REPORT AND
ACCOUNTS
2018
rpsgroup.com
Our story
OUR STORY
Founded in 1970, RPS is a leading global professional
services firm of 5,600 people.
Operating in 125 countries, working across six
continents we define, design and manage projects
that create shared value to a complex, urbanising
and resource-scarce world.
We work across six sectors: property, energy,
transport, water, resources, defence and government.
Our services span twelve clusters: project and
program management; design and development;
water services; environment; advisory and
management consulting; exploration and
development; planning and approvals; health,
safety and risk; oceans and coastal; laboratories;
training and communication and creative services.
2
We stand out for our clients by using deep expertise
to solve problems that matter. Delivering on our
promise of making complex easy.
Report and Accounts 2018 Contents
3
CONTENTS
Performance highlights
Financial headlines
Strategic report
Chairman’s statement
Chief Executive’s statement
Our promise
Building deep expertise since 1970
Our business model
Our digital transformation
Strong leadership and global reach
Financial review
Risk and risk management
People
A great place to do great work
Corporate social responsibility
People
Health and safety
Reportable accident rates
Business relationships
Environmental management and climate change
Greenhouse gas reporting
Responsible re-branding
Our partnership with Tree Aid
Report of the Directors
The Board
Corporate governance
Chairman’s introduction
Annual report
Nomination committee report
Audit committee report
Remuneration committee report
Annual report on remuneration
Financial statements
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5
7
8
10
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17
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27
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39
40
43
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51
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64
67
81
Report and Accounts 2018 Performance highlights
PERFORMANCE
HIGHLIGHTS
4
STRENGTHENED LEADERSHIP
Completed Board renewal
Group Leadership Team (GLT) structure finalised
Established Global Senior Leadership community
A GREAT PLACE TO DO GREAT WORK
New appraisal and development framework for all staff
Global incentive scheme for senior leaders
First ever global employee survey
TELLING OUR STORY BETTER
AND CONNECTING OUR BRAND
Launched new visual identity, brand ethos and website
Digital transformation underway
Global technology roll-out
SEGMENT ACHIEVEMENTS
ENERGY
Expanded our capabilities in renewables, in particular offshore wind
CONSULTING UK
AND IRELAND
Appointed to support Highways England’s six-year program for
work in the North of England
SERVICES UK AND
NETHERLANDS
Integrated drainage planning to reduce flooding for Anglian Water
NORWAY
Assigned project management for Norway’s largest water project,
New Water Supply to Oslo
NORTH AMERICA
AUSTRALIA
ASIA PACIFIC
Texas Engineering Excellence Gold medal award for
Critical Infrastructure Repairs
Acquisition of Corview, a leading transport advisory consultancy
Report and Accounts 2018 Financial headlines
FINANCIAL
HEADLINES
Revenue
(£m)
Fee income1
(£m)
PBTA1
(£m)
Statutory profit/
(loss) before tax
(£m)
Adjusted earnings
per share (diluted)1
(p) (£m)
Total dividend
per share (p)
(£m)
2018
2017
Variation %
637.4 630.6
574.2 562.3
1
2
50.2
53.9
(7)
5
41.0
(1.6) >100
16.34 17.01
(4)
9.88
9.88
–
(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.
Report and Accounts 2018 w
OUR
PURPOSE
We create shared value by solving problems
that matter to a complex, urbanising and
resource-scarce world.
Our purpose reflects our commitment to creating
shared value for our people, investors and clients.
It reinforces our undertaking to challenge industry
norms to solve the problems of a modern world.
Our purpose
6
Specialist consultants deploy drones to deliver lightweight wireless sensors via
biodegradable darts to gather vital survey data while ensuring human interference
in delicate ecosystems is kept to a minimum.
CHALLENGING THE NORM
Report and Accounts 2018
Image courtesy of Total
Strategic report
STRATEGIC
REPORT
7
Report and Accounts 2018
Report and Accounts 2018 CHAIRMAN’S
STATEMENT
“We are making significant progress
transforming our business into a
highly focused consulting and services
organisation where we strive
to make complex easy for
our clients.”
Ken Lever
Chairman
8
A year of change - investing to realise
our potential
Drivers of growth
During the year our Chief Executive, John Douglas
has led considerable change at RPS. We have greater
clarity about our markets and our offerings, deeper
understanding of how our clients and our people
view us, re-defined how we are organised and how
we present ourselves to our markets and clients and
gained greater insight into our purpose and culture.
The Group Leadership Team is now complete and
has the right people to provide the business, market
and functional leadership: bringing together internal
talent and external hires. This cohesion is being felt
across the organisation as colleagues work more
collectively and share good practice.
The investments we are making will drive sustainable
growth in the value of our business into the future.
Inevitably the cost of these investments had a short
term impact on the Group’s profit performance
which we have seen in the 2018 results with some
continuing effect into 2019.
In this Annual Report John Douglas explains how
our industry has consolidated and sets out the
competitive positioning of RPS. First and foremost,
we are a people business and so our success is
predicated on investing in our people and offering
them development in their careers so that we can
retain their skill, talent and knowledge within our
organisation. Although RPS offers a diverse array of
services, the markets we primarily address are those
impacted by the demands of population growth such
as energy, water, infrastructure, transport and the
environment. All these markets should provide good
long-term growth prospects for our business that is
likely to be in excess of global GDP. We are also seeing
the increasing impact of technology in our markets, in
our clients’ businesses and in our own business and
we are responding appropriately.
Board support for the strategy
The Board has been closely involved with the Group
Leadership Team to develop the strategy for the Group
and what is required for implementation. The time is
right to make the necessary investments. The market
opportunity is clear, and our depth of expertise
and digital capability gives us substantial potential
Report and Accounts 2018Strategic report to grow. Our strong cash flows mean that we are
well positioned for organic growth and growth by
value accretive acquisitions.
Remuneration Committee. Catherine will succeed
Robert as Chairman of the Remuneration Committee
and Liz Peace who joined the Board in 2017 will
become Senior Independent Non-Executive Director.
People need to know who we are, what we do and
where we do it. We have a good story to tell. We are
committed to leveraging our global capabilities across
multiple pockets of excellence to consistently deliver
market-leading service. We are aware of the challenge
of achieving year on year growth. Acquisitions in the
past have disguised this challenge. Our investment
in our identity, technology and people will position
us to take advantage of the growing markets where
we operate.
Returns to shareholders
Last year we stated our intention to retain the
dividend at its current level for the foreseeable future
so that future earnings growth will provide a more
appropriate earnings dividend cover. For 2018 the
final dividend is recommended to be 5.08 pence
resulting in an unchanged dividend in line with the
stated policy.
The Board is disappointed with the share price
performance in 2018 and believe there is a disconnect
between the share price and the intrinsic value. The
price at the start of the year was 272 pence and it
ended the year at 137 pence representing a decline of
50 per cent compared to decline in the All-Share Index
of 13 per cent over that period. At the date of writing
this, the share price had improved to 171 pence.
The Board’s focus is to drive growth in the long-term
intrinsic equity value of the business. It is the view
of the Board that over time the value benefit from
the necessary overdue investments will be driven by
the sustainable growth in the business which should
ultimately be reflected in an improving share price, as
the discount against the intrinsic value narrows.
Composition of the Board
We are delighted that during the year Michael
McKelvy and Catherine Glickman joined the Board.
Michael is the Chief Executive of Gilbane in the United
States and has experience of our markets and our
business. Catherine has a successful career as a
human resources leader.
Robert Miller-Bakewell will have been on the Board
for nine years at the forthcoming Annual General
Meeting. Accordingly, Robert will step down from
the Board and from his roles as Senior Independent
Non-Executive Director and Chairman of the
Our Company Secretary Nick Rowe retired at the
end of December after ten years with the Group
and has been replaced by David Gormley who has
held a series of roles as Company Secretary of UK
listed businesses.
The Board wishes to thank Robert and Nick for their
dedicated service to the Group over the years.
Behaving responsibly
We work with our clients to help them deliver
sustainable project outcomes that have minimal
impact on the local environment. Responsibility is
integral to our agreed purpose and behaviours. The
Board is delighted to be continuing its commitment
to Tree Aid.
Our people
In a year of repositioning and change I have been
very impressed by the energy of our people and how
positively they have responded.
9
I would like to thank all our employees and associates
for pushing the boundaries of what is possible for
clients, for engaging with the change process we have
embarked on, for getting involved in the conversation
on the direction in which we are taking the business
and for delivering for our clients, every day.
We recognise the talents of individuals and look to
create the most inclusive working environment that
we can. We are proud of our gender ratios on the
Board and on our Group Leadership Team. We are
working hard to address gender balance in general
across the organisation.
A renewed focus
As our new brand states, RPS is completely focused
on making complex easy and delivering market
leading results for our clients, our people and our
shareholders. While the Board is very positive about
the progress we are making, the progress must be
reflected in our share price and much remains to
be done to get to where we want to be. The Board is
united in its support for the strategy and is completely
focused on maintaining the pace of change and to
benefit from the opportunities available.
Strategic reportReport and Accounts 2018 1010
John Douglas
Chief Executive
Report and Accounts 2018
Strategic report CHIEF EXECUTIVE’S
STATEMENT
A year of strong fundamentals, significant change,
real opportunity and progress.
Investing to accelerate growth
As I reflect on my first full year as Chief Executive,
2018 has been a year of good progress for RPS.
Since 1970, RPS has grown into a global team of
5,600 creative professionals and service providers
and has established itself as an industry leader,
operating in 125 countries across six continents.
We solve problems that matter to a complex,
urbanising and resource scarce world. It’s a
heritage we are very proud of.
Trading conditions were good in 2018 with Energy
and Norway, in particular, performing strongly.
We are making targeted investment to make a
good business better and have shown strong
progress against our strategic objectives.
Staff turnover remains too high, but we are confident
that actions underway will bring it closer to industry
norms. Staff turnover and investment have dampened
returns a little in this year. The business remains very
profitable with good margins and strong cash flow. This
strong cash flow allows us to reinvest in the business
while still paying attractive dividends.
We expect our investment in people, brand and
connectivity to show a very positive return. RPS
is a good business that can get better. Ongoing
urbanisation and resource scarcity will ensure
ongoing demand for the services we provide.
Renewed focus
Over the last 12 months we have made a clear shift
from thinking of ourselves as a conglomerate of
small consulting and services businesses, to being a
mid-sized global firm that uses its combined expertise
to deliver professional services around the world.
We are good at what we do and we want to be the
best mid-sized company in our industry. We want
to capitalise on the opportunity our scale gives us.
We are large enough to solve complex problems and
small enough to be easy to work with. Good organic
growth and margins do not lie solely in the domain of
large companies.
In 2018, RPS refined its business model and global
structure. We restructured into six segments and
identified six sectors and 12 service clusters to reflect
the truly global nature of the business and to further
enable our people to meet the requirements of our
clients. This new way of describing our model allows
us to showcase our deep expertise, innovation,
technology and easily and intuitively connect clients
to all of our highly specialised consultants, service
providers and thought leaders. This re-organisation
also gives greater transparency in our reporting,
allowing people to see more clearly how different
parts of the business are performing.
11
We are a business rooted
in great fundamentals
A good and improving safety
record – but no complacency
Profitable with healthy margins
High levels of cash conversion and
good cash flows
A strong balance sheet and
supportive lenders
A diversified client-base
Quality people
Strategic reportReport and Accounts 2018 Five clear priorities
Investing in people and
reducing staff turnover
Tell our story better for staff, clients
and investors
Exploit revenue synergies where they
exist – but not where they don’t.
Define the sectors and services
that will be our core focus
Revitalise the Energy business to better
exploit opportunities in oil and gas, and
in broader energy markets
Grow our business organically and
through selective acquisition
2
4
12
1
3
5
Report and Accounts 2018Strategic report Strong fundamentals
On 21st February we announced a set of results that, overall, showed a business with a financial performance
that was in-line with revised expectations. Our results showed steady revenue and fee growth, reduced debt,
comfortable leverage levels, a strategic acquisition and strong dividend yield.
Revenue (£m)
Fee income (£m)
PBTA (£m)
Adjusted diluted earnings per share (p)
Total dividend per share (p)
Statutory profit/ (loss) before tax (£m)
FY
2018
637.4
574.2
50.2
16.34
9.88
41.0
FY
2017
630.6
562.3
53.9
17.01
9.88
(1.6)
FY 2017 at
constant currency
619.9
552.6
52.8
16.65
9.88
(2.4)
Statutory diluted earnings/(loss) per share (p)
13.23p
(7.47)p
(7.66)p
Trading performance and our markets
It’s a mixed picture for our segments in 2018.
· Our reinvigorated Energy segment benefited
from increased activity in oil and gas markets with
Exploration and Development, Oceans and Coastal,
and Advisory and Management posting good fee
and profit growth.
· Consulting – UK & Ireland: Our Ireland and
Northern Ireland businesses performed well where
public infrastructure spending is strong. Although
market conditions in the rest of the UK were
generally strong we have been held back by staff
recruitment and retention issues in London and,
to a lesser extent, Birmingham. This is our most
Brexit exposed segment. We have not seen any
shortening of order books but there is increasing
client concern.
· Services – UK & Netherlands: Our UK Water
businesses delivered a strong performance with
fees growing strongly. The business benefitted
from poor weather in the first half of the year.
Some of the growth was in profitable but
lower margin contracts. Organic investment in
other areas of the business suppressed overall
performance but is expected to provide additional
profits in 2019 and beyond.
· Norway traded well but felt the impact of
further integration costs; particularly the
cost of combining premises.
· In North America we did not capitalise on
the buoyant market conditions. We suffered
recruitment and retention issues resulting in
modest profit levels compared to prior years.
· In AAP the project management business
continues to benefit from an active defence
sector and grew fees. Retention issues within our
Advisory Services business saw a reduced profit
margin. Investment in support functions in the
region supressed margins in the short term
but will assist in improving retention in the
longer term.
A year of notable progress and
pragmatic investment
In the last 12 months we have made significant
progress in respect of our five strategic priorities.
There remains much to do, and we have the right
strategy in place to deliver our growth ambitions.
As we previously announced, more investment will
be made in support of the strategy to drive longer
term, sustainable growth for the future.
13
Strategic reportReport and Accounts 2018 · Revitalising Energy – Our Energy business is
being successfully revitalised. The inclusion of
all our directly exposed oil and gas businesses in
Energy enables us to provide globally recognised
consultancy and services to this important global
market. This, together with the appointment
of a new, experienced management team, has
enabled the reinvigoration of our Energy business
in markets that are showing greater levels of
activity. While much of our activity is still focused
on hydrocarbons, we are actively growing into
renewables. Offshore wind is an opportunity that
draws heavily on existing RPS services such as
Ocean and Coastal, Environment and Planning
and Approvals.
· Organic growth and selective acquisition –
Our portfolio is diverse which provides resilience
as well as some management challenges.
We continue to evaluate the portfolio but have
not identified material value creating divestment
opportunities. Our strategy is to build greater
density within our existing segments, sectors
and services. We will focus on organic growth,
supported by very selective acquisitions. The
announcement on 4 February 2019 of the
acquisition of Corview in Australia is an example
of a pre-eminent consultancy joining with us to
add expertise and talent to our existing strong
capabilities in the region. We continue to seek
acquisitions in all our existing geographies that
are value creating, that add density to our existing
offerings, and that fit with our culture and brand.
Our people have been integral to delivering this
progress and I would like to thank them for their
vision, hard work and dedication in 2018.
· Reducing staff turnover and developing
our staff – The loss of key staff from recently
acquired businesses affected business
performance this year. Investing in our people is
vital for the long-term health of the business and
this has been a priority for the business globally.
To lead this critical area of work we appointed a
Group People Director, to deliver a global view of
what an organisation like ours should be delivering
for our people. For the first time in RPS’ history,
critical people related activities are being looked
at from a global perspective. We worked at pace to
deliver some significant milestones, including our
first ever global employee survey, improved career
development pathways, a universal performance
review process, and a new bonus scheme for
senior leaders that is heavily focused on profits,
fee growth and cash collection.
· Telling our story better – defining our brand –
Excellent progress was made with respect to
our ambition to tell our story better. In January
2019 we unveiled a new global brand to best
position the Group for future growth. Informed
by an independent client perception audit and
comprehensive engagement with employees,
along with expert third-party research, the brand
encapsulates the essence of RPS via three core
concepts: our purpose (why we exist), our promise
(what we do) and our behaviours (how we do it).
We also updated our visual identity and have an
excellent new website which reflects our global,
unified business and effectively communicates RPS’
unique value proposition of making complex easy.
· Connectivity – As well as refining our business
model, we also finalised our Group Leadership
Team structure this year. Key appointments,
combining new and existing leaders, have created
a team who provide deep expertise, a global
perspective and strong functional support in a
more collaborative and responsive organisational
structure. Investment in the Group’s IT systems
was also required to underpin our strategic
priorities. We appointed a new Chief Information
Officer who will oversee this critical work. A major
component of our investment will be in a global
Enterprise Resource Planning (“ERP”) system
that will be developed by the end of 2019, with
deployment completed in 2021.
14
Report and Accounts 2018Strategic report
Group prospects
The future for RPS is about being at the forefront
of changing market trends, identifying growth
opportunities and delivering complex solutions in
a way that is easy to understand and implement.
Alongside investment in our brand, 2019 will see
a continuation of the focus and investment in our
people, technology and innovation to build on the
deep expertise that our clients have recognised us
for and give us a stronger competitive edge in all the
markets that we operate in. RPS is pragmatic in its
aspirations and we have the capability to utilise the
means available to us to achieve our goals and further
strengthen the business.
Trading conditions in most of our markets appear
satisfactory and supportive of organic growth
although necessary investment previously announced
will temper performance this year before accelerating
growth in future years. The risks associated with Brexit
are contained mainly within the Consulting UK and
Ireland business and we have seen little impact so
far. Against this background, the Board’s view of the
2019 outlook for the Group is unchanged and is in line
with market expectations. The transition the Group is
undertaking is providing a strong foundation to deliver
long term shareholder value.
15
Strategic reportReport and Accounts 2018 Strategic report
OUR
PROMISE
We have deep expertise in things that matter and
we are easy to work with.
Our clients trust us and we are respected for our
creative thinking.
Together we build strong relationships by
repeatedly delivering on our promise.
Making complex easy
16
16
Report and Accounts 2018
ROV Operator
Performing an underwater inspection with
an ROV (Remotely Operated Vehicle)
2004
Troy-Ikoda Ltd
Mason Richards Partnership
Bowman Bishaw Gorham
Flow Control Water Conservation Ltd
Cambrian Consultants Ltd
Kirk McClure Morton
Ingenieursbureau BCC BV
European Safety & Health Consultants BV
Report and Accounts 2018 BUILDING DEEP EXPERTISE
SINCE 1970
2020
2019
Corview
2016
DBK Partners Ltd
2014
Whelans InSites
Clear Environmental Consultants Ltd
GaiaTech Holdings Inc
CgMs Ltd
Point Project Management Pty Ltd
Delphi AS
2012
Manidis Roberts Pty Ltd
2010
Health in Business Ltd
Aquaterra Consulting Pty Ltd (AQT)
Boyd Exploration Consultants Ltd
2010
2008
Kraan Consulting Holdings BV (Holland)
RW Gregory LLP (UK)
WTW & Associates Ltd (UK)
Oceanfix International Ltd (UK)
Land Management Unit Trust t/a Koltasz Smith (Australia)
Rudall Blanchard Associates Group Ltd (Scotland)
The Geocet Group LLC (US)
Mountainheath Services Ltd (UK)
Paras Ltd (UK)
Business and Environmental Communications Ltd (IRL)
2006
Ecos Consulting Pty Ltd (Australia)
Harper Somers O’Sullivan Pty Ltd
Thonger Safety Associates (TSA)
Basicshare Ltd, and subsidiaries Burks Green & Partners Ltd and
Martindale Holdings Ltd
Geoprojects Canada Ltd (inc. parent company TLP Holdings Ltd)
2004
Troy-Ikoda Ltd
Mason Richards Partnership
Bowman Bishaw Gorham
Flow Control Water Conservation Ltd
Cambrian Consultants Ltd
Kirk McClure Morton
Ingenieursbureau BCC BV
European Safety & Health Consultants BV
2000
TPK Consulting Ltd UK
Chapman Warren Ltd
Environmental Engineering Ltd & NES Ltd
BKH Advies Bureau
1998
Utility Technical Services Ltd
1995
Safety & Reliability Consultants
Inspectorate Casella
1991
WJ Cairns & Partners
1989
Brian Clouston & Partners
2000
1990
1980
FOUNDED IN 1970
2018
Straight Talk
2015
Klotz Associates
Metier Holdings AS
Iris Environmental
Everything Infrastructure Group
2013
Petroleum Institute for Continuing Education
Knowledge Reservoir
Asia Pacific Applied Science Associates
HMA Land Services Ltd
Ichron Ltd
OEC Group
Ark Occupational Health
2011
Evans Hamilton Inc
Nautilus Ltd
Terranean
Esprey Consultants Inc
Applied Science Associates Inc
2009
Conics Pty Ltd
Mary Murphy Associates Ltd
2007
APA Petroleum Engineering Inc
Safety & Risk Practice Pty Ltd
Geophysical Consultants Ltd
Geocon Group Services Ltd
MetOcean Engineers Pty Ltd (Aus)
The Scotia Group Inc. (US)
Netadmin Ltd
JD Consulting (US) LP
Oil Experience Ltd
2005
Business Healthcare Ltd
ECL Group Ltd
17
2003
Hydrosearch Associates Ltd
Woods Warren Ltd
Emulous Group Ltd
KCA Associates
2002
Indepth Surveys Ltd
JR Stansfield & Associates Ltd
Probablistic Risk Assessments Ltd
MC O’Sullivan & Co. Ltd
Ecoscope Applied Ecologists
2001
Ashdown Environmental Ltd
Town Planning Consultancy Ltd
ELS BV t/a ASCOR
McHugh Consultants Ltd
Isochrone Holdings Ltd
1999
H2 Operations Ltd
All Water Technology Ltd
1997
BAK Nederland Beheer BV
1994
Nigel Moor & Associates Plc
Thomson Laboratories Ltd
Paleo Services Ltd
Strategic reportReport and Accounts 2018 18
OUR BUSINESS
MODEL
Delivering solutions to clients that position them to navigate
a complex urbanising, resource-scarce world coupled with
increasingly complex legislation and regulation.
The primary objective of the Group is to deliver
value for shareholders by growing profit and
generating cash. Our business has been purposefully
created from a hybrid of sectors, services and
geographies to deliver a responsive approach to our
clients in the markets that we operate in. 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 in the Chief Executive’s statement.
