- Abrdn PLC (LON:ABDN), Beazley PLC (LON:BEZ), and Weir Group PLC (LON:WEIR) are set to be promoted to the FTSE 100.
- Harbour Energy PLC (LON:HBR), Dechra Pharmaceuticals plc (LON:DPH) and Intermediate Capital Group plc (LON:ICP) are set to be relegated to the FTSE 250.
- 888 Holdings PLC (LON:888) looks likely to be relegated from the FTSE 250 to the FTSE Small Cap.
- Digital 9 Infrastructure PLC (LON:DGI9) is set to enter the FTSE All Share and the FTSE 250.
The FTSE All Share Index Quarterly Review is based on market capitalisations on Tuesday 29 November (announced 30 November), with changes taking effect after the close of business on Friday 16 December.
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Volatile markets and concerns about the prospects for global growth are the headwinds driving changes in the FTSE 100. Investor risk appetite appears to be returning despite the uncertainty ahead, which is helping the fortunes of Arbdn, which was relegated to the FTSE 250 at the last reshuffle but could soon return to the top flight.
Signs of a turnaround may be coming too late for Intermediate Capital Group which looks set to be ejected from the top flight. The lower oil price and worries about the impact of the larger windfall tax in the UK has weighed heavily on Harbour Energy, pushing it into the relegation zone.
Opportunities in the cyber world and the burgeoning space race look ripe for the picking for specialist insurer Beazeley which is set to enter the FTSE 100.
Abrdn - Contender For Promotion To The FTSE 100
It’s been a volatile year for Abrdn, the Edinburgh based investment company, as shares were dragged down amid the financial market volatility. Outflows from its funds caused nervousness among investors and it was ejected from the FTSE 100 at the last review.
But in recent weeks the company appears to have turned a corner, helped by a rising appetite for risk sending its share price sharply upwards and putting it in pole position for promotion back into the top flight.
Investor confidence in sectors around the world has jumped over the past month, and that’s helped restore optimism about the company’s prospects, particularly given that it’s known for its emerging markets and smaller companies’ funds.
A bolstered direct-to-consumer offering, and improved proposition are all welcome developments which could also help deliver an about turn in revenues. But the company will have to generate sustained and meaningful inflows to remove the risk of fresh volatility returning to the share price.
Beazley - Looks Set To Enter The FTSE 100
Specialist insurer Beazley looks set to soar into the FTSE 100 after climbing on board the space race and committing to pursuing more cyber-focused business. It raised £350 million in a share placement to accelerate its growth plans, hoping to capitalise on demand for cover which is outstripping supply in the market.
In the 9 months to September gross written premiums jumped by 22% while premium rates on renewal business increased by 17%.
These results and its plan for growth have sparked the appetite of investors and there appears particular interest in Beazley’s involvement in the first rocket launch on UK soil at SpacePort Cornwall, given it provided a policy covering risk of loss of the payload alongside insurer Marsh.
There are other risks on the horizon, not least climate change, with the increasing frequency and severity of natural catastrophes. However given the reticence of other players, Beazley believes its well placed to capitalise on more difficult conditions and sees significant opportunity in becoming a market leader in this space.
Weir Group - Contender For Promotion To The FTSE 100
Weir Group, the Glasgow based engineering firm, is also a close contender for re-entry to the FTSE 100. It took the opportunity to refocus on mining during the pandemic, moving away from the oil industry. Its share performance has been a little volatile as worries about global growth and the ongoing effects of China’s zero-Covid policy have continued.
However, optimism appears to be returning that its strategic move into mining will pay off over the longer term, and its recent results were resilient, showing strong demand from the sector for its equipment, with order numbers up by almost a fifth over the last quarter. Maintaining its full-year revenue and profit guidance is not to be sniffed at in the current market.
Harbour Energy Looks Set To Leave The FTSE 100
Harbour energy has been sideswiped by the rumours and then confirmation of an increase in a windfall tax on North Sea oil and gas producers. Pleas from Linda Cook, CEO of the company, for Jeremy Hunt to look again at taxing profits went unanswered.
The company said that the levy will drive investment out of the UK altogether, warning that the associated tax credit would not protect projects and jobs. The company has also been hit in recent days by falls in the price of crude, prompted by worries about the ongoing Covid crisis in China, with rolling lockdowns back in place in major cities after fresh outbreaks.
The share price has fallen by around 19% over the last six months making it one of the most likely candidates to drop out of the FTSE 100 in the December reshuffle.
Dechra Pharma - Contender To Leave The FTSE 100
Dechra Pharma is in the business of keeping animals healthy throughout their lifetimes and was helped by soaring popularity for new furry additions to the household during the pandemic. The company has benefited from robust organic growth and has been on a spending spree in the US acquiring two firms, Piedmont Animal Health and Med-Pharma.
But Dechra has also been caught in the claws of worry about inflation. Additional costs have weighed on the business which has dented profits and a share placing to fund acquisitions has also diluted earnings per share growth.
Although demand for the pharmaceutical company’s veterinary products has been reasonably strong, there have been worries that with incomes facing a squeeze, spending per head could decline.
Shares have fallen by more than 23% over the past six months as worries about growth prospects have risen, and it looks likely to drop out of the top league. However, demand for pets doesn’t seem to be waning just yet which should make future revenue streams reasonably resilient as long as new product pipelines don’t get blocked.
Intermediate Capital Group Looks Set To Be Ejected From The FTSE 100
Intermediate Capital Group looks set to drop out of the top flight after being hit by a dual speed performance from parts of its business. The private equity firm provides capital to help companies grow and provides funds aimed at institutional investors.
Its shares have fallen back by around 13% over the past three months as it was hit by losses racked up by its investment company which totalled £108.1 million for the first half. In recent weeks though the share price has started to recover, partly helped by a jump in third party fee income and profits at its fund management company.
Despite the market volatility and challenging economic backdrop, the company has seen some robust fundraising, with Europe VIII, Strategic Equity IV and Asia Pacific IV funds seeing closes above their initial target size.
888 Holdings Set To Be Relegated From The FTSE 250 to the FTSE Small Cap
The share price of 888 Holdings revved up during the depths of the Covid crisis due to the lack of entertainment elsewhere, but as customers have shifted back to pre-pandemic habits, the surge in betting has eased and revenues have been dented.
Growing concern that an increasing number of people have been developing a gambling problem means enhanced player safety measures have been brought in for the industry, which has had an adverse impact on trading.
Revenues fell 7% over the last quarter coming in behind expectations, pushed lower by a decline in the amount the company made via online channels in the UK by 13%. The company is also expected to be affected by macroeconomic headwinds in the month to come, which also accounts for the share price slide, pushing it into the likely demotion zone out of the FTSE 250.
Digital 9 infrastructure is an investment trust which helps the world stay inter-connected by helping to finance data centres and subsea fibre-optic networks. Data usage is rising rapidly around the world and that requires more infrastructure to support movement and storage.
Although shares have been hit by some volatility, they have climbed by 13% over the past month, showing renewed appetite from investors as risk appetite has begun to return.
Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
