FTSE 350 quarterly reshuffle: which companies are weathering the COVID-storm?

FTSE 350 quarterly reshuffle: which companies are weathering the COVID-storm?

FTSE Russell, the global index provider, announced its latest quarterly review on 3 March 2021, which saw two changes to the FTSE 100, and five changes to the FTSE 250.

This quarter’s reshuffle saw two engineering firms, Weir Group and Renishaw, promoted into the FTSE 100. Weir Group recently sold its oil & gas division, choosing to focus on becoming a ‘premium mining technology provider’. Since announcing the decision to sell its oil & gas business on October 2020, the group’s shares have continued to rise higher than even pre-pandemic levels. The oil & gas industry took a battering during the pandemic due to a drop in demand resulting from travel restrictions coupled with the focus for green energy. This was followed by oil prices plummeting to record lows. Contrastingly, the price of commodities such as metals, have reached record highs recently, with experts predicting a new commodity ‘supercycle’, driven by an increase in demand to fuel the push for green energy. Commenting on its decision, CEO, Jon Staton stated the following in the 2020 results: ‘Our decision to primarily focus on mining reflects the positive prospects for the industry, the strength of our market-leading positions, and the resilience of our aftermarket-focused business model.  Today, we are a premium mining technology business with a clear purpose - to enable the sustainable and efficient delivery of essential natural resources - and a strategy that will deliver long-term sustainable growth.’

Renishaw announced that it will be putting itself up for sale via a formal sale process on 2 March 2021, after the company’s founders and executive chair and non-executive deputy, David McMurtry and John Deer stated they wanted to sell their 53% majority stake and step down.  Prior to this, the healthcare engineering giant reported in its half-year results on 4 February 2021, that its profits have more than tripled since the same period last year. This was in part driven by restrictions due to the pandemic, which led to a decline in operating expenses, which were down from £28.4 m to £4.8 m, as the company held fewer exhibitions.

The 2020 March reshuffle saw utility provider, Pennon Group, secure one of the coveted FTSE 100 spots. One year on, the company has been demoted back down to the FTSE 250. Pennon has seen its share price plummet over the year, with the share price as of 3 March 2021 closing at over 20% lower than the same time last year. The news comes after Pennon reported a ‘landmark year’ in its 2020/2021 half year results in November 2020, following the completion of the sale of its waste business, Viridor, which resulted in a profit of £1.7 bn. Despite this, the company reported a 14.5% drop in its underlying profits, which was in part attributed to the pandemic as restrictions leading to a reduction of water usage for non-household customers.

The reported Christmas boost for Morrison (WM) Supermarkets was not enough to prevent its fate as the supermarket joins Pennon Group in its exit after 5 consecutive years in the FTSE 100. Like Pennon, the lockdown restrictions took a toll on the supermarket, with the company reporting a 23.1% fall in its like for like fuel sales in its January trading update. The company reported total direct COVID-19 costs of £280 m for 2020/21.

Despite the challenging year, the supermarket, like many others, noted a significant increase in online revenue, stating; ‘Online was again very strong as we continued to adapt well to the sustained increase in customer demand, with sales more than tripling so far in Q4 across all our channels year-on-year’. While this did not prevent its relegation, the growing demand for e-commerce cemented popular footwear brand Dr. Martens’ place in the FTSE 250. Dr. Martens listed just last month on 3 February and has a healthy market capital of around £4.8 bn. The footwear brand attributed much of its success to e-commerce which offset losses from store closures resulting from the pandemic. For more on this story, see Dr. Martens kick starts the new year announcing its intention to float on Main Market of the LSE.

Joining Dr. Martens in its FTSE 250 debut is software company, Bytes Technology Group which listed in December 2020 and has benefitted from the increasing shift to cloud software and a more digitised world. Chrysalis Investments has also benefitted from this shift as it is promoted to the big time, following its investment in fintech giant, Klarna, in which the company has a significant 15.4% holding.  Klarna has experienced significant growth over the last year, and recently confirmed a £718 m ($1 bn) fund raise. Chrysalis benefited from this, reporting an increase in its net asset value per ordinary share.

Other notable movements include Petrofac, who fell victim to the turmoil of the oil & gas sector, leading to its exit from the FTSE 250. The company’s share price has more than halved over the year, including a 28% dive in January 2021 following the announcement of an investigation by the Serious Fraud Office (SFO). The SFO concluded its five year investigation this month into its allegation of bribery, which resulted in all involved parties being convicted. Joining it in its exit from the blue chips is NextEnergy Solar Fund and BMO Commercial Property Trust. 

All changes will be implemented at the close of business on Friday 19 March 2021 and will come into effect from the start of trading on Monday 22 March 2021.

FTSE 100 entrants FTSE 100 exits
Weir Group Morrison (WM) Supermarkets
Renishaw Pennon Group

 

FTSE 250 entrants FTSE 250 exits
Dr Martens Weir Group
Morrison (WM) Supermarkets (down from FTSE 100) Renishaw
Pennon Group (down from FTSE 100) NextEnergy Solar Fund
Bytes Technology Group BMO Commercial Property Trust
Chrysalis Investments Petrofac

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