What we do
RPS is a leading global firm providing professional
services to clients across six sectors: property,
energy, transport, water, resources, defence
and government. We define, design and manage
projects that create shared value to a complex,
urbanising and resource-scarce world.
We are known and respected for our deep expertise
across a wide range of services: project and program
management; design and development; water
services; environment; advisory and management
consulting; exploration and development;
planning and approvals; health, safety and
risk; oceans and coastal; laboratories; training
and communication and creative services.
An important part of our offering is our project
management services which 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.
A significant proportion of our work is undertaken
at a local level, although increasingly, the
breadth of our international expertise is being
brought to bear on specific projects to provide
comprehensive solutions globally. The types
of projects that the Group undertakes are fully
described on our website at www.rpsgroup.com.
Drivers of our business
The demand for our services is underpinned by a need
to deliver solutions to clients that position them to
navigate the complexities they face, whether through
the impact of population growth or an increasingly
multifaceted legislative and regulatory landscape.
These are long term drivers that contribute to:
· 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
We create shared value, meaning that the work
we do solves clients’ problems and adds value to
their activities as well as our own. 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.
Report and Accounts 2018Strategic report 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.
Managing and leading to accelerate growth
The Group Board has overall responsibility for the
stewardship of the Group. At the operational level,
the Chief Executive has overall responsibility for the
executive management of the Group and is supported
by a settled Group Leadership Team which comprises
the Chief Executive, Group Finance Director, six
segment CEOs, Group People Director, Group
Marketing Director and the more recently appointed
Chief Information Officer and Group Strategy Director.
IN JULY 2018 THE BOARD MADE THE FOLLOWING CHANGES:
250
SERVICES
REFINED
TO
12
SERVICE
CLUSTERS
19
made the following organisational changes:
Our business in Norway that provides project and
program management is managed by a dedicated
team and now reports directly to the Group’s CEO.
Our business in the UK, Ireland and Netherlands is
now being managed as two separate businesses:
1. a design and development, planning and
environment, and project management
consulting business in UK and Ireland,
named ‘Consulting – UK and Ireland’; and
2. a water, laboratory, health, safety and
risk services business in UK and
Netherlands, named ‘Services
– UK and Netherlands’.
Creation of a global Energy business
As part of the Board’s strategic priority to revitalise
our Energy business, the Group’s oil and gas
businesses in Australia Asia Pacific (AAP), Norway,
and North America have been brought together
with the UK based Energy team to form a global
team. A new team is in place to lead and manage
the business, which now provides consulting
and services to the oil and gas sector globally.
The Board has also changed the name of BNE –
North America to ‘North America’. The Group’s
ocean science business, based in the USA, that
provides services to various sectors including
oil and gas, has extensive collaboration
with the Energy segment, but remains
within the North America business.
Re-organisation of our businesses in Europe
RPS provides a range of consultancy and
technical services in the UK, Ireland, Netherlands
and Norway. To increase focus and manage
the Group’s businesses better the Board has
Strategic reportReport and Accounts 2018 OUR DIGITAL
TRANSFORMATION
We want to capitalise on current and potential
strengths by combining data with digital
technologies and our deep expertise to collect,
collate, interpret and then disseminate this data to
our clients in a way that is easy to understand.
Scaling our digital advantage to deliver unique
experiences that our clients value has the potential
to create multiples of value and to disrupt traditional
consulting pricing models.
Our goal is to embed RPS’ digital advantage into
every part of our business towards delivering
self-sustaining, profitable business transformation.
We have assembled a group of digital leaders and
work is well underway towards:
•
Using data and digital technologies in progressive
ways to enhance client engagement and delivery
· Commercialising the untapped value in the data
assets we hold to extend our domain expertise into
new markets
· Harnessing technology that complements and
augments the services we offer to build new lines
of revenue.
Our goal is to create significant value for clients, our
people and shareholders as we seek to build the
density of our expertise across all markets, multiplied
by the power of data and digital technologies.
20
DIGITAL 3D MODELLING EXPERTISE
WHAT WE DO: We create shared understanding of
complex scenarios in the real world with a digital 3D
model in a virtual world.
MAKING COMPLEX EASY: Our 3D modelling
services help clients and stakeholders collaborate
to develop integrated solutions and communicate
complex scenarios.
THE RESULT: We transform complex technical
information into accurate, clear visual
communications. Our expertise includes rendering,
3D modelling, editing, video capture by drones
and technical software development to help our
clients communicate with clarity, to build trust
and deliver project outcomes with confidence.
Report and Accounts 2018Strategic report
21
Marketing Professional
Testing out VR capabilities at our service
and innovation leadership workshop
Report and Accounts 2018
Strategic report STRONG LEADERSHIP
AND GLOBAL REACH
Group Leadership Team
Effective
Integration
Gary Young
Group Finance Director
Value
creation
Global
mindset
John Tompson
CEO, Energy
Strategies for
growth
Paul Aitken
CEO, Services UK
& Netherlands
Energy and
nuclear
Liza Kane
Group People Director
Culture
change
Mergers and
aquisitions
Experienced
leaders
Judith Cottrell
Group Strategy Director
Oil and gas
Ross Thompson
CEO, Australia Asia Pacific
John Douglas
Chief Executive
Program
management
Engineering
22
Design and
innovation
Chantalle Meijer
Group Marketing Director
Agility and
connectivity
Transformational
technology
Global agenda
setting
Kelly Olsen
Chief Information Officer
John Chubb
CEO, Consulting UK & Ireland
Peter Fearn
CEO, North America
Halvard Kilde
CEO, Norway
Dedicated
commitment
SIX SECTORS
Property
Residential
Commercial and retail
Leisure and tourism
Industrial
Health and healthcare
Education
Resources
Mining
Waste
12 SERVICE CLUSTERS
Defence and
government services
Defence
Security and safety
Information and
telecommunications
Energy
Oil and gas
Renewables
Nuclear facilities
Power and gas networks
Storage
Transport
Roads
Rail
Aviation
Ports
Water
Water management
Wastewater
Flooding and drainage
Groundwater
Project and program management
Design and development
Water services
Environment
Advisory and management consulting
Training
Planning and approvals
Health, safety and risk
Oceans and coastal
Laboratories
Exploration and development
Communications and creative services
Report and Accounts 2018Strategic report OUR REACH
Energy
Sectors
Energy
Services
Exploration and development
Oceans and coastal
Advisory and management consulting
Training
Health, safety and risk
Environment
Laboratories
North America
Sectors
Property
Transport
Energy
Defence and
government services
Water
Services
Environment
Design and development
Advisory and management consulting
Oceans and coastal
Services – UK & Netherlands
Consulting – UK & Ireland
Sectors
Water
Property
Transport
Energy
Defence and government services
Services
Water services
Design and development
Laboratories
Health, safety and risk
Advisory and management consulting
Norway
Sectors
Defence and government services
Property
Energy
Services
Project and program management
Advisory and management consulting
Training
Sectors
Property
Transport
Energy
Water
Defence and government services
Resources
23
Services
Exploration and development
Oceans and coastal
Advisory and management consulting
Training
Health, safety and risk
Environment
Laboratories
Australia Asia Pacific
Sectors
Energy
Transport
Defence and government services
Property
Resources
Water
Services
Project and program management
Design and development
Advisory and management consulting
Environment
Communications and creative services
Planning and approvals
Water services
Strategic reportReport and Accounts 2018 FINANCIAL
REVIEW
Performance summary
Fee income for 2018 was £574.2m (2017: £562.3m, £552.6m at constant currency), an increase of 4% at constant
currency. Our PBTA was £50.2m (2017: £53.9m, £52.8m at constant currency).
The Group’s results for the year are summarised in the table below:
Key financial performance metrics
Revenue
Fee income
Operating profit before A1
Operating before A margin
PBTA
Adjusted diluted earnings per share
Amortisation and impairment of intangible
assets and transaction related costs
24
Statutory reporting
Operating profit
PBT
Statutory diluted earnings per share
2018
2017
2017
(constant currency)
£637.4m
£574.2m
£54.0m
9.4%
£50.2m
16.34p
£9.2m
£44.9m
£41.0m
13.23p
£630.6m
£562.3m
£58.5m
10.4%
£53.9m
17.01p
£55.5m
£2.9m
£(1.6)m
(7.47)p
£619.9m
£552.6m
£57.3m
10.4%
£52.8m
16.65p
£55.1m
£2.1m
(£2.4m)
(7.66)p
Note 1 ‘A’ is Amortisation and impairment of acquired intangibles and transaction-related costs.
We believe that PBTA and operating profit before A
are more representative measures of performance
than statutory measures. By excluding amortisation
and impairment of intangible assets and acquisition
related costs (‘A’), the Board has a clearer view on the
performance of the Group and is better able to make
operational decisions to support its strategy.
Segment underlying profit was £64.2m (2017 £68.2m)
with growth in Energy and Norway, whilst Consulting
UK & Ireland, North America and AAP suffered from
the effects of retention and recruitment challenges.
Organic initiatives, yet to produce significant returns,
lessened the performance of Services UK & NL.
Reorganisation costs were £1.8m compared to £1.2m
in 2017, the increase mainly due to lease exit costs in
Norway of £0.8m. Unallocated expenses were £8.4m,
compared to £8.5m in the prior year. In 2018 we
invested in Group HR, marketing and IT but incurred
no significant costs associated with Board changes
as we did in 2017 and bonuses were lower. Operating
profit before A was £54.0m (2017: £58.5m, £57.3m
at constant currency) at a margin on fees of 9.4%
(2017: 10.4%).
Report and Accounts 2018Strategic report
Net finance costs
Net finance costs were £3.9m (2017: £4.5m) reflecting
lower average total net borrowings, comprising net
bank debt and deferred consideration, in 2018 than in
2017. The average total net borrowings in 2018
was £87.2m (2017: £98.4m).
Tax
The effective tax rate for the year on profit before tax,
amortisation of acquired intangibles and transaction
related costs is 26.8 % (2017 29.6%). The reduction
is mainly due to a decrease in the US Federal tax rate
from 35% to 21% effective from 1 January 2018 and a
lower level of irrecoverable withholding tax in 2018.
The income tax expense for the year was £11.2m
(2017: £15.1m) on a profit before tax of £41.0m
(2017: £1.6m loss). The effective tax rate for the year
on profit before tax was 27.4% (2017: 39.2% after
adjustment for the impairment of goodwill which was
not deductible for tax purposes). The 2017 tax rate
was higher as it included the impact of the US Federal
tax rate reduction on deferred tax assets relating to
the amortisation of goodwill and intangibles.
EPS
Adjusted diluted EPS was 16.34p (2017: 17.01p, 16.65p
at constant currency), a decrease of 1.9% over last
year at constant currency. The percentage decrease
is less than the reduction in PBTA mainly due to
the lower effective tax rate on PBTA in the year. 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 diluted
EPS was 13.23p (2017: -7.47p).
Amortisation and impairment of intangible
assets and transaction related costs
Amortisation and impairment of intangible assets
and transaction related costs totalled £9.2m (2017:
£55.5m). Included in this total is goodwill impairment
of £nil (2017: £40.0m related to the impairment of our
oil and gas exposed energy businesses), amortisation
of acquired intangibles £9.1m (2017: £12.8m), and loss
on disposal of business £nil (2017: £2.7m).
Foreign exchange
Approximately 67% of underlying operating profit
was derived from operations other than in the 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 profit in 2018 suffered from exchange
movements on the conversion of overseas results.
PBTA in 2018 would have been £1.3m higher than
reported had 2017 exchange rates been repeated in
2018. The PBTA in 2017 would have been £1.2m lower
than reported if 2018 exchange rates have prevailed
in 2017. Statutory profit in 2017 would have been
£0.4m lower than reported if 2018 exchange rates
prevailed in 2017.
Borrowings and cash flow
Net bank borrowings at the year-end were lower at
£73.9m (31 December 2017: £80.6m). Net cash from
operating activities was £44.5m (2017: £43.7m). Our
conversion of profit into operating cash was again
good at 94% (2017: 91%) reflecting our strong focus
on collections. Net cash used in investing activities
was £13.4m (2017: £21.1m), the reduction due to
lower expenditure on deferred consideration for
acquisitions of £1.6m (2017: £12.9m) and higher
net capital expenditure of £11.7m (2017: £8.4m).
The amount paid in respect of dividends was £22.1m
(2017: £22.0m).
Deferred consideration outstanding at the year-end
was £0.3m (31 December 2017: £1.8m). Our leverage
(being net bank debt plus deferred consideration
expressed as a percentage of adjusted EBITDA) at the
year end was 1.3x (31 December 2017: 1.3x).
25
Strategic reportReport and Accounts 2018
Bank facilities
Basis of preparation and new
accounting standards
The Group’s main bank facility is a committed
multi-currency revolving credit facility totalling
£150m which expires in July 2020. £32.8m was drawn
at the year-end resulting in headroom of £117.2m.
The margin payable on the drawn funds is variable
and is set for the following six months dependent
on the leverage of the Group at 31 December and
30 June. The loans drawn at the year-end have
tenors of up to 1 month.
In 2014, the Group issued 7 year US private placement
notes of $34.1m and £30.0m that are repayable in
September 2021. 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 (2017 9.88p) and amounts
to £22.1m. The proposed final dividend of 5.08p
(2017: 5.08p) will be paid on 17 May 2019 to
shareholders on the register of members at the
close of business on 23 April 2019 subject to
approval at the Annual General Meeting on
1 May 2019.
Capital structure
As at 31 December 2018 the Group had shareholders’
funds of £377.6m (31 December 2017: £369.8m).
The Company had shareholders’ funds of £270.6m
(2017: £283.6m) and £226.1m fully paid ordinary
shares in issue at 31 December 2018
(31 December 2017: £224.8m).
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 92 and
93. The Group adopted IFRS 9 “Financial instruments”
and IFRS 15 “Revenue” for the first time in 2018. The
impact of the adoption of these new standards is
disclosed in note 30 to the accounts on page 125.
The Group will apply IFRS 16 ‘Leases’ from 1 January
2019 and has elected not to restate comparatives on
initial adoption. An assessment has been undertaken
of the impact of adopting IFRS 16 based on leases
outstanding at 31 December 2018 and the Group
estimates that lease right of use assets of £44m
and lease liabilities of £48m will be recognised on
transition. In addition, lease prepayments of £0.5m,
lease accruals of £0.5m and onerous lease provisions
of £2.1m will be derecognised on transition. We
have confirmed with our lenders that bank covenant
compliance will be calculated on the basis of IAS 17,
that is pre the application of IFRS 16, until the renewal
of our facilities.
26
Report and Accounts 2018Strategic report RISK AND RISK
MANAGEMENT
Risk management
Principal risks
The principal risks to which the Group is exposed, as
well as the measures taken to achieve their mitigation
and in each case any change that has happened in the
year, are detailed in the table on the following pages.
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 2022 taking account of the
principal 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 (and
reflected the potential impact of a no-deal exit from,
the EU). 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 2022. 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.
27
The nature of the activities that the Group undertakes
and its business model are described on pages 18 to
19. This gives rise to a range of risks consistent with
a commercial organisation of this type, the principal
risks of which are itemised and explained below. This
explanation encompasses the nature of each risk,
the steps taken to mitigate them and changes in the
magnitude of such risks during the year.
The Group’s formal system of Risk Management and
Internal Control and its principal components are
described on pages 57 to 58. Through the adoption
of appropriate controls and related audit this seeks
to mitigate financial and commercial risks which are
inherent in the Group’s operating processes. Given
the nature of the Group’s activities, however, the
effective management of risk also 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 the Group’s culture and the way it operates. Our
operational teams accordingly consider the risks to
which their component businesses are exposed, and
their mitigation, on an ongoing basis and at regular
meetings. A structured reporting framework is in
place to support this activity. This 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.
Strategic reportReport and Accounts 2018
28
RISK Exposure
Mitigation
Change in the year
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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.
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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.
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.
Well-planned business acquisitions
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 businesses can all result in a
business failing to deliver anticipated
profit and cash flow.
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.
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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.
Overall economic risks have increased
during the year. In line with the stance
adopted by the Trump administration
in the US, the risks of a significant
global trade war have increased. In
addition the risk of a ‘hard-Brexit’ and
ensuing economic disruption have
increased significantly.
The impact of staff loss from aquired
businesses was felt in Consulting UK
& Ireland, North America and AAP. Our
staff turnover rate remained high. 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 political uncertainty relating to
the terms of the UK’s departure from
the European Union has increased
as has the related possibility of a UK
General Election and potential change
of government. Political risks in the
Group’s other principal jurisdictions
have not changed substantially
although as noted above the risks
of a global trade war appear to be
heightened.
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.
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.
The Group retains the key strategic
priority of being recognised by
its people as being a great place
to do great work. This entails the
development of an appropriate culture
and related management systems.
The ongoing work in this area is fully
described on pages 32 to 34 the
successful completion of which will
serve to substantially 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.
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.
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 36.
Report and Accounts 2018Strategic report
RISK Exposure
Mitigation
Change in the year
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.
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.
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.
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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.
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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.
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 28 to the
financial statements on page 122.
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. The
roll-out of a number of additional
measures has commenced during the
year including user authentication and
device encryption.
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. Appropriate processes
have been put in place to deal with
the impact of GDPR. 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 the Group’s
activities and the environments in
which they are conducted have not
changed materially.
29
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. The
refinancing of this facility is a priority
for 2019 although is not expected
to present undue difficulty.
There was no overall change in the
year. The ongoing program 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 and must be accounted for
with responsible forethought.
Strategic reportReport and Accounts 2018
30
People
PEOPLE
31
Report and Accounts 2018 PEOPLE
A great place to do great work – one of our five strategic priorities
Creating the foundations for attracting
and retaining the best people
RPS has identified the recruitment and retention of
our people as a very high priority across the Group.
Our people are undeniably our greatest asset and
have always been the key to our success. We want
our teams to experience an environment that
engages and inspires them to be their best. We want
RPS to be a company where everyone can use their
skills and specialist knowledge to make complex easy
and solve the problems facing our changing world.
Without the right people in the right place doing the
best job they can, we won’t realise our full potential.
In recognition of this strategic imperative we have
established our first Global People Strategy. This can
be summed up as making RPS a great place to do
great work.
Creating a stimulating and engaging
working environment
In 2018 we conducted our inaugural global staff
survey because we wanted to hear our employees’
views on working life at RPS and for them to identify
the issues that need to be put at the heart of our
strategy. Thanks to a fantastic response rate of 80%
we have, for the first time, a detailed picture of what
our people are thinking and feeling, and this feedback
has underpinned our Global People Strategy. Our
action plans have prioritised:
· The effectiveness of our senior leaders and how
we act more successfully on our people’s ideas
and opinions
· Providing clarity on our strategy to build
confidence in the direction we are taking
· Improving levels of understanding of how
people are rewarded.
STRONGER TOGETHER
YOUNG RPS
NETHERLANDS
We inspire our
people to deliver
our strategy
We create a high
performance
culture and reward
accordingly
32
Our organisational
structure supports
clients and growth
RPS a great
place to do
great work
We enable our
employees to shine
and build meaningful
careers
We attract and
retain high calibre
talent and offer
them flexibility
We create high
performing
leadership teams
We recognise potential and work in
partnership to make the most of opportunity
RPS established a new forum in Netherlands called
Young RPS in 2018. Young RPS is for every employee
under the age of 35. The group shares an online
platform to keep in touch with each other, share
information and arrange events where they discuss
RPS’ strategy and their own career development and
journey at RPS.
Young RPS held its first meeting in October 2018
following the Senior Leadership Conference: sharing
the highlights and priorities presented by John
Douglas, Chief Executive. It also held a dedicated
career development day in January 2019 to focus
on employee career paths.
Report and Accounts 2018People
In 2019 our behaviours will be integrated into our
daily working life and form part of the fabric of key
initiatives which are aimed at helping our people
shine and build meaningful careers at RPS.
Diversity and inclusion
As a global firm operating in 125 countries, we’re as
diverse as the communities and clients we represent.
RPS is grounded in the belief that people should
be supported to find the right position and that all
interactions are based on respect, compassion and
fairness. It’s a view that our people share: in our global
staff survey completed in 2018, 82% agreed that RPS
treats employees fairly regardless of their age, gender,
race, sexual orientation, disability, religion or beliefs.
RPS has continued to make progress with the female
to male ratios at its most senior levels. The Group has
committed to a minimum target of 25% of its Board
being female. In 2017, this target was met with 33%
of the Board being female and in 2018 the percentage
was maintained at 33%. The Group Leadership Team,
made up of 12 members, was finalised in 2018 and
33% of this group is female.
Male to Female Ratios
Male to Female ratios
Board
9 members
6 men: 3 women
2017: 33% women
2018: 33% women
33
Group Leadership Team
12 members
8 men: 4 women
2017: 14% women
2018: 33% women
A newly defined set of
organisational behaviours
Our newly created Behaviours, which sit alongside
our new Purpose and Promise, form an integral part
of how we want people to identify with RPS and will
underpin our efforts in making RPS a great place to
do great work.
Each element of our brand was created by our people,
this is especially true of our behaviours. We know
these reflect what our clients like about working with
us. They also importantly reflect the best of what our
people say we are like to work for.
Our Behaviours
We solve
PROBLEMS
THAT MATTER
Y
L
T
N
E
D
I
F
N
O
C
C
I
T
A
M
G
A
R
P
e
r
a
e
W
e
r
a
e
W
R
E
G
N
O
R
T
S
R
E
H
T
E
G
O
T
Winning mindset
We make it
EASY TO
CONNECT
Our behaviours framework will help guide us
operating at our best day, every day.
Our aspiration is that our Behaviours will:
· Guide all employees on the environment we wish
to create
· Support our diverse collective of people around
the globe
· Guide our employees on the set standards of
performance to drive their career
· Support our leaders in aligning what needs to be
achieved and how we do it
· Drive a stronger culture of innovation
· Provide a strong link between what needs to be
achieved and how we do it
· Act as a reminder to be more compelling in
supporting the communities we impact
PeopleReport and Accounts 2018
Rewarding performance
Starting with developing global reward principles
to inform our decisions around reward, we are
prioritising the review of our reward offering to
our senior leaders. We want to ensure a pay for
performance philosophy aligned to robust annual
objectives that will provide focus on Absolute
Delivery. We are presently reviewing the short-term
and long-term incentive offering for leaders across
the organisation in readiness for the full year 2019
performance period.
Investment in leadership
This year we have paid particular attention to our
global leadership community. We established a
global senior leadership group made up of 80 of
our senior leaders around the world.
