services and that the advice the Remuneration Committee received was objective and independent.
The total fees paid to PwC in the year for services to the Committee amounted to £98,000 although of this amount £63,000
related to work in connection with the Company’s new remuneration policy and related incentive plans, which was completed
at the end of 2016. This fee was comprised of an annual retainer to cover certain standard advice and payment for additional
services in respect of which fees were agreed on a case by case basis. No contingent fee arrangements were operated.
shaRehOlDeR VOting
The Remuneration Committee’s Annual Report for 2016 was approved at the Company’s 2017 Annual General Meeting.
The voting for this resolution is shown below.
annual RePORt
Votes for
Votes against
Total
Withheld
number of
Votes cast
% of
Votes cast
155,485,016
8,598,043
94.76
5.24
164,083,059
100.00
4,812,462
–
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.
ReMuneRatiOn POlicY
Votes for
Votes against
Total
Withheld
number of
Votes cast
% of
Votes cast
159,064,587
16,607,705
90.55
9.45
175,672,292
100.00
3,167,972
–
50
RepoRt and accounts 2017 | coRpoRate GoVeRnance iMPleMentatiOn OF the ReMuneRatiOn POlicY FOR the YeaR enDing
31 DeceMBeR 2018
The Company’s remuneration policy was approved by shareholders at a General Meeting held on 30 November 2016 and will
apply for up to three years from 1 January 2017. The key components of this policy as they apply to the Executive Directors of
the Company including planned implementation for 2018 are set out in the table below. The full policy statement is available on
the Company’s website.
element, purpose and link
to strategy
Operation and maximum opportunity
Performance measures
and assessment
implementation for 2018
Base salaRY
To provide
competitive fixed
remuneration
that will attract
and retain key
employees and
reflect their
experience and
position in the
Group.
With effect from
1 January 2018
John Douglas’ salary
will be unchanged
at £495,000 and
Gary Young’s will be
increased by 2% to
£316,200.
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.
A broad assessment of
individual and business
performance is used as
part of the salary review.
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
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.
51
rpsgroup.com annual RePOR t On ReMuneRatiOn CONTINUED
Operation and maximum opportunity
Performance measures
and assessment
implementation for 2018
element, purpose and link
to strategy
BeneFits
To provide
competitive benefits
and to attract and
retain high calibre
employees
The Remuneration Committee’s policy is to provide a
market competitive benefits package.
Not applicable.
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.
Benefits for 2018
will be provided
in accordance
with the policy.
John Douglas will
continue to receive
benefits related
to his relocation,
including UK
property rental
costs, air fares for
family visits and
personal taxation
advice. This is
expected to be at a
comparable overall
level to 2017.
Pension benefits
for 2018 will
be provided in
accordance with
the policy. John
Douglas will receive
a contribution
of 20% of base
salary and Gary
Young will receive a
contribution of 15%
of base salary.
PensiOn
To provide a
competitive
company
contribution that
enables effective
retirement planning.
Not applicable.
The Executive Directors are eligible to participate in
defined contribution pension schemes, or receive a salary
supplement or a combination of the two.
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.
52
RepoRt and accounts 2017 | coRpoRate GoVeRnance element, purpose and link
to strategy
Operation and maximum opportunity
Performance measures
and assessment
implementation for 2018
the RPs gROuP Plc shOR t teRM annual BOnus Plan (the ‘staBP’)
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.
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 bonus
opportunity in
2018 will be 150%
of salary for John
Douglas and 125%
of salary for
Gary Young.
The bonus
awards in 2018
will be subject to
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, but will
disclose targets
retrospectively
following the
financial year end.
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 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.
53
rpsgroup.com annual RePOR t On ReMuneRatiOn CONTINUED
element, purpose and link
to strategy
Operation and maximum opportunity
Performance measures
and assessment
implementation for 2018
the RPs gROuP Plc eXecutiVe lOng teRM incentiVe Plan (the ‘eltiP’)
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).
ELTIP awards will normally vest after a three year
performance period subject to the achievement of the
performance measures.
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 ELTIP awards
granted in 2018 will
be 150% of salary
for John Douglas
and 125% of salary
for Gary Young.
The 2018 ELTIP
awards will vest
subject to the
achievement of
three measures: EPS
(25% weighting),
TSR (50%
weighting) and
cash conversion
(25% weighting).
Performance targets
will be as shown in
the separate table
below.
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.
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 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.
54
RepoRt and accounts 2017 | coRpoRate GoVeRnance element, purpose and link
to strategy
Operation and maximum opportunity
Performance measures
and assessment
implementation for 2018
all-eMPlOYee incentiVes
To encourage
all employees
to become
shareholders and
thereby align their
interests with those
of shareholders.
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.
Not applicable.
shaRehOlDing guiDelines
To ensure that
Executive Directors’
interests are aligned
with those of
shareholders over
the longer term.
Executive Directors are required to build or maintain
(as relevant) the following minimum shareholding in the
Company:
Not applicable.
• 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.
Executive Directors
will continue to
be eligible to
participate in the
Share Incentive
Plan.
Shareholding
guidelines will
remain at 200%
of salary for the
Group Chief
Executive and 150%
of salary for other
Executive Directors.
The following performance targets will apply to the LTIP awards to be made to Executive Directors in 2018.
Performance measure
Weighting
Measurement period
Performance target
Vesting level (% maximum)
Total Shareholder Return
relative to the FTSE All
Share
50%
Three years from
date of grant
Upper Quartile
100%
Median to Upper Quartile
Pro rata on a straight-line basis
between 20% and 100%
Average Annual Growth
in Earnings Per Share
(measured on a constant
currency basis)
25%
Three financial years
12% p.a.
Below Median
0%
100%
Between 3% and 12% p.a.
Pro rata on a straight-line basis
between 20% and 100%
Cash conversion
25%
Three financial years
100%
Below 3% p.a.
0%
100%
Between 80% and 100%
Pro rata on a straight-line basis
between 20% and 100%
80% and below
0%
55
rpsgroup.com
annual RePOR t On ReMuneRatiOn CONTINUED
eXecutiVe DiRectOR seRVice cOntRacts anD nOn-eXecutiVe letteRs
OF aPPOintMent
Executive Director service contracts
When setting notice periods, the Remuneration Committee has regard to market practice and best governance practice.
The Company’s general policy is to provide contracts to Executive Directors with no greater than 12 months’ notice.
The table below summarises the service contracts for the current Executive Directors.
eXecutiVe DiRectOR
John Douglas
Gary Young
Date of contract
notice period
June 2017
12 months
September 2000
12 months
None of the Directors’ contracts provide for extended notice periods or compensation in the event of a change of control.
Non-Executive Director letters of appointment
The Non-Executive Directors do not have service contracts but are appointed under letters of appointment which provide for
a review after an initial three year term. Each Non-Executive Director is subject to annual re-election at the Company’s AGM.
Details of the terms of appointment of the Non-Executive Directors are shown below:
nOn-eXecutiVe DiRectOR
Ken Lever
Robert Miller-Bakewell
Allison Bainbridge
Liz Peace
Date of appointment
unexpired term as at
31 December 2017
November 2016
22 months
May 2010
16 months
June 2017
29 months
August 2017
31 months
No compensation is payable in the event of early termination. All service contracts and letters of appointment are available for
viewing at the Company’s registered office.
cOnsiDeRatiOn OF eMPlOYee ReMuneRatiOn anD shaRehOlDeRs
Consideration of shareholder views
The Remuneration Committee takes the views of the shareholders very seriously and these have been influential in shaping
remuneration policy and practice. Shareholder views are considered when evaluating and setting on-going remuneration strategy
and the Remuneration Committee commits to consulting with shareholders prior to any significant changes to the remuneration
policy.
Employment conditions elsewhere in the Group
In setting the remuneration policy for Directors, the pay and conditions of other employees of RPS are taken into account,
including any base salary increases awarded.
The Remuneration Committee has not expressly sought the views of employees and no remuneration comparison
measurements were used when drawing up the Policy. Through the Board, however, the Remuneration Committee is updated
as to employee views on remuneration generally.
ROBeRt MilleR BaKeWell
Chairman of the Remuneration Committee
1 March 2018
56
RepoRt and accounts 2017 | coRpoRate GoVeRnance
inDePenDent auDit OR’s RePORt
to the members of RPS Group Plc
RePORt On the auDit OF the Financial stateMents
Opinion
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 2017 and
of the group’s loss 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.
We have audited the financial
statements of RPS Group plc (the
‘parent company’) and its subsidiaries
(the ‘group’) which comprise:
n
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 and parent
company statements of changes
in equity;
the consolidated cash flow
statement;
the statement of accounting
policies; and
the related notes to the
consolidated financial statements
1 to 29 and notes to the parent
company financial statements 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, including FRS
102 “The Financial Reporting Standard
applicable in the UK and Republic of
Ireland” (United Kingdom Generally
Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law.
Our responsibilities under those
standards are further described in the
auditor’s responsibilities for the audit
of the financial statements section of
our report.
We are independent of the group and
the parent company in accordance
with the ethical requirements that are
relevant to our audit of the financial
statements in the UK, including the
FRC’s Ethical Standard as applied
to listed public interest entities, and
we have fulfilled our other ethical
responsibilities in accordance with these
requirements. We confirm that the non-
audit services prohibited by the FRC’s
Ethical Standard were not provided to
the group or the parent company.
We believe that the audit evidence
we have obtained is sufficient and
appropriate to provide a basis for
our opinion.
57
rpsgroup.com inDePenDent auDit OR’s RePOR t CONTINUED
Summary of our audit approach
Key audit
matters
The key audit matters 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.
These are the same key audit matters identified in the prior year auditor’s report.
The materiality that we used in the current year was £2,600,000 which was determined on the basis of 5% of
profit before tax, amortisation and transaction related costs (PBTA) as detailed in note 3.
We focused our group audit scope and work on the business units at 6 locations. Within the 6 locations,
24 business units were subject to a full audit scope, whilst the remaining 7 were subject to specified audit
procedures. Our full scope audit testing and agreed upon procedures covered 96% of revenue, 90% of PBTA,
and 91% of net assets.
There have been no significant changes in our audit approach.
Materiality
Scoping
Significant
changes in
our approach
Conclusions relating to going concern, principal risks and viability statement
Going concern
We have reviewed the directors’ statement in the Report of the Directors on page 29 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 and company’s ability to continue to do so over a
period of at least twelve months from the date of approval of the financial statements.
We are required to state whether we have anything material to add or draw attention to in relation to that
statement required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent with our
knowledge obtained in the audit.
Principal risks and viability statement
Based solely on reading the directors’ statements and considering whether they were consistent with the
knowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of the
directors’ assessment of the group’s and the company’s ability to continue as a going concern, we are required
to state whether we have anything material to add or draw attention to in relation to:
n
n
n
the disclosures on pages 12 to 15 that describe the principal risks and explain how they are being managed
or mitigated;
the directors’ confirmation on page 12 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; or
the directors’ explanation on page 15 as to how they have assessed the prospects of the group, over what
period they have done so and why they consider that period to be appropriate, and their statement as to
whether they have a reasonable expectation that the group will be able to continue in operation and meet
its liabilities as they fall due over the period of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
We are also required to report whether the directors’ statement relating to the prospects of the group required
by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.
We confirm that
we have nothing
material to
report, add or
draw attention
to in respect of
these matters.
We confirm that
we have nothing
material to
report, add or
draw attention
to in respect of
these matters.
58
RepoRt and accounts 2017 | accounts
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team.
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.
ReVenue RecOgnitiOn
Key audit
matter
description
The group is engaged in the provision of consultancy services through contractual arrangements with
its customers.
The revenue balance was material at £631m (2016: £594m). ISA (UK) 240 states that when identifying and
assessing the risks of material misstatement due to fraud, the auditor shall, based on a presumption that there
are risks of fraud in revenue recognition, evaluate which types of revenue, revenue transactions or assertions
give rise to such risks.
The specific key audit matter is around the overstatement of accrued income where contracts remain open at
year end. There is judgement required around the recognition of the revenue and its recoverability.
The group’s revenue recognition policy is disclosed in note 1(c).
