2019
REPORT AND
ACCOUNTS
rpsgroup.com
OUR
PURPOSE
22
We create shared value by solving
problems that matter to a complex,
urbanising and resource-scarce world.
Our purpose reinforces our commitment to delivering
client solutions to complex problems in a world that
is rapidly changing. It is a bold affirmation of why
RPS exists.
Intentionally created with our clients at the core,
it is the driving force that connects and shapes a
winning mindset, underpinned by our behaviours
and reinforced through our actions.
Our purpose gives us
· Meaning
· Identity
· Authenticity
· Connectivity
· Creativity
· Energy
· Inspiration
It is the compass that keeps us in step with our people,
our clients, our investors and our communities.
A strategy and business model
built around purpose
Page 10
Purpose led corporate
responsibility
Page 34
Report and Accounts 2019 Contents
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CONTENTS
Our purpose
2019 at a glance
Performance headlines
Financial headlines
Strategic report
Chairman’s statement
Business model
Our promise
RPS at a glance
Macro drivers
Chief Executive’s statement
Our global strategy
People
Brand
Connectivity – data, digital and tech
Segment highlights
Our approach to responsible business
Financial review
Risk and risk management
Corporate responsibility
Report of the directors
The Board
Corporate governance
Chairman’s introduction
Overview and compliance
Response to the shareholder consultation
Nomination committee report
Audit committee report
Remuneration committee report
Remuneration at a glance
Annual report on remuneration
Financial statements
Connected content – Jump to connected content by using the sign
posts in the margins.
E.g.
people p.22
Report and Accounts 2019 Headlines
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2019 AT A GLANCE
Launched a new global
brand for RPS
New website –
53%
increase in site visits,
2 million page views
11%
increase in
cross selling
Global ERP designed,
built and piloted
Modern Workplace
initiative launched
Launched global
performance and
development
framework
Reward linked to
global objectives,
performance ratings
and common KPIs
New behaviours
embedded in how
we work
People
Brand
Connectivity
612.6 556.5 37.3
90%
Revenue (£m)
Fee income1 (£m)
PBTA1 (£m)
Cash conversion (%)
637.4 574.2 50.2
94%
-4%
-3%
-26%
-4%
Report and Accounts 2019
Headlines
21%
increase in profit
Expansion of renewables
service offerings
Implemented
succession planning
initiatives and online
training for the Global
Energy team
Acquisition of
Corview and
Reservoir Imaging Ltd
19%
organic fee growth in
Republic of Ireland
American Council
of Engineering
award
Multiple Project
Management
achievement
awards, Australia
Floating LiDAR L-2
certification
Energy
Organic growth and
selective acquisition
Awards/Recognition
5
4.8
12.31
4.42
Statutory profit before
tax (£m)
Adjusted earnings per
share (diluted)1 (p)
Total dividend
per share (p)
41.0
16.34
9.88
-88%
-25%
-55%
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2
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(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 consolidated financial statements.
Report and Accounts 2019
Ross Thompson
CEO
Australia Asia Pacific
SYDNEY
METRO
6
URBANISATION
A turn-up-and-go transformation of
Sydney’s urban rail network
What we do
RPS is supporting the development of Sydney Metro – a multi-phase project that will provide high frequency
‘turn up and go’ transport options for Australia’s largest city. Once complete, Sydney Metro will deliver
31 new rail stations between Sydney’s northwest and southwest via the Central Business District.
Making complex easy
Working as a key partner to Sydney Metro, our team is helping to drive efficiencies for business case
development, major package procurement and infrastructure delivery, while streamlining approvals and
engaging with stakeholders to ensure delivered outcomes meet community need. We’re also contributing
to project delivery through surveying and spatial services, heritage and more.
Result
The first stage of Sydney Metro is now open to the public after more than eight years of tunnelling, track laying
and station building. More than 11 million customer journeys were recorded on the Metro North West Line in
its first five months of operations, with the network now carrying more than 75,000 people each weekday.
Report and Accounts 2019
STRATEGIC
REPORT
7
CHAIRMAN’S
STATEMENT
8
I was appointed as Chairman in November 2016. The
previous Chairman had been on the Board for some
20 years. My first task was to find a Chief Executive
to succeed Alan Hearne, who was retiring from the
Board after being in post for over 30 years. John
Douglas was appointed at the start of June 2017,
formally taking over from Alan in October of that
year. John was familiar with the market and the sector
having previously been Chief Executive of Coffey in
Australia. Each of the current non-executive directors
was newly appointed shortly thereafter.
Future proofing the business whilst building
on the RPS legacy
With the longevity of the previous leadership it was
likely that changes would be required. Whilst Alan’s
legacy of building a group of over 5,000 people with
revenue of over £500 million was recognised, the
group John inherited was essentially a conglomeration
of acquired small businesses with little in the way of a
cohesive purpose and lacking synergy benefits from
integration. Some of the earlier and recently acquired
businesses proved to be fragile, past their peak and in
decline with the performance deterioration offset by
later acquisitions. The lack of integration added to the
fragility. John set about addressing some of the inherent
weaknesses in structure and market presence which
were already showing signs of impacting ongoing
performance. The business was underinvested in
technology systems, marketing and branding and
human resources systems.
A clear strategy involving change
and investment
The newly appointed Board recognised the potential
for the Group to grow into a substantial consulting
business based on the attractiveness of the markets we
serve, our competitive positioning in those markets and
the quality and capabilities of our people. In 2017 the
Board endorsed management’s strategy to pursue an
organic growth strategy supported by highly targeted
acquisitions whilst addressing the challenges of
underinvestment. This strategy was re-endorsed
again in 2018 and 2019.
John and his executive team have worked hard
to progress the various initiatives: to re-organise
the business into more logical segments serving
defined market sectors; to make changes to the
executive management team; to provide clarity
and transparency around the services offered; to
establish a culture of one RPS with a clear purpose
and expected behaviours; to develop and implement
action plans around marketing, technology systems
and human resources; and, to turn RPS from a
conglomerate of consulting businesses into one RPS
with clear direction. This has been apparent from the
greater clarity and transparency of external reporting.
We have invested significantly to achieve a new look
RPS Group and we have made substantial progress
with brand, social media presence, communication and
people management. We have also acquired Corview
in Australia supplementing our Business Advisory
business there and, in the Energy business, Reservoir
Imaging, which adds to our technology capability.
Both have been properly integrated with the existing
business. Internally and externally, the image of RPS
is now consistent and cohesive. HR practices are well
along the road to where they should be and although
this has not yet translated into a significantly lower
employee turnover statistic, colleagues are evaluated
in a consistent way and reviewed routinely. Through
the employee engagement survey employees are
listened to and feedback acted upon.
Enacting change is challenging. It has been tougher
and taken longer than we might have hoped to see
the benefits of the strategy, and the depth of the
underinvestment has made it harder. Whilst there
has been some underlying top line growth we have
seen margin erosion as a result of the higher level of
investment and of carrying scarce but underutilised
resources during market weakness.
Strategic reportReport and Accounts 2019
“We have without doubt made significant progress towards a more integrated,
cohesive and purposeful business that will respond positively to the
investments made and the improvements in our markets as they occur”
Ken Lever
Chairman
Market challenges
We are a consulting and services business and as such
are subject to the variations in economic conditions
in the markets we serve. 2019 brought its challenges
in two of our important markets in Australia, defence
and property. In the UK the uncertainty around Brexit has
curtailed investment decisions on new projects. Our
business is very much front-end in the project cycle
in property, infrastructure and transport schemes
and so this has taken its toll. We have also seen some
market contraction in our UK Services business ahead
of the introduction in the Water Industry of Asset
Management Plan 7 applicable to the period 2020 to 2025.
During 2019 we made two downward adjustments to
external profit expectations as the weakness in our end
markets impacted financial performance. We also re-
aligned the dividend to the lower level of profitability. This
is an appropriate and prudent response to responsible
cash management and capital allocation. These
adjustments had an inevitable impact on the share price
in an equity market which increasingly lacks liquidity
and tends to over-react to the downside. The share price
has only made slight progress since 31 December 2018
despite the investments in the business starting to
enhance longer term intrinsic value. Our shareholders’
disappointment with the progress of the share price is
shared by the Board and executive management who are
all invested in the business.
Bright spots
We have been particularly pleased with the
performance of our newly formed global Energy
segment which exceeded our internal expectations
and showed year on year improvement in revenue,
margin and profitability and is well positioned for
future growth. The business is now more broadly
based in the sector with a greater focus on renewable
energy and with less dependence on oil and so
less vulnerable to the cyclical downturns in the oil
sector. We have also seen good performances in the
Netherlands, Ireland and Northern Ireland.
Listening
I am a frequent visitor to our businesses. Recently I
spent a week in our offices in Australia. I last visited the
business there in 2017 prior to John’s arrival at RPS. I was
impressed by the improvement in the business since
2017. We clearly have a business in Australia which is
now more holistic, benefits from the links with other
segments in the RPS Group, is better organised and has
much greater clarity in terms of its market offering. The
business is no doubt well positioned to take advantage
of market improvements as they occur.
A great global team
Overall it has been a challenging time for RPS. However,
the business remains inherently profitable and cash
generative, albeit at lower levels than were planned.
Given the challenges of the markets and the extensive
changes and investment made, the performance in 2019
is a testimony to the hard work, ingenuity and tenacity
of our people at all levels of our business. Wherever I go
I see the high quality of our staff, the excellent quality of
the work that we do and the very strong and established
client relationships. Thank you to my Board colleagues,
our executive management and everyone at all levels in
the business for the time and energy invested to deliver a
respectable performance in trying circumstances and to
lay the foundations for future development.
Board changes
With the preliminary results announcement we
advised the market of the departure of our Finance
Director, Gary Young. Gary has been with RPS for some
twenty years and has been a very loyal and devoted
servant of the Board. With the significant changes to
the Board in 2017 Gary remained the only continuity
between the old and the new. The time is now right for
Gary to make way for his successor, Judith Cottrell.
Judith previously led the finance function of the
European business of RPS and also had the CEO,
Consulting UK and Ireland role for that business.
Latterly, as Judith has prepared to take on the role
of Finance Director, she has served as the Group
Strategy Director. Judith will join the Board and Gary
will step down at the Annual General Meeting.
The future
We have without doubt made significant progress
towards a more integrated, cohesive and purposeful
business that will respond positively to the investments
made and the improvements in our markets as they
occur. RPS is highly relevant for the future in a resource
constrained world and we are committed to seeing
the strengths in the business and the benefit of
the investments show through in the future
financial performance.
9
Strategic reportReport and Accounts 2019
BUSINESS
MODEL
The RPS business model is a model with purpose. Our purpose defines
the activities we engage in, the relationships we depend on and the
outcomes we aim to achieve – not just in the short-term but in the
best, longer-term, interests of our stakeholders.
Complexity drives demand
The demand for our services and people is
underpinned by a need from clients to deliver
solutions that position them to navigate the
complexities they face. Whether through the
impact of population growth or an increasingly
multifaceted legislative and regulatory landscape.
drivers p.16
The drivers of our business
10
Our key themes of sustainability, urbanisation and
natural resources generate demand for our services
and skills. Whether it’s the continuing need for
sustainable development of land and buildings or the
expanding need to provide adequate infrastructure
such as airports, power stations, public transport
and water treatment plants, professional services
are needed to deliver these. The delivery of energy
to market is also key in today’s world, particularly the
requirement to secure adequate supplies of energy
and other natural resources alongside the need to
manage environmental and health and safety risks,
including climate change.
What we do
Our business model is safe and robust. Primarily,
RPS is a consultancy business that sells the
expertise of our people without the risks
associated with construction.
Across our six sectors and 12 services, we define,
design and manage projects at each stage of an
asset lifecycle – from the planning stages when a
need is identified, through its useful life, to eventual
disposal. We generate profit by selling our expertise
at rates higher than the cost of employment,
managing utilisation and controlling our overheads.
RPS also generates revenue through data – selling
licenses and access to software and applications;
providing classroom, field based and on-line training
services to clients; and laboratory testing services.
How we do it
RPS is a well-balanced, diversified business with a
global presence.
· In Energy we have a global business that is
structured in step with global clients
· In Consulting UK & Ireland and Services
UK & Netherlands we offer a broad range
of connected services
· In Australia Asia Pacific we have an integrated
business that provides key services to a broad
range of clients
· In Norway we are focused on project and
program management – expertise which is
leveraged globally
· And in North America we have three business units
providing services to niche, in demand, areas
All our businesses have the following in common –
dedicated teams of highly qualified professionals
with deep expertise who know their specialism as well
as anyone. Our people form teams that are pragmatic
in their approach, absolutely focused on delivery
and who have their client’s goal at the heart of
everything they do.
Our business units around the world are supported by
a global network of functional support teams to ensure
we have the right infrastructure and agility in place to
respond to volatility and deliver for our clients.
Strategic reportReport and Accounts 2019 SEGMENTS
SECTORS
SERVICES
Energy
Consulting UK & Ireland
Services UK & Netherlands
Australia Asia Pacific
North America
Norway
Energy
Transport
Property
Water
Defence and government services
Resources
Design and development
Exploration and development
Advisory and management consulting
Project and program management
Water services
Environment
Planning and approvals
Laboratories
Oceans and coastal
Communications, creative and digital
Health, safety and risk
Training
Overseeing the global direction of our business is a
Group Leadership Team, made up of the Group CEO,
Group Finance Director, six segment CEOs and the
group leads for strategy, technology, people and
marketing. The leadership team reflects the natural
organisation of RPS, and the individuals provide a
complementary blend of expertise, experience and
local perspective. As a team the Group Leadership
Team formally interact on monthly calls and at
quarterly forums. The Group Leadership Team also
work in partnerships to drive specific areas of work
as required.
Volatility comes with the territory
RPS works on a range of project profiles from long-
term to short-term client work, with most of the work
undertaken with existing clients. We maintain six
month order books but have good visibility for three
months. Due to the relatively short term nature of our
Group Leadership Team
John
Douglas
CEO
order book, our business is susceptible to changes
in market conditions. Managing volatility is a key
component of our business model. Because of our
size and scale we are adept at managing our business
to changes in market conditions.
We do this by:
Staying close to clients to understand
our future work
Matching capacity to markets while
holding capability
Managing cash tightly
Maintaining a disciplined balance sheet
Staying agile enough to be responsive
11
John
Tompson
CEO
Energy
John
Chubb
CEO
Consulting
UK & IRE
Paul
Aitken
CEO
Services
UK & NL
Halvard
Kilde
CEO
Norway
Doug
Matthys
CEO
North
America
*Peter Fearn retired 2020
Ross
Thompson
CEO
Australia
Asia Pacific
Gary
Young
Group
Finance
Director
Liza
Kane
Group
People
Director
Chantalle
Meijer
Group
Marketing
Director
Kelly
Olsen
Chief
Information
Officer
Judith
Cottrell
Group
Strategy
Director
Strategic reportReport and Accounts 2019
W
Strategic report
OUR
PROMISE
12
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
Report and Accounts 2019 W
Doug Matthys
CEO
North America
ESG
SUSTAINABILITY
13
Translating purpose into plans, actions and
accountabilities – what does this mean for businesses?
Opportunity
Ongoing impacts from climate change, modern slavery and other social and environmental issues keep
the importance of demonstrating sustainability front and centre of most businesses ensuring corporate
sustainability programs have flourished. Our strategic Environmental Social Governance advisory services
can help increase valuation, lower risk and protect reputation.
Making complex easy
RPS is advising businesses on how to implement a sustainability strategy that is tailored for individual size
and scale and the challenges and opportunities relevant to the sectors they operate in.
Result
As banks, equity partners and clients seek to insulate themselves against risk and leverage potential
upsides, an increasing focus is placed upon demonstrable sustainability performance, with tangible
evidence of this now forming a condition of investment or contract. A strong corporate sustainability
performance inspires trust in investment and helps to win work.
Report and Accounts 2019
Strategic report
RPS AT
A GLANCE
Founded in 1970,
RPS is a leading
global professional
services firm of
5,000 people.
14
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.
Report and Accounts 2019 5,000
employees
6
segments
6
sectors
12
service clusters
SIX SECTORS
Property
Residential
Commercial and retail
Leisure and tourism
Industrial
Health and healthcare
Education
Resources
Mining
Waste
Defence and
government services
Defence
Security and safety
Information and
telecommunications
Energy
Gas and oil
Renewables
Nuclear facilities
Power and gas networks
Storage
Transport
Roads
Rail
Aviation
Ports
Water
Water management
Wastewater
Flooding and drainage
Groundwater
15
TWELVE SERVICE CLUSTERS
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, creative and digital
Strategic reportReport and Accounts 2019 MACRO
DRIVERS
Matching our expertise to growth markets where there is a demand for our services
Three macro growth markets have been intentionally defined where we have known client opportunities and
where there is a demand for our services. These are Sustainability, Urbanisation and Natural Resources.
Sustainability
Rapidly changing demographics and technological
developments have given rise to a way of living
that brings a range of environmental issues and
global challenges including resource scarcity,
climate change, instability and conflicts,
inequality, achieving sustainable development,
and maintaining biodiversity and food security.
The opportunity – supporting our clients to
deliver their projects in a responsible way
Our deep understanding of the environment
and the impacts of a changing world puts us in a
strong position to deliver high value sustainable
client solutions in a responsible way.
At RPS we have expertise in:
· Environmental, Social, and Governance
· Climate and compliance
· Consenting – net-zero carbon target by 2050
for UK clients
16
Creating shared value
RPS works with clients to identify and design
innovative opportunities and solutions that
embrace sustainability. We understand the
implications of changing availability, prices and
risk, dependencies and vulnerability and the
nature of evolving policy, regulation, investor
focus and emerging sustainability standards.
Our design solutions recognise:
· Environmental factors – natural resource use,
efficiency and impacts
· Social factors – impact and engagement
· Governance factors – oversight and management
And we manage projects that:
· Build asset resilience
· Are innovative and agile
· Have client experiences at the core
Go to page 13 to view
our ESG case study
PRE-ASSET EVALUATION
ASSET DEVELOPMENT
ASSET EXECUTION
OPERATION MAINTENANCE
AND MANAGEMENT
LATE LIFE
ASSET LIFECYCLE – Offshore wind energy
Strategic reportReport and Accounts 2019 Urbanisation
Natural resources
Global megatrends are rapidly changing demographic
patterns and accelerating rates of urbanisation.
Most of the world’s population live in urban areas,
and there is strong appetite for the development
of the infrastructure needed to support growing
communities. Striking a balance between social,
environmental and commercial needs is one of the
biggest challenges in the design and development
of our built environment.
The opportunity – building sustainable cities.
Balancing form and function
· Regionalisation
· Major cities
· Urban design and development
RPS – making complex easy to understand
Partnering with public and private sector clients
to define solutions to complex challenges around
constrained resource capacity and financing
infrastructure delivery, project prioritisation and
future-proofing built environments.
Working with clients to make informed decisions that
build sustainable futures for communities through:
· Designing new models planning approaches
· Digital and technology – challenging traditional
ways of doing things
· Supporting clients to make better choices
Ensuring the optimal solution is delivered through
careful management
· Enhancing the productivity, sustainability and
liveability of cities
· Improving connectivity and delivering integrated
infrastructure networks
· Stimulating enterprise and entrepreneurism
Go to page 6 to view our
Sydney Metro case study
Countries and organisations globally are working
hard to develop responsible energy supplies
using renewable resources that are derived from
sustainable sources such as wind and solar to ensure
a sustainable future for the generations to come.
The opportunity – be on the front foot of a global,
and complex shift in resource consumption
To work with clients to define, design and manage the
sustainable use of our natural resources to secure
water, food and energy supplies and build asset
resilience across water networks.
To work with our clients to adapt to increased
demands on natural resources to develop alternative,
renewable energy supplies while managing existing
and potentially finite resources.
Solving problems that matter
RPS defines and delivers pragmatic asset solutions
that are commercially and technically viable, to
manage and secure future supplies.
17
We work with our clients to optimise the performance
of energy and water networks while ensuring the
equitable distribution of vital natural resources
through great design
· Resource definition and viability
· High yield, low impact infrastructure
· Asset survey, monitoring and management
· Applying new technologies to reliably collect and
analyse data
RPS identifies ways for clients to manage
assets and projects to deliver viable,
sustainable outcomes
· Water management: building asset resilience,
reducing leakage and preventing flooding
and pollution, using data to maximise capital
maintenance programmes
· Energy: applying existing expertise in gas
and oil into renewables and leveraging
our extensive renewables experience
into new and emerging markets
Go to page 31 to view our
Offshore wind case study
PRE-ASSET EVALUATION
ASSET DEVELOPMENT
ASSET EXECUTION
OPERATION MAINTENANCE
AND MANAGEMENT
LATE LIFE
ASSET LIFECYCLE – Offshore wind energy
Strategic reportReport and Accounts 2019 CHIEF
EXECUTIVE'S
STATEMENT
Investing in a sustainable future
As CEO I want to ensure long-term success for RPS
by investing in a purposeful, sustainable future that
creates shared value for our stakeholders. We will do
this through creating economic value on a platform
of strong relationships with our people, investors
and clients, positive social impact and effective
succession planning.
Two years into the job we have a global strategy
supported by investment, rebased the dividend, put
succession planning into practice, strengthened
leadership and created much greater transparency.
We are well underway in transforming our business
from a conglomerate of small consulting firms to
a connected global firm that uses its combined
expertise to deliver professional services around
the world.
2019 – five clear strategic priorities
1818
strategy p.21
2019 saw us continue to focus on the five strategic
priorities we laid out in 2017 to create our platform
for sustainable growth.
people p.22
1. Our deliberate People plan is starting to
show results
brand p.26
2. At the start of the year we delivered a bold,
client driven brand, with measurable impact
3. Connectivity has been a significant focus this year
· The reorganisation of our business is yielding
results with greater cross selling across segments.
We are also seeing higher levels of cross selling
within segments.
ERP p.29
· Our ERP program is a thoughtful four year plan
to modernise the business by linking people
through improved systems, while controlling risk.
It represents the most significant proportion of our
strategic investment and it's crucial we get it right.
2019 was a critical year for the program, which
saw us deliver a global design on budget, complete
global construction and go-live in the Netherlands
and parts of our business in Australia
4. We consider the journey to revitalise our Energy
business to be complete. The Energy sector at
RPS is growing and a continued expansion of
renewables services offerings has also played a
larger part than this time last year
5. Improving organic growth remained a key focus
and we saw growth in fees and profits in Energy,
Ireland and the Netherlands in 2019. Acquisition
remained very selective as we invest and manage
the balance sheet. Our acquisition of Corview
(Australia) and Reservoir Imaging Ltd (Energy) this
year reinforced our ‘density, not greater diversity’
strategy.
Going forward, investment in the business won’t
stop, but we have for the most part, completed the
investment we outlined for our people and brand
priorities. Growth and acquisitions are still important,
but along with Energy, it’s now a business as usual focus.
Our refreshed strategic priorities for 2020 have
clients at the heart of our plan (see p.21). We will
deliver organic growth by giving our clients repeated
high value experiences that exceed expectations and
consistently delivering on our promise of making
complex easy. First-class customer experience
combined with data insight will strengthen our
relationships, create long-term loyalty, repeat work
and reduced cost of sales.
Managing volatility
In our June trading update we talked about a
disappointing set of half year results, largely due to
softness in the Australian market and a weak first
quarter in North America. But, despite a backdrop
of volatile markets, we continued to make solid
progress, throughout 2019, in achieving our
strategic priorities.
Strategic reportReport and Accounts 2019 “We are well underway in transforming our business from a
conglomerate of small consulting firms to a connected global
firm that uses its combined expertise to deliver professional
services around the world.”
John Douglas
Chief Executive
As part of a disciplined approach to capital allocation,
the dividend was rebased. RPS continues to be a
highly cash generative business, with strong market
positions in our segments and good underlying
fundamentals. The steps taken will support RPS'
growth in the medium to long term and improve
shareholder returns in the future.
In the short term our specialist businesses have a
three-month order book which we manage carefully.
This provides opportunities as well as challenges for RPS.
Financial performance
Our results were in line with expectations. They
reflect the significant investment made to progress
our strategic priorities and the difficult market
conditions and political uncertainty faced in some
of the key geographies where we operate.
Key financials
Revenue
£612.6m
Fee income
£556.5m
PBTA
£37.3m
Adjusted EPS
12.31p
Exceptional items
Total dividend
per share
Statutory loss
after tax
Statutory
diluted EPS
4.42p
(£1.2m)
(0.54p)
Exceptional items in 2019 resulted in costs totalling
£23.4m. These included a goodwill impairment of
£19.8m of our Australia Asia Pacific business and
£3.6m of other exceptional items. These include
the costs associated with our global rebrand, legal
fees incurred for an investigation regarding the
administration of some US government client work
and change management and data migration costs
associated with our ERP program.
Trading performance and our markets
Notwithstanding a good performance from Energy,
2019 was a difficult year
· The gas and oil industry continued to recover,
especially marine exploration and development,
and our Energy business benefitted from
strong demand for our exploration and
development, oceans and coastal, and
training services. We also saw continued
expansion of our renewables offering.
· Demand for our Consulting services in the
Republic of Ireland and Northern Ireland was
strong, leading to good fee growth. In the rest
of the United Kingdom, market conditions were
affected by political uncertainty which impacted
clients’ investment decisions, particularly in
our higher margin businesses. Despite these
challenges, the segment performed credibly.
· In our Services segment, the demand for our
water services in England and Wales was adversely
impacted, as expected, as the industry prepared for
the new AMP regulatory cycle that will commence
in April 2020. The Netherlands business performed
well, growing both fees and profit, having benefitted
from organic investments made in 2018.
· In Norway, teams in Oslo are benefitting from
working as a fully integrated business and
performance in the first half of the year was good.
However, senior staff losses due to competitive
pressures affected the second half of the year.
We remain a leading project and program
management services provider in a very attractive
and stable economy and we are fighting hard
to retain that position. The process to replace
those staff who left us is almost complete.
19
Strategic reportReport and Accounts 2019
· It was a difficult year for our North America
segment. While our oceans and coastal business
performed strongly, recruitment and retention
challenges held us back in the rest of the business.
Some management changes were made in 2020
following the retirement of Peter Fearn and a major
strategic review of the segment is underway.
· In Australia a well-documented national property
downturn and state and federal elections heavily
impacted 2019 performance. We did start to see
defence spending pick up in H2 and infrastructure
spend in New South Wales picked up in Q4,
although continues to be impacted by post
government changes. The impact of the
bushfires remains unquantified.
A sustainable business with significant upside
The oil price crash of 2013 exposed RPS dependence
on profit generated by oil for the overall success
of the Group. This led to an intense period of
acquisitions from 2013–2017 to replace Energy
profits and diversify the business. RPS then
experienced the impact of the end of acquisition
lock-in periods, organisational change, functional
investment and some Energy recovery. This is now
largely behind us. RPS is a sustainable business with
significant upside to come.
· RPS is a tighter, better integrated group with
acquisition risk dealt with
· Our turnaround investment has largely been
made, is yielding some results with more
benefit to come
· RPS is well balanced and well diversified
· We have great thematics – sustainability,
urbanisation and natural resources
Group Finance Director succession
On 19 February 2020, we announced Gary Young,
Group Finance Director, will be stepping down from the
Board of Directors at the time of the Group’s AGM on
30 April 2020 and will not offer himself for re-election.
Gary has been with RPS as Group Finance Director for
20 years and, during that time, has been instrumental
to the success and growth of the business. Since my
appointment two years ago, Gary has provided much
needed continuity as the Board was refreshed. He has
also been a trusted adviser to me over that time and
identified his successor.
We are pleased to announce that Gary will be
succeeded by Judith Cottrell. Judith has been with
RPS for five years. In that time she has been CFO
Europe, CEO Consulting UK and Ireland and Group
Strategy Director. Having qualified as an accountant
with KPMG, Judith held senior finance roles at AEA Plc
and Ricardo Plc. Her knowledge of RPS gives
her a perspective that is highly valued.
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. 2020
will see a continuation of the focus on our people and
investing in connectivity across the Group. Allowing
us to build on the deep expertise that our clients have
recognised and provide us with a stronger competitive
edge in all the markets that we operate in.
As we enter 2020, trading conditions in our markets
are generally satisfactory and we anticipate more
stable results from our segments. We will continue to
invest, especially to deliver better connectivity, but
we will do so in a measured way. We remain focused
on building a business that in due course is capable of
delivering mid-single digit rates of organic growth and
a double-digit operating margin. The Board remains
confident in the medium term outlook for the Group
and anticipates that the year ahead will be broadly in
line with 2019 with growth accelerating in 2021.
2020
drivers p.16
Strategic reportReport and Accounts 2019
OUR GLOBAL STRATEGY
OUR PURPOSE
Why we exist
We create shared value by solving problems that matter to a complex,
urbanising and resource-scarce world
OUR PROMISE
What we do
Making complex easy
OUR BEHAVIOURS
How we do it
We solve problems
that matter
We are confidently
pragmatic
We make it easy
to connect
We are stronger
together
Absolute
delivery
2019 – Strategic priorities – Laying the foundation for growth
PEOPLE
BRAND
ENERGY
ORGANIC GROWTH AND
SELECTIVE ACQUISITION
CONNECTIVITY
Invest in
people and
reduce staff
turnover
Tell our
story
better
Revitalise
the Energy
business
Density not
diversity
Exploit revenue
synergies where they
exist but not where
they don’t
21
Progressing
Delivered
Delivered
Progressing
Progressing
2020 – Strategic priorities –
Evolution not revolution
PEOPLE
CLIENTS
CONNECTIVITY
Make RPS a great place
to do great work
Grow our business by delivering
great work for our clients
Make it easy
to work together
“In 2019 we ran a thoughtful and comprehensive strategy and planning
process. We did this with management teams at a global and local level,
and with the Board. The outcome was a recognition that we were ready
to move our priorities on and that the time was right to put our clients
at the heart of our strategy for 2020. We will achieve organic growth by
delivering great work for our clients and our three priorities are designed
to achieve this.”
Judith Cottrell
Group Strategy Director
Strategic reportReport and Accounts 2019
PEOPLE
Building on our foundations
“In 2018 we laid the foundations for a People strategy designed to
attract and retain the best people. 2019 has seen a seismic shift in
the experience we offer our employees at RPS. It was a year focused
on realising the investment that has been made and starting the
professionalisation of experience and services we provide for our
people and offer the business.”
Liza Kane
Group People Director
Underpinning our people strategy is a desire to make
all our current and future employees feel that RPS is
a great place to do great work.