Our staff told us how important understanding the
strategy, building confidence in leadership and
leaders acting as role models is to them. To help our
leaders support their teams in these aspects, we ran
a three-day global Senior Leadership Conference
for our senior leaders. This was the first time in RPS’
history that a global team of this size had gathered to
discuss as a community how we wanted to move the
business forward. Attendees took part in a range of
sessions from strategy updates to exploring, probing
and contributing ideas as well as a targeted session
investing in their own leadership development.
Our new organisation structure supports
clients and growth
To support the restructure of our European
businesses, this year we have expanded the breadth of
expertise on the Group Leadership Team. We have also
appointed functional leaders with global scope and
we have also invested in strengthening operational
teams around the world.
34
Our people seizing the
opportunity at our first global
senior leadership conference
Report and Accounts 2018People Corporate Social Responsibility
CORPORATE SOCIAL
RESPONSIBILITY
35
Report and Accounts 2018
CORPORATE SOCIAL
RESPONSIBILITY
People
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.
This is also reflected as one of the Group’s strategic
priorities to be rated by employees as a great place
to do great work. Our Group People Director was
appointed during the year and, working with
the Group Leadership Team, has focused on
strengthening our resources and improving human
resource practices in pursuit of this priority. A full
report in relation to this area, including policies in
relation to diversity is presented on pages 32 to 34.
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 recognised
as one the Group’s principal risks. The Group sets
an overall policy for the management of health
and safety and the Group People Director retains
general oversight in this area. The Chief Executive
takes a direct interest in health and safety and
discusses performance on a regular basis with
business segments. He also reports to the Board on
overall performance and any more serious incidents
that arise. Operational responsibility, however, lies
within the Group’s operating businesses which are
closest to and best positioned to manage their
risks. The nature of these 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 level. This incorporates
analysis of incidents, dangerous occurrences and
near-misses in order that appropriate remedial action
can be taken where required. As noted above, the
Group Board receives and reviews 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
the Group People Director.
OHSAS 18001 is an internationally recognised
standard for health and safety management that is
aligned with the ISO 9000 (Quality Management) and
ISO 14001 (Environmental Management) standards.
69% (2017: 66%) 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 0.8
accidents per 1,000 employees (2017: 2.1). Accidents
that do occur most commonly relate to field staff and
involve manual handling activities, slips and falls.
Reportable accident rates
Group
2018
2017
Reportable injuries
Reportable injuries incident
rate per 1,000 employees
5
0.8
12
2.1
36
Report and Accounts 2018Corporate Social Responsibility Business relationships
Environmental management and
climate change
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 wellbeing 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 further review of
its supply chain published its second 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.
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:
· 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
· Provision of an inter-office IT network together
with communications and video
· Conferencing technology in order to reduce
business travel (the foregoing is consistent
with the Group’s current publicly stated policy
in this area).
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 2018 many of our offices continued to recycle
waste paper, spent toner and ink cartridges, obsolete
computer hardware, printers and mobile phones.
37
Corporate Social ResponsibilityReport and Accounts 2018 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 January 1 – December 31
2018 we have used the GHG Protocol Corporate
Accounting and Reporting Standard (revised edition)
and emission factors from the 2018 UK Government’s
Conversion Factors for Company Reporting and the
International Energy Agency CO2 Emissions from Fuel
Combustion, OECD/IEA, Paris, 2018 for consumption
in our international offices. Greenhouse gas emissions
are reported using the following parameters to
determine what is included within the reporting
boundaries in terms of RPS energy consumption.
· Scope 1 – direct emissions includes any gas
data and fuel use for company owned vehicles.
Fugitive emissions from air conditioning are
included where it is RPS’ responsibility within
the tenanted buildings
· Scope 2 – indirect energy emissions includes
purchased electricity throughout the
company operations.
38
Greenhouse gas emissions (tCO2e) are set out in
the table below.
Scope 1:
Direct emissions
Scope 2:
Indirect emissions
2017
9,435
2018
10,466
3,655
3,539
Total
13,090
14,005
The increase in Scope 1 is largely attributable
to increases in staff numbers and harsh winter
temperatures. The decrease in Scope 2 emissions is
largely attributable to some office rationalisation in
parts of the business and decarbonisation of the grid.
The Group has set a target to reduce per capita office
energy consumption by 2.5% on a five year rolling
average basis. Using this approach the five year rolling
average up to 2017 was 3.34 MWh per capita which
decreased to 3.26 MWh per capita for the five year
rolling average to 2018. This equates to a decrease of
2.39% which is just below our target.
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.
Report and Accounts 2018Corporate Social Responsibility RESPONSIBLE
RE-BRANDING
A considered and responsible approach to our re-brand
Our commitment to sustainability and ethical good practice have formed the foundation of
our re-branding process.
PERSONAL PROTECTIVE EQUIPMENT
Personal Protective Equipment (PPE) is critical to the safety and security of our people and we have a wide range
of items that are worn day in day out by thousands of colleagues across the world. One of the biggest challenges
of our responsible rebrand was how to minimise waste through out of date PPE. To do this we are working with a
global network of recycling groups to dispose of ‘old-brand’ PPE in the best ways possible. This includes shredding
hi-vis jackets to manufacture insulation for sustainable building components. In the US we are working with long
standing partner Green Standards on a waste diversion programme that will benefit community groups. In the UK
wool clothing is being re-woven into new clothing, other materials are being shredded for vehicle insulation and
we will achieve zero landfill certification through this process.
DIGITAL
BUSINESS CARDS
DUAL-WALL
THERMAL WATER BOTTLES
39
We have switched from
paper business cards to
digital cards. All 5,600
employees are now able
to create their own digital
business card. As well as
making good business
sense in reducing cost,
we are also dramatically
reducing our consumption
of paper, saving half a
million A4 sheets of paper
in the process, making a
meaningful reduction in
our carbon footprint.
To mark our brand
launch with employees
in a responsible way, we
gifted dual-wall thermal
water bottles. 5,600 more
people across the world
are now using long lasting
water bottles, instead
of adding to landfill. Our
supplier is regulated by
not-for-profit body Sedex,
working to improve ethical
and responsible business
practices throughout the
supply chain globally.
Corporate Social ResponsibilityReport and Accounts 2018 We create shared value by solving problems that matter
to a complex, urbanising and resource-scarce world.
OUR PARTNERSHIP WITH
TREE AID: CELEBRATING 12 YEARS
Since being founded in 1987, TREE AID has:
HELPED LIFT OVER
1 MILLION
PEOPLE OUT
OF POVERTY
GROWN OVER
17 MILLION
TREES
IMPROVED ACCESS
RIGHTS TO
FOREST AND
TREE RESOURCES
INFLUENCED NATIONAL AND INTERNATIONAL POLICY
OUR PAST
40
Long term and evolving relationship over the last 12 years.
For 5 years RPS as sole funder supported the specific Bongo River Trees project in Ghana, through a
mix of funding and pro-bono specialist and practical services working directly with the charity and
community volunteer groups.
PROTECTED 35KM
OF RIVER BANK
PLANTED 92K TREES
AND 34K VETIVER
GRASS PLANTS
BUILT 4 WEIRS
AND 2 WE LL S
IMPROVED THE LIVES OF OVER 11K PROJECT PARTICIPANTS IN THE BONGO RIVER AREA
RPS IS CURRENTLY FUNDING THE MEKI PROJECT IN ETHIOPIA
· The Meki river basin is a major source of
water in the country and of vital importance
to agriculture and horticulture in the
Oromia region – it flows from the Gurage
highlands in SNNPR, 100km to Lake Ziway.
· Along the Meki River, the land is over-
exploited as people try to survive, feeding
a cycle of environmental degradation and
poverty, with depleted topsoil silting up the
lake and damaging it as a vital water source.
Report and Accounts 2018Corporate Social Responsibility N 30 -50 ENTERPRISE
GROUPS PRODUCING
O
TREE RELATED
PRODUCTS e.g. HONEY
I
T
U
L
O
S
E
H
T
300 HECTARES
OF ENCLOSED LAND
FOR PLANTING AND
PROTECTION
60 WOMEN’S GROUPS
MAKING FUEL EFFICIENT
STOVES REDUCING NEED
FOR FUEL WOOD
THE IMPACT
PROJECT HAS BEEN
RUNNING FOR JUST
OVER A YEAR
INCREASED
VEGETATION
COVER ACROSS
300 HECTARES
REDUCED
FUELWOOD USE
41
INCREASED SUSTAINABLE INCOME
IMPROVED WATER SUPPLY
A PROJECT LEADER FROM OUR AMSTERDAM OFFICE VISITED THE BONGO RIVER TREES PROJECT
IN GHANA
Corporate Social ResponsibilityReport and Accounts 2018
42
Directors Report
REPORT OF
THE DIRECTORS
43
Report and Accounts 2018
THE BOARD
44
Report of the Directors
The Directors present their report together with the
audited financial statements of RPS Group Plc and
its subsidiary undertakings (the ‘Group’) for the year
ended 31 December 2018. 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 7 to 30, the Corporate Governance Report
on pages 52 to 78 and other parts of the Report
and Accounts as referred to below.
Directors
The Directors of the Company as at 31 December
2018 were those listed on pages 46 to 47. The
changes to the Board that occurred in the year are
as detailed on page 54. The Directors’ interests in
the share capital of the Company are as shown in the
Annual Report on Remuneration on page 69.
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 90 and shows the profit for the year. The
Directors recommend a final dividend of 5.08p (2017:
5.08p) per share which, subject to approval at the
Annual General Meeting to be held on 1 May 2019, will
be paid to shareholders on 17 May 2019. This together
with the interim dividend of 4.80p (2017: 4.80p) per
share paid on 12 October 2018 gives a total dividend
of 9.88p (2017: 9.88p) per share for the year ended
31 December 2018.
Strategic report
The Group’s Strategic Report can be found on pages
7 to 30. 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
Report and Accounts 2018Report of the Directors 45
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 as 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.
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.
Financial key performance indicators can be found on
page 5. 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 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.
The Group obtains enhanced tax relief for these
costs in the United Kingdom and has adopted the
RDEC (Research and Development Expenditure
Credit) regime.
The Board: (left to right) Gary Young, Liz Peace, Michael McKelvy,
Allison Bainbridge, John Douglas, Ken Lever, Catherine Glickman,
David Gormley, and Robert Miller-Bakewell.
Report of the DirectorsReport and Accounts 2018
THE BOARD
Ken Lever
Non-Executive Chairman
Robert Miller-Bakewell
Senior Independent Non-Executive
Ken Lever joined the Board in November 2016 as
Group Chairman. Ken is a Chartered Accountant and
his previous experience includes 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.
Robert is the Chairman of the Remuneration
Committee as well as being the Senior Independent
Director and a member of the Audit Committee; he
was also Chairman of the Nomination Committee
prior to November 2016. He is a director of private
companies in Scotland, Chairman of the EH99 think
tank, and Chairman of trustees of two private trusts.
Formerly a Senior Director of Investment Research at
Merrill Lynch and an investment analyst with NatWest
Markets, providing analysis and advice to water,
waste, transport and environmental infrastructure
companies internationally.
46
John Douglas
Chief Executive
Allison Bainbridge
Independent Non-Executive
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.
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.
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 September 2000 and was appointed
to the Board in November of that year.
Report and Accounts 2018Report of the Directors Liz Peace
Independent Non-Executive
Catherine Glickman
Independent Non-Executive
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.
Michael McKelvy
Independent Non-Executive
Michael joined the Board on 1 May 2018. He is based
in the USA and has extensive senior level experience
of its construction, infrastructure and natural
resource markets. In 2014 he became Chief Operating
Officer of Gilbane a major family owned construction
company, and was appointed as its Chief Executive
Officer in 2016. Prior to that Michael spent twelve
years with CH2M in a number of senior roles including
President of firstly its Industrial division and then
its Government, Environmental and Infrastructure
Division. Michael is a qualified architect, having spent
the earlier part of his career in this area, including a
period of fifteen years with Lockwood Greene which
was acquired by CH2M in 2003. Michael is a member
of the Nomination and Remuneration Committees.
Catherine was appointed to the Board on 2 August
2018 and has joined the Remuneration Committee.
Catherine has extensive senior level executive
experience in public companies, most recently as
Group HR Director at the FTSE 250 animal genetics
company, Genus Plc, where she led an agenda on
talent and leadership development to support
growth plans. Catherine retired from this position in
2017. Prior to her time at Genus, Catherine worked
for over twenty years at Tesco Plc where she held
various senior positions including latterly as Group
HR Director. Catherine is currently a Non-Executive
Director of Marston’s Plc, Renishaw Plc and TheWorks.
co.uk Plc where in each case she is Chair of the
Remuneration Committee.
David Gormley
Company Secretary
David has over 20 years’ senior experience as a
company secretary, starting his career with Guinness
Plc, before working in roles as company secretary
continental Europe in Belgium for the Albert Fisher
Group Plc, then group company secretary for Sky Plc.
He has since worked with UK insurance firms Brit and
Hiscox and infrastructure developer John Laing.
47
Report of the DirectorsReport and Accounts 2018 Corporate governance
Going concern
The Directors’ report on corporate governance can be
found on pages 52 to 78 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 32 to 34.
Corporate responsibility
The Group’s corporate responsibility statement is
included on pages 36 to 41.
This includes the disclosures concerning greenhouse
gas emissions that are required pursuant to part 7 of
The Companies Act (Strategic Report and Directors’
Report) Regulations 2013. The Group made no
contribution to political organisations during the year.
Substantial shareholdings
The Company is aware of the following interests
in excess of 3% of the ordinary share capital of the
Company as at 8 February 2019.
48
The Group’s business activities, a review of the
2018 results together with factors likely to affect its
future development and prospects are set out on
pages 11 to 15. Note 18 to the Consolidated Financial
Statements sets out the borrowings of the Group
and considers liquidity risk, whilst note 28 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.
It continues to enjoy strong cash flow and operates
well within the financial covenants applying to its
main bank facility. The Group’s bank facilities will not
expire until July 2020 and, it is anticipated, will be
renewed during 2019.
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 27.
Shareholder
Total holding % of ISC
Aberforth Partners
25,999,025
11.49
Directors’ responsibilities statement
UBS Asset Management
15,498,101
6.85
Artemis Investment
Management
Montanaro Investment
Managers
Unicorn Asset
Management
12,630,362
5.58
8,392,574
3.71
8,355,048
3.69
NBIM
8,285,142
3.66
Dimensional Fund
Advisors
8,199,363
3.62
BlackRock
8,109,040
3.58
BMO Global Asset
Management (UK)
Columbia Threadneedle
Investments
Majedie Asset
Management
Chelverton Asset
Management
7,655,213
3.38
7,536,877
3.33
7,286,198
3.22
7,235,000
3.20
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
Report and Accounts 2018Report of the Directors
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:
· 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
· make an assessment of the Company’s ability to
continue as a going concern.
Parent Company Financial Statements
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:
· 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.
In preparing the parent company financial statements,
the Directors are required to:
Financial instruments
· 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
Details on the use of financial instruments and
financial risk are included in note 28 to the
Consolidated Financial Statements.
Post balance sheet events
On 1 February 2019 the Group acquired the business
of Corview, an Australian based transport advisory
consultancy for a maximum consideration of
A$32.0m (£17.8m), all payable in cash. At completion
the vendors received A$17.6m (£9.8m) with A$4.8m
(£2.7m) payable on each of the first, second and third
anniversaries of completion. In the year to 30 June
2018, Corview had revenues of A$17.1m (£9.5m) and
adjusted profit after tax of A$5.1m (£2.8m).
There were no other events arising after the balance
sheet date requiring adjustments to the year end
results or disclosure.
49
Report of the DirectorsReport and Accounts 2018
50
Takeover directive
The following additional information is provided for
shareholders pursuant to the requirements of the
Takeover Directive.
Share Capital
As at 31 December 2018 the Company’s issued share
capital consisted of 226,105,296 ordinary shares of 3p
each. Substantial shareholder interests of which the
Company is aware are shown above on page 48.
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 69.
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.
Shareholder Rights and Restrictions
Listing rule 9.8.4c
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 in 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
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.
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 2019. 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
David Gormley
Company Secretary
21 February 2019
Registered Office:
20 Western Avenue
Milton Park
Abingdon
Oxfordshire OX14 4SH
Registered in England No. 02087786
Report and Accounts 2018Report of the Directors Corporate Governance
CORPORATE
GOVERNANCE
51
Report and Accounts 2018
CORPORATE
GOVERNANCE
Chairman’s introduction
Governance and culture
The Group’s strategic priorities and progress against
them is set out on pages 11 to 15. Whist achieving
these objectives is key to the Group’s future, the
Board also believes that maintaining high standards
of governance is an important ingredient to drive
success. Whilst the formal rules that apply to RPS as a
listed Group are important in maintaining standards
in this area, good governance is also about culture,
behaviours and how we do business. The Board is
therefore committed to ensuring that the Group’s
values and standards are set at the top and embedded
throughout the Group. The work to define Purpose,
Promise and Behaviours is described elsewhere in
the Annual Report and is an important component in
this process. During the year the Group held its first
Senior Leadership conference which brought together
senior leaders from the Group’s operations around
the world. I attended the start of this event and I
had a strong sense that a set of values to underpin
good governance practice throughout our Group are
emerging as a strong theme.
Framework and compliance
During the year under review the Group was subject
to the UK Corporate Governance Code as published
in April 2016 (the ‘Code’). The Board considers that
throughout the year to 31 December 2018 the Group
was in compliance with all the provisions of the Code.
The Code contains broad provisions together with
more specific provisions which set out standards of
good practice in relation to Board leadership and
effectiveness, accountability and remuneration and
relations with shareholders. The Annual Corporate
Governance Report that follows together with the
reports from each of our principal committee chairs
explain how, in a practical sense, the provisions of
the Code have been applied throughout this period.
52
The Board continues to operate within the framework
of a Board Charter which clarifies the respective roles
of the Chairman, Chief Executive, Finance Director
and Non-Executives as well as incorporating a
schedule of matters reserved for Board approval and
the terms of reference of the Board Committees.
The revised UK Corporate Governance Code which
was published in July 2018 (the ‘Revised Code’)
applies to the Group with effect from 1 January
2019. The Board has reviewed two papers relating
to the Revised Code and has already been taken a
number of steps to ensure compliance with it. In
particular Catherine Glickman has been designated
as the Non-Executive Director to oversee workforce
engagement. The Company has established a work
forum: ‘Your Voice’, which is representative of the
whole workforce and Catherine will be invited to
those meetings to hear and discuss issues raised
by the workforce. The Board Charter has also been
reviewed, amendments have been made to the
terms of reference of the Nomination Committee, to
reflect the wider responsibilities under the Revised
Code and the Company has introduced a new policy
around external appointments and overboarding, in
line with the Revised Code, and also, that whilst being
encouraged to take up Non-Executive appointments,
the Executive Directors should only take up one
appointment in a FTSE350 company.
The Board also reviewed the wider responsibilities
around the Remuneration Committee. The
Remuneration Committee has agreed to review these
further during the year, when the Remuneration
Policy will be renewed and will be further impacted by
changes in the Revised Code. This is discussed more
fully in the Remuneration Committee’s Chairman’s
introduction on page 64 to 66. A full explanation of
the steps taken in relation to the Revised Code and
compliance with it will be included as part of next
year’s reporting.
Report and Accounts 2018Corporate Governance meetings at operating business locations, a practice
that it intends to develop further during 2019. The two
day strategy review mentioned above was undertaken
in conjunction with the Group Leadership Team and
provided an excellent opportunity for the Board to gain
greater insight into the challenges facing our business.
Steps have also been taken to improve the Group’s
engagement with the investment community. The
Group now has a Communications and Corporate
Affairs Director whose brief includes a focus on this
area. The Group has committed to ongoing quarterly
reporting, taken steps to improve the quality and
accessibility of information on its Investor Relations
website and has sought to adopt a more pro-active
approach to the investment community with greater
access to executive management.
The year ahead
We will continue to focus on governance as an
important element in the achievement of our
strategic priorities and driving our business
performance. Whilst the necessary steps will be taken
to comply with revisions with the UK Governance
Code we will continue to focus on our values and
culture as key elements in driving good governance.
Better engagement with our stakeholder groups, in
particular our employees and shareholders, will also
continue to be a priority.
Ken Lever
Chairman
21 February 2019
53
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 below.
Leadership and performance
The further changes that have occurred at Board level
during the year are detailed in the Annual Report
of the Nomination Committee. The Board, as now
constituted, incorporates a strong and appropriate
balance of skills, diversity and experience and will,
I anticipate, following Robert Miller-Bakewell’s
forthcoming retirement, be stable in membership for
the foreseeable future. The Board is, I believe, now
well equipped to provide an appropriate balance of
leadership and oversight as the Group pursues its
strategic objectives and is working well with executive
management to offer support and robust challenge
as appropriate. The Board’s agenda will continue to
balance oversight and governance of the business
with the ability to debate and examine forward
looking strategy including changes to the business
environment and the markets in which we operate.
During the year the Board again undertook a two day
review of strategy with the Group Leadership Team.
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.
Although a number of areas for improvement were
identified no significant areas of concern arose and
the exercise, I believe, confirmed my view that the
Board is discharging the duties described above to
good effect. Whilst we had previously contemplated
undertaking an external review of performance
we concluded that against the backdrop of further
changes in Board membership such an exercise would
be premature. We will give further consideration to
undertaking an externally facilitated review during 2019.
Engagement
Notwithstanding the formal framework within which
the Board operates, it is important that it remains
connected with and understands the wider business.
The Board receives regular presentations from
business and functional areas within the Group and
has commenced a programme of holding Board
Corporate GovernanceReport and Accounts 2018
54
CORPORATE
GOVERNANCE
Annual Report
Overview and compliance
The Chairman’s statement which appears on page 8
incorporates comments relating to the governance
of the Group and provides a backdrop to this detailed
report. The Board continues to operate within the
framework of a charter which incorporates the key
aspects of the Group’s governance arrangements.
This includes the definition of roles, responsibilities
and authorities as applicable to the 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.
As indicated in the Chairman’s statement the Board
has been considering the revised version of the UK
Governance Code and has already made a number of
changes as detailed. The Board Charter is also being
updated to reflect the required changes. This report
and the following report of the Committee Chairmen
describe the structures, processes and events
through which compliance was achieved in 2018.
Board structure
At the date of this report the Board comprised two
Executive Directors, five Non-Executive Directors and
the Chairman. During the year Michael McKelvy and
Catherine Glickman both joined the Board on 1 June
and 2 August respectively. Robert Miller-Bakewell
will retire as a director at the forthcoming Annual
General Meeting.
