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LONDON (Alliance News) - Aerospace and defence company Meggit is likely to drop out of the FTSE 100 after a volatile March and a weak share performance in April and May, while satellite communications service provider Inmarsat is set to return to the blue-chip index following a strong run in its shares since the previous index review.
The quarterly FTSE index review is based on changing market capitalisation, and sees those FTSE 250-listed stocks that are the 90th biggest or larger in the main market move up, and FTSE 100 companies that are 111th biggest or smaller move down, keeping the indices balanced.
Similarly, the main market companies that are the 325th biggest or larger move up to the FTSE 250, and those that are 376th or smaller move down to the FTSE SmallCap index.
Often, the likely moves become apparent in the days ahead of the index review, although this time the changes to the FTSE 100 outside Inmarsat and Meggit are too close to call at this stage.
The index changes will be issued after market close on Wednesday, June 3, based on closing prices on June 2. The changes come into effect from the start of trading on Monday, June 22.
Re-indexing can lead to increased trading activity as, for example, fund managers with FTSE 100 tracker portfolios will need to offload stocks that no longer sit in the index and may want to buy the stocks that move in.
Here's a run down of the possible moves ahead of the official announcement:
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FTSE 100 Adds:
Inmarsat: Market capitalisation GBP5.0 billion. The satellite communications service provider has seen its share price appreciate steadily since the previous index review but has stumbled on a few occasions along the way. The most recent of which was on May 18 when the company suspended its guidance of 8% to 12% compound annual growth rate in revenue from wholesale mobile satellite services over 2014 to 2016, as the launch of its third Global Xpress satellite I-5 F3 was delayed by the failure of a related satellite. It was previously demoted from the FTSE 100 in December 2011. Current share price: 1,000p.
DCC Group: Market capitalisation GBP4.57 billion. Shares in the distribution company rose for most of the quarter but surged in mid-to-late May when it struck a EUR464 million deal to acquire French liquefied petroleum gas company Butagaz SAS from Royal Dutch Shell, making DCC a contender for entry. The company also posted a rise in pretax profit for the year to the end of March and predicted strong earnings growth in the current year. Panmure Gordon raised its price target to 5,300 pence from 4,550 pence following the acquisition, noting the company's "impressive" track record on making earnings-accretive acquisitions. Current share price: 5,175p.
Provident Financial Group: Market capitalisation GBP4.37 billion. The lender's shares have risen 10% during the quarter, in which it said it is well-placed for growth in 2015, citing "sound credit quality" across its three divisions and a "strong start" to the year for its businesses. The company's shares were also supported when Citigroup reiterated its Buy rating, saying it believes it has a strong earnings per share growth story with a sustainable dividend yield. Current share price: 2,980p.
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FTSE 100 Deletes:
Meggitt: Market capitalisation GBP3.96 billion. After a volatile period in March, Meggitt's shares have been on a run of losses from mid April. Shares fell particularly heavily when UBS downgraded the aerospace and defence company to Sell from Neutral. The Swiss investment bank said the appointment of Nigel Rudd as chairman fuelled speculation that Meggitt is a possible takeover target, with US rival United Technologies a potential buyer, but UBS did not believe so. Current share price: 504.00p.
Wm Morrison Supermarkets: Market Capitalisation GBP4.02 billion. The supermarket's stock price has fallen 20% since its peak in mid-March. Morrison's shares fell 6.6% in early May when it reported a steeper drop in like-for-like sales in the first quarter of its financial year than in the previous quarter, signalling the size of the task that its new chief executive has on his hands as he tries to turn the company around and attract back the customers that have headed elsewhere. Furthermore, UBS initiated coverage of the company at Sell, saying it needs to invest on multiple fronts to better differentiate its business. The bank initiated rivals Tesco and J Sainsbury at Buy. Current share price: 172.26p.
Sports Direct International: Market capitalisation GBP4.02 billion. Shares in the sporting goods retailer closed pretty much where they started at the beginning of the quarter. Having got off to a weak start in the period, Sports Direct was boosted by the Conservative party victory in the UK general election in the beginning of May. At the end of the month, shares were further supported after it said it expects underlying earnings before interest, taxation, depreciation and amortisation will be in line with market expectations, while both underlying pretax profit and earnings per share are set to be ahead. However, the stock fell in the few days before the index review, putting it in line for possible relegation into the FTSE 250. Current share price: 673.00p.
Aggreko: Market capitalisation: GBP4.02 billion. The temporary power provider's share price has broadly moved in line with the FTSE 100, but the company took a hit in mid May when it retained its 2015 guidance and cautioned that it can't predict the impact of the lower oil prices on its markets, even though revenue rose 8% in the first quarter of the year as it got a boost from the stronger dollar and growth in other regions. Current share price: 1,571p.
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FTSE 250 Adds
Aldermore Group: Market capitalisation GBP952 million. The bank's shares have risen 35% since its initial public offering on March 10. During the quarter the company said it is on track to meet its GBP1.4 billion net new lending target in 2015 as customer deposits rose and its capital ratios improved in the first quarter. Current share price: 281.00p.
