Proactiveinvestors United Kingdom Capita Group https://www.proactiveinvestors.co.uk Proactiveinvestors United Kingdom Capita Group RSS feed en Sun, 19 May 2019 09:48:17 +0100 http://blogs.law.harvard.edu/tech/rss Genera CMS action@proactiveinvestors.com (Proactiveinvestors) action@proactiveinvestors.com (Proactiveinvestors) <![CDATA[News - Capita profits fall less than expected as the outsourcer undergoes major overhaul ]]> https://www.proactiveinvestors.co.uk/companies/news/216446/capita-profits-fall-less-than-expected-as-the-outsourcer-undergoes-major-overhaul-216446.html Capita Group PLC (LON:CPI) posted a 26% drop in profit for 2018 that was better than it had expected as it completed the first year of its restructuring.  

The outsourcer said it made an adjusted pre-tax profit of £282.1mln last year, down from £383.1mln in 2017 but slightly higher than its estimates of £250mln-£275mln. Revenue dropped 5% to £3.8bn.  

READ: Capita lowers profit guidance and warns turnaround plan will take time

Capita has been undergoing a major overhaul under chief executive Jonathan Lewis, which has included a £700mln rights issue, the sale of £400mln of unwanted business and cost cuts.

On the back of the revival process, the group met its £70mln cost savings target last year and expects to realise cumulative savings of £175mln by the end of this year.

Further transformation

“Our transformation still has some way to go,” Lewis said.

“But I am very pleased with our progress. Our targets remain on track, and I’m excited about the prospects for a simplified and strengthened Capita.”

Capita’s order book at the end of the year stood at £7.1bn, compared to £8.2bn in 2017. The decline reflected the fact that the order intake of £1.8bn was lower than revenue recognised along with subdued bid activity in 2017.

Order intake largely comprised contract wins and renewals in the customer management division.

For the 2019 financial year, the group expects a pre-tax profit of between £265mln and £295mln.

The company said it was on course to meet its 2020 targets for £175mln cost savings, “double-digit” adjusted EBIT margins and at least £200mln of sustainable annual free cash flow, before exceptional and restructuring charges and additional pension contributions.

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Thu, 14 Mar 2019 07:43:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/216446/capita-profits-fall-less-than-expected-as-the-outsourcer-undergoes-major-overhaul-216446.html
<![CDATA[News - Capita to handle Westminster's council tax collections for another seven years ]]> https://www.proactiveinvestors.co.uk/companies/news/208708/capita-to-handle-westminster-s-council-tax-collections-for-another-seven-years-208708.html Capita PLC’s (LON:CPI) contract to handle Westminster Council’s revenues and benefits service has been renewed for a further seven years.

The outsourcer will continue to manage council tax, rates, and housing benefits for the council using its automated digital platform.

The renewal comes with an option to extend for an additional three years and is worth £65mln in total.

Capita and Westminster City Council have worked together for 24 years.

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Wed, 07 Nov 2018 08:28:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/208708/capita-to-handle-westminster-s-council-tax-collections-for-another-seven-years-208708.html
<![CDATA[News - Capita picks talent management platform operator Adepto as a partner ]]> https://www.proactiveinvestors.co.uk/companies/news/206665/capita-picks-talent-management-platform-operator-adepto-as-a-partner-206665.html Controversial outsourcing company Capita PLC (LON:CPI) has become a “scaling partner” to Adepto, a technology company with a platform focused on talent management.

Capita will provide business development services to support Adepto’s continued global expansion. Capita will also adopt Adepto’s cloud-based platform to help manage its own workforce and deploy it as a client solution via its People Solutions business to help clients better manage all the talent available to them.

70% of business leaders believe the competition for #Talent is increasing and yet only 10% are prioritising #Technology to achieve their goals via @LondonLovesBiz

— Adepto (@goadepto) October 8, 2018

“As part of our strategy to simplify and strengthen Capita, we are developing and partnering with leading digital platforms that are competitive and scalable, and help our clients overcome complex challenges,” explained Jon Lewis, the chief executive officer of Capita.

“After a detailed assessment, our partnership with Adepto provides us with the best talent pool platform to deliver industry-leading technology to our clients in our People Solutions division. We will also be using the platform internally to support our organisational development by attracting, retaining and developing talent,” Lewis added.

We would like to thank ⁦@socialworkaward⁩ for nominating us for the social work values award! However as Capita are sponsoring the event we are forced to withdraw our participation. You can read why below. Thanks for the ongoing support! #noborders https://t.co/3QHoBG9esl

— SW Without Borders (@SocialWorkersWB) October 8, 2018 ]]>
Tue, 09 Oct 2018 10:09:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/206665/capita-picks-talent-management-platform-operator-adepto-as-a-partner-206665.html
<![CDATA[News - UK government awards Capita five-year contract extension worth £93mln ]]> https://www.proactiveinvestors.co.uk/companies/news/204644/uk-government-awards-capita-five-year-contract-extension-worth-93mln-204644.html The UK government has awarded outsourcing group Capita Group PLC (LON:CPI) a new five-year contract worth £93mln.

Capita, which, among others, operates London’s congestion charge system, has had its contract to manage the UK’s Gas Safe Register extended until 2024. It had been due to run out in April of next year.

UK's Gas Safe Register

The register is the official list of gas businesses who are registered to work safely and legally on boilers, cookers, fires and all other gas appliances.

FTSE 250-quoted Capita is responsible for checking the competence of everyone on the list. Last year, it carried out 40,000 inspections on gas works carried out.

The company has managed the list since 2009. As part of the new contract, it will be required to deliver a new digital platform and electronic register via an improved website and mobile app.

READ: Capita poaches Go-Ahead CFO

It will also increase the number of inspections it makes and enhance its contact centres.

Capita chief executive Jon Lewis said: “We are delighted to continue operating the Gas Safe Register as the Health and Safety Executive’s partner of choice.

“This new contract is an example of our expertise in harnessing digital technologies to deliver critical and specialist public services and reflects Capita’s important role as a strategic partner to government, delivering tangible benefits for the public sector.”

HSE director of regulation Philip White added: “The bid from Capita was the strongest on cost and quality and we are confident they will continue to raise the standards of gas safety and provide a gas safe home for everyone.”

Capita shares were broadly flat at 148.7p on Tuesday afternoon.

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Tue, 11 Sep 2018 13:56:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/204644/uk-government-awards-capita-five-year-contract-extension-worth-93mln-204644.html
<![CDATA[News - Capita poaches Go-Ahead Group finance chief to help oversee turnaround plans ]]> https://www.proactiveinvestors.co.uk/companies/news/203363/capita-poaches-go-ahead-group-finance-chief-to-help-oversee-turnaround-plans-203363.html The support services group Capita PLC (LON:CPI) has poached the chief bean-counter of bus company Go-Ahead Group PLC (LON:GOG) as part of the former’s rebuilding process.

Patrick Butcher will replace Nick Greatorex, who signalled his intention to step down as Capita chief financial officer last month.

According to reports, former Network Rail finance boss Butcher will be a critical component of the rebuilding plan unveiled earlier this year by Jonathan Lewis, Capita's new chief executive.

Lewis kicked off the process of rebuilding the ailing group, which is responsible for collecting the TV licence fee, with a £700mln rights issue and sale of £400mln of unwanted businesses.

Cost savings key

As part of the revitalisation process, the CEO and his team expect to find £175m in cost savings by 2020 while boosting profit margins by focusing on "technology-led complex activities".

“Patrick is joining Capita at an exciting time,” said Lewis.

“We have de-levered the balance sheet, disposed of non-core assets, started to reduce costs and invest in the business. 

“We are looking forward to adding Patrick’s new perspective, energy and experience to support the good start we have made with our transformation programme and new strategy, delivering the commitments we have made to all our stakeholders.”

Series of profit warnings 

Investors in Capita, which also runs the UK military fire and rescue service, have been stung by a series of profit warnings as the margins on some of its government contracts have contracted.

Burdened with heavy debts, its travails came against the backdrop of the struggles and ultimate failure of civil engineer Carillion.

While the new boss’s early moves have shored up City sentiment and taken some pressure off the balance sheet, the group has still some way to go before it is back on a growth trajectory.

Interim results unveiled last month revealed a 59% fall in profitability.

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Wed, 22 Aug 2018 07:37:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/203363/capita-poaches-go-ahead-group-finance-chief-to-help-oversee-turnaround-plans-203363.html
<![CDATA[News - Capita share price decline presents buying opportunity, says RBC ]]> https://www.proactiveinvestors.co.uk/companies/news/202669/capita-share-price-decline-presents-buying-opportunity-says-rbc-202669.html Capita PLC (LON:CPI) shares have fallen 21% since the outsourcer cut its full-year profit guidance but RBC Capital Markets sees this as a buying opportunity.

RBC repeated an ‘outperform’ rating on Capita and raised its target price to 210p from 200p, saying it thinks the drop in the share price is a surprise.

Earlier this month, Capita said it expects full-year underlying profits to be between £250mln-£275mln, compared to the £270mln-£300mln it estimated earlier this year, after first-half profits fell 59% to £80.5mln and organic revenue dropped 2.4%.

READ: Capita lowers profit guidance and warns turnaround plan will take time

However, chief executive Jonathan Lewis said he was making good progress on his turnaround strategy and repeated his guidance for a return to growth in 2020.

“With near-term guidance reiterated, 2020 targets unaltered and financial deleveraging ahead of plan, we are reassured,” RBC said.

“This story is about cost savings and self-help (not organic growth) at present and on this basis, the group is on track.”

'Capita still thinking about new growth opportunities'

RBC said while the focus remains on Capita’s restructuring, it is encouraging to see developments like the company’s partnership with Microsoft to create a workspace application. The broker said this indicates that management is still thinking about new growth opportunities.

“This turnaround (for at least the next 18 months) is about what management can influence and not what the market does,” it added.

RBC expects a re-rating, to be driven by the delivery of cost savings, contract rehabilitation and cutting the interest cost, rather than organic growth.

Organic growth will remain difficult, RBC said, as it struggles with contract attrition and a benign UK market.

'Market caution looks overdone'

However, the broker thinks the turnaround looks “very within its compass and on this basis, market caution looks overdone to us”.

“We are not arguing that Capita has a superior business model. Indeed, with £500mln of investment needed over the next three years, there is evidently much to do,” RBC said.

“Concerns on its ability to win work and retain work will also persist. However, recent wins imply the group is not out in the 'wilderness' in the UK and we continue to believe that cost savings have been conservatively guided.”

RBC upgraded its earnings per share estimate for fiscal year 2018 by 4.5% to 11.60p. For 2019, it raised its EPS forecast by 8.5% to 13.60p. 

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Fri, 10 Aug 2018 11:17:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/202669/capita-share-price-decline-presents-buying-opportunity-says-rbc-202669.html
<![CDATA[News - Jefferies upgrades Capita to ‘Buy’ as it sees potential in software division following cut in full-year guidance ]]> https://www.proactiveinvestors.co.uk/companies/news/202574/jefferies-upgrades-capita-to-buy-as-it-sees-potential-in-software-division-following-cut-in-full-year-guidance-202574.html Analysts at broker Jefferies have upgraded Capita PLC (LON:CPI) to ‘Buy’ from ‘Hold’, saying there was a positive outlook for the firm’s software division after the firm cut its full-year guidance in its half-year results.

The broker said that despite the fact that the FTSE 250 outsourcer’s lowering of expected full-year profits had “removed investor euphoria”, the group’s software division had “attractive [free cash flow] characteristics…recently won a contract in India [and] can grow overseas”.

READ: Capita lowers profit guidance and warns turnaround plan will take time

They added that the firm’s 10%+ underlying earnings (EBITDA) margin target for the end of the 2020 financial year “is conservatively struck” and could potentially move toward the “11% figure reported in [the 2017 financial year]”.