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. Whilst Catherine Glickman was
engaged in a consultancy capacity by the Group for
a short period at the end of 2017 and start of 2018
to undertake some specific tasks, the Board was
satisfied at the time of her appointment that this
did not constitute a material business relationship
that would affect her independence. As noted in the
Report of the Nomination Committee a full external
search process was undertaken in respect of this
role at the end of which the Nomination Committee
and the Board concluded that Catherine Glickman
was the best qualified candidate for the role. 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. Following Robert Miller-Bakewell’s retirement
at the AGM, Liz Peace will be appointed to this role.
Report and Accounts 2018Corporate Governance The Board is assisted by the Audit, Remuneration
and Nomination Committees. Separate reports from
each of these Committees can be found on pages 59
to 78. The Chair of each Committee provides regular
updates at Board meetings.
Catherine Glickman and Michael McKelvy 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:
· 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, and the Group Marketing Director, the
Group People Director, the Chief Information Officer, the
Group Strategy Director and the Group’s five principal
business leaders.
Board meetings and 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 of performance,
the development of strategy, the adoption of
appropriate corporate policies, the management of
risk and regulatory obligations. During the year the
following items were considered at each meeting:
· Safety performance
· Financial and business performance
· Strategic priorities
· Emerging risks
· Material employment issuess
· Significant litigation
· Investor and City relations.
The Board additionally considered the following
at the appropriate point:
55
· The Group’s annual budget and business plan
· Group results and the Annual Report and Accounts
· Significant market announcements
· Board performance
· Review of internal control and risk management
· Dividends and dividend Policy
· Reports from Board Committee Chairmen
· Other matters reserved for Board approval
· Presentations from certain segments of the business.
Ken Lever
John Douglas
Gary Young
Robert Miller-Bakewell
Allison Bainbridge
Liz Peace
Michael McKelvy *
Catherine Glickman*
Number of meetings held
*served for part year only
Full Board
8
Audit Committee
-
Remuneration Committee Nomination Committee
-
3
8
8
8
8
8
6
2
8
-
-
4
4
4
-
-
4
-
-
6
-
6
4
1
6
-
-
3
3
3
1
-
3
Corporate GovernanceReport and Accounts 2018 The Board also conducted a two day strategy
workshop in conjunction with the Group Leadership
Team following which the strategic priorities
described on pages 11 to 15 were endorsed.
Detailed papers are made available in advance of
meetings in support of relevant agenda items through
a Board portal. 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 on three occasions during the year and
the Non-Executives met once during the year
without the Chairman present.
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.
Board performance
The Board undertakes an annual appraisal of its
performance. Given the substantive changes to Board
membership that took place in 2017 and the further
changes during 2018 it was again 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. The Board
also reviewed the action points that had arisen
out of the 2017 review, to assess how they were
performing, noting that most of the points had been
addressed, were ongoing and others remained as
work in progress. The Company uses Diligent for
posting its Board and Committee papers on and the
Board remains concerned that the board packs do not
become excessively large and are delivered in a timely
manner; this was also highlighted again this year. A
number of priorities and notably the following were
identified from this process:
· Consider having a Board update call between
meetings with no papers, no minutes, no
agenda – used by CEO/CFO to provide high
level updates and keep the Board informed
· Set up visits for individual Non-Executives
that meet their circumstances and then Non-
Executives to provide feedback from their visits
to the rest of the Non-Executives
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 2019.
Training and induction
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 from
members of the Group Leadership Team and engaged
with the Group’s various businesses more generally.
The Non-Executive Directors have access to a training
academy managed by Deloitte LLP.
56
Report and Accounts 2018Corporate Governance Communication
The Company attaches great importance to
communication with its shareholders and other
stakeholders. In addition to regular corporate
reporting, the Group website includes financial
presentations, general information about the Group
and the services it offers, as well as news stories
regarding projects on which businesses are engaged.
In addition to presentations of financial 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. As detailed in the
foregoing Chairman’s Introduction, various steps
have been taken in the year to improve the quality
of communication with shareholders and
the investment community generally.
The Chair 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 27 to 29.
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
An internal controls self-assessment system that was
launched in 2017 by the Group Assurance Manager
is now operational throughout the Group. As part
of this process the Finance Directors of the Group’s
operating units regularly assess the controls they
operate against a standard set of base controls, with
any shortcomings identified being mitigated or new
controls put in place.
57
Corporate GovernanceReport and Accounts 2018
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.
Annual Review
During the year reviewed, a detailed report regarding
the Group’s systems of risk management and internal
control was prepared. Having reviewed and discussed
this report the Board was satisfied that these systems
are effective.
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 48 to 49 and 82 and
the statement of the Directors in respect of going
concern appears on page 48. The long term viability
statement is set out on page 27.
Takeover directive
Disclosures required under the Takeover Directive
are included on pages 50 and 51 and form part of
the Group’s Corporate Governance report.
58
Report and Accounts 2018Corporate Governance NOMINATION
COMMITTEE REPORT
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.
Membership and meetings
Board changes
2017 saw substantial change to the Board with
a new Chief Executive appointed and two new
Non-Executives joining. During 2018 the task
of building a strong and diverse Board with an
appropriate balance of skills and experience has
continued with two additional Non-Executives
joining. Michael McKelvy has extensive senior level
experience of construction, infrastructure and natural
resource markets. He is based in North America and
accordingly has a deep understanding of markets in
which the Group has a strategic priority and wishes
to achieve substantial growth. Catherine Glickman
has senior level public company experience in Human
Resources and allied areas which will be of substantial
value in support of the Group’s strategic priority to
be rated as a great place to do great work. She also
has prior experience as Chair of a Remuneration
Committee and will succeed Robert Miller-Bakewell
in this role when Robert retires at the forthcoming
Annual General Meeting.
In both the above cases detailed role specifications were
prepared and a search process undertaken through
Spencer Stuart, following which recommendations were
made to and accepted by the Board.
59
I and all of our Non-Executive Directors, Allison
Bainbridge, Catherine Glickman, Michael McKelvy,
Robert Miller-Bakewell and Liz Peace, are members of
the Committee. Michael and Catherine both joined the
Committee on their respective appointments to the
Board as at 1 May and 2 August 2018. The Company
Secretary acts as Secretary of the Committee whilst
Executive Directors and external agents may be asked
to attend as required. The Committee met on a total
of three 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 from the Board 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.
Corporate GovernanceReport and Accounts 2018 Election and re-election of Directors
Diversity
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 mentioned above and set out in full on pages
46 to 47. 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 those directors
standing and recommends that shareholders vote
in favour of the relevant resolutions at the Annual
General Meeting.
Succession planning
The Board and Group Leadership Team have been
through a period of substantial change and with a
significant number of new appointments having been
made as a new team is built. Whilst the Committee
has considered succession issues from time to
time against the backdrop of what should now be a
stable Board and Executive team it intends to further
develop and formalise succession plans for key
roles during 2019.
The Committee is aware that the revised
UK Corporate Governance Code, effective from
1 January 2019, places an increased emphasis on the
role of the Nomination Committee in the areas of
diversity and inclusion. 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 Catherine
Glickman’s appointment to the Board 37.5% of
the Board are female which will rise to 43% on
Robert Miller- Bakewell’s forthcoming retirement.
As described in the People Report on page 32 and
following appointments made during the year,
the female membership of the Group Leadership
Team has increased from 14% to 33%. Further
information on gender balance is also given in
the People Report. The Committee is pleased to
report these trends and believes that the enhanced
balance of skills that this has brought will be an
important component in achieving the Group’s
strategic priorities. The Committee will give further
consideration to policy on diversity and inclusion,
in respect of which it will report further next year.
60
Ken Lever
Chairman of the
Nomination Committee
21 February 2019
Report and Accounts 2018Corporate Governance AUDIT
COMMITTEE REPORT
I am pleased to present our Audit Committee report for the year-ended
31 December 2018. 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
During 2018 the membership of the Committee
consisted of Liz Peace, Robert Miller-Bakewell
and myself. 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 most 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, with whom the Committee also 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
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.
61
Corporate GovernanceReport and Accounts 2018 Significant accounting issues
Fair balanced and understandable view
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 at 31st October 2018 with a subsequent
review for impairment triggers at the balance sheet
date. 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 2019. The conclusion was that no impairment was
necessary across any of the Group’s Cash Generating
Units. Consideration was also given as to whether
there were any indicators of impairment in respect
of other intangible assets and whether a reasonably
possible change in any one key assumption could
give rise to an impairment. The Board and Committee
agreed that no indicators of impairment exist and that
a reasonably possible change to any one assumption
would lead to an impairment.
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 Committee appreciates that there is estimation
applied in the recognition of revenue. However, 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.
Having reviewed the Report and Accounts, the
Committee concluded and advised the Board that
in its view the Report and Accounts for 2018, 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.
New accounting standards
2018 was the first year in which accounts have been
produced in compliance with IFRS 15 “Revenue from
Contracts with Customers” and IFRS 9 “Financial
Instruments”. During the year the Committee
received and reviewed papers explaining the steps
taken to ensure compliance. In addition IFRS 16
“Leases” will be applicable from 1 January 2019. The
Committee was also kept appraised of work being
undertaken to achieve compliance and in accordance
with the requirements of the standard an opening
balance sheet adjustment is disclosed in note 2a on
page 98.
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 for whom 2018 has been his second
completed audit. The Committee ensures that the
Group Auditors remain independent of the Group
and reviews this on an annual basis. In this regard
Deloitte provide a written report to the Committee
on how they comply with professional and regulatory
requirements designed to ensure their independence.
62
Report and Accounts 2018Corporate Governance 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:
· Bookkeeping services
· Valuation services
· Investment advisory, broker and dealing services
· General management services
· Preparation of financial statements
· Design and implementation of financial systems
· 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 2018 appears in note 10 on page 106.
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 27 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. As Chairman of the Committee on
an annual basis I hold a meeting with the Group
Assurance Manager.
Allison Bainbridge
Chair of the Audit Committee
21 February 2019
Re-appointment of auditors
63
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.
Corporate GovernanceReport and Accounts 2018 REMUNERATION
COMMITTEE REPORT
I am pleased to present the report of the Remuneration Committee for 2018
which consists of my Annual Statement which is set out immediately below
and the Annual Report on Remuneration which follows on pages 67 to 78.
64
Membership and meetings
I have acted as Chairman of the Committee during
the year and Liz Peace has also been a Committee
member throughout that period. Michael McKelvy
and Catherine Glickman both joined the Committee
during the year on their appointments as Directors.
On my retirement as Director at the forthcoming Annual
General Meeting, Catherine Glickman will become
Chair of the Committee. Catherine has extensive
senior level experience within the area of Human
Resources and has been the Chair of another listed
company Remuneration Committee for over a year.
The Committee held four meetings in the year timed
to ensure the proper discharge of the activities
described below. The Group Chairman attends
the meetings of the Committee. The Group Chief
Executive and Group People Director also both attend
these meetings, although they will not be present
when discussion relates to thier own remuneration.
The Company Secretary acts as Secretary to
the Committee and representatives from the
Committee’s advisers, PwC, attend meetings as
and when required.
Review of Advisors, Policy and
New Corporate Governance Code
During the year the Committee resolved that a
review of its advisor was appropriate. It has launched
a process under which a number of members of the
Remuneration Consultants Group have been invited
to present their credentials for evaluation as part
of a tender process. The Remuneration Committee
noted that the Revised Code, places a wider remit on
Remuneration Committee and that the Remuneration
Committee would need to decide how this impacts
on its terms of reference and duties. Any changes
the Remuneration Committee makes will also impact
on its Remuneration Policy which enters into its final
year and will need to be approved by shareholders in
2020. In light of this, the Remuneration Committee
agreed that the review of the Revised Code and the
Remuneration Policy, should all be included within
the review of the Remuneration advisors, rather
than make piecemeal changes now that we may
subsequently want to change when the full review
takes place with the new/existing advisor.
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.
Report and Accounts 2018Corporate Governance
The Committee now also has direct responsibility for
the terms and conditions of those Senior Executives
that sit immediately below Board level and who form
the Group Leadership Team. During the year, for the
first time, the Committee reviewed the terms and
conditions of this Group including future incentives
and approved any changes thereto.
The Committee is cognisant of the provisions of
the revised UK Governance Code as they affect
remuneration committees. A key provision relates
to the review of wider workforce remuneration and
the Committee’s remit has been extended to cover
this. The Committee already considers employment
conditions in the Group when setting Executive
Director remuneration, but as it now considers
wider Group policies will seek to align Executive
remuneration with these. The Committee has
formally reviewed other provisions of the revised
Code as they affect its activities which will be fully
taken account of during 2019 and reported upon at
the end of the year.
The Committee’s detailed terms of reference can be
found on the Company’s website.
Framework
The Company’s current remuneration policy was
approved by shareholders in November 2016 and
has operated during 2017 and 2018. 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 made under this plan due to reach maturity in
2020. Details of the awards made in 2018 and which
will be made to the Executive Directors in 2019 can
be found in the Annual Report on Remuneration on
page 67. The STABP is an annual bonus plan linked to
performance in the relevant year. The operation of the
STABP and the outcomes for 2018 are described below.
The current remuneration policy will reach the end
of its three-year life at the end of 2019. During the
year the Committee will, therefore, be undertaking a
review of current policy with view to submitting a new
policy to shareholders for approval and then to apply
from 2020 onwards.
As outlined on pages 11 to 15 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 and, in particular,
will consider this issue in context of the forthcoming
policy review highlighted above.
65
Corporate GovernanceReport and Accounts 2018 Performance and outcomes for 2018
Implementation of policy for 2019
The bonus opportunities for 2018 under the STABP
were set at 150% of basic salary for John Douglas, and
125% for Gary Young. The performance conditions for
the year related to PBTA (70%), cash collection (20%)
and personal objectives (10%).
The basic salaries of the Executive Directors have
been reviewed by the Committee following which
John Douglas’ salary was increased by 2.7% to
£508,400 and Gary Young’s was increased by 2.7% to
£325,000.
The threshold and maximum targets in respect of PBTA
were set at £54m and £60m respectively for 2018.
Actual PBTA for 2018 was £50.2 m (2017: £53.9m), with
the result that no bonus was earned in respect of this
element. In respect of cash collection threshold and
maximum were set at 80% and 100% respectively.
Actual cash collection for 2018 was 94% (2017: 91%)
with the result that partial bonus was also earned in
respect of this element.
The personal objectives for the year are outlined on
page 68 of the Annual Report on Remuneration. In the
case of the Chief Executive these were linked to the
progression of the Group’s strategic priorities and in
the case of the Group Finance Director to a number
of operational priorities. The Committee concluded
that, as detailed on page 68, the objectives in respect
of the Chief Executive Officer had been met in full and
85% met in respect of the Financial Director.
The table which appears on page 67 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 Committee was
satisfied that the policy had operated as intended in
2018 and the only discretion exercised related to the
achievement of personal objectives.
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.
Although both Executive Directors John Douglas
and Gary Young have elected to take all of
their bonus in the form of deferred shares.
66
John Douglas and Gary Young will participate in the
STABP in 2019 with maximum opportunities (again) at
150% and 125% of salary respectively. The balance of
performance conditions will be unchanged with 70%
attributable to PBTA, 20% to cash collection and 10%
to personal objectives.
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. A two year post-vesting holding period will
apply to these awards. Further details of the terms of
participation in these plans for 2019 are shown in the
Annual Report on Remuneration on pages 67 to 78.
Chief Executive Officer Relocation Allowance
When we recruited the CEO, John Douglas, the
Remuneration Committee agreed to put in place a
relocation allowance of approx. £117,000 p.a. for two
years. This reflected the fact that John was based in
Australia and the Company wished him to relocated
to the UK to take up the CEO role. As stated in the
Annual Report on Remuneration for 2017 the end of
this two year period will be March 2019.
Due to a change in personal circumstances John’s
family can no longer relocate to the UK and therefore
currently John is maintaining two dwellings. The
Board feels that over the next two years with the
launch and implementation of the new strategy
that John must be based in the UK and be solely
focused on its delivery. In order to ensure that John
is committed to staying in the UK and not distracted
from the implementation of the Company’ strategy
due to his personal circumstances; the Remuneration
Committee following consultation with the Chairman
of the Company has determined to provide John
with an accommodation allowance for two years
from March 2019. The value of this allowance will be
approximately £76,000 p.a.
Robert Miller-Bakewell
Chairman of the
Remuneration Committee
21 February 2019
Report and Accounts 2018Corporate Governance ANNUAL REPORT
ON REMUNERATION
This report details how the Company’s Remuneration Policy for Directors was
implemented during the financial year ended 31 December 2018.
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 2018 (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
Base Salary
or Fees
2018
2017
Benefits
2018
2017
Bonus
2018
2017
Long Term
Incentives
2018
2017
Pensions
2018
2017
All Employee
Share Plan
2018
2017
Total
2018
2017
Executive
John Douglas
Gary Young
495
316
289
310
114
17
124
16
178
89
142
127
–
–
–
–
99
47
58
47
2
4
1
4
888
473
614
504
67
Notes:
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.
2. In the case of John Douglas the benefits also include the grossed-up value of relocation assistance provided which is equal to
£101,000. The net of tax amounts reimbursed comprised UK property rental costs (£27,000), air fares for family visits (£16,000)
and the costs of professional tax advice figure – £11,000. With the exception of assistance relating to taxation advice, all relocation
assistance provided to John Douglas is time limited to 31 March 2019. The value of assistance to be provided in 2019 will therefore
be substantially lower than the prior year.
3. 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.
Short Term Annual Bonus Plan outcomes for the financial year ending 31 December 2018 (audited)
For 2018 John Douglas and Gary Young had a maximum annual bonus opportunity of 150% and 125% of
basic salary, respectively. For both Executive Directors the 2018 annual bonus determination was based on
performance against PBTA (70%), cash conversion (20%) and personal objectives (10%).
The table below provides information on the targets for each measure, actual performance and resulting
bonus payment for each Executive Director.
Measure
Weighting
PBTA
Cash Conversion
Personal
Performance
70%
20%
10% See below.
Performance
required
Actual
Performance
John Douglas
Gary Young
Threshold
(0%
vesting)
Maximum
(100%
vesting)
Actual % of element Value £000
Value £000
54m
80%
£60 m
100%
50.2
94%
Bonus achieved
in 2018
–
–
70
103,950
74,250
178,200
–
55,335
33,596
88,931
Corporate GovernanceReport and Accounts 2018 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
John Douglas
To make tangible progress
in achieving the Group’s
five strategic priorities.
Gary Young
To (a) develop a Group
ERP strategy and progress
its implementation (b)
accelerate monthly and
annual financial reporting
(c) develop a personal
succession plan and (d)
improve the Group budget
review process.
Assessment against the targets
Considerable progress has been made during the year with the launch of a new
senior leadership team and the new brand providing the Group with a clear identity
and appointing a new leader to revitalise the international oil and gas business.
Although no acquisitions were made in North America, the Group did make two
targeted acquisitions in Australia in line with its stated strategy.
The Committee was satisfied that the overall objectives achieved 100% of target.
The targets for the introduction of the ERP and the reduction in reporting days
were fully met during the year. The targets for the personal succession plan and for
improving the planning and budget process are well underway and made positive
progress during the period.
The Committee agreed that the personal objectives had been achieved at 85%
of target.
The Committee has reviewed the overall bonus outcomes against corporate performance and believes that the
bonuses earned are commensurate with the shareholder experience in 2018. 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. The award
of shares is not subject to performance conditions. Both John Douglas and Gary Young have elected to take all
of their bonus in the form of deferred shares.
Executive Long Term Incentive Plan (‘ELTIP’) awards vesting in the financial year ending 31 December 2018
There were no ELTIP awards vesting in the Financial Year ending 31 December 2018.
68
ELTIP awards granted in the financial year ending 31 December 2018 (audited)
The table below sets out the details of the ELTIP awards granted on 9 March 2018 to John Douglas and Gary
Young, where vesting will be determined according to the achievement of certain performance measures.
Director
type of award
Basis of award
Face value of
award at grant
Date (£)
number of shares
under option
John Douglas
Nil Cost Options
150% of salary
742,500
Gary Young
Nil Cost Options
125% of salary
395,250
296,017
157,576
Vesting date
08-Mar-21
08-Mar-21
Notes
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 5 – 7 March 2018 being 250.83p.
The awards will vest subject to achievement of the following targets.
Performance
measure
Measurement
period
Performance
target
Weighting
Vesting level (% maximum)
Total Shareholder
Return relative to
the FTSE All Share
50%
Upper Quartile
100%
Three years from
date of grant
Median to Upper
Quartile
Pro rata on a straight-line basis
between 20% and 100%
Below Median
12% p.a.
0%
100%
25%
Three financial years
Between 3% and
12% p.a.
Pro rata on a straight-line basis
between 20% and 100%
Average Annual
Growth in
Earnings Per Share
(measured on
a constant
currency basis)
Cash conversion
25%
Three financial years
Below 3% p.a.
0%
100%
100%
Between 80%
and 100%
Pro rata on a straight-line basis
between 20% and 100%
80% and below
0%
Report and Accounts 2018
Share Incentive Plan (‘SIP’) awards granted in the financial year ending 31 December 2018 (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 2018.
Executive Directors
John Douglas
Gary Young
Number of shares
1,003
1,971
Value of shares (£)
1,599
4,334
Shares are valued by reference to their price as at date of award.
Payments to past Directors (audited)
No payments were made to past Directors during the year with those made to Alan Hearne in 2017 having been
reported in last year’s Remuneration Report.
Payments for loss of office (audited)
No payments for loss of office were made during the year.
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 Lever
Robert Miller-Bakewell
Allison Bainbridge
Liz Peace
Michael McKelvy1
Catherine Glickman1
2018
136
64
55
53
33
21
Fee
2017
136
64
32
25
–
–
Notes:
1. Michael McKelvy was appointed to the Board on 1 May 2018. Catherine Glickman was appointed to the Board on 2 August 2018.
Statement of Directors’ shareholding and share interests (audited)
Directors’ share interests as at 31 December 2018 or at date of retirement from the Board are set out below.
Director
John Douglas
Gary Young
Ken Lever
Robert Miller-Bakewell
Allison Bainbridge
Liz Peace
Michael McKelvy
Catherine Glickman
number of
beneficially
owned shares
208,823
173,592
70,000
10,000
18,400
–
–
–
interests subject
to performance
conditions1
566,341
interests subject
to employment
conditions2
58,305
310,841
61,168
–
–
–
–
–
–
–
–
–
–
–
–
total interests
833,469
545,601
70,000
10,000
18,400
–
–
–
Notes:
1. Interests held under the Executive Long Term Incentive Plan.
2. Interests held under (i) The RPS Group Plc Short Term Annual Bonus plan (ii) The RPS Group Plc Bonus Plan and (iii) matching shares
held for less than three years under the Share Incentive Plan.
69
Corporate GovernanceReport and Accounts 2018 Between 31 December 2018 and 20 February 2019 no changes in the share interests shown above occurred.
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 2018 John Douglas and
Gary Young held beneficial shares in the Company equal in value to 56% and 73% 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.
Short Term Annual Bonus Plan
The interests of the Executive Directors under the STABP are set out below:
Number of
awards at
1 January
2018
-
25,610
-
Number
of awards
granted
56,789
-
25,403
Number
of awards
lapsed
-
-
-
Number
of awards
exercised
-
-
-
Number
of awards
as at 31
December
2018
56,789
25,610
25,403
Market
Price at
date of
grant
250.83p
252.83p
250.83p
Market
price at
date of
exercise
-
-
-
Date from
which
released
8/3/2021
9/3/2019
8/3/2021
John Douglas
Gary Young
Executive Long Term Incentive Plan (ELTIP)
The Interests of the Executive Directors under the ELTIP are set out below:
70
John Douglas
Gary Young
Number of
awards at
1 January
2018
270,324
-
153,265
-
Number
of awards
granted
-
296,017
-
157,576
Number
of awards
lapsed
-
-
-
-
Number
of awards
exercised
-
-
-
-
Number
of awards
as at 31
December
2018
270,324
269,017
153,265
157.576
Market
Price at
date of
grant
274.67p
250.83p
252.85p
250.83p
Market
price at
date of
exercise
-
-
-
-
Date from
which
released
8/6/2020
8/3/2021
9/3/2020
8/3/2021
Total Shareholder Return Performance
The graph below shows the value of £100 invested in RPS over the past ten 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.
RPS Group TSR performance against FTSE All Share Index and FTSE All Share Support Services Index
450
400
350
300
250
200
150
100
50
n
r
u
t
e
R
r
e
d
o
h
e
r
a
h
S
l
l
a
t
o
T
)
9
0
0
2
/
1
0
/
1
0
m
o
r
f
d
e
s
a
b
e
R
(
0
1/1/2009
1/1/2010
1/1/2011
1/1/2012
1/1/2013
1/1/2014
1/1/2015
1/1/2016
1/1/2017
1/1/2018
1/1/2019
RPS Group
FTSE All Share
FTSE All Share Support Services
RPS Group FTSE AllShareFTSE AllShare Support Services (all rebased to RPS).
Report and Accounts 2018Corporate Governance
Chief Executive Officer and employee pay
Chief Executive Officer Remuneration
The table below shows the Group Chief Executive’s total remuneration and percentage of opportunity achieved
for variable remuneration elements.
2009
A Hearne A Hearne A Hearne A Hearne A Hearne A Hearne A Hearne A Hearne A Hearne J Douglas J Douglas
2010
2018
2015
2013
2016
2014
2011
20172
20172
20121
636
608
793
1,650
883
922
748
981
627
351
888
zero
46%
54%
77%
47%
32%
zero
20%
33%
33%
24%
100%
zero
13%
100%
zero
zero
zero
zero
zero
zero
zero
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
1. Single Figure for 2012 includes the payment of deferred balances under the previous bonus banking plan from 2010 and 2011.
2. These balances were earned during these years but subject to deferral until the end of 2012 and at risk of performance based forfeiture.
3. The remuneration shown for Alan Hearne for 2017 in respect of the period to 31 August at which time he retired from the Board.
4. The total remuneration shown for John Douglas is in respect of 2017 is the period from 1 September 2017, when he was appointed
as Group Chief Executive. The remuneration for John Douglas in 2017 includes a pro-ration of the annual bonus that was earned
from 1 June 2017 being the date at which he joined the Board.
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.
71
Salary
Taxable Benefits
Annual Bonus
Relative importance of spend on pay
Percentage change from 2017 Financial Year
to 2018 Financial Year
CEO
0%
-8%
25.4%
Employees
2.2 %
4.3 %
-15.7 %
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:
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.
0
0
0
£
350,000
300,000
250,000
200,000
150,000
100,000
50,000
-
PBTA
6.4%
7.0%
Dividend
1.8%
0.5%
2016
2017
2018
Total employee pay
6.0%
1.4%
Corporate GovernanceReport and Accounts 2018 Committee organisation
Role of the Remuneration Committee (“Committee”)
The membership and responsibilities of the Remuneration Committee are described in the Annual Statement
on page 64. Meetings held during 2018 are included in the table shown on page 55.
External advice
During 2018 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 £33,500. 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 2017 was approved at the Company’s 2018 Annual General
Meeting. The voting for this resolution is shown below.
72
Annual report
Votes for
Votes against
Total
Withheld
Number of Votes cast % of Votes cast
173,014,539
12,522,844
185,537,383
3,149,300
93.25
6.75
100.00
–
The Company’s Remuneration Policy was approved at a General Meeting held on 30 November 2016. The voting
in respect of this resolution was as shown below:
Remuneration policy
Number of votes cast % of votes cast
Votes for
Votes against
Total
Withheld
159,064,587
16,607,705
175,672,292
3,167,972
90.55
9.45
100.00
-
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 applies for 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 2019 are set out in the table below.
The full policy statement is available on the Company’s website.
Report and Accounts 2018Corporate Governance Element, purpose
and link to strategy
Operation and
maximum opportunity
Performance measures
and assessment
Implementation
for 2019
A broad assessment of individual
and business performance is used
as part of the salary review.
With effect from
1 January 2019 John
Douglas’ salary will be
£508,400 an increase of
2.7% and Gary Young’s
salary will also be
increased by 2.7% to
£325,000.
73
BASE SALARY
To provide
competitive fixed
remuneration that will
attract and retain key
employees and reflect
their experience and
position in the Group.
An Executive Director’s basic salary
is considered by the Remuneration
Committee on appointment and
normally reviewed once a year, or
when there is a significant change to
role or responsibility.
When making a determination as
to the appropriate remuneration,
the Remuneration Committee,
where it is relevant, benchmarks the
remuneration against the Company’s
comparator Group (organisations of
comparable size and or sector to RPS
in the FTSE All Share).
The results of benchmarking will,
however, only be one of a number
of factors taken into account by the
Remuneration Committee and which
will include:
·
the individual performance
and experience of the
Executive Director;
pay and conditions for employees
across the Group;
the general performance of
the Group; and the economic
environment.
·
·
The Remuneration Committee
policy in relation to salary is:
around median salary on
·
appointment depending on the
experience and background of
the new Executive Director; and
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.
Corporate GovernanceReport and Accounts 2018 Element, purpose
and link to strategy
Operation and
maximum opportunity
Performance measures
and assessment
Implementation
for 2019
BENEFITS
To provide
competitive benefits
and to attract and
retain high calibre
employees.
PENSION
To provide a
competitive company
contribution that
enables effective
retirement planning.
74
Not applicable.
Not applicable.
The Remuneration Committee’s
policy is to provide a market
competitive benefits package.
The Executive Directors may receive
the following benefits:
· healthcare;
·
life assurance and
dependents’ 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.
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.
Benefits for 2019 will be
provided in accordance
with the policy. In the
period up to 31 March 2019
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.
Pension benefits for
2019 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.
Report and Accounts 2018Corporate Governance Element, purpose
and link to strategy
Operation and
maximum opportunity
Performance measures
and assessment
Implementation
for 2019
THE RPS GROUP PLC SHORT 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.
The bonus opportunity in
2019 will be 150% of salary
for John Douglas and 125%
of salary for Gary Young.
The bonus awards in
2019 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.
The bonus will be paid 50%
in cash and 50% in shares
deferred for a period of
three years.
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.
75
Corporate GovernanceReport and Accounts 2018 Element, purpose
and link to strategy
Operation and
maximum opportunity
Performance measures
and assessment
Implementation
for 2019
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.
76
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.
The ELTIP awards granted
in 2019 will be 150% of
salary for John Douglas
and 125% of salary for
Gary Young.
The 2019 ELTIP awards
will vest subject to the
achievement of three
measures: EPS
(25% weighting),
TSR (50% weighting) and
cash conversion
(25% weighting).
Performance targets are
as shown in the separate
table following.
In setting the EPS target
for the 2019 LTIP awards
the Committee has sought
to set the right balance
between investing in the
business, focusing on
sustainable growth and
maximising shareholder
returns. The Committee
has taken into account
analyst estimates for the
period 2019 – 2020 and
our own expectations of
the global market over the
three year performance
period. The Committee
is of the view that an EPS
range of 3 - 6% pa in the
current environment
strikes an appropriate
balance between setting
challenging targets
and motivating senior
management.
Report and Accounts 2018Corporate Governance Element, purpose
and link to strategy
Operation and
maximum opportunity
Performance measures
and assessment
Implementation
for 2019
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.
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:
·
200% of base salary for the Chief
Executive; and
150% of base salary for other
Executives.
·
Not applicable.
Executive Directors will
continue to be eligible to
participate in the Share
Incentive Plan.
Not applicable.
Shareholding guidelines
will remain at 200% of
salary for the Group Chief
Executive and 150% of
salary for other
Executive Directors.
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 maintained
77
The following performance targets will apply to the LTIP awards to be made to Executive Directors in 2019.
Performance
measure
Weighting
Measurement period
Performance target
Vesting level (% maximum)
Total Shareholder
Return relative to the
FTSE All Share
50%
Average Annual
Growth in Earnings
Per Share (measured
on a constant
currency basis)
Upper Quartile
100%
Three years from date
of grant
Median to Upper Quartile
Pro rata on a straight-line
basis between 20% and 100%
Below Median
6% p.a.
0%
100%
25%
Three financial years
Between 3% and 6% p.a.
Pro rata on a straight-line
basis between 20% and 100%
Below 3% p.a.
100%
0%
100%
Cash conversion
25%
Three financial years
Between 80% and 100%
Pro rata on a straight-line
basis between 20% and 100%
80% and below
0%
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.
Corporate GovernanceReport and Accounts 2018 The table below summarises the service contracts for the current Executive Directors.
Executive Director
John Douglas
Gary Young
Date of contract
June 2017
September 2000
Notice period
12 months
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
Michael McKelvy
78
Catherine Glickman
Date of appointment
November 2016
May 2010
June 2017
August 2017
May 2018
August 2018
Unexpired
term as at 31
December 2018
10 months
4 months
17 months
19 months
28 months
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
21 February 2019
Report and Accounts 2018Corporate Governance 79
Report and Accounts 2018
Financial statements
FINANCIAL
STATEMENTS
81
Report and Accounts 2018
INDEPENDENT AUDITOR’S
REPORT
to the members of RPS Group Plc
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
In our opinion:
•
•
•
•
the financial statements of RPS Group Plc (the
‘parent company’) and its subsidiaries (the ‘Group’)
give a true and fair view of the state of the Group’s
and of the parent company’s affairs as at 31
December 2018 and of the Group’s profit for the
year then ended;
the Group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the
European Union;
the parent company financial statements have
been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice,
including Financial Reporting Standard 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.
8282
We have audited the financial statements which
comprise:
•
•
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; and
the related notes to the consolidated financial
statements 1 to 31 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 Financial Reporting
Council’s (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.
Report and Accounts 2018Financial statements Summary of our audit approach
Key audit matters
revenue recognition – accrued income cut off; and
impairment of goodwill and long lived assets.
The key audit matters that we identified in the current year were:
•
•
Within this report, any new key audit matters are identified with and any key audit matters which are the
same as the prior year identified with .
Materiality
Scoping
The materiality that we used for the Group financial statements was £2.5m 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,
20 business units were subject to a full audit scope, whilst the remaining 6 were subject to specified audit
procedures. Our full scope audit testing and agreed upon procedures covered 97% of revenue, 94% of PBTA,
and 97% of net assets.
Significant changes
in our approach
There have been no significant changes in our audit approach, with the exception of the removal of the
recoverability of trade receivables and accrued income in the Energy segment as a key audit matter.
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 48 to the financial
statements 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 considered as part of our risk assessment the nature of the Group, its business model and related risks
including where relevant the impact of Brexit, the requirements of the applicable financial reporting framework
and the system of internal control. We evaluated the directors’ assessment of the Group’s ability to continue
as a going concern, including challenging the underlying data and key assumptions used to make the
assessment, and evaluated the directors’ plans for future actions in relation to their going concern assessment.
We confirm that
we have nothing
material to report,
add or draw
attention to in
respect of these
matters.
83
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:
•
•
•
the disclosures on pages 28-29 that describe the principal risks and explain how they are being managed or
mitigated;
the Directors’ confirmation on page 27 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 27 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.
Report and Accounts 2018Financial statements
8484
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.
In the prior year, we included the recoverability of trade
receivables and accrued income in the Energy segment
as a key audit matter. In the current year, this is not
considered a key audit matter on the basis that we have
not historically identified any material errors, combined
with improved economic conditions particularly in the
oil and gas sector.
REVENUE RECOGNITION - ACCRUED INCOME CUT-OFF
Key audit matter
description
The Group is engaged in the provision of consultancy services through contractual arrangements with
its customers. Revenue for the financial year 2018 is £637m (2017: £631m) with accrued income of
£45m (2017:£39m).
ISA 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 transactions or assertions give rise to such risks.
The specific key audit matter is around the recognition of accrued income on fixed fee contracts over £50,000
where the contracts remain open at year end. This risk excluded the Norwegian component where the total
value of fixed fee contracts was immaterial. There is judgement required around the recognition of the revenue
and its recoverability in estimating the stage of completion and the costs to complete fixed fee open contracts.
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 (including those related to accrued income recognition specifically)
for the most significant full scope components. Whilst relying on the operating effectiveness of the controls,
we tested in detail a sample of accrued income and work-in-progress balances, focusing on fixed fee contracts
over £50,000 by comparing them to the signed contract terms and where possible, agreeing inputs to the
related time records, verifying customer acceptances, billing milestones/schedules and understanding and
challenging the estimated costs to complete. In our assessment of the stage of completion, wherever possible
we attended project status review meetings and observed the process in place as well as confirming status
of projects. Finally, we recalculated the amount of revenue recognised against the percentage completion
determined and confirmed that they agreed to the general ledger record. Based on our findings from this, we
determined whether revenue recognition was appropriate.
Key observations
Based on our procedures, revenue recognised in respect of accrued income for fixed fee contracts open at
year end is appropriate.
IMPAIRMENT OF GOODWILL AND LONG LIVED ASSETS
Key audit matter
description
At 31 December 2018, the net book value of goodwill and long lived assets was £418m (2017: £424m). The
associated disclosure is included in note 13, the Audit Committee Report on page 62 and the accounting
policy is disclosed in note 1(e).
Assessment of the carrying value of goodwill and long lived assets is a key audit matter due to the quantum
of the balance recorded and the number of judgements involved in assessing impairment. The trading
announcement issued by the Group on 25th October 2018 also highlighted underperformance of certain
segments of the Group. Finally, in the prior year an impairment charge of £40m was recorded removing any
headroom in the Energy cash generating unit (CGU). Given this background, the key audit matter is pinpointed
to the key assumptions in the cash flow forecasts for the Energy, Australia Asia Pacific and North America CGUs.
The Group’s assessment of the carrying values of goodwill and long lived assets is based on assumptions of
future cash flows, including assumptions on growth rates and the selection of appropriate discount rates.
Report and Accounts 2018Financial statements How the scope
of our audit
responded to the
key audit matter
In respect of the key audit matter, the CGUs’ cashflows are predominantly derived from outside of the
European Union.
Our audit work assessed the adequacy of the design and implementation of controls over management review
of goodwill and long lived assets 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 for Energy, Australia Asia Pacific and
North America CGUs.
We considered management’s forecasts in light of current trading conditions by comparing it against current
and historical results with particular focus on Energy, Australia Asia Pacific and North America CGUs.
In performing our procedures, we challenged management’s assessment of the impact of Brexit on future
cashflows by performing sensitivity analysis on the potential impact.
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, relevant industry data and considering
historical growth rates, in order to check for any contradictory evidence. We benchmarked the
long-term growth rates against external peer Group published rates and market data. We also
performed sensitivity analysis on the amount and timing of cash flows. We have considered the
adequacy of the associated disclosures.
Key observations
Based on our procedures performed, we did not identify any impairment as at 31 December 2018.
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.
85
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
£2,500,000 (2017: £2,600,000)
£1,250,000 (2017: £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 determined at 3% of the parent company net
assets. This was then capped at 50% of Group materiality.
This materiality equates to 0.5% 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.
Report and Accounts 2018Financial statements 8686
PBTA £50.2m
• PBTA
• Group materiality
We agreed with the Audit Committee that we would
report to the Committee all audit differences in excess
of £125,000 (2017: £130,000), 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 (2017:
6). These are the same locations as prior year. Within
the 6 locations, 20 (2017:24) business units were
subject to a full audit scope, whilst the remaining 6
(2017: 7) 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
97% (2017: 91%) of the Group’s net assets, 97%
(2017: 96%) of the Group’s revenue and 94% (2017:
90%) 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 some locations with
local statutory reporting requirements were executed
at levels of materiality applicable to the individual
entity which were lower than Group materiality and
ranged from £1.0m to £1.25m (2017: £1.0m to £1.3m).
Group materiality £2.5m
Component materiality
range £1.25m to £1.0m
Audit Committee reporting
threshold £0.125m
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 certain
overseas components selected by the Senior Statutory
Auditor based on his judgement. In the year we visited
three (2017: three) overseas locations (Australia, US
and Netherlands). Every year, regardless of whether we
have visited or not, we include the component audit
partner and other senior members of the component
audit team in our team briefing, discuss their risk
assessment and review documentation of the findings
from their work.
The extent of our involvement which commenced
from the planning of the Group audit included;
•
setting the scope of the component auditor
and assessment of the component auditor’s
independence;
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;
visits to three overseas locations where the Group
audit scope was focussed in addition to the work
performed at the Group head office;
providing direction on enquiries made by the
component auditors and reviewing their reporting
documents submitted to the Group audit team;
a review of the component auditors files for the
three visited components (Australia, US and
Netherlands); and
participating in the audit close meetings for each
of the operating companies.
•
•
•
•
•
Report and Accounts 2018Financial statements Other information
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.
We have nothing to
report in respect of
these matters
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:
•
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
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
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.
•
•
87
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.
Details of the extent to which the audit was considered
capable of detecting irregularities, including fraud are
set out below.
A further description of our responsibilities for the
audit of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Extent to which the audit was considered
capable of detecting irregularities,
including fraud
We identify and assess the risks of material
misstatement of the financial statements, whether
due to fraud or error, and then design and perform
audit procedures responsive to those risks, including
obtaining audit evidence that is sufficient and
appropriate to provide a basis for our opinion.
Report and Accounts 2018Financial statements Identifying and assessing potential risks
related to irregularities
In identifying and assessing risks of material
misstatement in respect of irregularities, including
fraud and non-compliance with laws and regulations,
our procedures included the following:
•
Enquiring of management, internal audit and
the audit committee, including obtaining and
reviewing supporting documentation, concerning
the Group’s policies and procedures relating to:
o
identifying, evaluating and complying with laws
and regulations and whether they were aware
of any instances of non-compliance;
detecting and responding to the risks of fraud
and whether they have knowledge of any
actual, suspected or alleged fraud; and
the internal controls established to mitigate
risks related to fraud or non-compliance with
laws and regulations.
o
o
8888
•
•
Discussing among the engagement team including
significant component audit teams and involving
relevant internal specialists, including tax, IT and
industry specialists regarding how and where
fraud might occur in the financial statements and
any potential indicators of fraud. As part of this
discussion, we identified potential for fraud in
revenue recognition - accrued income cut off.
Obtaining an understanding of the legal and
regulatory frameworks that the Group operates in,
focusing on those laws and regulations that had
a direct effect on the financial statements or that
had a fundamental effect on the operations of the
Group. The key laws and regulations we considered
in this context included the UK Companies Act,
Listing Rules, pensions legislation and
tax legislation.
Audit response to risks identified
As a result of performing the above, we identified
revenue recognition – accrued income cut-off as a
key audit matter. The key audit matter section of our
report explains the matter in more detail and also
describes the specific procedures we performed in
response to the key audit matter.
•
•
•
•
In addition to the above, our procedures to respond to
risks identified included the following:
•
Reviewing the financial statement disclosures and
testing to supporting documentation to assess
compliance with relevant laws and regulations
discussed above.
Enquiring of management, the audit committee
and in-house and external legal counsel concerning
actual and potential litigation and claims.
Performing analytical procedures to identify any
unusual or unexpected relationships that may
indicate risks of material misstatement due to fraud.
Reading minutes of meetings of those charged
with governance, reviewing internal audit reports
and reviewing correspondence with tax authorities
where the case.
In addressing the risk of fraud through management
override of controls, testing the appropriateness of
journal entries and other adjustments; assessing
whether the judgements made in making
accounting estimates are indicative of a potential
bias; and evaluating the business rationale of any
significant transactions that are unusual or outside
the normal course of business.
We also communicated relevant identified laws and
regulations and potential fraud risks to all engagement
team members including internal specialists and
significant component audit teams, and remained alert
to any indications of fraud or non-compliance with
laws and regulations throughout the audit.
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:
•
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 of 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 Report of the Directors.
Report and Accounts 2018Financial statements
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
•
•
we have not received all the information and explanations we require for our audit; or
adequate accounting records have not been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns.
•
We have nothing to
report in respect of
these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’
remuneration have not been made or the part of the Directors’ remuneration report to be audited is not in
agreement with the accounting records and returns.
We have nothing to
report 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 and
subsequent financial periods. The period of
total uninterrupted engagement including
previous renewals and reappointments of the
firm is 7 years, covering the years ending
31 December 2012 to 31 December 2018.
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).
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.
Andrew Bond FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Reading, UK
21 February 2019
89
Report and Accounts 2018Financial statements CONSOLIDATED INCOME STATEMENT
£000s
Revenue
Recharged expenses
Fee income
Note
4,5
4,5
4,5
Year ended
31 Dec 2018
637,383
(63,226)
574,157
Year ended
31 Dec 2017
630,636
(68,316)
562,320
Operating profit before amortisation and impairment of acquired intangibles
3,4,6,7
54,041
58,467
and transaction related costs
Amortisation and impairment of acquired intangibles and transaction
related costs
Operating profit
Finance costs
Finance income
Profit before tax, amortisation and impairment of acquired intangibles
and transaction related costs
Profit/(loss) before tax
Tax expense
3,6
8
8
(9,181)
44,860
(4,111)
232
(55,541)
2,926
(4,639)
113
50,162
53,941
40,981
(1,600)
11
(11,240)
(15,072)
Profit/(loss) for the year attributable to equity holders of the parent
29,741
(16,672)
9090
Basic earnings/(loss) per share (pence)
Diluted earnings/(loss) per share (pence)
Adjusted basic earnings per share (pence)
Adjusted diluted earnings per share (pence)
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
£000s
Profit/(loss) 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 income/(loss) for the year attributable to equity holders
of the parent
*may be reclassified subsequently to profit or loss in accordance with IFRS.
The notes on pages 94 to 127 form part of these financial statements.
12
12
12
12
Note
27
11
13.34
13.23
16.47
16.34
(7.52)
(7.47)
17.13
17.01
Year ended
31 Dec 2018
29,741
Year ended
31 Dec 2017
(16,672)
677
(149)
(2,174)
(66)
15
(5,867)
28,095
(22,590)
Report and Accounts 2018Financial statements CONSOLIDATED BALANCE SHEET
£000s
Assets
Non-current assets:
Intangible assets
Property, plant and equipment
Deferred tax asset
Current assets:
Trade and other receivables
Cash at bank
Liabilities
Current liabilities:
Borrowings
Deferred consideration
Trade and other payables
Corporation tax liabilities
Provisions
Net current assets
Non-current liabilities:
Borrowings
Deferred consideration
Other payables
Deferred tax liability
Provisions
Net assets
Equity
Share capital
Share premium
Retained earnings
Merger reserve
Employee Trust
Translation reserve
Total shareholders’ equity
Note
As at
31 Dec 2018
As at
31 Dec 2017
13
14
21
16
18
19
17
20
18
19
21
20
22
385,699
32,005
3,795
421,499
166,418
17,986
184,404
2,581
53
117,914
3,648
2,119
126,315
58,089
89,280
249
1,719
6,405
4,363
102,016
377,572
6,783
120,400
213,656
21,256
(9,801)
25,278
377,572
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
91
These financial statements were approved and authorised for issue by the Board on 21 February 2019.
The notes on pages 94 to 127 form part of these financial statements.
John Douglas, Director
Gary Young, Director
On behalf of the Board of RPS Group Plc (company number 2087786).
Report and Accounts 2018Financial statements CONSOLIDATED CASH 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
Net cash generated in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of exchange rate fluctuations
9292
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 94 to 127 form part of these financial statements.
Note
26
Year ended
31 Dec 2018
44,488
Year ended
31 Dec 2017
43,744
(165)
(1,611)
(11,872)
–
222
–
(12,879)
(8,651)
234
221
(13,426)
(21,075)
(9)
–
(8,891)
–
(22,115)
(31,015)
(8)
382
(1,424)
(36)
(22,007)
(23,093)
47
(424)
15,376
(18)
15,405
17,986
(2,581)
15,405
16,503
(703)
15,376
15,588
(212)
15,376
23
26
26
Report and Accounts 2018Financial statements CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
£000s
At 1 January 2017
Share
capital
Share
premium
Retained
earnings
Merger
reserve
Employee
trust
Translation
reserve
Total
equity
6,703
114,353
249,353
21,256
(13,677)
33,319
411,307
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
–
–
–
–
–
–
42
3,437
–
–
–
–
–
–
(16,672)
(51)
(16,723)
(1,352)
2,700
(6,828)
(22,007)
–
–
–
–
–
–
–
–
–
–
–
(16,672)
(5,867)
(5,867)
(5,918)
(22,590)
(1,753)
–
6,828
–
–
–
–
–
374
2,700
–
(22,007)
6,745
117,790
205,143
21,256
(8,602)
27,452
369,784
Effect of changes in accounting standards
Profit for the year
Other comprehensive income
Total comprehensive income for the year
–
–
–
–
–
–
–
–
(521)
29,741
528
30,269
(799)
2,338
(659)
(22,115)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,174)
(2,174)
(1,858)
–
659
–
–
–
–
–
(521)
29,741
(1,646)
28,095
(9)
2,338
–
(22,115)
38
2,610
–
–
–
–
–
–
6,783
120,400
213,656
21,256
(9,801)
25,278
377,572
Issue of new ordinary shares
Share based payment expense
Transfer on release of shares
Dividends paid
At 31 December 2018
Details of dividends paid are provided in note 23.
The notes on pages 94 to 127 form part of these financial statements.
93
Report and Accounts 2018Financial statements
NOTES TO THE CONSOLIDATED
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 2018 comprise the Company
and its subsidiaries (together referred to
as the “Group”).
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
9494
The consolidated financial statements
were authorised for issuance on 21
February 2019.
(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 adopted
IFRS 9 “Financial Instruments” and IFRS
15 “Revenue from Contracts with
Customers” for the first time. Their impact
is disclosed in note 30 to the Financial
Statements. Otherwise the Group has
prepared these accounts on the same
basis as the 2017 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
Consultancy
The Group delivers consultancy services
to our clients on a time and materials or
fixed fee basis. In both cases, revenue is
recognised over the life of the project, as
the services are performed by our staff.
The Group delivers services that have no
alternative use to us (advice to clients,
which may take the form of reports,
designs, etc.) as the services are
specifically tailored to each client’s
projects and circumstances. The Group
has a right to payment for work
performed to date.
For time and materials projects, revenue
is recognised in proportion to the number
of hours worked and the out of pocket
expenses incurred. For fixed fee projects,
revenue is recognised with reference to
the cost to complete the project.
Software
The Group sells licences and access to
software and applications. The software
may be customised by RPS for each
client, and where we sell customised
software we recognise revenue over
the period of customisation. Access
to applications is provided for a period
and revenue is recognised evenly
over that period.
Training
The Group provides classroom, field based
and online training services to clients,
either on a course by course basis or
through a program specifying the
numbers of training days available to the
client. Revenue is recognised as the
courses are delivered to the clients. In
some cases, subscriptions give access to
training programmes and in those
circumstances, revenue is recognised
when the subscription is sold.
Equipment
From time to time, the Group sells pieces
of equipment to clients. In these cases,
revenue is recognised when control of
the asset passes to the customer and we
have no remaining rights over the asset.
Laboratory testing
The Group provides Laboratory testing
services and the revenue generated is
recognised as samples are tested.
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. Trade receivables, trade
payables and cash related to these
transactions are included in the
consolidated balance sheet.
Payment terms
For all revenue types, payment is typically
due between 30 and 60 days after the
invoice date, depending on the service,
the client and the territory in which the
Group is operating.
Fee income and recharged
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 recharge of costs
incidental to fulfilling the Group’s
contracts, for example mileage, flights,
subsistence and accommodation, and
subcontractor costs on which a negligible
margin is earned by the Group.
Contract assets and liabilities
Contract assets are booked when the
amount of revenue recognised on a
contract exceeds the amount invoiced.
Where the amount invoiced exceeds the
amount of revenue recognised, the
difference is booked in contract liabilities.
Financing components
The Group does not expect to have any
contracts where the period between the
transfer of the promised goods or services
to the customer and the payment by the
customer exceeds one year.
Consequently, the Group does not adjust
any of the transaction prices for the time
value of money.
Report and Accounts 2018Financial statements The estimated useful lives of the Group’s
intangible assets are as follows:
Customer relationships
5 to 10 years
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.
(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 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 2018, that has a significant risk of
resulting in a material adjustment to the
carrying amount of assets and liabilities
during 2019, is the lack of clarity around
the terms of the UK’s exit from the EU.
The uncertainty associated with Brexit
may affect the cash flows generated by
our Consulting UK & Ireland business.
Although we consider it unlikely, if these
cash flows are significantly different
to those modelled in our goodwill
impairment reviews, the carrying value of
goodwill associated with that CGU Group
may be affected.
95
(d) Deferred consideration
Deferred consideration arises when
settlement of all or part of the cost of a
business combination falls due after the
date the acquisition was completed.
It is stated at the fair value. All deferred
consideration has been treated as part
of the cost of investment. At each
balance sheet date, deferred
consideration comprises the fair
value of the remaining deferred
consideration valued at acquisition.
(e) Intangible assets
i Goodwill
All business combinations are accounted
for by applying the purchase method.
Goodwill has been recognised on
acquisitions of subsidiaries and the
business, assets and liabilities of
partnerships. Goodwill represents the
difference between the cost of the
acquisition and the fair value of the
identifiable assets acquired.
Goodwill is stated at cost less any
accumulated impairment losses.
Goodwill is allocated to Groups of
cash-generating units and is tested
annually for impairment.
ii Other intangible assets
Intangible assets other than goodwill that
are acquired by the Group are stated at
cost less accumulated amortisation and
impairment losses.
Intangible assets identified in a business
combination are capitalised at fair value
at the date of acquisition if they are
separable from the acquired entity or
give rise to other contractual or legal
rights. The fair values ascribed to such
intangibles are arrived at by using
appropriate valuation techniques.
Expenditure on internally generated
goodwill and brands is recognised in
the income statement as an expense
as incurred.
iii Amortisation
Amortisation is charged to profit or loss
in proportion to the timing of the benefits
derived from the related asset from
the date that the intangible assets
are available for use over their
estimated useful lives unless
such lives are indefinite.
Report and Accounts 2018Financial statements
9696
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
50 years
Alterations to
leasehold premises
Motor vehicles
Fixtures, fittings,
IT and equipment
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.
Financial Assets
The Group’s financial assets consist of
trade receivables, contract assets and
cash. These assets are measured at
amortised cost as the Group’s business
model for managing these assets is to
hold them until realisation of the asset
as cash.
Impairment of Financial Assets
For trade receivables and contract assets,
the Group applies the simplified
impairment approach permitted by IFRS 9
which requires expected lifetime losses to
be recognised from initial recognition of
the receivables.
To measure the expected credit losses,
trade receivables and contract assets
have been grouped based on shared
credit risk characteristics relating to the
markets we operate in. The Group’s
history of such losses is not material, even
during significant downturns, and
consequently the risk associated with
Brexit is deemed to be limited.
(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.
Report and Accounts 2018Financial statements (e) Employee benefits
i Defined contribution plans
Obligations for contributions to defined
contribution retirement benefit plans are
recognised as an expense in the income
statement as incurred.
ii Defined benefit plans
The cost of providing benefits is
determined using the projected unit
credit method, with actuarial valuations
being carried out at the end of each
reporting period. Remeasurement gains
and losses are recognised immediately in
the balance sheet with a charge or credit
to the statement of comprehensive
income in the period in which they occur.
These remeasurement gains and losses
are not recycled to the income statement.
Defined benefit costs are split into
three categories:
–
–
–
current service cost, past service cost
and gains and losses on curtailments
and settlements (recognised in
administrative expenses)
net interest expense or income
(recognised in finance costs); and
remeasurement (recognised in other
comprehensive income)
The retirement benefit obligation
recognised in the consolidated balance
sheet represents the deficit in the
Group’s defined benefit scheme.
iii Share-based payments
The Group operates share based payment
arrangements with employees.
The Share Incentive Plan (“SIP”) is an
all-employee share plan which operates
in the UK, Ireland, Australia, Canada,
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 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.
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.
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.
97
Report and Accounts 2018Financial statements 2. OTHER ACCOUNTING POLICIES CONTINUED
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
IFRS 16 “Leases”.
The Group will apply IFRS 16 from
1 January 2019. The Group has elected
not to restate comparatives on initial
adoption. The Group has performed an
assessment of the impact of adopting
IFRS 16 based on leases outstanding at
31 December 2018. The Group estimates
that lease right of use assets of £44m
and lease liabilities of £48m will be
recognised on transition. In addition, lease
prepayments of £0.5m, lease accruals of
£0.5m and onerous lease provisions of
£2.1m will be derecognised.
There are no other standards that are not
yet effective and that would be expected
to have a material impact on the Group in
current or future reporting periods and on
forseeable future transactions.
(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.
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.
9898
Report and Accounts 2018Financial statements 2. OTHER ACCOUNTING POLICIES 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 (“CODM”, deemed to be the
main Board) 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.
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.
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
£000s
Profit/(loss) before tax
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.
2018
40,981
9,181
50,162
3,879
54,041
2017
(1,600)
55,541
53,941
4,526
58,467
Add:
Amortisation and impairment of acquired intangibles and transaction related costs
PBTA
Add:
Net finance costs
Operating profit before amortisation and impairment of acquired intangibles and
transaction related costs
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
Profit/(loss) attributable to ordinary shareholders
Add:
Deduct:
Amortisation and impairment of acquired intangibles and transaction related costs
Tax on amortisation and impairment of acquired intangibles and transaction
related costs
Adjusted profit attributable to ordinary shareholders
2018
29,741
9,181
(2,205)
36,717
2017
(16,672)
55,541
(885)
37,984
99
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
Loss before tax
2017
630,636
562,320
53,941
(1,600)
Constant
currency effect
(10,697)
(9,742)
(1,176)
(754)
2017 at
constant
currency
619,939
552,578
52,765
(2,354)
Report and Accounts 2018Financial statements 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 26.
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 26.
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 11.
100100
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 CODM. The business
segment reporting format reflects the
Group’s management and internal
reporting structure.
The segment results for the year ended
31 December 2017 were restated
following changes to the Group’s
management structure and organisation,
as announced on 2 July 2018.
The business segments of the Group are
as follows:
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.
- Energy
- Consulting - UK and Ireland
- Services - UK and Netherlands
- Norway
- North America
- AAP
Report and Accounts 2018Financial statements
Segment results for the period ended 31 December 2018:
£000s
Energy
Consulting - UK and Ireland
Services - UK and Netherlands
Norway
North America
AAP
Group eliminations
Total
£000s
Energy
Consulting - UK and Ireland
Services - UK and Netherlands
Norway
North America
AAP
Total
Segment results for the period ended 31 December 2017 (restated):
£000s
Energy
Consulting - UK and Ireland
Services - UK and Netherlands
Norway
North America
AAP
Group eliminations
Total
£000s
Energy
Consulting - UK and Ireland
Services - UK and Netherlands
Norway
North America
AAP
Total
Fee
income
101,067
122,089
110,567
69,012
58,671
116,830
(4,079)
574,157
Expenses
12,800
Intersegment
revenue
(802)
30,679
11,414
965
1,149
6,714
(495)
63,226
(1,371)
(1,178)
(171)
(524)
(528)
4,574
–
Underlying
profit
9,579
Reorganisation
costs
(676)
15,501
13,581
6,978
5,245
13,328
64,212
(84)
(69)
(786)
(125)
(62)
(1,802)
Fee
income
93,005
120,767
95,699
67,986
68,274
119,674
(3,085)
562,320
Expenses
13,024
Intersegment
revenue
(675)
25,339
16,497
1,192
1,918
10,939
(593)
68,316
(1,388)
(708)
(212)
(217)
(478)
3,678
–
Underlying
profit
8,511
Reorganisation
costs
(544)
16,615
13,955
6,378
7,507
15,257
68,223
–
–
–
(206)
(461)
(1,211)
External
revenue
113,065
151,397
120,803
69,806
59,296
123,016
–
637,383
Segment
profit
8,903
15,417
13,512
6,192
5,120
13,266
62,410
External
revenue
105,354
144,718
111,488
68,966
69,975
130,135
–
630,636
Segment
profit
7,967
16,615
13,955
6,378
7,301
14,796
67,012
101
Report and Accounts 2018Financial statements 4. BUSINESS AND GEOGRAPHICAL SEGMENTS CONTINUED
Group reconciliation
£000s
Revenue
Recharged expenses
Fee income
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
Year ended
31 Dec 2018
637,383
Year ended
31 Dec 2017
630,636
(63,226)
574,157
(68,316)
562,320
64,212
(1,802)
62,410
(8,369)
54,041
(9,181)
44,860
(3,879)
40,981
68,223
(1,211)
67,012
(8,545)
58,467
(55,541)
2,926
(4,526)
(1,600)
Operating profit
Net finance costs
Profit/(loss) before tax
£000s
Energy
Consulting - UK and Ireland
Services - UK and Netherlands
Norway
North America
AAP
Unallocated
Group total
102102
Carrying amount of
segment assets
Year ended
31 Dec 2017
restated
74,637
Year ended
31 Dec 2018
76,297
Segment depreciation
and amortisation
Year ended
31 Dec 2017
restated
42,454
Year ended
31 Dec 2018
1,933
169,879
104,950
56,670
66,656
118,608
12,843
605,903
169,307
103,848
57,372
66,194
128,923
12,448
612,729
1,989
3,489
2,262
2,246
5,143
338
2,680
3,364
2,756
3,397
6,172
422
17,400
61,245
Report and Accounts 2018Financial statements The table below shows revenue and fee income to external customers based upon the country from which billing took place:
£000s
UK
Australia
USA
Norway
Netherlands
Ireland
Canada
Other
Total
£000s
UK
Australia
USA
Ireland
Norway
Canada
Netherlands
Other
Total
Revenue
Fee income
Year ended
31 Dec 2018
242,707
Year ended
31 Dec 2017
232,490
Year ended
31 Dec 2018
205,212
Year ended
31 Dec 2017
193,183
138,742
144,694
128,993
132,200
94,119
73,747
38,998
33,158
11,817
4,095
98,957
73,217
36,180
28,805
12,461
3,832
89,776
72,524
33,504
29,811
10,421
3,916
93,901
71,804
30,148
26,641
10,624
3,819
637,383
630,636
574,157
562,320
Carrying amount of
non current assets
As at
31 Dec 2018
As at
31 Dec 2017
163,591
96,436
49,458
42,166
38,454
12,679
18,710
5
162,597
102,999
50,910
41,782
40,530
9,885
18,678
5
421,499
427,386
103
5. REVENUE
Disaggregation of revenue
The Group segmental information disclosed in note 4 best depicts how the nature, timing, amount and uncertainty associated with
our revenues and cash flows are affected by economic factors. Segments are structured along geographical and market lines, and
risks are broadly consistent within the segments as a result.
Unsatisfied performance obligations
The transaction price allocated to partially satisfied or unsatisfied performance obligations at 31 December 2018 is set out below.
These obligations equate to the contracted work which the Group has on hand at the year end.
£000s
To be recognised in 2019
To be recognised in 2020
To be recognised in 2021 and beyond
These obligations will be recognised as revenue over time.
As at
31 Dec 2018
218,227
19,233
6,489
243,949
Report and Accounts 2018Financial statements 6. AMORTISATION AND IMPAIRMENT OF ACQUIRED INTANGIBLES AND
TRANSACTION RELATED COSTS
£000s
Amortisation of acquired intangibles
Impairment of goodwill (Note 13)
Loss on sale of business
Transaction costs
Year ended
31 Dec 2018
9,144
Year ended
31 Dec 2017
12,804
–
–
37
9,181
40,024
2,695
18
55,541
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 became onerous since we could no longer make
economic use of part of the building in which the business was based.
Impairment of goodwill
In 2017 the Group recognised an impairment charge of £40,024,000 against the goodwill allocated to its Energy businesses in Europe
and North America. No impairment charges were recognised against goodwill in 2018.
7. OPERATING PROFIT - BY NATURE OF EXPENSE
£000s
Revenue
104104
Staff costs (see note 9)
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
Bad debt provision
Other transaction related costs
Other costs
Operating profit
Year ended
31 Dec 2018
637,383
Year ended
31 Dec 2017
630,636
(311,691)
(148,351)
(26,688)
(8,256)
–
(37)
–
(13,453)
(4,986)
(16,576)
(21,608)
(9,144)
–
–
(37)
(31,696)
44,860
(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
Report and Accounts 2018Financial statements
8. 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
9. 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
Year ended
31 Dec 2018
Year ended
31 Dec 2017
(3,734)
(364)
(13)
(4,111)
232
(3,879)
(3,952)
(383)
(304)
(4,639)
113
(4,526)
Year ended
31 Dec 2018
268,749
Year ended
31 Dec 2017
265,643
26,912
13,443
249
2,338
25,858
13,044
243
2,700
311,691
307,488
Average number of employees (including Executive Directors) was:
Fee earning staff
Support staff
4,639
917
5,556
4,477
863
5,340
105
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 64. The share based payment charge in respect of key management personnel was
£396,000 (2017: £552,000). Social security costs in respect of these personnel were £260,000 (2017: £334,000).
Report and Accounts 2018Financial statements
10. 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 2018
50
Year ended
31 Dec 2017
50
569
619
27
–
646
–
12
658
562
612
27
2
641
4
11
656
Expenses for 2017 were £15,000. In finalising the 2017 audit, additional fees of £50,000 were billed which are not included in the
2017 numbers above.
11. INCOME TAXES
Analysis of tax expense/(credit) in the income statement for the year:
106106
£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 2018
Year ended
31 Dec 2017
3,065
9,509
887
13,461
(1,729)
28
(520)
(2,221)
3,750
9,603
1,422
14,775
(722)
2,278
(1,259)
297
Total tax charge for the year
11,240
15,072
In addition to the amount charged to the income statement, the following items
related to tax have been recognised:
Deferred tax charge/(credit) in other comprehensive income
149
(15)
Report and Accounts 2018Financial statements The effective tax rate for the year on profit before tax was 27.4% (2017: 39.2% as adjusted for the impairment of goodwill which was
not deductible for tax purposes). The effective tax rate for the year on PBTA was 26.8% (2017: 29.6%) as shown in the table below:
£000s
Total tax expense in income statement
Add back:
Tax on amortisation and impairment of acquired intangibles and transaction related costs
Adjusted tax charge on the profit/(loss) 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 2018
11,240
Year ended
31 Dec 2017
15,072
2,205
13,445
50,162
26.8%
0.6%
27.4%
885
15,957
53,941
29.6%
(971.6%)
(942.0%)
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 19.0% (2017: 19.25%) and Australia 30%
(2017: 30%). The tax rate in the US reduced to 22.5% in 2018 (2017: 38.0%) due to the reduction in the US Federal tax rate effective
from 1 January 2018.
The weighted average tax rate reduced to 23.1% in 2018 (2017: 26.1% as adjusted for the impairment of goodwill which was not
deductable for tax purposes) due to the reduction in the Federal tax rate effective from 1 January 2018.
The actual tax charge differs from the weighted average charge for the reasons set out in the following reconciliation:
£000s
Profit/(loss) before tax
Add back: impairment of goodwill
Profit before tax and impairment of goodwill
Year ended
31 Dec 2018
40,981
Year ended
31 Dec 2017
(1,600)
–
40,981
40,024
38,424
107
Tax at the weighted average rate of 23.1% (2017: 26.1%)
9,452
10,031
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
1,018
(56)
39
–
49
368
370
1,619
(581)
2,424
209
795
163
412
11,240
15,072
Report and Accounts 2018Financial statements 11. INCOME TAXES CONTINUED
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 offset 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 reduced in 2018 as less work was
undertaken in these jurisdictions.
