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This analysis examines the Q1 2022 reshuffle of the Financial Times Stock Exchange (FTSE) 350 companies, as published by the global index provider, FTSE Russell, in its latest quarterly review.

FTSE Russell announced its first of 2022 on 2 March 2022, which saw two changes to the FTSE 100 and seven changes to the FTSE 250.

Changes to the FTSE 100 index

The economic ripples of the ongoing Russia-Ukraine conflict have been felt as far afield as the FTSE 350. British manufacturing and mining company Evraz plc (Evraz), which operates primarily in Russia, and Anglo-Russian mining company Polymetal International plc (Polymetal) have both been unceremoniously demoted from the FTSE 100 this quarter.

Evraz, whose is Russian oligarch Roman Abramovich (28.6% stake), has seen its share price 91.3% from 613.60 pence per share on 12 January 2022 to a low of 53.10 pence per share on 3 March 2022. However, it has since recovered slightly to 92.00 pence per share as of 8 March 2022.

In its recent Annual Financial Report, on 25 February 2022, Evraz noted that:

‘The major part of the Group is based in the Russian Federation and is consequently exposed to the economic and political effects of the policies adopted by the Russian government. Worsening situation related to Ukraine has further increased the economic uncertainty and the risk of the imposition of sanctions. These conditions and future policy changes could affect the operations of the Group and the realisation and settlement of its assets and liabilities.’

Moreover, it seems that the ongoing conflict is not only affecting the Evraz’s financials. On 4 March 2022, the company that non-executive director, James Rutherford, was standing down from its board with immediate effect—the same day that the Institute of Directors (IoD) it was ‘no longer tenable for British people to hold board positions in Russian companies’ and called on all British board members to ‘show their commitment to the principles of democracy and national self-determination’. Rutherford’s departure was quickly followed by non-executive director Sandra Stash, which Evraz was standing down with immediate effect on 7 March 2022. An IoD poll of its members and the wider community found that 86% supported the view that British people should resign their Russian board mandates.

On 9 March 2022, Evraz an ‘update on certain matters’, which addressed the Russia-Ukraine conflict, as well as the international sanctions against Russia and the restrictions imposed by Russia. Although the update stated that the ongoing friction is having ramifications for Evraz’s supply, logistics and financial flows, it also mentioned that ‘to date there has been no material direct impact on day-to-day operations, trading or the financial position’ of the company. The day after, the Financial Conduct Authority temporarily the company's shares in an effort to protect investors pending clarification of the impact of the UK sanctions following the UK government's decision to impose sanctions on Abramovich.

It is a similar story for Polymetal, with its share price 85.7% from 1,186.50 pence per share on 16 February 2022 to 169.40 pence per share as of 4 March 2022. Of particular note is a terse statement by the company on 7 March 2022, which announced that Polymetal’s British chair, Ian Cockerill, as well as five of its non-executive independent directors—Ollie Oliveira, Tracey Kerr, Italia Boninelli, Victor Flores and Andrea Abt—were to step down from the board with immediate effect. This mass exodus from Polymetal’s board, which the gold and silver producer with a paltry board of three, bodes poorly for other companies with significant operations based in Russia. It also speaks clearly to both the influence of the IoD and the risks associated with sudden and unforeseen geopolitical circumstances.

Polymetal released a further on 9 March 2022 stating that Polymetal’s operations in Russia and Kazakhstan continue undisrupted, and that it has began a search for new directors in order to ‘maintain full compliance with the UK Governance Code’.

Evraz and Polymetal are to be replaced in the FTSE 100 by gold miner Endeavour Mining plc (Endeavour Mining) and joinery products maker Howden Joinery Group plc (Howden Joinery Group).

Endeavour Mining is one of the largest gold producers in West Africa, with operations in Senegal, Cote d’Ivoire and Burkina Faso. The company has seen strong share price growth over the past few months (37% growth), from 1,510 pence per share on 15 December 2021 to 2,067 pence per share as of 8 March 2022. Unlike its Russian mining counterparts, Endeavour Mining has been able to avoid the ramifications associated with its own geopolitical risks—a military coup d'état against the Burkina Faso government on 23 January 2022. The company on 24 January 2022 ‘that its operations and supply chains in Burkina Faso have not been affected by the current political situation and its mines and projects continue to operate as usual’.

Howden Joinery Group’s journey into the FTSE 100 has been considerably more bumpy, with its share price peaking at 963 pence per share on 4 September 2021, before falling back to 764.6 pence per share as of 8 March 2022. The company recently its intention to buyback £250m of its own shares over the next 12 months, perhaps in an effort to inflate its share price.

