Published 02 Sep 2014 16:51
LONDON (Alliance News) – Direct Line Insurance Group is set to be one of two possible entrants to the UK’s blue-chip index at the FTSE review on Wednesday, while initial public offerings will dominate the changes in the FTSE 250 for a second consecutive quarterly review.
Recently merged Dixons Carphone is also experiencing a strong run in the lead up to the review, putting it in with a chance of entering the FTSE 100, while drinks can maker Rexam and house builder Barratt Developments could be the companies relegated to make way.
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.
The index changes will be issued after market close on Wednesday, September 3, based on closing prices from September 2. The changes come into effect from the start of trading on Monday, September 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 likely moves ahead of the official announcement:
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FTSE 100 Adds:
Direct Line Insurance Group: Market capitalisation GBP4.51 billion. The insurer’s shares have risen steadily throughout the past three months, moving sharply higher at the beginning of August on the back of strong first-half results. The company’s shares jumped more than 6.5% in just two days, before rising to an all-time high of 307.00 pence, after it reported a significant increase in first-half pretax profit, as a weaker operating profit from ongoing operations after the severe UK winter weather was more than offset by a better result in its run-off segment and lower restructuring costs. Shares in the company did drop slightly in mid-August, but have since recovered and currently trade close to their record highs. Current share price 301.7p.
Dixons Carphone: Market capitalisation GBP4.26 billion. The UK’s biggest retailer of mobile phones and electrical goods was formed after Dixons Retail PLC and Carphone Warehouse Group PLC completed their GBP3.6 billion merger in July. While shares in the company fell sharply for two consecutive sessions after they started trading in the FTSE 250 on August 7, they managed to recover somewhat towards the end of the month. The company’s shares then moved firmly higher on Monday, closing up 6.9%, after it said it had agreed a long-term deal with FTSE 100-listed Vodafone Group for an enhanced distribution partnership. Current share price 369.9p.
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FTSE 100 Deletes:
Rexam: Market capitalisation GBP3.54 billion. The beverage can maker, which was one of the original companies in the FTSE 100 when the index was launched in 1984, is the smallest company in the blue-chip index by market cap. Analysts suggest that the company’s return of cash to shareholders in recent months is the primary reason for this. Alongside this, at the beginning of August, the company reported that first-half revenue and pretax profit declined marginally as good volume growth was offset by the strength of sterling and metal premium costs reaching an all-time-high. Current share price 502.5p.
Barratt Developments: Market capitalisation GBP3.59 billion. The housebuilder, which was added to the FTSE 100 in March, has experienced a mixed quarter of trading as it was both boosted and hit by oscillating expectations surrounding the timing of an interest rate rise in the UK. Comments made by Chancellor of the Exchequer George Osborne in June, which gave powers to the Bank of England to rein-in mortgage lending amid growing concerns about house price inflation, saw Barratt’s shares fall heavily. Current share price 364p.
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FTSE 250 Adds:
Saga: Market capitalisation GBP2.06 billion. The company missed out on the previous quarter’s index decision as its IPO was too late for consideration, but will be one of the new additions in the mid-chip index this time round. Saga had experienced a downturn in its share price through most of the summer months but has been making an impressive recovery since mid-August. The company performed particularly well when it announced on August 13 the acquisition of a majority stake in Destinology Ltd, an online travel firm specialising in four- and five-star holidays to the United Arab Emirates, the Far East, Indian Ocean and Europe. Current share price 185.54p.
Nostrum Oil & Gas: Market capitalisation GBP1.42 billion. The company on June 20 cancelled the listing of its global depositary receipts and traded shares on the London stock exchange. The size of the company will put it into the FTSE 250 index. Current share price 764.5p
TSB Banking Group: Market capitalisation GBP1.4 billion. The group, which was sold by Lloyds Banking Group as a condition of receiving state aid in the financial crisis, has had a rather volatile quarter but has seen its shares rise above its IPO price of 260p. At the end of July, the company’s shares were boosted by a jump in first-half pretax profit, aided by a one-off GBP63.7 million gain on its withdrawal from Lloyds Banking Group’s defined-benefit pension schemes. Current share price 280.25p.
SSP Group: Market capitalisation GBP1.17 billion. Since the company’s IPO on July 20 at 220p, the food operator’s shares have steadily trended upwards. In early August, the company said that sales had taken a hit due the strength of sterling but it managed to grow 3.3% year-on-year, driven by strong performances in its UK, North America and Asia-Pacific businesses. Current share price 246p.
Zoopla Property Group: Market capitalisation GBP1.05 billion. The property portal business began trading on the London market on June 18 at 220p and has seen its share price rise by 14%. On August 14, the company said that it had experienced growth in all areas of the business since April, with website and mobile traffic up 34% on the previous year. The company has also been boosted by 6% growth in advertising members in the same period. Current share price 250.75p.
Spire Healthcare Group: Market capitalisation GBP1.04 billion. The company’s shares have made significant gains since mid-August and now trade 22% above the July IPO price of 210p. Despite swinging to a pretax loss of GBP417.2m in the half year to end-June, shares in the company were driven by higher revenue and confidence in the company’s acquisition of St Anthony’s Hospital, as well as the further roll out of its Specialist Cancer Care Centres. Current share price 260p
Card Factory: Market capitalisation GBP738.5 million. Like Saga, the company missed out on the last quarterly review but looks like a certain inclusion into the FTSE 250 this quarter. The company joined the London market on May 15 at 225p but has since had a rather volatile three months with its shares falling by 4% from its IPO price. Despite this, the company’s size will makes it comfortably large enough for entry to the FTSE 250 next week. Current share price 216.75p.
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FTSE 250 Deletes:
Xaar: Market Capitalisation GBP325.9 million. The digital inkjet printing technology company’s shares have almost halved in value since the FTSE index review in June. Shares in the company fell sharply in mid-June after it warned that its revenue would fall slightly in 2014 as it struggled to quickly expand the take-up of its technology outside ceramic tiles markets, and gross margins are expected to decline as it faces increased competition. The stock also fell significantly at the end of August after the company lowered its revenue expectations for the full year due to softening demand in the Chinese ceramic tile decoration market, and it posted a lower pretax profit for the first half of the year. Current share price 425.7p.
BH Global: Market capitalisation GBP334.5 million. The closed-ended investment company has experienced a relatively flat quarter and due to its small size, looks set for relegation into the FTSE Smallcap index. The company recently said the net asset value of its sterling shares declined by 0.7% in the first half of 2014 to GBP13.25 per share. Current share price 1,193.2p.
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 five next smallest companies 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.
Exova Group: Market Capitalisation GBP477.5 million. Current share price 191p.
ITE Group: Market Capitalisation GBP501.9 million. Current share price 200.7p.
Dairy Crest Group: Market Capitalisation GBP570.1 million. Current share price 416.9p.
Personal Assets Trust: Market Capitalisation GBP582.8 million. Current share price 34,300p.
Circassia Pharmaceuticals: Market Capitalisation GBP585.3 million. Current share price 309p.
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By Neil Thakrar; neilthakrar@alliancenews.com
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