Our culture – embedding a culture of high
performance to support our staff to succeed
22
We inspire our
people to deliver
our strategy
We create a high
performance
culture and reward
accordingly
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
Our great place to do great work strategy inspires our
people to be their best self and be part of a successful
team in a results driven organisation that engages
and retains talent.
To ensure we were working on the right things in the
right way in 2019 and in recognition that the business
was in different stages of evolution, we adopted the
mantra of ‘think global, act local’ as opposed to a
‘one size fits all’ approach. This pragmatic mindset
has meant we have been able to implement a wide
range of initiatives this year.
Because of the calibre of our people, we attract
complex projects. As a result, RPS is not short on
stimulating work. Stimulating work requires a
working environment that allows our people to thrive
and reach their full potential. For this to happen we
have encouraged local initiatives that are tailored to
the needs of our people on the ground to flourish.
This has been achieved by improving the flow of
information employees receive, connecting pay to
performance and supporting our people to recognise
the work that counts to ensure we are all working on
what matters.
Y
L
T
N
E
D
I
F
N
O
C
C
I
T
A
M
G
A
R
P
We solve
PROBLEMS
THAT MATTER
e
r
a
e
W
e
r
a
e
W
R
E
H
T
E
G
O
T
R
E
G
N
O
R
T
S
Winning mindset
At the start of the
year, when we
launched our new
brand, we introduced
our behaviours that
underpin our new
purpose and promise
and give us the
framework to focus on
absolute delivery in the
right way. Created by our people, our behaviours are
at the heart of our people strategy. The connection
was clearly felt – when we launched a behaviours
awareness program of voluntary learning, we saw an
immediate uptake of 85% in the weeks that followed.
Our behaviours have also strengthened recruitment
processes, performance management, business
strategy rationale and client pitches.
We make it
EASY TO
CONNECT
Report and Accounts 2019
Closely linked to behaviours has been our emphasis
on leadership effectiveness across the organisation.
As well as providing a quarterly CEO forum for our
global senior leadership community, we established
a global line manager community – a first for RPS. For
the first time there has been targeted support for this
group to help them be the best managers they can be.
Nurturing our talented people around the world
In 2019 we launched Progress@RPS – a global
performance and development framework that
puts our employees in the driving seat of their
own growth at RPS. Based on the principle of more
frequent and meaningful conversations, our people
now have joint ownership, with their line manager,
of their careers. This is backed up with a wealth of
support for our people in achieving their ambitions
and supporting RPS in recognising the value in the
contribution our people make.
At a local level, businesses and teams implemented
their own initiatives targeted to their people, in their
business and in their operating environment. There
was a groundswell of activity including graduate
specific initiatives around connectivity to mental
health campaigns including RU OK in Australia and a
stress management workshop for colleagues in our
Consulting business.
Enhancing our learning and development offering
for our people is a key priority for 2020. In 2019 we
articulated our vision and work is well underway to
turning this into a reality next year.
GLOBAL MOBILITY
OPPORTUNITIES
FOR OUR BEST
AND BRIGHTEST
CASE STUDY
Nathan Benfer
Principal Consultant, Energy
· Moved from Australia to UK
· MetOcean to Energy
· Deep expertise – MetOcean data
· Transferable skills – marine and freshwater
environment projects, water movement and
material/pollutant transport modelling
MAKING
PROGRESS
STAFF
5,000
IN 2018
IMPROVED TO
80%
PERFORMANCE
REVIEWS IN 2017
50%
23
IN 2019
ROSE TO
>95%
360’s for line managers
t o b e r
e r - O c
b
December - Ja
n
CHECK IN
4
CHECK IN
1
u
a
r
y
Septe m
Year end
Performance
Development
Review, evaluating
objectives and our
behaviours
Talent and succession
planning and mid year
check in
y
l
u
J
-
e
n
u
J
CHECK IN
3
J
a
n
u
a
r
y
-
F
e
b
r
u
a
ry
Salary and promotion
effective date shared
via TRS and line
manager briefing
pril
A
CHECK IN
2
February - March
Peer calibration
and promotion
recommendations
Rating and promotion outcomes,
objective setting, career discussion
and development plans
Strategic reportReport and Accounts 2019
THE FUTURE
IS BRIGHT
CASE STUDY
Patrick Leahy
Project Manager, Project Management, Melbourne
International Project Management
Association (IPMA) Young Project Manager
of the Year 2019
RPS AEC GENDER
INDEX LEADER
BOARD
24
43% F
57% M
GROUP
LEADERSHIP
TEAM
33% F
67% M
SENIOR
LEADERSHIP
GROUP
33% F
67% M
AMBITION 40%
RATIO BY 2025
AEC REPORT 2019
A working environment that helps us deliver
making complex easy for our people and
our clients
RPS is a business full of deep expertise and fresh
thinking and that is critical in our line of work. The
diversity of our people contributes to the diversity
of our thinking significantly. We saw more innovation
than ever before coming to the surface in 2019. The
setting up of global forums – whether centred on a
specific expertise such as AI or an opportunity we
want to leverage like offshore wind – considerably
enriched the debate in 2019.
We acknowledge that for our business to grow; we
depend on diversity of talent and breath of thinking
from a range of backgrounds. Our diversity of talent
is what makes RPS a great place to do great work. We
are delighted to be the 2019 AEC industry leaders in
the gender index of larger firms, this represented in
our Board, Group Leadership Team and our global
Senior Leadership Group. In 2019 women currently
make up 43% of our Board and 33% of our Group
Leadership Team. Our intent is to have our Senior
Leadership Group 40% female by 2025. This figure
currently stands at 33%.
Our new behaviours are central to creating an
inclusive and diverse culture. Our global behaviours
training, which is also a key component of
onboarding, talks about wanting our people to be
respectful of each other, acknowledge diversity and
recognise the potential and contribution of everyone.
To foster this, we encourage our employees to bring
out the best in one another and assume best intent.
A modern workplace and providing our people with
the tools and equipment to create the fresh thinking
and deliver for our clients has made great strides this
year. Working with our technology partners we have
significantly upgraded and modernised key tools,
with more to come in 2020.
All this is set against an unrelenting focus on making
RPS a safe place to work – whether in our premises
or on site with clients. We are very proud that our
safety statistics continue to be strong – this gives our
people the confidence to focus on their work, thrive
in their surroundings and be the best they can be.
Strategic reportReport and Accounts 2019 RPS Director confirmed as 100th President of the Institution
of Structural Engineers
· Professional Reviewer of graduate engineers – Institution of Civil Engineers
and Engineers Ireland
· Mentor for RPS’ young engineers
· Royal Academy of Engineering Visiting Professor at Queens University Belfast
Professor
Don McQuillan
Transparency and clarity for our people when
it comes to reward
· Made improvements to our SIP scheme
In support of RPS’ commitment to be a more
consistently results driven organisation, we
introduced a number of improvements and initiatives
to help our people make the connection between
their performance and RPS’ success.
2 0 1 9
RPS GROUP PLC
INTERNATIONAL
SHARE PURCHASE
PLAN
· Introduced total
reward statements
for employees
D
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W
E
R
L
T
N
A
T
O
T
E
M
E
T
A
T
R
U
O
Y
S
r p s g r o u p . c o m
rpsgroup.com
P l e a s e b e a d v i s e d t h a t y o u r s t a t e m e n t c o n t a i n s p e r s o n a l
i s p e r s o n a l
i n c l u d i n g s a l a r y d e t a i
w h i c h
t o y o u .
l s ,
d a t a ,
International Share Purchase Plan
Employee booklet Australia
2019
· Launched a new Annual
Discretionary Bonus
Plan for our senior
leaders, founded on the
principles of aligned,
targeted, competitive,
trusted and responsive,
giving our people the ability to share in the success
of RPS through profit, fees and lock up days and
personal performance objectives
· Introduced a new global performance rating scale
which includes an assessment of behaviours
including Absolute Delivery which was defined by
our Senior Leadership Group
· The end of 2019 also saw the introduction of global
SMART objectives linked to common KPI’s that will
be universally rolled out in 2020 for the first time
With the introduction of our performance
management framework, greater rigour and
transparency around Reward and the embedding of
our new behaviours, we have laid strong foundations
for 2020. Our people priorities will remain focused
on making RPS a great place to do great work
but will also be closely aligned to our clients and
connectivity imperatives. 2020 will see a focus on
Learning and Development – in relation to sales and
project management capabilities. We will continue
to consolidate the investment in performance and
reward and our drive to modernise how we provide
our services will be at the forefront as we digitise the
assessment and development of our talent.
25
Maintaining momentum in 2020
Sales and RPS
Academy
700+
employees
to be enrolled
Consolidating
investment in
performance
and reward
Opportunities,
roles and skills
aligned with
strategy
Introduce
IT enabled
platform
under the
Progress
banner
Strategic reportReport and Accounts 2019
BRAND
A change in mindset giving us clear strategic direction
“At the start of the year we reset ourselves with the launch of a new
global brand for RPS. This important step in our evolution defined who
we are, signified a change in mindset and set the framework for our
strategic direction – our purpose, our promise and our behaviours.”
Chantalle Meijer
Group Marketing Director
26
A brand built on strong sense of PURPOSE
The character of RPS as defined by our people
Our purpose reflects our commitment to creating
shared value and reinforces our undertaking to
challenge industry norms to solve problems that
matter. Over the past year we’ve laid the foundations
for a global corporate responsibility framework that
looks at the services we offer, the environment
we create for our people and our impact on the
communities we serve. This work will continue
in 2020 and will underpin and continue to foster
a purposeful, responsible business culture that
empowers our people to live our purpose.
The way we deliver our purpose and our promise is
underpinned by five behaviours. Developed by our
people, these behaviours reinforce everything we do.
How we do things is the essence of our brand and
gives the sense of what it is to like to work with RPS
and for RPS. We know we are stronger together when
we develop integrated solutions for our clients. By
easily connecting our deep expertise, we can deliver
new, innovative thinking for clients. This innovation,
coupled with a commitment to solve problems in a
confident and pragmatic way, naturally delivers results.
A PROMISE that we repeatedly deliver
Bringing our brand to life
The articulation of our promise, making complex easy,
provided much needed clarity in our markets that
have been exposed to considerable political instability
and uncertainty. The focus on making complex
easy for our clients and repeatedly delivering on
our promise has deepened relationships, created
resilience and preserved client confidence.
Over the past year, we’ve invested in the way we
express ourselves through our visual and our verbal
identity – our brand personality. We’ve created
comprehensive guidelines and writing principles
designed to show empathy to our clients who are
often time poor and overwhelmed by content.
Repeatedly expressing ourselves in a way that
consistently delivers high value client experiences
at every interaction with our brand will deliver
trust and loyalty.
“Overall, we thought you were a great fit for Clipper from a capability and cost
perspective but also, we felt there was a pragmatic and collaborative approach
demonstrated that would fit with our culture.”
Nicholas Beadle, Clipper Logistics Plc
Strategic reportReport and Accounts 2019
In 2018, we partnered with a digital agency to design
and build a fully responsive website to create high
value client experiences and drive organic growth.
In January 2019 we launched our new global website.
Geotargeting capability ensures a localised and
targeted visitor experience and live chat is building
demonstrable pipeline velocity and revenue
conversations. Since launching the new site we’ve
received positive feedback from clients, investors,
our people and prospective new staff.
· 2–3 clicks to reach an expert
· Fully responsive
· Designed for mobile-first
· Targeted geolocation functionality
· Scalable
53%
increase in site visits
in 2019 compared
to 2018
2m
page views
Visitors spending
31.7%
more time on the site
compared to last year
3,000
web service enquiries
In 2019 we launched RPS’ Templafy solution –
automated templates making it easy for our
people to consistently produce high quality,
branded documents. The launch of Templafy
was a signature digital transformation project.
Templafy has...
· Given us a global understanding of our
regional document requirements
· Driven engagement in the brand through
local ownership
· Given RPS better management of legal
documents and disclaimers
· Met the complex design needs of a global
business with an easily accessible repository
of templates
· Improved work flow and considerably reduced
time spent on preparing material
2020 will see us continue to leverage the investment
by developing the skills of our users and refining our
document library to provide support on a wider
range of documents and applications.
“I am happy to say that the Canadian
Team is fully embracing the Templafy
Platform. Feedback from team members
is positive and based on recognition of the
ease of creating consistent documents/
reports. Based on the emphasis put on the
rebranding effort over the last year, it is
great to see a platform that helps support
and enhance the RPS brand.”
Roger Edgecombe, Senior VP – Geoscience, RPS Canada
2020, the next chapter
We know our markets and we know our clients.
We’ve recognised that social, technological,
economic, political and environmental factors
are impacting and influencing our clients' purchasing
decisions. Targeting the right clients using data
driven insights and developing optimised, connected
client journeys across each stage of our sales cycle in
markets where there is a demand for our services will
further reinforce the ethos of our brand.
27
Strategic reportReport and Accounts 2019 CONNECTIVITY –
DATA, DIGITAL AND TECH
Using data, digital and technology expertise to make complex easy
“We have moved at pace to deliver digital initiatives designed to
enable our teams to work smarter to enhance client engagement
and delivery.”
Kelly Olsen
Chief Information Officer
In 2018 RPS took a significant step away from being
a conglomerate of small businesses to becoming
a global business of inter-connected sectors and
services. We recognised that by combining our deep
expertise with data and digital technology capabilities
we held a unique and enviable position to repeatedly
deliver high value client experiences.
28
Our investment focused on:
· Leveraging the power of data
· Investing in digital solutions where they add
value and make complex easy
· Creating modern technological capability
to enable enhanced client experiences
· Cross selling our expertise and capability
across the asset lifecycle
Tangible progress
In 2019 we invested in future proofing our
technological capabilities, building our data
capability and continued to deliver on our
promise of making complex easy for our clients.
We also made a significant move to de-risk the
business by looking at the design of our own
business critical systems and processes and
how we can integrate them.
We are future proofing our technical
capabilities to ensure we have the capability
and expertise to embrace opportunities, are
fit to face the challenges of a digital age and
ready to respond to the pace of change.
In 2019, we:
· Built a global technology leadership team who
have reset the provision of technology services
at RPS to provide both critical business support
and client facing expertise
· Are better equipped to robustly handle cyber
security threats to ensure the integrity of valuable
data – both ours and of our clients, is protected
· Leveraged the cloud more than we have ever done
before, completing technology optimisations that
will allow us to disrupt markets by executing large
models in the cloud. We have also built a platform
for modern provisioning, that means we can
deploy new devices directly from the cloud
RPS manages IT systems and security risk
centrally – maximising reliability, resilience
and disaster planning.
A dedicated Security team monitors activity,
hardens systems and responds to events.
Policies, procedures and security measures
are regularly reviewed and enhanced. In 2019
additional automated technical and operational
security measures were introduced, including:
· Cloud monitoring
· Enhanced user authentication
· Encryption
· Security awareness training
· Attack simulations
Strategic reportReport and Accounts 2019 We built our data capability
Advanced analytics and artificial Intelligence are
helping us to improve operational efficiency and lift
the quality of projects by supporting our decision
making. By applying advanced analytics, we can pick
up on patterns and relationships in our project data
that are not immediately obvious to the human eye.
Artificial intelligence is being applied to materially
speed up and sometimes even eliminate whole
elements of traditional project delivery, particularly
routine and repetitive tasks.
As part of a strategy of promotion and best practice
of these progressive technologies, we have created
a Community of Practice to facilitate discussion,
collaboration, and to share ideas and best practice
between members.
We continued to make complex easy
for our clients
Our UK Services Water business is a great example
of how client facing teams have embraced digital,
data and technology and put customer experience
at the heart of this strategy – being smarter with
client data, leveraging potential of digital technology,
commercialising the untapped value of data and
using technology to support new ways of working
that help us meet the complex needs of our clients.
And in other segments, highlights include:
· Surveying marine seismic data
· Collecting data from solar farms
· Sharing meteorological and oceanographical
information
· Using AI solutions to drive efficiency in water
treatment processes
We invested in business critical systems
and processes
Enterprise Resource Planning (ERP) is a flagship
project for RPS in support of our focus on aligning
and connecting our segments. The nature of RPS’
growth through acquisition led to a complex system
of finance, operations and project management tools
being used in silos in our offices around the world.
RPS is making a significant investment in a new global
ERP system, Microsoft Dynamics 365, to upgrade
and streamline the many systems and processes
across RPS. In time this will provide one, easy access,
real time finance system that ensures one financial
ERP TIMELINE
2017
2018
2019
2020
Single, modernised and robust platform in
country for North America and Norway
Announced strategic investment of £14m
to connect our segments and business
systems with a new ERP with a single
common platform
Completed global design, built platform
and went live in part of Australia and the
Netherlands. Invoices out, suppliers paid,
books closed for December
Australia – Phase 2 in H2
Assess timeline and prepare for
UK and Ireland migration
reporting view for all RPS businesses worldwide.
The platform provides the flexibility to grow with our
business and integrates seamlessly with our existing
Microsoft Office 365 ecosystem.
We launched a Modern Workplace initiative
We also laid the foundations for our Modern
Workplace initiative that will see workplace
technology across RPS upgraded in 2020 to bring
us up to date with modern practice. The premise
of our Modern Workplace project is to create an
environment that:
· Ensures work and confidential data is better protected
· Gives our people access to the tools, documents
and information they need to do their job,
anywhere, anytime
· Allows us to easily connect, meet, chat, share and
work on projects together
· Is fully supported with training and support to help
our people become expert users
Modern Workplace is central to us modernising,
having a platform fit forthe future and creating a real
step change in how we work at RPS.
29
OPTIMISING CLOUD
TECHNOLOGY TO
DISRUPT THE MARKET
MetOcean business – Rhode Island, USA
· Develops industry leading process models to predict
ocean chemical spills for search and rescue scenarios
· Used in North America, Australia and increasingly
South East Asia
· RPS nearing completion on phase one optimisations
that will reduce model run times from 10 days to less
than eight hours
Strategic reportReport and Accounts 2019
Paul Aitken
CEO
Services UK & Netherlands
Data, digital and tech – commercialising
the opportunity
Our UK Services Water division creates shared value through the development
and delivery of pragmatic asset management strategies. Using our deep
expertise and digital technologies to interpret multiple sets of complex data,
we deliver high value client and user experiences.
30
The complexity: Reduce
leakage across the Welsh
Water network by 7%
The answer: Get available
data to work harder to better
predict leakage
RPS solution: Apply our WaternetTM software
to give better insight for repeatedly high
quality, timely decisions
The outcome: Improved resilience and
sustainability through
· Lowered leakage – by 11 million litres
per day
· Reduced interruptions to supply
· Minimised customer disruption
The complexity: Support
Thames Water in optimising
maintenance schedule to
achieve critical leakage
reduction KPIs
The answer: Design
a platform to monitor their pressure
management program – a critical element
of water management
RPS solution: Leverage our WaternetTM
software to develop a platform that monitors
the system, flags issues and identifies
maintenance needs
The outcome:
· 24/7 monitoring
· Automated maintenance activity reports
· Reliable, integrated, alert system that
flags issues more quickly
· Better planned maintenance activity
The complexity: Improve
the understanding of water
flow paths in the urban
environment at low cost
The answer: Automate
data collection for more
sophisticated analysis
RPS solution: Design and build object
detection software using AI to map and model
entry points to urban drainage systems
The outcome:
· Greater understanding of how and where
flows enter urban drainage networks
· Significantly improved modelling accuracy
· Improved confidence in modelled flooding
and pollution reduction solutions
The complexity: Support
clients to exploit efficiency
opportunities in a data-rich,
digital water world
The answer: Use agile
methodology to take a
streamlined, more collaborative approach to
problem solving
RPS solution: Bring the right people together
– clients, technical experts and industry
leaders – to discuss critical issues such as
extreme water scarcity, substance extraction,
in-pipe robots, community-based sensor
technology and industry terrorism
The outcome:
· Greater creative thinking led to a wider
range of opportunities /solutions
being identified
· Follow on actions focused on detailed
investigation of data were developed
Report and Accounts 2019 John Tompson
CEO
Energy
31
OFFSHORE
WIND
NATURAL
RESOURCES
Offshore wind organic growth initiative –
meeting the market demand for renewable energy
Opportunity
As the offshore wind industry has matured and costs have reduced, existing offshore wind markets have
continued to expand, and new markets have continued to emerge globally. We will continue to take a
pragmatic approach towards developing our Energy business into new sectors (such as offshore wind)
to build resilience and expand our reach.
Making complex easy
· Leveraging our global expertise and connecting services across segments, we are winning new work – such
as unexploded ordnance and Floating LiDAR
· We have established cross segment working groups whose role it is to develop our strategy and coordinate
our market approach
· We will exploit the deep expertise of our metocean and environmental consultancy to gain early market
share and then sell wider services across the asset lifecycle
Outcome
· We recognise there are growing opportunities in offshore wind and will leverage our brand reputation into
new and emerging markets to achieve organic growth in our top line revenue
Report and Accounts 2019
SEGMENT HIGHLIGHTS
5% fee growth in a stagnating and
uncertain market; collaborative
working strengthens position
for any market upturn.
John Chubb
CEO
Consulting UK & Ireland
Prospects, a group for our
younger staff to shape the future,
has been established across the
Consulting business.
32
Doug Matthys
CEO
North America
John Tompson
CEO
Energy
Won Texas Public Works
Association project of the year,
Environmental Category.
($2–5 million)
Launched professional excellence
initiatives including learning and
development program, mentorship
program for young professionals,
and staff incentive schemes.
Acquired Reservoir Imaging
Limited, a leading seismic
software company for £4m.
Implemented performance
review processes, succession
planning initiatives and on-line
training for the Global Energy
teams.
Westminster
City Council
An initial win for Consulting's
project management business
for a mixed-use scheme in Pimlico,
London expanded to include 13
RPS disciplines and 20 priced
activities. The strength of this
offering resulted in two further
project wins from the client.
Offshore Wind
Growth Initiative
In 2019 three segments set up a
forum to bring together technical
expertise to define and coordinate
our approach to offshore wind
market opportunities, making it
easier to collaborate, position
RPS in this market and drive
organic growth.
Strategic reportReport and Accounts 2019 Global measurement
and assessment of
factory premises to
standardise metrics
Bringing specialist and
local knowledge of a Dutch
measurement and registration
method, the Services team from
the Netherlands worked with
North American colleagues to
perform the assessment on
location at the ASML factory
in San Diego.
Queensland Advancing
Clean Energy School
Program (ACES)
Using Norway's MyProjects
software, RPS has helped shape
the Queensland ACES program
reducing operational costs and
contributing to the state’s 50 per
cent by 2030 renewable target.
Improved Water Quality to
customers of Scottish Water.
Paul Aitken
CEO
Services UK & Netherlands
Piloted Project Management
Academy training module in
UK and Netherlands, delivered
by Norway, ahead of global
launch.
Appointed to provide strategic
and operational advice to New
Roads (Nye Veier) in its 56 billion
NOK planning and execution of
improved road building in Norway.
33
Halvard Kilde
CEO
Norway
Developed in-house training
module – RPS Academy – to
provide project management
training in Norway and other
segments.
Following the acquisition of
Corview, launched a new advisory
division with leading offer to the
market, focused on infrastructure
advisory.
Embedded client engagement
program to respond to market
challenges and promote
cross selling.
Ross Thompson
CEO
Australia Asia Pacific
Strategic reportReport and Accounts 2019 OUR APPROACH TO
RESPONSIBLE BUSINESS
Living our purpose
Our purpose of creating shared value underpins
a responsible business culture that informs our
interactions and decision making and is reinforced by
our behaviours. We know this matters to our people,
clients and the communities in which we work. Our
corporate responsibility framework covers how we
ensure good governance and the way we manage
our environmental and social impacts. It applies to
all elements of our business; our people, our clients,
investors and the communities in which we work
and live.
A snapshot of where we focused our
energies in 2019
· Launch of a new brand and strategy – 2019 saw
the launch of our new strategy, centred around our
purpose, promise and behaviours
· A renewed attention on our approach to
corporate responsibility – Developing a
framework for being a responsible business that
supports us in delivering our purpose
· Investing in our people – Our people are
undeniably our greatest asset. This year’s focus
has been investing in performance management,
career development and developing our
behaviours.
people p.22
· Delivering for our clients – We continued
to provide our clients with best practice
environmental advice, driving sustainability
strategies and approaches and supporting
robust environmental, social and governance
due diligence
· Investing in our future – Future-proofing our
business processes to ensure we are best placed
to work with our clients on complex issues
Unlocking shared value, responsibly
Our potential to create shared value is unlocked
when we align our approach across our people, the
work we do with clients and how we interact with the
communities in which we work. In 2019 we focused
on two key themes; sustainable behaviours and
investing in future generations.
34
Our approach enables our purpose and supports
our business by:
· Making RPS an employer of choice that
attracts and retains the best talent
· Ensuring we provide the best services and
advice to our clients
· Reducing risk and building resilience in
our business
· Increasing transparency
· Giving substance to our story so our
employees, clients and investors have a
deeper understanding of who we are,
what we do and how we do it
We create shared value by solving problems
that matter to a complex, urbanising and
resource-scarce world.
Strategic reportReport and Accounts 2019 Our people
Our people want to know they are part of a business
with purpose that delivers positive social and
environmental impact. This is key to us attracting
and retaining the best talent.
We are committed to investing and developing our
next generation of talent, working towards creating a
pipeline of future leaders and continuing to deliver
the best work for our clients. You can read more
about our key people achievements on page 22.
The environment
A changing climate, together with the pressures of
population growth and urbanisation, require that
society and business work together to adapt. RPS
has unrivalled global capabilities that enable our
clients to take a balanced approach to deliver a
sustainable future.
We are fully committed to reducing our carbon
footprint across our global operations and our
‘leading minds’ are uniquely placed to work with
our clients to guide them in the implementation
of sustainable business practices.
Throughout our business our people are passionate
about promoting sustainable activities through
the choices we make and the initiatives we invest
in towards reducing our carbon footprint. Our
greenhouse gas reporting can be found on page 47.
Key work we have done this year includes:
· Introduction and increased use of video
conferencing to reduce travel
· Our Newark, UK office marked its certification to
The Planet Mark award for the sixth year in a row.
Their joint efforts saw an 11.8% decrease in carbon
footprint per employee
We support our clients to develop environmental and
socially responsible solutions. This isn’t new to us. RPS’
roots are in environmental consultancy. We have always
done this and will always continue to work this way.
John Chubb
CEO
Consulting UK & Ireland
LIGHTENING OUR FOOTPRINT AND
MAKING OUR MARK ON THE PLANET
In Newark, we marked our sixth successive year
of certification to The Planet Mark by holding a
sustainability and wellbeing awareness day.
INVESTING
IN FUTURE
GENERATIONS
Amy Rogers
Environmental Scientist
35
CASE STUDY
“I wanted to join RPS’ graduate scheme because
of the training and support on offer. The course
content is varied and includes development in
essential soft skills alongside technical areas.”
TRANSFORMING DISUSED STEELWORKS INTO
RECREATIONAL PARK FOR THE BENEFIT OF
LOCAL RESIDENTS, WORKFORCE AND VISITORS
Considering the extensive contractual risks presented
by the uniqueness of the site, characteristics of the
waste material and location within Cork Harbour, this
is a significant achievement showcasing excellence in
Irish engineering and its positive impact on society.
Report and Accounts 2019
Our communities
Our impacts are not limited to the advice we give
our clients or the environment we create for our
employees. We also have a responsibility to the
communities in which we work and operate. To live
our purpose our work must create shared value; for
our people, clients and importantly our communities.
· We are working with global charities to help
communities mitigate the effects that they are
feeling from resource scarcity. Our ongoing
support of Tree Aid is a great example of this. At
a local level our employees have taken part in a
variety of local initiatives, including a river clean
up as part of Keep Scotland Beautiful’s Upstream
Battle campaign
· Our work with communities also includes
activities that focus on support to developing a
diverse pipeline of future talent. One example of
this is our work with Yalari in Australia, who focus
on empowering indigenous children through
education. We have provided financial support
and volunteers for their fundraising events
Bongo River Trees Project in Ghana
36
Looking to 2020
Keep Scotland Beautiful
We have defined our behaviours to support our purpose. As we embed these throughout the organisation our
2020 global corporate responsibility approach will be structured as a three-year corporate responsibility plan
that reflects our purpose, promise and behaviours and informs the way we develop our approach to managing
environmental and social impacts.
Continue to provide
the best practice
environmental, social
and governance advice
to clients
Continue to support
our people – great
place to do great work
Support our
communities –
our work creates
shared value
Focus on our
environmental
impact – manage and
reduce our footprint
Strategic reportReport and Accounts 2019 FINANCIAL
REVIEW
This has been a difficult trading year for the Group with challenges in a number of
segments and necessary investment in strategic priorities impacting results. Our
conversion of profit into cash was again good but net bank borrowings were higher
at the year end partly due to increased capital investment during the year.
Performance summary
The Group’s key profit performance metrics for the year are summarised in the table below:
Gary Young
Group Finance Director
2019
2018
2018
(constant currency)
Key financial performance metrics
Revenue
Fee income1
Underlying operating profit1
Underlying operating profit margin1
PBTA1
Adjusted diluted earnings per share1
Statutory reporting
Operating profit
PBT
Statutory diluted (loss)/earnings per share
Trading performance
£m
Energy
Consulting UK & Ireland
Services UK & Netherlands
Norway
North America
AAP
Total segment profit1
Unallocated expenses
Underlying operating profit1
£612.6m
£556.5m
£43.4m
7.8%
£37.3m
12.31p
£10.9m
£4.8m
(0.54)p
2019
11.1
15.1
10.8
6.0
3.4
6.4
52.7
(9.3)
43.4
£637.4m
£574.2m
£54.0m
9.4%
£50.2m
16.34p
£44.9m
£41.0m
13.23p
£634.3m
£571.4m
£53.8m
9.4%
£49.9m
16.24p
£44.7m
£40.8m
13.16p
37
2018
2018
(constant currency)
8.9
15.4
13.5
6.2
5.1
13.3
62.4
(8.4)
54.0
9.1
15.4
13.5
5.9
5.4
12.9
62.2
(8.4)
53.8
Note:
1. Alternative performance measures are used consistantly throughout the report and accounts. For further details of their purpose,
definition and reconciliation to the equivalent statutory measures see note 3 to the consolidated finacial statements.
Strategic reportReport and Accounts 2019 38
Notwithstanding a good performance from Energy,
2019 was a difficult year. Energy benefitted from
improving market conditions and had a good year.
