FTSE 250 round-up: big losses for this mid-cap pair

The longer-term growth optimism of Renishaw (LSE:RSW) and Tate & Lyle (LSE:TATE) today failed to prevent a drubbing for their shares in an otherwise robust session for the FTSE 250 index.

Both companies continue to be impacted by subdued market conditions, which in the case of the food ingredients firm has left its share price below 600p for the first time in a decade.

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The latest slide in Tate’s valuation has come despite an overhaul to improve earnings quality, which has included the disposal of its US primary products business.

November’s acquisition of US-based CP Kelco, a provider of pectin, speciality gums and other nature-based ingredients, has also made it a leader in the mouthfeel segment.

Chief executive Nick Hampton said the deal represented a significant acceleration in Tate’s growth-focused strategy, adding that he has been encouraged by the initial response of customers to the benefits of the expanded portfolio and solutions.

He reported a solid operating performance in the third quarter but said the acceleration in demand expected in the second half has yet to materialise.

Hampton added: “The muted consumer demand environment and ongoing geopolitical uncertainties reinforce the importance of the steps we have taken to reposition Tate & Lyle over the last six years.”

Updating guidance for the financial year, Tate forecast revenues will be a mid-single digit percent lower with earnings towards the lower end of its growth range of 4% to 7%.

In December, Deutsche Bank backed the shares with a target price of 950p. It said: “From a commercial standpoint we think that the CP Kelco deal makes sense and subscribe to the view that the enlarged business should be able to deliver faster revenue growth.”

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Precision engineering firm Renishaw is also awaiting a cyclical upturn, with shares down 345p to 3235p in today’s session after interim results showed a weaker second quarter compared with the first three months of the financial year.

The deterioration was blamed on currency contracts, adverse product mix and one-off supply chain costs, although profits across the half year came in 2% higher at £57.5 million.

Chief executive Will Lee, who was appointed in 2018, said the Gloucestershire-based company continued to make steady progress in mixed trading conditions.

He is encouraged by a recent improvement in order intake, particularly from the semiconductor and consumer electronics sectors.

Lee added: “Our markets present significant structural growth opportunities, and we are confident that the investment that we are currently making in productivity improvements will drive our operating margins towards our 20% target in the medium term."

Broker Peel Hunt said today’s profit figure and revenues of £341.4 million came in below its estimates of £64 million and £349 million respectively. It lowered its full-year profit estimate from £143 million to £113.5 million, with further cuts in the outer years.

However, it remains supportive of the company based on a new price target of 4,300p. It said: “We are confident in the medium-term delivery of high-single-digit through-cycle organic revenue growth, coupled with 20% plus margins.

“The proposition remains compelling with a unique model, hence our continued Buy recommendation.”

The declines for Tate and Renishaw came in a session of outperformance for the FTSE 250 index, up 42.41 points to 20,922.91 by mid-afternoon.

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Stronger mid-cap stocks included Travis Perkins (LSE:TPK) and Dunelm Group (LSE:DNLM) after GDP figures showed the UK grew by more than expected at the end of the fourth quarter.

The resulting boost for sterling meant the international-focused FTSE 100 index declined 61.72 points to 8,745.72, having closed at records in the three previous sessions.