How the scope
of our audit
responded to
the key audit
matter
Our audit work assessed the adequacy of the design, implementation and tested the operating effectiveness of
controls over the recognition of revenue for the most significant 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 through obtaining evidence of stage
of completion including comparison of time utilised to complete the project against time booked at year end,
discussing the progress of each sample with project managers and reviewing client confirmations of progress
where available. Based on our findings from this, we determined whether revenue recognition was appropriate
based on management’s assessment of the stage of completion.
Key
observations
Based on our procedures, no material misstatements were identified in respect of accrued income for contracts
open at year end.
gOODWill, intangiBle assets anD PPe iMP aiRMent
Key audit
matter
description
At 31 December 2017, the net book value of goodwill, intangible assets and PPE was £424m (2016: £484m)
after impairments. The associated disclosure is included in notes 12 and 13 and the accounting policy is
disclosed in notes 1(c), 1(f) and 2(b). The Audit Committee has included their assessment of this risk on
page 39 and it is also included in the key accounting estimates in note 1(h).
Assessment of the carrying value of goodwill, intangible assets and PPE is a key audit matter due to the quantum
of the balance recorded, the number of judgements involved in assessing impairment and the continuing
challenging economic conditions in the oil and gas sector. The risk is focused on the forecasting of future cash
flows and long-term growth rates used in determining the value in use. The risk is focused on the Energy
Europe, Africa and Middle East (“Energy EAME”) and Energy North America (“Energy NA”) cash generating
units where market conditions have been challenging and where there is limited headroom.
Management has calculated an impairment of £6.6m in Energy NA and £33.4m in Energy EAME.
59
rpsgroup.com inDePenDent auDit OR’s RePOR t CONTINUED
How the scope
of our audit
responded to
the key audit
matter
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 in Energy EAME and Energy NA cash
generating units, given the continued uncertainty in the oil and gas market.
We considered management’s 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
We assessed the individual assumptions used to model the value in use by management. Whilst acceptable
overall, we noted differences in the assumptions, with some being more conservative and others more
optimistic than our assessment. Overall, we concluded that the recoverable amount and impairment recognised
was reasonable.
RecOVeRaBilitY OF tRaDe ReceiV aBles anD accRueD incOMe
Key audit
matter
description
At 31 December 2017 trade receivables were £120 million (2016: £125 million), and accrued income was
£39 million (2016: £34 million).
The trade receivables provision for impairment was £5m (2016: £6m) and the accrued income provision for
impairment was £6m (2016: £4m). These are disclosed in note 15.
Recoverability of trade receivables and accrued income aged over 90 days is a key audit matter across the group
given the expected credit terms provided to customers. The recoverability of trade receivables is a particular
concern where the customers operate in the Energy segment and are aged over 90 days. The Energy customers
often operate in unstable political environments and which encounter macroeconomic challenges, meaning that
recoverability of the receivable is a key audit matter.
The Audit Committee has included their assessment of this risk on page 39.
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
n
n
n
n
understanding the latest facts and circumstances, examining any relevant correspondence and challenging any
conclusion by management regarding provisions for aged receivables;
reviewing cash received post year end on a sample of customer debts;
reviewing invoices raised and cash received post year end on a sample of accrued income balances;
reviewing the overall ageing analysis for trade receivables and accrued income by entity and customer; and
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.
60
RepoRt and accounts 2017 | accounts 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 Financial stateMents
PaRent cOMPanY Financial stateMents
Materiality
£2,600,000 (2016: £2,500,000)
£1,300,000
Basis for
determining
materiality
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.
Materiality was determined on the basis of the parent
company’s net assets. This was then capped at 50% of
group materiality. This materiality equates to 0.46% of
net assets.
Rationale for
the benchmark
applied
We chose this measure as it is the group’s key
profit performance indicator. It is also the primary
measurement used by the users of the accounts
and key stakeholders to measure the performance
of the group. The group carries a material level of
intangible assets, therefore on an annual basis, the
results, including the impact of amortisation and
acquisitions, can be significantly distorted.
Net assets has been chosen as a benchmark as it is
considered the most relevant benchmark for investors
and is a key driver of shareholder value.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £130,000
(2016: £100,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation
of the financial statements.
An overview of the scope
of our audit
Our group audit was scoped by
obtaining an understanding of the group
and its environment, including group-
wide controls, and assessing the risks of
material misstatement at the group level.
Based on that assessment, we focused
our group audit scope and work on
the business units at 6 locations – UK,
Australia, USA, Norway, Netherlands
and Ireland (2016: 6). These are the
same locations as prior year. Within the
6 locations, 24 (2016: 23) business units
were subject to a full audit scope, whilst
the remaining 7 (2016: 10) 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 91% (2016:
87%) of the group’s net assets, 96%
(2016: 90%) of the group’s revenue and
90% (2016: 87%) 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 £1.0m to £1.3m
(2016: £1.0m).
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. In the year we visited
3 overseas locations (Australia, US,
Norway) at planning stage to discuss
the plan and approach. Additionally in
Australia we reviewed interim testing
completed at that time.
The extent of our involvement which
commenced from the planning of the
group audit included;
n
setting the scope of the component
auditor and assessment of the
component auditor’s independence;
61
rpsgroup.com inDePenDent auDit OR’s RePOR t CONTINUED
n
designing the audit procedures for all
significant risks to be addressed by
the component auditors and issuing
group audit instructions detailing the
nature and form of the reporting
required by the group engagement
team;
n
n
including the component audit
partners and other senior members
of the component audit team in our
team briefing;
visits to three overseas locations
where the group audit scope was
focussed in addition to the work
performed at the group head office;
n
n
n
providing direction on enquiries
made by the component auditors;
a review of the component auditors’
completed files for two components
(Australia and Netherlands); and
attending audit close meetings for
each of the operating companies.
Other information
We have
nothing to
report in
respect of these
matters.
The directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material misstatements
of the other information include where we conclude that:
n Fair, balanced and understandable – the statement given by the directors that they consider the annual report
and financial statements taken as a whole is fair, balanced and understandable and provides the information
necessary for shareholders to assess the group’s position and performance, business model and strategy, is
materially inconsistent with our knowledge obtained in the audit; or
n Audit committee reporting – the section describing the work of the audit committee does not appropriately
address matters communicated by us to the audit committee; or
n Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the directors’
statement required under the Listing Rules relating to the company’s compliance with the UK Corporate
Governance Code containing provisions specified for review by the auditor in accordance with Listing
Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate
Governance Code.
Responsibilities of directors
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, and for such internal control as
the directors determine is necessary
to enable the preparation of financial
statements that are free from material
misstatement, whether due to fraud
or error.
In preparing the financial statements, the
directors are responsible for assessing
the group’s and the parent company’s
ability to continue as a going concern,
disclosing as applicable, matters related
to going concern and using the going
concern basis of accounting unless the
directors either intend to liquidate the
group or the parent company or to
cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the
audit of the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level
of assurance, but is not a guarantee
that an audit conducted in accordance
with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud
or error and are considered material
if, individually or in the aggregate,
they could reasonably be expected
to influence the economic decisions
of users taken on the basis of these
financial statements.
62
RepoRt and accounts 2017 | accounts A further description of our
responsibilities for the audit of the
financial statements is located on the
Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities.
This description forms part of our
auditor’s report.
Use of our report
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.
RePORt On OtheR
legal anD RegulatORY
RequiReMents
Opinions on other matters
prescribed by the Companies
Act 2006
In our opinion the part of the directors’
remuneration report to be audited has
been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work
undertaken in the course of the audit:
n
n
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
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 group and the
parent company and their environment
obtained in the course of the audit,
we have not identified any material
misstatements in the strategic report
or 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 we have not received all the information and explanations we require for our audit; or
n adequate accounting records have not been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us; or
n the parent company financial statements are not in agreement with the accounting records and returns.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’
remuneration have not been made or the part of the directors’ remuneration report to be audited is not in
agreement with the accounting records and returns.
We have
nothing to
report in
respect of these
matters.
We have
nothing to
report in
respect of these
matters.
OtheR MatteRs
Auditor tenure
Following the recommendation of the
audit committee, we were appointed
by the board on 27 June 2012 to audit
the financial statements for the year
ending 31 December 2012. We were
reappointed by the members on 3 May
2013 for subsequent financial periods.
The period of total uninterrupted
engagement including previous renewals
and reappointments of the firm is 6
years, covering the years ending 31
December 2012 to 31 December 2017.
Consistency of the audit report
with the additional report to the
audit committee
Our audit opinion is consistent with
the additional report to the audit
committee we are required to provide
in accordance with ISAs (UK).
Andrew Bond FCA
(Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory
Auditor
Reading, UK
1 March 2018
63
rpsgroup.com cOnsOliD ateD incOMe stateMent
£000s
Revenue
Recharged expenses
Fee income
Year ended
31 Dec
2017
Year ended
31 Dec
2016
630,636
(68,316)
562,320
594,471
(60,175)
534,296
Note
4
4
4
Operating profit before amortisation and impairment of acquired intangibles
and transaction related costs
3,4,5,6
58,467
55,877
Amortisation and impairment of acquired intangibles and transaction related costs
Operating profit
Finance costs
Finance income
Profit before tax, amortisation and impairment of acquired intangibles
and transaction related costs
(Loss)/profit before tax
Tax expense
3,5
7
7
(55,541)
2,926
(4,639)
113
(17,890)
37,987
(5,331)
158
53,941
50,704
(1,600)
32,814
10
(15,072)
(7,733)
(Loss)/profit for the year attributable to equity holders of the parent
(16,672)
25,081
Basic (loss)/earnings per share (pence)
Diluted (loss)/earnings per share (pence)
Adjusted basic earnings per share (pence)
Adjusted diluted earnings per share (pence)
11
11
11
11
(7.52)
(7.47)
17.13
17.01
11.35
11.29
16.60
16.51
cOnsOliD ateD stateMent OF cOMPRehensiVe incOMe
£000s
(Loss)/profit for the year
Actuarial gains and losses on remeasurement of defined benefit pension scheme
Tax on remeasurement of defined benefit provision liability
Exchange differences*
Total recognised comprehensive (loss)/income for the year
attributable to equity holders of the parent
*may be reclassified subsequently to profit or loss in accordance with IFRS.
The notes on pages 68 to 102 form part of these financial statements.
Note
26
10
Year ended
31 Dec
2017
Year ended
31 Dec
2016
(16,672)
(66)
15
(5,867)
25,081
(261)
65
41,429
(22,590)
66,314
64
RepoRt and accounts 2017 | accounts cOnsOliD ateD B alance 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
Retained earnings
Merger reserve
Employee Trust
Translation reserve
Total shareholders’ equity
as at
31 Dec
2017
As at
31 Dec
2016
Note
12
13
20
15
17
18
16
19
17
18
20
19
21
395,730
28,344
3,312
427,386
169,755
15,588
185,343
212
1,608
123,406
3,415
2,953
131,594
53,749
96,008
148
2,543
8,340
4,312
111,351
369,784
6,745
117,790
205,143
21,256
(8,602)
27,452
369,784
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
249,353
21,256
(13,677)
33,319
411,307
These financial statements were approved and authorised for issue by the Board on 1 March 2018.
The notes on pages 68 to 102 form part of these financial statements.
John Douglas, Director
Gary Young, Director
On behalf of the Board of RPS Group Plc (company number 2087786).
rpsgroup.com
65
rpsgroup.com cOnsOliD ateD c ash FlOW stateMent
£000s
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
Proceeds from sale of business
Proceeds from sale of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities:
Costs of issue of share capital
Proceeds from issue of share capital
Repayment of bank borrowings
Payment of finance lease liabilities
Dividends paid
Payment of pre-acquisition dividend
Net cash generated in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of exchange rate fluctuations
Cash and cash equivalents at end of year
Cash and cash equivalents comprise:
Cash at bank
Bank overdraft
Cash and cash equivalents at end of year
The notes on pages 68 to 102 form part of these financial statements.
