Fuel costs, labour demand weighing on RTC's margins

(Sharecast News) -

The AIM-traded recruitment and conferencing group said it had announced six major contract wins across the business in the first quarter of 2026, including significant extensions of long-standing agreements with key clients, supporting a strong and growing long-term order book.

Executive chairman and chief executive Andy Pendlebury said demand for core maintenance activities in rail remained positive and in line with 2025 levels, although rising costs were affecting margins.

He added that activity could increase as CP7 rail enhancement funding is released.

Demand across other infrastructure markets, including water and environmental services, was also continuing at similar levels.

RTC said its conferencing business was performing ahead of the prior year, supported by strong customer demand, despite significantly higher government-imposed costs.

The group said it remained optimistic about further opportunities in international markets.

However, Pendlebury said geopolitical tensions linked to the Iran conflict had pushed up global energy prices, materially increasing fuel costs and fleet expenses.

These higher costs were expected to continue affecting margins in the rail and energy divisions.

The group also said elevated energy prices had reduced activity among some smaller manufacturing clients, with site closures or lower production reducing demand for temporary labour.

Wider uncertainty was contributing to more cautious hiring behaviour, with some clients delaying, scaling back or cancelling recruitment plans.

RTC said the permanent recruitment market remained challenging, with vacancy levels at their lowest since 2021 after a sustained multi-year decline.

Demand was being constrained by higher employment costs, including above-inflation increases in the National Living Wage, and employer caution around the Employment Rights Act.

In the energy division, demand is shifting as the smart metering market moves beyond the initial rollout phase.

RTC said the extension of targets to 2028 had softened short-term demand for new installations, while clients were increasingly focused on meter health work, including SMETS1 to SMETS2 upgrades, communications hub replacements and smart mode compliance.

The group said that had led to a short-term reduction in demand, although it expected activity to increase over the medium term as those programmes scale.

Pendlebury said rail operations had improved gradually since the start of the current contract, but had not yet reached the level originally expected at the outset of CP7, consistent with wider industry trends around rail enhancement projects.

Despite the challenges, he said the group had a solid foundation after strong cash generation in 2025, with a clean balance sheet, no term debt, strong operating cash flow and disciplined cost management.

RTC said it expected to publish interim results for the six months ending 30 June on or around 27 July.

At 1025 BST, shares in RTC Group were down 8.78% at 111.75p.

Reporting by Josh White for Sharecast.com.

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