(Bloomberg) -- Marks & Spencer Group Plc is set to be demoted from the U.K.'s benchmark FTSE 100 index, according to indicative results from equity index provider FTSE Russell.
The high street retailer, along with Micro Focus International Plc and home and motor insurer Direct Line Insurance Group Plc will be relegated to the mid-cap FTSE 250 index, indicative results of a quarterly re-balancing by FTSE Russell show. Micro Focus shares fell 29% last week after the enterprise software firm cut its full-year revenue guidance.
Gold miner Polymetal International Plc, generic drug-maker Hikma Pharmaceuticals Plc and aerospace and defense engineer Meggitt Plc earned promotion from the FTSE 250 to the FTSE 100, according to the indicative results.
FTSE-eligible shares are ranked by market capitalization. Any stock that falls to 111th position or below is automatically deleted from the FTSE 100, while any that rise to 90th position or above join the index, according to FTSE Russell's guidelines.
M&S had a market cap of 3.7 billion pounds ($4.5 billion) based on Monday's closing price, down from a peak of about 18 billion pounds in 1997. The stock has fallen about 20% this year as the company announced plans to finance a joint venture with Ocado Group Plc through a rights offering and a dividend cut. The company's departure will be the first time the retailer has been absent since the benchmark gauge was formed in January 1984.
“It's symbolic of the changes in retail, as well as the challenges facing the company,” Liberum Capital Ltd. analyst Adam Tomlinson said by phone, adding that it could put further pressure on the shares given the number of funds whose holdings are tied to the index. “It's unhelpful, but has been coming for a while.”
The index changes will be confirmed on Sept. 4 and take effect from Sept. 23, a spokeswoman for London Stock Exchange Group Plc, FTSE Russell's parent, said by email.
To contact the reporter on this story: Joe Easton in London at jeaston7@bloomberg.net
To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Jon Menon
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