FTSE 250 shares round-up: Morgan Sindall, RS Group and ASOS

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Photo: Astrid Stawiarz/Getty Images for ASOS.

A hawkish interest rate decision today dampened the mid-cap mood after Morgan Sindall Group (LSE:MGNS), RS Group (LSE:RS1) and ASOS (LSE:ASC) had earlier helped the FTSE 250 index to a record high above 25,000.

The UK-focused benchmark peaked at 25,176 in early dealings but then faded as far as 25,043 after some members of the nine-strong Bank of England’s monetary policy committee signalled that another hike may soon be needed on top of today’s 0.25% rise to 4%.

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The debate among economists is whether the increase comes next month or in February, with the course of the war in the Middle East and the impact on energy prices a key factor.

Peel Hunt said: “Markets currently price in a 51% chance of a further hike in December. In our view, that de facto coin-toss call probably correlates just as well with markets’ assessment of whether the US-Iran war will yield a positive breakthrough.”

The initial peak for the FTSE 250 was achieved against a backdrop of improved global risk appetite and the encouragement of today’s various trading updates and results.

Morgan Sindall led the risers board for much of the session after the construction, fit-out and partnerships housebuilder extended its run of profit upgrades to at least 14 in the past decade.

Shares rose 262p to 4,402p as the company accompanied guidance that profits will be slightly ahead of management expectations with the launch of a £75 million shares buyback.

The shares have underperformed the subsector, having posted a year-to-date fall of 11% up until last night and 25% since the February record high of 5,530p.

The run, which has left the company on about 12.3 times Peel Hunt’s forecast 2027 earnings, has come even though strong trading in the fit-out and construction arms continues to offset the challenging market conditions in partnership housing.

Former blue-chip stock RS Group, which used to be known as Electrocomponents, traded above 800p for the first time in two years after shares rallied 42p on the back of interim results.

The distributor of 875,000 industrial and specialist products from more than 2,500 suppliers recorded a performance ahead of its expectations, albeit aided by easier comparatives.

Revenues rose 7% on a like-for-like basis, with an improved margin of 9.2% leading to 17% growth in adjusted profit to £133 million. The interim dividend has risen 2% to 8.9p a share.

Chief executive Simon Pryce said manufacturing sentiment remained positive, which together with customer facing investments contributed to momentum in all three trading regions.

Pryce reiterated his medium-term financial targets of revenue growth at twice the market, alongside mid-teen adjusted operating margins, cash conversion of over 80% and return on capital employed in excess of 20%.

He added: “Our first-half outperformance reflects the exciting opportunities ahead. We are increasingly well positioned to benefit from underlying market growth, gain market share, and drive improved operating leverage.”

Berenberg recently lifted its price target to 900p after noting the continued expansionary territory for lead indicators such as industrial production and purchasing managers’ indices.

The bank said last month: “Having previously reserved judgement on the company’s turnaround amid a drawn-out earnings downgrade cycle, we think that the cycle is now moving in RS Group’s favour.”

Online fashion retailer ASOS traded as much as 6% higher at 449p after full-year results showed adjusted earnings rose by 29% to the upper end of guidance at £170 million, supported by a 340-basis point improvement in gross margin to 50.5%.

Gross merchandise value in the fourth quarter returned to growth for the first time since 2022, with the figure broadly flat in the opening weeks of the financial year despite the impact of a recent cyber incident.

Chief executive José Antonio Ramos Calamonte said: “We enter the 2027 financial year encouraged by our progress. Our priority is to consolidate our return to growth and make sustained, profitable growth the new normal for ASOS.

“Our expectation is that FY27 will mark our first full year of growth since completing the transformation of our business model.”

The shares, which have traded this year between April’s 206p and September’s 508p, later drifted back to 418p. Berenberg left its price target at 750p following today’s results, while Shore Capital continues to see 23% upside to 520p.

The latter pointed out that significant progress on the balance sheet has materially reduced the liquidity and refinancing concerns that have weighed on the investment case in recent years.

Shore added: “We see today’s results as another positive step in the recovery and highlight the resilience and improved flexibility of the ASOS model.”

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