Shares in professional services firm RPS (RPS) jump 8% to 150p after it confirms that full year earnings for 2018 will be in line with lowered market expectations.
Last October the company warned that ‘necessary investment in the business’ meant pre-tax profits would be below expectations, which at the time were in the region of £55m.
The shares tumbled 27% from 207 to 150p on the day of the announcement and analysts subsequently shaved their forecasts to around £50m.
Since then the shares have trundled sideways between 130p and 140p but today's news that RPS expects profits of £50.2m has sent them sharply higher.
Chief executive John Douglas highlights the firm’s ‘healthy margins, excellent cash conversion and robust balance sheet’, reassuring investors that the investments which dented the bottom line will make RPS ‘an even better business in the future’.
ACQUISITION BUILDS ON CORE EXPERTISE
Along with updating the market on profits the firm has announced the acquisition of Australian transport advisory consultancy Corview for AUD$32m, which includes AUD$2.1m of cash used for working capital.
Corview is a leading player in the New South Wales and Queensland transport consultancy market and generated AUD$17.1m of turnover in the year to last June.
Transport is a key market for RPS and as well as adding depth to its Australian business Corview brings a strong brand and important public-sector relationships.
Also, given that pre-tax earnings last year were AUD$5.1m, the price tag is less than six times earnings excluding the cash on Corview’s balance sheet making it an attractive and accretive deal.
RPS will publish its full annual results on 21 Feb as scheduled.
