Takeaway website in line to join blue-chip index in quarterly review as more and more Britons shun cooking
Just Eat is on course to enter the FTSE 100 after its stock market value rose higher than Sainsbury’s.
The takeaway website has soared in value since making its stock market debut in 2014, with the company now worth £5.6bn after gobbling up smaller rivalsincluding Hungryhouse and SkipTheDishes.
Steve Clayton, the head of equity funds at Hargreaves Lansdown, said: “Twenty years ago it was all about going out to a restaurant, but now it is all about the meal coming to the home.
“We are all carrying digital devices in our pockets and Just Eat moved first to connect independents to the dining public.”
The FTSE 100 and 250 indices are reviewed on a quarterly basis, with the reshuffles highlighting the waxing and waning of company fortunes.
Tough trading conditions in the retail sector mean some of the lowest rungs of the FTSE 100 areoccupied by major high street names including M&S, Sainsbury’s and Morrisons. All three food retailers have a lower market capitalisation than Just Eat, whose shares have gone up 40% over the past year.
It is on track to secure a place in Britain’s top 100 companies when the quarterly review is published on Wednesday. The packaging company DS Smith and the engineering group Halma, which makes smoke detectors and other sensors, are also expected to make the grade.
The reshuffle is expected to claim the scalp of Merlin Entertainments, the struggling leisure group behind Madame Tussauds, Alton Towers and Legoland. The company’s shares have fallen nearly 17% in the past 12 months afterholidaymakers shunned its attractions following terrorist attacks in London and Manchester.
Babcock International, the engineering and outsourcing group, and the private hospitals group Mediclinic International are also staring at demotion to the FTSE 250.
Just Eat is riding on the back of therestaurant delivery boom as more and more Britons avoid cooking evening meals. UK spending on takeaways reached £9.9bn in 2016, a 34% increase on 2009, according to a recent report. The market’s growth trend is expected to continue, with the takeaway economy tipped to be worth £11.2bn in 2021.
The company, which earns commission on restaurant orders placed via its website and apps, dominates the mass market end of the takeaway sector. Rivals such as Deliveroo concentrate on offering delivery services for more upmarket chains including Pizza Express and Gourmet Burger Kitchen. Just Eat provides the digital ordering service for its 78,700 restaurant partners, which then deliver the meals.
Last month, the Just Eat chief executive, Peter Plumb, said sales had increased 47% to £138.6m in the three months to the end of September thanks to strong growth in order numbers and the inclusion of SkipTheDishes business. It handled 26.2m UK orders during the period.
Further growth is on the cards after it received final clearance for the takeover of Hungryhouse last year following a lengthy investigation by the Competition and Markets Authority.
Babcock, which has lost nearly 30% of its value this year, has been dragged down by the woes of rival Carillion, which is fighting for survival due to the combination of a large debt pile and badly performing contracts, and defence spending cuts.
Helal Miah, an analyst at The Share Centre, said Babcock had been in the “drop zone” for several quarters: “The performance of the group over the last year has been disappointing on the back of concerns for support service providers, which was notably highlighted by the problems at Carillion,” he said.
“Concerns remain over Babcock’s growth targets for next year and continued pressure on the sector as a result of Brexit and contract delays.”
Mediclinic’s share price is also down nearly 30% due to its exposure to South Africa’s sluggish economy. The company is looking for deals but a £1.3bn move on Spire Healthcare last month was rejected.