Year ended
31 Dec
2017
Year ended
31 Dec
2016
43,744
62,277
Note
25
–
(12,879)
(8,651)
234
221
(21,075)
(8)
382
(1,424)
(36)
(22,007)
–
(23,093)
(6,557)
(23,672)
(8,130)
–
225
(38,134)
(5)
–
(6,921)
(47)
(21,613)
(850)
(29,436)
(424)
(5,293)
16,503
(703)
15,376
15,588
(212)
15,376
17,322
4,474
16,503
16,503
–
16,503
22
25
25
66
RepoRt and accounts 2017 | accounts cOnsOliD ateD stateMent OF changes in equitY
£000s
At 1 January 2016
Share capital
Share
premium
Retained
earnings
Merger
reserve
Employee
trust
Translation
reserve
Total
equity
6,667
112,026
244,648
21,256
(11,997)
(8,110)
364,490
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Issue of new ordinary shares
Share based payment expense
Tax recognised directly in equity
Dividends paid
At 31 December 2016
loss for the year
Other comprehensive income
total comprehensive income for the year
issue of new ordinary shares
share based payment expense
transfer on release of shares
Dividends paid
at 31 December 2017
–
–
–
36
–
–
–
6,703
–
–
–
42
–
–
–
6,745
–
–
–
2,327
–
–
–
114,353
–
–
–
3,437
–
–
–
117,790
25,081
(196)
24,885
(688)
2,184
(63)
(21,613)
249,353
(16,672)
(51)
(16,723)
(1,352)
2,700
(6,828)
(22,007)
205,143
–
–
–
–
–
–
–
21,256
–
–
–
–
–
–
–
21,256
–
–
–
(1,680)
–
–
–
(13,677)
–
–
–
(1,753)
–
6,828
–
(8,602)
–
41,429
41,429
–
–
–
–
33,319
–
(5,867)
(5,867)
–
–
–
–
27,452
25,081
41,233
66,314
(5)
2,184
(63)
(21,613)
411,307
(16,672)
(5,918)
(22,590)
374
2,700
–
(22,007)
369,784
Details of dividends paid are provided in note 22.
The notes on pages 68 to 102 form part of these financial statements.
rpsgroup.com
67
rpsgroup.com
nOtes tO the cOnsOliD ateD Financial stateMents
1. signiFicant accOunting POlicies
RPS Group Plc (the “Company”) is a
public company limited by shares
domiciled in England under the
Companies Act. The consolidated
financial statements of the Company
for the year ended 31 December 2017
comprise the Company and its
subsidiaries (together referred to
as the “Group”).
The consolidated financial statements
were authorised for issuance on
1 March 2018.
(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
IAS 7 (amended), IAS 12 (amended)
and the amendments to IFRS 12
included in the Annual Improvements to
IFRS 2012 – 2014 cycle. Their adoption
has not had a material impact on the
disclosures or amounts reported in
these accounts. Otherwise the Group
has prepared these accounts on the
same basis as the 2016 Report and
Accounts.
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. When the Group makes
acquisitions the acquiree’s identifiable
assets, liabilities and contingent liabilities
are initially recognised at their fair values
at the acquisition date in the
Consolidated Balance Sheet. 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 as it becomes
due to the Group. Receivables, payables
and cash related to these transactions
are included in the consolidated
balance sheet.
Accrued income is booked when the
amount of revenue recognised on a
contract exceeds the amount invoiced.
It is reported in trade and other
receivables in the balance sheet. Where
the amount invoiced exceeds the
amount of revenue recognised, the
difference is booked in deferred income
in trade and other payables.
(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.
68
RepoRt and accounts 2017 | accounts (e) Intangible assets
Customer relationships
5 to 10 years
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:
Trade names
Order backlog
Software
1 to 5 years
1 to 6 years
4 to 8 years
Intellectual property rights
4 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.
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
asset’s 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) 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(h) below), that have had a significant
effect on the amounts recognised in the
financial statements.
(h) 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 2017, that has a significant risk of
resulting in a material adjustment to the
carrying amounts of assets and liabilities
during 2018, 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.
rpsgroup.com
69
rpsgroup.com 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
(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).
70
RepoRt and accounts 2017 | accountsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 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 Share Incentive Plan (“SIP”) is
an all-employee share plan which
operates in the UK, Australia, Canada,
The Netherlands, Norway and USA.
Employees purchase partnership shares
on a monthly or annual basis using
deductions from salary and the Group
matches this by awarding matching
shares. These matching shares are
awarded at no cost to the employee
and are released to the employee
subject to continuity of employment
provision after three years.
The Performance Share Plan (“PSP”)
is a discretionary share incentive
arrangement for RPS Group plc’s senior
employees. The awards are granted over
a fixed number of shares at no cost to
the employees. At the end of the three
year holding period the award will vest
subject to continuity of employment
conditions.
The Energy Share Option Plan is
a discretionary share incentive
arrangement for RPS Group plc’s
senior employees within the Energy
segment. The awards are granted over
a fixed number of shares. At the end
of the three year holding period, the
award will vest subject to continuity of
employment conditions. The employee
can exercise the option to purchase the
shares on payment of the option price
to the Company at any point between
three and ten years following the grant
of the option.
The Executive Long Term Incentive
Plan (“ELTIP”) is a discretionary share
incentive arrangement for RPS Group
plc’s senior employees. The awards are
granted over a fixed number of shares at
no cost to the employees. At the end of
the three year holding period the award
will vest subject to the achievement of
the performance measures outlined in
the Remuneration Report. There is then
a two year holding period for awards
that have vested.
The Short Term Annual Bonus Plan
(“STABP”) is an incentive scheme for
RPS Group plc’s senior employees
based on the achievement of a range
of financial and non-financial targets
over a one year period. 50% of the
bonus award is paid in cash and 50% is
deferred into shares which are subject
to a three year holding period. There
are no further performance conditions
applicable to the deferred shares.
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 due within one year
are not discounted.
(h) Borrowings
Bank overdrafts and interest bearing
loans are initially measured at cost.
Borrowings are not discounted.
(i) Reserves
The description and purpose of the
Group’s reserves are as follows:
Share premium
Premium on shares issued in excess
of nominal value, other than on shares
issued in respect of acquisitions when
merger relief is taken.
Merger reserve
Premium on shares issued in respect of
acquisitions when merger relief is taken.
Employee trust
Own shares held by the SIP and
Employee Benefit trusts. When the
shares are released to staff, the related
entry to the Employee Trust reserve
is reversed to Retained earnings.
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.
71
rpsgroup.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 2. OtheR accOunting POlicies CONTINUED
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 and rules 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.
(m) Share Scheme Trusts
The Company administers its share
plans through two Trusts - the Employee
Benefit Trust and the SIP Trust. The SIP
Trust is used for the HMRC-approved
Share Incentive Plan and the EBT as
used for all other plans. As the Company
is deemed to have control of its share
trusts, they are treated as subsidiaries
and consolidated for the purpose of the
Group accounts. The Trusts 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 Trusts
investments in the Company’s shares are
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 the
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):
IFRS 9
IFRS 15
IFRS 16
IFRS 17
IFRS 2
(amendments)
‘Financial instruments’
‘Revenue from contracts
with customers’
‘Leases’
‘Insurance contracts’
‘Classification and
measurement of
share-based payment
transactions’
IFRS 4
(amendments)
‘Applying IFRS 9 financial
instruments with IFRS 4
insurance contracts’
IAS 40
(amendments)
‘Transfers of investment
properties’
Annual
improvements
to IFRSs 2014
– 2016 cycle
IFRS 10
and IAS 28
(amendments)
IFRIC 22
IFRIC 23
‘Amendments to IFRS
1 ‘First time adoption
of IFRS’ and IFRS 28
‘Investments in associates
and joint ventures’
‘Sale or contribution
of assets between an
investor and its associate
or joint venture’
‘Foreign currency
transactions and
advanced consideration’
‘Uncertainty over income
tax amounts’
IFRS 9 ‘Financial instruments’
The Group will apply IFRS 9 from
1 January 2018. The Group has elected
not to restate comparatives on the
initial adoption of IFRS 9.The Group has
performed an assessment of the impact
of adopting IFRS 9 based on the financial
instruments as at the date of initial
application of the standard. The main
impact of the change in standard for
RPS is the movement to an expected
lifetime loss model for impairment.
The Group estimates that the impact
of this change at 31 December 2017
will be immaterial.
IFRS 15 ‘Revenue from contracts
with customers’
The Group will apply IFRS 15 from
1 January 2018. The Group has
elected not to restate comparatives on
initial adoption of the standard. Our
assessment of the impact of adopting
IFRS 15 based on the contracts
outstanding at 1 January 2018 suggests
that any impact will be minimal and
restricted to updated disclosures. Our
review of those contracts indicates that
there will be no material change to
revenue recognised, profit before tax
or reserves as a result of this change
in standard.
72
RepoRt and accounts 2017 | accountsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
3. alteRnatiVe PeRFORMance MeasuRes
Throughout this document the Group
presents various alternative performance
measures. The measures presented are
those adopted by the Chief Operating
Decision Maker and analysts who follow
us in assessing the performance of the
business.
believes distort the trading performance
of the Group. These items are either
acquisition and disposal related or they
are non-cash items.
Group profit and earnings measures
PBTA
Profit before tax and amortisation and
impairment of acquired intangibles and
transaction related costs (PBTA) is used
by the Board to monitor and measure
the trading performance of the Group. It
excludes certain items which the Board
Delivering the Group’s strategy includes
investment in selected acquisitions that
enhance the depth and breadth of
services that the Group offers in the
territories in which it operates. In
addition, from time to time the Group
chooses to exit a particular market or
service offering because it is not offering
the desired returns. By excluding
acquisition and disposal related items
from PBTA, the Board has a clearer view
of the performance of the Group and is
able to make better operational
decisions to support its strategy.
Accordingly, transaction related costs
including costs of acquisition and
disposal, losses on the closure of
businesses and amortisation and
impairment of intangible assets are
excluded from the Group’s preferred
performance measure, PBTA.
Items are treated consistently year
on year, and these adjustments are
also consistent with the way that
performance is measured under
the Group’s incentive plans and its
banking covenants.
Operating profit before amortisation and impairment of acquired intangible assets and transaction related costs is a derivative of
PBTA. A reconciliation is shown below.
Add:
Add:
£000s
(Loss)/profit before tax
Amortisation and impairment of acquired intangibles and transaction related costs
PBTA
Net finance costs
Operating profit before amortisation and impairment of acquired intangibles and
transaction related costs
2017
(1,600)
55,541
53,941
4,526
58,467
2016
32,814
17,890
50,704
5,173
55,877
Adjusted profit attributable to ordinary shareholders
It follows that the Group uses adjusted profit attributable to ordinary shareholders as the input to its adjusted EPS measures.
Again, this profit measure excludes amortisation of acquired intangibles and transaction related costs, but is an after tax
measure.
£000s
(Loss)/profit attributable to ordinary shareholders
Add:
Amortisation and impairment of acquired intangibles and transaction related costs
Deduct:
Tax on amortisation and impairment of acquired intangibles and transaction
related costs
Adjusted profit attributable to ordinary shareholders
2017
(16,672)
55,541
2016
25,081
17,890
(885)
(6,292)
37,984
36,679
Constant currency
The Group generates revenues and
profits in various territories and
currencies because of its international
footprint. Those results are translated on
consolidation at the foreign exchange
rates prevailing at the time. These
exchange rates vary from year to year,
so the Group presents some of its
results on a constant currency basis. This
means that the prior year’s results have
been retranslated using current year
exchange rates. This eliminates the effect
of exchange from the year on year
comparison of results. The difference
between the reported numbers and
the constant currency numbers is the
“constant currency effect”.
£000s
Revenue
Fee income
PBTA
Profit before tax
2016
594,471
534,296
50,704
32,814
Constant
currency effect
2016 at
constant currency
20,358
18,248
1,713
854
614,829
552,544
52,417
33,668
73
rpsgroup.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 3. alteRnatiVe PeRFORMance MeasuRes CONTINUED
Segment profit and underlying profit
Segment profit is presented in our
segmental disclosures. This excludes the
effects of financing and amortisation
which are metrics outside of the
control of segment management. It
also excludes unallocated expenses.
Segment profit is then adjusted by
excluding the costs of reorganisation to
give underlying profit for the segment.
This reflects the underlying trading of
the business. A reconciliation between
segment profit and operating profit is
given in note 4.
Reorganisation costs
This classification comprises costs and
income arising as a consequence of
reorganisation such as redundancy
costs, profit or loss on disposal of
plant, property and equipment, the
costs of consolidating office space and
rebranding costs.