“This is ahead of management’s 10%+ target and our 10.5% forecast but consistent with the CEO’s comment in April 2018 that “a leaner business should generate a margin similar to the past,” the broker said.

Jefferies also cut its target price for Capita to 180p from 200p, saying that despite the positive outlook for the software division, they were still “cautious regarding the outlook for outsourcing turnover as attrition is likely to remain elevated (especially with local government) and we suspect the bid pipeline is mostly re-tenders where incumbent providers should have a 90% win rate”.

In its half-year results on 1 August, Capita said it expected underlying profits to be between £250mln-£275mln for the full-year, compared to the £270mln-£300mln it estimated earlier in the year, while also reporting a 59% drop in underlying pre-tax profit to £80.5mln for the six months ended June 30.

In mid-morning trading Thursday, Capita’s shares were up 3.9% at 133.3p.

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Thu, 09 Aug 2018 10:29:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/202574/jefferies-upgrades-capita-to-buy-as-it-sees-potential-in-software-division-following-cut-in-full-year-guidance-202574.html
<![CDATA[News - Capita lowers profit guidance and warns turnaround plan will take time ]]> https://www.proactiveinvestors.co.uk/companies/news/201998/capita-lowers-profit-guidance-and-warns-turnaround-plan-will-take-time-201998.html Capita PLC (LON:CPI) shares slumped as the outsourcer cut its full-year profit guidance and warned that its turnaround plan would take time to deliver benefits.

Chief executive Jonathan Lewis announced a major overhaul of the business in April, which involves simplifying the business to focus on core areas. The group also launched a £701mln rights issue.

READ: Capita unveils £701mln rights issue as it reports wider annual loss

In the company’s first-half results statement on Wednesday, Lewis said he was making good progress on his strategy and repeated his guidance for a return to growth in 2020.

“It is still early days, but my team and I are very focused and confident in our ability to deliver those commitments,” he said.

Capita reported a 59% drop in underlying pre-tax profit to £80.5mln for the six months ended June 30.  Underlying revenue fell 4% to £1.9bn with declines across all divisions including software, people solutions, customer management, government services, IT services and specialist services.

The order book stood at £7.7bn at the end of the period, down from £8.2bn at December 31, reflecting low levels of bid activity last year and delays in decisions.

For the 2018 financial year, it now expects underlying profits to be between £250mln-£275mln, compared to the £270mln-£300mln it estimated earlier this year.

The group said it was on track to deliver £70mln in cost savings this year and £175mln by 2020. Capita also expects to raise £415mln from the disposal of non-core businesses, including Supplier Assessment Services and ParkingEye.

Shares fell 10% to 145p in morning trading. 

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Wed, 01 Aug 2018 09:08:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/201998/capita-lowers-profit-guidance-and-warns-turnaround-plan-will-take-time-201998.html
<![CDATA[News - Capita's contract with NHS England a 'shambles', say MPs ]]> https://www.proactiveinvestors.co.uk/companies/news/201569/capita-s-contract-with-nhs-england-a-shambles-say-mps-201569.html Capita PLC (LON:CPI) was dealt another blow on Wednesday after MPs accused the outsourcing company of failing to deliver on key aspects of a contract to perform back-office tasks for NHS England.

A report by the Public Accounts Committee (PAC) said the outsourcing of back office tasks to Capita was a “shambles” as thousands of GPs, opticians and dentists had been delayed in treating patients.

There were delays in moving medical records, meaning patients may not have been able to access necessary care and putting them “at risk of serious harm”, the report claimed.

Capita apologises, NHS says contract saved money

Capita, which signed a seven-year contract with the NHS England in 2015, apologised for “unacceptable failings in relation to the initial delivery of this contract” but said it had overcome its teething problems.

"We are now meeting the vast majority of key performance targets, and have put in place a new governance arrangement with NHS England to ensure improvement continues,” a spokesperson for the company said.

An NHS England spokesman said the contract had saved taxpayers £60mln over the past two years. The money has been reinvested in frontline patient care, funding the equivalent of an extra 30,000.

Under the contract, the services Capita provided included: organising payments to GP practices, opticians and pharmacies; administering GPs’ pensions; confirming GPs', dentists' and opticians' qualifications; and sending out letters for those eligible screening.

'A complete mess'

The PAC report said about 87 women were incorrectly notified that they were no longer part of the cervical screening programme.

Doctors also reported problems with the transfer of medical documents as well as issues caused by shortages of stock in the NHS supply chain.

PAC chairwoman Meg Hillier said: "NHS England made a complete mess of what could have been a responsible measure to save taxpayers' money.

"It is clearly unacceptable that poor procurement should put patients at risk of harm and undermine the ability of GPs, dentists, opticians and pharmacists to do their jobs."

The news comes just after Reuters reported that the UK's Ministry of Defence (MoD) had suspended a contract for Capita to provide firefighting services on military sites.

READ: Capita weak on report UK MoD has suspended military firefighting services contract award

The newswire said the contract suspension was made after Serco PLC (LON:SRP) began a legal challenge to the MoD's decision to choose Capita over its rival for the deal. 

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Wed, 25 Jul 2018 14:34:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/201569/capita-s-contract-with-nhs-england-a-shambles-say-mps-201569.html
<![CDATA[News - Capita weak on report UK MoD has suspended military firefighting services contract award ]]> https://www.proactiveinvestors.co.uk/companies/news/201318/capita-weak-on-report-uk-mod-has-suspended-military-firefighting-services-contract-award-201318.html Capita PLC (LON:CPI) saw its shares fall on Monday after the UK's Ministry of Defence (MoD) said it had suspended a contract for the outsourcing group to provide firefighting services on military sites, according to a Reuters report.

The newswire said the contract suspension was made after the FTSE 250-listed firm’s rival Serco PLC (LON:SRP) began a legal challenge to the MoD decision.

READ: Capita jumps on MoD contract win, plus £160mln sale of non-core supplier assessment business

Capita beat Serco to win the contract in June in a major boost to the company which is being restructured by new chief executive, Jonathan Lewis.

Reuters said Serco confirmed that it was taking legal action over the contract but declined to comment any further.

Capita told the newswire that it remained fully committed to the contract and would continue to work with the MoD on the matter.

In mid-morning trading, Capita shares were down 2.2% at 161.35p, while Serco shares gained 0.4% at 99.6p.

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Mon, 23 Jul 2018 10:17:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/201318/capita-weak-on-report-uk-mod-has-suspended-military-firefighting-services-contract-award-201318.html
<![CDATA[News - Capita on the front foot as it announces £30mln contract win with Southern Water ]]> https://www.proactiveinvestors.co.uk/companies/news/201130/capita-on-the-front-foot-as-it-announces-30mln-contract-win-with-southern-water-201130.html Capita PLC (LON:CPI) shares edged higher as the outsourcer said it won a £30mln contract with Southern Water.

The company will manage Southern Water’s back office billing processes, correspondence handling, print and mail for the next five years.

READ: Capita shares gain as it sells Parking Eye business and announces contract win

The deal marks an extension on Capita’s six-year partnership with Southern Water. Under a contract, Capital established a front-office operation for Southern Water.

“This expanded partnership with Southern Water demonstrates Capita’s expertise in transforming customer experience across all channels,” said Capita chief executive Jon Lewis.

“It also reflects our track record of supporting blue-chip clients in highly-regulated sectors such as utilities and financial services.”

In early trading, shares rose 2% to 167p.

The news comes a week after the company said it had been awarded a six-year £109mln contract with the Department for Education’s Standards and Testing Agency (STA).

Capita will manage the administration, processing and support for all primary school national curriculum assessment (NCA) tests in England.

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Thu, 19 Jul 2018 08:49:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/201130/capita-on-the-front-foot-as-it-announces-30mln-contract-win-with-southern-water-201130.html
<![CDATA[News - Capita shares gain as it sells Parking Eye business and announces contract win ]]> https://www.proactiveinvestors.co.uk/companies/news/200660/capita-shares-gain-as-it-sells-parking-eye-business-and-announces-contract-win-200660.html UK outsourcing firm Capita PLC (LON:CPI) has agreed to sell its parking management business as part of a turnaround plan that involves offloading non-core assets.  

Capita will sell Parking Eye to a vehicle owned by Macquarie and funds advised by MML Capital Partners for £235mln in cash.

The company said it expects to raise more than £400mln from non-core disposals this year, ahead of its £300mln target.  

“This transaction marks a further step in executing the strategy announced in April aimed at simplifying and strengthening the business to deliver future success,” said Capita chief executive Jon Lewis.

Last year Parking Eye generated revenue of £40mln and operating profit of £14mln.

Restructuring plan 

The disposal of Parking Eye comes a month after the group revealed it was selling its Supplier Assessment Services unit to funds affiliated with Warburg Pincus for £160mln.

READ: Capita jumps on MoD contract win, plus £160mln sale of non-core supplier assessment business

Lewis laid out his strategy to focus on core areas of the business in April after admitting the company was “too complex” and “too widely spread across multiple markets and services”, making it challenging to maintain a competitive advantage in every business. 

READ: Capita raises £681mln to help pay down debts

His plan was unveiled alongside the company’s full-year results, which revealed a wider loss after contracts were terminated without securing new ones to replace them.

READ: Capita unveils £701mln rights issue as it reports wider annual loss

In May, Capita raised £681.4mln for its rights issue designed to pay down debts as well as plugging a pension deficit and boosting investment.

Capita wins £109mln contract 

In a separate announcement on Thursday, Capita said it has been awarded a £109mln contract with the Department for Education’s Standards and Testing Agency (STA).

Under the six-year contract, Capita will manage the administration, processing and support for all primary school national curriculum assessment (NCA) tests in England. 

The group said the contract will cover the 2020 to 2024 test cycles and will begin in September 2019 after a “phased implementation and transition” from September of this year.

Capita will print, distribute and collate more than nine million test papers each year for key stage 1 and key stage 2 tests. It will also provide the phonics screening check and administer the marking of four million key stage 2 test papers annually.

Capita’s digital service will be supplied to 16,000 schools and 4,000 test markers, allowing users access a secure portal to review the status of the test process, obtain results and update and download records in one place.

“Capita is an established and experienced partner to the education sector and this contract further reinforces our strategy,” Lewis said. 

“We look forward to using our technology and service management capabilities to identify and deliver efficiencies and improvements ensuring both value for money and a positive experience for schools across England.”

Shares rose 4.5% to 168p in morning trading. 

ShoreCap retains 'hold' rating 

Shore Capital analyst Robin Speakman said the contract award is a "welcome win" for the company in the public sector. 

"However, we still caution that the public sector market for contracts remains subdued and is likely to remain so for the immediate future; Capita’s new contract flow still remains below its revenue and profit replacement rate and so continues to weigh on reported financials," the analyst said. 

Speakman said the disposal of Parking Eye is also welcome news.  ShoreCap left its rating at 'hold' and target price at 160p ahead of the group's interims on August 1.

"With financial results demonstrating a decline in financial results to present for a while yet, we retain a 'hold' stance for the present," Speakman said.

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Thu, 12 Jul 2018 08:33:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/200660/capita-shares-gain-as-it-sells-parking-eye-business-and-announces-contract-win-200660.html
<![CDATA[News - Government to bring in tougher contract terms for outsourcers following Carillion’s collapse ]]> https://www.proactiveinvestors.co.uk/companies/news/199568/government-to-bring-in-tougher-contract-terms-for-outsourcers-following-carillions-collapse-199568.html The UK government is to bring in tougher contract terms for outsourcers following the collapse of Carillion earlier this year, according to reports.

Carillion went bust in January after racking up large debts and losing money on contracts, which included building part of the HS2 high speed railway line and providing 32,000 school meals every day.