The political uncertainty in the UK impacted on
Consulting UK and Ireland for much of the year,
although the uncertainty was significantly reduced
by the general election that took place in December.
The performance of Services UK & Netherlands was
impacted, as anticipated, by the usual reduction in
activity on the England and Wales water business
as the current AMP regulatory cycle entered its
final year. Despite strong markets in North America
our performance was disappointing, largely due to
ongoing retention and recruitment challenges in
the region and management has accordingly been
strengthened, as it was in Norway where we were
impacted by the loss of some senior staff during
the year. The results of Australia Asia Pacific were
impacted by the hiatus caused by state and federal
elections at the start of the year and a slow property
market, although there was some improvement in
trading conditions in the latter part of the year. The
increase in unallocated costs reflects increased
investment in IT to improve the connectivity of our
various businesses.
less certain than in previous impairment reviews.
Consequently, this resulted in the impairment
of goodwill.
We completed the global rebranding of RPS, which
introduced a new logo, colour scheme and a new
website for a total cost of £1.0m.
Legal fees were incurred totalling £1.4m investigating
potential issues regarding the administration of
US government contracts and/or projects. The
investigation is ongoing and further exceptional costs
for legal fees will be incurred in 2020. This matter is
disclosed as a contingent liability in note 26.
Our new ERP has been implemented in the
Netherlands and part of Australia. The amount
expensed in 2019 in respect of change management
and data migration was £1.2m (2018: £nil). Further
exceptional cost of this nature will be incurred in 2020
as the roll out of the ERP continues.
We anticipate that total exceptional costs in 2020 will
be broadly similar to the amount incurred in 2019
excluding the goodwill impairment charge of £19.8m.
Net finance costs
Foreign exchange
Net finance costs were £6.1m (2018: £3.9m), which
includes £1.9m in respect of IFRS 16 (2018: nil).
Excluding lease obligations, the average total net
borrowings in 2019 was £104.4m (2018: £87.2m).
Interest expense includes imputed interest on
deferred consideration of £0.2m in 2019 (2018: nil).
Exceptional items
Exceptional items in 2019 resulted in costs totalling
£23.4m (2018: £nil).
These included a goodwill impairment charge of
£19.8m relating to the impairment of our business in
Australia Asia Pacific. Performance of this business was
poor in the first half of 2019 and although it improved
in the second half, was not as good as anticipated. The
Board considered the risks faced by the Australian
economy and concluded that the prospects for the
business, particularly from historic acquisitions, are
Approximately 69% of underlying operating profit
was derived from operations other than in UK,
mainly in Australia, US, Norway, Netherlands, Ireland
and Canada. The Group’s consolidated results are
therefore significantly exposed to the effect of
exchange rates when translating the results of
non-UK operations into sterling.
The profit in 2019 suffered marginally from exchange
movements on the conversion of overseas results in
comparison to 2018. PBTA in 2019 would have been
£0.3m higher than reported had 2018 exchange rates
been repeated in 2019. The PBTA in 2018 would have
been £0.3m lower than reported if 2019 exchange
Strategic reportReport and Accounts 2019
rates have prevailed in 2018. Statutory profit before
tax in 2018 would have been £0.2m lower than
reported if 2019 exchange rates prevailed in 2018.
useful indication of performance and trends over time.
Statutory diluted (loss) / earning per share was (0.54)p
(2018: 13.23p).
Organic growth at constant currency
Dividends
The acquisition of Corview was completed in February
2019 and Reservoir Imaging Limited in September.
There were no acquisitions in 2018. Adjusting for the
impact of acquisitions and at constant currency the
organic fee decline in the year was 4% and operating
profit decline was 21%.
Tax
The effective tax rate for the year on adjusted profit
before tax is 25.4 % (2018: 26.8%). The reduction is
mainly due to prior year adjustments, proportionally
less profit from Australia, offset by an increase in
irrecoverable withholding tax suffered that mainly
arises in our Energy business.
The statutory tax expense for the year was £6.1m
(2018: £11.2m) on a profit before tax of £4.8m (2018:
£41.0m). The effect of tax on the impairment of
goodwill incurred in the year of £19.8m is nil.
Amortisation of intangible assets and
transaction-related costs
Amortisation of intangible assets and transaction
related costs totalled £9.1m (2018: £9.2m). Included
in this total is amortisation of acquired intangibles
£8.6m (2018: £9.1m), and acquisition related third
party transaction costs of £0.5m (2018: £nil).
EPS
Adjusted diluted EPS was 12.31p (2018: 16.34p, 16.24p
at constant currency), a decrease of 24% over last year
at constant currency. The Board consider that adjusted
EPS, which is statutory EPS excluding exceptional items
and amortisation of intangible assets and transaction-
related costs and the tax thereon provides a more
The Board announced a change to its dividend
policy in the 2019 Interim Results announcement.
The policy was rebased such that full year dividends
will equal, in total, 40% of the adjusted earnings for
the financial year. Accordingly, the total (paid and
proposed) dividend for the year amounts to £10.0m
(2018: £22.1m) equivalent to 4.42p per ordinary share
(2018: 9.88p). The proposed final dividend amounts
to £4.5m (2018: £14.4m), equivalent to 2.00p per
share (2018: 5.08p) will be paid on 15 May 2020 to
shareholders on the register of members at the close
of business on 24 April 2020 subject to approval at the
Annual General Meeting on 30 April 2020.
Acquisitions
39
In February we acquired the trade and assets of
Corview an Australian transport advisory consultancy,
for total fair value of consideration of AUD 29.2m
(£17.3m). The amount paid on completion was AUD
17.6m (£9.8m) with the deferred consideration balance
payable on the first second and third anniversaries of
completion. We acquired AUD 2.1m (£1.2m) of cash
at acquisition. Based upon provisional fair values of
the acquired net assets, the fair value of intangible
assets arising was £17.5m. This includes goodwill
of £13.3m. It contributed £5.9m to AAP segment
fee income and £0.8m to AAP segment profit since
acquisition. The integration of Corview into the
AAP segment has been substantially completed.
In September we acquired Reservoir Imaging Limited,
a seismic software services consultancy, that
strengthens our existing marine seismic capabilities
in our Energy segment. The fair value of consideration
was £4.0m of which £2.7m was paid at completion,
with the deferred consideration payable on the first
and second anniversaries of completion. Based upon
provisional fair values of the acquired net assets,
the fair value of intangible assets arising was £2.5m.
This includes goodwill of £1.5m. It contributed £0.6m
Strategic reportReport and Accounts 2019
to Energy segment fee income and £0.1m to Energy
segment profit since acquisition. The integration of
Reservoir Imaging Limited into Energy is progressing well.
roll out the system to the rest of Australia during 2020.
Deferred consideration outstanding at the year
end was £8.7m (31 December 2018: £0.3m).
Our leverage (being net bank debt plus deferred
consideration expressed as a percentage of adjusted
EBITDA) at the year end was 2.0x (31 December 2018:
1.3x) which is at the high end of our desired operating
range of 1.0x to 2.0x. We expect this will reduce during
2020. The bank covenant limit that applies to all our
facilities is 3.0x.
Bank facilities
The Group’s main banking facility was refinanced in
July with Lloyds, HSBC and NatWest. The facility is a
committed multi-currency revolving credit facility
totalling £100m which expires in July 2022, that may
be extended to July 2024 with the banks’ agreement.
The facility includes an accordion feature whereby
the Company may request an additional facility up
to £60m although this is uncommitted and requires
lender approval.
The amount drawn under the facility at the year end
was £55.4m resulting in headroom of £44.6m. 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 seven year US private
placement notes of $34.1m and £30.0m that
40
Intangible assets
The net book value of intangible assets at the year
end was £378.7m (31 December 2018: £385.7m)
which largely comprises goodwill. The increase
during the year is attributable to intangible assets
recognised through the acquisition of Corview and
Reservoir Imaging Limited, investment in the new
ERP, less amortisation, impairment and the effect of
foreign exchange movements.
Borrowings and Cash flow
Net bank borrowings at the year end were £94.1m
(31 December 2018: £73.9m). Net cash from operating
activities was £37.6m (2018: £44.5m). Our conversion
of profit into operating cash was again good at 90%
(2018: 94%). It would have been better but for delays
in invoicing in the Netherlands and Australia arising
from the implementation of the new ERP there in
November. Lock up days* at the end of December 2019
were 69 days compared to 65 days at the end of 2018,
the increase due to the impact of the ERP. We expect
to reduce lock up during 2020. Our focus on improving
collections is demonstrated by average lock up days
for the year that were 69 days for 2019 compared to
71 days for 2018.
Net cash used in investing activities was £30.9m
(2018: £13.4m), the increase due to higher acquisition
expenditure of £10.1m (2018: £1.8m) and higher net
capital expenditure of £20.8m (2018: £11.7m). The
amount paid in respect of dividends was £16.9m (2018:
£22.1m) reflecting the rebased dividend policy.
Included within capital expenditure was £7.8m (2018:
£2.2m) invested in our new ERP system. We have
completed the global design phase and implemented
in the Netherlands and in part of Australia. We plan to
*(Being a calculation of the number of days taken between undertaking work for clients,
through billing to the collection of cash).
Strategic reportReport and Accounts 2019
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.
Capital structure
As at 31 December 2019 the Group had
shareholders’ funds of £368.3m (31 December
2018: £377.6m). The company had shareholders’
funds of £249.1m (2018: £270.6m) and 227.1m
fully paid ordinary shares in issue at 31 December
2019 (31 December 2018: 226.1m).
Basis of preparation and new
accounting standards
The financial statements have been prepared in
accordance with International Financial Reporting
Standards (IFRS) adopted by the EU and International
Financial Reporting Standards Interpretations
Committee (IFRS IFRIC) interpretations issued and
effective at the time of preparing the financial
statements. The Group’s significant accounting
policies are detailed in note 1 to the accounts on
pages 102 and 103. The Group adopted IFRS 16
“Leases” for the first time in 2019. The impact of the
adoption of this new standard is disclosed in note
32 to the consolidated financial statements. Bank
covenant compliance is calculated using accounting
standard IAS 17, that is pre the application of IFRS 16.
41
Strategic reportReport and Accounts 2019 RISK AND RISK
MANAGEMENT
Risk management
The nature of the activities that the Group undertakes
and its business model are described on page 10.
This gives rise to a range of risks consistent with a
commercial organisation of this type, the principal
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.
There are two principal components to the Group’s
system of risk management. The Group’s formal
system of Risk Management and Internal Control
and its principal components described on page
66. 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
Boards accordingly consider the risks to which
their component businesses are exposed and their
mitigation on an ongoing basis and at each of their
regular meetings. A structured reporting framework
is in place to support this activity. This rates and
analyses key risks to provide clear understanding
and enable identification of mitigating actions.
Against the background of reporting from this level,
the Group Leadership Team oversees the operational
management of the key risks to which the Group as
a whole is exposed. Reporting to the Group Board
incorporates the principal risks to which the Group is
exposed and the specific manifestation of those risks
from time to time. In considering and challenging
this information the Group Board undertakes robust
assessment of the principal risks facing the Group
including those that would threaten its business
model, future performance, solvency or liquidity.
Management prepares for the Group Board an Annual
Review of Risk Management and Internal Control.
This process is integral to consideration of the Group’s
Long Term Viability Statement which is shown below.
Principal risks
The principal risks to which the Group is exposed as
well as the measures taken to achieve their mitigation
and in each case any change that has happened in the
year are detailed in the table below.
RISK
EXPOSURE
MITIGATION
CHANGE IN THE YEAR
Political events
The changes and uncertainties
arising from political events
may have an impact upon the
markets in which we operate
and the plans of our clients. This
may cause the cancellation,
postponement or downsizing
of projects, or present further
opportunities for the business.
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.
Overall risk remained unchanged
during the year. Despite the
results of the General Election
and the forthcoming exit from
the EU, the political uncertainty
relating to the terms of the UK’s
departure from the European
Union remains unclear. General
elections in Australia, the
Netherlands and Canada have
provided a degree of political
stability in the coming years.
42
Strategic reportReport and Accounts 2019 RISK
EXPOSURE
MITIGATION
CHANGE IN THE YEAR
Recruitment
and retention
of staff
The Group’s ability to manage
and service its clients is
dependent upon the skills of
well-qualified and professional
employees. A failure to recruit
and retain employees of
appropriate calibre will therefore
affect our ability to meet client
expectations and develop
the business. Linked to this a
failure to adequately consider
management succession
may lead to discontinuity in
operations.
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 22 to
25. The successful completion of
which will serve to substantially
mitigate overall risk in this area.
Business
acquisitions
Health and
safety
Regulatory and
compliance
The Group will look for
acquisitions that are
complementary to the markets
that we operate in and add value
to our business proposition. They
will continue to be an important
element in support of our
strategy. A failure to understand
the market conditions affecting
an acquired business, to identify
acquired liabilities, or to retain
and motivate key employees
within an acquired business 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.
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.
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 46.
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.
A focused effort on development
of leadership succession and
bench strength has occurred
specifically in our Global Energy
business. Vacancies across
Segment leadership teams has
provided an opportunity to build
bench strength specifically
in our Consulting UK/Ireland
and Services UK/NL business.
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.
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.
43
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.
Whilst the detail of applicable
law and regulation will continue
to evolve there have been no
changes anticipated within the
Group’s current jurisdictions
which are likely to have any
material effect upon overall
risks in this area. The range of
jurisdictions in which project
work is undertaken may change,
although will remain subject to
scrutiny as highlighted above.
Strategic reportReport and Accounts 2019 RISK
EXPOSURE
MITIGATION
Service failures
A failure to deliver our services
in accordance with contractual
obligations may lead to
compensatory claims against
the Group and damage to
reputation as well as possible
loss of future work.
Financial risks
An inability to secure adequate
funding for the Group will limit
the ability to invest in growth.
In addition, a failure to manage
risks related to foreign exchange,
interest rates, credit and liquidity
could lead to a significant
deterioration in the Group’s
financial position and its ability
to win work.
44
Information
technology and
security risks
A prolonged lack of availability
of critical IT systems could
cause significant discontinuity
in operations. A cyber-related
attack on our systems could
lead to infection by viruses, loss
of personal and commercially
sensitive data, theft or fraud.
Phishing and business email
compromise attacks on
individuals could lead to
diversion of payments, exposure
of critical business systems or
release of data. Any of the above
attack vectors could lead to
operational disruption, affecting
our ability to deliver client
services, leading to financial
loss and reputational damage.
The Group operates quality
control systems many of which
are externally certified 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.
During the year the Group
successfully refinanced its
multi-currency revolving credit
facility for £100m and arranged
an uncommitted accordion
facility of £60m both of which
have a three-year term to 2022,
with the possibility of extending
for another two years. This is
provided by Nat West, Lloyds
and HSBC. 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 30 to the
consolidated financial statements.
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 team that monitors
activity, hardens systems and
responds to security events.
Policies, procedures and
security measures are reviewed
and enhanced on a regular
basis. The roll-out of additional
automated technical and
operational security measures
has commenced during the year
including: cloud monitoring,
vulnerability management,
enhanced user authentication,
device hardening, encryption,
security awareness training and
attack simulations.
CHANGE IN THE YEAR
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.
Following the refinancing of
the multi-currency facility and
introduction of the accordion
facility, the Group has an
adequate committed facility
until 2022 and will continue
to manage financial risks on a
prudent basis.
As system resilience improves,
the focus of cyber-attacks has
shifted from systems towards
individuals, who are targeted
through social engineering
techniques. The ongoing
program of training, systems
development and monitoring
should serve to improve
the resilience of end-users
and systems. There was no
overall change in the year. The
ongoing programme of systems
development should serve
to improve the resilience and
reliability of systems.
Notwithstanding additional
measures highlighted above the
level of threat from cyber-attacks
of an increasingly sophisticated
nature is unlikely to diminish.
Strategic reportReport and Accounts 2019 Going concern
Long term viability
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 Directors have reviewed the latest budgets
and forecasts and considered the activities and
performance of the Group together with factors
which could potentially affect future developments.
Based on this assessment the Directors have a
reasonable expectation that the Group has adequate
resources to continue in operational existence for a
period of at least 12 months from the date of approval
of the financial statements. Accordingly, the financial
statements have been prepared on the going
concern basis.
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 2023 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 is supported by the detailed
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, working capital
management, exchange rates and other outflows
including those associated with the principal risks
the Group faces. This modelling included severe
but reasonable scenarios of selected principal risks
to analyse the cash and borrowing levels, leverage
and headroom under the Group’s facilities and
the potential for and effectiveness of mitigating
actions. Various scenarios were modelled, some
of which took account of the impact of multiple
risks occurring and these included the impact of a
downturn in one or more markets, a strengthening
of sterling versus all other major currencies in which
we operate, a deterioration in working capital and
a significant uninsured claim against the Group.
The Directors have also made key assumptions in the
modelling of the long-term funding for the Group. The
Group’s loan notes are repayable in September 2021
and we have a reasonable expectation of being able to
refinance them on similar terms. The revolving credit
facility was successfully refinanced during 2019 on a
three year term with the possibility of extending for a
further two years and extension has been assumed
in the modelling.
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 2023.
45
Strategic reportReport and Accounts 2019
CORPORATE
RESPONSIBILITY
Our approach to responsibility ensures good
governance and management of our environmental
and social impacts applies to all elements of our
business; our people, our clients, investors and the
communities in which we work.
On pages 34–36 of this report we have given
examples of the work we are doing across the
business to deliver our purpose. We provide
information on the development, performance and
the impact of our activity across environmental and
social matters, our employees, human rights and
business ethics.
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. They are our greatest asset and have
been a focus of 2019.
A full report in relation to this area is presented on
pages 22 to 25.
Environmental management
RPS’ roots are in environmental consultancy and we
have always been mindful of our responsibility to the
environment in which we work. The Group’s greatest
contribution to the environment is through its own
expertise and many of the projects we work on. We
advise 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. Our
direct impact on the environment is comparatively
modest however 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
A number of the Group’s operating businesses have
achieved ISO 14001, the internationally recognised
environmental management system standard.
During 2019 many of our offices continued to recycle
waste paper, spent toner and ink cartridges, obsolete
computer hardware, printers and mobile phones.
We are a participating member of the Carbon
Disclosure Project to which we provide data on an
annual basis.
Greenhouse gas reporting
For the reporting year 1 January 2019–31 December
2019, we have used the GHG Protocol Corporate
Accounting and Reporting Standard (revised edition)
and emission factors from the 2019 UK Government’s
Conversion Factors for Company Reporting and the
International Energy Agency CO2 Emissions from Fuel
Combustion, OECD/IEA, Paris, 2019 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.
46
Strategic reportReport and Accounts 2019 · 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.
Greenhouse gas emissions (tCO2e)
are set out in the table below.
Scope 1:
Direct emissions
Scope 2:
Indirect emissions
Total
2018
10,466
2019
9,074
3,539
2,843
14,005
11,917
The decrease of 13% in Scope 1 is largely attributed
to a restructuring of the RPS water business and
a consequent halving of the van fleet but also
the use of 100% electric cars in our Netherlands
car fleet. The decrease of 20% in Scope 2
emissions is principally attributable to the ongoing
decarbonisation of the grid but also rationalisation
of our London based offices through the opening
of the new Farringdon office which consolidated
three offices into one more efficient building.
Overall per capita performance shows an
8% decrease year on year of 2.34 tCO2e
for 2019 against 2.52 tCO2e for 2018.
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 2018, was 3.26 MWh
per capita which decreased to 3.24 MWh per capita
up to 2019. This equates to a decrease of 0.5%
which is below our target. Going forward for 2020,
we will be reviewing our strategy and approach
to our carbon and energy management. This will
include defining targets and identifying efficiencies
and opportunities such as expanding the use of
electric cars within the company car fleet.
Community Involvement
We have a clear responsibility to the communities in
which we work, this is key to delivering our purpose
to create shared value. Our people work in their local
communities every day and we are always mindful
of the impact our work has. In addition to this, our
people take part in a range of activities to support
local communities, organisations and charities.
As a Group, we continued to support Tree Aid. Since
2006, we have provided £1.1 million of funding
which has been used across projects in Ghana, Mali
and Ethiopia. We are currently supporting a project
in Ethiopia focusing on healthy ecosystems and
sustainable livelihoods, donating over £380,000
across five years.
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 of the Group’s principal risks.
47
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 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 have in common clear
policies and procedures and appropriate risk
assessment techniques backed by training and
clear communication.
Strategic reportReport and Accounts 2019 48
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. 61% (2017:
66%) of employees across the Group work in offices
that now have third party accreditation to the OHSAS
18001 standard. This slight reduction is due to changes
in staff numbers across multiple offices.
The reportable accident rate in the year was 1.2
accidents per 1,000 employees (2018: 0.8). We’ve
looked into the increase in injuries in 2019. We are
reviewing the trends along with the segment CEOs
and putting in improvement plans to reduce minor
injuries within the business. Accidents that do occur
most commonly relate to field staff and involve
manual handling activities, slips and falls.
Reportable accident rates
Group
Reportable injuries
Reportable injuries incident
rate per 1,000 employees
Business relationships
2019
7
1.2
2018
5
0.8
In 2019 we launched our behaviours and embedded
them across the Group with over 75% of employees
completing the online training. Our behaviours are at
the core of how we do business. Sitting alongside our
approach to corporate responsibility, they ensure we
conduct business in a transparent and fair way with a
focus on delivering our purpose of creating shared value.
We have policies and procedures that support our
people and provide us with a framework to ensure they
act in a consistent way with our behaviours. 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 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 incident of bribery or corruption has been identified
within the Group’s operations.
In the coming year we are reviewing our Code of
Conduct and associated policies and will be rolling out
an independent whistleblowing line. These will further
strengthen our approach to responsible business.
The Group 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.
We support the objectives of the UK Modern Slavery
Act and will not tolerate modern slavery or human
trafficking within its own supply chain. During the
year, the Group conducted a further review of its
supply chain and 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.
We support the introduction of the Australian Federal
Government’s Modern Slavery Act and will review our
Group position in line with its guidance.
Cyber and data security
Throughout 2019 we have strengthened our
approach with new automatic technical and security
measures. More information on our approach can
be found on page 28.
Signed on behalf of the Board
David Gormley
Company Secretary
19 February 2020
Strategic reportReport and Accounts 2019 Directors Report
REPORT OF
THE DIRECTORS
49
THE BOARD
50
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 2019. 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 48, the Corporate Governance Report on
pages 57 to 92 and other parts of the Report and
Accounts as referred to below.
Directors
The Directors of the Company as at 31 December
2019 were those listed on pages 52 to 53. The
changes to the Board that occurred in the year are
as detailed on page 68. The Directors’ interests in
the share capital of the Company are as shown in the
Annual Report on Remuneration on page 78.
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 103 and shows the profit for the year. The
Directors recommend a final dividend of 2.00p
(2018: 5.08p) per share which, subject to approval at
the Annual General Meeting to be held on 30 April
2020, will be paid to shareholders on 15 May 2020.
This together with the interim dividend of 2.42p
(2018: 4.80p) per share paid on 11 October 2019 gives
a total dividend of 4.42p (2018: 9.88p) per share for
the year ended 31 December 2019.
Report and Accounts 2019Report of the Directors The Board: (left to right) Ken Lever, Liz Peace, Gary Young, John Douglas, Catherine Glickman, David Gormley, Allison Bainbridge, Michael McKelvy
51
present use non-financial key performance indicators
to assess the Group as a whole, although parts of the
Group do use such indicators from time to time.
Consistent with its size and complexity, the Group
has a large number of contractual relationships with
clients and suppliers. In the Directors’ view, however,
there is no single contract or client relationship,
which is essential to the Group’s business. The
Group’s subsidiary undertakings are listed in note 6 to
the Parent Company Financial Statements. The Group
develops and delivers innovative technical solutions
to its clients, the costs of which are expensed to the
Consolidated Income Statement.
The Group obtains enhanced tax relief for these
costs in the United Kingdom and has adopted the
RDEC (Research and Development Expenditure
Credit) regime.
Strategic report
The Group’s Strategic Report can be found on pages
7 to 48. This report is required to contain a fair review
of the Company’s business and a description of the
principal risks and uncertainties that it faces. The
Strategic Report contains certain forward looking
statements with respect to the financial condition,
results of operations and businesses of RPS as well as
likely future developments. These statements involve
risk and uncertainty 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.
Financial key performance indicators can be found on
page 4. 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
Report of the DirectorsReport and Accounts 2019 THE BOARD
52
Ken Lever
Non-Executive Chairman
Gary Young
Finance Director
Ken Lever joined the Board in November 2016 as
Group Chairman. Ken is a chartered accountant and
his previous experience includes spells as Finance
Director of Alfred McAlpine plc, Albright and Wilson
plc and Tomkins plc. Prior to that he was a partner
at Arthur Andersen. He was Chief Executive of
Xchanging plc between 2010 and 2015. Ken is
currently Chairman of Biffa plc and holds
non-executive positions at Blue Prism Group plc,
Gresham House Strategic plc and Vertu Motors plc.
Ken is Chairman of the Nomination Committee.
John Douglas
Chief Executive
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 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.
Liz Peace
Independent Non-Executive
Liz Peace was appointed to the Board in July 2017.
Liz was Chief Executive of the British Property
Federation for thirteen years until her retirement in
2014. She was awarded a CBE in 2008 for services
to the property industry. Liz now has a portfolio
career with a range of non-executive, advisory and
charity roles, at Howard de Walden Estates, RDI REIT,
Holtby Turner, the Churches Conservation Trust
and Whiteley Homes Trust. She is Chairman of the
Architectural Heritage Fund and Centre for London
and President of the Property Litigation Association.
She is also a member of the Mayor of London’s Homes
for Londoners Board. In 2017 Liz was appointed
Chairman of the Old Oak and Park Royal Development
Corporation (OPDC) and in 2018 she was appointed
Chairman of the shadow Sponsor Board for the
Palace of Westminster Restoration and Renewal
Programme. Liz was appointed Senior Independent
Director in May 2019 and is a member of the Audit,
Remuneration and Nominations Committees.
Report and Accounts 2019Report of the Directors Allison Bainbridge
Independent Non-Executive
Catherine Glickman
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, 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 and Remuneration Committees.
Catherine was appointed to the Board on 2 August
2018 and is Chairman of 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 Renishaw plc and
TheWorks.co.uk plc where in each case she is Chair
of the Remuneration Committee. Catherine is also a
member of the Audit and Nominations Committee.
Michael McKelvy
Independent Non-Executive
Michael was appointed to the Board on 1 May 2018.
US-based, Michael is a member of the Nomination
and Remuneration Committees. Michael is CEO of
construction firm Gilbane and has held Presidential
roles with CH2M. He is a chartered architect and has
extensive senior level experience of construction,
infrastructure and natural resource markets.
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.
53
Report of the DirectorsReport and Accounts 2019 Corporate governance
Going concern
The Directors’ report on Corporate Governance can
be found on pages 55 to 90 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 22 to 25.
Corporate responsibility
The Group’s business activities, a review of the
2019 results together with factors likely to affect its
future development and prospects are set out on
pages 7 to 48. Note 20 to the Consolidated Financial
Statements sets out the borrowings of the Group and
considers liquidity risk, whilst note 30 describes the
Group’s approach to capital management, and financial
risk management in general. The going concern
statement together with the viability statement is set
out in the Strategic Report on page 45.
The Group’s Corporate Responsibility statement is
included on pages 46 to 48.
Directors’ responsibilities statement
The Directors are responsible for preparing the
Annual Report and the financial statements in
accordance with applicable law and regulations. Each
of the persons who is a Director at the time of this
report confirms that, so far as they are aware, there is
no relevant audit information of which the Company’s
auditor is unaware and that they have taken all the
steps necessary to make themselves 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.
The Directors are required by Company law to prepare
financial statements for each financial year, and
prepare the Group financial statements in accordance
with International Financial Reporting Standards
(IFRSs) as adopted by the European Union and Article
4 of the IAS Regulation. The Directors 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.
This includes disclosures concerning Greenhouse
Gas emissions as 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
54
The Company is aware of the following interests
in excess of 3% of the ordinary share capital of the
Company as at 18 February 2020.
Shareholder
Total holding % of ISC
Aberforth Partners (i)
29,244,784
12.87%
UBS Asset Management (ii)
17,029,807
7.49%
Artemis Investment Managemnet
16,008,701
7.05%
Montanaro Asset Management
12,000,000
5.28%
BMO Global Asset Management
9,504,218
4.18%
Chelverton Asset Management
9,326,785
4.10%
Unicorn Asset Management
9,000,000
3.96%
Dimensional Fund Advisors
8,697,890
3.83%
Blackrock
NBIM
8,431,960
3.71%
7,578,668
3.33%
Vanguard Group
7,392,897
3.25%
Coloumbia Threadneedle
Investments
7,201,049
3.17%
(i) The Wellcome Trust Ltd as Trustee of the Wellcome Trust holds
6,908,549 (3.13%) shares included within the shares held by
Aberforth Partners.
(ii) Tameside MBC re Greater Manchester Pension Fund holds
13,798,887 (6.08%) shares included within the shares held
by UBS Asset Management
Report and Accounts 2019Report of the Directors 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
In preparing the Parent Company financial
statements, the Directors are required to:
· Select suitable accounting policies and then
apply them consistently;
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.
· Make judgements and accounting estimates that
are reasonable and prudent;
Financial instruments
· State whether applicable UK Accounting Standards
have been followed, subject to any material
departures disclosed and explained in the financial
statements; and
Details on the use of financial instruments
and financial risk are included in note 30 to
the Consolidated Financial Statements.
· 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 responsible for safeguarding the
assets of the Company and taking all reasonable
steps for the prevention and detection of fraud or
other irregularities.
Post balance sheet events
There are no significant post balance sheet
events requiring adjustments to the year end
results or disclosure.
Takeover directive
The following additional information is provided
for shareholders pursuant to the requirements
of the Takeover Directive.
55
Report of the DirectorsReport and Accounts 2019 Share capital
Change of control
As at 31 December 2019 the Company’s issued share
capital consisted of 227,139,412 ordinary shares of 3p
each. Substantial shareholder interests of which the
Company is aware are shown on page 54.
