- On track to meet FY expectations
- Improving conditions across
- Analysts downgrade 2014/15 earnings due to FX
Energy and engineering consultant RPS Group said it remained on track to meet current market expectations for the full year.
The FTSE 250 company treated investors to a third quarter update bubbling with optimism due to strong energy demand and a nascent recovery in its Australia markets.
However, RPS admitted the weaker Australian dollar
will impact on results, but stressed its cost cutting made over the last year will enable it to benefit from growth as it develops.
Broker Panmure Gordon maintained its 2013 forecasts but cut its 2014 and 2015 estimates by 5%-6% due to current foreign exchange
(FX) movements including the weaker Australian and US dollars.
Looking further forward, Chairman Brook Land predicted "significantly improved trading" in 2014 due to acquisitions and internal investments made earlier this year.
"We have invested extensively this year in order to diversify and expand further internationally and believe that, with the integration and development of these acquisitions, 2014 will be a good year for the group."
The Oxfordshire-headquartered company said its Energy business continued to trade encouragingly in the second half, as a result of a growing market presence and significant investment by clients in the oil and gas exploration and production sector.
Aside from challenging conditions in Canada, particularly the potash sector, RPS said its strong reputation and geographic diversity allowed it to benefit from good levels of demand in many geographical markets.
In its Built and Natural Environment (BNE) business, the Australia Asia Pacific (AAP) region saw early signs of a recovery and Europe continued to perform well in spite of the continuing economic uncertainty.
In Australia, boosted by the change of government in Australia and the attractions of a weaker dollar, investment by some clients "may" be starting to increase again as previous natural resources project delays dissipated.
The company announced a new management structure of the business for future financial reporting, forming a new BNE: North America segment due to success in that region, with a merger of its BNE: AAP business with that part of Energy which trades in AAP to create a new segment known as AAP.
Broker Numis said RPS looked well positioned for the long term.
"We view signs of stabilisation in Australia as positive for sentiment. We continue to believe that the group is positioned well for growth in Energy, and we think there is recovery potential in Europe BNE."
However, analysts at Panmure, while maintaining 2013 forecasts, executed FX-related downgrades in 2014 and 2015 predictions "primarily due to the weakness in the Australian dollar but have also considered US dollar weakness as well [and] we would expect others to follow suit and see consensus edge down in future years due to the currency impact."
While stressing they remained long term fans of the business, Panmure reduced its recommendation from buy to hold predominantly due to the strong share price performance seen of late.
Shares in RPS bounced back somewhat from an opening 5% fall to trade down 3.8% at 287.7p at 09:50 on Thursday.