Auto Trader Group: Market capitalisation GBP2.85 billion. The company's share price has risen 9% since its IPO on March 19 and it has since been initiated at Buy by a number of brokers and investment banks including Goldman Sachs, Merrill Lynch and Numis. Numis analyst Paul Richards said Auto Trader is the pre-eminent digital marketplace for the large and complex UK used vehicle industry, thereby generating powerful network effects. Richards noted that 80% of retailers market their vehicles for sale on the company's website. Current share price: 284.5p.
B&M European Value Retail: Market capitalisation: GBP3.33 billion. Shares in the discount retailer chaired by former Tesco Chief Executive Terry Leahy have risen 4% in the quarter. It reported late May a pretax profit in its recently-ended financial year, as it recovered from a loss in the prior year. In March, Deutsche Bank said B&M shares were cheap as the retailer still had price leadership in the branded grocery sector. Current share price: 333.12p.
John Laing Group: Market capitalisation: GBP850 million. Shares in the investment vehicle have risen by 17% in the last quarter. Late May, it said it was intending to raise GBP45 million via a share issue and is planning to create a placing programme to repay its existing credit facility and fund further acquisitions. In April, it said the East West Connect consortium reached a deal with the Victoria state government in Australia on a heads of agreement for the East West Link project. John Laing Group said it expected the GBP60.7 million investment it made in the consortium, in which it held a 30% stake, to be returned in full. Current share price: 231.75p.
Wizz Air Holdings: Market capitalisation: GBP1.5 billion. Shares in the Central and Eastern Europe-focused budget carrier have risen by 17% since it made its debut on March 2. Wizz Air's net profit more than doubled in its 2015 financial year as the group carried more passengers and improved its load factor and profit margin. The company said trading so far in its 2016 financial year has been strong, expecting to grow capacity by around 17% in the coming year. It also expects a further rise in post-tax profit in the coming year. Wizz Air will open its 22nd base in Europe in December 2015 by placing an Airbus A320 at Debrecen in Hungary. Current share price: 1,534p.
Onesavings Bank: Market capitalisation: GBP788 million. The specialist lender, which funds residential, buy to let and commercial mortgages, secured loans and development finance, has seen its share rise by 49% in the quarter. The rise started mid-March, when it reported a jump in pretax profit in 2014 as it continued to grow its loan book. Later that month, it said it struck a deal to acquire a portfolio of UK second-charge mortgages from an unnamed major financial services company. Its strong share performance cost the company downgrades from Numis to Hold from Add, but in April it was also upgraded to Buy from Hold by Cannacord. Current share price: 324.25p.
Shawbrook Group: Market capitalisation: GBP929 million. The lender made its debut on April 1, raising GBP90 million when it went public, and its shares have risen by 21% since then. Shortly after that, it saw Iain Cornish succeeding the departing George Mathewson as its chairman, while its chief executive Richard Pyman took temporary leave due to illness on late May. Current share price: 371.75p.
Woodford Patient Capital Trust: Market capitalisation: GBP874 million. The trust saw its shares decline in its IPO in late April, but a rally in late May means the stock is now up 6% since its debut. The trust raised GBP800 million in its initial public offering which, according to trade body the Association of Investment Companies, was the largest ever launch for a UK investment company. Current share price:109.25p.
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FTSE 250 Deletes
De La Rue: Market capitalisation GBP521 million. The banknote printer had a largely flat quarter until late May, when it reported a drop in pretax profit in its recently completed financial year, as margins were squeezed by pricing pressure and the company achieved lowers levels of new business than expected in its identity systems and security products. Since the results were released, its shares have dropped by 7%. Current share price: 515.47p.
RPS Group: Market capitalisation: GBP524 million. Late April, the energy and environmental consultancy struck a deal to acquire Norway's Metier Holding AS but its shares sharply dropped as it said its energy business had a slower-than-expected start to the year as tough conditions in the oil market dragged on its performance. During the last quarter, RPS suffered several price target cuts from brokers as JP Morgan and Liberum due to the weakness of its energy business. Current share price: 236.00p.
Blackrock World Mining Trust: Market capitalisation: GBP546 million. The trust, which invests in mining stocks, experienced the worst year in its 21-year history in 2014 as its net asset value fell by 29% due to the rapid decline in iron ore pricing and a writedown it booked on its investment in London Mining, which collapsed into administration last year. Current share price: 308.00p.
Infinis Energy: Market capitalisation: GBP564 million. The British renewable energy company had a volatile quarter, with its shares dropping by 7% in the past three months. Late May, the company said it swung to a profit from a substantial loss in the last financial year and it raised its dividend, as expected, as the expansion of its wind farms continues to progress on schedule. Current share price: 187.90p.
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While none of the companies listed below have a market capitalisation small enough to automatically put them in line for deletion from the FTSE 250, the next three smallest in the index will be forced out by the newly-listed names detailed above. Currently, this means that the following companies will move down to the FTSE SmallCap.
SOCO International
Personal Assets Trust
Law Debenture Corporation
By Neil Thakrar and Daniel Ruiz; neilthakrar@alliancenews.com; @NeilThakrar1; danielruiz@alliancenews.com
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