The Company’s debt facilities include provisions that
take effect on a change of control and 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
At a general meeting of the Company every holder
of ordinary shares present in person is entitled to
vote on a show of hands and on a poll every member
present in person or by proxy and entitled to vote
has one vote for every ordinary share held. Holders
of ordinary shares may receive interim dividends
approved by the Directors and dividends declared
in general meetings. On liquidation and subject to a
special resolution, the liquidator may divide among
members in specie the whole or any part of the
assets of the Company. There are no shares in issue
that carry special rights with regard to control of the
Company and there are no restrictions on the transfer
of ordinary shares in the Company other than those
that may be imposed by law or regulation from time to
time. The Company’s Articles of Association may be
amended by special resolution at a General Meeting
of the shareholders.
Listing rule 9.8.4c
Pursuant to listing rule 9.8.4c the Company is required
to disclose that an arrangement is in place whereby
the trustee of the Company’s employee benefit trust
has agreed to waive present and future dividend
rights in respect of certain shares that it holds. There
are no other matters requiring disclosure required
pursuant to this listing rule.
Directors’ indemnities
Directors and Officers of the Company benefit from
Directors’ and Officers’ liability insurance cover
in respect of legal actions brought against them.
In addition Directors are indemnified under the
Company’s articles of association to the maximum
extent permitted by law, such indemnities being
qualifying third party indemnities.
Directors
Annual General Meeting
Directors are appointed by ordinary resolution at a
General Meeting of the shareholders. Whilst the Board
can appoint a Director any Director appointed in that
manner must be elected by an ordinary resolution
at the next General Meeting. Under the Articles of
Association any Director who has held office for more
than three years since their last appointment must
offer themselves for re-election at the next Annual
General Meeting. It is the Company’s policy, however,
that all Directors should stand for annual re-election.
The Directors have power to manage the Company’s
business subject to the provision of the Company’s
Articles of Association, law and applicable regulations.
The Directors have power to issue and buy back
shares in the Company pursuant to the terms and
limitations of resolutions passed by shareholders
at each Annual General Meeting of the Company.
No such power was exercised during the year under
review. Directors’ interests in the share capital of the
Company are shown in the table on page 81.
The Annual General Meeting will be held on
30 April 2020. 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.
Signed on behalf of the Board
David Gormley
Company Secretary
19 February 2020
Registered Office:
20 Western Avenue
Milton Park
Abingdon
Oxfordshire OX14 4SH
Registered in England No. 02087786
56
Report and Accounts 2019Report of the Directors CORPORATE
GOVERNANCE
57
58
CORPORATE
GOVERNANCE
Chairman’s Introduction
Governance and culture
The Group’s strategic priorities and progress against
them is set out on page 21. 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 are an important component in
this process.
At the start of 2019 we launched our new brand
and introduced our behaviours that underpin our
purpose and promise and give us the framework to
focus on absolute delivery. Created by our people our
behaviours are at the heart of our people strategy
discussed in the people section of this report. The
launch of our new global brand was an important step
in our evolution and defined who we are, signifying a
change in mindset and further setting the framework
for our strategic direction.
Framework and compliance
During the year under review the Group was subject
to the revised UK Corporate Governance Code which
was published in July 2018 (the ‘Code’). During the
year the Group has moved to be fully compliant
with the Code and considers that apart from
Whistleblowing remaining under the remit of the
Audit Committee was fully compliant in all other areas
of the Code at the end of the year. The areas where
we have moved towards compliance are discussed in
more detail within the Corporate Governance Report
on page 60. 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.
The Board continues to operate within the framework
of a Board Charter which clarifies the respective roles
of the Chairman, Chief Executive and Non-Executive
Directors as well as incorporating a schedule of
matters reserved for Board approval and the terms
of reference of the Board Committees.
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 and experience and
having undergone a number of changes in recent
years I expect it to be stable in membership for
the foreseeable future. The Board is, I believe, 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. As the Board has now been working as a
Report and Accounts 2019Corporate Governance
cohesive unit for just over two years, under its current
membership, it found that there were no specific
areas for improvement but did note that unscheduled
calls between the Board that happen between
meetings worked well. The exercise continued
to confirm my view that the Board is discharging
its duties described 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 look to
conduct an externally facilitated review during 2020.
Workforce and shareholder 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
meetings at operating business locations, a practice
that it intends to develop further during 2020.
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.
The Board are encouraged to visit the offices of the
Company and meet and hear from our people about
their expectations and experience of working for
RPS. During the year we also appointed Catherine
Glickman as the Non-Executive Director responsible
for workforce engagement and Catherine has visited
a number of offices during the year meeting with staff
and holding various Q&A sessions on these visits.
During 2018 steps were taken to improve the Group’s
engagement with the investment community. The
Chief Executive Officer and Finance Director meet
regularly with the Company’s shareholders both
through individual engagement with our largest
shareholders and through investment presentations
and investor roadshows. During the year I met with
a number of our major shareholders, who noting
the difficult year that the Group has experienced,
remain fully supportive of the strategy that is being
implemented by the Chief Executive Officer and his
leadership team. Liz Peace, who was appointed as the
Senior Independent Director, has also met with some
of the Group’s shareholders.
In December 2019 we renewed the Remuneration
Policy of the Group for another three years, following
extensive consultation with our shareholders led
by Catherine Glickman, Chair of the Remuneration
Committee, I am happy to note that we received a
vote of 87.15% in favour of the Remuneration Policy.
2019 AGM
At the Annual General Meeting held in May 2019
the Company received a vote of 22% against my
reappointment as Chairman of the Group. Although
this is disappointing from a personal level, this was
due to concerns raised about the number of Board
positions that I hold. This is covered more fully in
the report from the Senior Independent Director
on page 67.
The year ahead
We will continue to focus on governance as an
important element in the achievement of our
strategic priorities and key to this is our focus on
our behaviours and culture as key elements in
driving good governance.
“It is clear to me, from the conversations I have had at all levels in
the organisation, that the changes occurring in the organisation are
significant and that everyone is focused on creating a single RPS that
addresses the challenges of our clients in a consistent way so that
complex is made easy.”
Ken Lever
Chairman
19 February 2020
59
Corporate GovernanceReport and Accounts 2019 60
CORPORATE
GOVERNANCE
Overview and compliance
The Chairman’s statement on pages 58 to 59
incorporates comments relating to the governance
of the Group; and provides a backdrop to this
detailed report.
The Board operates within the framework of a
charter incorporating 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 its
individual Directors.
Throughout the year the Board has focused firmly
on progressing to a target of full compliance with the
provisions of the Corporate Governance Code 2019
(the ‘Code’). There are specific instances where it has
not achieved full compliance in the last year:
Whistleblowing Policy: The Company’s Whistleblowing
Policy allows for employees to raise any matters
of concern securely, and is overseen by the Audit
Committee. The Board reviewed the current structure
of the Company’s whistleblowing arrangements
resulting that in the first instance the Whistleblowing
policy should remain under the remit of the Audit
Committee, but with the addition that any incidents
reported through the policy be reported to the Board
together with recommendations for follow up actions
or processes to be instigated.
As all Board members attend meetings of the Audit
Committee either as a member or an invitee, it is to
be expected that the Board will be aware at all times
of any incidents that arise in this area.
Post-Employment Shareholding: The Company
confirmed in its 2018 annual report that it would
be reviewing and subsequently renewing its
Remuneration Policy during 2019. Part of that
review would include the development of a formal
policy for post-employment shareholding. The new
Remuneration Policy includes a post-employment
shareholding requirement, effective from
1 January 2020 and discussed more fully in
the Remuneration Report on pages 74 to 92.
Executive Director Pension Contribution Rates: As
part of the review of the Remuneration Policy the
Remuneration Committee reviewed the pension
rates of the current Executive Directors, and has
implemented a policy for all new Executive Director
appointees to pay a pension contribution in line
with the wider workforce. There is no change to the
current pension contributions of Executive Directors
already employed at such level by the Company.
This is explained more fully in the Remuneration
Committee report on pages 74 to 92.
This report and the following report of the Committee
Chairs describe the structures, processes and events
through which compliance was achieved in 2019.
Board structure
At the date of this report the Board comprised two
Executive Directors, four Non-Executive Directors and
the Chairman. During the year Robert Miller-Bakewell
rotated off the Board at the Annual General Meeting
having served over nine years as a Non-Executive
Director of the Company. Robert has been replaced in
his role of Senior Independent Director by Liz Peace.
With the announcement of our preliminary results we
also announced that Gary Young will be retiring from
the Board after 20 years with the Company and will be
succeeded by Judith Cottrell. Gary will retire from the
Board at the 2020 Annual General Meeting, at which
time it is proposed that Judith will be elected to the
Board by the shareholders.
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 all Directors receive the right 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.
Report and Accounts 2019Corporate Governance 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 (as detailed
in the guidance notes of the Code) that may affect
judgements. Catherine Glickman was formerly
engaged in a consultancy capacity by the Group
for a short period during 2017–2018 to undertake
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. 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. Liz Peace has performed the role of
Senior Independent Director from May 2019 onwards
following Robert Miller-Bakewell stepping down at the
Annual General Meeting. The Board is assisted by the
Audit, Remuneration and Nomination Committees.
Separate reports from each of these Committees
can be found on pages 68 to 92. The Chairman of
each Committee provides regular updates at
Board meetings.
All Directors are subject to annual re-election
by shareholders.
Board responsibilities
· Recommendation and approval of dividends
and other capital distributions
· Approval of material corporate transactions
including all acquisitions
· Approval of policies and systems for risk
management and internal control
· Appointment of key advisers to the Group
· Approval of major items of capital expenditure
· Any substantive change in the nature of the
Group’s activities
Matters falling outside 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. The Group
Leadership Team meets regularly throughout the
year and retains operational oversight of the Group’s
activities. This team currently consists of: the Chief
Executive, Group Finance Director, Group Marketing
Director, Group People Director, Chief Information
Officer, Group Strategy Director and the Group’s six
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,
strategy development, adoption of appropriate
corporate policies, risk management 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 issues
· Significant litigation
· Investor and City relations
In addition to these, and at the appropriate point the
Board also considered:
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
· Approval of annual budgets and business plans
· Financial reporting including annual and half year
results and market updates
· 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
61
Corporate GovernanceReport and Accounts 2019 Full Board
Audit Committee
Remuneration Committee
Nomination Committee
Ken Lever
John Douglas
Gary Young
Robert Miller-Bakewell*
Allison Bainbridge**
Liz Peace*****
Michael McKelvy ***
Catherine Glickman****
Number of meetings held
14
14
14
6
13
14
14
14
14
–
–
–
1
4
3
2
3
4
–
–
–
7
5
9
10
10
10
3
–
–
1
3
2
3
3
3
62
* Robert Miller-Bakewell retired as a director on 1 May 2019.
** Allison Bainbridge was appointed to the Remuneration Committee on 18 February 2019 and missed one board meeting which
was called at short notice and she was on holiday without a mobile signal at the time.
***Mike McKelvy was appointed to the Audit Committee on 18 February 2019.
**** Catherine Glickman was appointed to the Audit Committee on 18 February 2019.
***** Liz Peace was unable to attend meetings of the Remuneration, Nominations and Audit Committees, due to a prior board
engagement with another Company.
· A presentation from the CEO of Australia Asia
Pacific discussing the issues and performance of
the business during the year.
· The Board also received a number of
presentations from the Chief Information
Officer on the introduction of a new
ERP system into the business.
Prior to the holding of a majority of the Board
meetings, the Chairman will hold a private session
with the Non-Executive Directors to discuss the
forthcoming business of the meeting and any
particular issues that they should focus on in the
Board meeting. Outside of Board meetings the
Chairman holds regular discussions with all Directors,
on issues that may arise between meetings and to
provide briefings. The Non-Executives met once
during the year without the Chairman present.
Each Director is required to declare any interests
that may give rise to a conflict of interest with the
Company on appointment and subsequently as they
may arise, in accordance with the Companies Act
2006. Where such a conflict or potential conflict
arises the Board is empowered (under the Company’s
articles of association) to consider such conflicts and
authorise as appropriate and subject to such terms
as the Board deems relevant. 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.
Report and Accounts 2019Corporate Governance Stakeholder engagement
People
Investors
· Quarterly CEO calls with the global
Senior Leadership Group
· Regular communication with
all employees
· Bi-annual global employee survey
· Frequently held future leaders forums
for junior employees to discuss their
roles and aspirations for themselves
and the Company, and to ask the
Board about the strategy and
business performance
· Launched Progress@RPS a global
business and development framework
· Annual Report and General Meeting
· Communicate four times a year to
the market
· One-to-one investor meetings
· Chairman and Senior Independent
Non-Executive Director had meetings
with the top 10 shareholders
· Regular sales team briefings and
sell-side analyst presentations
· Accessible and up-to-date
investor website
63
Clients
Industry
· Reinforced making complex easy
that was validated through global
client research
· Acted on feedback received
from clients
· Bringing new and innovative
solutions to complex problems
· Consistently giving high value
client experiences
· Engaged in industry discussions at
key conferences throughout the year
· Actively engaged with industry bodies
to participate in client innovation events
· Memberships of professional bodies
· Don McQuillan acting as mentor for
engineering graduates in his capacity as
President of the Institution of Structural
Engineers
Corporate GovernanceReport and Accounts 2019 Board performance
The Board undertakes an annual appraisal of its
performance. Given the substantive changes to
Board membership in 2017 and further changes
during 2018 it was again concluded that a highly
structured evaluation process would be of limited
value at this point. The Chairman engaged with all
of the Company’s Directors across a range of topics
during this time as a strategic action to ascertain
any areas of concern and suggestions.
The results of the exercise were reported to the
Board as a whole for discussion. The Board noted
that there were no major areas of concern that
required immediate attention, but it was noted that
having update calls in-between scheduled Board
meetings worked well and that this should be
utilised more through out the year.
The Board continues to review progress in these areas
as an ongoing action. A more structured review will
be undertaken during 2020, potentially involving an
external facilitator if felt required.
Directors duties – Section 172
64
The Board is mindful of its duties under Section 172 of
the Companies Act 2006, to promote the success of
the Company and with regards to all its stakeholders
and has complied with this in the following ways:
Consequences of decisions in the long term: In the
2018 Annual Report the Group determined five clear
strategic priorities for the business. We were very clear
in setting these strategies that they were aimed at
building long term sustainable growth for the future
and that remains very much the case today. We were
clear that investment would be required to support
the strategy where it had not existed before and
that during this period of growth our profits would
therefore be subdued. This was clearly articulated to
our shareholders who to date have supported us in the
execution of our strategic aims and we have achieved
significant progress in the aims during the last 24 months.
In 2019, we delivered on brand enabling us to move
to focus on client experience and our priority of
energising the Energy business is complete. With this
progress, these five priorities have evolved into three
strategic priorities of people, clients and connectivity.
Employees: The Group’s core strategy is our
purpose, promise and behaviours which we talk about
extensively throughout the Annual Report. This is the
Group’s DNA and one of our core strategic priorities
is our “People and making RPS a great place to work”.
When the Board meets it regularly holds informal
lunches with staff members who are invited to join
the Board and discuss their roles and aspirations for
themselves and the Company and at the same time to
ask questions of the Board, on strategy and business
performance. These are mostly junior staff who have
The Board is encouraged to visit the various locations of the Group and meet and discuss
various topics with employees
Director
Ken Lever
Engagement opportunities with employees
During 2019 the Chairman visited a number of office locations
In Consulting UK and Ireland he visited our offices in Wolverhampton,
Warrington, Manchester and Newcastle
He also went to the consulting business in Derby and our laboratory in Bedford,
being parts of our Services UK and Netherlands business
And then towards the end of the year he spent a week visiting our offices in
Perth, Brisbane, Melbourne and Sydney
He has in previous years visited our operations in North America, Netherlands,
Norway, Ireland, Northern Ireland and Scotland
Held town hall gatherings across a number of our UK locations
and in Australia
Met our Corporate Responsibility Lead to advise on our approaches
to corporate responsibility
Supported our London office in their gender diversity initiative
at MIPIM 2019
Visited our offices in Rhode Island and attended the Group Leadership
Team meeting
Assisted John Douglas in interviewing the preferred candidate for the
Chief Executive Officer role in North America
Catherine Glickman
(as workforce representative)
Liz Peace
Mike McKelvy
Report and Accounts 2019Corporate Governance
been identified as future leaders of the business.
The Board also received a presentation from the
board on Prospects, an employee development
platform which aims to align future leaders across the
organisation, focused on personal and professional
development whilst driving value and efficiency. Open
to employees up to Associate level, its purpose is to
prepare our leaders of tomorrow by equipping them
with skills that ensure the continuity and prosperity
of the business.
The Group also launched during the year
Progress@RPS, a global business and development
framework, which is discussed more fully in the
people section of the Annual Report.
Customers: Our brand has been intentionally created
with our clients at the core and we are now in a strong
position to deliver a return on the investment that we
made in 2018/2019.
Repeatedly delivering high value client experiences
that exceed expectations and consistently delivering
on our promise of making complex easy at every
interaction is at the centre of everything we do.
In 2020, our focus will be on using data insights to
deliver connected client experiences by generating
trackable, measurable leads at every stage of the
client journey to further strengthen our client
relationships resulting in long-term loyalty, repeat
work and reduced cost of sales.
Community and environment: The Board has
noted that we need to improve our own Corporate
Responsibility priorities. We as a Company are
involved in various environmental projects, we have
unrivalled global capabilities that enable our clients
to develop environmental and socially responsible
solutions. We have recognised the growing
opportunities in offshore wind and will leverage our
brand reputation into new and emerging markets to
achieve organic growth in our top line revenue.
We have also appointed a Corporate Responsibility Lead
to the business, and this will be a major area of focus
for the business in the year ahead, building out our
Corporate Responsibility policies and Liz Peace has
been instrumental in reviewing the Company’s plans
for the year in this area.
High standards of business conduct: The
employees of the Company are obliged to act in
a legal, ethical and responsible manner. These
obligations apply to all staff who work for the
Company. The Company has a suite of policies in
place from anti-bribery to a code of conduct and we
have a moral and legal responsibility to safeguard all
our employees and others affected by our operations
and services. The Board receives regular health and
safety updates at all meetings. The instances of
accidents has slightly increased during the year but
there is nothing systematic or any trends that have
been identified, to cause a matter of concern.
Act fairly between the members of the Company:
Shareholders are invited to attend the Company’s
Annual General Meetings and ask questions of the
Board. The Board have met with shareholders at
various times during the year in one to one meetings
as requested and through result presentations to
our institutional shareholders. There has also been a
series of investor roadshows to promote the Company
and encourage prospective shareholder investment.
The Company’s investor website page [https://
ir.rpsgroup.com/] on its corporate website [https://
www.rpsgroup.com] gives access to a wealth of
longstanding and new information on the Company
and its activities.
Training and induction
Directors receive information on the Company as well
as the Board and its procedures on appointment. They
also meet with 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
on key technical matters are provided 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 as well as engaging with the Group’s
wider business activities more generally.
The Non-Executive Directors have access to a
training academy managed by Deloitte LLP.
Communication
The Company attaches great importance to
communication with its shareholders and other
stakeholders. The Group website includes financial
presentations, general information about the Group
and its services, as well as regular corporate reporting
including public details on projects the Company
is engaged on. In addition to presenting financial
results, the Executive Directors hold meetings with
the Company’s principal shareholders to discuss the
65
Corporate GovernanceReport and Accounts 2019
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.
Treasury
The Group operates a central treasury function that
undertakes required borrowing and foreign exchange
transactions as well as daily monitoring of bank balances
and cash receipts. Appropriate payment authorisation
processes are in place throughout the Group. Trading in
financial instruments is not permitted.
The Chairman of each of the Board Committees
attends the Annual General Meeting and is available
to answer questions.
Risk management and internal controls
Overview
The Board retains overall responsibility for setting the
Group’s risk appetite as well as risk management and
internal control systems. The Board has maintained
procedures in accordance with this throughout the
year and up to the date of approval of the financial
statements, as recommended in the UK Corporate
Governance Code and the supporting document
issued by the Financial Reporting Council’s Guidance
on Risk Management, Internal Control and Related
Financial and Business Reporting’.
66
The principal risks to which the Group is exposed and
the measures to mitigate those risks are described on
pages 42 to 44.
The key procedures established by the Company’s
Directors to ensure effective internal financial
controls are:
Financial reporting
The Financial results for the Group are reviewed at
each Board meeting. The detailed formal budgeting
process for all Group businesses culminates in an
annual Group budget approved by the Board.
Financial and accounting principles and internal
financial controls assurance
The Group’s accounting policies, principles and
standards for effective financial control are clearly
communicated to all its accounting teams, assured by
the Internal Audit Manager through periodic detailed
reviews to ensure close adherence to policies
and procedures as well as to identify any control
weaknesses.
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.
Base controls
The internal controls self-assessment system launched
in 2017 by the Group Assurance Manager is now
operational throughout the Group. Within this, the
Finance Directors of the Group’s operating units
regularly assess their operational controls against a
standard base control set, to identify and mitigate any
shortcomings effectively and inform new controls
where appropriate.
Delegated authorities
A system of delegated authorities is in place throughout
the Group, whereby incurring expenditure and
assumption of contractual commitments can only be
approved by specified individuals and within pre-defined
limits.
Review and reporting
Internal controls and in particular any failures are
reported to and reviewed at Group and operating
Board meetings to facilitate effective implementation
of system changes wherever required. The Audit
Committee maintains a brief to keep the overall
internal control systems under review. A detailed
review of the Group’s internal control system and
risk management was undertaken and reviewed by
the Board during the year. The Board and the Audit
Committee were satisfied that the systems in place
are appropriate and effective.
Annual review
A detailed report of the Group’s systems of risk
management and internal control was prepared
during the year. Having reviewed and discussed this
report the Board was satisfied that these systems
are effective.
The respective responsibilities of the Directors
and the independent auditors in connection with
the accounts are explained on pages 54 and 100.
The statement of the Directors in respect of going
concern appears on page 45. The long term viability
statement is on page 45.
Takeover directive
Disclosures required under the Takeover Directive
are included on page 56 and form part of
the Group’s Corporate Governance report.
Report and Accounts 2019Corporate Governance
Response to
SHAREHOLDER
CONSULTATION
Report from the Senior Independent Director
Annual General Meeting
At the Annual General Meeting that was held on 1 May 2019, 22.09% of votes were
cast against the re-election of Ken Lever as Chairman of the Company. In discussions
with some of the Company’s shareholders they raised concerns on the number of
directorships that the Chairman held and although this was highlighted by Glass Lewis
and ISS within their proxy reports they did not believe this warranted a vote against.
Liz Peace
Independent Non-Executive
Board Member
Following the vote, I personally wrote to a number of our top shareholders, and specifically
to those shareholders who voted against the resolution, to explain why the Board of RPS
believed that the Chairman was the right person to lead the Company forward.
The Board is aware that there was a change in the Corporate Governance Code, which made specific
recommendations as regards to an additional Board role for an Executive Director. A number of institutional
investors and proxy advisors have developed more specific guidelines, which cover the overboarding of both
Executive and Non-Executive Directors.
In the letter to shareholders I clearly explained that on his appointment to the Board in November 2016
the Chairman had, at that time, a number of other appointments and had indeed resigned from two of his
positions during the year. We note that this was a main concern of shareholders in that it could undermine the
Chairman’s ability to serve effectively on the Board of RPS, particularly at times when the Chairman may be
required to involve himself at short notice, such as when urgent issues arise for the Company. Over the period
that the Chairman has been on the Board of RPS he has not, to date, missed a Board meeting, or committee
meeting of the Company. Furthermore, the Company does hold ad hoc Board and Committee calls and the
Chairman has been in attendance at all of these meetings.
I also pointed out that the Chairman does not hold a full time executive role and had calculated that during
the last two years he had to commit to circa 150 days in fulfilling his various directorship roles, this would
leave him with at least 70 free business days within a year, to devote to other activities.
The Board does monitor the appointments that the Non-Executive Directors hold and in the case of the
Chairman we have no concerns in the Chairman being able to fulfil his role on behalf of RPS.
The Board of RPS believes that the Chairman plays a pivotal role in helping drive the strategy of the Group
and we remain fully supportive of the role and guidance he provides to the Company and fully endorse his
continuing role as Chairman of the Company.
In the letter, I did offer to meet with shareholders if they had any concerns and was happy to discuss any
governance issues but did not receive any responses.
A copy of the letter has been posted on the Company’s investor website.
67
Corporate GovernanceReport and Accounts 2019 NOMINATION
COMMITTEE REPORT
I am pleased to report to shareholders in my capacity as Chairman of
the Nomination Committee. This report outlines the key responsibilities
of the Committee and activities during the year. The previous two
years were a busy period for the Nomination Committee, with the
appointment of a new Chief Executive Officer, and a number of changes
to the Board. The last year has seen a settling down of the Board.
Ken Lever
Chairman of the
Nomination Committee
19 February 2020
68
Membership and meetings
Board changes
I and all of our Non-Executive Directors, Allison
Bainbridge, Catherine Glickman, Mike McKelvy and Liz
Peace are members of the Committee. 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 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 retiring Directors for re-election as
relevant, and where appropriate considering any
issues relating to any Director’s continuation in office.
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, some of which are described in more detail
below. The Committee has written terms of reference
which are available on the Company’s website.
After serving on the Board for over nine years
Remuneration Committee Chairman Robert Miller-
Bakewell stepped down from the Board at the 2019
Annual General Meeting. Robert has been replaced
by Catherine Glickman. Catherine has extensive HR
experience and having served on other remuneration
committees, it was always the intention that following
her appointment as a Non-Executive Director
she would assume the role of the Chair of the
Remuneration Committee from Robert.
The Nomination Committee further recommended
to the Board the appointment of Liz Peace as the
Senior Independent Non-Executive Director. Liz has
extensive experience as a director both in the private
and public sector and was widely endorsed as the
appropriate person for this role.
The Nomination Committee has been aware that the
Group Finance Director would at sometime be looking
to retire from the Board of Directors and in holding
sessions with management and in particular, looking
at succession, the Committee had identified Judith
Cottrell as a possible long term successor to Gary
when he retired. Judith has experience of working
initially as the CFO for Europe and then moved into
an interim role as the Chief Executive Officer for
Europe and then Consulting, following the split of
the segments. In preparing Judith for this role, she
also underwent the KPMG C Suite programme which
is a programme to develop individuals to undertake
senior Board level roles.
Report and Accounts 2019Corporate Governance Diversity
The Committee is aware that the Code places an
increased emphasis on the role of the Nomination
Committee in the areas of diversity and inclusion.
When 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 Robert
Miller-Bakewell’s retirement from the Board 43% of
the Board are female. The female membership of the
Group Leadership Team is 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.
69
The Committee did also consider external candidates
for the role but were of the opinion that Judith would
be the best person for the role having a wide knowledge
and understanding of the Group’s operations.
Election and re-election of Directors
As in previous years and in accordance with the UK
Governance Code all Directors will stand for election
or re-election at the Annual General Meeting. The
range of skills and experience offered by the current
Board is mentioned above and set out in full on pages
50 to 51. The Committee and the Board consider the
performance of each of the Directors standing for
election or re-election to be fully satisfactory and
that they have demonstrated ongoing commitment
to their roles. The Board therefore strongly supports
the election or re-election of all Directors and
recommends that shareholders vote in favour of the
relevant resolutions at the Annual General Meeting.
Succession planning
The Board and Group Leadership Team have been
through a period of substantial change over the
last three years, with a significant number of new
appointments having been made as the new team
was built. Whilst the Committee has considered
succession issues 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 2020 and beyond.
Corporate GovernanceReport and Accounts 2019
AUDIT
COMMITTEE REPORT
I am pleased to present our Audit Committee report for the
year ended 31 December 2019. 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.
Allison Bainbridge
Chair of the
Audit Committee
19 February 2020
70
Membership and meetings
Responsibilities and activities
There have been a number of changes to the
membership of the Committee during the year,
following Robert Miller-Bakewell’s resignation from
the Board of Directors at the Annual General Meeting.
Catherine Glickman and Mike McKelvy were both
appointed as members of the Committee and the
membership constitutes myself, Liz Peace, Catherine
Glickman and Mike McKelvy.
As the serving Finance Director of a fully listed public
company I am identified as the Committee member
having recent and relevant financial experience,
although the Board considers that all members of the
Committee have experience that is relevant to the
role. The Company Secretary acts as secretary of
the Committee.
The Committee held four meetings during the year:
these included one to consider audit planning and
one to coincide with each of the publication of the
Group’s annual and interim financial results. Other
matters which fall within the Committee’s terms
of reference are included on the agendas of these
meetings as required. The Group Chairman, Group
Chief Executive and Group Finance Director all attend
the Committee’s meetings and members of the Group
Finance team are asked to attend from time to time.
The Deloitte Audit Partner and Director also attend
meetings and with whom the Committee has a
private session at least once a year without
executive management present.
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, and
the integrity of the accounting statements, 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 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.
Report and Accounts 2019Corporate Governance The Committee monitors the external auditor’s
effectiveness, independence and objectivity –
including the nature and appropriateness of any
non-audit fees. The Committee additionally assists
the Board in monitoring and reviewing the Group’s
internal control and risk management procedures as
described in the Corporate Governance Report. This
includes review of the Group’s whistleblowing 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, some of which are described in more detail
below. The Committee’s detailed terms of reference
can be found on the Company’s website.
Significant accounting issues
In respect of the year under review and as part of its
role in reviewing estimates and judgements made by
management, the following significant issues were
reviewed and in each case addressed as indicated.
Intangible assets
This classification of assets is by far the largest
on the Group balance sheet and as such receives
careful attention from the Board and Committee to
ensure that its carrying value is appropriate. Goodwill
impairment testing is normally undertaken at 30
November; in 2019 additional impairment testing of
the Group’s Australia Asia Pacific and North American
cash generating unit (‘CGU’) groups was undertaken
at 31 May due to the underperformance of those
business units relative to budget.
The Board and Committee considered the
appropriateness of the CGU’s for goodwill testing,
along with the assumptions and estimates used in the
modelling including the approved budgets for 2020
and the three year strategic plan.
After careful consideration, the Board and
Committee concluded that it was appropriate to
book an impairment charge of £19.8m against
the Group’s Australia Asia Pacific CGU grouping
given the performance and prospects of that
CGU group and the growth expectations for that
business in the medium term. See note 14 to the
financial statements for further information.
In respect of the other CGU groups, consideration
was given as to:
· Whether there were any indicators of impairment
in respect of other non-current assets; and
· Whether a reasonably possible change in any one
key assumption could give rise to an impairment
For these CGUs, the Board and Committee agreed
that no indicators of impairment existed and that a
reasonably possible change to any one assumption
would not lead to an impairment.
