FTSE Reshuffle Shows Lockdown Impact With Travel Out, DIY In

(Bloomberg) --

The latest changes to the U.K.'s blue-chip stock benchmark demonstrate how Covid-19 has disrupted consumer spending and the business world.

Airline EasyJet Plc, airplane parts-maker Meggitt Plc and cruise ship operator Carnival Plc are among four stocks exiting the FTSE 100 index following a quarterly re-balancing based on market capitalizations at Tuesday's close, provider FTSE Russell announced Wednesday.

B&Q home-improvement store owner Kingfisher Plc and household repair group HomeServe Plc earned promotion to the benchmark from the mid-cap FTSE 250 index, having prospered due to more time spent at home during lockdowns, along with cybersecurity group Avast Plc, whose business has benefited from the work-from-home trend.

“This FTSE reshuffle is highly reflective of the current crisis environment,” Helal Miah, an analyst at investment broker The Share Centre, wrote in emailed comments prior to confirmation of the changes. “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,” he said.

The rejig may leave demoted stocks vulnerable to selling by funds whose aim is to mirror the performance of the FTSE 100, with new entrants benefiting as the so-called tracker funds increase their weightings.

Both Homeserve and Avast enter the blue-chip gauge for the first time, while Kingfisher rejoins after its demotion to the FTSE 250 in March.

Centrica, GVC

The final company leaving the FTSE 100 is Centrica Plc, in a demotion that represents a moment of historical significance for a stock that under different names has been ever-present in the gauge since 1986. That was the year the Conservative government of Margaret Thatcher privatized British Gas through an initial public offering.

Among Centrica's key attractions was a stable income stream: its annual dividend over the past two decades was about 2.5 times the median payout of a FTSE 100 stock. Its median payout of 500 million pounds ($630 million) is also remarkably similar to last year's 471 million pounds, illustrating the level of consistency.

Gambling company GVC Holdings Plc heads the other way, returning to the blue-chip index for the first time since March 2019.

According to guidelines from FTSE Russell, a unit of London Stock Exchange Group Plc, a stock will be removed from the FTSE 100 if its market capitalization ranks 111 or below among eligible shares at the time of the re-balancing, while any that rise to 90th position or above join the index. Changes in the final review go into effect on June 22.