RS Group shares slump on weak FY forecasts as sales fall

Shares in RS Group slumped on Tuesday as the Industrial and electrical products distributor said full-year profit would be at the bottom end of guidance after third-quarter revenues fell 3% due to declining output and falling business confidence among European customers.

Sales fell 1% on a like-for-like basis, the company said in a trading update for the three months to December 31 with weaker trading in the second half of December as many customers imposed more extended holiday-related plant shutdowns. RS Group shares were down at least 7% in early London trade on the news.

In Europe, Middle-East and Asia like-for-like revenue declined 3% with softness in key markets consistent with weaker business sentiment and purchasing manager (PMI) survey data across the region, especially in the UK where RS Group saw a “material slowdown” from the beginning of November.

Like-for-like revenue in Americas grew by 3%, mainly due to improvement in the US and strong sales growth in Mexico. Asia Pacific like-for-like revenue increased by 1%.

“January trading is in line with our revised expectations, and we will continue investing in our key strategic initiatives whilst managing costs effectively in this difficult trading environment which we expect to continue until we see a more sustained improvement in PMIs,” the company said.

RS Group is expecting adjusted profit before tax in a range of £247m - £274m and revenue of £2.87b - £3.01bn, according to company-compiled consensus estimates for the year to March 31.

Reporting by Frank Prenesti for Sharecast.com