Just Eat poised to enter FTSE 100 following surge in value

Just Eat is on course to join the blue-chip FTSE 100 index, with a stock market value greater than Marks & Spencer.

The takeaway ordering website has soared in value since making its stock market debut in 2014, with the company now worth £5.6bn after gobbling up smaller rivals including Hungryhouse and SkipTheDishes.

“Twenty years ago it was all about going out to a restaurant but now it is all about the meal coming to the home,” said Steve Clayton, head of equity funds at Hargreaves Lansdown. “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 that some of the lowest rungs of the FTSE 100 areoccupied by major high street names including M&S, Sainsbury’s and Morrisons. All three have a lower market capitalisation than Just Eat, whose shares are up 40% over the past year.

It is on track to secure a place in the prestigious list of Britain’s top 100 companies when the quarterly review is published on Wednesday. Packaging firm DS Smith and Halma, the engineering group that makes smoke detectors and other sensors, are also expected to make the grade.

The reshuffle, however, 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 after holidaymakers shunned its attractions after the terrorist attacks in London and Manchester.

Babcock International, the engineering and outsourcing group, and private hospitals group Mediclinic International are also staring at demotion to the FTSE 250.

Just Eat is riding on the back of the restaurant delivery boom as more and more Britons shun cooking their evening meal. UK spending on takeaways hit £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 expected to be worth £11.2bn in 2021.

Just Eat, which earns commission on restaurant orders placed via its website and apps, dominates the mass market end of the takeaway market in UK. Rivals like Deliveroo concentrate on offering delivery services for more upmarket chains like Pizza Express and Gourmet Burger King. Just Eat only provides the digital ordering service for its 78,700 restaurant partners who deliver the meals themselves.

Last month 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 three month period.

Further growth is now on the cards after it received final clearance for last year’s takeover of Hungryhouse after a lengthy probe 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, 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.

“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 the business’s exposure to South Africa’s sluggish economy. It is looking for deals but last month’s £1.3bn move on Spire Healthcare was rejected.