Contingent liability
The Board and Committee considered in detail
potential issues regarding RPS’ administration of
government contracts and/or projects in the USA.
RPS has informed the US government of these
potential issues and is continuing to identify the
implications, if any, of the conduct under review.
The related employment claims against the Group
were also considered.
After careful consideration, the Board and
Committee are satisfied that, at this stage, the
impact (if any) is unknown and that it is not
appropriate to recognise a provision in respect
of these matters at this time. The Board and
Committee are also satisfied that it is appropriate
to treat these matters as contingent liabilities.
Exceptional items
This year the Group has presented Exceptional items
in the Income Statement. A paper was presented
to the Committee detailing the items in question
and confirming that those items are significant in
quantum and are expected to be non-recurring.
The Board and Committee are satisfied that it is
appropriate to separately disclose those items.
71
Corporate GovernanceReport and Accounts 2019
Recoverability of trade receivables and
accrued income
Potential risks arising from trade debtors not
collected and/or non-billable accrued income
therefore being overstated in the accounts is
considered by the Board on an ongoing basis:
at its regular meetings as part of its review of
business performance.
The Committee appreciates that there is a reasonable
estimation applied in the recognition of revenue but
does not consider this to be a key area of risk. The
number of fee-earning projects undertaken by the
company at any time is large and there are relatively
few that are individually material. The procedures
in place for recognising such revenue are well
established and a good level of assurance is secured
through the Committee’s comprehensive financial
review of monthly results.
Fair balanced and understandable view
72
Having reviewed the Report and Accounts, the
Committee concluded and advised the Board that
in its view the Report and Accounts for 2019 taken
as a whole is fair, balanced and understandable. The
Board then separately considered the advice before
formally concurring 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 for 2019.
New accounting standards
2019 was the first year in which accounts have been
produced in accordance with IFRS 16 ‘Leases’. During
the year the Committee received papers detailing the
transition process and the impact of IFRS 16 on the
Group accounts.
Auditor independence
Deloitte LLP was appointed as Group Auditor in June
2012 following a comprehensive tender process. As
general policy audit partners are rotated at least every
five years. The Group’s policy is that the Group audit
appointment should be retendered at least every
ten years. The Group Audit Partner in the previous
year was Andrew Bond who completed two audits.
Following a review of our relationship with Deloitte,
Alex Butterworth took over the Group Audit Partner
role from Andrew. The Committee ensures that the
Group Auditor remains independent of the Group
and reviews this on an annual basis, with Deloitte
providing a written report to the Committee showing
its compliance with professional and regulatory
requirements to ensure independence.
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, including 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 Auditor 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 2019 appears in note 11 to the
consolidated financial statements.
Report and Accounts 2019Corporate Governance Re-appointment of auditors
As noted above the Audit Committee keeps the
scope, cost and effectiveness of the external
audit under review. The Committee reviews the
effectiveness of the annual audit prior to making
recommendations for the annual re-appointment
of auditors. This assessment is based upon the
Committee’s interactions with the external auditor
and through feedback from finance teams across
the Group. The Committee is satisfied that Deloitte
continues to provide an effective service across the
Group and accordingly recommended to the Board
that a resolution to re-appoint Deloitte as auditor be
proposed at the next Annual General Meeting.
Internal control and audit
The Committee also monitors the ongoing
effectiveness of the Group’s internal financial controls
and risk management processes as described on
page 42 as well as assisting the Board with its annual
assessment of this area. Internal audit within the
Group is undertaken by the Internal Audit Manager
who has a dual reporting line to the Chairman of the
Audit Committee and the Group Finance Director.
The Internal Audit 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 any related follow-up actions identified and in
some cases further summary reports provided to the
Audit Committee for consideration.
Halvard Kilde
CEO
Norway
SHOWCASING OUR ABILITY TO TRANSFER
OUR PROJECT MANAGEMENT SKILLS
FROM GAS AND OIL TO TRANSPORT AND
INFRASTRUCTURE WORKING ON BIG
AND OFTEN COMPLEX PROJECTS.
Oslo S / Oslo Central Station
The Follo Line – view from Oslo Central
Station towards the Ekeberg hill.
Source: Bane NOR/ViaNova
73
Report and Accounts 2019 REMUNERATION
COMMITTEE REPORT
I am pleased to present the report of the Remuneration Committee
for 2019, which consists of my Annual Statement and the Annual
Report on Remuneration, which follows on pages 76 to 90.
Catherine Glickman
Independent Non-Executive
Board Member
19 February 2020
74
Membership and meetings
Review of advisors
I took over the role of Chair of the Committee
following Robert Miller-Bakewell’s retirement from the
Board earlier in the year. I am grateful to Robert for
establishing the core remuneration policy effective
from 2017: I plan to continue to evolve this in line
with RPS’ strategy. During the year, Allison Bainbridge
was appointed to the Committee, joining Liz Peace
and Mike McKelvy, all as independent Non-Executive
Directors of the Board.
In the 2018 Annual Report we announced that we
would be reviewing our remuneration advisors.
The Committee invited a number of advisors to
meet with the Remuneration Committee Chair, prior
Remco Chairman and members of management.
The Committee chose Mercer to act as the Company’s
principal remuneration advisor and they have been
advising us since May 2019.
Remuneration policy renewal
During 2019, we conducted a full review of the
remuneration policy as our current policy expired on
31 December 2019. After discussion, we proposed
minimal change as the Committee considered
that, for this cycle, the policy was aligned with
the Company strategy and the design targeted
delivery of the right performance metrics. We put
the proposals out to consultation with our major
shareholders and were pleased that so many engaged
with us. After receiving feedback, we introduced a
post-employment shareholding requirement and
confirmed that, for current Executive Directors, we
would keep the position on pension contribution
under review. In December 2019, shareholders
voted in favour of the Remuneration Policy with a
87.15% majority vote. We thank shareholders for their
feedback during the consultation and support of the
policy which became effective on 1 January 2020.
Framework
The objectives of the remuneration policy continue
to be to reward delivery of the strategy and results, to
be fair and competitive, and retain and motivate the
Executive Directors. These were the objectives
of both the 2017 and 2020 policy.
The Committee believes that there should be a
competitive base package of salary and benefits,
with variable incentives rewarding short and long
term results. The Short Term Annual Bonus Scheme
– the STABP – rewards annual results of which
adjusted PBTA forms the largest part, supported
by cash conversion and achievement of Personal
Objectives. The 3 year incentive - the Executive Long
Term Incentive Plan (ELTIP) – is linked to long term
growth of the value of the business, with performance
metrics linked to EPS, Total Shareholder Return and
Cash Conversion. We made our first awards under the
ELTIP in FY2017 for the financial years from FY2017
Report and Accounts 2019Corporate Governance to FY2019. ELTIPs are due to vest in 2020 and will be
reported in next year’s report. ELTIP awards made
in 2019 and proposed for 2020 are detailed in the
Annual Report on Remuneration on page 79,
together with the targets for the 2020 awards.
Committee has exercised its discretion under the
terms of 2017’s policy and agreed that FY2019’s
bonus payment to Gary Young will be paid wholly in
cash, with no deferral. John Douglas has elected to
take all of his bonus in the form of deferred shares.
Performance and outcomes for 2019
Implementation of policy for 2020
We have reviewed the salary of the CEO, increasing
it by 2% - the increase of the wider workforce – to
£518,600 with effect from 1 January 2020. John
Douglas helpfully offered the Remuneration
Committee the opportunity to balance any salary
increase with a reduction in his pension contribution:
we thank John for this offer and have accepted it.
The CEO will participate in the STABP in 2020 with
maximum opportunity of 150% of salary. The
performance conditions will be unchanged: 70% will
be earned on adjusted PBTA, 20% on cash collection
and 10% on Personal Objectives.
In respect of the ELTIP, John will receive an award
of shares equal to 150% of salary. A two year post-
vesting holding period will apply to any shares that
vest. Further details of the terms of participation in
these plans for 2020 are shown in the Annual Report
on Remuneration on page 89.
75
Under the STABP, the bonus opportunity for John
Douglas is up to 150% of basic salary and for Gary
Young, up to 125%. The performance metrics were
adjusted PBTA (70%), cash collection (20%) and
achievement of Personal Objectives (10%).
In 2019, the threshold and maximum targets for
PBTA were £50.2m and £56.9m respectively. PBTA
was £37.3m (2018: £50.2m) so no bonus was earned
for this element. For cash conversion, threshold and
maximum were set at 80% and 100% respectively.
Cash conversion was 90% (2018: 94%), so partial
bonus was earned in respect of this element.
The Personal Objectives are outlined on page 79 of
the Annual Report on Remuneration. For the Chief
Executive, they were linked to the Group’s strategic
priorities, for the Group Finance Director, to key
operational priorities. The Committee concluded that
the objectives for both John Douglas and Gary Young
had been partially met, and that each Executive
should receive 50% of the maximum award under this
element. A commentary on performance against the
objectives is provided on page 79.
The table on page 78 details the bonus earned in
respect of each element and the total bonus payable
to the Executive Directors. The Committee was
satisfied that the policy had operated as intended in
2019 and that the rewards were commensurate with
the business performance: discretion was exercised in
relation to achievement of personal objectives. Under
the normal terms of the STABP, 50% of any bonus
earned is payable in cash and 50% deferred in shares
over a three year period. In light of the retirement
of Gary Young at this year’s AGM, the Remuneration
Corporate GovernanceReport and Accounts 2019 We will continue to review the remuneration policy as
the strategy and remuneration guidance develops,
recognising that this is a fast moving area, and that
requirements are continually changing. We welcome
engagement with shareholders, and should anyone
wish to engage with me, I can be contacted at
investorrelations@rpsgroup.com
CATHERINE GLICKMAN
Chair of the Remuneration Committee
19 February 2020
Appointment of new Finance Director
The Company has announced the retirement of
Gary Young as the Group Finance Director and Board
Director effective from the time of the AGM, and I
would like to recognise the contribution Gary has
made over a long and successful career with RPS.
We are pleased that we are able to appoint an able
and well qualified internal successor, Judith Cottrell,
who knows the business well and can rapidly make
a contribution as she joins the Board. We have
agreed an appointment salary of £250,000: in future
years, as Judith develops in the role, the Committee
reserves the right to increase her salary at a rate
higher than general awards for staff to ensure she
is appropriately rewarded for her role. Her annual
incentive opportunity is up to 125% of basic salary
and her ELTIP award of shares will be 125% of salary
– the same as her predecessor. In line with our policy,
Judith’s pension contribution has been reduced and
aligned with that of the wider workforce at 5%, rising
to 7% in July in line with her length of service with
RPS. The other terms of her remuneration are in line
with policy and will be disclosed in the 2020 Annual
Report on Remuneration.
76
Report and Accounts 2019Corporate Governance
REMUNERATION
AT A GLANCE
Summary of our current Remuneration
Policy and structure for FY19
Key reward component
Key features
Base salary and core benefits
Competitive salary and benefits to attract right calibre of executive
Short Term Annual Bonus Plan
(STABP)
70% PBTA
20% Cash
10% Personal
Max potential 150% of salary for CEO
Max potential 125% of salary for GFD
Key financial KPIs and personal objectives
Executive Long Term Incentive Plan
50% TSR
25% EPS
25% Cash
CEO Award up to 150% of salary
GFD Award up to 125% of salary
Shareholding
requirements
CEO: 200% of salary
GFD: 150% of salary
Ensure material personal stake in the business
Reward linked to performance
What did we do?
Key reward component
What we have done
Base salary
Increased salaries for CEO and GFD by 2.7%
Salaries effective 1st January 2019
CEO : £508,400
GFD: £325,000
Short Term Annual Bonus Plan
(STABP)
Bonus
CEO : £114,000
GFD: £61,000
Executive Long Term Incentive Plan
(ELTIP)
CEO : 420,234 shares value of £762,600
GFD: 223,866 shares value of £406,250
77
Corporate GovernanceReport and Accounts 2019
ANNUAL REPORT
ON REMUNERATION
This Report details how the Company’s Remuneration Policy for Directors
was implemented during the financial year ended 31 December 2019.
It has been prepared in accordance with the provisions of the Companies Act 2016, 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 scheduled for 1 May 2020.
Director remuneration for the financial year ended 31 December 2019 (audited)
Executive Director’s total single figure remuneration
The following table sets out the breakdown total of the remuneration received by each of the Executive
Directors during the year under review, with the comparative figures for the prior financial year. Figures
provided have been calculated in accordance with the Regulations.
Executive Director
£000s
Year
Executive
John Douglas
Gary Young
78
Base Salary
or Fees
2019
Benefits1
Bonus
2018 2019
2018 2019
Long Term
Incentives4
Pensions3
All Employee
Share Plan5
2018 2019
2018 2019
2018 2019
Total
2018 2019
2018
508
325
495
316
1802
17
114
17
114
61
178
89
–
48
–
–
108
49
99
47
2
2
2
4
912
502
888
473
Notes:
1. Benefits – the value of benefits for each Executive Director shown is comprised of a company car or car allowance, private
medical insurance, life assurance and group income protection.
2. In the case of John Douglas this includes a relocation allowance of £76,000 per annum that is grossed up and includes a payment
for the outstanding balance due for 2017 of £29,000, an outstanding balance of £56,000 in 2018 and a payment of £83,000 for
the current year. The relocation allowance is time limited to 31 March 2021.
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.
4. Long term Incentives: This relates to an exercise of 27,687 shares under the STABP that were exercised on 14 March 2019 at
£1.74 per share.
5. This refers to the matching share award for John Douglas and Gary Young under the Share Incentive Plan.
Short Term Annual Bonus Plan outcomes for the financial year ending 31 December 2019 (audited)
For 2019 John Douglas and Gary Young had a maximum annual bonus opportunity of 150% and 125% of
basic salary respectively. For both Executive Directors the 2019 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
Threshold
(0% vesting)
£50.2m
80%
Maximum
(100% vesting)
£56.9m
100%
Actual
Performance
John Douglas
Gary Young
Actual % of element
Value £000
Value £000
£37.3m
90%
0
50%
Bonus achieved
in 2019
0
£76,260
£38,130
0
£40,625
£20,313
£114,390
£60,938
Report and Accounts 2019Corporate 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
John Douglas
Personal objectives set at the start of the year
Deliver meaningful progress on our five strategic
objectives and communicate with investors.
Focus on improving the performance of the
Australian business.
Develop a succession plan for the Group Finance
Director.
Recommend and implement a succession plan for
North America.
Build the GLT into a high performing team.
Gary Young
Refinance the revolving credit facility.
Improve the production time of the ED report to
the Board ensuring quality reviews at every level.
Develop standardised Segment reporting for RPS
to enable consistency and insight.
Agree a development plan for the senior Finance
team.
As an ERP steering committee member, deliver
the project on time, under budget and with agreed
functionality.
Develop a plan to deliver significant savings in the
finance function to largely offset the additional
costs of the ERP
Assessment against the targets
The RPS brand was successfully launched, Progress@RPS
and other initiatives were introduced; improved
connectivity delivered new cross selling opportunities
and the Energy business was revitalised.
Organic growth was delivered in three segments, but the
Australian business was particularly affected by the weak
economy.
Judith Cottrell was developed internally and will be
appointed as the Group Finance Director in May 2020.
Doug Matthys has been appointed as CEO North America,
an internal promotion.
The GLT continues to evolve into a strong leadership
team.
The Committee agreed that objectives had been met at
50% of target.
The Revolving Credit Facility was renewed for a further
three years.
The Board reporting time achieved the targeted
production date, with no reduction in quality of review.
Segment reporting improved throughout the year, which
resulted in better insight into business performance and
consistency of interpretation.
The senior Finance leadership has been developed: the
team has strengthened with new appointments and
promotions.
ERP was launched on plan in part of Australia and the
Netherlands: there have been some difficulties with the
implementation which are being resolved: commitment
remains to the ERP solution.
A number of cost savings were implemented during the
year.
The Committee agreed that the objectives had met 50%
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 2019. 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. John
Douglas has elected to take all of his bonus in the form of deferred shares. Due to the fact that Gary Young is
retiring, the Remuneration Committee has exercised its discretion under the terms of 2017’s policy and agreed
that FY2019’s bonus payment to Gary Young will be paid wholly in cash, with no deferral.
Executive Long Term Incentive Plan (‘ELTIP’) awards vesting in the financial year ending 31 December 2019
There were no ELTIP awards vesting in the Financial Year ending 31 December 2019.
ELTIP awards granted in the financial year ending 31 December 2019 (audited)
The table below sets out the details of the ELTIP awards granted on 7 March 2019 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
John Douglas
Nil Cost Options
150% of salary
Gary Young
Nil Cost Options
125% of salary
Face value of
award at grant
Date (£)
762,600
406,250
Number of shares
under option
Vesting date
420,234
223,866
07/03/22
07/03/22
Notes:
1. The number of shares to constitute these awards was calculated by reference to the average of the Company’s closing share
price over the period 4 – 6 March 2019 being 181.47p.
79
Corporate GovernanceReport and Accounts 2019
The awards will vest subject to achievement of the following targets.
Performance
measure
Weighting
Measurement
period
Performance
target
Vesting level (% maximum)
Total Shareholder
Return relative to
the FTSE All Share
50%
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
9% p.a.
0%
100%
25%
Three financial years
Between 3% and
9% 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)
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%
Cash conversion
25%
Three financial years
Share Incentive Plan (‘SIP’) awards granted in the financial year ending 31 December 2019
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 2019.
Executive Directors
John Douglas
Gary Young
Number of shares
1,362
2,375
Value of shares (£)
2,202
3,927
80
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.
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-Bakewell1
Allison Bainbridge
Liz Peace
Michael McKelvy
Catherine Glickman
Notes:
Fee
2019
140
27
55
58
52
54
1. Robert Miller-Bakewell resigned as a Director on 1 May 2019.
Fee
2018
136
64
55
53
33
21
Report and Accounts 2019Corporate Governance Statement of Directors’ shareholding and share interests (audited)
Directors’ share interests as at 31 December 2019 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
Catherine Glickman
Notes:
Number of
beneficially
owned shares
528,354
203,654
70,000
10,000
18,400
7,000
21,500
Interests subject
to performance
conditions1
986,575
Interests subject
to employment
conditions2
157,733
534,707
85,793
–
–
–
–
–
–
–
–
–
–
Total interests
1,672,662
824,154
70,000
10,000
18,400
7,000
21,500
1. Interests held under the Executive Long Term Incentive Plan.
2. Interests held under (i) The RPS Group Plc Short Term Annual Bonus plan and (ii) matching shares held for less than three years
under the Share Incentive Plan.
Between 31 December 2019 and 18 February 2020 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 2019 John Douglas and Gary
Young held beneficial shares in the Company equal in value to 179% and 108% 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
81
The interests of the Executive Directors under the STABP are set out below:
Number of
awards at
1 January
2019
56,789
–
25,610
25,403
–
Number
of awards
granted
–
98,198
–
–
49,005
Number
of awards
lapsed
–
–
–
–
–
Number
of awards
exercised
–
–
27,6871
–
–
Number
of awards
as at 31
December
2019
56,789
98,198
–
25,403
49,005
Market
Price at
date of
grant
250.83p
181.47p
252.83p
250.83p
181.47p
Market
price at
date of
exercise
–
–
174p
–
–
Date from
which
released
08/03/2021
07/03/2022
14/03/2019
08/03/2021
07/03/2022
John Douglas
Gary Young
1. The award included 2,077 shares accrued as a dividend reinvestment under the rules of the STABP. On the exercise of the award,
Gary Young made a gain of £48,673.74.
The weighted average share price of awards exercised in the year was £1.74.
Executive Long Term Incentive Plan (ELTIP)
The interests of the Executive Directors under the ELTIP are set out below:
Number of
awards at
1 January
2019
270,324
296,017
–
153,265
157,576
–
Number
of awards
granted
–
–
420,234
–
–
223,866
Number
of awards
lapsed
–
–
–
–
–
–
Number
of awards
exercised
–
–
–
–
–
–
Number
of awards
as at 31
December
2019
270,324
296,017
420,234
153,265
157.576
223,866
Market
Price at
date of
grant
274.67p
250.83p
181.47p
252.85p
250.83p
181.47p
Market
price at
date of
exercise
–
–
–
–
–
–
Date from
which
released
08/06/2020
08/03/2021
07/03/2022
09/03/2020
08/03/2021
07/03/2022
John Douglas
Gary Young
Corporate GovernanceReport and Accounts 2019
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
350
300
250
200
150
100
50
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
RPS
FTSE All-Share
FTSE All-Share Support Services
Chief Executive Officer and employee pay
Chief Executive Officer Remuneration
82
The table below shows the Group Chief Executive’s total remuneration and percentage of opportunity achieved
for variable remuneration elements.
2010
A Hearne A Hearne A Hearne A Hearne A Hearne A Hearne A Hearne A Hearne J Douglas J Douglas
2018
2013
2015
2016
2014
2011
20172
20172
20121
2019
J Douglas
608
793
1,650
883
922
748
981
627
351
888
912
46%
54%
77%
47%
32%
zero
20%
33%
33%
24%
15%
zero
13%
100%
zero
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. These
balances were earned during these years but subject to deferral until the end of 2012 and at risk of performance based forfeiture.
2. The remuneration shown for Alan Hearne for 2017 is in respect of the period to 31 August at which time he retired from the
Board. The total remuneration shown for John Douglas is in respect of 2017 is for 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.
Report and Accounts 2019Corporate Governance Chief Executive Officer Pay Ratio
2019 is the first year for which RPS Group is required to publish a CEO pay ratio. As required by the reporting
regulations, the Committee will build up this disclosure in future years to disclose the trend in the pay ratio
over time. The table below provides the ratio between the CEO single figure total remuneration and total
remuneration for all UK employees and the details of the salary and total remuneration for UK employees in
2019. We have chosen option B as our method for calculating the pay ratio for this report, consistent with the
methodology for reporting of the gender pay gap.
Salary
Total remuneration
Year
2019
2019
Method
B
B
Pay ratio
Remuneration
25th
percentile Median
23
40
16
26
75th
percentile
12
17
25th
percentile Median
£32,050
£22,068
£34,487
£22,719
75th
percentile
£43,890
£52,387
The Committee has considered the findings of the pay ratio analysis which appear to be reasonable in the
context of the RPS Group’s sector and taking into account the composition of the Group’s UK workforce
against which CEO remuneration is compared. Going forward, the Committee will review the trend in pay ratio
as well as the ratio for the relevant year, and seek to understand the drivers of any short- and medium-term
changes to this. Mindful that the ratio of total remuneration will be volatile over time (in large part due to the
relative weighting in the CEO’s package of variable, performance-based incentives), the Committee has also
decided to calculate and publish the pay ratio for salary only. We believe this additional perspective on relative
pay (in particular the trend over time) will help ensure that RPS Group is delivering against its stated policy for
Executive Director salary increases generally to be consistent with the range awarded across the Group
more broadly.
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 Company employees.
83
Salary
Taxable Benefits
Annual Bonus
Percentage change from 2018 Financial Year
to 2019 Financial Year
CEO
2.7%
58%1
-36%
Employees
3.6%
15%
24%
1. In the case of John Douglas this includes a relocation allowance of £76,000 that is grossed up per annum and includes a payment
for the outstanding balance due for 2017 of £29,000 an outstanding balance of £56,000 in 2018 and a payment of £83,000 for
the current year. The relocation allowance is time limited to 31 March 2021.
Relative importance of spend on pay
The chart below shows the total remuneration paid to or receivable by all employees of the Company
and total distributions to shareholders by way of dividends for the current and previous financial years:
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.
s
0
0
0
£
350,000
300,000
250,000
200,000
150,000
100,000
50,000
-
PBTA
6.4% -7.0% -13.5%
Dividend
1.8% 0.5% -23.8%
2016
2017
2018
2019
Total employee pay
6.0% 1.4% -1.6%
Corporate GovernanceReport and Accounts 2019
Committee organisation
Role of the Remuneration Committee (“Committee”)
The Committee held 10 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 attend meetings, although they will not be present when discussion relates to their own
remuneration. The Company Secretary acts as Secretary to the Committee and representatives from the
Committee’s advisers, Mercer, attend meetings as and when required.
The Remuneration Committee is responsible for determining the overall policy for executive remuneration
which is then subject to Board and shareholder approval. Within the context of shareholder approved policy
the Committee is then responsible for determining the specific remuneration packages for the Executive
Directors. This incorporates review of salaries as well as determining opportunities under incentive plans and
performance conditions relating to those plans. Activities also include the determination of terms for any
Executive leaving or joining the Board.
The Committee also has direct responsibility for the terms and conditions of those Senior Executives that sit
immediately below Board level and form the Group Leadership Team. During the year, 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 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 as a whole when setting
Executive Director remuneration.
84
The Committee’s detailed terms of reference can be found on the Company’s website.
External advice
During the period January to April 2019 the Committee received external advice in relation to executive
remuneration from PwC. Following a tender exercise taken out by the Committee, Mercer were selected to
provide ongoing remuneration advice to the Committee and took over the role from PwC on 1 May 2019. Both
PwC and Mercer 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 provided by PwC
and that the advice the Remuneration Committee received was objective and independent. The Committee
can also confirm that Mercer provided no other services for the Company. The total fees paid to PwC in the year
for services to the Committee amounted to £31,582. This fee was comprised of an annual retainer to cover
certain standard advice and payment for additional services in respect of which fees were agreed on a case
by case basis. No contingent fee arrangements were operated. The fees paid to Mercer during the period May
2019 to December 2019 were £23,190 and were agreed on a project by project basis.
Report and Accounts 2019Corporate Governance
Shareholder voting
The Remuneration Committee’s Annual Report for 2018 was approved at the Company’s 2019 Annual General
Meeting on 1 May. The voting for this resolution is shown below.
Annual report
Votes for
Votes against
Total
Withheld
Number of Votes cast % of Votes cast
155,214,497
7,361,229
162,575,726
10,923,907
95.47
4.53
100.00
–
Implementation of the remuneration policy for the year ending 31 December 2020
The Company’s remuneration policy was approved by shareholders at a General Meeting held on 30 November
2016 and applied for 3 years until 31 December 2019. On 16 December 2019 the remuneration Policy was
renewed for a further three years effective from 1 January 2020. The key components of this policy as they
apply to the Executive Directors of the Company are set out on pages 74 to 75, together with any changes that
have been made effective from 1 January 2020.
The full policy statement is available on the Company’s website.
In respect of the Remuneration Policy that was approved at a General Meeting on 30 November 2016, the
voting in respect of the report 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
–
85
In respect of the Remuneration Policy that was approved at a General Meeting on 16 November 2019, the voting
in respect of the report was as shown below:
Remuneration policy
Number of votes cast % of votes cast
Votes for
Votes against
Total
Withheld
162,451,438
23,949,709
186,401,147
58,147
87.15
12.85
100.00
–
Corporate GovernanceReport and Accounts 2019 Element, purpose
and link to strategy
Operation and
maximum opportunity
Performance measures
and assessment
Implementation
for 2020
A broad assessment of individual and
business performance is used as part
of the salary review.
With effect from 1 January
2020 the salary for John
Douglas is £518,600.
BASE SALARY
To provide
competitive fixed
remuneration that will
attract and retain key
employees and reflect
their experience and
position in the Group.
86
the economic environment
individual performance and
the general performance of the
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
the 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 only
be one of a number of factors taken
into account by the Remuneration
Committee which includes:
·
experience of the Executive Director;
· pay and conditions for employees
across the Group;
·
Group; and
·
The Remuneration Committee policy
in relation to salary is:
·
salary for the role on appointment,
depending on experience and
background; and
· on promotion, to increase salary up
to the median salary for the new role
Annual percentage increases
are generally consistent with the
range awarded across the Group.
Percentage increases in salary above
this level may be made in certain
circumstances – such as change in
responsibility or significant increase
in the scale of a role or the Group’s
size and complexity.
Individuals 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.
to position this around the median
Report and Accounts 2019Corporate Governance
Element, purpose
and link to strategy
Operation and
maximum opportunity
Performance measures
and assessment
Implementation
for 2020
Element, purpose
and link to strategy
Operation and
maximum opportunity
Performance measures
and assessment
Implementation
for 2020
BASE SALARY
To provide
An Executive Director’s basic salary
A broad assessment of individual and
With effect from 1 January
competitive fixed
is considered by the Remuneration
business performance is used as part
2020 the salary for John
remuneration that will
Committee on appointment and
of the salary review.
Douglas is £518,600.
attract and retain key
normally reviewed once a year, or
employees and reflect
when there is a significant change to
their experience and
the role or responsibility.
position in the Group.
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 only
be one of a number of factors taken
into account by the Remuneration
Committee which includes:
·
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:
·
to position this around the median
salary for the role on appointment,
depending on experience and
background; and
· on promotion, to increase salary up
to the median salary for the new role
Annual percentage increases
are generally consistent with the
range awarded across the Group.
Percentage increases in salary above
this level may be made in certain
circumstances – such as change in
responsibility or significant increase
in the scale of a role or the Group’s
size and complexity.
Individuals 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.
Not applicable.
Benefits for 2020 will be
provided in accordance
with the policy. In the
period up to 31 March 2021
John Douglas will continue
to receive a relocation
allowance of £76,000 pa.
Not applicable.
Pension benefits for
2020 will be provided
in accordance with the
policy. The pension
contribution for John
Douglas will be reduced
relative to the salary
increase received from
1 January 2020.
87
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.
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 in order to
calculate other benefits and incentive
opportunities.
For incumbent Executive Directors
the maximum employer contribution
either to a pension scheme and/or
provided as a salary supplement is
20% of base salary for the CEO and
15% of base salary for the FD.
Under the new policy any new
Executive Director appointments
from 1 January 2020 will receive an
employer contribution in line with
that available for the wider workforce
in the relevant market.
Corporate GovernanceReport and Accounts 2019
Element, purpose
and link to strategy
Operation and
maximum opportunity
Performance measures
and assessment
Implementation
for 2020
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.
The bonus opportunity in
2020 will be 150% of salary
for John Douglas.
The bonus awards in
2020 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 in relation to
the trading performance
of the Company but
will disclose targets
retrospectively following
the financial year end.
The bonus will normally be
paid 50% in cash and 50%
in shares deferred for a
period of three years.
Maximum awards each year under the
STABP are equal to 150% of salary.
The performance period is one
financial year with pay-out determined
by the Remuneration Committee
following the year end, based on
achievement against a range of
financial and non-financial targets.
50% of the bonus award will be paid
out in cash with the remaining 50%
deferred into shares subject to a
further three year vesting period.
There are no further performance
targets applicable to the deferred
amount.