Unallocated expenses
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.
Revenue measures
The Group disaggregates revenue
into Fee Income and Recharged
Expenses. This provides insight into the
performance of the business and our
productive output. (See note 1(c).) This
is reconciled on the face of the income
statement. Fee income by segment is
reconciled in note 4.
Cash flow measures
EBITDAS
EBITDAS is operating profit adjusted by
adding back non-cash expenses, tax and
financing costs. The adjustments include
interest, tax, depreciation, amortisation
and impairment and transaction related
costs and share scheme costs. This
generates a cash-based operating profit
figure which is the input into the cash
flow statement. A reconciliation between
Operating Profit and EBITDAS is given
in note 25.
Conversion of profit into cash
A key measure of the Group’s cash
generation is the conversion of profit
into cash. This is the cash generated
from operations divided by EBITDAS
expressed as a percentage. This metric
is used as a measure against which
the Group’s long and short term
performance incentive schemes are
judged and reflects how much of the
Group’s profit has been collected as
cash in the year.
Net bank borrowings
Net bank borrowings is the total of cash
and cash equivalents, interest bearing
bank loans and finance leases. This
measure gives the external indebtedness
of the Group, and is an input into the
leverage calculations. This is reconciled
in note 25.
Leverage
Leverage is the ratio of net bank
borrowings plus deferred consideration
to annualised EBITDAS and is one of
the financial covenants included in our
bank facilities.
Tax measures
We report one adjusted tax measure,
which is the tax rate on PBTA
(“adjusted effective tax rate”). This
is the tax charge applicable to PBTA
expressed as a percentage of PBTA
and is set out in note 10.
4. 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 (CODM). 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
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 which represent
separate segments.
The business segments of the Group
are as follows:
Energy - the provision of integrated
technical, commercial and project
management support and training in
the fields of geoscience, engineering
and health, safety and environment
on a global basis 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. The results of
this region are maintained separately for
performance and allocation of resources
purposes. Accordingly the results of
this business are reported as a separate
segment.
“Segment profit”, “Underlying profit”
and “Reorganisation costs” are defined
in note 3.
74
RepoRt and accounts 2017 | accountsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued Segment results for the year ended 31 December 2017
£000s
BNE - Europe
BNE - North America
Energy
AAP
Group eliminations
Total
£000s
BNE - Europe
BNE - North America
Energy
AAP
Total
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
Total
Fee
income
287,574
76,160
65,407
135,025
(1,846)
562,320
Fee
income
269,029
65,382
71,490
130,140
(1,745)
534,296
Recharged
expenses
intersegment
revenue
external
revenue
43,190
1,989
11,100
12,556
(519)
68,316
(1,246)
(265)
(470)
(384)
2,365
–
underlying
profit
Reorganisation
costs
37,048
8,542
6,801
15,832
68,223
–
(208)
(441)
(562)
(1,211)
329,518
77,884
76,037
147,197
–
630,636
segment
profit
37,048
8,334
6,360
15,270
67,012
Recharged
expenses
Intersegment
revenue
External
revenue
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
The 2017 half year results were reported as a three segment, regional basis, consistent with reporting to the CODM. As
announced on 1 February 2018, and in line with the Group’s emerging strategy, in the second half of the year the reporting
to the CODM reverted to the 2016 structure with BNE Europe, BNE North America, Energy and AAP separately identified.
75
rpsgroup.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 4. Business anD geOgRaPhical segMents CONTINUED
The restatement of the 2017 half year results is presented below:
Segmental Results for June 2017 as restated
£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
Fee
income
147,014
35,221
33,209
66,970
(1,359)
281,055
Recharged
expenses
Intersegment
revenue
20,006
2,232
5,835
5,593
(205)
33,461
(536)
(123)
(686)
(219)
1,564
–
Underlying
profit
Reorganisation
costs
19,517
4,411
2,998
8,302
35,228
–
(109)
(236)
(349)
(694)
External
revenue
166,484
37,330
38,358
72,344
–
314,516
Segment
profit
19,517
4,302
2,762
7,953
34,534
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
Year ended
31 Dec
2017
630,636
(68,316)
562,320
68,223
(1,211)
67,012
(8,545)
58,467
(55,541)
2,926
(4,526)
(1,600)
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
(Loss)/profit before tax
Carrying amount of
segment assets
Segment depreciation
and amortisation
Year ended
31 Dec
2017
Year ended
31 Dec
2016
Year ended
31 Dec
2017
Year ended
31 Dec
2016
338,011
76,116
51,885
143,062
3,655
612,729
342,552
80,441
101,459
147,164
400
672,016
8,801
3,864
41,594
6,564
422
61,245
9,423
5,303
2,468
8,043
623
25,860
£000s
BNE - Europe
BNE - North America
Energy
AAP
Unallocated
Group total
76
RepoRt and accounts 2017 | accountsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
The table below shows revenue and fee income to external customers based upon the country from which billing took place:
Year ended
31 Dec
2017
232,490
144,694
98,957
73,217
36,180
28,805
12,461
3,832
630,636
Revenue
Year ended
31 Dec
2016
220,053
134,935
91,705
69,528
31,759
27,190
15,172
4,129
594,471
£000s
UK
Australia
USA
Norway
Netherlands
Ireland
Canada
Other
Total
£000s
UK
Australia
USA
Ireland
Norway
Canada
Netherlands
Other
Total
Fee income
Year ended
31 Dec
2016
186,939
126,366
83,486
68,129
26,803
24,585
13,927
4,061
534,296
Carrying amount of
non current assets
As at
31 Dec
2016
201,919
108,309
62,144
40,537
44,672
13,857
18,463
8
489,909
Year ended
31 Dec
2017
193,183
132,200
93,901
71,804
30,148
26,641
10,624
3,819
562,320
as at
31 Dec
2017
162,597
102,999
50,910
41,782
40,530
9,885
18,678
5
427,386
5. aMORtisatiOn anD iMPaiRMent OF acquiReD intangiBles anD
tRansactiOn RelateD cOsts
£000s
Amortisation of acquired intangibles
Impairment of goodwill (Note 12)
Loss on sale of business
Adjustments to consideration payable
Transaction costs
Year ended
31 Dec
2017
Year ended
31 Dec
2016
12,804
40,024
2,695
–
18
55,541
17,470
–
–
187
233
17,890
Loss on sale of business
On 29 December 2017, the Group disposed of the trade and certain assets of its pipeline approval business in Canada. The sale
proceeds were C$395,000 (£233,000). The loss on disposal includes a lease which has become onerous since we no longer are
able to make economic use of part of the building in which the business was based.
77
rpsgroup.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 6. OPeRating PROFit - BY natuRe OF eXPense
£000s
Revenue
Staff costs (see note 8)
Subconsultant costs
Other employment related costs
Depreciation of owned assets
Depreciation of assets held under finance leases
Loss on disposal of property, plant and equipment
Loss on sale of business
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
7. 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
Year ended
31 Dec
2017
Year ended
31 Dec
2016
630,636
594,471
(307,488)
(137,849)
(23,626)
(8,409)
(8)
(86)
(2,695)
(12,840)
(5,402)
(13,980)
(19,850)
(12,804)
(40,024)
–
(28)
(18)
(42,603)
2,926
(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
Year ended
31 Dec
2017
Year ended
31 Dec
2016
(3,952)
(383)
(304)
(4,639)
113
(4,526)
(3,982)
(359)
(990)
(5,331)
158
(5,173)
78
RepoRt and accounts 2017 | accountsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 8. eMPlOYee BeneFit eXPense
£000s
Wages and salaries
Social security costs
Pension costs - defined contribution plans
Pension costs - defined benefit plans
Share based payment expense - equity settled
Average number of employees (including Executive Directors) was:
Fee earning staff
Support staff
Year ended
31 Dec
2017
Year ended
31 Dec
2016
265,643
25,858
13,044
243
2,700
307,488
4,477
863
5,340
251,777
23,714
12,248
101
2,184
290,024
4,235
864
5,099
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 £552,000 (2016: £4,000). Social security costs in respect of these personnel were £334,000 (2016: £250,000).
9. 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 audit related assurance services
Tax compliance services
Other services
Total fees
Year ended
31 Dec
2017
Year ended
31 Dec
2016
50
562
612
27
2
641
4
11
656
50
524
574
27
–
601
63
51
715
79
rpsgroup.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
10. 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 temporary differences
Effect of change in tax rate
Adjustments in respect of prior years
Year ended
31 Dec
2017
Year ended
31 Dec
2016
3,750
9,603
1,422
14,775
(722)
2,278
(1,259)
297
3,115
7,297
(49)
10,363
(2,589)
(223)
182
(2,630)
Total tax charge for the year
15,072
7,733
In addition to the amount charged to the income statement, the following items
related to tax have been recognised:
Deferred tax credit in other comprehensive income
Deferred tax charge in equity for the year
(15)
_
(65)
63
The effective tax rate for the year on profit before tax was significantly distorted by the impairment of goodwill which was not
deductible for tax purposes. When the impact of this is excluded the tax rate was 39.2%. The effective tax rate for the year on
PBTA was 29.6% (2016: 27.7%) 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 (loss)/profit for the year
Profit before tax, amortisation and impairment of acquired intangibles
and transaction related costs
Adjusted effective tax rate
Tax rate impact of amortisation and impairment of acquired intangibles and transaction related
costs
Statutory effective tax rate
Year ended
31 Dec
2017
Year ended
31 Dec
2016
15,072
7,733
885
15,957
6,292
14,025
53,941
29.6%
(971.6%)
(942.0%)
50,704
27.7%
(4.1%)
23.6%
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 earned 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 19.25%
(2016: 20%), Australia 30% (2016: 30%), US 38% (2016: 39%).
The weighted average tax rate excluding the impact of goodwill which was not deductible for tax purposes increased to 26.1%
in 2017 (2016: 25.1%). This increase was due to greater proportions of tax arising in Australia and the US, which are taxed at
high rates, and a lower proportion in the UK which is taxed at lower rates.
80
RepoRt and accounts 2017 | accountsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued The actual tax charge differs from the weighted average charge for the reasons set out in the following reconciliation:
£000s
(Loss)/profit before tax
Add back: impairment of goodwill
Profit before tax and impairment of goodwill
Tax at the weighted average rate of 26.1% (2016: 25.1%)
Effect of:
Irrecoverable witholding tax suffered
Impact of intercompany financing
Effect of change in tax rates
US repatriation tax
Canadian losses not recognised
Adjustments in respect of prior years
Other differences
Total tax expense for the year
Year ended
31 Dec
2017
Year ended
31 Dec
2016
(1,600)
40,024
38,424
32,814
–
32,814
10,031
8,240
1,619
(581)
2,424
209
795
163
412
15,072
1,190
(1,664)
(223)
–
–
133
57
7,733
The Group operates, mainly through
our oil and gas exposed 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 irrecoverable
withholding tax suffered increased in
2017 as more work was undertaken
in these jurisdictions.
The impact of intercompany financing
relates to the funding of US operations
from the UK. In response to the OECD’s
Base Erosion and Profit Shifting project
(BEPS) the UK introduced new legislation
which reduced the impact in 2017. The
reduction in the US Federal tax rate from
35% to 21% that applies from 1 January
2018 will further reduce the impact in
future periods.
From 1 January 2018 the US Federal tax
rate reduced from 35% to 21% and the
Norwegian tax rate reduced from 24%
to 23%. These changes have resulted
in an income statement charge arising
principally from the reduction in the
balance sheet carrying value of deferred
tax assets relating to the amortisation of
intangible assets.
Following US tax reform that was
enacted in December 2017, undistributed
profits of US subsidiaries became taxable
at rates between 8.0% and 15.5%. The
charge is not recurring and future US
subsidiary profits will not be taxable.
In Canada no benefit has been
recognised for the losses arising on
the disposal of the pipeline approval
infrastructure business as it is uncertain
that they will be utilised.
Adjustments in respect of prior years
arise when amounts of tax due calculated
when tax returns are submitted differ
from those estimated at the year end.
Other differences include expenses
not deductible for tax purposes such
as entertaining, share scheme charges,
depreciation of property, plant and
equipment 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 other differences
increased in 2017 as it included the
impact of higher non-deductible
transaction costs and 2016 was reduced
by foreign exchange movement.
