The latest quarterly review of the FTSE 100 has just been published. The review sees Tate & Lyle (LSE: TATE) and AMEC (LSE: AMEC) drop out of the UK’s top index, and Barratt Developments (LSE: BDEV) and St. James’s Place (LSE: STJ) join the blue-chip elite.
The FTSE committee made its decision after the market closed on Wednesday, and the changes take effect from the start of trading on Monday 24 March.
Barratt Developments
In the economic turmoil of 2007/8 the UK’s three big housebuilders — Barratt, Persimmon, and Taylor Wimpey — all dropped out of the FTSE 100. Persimmon returned last June, and is now joined by Barratt, with Taylor Wimpey just missing out.
In half-year results announced last week, Barratt reported pre-tax profit rocketing 162% on the back of a “strong, broad based recovery with higher sales rates across all areas of the country”. The company also said it had made a “very strong start to the second half”.
A 37% rise in the shares over the past three months to 444p, has propelled Barratt into the FTSE 100 on 16 times forecast earnings for the year ending 30 June.
St. James’s Place
Wealth management group St. James’s Place enters the FTSE 100 after a momentous 2013. For one thing, Lloyds Banking completed the sale of its 57% stake in the company; for another, St. James’s Place reported a “strong performance in all aspects of our business”, with pre-tax profit up 42%, in annual results released last week.
As a measure of management’s confidence, the dividend was lifted 50%, with the board anticipating a further hike of 30%-40% for 2014. However, after a 36% rise in the shares over the past three months to 862p, even an increase at the top end of that range would give a below-market average yield of 2.6%.
The losers
Sweeteners group Tate & Lyle is the FTSE 100’s yo-yo champion, moving back and forth between the top index and the second-tier FTSE 250 with monotonous regularity. A profit warning in February did for it this quarter, and the company now drops to the FTSE 250. The shares have plummeted to 638p, or 11 times forecast earnings; the sting in the tail is that analysts see no earnings growth until at least 2015/16.
Shares in engineering and project management specialist AMEC have recovered a bit since the company released its annual results last month. However, a 15% dividend increase and a firm takeover offer for rival Foster Wheeler haven’t given the shares enough of a boost to prevent AMEC from exiting the FTSE 100 at 1,121p after a six-year stay. The shares trade on 12 times current-year forecast earnings with a prospective yield of over 4% — but the acquisition of Foster Wheeler is a big ‘un, which always creates a degree of uncertainty.