Malus and clawback provisions
may apply at the discretion of the
Remuneration Committee where it
considers such actions necessary and
appropriate.
The malus period would be up to the
date of the bonus determination and
three years after in respect of deferred
shares under the STABP. The clawback
period will be three years from the
date of the bonus determination for
any cash payments under the STABP.
Participants may be entitled to
dividend equivalents representing
the dividends paid during the deferral
period of the shares.
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.
88
Report and Accounts 2019Corporate Governance
Element, purpose
and link to strategy
Operation and
maximum opportunity
Performance measures
and assessment
Implementation
for 2020
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.
The ELTIP awards granted
in 2019 will be 150% of
salary for John Douglas.
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
will be as shown in the
separate table on page 91.
Under the ELTIP, the Remuneration
Committee may award annual grants
of performance share awards in the
form of nil-cost options or conditional
shares (‘ELTIP awards’).
Maximum ELTIP awards each year are
equal to 150% of base salary (200% of
salary in exceptional circumstances).
ELTIP awards will normally vest after
a three year performance period
subject to the achievement of the
performance measures.
The Remuneration Committee will
retain the discretion to determine
whether to attach a holding period to
a particular award at the date of
each grant.
Malus and clawback provisions
may apply at the discretion of the
Remuneration Committee where it
considers such action necessary
and appropriate.
The malus period will be up to the
date of vesting (i.e. three years from
the date of grant). The clawback
period will be two years from the date
of vesting.
Participants may be entitled to
dividend equivalents during the
deferral period of the shares.
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 due to developments in the
Group’s strategy and, where these are
material, following dialogue with the
major shareholders.
89
Corporate GovernanceReport and Accounts 2019 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 colleague
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.
The Executive Directors are required
to build or maintain a minimum
shareholding in the Company.
Shares included in this calculation
are those held beneficially by the
Executive Director and their 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 their post-tax number of
shares vesting under the STABP and
ELTIP until their requirement is met
and then maintained.
The Post-Employment Policy
stipulates that the post-employment
shareholding for the Executive
Directors will be:
·
In Year One the shareholding to be
the lessor of the in employment
shareholding requirement or the
current shareholding
In Year Two this will reduce to 50%
of the figure.
·
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.
Not applicable.
The new policy will apply
from 1 January 2020
and will not apply to
any historical awards,
or voluntary shares
purchased, including the
voluntary deferral into
shares of any bonus above
the mandatory deferral
requirement (50%) under
the STABP.
90
Report and Accounts 2019Corporate Governance The following performance targets will apply to the LTIP awards to be made to Executive Directors in 2020.
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
9% p.a.
0%
100%
25%
Three financial years
Between 3% and 9% 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.
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
91
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.
Corporate GovernanceReport and Accounts 2019 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
Allison Bainbridge
Liz Peace
Michael McKelvy
Catherine Glickman
Date of appointment
November 2016
June 2017
August 2017
May 2018
August 2018
Unexpired
term as at 31
December 2019
5 months
6 months
8 months
17 months
20 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
92
The Remuneration Committee takes the views of the shareholders very seriously and these have been influential
in shaping remuneration policy and practice. Shareholders were consulted with in September 2019 on the
renewal of the Remuneration Policy and their views were considered when evaluating and setting ongoing
remuneration strategy. We also consulted with shareholders in February 2019 in relation to changes we were
considering making to the remuneration policy. We would like to thank shareholders for their engagement and
comments received during the year. The Remuneration Committee will continue to consult 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 is 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.
CATHERINE GLICKMAN
Chair of the Remuneration Committee
Report and Accounts 2019Corporate Governance FINANCIAL
STATEMENTS
93
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 2019 and of the group’s loss for the
year then ended;
the group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the
European Union;
the parent company financial statements have
been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice,
including 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.
9494
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 33 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 2019Financial statements Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
• Revenue recognition – accrued income cut-off; and
•
Within this report, key audit matters are identified as follows:
Similar level of risk
Impairment of goodwill and long lived assets.
Materiality
Scoping
The materiality that we used for the group financial statements was £1.7m 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 5 locations. Within the 5 locations,
19 business units were subject to a full audit scope, whilst the remaining 7 were subject to specified audit
procedures. Our full scope audit testing and specified audit procedures covered 91% of revenue, 92% of PBTA,
and 98% of net assets.
Significant changes
in our approach
There have been no significant changes in our audit approach in comparison to the prior year except for
classification of the Ireland component as it was not material in the current year, and therefore not subject to
a full scope audit.
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 49 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 12 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 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 42-45 that describe the principal risks, procedures to identify emerging
risks, and an explanation of how these are being managed or mitigated;
the directors’ confirmation on page 42 that they have carried out a robust assessment of the
principal and emerging risks facing the group, including those that would threaten its business
model, future performance, solvency or liquidity; or
the directors’ explanation on page 45 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.
Going concern is the
basis of preparation
of the financial
statements that
assumes an entity will
remain in operation
for a period of at least
12 months from the
date of approval of the
financial statements.
We confirm that we
have nothing material
to report, add or draw
attention to in respect
of these matters.
Viability means the
ability of the group to
continue over the time
horizon considered
appropriate by the
directors.
We confirm that we
have nothing material
to report, add or draw
attention to in respect
of these matters.
95
Report and Accounts 2019Financial statements
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.
There have been no changes to the key audit matters
from the prior year.
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 2019 is £613m (2018: £637m) with accrued income of £46m (2018:
£45m).
How the scope
of our audit
responded to the
key audit matter
9696
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. 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. Given the level of judgement involved in the recognition of revenue in relation to fixed fee contracts,
we identified a risk of fraud in the recognition of revenue.
The group’s revenue recognition policy is disclosed in note 1(c).
We tested relevant controls over the recognition of revenue (including those related to accrued income
recognition).
Whilst relying on controls where we tested satisfactorily, we tested in detail a sample of accrued income
and work-in-progress balances. We focused on fixed fee contracts over £50,000 by comparing them to the
signed contract terms and where relevant agreeing inputs to the related time records, verifying customer
acceptances, billing milestones/schedules, understanding and challenging the estimated costs to complete. In
the locations where we were unable to rely on controls due to the results of our testing not being satisfactory,
we increased the extent of our testing.
In our assessment of the stage of completion, wherever relevant, we attended project status review meetings
and observed the management’s process as well as confirming status of projects.
We recalculated the amount of revenue recognised against the percentage completion and ensured that they
agreed to the general ledger record.
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 2019, the net book value of goodwill and long lived assets was £411m (2018: £418m). The
associated disclosure is included in note 14, the audit committee report on page 71 and the accounting policy
is disclosed in note 1(e).
The 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 26 June 2019 and prior to that, on 25 October 2018 highlighted
underperformance of certain segments of the group, namely Australia Asia Pacific and North America. The key
audit matter is pinpointed to the key assumptions in the cash flow forecasts for the Australia Asia Pacific and
North America CGUs, specifically assumptions on growth rates and the selection of appropriate discount rates.
Management have identified an impairment charge of £19.8m against the Australia Asia Pacific CGU.
In respect of the key audit matter, the CGUs cashflows are predominantly derived from outside of the
European Union.
Report and Accounts 2019Financial statements How the scope
of our audit
responded to the
key audit matter
We obtained an understanding of the relevant 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 Australia Asia Pacific and North
America CGUs. This included discussions with both group and local management teams and corroboration of
information obtained.
We considered management’s forecasts in light of current trading conditions by comparing them against
current and historical results with particular focus on Australia Asia Pacific and North America CGUs.
We worked with 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 and medium 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
We concur with management that the carrying value of goodwill and long lived assets as at 31 December 2019
is appropriately valued.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable
that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use
materiality both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole
as follows:
97
GROUP FINANCIAL STATEMENTS
PARENT COMPANY FINANCIAL STATEMENTS
Materiality
£1,700,000 (2018: £2,500,000)
£850,000 (2018: £1,250,000)
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.
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. Materiality has
decreased by 32% from prior year consistent in line with
group materiality due to the application of a component
materiality threshold.
Basis for
determining
materiality
Rationale for the
benchmark applied
5% of adjusted pre-tax profit, adjusted for
amortisation and impairment of acquired
intangible assets, transaction related costs and
exceptional items (PBTA). This basis is consistent
with the prior year.
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. Similarly, transaction
related and other infrequent costs and are
excluded as they are not reflective of the Group’s
trading performance in the year. Materiality
has decreased by 32% from the prior year
consistent with the decrease in PBTA in the year
compared to prior year. The reduction in PBTA
is due to a number of CGUs suffering reduced
performance in the year.
Report and Accounts 2019Financial statements PBTA £37.3m
• PBTA
• Group materiality
We set performance materiality at a level lower than
materiality to reduce the probability that, in aggregate,
uncorrected and undetected misstatements exceed
the materiality for the financial statements as a whole.
Performance materiality was set at 70% of materiality
for the 2019 audit (2018: 70%). In determining
performance materiality, we considered the
following factors:
a.
our risk assessment, including our assessment of
the group’s overall control environment and that
we consider it appropriate to rely on controls over
a significant part of our revenue testing;
the implementation in the year of a new Enterprise
Resource Planning system in Australia and the
Netherlands; and
our past experience of the audit, which has
indicated a low number of uncorrected
misstatements identified in prior periods.
b.
c.
9898
We agreed with the Audit Committee that we would
report to the Committee all audit differences in excess
of £85,000 (2018: £125,000), 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 5 locations
– UK, Australia, USA, Norway and Netherlands (2018:
6). With the exception of Ireland which was no longer
in scope for the current year, these are the same
locations as prior year. Within the 5 locations, 19
(2018:20) business units were subject to a full audit
Group materiality £1.7m
Component materiality
range £0.9m to £0.7m
Audit Committee reporting
threshold £0.1m
scope, whilst 7 (2018: 6) 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 98% (2018:
97%) of the group’s net assets, 91% (2018: 97%) of
the group’s revenue and 92% (2018: 94%) 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. Component materiality ranged from £0.68m to
£0.85m (2018: £1.0m to £1.25m).
At the group level, we also tested the consolidation
process, impairment of goodwill and long lived assets,
accounting for leases, accounting for acquisitions
and related balances, borrowings, intercompany
and carried out analytical procedures to support 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 (2018: three) overseas locations (Australia,
US and Norway) in addition to the UK. 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:
Report and Accounts 2019Financial statements •
•
•
•
•
•
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 significant risks work for all component auditors’ including the three components we visited
this year, Australia, US and Norway; and
participating in the audit close meetings for each of the operating companies.
8%
19%
Revenue
7%
7%
Profit
before tax
73%
85%
2%
12%
Net assets
86%
• Full audit scope
• Specified audit procedures
• Review at group level
• Scoped out
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
99
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.
Report and Accounts 2019Financial statements 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 and
non-compliance with laws and regulations 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.
100100
audit procedures responsive to those risks, including
obtaining audit evidence that is sufficient and
appropriate to provide a basis for our opinion.
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,
we considered the following:
•
the nature of the industry and sector, control
environment and business performance including
the design of the group’s remuneration policies,
key drivers for directors’ remuneration, bonus
levels and performance targets;
results of our enquiries of management, internal
audit and the audit committee about their own
identification and assessment of the risks of
irregularities;
any matters we identified having obtained and
reviewed the group’s documentation of their
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;
the internal controls established to mitigate
risks of fraud or non-compliance with laws and
regulations;
o
o
the matters discussed among the audit
engagement team including significant
component audit teams and involving relevant
internal specialists, including tax, IT, Valuation and
industry specialists regarding how and where fraud
might occur in the financial statements and any
potential indicators of fraud.
•
•
•
As a result of these procedures, we considered the
opportunities and incentives that may exist within
the organisation for fraud and identified the greatest
potential for fraud in revenue recognition - accrued
income cut off. In common with all audits under
ISAs (UK), we are also required to perform specific
procedures to respond to the risk of management
override.
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
We also obtained an understanding of the legal and
regulatory frameworks that the group operates in,
focusing on provisions of those laws and regulations
that had a direct effect on the determination of
material amounts and disclosures in the financial
statements. The key laws and regulations we
considered in this context included UK Companies Act,
Report and Accounts 2019Financial statements
Listing Rules, pensions legislation and tax legislation.
In addition, we considered provisions of other laws
and regulations that do not have a direct effect on the
financial statements but compliance with which may
be fundamental to the group’s ability to operate or to
avoid a material penalty. These included the group’s
operating license, regulatory solvency requirements
and environmental regulations.
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 related to the potential risk of fraud. The
key audit matters section of our report explains the
matter in more detail and also describes the specific
procedures we performed in response to that 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 provisions of relevant laws and
regulations described as having a direct effect on
the financial statements;
•
•
•
•
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; and
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 the parent company and their environment
obtained in the course of the audit, we have not
identified any material misstatements in the strategic
report or the directors’ report.
101
Report and Accounts 2019Financial 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 8 years, covering
the years ending 31 December 2012 to
31 December 2019.
102102
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.
Alexander Butterworth ACA
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Reading, UK
19 February 2020
Report and Accounts 2019Financial statements CONSOLIDATED INCOME STATEMENT
£000s
Revenue
Recharged expenses
Fee income
Year ended
31 December 2019
612,599
(56,099)
556,500
Year ended
31 December 2018
637,383
(63,226)
574,157
Note
4,5
4,5
4,5
Adjusted operating profit
3,4,6,7,8
43,377
54,041
Amortisation of acquired intangibles and transaction-related costs
Exceptional items
Operating profit
Finance costs
Finance income
Profit before tax, amortisation of acquired intangibles,
transaction-related costs and exceptional items
Profit before tax
Tax expense
3,6
7
9
9
(9,106)
(23,359)
10,912
(6,243)
172
(9,181)
–
44,860
(4,111)
232
37,306
50,162
4,841
40,981
12
(6,072)
(11,240)
(Loss)/profit for the year attributable to equity holders of the parent
(1,231)
29,741
Basic (loss)/earnings per share (pence)
Diluted (loss)/earnings per share (pence)
Adjusted basic earnings per share (pence)
Adjusted diluted earnings per share (pence)
13
13
13
13
(0.55)
(0.54)
12.43
12.31
13.34
13.23
16.47
16.34
103
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
£000s
(Loss)/profit for the year
Actuarial gains and losses on remeasurement of defined benefit
pension scheme
Tax on remeasurement of defined benefit provision liability
Exchange differences*
Total comprehensive expense
Total recognised comprehensive (expense)/income for the year
attributable to equity holders of the parent
*may be reclassified subsequently to profit or loss in accordance with IFRS.
The notes on pages 107 to 142 form part of these financial statements.
Year ended
31 December 2019
Year ended
31 December 2018
Note
29
12
(1,231)
(83)
(18)
(12,263)
(12,364)
(13,595)
29,741
677
(149)
(2,174)
(1,646)
28,095
Report and Accounts 2019Financial statements CONSOLIDATED BALANCE SHEET
£000s
Assets
Non-current assets:
Intangible assets
Property, plant and equipment
Right-of-use assets
Deferred tax asset
Current assets:
Trade and other receivables
Corporation tax receivable
Cash at bank
Liabilities
Current liabilities:
Borrowings
Lease liabilities
Deferred consideration
Trade and other payables
Corporation tax liabilities
Provisions
Net current assets
Non-current liabilities:
Borrowings
Lease liabilities
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
104104
As at
31 December 2019
As at
31 December 2018
Note
14
15
16
23
18
20
16
21
19
22
20
16
21
23
22
24
378,723
32,300
44,766
3,856
459,645
156,990
961
17,731
175,682
1,361
10,011
3,105
104,786
–
913
120,176
55,506
110,465
39,784
5,642
1,474
6,328
2,921
166,614
348,537
6,814
121,937
195,652
21,256
(10,085)
12,963
348,537
385,699
32,005
–
3,795
421,499
165,783
635
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
These financial statements were approved and authorised for issue by the Board on 19 February 2020.
The notes on pages 107 to 142 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 2019Financial statements CONSOLIDATED BALANCE SHEET
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
Purchase of intangible assets
Proceeds from sale of assets
Net cash used in investing activities
Cash flows from financing activities:
Costs of issue of share capital
Increase in bank borrowings
Payment of lease liabilities
Bank arrangement fees
Dividends paid
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of exchange rate fluctuations
Cash and cash equivalents at end of year
Cash and cash equivalents comprise:
Cash at bank
Bank overdraft
Cash and cash equivalents at end of year
The notes on pages 107 to 142 form part of these financial statements.
Year ended
31 December 2019
37,602
Year ended
31 December 2018
44,488
Note
28
(10,053)
(51)
(13,325)
(7,835)
384
(30,880)
–
23,449
(9,240)
(670)
(16,855)
(3,316)
3,406
15,405
(2,441)
16,370
17,731
(1,361)
16,370
(165)
(1,611)
(11,872)
–
222
(13,426)
(9)
(8,891)
–
–
(22,115)
(31,015)
47
15,376
(18)
15,405
17,986
(2,581)
15,405
25
28
28
105
Report and Accounts 2019Financial statements CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
£000s
At 1 January 2018
Effect of changes in accounting standards
Profit for the year
Other comprehensive income/(expense)
Total comprehensive income/(expense) for
the year
Issue of new ordinary shares (note 24)
Share-based payment expense (note 31)
Transfer on release of shares
Dividends paid (note 25)
At 31 December 2018
Share
capital
6,745
Share
premium
117,790
Retained
earnings
205,143
Merger
reserve
21,256
Employee
trust
(8,602)
Translation
reserve
27,452
Total
equity
369,784
–
–
–
–
–
–
–
–
38
2,610
–
–
–
–
–
–
(521)
29,741
528
30,269
(799)
2,338
(659)
(22,115)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(521)
29,741
(2,174)
(1,646)
(2,174)
28,095
(1,858)
–
659
–
–
–
–
–
(9)
2,338
–
(22,115)
6,783
120,400
213,656
21,256
(9,801)
25,278
377,572
Effect of changes in accounting standards
Loss for the year
Other comprehensive income/(expense)
Total comprehensive expense for the year
–
–
–
–
–
–
–
–
Issue of new ordinary shares (note 24)
31
1,537
Share-based payment expense (note 31)
Transfer on release of shares
Dividends paid (note 25)
At 31 December 2019
106106
–
–
–
–
–
–
The notes on pages 107 to 142 form part of these financial statements.
(1,240)
(1,231)
(101)
(1,332)
(566)
2,707
(718)
(16,855)
–
–
–
–
–
–
–
–
–
–
–
–
(1,002)
–
718
–
(52)
(1,292)
–
(1,231)
(12,263)
(12,364)
(12,263)
(13,595)
–
–
–
–
–
2,707
–
(16,855)
6,814
121,937
195,652
21,256
(10,085)
12,963
348,537
Report and Accounts 2019Financial statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
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
address of the registered office is given
on page 56. The nature of the Company's
operations and its principal activities are
set out in the strategic report on pages
7 to 48. The consolidated financial
statements of the Company for the year
ended 31 December 2019 comprise the
Company and its subsidiaries (together
referred to as the ‘Group’).
assets, liabilities and contingent liabilities
are initially recognised at their fair values
at the acquisition date in the Consolidated
Balance Sheet. The results of acquired
operations are included in the
consolidated statement of
comprehensive income from the date on
which control is obtained. They are
deconsolidated from the financial
statements from the date control ceases.
(c) Revenue
(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 16 ‘Leases’ for the first time and the
impact is disclosed in note 32 to the
financial statements.
The adoption of IFRIC 23 ‘Uncertainty
over income tax treatment’ has not
impacted on the current and deferred tax
balances presented in the consolidated
financial statements.
Except for IFRS 16 and IFRIC 23 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
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.
107
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.
Upon invoicing, the contract asset is
reclassified to trade receivables. Where
the amount invoiced exceeds the amount
of revenue recognised, the difference is
booked in contract liabilities.
Report and Accounts 2019Financial statements 108108
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.
(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.
Deferred consideration is stated at fair
value and 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 and is
not amortised as it has an indefinite life.
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 and internally
generated software are stated at cost
less accumulated amortisation and
impairment losses. Where assets are
under construction, these are reviewed at
the balance sheet date to determine
whether there is an impairment.
Intangible assets identified in a business
combination are capitalised at fair value
at the date of acquisition if they are
separable from the acquired entity or
give rise to other contractual or legal
rights. The fair values ascribed to such
intangibles are arrived at by using
appropriate valuation techniques.
Expenditure on internally generated
goodwill and brands is recognised in
the income statement as an expense
as incurred.
iii Amortisation
Amortisation is charged to profit or loss
in proportion to the timing of the benefits
derived from the related asset from the
date that the intangible assets are
available for use over their estimated
useful lives unless such lives are indefinite.
The Group’s intangible assets are
amortised on a straight-line basis over
their expected useful lives:
Customer relationships
5 to 10 years
Trade names
Order backlog
Software
1 to 5 years
1 to 6 years
4 to 8 years
Internally generated software
10 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
The key assumptions concerning the
future and other sources of estimation
uncertainty at the end of 2019 that have
a significant risk of resulting in a material
adjustment to the carrying amount of
assets and liabilities are described below.
The Group performs an annual
impairment review on goodwill and
other non-current assets or whenever
there are indicators of impairment. The
recoverable amounts of cash-generating
units have been determined from value
in use calculations and these calculations
include estimates about the future
financial performance based on budgets
and forecasts, medium and long-term
growth rates, discount rates and the
markets in which the Group operates.
Impairment indicators were noted during
the year in the AAP and North America
segments from poor performance. There
is ongoing economic uncertainty in
the UK associated with Brexit that may
affect the cash flows generated by the
segments which operate in the UK. Based
on the calculations performed, all CGUs
have significant headroom except for AAP
(further discussion of this uncertainty can
be found in note 14).
Report and Accounts 2019Financial statements
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 level 2 inputs: 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 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.
iii 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) Leases
The Group has applied IFRS 16 from
1 January 2019 using the modified
retrospective approach and therefore the
comparative information has not been
restated and is reported under IAS 17.
The impact of the change is disclosed in
note 32.
From 1 January 2019, the Group assesses
whether a contract is, or contains, a lease
and recognises a right-of-use asset and a
corresponding liability at the date at
which the leased asset is available for use
by the Group.
i Right-of-use assets
Right-of-use assets are measured at cost
comprising the following:
–
–
–
–
the amount of the initial
measurement of the lease liability;
any lease payments made at or
before the commencement date less
any lease incentives received;
any initial direct costs; and
any restoration costs.
The right-of-use asset is depreciated on a
straight-line basis from the
commencement date to the earlier of the
useful life and the end of the lease term.
In addition, the right-of-use asset may be
periodically reduced by impairment losses
and adjusted for certain remeasurements
such as exercising a break or an
extension option.
ii Lease liabilities
Lease liabilities are measured at the net
present value of the following lease
payments:
–
–
–
fixed payments less any incentives
receivable;
variable lease payments based on an
index or rate; and
payments of penalties for terminating
the lease, if the lease term reflects
the lessee exercising that option.
Extension and termination options are
included in many property leases across
the Group to maximise operational
flexibility and these options tend to be
only exercisable by the Group and not the
lessor. In determining the lease term, the
Group considers the facts and
circumstances that incentivise the Group
to exercise an extension or termination
option. Extension options are included to
the extent they are reasonably certain to
be exercised. Likewise, the period after a
termination option is only excluded from
a lease if the option to terminate is
reasonably certain to be exercised.
The lease payments are discounted using
the incremental borrowing rate in all
cases, as the interest rate implicit in the
Group’s leases cannot be determined. The
lease liability is remeasured when there is
a change in future lease payments arising
from a change in index or rate, or if the
Group changes its assessment of whether
it will exercise an extension or termination
option. A corresponding adjustment is
made to the carrying amount of the right-
of-use asset.
iii Short-term leases and low
value assets
Payments associated with short-term
leases and leases of low value assets are
recognised as an expense in the income
statement on a straight-line basis over the
lease term. Short-term leases are leases
with a term of 12 months or less. Low
value assets generally include small
pieces of office equipment such as coffee
machines and photocopiers.
109
Report and Accounts 2019Financial statements 2. OTHER ACCOUNTING POLICIES CONTINUED
iv Comparative information
The comparative information is presented
under IAS 17. Leases which contained
terms whereby the Group assumed
substantially all the risks and rewards
incidental to ownership were classified as
finance leases. Assets acquired under a
finance lease were capitalised at inception
of the lease at the fair value of the leased
asset, or if lower, the present value of the
minimum lease payments. Obligations
under finance leases were included in
liabilities net of finance costs allocated to
future periods. The finance charge was
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.
All other leases were classified as
operating leases and charged to the
income statement on a straight-line basis
over the lease term. Lease incentives
received were recognised as an integral
part of the total lease expense.
(d) 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.
(e) 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.
(f ) 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 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.
110110
Report and Accounts 2019Financial statements 2. OTHER ACCOUNTING POLICIES CONTINUED
The Group has calculated the fair market
value of options using a binomial model
and for whole share awards the fair value
has been based on the market value of
the shares at the date of grant adjusted to
take into account some of the terms and
conditions upon which the shares were
granted.
Those fair values were charged to the
income statement over the relevant
vesting period adjusted to reflect actual
and expected vesting levels.
iv Accrued holiday pay
Provision is made at each balance sheet
date for holidays accrued but not taken,
to the extent that they may be carried
forward, calculated at the salary of the
relevant employee at that date.
(g) 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.
(h) Trade and other payables
Trade and other payables are stated at
cost. Trade payables due within one year
are not discounted.
Financial liabilities
The Group’s financial liabilities consist
of trade and other payables, contract
liabilities and borrowings and are
measured at amortised cost.
(i) Borrowings
Bank overdrafts and interest bearing
loans are initially measured at cost and
subsequently stated at amortised cost.
(j) 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.
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.
(m) 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.
(n) Share Scheme Trusts
The Company administers its share
plans through two Trusts - the Employee
Benefit Trust ('EBT') 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.
(o) Accounting standards issued
but not adopted
There are no 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.
111
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.
(k) Exceptional items
Exceptional items are items which,
because of their size, nature or expected
infrequency, merit separate presentation
in the consolidated income statement
to allow users to better understand the
Group's performance in the year.
(l) Income tax
Income tax on the income for the
years presented comprises current and
deferred tax. It is the best estimate of
the tax amount expected to be paid or
received that reflects uncertainty related
to income taxes, if any. Income tax is
recognised in the income statement
except to the extent that it relates to
items recognised in equity, in which case
it is recognised in equity.
Current tax is the expected tax payable on
the taxable income for the year, using tax
rates and rules enacted or substantially
enacted at the balance sheet date, and
any adjustment to tax payable in respect
of previous years. Deferred tax is provided
using the balance sheet liability method,
providing for temporary differences
between the carrying amounts of assets
and liabilities for financial reporting
purposes and the amounts used for
taxation purposes. The following
temporary differences are not provided
for: goodwill not deductible for tax
purposes, the initial recognition of assets
or liabilities that affect neither accounting
nor taxable profit and the differences
relating to investments in subsidiaries
to the extent that they will probably not
reverse in the foreseeable future. The
amount of deferred tax provided is based
on the expected manner of realisation
or settlement of the carrying amount
of assets and liabilities, using tax rates
Report and Accounts 2019Financial statements 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.
Group profit and earnings
measures
PBTA and adjusted operating profit
Profit before tax and amortisation of
acquired intangibles and transaction-
related costs and exceptional items (PBTA)
is used by the Board to monitor and
measure the trading performance of the
Group. It excludes certain items which the
Board believes distort the trading
performance of the Group. These items are
either acquisition and disposal related or
non-cash items, or they are exceptional in
nature.
Delivering the Group’s strategy includes
investment in selected acquisitions that
enhance the depth and breadth of services
that the Group offers in the territories in
which it operates. In addition, from time to
time the Group chooses to exit a particular
market or service offering because it is not
offering the desired returns. By excluding
acquisition and disposal related items from
PBTA, the Board has a clearer view of the
performance of the Group and is able to
make better operational decisions to
support its strategy.
Accordingly, transaction-related costs
including costs of acquisition and disposal,
losses on the closure of businesses and
amortisation of intangible assets are
excluded from the Group’s preferred
performance measure, PBTA. Similarly,
exceptional items are excluded as they are
not reflective of the Group's trading
performance in the year.
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.
Adjusted operating profit is a derivative of
PBTA. A reconciliation is shown below.
£000s
Profit before tax
Add:
Amortisation of acquired intangibles and transaction-related costs
Exceptional items
PBTA
Add:
Net finance costs
Adjusted operating profit
Year ended
31 December 2019
4,841
Year ended
31 December 2018
40,981
9,106
23,359
37,306
6,071
43,377
9,181
–
50,162
3,879
54,041
112112
Adjusted profit attributable to ordinary shareholders and adjusted earnings per share
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. The Board
considers adjusted EPS to be more reflective of the Group's trading performance in the year.
£000s
(Loss)/profit attributable to ordinary shareholders
Add:
Amortisation of acquired intangibles and transaction-related costs
Exceptional items
Tax on amortisation of acquired intangibles, transaction-related costs
and exceptional items
Adjusted profit attributable to ordinary shareholders
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
Year ended
31 December 2019
(1,231)
Year ended
31 December 2018
29,741
9,106
23,359
(3,396)
27,838
9,181
–
(2,205)
36,717
and the constant currency numbers is the
‘constant currency effect’.
£000s
Revenue
Fee income
PBTA
Profit before tax
2018
637,383
574,157
50,162
40,981
Constant
currency effect
(3,122)
2018 at
constant currency
634,261
(2,776)
(295)
(215)
571,381
49,867
40,766
Report and Accounts 2019Financial statements Segment profit and underlying profit
Segment profit is presented in our
segmental disclosures. This excludes
the effects of financing, amortisation
and exceptional items 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 and the costs of
consolidating office space.
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 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 28.
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 and interest
bearing bank loans. This measure gives
the external indebtedness of the Group
(excluding lease liabilities), and is an input
into the leverage calculations. This is
reconciled in note 28.
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 12.
4. BUSINESS AND GEOGRAPHICAL SEGMENTS
Segment information is presented in
The business segments of the Group are
the financial statements in respect of
as follows:
the Group’s business segments, as
reported to the CODM. The business
segment reporting format reflects the
Group’s management and internal
reporting structure.
- Energy
- Consulting - UK and Ireland
- Services - UK and Netherlands
- Norway
- North America
- AAP
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.
