2019 HALF YEAR RESULTS rpsgroup.com rpsgroup.com STRONG PLATFORM - - PowerPoint PPT Presentation

rpsgroup.com

2019 HALF YEAR RESULTS

rpsgroup.com

STRONG PLATFORM FOR GROWTH

01 AUGUST 2019

2

Agenda

• Overview
• Group financial results
• Segmental performance
• Significant progress
• Group outlook

Agenda

3

Managing volatility, significant progress, positive outlook

Managing volatility

• 3% decline in fee income (at constant

currency) – headwinds in Australia offset growth elsewhere

• Capacity matched to markets while retaining

capability

• PBTA of £18.2m after rebranding costs
• f £1.0m
• Strong and improving cash cycle resulting

in continued good cash conversion

• Disciplined balance sheet management -

dividend rebased

Significant progress

• People, Brand, Connectivity
• Energy – particularly renewables
• Organic growth and selective acquisition -

Corview

Positive outlook

• Strong competitive positions in long-term

growth markets

• Good thematics – resource scarcity and

urbanisation

• Unsettled markets with positive signs

Overview

4

Dividend rebased – investing to drive organic growth

Policy is to pay out 40% of PAT on a half yearly basis – sustainable, disciplined and progressive Long-term aspiration to maintain a pay-out ratio of 40% OR 2.5 times dividend cover Recent headwinds in Australia and political uncertainty in the UK Need for disciplined balance sheet management Committed to organic growth and very selective acquisition Yield remains healthy even with a rebased dividend

Overview

5

Overview

Proportion of fees generated by segment

Consulting - UK & Ireland Australia Asia Pacific Services - UK & Netherlands Energy North America Norway

SEGMENTS

HY 2019 fee income £280.3m

Public / private sector exposure

SECTORS

Private Public

Well balanced

HY 2019 fee income £280.3m

6

Well diversified

Proportion of fee income generated by sector and service

SECTORS

Overview

HY 2019 fee income £280.3m

Advisory and management consulting Health, safety and risk Design and development

(Less than 20%)

Exploration and development Water services Project and program management Training Laboratories Planning and approvals Environment Ocean and coastal

SERVICES

Communications, creative and digital Resources Transport Energy Property Water Defence and government services

7

Safe

RIDDOR – reporting of Injuries Diseases and Dangerous Occurrence Regulations

0.5 1 1.5 2 2.5 3 3.5 4 4.5

RIDDOR Reportable Injury Frequency Rate (Injuries per 1,000,000 work-hours)

0.5 1 1.5 2 2.5 3

RPS Construction Manufacturing Professional, Scientific and Technical Activities

RIDDOR Reportable Injury Frequency Rate YTD Overview

8

Agenda

• Overview
• Group financial results
• Segmental performance
• Significant progress
• Group outlook

Agenda

9

Results down in volatile markets

H1 2019 H2 2018 H1 2018 H1 2018 cc1 cc growth Revenue (£m) 309.7 316.3 321.1 321.0

• 4%

Fees (£m) 280.3 285.1 289.1 289.1

• 3%

Operating profit2 (£m) 21.1 24.6 29.4 29.4

• 28%

Operating profit margin2 (%) 7.5% 8.6% 10.2% 10.2%

• 3%

PBTA (£m) 18.2 22.8 27.4 27.4

• 34%

Tax rate on PBTA (%) 24.6% 24.5% 28.7% 28.7%

• 4.1%

Diluted eps3 (p) 6.06 7.64 8.70 8.70

• 30%

Dividend per share (p) 2.42 5.08 4.80 4.80

• 50%

1 2018 results at 2019 currency rates 2 pre amortisation and impairment of acquired intangibles and transaction related costs 3 pre amortisation and tax on amortisation

Group Financial Results

10

Strong cash conversion maintained

£m H1 2019 H2 2018 H1 2018 Operating profit 21.1 24.6 29.4 Depreciation 8.9 4.2 4.1 Share scheme costs 1.3 1.3 1.1 Other (0.5) (0.2) (0.3) EBITDAS 30.8 29.9 34.3 Working capital (15.4) 14.1 (17.9) Cash from operations 15.4 44.0 16.3 Conversion of profit into cash 50% 147% 48% Interest (2.7) (1.7) (1.9) Tax (6.0) (7.0) (5.4) Net cash from operating activities 6.8 35.4 9.1