READ: Carillion collapse confirmed

Its demise left the government scrambling to find alternate option to cover the services which Carillion should have provided.

To avoid that happening again, MPs want to force those doing critical work for government departments to provide a “living will” agreement that would pass their work on to another supplier in an emergency.

Reuters also reported that the government will demand a number of key performance indicators be published, such as how much the contractor has paid suppliers, delivery times and feedback from customers.

The idea is to make taxpayer-funded services more transparent.

It’s not just Carillion that has struggled in recent years, fellow outsourcers Capita PLC (LON:CPI) and Mitie Group PLC (LON:MTO) have had to deal with stringent private and public sector budgets which has squeezed margins.

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Tue, 26 Jun 2018 09:38:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/199568/government-to-bring-in-tougher-contract-terms-for-outsourcers-following-carillions-collapse-199568.html
<![CDATA[News - Citigroup ups its target price for Capita, repeats ‘buy’ rating, thinks outsourcer could have reached its nadir ]]> https://www.proactiveinvestors.co.uk/companies/news/199311/citigroup-ups-its-target-price-for-capita-repeats-buy-rating-thinks-outsourcer-could-have-reached-its-nadir-199311.html Citigroup has increased its target price for outsourcing group Capita PLC (LON:CPI) to 190p from 160p to reflect lower debt forecasts and increases in earnings estimates and a repeated a ‘buy’ rating on the stock.

In response, in mid-morning trading, Capita shares were 0.9% higher at 163.5p.

READ: Capita jumps on MoD contract win, plus £160mln sale of non-core supplier assessment business

In a note to clients, analysts at the US investment bank said its forecast for the FTSE 250-listed firm’s net debt is now around £100mln  lower having raised its estimates for proceeds the Constructionline/ParkingEye disposals to £300mln from £200mln.

They said they have also upped the earnings per share estimate for the firm for 2019-2020 by around 1% following recent news of the Ministry of Defence’s military fire and rescue services contract win.

The analysts have also lowered their 2020 sector EV/EBITA discount for Capita shares to 10%-20% from 20%-30% to reflect reduced balance sheet risk following the agreed £160mln Constructionline disposal.

They concluded: “Earnings rebasement, a rebuilt balance sheet and another £105mln cost savings targeted post-2018 suggest that Capita should have reached its nadir.”

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Thu, 21 Jun 2018 10:19:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/199311/citigroup-ups-its-target-price-for-capita-repeats-buy-rating-thinks-outsourcer-could-have-reached-its-nadir-199311.html
<![CDATA[News - Capita jumps on MoD contract win, plus £160mln sale of non-core supplier assessment business ]]> https://www.proactiveinvestors.co.uk/companies/news/199104/capita-jumps-on-mod-contract-win-plus-160mln-sale-of-non-core-supplier-assessment-business-199104.html Capita PLC (LON:CPI) shares jumped 6% higher on Tuesday, lifted by two pieces of good news, with the group confirming an Ministry of Defence (MoD) contract win and a non-core disposal.

The FTSE 250-listed outsourcing group has agreed to sell its Supplier Assessment Services unit for £160mln in cash. The unit, which includes the Constructionline operation, is being bought by funds affiliated with Warburg Pincus. 

READ: Capita raises £681mln to help pay down debts

The group said the sale is in line with its strategy of simplifying its business and to focus on key growth markets. Capita added that it will use the injection of funds to reduce its indebtedness.

Jon Lewis, Capita's chief executive commented: “This transaction marks a further step in executing the strategy announced in April aimed at simplifying and strengthening the business to deliver future success and contributing to realising £300mln from non-core disposals in 2018."

The company noted that the unit being sold had underlying revenue and operating profit of £14mln and £6mln respectively last year, and it had gross assets valued at £26mln.

Outsourcing of military fire and rescue services

In a later brief separate announcement, Capita also acknowledged a recent statement by the MoD and confirmed that it has been selected as the winning tenderer for the Defence Fire and Rescue Project. The firm simply said: "Further details will be provided when appropriate."

In early afternoon trading, Capita shares were 6,1% higher at 161.6p.

The contract to outsource military fire and rescue services to Capita could prove controversial, however, with unions already having been warned over the move according to media reports.

The Forces Network website said that the Prospect union warned that the decision to press ahead with privatisation was wrong while lessons were still being learnt from the collapse earlier this year of engineering giant Carillion PLC (LON:CLLN).

And the website also reported that Unite national officer Jim Kennedy said: "There is absolutely no business case for these essential and highly dedicated workers to have their jobs outsourced and privatised. The Government remains addicted to the failed model of privatising and outsourcing."

   --  Adds MoD contract statement, share price  -- ]]>
Tue, 19 Jun 2018 07:47:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/199104/capita-jumps-on-mod-contract-win-plus-160mln-sale-of-non-core-supplier-assessment-business-199104.html
<![CDATA[News - Capita "still an enigma" but worth a dabble after the recent fund-raising ]]> https://www.proactiveinvestors.co.uk/companies/news/198526/capita-still-an-enigma-but-worth-a-dabble-after-the-recent-fund-raising-198526.html The little-loved outsourcing sector received a small boost on Friday as RBC Capital Markets nudged up its rating for Capita PLC (LON:CPI).

The broker has upgraded its forecasts to reflect the impact of the rights issue announced last month.

READ: Capita raises £681mln to help pay down debts​

The fund-raising has gone some way to address concerns over gearing while the risk of negative news flow has now been reduced by the introduction of what RBC thinks is a “credible turnaround plan”.

As a result of the above, RBC thinks the shares should outperform in the near-term, though it cautions “this won’t be a straight line recovery”.

Based on projected earnings for 2020, a price/earnings multiple of 9.6 “looks a compelling starting point for a re-rating”, the broker said, as it increased its target price to 200p from 185p.

RBC concludes that the company is “still an enigma” but if management can deliver against both margin and cash targets, it is worth getting on board at the current price.

The shares were up 3.4p at 153.45p in mid-morning trading.


 

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Fri, 08 Jun 2018 10:21:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/198526/capita-still-an-enigma-but-worth-a-dabble-after-the-recent-fund-raising-198526.html
<![CDATA[News - Capita raises £681mln to help pay down debts ]]> https://www.proactiveinvestors.co.uk/companies/news/197707/capita-raises-681mln-to-help-pay-down-debts-197707.html Capita PLC (LON:CPI) said it had an acceptance level of  97.25%, raising £681.4mln for its rights issue designed to pay down debts as well as plugging a pension deficit and boosting investment.

The FTSE 250-outsourcer said the rights issue of 1bn new shares, in which investors could acquire three new shares for each two already held at 70p each, an almost 50% discount to the closing price of 136.4p on May 24, had acceptances for 973.5mln shares.

READ: Capita unveils £701mln rights issue as it reports wider annual loss

In a later announcement, Capita announced that subscribers have been procured for the 27,535,611 new shares not taken up in the rights issue, representing approximately 2.75% of the total, at a price of 137p each.

The company initially planned to raise £700mln from investors to support its plan to simplify and strengthen the business.

The rights issue was announced in late April, when the company reported a pre-tax loss of £514.1mln for 2017 compared to a £89.8mln loss the previous year, mainly due to a £551.6mln goodwill impairment resulting from the termination of contracts, a deterioration in new business opportunities and its transformation costs.

In late afternoon trading, Capita shares were up 3.7% at 141.4p.

 -- Adds rump placement details, updates share price --

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Fri, 25 May 2018 11:05:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/197707/capita-raises-681mln-to-help-pay-down-debts-197707.html
<![CDATA[News - Capita unveils £701mln rights issue as it reports wider annual loss ]]> https://www.proactiveinvestors.co.uk/companies/news/195539/capita-unveils-701mln-rights-issue-as-it-reports-wider-annual-loss-195539.html Capita PLC (LON:CPI) said on Monday it plans to raise £701mln through a rights issue and unveiled a wider full year loss.

The fully underwritten rights issue of more than one billion new shares will be priced at 70p per share, representing a discount of about 56.2% to the group's closing price last Friday.

In January, the outsourcing company revealed plans to raise £700mln from shareholders later this year as it warned on 2018 profits and scrapped its dividend.

READ: Capita shares plunge as it warns on profits and announces £700mln rights issue

Capita said in a statement on Monday that proceeds from the rights issue would be used to pay down debt, execute its strategy and invest in the business. Net debt at the end of 2017 stood at £1.1bn.

Shares rose 11.2% to 177p in morning trading. 

“Key to the share price advance is investor relief that a £701m rights issue is fully underwritten, meaning various investment banks have guaranteed to take any of the new stock unwanted by shareholders, so there isn’t any doubt that it won’t raise all the desired money," said Russ Mould, investment director at AJ Bell.

“The new cash should help remove financial pressures on the company’s balance sheet and allow management to focus on finding ways to revive Capita’s fortunes. However, the business will still be under pressure to show positive results fairly quickly if it is to keep investors on side."

The strategy under new chief executive Jonathan Lewis is to simplify the company by selling off divisions and focusing on core areas.

The group expects proceeds of about £300mln from the disposal of non-core units in 2018. It made £445.4mln on the sale of Capita Asset Services businesses.

Annual losses steepen, revenues fall 

In 2017, Capita made a pre-tax loss of £514.1mln compared to a £89.8mln loss the previous year, mainly due to a £551.6mln goodwill impairment resulting from the termination of contracts, a deterioration in new business opportunities and its transformation costs, the company said in a separate statement releasing its results.

"Only last week the company renewed its contract with the BBC to collect the licence fee so while this week’s loss doesn’t make for pleasant reading, today’s announcement does appear to suggest that management have a turnaround plan that might work, and the confidence of shareholders in pulling it off," said Michael Hewson, chief market analyst at CMC Markets. 

READ: Capita receives welcome boost as it wins contract extension with BBC

Underlying pre-tax profit rose 43% to £383mln from £268.5mln on the back of contracts with The Co-operative Bank, Transport for London, Defence Infrastructure Organisation, the Department for Work and Pensions and the Data and Communications Company.

Revenue fell 3.1% on a reported basis to £4.2bn from £4.3bn while underlying revenue dropped 4.3% to £4.1bn from £4.3bn, reflecting declines in the public services partnerships, professional services, and digital and software services businesses.

Underlying like-for-like revenue, excluding results from discontinued operations, decreased 0.6%.

Cash flow and cost savings targets 

Free cash flow plunged to £37.7mln from £367.3mln on a reported basis, in part due to a low level of new business signed in 2016 and 2017.

The company did not recommend a final dividend and said it would resume payouts once it generates "sufficient sustainable" free cash flow. 

Capita is targeting post-tax free cash flow of at least £200mln in 2020. It is also aiming towards annualised cost savings of £175mln by the end of 2020.

Capita said it continues to expect underlying pre-tax profits in 2018 of £270mln to £300mln as trading in the first quarter met estimates. 

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Mon, 23 Apr 2018 07:55:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/195539/capita-unveils-701mln-rights-issue-as-it-reports-wider-annual-loss-195539.html
<![CDATA[News - Capita receives welcome boost as it wins contract extension with BBC ]]> https://www.proactiveinvestors.co.uk/companies/news/195284/capita-receives-welcome-boost-as-it-wins-contract-extension-with-bbc-195284.html Capita PLC (LON:CPI) shares gained as the company said it has won a contract extension to provide audience services to the British Broadcasting Corporation (BBC).

The deal will extend Capita’s contract with the BBC for an initial five years with a possible option for a further two years.

The news is a welcome boost for Capita after the outsourcing firm announced a major overhaul under new chief executive Jonathan Lewis following a series of profit warnings.  

Lewis, who has been at the helm of Capita since last December, is trying to simplify the business by selling off divisions after admitting the company was too widely spread across multiple markets.