113
Report and Accounts 2019Financial statements
4. BUSINESS AND GEOGRAPHICAL SEGMENTS CONTINUED
Segment results for the year ended 31 December 2019:
£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 year ended 31 December 2018:
114114
£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
110,571
127,589
101,390
64,746
58,305
98,314
(4,415)
556,500
Expenses
10,534
27,757
9,736
837
1,046
6,690
(501)
56,099
Intersegment
revenue
(1,000)
(1,279)
(1,729)
(184)
(509)
(215)
4,916
–
Underlying
profit
11,073
Reorganisation
costs
(4)
15,087
10,809
6,091
3,465
6,970
53,495
–
(21)
(127)
(87)
(593)
(832)
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)
External
revenue
120,105
154,067
109,397
65,399
58,842
104,789
–
612,599
Segment
profit
11,069
15,087
10,788
5,964
3,378
6,377
52,663
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
Report and Accounts 2019Financial statements Group reconciliation:
£000s
Revenue
Recharged expenses
Fee income
Underlying profit
Reorganisation costs
Segment profit
Unallocated expenses
Adjusted operating profit
Amortisation of acquired intangibles and transaction-related costs
Exceptional items
Operating profit
Net finance costs
Profit before tax
£000s
Energy
Consulting - UK and Ireland
Services - UK and Netherlands
Norway
North America
AAP
Unallocated
Group total
Year ended
31 December 2019
612,599
Year ended
31 December 2018
637,383
(56,099)
556,500
53,495
(832)
52,663
(9,286)
43,377
(9,106)
(23,359)
10,912
(6,071)
4,841
(63,226)
574,157
64,212
(1,802)
62,410
(8,369)
54,041
(9,181)
–
44,860
(3,879)
40,981
Carrying amount of
segment assets
Segment depreciation
and amortisation
Year ended
31 December 2019
81,739
Year ended
31 December 2018
76,297
Year ended
31 December 2019
2,962
Year ended
31 December 2018
1,933
184,408
107,568
53,865
66,726
114,032
26,989
635,327
169,879
104,950
56,670
66,656
118,608
12,843
605,903
4,749
5,212
2,893
3,299
7,851
968
27,934
1,989
3,489
2,262
2,246
5,143
338
17,400
115
Report and Accounts 2019Financial statements 4. BUSINESS AND GEOGRAPHICAL SEGMENTS CONTINUED
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
116116
Revenue
Fee income
Year ended
31 December 2019
232,447
Year ended
31 December 2018
242,707
Year ended
31 December 2019
203,648
Year ended
31 December 2018
205,212
123,398
138,742
113,557
128,993
97,462
66,152
40,525
38,311
10,416
3,888
94,119
73,747
38,998
33,158
11,817
4,095
92,783
65,243
34,440
34,352
8,993
3,484
89,776
72,524
33,504
29,811
10,421
3,916
612,599
637,383
556,500
574,157
As at
31 December 2019
Carrying amount of
non-current assets
As at
31 December 2018
193,160
163,591
96,955
52,071
39,896
21,060
43,423
13,064
16
96,436
49,458
42,166
38,454
12,679
18,710
5
459,645
421,499
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 the balance sheet date are set out below.
These obligations equate to the contracted work which the Group has on hand at the year end.
£000s
To be undertaken and recognised within one year
To be undertaken and recognised between one and two years
To be undertaken and recognised after two years
These obligations will be recognised as revenue over time.
As at
31 December 2019
252,805
As at
31 December 2018
218,227
37,378
23,592
313,775
19,233
6,489
243,949
Report and Accounts 2019Financial statements 6. AMORTISATION OF ACQUIRED INTANGIBLES AND
TRANSACTION-RELATED COSTS
£000s
Amortisation of acquired intangibles
Transaction-related costs
Total
7. EXCEPTIONAL ITEMS
£000s
Impairment of goodwill (note 14)
Legal fees
Rebranding costs
ERP Implementation costs
Total
Year ended
31 December 2019
8,602
Year ended
31 December 2018
9,144
504
9,106
37
9,181
Year ended
31 December 2019
19,806
Year ended
31 December 2018
–
1,373
1,012
1,168
23,359
–
–
–
–
An impairment charge of £19,806,000 (2018: £nil) has been recognised on the AAP CGU (note 14).
During the year the global rebranding of RPS was completed which introduced a new logo, colour scheme and a new website. Total
costs during the year of this rebranding were £1,012,000 (2018: £nil).
Legal fees were incurred investigating potential issues regarding the administration of US government contracts and/or projects (see
note 26). The investigation is ongoing and further exceptional costs for legal fees will be incurred in 2020.
Our new ERP has been implemented in the Netherlands and part of Australia. The amount expensed in 2019 in respect of change
management and data migration was £1,168,000 (2018: £nil). Further exceptional cost of this nature will be incurred in 2020 as the
roll out of the ERP continues.
117
8. OPERATING PROFIT - BY NATURE OF EXPENSE
£000s
Revenue
Staff costs (note 10)
Subconsultant costs
Other employment-related costs
Depreciation of owned assets
Depreciation of right-of-use assets
Amortisation of software
Profit on disposal of property, plant and equipment and right-of-use assets
Operating lease rentals payable - property
Operating lease rentals payable - equipment and motor vehicles
Short-term and low value lease rentals
Travel costs
Office costs
Amortisation of acquired intangibles
Transaction-related costs
Exceptional items
Other costs
Operating profit
Year ended
31 December 2019
612,599
Year ended
31 December 2018
637,383
(306,701)
(137,671)
(27,557)
(9,267)
(9,981)
(84)
93
–
–
(2,675)
(18,221)
(22,396)
(8,602)
(504)
(23,359)
(34,762)
10,912
(311,691)
(148,351)
(26,688)
(8,256)
–
–
(37)
(13,453)
(4,986)
–
(16,576)
(21,608)
(9,144)
(37)
–
(31,696)
44,860
Report and Accounts 2019Financial statements
9. NET FINANCING COSTS
£000s
Finance costs:
Interest and charges on loans and overdraft
Interest on lease liabilities
Amortisation of prepaid financing costs
Interest payable on deferred consideration
Finance income:
Deposit interest receivable
Net financing costs
10. EMPLOYEE BENEFIT EXPENSE
£000s
Wages and salaries
Social security costs
Pension costs - defined contribution plans
Pension costs - defined benefit plans
Share-based payment expense - equity settled
Average monthly number of employees (including Executive Directors) was:
118118
Fee earning staff
Support staff
Year ended
31 December 2019
Year ended
31 December 2018
(3,862)
(1,885)
(287)
(209)
(6,243)
172
(6,071)
(3,734)
––
(364)
(13)
(4,111)
232
(3,879)
Year ended
31 December 2019
262,903
Year ended
31 December 2018
268,749
26,884
14,004
203
2,707
306,701
4,129
845
4,974
26,912
13,443
249
2,338
311,691
4,639
917
5,556
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 74. The share-based payment charge in respect of key management personnel was
£602,000 (2018: £396,000). Social security costs in respect of these personnel were £285,000 (2018: £260,000).
Report and Accounts 2019Financial statements
11. AUDITORS’ REMUNERATION
During the year, the Group (including its overseas subsidiaries) obtained the following services from the Group’s auditors at costs as
detailed below:
£000s
Statutory audit of the Company's annual accounts
Statutory audit of the Group's subsidiaries
Total audit fees
Interim review
Total audit-related assurance services
Other services
Total fees
12. INCOME TAXES
Analysis of tax expense in the consolidated income statement for the year:
£000s
Current tax:
UK corporation tax
Overseas tax
Adjustments in respect of prior years
Deferred tax:
Origination and reversal of temporary differences
Effect of change in tax rate
Adjustments in respect of prior years
Total tax charge for the year
Year ended
31 December 2019
65
Year ended
31 December 2018
50
788
853
62
915
–
915
569
619
27
646
12
658
Year ended
31 December 2019
Year ended
31 December 2018
1,795
6,008
(482)
7,321
(964)
–
(285)
(1,249)
6,072
3,065
9,509
887
13,461
(1,729)
28
(520)
(2,221)
11,240
119
In addition to the amount charged to the consolidated income statement, the following
items related to tax have been recognised:
Deferred tax charge in other comprehensive income
18
149
Report and Accounts 2019Financial statements 12. INCOME TAXES CONTINUED
The effective tax rate for the year on profit before tax was 125.4% (2018: 27.4% ). The effective tax rate for the year on PBTA was
25.4% (2018: 26.8%) as shown in the table below:
£000s
Total tax expense in income statement
Add back:
Tax on amortisation of acquired intangibles, transaction-related costs and
exceptional items
Adjusted tax charge on the profit for the year
Profit before tax, amortisation of acquired intangibles, transaction-related costs and
exceptional items
Adjusted effective tax rate
Tax rate impact of amortisation of acquired intangibles, transaction-related costs
and exceptional items
Statutory effective tax rate
Year ended
31 December 2019
6,072
Year ended
31 December 2018
11,240
3,396
9,468
37,306
25.4%
100.0%
125.4%
2,205
13,445
50,162
26.8%
0.6%
27.4%
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% (2018: 19.0%) and Australia 30%
(2018: 30%) and the weighted average tax rate reduced to 21.3% in 2019 (2018: 23.1%).
The actual tax charge differs from the weighted average charge for the reasons set out in the following reconciliation:
£000s
Profit before tax
120120
Tax at the weighted average rate of 21.3% (2018: 23.1%)
Effect of:
Irrecoverable witholding tax suffered
Impact of intercompany financing
Impairment of goodwill
Effect of change in tax rates
Losses not recognised
Adjustments in respect of prior years
Other differences
Total tax expense for the year
Year ended
31 December 2019
4,841
1,031
1,169
(65)
4,219
–
5
(767)
480
6,072
Year ended
31 December 2018
40,981
9,452
1,018
(56)
–
39
49
368
370
11,240
The Group operates, mainly through our oil and gas exposed businesses, in jurisdictions that impose withholding taxes on revenue
earned in those jurisdictions. This tax may be off-set against domestic corporation tax either in the current year or in the future within
certain time limits. To the extent that full recovery is not achieved in the current year or is not considered possible in future years the
withholding tax is charged to the income statement. The impact of irrecoverable withholding tax suffered increased in 2019 as more
work was undertaken in these jurisdictions.
The impact of intercompany financing relates to the funding of US operations from the UK.
Enacted changes in tax rates impact the carrying value of deferred tax balances, principally those related to the amortisation
of intangible assets. The impact in 2018 relates to the Norwegian tax rate that reduced from 23% to 22% with effect from
1 January 2019.
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 2019 credit arose mainly in the USA.
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.
Report and Accounts 2019Financial statements 13. EARNINGS PER SHARE
The calculations of basic and diluted earnings per share were based on the profit attributable to ordinary shareholders and a weighted
average number of ordinary shares outstanding during the related period as shown in the table below:
£000s
(Loss)/profit attributable to equity holders of the parent
Weighted average number of ordinary shares for the purposes of basic earnings per share
Effect of employee share schemes
Weighted average number of ordinary shares for the purposes of diluted earnings per share
Basic (loss)/earnings per share (pence)
Diluted (loss)/earnings per share (pence)
Year ended
31 December 2019
(1,231)
Year ended
31 December 2018
29,741
223,958
2,264
226,222
(0.55)
(0.54)
222,946
1,793
224,739
13.34
13.23
The calculations of adjusted earnings per share (see note 3) were based on the number of shares as above and are shown in the
table below:
£000s
(Loss)/profit attributable to equity holders of the parent
Amortisation of acquired intangibles and transaction-related costs (note 6)
Exceptional items (note 7)
Tax on amortisation of acquired intangibles, transaction-related costs and exceptional
items (note 12)
Adjusted profit attributable to equity holders of the parent
Adjusted basic earnings per share (pence)
Adjusted diluted earnings per share (pence)
Year ended
31 December 2019
(1,231)
Year ended
31 December 2018
29,741
9,106
23,359
(3,396)
27,838
12.43
12.31
9,181
–
(2,205)
36,717
16.47
16.34
121
Report and Accounts 2019Financial statements 14. INTANGIBLE ASSETS
Intellectual
property
rights
Customer
relationships
Order
backlog
Trade
names
Non
compete
Internally
generated
agreements Software
software Goodwill
Total
£000s
Cost:
At 1 January 2019
3,743
131,606
19,260
9,355
624
3,299
– 418,507 586,394
Additions
Reclassification from
tangible assets
Exchange differences
At 31 December 2019
–
–
4,109
976
–
–
87
–
(137)
3,606
(3,815)
(579)
(315)
131,900
19,657
9,127
–
–
(14)
610
–
–
9,199
14,827
29,198
2,175
–
2,175
(124)
2
(9,413)
(14,395)
3,175
11,376 423,921 603,372
Aggregate amortisation and impairment losses:
At 1 January 2019
3,743
112,228
19,149
9,259
624
3,036
–
–
(137)
3,606
7,443
–
836
–
115
–
(3,129)
(556)
(313)
116,542
19,429
9,061
–
–
(14)
610
208
–
(118)
3,126
–
84
–
1
52,656 200,695
–
8,686
19,806
19,806
(272)
(4,538)
85
72,190 224,649
–
15,358
228
66
–
49
11,291
351,731 378,723
Intellectual
property
rights
Customer
relationships
Order
backlog
Trade
names
Non
compete
agreements Software Goodwill
Total
Amortisation
Impairment
Exchange differences
At 31 December 2019
Net book value at
31 December 2019
£000s
Cost:
122122
At 1 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
–
(853)
319
(3,675)
359
3,299
418,507
586,394
Aggregate amortisation and impairment losses:
At 1 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
–
–
180
3,743
8,527
(2,130)
760
222
50
(1,274)
(271)
68
60
112,228
19,149
9,259
–
–
21
624
345
–
65
–
–
411
9,144
(3,675)
1,565
3,036
52,656
200,695
–
19,378
111
96
–
263
365,851
385,699
Customer relationships relate to assets acquired in business combinations since 2008 and have remaining useful lives of 1-10 years.
Goodwill
The Group tests annually for impairment or when there are any impairment triggers. 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.
Report and Accounts 2019Financial statements Growth rates
The growth rates applied reflect management’s judgement regarding the potential future performance of the business. The medium
term comprises the years 2021 to 2024. 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 (2018: -2.0% and 2.5%)
reflecting the average long-term EBIT growth rates of the economies in which the CGUs are based and our assessment of the longer
term prospects of these businesses.
The assumptions used for the Groups of CGUs are as follows:
Consulting (UK and Ireland)
Services (UK)
Services (NL)
Norway
North America
AAP
Energy
Pre-tax discount rate
2018
2019
Medium-term growth rate
2018
2019
Long-term growth rate
2018
2019
10.7%
11.2%
12.4%
10.8%
11.0%
12.9%
14.2%
11.6%
12.2%
13.9%
12.1%
12.3%
14.2%
15.4%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
2.1%-2.5%
2.1% - 2.5%
2.1%
2.0%
2.3%
2.3%
2.5%
2.1%
2.0%
2.3%
2.3%
2.5%
(2.0%)
(2.0%)
Summary of results
The Group has recognised an impairment charge of £19,806,000 against the goodwill allocated to the AAP CGU group. AAP
performance was well below budget in the first half of the year and goodwill was tested for impairment at that time. The conclusion
at the interim was that the goodwill was not impaired as the Group expected AAP performance to improve in the second half and
over the forecast period. Whilst performance has improved in the second half, and our budgets show that the CGU group is expected
to grow in 2020 and beyond, performance is not as good as previously expected. The Board has considered the prospects of and
uncertainty in this business and while improved performance in 2020 is still expected, the medium-term performance is less certain
than at the last review. This is due to the combination of market, economic and political risk.
We remain committed to the Australian market and our activities in Australia are fully aligned with and support our strategic objectives.
All other CGUs were tested for impairment and no impairment charges were identified.
Sensitivity of results to changes in estimates
The Group’s CGU groups all have headroom except for AAP which has no headroom. Aside from AAP, the Group does not consider
the changes in estimates that would result in material adjustment to the carrying amounts of assets and liabilities in 2019 to be
reasonably possible.
The valuation of goodwill allocated to the AAP CGU group is most sensitive to the achievement of the 2020 budget. Budgets comprise
forecasts of revenue, staff costs and overheads based on current and anticipated market conditions that have been considered and
approved by the Board. Whilst we are able to manage staff costs, direct costs and overheads, the revenue projections are inherently
uncertain due to the short-term nature of our order book and Australian market conditions which remain fragile.
Consequently, further underperformance against budget in 2020 is possible which could lead to an additional reduction in the
carrying value of this CGU. It is also reasonably possible that AAP exceeds its budget if market conditions allow.
A 50% underperformance against budget would generate an additional impairment charge of up to £34 million. For 2020 we consider
it reasonably possible that AAP could suffer an additional impairment charge of up to £34 million if market conditions worsen
significantly. Headroom for this CGU group is currently £nil.
Goodwill acquired in a business combination is allocated at acquisition to the Groups of CGUs that are expected to benefit from that
business combination. The carrying amount of goodwill has been allocated as follows:
£000s
Consulting (UK and Ireland)
Services (UK)
Services (Netherlands)
Norway
North America
AAP
Energy
As at
31 December 2019
112,230
As at
31 December 2018
114,021
50,095
9,798
31,164
40,516
70,895
37,033
50,095
10,106
32,897
42,142
81,229
35,361
351,731
365,851
123
Report and Accounts 2019Financial statements 15. PROPERTY, PLANT AND EQUIPMENT
£000s
Cost:
At 1 January 2019
Additions
Additions through acquisition
Disposals
Transfers
Reclassification to intangible assets
Exchange differences
At 31 December 2019
Depreciation:
At 1 January 2019
Charge for the year
Disposals
Exchange differences
At 31 December 2019
Net book value at 31 December 2019
£000s
Cost:
At 1 January 2018
Additions
Disposals
Transfers
Exchange differences
At 31 December 2018
Depreciation:
At 1 January 2018
Charge for the year
Disposals
Transfers
Exchange differences
At 31 December 2018
Net book value at 31 December 2018
Freehold
land and
buildings
Alterations
to leasehold
premises
Motor
vehicles
Fixtures,
fittings,
IT and
equipment
10,755
23
–
–
–
–
(562)
10,216
3,638
229
–
(174)
3,693
6,523
6,372
565
–
(1,107)
1,034
–
(235)
6,629
4,273
857
(1,096)
(138)
3,896
2,733
3,517
375
–
(724)
–
–
(102)
3,066
2,305
467
(707)
(57)
2,008
1,058
78,548
12,229
37
(10,147)
(1,034)
(2,175)
(1,765)
75,693
56,971
7,714
(9,858)
(1,120)
53,707
21,986
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
Total
99,192
13,192
37
(11,978)
–
(2,175)
(2,664)
95,604
67,187
9,267
(11,661)
(1,489)
63,304
32,300
Total
93,228
12,187
(5,633)
–
(590)
99,192
64,884
8,256
(5,372)
–
(581)
67,187
32,005
124124
Report and Accounts 2019Financial statements
16. LEASES
The Group applied IFRS 16 ‘Leases’ from 1 January 2019 and the impact of the adoption is disclosed in note 32.
Properties
Vehicles
Office
equipment
40,646
8,124
(7,958)
1,092
(207)
(934)
40,763
3,968
1,794
(1,774)
(31)
(33)
(132)
3,792
242
254
(249)
2
(22)
(16)
211
Total
44,856
10,172
(9,981)
1,063
(262)
(1,082)
44,766
£000s
i. Right-of-use assets
At 1 January 2019
Additions
Depreciation
Remeasurements
Derecognition
Exchange differences
As at 31 December 2019
£000s
ii. Lease liabilities
The maturity profile of the Group’s lease liabilities based on contractual undiscounted cash flows:
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities at 31 December 2019
Lease liabilities included in the balance sheet:
Current
Non-current
Total
£000s
iii. Amounts recognised in profit or loss
Depreciation on right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases
Expense relating to low value assets
£000s
iv. Amounts recognised in statement of cash flows
Total cash outflow for leases
125
As at
31 December 2019
11,728
32,418
11,771
55,917
10,011
39,784
49,795
Year ended
31 December 2019
9,981
1,885
2,663
12
Year ended
31 December 2019
9,240
9,240
17. SUBSIDIARIES
The Group consists of RPS Group Plc (the parent company incorporated in the UK) and its 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.
Report and Accounts 2019Financial statements 18. TRADE AND OTHER RECEIVABLES
£000s
Trade receivables
Contract assets
Prepayments
Other receivables
Trade receivables and contract assets net of provision for impairment are shown below.
£000s
Trade receivables
Provision for impairment
Trade receivables net
£000s
Contract assets
Provision for impairment
Contract assets net
As at
31 December 2019
95,822
As at
31 December 2018
106,509
45,626
10,914
4,628
156,990
44,907
10,406
3,961
165,783
As at
31 December 2019
98,794
As at
31 December 2018
111,735
(2,972)
95,822
(5,226)
106,509
As at
31 December 2019
50,948
As at
31 December 2018
51,531
(5,322)
45,626
(6,624)
44,907
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.
126126
Certain trade receivables are past due but have not been impaired. These relate to customers where we have no concerns over the
recovery of the amount due. The age of financial assets past due but not impaired is as follows:
£000s
Not more than three months past due
More than three months past due
As at
31 December 2019
11,308
As at
31 December 2018
10,462
7,937
19,245
9,582
20,044
No interest is charged on overdue receivables. At the year end the Group’s debtor days were 52 (2018: 50).
Report and Accounts 2019Financial statements
Movements in impairment:
£000s
As at 1 January 2019
Impairment charge
Reversal of provisions
Receivables written off during the year as uncollectible
Exchange differences
As at 31 December 2019
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
Trade receivables
5,226
Contract assets
6,624
1,591
(2,461)
(1,339)
(45)
2,972
4,847
353
2,285
(1,634)
(621)
(4)
5,226
2,361
(2,254)
(1,311)
(98)
5,322
5,756
296
3,646
(980)
(2,082)
(12)
6,624
Total
11,850
3,952
(4,715)
(2,650)
(143)
8,294
10,603
649
5,931
(2,614)
(2,703)
(16)
11,850
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 December 2019
62,585
As at
31 December 2018
65,220
32,185
26,833
21,129
1,841
8,389
3,286
742
31,847
24,677
25,576
4,296
11,977
1,544
646
156,990
165,783
127
The maximum exposure to credit risk at the reporting date is £152,362,000 (2018: £161,822,000).
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 2018 but related revenue recognised in 2019 was immaterial.
19. TRADE AND OTHER PAYABLES
£000s
Trade payables
Accruals
Contract liabilities
Creditors for taxation and social security
Other payables
As at
31 December 2019
26,331
As at
31 December 2018
33,210
36,946
21,116
15,767
4,626
104,786
38,015
22,931
18,385
5,373
117,914
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.
The revenue recognised in the year that was included in contract liabilities in the previous year was £22,931,000.
Report and Accounts 2019Financial statements
20. BORROWINGS
£000s
Bank loans
US loan notes
Bank overdraft
Total bank loan, notes and overdrafts
Arrangement fees
Net bank debt
Leases
Total borrowings
£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 December 2019
55,400
As at
31 December 2018
32,800
55,719
1,361
112,480
(654)
111,826
49,795
161,621
56,751
2,581
92,132
(271)
91,861
–
91,861
As at
31 December 2019
As at
31 December 2018
1,361
55,719
55,400
112,480
2,581
32,800
56,751
92,132
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.
128128
(iii) The Group has one principal bank facility: a multicurrency revolving credit facility of £100,000,000 with Lloyds Bank plc, HSBC
Bank plc and NatWest Bank plc, expiring in 2022. The facility includes an accordion feature whereby the Group may request an
additional facility up to £60,000,000, subject to lender approval. Term loans drawn under this facility carry interest fixed for the
term of the loan equal to LIBOR (or the currency equivalent) plus a margin determined by reference to the leverage of the Group.
There were loans drawn totalling £55,400,000 at 31 December 2019 (2018: £32,800,000).
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
As at
31 December 2019
4,842
As at
31 December 2018
5,486
58,623
56,132
119,597
35,364
58,151
99,001
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 2019Financial statements
21. 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 December 2019
3,105
As at
31 December 2018
53
3,004
2,255
383
8,747
77
49
123
302
Deferred consideration relates to payments due to vendors of acquired companies which are due to be made on future anniversaries
of the acquisitions.
22. PROVISIONS
Onerous contracts
The provision for onerous contracts related to a vacant property.
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 2019
Reduction in provision on adoption of IFRS 16
Additional provision in the year
Utilised in year
Released
Exchange difference
As at 31 December 2019
£000s
Due as follows:
Within one year
After more than one year
Onerous
contracts
2,263
(2,263)
–
–
–
–
–
Warranty
1,782
Dilapidations
2,437
–
–
(25)
–
(25)
–
382
(255)
(428)
(34)
1,732
2,102
Total
6,482
(2,263)
382
(280)
(428)
(59)
3,834
129
As at
31 December 2019
As at
31 December 2018
913
2,921
3,834
2,119
4,363
6,482
The carrying value of the provisions disclosed above is a reasonable approximation of their fair value.
Report and Accounts 2019Financial statements 23. DEFERRED TAXATION
£000s
At 1 January 2018
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
(Charge)/credit to income relating to
current year
Charge to equity for the year
Acquisitions
Exchange differences
At 31 December 2019
Disclosed within liabilities
Disclosed within assets
Property,
plant and
equipment
timing
differences
762
Goodwill
and
intangible
assets
(6,687)
–
(32)
2
–
(15)
717
285
432
–
327
(20)
–
261
(6,119)
(8,351)
2,232
(862)
1,212
–
–
–
(145)
(465)
320
–
(1,437)
149
(6,195)
(5,366)
(829)
Employment
benefits
2,821
Share
based
payments
(132)
Provisions
and other
timing
differences
(1,792)
–
–
116
Total
(5,028)
116
338
(133)
1,749
2,249
(15)
(149)
(108)
2,887
419
2,468
(324)
(18)
–
(160)
2,385
497
1,888
–
–
–
(265)
(290)
25
38
–
–
3
(224)
(231)
7
5
–
92
170
1,532
(28)
(149)
230
(2,610)
(6,405)
(1,362)
3,795
1,185
1,249
–
–
(18)
(1,437)
352
344
1,707
(2,472)
(763)
(6,328)
2,470
3,856
No deferred tax liability is recognised on temporary differences of £3,443,000 (2018: £3,776,000) 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 £393,000
(2018: £406,000).
130130
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 2019Financial statements 24. SHARE CAPITAL
Ordinary shares of 3p each
As at 31 December 2019
As at 31 December 2018
Authorised
Number
240,000,000
Authorised
£000s
7,200
Authorised
Number
240,000,000
Authorised
£000s
7,200
Issued and fully paid
Number
2019
£000s
Share
capital
£000s
Share
premium
Number
2018
£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 Bonus Plan
Admission fees
At 31 December
226,105,296
6,783
120,400
224,817,001
6,745
117,790
685,990
320,439
27,687
–
20
10
1
–
982
488
67
–
877,492
410,803
–
–
26
12
–
–
1,833
786
–
(9)
227,139,412
6,814
121,937
226,105,296
6,783
120,400
Number
Ordinary shares held by the ESOP Trust
Ordinary shares held by the SIP Trust
As at
31 December
2019
3,645,018
As at
31 December
2018
3,237,181
5,302,292
4,619,977
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.
131
The table below shows options outstanding under the Energy Share Option Scheme at 31 December 2019:
Period exercisable
2019 - 2021
Number
50,000
Exercise
price (p)
212.01
Report and Accounts 2019Financial statements
25. DIVIDENDS
£000s
Amounts recognised as distributions to equity holders during the year:
Final dividend for the year ended 31 December 2018 of 5.08p (2017: 5.08p) per share
Interim dividend for the year ended 31 December 2019 of 2.42p (2018: 4.80p) per share
Proposed final dividend for the year ended 31 December 2019 of 2.00p (2018: 5.08p)
per share
Year ended
31 December 2019
Year ended
31 December 2018
11,406
5,449
16,855
11,358
10,757
22,115
4,522
11,415
The proposed final dividend for the year ended 31 December 2019 is subject to approval by shareholders at the Annual General
Meeting and has not been included as a liability in the financial statements.
26. CONTINGENCIES
From time to time the Group receives claims from clients and suppliers. Some of these result in payments to the claimants by the
Group and its insurers. The Board reviews all significant claims at each Board meeting and more regularly if required. The Board is
satisfied that the Group has sufficient provisions at the balance sheet date to meet all likely uninsured liabilities.
RPS has notified the US government of potential issues regarding its administration of government contracts and/or projects.
We are continuing to identify the implications, if any, of the conduct under review. The impact, if any, is unknown. During 2019
legal fees totalling £1,373,000 were incurred investigating this matter and were presented within exceptional items (note 7).
Related to this matter are certain employment claims made against RPS, the outcome of which are also unknown.
132132
27. 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 are on an arms length basis and 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 2019Financial statements
28. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
£000s
Operating profit
Adjustments for:
Depreciation of owned assets
Depreciation of right-of-use assets
Amortisation of intangibles
Amortisation of acquired intangible assets
Impairment of goodwill
Non-cash movement on provisions
Share-based payment expense
(Profit)/loss on sale of assets
EBITDAS
Decrease in trade and other receivables
Decrease in trade and other payables
Cash generated from operations
Interest paid
Interest received
Income taxes paid
Net cash from operating activities
Year ended
31 December 2019
10,912
9,267
9,981
84
8,602
19,806
–
2,707
(93)
61,266
6,358
(12,750)
54,874
(5,843)
172
(11,601)
37,602
Year ended
31 December 2018
44,860
8,256
–
–
9,144
–
(461)
2,338
37
64,174
1,964
(5,779)
60,359
(3,773)
232
(12,330)
44,488
133
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 2019.
£000s
Cash at bank
Overdrafts
Cash and cash equivalents
Bank loans and notes
Net bank debt
Leases
At 31
December
2018
17,986
Effect of
changes in
accounting
standards
–
(2,581)
15,405
(89,280)
(73,875)
–
(73,875)
–
–
–
–
(49,208)
(49,208)
Cash flow
2,186
1,220
3,406
(22,779)
(19,373)
9,240
(10,133)
Prepaid
arrangement
fees
–
Lease
accounting
adjustments1
–
Foreign
exchange
(2,441)
–
–
(287)
(287)
–
(287)
–
–
–
–
(10,800)
(10,800)
–
(2,441)
1,881
(560)
973
413
At 31
December
2019
17,731
(1,361)
16,370
(110,465)
(94,095)
(49,795)
(143,890)
1Includes lease additions, remeasurements and disposals.
