ITV set for FTSE 100 drop with B&M poised to join

With a market value of £2.5bn ITV is ranked at about 140 leaving it little chance of recovering before changes are decided on 1 September, AJ Bell research shows. The broadcaster has been demoted once before since it was formed in 2003 and has been a FTSE 100 member since 2011.

ITV's business has been hit by plunging advertising revenues as the Covid-19 crisis has aggravated existing pressures as ads move online and viewers switch to streaming services such as Netflix. The company's profit was almost wiped out in the first half and it paid no dividend.

Russ Mould, investment director at AJ Bell, said: "The Covid-19 pandemic limits ITV's ability to create and show new content and thus attract advertising, although the longer-term trend of competition from streaming services and rival broadcast technologies is a huge factor as well. This year’s first-half figures made for grim reading."

Budget retailer B&M became a public company in 2014 and is the most likely candidate to replace ITV. Its shares have risen from 268p on 19 March to 482p as shoppers have sought out low prices in hard times. B&M reported a strong first quarter in early July.

British Land's position in the FTSE 100 also looks wobbly in the quarterly reshuffle with Direct Line the most likely replacement if the commercial property company leaves the index. Like ITV, British Land has been hit by the Covid-19 crisis, which has reduced retail property values and prompted fears about surplus office space as people work from home.

Mould said: "British Land is another firm where long-term trends (in this case the challenge posed to bricks-and-mortar retailers by online rivals) are being exacerbated by the pandemic and the economic fallout, with the possibility of reduced demand for office space a further complication."

If Direct Line returns to the FTSE 100 after a year's absence it will be one of eight companies in the index to have a female chief executive. Penny James, who took over as CEO last year, reported an increased dividend and solid first-half results in early August with minimal impact from Covid-19.

The FTSE 100 review is managed so that companies do not move in and out too often. To be relegated a company's market value must be below that of the top 10 companies beneath it and to gain promotion a FTSE 250 company's valuation must exceed that of the bottom 10 in the FTSE 100.