Shares tumble as Tenon trading hit by flat demand

The group insisted its “balanced mix of services and recurring revenue streams” offers some protection amid a competitive and unpredictable environment.

Demand for its transaction-based services has fallen in particular, said RSM. It chose to focus on non-chargeable training work in the summer months, and will focus on revenue-generating work later in the year.

As a result, more of its profits will be generated in its second half than the first. RSM said it will see a corresponding outflow of cash in the first half, with “strong inflows” in the second half.

Shares in the group shed 2p to close at 24p.

RSM employs about 170 staff in Yorkshire, and has full service offices in Leeds and Harrogate, as well as corporate recovery offices in Wakefield and Sheffield. It closed a small site in Doncaster earlier this year.

Chief executive Andy Raynor said: “In markets that are difficult by any standards, we have continued to improve our competitive position whilst prioritising financial control. We are committed to the further hard work that the current environment requires.”

RSM Tenon, which competes with business advisory firms such as BDO and Grant Thornton, said its current activity levels were largely as expected, helped by opportunities across all its divisions.

The company now aims to focus on three areas – reducing working capital, organic development and cost control – to increase the percentage of profit generated in the second half of the year. It is focusing on efficiency by sharing resources, managing recruitment and cutting overheads.

House broker Altium Securities downgraded its expectations for the year by 10 per cent.

“The trading environment remains deeply testing and uncertain,” said analysts at Altium. “Demand for the group’s services has come under continued pressure, delaying any vestigial recovery still further.

“Our new circa 10 per cent lower forecasts are struck to reflect the changing shape and dynamics of the business.”

Duncan Hall, analyst at Finncap, said: “Debt reduction remains key and, despite the low rating, with scope for a technical recovery, the shares are likely to remain friendless at current levels.”

Brewin Dolphin downgraded its rating to “hold”. “Given the weaker-than-expected start to the year, we make small downward revisions to our estimates, principally due to weaker than expected activity in specialist tax and audit, tax and advisory,” said Brewin in a note.

“Until we get further clarity that trading has stabilised, we adopt a more cautious approach and reduce our recommendation.”