FTSE 100 Review


The FTSE 100 has undergone its latest quarterly review.

FTSE Russell, the providers of the FTSE 100 and related UK indices, has announced the results of its quarterly review.  This was based on market values on 28th November and will take effect from Monday 18th December.

As far as the FTSE 100 is concerned, there are three exits and three entries:

Going out…
ConvaTec Group, is a healthcare group focused on wound care, continence and critical care and infusion devices. In mid-October it issued a profit warning which prompted a near 25% drop in the share price. That was enough to put ConvaTec’s position in the Footsie at risk. The share price did not recover from the warning, leaving the inevitable to happen.

Merlin Entertainments runs Madame Tussauds, Legoland Parks and a variety of other theme parks. Its share suffered a downward rollercoaster experience in October when it revealed “difficult” summer trading because of terror attacks and unfavourable weather.  After falling nearly 20%, the shares have drifted down further, following a similar pattern to ConvaTec. At current levels, the market punishes bad news.

Babcock International Group is a support services company with an emphasis on defence industries.  Support services have been out of favour (think Capita, Carillion). Its half year results in November were in line with forecasts, but highlighted issues that were holding back revenue growth, giving the share price a Footsie-fatal second leg down.

Coming in…
Just Eat will be a familiar name to many. Floated only 3 years ago, Just Eat dominates mass market takeaway internet ordering, although unlike its rivals, such as Deliveroo, it makes no deliveries itself. Just Eat has grown dominant by buying out much of the competition. Its growth comes at a rich share price – the price/earnings ratio is over 50 and so far, there is no dividend.

Ironically, at the same time as Just Eat moved into the Footsie, Restaurant Group (whose brands include Frankie & Benny’s, Garfunkel’s, Joe’s Kitchen, etc) was ejected from the FTSE 250.

Smith (DS), is a packaging specialist, with an innovative line in corrugated paper. It has grown as its competitors have fallen by the wayside, making acquisitions en route. Ultimately its business is about cardboard boxes, but there remains plenty of demand for them – just think of all those Amazon deliveries…

Halma is the sort of business that generates a “Who?” response. It produces safety, health and environmental equipment and has been on a roll since announcing “widespread growth” in a September trading update, followed by good half year results in November.

The arrival of Just Eat is a reminder that technology can produce rapidly growing companies outside the USA.