Covid woes and supply chain issues among FTSE reshuffle drivers



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The quarterly review of the FTSE All Share index is based on today’s closing prices and is due to be announced on Wednesday, December 1, with changes taking effect after the close on Friday, December 17.

– A sparkling performance of Electrical components pushes it into a privileged position to pass into the FTSE 100.

Dechra pharmaceutical, another FTSE 100 suitors seized the opportunity of the growing popularity of pets.

– Cybersecurity cabinet Dark trace ready to slide out of the FTSE 100 as a result of a decline in shares at the end of the IPO period.

Johnson matthey’s post in the FTSE 100 seems shaky after dropping its drum plans.

– Supply chain issues plague electricity retailers AO World because it seems ready to slip from FTSE 250.

Petershill Partners eyes raised FTSE 250 positions and new acquisitions of private equity assets.

– New Covid woes have struck The catering group because it seems ready to slide out of the FTSE 250.

Susannah Streeter, senior analyst in investments and markets, Hargreaves lansdown summarizes the riders and riders:

Electrical components – candidate for entry FTSE 100

The sparkling performance of Electrical components, with adjusted pre-tax income up 91% in the first half, caused its share price to soar, placing it in a privileged position to enter the market. FTSE 100 territory. The distributor’s wide range of industrial and electronic products is partly responsible for its success, as well as its smooth online operations catering to the lucrative business-to-business segment. It hasn’t been immune to rising transportation and labor costs and global supply chain issues, but it appears to have skillfully managed its inventory and kept its margins intact. While there are likely other cost pressures to come, Electrical components appears in a robust position, especially as demand for electrical parts shows little sign of decline. ”

Dechra pharma – candidate for entry into the FTSE 100

Dechra Pharmaceuticals seized the opportunity of the growing popularity of pets during the pandemic. Its stock price has jumped higher and it is a prime competitor to roam the FTSE 100. With so many people working from home, this was a perfect opportunity to settle into a new furry friend and Dechra mission is to keep them healthy throughout their life. Demand for the pharmaceutical company’s veterinary products has been strong, with annual results showing pre-tax profits nearly doubling. There is a risk that with incomes facing increasing inflation squeeze, per capita spending could decline, so there could be headwinds to manage. But other results from companies focused on pets indicate that demand for pets does not appear to be declining, which bodes well for future revenue streams. ”

Dark trace – likely to be demoted FTSE 100

” Cyber ​​security company Dark trace made a stealthy entry into the elite in the latest reshuffle, but is a top contender to leave the blue chip index given that stocks have fallen 52% since hitting an all-time high in September. This appears to be until the lock-in period after its IPO ends, with large chunks of new stocks flooding the market causing the falls. Dark trace isn’t alone in being a former IPO darling, now suffering the pain of a rapid deceleration in its share price. Its successful launch in the spring was seen as a coup for the London market, and if it comes out of the elite, it will leave a great technological vacuum in the FTSE However, given the continued growth reported by the company and a few rather optimistic business updates, it may not stay outside the elite for long. There is a growing demand for sophisticated technologies to counter the growing armies of cybercriminals and Dark trace uses AI to analyze regular business operations and detect tiny irregularities, providing an early warning system for cyber attacks. The ongoing digital transition should continue to open up new opportunities and markets for Dark trace as businesses expand their operations to meet demand, while trying to keep their systems secure. ”

Johnson matthey – likely to be demoted FTSE 100

Investors are clearly concerned about Johnson matthey’s strategy for the future and in the midst of this uncertainty, the company risks breaking out of FTSE The engineering firm’s decision to abandon its plans to become a battery supplier by selling its eLNO business caused shares to fall, as it appeared to be JMAT’s response to the move to electric vehicles and the downturn. ‘abandonment of combustion engines, for which it manufactures catalytic converters. Management says it will focus on other potential growth avenues, but ultimately the group will start from scratch in search of new opportunities alongside the new, greener auto industry. While catalytic converters will not be made obsolete immediately, time is running out and as the transition to electric vehicles accelerates, Johnson matthey will have to quickly find a new sense of direction. ”

AO World – likely to be demoted FTSE 250

” Online electrical retailer AO World was well set up to take advantage of the accelerated shift to e-commerce during the early stages of the pandemic, with profits soaring as demand for white goods and IT equipment increased. But the company has fallen to earth with a bump, falling to a half-yearly £ 10million loss, pushing shares down, and this dramatic reversal of fortunes will likely see it kicked out of the FTSE 250. Her rapid growth seems to have been part of the problem, as she hasn’t had as much time to build deep relationships with suppliers. priorities. Higher labor and transportation costs, exacerbated by the shortage of drivers, also impacted margins, as it relies so heavily on its delivery network to make sales and follow up. A quick turnaround is unlikely given the company has warned that the crucial Christmas trading period will be difficult, with supply chain issues lingering, so AO World may have trouble climbing up the ladder in FTSE 250 territory for a while. ”

The catering group – likely to be demoted FTSE 250

As fears about the Omicron variant swirl, there are new concerns that restrictions could be tightened on hotel companies and The catering group has not escaped this new wave of volatility. Although stocks edged up today, they fell 35% over the past month, as investors feared that despite a major round of cost cuts and shrinking restaurant footprints, a big rebound in stocks. fortunes remain elusive. Although its flagship brand Wagamama delivers fast food as fast as it can to crowds lining up outside restaurants or ordering from home, its airport concession business saw a 53% drop in like-for-like sales in the last quarter. reading, because tourism has been slow to recover. Like many other companies in the industry, the company is also facing the challenges of rising costs and wage pressures, against a backdrop of staff shortages and these issues look set to persist. ”

Provident Financial – candidate for the FTSE 250

Provident Financial, the venture firm known to specialize in credit cards, online lending and consumer auto finance, is likely to gain a foothold in the market. FTSE 250 after her valuation recovered as she pivoted the business. The company ended its home lending business earlier this year as part of its attempt to get out of a financial black hole, after being forced to pay compensation for mis-selling its products. Shifting its business model from riskier high interest loans to a medium cost lending model is now more of a priority for the company and it is a direction of travel that investors have taken. Although the share price has died down in recent days, which may be partly due to fears that if the new variant leads to a further decline, the potential for bad debts could rise, the shares are still up 41%. % in the last six months. . ”

Petershill Partners – candidate for FTSE 250

Petershill Partners only started trading on the London Stock Exchange in September, but it is already a leading competitor to enter the FTSE 250. Petershill has minority stakes in a series of alternative asset managers such as venture capital firms and private equity firms, many of which had been managed by Goldman Sachs for a decade or more. The investment firm’s assets under management increased by 8% in the third quarter and it is targeting further outlets with new acquisitions being sized. Petershill capitalized on the thirst for private equity investments in an era of ultra-low interest rates, allowing companies to borrow cheaply to finance takeovers. With a rise in interest rates looming, there is a risk that the appetite for such assets will wane, and this could partly explain a slight drop in the share price over the past month. ”

NOTES TO EDITORS

Media contact:

Susannah Streeter

Senior investment and market analyst, Hargreaves lansdown

[email protected]

07527 384747

@StreeterNews

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