26th Jun 2019 09:08
(Alliance News) - Shares in RPS Group PLC tumbled on Wednesday after the professional services firm said its results in 2019 will be "materially below" management and market expectations.
RPS was down 36% in morning trading at 106.60 pence, one of the worst performers on the London Main Market.
In 2018, RPS posted a GBP41.0 million pretax profit on revenue of GBP637.4 million.
RPS considers the market expectations for its fee income to be GBP594.0 million with consensus profit before tax & amortisation seen at GBP49.9 million.
RPS blamed the recent trading conditions in the company's Australia Asia Pacific business. According to RPS, Australia is experiencing its slowest growth since 2009.
"It's disappointing that softness in Australia is having a negative impact on group performance in 2019, despite progress in other segments such as Energy and Norway. Notwithstanding this near-term impact, RPS is well placed to benefit when the Australian market recovers," Chief Executive John Douglas said.
RPS noted the recent state elections in the Australian territories of Victoria and New South Wales resulted in a "hiatus" in infrastructure spending, hurting the company's business.
In Australia's federal elections, the "business-friendly" centre right party was returned to government. RPS said this result "surprised many commentators". The company's Project Management business in the country works exclusively in defence contracts which, according to RPS, have been released "much slower than normal".
Finally, RPS said its private sector work in Australia has been hurt. The unit is focused on the property sector, which is currently "subdued".
"As at April 2019 dwelling approvals were down more than 20% compared to the prior year," RPS explained. "However, the Federal election result has produced more property-sector-friendly policies. A recent interest rate cut will also be helpful."
Elsewhere, RPS said its Energy business has seen "good" trading conditions and expects the oil and gas markets to "continue to improve".
"Energy is still a business in recovery and although the recent weakness in the oil price has had some impact, management believe that it will grow year on year," the company added.
RPS said its Consulting business in the UK and Ireland is performing "slightly" below management expectations as "political uncertainty" continues to impact client investment decisions.
In a rare bright spot, RPS's Norwegian business will meet management expectations for the full year following a "good" first quarter.
The company's Services unit in the UK and Netherlands is performing "as expected".
In North America, RPS - after lowering expectations following staff departures - expects the business to perform "at a good level".
Douglas added: "We are making solid progress in achieving our stated strategic priorities. The implementation of these initiatives will support RPS' growth in the medium to long-term and I look forward to updating shareholders on progress at our interim results in August."
RPS is expected to release its interim results for the six months ending June 30 on August 1.
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