Thomas Cook to fall out of FTSE 100

Thomas Cook will fall out of the FTSE 100 list of companies on the London Stock Exchange later this month after its share price took a hammering as a result of the volcanic ash crisis.

However, City analysts dismissed the company’s relegation to the FTSE 250 as of little consequence and the group’s chief executive Manny Fontenla-Novoa remains bullish.

The group’s demotion follows the FTSE’s routine quarterly review of listed companies. It will remain in the Index until close of trading on June 18.

A FTSE 100 listing is determined by market capitalisation, or the total value of a company’s shares. Companies fall out for two reasons. They are automatically demoted if they fall below 110th position in the Index overall, and can also fall out – if at the foot of the table – to make way for a company automatically promoted.

The FTSE review released late this afternoon showed Thomas Cook was third from bottom of the FTSE 100 after trading on Tuesday, with two companies poised to gain automatic entry, but was in 117th place in the Index overall.

The group was valued at just over £1.6 billion, its share price falling from £2.70 in early April – before the ash crisis grounded aircraft – to just above £1.90 this week. However, Thomas Cook’s trading update in May indicated the group was performing strongly.

Both its share price and Tui Travel’s have lagged the FTSE since the ash crisis, and the loss of market capitalisation at both has been many times the cost of the crisis.

Speaking before the announcement at the ITT conference yesterday, Fontenla-Novoa said he was confident of a return to the FTSE 100 and an improved future performance if Cook did move into the FTSE 250.

Analysts were also unconcerned. Nick Batram of KBC Peel Hunt said: “There is a certain kudos attached to being in the FTSE 100 and some people make a great play of it, but it is a complete irrelevance to Thomas Cook’s customers.

“The fundamentals of the business are good and there are no implications in terms of raising money.”

Douglas McNeill of Charles Stanley Securities recently recommended Thomas Cook shares to investors. He said: “A FTSE 100 listing is thought to be of significance, but shares can fare quite well when a company falls out of the FTSE.

“Some funds only invest in FTSE 100 companies, so they will sell [Thomas Cook shares], but other investors tend to focus on FTSE 250 companies. Few consumers will be aware or care.”

Share article

View Comments

Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.