Last 12 months – 98% cash conversion

Group Financial Results

11

Disciplined investment

£m H1 2019 H2 2018 H1 2018

Net cash from operating activities 6.8 35.4 9.1 Capex (9.8) (6.5) (5.1) Free cash flow (3.0) 28.9 4.0 Acquisitions (8.6)

• (0.1)

Deferred consideration (0.1) (0.4) (1.2) Dividends (11.4) (10.8) (11.4) Lease funding (4.0)

• Cash flow

(27.0) 17.7 (8.7)

Group Financial Results

12

Increased borrowings following investment

£m H1 2019 H2 2018 H1 2018 Opening net bank borrowings (73.9) (90.5) (80.6) Cash flow (27.0) 17.7 (8.7) FX and other (0.3) (1.1) (1.1) Closing net bank borrowings (101.2) (73.9) (90.5) Opening deferred consideration (0.3) (0.7) (1.8) Cash flow 0.1 0.4 1.2 Acquisitions (7.5)

• (0.1)

Closing deferred consideration (7.8) (0.3) (0.7) Total closing borrowings (109.0) (74.2) (91.2)

Group Financial Results

13

58 60 62 64 66 68 70 72 74 76 78 80 December January February March April May June July August September October November December

Historical lock-up trends

2018 2019

Improved cash cycle

Jun 18 73 days Dec 18 65 days Jun 19 67 days 1 Jan 18 70 days 1 Jan 19 65 days

Lock up days 80 78 76 74 72 70 68 66 64 62 60 58 31/12

Group Financial Results

14

0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x

Improved cash cycle and dividend rebase will reduce leverage

Bank leverage limit Dec 17 1.3x Jun 18 1.4x Dec 18 1.3x Jun 19 2.0x Group Financial Results

15

Cash flow impact in H1 2019 Cash from operations +£4.9m Interest paid

• £0.9m

Lease funding

• £4.0m

Group Financial Results

IFRS16 changes have no impact on leverage calculations

Balance sheet effect to 30 June 2019 Right of use asset +£41.7m Lease liability

• £46.6m

Other net assets +£3.4m Reserves

• £1.5m

Income statement impact in H1 2019 Depreciation

• £4.4m

Operating lease expense +£5.0m Operating profit +£0.6m Interest

• £0.9m

PBTA

• £0.3m

Bank leverage calculations based on pre IFRS16 lease accounting

16

RCF refinanced with extended maturity

£ 20m £ 40m £ 60m £ 80m £ 100m £ 120m £ 140m £ 160m July 2019 2020 2021 2022 2023 2024

Group Financial Results

17

Agenda

• Overview
• Group financial results
• Segmental performance
• Significant progress
• Group outlook

Agenda

18

Segmental performance

Segment Headline Energy

Good profit growth, successful expansion into offshore wind

Consulting (UK & Ireland)

Encouraging growth in spite of Brexit uncertainty affecting higher margin business units

Services (UK & Netherlands)

Netherlands growing on previous investment, Water moving down with the AMP cycle

Norway

Growth following integration

North America

Improved Q2 performance, favourable markets, recruitment/retention challenges remain

Australia Asia Pacific (AAP)

Three elections and a property downturn have significantly impacted H1 performance

Segmental performance

19

£m H1 2019 H2 2018 H1 2018 H1 2018 cc1 cc growth Energy 50.5 52.5 48.6 49.3 2% Consulting (UK & Ireland) 63.4 61.1 61.0 60.8 4% Services (UK & Netherlands) 53.3 56.1 54.4 54.3

