- Frasers Group, B&M European Value Retail and Vistry are in the relegation zone from the FTSE 100.
- Games Workshop could join the blue-chip index, alongside St James’s Place and Alliance Witan.
- Wood Group, PZ Cussons, Close Brothers, Ceres Power look set for relegation from the FTSE 250
- Diversified Energy Co and Mobico are likely contenders for promotion from the FTSE Small Cap to the FTSE 250.
- Deliveroo and Oxford Nanopore also look set to join the FTSE 250.
The FTSE All Share Review is based on prices at the close on Tuesday 3 December and announced on Wednesday 4 December. Changes will come into effect after the close on Friday 20 Dec.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’A retail reshuffle is on the cards at the next FTSE Review with B&M European Value Retail and Frasers Group set to slide out of the blue-chip index, while Games Workshop looks likely to unwrap an early Christmas present of a promotion into the big league. Vistry’s budget miscalculations look set to cost it a place in the FTSE 100, while a recovery in the share price of wealth manager St James Place thanks to a big shake up looks likely to propel it back up the table. Dundee based Alliance Witan investment trust is also set to leap into the FTSE 100 given the might of the newly merged company. A change in the listing rules is also set to propel Deliveroo into the FTSE 250 for the first time, just months after the company finally turned a profit.
Frasers Group
Frasers Group shares are down 7% over the last month amid some nervousness about its position as consumers show caution. Its brand elevation strategy with the company integrating luxury names into its offering is tricky, when aspirational shoppers are more wary about splashing the cash. Its low-cost Sports Direct chain does offer resilience, pulling in more than half of total revenues last year. However, the chain is also having to contend with the ongoing shift from bricks and mortar to online and falling footfall for department stores. As it restructures its portfolio, the closure of several legacy House of Fraser shops has dented profitability in the short term but should free up cash to deploy in more productive areas of the business. Fraser Group’s attempts to wrestle more control of companies its invested in, notably Mulberry and Boohoo has been watched closely, and the constant rebuffing has also caused some extra volatility in the share price.
B&M European Value Retail
Investors have been rattled by falling like-for-like sales at B&M European Value Retail. Although the decline was stemmed at the last count, relying on growth from new store openings is far from ideal. Keeping existing customers coming back for more is crucial and it seems the product mix has not chimed well enough, despite the pile ‘em high, sell ‘em cheap approach. Nevertheless, it’s store expansion programme is ramping up, with the target of 1,200 stores across the UK, up from 764 this month. This rapid growth of the store estate will bring higher lease liabilities as well so merchandising expertise in the months ahead will be crucial to ensure sales growth returns to a steadier footing.
Games Workshop
Games Workshop is a one stop shop when it comes to tabletop miniature gaming and its prowess at the full sweep of production design, manufacturing, distribution and retail has made it a global leader. Its top hit Warhammer 40,000 has had a big year, with the 10th edition launched which drove record revenue, helped by its video game licensing. This push into licensing is a big part of the company’s future growth strategy, with potential forged with Amazon to develop the game into films or series. This has all helped Warhammer cement a strong financial position, with a deep well of accessible cash offering the company significant flexibility.
Vistry
Sharp disappointment in Vistry’s performance is set to see the company exit the FTSE 100. It had been chasing faster-than-average growth since its transition to a Partnership giant, specialising in providing affordable housing by teaming up with local authorities. But the scale of recent profit downgrades raised big questions about the new structure and internal controls, and seriously dented the share price. An independent review points to the problems being contained to one division, but Vistry will need to work hard to rebuild investor confidence. Vistry’s high volumes of affordable housing looks well aligned with the new government’s ambition to address the country’s housing shortage. But demand softened in the run-up to the government’s Autumn budget. With falling interest rates expected to be a tailwind, where demand tracks from here will be key.
St James’s Place
The recovery plan underway at St James’s Place has been reaping rewards following a torrid period which saw it booted out of the big-league. The turbulence was prompted by concerns about its business model following the introduction of the new Consumer Duty last summer which imposed a legal requirement to treat customers fairly After the company outlined new growth targets and cost-cutting measures in the summer sentiment has improved towards the company. The improving macro-economic climate in early Autumn with interest rate cuts eyed on the horizon, also helped boost funds under management. It also flagged that uncertainty about the impact of the UK Budget on portfolios was also going to keep its advisors in demand.
Deliveroo
Thanks to a change in the rules surrounding listing requirements, Deliveroo is set to arrive into the FTSE 250 for the first time. Since July, the standard and premium segments have now been replaced with a single equity shares category as part of plans to make London more attractive. Although the jury is out whether that’s having the desired effect, it has opened new doors to Deliveroo and means it will be included in funds which track the FTSE 250 index. This looks set to boost demand for shares just at a time when sentiment has improved slightly thanks to the delivery service making a profit for the first time. However, shares are still languishing well below the level they traded back in the summer of 2021 soon after listing. The future is still uncertain for the delivery company, given the competition from big players like Uber Eats and Just Eat Takeaway, but increases in ad revenue and efficiencies made across the business have helped the bottom line.’’
