The Latest FTSE 100 Reshuffle


LONDON -- The latest quarterly review of the FTSE 100 (INDEX: ^FTSE) has just been published. The review sees two finance-sector firms demoted from the U.K.'s top index and two companies promoted from the FTSE 250 to join the elite coterie of blue-chip badge wearers.

The FTSE committee's reshuffle was determined by the market value of the companies at the close of business on Tuesday this week, and the changes take effect from the start of trading on Sept. 24.

Interbroker dealer ICAP (ISE: IAP.L) leaves the FTSE 100, having been a fixture of the index for six years. The provider of services in the derivatives, securities, and money markets has seen reduced trading volumes and falling revenue as the sluggish global economy and eurozone crisis take their toll.

ICAP's shares, currently trading at 338 pence, look quite attractively valued on a forecast price-to-earnings ratio of nine for the year ending March 2013. Furthermore, the company has increased its dividend every year since joining the FTSE 100 in 2006, and analysts are forecasting a modest uplift this year to give a prospective yield of 6.5%.

Fellow financial firm AshmoreGroup (ISE: ASHM.L) follows ICAP through the Footsie's trapdoor. The specialist emerging-markets asset manager had entered the FTSE 100 for the first time in September last year.

Incidentally, Ashmore announced full-year results ahead of market expectations this week, albeit with revenue and profits modestly down on last year. The directors expressed confidence for the future, so there may be some upgrades to analysts' forecasts that, at present, put the company on a not-too-attractive forward P/E of 14 with the shares at 328 pence.

The first of the two new arrivals in the FTSE 100 is Melrose (ISE: MRO.L) , a curious company that is officially listed in the FTSE's industrial-engineering sector but which in practice operates more like a private-equity investment group. Its modus operandi is to acquire industrial businesses, "improve them by a mixture of investment and changed management focus, realize the value created, and then return it to shareholders."

Melrose has been hugely successful, and its promotion to the FTSE 100 -- with a market value of 3.2 billion pounds -- is the culmination of a journey that began with a flotation on AIM in 2003, followed by a move to London's main exchange in 2005. At the current share price of 256 pence, Melrose looks fairly valued on a current-year forecast P/E of close to 16, with analysts forecasting low-double-digit earnings growth in each of the next two years.

International energy-services company JohnWoodGroup (ISE: WG.L) also moves up to the FTSE 100. While Melrose is making its maiden entry into the index, Wood Group, which supplies services to the oil and gas and power-generation industries, has yo-yoed in and out of the Footsie over the past four years.

I took a close look at the oil and gas services sector a month ago. At that time, Wood's shares were at 827 pence, the rolling 12-month forecast P/E was 13.9, and with forecast earnings growth of 25%, the P/E-to-earnings growth ratio was an attractive 0.6. At the current price of 854 pence, the ratios are little changed.

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G A Chester does not own shares in any of the companies mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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