81
rpsgroup.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 11. 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
(Loss)/profit attributable to equity holders of the parent
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 (loss)/earnings per share (pence)
Diluted (loss)/earnings per share (pence)
Year ended
31 Dec
2017
Year ended
31 Dec
2016
(16,672)
25,081
221,804
1,479
223,283
(7.52)
(7.47)
220,977
1,237
222,214
11.35
11.29
The Directors consider that earnings per share before amortisation and impairment of acquired intangible and transaction
related costs provides a more consistent 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
(Loss)/profit attributable to equity holders of the parent
Amortisation and impairment of acquired intangibles and transaction related costs (note 5)
Tax on amortisation and impairment of acquired intangibles and transaction related costs (note 10)
Adjusted profit attributable to equity holders of the parent
Adjusted basic earnings per share (pence)
Adjusted diluted earnings per share (pence)
Year ended
31 Dec
2017
Year ended
31 Dec
2016
(16,672)
55,541
(885)
37,984
17.13
17.01
25,081
17,890
(6,292)
36,679
16.60
16.51
82
RepoRt and accounts 2017 | accountsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 12. intangiBle assets
£000s
cost:
at 1st January 2017
Disposals
exchange differences
at 31 December 2017
intellectual
property
rights
customer
relationships
Order
backlog
trade
names
non
compete
agreements
software
goodwill
total
3,859
–
(296)
3,563
137,653
–
(4,737)
132,916
21,187
–
(709)
20,478
9,889
–
(323)
9,566
aggregate amortisation and impairment losses:
at 1st January 2017
amortisation
impairment
exchange differences
at 31 December 2017
net book value at 31 December 2017
3,859
–
–
(296)
3,563
–
97,256
11,442
–
(3,627)
105,071
27,845
20,131
713
–
(711)
20,133
345
9,630
113
–
(323)
9,420
146
634
–
(31)
603
634
–
–
(31)
603
–
3,418
–
(194)
3,224
424,837
(234)
(5,562)
419,041
601,477
(234)
(11,852)
589,391
2,238
536
–
(148)
2,626
598
12,221
–
40,024
–
52,245
366,796
145,969
12,804
40,024
(5,136)
193,661
395,730
Acquisitions in 2016 were originally stated at provisional values. These have now been finalised with no adjustment.
Intellectual
property
rights
Customer
relationships
Order
backlog
Trade
names
Non
compete
agreements
Software
Goodwill
Total
£000s
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
Goodwill
There was no movement in goodwill in respect of acquisitions made in 2016. No negative goodwill was recognised in 2017 or
2016. 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:
83
rpsgroup.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 12. intangiBle assets CONTINUED
£000s
Europe (UK and Ireland)
Europe (Netherlands)
Europe (Norway)
North America
AAP
Energy EAME
Energy North America
as at
31 Dec
2017
163,762
10,046
32,787
43,652
89,666
11,327
15,556
366,796
As at
31 Dec
2016
as restated
162,549
9,836
34,108
47,789
90,875
44,959
22,500
412,616
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.
Growth rates
The growth rates applied reflect
management’s judgement regarding the
potential future performance of the
business. The medium term comprises
the years 2019 to 2022. The average real
growth rate used during this period is
between 0% and 3% relative to budgeted
performance, 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
-5.0% and 2.5% per annum (2016: 2.0%
and 2.5%) reflecting the average long
term EBIT growth rates of the economies
in which the CGUs are based and our
assessment of the longer term prospects
of these businesses. For the Energy
NA and Energy EAME CGU groups
probability weightings of long term
growth rates were used.
The assumptions used for the groups of
CGUs are as follows:
Pre tax discount rate
Medium term growth rate
Long term growth rate
2016
5.0%
5.0%
5.0%
2.5%
5.0%
2017
2.1%
2.0%
2.3%
2.3%
2.5%
– 0.0% - (5.0%)
– 0.0% - (5.0%)
–
10.0%
2016
2.1%
2.0%
2.3%
2.3%
2.5%
–
–
2.2%
Europe (UK and Ireland)
Europe (Netherlands)
Europe (Norway)
North America
AAP
Energy EAME*
Energy NA*
Energy (global)*
2017
10.8%
11.5%
10.8%
10.9%
12.8%
16.1%
12.9%
–
2016
13.2%
11.1%
11.0%
11.3%
11.2%
–
–
11.3%
2017
3.0%
3.0%
3.0%
3.0%
3.0%
0.0%
0.0%
–
*The Energy (global) CGU group was split into its North American and European components at the start of 2017.
84
RepoRt and accounts 2017 | accountsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued due to the short term nature of our
order book and the oil and gas market
conditions which remains unpredictable.
The Energy markets that we operate in
continue to suffer from the downturn
that started in 2015. Our Energy
business continued to underperform
against budget in 2017 and further
underperformance in 2018 is possible.
We have probability weighted our
estimate of the recoverable amount
of the Energy business, but further
underperformance in 2018 may lead
to an additional reduction in the
carrying value of these CGUs. It is also
reasonably possible that Energy exceeds
its budget if market conditions allow.
A 50% underperformance against
budget would generate an impairment
charge of up to £17 million. For 2018,
we consider it reasonably possible that
Energy goodwill may suffer a further
impairment charge of up to £17 million
if market conditions worsen significantly.
Headroom for the Energy CGU groups
is currently £nil, as an impairment charge
against them has been taken in 2017.
Summary of results
During the year, all goodwill was tested
for impairment.
The Group has recognised impairment
charges of £33,420,000 in respect of
the goodwill allocated to its Energy
EAME CGU group and £6,604,000
in respect of goodwill allocated to its
Energy NA CGU group. Energy EAME
and NA performed close to budget
during the first half of 2017 and whilst
trading improved in the second half it
was less good than expected despite
the increased oil price. The Board has
considered the prospects for the oil
industry and the potential demand for
our services and consider them to be
lower in the longer term than at the
last review. Accordingly, our impairment
review at the year-end incorporated a
lower forecast for cash generation than
previously which has resulted in the
goodwill impairment.
We remain committed to the oil and
gas sector and we have a strategic
objective to develop a leading, global
and innovative energy business in oil and
gas and the broader energy market.
When goodwill was assessed for
impairment at the end of 2016 our
Energy business was treated as a single
CGU group. For part of 2017, the
Energy businesses in Europe and North
America were managed separately
(reporting as part of those respective
regional segments). Consequently, the
goodwill allocated to the Energy CGU
group was split into amounts allocated
to Energy North America and Energy
EAME. No impairment would have
arisen at the end of 2016 had this
split already occurred when the 2016
impairment testing was undertaken.
The recoverable amounts of the Energy
EAME and Energy North America CGU
groups were calculated using value in
use. Those recoverable amounts are:
£11,327,000 for Energy EAME and
£15,556,000 for Energy North America.
The pre-tax discount rates used to
value the two CGU groups were 16.1%
for Energy EAME and 12.9% for Energy
North America.
Sensitivity of results to changes
in estimates
The Group’s CGUs all have significant
headroom with the exception of Energy
which has no headroom. 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 2018 to be reasonably possible.
The valuation of goodwill allocated
to the Energy CGU group is most
sensitive to the achievement of the 2018
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
85
rpsgroup.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 13. PROPeRtY, Plant anD equiPMent
£000s
cost:
at 1st January 2017
additions
Disposals
Foreign exchange differences
at 31 December 2017
Depreciation:
at 1st January 2017
charge for the year
Disposals
Foreign exchange differences
at 31 December 2017
net book value at 31 December 2017
£000s
Cost:
At 1st January 2016
Additions
Disposals
Additions through acquisition
Foreign exchange differences
At 31 December 2016
Depreciation:
At 1st January 2016
Charge for the year
Disposals
Foreign exchange differences
At 31 December 2016
Net book value at 31 December 2016
Freehold
land and
buildings
alterations
to leasehold
premises
10,229
20
–
379
10,628
3,040
232
–
99
3,371
7,257
6,360
427
(118)
(13)
6,656
3,282
1,015
(118)
(16)
4,163
2,493
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
Fixtures,
fittings,
it and
equipment
69,464
7,675
(4,206)
(273)
72,660
52,393
6,672
(3,928)
6
55,143
17,517
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
Motor
vehicles
3,144
519
(350)
(29)
3,284
2,034
498
(301)
(24)
2,207
1,077
Motor
vehicles
2,824
371
(415)
–
364
3,144
1,607
597
(396)
226
2,034
1,110
total
89,197
8,641
(4,674)
64
93,228
60,749
8,417
(4,347)
65
64,884
28,344
Total
80,605
7,678
(6,763)
131
7,546
89,197
54,101
8,390
(6,001)
4,259
60,749
28,448
86
RepoRt and accounts 2017 | accountsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
14. 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 108.
15. tRaDe anD OtheR ReceiVaBles
£000s
Trade receivables
Accrued income
Prepayments
Other receivables
Trade receivables and accrued income net of provision for impairment 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
2017
114,653
39,001
10,568
5,533
169,755
as at
31 Dec
2017
119,500
(4,847)
114,653
as at
31 Dec
2017
44,757
(5,756)
39,001
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
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 concerns
over the recovery of the amount due. The age of financial assets past due but not impaired is as follows:
£000s
Not more than three months past due
More than three months past due
as at
31 Dec
2017
10,740
10,558
21,298
As at
31 Dec
2016
10,201
11,735
21,936
87
rpsgroup.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
15. tRaDe anD OtheR ReceiVaBles CONTINUED
Movements in impairment
£000s
as at 1 January 2017
impairment charge
Reversal of provisions
Receivables written off during the year as uncollectible
exchange differences
as at 31 December 2017
As at 1 January 2016
Impairment charge
Reversal of provisions
Receivables written off during the year as uncollectible
Additions through acquisitions
Exchange differences
As at 31 December 2016
trade receivables accrued income
6,038
2,445
(2,417)
(1,161)
(58)
4,847
10,875
2,155
(6,449)
(1,076)
255
278
6,038
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
Malaysian Ringitt
Other
The maximum exposure to credit risk at the reporting date is £164,222,000 (2016: £156,068,000).
16. tRaDe anD OtheR PaYaBles
£000s
Trade payables
Accruals
Deferred income
Creditors for taxation and social security
Other payables
4,416
5,153
(1,426)
(2,354)
(33)
5,756
3,572
3,443
(1,360)
(1,550)
–
311
4,416
as at
31 Dec
2017
62,475
33,594
23,766
30,499
2,824
13,740
2,064
793
169,755
as at
31 Dec
2017
34,838
41,026
22,199
18,909
6,434
123,406
total
10,454
7,598
(3,843)
(3,515)
(91)
10,603
14,447
5,598
(7,809)
(2,626)
255
589
10,454
As at
31 Dec
2016
58,946
29,112
22,754
31,989
8,563
13,380
550
310
165,604
As at
31 Dec
2016
33,825
42,039
24,389
17,850
7,062
125,165
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.
88
RepoRt and accounts 2017 | accountsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
17. BORROWings
£000s
Bank loans
US loan notes
Bank overdraft
Total bank loan, notes and overdrafts
Finance lease creditor
Arrangement fees
£000s
The bank loan, notes and overdrafts are repayable as follows:
Amounts due for settlement within 12 months
In the third to fifth years inclusive
as at
31 Dec
2017
41,457
55,185
212
96,854
–
(634)
96,220
as at
31 Dec
2017
212
96,642
96,854
As at
31 Dec
2016
43,312
57,571
–
100,883
36
(997)
99,922
As at
31 Dec
2016
–
100,883
100,883
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 under this facility carry interest fixed for the term of the loan equal to
LIBOR (or the currency equivalent) plus a margin determined by reference to the leverage of the Group.
There were loans drawn totalling £41,457,000 at 31 December 2017 (2016: £43,312,000).
The facility is guaranteed by the Company and certain subsidiaries but no security over the Group’s assets exists.
(iv) In addition, in September 2014 the Group issued seven year non amortising US private placement notes of $34,070,000
and £30,000,000 with fixed interest chargeable at 3.84% and 3.98% respectively, that are repayable in 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.
89
rpsgroup.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
17. 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
2017
3,093
2,881
100,539
106,513
2016
3,201
3,201
108,265
114,667
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.
