The new year 2020 is going to usher in new value creation possibilities on the London Stock Exchange like never before. The transition in the business environment in the United Kingdom and in continental Europe will bring in new business realignments giving rise to several value creation opportunities that could turn the fortunes of several companies operating from the nation. Within the United Kingdom the companies that will benefit the most are the ones which have a domestic focus, because some foreign-made components, intermediate commodities, consumer goods and food items will now be more expensive to buy; hence it will be a boom period for domestic producers of these goods.
We will look at top ten FTSE 100 companies which have the best value creation potential in the year 2020, given the situation that is set to develop in the post Brexit macro-economic environment in UK.
- Barratt Developments Plc – Barratt Development Plc (LON: BDEV) is the United Kingdom domiciled property developer, it is one of the largest residential property developers in the country having an operating network of 30 divisions, the developer owns and operates three consumer brands; Barratt Homes, David Wilson Homes and Barratt London. The company is one of the best- performing companies in its class on the London stock exchange, during the past five years, the group has recorded a Net Margin of 12.54 per cent against the industry average of 11.89 per cent recorded in the same period and delivered a 5-year average return on investment (ROI) of 11.4 per cent against the industry average of 10.45 per cent respectively.
The Real estate market in the United Kingdom has been one of the hardest hit due to the Brexit headwinds. In the Improved politico-economic conditions in the United Kingdom in 2020, the real estate market will get a big boom due to the pent-up demand of previous years.
- Tesco Plc – Tesco PLC (LON: TSCO) is the United Kingdom domiciled supermarket chain company and is one of the largest retailers of consumer goods in the world, serving millions of customers every week through stores as well as online space. The company primarily operates as a retailer of grocery products and also offers insurance and retail banking services. The group operates in Retail segment and Tesco Bank. The Retail division is further divided into three geographical segments: UK & ROI, Asia and Central Europe.
The consumer confidence level post November 2019 has improved significantly with still improving conditions post December 2019 general elections and still further improvement expected post January 2020 Brexit date. The consumers in the United Kingdom have also shown signs of the betterment of sentiments with improved sales on Black Friday and prior Christmas day sales. The situation will further improve in the new year.
- Kingfisher Plc - Kingfisher Plc (LON: KGF) is a general retailer company, supplying home improvement products and services through a network of online channels and retail stores, the company caters the needs of nearly 6 million customers from 10 countries. The company has an employee base of around 77,300 people with nearly 1,331 stores. The company business operations are spread across the United Kingdom, Ireland, France and Other International geographical segments.
The performance of the company has seen the decline in previous years on account of weakened trading conditions in the pre-Brexit jittery, especially in the United Kingdom. In the new and improved economic environment post Brexit in 2020, the company will benefit from the rise in consumer demand.
- London Stock Exchange Group Plc - London Stock Exchange Group Plc (LON: LSE) is a London, the United Kingdom-headquartered company which engages in international markets infrastructure business, operating a wide range of equity, ETF, bond and derivatives markets. The company is also a global leader in analytic services, benchmarking and financial indexing, and offers market participants unrivalled access to capital markets in Europe. The group develops and operates high-performance technology solutions, and risk management and post-trade services are a significant part of its business operations.
The London Stock Exchange is envisaged to be one of the highest performing equity markets in the world. Most of the fund managers of top fund houses have opined that the equities on the London Stock Exchange are looking incredibly undervalued on account of being battered by the macroeconomic headwinds of the past few years. Post-Brexit and with improved economic conditions in 2020 significant foreign capital will flow into the London Stock Exchange in addition to the domestic aggressive stance taken by domestic investors, given the above reasons the London Stock Exchange Group would be a good value creator in 2020 and beyond.
- Experian Plc - Experian Plc (LON: EXPN) is the United Kingdom domiciled, Dublin headquartered information services company engaged in the business of data, analytics and software to deliver a bunch of services for the clients and consumers, its areas of operation are categorised into segments like Credit Service, Decision Analytics and Consumer Services, the company’s business operations abode North America, Latin America, the UK and Ireland, the Middle East, Africa and the Asia Pacific.
In the new economic scenario of 2020, the services of the company will be in great demand as new business alignments and realignments take place across the world. The company has in the past also performed well despite the Brexit headwinds, accentuating the fact of how well its services are being received by the market and the impending transition period of 2020 and beyond will make these services even more crucial.
- Berkeley Group Holdings Plc - Berkeley Group Holdings Plc (LON: BKG) is a company based in the United Kingdom, which deals in creating homes with access to parks and public spaces and amenities. The company has successfully delivered 19,000 plus houses in the last five years. More than 11,000 people work for the company. The company has also ventured into creating schools with some already delivered and some in the pipeline.
The Real estate market in the United Kingdom has been one of the hardest hit due to the Brexit headwinds. In the improved politico-economic conditions in the United Kingdom in 2020, the real estate market will get a big boost with pent up demand of previous years.
- Associated British Foods Plc - Associated British Foods PLC (LON: ABF) is a London-based diversified group of companies offering a wide range of products and services which are marketed through many widely known brands and enjoy a high degree of autonomy, with operations in 52 countries across Europe, Southern Africa, the Americas, Asia and Australia. The group has five reporting segments being Agriculture, Sugar, Ingredients, Retail and Grocery.
The company in the year 2020 and beyond will benefit from improved trading conditions in the commodities it deals with. With the custom and other related taxation system seeing an overhaul in the post Brexit scenario, the fortunes of domestic producers in the United Kingdom of these commodities will improve.
- CRH Plc – CRH Plc (LON: CRH) is an Ireland-based leading global diversified building materials group, headquartered in Dublin, Ireland and is the second-largest building materials company worldwide and largest in North America, the largest heavy side player in Europe as well as strategic operations in Asia and South America. The company's operations are now differentiated in three operating segments, from six in prior years, reflecting more simplified organisational structure: Europe Materials, Americas Materials, and Building Products.
The construction industry in the United Kingdom over the past few years has been on a decline due to the Brexit headwinds. In the Improved politico-economic conditions in the United Kingdom in 2020, there will be enhanced demand for new constructions providing a big boom to the industry on account of stalled and postponed projects of previous years.
- Meggitt Plc - Meggitt Plc (LON: MGGT) is the United Kingdom-headquartered engineering company that offers advanced technologies, products and services it operates in 16 countries and focuses on three core sectors, namely aerospace, defence and energy, the company’s differentiated technology and products are underpinned by deep intellectual property, across a wide range of applications. The group’s operations are differentiated in five operating segments: Meggitt Equipment Group, Meggitt Sensing Systems, Meggitt Polymers & Composites, Meggitt Control Systems, and Meggitt Aircraft Braking Systems.
In the past few years there has been a slowdown in the defence spending of the United Kingdom on account of the deterioration in economic conditions in the country, because of which most of the companies in this business have witnessed a slowdown in their business. In the improved economic environment of 2020, there will be an improved flow of funds into this sector with ensuing improved performance of its constituent companies.
- Taylor Wimpey Plc - Taylor Wimpey Plc (LON: TW) is a residential housing developer company, which builds a wide range of properties, with the various price range, the company produces both private and affordable homes. The company operates from 24 regional offices. The operations of the group are differentiated in four geographical segments, namely London & South East, North, Central & South West, and Spain.
The residential housing market in the United Kingdom has been one of the hardest hit due to the Brexit headwinds. In the Improved politico-economic conditions in the United Kingdom in 2020, the residential housing market is likely to witness good improvement.
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