The impact of intercompany financing
relates to the funding of US operations
from the UK. The impact reduced in 2018
due to the reduction in the US Federal tax
rate from 35% to 21% that applied from
1 January 2018.
Effect of change in tax rates - from 1
January 2018 the Norwegian tax rate
reduced from 23% to 22%. This 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. A higher charge
arose in 2017 due to the US Federal tax
rate reducing from 35% to 21% and the
Norwegian tax rate from 24% to 23%.
US repatriation tax - this applied in 2017
on undistributed profits of US subsidiaries
which became taxable at rates between
8.0% and 15.5% following US tax reform.
The charge was not recurring.
Canadian losses not recognised - no
benefit was recognised for losses arising
where it was uncertain they would
be utilised. The impact was higher at
December 2017 due to the the losses
arising on the disposal of the Linear
Infrastructure business.
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. The 2018
charge relates mainly to issues arising in
the US.
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.
12. 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:
108108
£000s/000s
Profit /(loss) 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 earnings/(loss) per share (pence)
Diluted earnings/(loss) per share (pence)
Year ended
31 Dec 2018
29,741
Year ended
31 Dec 2017
(16,672)
222,946
1,793
224,739
13.34
13.23
221,804
1,479
223,283
(7.52)
(7.47)
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
Profit /(loss) attributable to equity holders of the parent
Amortisation and impairment of acquired intangibles and transaction related costs (note 6)
Tax on amortisation and impairment of acquired intangibles and transaction related costs
(note 11)
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 2018
29,741
Year ended
31 Dec 2017
(16,672)
9,181
(2,205)
36,717
16.47
16.34
55,541
(885)
37,984
17.13
17.01
Report and Accounts 2018Financial statements 13. INTANGIBLE ASSETS
£000s
Cost:
Intellectual
property
rights
Customer
relationships
Order
backlog
Trade
names
Non
compete
agreements Software Goodwill
Total
At 1st January 2018
3,563
132,916
20,478
9,566
603
3,224
419,041 589,391
Additions
Disposals
Exchange differences
At 31 December 2018
–
–
180
3,743
–
–
–
(2,130)
(1,274)
(271)
820
56
60
131,606
19,260
9,355
–
–
21
624
–
–
75
319
319
–
(3,675)
(853)
359
3,299
418,507 586,394
Aggregate amortisation and impairment losses:
At 1st January 2018
3,563
105,071
20,133
9,420
603
2,626
52,245 193,661
Amortisation
Disposals
Exchange differences
At 31 December 2018
Net book value at
31 December 2018
£000s
Cost:
At 1st January 2017
Disposals
Exchange differences
At 31 December 2017
–
–
180
3,743
8,527
222
50
(2,130)
(1,274)
(271)
760
68
60
112,228
19,149
9,259
–
–
21
624
345
–
65
–
–
9,144
(3,675)
411
1,565
3,036
52,656 200,695
–
19,378
111
96
–
263
365,851 385,699
Intellectual
property
rights
Customer
relationships
Order
backlog
Trade
names
Non
compete
agreements
Software Goodwill
Total
3,859
–
(296)
3,563
137,653
21,187
9,889
–
–
–
(4,737)
(709)
(323)
132,916
20,478
9,566
634
–
(31)
603
3,418
424,837
601,477
–
(234)
(234)
(194)
(5,562)
(11,852)
3,224
419,041
589,391
109
Aggregate amortisation and impairment losses:
At 1st January 2017
Amortisation
Impairment
Exchange differences
At 31 December 2017
Net book value at
31 December 2017
20,131
9,630
634
2,238
12,221
145,969
3,859
–
–
(296)
3,563
97,256
11,442
–
713
–
113
–
(3,627)
(711)
(323)
105,071
20,133
9,420
–
–
(31)
603
536
–
–
40,024
12,804
40,024
(148)
–
(5,136)
2,626
52,245
193,661
–
27,845
345
146
–
598
366,796
395,730
Customer relationships relate to assets acquired in business combinations since 2008 and have remaining useful lives of 1-3 years.
Goodwill
No negative goodwill was recognised in 2018 or 2017. 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 and as a consequence of
the change in segmentation of the Group (see note 4) the allocation to CGUs has been updated since 2017. The carrying amount of
goodwill has been allocated as follows:
Report and Accounts 2018Financial statements 13. INTANGIBLE ASSETS CONTINUED
£000s
Consulting (UK and Ireland)
Services (UK)
Services (Netherlands)
Norway
North America
AAP
Energy
The Group tests annually for impairment
at 31 October and then considers whether
there are any impairment triggers at the
balance sheet date. 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 a combination of market,
industry and company specific data.
Growth rates
The growth rates applied reflect
management’s judgement regarding
110110
As at
31 Dec 2018
114,021
As at
31 Dec 2017
as restated
113,666
50,095
10,106
32,897
42,142
81,229
35,361
50,095
10,046
32,787
39,675
84,632
35,895
365,851
366,796
the potential future performance of the
business. The medium term comprises
the years 2020 to 2023. The average
real growth rate used during this period
is 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 -2.0%
and 2.5% per annum (2017: -5.0% 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. In 2017, probability weighted
long term growth rates were used in
assessing the value of impairment to book
against goodwill allocated to Energy CGU
Group, but in 2018, as there is significant
headroom, this was not required.
The assumptions used for the Groups of CGUs are as follows:
Pre tax discount rate
2017
2018
Medium term growth rate
2017
2018
Long term growth rate
2017
2018
Consulting (UK and Ireland)
Services (UK)
Services (NL)
Norway
North America
AAP
Energy
Europe (UK and Ireland)
Energy EAME
Energy NA
11.6%
12.2%
13.9%
12.1%
12.3%
14.2%
15.4%
-
-
-
–
–
11.5%
10.8%
10.9%
12.8%
–
10.8%
16.1%
12.9%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
–
–
–
Summary of results
During the year, all goodwill was tested
for impairment and no impairment charge
was identified.
For part of 2017, our Energy business was
split into North America and European
elements and those were managed
separately. Consequently, goodwill was
tested for two Energy CGUs in 2017.
At the end of 2017 the businesses were
recombined into a global Energy business
and that has been managed in that way
for the whole of 2018. Goodwill has been
monitored at an Energy level throughout
2018. Consequently goodwill has been
tested on a global Energy basis for 2018.
–
–
3.0%
3.0%
3.0%
3.0%
–
3.0%
–
–
2.1% - 2.5%
2.1%
2.0%
2.3%
2.3%
2.5%
(2.0%)
–
–
–
-
-
2.0%
2.3%
2.3%
2.5%
-
2.1%
0% - (5.0%)
0% - (5.0%)
Sensitivity of results to changes
in estimates
The Group’s CGUs all have significant
headroom. The Group does not consider
the change in any one key estimate that
would result in a material adjustment
to the carrying amounts of assets and
liabilities in 2018 to be reasonably possible.
Report and Accounts 2018Financial statements 13. INTANGIBLE ASSETS CONTINUED
14. PROPERTY, PLANT AND EQUIPMENT
£000s
Cost:
At 1 January 2018
Additions
Disposals
Transfers
Foreign exchange differences
At 31 December 2018
Depreciation:
At 1 January 2018
Charge for the year
Disposals
Transfers
Foreign exchange differences
At 31 December 2018
Net book value at 31 December 2018
£000s
Cost:
At 1 January 2017
Additions
Disposals
Foreign exchange differences
At 31 December 2017
Depreciation:
At 1 January 2017
Charge for the year
Disposals
Foreign exchange differences
At 31 December 2017
Net book value at 31 December 2017
Freehold
land and
buildings
Alterations
to leasehold
premises
Motor
vehicles
Fixtures,
fittings,
IT and
equipment
10,628
16
–
–
111
10,755
3,371
234
–
–
33
3,638
7,117
6,656
426
(774)
142
(78)
6,372
4,163
829
(771)
102
(50)
4,273
2,099
3,284
622
(289)
–
(100)
3,517
2,207
450
(289)
–
(63)
2,305
1,212
72,660
11,123
(4,570)
(142)
(523)
78,548
55,143
6,743
(4,312)
(102)
(501)
56,971
21,577
Freehold
land and
buildings
Alterations
to leasehold
premises
Motor
vehicles
Fixtures,
fittings,
IT and
equipment
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
3,144
519
(350)
(29)
3,284
2,034
498
(301)
(24)
2,207
1,077
69,464
7,675
(4,206)
(273)
72,660
52,393
6,672
(3,928)
6
55,143
17,517
Total
93,228
12,187
(5,633)
–
(590)
99,192
64,884
8,256
(5,372)
–
(581)
67,187
32,005
Total
89,197
8,641
(4,674)
64
93,228
60,749
8,417
(4,347)
65
64,884
28,344
111
Report and Accounts 2018Financial statements
15. SUBSIDIARIES
The Group consists of RPS Group Plc (the parent company incorporated in the UK) and a number of 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 133.
16. TRADE AND OTHER RECEIVABLES
£000s
Trade receivables
Contract assets
Prepayments
Other receivables
As at
31 Dec 2018
106,509
As at
31 Dec 2017
114,653
44,907
10,406
4,596
166,418
39,001
10,568
5,533
169,755
The Group measures the loss allowance for trade receivables as an amount equal to the lifetime expected credit loss (ECL). This loss
is estimated using the Group’s history of loss for similar assets, adjusted for the markets and territories that the trade receivable is
exposed to. This takes into account current and forecast conditions. The Group has considered the potential impact of Brexit on the
ECL and has deemed this to be immaterial given the Group’s history of trade receivable recoveries after historical downturns.
Trade receivables and contract assets net of provision for impairment are shown below.
112112
£000s
Trade receivables
Provision for impairment
Trade receivables net
£000s
Contract assets
Provision for impairment
Contract assets net
As at
31 Dec 2018
111,735
As at
31 Dec 2017
119,500
(5,226)
106,509
(4,847)
114,653
As at
31 Dec 2018
51,531
As at
31 Dec 2017
44,757
(6,624)
44,907
(5,756)
39,001
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
No interest is charged on overdue receivables. At the year end the Group’s debtor days were 50.
As at
31 Dec 2018
10,462
As at
31 Dec 2017
10,740
9,582
20,044
10,558
21,298
Report and Accounts 2018Financial statements
Movements in impairment
£000s
As at 1 January 2018
Increase in provision on adoption of IFRS 9
Impairment charge
Reversal of provisions
Receivables written off during the year as uncollectible
Exchange differences
As at 31 December 2018
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
Trade
receivables
4,847
Contract
assets
5,756
353
2,285
(1,634)
(621)
(4)
5,226
6,038
2,445
(2,417)
(1,161)
(58)
4,847
296
3,646
(980)
(2,082)
(12)
6,624
4,416
5,153
(1,426)
(2,354)
(33)
5,756
Total
10,603
649
5,931
(2,614)
(2,703)
(16)
11,850
10,454
7,598
(3,843)
(3,515)
(91)
10,603
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
As at
31 Dec 2018
64,043
As at
31 Dec 2017
62,475
32,161
24,677
27,071
4,296
11,977
1,544
649
33,594
23,766
30,499
2,824
13,740
2,064
793
166,418
169,755
113
The maximum exposure to credit risk at the reporting date is £161,822,000 (2017: £164,222,000).
The concentration of credit risk is limited as the customer base is large and unrelated.
The impact on revenue of projects where work was undertaken in 2017 but related revenue recognised in 2018 was immaterial.
17. TRADE AND OTHER PAYABLES
£000s
Trade payables
Accruals
Contract liabilities
Creditors for taxation and social security
Other payables
As at
31 Dec 2018
33,210
As at
31 Dec 2017
34,838
38,015
22,931
18,385
5,373
117,914
41,026
22,199
18,909
6,434
123,406
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.
Report and Accounts 2018Financial statements
18. BORROWINGS
£000s
Bank loans
US loan notes
Bank overdraft
Total bank loan, notes and overdrafts
Arrangement fees
£000s
The bank loan, notes and overdrafts are repayable as follows:
Amounts due for settlement within 12 months
Amount due between one and two years
In the third to fifth years inclusive
As at
31 Dec 2018
32,800
As at
31 Dec 2017
41,457
56,751
2,581
92,132
(271)
91,861
55,185
212
96,854
(634)
96,220
As at
31 Dec 2018
As at
31 Dec 2017
2,581
32,800
56,751
92,132
212
–
96,642
96,854
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.
114114
There were loans drawn totalling £32,800,000 at 31 December 2018 (2017: £41,457,000).
The facility is guaranteed by the Company and certain subsidiaries but no security over the Group’s assets exists.
(iv) 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.
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
2018
5,486
35,364
58,151
99,001
2017
3,093
2,881
100,539
106,513
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.
Report and Accounts 2018Financial statements
19. 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 2018
53
As at
31 Dec 2017
1,608
77
49
123
302
–
26
122
1,756
Deferred consideration relates to payments due to vendors of acquired companies which are due to be made on future anniversaries
of the acquisitions.
20. 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 five 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
ten years.
£000s
As at 1 January 2018
Additional provision in the year
Utilised in year
Released
Exchange difference
As at 31 December 2018
£000s
Due as follows:
Within one year
After more than one year
Onerous
Contracts
3,328
14
(551)
(462)
(66)
Warranty
1,497
Dilapidations
2,440
528
–
(250)
7
521
(393)
(102)
(29)
2,263
1,782
2,437
Total
7,265
1,063
(944)
(814)
(88)
6,482
115
As at
31 Dec 2018
As at
31 Dec 2017
2,119
4,363
6,482
2,953
4,312
7,265
The carrying value of the provisions disclosed above is a reasonable approximation of their fair value.
Report and Accounts 2018Financial statements 21. DEFERRED TAXATION
£000s
At 1 January 2017
(Charge)/credit to income relating to
current year
(Charge)/credit to income due to change
in tax rates
Credit to equity for the year
Exchange differences
At 31 December 2017
Disclosed within liabilities
Disclosed within assets
Effect of changes in accounting standards
(Charge)/credit to income relating to
current year
(Charge)/credit to income due to change in
tax rates
Charge to equity for the year
Exchange differences
At 31 December 2018
Disclosed within liabilities
Disclosed within assets
Property,
plant and
equipment
timing
differences
769
Goodwill
and
intangible
assets
(6,507)
Employment
benefits
2,748
Share
based
payments
(160)
Provisions
and other
timing
differences
(942)
Total
(4,092)
48
2,720
118
44
(949)
1,981
(29)
–
(26)
762
840
(78)
(2,310)
–
(590)
(6,687)
(10,102)
3,415
(16)
15
(44)
2,821
751
2,070
–
–
(16)
(132)
(82)
(50)
77
–
22
(1,792)
253
(2,278)
15
(654)
(5,028)
(8,340)
(2,045)
3,312
116
116
(32)
327
338
(133)
1,749
2,249
2
–
(15)
717
285
432
(20)
–
261
(6,119)
(8,351)
2,232
(15)
(149)
(108)
2,887
419
2,468
–
–
–
(265)
(290)
25
5
–
92
(28)
(149)
230
170
(2,610)
1,532
(6,405)
(1,362)
3,795
116116
From 1 January 2018 the Norwegian tax
rate reduced from 24% to 23%.
Accordingly deferred tax assets and
liabilities in Norway 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. In 2017 the US
Federal corporation tax reduced from 35%
to 21% and the Norwegian tax rate from
24% to 23%.
No deferred tax liability is recognised on
temporary differences of £3,776,000
(2017: £3,773,000) 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
£406,000 (2017: £402,000).
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.
Report and Accounts 2018Financial statements 22. SHARE CAPITAL
Ordinary shares of 3p each
as at 31 December 2018
as at 31 December 2017
Authorised
Number
240,000,000
Authorised
£000s
7,200
Authorised
Number
240,000,000
Authorised
£000s
7,200
Issued and fully paid
Number
2018
£000s
Share
Capital
£000s
Share
Premium
Number
2017
£000s
Share
Capital
£000s
Share
Premium
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
224,817,001
6,745
117,790
223,435,014
6,703
114,353
877,492
410,803
–
–
–
26
12
–
–
–
1,833
786
–
–
(9)
654,970
450,058
185,000
91,959
–
20
13
6
3
–
1,733
1,123
376
213
(8)
226,105,296
6,783
120,400
224,817,001
6,745
117,790
Number
Ordinary shares held by the ESOP Trust
Ordinary shares held by the SIP Trust
As at
31 Dec 2018
3,237,181
As at
31 Dec 2017
2,726,038
4,619,977
4,314,641
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.
117
The table below shows options outstanding under the Energy Share Option Scheme at 31 December 2018:
Period exercisable
2018 - 2021
Number
50,000
Exercise
price (p)
212.01
Report and Accounts 2018Financial statements
23. DIVIDENDS
£000s
Amounts recognised as distributions to equity holders during the year:
Final dividend for the year ended 31 December 2017 of 5.08p (2016: 5.08p) per share
Interim dividend for the year ended 31 December 2018 of 4.80p (2017: 4.80p) per share
Year ended
31 Dec 2018
Year ended
31 Dec 2017
11,358
10,757
22,115
11,308
10,699
22,007
Proposed final dividend for the year ended 31 December 2018 of 5.08p (2017: 5.08p) per share
11,415
11,361
The proposed final dividend for the year ended 31 December 2018 is subject to approval by shareholders at the Annual General
Meeting and has not been included as a liability in the financial statements.
24. OPERATING LEASE ARRANGEMENTS
At 31 December 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 2018
As at 31 December 2017
Property
11,799
28,871
8,318
48,988
Other
3,519
4,567
1
8,087
Property
11,703
22,852
2,186
36,741
Other
3,345
4,233
55
7,633
118118
25. 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.
Report and Accounts 2018Financial statements
26. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
£000s
Operating profit
Adjustments for:
Depreciation
Amortisation of acquired intangible assets
Impairment of goodwill
Non-cash movement on provisions
Share based payment expense
Loss on sale of business assets
Loss on sale of property, plant and equipment
EBITDAS
Decrease/(increase) in trade and other receivables
(Decrease)/increase 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 2018
44,860
Year ended
31 Dec 2017
2,926
8,256
9,144
–
(461)
2,338
–
37
64,174
1,964
(5,779)
60,359
(3,773)
232
(12,330)
44,488
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
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 2018.
£000s
Cash at bank
Overdrafts
Cash and cash equivalents
Bank loans and notes
£000s
Cash at bank
Overdrafts
Cash and cash equivalents
Bank loans and notes
Finance lease creditors
119
At 31 Dec
2017
15,588
(212)
15,376
(96,008)
(80,632)
At 31 Dec
2016
16,503
–
16,503
(99,886)
(36)
(83,419)
Prepaid
arrangement
fees
–
–
–
(363)
(363)
Prepaid
arrangement
fees
–
–
–
(364)
–
(364)
Cash flow
2,416
(2,369)
47
8,891
8,938
Cash flow
(212)
(212)
(424)
1,424
36
1,036
Foreign
exchange
(18)
–
(18)
(1,800)
(1,818)
Foreign
exchange
(703)
–
(703)
2,818
–
2,115
At 31
Dec 2018
17,986
(2,581)
15,405
(89,280)
(73,875)
At 31
Dec 2017
15,588
(212)
15,376
(96,008)
–
(80,632)
The cash balance at 31 December 2018 includes £2,164,000 (2017: £2,917,000) that is restricted in its use either as security or
client deposits.
Report and Accounts 2018Financial statements 27. 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.
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 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
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 2018 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
2018
2.60%
2.75%
2.50%
2017
2.30%
2.50%
2.25%
With the exception of the rates of pension increase all principal assumptions are the same for both schemes. The assumed rates of
pension increase were 2.5% and 0% (2017: 2.25% and 0.4%).
The assumed life expectations on retirement at age 65 are:
Years
Retiring today:
Males
Females
This is based on Norway’s standard mortality table with modifications to reflect expected changes in mortality.
Amounts recognised in income in respect of these defined benefit schemes are as follows:
120120
£000s
Current service cost
Net interest expense
Components of defined benefit costs recognised in profit or loss
2018
2017
21.8
25.0
2018
249
14
263
21.8
25.0
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:
£000s
Actuarial gains/(losses) arising from:
Changes in financial assumptions
Movements in payroll tax
Remeasurement of the net defined benefit liability
2018
2017
606
71
677
(58)
(8)
(66)
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
2018
(4,042)
4,022
(20)
2017
(4,389)
3,630
(759)
Report and Accounts 2018Financial statements 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) and losses arising from changes in financial assumptions
Reduction in employer’s national insurance liability
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 (gains)/losses:
The return on plan assets (excluding amounts included in net interest expense)
Actuarial gains arising from changes in financial assumptions
Exchange differences
Contributions from the employer
Benefits paid
Administration costs
Plan assets at 31 December
The major categories and fair values of scheme assets at the end of the reporting period were:
Shares
Other investments
Short term bonds
Term bonds
Property
Total
2018
4,389
249
113
(514)
(81)
(39)
(75)
4,042
2018
3,630
99
92
(5)
288
(75)
(7)
2017
4,253
243
86
93
–
(195)
(91)
4,389
2017
3,475
37
35
(127)
306
(91)
(5)
4,022
3,630
2018
11.7%
0.9%
23.5%
54.1%
9.8%
2017
9.7%
0.6%
22.5%
56.7%
10.5%
100.0%
100.0%
121
Report and Accounts 2018Financial statements 28. FINANCIAL RISK MANAGEMENT
(a) Capital management
The capital of the Group consists of
debt, which includes the borrowings and
facilities disclosed in note 18, 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 note 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.
The Group’s businesses provide a good
level of cash generation which helps
fund future growth. The Group seeks to
minimise borrowings by utilising cash
generated by operations that is surplus
to the immediate operating needs of the
business and an objective is to maintain a
minimum level of cash at bank.
(b) Financial instruments
The Group’s financial assets comprise
cash and trade and other receivables. The
Group’s financial liabilities comprise bank
loans, deferred consideration and trade
and other payables. It is, and has been
throughout the period under review, the
Group’s policy that no trading in financial
instruments shall be undertaken.
Fair values
The fair value of the financial assets and liabilities of the Group are considered to be materially equivalent to their book value.
The classification of financial instruments is shown in the table below.
£000s
Cash
Trade and other receivables
122122
Financial assets
Borrowings
Deferred consideration
Trade and other payables
Financial liabilities
As at
31 Dec 2018
17,986
As at
31 Dec 2017
15,588
156,012
173,998
91,861
302
84,799
176,962
159,187
174,775
96,220
1,756
92,106
190,082
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 18. 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.
Report and Accounts 2018Financial statements Interest rate risk and profile of financial liabilities
The interest rate risk profile of the Group’s financial liabilities at 31 December was as follows:
£000s
Sterling
Euro
Australian Dollar
Canadian Dollar
US Dollar
Norwegian Krone
Other
Floating rate
Fixed rate
Non interest bearing
2018
31,842
2017
32,375
2018
29,868
2017
30,981
–
–
–
–
–
–
–
–
3,400
–
8,857
–
–
213
–
–
63
–
26,814
25,244
26
–
456
–
2018
33,513
6,588
15,615
4,343
9,978
14,438
324
2017
33,459
7,147
19,296
4,122
14,052
13,175
855
2018
95,223
6,588
15,828
4,343
36,792
17,864
324
Total
2017
96,815
7,147
19,359
4,122
39,296
22,488
855
At 31 December
35,242
41,232
56,921
56,744
84,799
92,106
176,962
190,082
The maturity profile of financial liabilities at 31 December was as follows:
Floating rate
Fixed rate
Non interest bearing
£000s
Within one year
In one to two years
In two to five years
Over five years
2018
2,581
32,661
–
–
2017
212
–
2018
53
77
2017
1,608
–
41,020
56,668
55,014
–
123
122
2018
78,717
3,345
2,129
608
2017
85,250
2,774
2,902
1,180
2018
81,351
36,083
58,797
731
Total
2017
87,070
2,774
98,936
1,302
35,242
41,232
56,921
56,744
84,799
92,106
176,962
190,082
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
Fixed rate
financial liabilities
Weighted average interest rate %
Weighted average period for
which rate is fixed – months
123
2018
3.0
3.5
3.8
2.3
3.2
2017
2.8
2.3
3.8
1.9
3.0
2018
33
34
33
16
21
2017
43
104
45
5
44
As at
31 Dec 2018
261
As at
31 Dec 2017
1,925
2,103
2,302
3,837
955
7,044
1,069
122
293
1,468
2,306
2,396
1,411
3,731
1,073
344
934
17,986
15,588
Report and Accounts 2018Financial statements 28. FINANCIAL RISK MANAGEMENT CONTINUED
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. It is Group policy, implemented locally, that receivables are only written off when there is
no reasonable expectation of recovery. This may occur if there is objective evidence of a client’s financial difficulty, or if enforcement
activity has been unsuccessful. See note 16 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 Group does not
have significant credit risk exposure to any single counterparty or Group of counterparties having similar characteristics.
The credit risk in cash and derivatives is limited because the counterparties are banks with high credit ratings assigned by international
credit ratings.
29. SHARE-BASED PAYMENTS
Share scheme costs
124124
£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 2018
1,304
Year ended
31 Dec 2017
1,367
640
277
117
2,338
785
295
253
2,700
SIP
Year of grant
2015
2016
2017
2018
Year of grant
2014
2015
2016
2017
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
New grants
–
–
–
833,623
833,623
New grants
–
–
–
613,984
613,984
Releases
(435,899)
(26,398)
(19,352)
(6,555)
Forfeits
(27,169)
(63,873)
(52,987)
(25,732)
Number
outstanding
31 Dec 2018
–
612,608
506,496
801,336
(488,204)
(169,761)
1,920,440
Releases
(340,636)
(23,785)
(35,535)
(9,584)
Forfeits
(17,770)
(41,784)
(62,518)
(25,565)
Number
outstanding
31 Dec 2017
–
463,068
702,879
578,835
(409,540)
(147,637)
1,744,782
Vesting
conditions
3 years
3 years
3 years
3 years
Vesting
conditions
3 years
3 years
3 years
3 years
Report and Accounts 2018Financial statements
PSP
Year of grant
2009
2011
2012
2013
2014
2015
2016
2017
2018
Year of grant
2009
2011
2012
2013
2014
2015
2016
2017
Number
outstanding
31 Dec 2017
52,543
41,618
45,315
51,139
66,554
383,118
470,080
337,729
–
1,448,096
Number
outstanding
31 Dec 2016
83,366
60,539
68,642
82,170
350,755
441,900
526,876
–
1,614,248
New grants
–
–
–
–
–
–
–
–
431,122
431,122
New grants
–
–
–
–
–
–
–
352,307
352,307
Releases
(34,251)
(20,959)
(15,147)
(15,641)
(24,894)
(278,726)
(13,364)
(7,821)
–
(410,803)
Releases
(25,010)
(16,446)
(23,740)
(28,393)
(273,872)
(41,473)
(35,410)
(5,714)
(450,058)
Number
outstanding
31 Dec 2018
18,292
20,659
27,617
34,697
38,647
76,326
421,302
305,495
429,393
1,372,428
Number
outstanding
31 Dec 2017
52,543
41,618
45,315
51,139
66,554
383,118
470,080
337,729
1,448,096
Lapses
–
–
(2,551)
(801)
(3,013)
(28,066)
(35,414)
(24,413)
(1,729)
(95,987)
Lapses
(5,813)
(2,475)
413
(2,638)
(10,329)
(17,309)
(21,386)
(8,864)
(68,401)
Vesting
conditions
3 years
3 years
3 years
3 years
3 years
1, 2 or 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
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.
125
Fair value at measurement date
Weighted fair value
Holding period
SIP awards
145.30p - 292.25p
216.92p
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
148.81p - 318.65p
206.54p
255.97p
3 years
1.83% - 5.52%
Report and Accounts 2018Financial statements
30. NEW ACCOUNTING STANDARDS
This note explains the impact of the adoption of IFRS 9 ‘Financial Instruments’ and ‘IFRS 15 Revenue from Contracts with Customers’
on the Group’s financial statements. New accounting policies have been applied from 1 January 2018 and these are disclosed in note
1 to the accounts.
IFRS 9 ‘Financial Instruments’
Impact of adoption
IFRS 9 was adopted without restating comparative information, in accordance with the provisions of the standard. The Group does not
account using hedge accounting mechanisms, either under IAS 39 or under IFRS 9.
The only financial assets that the Group holds are trade receivables, contract assets, other receivables at amortised cost and cash,
and the only financial liabilities that are held are borrowings, trade and other payables and deferred consideration. There is no change
to the classification of these assets and liabilities because of the adoption of IFRS 9; they continue to be recorded at amortised cost.
These assets and liabilities are held to realise cash flows at maturity. In addition, the Group holds some forward foreign exchange
contracts. These are recorded at fair value through profit or loss - there is no reclassification for these contracts either. The business
holds these to manage foreign exchange exposures; it is Group policy not to trade in those derivatives.
The only adjustments that have arisen on transition to IFRS 9 relate to the recognition of additional provisions against trade
receivables and contract assets which represent the lifetime expected credit losses on those assets. To measure the expected credit
losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics, relating to the markets
that we operate in. The Group’s history of such losses has been low and we do not currently consider the potential impact of Brexit on
the recovery of contract assets and trade receivables to be material. The change in valuation of those assets has been recorded as an
adjustment through opening reserves.
The loss allowances for trade receivables and contract assets as at 31 December 2017 reconcile to the opening loss allowances as at
1 January 2018 as follows:
£000’s
At 31 December 2017, calculated under IAS 39
Amounts restated through opening retained earnings
126126
Opening loss allowance as at 1 January 2018, calculated under IFRS 9
Contract
assets
5,756
296
6,052
Trade
receivables
4,847
353
5,200
The loss allowances increased by £598,000 to £11,850,000 at 31 December 2018. The reduction would have been £27,000 higher
under IAS 39.
Report and Accounts 2018Financial statements
Impact of IFRS 9 on retained earnings
£000’s
At 31 December 2017 closing retained earnings, calculated under IAS 39
Increase in provision for trade receivables
Increase in provision for contract assets
Increase in deferred tax assets related to impairment provisions
Opening retained earnings 1 January 2018, calculated under IFRS 9
IFRS 15 ‘Revenue from Contracts with Customers’
2018
205,143
(353)
(296)
128
204,622
Impact of adoption
After a detailed review of contracts across the Group’s service lines and sectors, no IFRS 15 adjustment was identified. However, the
Group has amended its revenue accounting policies to reflect the requirements of the new standard – see note 1 to the accounts.
31. EVENTS AFTER THE BALANCE SHEET DATE
On 1 February 2019 the Group acquired the business of Corview, an Australian based transport advisory consultancy for a maximum
consideration of A$32.0m (£17.8m), all payable in cash. At completion the vendors received $17.6m (£9.8m) with A$4.8m (£2.7m)
payable on each of the first, second and third anniversaries of completion. In the year to 30 June 2018, Corview had revenues of
A$17.1m (£9.5m) and adjusted profit of A$5.1m (£2.8m).
Due to the proximity of the acquisition to the date of signing the accounts, it is not possible to give further information.
127
Report and Accounts 2018Financial statements
PARENT COMPANY
BALANCE SHEET
£000s
Fixed assets:
Intangible assets
Tangible assets
Investments
Current assets:
Debtors:
- due within one year
Cash at bank and in hand
Creditors: amounts falling due within one year:
Net current assets
Total assets less current liabilities
Creditors: Amounts falling due after more than one year
Provision for liabilities
128128
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 2018
As at
31 Dec 2017
4
5
6
7
8
9
10
12
12
12
12
12
12
251
1,541
353,356
355,148
50,525
139
50,664
45,733
4,931
360,079
89,280
152
270,647
6,783
120,400
76,664
21,256
(9,801)
55,345
270,647
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
The profit for the year attributable to the shareholders of the Parent Company and recorded through the accounts of the Parent
Company was £6,882,000 (2017 restated: loss of £29,217,000).
These financial statements were approved and authorised for issue by the Board on 21 February 2019.
The notes on pages 130 to 138 form part of these financial statements.
John Douglas, Director
Gary Young, Director
On behalf of the Board of RPS Group Plc (company number: 2087786).
Report and Accounts 2018Financial statements
PARENT COMPANY
STATEMENT OF
CHANGES IN EQUITY
£000s (restated)
At 1 January 2017
Changes in equity during 2017:
Issue of new shares
Share-based payment expense
Transfer on release of shares
Total comprehensive loss
Reserves transfer on impairment loss (note 3,6)
Dividend paid (note 13)
At 31 December 2017
Changes in equity during 2018:
Issue of new shares
Share-based payment expense
Transfer on release of shares
Profit and total comprehensive income
Reserves transfer on impairment loss (note 3,6)
Dividend paid (note 13)
At 31 December 2018
Share
capital
6,703
Share
premium
114,353
Merger
reserve
21,256
Employee
trust
shares
(13,677)
Profit and
loss
reserve
103,642
Other
reserve
99,424
Total
331,701
42
3,437
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,753)
–
6,828
–
–
–
(1,352)
2,700
(6,828)
(29,217)
–
–
–
–
374
2,700
–
(29,217)
36,435
(36,435)
–
(22,007)
–
(22,007)
6,745
117,790
21,256
(8,602)
83,373
62,989
283,551
38
2,610
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,858)
–
659
–
–
–
(799)
2,338
(659)
6,882
7,644
–
–
–
–
(7,644)
(9)
2,338
–
6,882
–
(22,115)
–
(22,115)
6,783
120,400
21,256
(9,801)
76,664
55,345
270,647
129
The notes on pages 130 to 138 form part of these financial statements.
Report and Accounts 2018Financial statements NOTES TO THE
PARENT COMPANY
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 50. The
nature of the Company’s operations and
its principal activities are set out in the
strategic report on pages 7 to 30.
130130
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.
Report and Accounts 2018Financial statements 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 98. 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.
i Financial assets
Trade debtors and other receivables are
financial assets that are recognised at fair
value on inception and are subsequently
carried at amortised cost. They are
subject to impairment tests whenever
events or changes in circumstances
indicate that their carrying value may not
be recoverable. Impairment losses are
taken to the profit and loss account
as incurred.
ii Financial liabilities
Trade creditors and other payables
including bank loans are financial
liabilities that are recognised at fair
value on inception and are subsequently
carried at amortised cost.
2. CRITICAL ACCOUNTING JUDGEMENTS AND
KEY SOURCES OF ESTIMATION UNCERTAINTY
In the course of preparing the financial
The valuation of the investment is most
statements, no judgements have been
sensitive to the achievement of the 2019
made in the process of applying the
budget. The budget comprises forecasts
Company’s accounting policies, other
of revenue, staff costs and overheads
than those involving estimations,
based on current and anticipated market
that have had a significant effect
conditions that have been considered and
on the amounts recognised in the
approved by the Board. Whilst we are able
financial statements.
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.
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 2018, that has a
significant risk of resulting in a material
adjustment to the carrying amounts of
assets and liabilities during 2019, 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
sub-Group is reasonably possible in 2019.
The US business underperformed against
budget in 2018 and whilst not probable, it
is possible that further underperformance
may occur in 2019 if expenditure by our
clients reduces. Our US business may
exceed budget if market conditions allow.
An underperformance against budget
may lead to an impairment of this asset.
The investment value associated with
the US business at 31 December was
£100,472,000.
131
Report and Accounts 2018Financial statements
3. PROFIT ATTRIBUTABLE TO SHAREHOLDERS
The 2017 profit has been restated as a result of a change in the treatment of the impairment loss that the company recognised on its
investment in its US subgroup. Previously this loss was recognised directly in reserves. It has now been shown as a charge to profit and
loss with a corresponding transfer from the other reserve to offset the effect on the profit and loss reserve. There is no impact on
2018 opening reserves. The profit attributable to shareholders for 2017 as previously stated was £7,218,000. The restated loss for
2017 is £29,217,000.
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 (2017: £50,000).
4. INTANGIBLE ASSETS
£000s
Cost
At 1 January 2018 and at 31 December 2018
Amortisation
At 1 January 2018
Charge for the year
At 31 December 2018
Net book value at 31 December 2018
Net book value at 31 December 2017
5. TANGIBLE ASSETS
£000s
Cost or valuation
At 1 January 2018
Additions
Disposals
At 31 December 2018
Depreciation
At 1 January 2018
Charge for the year
At 31 December 2018
Net book value at 31 December 2018
Net book value at 31 December 2017
132132
Goodwill
2,134
1,817
66
1,883
251
317
Total
7,844
1,177
(112)
8,909
7,029
339
7,368
1,541
815
Alterations
to leasehold
premises
Fixtures,
fittings,
IT and
equipment
545
54
–
599
487
18
505
94
58
7,299
1,123
(112)
8,310
6,542
321
6,863
1,447
757
Report and Accounts 2018Financial statements 6. INVESTMENTS
£000s
Subsidiary undertakings
Cost
At 1 January and 31 December 2018
Provisions
At 1 January
Impairment
At 31 December 2018
Net book value at 31 December 2018
2018
2017
455,670
455,670
94,670
7,644
102,314
353,356
58,235
36,435
94,670
361,000
The Group’s investment in its US business was impaired by £7,644,000 (2017: £36,435,000). This has been recorded through the
profit and loss account. The impact on the profit and loss reserve is offset by a transfer of the same amount from the other reserve.
The other reserve represents profits previously recognised in a group reorganisation involving the US business.
Subsidiary undertakings
The principal activity of the majority of our trading subsidiaries is the provision of consulting services.
The following were the subsidiaries during the year. 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 where they are held by a subsidiary undertaking.
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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
1 RPS APASA Pty Ltd
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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 AAP Consulting Pty 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
3 Petroleum Institute for Continuing Education Ltd
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
3 RPS Energy Canada Ltd
4 Canadian GaiaTech, B.C. ULC
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134134
6. INVESTMENTS CONTINUED
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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
5 Ichron Limited
5 Isochrone Holdings Limited
5 Knowledge Reservoir (UK) Ltd
5 Martindale Holdings Limited
5 Nautilus (SEAA) Limited
5 Nautilus Limited
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 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
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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
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
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Malaysia
*
9 Cambrian Consultants Asia Sdn. Bhd
10 Knowledge Reservoir Geoscience & Engineering Sdn. Bhd *
*
11 RPS Consultants Sdn Bhd
Mexico
12 Cambrian Consultants CC America, Inc S.de R.L. de C.V.
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
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Report and Accounts 2018Financial statements
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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
USA
30 APA USA, Inc
31 Applied Science Associates Inc.
30 Cambrian Consultants America Inc.
Registered Offices
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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 RPS Infrastructure 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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1 512 Wickham Street, Fortitude Valley, Queensland 4006, Australia
17 Elmwood House, 74 Boucher Road, Belfast, BT12 6RZ
2 Av. Almirante Barroso 91, Rio de Janeiro, Rio De Janeiro 20031--005,
18 Engelsminnegata, 24, 4008 Stavanger, Norway
135
Brazil
3 1200, 700 - 2nd Street SW, Calgary, Alberta, TP2 4V5, Canada
4 1300-777 ST Dunsmuir Vancouver, British Columbia V7Y1K2 Canada
5 20 Western Avenue, Milton Park, Abingdon, Oxfordshire OX14 4SH
6 Frankfurt am Main, Gashaftsanschrift, Marketstrasse 4460388
Frankfurt am Main, Germany
7 Line Group Limited, 57/63 Line Wall Road, Gilbraltar
8 West Pier Business Campus, Old Dunleary Road, Dunlaoghaire,
Co Dublin, Republic of Ireland
9 Level 11-2 Faber Imperial Court, Jalan Sultan Ismail 50250, Kuala
Lumpur, Malaysia
10 Welhavens Road 5, 4319 Sandines, Sandines, Norway
11 Suite 11-13A, Level 11, Wisma UOA II, Jalan Pinang,
50450 Kuala Lumpur. Malaysia
12 Avenida Paseo de la Reforma No. 404, Pisa 6 - Despacho 602,
CoL Juarez, Mexico City, Mexico, FED DISTR. 06600
13 701 San Business Centre, 8th Khoroo, Sukhbaatar, Ulaanbaatar,
Mongolia
14 Elektronicaweg 2, 2628 XG Delft, The Netherlands
15 Minervum 7002, 4817, ZL Breda, The Netherlands
16 50 Customhouse Quay, Wellington Central, Wellington, 6011,
New Zealand
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
24 Al-Kulieah Street, Al-Khuwair 17/2, Building No.741,
Way No. 4508 Muscat, Oman
25 2nd Floor, Brian Bell Plaza, Turumu Street, Boroko, NCD,
Papua New Guinea
26 9 Queens Road, Aberdeen, AB15 4YL
27 Unit 1, Ratho Park, Station Road, Edinburgh, EH28 8QQ
28 Paya Lebar Road 60, 40 Singapore - Hougang, Singapore - Singapore
29 Drottninggatan 71, C, 111 36, Stockholm, Sweden
30 20405 Tomball Parkway, Suite 200, Houston, Texas 77070, USA
31 55 Village Square Drive, South Kingstown, Rhode Island, 02879, USA
32 135 S. La Salle Street, Suite 3500, Chicago, Illinois 60603, USA
33 1432 Webster Street, Suite 302, Oakland, California, 94612, USA
34 1160 Dairy Ashford, Suite 500, Houston, Texas, 77079, USA
35 1209 Orange Street, Wilmington, Delaware, 19801, USA
Report and Accounts 2018Financial statements
7. DEBTORS
£000s
Amounts falling due within one year:
Amounts due from subsidiary undertakings
Tax receivable
Other debtors
Prepayments and accrued income
31 Dec 2018
31 Dec 2017
42,665
2,032
2,729
3,099
50,525
47,828
1,523
2,557
2,480
54,388
8. CREDITORS – AMOUNTS FALLING DUE WITHIN ONE YEAR
£000s
Borrowings
Trade creditors
Amounts due to subsidiary undertakings
Other creditors
Accruals and deferred income
31 Dec 2018
31 Dec 2017
2,581
3,270
36,646
501
2,735
45,733
212
4,191
29,773
516
2,221
36,913
136136
9. CREDITORS – AMOUNTS DUE AFTER MORE THAN ONE YEAR
£000s
Borrowings:
Bank loans
US loan notes
Arrangement fees
Due as follows:
Amount due between one and two years
In the third to fifth years inclusive
Arrangement fee previously settled
Details of borrowings are disclosed in note 18 to the consolidated accounts.
31 Dec 2018
31 Dec 2017
32,800
56,751
(271)
89,280
32,800
56,751
(271)
89,280
41,457
55,185
(634)
96,008
96,642
–
(634)
96,008
Report and Accounts 2018Financial statements
10. PROVISION FOR LIABILITIES
£000s
As at 1 January 2018
Additional provision in the year
Utilised in the year
As at 31 December 2018
The provisions relate to property and dilapidations provisions.
The total provision is expected to be utilised as follows:
£000s
Within one year
After more than one year
11. DEFERRED TAXATION
The movement on deferred taxation in the year was as follows:
£000s
Net asset at beginning of year
(Charge)/credit to income for the year
Net asset at year end
The deferred taxation balances comprise:
£000s
Short term timing differences
Depreciation in excess of capital allowances
Deferred tax asset
Deferred tax is included within other debtors in the balance sheet.
Total
172
42
(62)
152
As at
31 Dec 2018
4
As at
31 Dec 2017
46
148
152
126
172
As at
31 Dec 2018
257
As at
31 Dec 2017
149
(59)
198
108
257
As at
31 Dec 2018
27
As at
31 Dec 2017
62
171
198
195
257
137
Report and Accounts 2018Financial statements
12. SHARE CAPITAL AND RESERVES
Ordinary shares of 3p each
At 1 January 2018
At 31 December 2018
Authorised
Allotted and fully paid
Number
240,000,000
240,000,000
Value
£000s
7,200
7,200
Number
224,817,001
226,105,286
Value
£000s
6,745
6,783
Full details of the share capital of the Company are disclosed in Note 22 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 23 of the Consolidated Financial Statements.
138138
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
2018
20
20
40
31 Dec
2017
20
20
40
31 Dec
2018
834
874
1,708
Other
31 Dec
2017
1,212
1,307
2,519
15. DIRECTORS’ INTERESTS IN TRANSACTIONS
There were no transactions during the year in which the Directors had any interest.
Report and Accounts 2018Financial statements FIVE YEAR SUMMARY
£000s
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
2018
637,383
574,157
50,162
(73,875)
377,572
60,359
5,556
9.88p
16.47p
16.34p
2017
630,636
562,320
53,941
(80,632)
2016
594,471
534,296
50,704
(83,419)
2015
566,972
506,110
51,795
(78,779)
369,784
411,307
364,490
63,511
5,340
9.88p
17.13p
17.01p
78,253
5,099
9.74p
16.60p
16.51p
92,628
5,054
9.74p
16.57p
16.47p
2014
572,126
504,959
66,114
(73,180)
384,677
70,772
4,530
8.47p
22.04p
21.92p
The Five Year Summary does not form part of the audited financial statements.
139
Report and Accounts 2018Financial statements 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