Energy firm RPS saw it share price collapse by 40 per cent today as it issued a major profit warning for its current financial year.
Australia bites RPS down under
Poor trading in RPS’s Australia Asia Pacific division will leave full-year results “materially below” profit before tax expectations of £50m, the firm admitted.
Australian elections led to a “hiatus in infrastructure spend” that will impact RPS’s full-year results, confirmed chief executive John Douglas.
“The release of major defence projects has been much slower than normal, affecting our Project Management business that works extensively in this sector,” RPS added.
A subdued Australian housing market has also hurt RPS’ private sector activities.
“It’s disappointing that softness in Australia is having a negative impact on group performance in financial year 2019, despite progress in other segments such as energy and Norway,” Douglas said.
“Notwithstanding this near-term impact, RPS is well placed to benefit when the Australian market recovers.”
However, the market reacted with alarm to the update, selling out of the firm to send RPS’ share price down 40 per cent to 100p per share.
It follows a catastrophic 30 per cent hit RPS took last October when the oil and gas and renewables player warned profit before tax would suffer a 10 per cent drop in its third quarter.
Shares have lost more than half their value since June 2018, when they were worth 260p.
‘Solid progress’ elsewhere
But Douglas pointed to “solid progress” in other divisions, such as good trading conditions in energy, UK & Netherlands services, and Norway.
“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,” he said.
However, political uncertainty in the UK & Ireland has impacted clients’ investment decisions in RPS’ consulting division, meaning performance is epxpected to fall below management expectations.
Still, analysts at Liberum issued a “buy” recommendation for the firm, changing its target price from 230p to 170p.