• 2%

Norway 36.2 34.0 35.0 34.2 6% North America 29.8 28.9 29.8 31.5

• 5%

Australia Asia Pacific (AAP) 49.3 54.8 62.1 60.7

• 19%

Segment fees 282.5 287.4 290.9 290.8

• 3%

Eliminations (2.2) (2.3) (1.8) (1.7) 29% Group fees 280.3 285.1 289.1 289.1

• 3%

1 2018 results at 2019 currency rates

Segmental performance

Fee income – small downturn driven by AAP

20

£m H1 2019 H2 2018 H1 2018 H1 2018 cc1 cc growth Energy 4.5 4.2 4.7 4.8

• 6%

Consulting (UK & Ireland) 7.1 7.3 8.1 8.1

• 12%

Services (UK & Netherlands) 6.1 6.7 6.8 6.8

• 11%

Norway 3.7 2.9 3.3 3.2 15% North America 2.0 1.7 3.4 3.7

• 46%

Australia Asia Pacific (AAP) 2.6 6.1 7.1 7.0

• 63%

Segment profit 25.9 28.9 33.5 33.5

• 23%

Unallocated expenses (3.9) (4.3) (4.1) (4.1) 4% Rebrand costs (1.0)

• 100%

Operating profit2 21.1 24.6 29.4 29.4

• 28%

Interest (2.9) (1.9) (2.0) (2.0)

• 44%

PBTA 18.2 22.8 27.4 27.4

• 34%

1 2018 results at 2019 currency rates 2 pre amortisation and impairment of acquired intangibles and transaction related costs

Segmental performance

Profits down on AAP, North America – investing for growth

Adjusted for bad debt provision – cc growth 16%

21

Capacity matched to markets while retaining capability - reductions in Services (AMP cycle) and AAP

Segment H1 2019 H2 2018 H1 2018 Energy 390 350 400 Consulting (UK & Ireland) 1,660 1,650 1,650 Services (UK & Netherlands) 1,470 1,850 1,850 Norway 250 240 240 North America 350 420 400 Australia Asia Pacific (AAP) 910 1,000 1,000 Central services (inc. Group IT) 95 90 80 Group 5,125 5,600 5,620

Segmental performance

22

Australia Asia Pacific (AAP)

H1 2019 fee income £49.3m

Proportion of fees by sector and service

Energy Environment Water services Project and program management Communications, creative and digital Design and development Advisory and management consulting Planning and approvals

SERVICES

Transport Defence and government services

SECTORS

Water Resources Private Public

SECTORS

Property

Segmental performance

23

AAP

HY 2019

• Government transport spend has been restrained by recent elections VIC (Nov 18), NSW (Mar 19)
• Project management business impacted by delays in major defence contracts - Federal election in May
• Residential property sector declined substantially in the period impacting our property planning and development operations

Outlook

• Both the NSW and VIC governments have made substantial transport and social infrastructure commitments over the next three

years and beyond. RPS is well positioned to pick up a share of the work, particularly given the recent acquisition of Corview

• Defence procurement is expected to pick up in H2 – project management business secured two major defence contracts in July
• We anticipate the property sector will improve but remain challenging in H2

Three elections and a property downturn have significantly impacted H1 performance £m H1 2019 H2 2018 H1 2018 H1 2018 cc cc growth Fee income 49.3 54.8 62.1 60.7

• 19%

Segment profit 2.6 6.1 7.1 7.0

• 63%

Margin 5.3% 11.2% 11.5% 11.5%

Segmental performance

24

North America

HY 2019 fee income £29.8m

Proportion of fees by sector and service

Energy Property Transport Water Defence and government services

SECTORS

Design and development Oceans and coastal Advisory and management consulting Environment

SERVICES

Private Public

SECTORS

Segmental performance

25

North America

Improved Q2 performance, favourable markets, recruitment/retention challenges remain

HY 2019

• Recruitment/retention issues plus continued client delays in project activation impacted Q1 results
• Performance has improved in Q2 and results are now on an upward trajectory
• Strong sales across all divisions

Outlook

• Market fundamentals are robust and demand for services is strong
• The outlook is positive and the business will continue to recover in H2
• Managing recruitment/retention challenges in the tight US labour market is key

£m H1 2019 H2 2018 H1 2018 H1 2018 cc cc growth Fee income 29.8 28.9 29.8 31.5

• 5%

Segment profit 2.0 1.7 3.4 3.7

• 46%

Margin 6.6% 5.8% 11.6% 11.6%

Segmental performance

26

Consulting – UK & Ireland

Water services Design and development Project and program management Oceans and coastal Health, safety and risk Environment Planning and approvals Advisory and management consulting

