Brambles gets the boot from UK's FTSE 100

Well, now it's official. Brambles is to get booted from the UK's FTSE 100 index at the end of the month after a shocking performance these past 12 months which has left its shares down 50 per cent.

The company sealed its fate with last month's surprise profit warning and the alarming news that it had misplaced 15 million pallets. That little stunt shaved almost 30 per cent from Brambles shares in a single day.

Such was the dismay of investors yesterday at Brambles having its FTSE 100 spot wrenched away that they left the stock up 7c at $4.59. In other words, the omission was expected.

Chairman Don Argus invested some time at the fiery Brambles annual meeting trying to explain to shareholders that it didn't really mean that much.

Big investors and fund managers that structure their portfolios to slavishly track the FTSE 100 don't really own a whole lot of Brambles, he said.

But he indicated that while a short holiday from the FTSE 100 wouldn't cause that much of a problem for Brambles, he wouldn't want it to turn into an extended exile.

``There will be a time when the index investors will start to get back into the stock," he said at the AGM. ``That's when you start to be disadvantaged if you're not back into the major indices."

For what its worth, about $US23 billion ($41 billion) in funds tracks the FTSE 100.

Not so Spotless

Spotless Services was handed a decent Christmas thrashing yesterday on concerns about rampant competition overseas.

At the heart of the worries was a report by the JP Morgan team, typed up after a meeting with Mainetti chief executive Michael Stakhol.

Mainetti is one of the main rivals of Spotless's coat hanger businesses, Braitrim in Europe and Plastiform in the US.

The chat with Mainetti stoked fears that Plastiform will start to feel the blowtorch of margin pressure, particularly with the business's major contract with Target up for renegotiation. JP Morgan estimates that about 35 per cent of Plastiform's revenues come from that one deal.

While that's going on, Mainetti is investing $US500 million in a coathanger factory in China's Shenzhen Province, giving it further scale with which to attack the US market.

Meanwhile, in Europe, competitive activity has stepped up a notch too, and retailers are starting to throw their weight around, demanding discounts of 2 to 3 per cent. While JP Morgan nonetheless maintained an ``overweight" recommendation on Spotless, it noted the company's prospects of maintaining a ``reasonable" level of profitability with all this going on were ``open for debate".

Spotless shares fell 26c to $4.74 and are down almost 8 per cent in the past week.

Perpetual rising

Perpetual Trustees devotees would have been pleased to see the fund manager report this week that funds under management were again on the up.

The company has lost more than $2 billion either in a combination of institutional mandate losses and redemptions or reduced portfolio values since the start of September.

Late on Tuesday, Perpetual reported funds of $17.8 billion at November 30, up from $17.7 billion a year earlier.

It was reported in November that Perpetual lost a $450 million Frank Russell mandate, so given that, the performance looks quite credible. And the market didn't help that much given it was up only 1.7 per cent, suggesting retail inflows filled the breach.

Retail money is preferred anyway, because it is higher margin and ``stickier".

Perpetual is also looking to new funds to keep the momentum going, with new hedge, geared and property funds due to be launched in the first quarter of next year.

Perpetual closed 10c higher at $30.70.

The mystery for investors remains: how was key fund manager Peter Morgan allowed to leave, set up his own business just a few weeks later and therefore wreak such damage on the share price?

And what damage it has been, given Perpetual shares looked likely to break $50 in about March.

That's approximately a $500 million loss in market value over that period.