Improvement in Energy and net debt drives EPS upgrade by Liberum

Companies: RPS Group Plc

Shares in RPS Group opened up 11% on Thursday as the AIM-listed firm announced results "well above" expectations after seeing significantly improved trading in the second half of 2016, improved leverage, and the reversal of a £7m debt provision dating back to 2015.

Performance in H2 16 was "materially" better than in the first half, with improved profitability in Energy, favourable currency movements, and lower reorganisational costs.

Cash conversion of profit into cash was also strong during the period, and the firm ended the year with bank debt of £84m, a sizeable reduction from the £95m in the middle of 2016. This improved year end leverage to c.1.6x, down from 2.2x at the end of June. 

The Group also confirmed it had recovered a sizeable portion (£4.2m) of a £7m provision for doubtful debts in Energy in 2015. However, to be clear, the firm's results were still well above current expectations when excluding the reversal.

Broker Liberum welcomed the results, increasing its 2016 EPS by 13% to 15.9p and its 2017 EPS by 9%.

The information contained within this post is based on personal experience and opinion and should not be considered as a recommendation to trade nor financial advice.