Under the renewed contract with the BBC, Capita will continue to provide the public broadcaster with audience feedback, ideas for programme-making and new ways to encourage public participation.

The deal comes after Capita announced last week that Volkswagen Group UK has extended an 11-year customer service contract with the outsourcer by two years.

READ: Capita shares jump as Volkswagen extends customer services contract

Last month, Capita had failed to win a British Airways call centre contract following a period of exclusive talks.

Capita has provided the BBC with audience service since 1999.

Shares rose 2% to 148p in afternoon trading.

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Wed, 18 Apr 2018 14:47:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/195284/capita-receives-welcome-boost-as-it-wins-contract-extension-with-bbc-195284.html
<![CDATA[News - Capita shares jump as Volkswagen extends customer services contract ]]> https://www.proactiveinvestors.co.uk/companies/news/194646/capita-shares-jump-as-volkswagen-extends-customer-services-contract-194646.html Capita PLC (LON:CPI) shares leapt after saying Volkswagen Group UK has extended an 11-year customer service contract with the outsourcer by two years.

Volkswagen will continue to use Capita’s customer service support centre for its UK brands including Volkswagen, Audi, ŠKODA and SEAT.

The support centre offers customer care and technical services over the phone, on social media and online.

“The extension of our partnership demonstrates the continued success of our work with Volkswagen Group over many years,” said Mike Barnard, Capita’s executive director of the private sector.

“We look forward to continuing our successful relationship and delivering a consistent and comprehensive service to customers.”

Shares in Capita rose 5.2% to 139p in afternoon trading.

Capita and Volkswagen have been working together since 2006.

The announcement comes in the wake of Capita unveiling a profit warning and plans for a £700mln rights issue in a January trading update.

READ: Capita shares plunge as it warns on profits and announces £700mln rights issue

New chief executive Jonathan Lewis admitted that Capita was too widely spread across multiple markets and “significant change” was needed for the business.

The group is simplifying the business by selling off divisions, including the car park management arm ParkingEye and contractor registry Constructionline.

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Tue, 10 Apr 2018 14:34:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/194646/capita-shares-jump-as-volkswagen-extends-customer-services-contract-194646.html
<![CDATA[News - Capita shares rise as ShoreCap upgrades the stock and commends turnaround plan ]]> https://www.proactiveinvestors.co.uk/companies/news/192758/capita-shares-rise-as-shorecap-upgrades-the-stock-and-commends-turnaround-plan-192758.html Capita Group (LON:CPI) chief executive Jonathan Lewis is taking the right steps to put the business back on track but it’s going to take a while, according to Shore Capital.

The contractor is undergoing a major restructuring after issuing a profit warning and announcing a £700mln rights issue in January.

READ: Capita shares plunge as it warns on profits and announces £700mln rights issue

ShoreCap raised its rating on the stock to ‘hold’ from ‘sell’ with a target price of 152p.

“To be clear, we are fully behind CEO Mr Lewis’s strategy of restructuring the group, simplifying operations and refocusing upon a core of technology-based service solutions,” said ShoreCap analyst Robin Speakman.  

“We simply fear that the group’s complexity and past growth by acquisition strategy hides a myriad of issues that may cost more and take longer to resolve than can yet be judged with any great visibility. It could be a better outcome than we fear of course – repeat: we have no visibility.”

The restructuring includes selling off non-core divisions, including its car park management business ParkingEye and contractor registry Constructionline, with proceeds to be used to pay down debt and reinvest its core operations.

Rights issue to be dilutive to shareholders

Speakman said the financial restructuring and rights issue will be “significantly dilutive” to shareholders in order to attract new investors.

Another worry is a significant overhang from ‘unsold rights’ from investors unwilling to subscribe, he said.

The analyst noted media reports that bondholders of about £1.5bn in debt have drafted in advisers to protect their interests during talks over the forthcoming overhaul.

Speakman assumes bondholders are looking for a ring-fencing arrangement, potentially pressuring management further on the size of the rights issue. He expects the fund raise to go ahead regardless.

Capita has potentially bright future, says ShoreCap

“As a strategic supplier to UK government and, indeed, to private sector clients we do believe that the company does have a future, and once rebuilt with focus and integrity, potentially a bright one,” he added.

“Assessing and pricing such potential at present (ahead of the refinancing) looks impossible to us at present, but we accept that long-term value may emerge over the next few years with volatility likely in the short term to our eyes.

“We also feel that investors still holding the shares are likely taking such a long-term view, those with a mind to sell have probably done so by now.”

Capita’s shares have more than halved since its January profit warning. In Wednesday morning trade, shares edged up 2% to 155p.

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Wed, 07 Mar 2018 10:19:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/192758/capita-shares-rise-as-shorecap-upgrades-the-stock-and-commends-turnaround-plan-192758.html
<![CDATA[News - Capita shares rebound as Morgan Stanley moves to 'equal-weight' rating ]]> https://www.proactiveinvestors.co.uk/companies/news/191064/capita-shares-rebound-as-morgan-stanley-moves-to-equal-weight-rating-191064.html Capita PLC (LON:CPI) shares received a much-needed boost on Friday after Morgan Stanley raised its rating on the struggling outsourcer to ‘equal-weight’ from ‘underweight’.

The contractor on Wednesday announced a £700mln rights issue and said it would scrap its dividend as it warned on profits, sending its shares tumbling.

READ: Capita shares plunge as it warns on profits and announces £700mln rights issue

Jonathan Lewis, who started as Capita’s chief executive two months ago, said the group plans to sell off divisions to pay down debts and reinvest in its core operations.

The group expects 2018 underlying pre-tax profits to be lower at around £270mln to £300mln, below consensus forecasts of £380mln, due to contract delays, higher attrition, weak new sales and higher costs.

Capita's guidance provides 'limited visibility'

Morgan Stanley said the outlook for Capita’s estimates remains unclear until a strategic update later in the year and cut its target price on the stock to 180p from 460p.

“We continue to view Capita as a traditional BPO (business process outsourcing) provider that is competitively challenged, which justifies a discount to its wider peers,” it said.

“But with the shares now up with events, we move to equal-weight.”

Morgan Stanley expects Capita to report underlying pre-tax profit of £275mln, which is 30% below its estimates prior to the company’s profit earnings.

Capita’s guidance provides limited visibility as it assumes flat revenue and does not include any additional cost efficiencies or investment with the company saying “2018 will be a year of net investment” and 2019 “could be”, Morgan Stanley said.

Capita 'needs to develop strategy for digital transformation'

The company is trading at a 25% discount to its peers, the financial services firm added.

“We continue to believe that, like most sector peers, Capita needs to develop a co-ordinated strategy for digital transformation/automation,” Morgan Stanley said.

“We suspect it is accelerating investment in this, but also expect the market place to be changing quickly.”

Shares rose 5% to 166.2p in morning trading. 

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Fri, 02 Feb 2018 09:55:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/191064/capita-shares-rebound-as-morgan-stanley-moves-to-equal-weight-rating-191064.html
<![CDATA[News - Capita taking right steps to recovery but UK political turmoil weighs, say analysts ]]> https://www.proactiveinvestors.co.uk/companies/news/190987/capita-taking-right-steps-to-recovery-but-uk-political-turmoil-weighs-say-analysts-190987.html Capita PLC (LON:CPI) could be an “interesting recovery story” but it is too early to tell whether the new chief executive’s turnaround plan will bear fruit, according to analysts at Jefferies.

The outsourcing firm, which holds several contracts with the government, on Wednesday issued a profit warning and announced plans for a £700mln rights issue, to scrap its dividend and sell off non-core divisions.

READ: Capita shares plunge as it warns on profits and announces £700mln rights issue

The news sparked worries that it could face the same fate as collapsed contractor Carillion PLC (LON:CLLN).

Jonathan Lewis, who started as Capita’s chief executive two months ago, admitted that the company was “too complex” and “too widely spread across multiple markets and services”, making it challenging to maintain a competitive advantage in every business. 

“Capita could be an interesting recovery story but it is too opaque to model with conviction, management guidance has been unreliable, and perpetual UK political turmoil continues to weigh on the revenue outlook,” said Jefferies.

Jefferies downgrades Capita to 'hold'

The broker cut its rating on the stock to ‘hold’ from ‘buy’ and slashed its target price to 200p from 750p.

Capita now expects 2018 underlying pre-tax profits to be lower at around £270mln to £300mln, well below consensus forecasts of £380mln, due to contract delays, higher attrition, weak new sales and higher costs.

Revenue is expected to be flat compared to the previous year, which is ahead of consensus forecasts for a 204% decline.

“The new CEO may have kitchen-sinked expectations and front-end loaded investment costs but it’s difficult to prove at this juncture,” Jefferies said.

CEO on the right track 

The view of RBC Capital Markets is that Lewis is “doing all the right things” but weaker trading and the “more precarious” balance sheet mean he has had to raise capital before completing a full strategic review.

RBC left its rating at ‘sector perform’ but cut its target price to 185p from 500p.

Capita plans to use the proceeds of asset disposals to pay down net debt, which stands at £1.15bn.

But RBC said 2018 is going to be hit by lower EBITDA and £215mln spend on one-off items, including a £66mln settlement with the Financial Conduct Authority for failing to meet regulatory requirements with its Connaught fund as well as £130mln to unwind working capital and £130mln cash outflow on deferred income due to a lower level of new business.

“Even with the dividend cut, net debt would be up to £1.5bn, implying gearing of over 3.5x pre the pension,” RBC said.

Risk of continued market weakness 

RBC noted that management is trying to reduce cut costs through the suspension of the dividend, a rights issue and disposals.

“Whilst cost savings going forward should be a positive, there is the risk of continued market weakness, given Brexit and the UK political environment and rebid risk is also on the horizon,” it said.

After yesterday's 40% plunge, Capita shares were down another 14% in afternoon trading on Thursday at 156.65p.

 -- Updates share price -- 

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Thu, 01 Feb 2018 10:05:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/190987/capita-taking-right-steps-to-recovery-but-uk-political-turmoil-weighs-say-analysts-190987.html
<![CDATA[News - Capita collapse could create bigger headache than Carillion's demise ]]> https://www.proactiveinvestors.co.uk/companies/news/190914/capita-collapse-could-create-bigger-headache-than-carillion-s-demise-190914.html Capita PLC’s (LON:CPI) profit warning and £700mln rights issue has raised alarm bells on whether it could meet the same fate as fellow contractor Carillion PLC (LON:CPI).

Carillion went into liquidation earlier this month after failing to secure a rescue deal in talks with the government and its lenders following a series of profit warnings and mounting debt.

Like Carillion, Capita holds several contracts with the government.

Contacts include managing the licence fee for the BBC, the electronic tagging of criminals for the Ministry of Defence, operating the jobseeker’s allowance helpline and administering the teacher’s pension scheme.

Capita the biggest supplier of local government contracts

A potential collapse of Capita could create an even more of a headache for the public sector than Carillion since it is the biggest supplier of local government services in the UK, according to Tussell data.

On mornings like today @tussell_UK are the guys for the best data on UK public sector contracts. 226 awarded to Capita in last 2 years. More than ten times the number awarded to Carillion over the same period. pic.twitter.com/HmeHdR97Do

— Simon French (@shjfrench) 31 January 2018

“If Capita were to fail the ensuing political fallout would make Carillion look like a tea party,” said Michael Hewson, chief market analyst at CMC Markets.

Capita CEO's bold turnaround plan

But new chief executive, Jonathan Lewis, has a plan to turn around the business.

He acknowledged that Capita was “too complex” and “too widely spread across multiple markets and services” so needs to sell non-core parts of the business.

His plan also includes raising £700mln from shareholders later this year and suspending the dividend until the company generates a "sustainable free cash flow".

In a bid to reduce its pension deficit, the group is undertaking a triennial review of its current scheme. It expects the deficit to fall below the £381mln announced last summer following the review.