18. DeFeRReD cOnsiDeRatiOn
£000s
Amount due within one year
Amount due between one and two years
Amount due between two and five years
Amount due after five years
as at
31 Dec
2017
1,608
–
26
122
1,756
As at
31 Dec
2016
13,376
1,625
9
–
15,010
90
RepoRt and accounts 2017 | accountsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
19. PROVisiOns
Onerous contracts
The provision for property costs relates to onerous operating lease rentals and related costs on vacated property along with
loss making contracts and will be utilised within six years.
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
eight years.
£000s
As at 1 January 2017
Additional provision in the year
Utilised in year
Released
Exchange difference
As at 31 December 2017
£000s
Due as follows:
Within one year
After more than one year
Onerous
Contracts
400
3,314
(327)
(60)
1
3,328
Warranty
Dilapidations
Total
851
884
(250)
–
12
1,497
2,348
323
(114)
(112)
(5)
2,440
as at
31 Dec
2017
2,953
4,312
7,265
3,599
4,521
(691)
(172)
8
7,265
As at
31 Dec
2016
1,809
1,790
3,599
The carrying value of the provisions disclosed above is a reasonable approximation of their fair value.
91
rpsgroup.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 20. DeFeRReD taXatiOn
£000s
At 1 January 2016
(Charge)/credit to income for the year
(Charge)/credit to income due to change in tax rate
(Charge)/credit to equity for the year
Additions through acquisitions
Exchange differences
At 31 December 2016
Disclosed within liabilities
Disclosed within assets
(charge)/credit to income for the year
(charge)/credit to income due to change in tax rate
(charge)/credit to equity for the year
exchange differences
at 31 December 2017
Disclosed within liabilities
Disclosed within assets
Property,
plant and
equipment
timing
differences
Goodwill and
intangible
assets
Employment
benefits
Share based
payments
Provisions
and other
timing
differences
(168)
968
(37)
–
–
6
769
622
147
48
(29)
–
(26)
762
840
(78)
(7,195)
1,691
300
–
(675)
(628)
(6,507)
(12,314)
5,807
2,720
(2,310)
–
(590)
(6,687)
(10,102)
3,415
2,264
(21)
(9)
65
–
449
2,748
2,735
13
118
(16)
15
(44)
2,821
751
2,070
(33)
(74)
8
(63)
–
2
(160)
(185)
25
44
–
–
(16)
(132)
(82)
(50)
(630)
(157)
(39)
–
–
(116)
(942)
(903)
(39)
(949)
77
–
22
(1,792)
253
(2,045)
Total
(5,762)
2,407
223
2
(675)
(287)
(4,092)
(10,045)
5,953
1,981
(2,278)
15
(654)
(5,028)
(8,340)
3,312
From 1 January 2018 the US Federal
corporation tax rate reduced from 35% to
21% and the Norwegian tax rate from 24%
to 23%. Accordingly, deferred tax assets
and liabilities in both countries have been
calculated at the reduced rates of
corporation tax which materially reflect the
rates 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 £3,773,000
(2016: £33,130,000) 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 £402,000
(2016: £1,876,000).
Deferred corporation 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.
92
RepoRt and accounts 2017 | accountsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
21. shaRe caPital
as at 31 December 2017
authorised
£000s
authorised
number
as at 31 December 2016
Authorised
£000s
Authorised
Number
Ordinary shares of 3p each
240,000,000
7,200
240,000,000
7,200
Issued and fully paid
number
Ordinary shares of 3p each
At 1 January
Issued under the Share Incentive Plan
Issued in respect of the Performance Share Plan
Issued in respect of the Energy Option Plan
Issued in respect of the Bonus Plan
Admission fees
At 31 December
223,435,014
654,970
450,058
185,000
91,959
–
224,817,001
2017
£000s
share
Premium
114,353
1,733
1,123
376
213
(8)
117,790
£000s
share
capital
6,703
20
13
6
3
–
6,745
Number
222,234,251
905,362
295,401
–
–
–
223,435,014
2016
£000s
Share
Premium
112,026
1,653
680
–
–
(6)
114,353
£000s
Share
Capital
6,667
27
9
–
–
–
6,703
Number
Ordinary shares held by the ESOP Trust
Ordinary shares held by the SIP Trust
as at
31 Dec
2017
As at
31 Dec
2016
2,726,038
4,314,641
2,497,500
4,428,223
The total number of issued and fully paid shares is inclusive of the shares held in the ESOP and SIP Trusts. These shares are
deducted from equity through the EBT reserve. The ESOP Trust has elected to waive any dividend on the unallocated ordinary
shares held.
The table below shows options outstanding at 31 December 2017:
Period exercisable
2018
2018 - 2021
Number
165,000
50,000
215,000
Exercise price (p)
295.25
212.01
93
rpsgroup.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 22. DiViDenDs
£000s
Amounts recognised as distributions to equity holders during the year:
Final dividend for the year ended 31 December 2016 of 5.08p (2015: 5.08p) per share
Interim dividend for the year ended 31 December 2017 of 4.80p (2016: 4.66p) per share
Year
ended
31 Dec
2017
11,308
10,699
22,007
Year
ended
31 Dec
2016
11,267
10,346
21,613
Proposed final dividend for the year ended 31 December 2017 of 5.08p (2016: 5.08p) per share
11,361
11,315
The proposed final dividend for the year ended 31 December 2017 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 2017 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 2017
As at 31 December 2016
Property
11,703
22,852
2,186
36,741
Other
3,345
4,233
55
7,633
Property
13,911
24,625
3,328
41,864
Other
1,623
2,450
–
4,073
24. RelateD PaRtY tRansactiOns
Related parties, following the definitions within IAS 24, are the subsidiary companies, members of the Board, key management
personnel 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.
94
RepoRt and accounts 2017 | accountsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
25. nOtes tO the cOnsOliDateD cash FlOW stateMent
£000s
Operating profit
Adjustments for:
Depreciation
Amortisation of acquired intangible assets
Impairment of goodwill
Consideration fair value adjustments
Share based payment expense
Loss on sale of business assets
Loss on sale of property, plant and equipment
EBITDAS
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Cash generated from operations
Interest paid
Interest received
Income taxes paid
Net cash from operating activities
Year ended
31 Dec
2017
Year ended
31 Dec
2016
2,926
37,987
8,417
12,804
40,024
–
2,700
2,617
86
69,574
(7,584)
1,521
63,511
(4,960)
113
(14,920)
43,744
8,390
17,470
–
187
2,184
–
537
66,755
9,522
1,976
78,253
(5,077)
158
(11,057)
62,277
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 2017.
£000s
Cash at bank
Overdrafts
Cash and cash equivalents
Bank loans and notes
Finance lease creditor
At 31 Dec
2016
16,503
–
16,503
(99,886)
(36)
(83,419)
Cash flow
(212)
(212)
(424)
1,424
36
1,036
Prepaid
arrangement
fees
Foreign
exchange
At 31
Dec 2017
–
–
–
(364)
–
(364)
(703)
–
(703)
2,818
–
2,115
15,588
(212)
15,376
(96,008)
–
(80,632)
The cash balance at 31 December 2017 includes £2,917,000 (2016: £3,036,000) that is restricted in its use either as security or
client deposits.
95
rpsgroup.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
26. 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 Group to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.
The most recent full actuarial valuations of the plans’ assets and present value of the defined benefit liabilities were carried out
in November 2017 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
2017
2.30%
2.50%
2.25%
2016
2.10%
2.25%
2.00%
There are two defined benefit schemes in Norway; with the exception of the rates of pension increase all principal assumptions
are the same for both schemes. One scheme has assumptions of 2.25% and the other used 0.4 % (2016: 2.0% and nil %).
The assumed life expectations on retirement at age 65 are:
Years
Retiring today:
Males
Females
2017
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
2017
243
49
292
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:
2016
21.8
25.0
2016
101
50
151
£000s
Actuarial losses/(gains) arising from:
Changes in financial assumptions
Movements in payroll tax
Remeasurement of the net defined benefit liability
2017
2016
58
8
66
248
13
261
96
RepoRt and accounts 2017 | accountsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 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
2017
(4,389)
3,630
(759)
2016
(4,253)
3,475
(778)
The net liability is reported within the consolidated balance sheet within “other payables”. 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:
£000s
Plan assets at 1 January
Remeasurement gain/(losses):
The return on plan assets (excluding amounts included in net interest expense)
Actuarial losses arising from changes in demographic assumptions
Actuarial gains 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
2017
4,253
243
86
–
93
–
(195)
(91)
4,389
2017
3,475
37
–
35
(127)
306
–
(91)
(5)
3,630
2017
9.7%
0.6%
22.5%
56.7%
10.5%
100.0%
2016
3,553
101
91
(293)
163
(168)
858
(52)
4,253
2016
2,888
41
(376)
17
644
423
(106)
(52)
(4)
3,475
2016
8.4%
3.2%
28.8%
47.5%
12.1%
100.0%
97
rpsgroup.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued 27. Financial RisK ManageMent
(a) Capital management
The capital of the Group consists of
debt, which includes the borrowings
and facilities disclosed in note 17,
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 leverage ratio of Group
net borrowings (including deferred
consideration) to EBITDAS adjusted to
include the annualised 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 non amortising 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 that are the same as for the
revolving credit facility above. These loan
notes represent the Group’s core debt.
Fair values
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.
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
2017
15,588
159,187
174,775
96,220
1,756
92,106
190,082
As at
31 Dec
2016
16,503
156,068
172,571
99,922
15,010
89,021
203,953
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 17. 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 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.
98
RepoRt and accounts 2017 | accountsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued Interest rate risk and profile of financial liabilities
The interest rate risk profile of the Group’s financial liabilities at 31 December was as follows:
£000s
2017
2016
2017
2016
2017
2016
2017
Floating rate
Fixed rate
Non interest bearing
Sterling
Euro
Australian Dollar
Canadian Dollar
US Dollar
Norwegian Krone
Other
At 31 December
32,375
–
–
–
–
8,857
–
41,232
33,964
–
–
–
–
8,612
–
42,576
30,981
–
63
–
25,244
456
–
56,744
32,213
–
3,696
–
31,423
5,024
–
72,356
33,459
7,147
19,296
4,122
14,052
13,175
855
92,106
29,506
9,905
18,130
6,553
11,578
13,052
297
89,021
96,815
7,147
19,359
4,122
39,296
22,488
855
190,082
The maturity profile of financial liabilities at 31 December was as follows:
Floating rate
Fixed rate
Non interest bearing
£000s
2017
2016
2017
2016
2017
2016
2017
Within one year
In one to two years
In two to five years
Over five years
212
–
41,020
–
41,232
–
–
42,576
–
42,576
1,608
–
55,014
122
56,744
13,412
1,625
57,319
–
72,356
85,250
2,774
2,902
1,180
92,106
84,735
1,611
1,628
1,047
89,021
87,070
2,774
98,936
1,302
190,082
Total
2016
95,683
9,905
21,826
6,553
43,001
26,688
297
203,953
Total
2016
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:
Sterling
Australian Dollar
US Dollar
Norwegian Krone
Cash balances at year end:
£000s
Sterling
Euro
US Dollar
Australian Dollar
Canadian Dollar
Norwegian Krone
Malaysian Ringgit
Singapore Dollar
Other
Fixed and floating rate
financial liabilities
Weighted average interest rate %
2017
2016
2.8
2.3
3.8
1.9
3.0
3.0
3.6
3.9
3.3
3.3
Fixed rate
financial liabilities
Weighted average period for
which rate is fixed – months
2017
43
104
45
5
44
as at
31 Dec
2017
1,925
1,468
2,306
2,396
1,411
3,731
1,073
344
934
15,588
2016
53
10
51
5
47
As at
31 Dec
2016
1,462
1,341
2,817
1,877
2,761
4,607
924
121
593
16,503
99
rpsgroup.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
nOtes tO the cOnsOliD ateD Financial stateMents CONTINUED
27. 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 2017 was £108,543,000
(2016: £106,688,000).
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 for a year would increase
Group profit before tax by £908,000.
A 1.0% increase in interest rates would
decrease Group profit before tax by
£908,000.
(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 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.
The fair value of the forward foreign
exchange contracts held at year end was
not material.
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 15
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
government agencies and departments,
national water companies, multi-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.
