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F&C Investment Trust joins FTSE 100 in latest rebalance

01 September 2022

Abrdn, Hikma Pharma and Howdens Joinery are among those set to drop out of the FTSE 100 index, whilst F&C, Harbour Energy and Convatec take their place.

By Tom Aylott,

Reporter, Trustnet

The UK market has been exceptionally volatile this year and the latest quarterly FTSE rebalance reflects this, with the likes of abrdn, Hikma Pharma and Howdens demoted from the FTSE 100. The news was confirmed today and will take place later this month.

Whether a company is in the UK’s premier index can have huge consequences. Those that are added tend to be boosted by passive funds, which are obligated to buy them, while those that are demoted can suffer from the inverse effect. Below Trustnet looks at some of the biggest movers in the market this time around.

Asset management group, abrdn, is one of the top companies to drop. Many portfolios run by investment groups have been rattled by soaring inflation and geopolitical uncertainty, but Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said “abrdn’s weaker performance in this environment” contributed to its drop from “the big league”.

The funds managed by abrdn have declined in 2022’s choppy markets, but Streeter added that it is behind the curve on environmental, social and governance (ESG) matters, which could be off-putting for some sustainably conscious investors.

“It’s ESG options currently lag peers, and demand for ESG investments is on the rise, which puts it in a tricky position,” she said.

Abrdn’s share price may have fallen 40.3% since the start of the year, but its acquisition of investment platform interactive investor could provide a steady source of revenue through this difficult period.

Share price of Abrdn in 2022

Source: Google Finance

Likewise, the asset manager has a long-term record of delivering high returns, so keeping ahead of the benchmark over the coming months will be “a key requirement if fund investors are to be tempted back,” according to Streeter.

Another company to lose its spot on the FTSE 100 is pharmaceuticals business, Hikma Pharma. Investors began losing confidence in the company after chief executive Siggi Olafsson resigned at the end of June to pursue other opportunities.

Former CEO, Said Darwazah, has stepped back into the role temporarily as he seeks to find a permanent replacement, but the lack of solid leadership has lowered sentiment in the company.

As well as this, the firm also announced that revenues had remained stagnant over the past six months from 30th June.

Olafsson’s exit and sluggish revenue growth were the main drivers in the company’s 40.3% drop in share price over 2022 so far.

Share price of Hikma Pharma in 2022

Source: Google Finance

Another faller is kitchen renovations company Howdens Joinery, which only joined the FTSE 100 index in spring. The outlook for home improvement companies was bright following the pandemic as consumers splashed their pent-up savings and hybrid working became the norm, but spenders have tightened their wallets now that UK inflation has reached 10.1%.

Consumer spending habits have already begun to alter as the cost-of-living crisis takes hold and Howdens Joinery’s share price has fallen 38.7% since the start of the year.

Share price of Howdens Joinery in 2022

Source: Google Finance

However, Streeter suggested that the company could capitalise on consumers’ focus on energy efficiency, stating: “Britain’s housing stock is ageing and that should provide some resilience particularly with the fresh focus on energy efficiency which could provide added impetus for renovations.”

On the other side of the equation F&C Investment Trust was added the premier index. Like many investment companies, the world’s oldest trust has struggled to make a positive return in 2022, with performance down 1.9% since the start of the year, but the £4.7bn portfolio is still large enough to qualify.

It may be down, but the trust has still outperformed its peers in the IT Global sector by a sizable 15.7 percentage points over the period.

Total return of trust vs benchmark and sector in 2022

Source: FE Analytics

North Sea oil and gas producer, Harbour Energy, also reclaimed its FTSE 100 status after concerns around the government’s windfall tax on oil majors’ profits dragged it from the index at the last reshuffle.

Its share price has since recovered, up 30.2% since the start of the year, and the high demand for oil following Russia’s invasion of Ukraine and the subsequent sanctions levied on the former has boosted performance – Harbour Energy’s half-year profits skyrocketed to $1bn from $120m the previous year.

Energy price levies could take around $300m from the company over the full tax year, but Streeter said that “it’s not deterring investment in the UK market, with new projects in the pipeline”.

Share price of Harbour Energy in 2022

Source: Google Finance

Another new entrant is medical company, Convatec, which has benefitted from an aging population around the world demanding more medical care.

It has struggled with inflationary pressures like many of its peers, but Streeter was confident in the company’s future outlook.

“It’s battled cost inflation but its profit’s performance has still be pretty hardy, despite the headwinds,” she said. “As populations age around the world, the ailments of the elderly such as leg ulcers are expected to provide brisk business for the company.”

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.