FTSE 100 reshuffle: Easyjet and British Gas drop out over coronavirus
Four major UK companies dropped out of the FTSE 100 in last night’s reshuffle, over their exposure to the coronavirus pandemic.
Pummelled by a collapse in oil prices and commercial energy demand, British Gas owner Centrica has dropped out of the UK’s top index.
Cruise ship operator Carnival, whose Diamond Princess cruiseliner suffered one of the first Covid-19 outbreaks, also fell out of favour with investors.
Despite targeting a return to domestic flights from mid-June, Easyjet has also departed the FTSE 100 in the reshuffle. And aerospace engineer Meggitt has also dropped out.
Emily Waterworth, investment manager at Brewin Dolphin, said the FTSE 100 reshuffle “is a stark representation of the global impact of the coronavirus”.
“It isn’t a surprise that the travel, tourism and leisure sectors have been hard with travel and lockdown restrictions still firmly in place,” she added.
“The energy sector was also hit hard with unprecedented lows in the oil price reflecting the lack of demand for this commodity as the world essentially shut down.”
She said the recent rally in oil prices – pushing European standard Brent crude back above $40 per barrel – was not enough to save Centrica’s position.
Easyjet only returned to the FTSE 100 last December after falling out in June 2019. But coronavirus has seen it prepare to cut 30 per cent of its staff and take a £600m bailout from the government.
Ladbrokes owner GVC weathered the crisis well and has returned to the top tier index. It is joined by cyber security firm Avast, Homeserve, and Kingfisher, which fell out of the FTSE 100 in March’s reshuffle.
Helal Miah, an investment research analyst at The Share Centre, called Centrica’s demise previously “unimaginable”.
“This FTSE reshuffle is highly reflective of the current crisis environment,” he added. “Out go stocks from sectors that have taken a beating and questions arise as to how and whether some of these can manage this crisis.”
“Our advice to investors is always to think in the medium to long term, and this is particularly relevant at present,” Waterworth added.
“Kingfisher as a retailer is a perhaps surprising re-entrant to the top one hundred, having lost its place in just March this year. This is a reminder that it could of course be all change again in the next review, with all eyes on the easing of lockdown and the resulting changes to day to day life.”