Investors will need to practice some patience, however, as Lewis said the overhaul of the business would take at least two years.

“This is a bold move by new CEO Jonathan Lewis and the fact that he thinks that this sort of restructuring is necessary, speaks volumes to the current sentiment around the outsourcing industry in the wake of Carillion’s insolvency,” Hewson said.

“Concerns over debt levels and pension deficits, along with the over-diversification of the business appears to have prompted this significant slim lining approach.”

Capita’s net debt at the end of fiscal year 2017 was around £1.15bn.

Profits hit by contract and volume attrition

The company warned that underlying profits in 2018 were likely to be between £270mln and £300mln, well below the £406mln expected by analysts.

"There is likely to be a significant negative impact upon profits from contract and volume attrition, the dropping out of one-off items... and increases in some cost items,” it explained.

"These headwinds are particularly expected to impact upon the financial performance of the Private Sector Partnerships, in both insurance services and customer management, public services partnerships and IT services division."

READ: Capita shares plunge as it warns on profits and announces £700mln rights issue

In reaction, Capita shares were down 41% to 202p in late morning trade.

Where Capita's problems began

Capita’s profit warning should not come as too much of a shock to the market since its problems have been building for quite some time.

In December, the company said the market for major contracts remained subdued, particularly in the public sector.

A month later it announced the loss of a major contract with pensions giant Prudential PLC (LON:PRU).

Mike van Dulken, head of Research at Accendo Markets, said today’s update will have been “painful” for the market and “may well sting a while longer”.

“However, it may yet prove a case of honesty being the best policy and short-term pain being necessary to ensure a successful turnaround and deliver long-term gains for loyal shareholders who’ve had it tough to say the least,” he said.

'We can't afford another Carilion', says trade union

Frances O'Grady, the general secretary of the Trades Union Congress (TUC), urged the government to step in to address the issues at Capita to avoid a collapse. 

“We can’t afford another Carillion," O'Grady said.

"The TUC is calling for an urgent risk assessment of all large outsourcing firms. It’s essential the government completes this quickly and is prepared to bring services and contracts in-house if they are at risk.”

Labour also called on the government to oversee the activities of Capita, which employs about 70,000 people in the UK.

Jon Trickett, the shadow minister for the Cabinet Office, said: "The Tories’ privatisation dogma risks lurching our public services from crisis to crisis, threatening jobs, taxpayers’ money and leaving people without the services they need."

He added: “The government must end its ideological attachment to private profit in public services and instead start putting the public interest first.”

 

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Wed, 31 Jan 2018 11:47:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/190914/capita-collapse-could-create-bigger-headache-than-carillion-s-demise-190914.html
<![CDATA[News - Capita shares plunge as it warns on profits and announces £700mln rights issue ]]> https://www.proactiveinvestors.co.uk/companies/news/190891/capita-shares-plunge-as-it-warns-on-profits-and-announces-700mln-rights-issue-190891.html Capita PLC (LON:CPI) shares tumbled more than 30% in morning trade after the troubled outsourcer warned on profits and announced plans for a rights issue and to scrap its dividend.

The news comes in the wake of the collapse of fellow contractor Carillion earlier this month, raising concerns that Capita faces the same fate.

READ: Carillion collapse: True scale of fundamental flaws being revealed, says Unite union

Shares dropped 35% to 225p at 8.20am.

Jonathan Lewis, who started as Capita’s chief executive two months ago, said “significant change” was required for the business.

“We are now too widely spread across multiple markets and services, making it more challenging to maintain a competitive advantage in every business and to deliver world class services to our clients every time,” he said.

In response, the group plans to sell off divisions, including its car park management business ParkingEye and contractor registry Constructionline. The proceeds will be used to pay down debts and reinvest in Capita’s core operations.

Net debt at the end of fiscal year 2017 was around £1.15bn.

Rights issue and profit warning

It plans to raise £700mln from shareholders later this year and will suspend its dividend until it generates a "sustainable free cash flow".

Capita said trading in the second half of 2017 was in line with expectations despite challenging market conditions.

However, it now expects 2018 underlying pre-tax profits to be lower at around £270mln to £300mln.

"There is likely to be a significant negative impact upon profits from contract and volume attrition, the dropping out of one-off items... and increases in some cost items,” Capita said.

"These headwinds are particularly expected to impact upon the financial performance of the Private Sector Partnerships, in both Insurance Services and Customer Management, Public Services Partnerships and IT Services division."

Capita tackles pension deficit

Capita is also undertaking a triennial review of its pension scheme to reduce its deficit, which stood at £381mln on June 30.

"Servicing a relatively high level of debt and nursing a large pension deficit is the main issue here, but if Capita can trim down its liabilities and focus on a handful of profitable businesses it could turn itself around," said David Madden, market analyst at CMC Markets.

Capita taking action to avoid same fate as Carillion

Madden added: "For some investors, today’s update from Capita will be reminiscent of Carillion as both companies have government contracts. Carillion collapsed but Capita Group are still in the game, and provided they undergo the necessary asset-stripping and capital raising, they could be on the road to recovery in the near-term."

Neil Wilson, senior market analyst at ETX Capital, said the similarities with Carillion are "all too clear" but Capita is taking steps to avoid the same fate.

"A rights issue to shore up the balance sheet – up to £700m, or about a third of the market cap before today – should certainly help," he said.

READ: Capita shares drop as it warns of 'subdued' outsourcing market

Capita's shares have lost around half their value in the past six months following a string of profit warnings.

In December the company said the market for major contracts remained subdued, particularly in the public sector.

A month later it announced the loss of a major contract with pensions giant Prudential PLC (LON:PRU).

READ: Capita shares drop as Prudential terminates contract for UK life and pensions administration

Like Carillion, Capita has several government contracts such as administering the pensions of Britain's teachers, supplying the Ministry of Defence with an electronic tagging service for criminals and running helplines for the Department for Work and Pensions. 

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Wed, 31 Jan 2018 08:33:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/190891/capita-shares-plunge-as-it-warns-on-profits-and-announces-700mln-rights-issue-190891.html
<![CDATA[News - Capita shares rally as M&S extends digital customer contact partnership by further five years ]]> https://www.proactiveinvestors.co.uk/companies/news/190234/capita-shares-rally-as-ms-extends-digital-customer-contact-partnership-by-further-five-years-190234.html Capita PLC (LON:CPI) saw its shares rally today on news high street retailer Marks & Spencer PLC (LON:MKS) has extended its longstanding digital customer contact partnership with the outsourcing group by a further five years.

In a statement, Capita said the contract renewal and expansion commences April 2018 and is worth approximately £70mln over the contract term.

READ: Capita shares drop as Prudential terminates contract for UK life and pensions administration

The FTSE-250 firm said the extension will see it continue to provide quality customer service support for marksandspencer.com across voice, online and webchat channels from its existing award-winning teams, including those based in Preston Brook in the UK.

As part of the new agreement, Capita will also extend its customer services support to M&S’s international online business in markets like the US, Australia and France.

READ: Capita shares drop as it warns of 'subdued' outsourcing market

Jonathan Lewis, Capita’s chief executive officer said: “Marks & Spencer’s extension and expansion of its partnership with us is testament to the strength of our longstanding relationship and our consistent delivery of high quality services rightly associated with this brand.

In mid morning trading, Capita shares were up 2%, or 9p at 397.5p, having dropped on Tuesday following news that financial services blue chip Prudential PLC (LON:PRU) has decided to transfer the administration of its UK life and pensions business to a new supplier on July 31.

Capita had said it expects the Prudential contract to contribute revenue of around £80mln in 2017. The group said it will continue to administer Prudential's international operations.

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Thu, 18 Jan 2018 10:38:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/190234/capita-shares-rally-as-ms-extends-digital-customer-contact-partnership-by-further-five-years-190234.html
<![CDATA[News - Capita shares drop as Prudential terminates contract for UK life and pensions administration ]]> https://www.proactiveinvestors.co.uk/companies/news/190093/capita-shares-drop-as-prudential-terminates-contract-for-uk-life-and-pensions-administration-190093.html Capita PLC (LON:CPI) saw its shares shed 5% on Tuesday after the outsourcing group announced that Prudential PLC (LON:PRU) has decided to transfer the administration of its UK life and pensions business to a new supplier on July 31.

In a statement, the FTSE 250 listed outsourcing group said Prudential has decided to terminate the contract as part of a wider customer and technology transformation programme.

READ: Capita shares drop as it warns of 'subdued' outsourcing market

The company noted that it expects the Prudential contract to contribute revenue of around £80mln in 2017.

Capita said it will continue to administer Prudential's international operations.

The group also said the contract termination is unrelated to previously disclosed discussions with a separate, undisclosed life and pensions client, which remain ongoing.

In afternoon trading, Capita shares were down 5%, or 22p at 398p.

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Tue, 16 Jan 2018 10:13:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/190093/capita-shares-drop-as-prudential-terminates-contract-for-uk-life-and-pensions-administration-190093.html
<![CDATA[News - Capita shares drop as it warns of 'subdued' outsourcing market ]]> https://www.proactiveinvestors.co.uk/companies/news/188791/capita-shares-drop-as-it-warns-of-subdued-outsourcing-market-188791.html Capita PLC (LON:CPI) shares fell after reporting a decline in its bidding pipeline and saying the market for major contracts remained subdued, particularly in the public sector.

The British outsourcing company which issued a string of profit warnings in the second half of last year, said in a trading update for the year to date, that its 2017 results would include a number of one-off costs.

The one-off costs include a settlement with the Financial Conduct Authority over its connection to the collapsed Connaught Income Series 1 fund, an impairment for a contract with a major life and pensions client as well as a number of asset write downs and impairments in relation to past acquisitions that have experienced difficult trading.

READ: Capita's target price lopped by Citi after Connaught settlement

In early afternoon trading, Capita shares had dropped 12.4%, or 57.9p to 408p.

The bid pipeline stood at £2.5bn, compared to the £3.1bn reported in September. 

The group warned that a higher level of contract and volume attrition could impact the performance of its public sector partnerships division in 2018.

The IT services division improved on the back of cost cuts but profits are expected to be slightly lower in the second half due to the non-recurrence of a £9mln one-off supplier settlement.

The end of two major software licences in the second half of last year is expected to lead to a decline in profits in the digital and software solutions unit.

Second half estimates unchanged

Capita said it still continues to expect underlying profits, excluding new contracts and restructuring costs, to rise modestly in the second half of this year. 

READ: Capita appoints former Amec Foster Wheeler boss Jon Lewis as chief executive

The company secured major contracts with an aggregate total value of £471mln in the year to date.

Jonathan Lewis, who replaced Andy Parker as chief executive this month, said he plans to “focus the business and allocation of capital and resources on the markets which offer the best growth prospects.”

He added the company would work to improve cost competitiveness and recharge its sales performance.

Capita said it will incur restructuring charges of around £18mln this year but expects £57mln in cost savings by the end of 2018. 

What analysts think

UBS said the restructuring costs will hit consensus forecasts for pre-tax profit of £401mln in 2017.

The bank also sees market estimates for 2018 pre-tax profit of £417mln, falling by mid-single digits as the market remains challenging with new contract wins and the bid pipeline reducing. It left its rating at 'neutral' with a target price of 466p. 

Shore Capital repeated a 'sell' rating and target price of 465p, citing a "challenging environment".

"We see little positive in Capita’s full year update this morning, with only ‘thin’ guidance for the likely performance of the group for FY2018F," said ShoreCap analyst Robin Speakman.

 -- Updates share price --

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Thu, 14 Dec 2017 09:13:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/188791/capita-shares-drop-as-it-warns-of-subdued-outsourcing-market-188791.html
<![CDATA[News - Capita's target price lopped by Citi after Connaught settlement ]]> https://www.proactiveinvestors.co.uk/companies/news/187148/capita-s-target-price-lopped-by-citi-after-connaught-settlement-187148.html Citigroup remains cautious on the turnaround story of cash-strapped outsourcing giant Capita Group PLC (LON:CPI).

The US bank kept its neutral stance on the stock but lowered the target price to 535p from 640p, saying it expects the recovery process to be lengthy.

Shareholders should be prepared for “further earnings rebasement” – what you and I would probably call profit warnings.

EPS risk remains to the downside, says new CEO

“Despite a clear cost savings narrative, weak bidding activity levels, elevated margins (relative to our perception of current BPO [business process outsourcing] available returns) and likely strategic investments under the new CEO suggest EPS risk remains to the downside,” opined Citi’s Ed Steele.

On Friday, Capita agreed a full and final settlement of £66mln with the Financial Conduct Authority (FCA) regarding the Connaught Income Series 1 Fund.

Capita Financial Managers (CFM) was the operator of the fund until September 2009, and in the FCA’s judgement, did not meet all of its regulatory requirements in the period April 2008 to September 2009.

The settlement was £29mln higher than Citi had modelled in its target price forecast.

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Mon, 13 Nov 2017 10:08:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/187148/capita-s-target-price-lopped-by-citi-after-connaught-settlement-187148.html
<![CDATA[News - Capita appoints former Amec Foster Wheeler boss Jon Lewis as chief executive ]]> https://www.proactiveinvestors.co.uk/companies/news/185323/capita-appoints-former-amec-foster-wheeler-boss-jon-lewis-as-chief-executive-185323.html Capita Group PLC (LON:CPI) has appointed former Amec Foster Wheeler PLC (LON:AMFW) boss Jon Lewis as its chief executive to lead the turnaround of the struggling outsourcer.

Lewis has served as chief executive of Amec for the past year and has left following the completion of the UK oil services company's takeover by John Wood Group PLC (LON:WG), which was announced yesterday. He also spent 20 years at oilfield services firm Halliburton, including heading the Landmark software business.

READ: Capita drops as first half underlying revenue declines although profits rise, restructuring on track

Lewis will join Capita on December 1, allowing Nick Greatorex to resume his position as finance director.

Greatorex, who stepped in following the departure of Andy Parker in March, will continue to serve as interim chief executive until November 30.

Parker left the company in the middle of its restructuring as it reported a sharp decline in annual profit that was well below the group’s expectations despite two profit warnings.

READ: Jefferies believes that although Capita is ”deeply unloved”, its risk/reward is slowly improving Lewis determined to turn around business

“There is work to do to complete the transformation of Capita and I am determined to make the business and its value propositions stronger for our employees, customers and shareholders, and return this great company to growth,” Lewis said.

Capita chairman Ian Powell said Lewis has a strong track record of growing high value, technology-enabled services businesses through securing and developing major client relationships in both the private and public sectors.

“Jon is a proven, successful business leader with the ideal blend of experience to lead the transformation of Capita,” Powell said.

Shares in Capita rose 3.47% to 581.50p in morning trading. 

Lewis a positive addition to Capita, says UBS

UBS said while the CEO sucession has taken a long time, it is a positive that Lewis will start in December. The bank believes his experience with turnarounds and long-term customer contracts will be helpful to Capita.

"That said, after a long career in oil & gas the move to Capita's BPO (business process outsourcing) markets across many customer segments will be a new step," UBS said. 

"However Ian Powell, Capita's chairman, has highlighted the 10 years Lewis spent in and running the 'Landmark' software business, where clearly there is more overlap with Capita's activities."

UBS added that market conditions remain challenging, and while a restructuring is underway it expects the new CEO to come back with a reinvigorated strategy.

"It remains to be seen if a strategic review can be completed by the fiscal year 2017 results in March 2018, but previous guidance has been for a return to growth from fiscal year 2018."

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Tue, 10 Oct 2017 08:16:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/185323/capita-appoints-former-amec-foster-wheeler-boss-jon-lewis-as-chief-executive-185323.html
<![CDATA[News - Capita drops as first half underlying revenue declines although profits rise, restructuring on track ]]> https://www.proactiveinvestors.co.uk/companies/news/184355/capita-drops-as-first-half-underlying-revenue-declines-although-profits-rise-restructuring-on-track-184355.html Capita PLC (LON:CPI) saw its shares drop 10% today after the under-pressure outsourcing group saw its first half underlying revenue decline, although profits rise and it said its restructuring is on track along with its hunt for a new chief executive.

In early morning trading, Capita shares topped the FTSE 250 fallers list, down 10.5%, or 68p to 576p.

READ: Capita up after £888mln price for disposal of asset services business "better than expectations"

Reporting half year results for the 6 months to 30 June 2017, Capita said its underlying revenue fell by 3% to £2.07bn, while its underlying pre-tax profit jumped by 46% to £195mln and its major contract win rate was one in two, up from one in three in 2016.

Capita - which has been hit by a Brexit-induced slowdown -  added that pre-tax profit before significant new contracts and restructuring was expected to rise modestly in the second half, compared to the first half of 2017.

READ: HSBC provides pointers for any new Capita CEO as they upgrade their rating for the outsourcer to 'buy'

Nick Greatorex, Capita’s interim CEO, commented: “In the first half of 2017, we made good progress on executing the plans laid out at the end of last year to reposition the Group: we announced the sale of our Asset Services businesses, completed the disposal of our specialist recruitment business and commenced a number of cost initiatives.”

He added: “We remain confident that these actions are making Capita a simpler business, well positioned for the future under new leadership."

The group is paying an unchanged interim dividend of 11.1p.

 -- Adds share price --

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Thu, 21 Sep 2017 07:49:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/184355/capita-drops-as-first-half-underlying-revenue-declines-although-profits-rise-restructuring-on-track-184355.html
<![CDATA[News - Capita up after £888mln price for disposal of asset services business "better than expectations" ]]> https://www.proactiveinvestors.co.uk/companies/news/179817/capita-up-after-888mln-price-for-disposal-of-asset-services-business-better-than-expectations--179817.html Capita PLC (LON:CPI) saw its shares gain around 3% in mid-morning trading following news after-hours on Friday of the £888mln disposal of the outsourcer’s asset services business, a price analysts at UBS called “better than expectations.”

In a note to clients, the Swiss bank’s analysts said: "This disposal had been well-flagged but the sale price is better than expectations (UBSe c£700m, c11x EBITA).”

READ: HSBC provides pointers for any new Capita CEO as they upgrade their rating for the outsourcer to 'buy'

Capita had revealed in December that it was seeking a buyer for its asset services division, which commentators had said could fetch up to £600mln.

The UBS analysts added: “We therefore see two positives: i) this disposal is a key step in Capita's turnaround plan, significantly de-gearing the balance sheet, reducing investor concern and giving scope for reinvestment; we estimate Capita may now finish FY17 at c1.6x ND/EBITDA vs. target 2.0-2.5x; ii) net of transaction costs, the excess proceeds of c£110m represent a c2% accretion to Capita's equity.”

In its brief statement on Friday, Capita said that, upon completion of the sale - expected in the fourth quarter - after the deduction of transaction expenses of approximately £72mln, the net cash proceeds are intended to be used to reduce indebtedness.

Disposal makes Capita a leaner business with a stronger balance sheet

Andy Parker, Capita’s chief executive – who in March announced his intention to step-down this autumn – said: “We have achieved an attractive price and the reduction in leverage is significant and ensures that Capita can fully focus on the pursuit of what it does best: continuing to deliver outstanding services to our clients and their customers.”

He added: “ The disposal of CAS, alongside our other initiatives, makes Capita a leaner business with a stronger balance sheet, better placed to return to profitable, sustainable growth.”

At the end of May, market rumours had also suggested that the under-pressure outsourcing group was in advanced talks about the sale of its recruitment division.

Sky News reported that the FTSE 250-listed firm was in exclusive negotiations to sell the division – which handles recruitment activity in areas such as social care, IT, education and energy – to specialist turnaround investor, Endless.

However, no confirmation on the discussions has come from Capita, which issued a fairly reassuring update on June 13 saying overall trading in the year to date is in line with expectations, and that it has also drawn up a shortlist of “strong candidates” to replace Parker.

READ: Capita says overall trading in line with expectations

UBS’s analysts noted that in a previous note on June 17 following Capita’s trading update they had “identified the steps that we believe Capita needs to go through to reform in the eyes of investors: de-gear the balance sheet, deliver cost savings targets, announce a new CEO, re-base accounting, and re-invest in technology to drive growth for the mid-term.”

They said: “This disposal is clearly a positive step, but there remains much more to be done. We also note that the positive share price performance recently, and particularly since the solid trading update, suggests some of this momentum may already be being priced in.

UBS reiterated a ‘neutral’ stance and price target of 580p on Capita shares.

In mid-morning trading, Capita shares on the FTSE 250 index were 2.8%, or 19.5p higher at 711.0p.

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Mon, 26 Jun 2017 10:45:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/179817/capita-up-after-888mln-price-for-disposal-of-asset-services-business-better-than-expectations--179817.html
<![CDATA[News - HSBC provides pointers for any new Capita CEO as they upgrade their rating for the outsourcer to 'buy' ]]> https://www.proactiveinvestors.co.uk/companies/news/179608/hsbc-provides-pointers-for-any-new-capita-ceo-as-they-upgrade-their-rating-for-the-outsourcer-to-buy--179608.html Analysts at HSBC have penned an open letter to those seeking the role of chief executive at troubled outsourcing group Capita PLC (LON:CPI) - the missive also forms the basis of an upgrade to the bank's rating for the stock.

They kick-off by warning: “Under the stewardship of Rod Aldridge, Paddy Doyle, and Paul Pindar, Capita grew and changed rapidly. It became complex. As new CEO of Capita this complexity will be your foe.”

READ: Capita says overall trading in line with expectations, has shortlist of “strong candidates" for CEO job

Simplifying revenue recognition (and enacting broader accounting changes), streamlining the constituent businesses and delivering cost savings will help with the turn-around, they add.

So will learning to navigate the local and national political landscape, with government backing key to the massive public-sector contracts from which Capita has traditionally made a great deal of its money.

New Capita boss will be rewarded by the market for simply outlining a “solid plan”

“Capita is a good business, it creates process solutions for the public and the private sector, and there will be demand,” the HSBC analysts contend.

“Focus on de-cluttering, simplifying, and understanding the risks inherent in long contracts, and complex accounting. 

“Understand remuneration structures of bid teams, what are you paying them to do? You can sustainably improve the business and the market’s perception of it.”

They conclude by saying the new Capita boss will be rewarded by the market for simply outlining a “solid plan”. 

“If you deliver upon it, with solid simple execution, this will be sustained,” they go on.

So fervent are they about Capita's potential the team at HSBC upgraded its recommendation to ‘buy’ and upped its price target to 820p a share from 590p.

“We think reflects our more conservative estimates, the political risk, and the level of execution skill that will be required,” the analysts say. 

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Wed, 21 Jun 2017 10:13:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/179608/hsbc-provides-pointers-for-any-new-capita-ceo-as-they-upgrade-their-rating-for-the-outsourcer-to-buy--179608.html
<![CDATA[News - Jefferies believes that although Capita is ”deeply unloved”, its risk/reward is slowly improving ]]> https://www.proactiveinvestors.co.uk/companies/news/179451/jefferies-believes-that-although-capita-is-deeply-unloved-its-riskreward-is-slowly-improving-179451.html Jefferies International believes that although struggling outsourcer Capita PLC (LON:CPI) is ”deeply unloved”, the risk/reward for the group is slowly improving, leading the broker to upgrade its rating for the stock.

In a note to clients, following the FTSE 250-listed firm’s recent trading update, the US broker raised its rating on Capita to ‘buy’ from ‘hold’ after boosting their target price to 750p from 465p.

In early trading this morning, having posted a 15% share price leap after its AGM update on June 13, Capita shares were 3.6%, or 23.5p higher at 669.0p.

READ: Capita says overall trading in line with expectations

Jefferies analysts said:  “There is evidence of change under the Chairman, a full price for the CAS (Capital Asset  Services) disposal would derisk the balance sheet, IFRS15 is benign, and equity markets seem willing to back management turnarounds at a very early stage.”

They added: “With the UK in perpetual political turmoil, trading will remain difficult but lowly valuation multiples underappreciate self-help.“

In its recent trading update,  Capita said its overall trading in the year to date has been in line with expectations, and added that it has also drawn up a shortlist of “strong candidates” to replace its departing chief executive, Andy Parker.

READ: Capita boss quits as outsourcer reports drop in full year profits

The group announced in March that Parker is to depart in the autumn, at the same time as its reported a 33% drop 2016 pre-tax profit to £74.8mln, impacted by weak revenues in both its recruitment and IT services businesses, plus a £50mln write-down of assets.

Capita also lost its blue chip status in March, being demoted from the FTSE 100 index.

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Mon, 19 Jun 2017 09:38:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/179451/jefferies-believes-that-although-capita-is-deeply-unloved-its-riskreward-is-slowly-improving-179451.html
<![CDATA[News - Capita boosted by 'positive profits warning', with no bad news proving good news for an outsourcer once again ]]> https://www.proactiveinvestors.co.uk/companies/news/179163/capita-boosted-by-positive-profits-warning-with-no-bad-news-proving-good-news-for-an-outsourcer-once-again-179163.html It was another day, another outsourcing company showing strong gains after an update today, with Capita PLC (LON:CPI) following on from the post-results bounce by Mitie Group PLC (LON:MTO) on Monday.

Like Mitie, Capita’s 15% share price leap came after the group’s AGM statement and trading update showed no new bad news after a turbulent past year for the firm which is one of the largest private sector employers in UK.

READ: Capita says overall trading in line with expectations

After big impairment write-downs on historic contracts, Capita reported a 33% drop in 2016 profits in March, announced that its chief executive Andy Parker was to step down this autumn, and lost its blue chip status around the same time.

But the FTSE 250-listed firm said today its overall trading in the year to date is in line with expectations, and added that it has also drawn up a shortlist of “strong candidates” to replace its departing chief executive.

Mike van Dulken, head of research at Accendo Markets, pointed out that Capita’s management has been able to upgrade March’s forecast for its first-half performance to “no worse than” the second half of 2016  - a period chock full of profits warnings - as opposed to “weaker than”.

“A positive profits warning if you like, despite higher costs and excluding write-downs and disposals,” the markets commentator said.

READ: Capita boss quits as outsourcer as it reports drop in full year profits

“Add to this an outlook for steadily improving profitability in the second half and beyond thanks to successful implementation of initiatives that began last year to slim the group, coupled with reduced attrition rates, and the investor response is understandable,” van Dulken continued.

“Progress on the shortlist for a new CEO is also welcome, as is a smooth start for new contracts with Mobilom-Debitel and Three UK.”

Van Dulken concluded: “The shares have broken out to trade fresh 2017 highs today, making a bullish test of a 200-day moving average not traded above since early December 2015.

“Is this the turnaround we’ve all been waiting for?”

In late afternoon trading, Capita shares topped the FTSE 250 leader board, up 15.6%, or 86.0p at 636.5p.

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Tue, 13 Jun 2017 15:13:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/179163/capita-boosted-by-positive-profits-warning-with-no-bad-news-proving-good-news-for-an-outsourcer-once-again-179163.html
<![CDATA[News - Capita says overall trading in line with expectations, has shortlist of “strong candidates" for CEO job ]]> https://www.proactiveinvestors.co.uk/companies/news/179122/capita-says-overall-trading-in-line-with-expectations-has-shortlist-of-strong-candidates-for-ceo-job-179122.html Capita PLC (LON:CPI) saw its shares leap higher this morning as the outsourcing group said its overall trading in the year to date is in line with expectations, and added that it has also drawn up a shortlist of “strong candidates” to replace its departing chief executive, Andy Parker.

In an AGM statement and trading update, the FTSE 250-listed group said the turnaround of its IT Services business “is progressing better than expected, with improving profitability following the restructuring of the divisional management team and operating model”.

READ: Capita boss quits as outsourcer is demoted from FTSE 100 and reports drop in full year profits

It said there are also “steady signs of improvement” in Capita Europe, its customer management operations in Germany and Switzerland."

However, the firm added, trading across its property, employee benefits consulting and learning services operations is yet to improve.

In early trading, Capita shares jumped over 13%, or 72.5p higher to 623.0p.

Good progress on strategic initiatives

AJ Bell investment director, Russ Mould said: ““Capita is making good progress on the strategic initiatives it laid out at the end of last year which aim to create a simpler business. The new divisional management and market-facing organisation structure has created greater renewed focus on sales, consistent operational performance and customer service.

He added: “Investors will be encouraged that the group is also on track for sustainable profitable growth in 2018 and beyond.”

Capita said its bid pipeline is currently £3.8bn, and added that it is seeing good levels of activity in the private sector, particularly in financial services, transport and telecoms.

Confirming recent media coverage, the group also announced it has “entered a period of exclusive engagement with British Airways to explore forming a potential partnership to support its global customer contact operations, which currently handles approximately 9.5 million calls per year.”

The firm said it continues to expect “the majority of sales decisions by value to come in the second half of this year.”

First half performance to be no lower than the second half of 2016

It reiterated that, taking into consideration accounting changes, it expects its first half performance to be no lower than the second half of 2016, excluding the write-down of accrued income and potential impact from disposals.”

It concluded: “We continue to expect profitability to improve in the second half, reflecting the cumulative benefit from performance improvement initiatives and lower attrition, and our current view that the trading businesses will continue to steadily improve.”

In March, Capita reported a 33% drop in 2016 pre-tax profit to £74.8mln, impacted by weak revenues in both its recruitment and IT services businesses, plus a £50mln write-down of assets.

READ: Capita plans asset sales as it cuts its profit forecast once again

The group also announced that its chief executive Andy Parker was to step down, and lost its blue chip status in March as well. Parker is due to remain in the post until this autumn.

Capita also said it is making “good progress in the search to select a new Chief Executive and the selection process is moving forward with a shortlist of strong candidates.”

The group is one of the largest private sector employers in UK, and has a global workforce of about 73,000.

 -- Adds share price, analyst comment --

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Tue, 13 Jun 2017 07:31:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/179122/capita-says-overall-trading-in-line-with-expectations-has-shortlist-of-strong-candidates-for-ceo-job-179122.html
<![CDATA[News - Capita shares jump on rumours it is in advanced talks about the sale of its recruitment division ]]> https://www.proactiveinvestors.co.uk/companies/news/178565/capita-shares-jump-on-rumours-it-is-in-advanced-talks-about-the-sale-of-its-recruitment-division-178565.html Capita PLC (LON:CPI) saw its shares jump higher today as market rumours suggested that the under-pressure outsourcing group is in advanced talks about the sale of its recruitment division.

Sky News reported late yesterday that the FTSE 250-listed firm is in exclusive negotiations to sell the division – which handles recruitment activity in areas such as social care, IT, education and energy – to specialist turnaround investor, Endless.

READ: Capita plans asset sales as it cuts its profit forecast once again

Talks are understood to value Capita Specialist Recruitment at roughly £25mln, Sky News said, according to people close to the sale process.

In reaction to the rumour, Capita shares on the FTSE 100 index were ahead 3.4%, or 19p at 586p at lunchtime.

The disposal chatter follows other restructuring moves at the group, which delivered a series of profit warnings last year, with Capita revealing in December that  it was  seeking a buyer for its asset services division, which could fetch up to £600mln.

READ: Capita boss quits as outsourcer is demoted from FTSE 100 and reports drop in full year profits

In March, Capita reported a 33% drop in 2016 pre-tax profit to £74.8mln, impacted by weak revenues in both its recruitment and IT services businesses, plus a £50mln write-down of assets.

The group also announced that its chief executive Andy Parker was to step down, and lost its blue chip status in March as well.

Although Parker is due to remain in the post until this autumn, no replacement chief executive has yet been announced.

Capita is one of the largest private sector employers in UK, and has a global workforce of about 73,000.

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Wed, 31 May 2017 12:50:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/178565/capita-shares-jump-on-rumours-it-is-in-advanced-talks-about-the-sale-of-its-recruitment-division-178565.html
<![CDATA[News - Capita boss quits as outsourcer is demoted from FTSE 100 and reports drop in full year profits ]]> https://www.proactiveinvestors.co.uk/companies/news/174093/capita-boss-quits-as-outsourcer-is-demoted-from-ftse-100-and-reports-drop-in-full-year-profits-174093.html Capita PLC (LON:CPI) has today announced the departure of chief executive Andy Parker alongside a 33% drop in full year profit, a day after the outsourcing group was ejected from the FTSE 100.

Parker, who has been with Capita for the past 16 years, will step down later this year to “pursue the next phase of his career” once a successor is found.

“2016 has been a difficult year for Capita but the company is now a simpler, more focussed group with a clear service offering and growth strategy, and a plan to achieve a stronger balance sheet,” Parker said in a statement.

“We have achieved a great deal but going forward it is time for a new leader to take Capita through the next steps to renewed and sustainable organic growth.”

The news comes after indexes compiler FTSE Russell announced yesterday that the group would be demoted to the FTSE 250 as part of a quarterly reshuffle. Capita has lost 40% of its value in the past 12 months and has downgraded its profit forecasts twice in three months at the end of 2016.

Profits drop ...

Capita today posted pre-tax profits of £74.8mln on a reported basis in the year to 31 December 2016, down from £112.1mln the previous year.

Revenue rose to £4.9bn from £4.8bn as a steady performance in the digital and software solutions division was offset by organic declines in the specialist recruitment, property, and technology and enterprise solutions businesses.

The dividend was left at 31.7p while free cash flow rose to £40.9mln from £304mln and net debt fell to £1.8bn from £1.9bn.

Major contract wins rose to £1.3bn from £1.8bn, including 46% new business and 54% extensions and renewals.

The group said the uncertainty surrounding last June’s Brexit vote meant there were fewer opportunities coming to the market, particularly in government contracts, and delays in client decision making.

“Although the referendum decision may continue to limit central government activity in 2017, we expect new opportunities to emerge over the medium term, as the UK's administrative responsibilities increase over time,” Capita said in a statement.

Return to growth ...

Capita expects to return to growth in 2018 as it undergoes a restructuring and completes disposals this year.

The group has proposed the sale of its asset services businesses.

Capita said it has received “good interest” for the businesses and the disposals are likely to be completed this year, helping to strengthen the balance sheet.

For fiscal year 2017, Capita expects a similar trading performance to 2016 before the impact in pension charges. The first half of 2017 is likely to face the same headwinds it faced in the second half of 2016, Capita said.

Peel Hunt analyst Christopher Bamberry said: "The 2016 final results are in line with expectations. With the revenue headwinds entering 2017, the operational challenges and constrained balance sheet, we remain wary of investing in Capita despite the shares trading on 9.4x price-earnings ratio and yielding 5.6%." 

Peel Hunt reitered a 'reduce' rating and target price of 466p. 

Shares fell 9.12% to 513.50p in morning trading.

