Some good news (on debt reduction and continued diversion away from Energy being predominant - see AMFW!) but some cautious statements too, and a thought that they might go back into buying other firms (consolidate what you've got first please!). Divi held at same as last year, which i think is the end of continuously rising annual divis; i may be wrong. Market seems to like it a little, even after recent rises. Glad i've held on to this through the drops of 2015/16, and will continue to do so.
Ditto, at 174 in June - latest Environment Business survey for 2016 suggests the market for Consultancy rising at 2-5%, and only problem is shortage of decent staff at senior level. That was all pre-Trump EPA though...!
Read Liberum's note on RPS GROUP, out this morning, by visiting https://www.research-tree.com/company/GB0007594764
"FY 2016 and 2017 FD EPS reduced 18%. In Europe the acquisition of DBK off-sets weak EBIT in Norway, which is being affected by the O&G downturn. Further estimate reduction at Energy which is now only 7% of EBIT. BNE Europe continues to perform well outside Norway. BNE North America is restrained by Energy infrastructure. AAP suffers from weak spend by oil and gas clients ..."
This is not that unexpected, but i think we can see the end of the long upward Divi trend with this one, hence the market reaction? Have been hanging on to a few shares, and waiting for the dip to end before investing more in this environmental business...but i might just 'sit' now for a while.
RPS Group is currently by far the most undervalued publicly quoted engineering consultancy found on European and North-American stock exchanges, based on the average free cash flow in the past 5 years.
Whether yesterday's trading update is a profit warning remains to be seen. The Energy business has had a "slower" than expected start to the year, although RPS expects better conditions during the course of the year. The oil price is recovering as of recently. The BNE division continues to grow. Acquisitions should contribute to revenues and profits. The company also expects to benefit from cost cuttings. All in all, I remain very optimistic about RPS. The stock is one of the most undervalued within the FTSE 350 and should recover during the course of the year.
Fair value: 348p based on 21x average free cash flow 2010-2014.
Yesterday's trading update is essentially a profit warning, and has certainly been interpreted as such. The crux of the matter is that this environmental consultancy is now having trouble seeing the level of future earnings from oil. The price is now almost 30% off the year's high.
Around 45% of earnings are oil related. If these halve, which is possibly an extreme outlook, EPS will drop to c13p. As the company stresses much of its work is for regulatory bodies and national firms rather then speculative explorers, so it might be rather more secure. That figure will give a PER of c11 as the price stands. The dividend is currently 8.4p, twice covered. It should be maintained, giving a yield of over 4%.
Any loss of earnings could be mitigated by income from the new Norwegian acquisition, and further acquisitions are noted as being under consideration. With gearing currently at around 20% that is possible under the current banking arrangements. The acquisition record here is good.
The big fly in the ointment is the glut of emerging broker targets of 200. If we arrive there this will be a screaming buy. Even at the moment it is a possible purchase whether you are seeking income or growth. But those targets have a habit of becoming self-fulfilling prophecies!
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