How has the Spring Budget affected the stock market?
The latest FTSE reshuffle has been revealed based on closing prices yesterday. Experts at Hargreaves Lansdown shared their data with Business Leader.
- WM Morrison Supermarkets – out of the FTSE 100
- Dr Martens and The Bytes Group – both enter the FTSE 250 after successful IPOs
- Engineering firm Weir Group – re-enters FTSE 100 as mining refocus pays off
- South West water owner Pennon Group – relegated from FTSE 100
- TUI – narrowly misses out regaining a slot in the blue-chip index
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown then provided her analysis of the current FTSE rankings.
WM Morrison Supermarkets – relegated from the FTSE 100
“Morrisons did look set to cling onto the FTSE 100 lifebuoy but a slide in its share price over the last few days has seen it drift downstream to the FTSE 250. It’s been on the edge of relegation for some time as its supermarket rivals seemed better equipped to capitalise on the shift to digital sales during the pandemic. Although it has edged a tiny step forward in market share to take a 10.3% slice in the 12 weeks to February 21st it’s still seen as the underdog snapping at the heels of Tesco, J Sainsbury and Asda. It has though managed to deliver a 13.9% rise in sales over the three months and the conversion of 300 more McColls convenience stores to the Morrison Daily format could help boost future revenues, given this sector has held up particularly well over the past year. Morrisons is may be down and out right now but with the right kind of wind in its sails, it’s proved in the past it can climb back up to the FTSE quite rapidly.”
Renishaw – enters FTSE 100
“Engineer Renishaw, known for its precision and its announcement that the sales boards were going up at the business, came with impeccable timing. Shares rose 18% on Tuesday after founders Sir David McMurtry and John Deer said they were selling their combined 53% holding. Renishaw will now come with an even glossier brochure, now the company has acquired blue-chip status. Renishaw has been a labour of love for the pair who set up the company almost five decades ago and have seen it flourish into a global player. They don’t seem in a desperate rush to find a buyer and have indicated their focus will be on finding a new owner who fits their vision for the company while respecting its culture and heritage. Crucially it seems they want a buyer which commits to the communities in which it operates. It has manufacturing bases not just in Gloucestershire, where the company is headquartered, but also in Cardiff and York as well as plants in Ireland, India Germany and the USA. Renishaw’s shares have doubled in a year and any potential match will have to meet a pretty hefty price tag to scoop the deal.”
Dr Martens – enters the FTSE 250
“The bootmaker made famous for dressing punk and grunge fans has had a city-style makeover with a successful IPO, a buoyant share price and a market capitalisation of £4.84 billion. It was in with a fighting chance of stomping into the FTSE 100 but was pipped at the post by Renishaw. The boot maker saw e-commerce sales rise sharply over the last year, accounting for 30% of overall sales in the nine months to the end of December. Standard sizing of its iconic designs means it benefits from a lower return rate, helping boost margins. But the brand will be sensitive to future fashion trends. It may now be basking in the style spotlight with the grunge look back in mode, but fashion is fickle and that could reflect in its share price down the line. Widening its footprint of styles is likely to be the path trodden in the future, but that also risks diluting the core brand.”
The Bytes Group – enters FTSE 250
“Its December IPO was a cloud nine moment for The Bytes Group, the culmination of 38 years of sustained growth. Its shares lifted by twenty percent in the first hours of trading and have continued the upwards streak. Its market capitalisation now stands at around £989 million with demand judged to be strong for the company’s core cloud storage and security solutions. The listing was part of Bytes demerger from its South African parent company Altron, and it has a secondary listing on the Johannesburg Stock Exchange. The company has also benefited from the shift to home working during the pandemic, a trend which is unlikely to fully unravel with demand for its services from individuals and bigger corporate companies forecast to grow.”
Weir Group – re-entry into FTSE 100
“Weir Group, the Glasgow-based engineering firm, was a firm contender for re-entry to the FTSE 100. It’s been admired for its nifty footwork in refocusing on mining as the oil industry took a hit during the pandemic. Its shares have also benefited from the triple dose of optimism that vaccine rollouts will herald a sustained recovery in global growth. So far the strategic move away from oil and gas and the concentration of its efforts on providing mining equipment appears to be paying off. Commodity prices forecast to rise further in 2021 as demand grows for minerals and metals to power the green revolution.”
Pennon Group – relegated from FTSE 100
“The fortunes of South West water owner Pennon group have trickled downstream since it disposed of the recycling business Viridor for more than £4 billion. It may be sitting on a big cash pile but shareholders are still waiting for a new sense of direction from the company. There has been a lot of chat about acquisitions in the water sector but little action so far. Although they have kept up returns in the regulated South West Water business, with an uptick in household use offsetting a decline from closed businesses, the region is dependent on tourism and a slow return of visitors could soak up some revenue potential. With no income coming from Viridor any longer, the group’s dividend to shareholders represents the payment from South West Water alone. While investors can do little but watch this space, its share price has come under pressure.”
TUI – missed out on climbing back into the blue-chip index
“It’s almost a year since TUI was booted out of the FTSE 100 as the spread of Covid-19 around the world began closing down the global travel industry. The past 12 months have been devastating for the world’s largest tour operator, but vaccine rolls outs and government bailouts have given investors more confidence that the worst of TUI’s woes are over. However it’s narrowly missed out on regaining its blue-chip credentials, a sign that there is still some way to go before the travel industry stages a sustained recovery. There is still not yet a flightpath laid out to reopening of the industry across Europe and although there is evidence of pent-up demand from holidaymakers, a bumper summer season is still not guaranteed.”