Changes to the FTSE 250 index

London-based gold mining company, Petropavlovsk plc (Petropavlovsk), which operates in Russia, has been demoted from the FTSE 250 roughly two years after it joined back in Q1 2020. Like former FTSE 100 Russian miners Evraz and Polymetal, the ongoing Ukraine conflict has seen Petropavlovsk’s share price 88.8%, from 16 pence per share as of 17 February 2022 to 1.8 pence per share as of 3 March 2022. However, unlike its FTSE 100 counterparts there is yet to be any board exodus, with its latest being the unfortunate passing of its independent non-executive director of Malay Mukherjee on 31 January 2022. On 9 March 2022, Petropavlovsk released an reporting ‘that its mining operations, which are located in the Far East of Russia, currently continue without interruption despite the ongoing conflict in Ukraine’, although it noted that ‘a significant risk at present is the potential disruption to the supply chain’ caused by the conflict.

Also leaving the FTSE 250 is former outsourcing and professional services colossus Capita plc (Capita), whose share price has steadily more than 97.3% from the lofty heights of 795.17 pence per share in July 2015, to 21.14 pence per share as of 8 March 2022. This is despite by the company to overhaul itself over the past few years, as well as to control spiralling costs and debt, including through the selling of many of its businesses—most recently its speciality insurance businesses, which it to sell to Marco Capital Holdings (UK) Ltd on 2 November 2021 for an undisclosed sum.

Others being demoted from the FTSE 250 include:

• the world's second-largest cinema chain, Cineworld Group plc, which is yet to see a recovery in its share price following the impact of the coronavirus (COVID-19) pandemic

• Reach plc, whose steady since August 2021 suddenly fell off a cliff on 28 February 2022 after the newspaper, magazine and digital publisher in its Annual Report for 2021 that ‘the gross impact of inflation in 2022 is expected to be higher than in recent years’, and that the company anticipates ‘a modest year-on-year reduction in operating profit’

• Baillie Gifford Shin Nippon plc, an investment trust with holdings in small Japanese companies, which has its share price fall 29.0% since the start of 2022

Entrants to the FTSE 250 include Leeds-based Clipper Logistics plc (Clipper), despite news of a recommended acquisition for the company by US rival GXO Logistics LLC (GXO). The ecommerce specialist, which provides a range of services from warehousing to distribution for retailers who have an online presence, has benefitted from the pandemic-induced increase in online shopping. Despite Clipper’s share price at 676 pence per share on 31 January 2022, February saw the company’s shares steadily increase, reaching 891 pence per share following the of GXO’s possible offer on 21 February 2022, and bolstered by its entry to the FTSE 250.

Also entering the FTSE 250 is Ruffer Investment Company Ltd (Ruffer). Ruffer’s entry to the FTSE 250 may be due in part to its investment in gold and gold mining stocks, which have recently shot up, as investors seek out safe havens amid current market instability. According to its January 2022 , Ruffer allocated 7.1% of its assets to gold exposure and gold equities. Gold prices on 24 February 2022 remained between £1,411.33 and £1,472.28 per ounce, but have continually increased as the Ukraine conflict has escalated and on 8 March 2022 sit at £1,576.34 per ounce. A further contributary factor is the company’s reasonably high cash position. While the company is yet to release its February factsheet, Ruffer’s cash position in January was 14.9%, meaning it may be less susceptible to market shocks.

Further FTSE 250 promotions are multinational oil and gas explorer Tullow Oil plc (Tullow Oil) and Temple Bar Investment Trust (Temple Bar). Neither company are strangers to the FTSE 250, having both dropped out of the index in the September 2021 reshuffle. Tullow Oil, which focuses on Africa, has seen its shares benefit from soaring oil and gas prices during the Ukraine conflict.

Temple Bar has had a tumultuous few years and has struggled to remain in the FTSE 250. The company’s exit from the index in September 2021 occurred only three months after its entry. However, since then, the investment trust has a considerable turnaround following the appointment of RWC Asset Management LLP as its manager in late 2020. In addition, its holdings have benefitted from an increase in oil and gas prices, with Temple Bar’s consisting of a 17.49% stake in the energy sector. Included in the company’s are BP plc, Shell plc, TotalEnergies SE, and Centrica plc. Temple Bar’s holdings have also reaped the rewards of the general rise in UK share prices and Public M&A activity during 2021, as the restrictions of coronavirus (COVID-19) pandemic began to in light of the UK’s successful roll-out of coronavirus vaccines. (For more information on Public M&A activity in 2021, see our  report: Trends in UK Public M&A in 2021).

Urban Logistics REIT plc (Urban Logistics) is to enter the FTSE 250 for the first time. Like Clipper, Urban Logistics has benefitted from an increase in online shopping, which has seen its shares steadily increase from 102.99 pence per share in March 2020 to 181 pence per share in March 2022.

Risers and fallers

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