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The companies set to be relegated from the FTSE 100

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24/02/2020
NMC Healthcare is almost certain to drop out of the FTSE 100 while publisher Pearson and supermarket Morrisons are also teetering on the edge.

The next quarterly FTSE Russell index reshuffle is on 3 March, and a number of big names are facing demotion.

NMC Healthcare has tumbled to 209th place – based on market cap – among the FTSE 350 shares, according to The Share Centre.

It would need to rally 250% in the next couple of weeks to secure its chance of survival.

This is “highly unlikely” given the problems at the Middle Eastern healthcare provider, said Helal Miah, investment research analyst at The Share Centre. He said he couldn’t recall such a clear-cut relegation from the list.

Asset manager Intermediate Capital Group is likely to replace NMC Healthcare. The business focusses on private debt, credit and equity funds.

Miah said: “Solid returns over the years and fund inflows have seen assets under management grow to €42.6bn. The latest update suggests all its funds are on target to meet or exceed hurdle rates and recent broker upgrades have lifted the shares higher to give it a stellar performance, reaching close to £19 a share. It had a trough price of 80p during the financial crisis.”

Publisher Pearson and supermarket Morrisons are also on the brink of relegation.

Pearson’s 2019 results came with a profit warning as it has faced a decline in sales as students move to digital platforms. Sale of the FT and Penguin Random House didn’t do much to halt the declines, said Miah.

Morrisons is a regular candidate for relegation. As the smallest of the core supermarket chains, it has lost market share to German discounters Aldi and Lidl. Miah added that intense competition will keep margins below historic norms.

The companies set to rise to the FTSE 100

Should Pearson and Morrisons drop out of the FTSE 100, housebuilder Bellway and Mexican mining group Fresnillo would be best placed to replace them.

Miah said: “Bellway could add to the growing list of house builders in the FTSE 100 as the sector enjoys renewed confidence following Boris Johnson’s emphatic election win and getting Brexit done. Bellway and the sector continues to benefit from low mortgage rates, Help to Buy, resilient employment levels and most importantly the shortage of housing in the UK and supportive government development plans.

“Bellway’s latest half year results showed record completion levels with an 11% increase in the private reservation rate. Investors can expect strong pay-outs as the company sits on a net cash position of £4.6bn and a strong forward order book.

“Fresnillo only recently dropped off but a sharp rise in gold and silver due to concerns over global growth, US/Iran tensions and the impact of the Covid-19 outbreak could see the Mexican-based miner make a quick return back into the top 100.”

He added Centrica, Sainsbury and Kingfisher are also potentials to go while Pennon, GVC Holdings and UNITE stand ready to replace them.

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