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RPS shares plunge as it expects 2019 results to undershoot guidance

The company said poor recent trading in its Australia Asia Pacific division is likely to have an adverse impact on its results for the full-year
The Australian economy is experiencing its slowest growth since 2009

Shares in RPS Group PLC (LON:RPS) plummeted after the business consultancy firm said its 2019 full year results would miss expectations after difficult trading in Australia.

In an unscheduled update, the company said poor recent trading in its Asia Pacific division is likely to have an adverse impact on its results for the year as the Australian economy experiences its slowest growth since 2009.

Victoria and New South Wales governments have put public sector infrastructure spend on hold since recent state elections, which will hit the firm’s results.  

READ: RPS Group says recovery will be slow as profits fall

The Australian Federal government, which in May saw the election of the conservative Liberal Party, has also awarded defence projects at a slower than usual pace, hurting the company’s project management business.

The group’s private sector business has been affected by a subdued Australian property market but it said the Federal election will result in policies that will support the sector while a recent interest rate cut will help.

Brexit uncertainty hits UK consulting business 

In the UK and Ireland, market conditions in consulting continue to be weighed down by political uncertainty as clients delay investment decisions. The performance of this division is now expected to be slightly below management expectations.

In North America, the recent departure of a small team that took major accounts with them has led the group to lower expectations for 2019.  However, the second half is expected to be at a “good level” as improvements expected in the second quarter have started to materialise.

Trading conditions in energy are also “good” as the oil and gas market recovers while the services unit in the UK and the Netherlands continues to perform as expected.

The Norway business is expected to meet management expectations for the year.

Full-year profits to fall short of expectations 

Overall, RPS expects its full-year results will be “materially below” management and market expectations for profit before tax and amortisation of £49.9mln and for fee income of £594mln.

In morning trading, RPS shares fell 37% to 104.8p.

Liberum maintained a 'buy' rating on the shares but cut its target price to 170p from 230p as it reduced its fully diluted earnings per share estimates for 2019 and 2020 by 26%. 

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