RS Group PLC (LSE:RS1) shares fell 4% to 562p despite the industrial parts distributor reporting full-year profits marginally ahead of analyst expectations, as investors focused on a steeper-than-expected drop in revenues.
For the twelve months to 31 March 2026, like-for-like revenue fell 0.6%, worse than the market had anticipated.
The shortfall was largely driven by Mexico, where trading conditions deteriorated sharply in the second half of the year, offsetting improving momentum in Europe, the Middle East and Africa (EMEA) and Asia Pacific.
Adjusted profit before tax is nevertheless expected to come in marginally above the analyst consensus of £241 million, helped by a solid gross margin, tighter cost control and improved efficiency.
Broker Peel Hunt said it expected to trim its profit forecast for the coming year by around 5% to reflect the weaker revenue backdrop and likely inflationary pressures, while maintaining its high-end current-year estimate of £245 million.
The broker noted RS has no direct exposure to the Middle East conflict, and pointed to the improving revenue trend in EMEA as a reason for optimism, arguing the shares look attractively valued at around 14 times forecast earnings.