JPMorgan downgrades RS Group after H1 results

JPM said the downgrade is driven by a combination of a deteriorating macroeconomic outlook, with RS Group continuing to invest into its cost base; increased uncertainty following the CEO leave of absence; and its preference for more defensive exposure elsewhere in its Business Services coverage.

"We had already become relatively more cautious on RS1 and downgraded to neutral last month and although RS1 delivered strong results in Americas and APAC in H1 (in-line with the view that H1 has continued to be strong), the year-over-year margin decline in Europe was a negative surprise," the bank said.

"This highlighted one of the risks we flagged, namely that RS1 is likely to see margin pressure in the near term as it has been increasing opex ahead of the cycle turning."

JPM said that overall, it still sees the business as being well run and with a strong strategy medium term, but expects a better entry point in the future.