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TOP NEWS: Ocado set for FTSE 100 relegation but IMI to join blue-chips

23rd May 2023 17:42

(Alliance News) - Ocado Group PLC's five-year stint in London's top-flight index is under threat, after a tough run which has seen the grocer's shares plunge 35% since the turn of the year.

According to the latest set of indicative index changes from FTSE Russell, engineering firm IMI is primed to replace Ocado in the FTSE 100. There may also be a host of changes in the mid-cap FTSE 250 index, according to the indicative changes.

The indicative changes are based on closing prices from Friday. The official review, to be announced next week Wednesday, will be based on closing prices from this time next week.

With a market capitalisation of GBP3.33 billion, Ocado is now a much smaller outfit than IMI, which has an equity value of GBP4.26 billion. IMI's stock has risen around 27% since the end of 2022.

Ocado had a tough start to the year on the stock market, on a less-than-stellar fourth quarter update for its Ocado Retail Ltd joint-venture, in which Marks & Spencer PLC also has a 50% stake.

A widened annual group loss, reported in February and a warning of a "challenging" and falling basket size in March did little to lift sentiment towards Ocado shares.

Another legal win in a patent dispute against AutoStore AS late in March helped arrest its share price decline, though its stock market performance in April was weak, and shares have slumped another 21% so far in May.

IMI has shone in contrast, and a guidance boost in early May means its stock is up 2.5% so far this month.

There will be a handful of departures on the FTSE 250, according to indicative changes. Upstream energy company Capricorn Energy PLC, Africa and South America-focused exploration firm Tullow Oil PLC and oil and gas industry services provider Hunting PLC are set for the chop. Tech investor Molten Ventures PLC and Videndum PLC, are provider of hardware and software for the content creation market are also under threat.

They will be replaced by Empiric Student Property PLC, Gore Street Energy Storage Fund PLC, instant-service equipment firm ME Group International PLC and door and window components supplier Tyman PLC. Capita PLC is also set for a promotion to the FTSE 250, helped by the outsourcer's well-received annual results in March, and despite suffering a cyber-attack in April.

Oil prices were boosted in April following a surprise Opec+ output cut, though they have since ebbed on a weaker outlook for the global economy, sending shares in the likes of Capricorn, Tullow and Hunting lower.

Videndum, meanwhile, which entered the FTSE 250 back in September. It replaced Homeserve, which has now gone private. The home repairs company itself had replaced cybersecurity firm Avast, which was bought out by Tempe, Arizona-based peer NortonLifeLock Inc.

More recently, Videndum shares have declined around 10% over the past month amid a writers strike in the US.

The Writers' Guild of America, which combines two different US labour unions representing TV and film writers in New York and Los Angeles, called a strike. The strike has caused some US cine/scripted TV productions to be paused, Videndum said earlier in May.

Consequently, the company said that short-term demand for its cine and scripted TV products in the US - which represents around 20% of company revenue - has been affected. This, it said, will likely increase the second-half weighting of the company's performance in 2023 and is also creating a "wider range" of possible outcomes for the year than previously expected.

Earlier this week, FTSE Russell said BlackRock Greater Europe Investment Trust PLC, an investment trust focused on small, mid and large-cap companies across Europe, will replace outbound Mediclinic International PLC in the FTSE 250 on Thursday. The private healthcare provider will be acquired by a consortium led by the Johannesburg-listed investment firm Remgro Ltd.

By Eric Cunha, Alliance News news editor

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