The fortunes of the UK’s largest public companies during the course of the Covid-19 pandemic is set to see the FTSE 100 benchmark index experience its biggest shake-up in years. The benchmark index consists of the 100 largest companies by market capitalisation listed on the London Stock Exchange (LSE). It is rejigged every three months to account for current constituents dropping out of the top 100 to be replaced by FTSE 250 companies that have overtaken them in value.
Being part of the FTSE 100 is a major boost for the value of companies in itself, as so many tracker funds follow the index and automatically buy shares in all of its constituents, pushing up demand. That also makes remaining part of the index much easier than gaining promotion to it.
A far larger number of FTSE 100 companies than usual have seen significant drops in their value over the past 3 months because the Covid-19 lockdown has hit their revenues. That means there will be a much more significant changing of the guard than is common this time around.
Among the companies that will be demoted is British Gas-owner Centrica. It is not the first time Centrica has been in danger of relegation to the FTSE 250 in recent years but this time there will be no escape. The oil price crash and a drop off in demand for gas and electricity from large commercial clients as office staff have worked from home and other large public buildings remained closed has seen the Centrica share price almost half over the past 3 months.
Companies in the travel and tourism sectors will also unsurprisingly drop out of the FTSE 100 after being among the worst hit by the pandemic lockdown. Budget airline Easyjet and cruise operator Carnival will be relegated. Both have enjoyed recent share price rallies but they have come too late to save them from dropping into the FTSE 250.
Aerospace engineer Meggitt is another that will lose its place at the top table. The grounding of fleets of aeroplanes means there has been a slump in demand for spare and replacement parts. That has seen the Meggitt share price drop 43% since the beginning of March. The company only regained promotion to the FTSE 100 last September.
Moving in the other direction will be gambling group GVC. People stuck at home during lockdown has seen a rise in the amount of money spent in online casinos. More spare time has also proven a boon for DIYers, and B&Q and Screwfix owner Kingfisher will return to the FTSE 100 after its share price rose 12% over the quarter. Some of its stores were able to remain open during the lockdown and saw a roaring trade.
Home repairs group Homeserve will join the FTSE 100 after the company, which will join the benchmark index for the first time, saw a full recovery of its share price after a crash in early March.
Another climber will be cybersecurity company Avast, which only went public with an IPO two years ago. The general trend towards digitalisation has been further accelerated by more activities moving online during lockdown, boosting demand for cybersecurity products and services. Avast is now worth over £5 billion.
The changes, which will take effect from June 22, could have been even more drastic. ITV and Premier Inn owner Whitbread just hang on to their FTSE 100 status, with Convatec and B&M narrowly missing out on promotion.
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