100
RepoRt and accounts 2017 | accountsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued nOtes tO the cOnsOliD ateD Financial stateMents CONTINUED
28. shaRe-B aseD PaYMents
Share scheme costs
£000s
Share Incentive Plan (“SIP”)
Performance Share Plan (“PSP”)
Executive Long Term Incentive Plan (“ELTIP”)
Short Term Annual Bonus Plan (“STABP”)
Total share scheme costs
A description of each plan is given in accounting policy note 2(e)iii.
The following tables set out details of material share schemes activity:
Year ended
31 Dec
2017
Year ended
31 Dec
2016
1,367
785
295
253
2,700
1,356
828
–
–
2,184
SIP
Year of grant
2014
2015
2016
2017
Year of grant
2013
2014
2015
2016
PSP
Year of grant
2009
2011
2012
2013
2014
2015
2016
2017
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
New grants
–
–
–
613,984
613,984
New grants
–
–
–
851,448
851,448
New grants
–
–
–
–
–
–
–
352,307
352,307
Releases
(340,636)
(23,785)
(35,535)
(9,584)
(409,540)
Releases
(349,577)
(45,828)
(59,677)
(25,495)
(480,577)
Releases
(25,010)
(16,446)
(23,740)
(28,393)
(273,872)
(41,473)
(35,410)
(5,714)
(450,058)
Forfeits
(17,770)
(41,784)
(62,518)
(25,565)
(147,637)
Forfeits
(14,783)
(30,158)
(49,085)
(25,021)
(119,047)
Lapses
(5,813)
(2,475)
413
(2,638)
(10,329)
(17,309)
(21,386)
(8,864)
(68,401)
Number
outstanding
31 Dec 2017
–
463,068
702,879
578,835
1,744,782
Number
outstanding
31 Dec 2016
–
358,406
528,637
800,932
1,687,975
Number
outstanding
31 Dec 2017
52,543
41,618
45,315
51,139
66,554
383,118
470,080
337,729
1,448,096
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
101
rpsgroup.comNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
nOtes tO the cOnsOliD ateD Financial stateMents CONTINUED
28. shaRe-BaseD PaYMents CONTINUED
Year of grant
2009
2011
2012
2013
2014
2015
2016
Number
outstanding
31 Dec 2015
85,027
70,638
86,132
309,482
406,481
510,983
–
1,468,743
New grants
–
–
–
–
–
–
526,876
526,876
Releases
(1,634)
(9,109)
(13,491)
(224,385)
(19,830)
(26,952)
–
(295,401)
Lapses
(27)
(990)
(3,999)
(2,927)
(35,896)
(42,131)
–
(85,970)
Number
outstanding
31 Dec 2016
83,366
60,539
68,642
82,170
350,755
441,500
526,876
1,614,248
Vesting
conditions
3 years
3 years
3 years
3 years
3 years
1, 2 or 3 years
3 years
SIP
For the purposes of calculating the fair value of conditional shares awarded under the SIP, the fair value was calculated as
the market value of the shares at the date of grant as participants are entitled to receive dividends over the three year
holding period.
Fair value at measurement date
Weighted fair value
Holding period
SIP awards
169.50p - 292.25p
223.20p
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)iii).
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
Weighted average exercise price
Holding period
Expected dividend yield
PSP awards
130.01p - 318.65p
194.88p
261.56p
3 years
1.83% - 5.52%
29. eVents aFteR the B alance sheet Date
There were no events arising after the balance sheet date requiring adjustment to the year end results or disclosure.
102
RepoRt and accounts 2017 | accounts
nOtes tO the cOnsOliD ateD Financial stateMents CONTINUED
PaRent cOMP anY B alance 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
2017
As at
31 Dec
2016
4
5
6
7
8
9
10
12
12
12
12
12
12
317
815
361,000
362,132
54,388
124
54,512
36,913
17,599
379,731
96,008
172
283,551
6,745
117,790
83,373
21,256
(8,602)
62,989
283,551
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
The profit for the year attributable to the shareholders of the Parent Company and recorded through the accounts of the
Parent Company was £7,218,000 (2016: £8,300,000).
These financial statements were approved and authorised for issue by the Board on 1 March 2018.
The notes on pages 105 to 113 form part of these financial statements.
John Douglas, Director
Gary Young, Director
On behalf of the Board of RPS Group Plc (company number: 2087786).
103
rpsgroup.com
PaRent cOMP anY stateMent OF changes in equitY
£000s
At 1 January 2016
Changes in equity during 2016:
Issue of new shares
Share-based payment expense
Profit and total comprehensive income
Dividend paid (note 13)
at 31 December 2016
changes in equity during 2017:
issue of new shares
share-based payment expense
transfer on release of shares
Profit and total comprehensive income
non distributable loss
Dividend paid (note 13)
at 31 December 2017
Share
capital
Share
premium
Merger
reserve
Employee
trust shares
Profit and
loss reserve
Other
reserve
Total
6,667
112,026
21,256
(11,997)
115,459
99,424
342,835
36
–
–
–
6,703
42
–
–
–
–
–
6,745
2,327
–
–
–
114,353
3,437
–
–
–
–
–
117,790
–
–
–
–
21,256
–
–
–
–
–
–
21,256
(1,680)
–
–
–
(13,677)
(1,753)
–
6,828
–
–
–
(8,602)
(688)
2,184
8,300
(21,613)
103,642
(1,352)
2,700
(6,828)
7,218
–
(22,007)
83,373
–
–
–
–
99,424
–
–
–
–
(36,435)
–
62,989
(5)
2,184
8,300
(21,613)
331,701
374
2,700
–
7,218
(36,435)
(22,007)
283,551
The notes on pages 105 to 113 form part of these financial statements.
104
RepoRt and accounts 2017 | accounts nOtes tO the PaRent cOMP anY Financial stateMents
1. accOunting POlicies
RPS Group Plc (the “Company”) is a
company domiciled in England 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 individual Company 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:
Life of lease
Fixtures, fittings, IT and equipment:
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.
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.
105
rpsgroup.com nOtes tO the PaRent cOMP anY Financial stateMents CONTINUED
1. accOunting POlicies CONTINUED
Employee Share Trusts
The assets, income and expenditure
of the SIP and Employee Benefit Trust
are incorporated into the Company’s
financial statements.
The Trusts are used to issue shares
under the Group’s share schemes, as
described on page 71. Cash is loaned to
the Trust and then used to subscribe for
shares in the Company.
Financial instruments
Disclosures on financial instruments have
not been included in the Company’s
financial statements as its consolidated
financial statements include appropriate
disclosures.
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.
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
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 2017, that has a
significant risk of resulting in a material
adjustment to the carrying amounts of
assets and liabilities during 2018, relates
to the testing for impairment of the
Company’s investments.
A further impairment of the carrying
value of RPS Group Plc’s investment in
its US subgroup is reasonably possible in
2018 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 2018 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.
The US business underperformed
against budget in 2017 and whilst not
probable, it is possible that further
underperformance may occur in 2018
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
£108,117,000.
106
RepoRt and accounts 2017 | accounts
nOtes tO the PaRent cOMP anY Financial stateMents CONTINUED
3. PROFit attRiButaBle tO shaRehOlDeRs
No profit and loss account is disclosed by the Parent Company as allowed by Section 408 of the Companies Act 2006.
The remuneration of the auditors for the statutory audit of the Company was £50,000 (2016: £50,000).
4. intangiBle assets
£000s
Cost
At 1 January 2017 and at 31 December 2017
Amortisation
At 1 January 2017
Charge for the year
At 31 December 2017
Net book value at 31 December 2017
Net book value at 31 December 2016
5. tangiBle assets
£000s
Cost or valuation
At 1 January 2017
Additions
Disposals
At 31 December 2017
Depreciation
At 1 January 2017
Charge for the year
Disposals
At 31 December 2017
Net book value at 31 December 2017
Net book value at 31 December 2016
Goodwill
2,134
1,752
65
1,817
317
382
Total
7,365
492
(13)
7,844
6,617
421
(9)
7,029
815
748
Alterations
to leasehold
premises
Fixtures,
fittings,
IT and
equipment
509
43
(7)
545
427
67
(7)
487
58
82
6,856
449
(6)
7,299
6,190
354
(2)
6,542
757
666
107
rpsgroup.com nOtes tO the PaRent cOMP anY Financial stateMents CONTINUED
6. inVestMents
£000s
Subsidiary undertakings
Cost
At 1 January
Additions
At 31 December 2017
Provisions
At 1 January
Impairment
At 31 December 2017
Net book value at 31 December 2017
2017
2016
455,670
–
455,670
58,235
36,435
94,670
361,000
455,670
–
455,670
58,235
–
58,235
397,435
The Group’s investment in its US business has been impaired by £36,435,000. This has been booked against the non-
distributable reserve, which represents profits previously recognised in a group reorganisation involving the US business.
Subsidiary undertakings
The principal activity of the majority of our trading subsidiaries in the provision of consulting services.
The following were the subsidiaries during the year. All subsidiaries are held 100% by RPS Group Plc with the exception of
Delphi Group Asia PTE Limited where 85% of the ordinary share capital is held.
Shares are held directly by RPS Group Plc except where marked by an asterisk whre they are held by a subsidiary undertaking.
