FTSE 100: Ocado set to be chucked from the trolley in London index reshuffle
Ocado is set to be rubbed off many investors’ shopping lists this week as it faces a relegation from the FTSE 100 following a troubled period of slowing sales and a tumbling share price.
Investors have soured on the grocery tech firm in recent months amid a period of widening losses, with shares in the firm falling some 37 per cent since January.
FTSE Russell, which manages the make up of London’s indexes, is set to reshuffle its indices on Tuesday, and Ocado’s fall in value means it is now in the danger zone to be booted from the premier index.
“Shopping basket sizes have been shrinking at Ocado and the retail side of the business can’t benefit from the surge in demand to shop in bricks and mortar stores once more,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“But the falling share price also demonstrates that investors are losing patience with Ocado Solutions, which is meant to be the long-term powerhouse of the company, but demand for robotic technology for warehouses remains weaker than hoped, with fewer deals than expected coming through.”
The reversal in fortunes for Ocado comes despite its ties to resurgent retailer M&S through a bumper joint venture signed in 2019. M&S has itself staged a slick recovery this year under the leadership of boss Stuart Machin, but it “still spies further potential” in its partnership with Ocado, Streeter said.
Tuesday’s reshuffle could prove a more positive day for a number of firms, however, with Birmingham-based IMI, formerly Imperial Metal Industries, vying for promotion into the premier index from the FTSE 250.
The engineering company has seen its share price surge by more than 20 per cent year-to-date and has lifted its full year earnings guidance following a strong performance in the first quarter. It said the integration of recent acquisitions, including Heatmiser, purchased at the end of 2022, were progressing well and unlocking new opportunities for growth.
Troubled outsourcing outfit Capita is among the companies in the promotion zone from the FTSE Small Cap into the FTSE 250. Its share price rose sharply in March after its turnaround strategy appeared to be bearing fruit.
“Chief executive Jon Lewis has been attempting to refocus the business, control costs and reduce debts, and a programme of disposals has been underway. The company is cash generative after years of outflows and revenues grew 2.4 per cent on an adjusted basis last year,” said Streeter.
“The data breach at the company following a cyberattack, which is still being investigated, has knocked some confidence.
“But shares have still risen by almost a quarter since the start of the year, easing its passage back into the FTSE 250 which it was relegated from in March 2022.’’