RS Group plc’s share price fell after the global distributor of industrial products and services published a mixed Q3 trading update today.
RS Group’s trading update showed a mixed performance in a challenging economic environment and revealed that revenues had declined by -3.0% overall, with a -1.0% drop, when measured on a like-for-like basis.
Falling sales were attributed to lower industrial production, weaker PMI data, and a series of extended holiday shutdowns, among RS Group’s customers, during December.
It’s not a uniform picture however, as whilst the EMEA region experienced a -3.0% drop in sales. The Americas division delivered +3.0% revenue growth, which was driven by a combination of an improving US market, and strong sales, south of the border, in Mexico. Asia Pacific also booked a +1.0% increase in revenues.
Despite the challenging market backdrop, on a positive note, RS Group continues to strengthen its tech platforms, expand its product lines, and enhance its customer support.
The company is also on track with cost-saving measures that should deliver more than the firm’s £30.0 million annual target.
Softer third-quarter revenues and weaker business confidence in EMEA, does mean that full-year profits before tax are now expected to come in at around the bottom end of the analyst’s consensus forecasts.
Overall, RS Group’s Q3 update reflects the difficulties experienced by many businesses, in the current economic climate.
And while revenue has been impacted by a variety of factors outside of RS Group’s control, the company’s focus on efficiency and costs seems to be working.
However, investors will want to see the benefits of those cost controls, filtering through into both margins and profitability, before the RS Group share price picks up meaningfully.
The forward PE of 14.70 times, versus the trailing twelve month ratio of 18.90, does imply things are moving in the right direction, however.
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