SERVICES Segmental performance

H1 2019 fee income £63.4m

Proportion of fees by sector and service

Defence and government services Property Energy

SECTORS

Resources Transport Water Private Public

SECTORS

27

Consulting - UK & Ireland

Encouraging growth in spite of Brexit uncertainty affecting higher margin business units

HY 2019

• Steady organic growth led by Ireland
• Brexit related softening - primarily in London markets

Outlook

• Expect ongoing strong performance in Ireland
• Well positioned to benefit from Brexit resolution

£m H1 2019 H2 2018 H1 2018 H1 2018 cc cc growth Fee income 63.4 61.1 61.0 60.8 4% Segment profit 7.1 7.3 8.1 8.1

• 12%

Margin 11.2% 12.0% 13.3% 13.3%

Segmental performance

28

Services – UK & Netherlands

Water services Health, safety & risk Project and program management Design and development Laboratories Environment

SERVICES

Segmental performance

HY 2019 fee income £53.3m

Proportion of fees by sector and service

Property Resources Water Transport

SECTORS

Energy Defence and government services Private regulated Public

SECTORS

Private non-regulated

29

HY 2019

• Water in the UK down with the end of the AMP cycle, as expected
• Netherlands performance improved on recent investments
• Some under performance in small health and safety business

Outlook

• Expect H2 performance to follow H1
• Well positioned to take advantage of AMP7 opportunities in 2020
• Netherlands is expected to show continued organic growth

£m H1 2019 H2 2018 H1 2018 H1 2018 cc cc growth Fee income 53.3 56.1 54.4 54.3

• 2%

Segment profit 6.1 6.7 6.8 6.8

• 11%

Margin 11.4% 11.9% 12.5% 12.5%

Services - UK & Netherlands

Netherlands growing on previous investment, Water moving down with the AMP cycle

Segmental performance

30

Norway

H1 2019 fee income £36.2m

Proportion of fees by sector and service

Project and program management Training Advisory and management consulting

SERVICES

Transport Defence and government services

SECTORS

Property Energy Public Private

SECTORS

Segmental performance

31

Norway

Growth following integration

HY 2019

• Good performance - increased market share and improved hourly rates
• Notable growth within construction projects, management consulting, project systems and the

project academy Outlook

• Substantial opportunities within the public sector in Norway
• Significant prospects for new roads and the Norwegian Rail
• Increasingly competitive market for talent

£m H1 2019 H2 2018 H1 2018 H1 2018 cc cc growth Fee income 36.2 34.0 35.0 34.2 6% Segment profit 3.7 2.9 3.3 3.2 15% Margin 10.2% 8.5% 9.4% 9.4%

Segmental performance

32

Energy

Proportion of fees by sector and service

HY 2019 fee income £50.5m

Exploration and development

Advisory and management consulting Project and program management Training Laboratories Oceans and coastal Health, safety and risk

SERVICES

Planning and approvals

Energy Resources SECTOR Private Public SECTOR

Segmental performance

33

Energy

Good profit growth, successful expansion into offshore wind

HY 2019

• Business performed despite fluctuations in the oil price
• Expansion into offshore wind activities assisted the overall performance

Outlook

• Oil price uncertainty will continue while the geopolitical situation remains unclear
• Continue push into renewables
• We expect overall growth

£m H1 2019 H2 2018 H1 2018 H1 2018 cc cc growth Fee income 50.5 52.5 48.6 49.3 2% Segment profit 4.5 4.2 4.7 4.8

• 6%

Margin 8.9% 8.0% 9.7% 9.8% Adjusted for bad debt provision reversals Segment profit 4.4 4.2 3.7 3.8 16% Margin 8.8% 8.0% 7.6% 7.7%

Segmental performance

34

Agenda

• Overview
• Group financial results
• Segmental performance
• Significant progress
• Group outlook