£000s
Cash at bank
Overdrafts
Cash and cash equivalents
Bank loans and notes
At
31 December 2017
15,588
Prepaid
Cash flow
2,416
arrangement fees Foreign exchange
(18)
–
At
31 December 2018
17,986
(212)
15,376
(96,008)
(80,632)
(2,369)
47
8,891
8,938
–
–
(363)
(363)
–
(18)
(1,800)
(1,818)
(2,581)
15,405
(89,280)
(73,875)
The cash balance at 31 December 2019 includes £1,301,000 (2018: £2,164,000) that is restricted in its use either as security or
client deposits.
Report and Accounts 2019Financial statements 29. DEFINED BENEFIT PENSION SCHEMES
The Group has two defined benefit pension schemes, arising from the acquisition in 2013 of the OEC Group. These schemes are
closed to new entrants.
The schemes are administered by a fund that is legally separated from the company. The trustees of the pension fund are required by
law to act in the interest of the fund and of all relevant stakeholders in the scheme. The trustees are responsible for the investment
policy with regard to the assets of the fund.
Under the plans, the employees are entitled to post-retirement yearly instalments amounting to 66% of pensionable salary on
attainment of a retirement age of 67. The pensionable salary is the difference between the current salary of the employee and the
state retirement benefit.
The schemes expose the Group to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.
The most recent full actuarial valuations of the plans’ assets and present value of the defined benefit liabilities were carried out in
November 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
As at
31 December 2019
As at
31 December 2018
1.80%
2.25%
2.00%
2.60%
2.75%
2.50%
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 2.0% and 0% (2018: 2.5% and 0%).
The assumed life expectations on retirement at age 65 are:
Years
Retiring today:
Males
Females
134134
As at
31 December 2019
As at
31 December 2018
21.8
25.0
21.8
25.0
This is based on Norway’s standard mortality table with modifications to reflect expected changes in mortality.
Amounts recognised in income in respect of these defined benefit schemes are as follows:
£000s
Current service cost (including tax)
Net interest (income)/expense
Components of defined benefit costs recognised in profit or loss
Year ended
31 December 2019
Year ended
31 December 2018
203
(3)
200
249
14
263
The service charge for the year has been included in the income statement in administrative expenses. The net interest (income)/
expense has been included within net 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
Derecognition of surplus
Remeasurement of the net defined benefit liability
Year ended
31 December 2019
Year ended
31 December 2018
(54)
(11)
148
83
606
71
–
677
Report and Accounts 2019Financial statements 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
Asset not recognised
Net asset/liability arising from defined benefit obligations
As at
31 December 2019
As at
31 December 2018
(2,697)
2,845
148
(148)
–
(4,042)
4,022
(20)
–
(20)
In 2018, the net liability is reported within the consolidated balance sheet within ‘other payables’. Movements in the present value of
defined benefit obligations in the year were as follows:
£000s
Defined benefit obligation at 1 January
Current service cost
Interest cost
Remeasurement (gains)/losses:
Actuarial gains arising from changes in 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
Year ended
31 December 2019
Year ended
31 December 2018
4,042
167
102
(1,300)
(14)
(227)
(73)
2,697
4,389
249
113
(514)
(81)
(39)
(75)
4,042
Year ended
31 December 2019
Year ended
31 December 2018
4,022
3,630
135
105
(1,246)
(221)
266
(73)
(8)
2,845
99
92
(5)
288
(75)
(7)
4,022
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
As at
31 December 2019
As at
31 December 2018
9.7%
1.9%
12.4%
62.6%
13.4%
100%
11.7%
0.9%
23.5%
54.1%
9.8%
100.0%
Reasonably possible changes at the reporting date to one of the actuarial assumptions, holding all other assumptions constant would
have affected the defined benefit obligation as follows:
£000s
Discount rate (1% movement)
Future salary growth (1% movement)
Future pension growth (1% movement)
Mortality rates (1 year movement)
As at 31 December 2019
Increase
Decrease
(358)
92
355
(122)
428
(86)
(23)
108
Report and Accounts 2019Financial statements 30. FINANCIAL RISK MANAGEMENT
(a) Capital management
The capital of the Group consists of debt, which includes the borrowings and facilities disclosed in note 20, 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. The Group manages its capital to support its strategy. At the interim results, the Group changed its
dividend policy. Full year dividends to equal, in total, 40% of adjusted earnings for the financial year.
The borrowings are managed centrally and funds are onward lent to operating subsidiaries as required. The Group has a committed
£100 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 borrowings, lease
liabilities, 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.
136136
£000s
Cash
Trade and other receivables
Financial assets
Borrowings
Lease liabilities
Deferred consideration
Trade and other payables
Financial liabilities
As at
31 December 2019
17,731
As at
31 December 2018
17,986
146,076
163,807
112,480
49,795
8,747
73,211
244,233
156,012
173,998
91,861
–
302
84,799
176,962
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 20. 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 2019Financial 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
2019
56,761
2018
31,842
–
–
–
–
–
–
–
–
–
–
3,400
–
2019
50,112
5,529
19,569
1,589
32,449
4,868
145
2018
29,868
–
213
–
26,814
26
–
2019
28,436
6,737
12,523
339
13,434
11,537
205
2018
33,513
6,588
15,615
4,343
9,978
14,438
324
2019
135,308
12,266
32,092
1,928
45,883
16,405
351
Total
2018
95,223
6,588
15,828
4,343
36,792
17,864
324
At 31 December
56,761
35,242
114,261
56,921
73,211
84,799
244,233
176,962
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
2019
1,361
2018
2,581
–
32,661
55,400
–
–
–
2019
13,116
67,925
21,775
11,445
2018
53
77
56,668
123
2019
68,816
1,346
2,117
932
2018
78,717
3,345
2,129
608
2019
83,293
69,271
79,292
12,377
Total
2018
81,351
36,083
58,797
731
56,761
35,242
114,261
56,921
73,211
84,799
244,233
176,962
The weighted average interest rate and term for interest bearing financial liabilities is shown below:
Sterling
Australian Dollar
US Dollar
Norwegian Krone
Euro
Canadian Dollar
Other
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
137
2019
3.2
3.9
3.9
4.0
2.5
4.6
4.4
3.4
2018
3.0
3.5
3.8
2.3
–
–
–
3.2
2019
44
59
28
65
59
38
66
43
2018
33
34
33
16
–
–
–
21
As at
31 December 2019
2,029
As at
31 December 2018
261
2,215
2,393
3,897
393
5,653
486
134
531
2,103
2,302
3,837
955
7,044
1,069
122
293
17,731
17,986
The fair value of the forward foreign exchange contracts held at year end was not material.
Report and Accounts 2019Financial statements 30. FINANCIAL RISK MANAGEMENT CONTINUED
(d) 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 18 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.
31. SHARE-BASED PAYMENTS
Share scheme costs
£000s
Share Incentive Plan (‘SIP’)
Performance Share Plan (‘PSP’)
138138
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(f)iii.
The following tables set out details of material share schemes activity:
Year ended
31 December 2019
1,457
Year ended
31 December 2018
1,304
652
414
184
2,707
640
277
117
2,338
SIP
Year of grant
2016
2017
2018
2019
Year of grant
2015
2016
2017
2018
Number
outstanding
31 December
2018
612,608
506,496
801,336
–
1,920,440
Number
outstanding
31 December
2017
463,068
702,879
578,835
–
1,744,782
New grants
–
–
–
1,146,438
1,146,438
Releases
(572,513)
(23,263)
(30,154)
(11,406)
Forfeits
(40,095)
(45,916)
(75,827)
(39,564)
(637,336)
(201,402)
New grants
–
–
–
833,623
833,623
Releases
(435,899)
(26,398)
(19,352)
(6,555)
Forfeits
(27,169)
(63,873)
(52,987)
(25,732)
(488,204)
(169,761)
1,920,440
Number
outstanding
31 December
2019
–
437,317
695,355
1,095,468
2,228,140
Number
outstanding
31 December
2018
–
612,608
506,496
801,336
Vesting
conditions
3 years
3 years
3 years
3 years
Vesting
conditions
3 years
3 years
3 years
3 years
Report and Accounts 2019Financial statements
New grants
–
Releases
(16,482)
PSP
Year of grant
2009
2011
2012
2013
2014
2015
2016
2017
2018
2019
Year of grant
2009
2011
2012
2013
2014
2015
2016
2017
2018
Number
outstanding
31 December
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 December
2017
52,543
41,618
45,315
51,139
66,554
383,118
470,080
337,729
–
1,448,096
–
–
–
–
–
–
–
–
561,660
561,660
New grants
–
–
–
–
–
–
–
–
431,122
431,122
Number
outstanding
31 December
2019
–
19,899
26,767
33,295
37,615
63,919
67,234
257,338
406,266
558,895
Lapses
(1,810)
(760)
(850)
(1,402)
(1,032)
(3,336)
(68,753)
(39,776)
(21,937)
(2,765)
–
–
–
–
(9,071)
(285,315)
(8,381)
(1,190)
–
(320,439)
(142,421)
1,471,228
Number
outstanding
31 December
2018
18,292
20,659
27,617
34,697
38,647
76,326
421,302
305,495
429,393
1,372,428
Lapses
–
–
(2,551)
(801)
(3,013)
(28,066)
(35,414)
(24,413)
(1,729)
(95,987)
Releases
(34,251)
(20,959)
(15,147)
(15,641)
(24,894)
(278,726)
(13,364)
(7,821)
–
(410,803)
Vesting
conditions
3 years
3 years
3 years
3 years
3 years
1, 2 or 3 years
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
3 years
3 years
139
SIP
For the purposes of calculating the fair value of conditional shares awarded under the SIP, the fair value was calculated as the market
value of the shares at the date of grant as participants are entitled to receive dividends over the three year holding period.
Fair value at measurement date
Weighted fair value
Holding period
SIP awards
120.00p - 292.25p
193.47p
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(f)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
147.97p - 318.65p
199.4p
184.93p
3 years
2.02% - 5.55%
Report and Accounts 2019Financial statements
32. NEW ACCOUNTING STANDARD
The Group has applied IFRS 16 from 1 January 2019 using the modified retrospective approach under which the cumulative effect is
recognised in retained earnings on the date of application. The Group leases offices, equipment and vehicles that are negotiated on an
individual basis and contain a wide range of different terms and conditions.
On transition to IFRS 16, the Group has elected not to reassess whether a contract is or contains a lease at the date of initial
application and has relied upon the assessment made under IAS 17. In addition, the following practical expedients permitted by the
standard have been applied:
-
-
-
-
The use of a single discount rate for a portfolio of leases with reasonably similar characteristics.
Reliance on previous estimates of whether leases are onerous.
The accounting for operating leases with a remaining life of less than one year as at 1 January 2019 as short-term leases.
The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
On adoption of IFRS 16, the Group measured the lease liabilities at the present value of the remaining lease payments, discounted
using the incremental borrowing rate at 1 January 2019. The weighted average incremental borrowing rate applied was 3.96%. The
associated right-of-use assets were measured on a retrospective basis as if the new rules had always been applied. Onerous lease
contracts have been adjusted through the right-of-use assets.
The change in accounting policy affected the following items in the consolidated balance sheet on 1 January 2019:
£000s
Right-of-use assets increased by:
Deferred tax asset increased by:
Prepayments reduced by:
Accruals reduced by:
Lease liabilities increased by:
Provisions reduced by:
Translation reserve reduced by:
Retained earnings reduced by:
44,856
350
482
1,096
49,208
2,096
52
1,240
140140
A reconciliation of the operating lease commitments at 31 December 2018, disclosed in the 2018 consolidated financial statements,
to the lease liability recognised on the transition date is as follows:
£000s
Operating lease commitments disclosed as at 31 December 2018
Recognition exemption for short-term leases
Recognition exemption for low value assets
Adjustments as a result of different treatment of extension and termination options
Effect of discounting
Lease liability recognised at 1 January 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
57,075
(2,148)
(19)
1,331
(7,031)
49,208
8,054
41,154
At 31 December 2018 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
Property
11,799
28,871
8,318
48,988
Other
3,519
4,567
1
8,087
Report and Accounts 2019Financial statements Impact on alternative performance measures
Adjusted earnings per share decreased by 0.16p for the year ended 31 December 2019 as a result of the adoption of IFRS 16. PBTA
decreased by £572,000, operating profit before amortisation increased by £1,313,000 and finance costs increased by £1,885,000.
Segment profit has been disclosed including the effects of IFRS 16 transition. This is consistent with how management reviews the
performance of the business. The IFRS 16 adjustments that have been posted to each segment for the year ended 31 December 2019
are as follows:
£000s
Energy
Consulting - UK and Ireland
Services - UK and Netherlands
Norway
North America
AAP
Total
Segment profit
per note 4
11,069
IFRS 16
adjustment
(83)
Segment profit
pre IFRS 16
adjustment
10,986
15,087
10,788
5,964
3,378
6,377
52,663
(514)
(111)
(129)
(172)
(263)
(1,272)
14,573
10,677
5,835
3,206
6,114
51,391
33. ACQUISITIONS
On 1 February 2019 the Group acquired the trade and assets of Corview Pty Ltd, an Australian transport advisory consultancy that is
included in the AAP segment. This acquisition further strengthens RPS’s deep expertise in the region.
On 30 September 2019 the Group acquired the entire issued share capital Reservoir Imaging Limited, a UK-based seismic data
acquisition software services company that will add a new growth area to the Energy segment.
The amounts recognised in respect of identifiable assets acquired and liabilities assumed, the fair value of consideration and the
resulting goodwill are as follows:
£000s
Intangible assets:
Order book
Customer relations
Trade names
Property, plant and equipment
Cash
Other assets
Other liabilities
Net assets acquired
Satisfied by:
Initial cash consideration
Fair value of deferred cash consideration
Total consideration
Goodwill
The fair values of the net assets are provisional.
Corview
Reservoir
Imaging Limited
141
776
3,359
67
29
1,164
57
(1,442)
4,010
9,756
7,548
17,304
13,294
200
750
20
8
1,222
860
(627)
2,433
2,683
1,283
3,966
1,533
The goodwill arising on both acquisitions represents the value of the workforce acquired, potential synergies, future contracts and
access to new markets and customers. There is no tax deductible goodwill.
Report and Accounts 2019Financial statements 33. ACQUISITIONS CONTINUED
The fair value of the receivables acquired and the breakdown between gross receivables and estimated irrecoverable amounts was
as follows:
£000s
Gross receivables
Estimated irrecoverable
Fair value of assets acquired
Corview
67
–
67
Reservoir
Imaging Limited
767
–
767
The Group incurred acquisition-related costs of £398,000 for Corview and £106,000 for Reservoir Imaging Limited which have been
expensed through the consolidated income statement and are included within amortisation of acquired intangibles and transaction-
related costs.
The contribution of Corview and Reservoir Imaging Limited to the Group’s results for the year is given below:
£000s
Revenue
Fees
Operating profit before amortisation
Operating (loss)/profit
Corview
7,640
5,895
821
(882)
Reservoir
Imaging Ltd
641
641
135
64
The pro forma Group revenue and operating profit assuming that the acquisitions had been completed on the first day of the year
would have been £614,903,000 and £31,038,000 respectively.
A reconciliation of the goodwill movement in 2019 in respect of the acquisition of Corview is as follows:
£000s
On acquisition
142142
Foreign exchange revaluation
As at 31 December 2019
Corview
13,294
(568)
12,726
Reservoir
Imaging Limited
1,533
–
1,533
Report and Accounts 2019Financial 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
Net assets
Capital and reserves
Called up share capital
Share premium account
Profit and loss account
Merger reserve
Employee trust shares
Other reserve
Total shareholders’ equity
As at
31 December 2019
As at
31 December 2018
Notes
4
5
6
7
8
9
10
12
12
12
12
12
12
11,292
1,370
341,267
353,929
48,595
111
48,706
42,889
5,817
359,746
110,465
172
249,109
6,814
121,937
65,931
21,256
(10,085)
43,256
249,109
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
143
The loss for the year attributable to the shareholders of the Parent Company and recorded through the accounts of the Parent
Company was £7,390,000 (2018 profit: £6,882,000).
These financial statements were approved and authorised for issue by the Board on 19 February 2020.
The notes on pages 145 to 153 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 2019Financial statements
PARENT COMPANY
STATEMENT OF
CHANGES IN EQUITY
£000s
At 1 January 2018
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 6)
Dividend paid (note 13)
At 31 December 2018
Changes in equity during 2019:
Issue of new shares
Share-based payment expense
Transfer on release of shares
144144
Loss and total comprehensive expense
Reserves transfer on impairment loss (note 6)
Dividends paid (note 13)
At 31 December 2019
Share
capital
6,745
Share
premium
117,790
Merger
reserve
21,256
Employee
trust
shares
(8,602)
Profit and
loss
account
83,373
Other
reserve
62,989
Total
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
31
1,537
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,002)
–
718
–
–
–
(566)
2,707
(718)
(7,390)
–
–
–
–
12,089
(12,089)
–
2,707
–
(7,390)
–
(16,855)
–
(16,855)
6,814
121,937
21,256
(10,085)
65,931
43,256
249,109
The notes on pages 145 to 153 form part of these financial statements.
Report and Accounts 2019Financial 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 56. The
nature of the Company’s operations and
its principal activities are set out in the
strategic report on pages 7 to 48.
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.
Other intangible assets
Other intangible assets are stated at
cost less accumulated amortisation and
impairment losses.
Amortisation is charged to the income
statement on a straight-line basis over
their estimated useful lives as follows:
Software
10 years
Valuation of investments
Investments held as fixed assets are
stated at cost, less any provision for
impairment in value.
Tangible fixed assets
Tangible fixed assets are stated at cost,
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. Further
information on these arrangements
is in other accounting policies to the
consolidated financial statements (2(f)(iii)).
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
145
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 2019Financial statements
1. ACCOUNTING POLICIES CONTINUED
Employee Share Trusts
The assets, income and expenditure
of the SIP and Employee Benefit Trust
are incorporated into the Company’s
financial statements.
The Trusts are used to issue shares under
the Group’s share schemes, as described
on page 110. 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, other debtors and
amounts due from subsidiary
undertakings 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 creditors
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 ongoing economic uncertainty in the
statements, no judgements have been
UK associated with Brexit was considered
made in the process of applying the
for the investment values in the UK.
Company’s accounting policies, other
than those involving estimations,
that have had a significant effect
on the amounts recognised in the
financial statements.
The US business underperformed against
budget in 2019 and whilst not probable, it
is possible that further underperformance
may occur in 2020 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.
146146
The investment value associated with
the US business at 31 December 2019
was £88,383,000.
No impairment was recorded against the
investment value associated with the
Australia business and the carrying value
at 31 December 2019 was £75,613,000.
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 2019, that has a
significant risk of resulting in a material
adjustment to the carrying amounts of
assets and liabilities during 2020, relates
to the testing for impairment of the
Company’s investments.
The Company performs an annual
impairment review on the valuation of the
investment. The recoverable amounts of
each investment have been determined
from value in use calculations and these
calculations include estimates about the
future financial performance based on
budgets and forecasts, medium and long-
term growth rates, discount rates and the
markets in which the investments operate.
Report and Accounts 2019Financial statements
3. PROFIT ATTRIBUTABLE TO SHAREHOLDERS
No profit and loss account is disclosed by the Parent Company as allowed by Section 408 of the Companies Act 2006.
The remuneration of the auditors for the statutory audit of the Company was £65,000 (2018: £50,000).
The average number of employees of the Company during the year, including Directors, was 160 (2018: 141).
4. INTANGIBLE ASSETS
£000s
Cost
At 1 January 2019
Additions
Reclassification frm tangible assets
At 31 December 2019
Amortisation
At 1 January 2019
Charge for the year
At 31 December 2019
Net book value at 31 December 2019
Net book value at 31 December 2018
5. TANGIBLE ASSETS
£000s
Cost or valuation
At 1 January 2019
Additions
Disposals
Reclassification to intangible assets
At 31 December 2019
Depreciation
At 1 January 2019
Charge for the year
Disposals
At 31 December 2019
Net book value at 31 December 2019
Net book value at 31 December 2018
Goodwill
Software
Total
2,134
–
–
2,134
1,883
66
1,949
185
251
–
10,200
924
11,124
–
17
17
11,107
–
Alterations
to leasehold
premises
Fixtures,
fittings,
IT and
equipment
599
55
–
–
654
505
48
–
553
101
94
8,310
1,170
(36)
(924)
8,520
6,863
424
(36)
7,251
1,269
1,447
2,134
10,200
924
13,258
1,883
83
1,966
11,292
251
Total
8,909
1,225
(36)
(924)
9,174
7,368
472
(36)
7,804
1,370
1,541
147
Report and Accounts 2019Financial statements 6. INVESTMENTS
£000s
Subsidiary undertakings
Cost
At beginning and end of year
Provisions
At beginning of year
Impairment
At end of year
Net book value at end of year
2019
2018
455,670
455,670
102,314
12,089
114,403
341,267
94,670
7,644
102,314
353,356
The Group’s investment in its US business was impaired by £12,089,000 (2018: £7,644,000) and this was 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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Country of registration and operation
Australia
148148
1 ECL DM Pty Ltd
1 ECL Drilling Management Pty Limited
1 ECL Pty Ltd
1 Everything Infrastructure Consulting Pty Ltd
1 Everything Infrastructure Group Pty Ltd
1 Intelligent Infrastructure Pty Ltd
1 RPS APASA Pty Ltd
1 RPS Advisory Services Pty Ltd
1 RPS Aquaterra Pty Ltd
1 RPS Australia East Pty Ltd
1 RPS Australia West Pty Ltd
1 RPS Consultants Pty Ltd
1 RPS ECOS Pty Ltd
1 RPS Energy Pty Ltd
1 RPS Energy Services Pty Ltd
1 RPS Environment and Planning Pty Ltd
1 RPS Harper Somers O’Sullivan Pty Ltd
1 RPS Manidis Roberts Pty Ltd
1 RPS AAP Consulting Pty Ltd
1 Rudall Blanchard Associates Pty Limited
1 Troy Ikoda Australasia Pty Ltd
1 Whelans Corporation Pty Limited
1 Whelans Insites Pty Limited
Brazil
2 RPS Consultores do Brasil Ltda
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Canada
3 Petroleum Institute for Continuing Education Ltd
3 Boyd Exploration Consultants Ltd
3 Maverick Land Consultants 2012 Ltd
3 RPS Canada Ltd
3 RPS Energy Canada Ltd
4 Canadian GaiaTech, B.C. ULC
England
5 Aquaterra International Ltd
5 Aquaterra UK Limited
5 Basicshare Limited
5 Burks Green & Partners Limited
5 Cambrian Consultants America Limited
5 Cambrian Consultants Limited
5 CgMs Holdings Limited
5 CgMs Limited
5 Clear Environmental Consultants Limited
5 DBK Partners Limited
5 ECL Group Limited
5 ECL Resources Management Limited
5 ECL Technology Limited
5 Emulous Group Limited
5 Emulous Ltd
5 Energy Innovations Limited
5 Exploration Consultants Limited
5 Flow Control (Water Conservation) Limited
5 Geocon Group Services Limited
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Report and Accounts 2019Financial statements
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Country of registration and operation
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 Reservoir Imaging Limited
5 R W Gregory Limited
5 RPS Business Healthcare Limited
5 RPS Chapman Warren Limited
5 RPS Consultants Ltd
5 RPS Consulting Services Limited
5 RPS Design Ltd
5 RPS Ecoscope Limited
5 RPS Energy Consultants Limited
5 RPS Energy Limited
5 RPS Energy Services Limited
5 RPS Environmental Management Limited
5 RPS Finance AAP 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 RPS Utilities Limited
5 Rudall Blanchard Associates Group Limited
5 Rudall Blanchard Associates Limited
5 Safety and Reliability Consultants Limited
5 Scott Pickford Limited
5 Sherwood House Properties Limited
5 SRC (Consultants) Limited
5 Town Planning Consultancy Limited
5 TPK Consulting Limited
5 Troy Ikoda Limited
5 Troy-Ikoda Management Limited
5 Utility Technical Services Limited
5 WTW & Associates Limited
5 X-IPEC Limited
Germany
6 Metier Academy GmbH
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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 OEC AS
20 RPS Norway AS
20 RPS Group AS
Oman
21 Knowledge Reservoir LLC (Oman)
Papua New Guinea
22 Point Project Management (PNG) Ltd
Scotland
23 OceanFix International Limited
24 RPS Health in Business Limited
Singapore
25 Delphi Group Asia PTE Limited
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6. INVESTMENTS CONTINUED
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Sweden
26 Metier AB
26 Metier Academy AB
USA
27 APA USA, Inc
27 Espey Consultants, Inc.
27 GaiaTech Holdings, Inc
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27 GaiaTech Canada, Inc
27 Houston Geoscan Inc
27 Hydrosearch USA Inc
28 RPS Infrastructure Inc
27 Knowledge Reservoir Group Inc
27 RPS America Group Inc
27 RPS Americas Inc
27 RPS Group, Inc.
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150150
Registered Offices
1 520 Wickham Street, Fortitude Valley, Queensland 4006, Australia
14 Elektronicaweg 2, 2628 XG Delft, The Netherlands
2 Av. Almirante Barroso 91, Rio de Janeiro, Rio De Janeiro 20031--005,
15 Minervum 7002, 4817, ZL Breda, The Netherlands
Brazil
16 50 Customhouse Quay, Wellington Central, Wellington, 6011,
3 1200, 700 - 2nd Street SW, Calgary, Alberta, TP2 4V5, Canada
New Zealand
4 1300-777 ST Dunsmuir Vancouver, British Columbia V7Y1K2 Canada
17 Elmwood House, 74 Boucher Road, Belfast, BT12 6RZ
5 20 Western Avenue, Milton Park, Abingdon, Oxfordshire OX14 4SH
18 Engelsminnegata, 24, 4008 Stavanger, Norway
6 Frankfurt am Main, Gashaftsanschrift, Marketstrasse 4460388
19 Hoffsveien 70C, 0377 Oslo, Norway
Frankfurt am Main, Germany
7 Line Group Limited, 57/63 Line Wall Road, Gilbraltar
20 Hovfaret 10, 0275 Oslo, Norway
21 Al-Kulieah Street, Al-Khuwair 17/2, Building No.741,
8 West Pier Business Campus, Old Dunleary Road, Dunlaoghaire,
Way No. 4508 Muscat, Oman
Co Dublin, Republic of Ireland
22 2nd Floor, Brian Bell Plaza, Turumu Street, Boroko, NCD,
9 Level 11-2 Faber Imperial Court, Jalan Sultan Ismail 50250, Kuala
Papua New Guinea
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
23 9 Queens Road, Aberdeen, AB15 4YL
24 Unit 1, Ratho Park, Station Road, Edinburgh, EH28 8QQ
25 Paya Lebar Road 60, 40 Singapore - Hougang, Singapore - Singapore
26 Drottninggatan 71, C, 111 36, Stockholm, Sweden
27 20405 Tomball Parkway, Suite 200, Houston, Texas 77070, USA
13 701 San Business Centre, 8th Khoroo, Sukhbaatar, Ulaanbaatar,
28 575 North Dairy Ashford, Suite 700, Houston, Texas 77079, USA
Mongolia
Report and Accounts 2019Financial statements
7. DEBTORS
£000s
Amounts falling due within one year:
Amounts due from subsidiary undertakings
Corporation tax receivable
Other debtors
Prepayments
As at
31 December 2019
As at
31 December 2018
36,478
4,000
3,299
4,818
48,595
42,665
2,032
2,729
3,099
50,525
Amounts due from subsidiary undertakings include short-term loans of £33,850,000 that incur interest at rates of between 1.33% and
4.67%. All other amounts are unsecured, interest free and repayable on demand.
8. CREDITORS – AMOUNTS FALLING DUE WITHIN ONE YEAR
£000s
Borrowings
Trade creditors
Amounts due to subsidiary undertakings
Other creditors
Accruals
As at
31 December 2019
1,361
As at
31 December 2018
2,581
2,549
34,386
630
3,963
42,889
3,270
36,646
501
2,735
45,733
Amounts due to subsidiary undertakings include short-term loans of £27,565,000 that incur interest at rates of between 1.13% and
4.47%. All other amounts are unsecured, interest free and repayable on demand.
151
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 20 to the consolidated financial statements.
As at
31 December 2019
As at
31 December 2018
55,400
55,719
(654)
110,465
55,719
55,400
(654)
110,465
32,800
56,751
(271)
89,280
32,800
56,751
(271)
89,280
Report and Accounts 2019Financial statements
10. PROVISION FOR LIABILITIES
£000s
As at 1 January 2019
Additional provision in the year
Utilised in the year
As at 31 December 2019
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:
152152
£000s
Net asset at beginning of year
Credit/(charge) to income for the year
Net asset at year end
The deferred taxation balances comprise:
£000s
Short-term timing differences
Depreciation in excess of capital allowances
Deferred tax asset
Deferred tax is included within other debtors in the balance sheet.
Total
152
24
(4)
172
As at
31 December 2019
51
As at
31 December 2018
4
121
172
148
152
As at
31 December 2019
198
As at
31 December 2018
257
91
289
(59)
198
As at
31 December 2019
163
As at
31 December 2018
27
126
289
171
198
Report and Accounts 2019Financial statements
12. SHARE CAPITAL AND RESERVES
Ordinary shares of 3p each
At 1 January 2019
At 31 December 2019
Authorised
Allotted and fully paid
Number
240,000,000
240,000,000
Value
£000s
7,200
7,200
Number
226,105,286
227,139,412
Value
£000s
6,783
6,814
Full details of the share capital of the Company are disclosed in note 24 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 account
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 25 of the consolidated financial statements.
14. COMMITMENTS UNDER OPERATING LEASES
Total future minimum lease payments under non-cancellable operating leases are as follows:
153
Land and buildings
Other
£000s
Within one year
Between one and five years
31 December 2019 31 December 2018 31 December 2019 31 December 2018
834
20
629
16
–
16
20
40
662
1,291
874
1,708
15. DIRECTORS’ INTERESTS IN TRANSACTIONS
There were no transactions during the year in which the Directors had any interest.
Report and Accounts 2019Financial 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
2019
612,599
556,500
37,306
(94,095)
348,537
54,874
4,974
4.42p
12.43p
12.31p
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
The Five Year Summary does not form part of the audited financial statements.
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Contact:
RPS Group Plc
20 Western Avenue, Milton Park
Abingdon, Oxon OX14 4SH
T +44 (0)1235 863206
Registered in England No. 2087786
rpsgroup.com