LONDON (Alliance News) - Consultancy RPS Group PLC struck a deal on Tuesday to further diversify its operations but said its exposure to the struggling oil and gas industry has continued to hit its performance, guiding to weaker results in 2016.
RPS shares were down 16% to 179.25 pence on Tuesday, one of the worst performers in the FTSE All-Share.
RPS, which advises on energy and property development projects, was demoted from the FTSE 250 in 2015 after it was hit hard by the downturn in activity in the oil and gas industry due to the lower price of crude.
Oil and gas companies have been cutting spending plans, delaying and cancelling projects in an attempt to shore up their operations and keep their projects economically viable.
This has severely hit demand for RPS's services and was the primarily contributor the group posting a 79% fall in pretax profit in 2015.
The story has remained the same so far in 2016. RPS said the further fall in the oil price at the end of 2015 and in early 2016 coincided with many of its clients in the oil and gas industry finalising their budgets for the current year.
Due to the challenges facing the market, RPS said it has seen a significant reduction in expenditure plans amongst its oil and gas clients, materially hitting its Energy division and and all other businesses exposed to the oil and gas sector in the first quarter.
Though the recovery seen recently in the oil price has been encouraging and would point to an improved performance as the year progresses, RPS said, the uncertainty clouding the market remains significant and, as a result, it will cut another 14% of its staff, in addition to the 19% it trimmed in 2015.
The company said it expects its results to improve over the course of the year as it benefits from the cost cuts it has made. But without an improvement in market conditions, its overall results will be weaker year-on-year.
RPS said it will go into 2017 with a lower exposure to the oil and gas sector, however, and an attractive long-term opportunity to increase its presence in project management markets globally. It added that its largest division, BNE:Europe, with the exception of its Norwegian arm, is not exposed to oil and gas and has performed well, helped by robust UK planning, development, infrastructure and water markets.
The push by the company to diversify away from the oil and gas sector also continued on Tuesday, as RPS said it has struck a GBP13.0 million cash deal to acquire DBK, a Birmingham-based project management consultancy primarily focused on the UK property development industry.
RPS said the acquisition will continue its push to diversify revenue streams away from the oil and gas sector. The new business will be integrated into RPS's BNE:Europe business.
The DBK deal comes after RPS made three acquisitions in 2015 designed to boost its non-oil and gas business. In April, it acquired Norway's Metier Holding, an Oslo-based project management and training-services provider. It followed that in October with the acquisitions of Iris Environmental, a California-based environmental services consultancy, and Everything Infrastructure Group, a Sydney-based infrastructure development, delivery and management consultancy.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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