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ITV set to be relegated from FTSE 100 as ad slowdown bites

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·2-min read
Presenters Holly Willoughby and Phillip Schofield pose for photographers upon arrival at the ITV Gala event in London, Thursday, Nov. 24, 2016. (Photo by Joel Ryan/Invision/AP)
ITV's This Morning presenters Holly Willoughby and Phillip Schofield pose for photographers upon arrival at the ITV Gala event in London. Photo: Joel Ryan/Invision/AP

ITV (ITV.L) is set to be dropped from the FTSE 100 (^FTSE) for the first time in nine years when the index undergoes its quarterly reshuffle on Tuesday.

The broadcaster looks set to be relegated to the FTSE 250 (^FTMC), with property firms Hammerson (HMSO.L) and British Land (BLND.L) also at risk of demotion.

ITV shares have fallen more than 60% so far this year as a slump in advertising has hit the company’s revenues. Its TV production arm has also been disrupted by the COVID-19 pandemic, which halted filming for months.

“The Love Island broadcaster's revenue has fallen dramatically as companies have cut advertising spend during the coronavirus pandemic,” said Susannah Streeter, a senior investment and markets analyst at stockbroker Hargreaves Lansdown.

“Even though its half year results were not as bad as forecast, and included a small profit, it is still firmly in line for a relegation to the mid cap index.”

ITV was last relegated from London’s topflight index in 2008 during the financial crisis, which also sparked an advertising downturn. The broadcaster rejoined the FTSE 100 in 2011.

Discount retailer B&M Europe (BME.L) looks set to replace ITV, entering the FTSE 100 for the first time ever six years after going public.

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“As cash strapped consumers hunt for a bargain, that’s boosted the fortunes of B&M European Value Retail,” Streeter said.

“The firm, whose UK expansion to more than 500 stores was facilitated by buying up dozens of ex Woolworths shops, was promoted to the FTSE 250 within a year of its flotation in London in June 2014. The ‘pile it high sell it cheap’ approach as household budgets are squeezed could see it reap the reward of now being promoted to the top flight.”

Shopping centre landlord Hammerson and property group British Land are also vulnerable to be downgraded in the quarterly reshuffle, which takes place on Tuesday. Both have been hit by the falling value of retail property as more and more spending shifts online.

“The trends of eating in and shopping online have exacerbated the deep problems experienced by shopping centre landlord Hammerson,” Streeter said.

Hammerson, which owns the Birmingham Bull Ring and Brent Cross shopping centres, collected just 72% of its rents in the first half of the year. Rival shopping centre owner Intu fell into administration in June.

British Land, which owns both retail and office property, is “teetering on the brink” of relegation, said Russ Mould, investment director at stockbroker AJ Bell.

“Its market cap of £3.3bn ($4.4bn) leaves the Real Estate Investment Trust ranked right on the cut-off point,” he said in an email.