Seven likely to go in massive FTSE shake-up

THE FTSE 100 Index is reported to be heading for its biggest shake-up since the wake of the September 11 terrorist attacks as companies feel the force of the global credit crunch.

THE FTSE 100 Index is reported to be heading for its biggest shake-up since the wake of the September 11 terrorist attacks as companies feel the force of the global credit crunch.

Seven blue-chip companies are expected to drop out of the top flight index at the next quarterly reshuffle, which will be announced on Wednesday.

The final decision on which companies make up the benchmark index will be based on the market capitalisation of firms when the market closes tomorrow.

But based on Thursday’s closing prices, Northern Rock, newspaper group Daily Mail & General Trust and sugars and ingredients firm Tate & Lyle, which recently reported a 19% drop in profits, will all be relegated.

They are likely to be joined by retailer DSG International, which recently unveiled a 25% fall in first-half profits, Punch Taverns, housebuilder Barratt Developments and All Bar One and Harvester owner Mitchells & Butlers.

Shares in Mitchells & Butlers have been gradually drifting downwards since mid-May, when they touched the 900p mark, to close at 507.5p on Friday.

The group recently reported slowing sales growth and said costs linked to a shelved property deal with entrepreneur Robert Tchenguiz had risen to £260m.

Companies tipped to take their place are Cairn Energy, Kelda Group, whose time in the index could be short-lived as it is in the process of being taken over by an infrastructure consortium, and Thomson holiday operator TUI.

Other groups that look set to be on the way up include Admiral, the car insurance group that was only created in 1991, bus and rail operator First Group, security firm G4S and fashion house Burberry.

If the reshuffle does go ahead as predicted it will be the biggest change since September 11, 2001, when eight companies dropped out of the top flight index.

Share prices on the day had dived, with the FTSE 100 dropping by 287.7 points to 4746, as the market responded to the shock terrorist attacks.

Northern Rock is almost certain to be ejected from the FTSE 100 after seeing its share price dive by more than 85% to just 103p following revelations that it had agreed emergency funding with the Bank of England. But the group should avoid the ignominy of being catapulted straight into the small cap index.

The bank is currently valued at around £430m, a far cry from its peak of more than £5bn in February this year, but probably enough for it to rank towards the bottom end of the FTSE 250 mid-cap index, rather than being relegated straight into the FTSE Smallcap Index.

Analysts said the shake-up provided evidence that companies across the board were being hit by the credit crisis.

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