Investment

A shuffling of the FTSE 100 – The latest quarterly review of the FTSE 100 constituents is an interesting snapshot of Covid-19’s impact

By June 18, 2020 No Comments

The results of the quarterly review of the FTSE 100 constituents have been announced and three of the four demoted companies have a travel theme in common:

Carnival is a company that runs – or rather used to run – several large fleets of cruise ships, including Princess Cruises and P&O Cruises. Its share price has cratered: having started 2020 at 3644p, it is now 1174p. Even that is nearly double the 605p it sunk (sic) to at the start of April.

easyJet needs no introduction. While it is one of the more efficient airlines, it cannot escape the impact of the groundings across its European base. Its share price has nearly halved since mid-February. A dispute with its largest shareholder and founder, Sir Stelios Haji-Ioannou, has not helped matters.

Meggitt is not a well-known name, but its woes are obvious when you look at its main business – supplying parts to the aerospace industry, notably for the Boeing 737 Max. Again, its share price has more than halved since February.

Centrica is not involved in the travel industry, making it the odd one out. Its main business is British Gas, the long ago privatised utility company. Utility price caps, and a slashed and subsequently suspended dividend made it only a matter of time before Centrica parted company with the FTSE 100. Its share price has also halved since February.

The new entrants are more diverse, although it can be argued that home is their underlying theme:

Avast is a supplier of anti-virus and security software and has benefited from all the homeworking that has been a theme of Covid-19.

GVC Holdings is an Isle of Man based betting and gaming company, which took over Ladbrokes in 2018, having previously acquired Sportingbet and bwin. It was ejected from the FTSE 100 in March after its share price halved in the wake of the Government’s crackdown on Fixed Odds Betting Terminals and sporting fixtures disappearing. The prospect of sport gradually returning has lifted the shares by 150% above their March low.

Homeserve, as the names suggests, operates in the domestic environment, supplying emergency and repair services in the home. Its share price nearly halved in March, but has since recovered to previous levels on the back of better than expected profits and business from stay-at-home customers.

Kingfisher, owner of B&Q, returns to the Footsie three months after being ejected. It too has benefited from the furloughed millions with time on their hands, as well as DIY retailers being one of the earliest sectors to reopen.

COMMENT

The FTSE 100 changes in June, which take effect at close from 22 June, are an interesting mirror on changing life patterns. It will be interesting to see whether September’s revision continues the trend.

Credit – Techlink June 2020