Share Prices & Company Research

Press Release

31 May 2018

Sign of the times as online retailers eclipse traditional stores

Online grocer Ocado has been promoted to the FTSE 100 in a sign of the times for the retail sector.

The index’s latest reshuffle has seen a rise in fortunes for internet-based retailers, whose values have eclipsed traditional bricks and mortar stores during a turbulent period for the high street.

In mid-May, Ocado announced a partnership with Kroger, the US’s second-largest supermarket chain. In the deal, Kroger will use Ocado’s technology in the US for grocery and other food distribution activities. As part of the agreement, Kroger invested £183m in Ocado in exchange for a 5% stake.

Ocado now has a larger market capitalisation than Marks & Spencer, which only just managed to escape relegation from the FTSE 100 despite widespread speculation it would lose its place for the first time since 1984.

M&S’s full-year report last week revealed a 62% fall in annual profits as it has struggled to keep up with online retailers such as ASOS, whose market capitalisation is larger than that of M&S despite being traded on AIM.

Sports betting and gaming group GVC Holdings has been elevated to the FTSE 100. Last week the group, which has grown rapidly through acquisitions including its £4bn purchase of bookmaker Ladbrokes Coral late last year, reported total group net gaming revenue rose 7% in the first 20 weeks of the year. Total online gaming revenue was up 17%.

Dropping into the FTSE 250 is international healthcare group Mediclinic International, which last week posted pre-tax losses of £479m in the year to 31st March 2018.

The losses were attributed to a £644m charge for writing down the value of its Hirslanden private hospitals in Switzerland, which have been impacted by regulatory changes. In addition, there was a £109m charge for its 30% stake in UK healthcare company Spire, whose value fell after it paid out £37m compensation to women treated by rogue surgeon Ian Paterson.

Mediclinic’s bid to acquire the remaining 70% of Spire was rejected in November.

G4S joins Mediclinic in being relegated to the FTSE 250. Earlier in May, the outsourcing group said it expected growth to accelerate in the second half of the year after organic revenue fell 2% in the first quarter.

The group said the fall was due to a tougher comparative period, as revenue the same time the previous year was lifted by a large retail solutions contract in North America.

A rise in oil prices has helped Energean Oil & Gas and Premier Oil into the FTSE 250, along with electronics engineer Laird and Integrafin Holdings, a holding company for the investment platform Transact.

Dropping out of the index are pub operator Marston’s, pet services provider and retailer Pets At Home Group, sweetener manufacturer PureCircle and Woodford Patient Capital Trust. Neil Woodford’s investment trust, which aims to achieve long-term growth through investing in a diversified portfolio with a focus on UK companies, joined the FTSE 250 in 2015 after raising £800m at its launch. At the time of writing (31st May 2018), its market capitalisation was £607m.

All changes from this review will be implemented at the close of business on Friday, 15th June and take effect from the start of trading on Monday 18th June.

Please note, past performance and forecasts are not reliable indicators of future results or performance. This article is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
Sign of the times as online retailers eclipse traditional stores