- Royal Mail PLC (LON:RMG) – prime contender for promotion to the FTSE 100
Q1 2021 hedge fund letters, conferences and more
- ITV plc (LON:ITV) – outside contender to inch back up back up to the topflight
- Renishaw plc (LON:RSW) – set for demotion from the FTSE 100
- Harbour Energy PLC (LON:HBR) – potential to jump into the FTSE 250
- Darktrace PLC (LON:DARK) – set to secure FTSE 250 position after successful IPO
- Moonpig Group PLC (LON:MOON) – set to fly into the FTSE 250 after its floatation
- Trustpilot Group PLC (LON:TRST) - FTSE 250 contender after listing in London
- Tyman PLC (LON:TYMN) – potential for promotion to the FTSE 250
- 4imprint Group plc (LON:FOUR) – set to be demoted from FTSE 250
- Provident Financial plc (LON:PFG) –could be ejected from FTSE 250
- Foresight Solar Fund Ltd (LON:FSFL) – could lose its FTSE 250 lustre
"The FTSE reshuffle is set to be a be more of a waltz this time around, with the topflight expected to move only slightly, while there is some significant legwork going on with changes to the FTSE 250. The new line up is likely to include newcomers like DarkTrace, Moonpig and Trust Pilot which have all launched onto the London market in recent months, while Premier Oil’s transformation into Harbour Energy could see it make the mid cap list. Shuffling down a grade could be 4imprint Group, Provident Financial Group and Foresight Solar Fund as industry trends weigh on their respective sectors.
Royal Mail - prime contender for promotion to the FTSE 100
Royal Mail has been delivering a succession of bumper sales figures as it continues to capitalise on the e-commerce boom. It’s expected to post annual results on Thursday 20th May, showing a doubling of profits to £700 million. The pandemic boost is likely to keep it in pole position to accelerate into the FTSE fast lane. Momentum revved up as the group increased its capacity for parcel deliveries and the renaissance in letter writing was an added bonus after declines last year giving the red post box the chance of a much longer life. But the group’s UK operations still creaks under high demand and significantly more capital expenditure will be needed after years of underfunding. Agreements with its unions have helped ease some long running tensions but it’s the expansion of the company’s international business which is set to be the shining light. Royal Mail is targeting 12% annual revenue growth over the next five years for GLS with only modest capital expenditure, a blueprint its domestic business can as yet only dream of emulating.
ITV - outside contender to inch back up to the top flight
ITV lost its lustre as the pandemic caused production problems for its pipeline of shows and it grappled with rapid belt tightening of advertising budgets. The Love Island broadcaster’s revenue plunged after the hit show was cancelled and episodes of popular soaps were scaled back. But marketing spend is ramping up once again as vaccine roll outs fuel confidence among brands. There is also hope of a rebound in fortunes for its Studios business, where it produces content for others, especially with the streaming wars seeing little sign of de-escalating. This part of the business is key to ITV’s turnaround, to help the company reduce the reliance on the fickle world of advertising. It is still slow progress, but investors have glimpsed the flicker of better times ahead and it has the potential to clamber back up to the topflight if momentum continues.
Renishaw - set for demotion from the FTSE 100
Renishaw, known for its precision engineering, made it into the topflight within a hair's breadth. It was boosted into position by announcing its sale with impeccable timing for the last reshuffle. But the blue-chip status hasn’t helped find a buyer and the company’s high price tag and strings attached to the deal seemed to have put off potential suitors from clinching a deal. Founders Sir David McMurtry and John Deer who are selling their combined 53% holding set up the company almost five decades ago and have seen it flourish into a global player. They indicated their focus will be on finding a new owner who fits their vision for the company while respecting its culture, heritage and commitment to the communities in which it operates. It has manufacturing bases not just in Gloucestershire, where the company is headquartered, but also in Cardiff and York as well as plants in Ireland, India, Germany and the USA. It’s share price has been on the slide as the hunt for a new owner continues, and it’s fall back into the FTSE 250 league looks highly likely.’
Harbour Energy - contender to jump into the FTSE 250
Harbour Energy looks set to jump upstream into the FTSE 100, as demand for oil and gas recovers and more countries ease out of pandemic restrictions. Harbour Energy is the reincarnation of Premier Oil formed via a reverse takeover by newly listed Chrysaor, which gave Premier a nifty solution to its debt issues. It won’t be plain sailing for the group though, with concerns about fresh Covid strains likely to weigh on the oil price. It offers some green credentials, by being a key player in the Acorn project, a carbon capture and hydrogen venture alongside Shell and Storegga. But with ESG concerns of increasing interest to investors, future guidance on its renewable strategy will be watched with interest.
DarkTrace - to secure FTSE 250 position after successful IPO
Cyber security firm, DarkTrace is highly likely to creep into the FTSE 250 following its successful IPO which saw shares soar 40% on listing. It raised £143.3 million which will be used to further develop its AI technologies which detect and counter cyber threats. Founded by US and UK intelligence agents in 2013, it uses machine learning, to scan regular business operations and detect tiny irregularities, which can be the canaries in the coalmine of cyber-attacks. The global shift to digital which has accelerated during the pandemic, should open up new opportunities and markets for DarkTrace as firms scale up their operations to meet demand, whilst trying to ensure their systems stay secure.