Agenda

35

Renewed Board – good mix of background, skill, geography and gender

Allison Bainbridge

Audit Chair Appointed 2017

Michael McKelvy

Independent Non-Executive Appointed 2018

Catherine Glickman

Remuneration Chair Appointed 2018

David Gormley

Company Secretary Appointed 2018

John Douglas

Chief Executive Appointed 2017

Ken Lever

Non-Executive Chairman Appointed 2016

Gary Young

Finance Director

Appointed 2000

Liz Peace

Senior Independent Non-Executive Appointed 2017

Significant progress

36

Strong Group Leadership Team – blend of ‘old’ and ‘new’

Significant progress

Halvard Kilde CEO Norway Ross Thompson CEO AAP John Chubb CEO Consulting UK & IRE Paul Aitken CEO Services UK & NL Peter Fearn CEO North America Judith Cottrell Group Strategy Director Chantall e Meijer Group Marketing Director Kelly Olsen Chief Information Officer John Tompson CEO Energy Gary Young Group Finance Director

John Douglas

Liza Kane Group People Director

CEO

rpsgroup.com

PEOPLE

38

We now have quality data

June 2019 YTD Voluntary 9.7% Involuntary 8.4% Total 18.1%

• H1 numbers not full year numbers
• H1 turnover tends to be higher –

remuneration decided in April

• No quality comparable data for 2018
• Voluntary turnover broadly in line with

2018

• Involuntary turnover appreciably higher

due to AMP cycle and the Australian property downturn

Significant progress

39

Raising the bar

2017 2018

55% of employees received a performance review in 2017 81% of employees received a performance review in 2018 Actively managing under performance FY 2018 6% of those reviewed were rated as under performing H1 2019 10% of voluntary leavers were under performers H1 2019 30% of involuntary leavers were under performers

Significant progress

rpsgroup.com

BRAND

41

Significant progress

A bold, bottom-up, rebrand delivered efficiently

42 42

A NEW WEBSITE

Since 14 January 2019

Measurable impact

Features:

• 2-3 clicks to reach an expert
• Fully responsive
• Designed for mobile-first
• Targeted geolocation functionality
• Scalable

Significant progress

rpsgroup.com

CONNECTIVITY

44

RPS Product: My Projects - Software application for managing projects Source: Norway Destination: AAP Benefit: Client – high value outcomes, insight and performance RPS – strengthens market position to manage complex programs of work Dx sweet spot: Project management expertise + project performance data + engaging platform

Selling across segments – the digital transformation (Dx) sweet spot

Value: Part of two major programs of work (federal and state) - worth AUS$4m over four years. With potential for additional AUS$0.5m new digital revenues in 2020 Broader My Projects pipeline building rapidly

Significant progress

45

Consulting

Selling within segments

Community supported housing Improved environmental performance

• f council properties

Enhanced quality of built environment and neighbourhoods Safeguard public purse

Creating shared value:

Client: Westminster City Council Original RPS bid: Project management Expanded to: 13 disciplines and 20 priced activities Original value: £60,000 fee income End result: £700,000 fee income

Significant progress

46

ERP project – modular and on track

Milestone

On time/on track Date Future phases

Global design

Global construction

Phase 1 Go Live

Delivered in June, on budget Due for completion August 2019 AAP 1 and Netherlands – November 2019 AAP 2 – March 2020 Plan - UK, Ireland, Norway - H2 2020 Potential - North America transition – Q4 2020

Significant progress

rpsgroup.com

ENERGY

48

Offshore wind – a big opportunity

RPS Energy ready to seize the opportunity Supporting our clients through asset evaluation, development, execution, operation & maintenance and late life

• MetOcean (including wind resource

measurement)

• Consenting and permitting
• Site investigation
• Unexploded ordnance
• Survey support
• Due diligence
• HS&E
• Data management and visualisation

MARKET DRIVER

Global power demand grows by 62% between now and 2050, or by 1.5% per year Wind generates 26%

• f the world’s electricity

by 2050, compared with 5% today

MARKET OPPORTUNITY

c.£5 trillion

invested in wind -

• ffshore and onshore

c.£1 billion

• f the wind
• pportunity available to

consultants like RPS

OUR OPPORTUNITY

(Source: BloombergNEF 2019)

