Berkeley climbs despite its relegation from FTSE
ALL eyes were on the FTSE as the market closed to reveal the first reshuffle since the referendum vote. Every three months companies are booted out of the index of the UK’s largest firms if they are no longer making the grade.
A company’s market capitalisation must fall to 111th as the market closes on reshuffle day for it to leave the FTSE 100, and any business hoping to graduate to the top flight must be the 90th biggest or above to earn a promotion.
Housebuilders were widely expected to bear the brunt of any relegations with other names including Travis Perkins, Intu Properties and Dixons Carphone also being thrown into the mix of possible contenders. On the day it was only housebuilder Berkeley which was relegated. It’s been a tough year for the company, which had warned even before the referendum that pre-tax profits and reservations were down.
After the Brexit vote its shares plunged 30pc as investors feared the impact on the property market. Yesterday shares finished 3pc, or 77p lower at 2672p. Replacing it and climbing into the FTSE 100 is pre- cious metals mining company Poly
metal International. Its shares are up 80pc so far this year.
Yesterday they slipped 5.6pc, or 62p to 1053p. The FTSE 100 itself closed down 0.58pc, or 39.28 points at 6781.51. That’s not all the moving and shaking over with though. Next week ARM Holdings will leave the FTSE as SoftBank’s takeover of the business goes ahead.
It will be replaced by whichever stock is the largest on the FTSE 250 that day. Yesterday that was fellow tech firm Micro Focus Interna
tional ( down 1.8pc, or 37p to 1998p). Carclo crashed after it dealt a major blow to investors. The company, which makes plastic components mainly used for medical prod- ucts, said it was unlikely to be able to pay its final dividend. Carclo had announced the payment in its June update and shareholders had been expecting to pocket 1.95p a share on October 7. The firm blamed a significant increase in its pension deficit for wiping out cash reserves.
Carclo said lower corporate bond yields since the EU referendum were the problem. The firm can use bond yields to discount its pension liability under accountancy rules.
Figures from Hargreaves Lansdown show the sterling corporate bond yield has fallen from 3.37pc on June 7, when Carclo announced its dividend, to 2.33pc today. Government gilts have slipped from 2.01pc to 1.16pc in that time. Carclo said it was disappointed that the final dividend was now unlikely to be paid, but intends to resume its dividend policy once legal and accounting circumstances allow.
Tom McPhail, head of retirement policy at Hargreaves Lansdown, said more companies were likely to make announcements of this type in the coming months unless yields improved. He said: ‘Current monetary policy may have kept the economy going, but it is killing pension schemes.’ Finncap and N+1 Singer both cut the stock to a ‘hold’. Carclo said that trading was still in line with expectations for the year. Shares plunged 17.2pc, or 27p to 130p.
Manufacturer Melrose Industries advanced as it announced the acquisition of Nortek. Melrose has bought the US firm, which makes home ventilation products, for around £2.1bn – the equivalent of £65.50 a share. Melrose being the smaller of the two companies, it is a reverse takeover. Shares gained 1.2pc, or 1.75p to 148p.
AIM-listed Superglass revealed it would delist its shares by the end of September after it was bought by investment company Inflection.
The glass wool insulation manufacturer was acquired for £8.7m after Inflection made an offer equivalent to 5.6p a share at the end of July – a premium of 114pc on that day’s share price.
Jan Holmstrom, non- executive director at Superglass, has stepped down from the board with immediate effect and non-executive chairman Mark Cubitt will go when the shares are delisted. Superglass shares closed flat at 5.5p.