d
e
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e
t
s
i
g
e
R
e
c
i
f
f
O
Country of registration and operation
Australia
1 C & B Plant Pty Ltd
1 Conics (Brisbane) Pty Ltd
1 Conics (Brisbane) Unit Trust Ltd
1 Conics (Cairns) Pty Limited
1 Conics (Gold Coast) Pty Ltd
1 Conics (Mackay) Pty Ltd
1 Conics (Mining & Infrastructure) Pty Ltd
1 Conics (Sunshine Coast) Pty Ltd
1 Conics (Sunshine Coast) Unit Trust
1 Conics (Sydney) Pty Ltd
1 Conics (Townsville) Pty Ltd
1 Conics Positioning Pty Ltd
1 Conics Pty Ltd
1 ECL DM Pty Ltd
1 ECL Drilling Management Pty Limited
1 ECL Pty Ltd
1 EHA Pty Ltd
1 Everything Infrastructure Consulting Pty Ltd
1 Everything Infrastructure Group Pty Ltd
1 Everything Infrastructure Services Pty Ltd
1 Geo Mapping Technologies Pty Ltd
1 Intelligent Infrastructure Pty Ltd
1 Manidis Roberts Employee Benefits Pty Ltd
1 Massie Cosgrove Pty Ltd
1
Natural Solutions Environmental Consultants
Pty Ltd
1 Newco (Brisbane) Pty Ltd
1 Newco (Sunshine Coast) Pty Ltd
1 Pioneer Surveys Pty Ltd
1 PMM Global Surveys Pty Ltd
1 PMM Holdings Pty Ltd
1 PMM Sydney Pty Ltd
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
d
e
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e
t
s
i
g
e
R
e
c
i
f
f
O
Country of registration and operation
1 RPS APASA Pty Ltd
1 RPS Advisory Services Pty Ltd
1 RPS Aquaterra Pty Ltd
1 RPS Australia East Pty Ltd
1 RPS Australia West Pty Ltd
1 RPS Consultants Pty Ltd
1 RPS ECOS Pty Ltd
1 RPS Energy Pty Ltd
1 RPS Energy Services Pty Ltd
1 RPS Environment and Planning Pty Ltd
1 RPS Harper Somers O’Sullivan Pty Ltd
1 RPS HSO Subco Pty Ltd
1 RPS Manidis Roberts Pty Ltd
1 RPS PM Ltd
1 Rudall Blanchard Associates Pty Limited
1 Terranean Mapping Technologies Pty Ltd
1 Troy Ikoda Australasia Pty Ltd
1 Urban Blueprint Pty Ltd
1 Vivo Design Pty Ltd
1 Whelans Corporation Pty Limited
1 Whelans Insites Pty Limited
Brazil
2 RPS Consultores do Brasil Ltda
Canada
d
e
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s
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e
R
e
c
i
f
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O
Country of registration and operation
3 RPS Energy Canada Ltd
4 Canadian GaiaTech, B.C. ULC
England
5 Aquaterra International Ltd
5 Aquaterra UK Limited
5 Basicshare Limited
5 Burks Green & Partners Limited
5 Cambrian Consultants America Limited
5 Cambrian Consultants Limited
5 CgMs Holdings Limited
5 CgMs Limited
5 Clear Environmental Consultants Limited
5 DBK Partners Limited
5 ECL Group Limited
5 ECL Resources Management Limited
5 ECL Technology Limited
5 Emulous Group Limited
5 Emulous Ltd
5 Energy Innovations Limited
5 Exploration Consultants Limited
5 Flow Control (Water Conservation) Limited
5 Geocon Group Services Limited
5 Geophysical Consultants Limited
5 Geophysical Safety Resources Limited
5 Hydrosearch Associates Limited
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
3 Petroleum Institute for Continuing Education Ltd *
5 Ichron Limited
3 Boyd Exploration Consultants Ltd
3 HMA Land Services Ltd
3 Maverick Land Consultants 2012 Ltd
3 Roland Resources 2012 Inc
3 RPS Canada Ltd
*
*
*
*
*
5 Isochrone Holdings Limited
5 Knowledge Reservoir (UK) Ltd
5 Martindale Holdings Limited
5 Nautilus (SEAA) Limited
5 Nautilus Limited
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
108
RepoRt and accounts 2017 | accounts
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5 Net Admin Limited
5 Nigel Moor Associates plc
5 Oil Experience Limited
5 Paras Consulting Limited
5 Paras Limited
5 Probablistic Risk Assessments Limited
5 Quad Engineering Limited
5 R W Gregory Limited
5 RPS Business Healthcare Limited
5 RPS Chapman Warren Limited
5 RPS Consultants Ltd
5 RPS Consulting Services Limited
5 RPS Design Ltd
5 RPS Ecoscope Limited
5 RPS Energy Consultants Limited
5 RPS Energy Limited
5 RPS Energy Services Limited
5 RPS Environmental Management Limited
5 RPS Finance Holdings (UK) Ltd
5 RPS Finance (UK) Ltd
5 RPS Group US Holdings Limited
5 RPS Occupational Health Limited
5 RPS Laboratories Limited
5 RPS Mountainheath Limited
5 RPS Planning & Development Limited
5 RPS Timetrax Limited
5 RPS Trustees Limited
5 RPS US Holdings Limited
5 Rudall Blanchard Associates Group Limited
5 Rudall Blanchard Associates Limited
5 Safety and Reliability Consultants Limited
5 Scott Pickford Limited
5 Sherwood House Properties Limited
5 SRC (Consultants) Limited
5 Town Planning Consultancy Limited
5 TPK Consulting Limited
5 Troy Ikoda Limited
5 Troy-Ikoda Management Limited
5 Utility Technical Services Limited
5 WTW & Associates Limited
5 X-IPEC Limited
Germany
6 Metier Academy GmbH
Registered Offices
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Country of registration and operation
Gibraltar
7 Geocon Asia Limited
Ireland
8 RPS Consulting Engineers Limited
8 RPS Engineering Services Limited
8 RPS Environmental Consultancy Limited
8 RPS Group Limited
8 RPS MMA Limited
8 RPS Planning & Environment Limited
8 RPS Properties Limited
Malaysia
9 Cambrian Consultants Asia Sdn. Bhd
10
Knowledge Reservoir Geoscience & Engineering
Sdn. Bhd
11 RPS Consultants Sdn Bhd
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Country of registration and operation
Oman
24 K.R. LLC (Oman)
Papua New Guinea
25 Point Project Management (PNG) Ltd
Scotland
26 OceanFix International Limited
27 RPS Health in Business Limited
Singapore
28 Delphi Group Asia PTE Limited
Sweden
29 Metier AB
29 Metier Academy AB
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Mexico
Cambrian Consultants CC America, Inc S.de R.L.
de C.V.
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USA
30 APA USA, Inc
Mongolia
13 Aquaterra East Asia LLC
Netherlands
14 RPS advies-en ingenieursbureau bv
15 RPS Analyse BV
14 RPS BV
14 RPS Detachering BV
New Zealand
16 RPS Consultants NZ Limited
Northern Ireland
17 RPS Ireland Limited
Norway
18 Delphi AS
9 Knowledge Reservoir AS
9 Knowledge Reservoir Holding AS
19 Metier AS
19 Metier Holding AS
20 Metier Trondheim AS
21 Metier Vest AS
22 OEC Gruppen AS
23 RPS Norway AS
23 RPS Group AS
31 Applied Science Associates Inc.
30 Cambrian Consultants America Inc.
30 Espey Consultants, Inc.
30 Evans Hamilton, Inc.
30 GaiaTech Canada, LLC
32 GaiaTech Holdings, Inc
30 GaiaTech, Inc
30 Houston Geoscan Inc
30 Hydrosearch USA Inc
33 Iris Environmental
34 Klotz Associates Inc.
30 Knowledge Reservoir Group Inc
35 Knowledge Reservoir, LLC
30 Nautilus Holdings LLC
30 Nautilus World LP
30
Petroleum Institute for Continuing Education
USA Inc
30 RPS America Group Inc
30 RPS Americas Inc
30 RPS Group, Inc.
30 RPS JDC Inc.
30 The Geocet Group LLC
30 The Scotia Group Inc
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1 743 Ann Street, Fortitude Valley, Queensland 4006,
7 Line Group Limited, 57/63 Line Wall Road,
12 Avenida Paseo de la Reforma No. 404,
Australia
Gilbraltar
2 Av. Almirante Barroso 91, Rio de Janeiro,
Rio De Janeiro 20031--005, Brazil
8 West Pier Business Campus, Old Dunleary Road,
Dunlaoghaire, Co Dublin, Republic of Ireland
3 1200, 700 - 2nd Street SW, Calgary, Alberta,
9 Level 11-2 Faber Imperial Court, Jalan Sultan Ismail
Pisa 6 - Despacho 602, CoL Juarez, Mexico City,
Mexico, FED DISTR. 06600
13 701 San Business Centre, 8th Khoroo, Sukhbaatar,
Ulaanbaatar, Mongolia
TP2 4V5, Canada
50250, Kuala Lumpur, Malaysia
14 Elektronicaweg 2, 2628 XG Delft, The Netherlands
4 1300-777 ST Dunsmuir Vancouver
British Columbia V7Y1K2 Canada
10 Welhavens Road 5, 4319 Sandines, Sandines,
15 Minervum 7002, 4817, ZL Breda, the Netherlands
Norway
16 50 Customhouse Quay, Wellington Central,
5 20 Western Avenue, Milton Park, Abingdon,
11 Suite 11-13A, Level 11, Wisma UOA II, Jalan Pinang,
Wellington, 6011, New Zealand
Oxfordshire OX14 4SH
50450 Kuala Lumpur. Malaysia
6 Frankfurt am Main, Gashaftsanschrift, Marketstrasse
4460388 Frankfurt am Main, Germany
17 Elmwood House, 74 Boucher Road, Belfast,
BT12 6RZ
109
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nOtes tO the PaRent cOMP anY Financial stateMents CONTINUED
6. inVestMents CONTINUED
18 Engelsminnegata, 24, 4008 Stavanger, Norway
25 2nd Floor, Brian Bell Plaza, Turumu Street, Boroko,
31 55 Village Square Drive, South Kingstown,
19 Hoffsveien 70C, 0377 Oslo, Norway
20 Professor Brochs, Gate 2, 7030 Trondheim, Norway
21 Hinna Park, Bygg D 2.etasje, Jattavagveien 7,
4020 Stavanger, Norway
22 Lysaker Torg 25, 1366 Lysaker, 0219 BAERUM,
Norway
23 Olav Vs Gate 4, 0356 Oslo, Norway
NCD, Papua New Guinea
Rhode Island, 02879, USA
26 6 Carden Place, Aberdeen, AB10 1UR
32 135 S. La Salle Street, Suite 3500, Chicago,
27 Unit 1, Ratho Park, Station Road, Edinburgh,
EH28 8QQ
28 Paya Lebar Road 60, 40 Singapore - Hougang,
Illinois 60603, USA
33 1432 Webster Street, Suite 302, Oakland,
California, 94612, USA
Singapore - Singapore
34 1160 Dairy Ashford, Suite 500, Houston, Texas,
29 Drottninggatan 71, C, 111 36, Stockholm, Sweden
77079, USA
35 1209 Orange Street, Wilmington, Delaware, 19801,
USA
24 Al-Kulieah Street, Al-Khuwair 17/2, Building No.741,
Way No. 4508 Muscat, Oman
30 20405 Tomball Parkway, Suite 200, Houston,
Texas 77070, USA
7. DeBtORs
£000s
Amounts falling due within one year:
Amounts due from subsidiary undertakings
Tax receivable
Other debtors
Prepayments and accrued income
31 Dec
2017
47,828
1,523
2,557
2,480
54,388
31 Dec
2017
212
4,191
29,773
516
2,221
36,913
31 Dec
2016
73,395
–
2,135
2,048
77,578
31 Dec
2016
–
1,834
40,081
552
2,268
44,735
8. cReDitORs – aMOunts Falling Due Within One YeaR
£000s
Borrowings
Trade creditors
Amounts due to subsidiary undertakings
Other creditors
Accruals and deferred income
110
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nOtes tO the PaRent cOMP anY Financial stateMents CONTINUED
9. cReDitORs – aMOunts Due aFteR MORe than One YeaR
£000s
Borrowings:
Bank loans
US loan notes
Arrangement fees
Due as follows:
After two years and within five years
Arrangement fee previously settled
Details of borrowings are disclosed in note 17 to the consolidated accounts.
10. PROVisiOn FOR liaBilities
£000s
As at 1 January 2017
Additional provision in the year
Released in the year
As at 31 December 2017
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
31 Dec
2017
31 Dec
2016
41,457
55,185
(634)
96,008
96,642
(634)
96,008
43,312
57,571
(997)
99,886
100,883
(997)
99,886
Total
148
59
(35)
172
As at
31 Dec
2016
140
8
148
as at
31 Dec
2017
46
126
172
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11. DeFeRReD taXatiOn
The movement on deferred taxation in the year was as follows:
£000s
Net asset at beginning of year
Credit to income for the year
Net asset at year end
The deferred taxation balances comprise:
£000s
Short term timing differences
Depreciation in excess of capital allowances
Deferred tax asset
Deferred tax is included within other debtors in the balance sheet.
12. shaRe caPital anD ReseRVes
Authorised
Value
£000s
Number
as at
31 Dec
2017
149
108
257
as at
31 Dec
2017
62
195
257
As at
31 Dec
2016
122
27
149
As at
31 Dec
2016
(58)
207
149
Allotted and fully paid
Number
Value
£000s
6,703
6,745
Ordinary shares of 3p each
At 1 January 2017
At 31 December 2017
240,000,000
240,000,000
7,200
7,200
223,435,014
224,817,001
Full details of the share capital of the Company are disclosed in Note 20 to the Consolidated Financial Statements.
The Company’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.
Profit and loss reserve Cumulative net gains and losses recognised in the profit and loss account and statement of changes
in equity.
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 Employee Benefit trusts.
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.
112
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nOtes tO the PaRent cOMP anY Financial stateMents CONTINUED
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
2017
525
1,684
2,209
31 Dec
2016
272
152
424
31 Dec
2017
112
108
220
Other
31 Dec
2016
96
140
236
15. DiRectORs’ inteRests in tRansactiOns
There were no transactions during the year in which the Directors had any interest.
113
rpsgroup.com FiVe YeaR suMMaRY
£000s
2017
2016
2015
2014
2013
Revenue
Fee income
PBTA
Net bank debt
Net assets
Cash generated from operating activities
Average number of employees
Dividend per share
Adjusted basic EPS
Adjusted diluted EPS
630,636
562,320
53,941
(80,632)
369,784
63,511
5,340
9.88p
17.13p
17.01p
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
The Five Year Summary does not form part of the audited financial statements.
114
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Cover image: Dublin Port, Ireland.
RPS assisted Dublin Port Company to
secure planning permission for the
Alexandra Basin Redevelopment.
REPORT & A CCOUN TS
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Contact:
RPS Group Plc
20 Western Avenue, Milton Park
Abingdon, Oxon OX14 4SH
T +44 (0)1235 863206
Registered in England No. 2087786
rpsgroup.com
49191
Secure & Stable
ADDING VALUE
2017