FTSE100, who's getting demoted?

It's getting around to that time again when the FTSE100 and 250 play relegation and promotion.

Companies that look like dropping to the FTSE 250 include public sector outsourcer Serco, oil services company Wood Group and struggling miner ENRC. Of these, Wood Group is a little surprising as it wasn't that long ago that they were promoted from the 250. Mind you, the share price has been under pressure recently as results have failed to impress.

Going up from the FTSE250 will be Sports Direct International, a UK High Street retailing success during what has been a difficult time, now valued at a touch over £4 billion. They are expected to be joined by packaging company Mondi and a former Greece listed company Coca Cola Hellenic.

Valued at around a £billion, Partnership Assurance is tipped to join the FTSE250.

One AIM company that is hoping to join the FTSE250 this year is Quindell Portfolio (see - Quindell Portfolio, incredibly cheap or crash and burn), the share price of which has recovered from around 5p to currently around 17p after undergoing a short sell attack earlier this year. Doubt they are going to make it this time though, although their ambition is to be FTSE100 eventually.

Wood Group produces, but what will Kentz Corp announce?

Wood Group announced pretty good numbers this morning and the market has responded positively with a rise thus far of around 7.5%.

International energy services company Wood Group, posted a 20 per cent rise in revenue from continuing operations in its full year ended December 31st, boosted by growth in all three divisions. 

Revenue from continuing operations totalled $6,821.3m (2011: $5,666.8m), while earnings before interst, tax, and amortisation (EBITA) from continuing operations came in at $461.1m (2011: $341.6m), up 35%. The EBITA margin increased from 6.0% to 6.8%. 

Profit from continuing operations before tax and exceptional items was $362.7m (2011: $254.1m), up 43%, and adjusted diluted earnings per share were 85.2 cents (2011: 60.2 cents), up 42%. 

The total dividend for the year was up 26% at 17 cents per share (2011: 13.5 cents), following a final dividend payment of 11.3 cents, reflecting the company's "confidence in the longer term outlook for the group". 

http://www.digitallook.com/cgi-bin/dlmedia/security.cgi?csi=48822&action=news&story_id=20737594

It is often the case that share price will jump on the announcement of a good result, especially if it comes in ahead of expectations. This can also be the start of a new trend as the share price goes higher. Often however, the market will anticipate the good news so to some degree it may well be priced in. Wood Group has been another steady riser, with dips along the way, for a few years. After today's price move there may be more to come, but are there others in the same sector who just might come in with decent numbers when they announce them and so far it isn't totally reflected in their share price?

Wood Group sell off, one to watch.

The FTSE100 is feeling slightly more cheery today with the hope of a fiscal cliff deal coming sooner rather than later, but one company is not sharing in the cheer, Wood Group. The oil services company was recently promoted from the FTSE250, but hasn't really shown much in terms of share price performance. However, the price is down around 4% as of writing because of some family selling.

Wood family trust and members of the Wood family have sold 4.4% - 16.3m shares which represent their total stake - at 775p each through Credit Suisse, raising around £126m. Sir Ian Wood, the departing chairman and grandson of the company's founder, said he had no current intention to sell his 2.4% shareholding.

The news has sent Wood Group's shares down 33p to 782p, a 4% decline which makes them the biggest faller in a rising FTSE 100. But Oriel Securities said this was a good opportunity to buy into the company:

Overall we think [its] strong international position in offshore facilities, subsea and production support leaves the company well placed to take advantage of increasing industry spending.

Andrew Whittock at Liberum Capital kept a hold rating and said:

Given the family's apparent lack of interest in the business we would not read anything into this share sale.

http://www.guardian.co.uk/business/marketforceslive/2012/nov/29/ftse-eurozone-us-wood-group

The FTSE game of relegation and promotion

Today the FTSE100, 250 and smaller companies index have a slightly different look about them because of the quarterly promotion/relegation battle that goes on which can see each index change over time.  Without going into the calculation that determines who gets promoted and relegated, these changes should be noted and if necessary acted upon by investors and traders.

For long term buy and hold investors it can be a big negative if the company that you hold gets relegated. Usually, the relegation is known well in advance, so it is possible to act before the change actually happens.  Whether you act will depend on how you see the prospects for the company going forward.  A few quarters back hedge fund manager Man Group was one of those relegated from the FTSE100 to the 250 index and since then its share price has continued to fall.  It had been in freefall for some time prior to its relegation, so the writing had been on the wall that the company was facing difficulties.

On the other hand, if you hold a company that is promoted often the share price will rise as the bigger buyers come in to add to their positions.  This probably is more the case with smaller companies promoted to the FTSE250, but also companies promoted to the FTSE100 might see some price rise as FTSE 100 funds will look to buy.

So, what changed today?