FTSE 350 Quarterly reshuffle: UK’s largest companies hit with holiday blues

FTSE 350 Quarterly reshuffle: UK’s largest companies hit with holiday blues

The FTSE Russell announced its June quarterly review on 3 June 2020, evidencing the effects of COVID-19 on investor confidence.

With further restrictions since the last reshuffle in March, the travel industry continues to take a severe beating, seeing Easyjet plc and Carnival plc plummeting off the FTSE 100 after their shares went down almost 50% and 70% respectively since the start of 2020.  In February, Carnival’s luxury vessel, the Diamond Princess, was hit by disaster as over 3700 people were forced to quarantine onboard, in the worst known outbreak outside of China at the time. Following the incident, the cruise operator became the first to put a pause on its cruise operations on March 13, prior to the US and UK officially announcing lockdown.  The company, who had previously been on the FTSE 100 index since 2002, have since made several announcements on extending the pause on its various cruises.   Easyjet, on the other hand, announced that it will resume flying from 15 June, although the airline expects to fly around 30% of the planned capacity flown in Q4 2019, in the final quarter for 2020.  The company also expects to decrease its fleet stating that ‘easyJet believes that the levels of market demand seen in 2019 are not likely to be reached again until 2023’.

Meggitt plc are feeling the effects of reduced market demand in the airline industry and found themselves dropping off the FTSE 100 as a result. The aerospace company stated in its quarterly update: ‘Covid-19 will result in a significant reduction in demand across our civil aerospace business in 2020, as our customers adapt and scale back their activities to reflect the reduction in global air traffic’. Senior plc was also demoted in the reshuffle, falling off the FTSE 250. The company similarly felt the impact of the pandemic on its civil aerospace business, stating ‘customer demand [has been] falling as activity levels have reduced’, in its April market update.

The restrictions also hit home at a more local level. Local public transport company Stagecoach Group plc saw its share price drop more than 50% since the start of the year, leading to it dropping off the FTSE 250 in the reshuffle.

Outside of the travel industry, FTSE 100 stalwart Centrica found itself out in the cold as it was demoted to the FTSE 250 for the first time since its demerger from British Gas in 1997. As people have been forced to work from home, the company noted a significant reduction in demand from its business customers in its April trading update. Furthermore, with many people out of a job and reduced household income, the company is also expecting an increase in bad debt.

Nevertheless, stay-at-home measures have proven beneficial for some. DIY and household appliance retailers, Kingfisher plc and AO World plc were promoted to FTSE 100 and FTSE 250 respectively. Kingfisher had initially fallen off the FTSE 100 in the March reshuffle, however, its stores were deemed ‘essential’ following lockdown.  The company mostly operated a click and collect and drive through service in light of the pandemic, noting strong growth in e-commerce sales, which were up fourfold since mid-March.  As an online-only retailer, ‘AO has grown market share and seen increased demand and sales across all categories since the lockdown measures came into force’, as ‘overnight 100% of the market moved online’.

Lockdown measures have also seen cybersecurity specialists Avast plc enter the FTSE 100, with the  company noting in its trading update: ‘Avast has an important role to play in protecting individuals and communities online at a time of increased reliance on digital communications’. Homeserve plc, who operate in technology and home improvement, similarly noted: ‘We have all become acutely aware of the importance of our homes over the last few months, which means that HomeServe's purpose of making home repairs and improvements easy has never been more relevant’.

Healthcare focused sectors have also found themselves at a unique advantage, with Oxford Biomedica, BB Healthcare Trust, and Civitas Social Housing all being promoted to FTSE 250 status.

FTSE 100 entrantsFTSE 100 exits
GVC HoldingsCentrica

FTSE 250 entrants FTSE 250 exits
Carnival (down from FTSE 100) Avast (promoted to FTSE 100)
Centrica (down from FTSE 100) GVC Holdings (promoted to FTSE 100)
Easyjet (down from FTSE 100) Homeserve (promoted to FTSE 100)
Meggitt (down from FTSE 100) Kingfisher (promoted to FTSE 100)
888 Holdings Bakkavor Group
AO World Elementis
BB Healthcare Trust Forterra
Calisen Hyve Group
Civitas Social Housing JPMorgan Indian Investment Trust
JLEN Environmental Assets Group Marstons
Liontrust Asset Management Mccarthy & Stone
Oxford Biomedica Senior
Scottish American Investment Stagecoach Group

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