Berkeley rides property wave into blue-chip index

Inclusion in the list of top 100 stocks means companies benefit from index-tracker funds

Upmarket housebuilder Berkeley Group’s entry into the FTSE 100 is set to be confirmed this week at the expense of embattled industrial engineer Weir Group.

The latest index review on Wednesday is expected to reveal the promotion of Tony Pidgley’s Berkeley from the FTSE 250 to the top tier of UK stocks, with Weir moving in the other direction.

The booming property market has prompted a 36 per cent rise in Berkeley’s share price this year, boosting its value on the stock market to close to £5bn.

Its annual results in June revealed a 42 per cent increase in profits to £539.7m on sales of £2.12bn, up 31 per cent.

Michelle McGrade, chief investment officer at TD Direct Investing, said: “Britain’s booming property market benefits not only homeowners but also homebuilders like Berkeley Group whose share price has risen fourfold in the last five years and is the most likely new entrant to the FTSE 100.

“The firm’s future share price is obviously very much tied to the health of the real estate market.”

It is a stark contrast to the fortunes of Weir Group, which is expected to drop out of the FTSE 100.

The Glasgow-based company, which makes pumps and valves for the oil industry, has seen its share price almost halve in a year – dragging its market capitalisation to below £3bn – with oil firms slashing budgets amid lower prices.

Its half-year results in July revealed a 13 per cent decline in revenues to £1bn and a 40 per cent slump in pre-tax profits to £108m, prompting chief executive Keith Cochrane to call it “the most severe downturn in oil and gas markets for nearly thirty years”.

Inclusion in the list of top 100 stocks means companies benefit from index-tracker funds, which follow an index such as the FTSE 100. They have to buy the shares, which usually boosts the share price.

Likewise, when a company is relegated from the Footsie, its shares normally suffer.

The last reshuffle in June saw struggling temporary power provider Aggreko replaced by satellite operator Inmarsat.