Moonpig - set to fly into the FTSE 250
E-card retailer Moonpig’s is set to fly into the FTSE 250, after snuffling out a hefty valuation at its IPO launch. Although it’s shares have had a bit of a wobble in recent weeks, the company still boasts a £1.43 billion price tag. By positioning itself as a digital sales platform, using data to predict consumer preferences, Moonpig has succeeded in positioning itself as a big e-commerce player, rather than an online card retailer. The company has been living high on the hog during the pandemic as demand for cards and personalised gifts ordered online soared. But easing pandemic restrictions mean consumers are now free to browse real rather than virtual racks of cards once more, and its flying sales risk coming down to earth with a bit of a bump. Plenty of other retailers are sniffing out the truffles in the e-card market with Card Factory, Funky Pigeon and start up Papier eager to steal more market share.
Trust Pilot - FTSE 250 contender after listing in London
The consumer reviews operator Trust Pilot has capitalised on the accelerated shift to digital during the pandemic and launched on the London market as part of the IPO gold rush. After a bit of a volatile start to trading, it’s shares have broadly risen over the past month, giving it a market capitalisation of £1.25 billion, as investors assess not just its value as a reviews site but also the vast amount of data it holds on consumer behaviour. It offers consumers the chance to voice their opinions about sites and sellers, offering crucial information to shoppers testing out e-commerce traders for the first time. The data it is able to mine on customer experience is Trust Pilot’s currency and it sells a subscription model to companies allowing them to not only use positive reviews for marketing but providing information to help them improve their service. However, the company is still loss making and its profit prospects will depend on the company winning more paid subscribers. With the e-commerce boom likely to continue there is significant potential for growth. However, there is competition in this space not least from the big retail platforms, like Amazon, hosting the digital shops of small retailers, who run their own review systems. Trust Pilot’s future prospects will depend very much on how the e-commerce ecosystem evolves.
Tyman - set to be promoted to the FTSE 250
Door and window manufacturer Tyman has seen its share price rise sharply after it benefited from robust demand for repairs, renovations and new build homes in its key markets. There is of course a risk that demand for new panes will wane, as the home renovation craze cools. However, the housing market in the US and the UK doesn’t show signs of stalling any time soon, with remote working having sparked interest in moving to bigger properties or more rural locations. In the US it could also benefit from Biden’s infrastructure spending boost. Higher commodity costs though, could cause the price it pays for components for its engineered parts to rise, and there is a risk that could eat into margins.
4imprint Group - set to be demoted from FTSE 250
It’s been a tough year for 4imprint Group as demand plummeted for its promotional products during the pandemic. With advertising and marketing spend tightened, orders plunged and profits fell 93% for the full year. Much of the merchandise 4imprint sells is aimed at the conference market and with events cancelled in the UK and around the world, demand has been low for little treats and gifts carrying corporate logos. Recovery is on the cards for the group, with a more robust fourth quarter, but returning to pre-pandemic levels is inevitably going to take time. Virtual shows look set to replace physical events for the foreseeable future, a trend which is likely to limit a sharp bounce back.
Provident Financial - doorstep lending woes could see it ejected from FTSE 250
The fortunes of Provident Financial Group have been seriously on the slide, and the company has now called time on its doorstep lending business. It’s all part of its attempt to climb out of a financial black hole, after being forced to pay compensation for mis-selling its products. Thousands of complaints were upheld against the company, and the bill to compensate customers was already set at £50 million. The business has been targeted by claims management companies, sniffing out the opportunity to make money after the financial ombudsman service upheld a high number of complaints. In many ways, by setting up the compensation scheme, Provident had been trying to shut the stable door, after the horse had already bolted. With such a big bill to foot, and customers more wary of signing up to high-cost credit, the doorstep lending business clearly looks largely unprofitable going forward. Shifting its business model away from riskier high interest loans towards a mid-cost credit model now looks like the direction of travel for the company. It’s highly likely that it will try and make that slow but difficult pivot from outside of the mid cap league, given the fresh downwards trajectory of its share price.
Foresight solar fund - could lose its FTSE 250 lustre
The Jersey based investment company; Foresight Solar Fund has lost some of its shine amid a change in the direction of its diversified portfolio. It’s won shareholder approval to focus on battery storage alongside its ground based solar plants. As part of the plan it ploughed £12.7 million into a 50% equity stake in a 50MW UK grid battery project, using existing revolving credit facilities. It is likely to take time for the strategy to bear fruit but upgraded battery storage facilities are seen as crucial for the long-term success of renewable energy projects. But there are still concerns over the aging UK power network and when it can be sufficiently upgraded to meet the requirements of a rapid roll out of green power.”
Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
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