Significant progress

49

Proven expertise

Client: Ørsted Project: Hornsea Projects 1, 2 and 3 Role: Lead environmental consultant providing offshore and

• nshore services

Value: c.£8.3m Client: EQUINOR Project: Multi-site, bankable wind resource data collected to develop offshore wind farms Tool: Traditional LiDAR technology integrated into a buoy with power, data storage and satellite communication capabilities Value: c.£5.0m

Significant progress

50

Small but growing part of our Energy sector work

£0 £20,000,000 £40,000,000 £60,000,000 £80,000,000 £100,000,000 £120,000,000 £140,000,000

2016 fee income 2017 fee income 2018 fee income Renewables Energy sector 8% 6% 2% Significant progress

rpsgroup.com

ORGANIC GROWTH AND SELECTIVE ACQUISITION

52

£m H1 2019

Consulting (Ireland) 22% Services (Netherlands) 9% Norway 6% Energy 2% Consulting (UK) 0% Services (UK) (6%) North America (5%) AAP* (24%) Group (4%)

Mixed scorecard on organic growth

*Organic growth excludes the impact of Corview. Including Corview, constant currency decline for the Group is 3% Significant progress

53

Committed to very selective acquisition

Value creative Congruent with our brand and culture Add data and expertise Add density, not greater diversity

Significant progress

54

Integration of Corview progressing well - strategic logic remains robust

Value creative Add density, not greater diversity Congruent with our brand and our culture

East Coast advisory team increased 30%. Consolidated market position in Australia’s most significant infrastructure projects Integration nearly complete. Team performing well. Important new projects being won Shaped a combined market proposition for complex infrastructure projects – a first for RPS

Add data/expertise

Data Analytics and Insights team derives insights from multiple data sources to help clients make investment decisions – a new capability

Significant progress

55

Agenda

• Overview
• Group financial results
• Segmental performance
• Significant progress
• Group outlook

Agenda

56

Managing volatility

We stay close to our clients to understand our future work We match capacity to markets while holding capability We manage cash tightly – with a clear focus on reducing lock-up days We maintain a disciplined balance sheet – with target leverage of 1.0 to 2.0 We talk to markets at least four times a year – because things change in three months

Many of our specialist businesses have a three-month order book - provides opportunities as well as challenges

Group outlook

57

Competitive position in unsettled markets with positive signs - staying close to our clients

Segment Competitive position Outlook Energy Strong

Oil price uncertainty - geopolitical situation remains unclear Continue push into renewables - expect overall growth

Consulting (UK & Ireland) Strong

Expect ongoing strong performance in Ireland Well positioned to benefit from Brexit resolution

Services (UK & Netherlands) Strong

Opportunities with AMP7 in 2020 Continued organic growth expected in Netherlands

Norway Strong

Substantial public sector opportunities Significant prospects in transport

North America Underweight

Robust market fundamentals and strong demand for services Recovery to continue in H2 Managing recruitment and retention is key

Australia Asia Pacific (AAP) Strong

State government committed to ongoing infrastructure spend Defence procurement expected to continue to pick up Property sector uncertain but some signs of recovery Group outlook

58

In our June trading update we anticipated this disappointing set of results, largely due to softness in the Australian market and a weak first quarter in North

• America. RPS has a strong presence in Australia and we

are well placed to benefit as this market recovers. We anticipate a stronger performance from AAP, North America and the Group in total during H2 2019.

Group outlook

Group outlook

59

Managing volatility, significant progress, positive outlook

Managing volatility

• 3% decline in fee income (at constant

currency) – headwinds in Australia offset growth elsewhere

• Capacity matched to markets while retaining

capability

• PBTA of £18.2m after rebranding costs
• f £1.0m
• Strong and improving cash cycle resulting

in continued good cash conversion

• Disciplined balance sheet management -

dividend rebased

Significant progress

• People, Brand, Connectivity
• Energy – particularly renewables
• Organic growth and selective acquisition -

Corview

Positive outlook

• Strong competitive positions in long-term

growth markets

• Good thematics – resource scarcity and

urbanisation

• Unsettled markets with positive signs

Group outlook

QUESTIONS?