Out with textiles and in with IT in FTSE's end-of-year review

Week ahead

A new stock market sector has appeared. Quietly and with the minimum of fuss, information technology companies have been given their own playing field, complete with an FTSE sector index.

Footsie International, the organisation behind the range of market indices, has been preparing for the IT debut for some time. Companies involved are consulted; their views taken on board.

The creation of an index is an important development for shareholders. It could lead to re-ratings.

Many of the IT groups have enjoyed a remarkably cheerful run since it became apparent they would form a stand alone sector. Before their "independence" most were lumped in with support services companies.

Among those to benefit from the signalled IT sector and push ahead in the past month are Lynx and Sherwood International. The suspicion the new index will have a beneficial influence lifted Lynx, which started life as a company developing hotel safes, from 99p to 128.5p; Sherwood had an even more impressive run, going from 365p to 572.5p.

Stockbroker Granville Davies believe the IT performance of fund managers will be measured against the new index. "This may well nudge prices even higher as those which are underweight attempt to achieve a full weighting."

The IT sector embraces 88 companies including five MidCaps and 24 AIM stocks. The largest constituents are Misys, capitalised at approaching pounds 2.1bn, and Sema at pounds 1.7bn.

Composition of the sector is already arousing comment. There seems to be a move to include more IT recruitment companies. As Granville Davies point out 74 per cent of CRT's turnover comes from IT services yet it is in the Education, Business and Training sector. Among others excluded are SBC Group, which collects all its revenue from the provision of IT staff, Highams Systems Services (90 per cent) and Harvey Nash (75 per cent). The stockbroker suggest those which feel they have been overlooked will be pressing for inclusion.

The index changes were not confined to the creation of the IT sector. It was also decided to end the existence of the textile and apparel sector, merging it with household products.

Big sector changes are made at the start of the year. For many years there were no substantial changes, just the occasional gentle tinkering. But what appeared to be a realistic division in the 1970's looked out of place in the much more classification conscious 1990's. So five years ago there was an overhaul which led to the removal of some rather bewhiskered, rather quaint sectors, such as Drapery and Stores.

The drinks industry is one area which has felt the reforming zeal of the index men. Until the government's Beer Orders quoted pub companies were conspicuous by their absence. The late Maxwell Joseph had swallowed the last quoted independents in the 1960's when his Grand Metropolitan empire took over Levy & Franks and Shorts. In those days pub portfolios were seen as essential adjuncts to a brewery.

But the Beer Orders forced the big brewers to unload vast chunks of their once cherished estates. And, as the Bass sale of its 1,400 remaining tenanted pubs demonstrates, the ownership of as many pubs as possible is no longer regarded as an essential part of the big brewers strategy.

The upheaval among the beerage led to the creation of a host of pub-owning companies. Many were backed by venture capitalists. They are not the most patient of souls and were not slow to press for a stock market presence so they could realise at least part of their investment.

With quoted restaurant chains, another phenomenon of the 1990's, it was felt there was a need to end the existence of the old Distilleries and Breweries sector which seemed an ill-fitting classification for pub chains as well as GrandMet, which by then had sold its breweries, and the likes of cider maker HP Bulmer.

Two new sectors were created - Breweries, Pubs and Restaurants and Alcoholic Beverages. There were some complaints and the sight of Harry Ramsden fish and chip shops rubbing shoulders with Scottish & Newcastle, the nation's largest brewer, caused some astonishment.

The split was possibly more beneficial to the breweries sector, which enjoys a higher rating than the alcohol segment.

A certain amount of bedding down follows an index reshuffle and FTSE International expect there may be some minor IT and textile adjustments.

"Any company which feels it has been misplaced should contact us and put forward its case which we will discuss with them," said a spokesman.

There had been expectations the drug sector would be changed with the fledgling element, the biotechs, stripped out. But FTSE International decided against any move. "It was felt biotechs are merely drug companies at an early stage of their development and should remain with the giants," said the spokesman.

A sector of the future could be football clubs. Fifteen are now on the market. More are expected. Perhaps they will get their own pitch at the next review.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Under the skin: Sarah Kane in May 1998
theatreThe story behind a new season of Sarah Kane plays
Arts and Entertainment
Preening: Johnny Depp in 'Mortdecai'
filmMortdecai becomes actor's fifth consecutive box office bomb
Sport
Bradford City's reward for their memorable win over Chelsea is a trip to face either Sunderland or Fulham (Getty)
football
News
Lars Andersen took up archery in his mid thirties
video
Voices
Focus E15 Mothers led a protest to highlight the lack of affordable housing in London
voicesLondon’s housing crisis amounts to an abuse of human rights, says Grace Dent
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

Auschwitz liberation 70th anniversary

Woman sent to three Nazi death camps describes surviving gas chamber
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea