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FTSE Russell announced its third quarterly review of 2022 on 31 August 2022, which saw three changes to the FTSE 100 and eight changes to the FTSE 250. The changes are to take effect from the start of trading on 19 September 2022.

Changes to the FTSE 100 index

Scottish investment firm Abrdn plc (Abrdn), multinational pharmaceutical company Hikma Pharmaceuticals plc (Hikma Pharmaceuticals) and kitchens and joinery products supplier Howden Joinery Group plc (Howden Joinery Group) are to be dismissed from the FTSE 100. The three companies have seen a steady decline in their share prices over the past year, albeit for different reasons.

From its recent high of 284.79 pence per share on 13 February 2021, Abrdn has since seen its fall 47.9% to 148.20 pence per share as of 5 September 2022. The investment firm, formerly known as Standard Life Aberdeen plc due to the of Standard Life plc and Aberdeen Asset Management plc back in August 2017, has suffered alongside other asset managers, as global equities fall amid a general slowdown in international economic growth and outflows increase as a result of continuing market volatility. However, these woes catch Abrdn at an inopportune moment, as it continues to restructure its business post-merger. The investment firm’s for 2022 make difficult reading, with its chief executive, Stephen Bird, noting that they ‘largely reflect the challenging global economic environment and market turbulence’. During H1 2022, Abrdn’s fee-based revenue fell 8% compared H1 2021 to £696m and adjusted operating profit was 28% lower at £115m. Moreover, the company suffered a pre-tax loss of £320m, compared to a H1 2021 profit of £113m, and its assets under management fell to £508bn, as the company saw total net outflows of £35.9bn. This included £24.4bn from Lloyds Banking Group, as it withdrew its latest tranche in accordance with an earlier agreement with Abrdn back in 2019. Following the disclosure of its results on 9 August 2022, the investment firm’s share price slumped even further throughout the rest of the month.

It is a similar story at Hikma Pharmaceuticals, where the gradual decline in its share price over the past year suddenly turned into a nose dive following the disclosure of its own for 2022 on 4 August 2022. The pharmaceutical company reported flat revenue growth and a 4% fall in core operating profit during H1 2022 when compared to H1 2021. The current ‘global inflationary environment’ was highlighted as a factor that is having an increasing impact on the company’s operations. Other principal risks mentioned by the company include the commercial viability of the industry in the current political climate and its product pipeline. In the aftermath of the results being disclosed, the company’s fell 27.1%, from 1,762.50 pence per share to 1,284 pence per share as of 5 September 2022.

Howden Joinery Group has suffered due to the ongoing cost-of-living crisis, with the kitchen maker noting in its for 2022 that the principal risks and uncertainties for the company include ongoing issues with supply chains, as well as the risks associated with ‘inflation, geopolitical events and macroeconomic forecasts’. Despite this, the company reported a healthy H1 2022, with revenue 16.3% ahead of H1 2021 and 39.9% ahead of pre-coronavirus levels in 2019, which resulted in an uptick in the Howden Joinery Group’s . However, this did not last, with the company’s shares falling 36.9% over the course of the year from 876.44 pence per share on 31 December 2021 to 553.20 pence per share as of 5 September 2022.

Replacing Abrdn, Hikma Pharmaceuticals and Howden Joinery Group are Anglo-American medical devices company ConvaTec Group plc (ConvaTec), London and New Zealand listed F&C Investment Trust and independent oil and gas company Harbour Energy plc (Harbour Energy).

Harbour Energy’s share price has been buoyed in recent weeks (up 63.1% since 6 July 2022) by an impressive , which saw a 40% increase in average production to 211 kboepd (thousand barrels of oil equivalent per day) compared to 151 kboepd during H1 2021, and a 5% fall in operating costs to US$14.2/boe (barrels of oil equivalent). This has led pre-tax profits at the oil and gas company to soar to US$2bn (US$984m after tax). Moreover, to the delight of investors, Harbour Energy recently took the decision to increase its ongoing US$200m share buyback to US$300m, which has likely played a part in the meteoric rise of the company’s share price. However, it should be noted that its current of 484 pence per share as of 5 September 2022 is still a far cry from its pre-coronavirus highs, which saw the company’s share price peak at 2,720.51 and 2,295.25 pence per share respectively as of 22 September 2018 and 11 January 2020.

F&C Investment Trust also makes a return to the FTSE 100, despite its falling 8.7% since mid-August 2022. The world's oldest collective investment scheme, which is managed by Columbia Threadneedle, has had a poor , with an 11.8% decline in share price total return and a 9.6% fall in Net Asset Value total return when compared to the year before. However, the asset manager’s share price continued to increase, reaching a peak of 930.00 pence per share until 15 August 2022, before falling back to 852.00 pence per share as of 5 September 2022.

Changes to the FTSE 250 index

The Q3 reshuffle is to see long-suffering sandwich maker Greencore Group plc (Greencore Group) demoted from the FTSE 250. Like many of its FTSE 100 counterparts, its fall is due to a general decline in share price rather than any sudden collapse. Although early 2021 saw a slight recovery in , since 15 May 2021, the company’s share price has halved from 167.40 pence per share to 84.75 pence per share as of 5 September 2022. This is despite Greencore Group’s noting a 35% growth in revenue for Q3 2022 and 34.1% for the first three quarters of 2022 when compared to those of 2021. This positive news seems to have done little to forestall the company’s decline, with its share price continuing to fall on the day the results were disclosed. Perhaps this is due to ongoing challenges at Greencore Group, with the company noting that:

‘Inflation trends are expected to continue into FY23 and the Group continues to monitor closely the impact of the inflationary environment on consumer sentiment and demand, as well as working with customers and supply partners to mitigate the ongoing impact on consumer prices.’

Greencore Group suffered from a number of shareholder revolts regarding its executive pay practices over the past few years, the latest being company’s remuneration report at its , which scraped through with 53.7% of votes cast in support. The large level of investor dissent was at least partially due to the fact that, under Greencore’s share bonus scheme, senior executives trousered awards despite the fact that Greencore Group was yet to repay any of the £30m that it received under the UK government’s Coronavirus Job Retention Scheme. For more information, see: Sandwich maker in a pickle as investors target remuneration report.

Entering the FTSE 250 are three funds—Bluefield Solar Income Fund, NextEnergy Solar Fund and Twentyfour Income Fund. The two former are investment companies for low carbon assets, particularly those in the field of solar power, which could mark an increase in support for green energy funds among the investor community.  However, it could also reflect the general increase in energy prices amid the Ukraine conflict, as renewable energy remains tied to wholesale energy prices. According to the , during June 2022 ‘renewable generation increased by 9.3% on the same period last year due to increased capacity and more favourable weather conditions, particularly for wind and solar PV’. The latter is an asset manager specialising in fixed income.

Also of note is specialist urban and 'last-mile' industrial warehouse investor, Warehouse REIT,  which enters the FTSE 250 despite its being approximately where it was a year ago.

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