Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown provides her views on the upcoming rebalancing of the UK’s most closely watched share indexes:
The FTSE All Share Index Quarterly Review will take place next week – based on market capitalisations on Tuesday 29 November (announced 30 November), with changes taking effect after the close of business on Friday 16 December.
Abrdn – contender for promotion to the FTSE100
It’s been a volatile year for Abrdn LON:ABDN, 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.
Weir Group – contender for promotion to the FTSE 100
Weir Group LON:WEIR, 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 LON:HBR 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 30% 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 LON:DPH 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 20% over the past year 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 revenues streams reasonably resilient as long as new product pipelines don’t get blocked.‘’
This article has been brought to you in association with Hargreaves Lansdown. All opinions expressed in this article are from the analysts and do not necessarily represent the opinions of The Armchair Trader.