-- Adds broker comment, share price reaction -- 

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Thu, 02 Mar 2017 07:37:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/174093/capita-boss-quits-as-outsourcer-is-demoted-from-ftse-100-and-reports-drop-in-full-year-profits-174093.html
<![CDATA[News - Outsourcing group Capita takes £50mln impairment after writing-down historic contracts ]]> https://www.proactiveinvestors.co.uk/companies/news/173444/outsourcing-group-capita-takes-50mln-impairment-after-writing-down-historic-contracts-173444.html Under-pressure outsourcing group Capita Group PLC (LON:CPI) will lose around £40mln of income after writing-down the value of a number of historic contracts although it said that aside from that trading is in line with the guidance it gave in December.

The FTSE 100-listed firm, which downgraded its profit forecasts twice in three months at the end of 2016, said assets of around £50mln will be written off as a non-underlying charge.

It added that accrued income of around £40mln will also be written down as a charge.

The group said the date back to 2009, with the majority relating to the period between 2012 and 2014.

In a statement, Capita said: “These impairments will have no adverse impact on cash or future trading.”

It added: “Excluding the impact of accrued income written down, our guidance regarding trading performance for 2016 remains as last stated on 8 December 2016.”

But Shore Capital analyst Robin Speakman said: “We remain concerned over further write downs pertaining to the c£2.2bn of goodwill from acquisitions on Capita’s balance sheet and over implications for the group’s shareholder return strategy.”

He repeated a ‘sell’ rating on Capita.

In opening deals, Capita shares shed over 3%, or 16.9p at 497.1p.

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Tue, 21 Feb 2017 08:11:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/173444/outsourcing-group-capita-takes-50mln-impairment-after-writing-down-historic-contracts-173444.html
<![CDATA[News - Capita? More like Decapita, as City slashes price targets ]]> https://www.proactiveinvestors.co.uk/companies/news/170466/capita-more-like-decapita-as-city-slashes-price-targets-170466.html Even when they were coining it, outsourcing firms were not much loved and now it looks like investor sentiment is also turning sour.

Broker Jefferies admitted today it got it wrong on Capita PLC (LON:CPI).

It has downgraded the outsourcing firm to ‘hold’ following last week’s profit warning.

The group’s working capital looks weak, despite lower revenue, and the pipeline is thinning out, Jefferies notes.

Proposed asset disposals would beef up the balance sheet, but carry execution risk, the broker argues.

“Management are under considerable pressure, and we are concerned about the number and public profile of underperforming contracts,” the City firm confessed.

“Until visibility improves we downgrade from Buy to Hold and will revisit subject to working capital, bid pipeline and disposal momentum over the next 3-6 months,” Jefferies said.

The price target was hacked from 815p to 465p.

Peel Hunt has also stuck the boot into Capita, cutting its price target from 657p to 479p.

The shares look cheap, trading on less than eight times projected earnings.

The dividend yield, at 7% or so, also looks enticing.

Nevertheless, the broker says it would remain wary of investing in Capita.

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Wed, 14 Dec 2016 10:00:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/170466/capita-more-like-decapita-as-city-slashes-price-targets-170466.html
<![CDATA[News - Capita plans asset sales as it cuts its profit forecast once again ]]> https://www.proactiveinvestors.co.uk/companies/news/170173/capita-plans-asset-sales-as-it-cuts-its-profit-forecast-once-again-170173.html Capita PLC (LON:CPI) has cut its full-year profit forecast for the second time in three months, with the Brexit vote continuing to take a toll on outsourcers, and said it plans to sell a raft of assets in a bid shore up its tattered balance sheet.

The group, which recruits for the army and NHS, said it now expects underlying pre-tax profit before tax to be at least £515mln, well below a forecast made in September of between £535mln and £555mln.

That September guidance was already more than 10% down on the £614mln it had previously forecast.

READ: Capita's September warning

Capita shares, which have halved in value since the September profit warning, remained at the top of the FTSE 100 fallers board at midday, off nearly 6%, or 53p at 511p, hitting a 10-year low.

Capita, which also operates London’s Congestion Charge, said it would now sell the majority of its Capita Asset Services division and a number of other businesses to help it out of the current hole.

In a client note today, analysts at Shore Capital Markets said: “In total, Capita is to exit an estimated £70m of EBIT for FY2017F (c12% of next year’s forecast level), this likely pushing our EPS forecasts down further for next year.”

They added: ”The cost of restructuring is put at c£50m at present, this is less than we expected (in our model £100m), but we cannot rule out further, higher, charges next year.”
The analysts concluded: “We believe that the proposed sale reflects the evident balance sheet pressure.”

The company first announced plans for a major review of its operations and strategy in October, and last month revealed initial plans to overhaul its structure.

Brexit headwinds

Outsourcers have struggled since June’s Brexit vote as clients have delayed making decisions on investment and contracts due to the uncertainty.

Capita chief executive, Andy Parker, said: “I am confident that the markets Capita addresses offer long-term structural growth. We are, however, currently facing some near-term head-winds, which continue to make 2016 a challenging year and will affect trading performance in the first half of 2017.”

In some good news for investors, however, the group said it expects to recommend a total dividend for the current year of 31.7p, unchanged on 2015, and it hopes to maintain that pay-out in 2017.

Capita is predominantly UK-based, unlike bigger rivals such as G4S PLC (LON:GFS) and Serco PLC (LON:SRP) that have been sheltered to a large degree from Brexit-related fallout by their bigger geographical footprint.

Shares in Serco were up 3%, or 4.3p to 141.6p at lunchtime, while G4S shares were flat. 

 - updates with broker comment, share prices - 

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Thu, 08 Dec 2016 08:15:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/170173/capita-plans-asset-sales-as-it-cuts-its-profit-forecast-once-again-170173.html
<![CDATA[News - Capita picks up €230mln contract with big German telecoms provider ]]> https://www.proactiveinvestors.co.uk/companies/news/169262/capita-picks-up-230mln-contract-with-big-german-telecoms-provider-169262.html Capita plc (LON:CPI) has continued its European expansion - with a  €230mln (£197m) contract to partner with one of Germany's largest mobile and internet providers.

The seven year deal with Mobilcom-debitel, which will include the acceleration of digital channels, is expected to begin at the beginning of March next year.

Capita’s chief executive Andy Parker told investors Capita was 'delighted' to become mobilcom-debitel’s strategic customer services partner.

"Capita will deliver a transformed customer service operation focused on continuing to deliver customer excellence to mobilcom-debitel’s existing and new customers and promoting its digital lifestyle products.

"Our enhanced operational platform will be capable of supporting mobilcom-debitel’s products as they continue to evolve."

It will use the same model as it has on some of its major customer management contracts in the UK, including O2, which directly incentivises Capita to produce the best possible outcomes for customers, rather than charging on a ‘per-contact’ basis.

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Mon, 21 Nov 2016 11:51:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/169262/capita-picks-up-230mln-contract-with-big-german-telecoms-provider-169262.html
<![CDATA[News - City broker expecting another year of restructuring at Capita ]]> https://www.proactiveinvestors.co.uk/companies/news/168866/city-broker-expecting-another-year-of-restructuring-at-capita-168866.html It’s time to sell outsourcing giant Capita Group PLC (LON:CPI), according to one City broker.

Capita announced on Thursday afternoon that it is bringing in a new management and operating structure – along with some new faces - to try and spark some growth.

As chief executive Andy Parker said: “[The company] is reshaping and simplifying its organisational and management structure to deliver organic growth and good financial performance in 2017 and beyond.”

While Shore’s Robin Speakman welcomes the refocus on organic growth, he’s not a fan of the lack of information being offered by Capita.

“At present Capita has not provided any guidance on the outlook/visibility for FY2017,” says Speakman.

“We hope to get some insight into the totality of the restructuring charges (in respect of the new divisional structure) and any potential intangible write downs for the current year,” says Speakman.

On top of the lack of guidance, Speakman thinks further restructuring activity and subsequent charges will continue through next year, hampering the firm’s progress.

“To us, at present, next year feels like it may be one of further retrenchment, building foundations for a return to growth thereafter.

“With continuing clouded visibility we retain a ‘sell’ stance.”

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Fri, 11 Nov 2016 13:05:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/168866/city-broker-expecting-another-year-of-restructuring-at-capita-168866.html
<![CDATA[News - Heathrow set for third runway ]]> https://www.proactiveinvestors.co.uk/companies/news/167923/heathrow-set-for-third-runway-167923.html The controversial decision to expand Heathrow airport has been given the go-ahead but it could be nearly a decade before the extra capacity is up and running.

A committee of ministers agreed an £18bn scheme for a new third North West runway at Heathrow - it was one of three plans it was considering.

Heathrow had been the favourite location for the expansion rather than Gatwick.

Speaking in the Commons, Transport Minister Chris Grayling said the government believed the plan offered the greatest benefits to passengers, businesses, and the rest of the UK economy.

On the latter, the benefit is expected to be £61bn over the next 60 years. It will create 77,000 new jobs but spell the end of 800 homes.

However, the plan is still a very long way off becoming a reality.

MPs must still vote on it in around a year's time and that is likely to come after legal challenges from various groups and a public consultation.

The thorny issue of whether to increase Britain's airport capacity has divided opinion for a quarter of a century.

Supporters say it is vital to say Britain is open for business and boost its global ambitions, particularly after Brexit,  while others say it is an economic and environmental mistake.

President of the CBI Paul Drechsler said it was good news for firms across the UK.

"This project should form part of a long-term framework for aviation capacity for the whole of the UK. Pressing ahead with key infrastructure projects like this will provide not only a welcome economic stimulus, but will show the world that we are well and truly open for business as we negotiate our exit from the EU," he said.

But chief executive at online estate agents eMoov.co.uk Russell Quirk pointed out it wasn't so great for  hundreds of residents that will see their properties demolished.

Homeowners in Hounslow, Kew, Windsor, Maidenhead and other surrounding areas are also likely to to see the value of their property blighted, he said.

Research from Lloyds has shown that 37% of British exporters believe extra routes at their local airport would help them sell more goods and services overseas.

That figure rises to  43% among exporting businesses in London,

But the share price reaction from various companies didn't shout positive. Outsourcing group Capita (LON:CPI) today saw shares shed 0.08% to 615p despite it being touted as a big beneficiary of the new runway.

British Airways owner IAG (LON:IAG) flew 1.28% lower to 399.6p, while low cost carrier Ryanair Group Holdings (LON:RYA) lost 0.39% to 12.65p. EasyJet plc (LON:EZJ) was flat at 931.78p.

Objections to any expansion have been well documented and these voices are increasingly likely to be heard in coming months.

Foreign Secretary Boris Johnson and former London mayor is expected  to call it  a mistake and not in the capital's interests.

Justine Greening, the education secretary and Zac Goldsmith, Conservative MP for Richmond Park are also against.

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Tue, 25 Oct 2016 12:01:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/167923/heathrow-set-for-third-runway-167923.html
<![CDATA[News - Broker slashes Capita target due to Brexit concerns ]]> https://www.proactiveinvestors.co.uk/companies/news/167078/broker-slashes-capita-target-due-to-brexit-concerns-167078.html Swiss broker UBS has downgraded both recruiter Hays (LON:HAS) and outsource specialist Capita (LON:CPI).on the possibility of a severe cutback in IT spending post–Brexit.

Capita has already issued a major profit warning but more pain may be on its way said the broker.

UBS surveyed IT buyers across the UK, France and Germany to gain insight into how B2B (business-to-business) service spending might be affected post-referendum.

According the broker, some 22% of companies are planning hiring freezes, 20% plan to use fewer IT consultants, and 39% of IT projects are being delayed/cancelled.

The broker concludes that a 20% decline in most areas of B2B discretionary spending is a reasonable expectation, with no lifting of the uncertainty until  2019.

As well as Capita, Mitie (LON:MTO) and Aggreko (LON:AGK) have warned already on trading and UBS is cautious over prospects for these and also other outsourcers such as Serco (LON:SRP).

Hays, meanwhile, has had its rating cut to ‘neutral’ from ‘buy’ though its price target rises to 140p.

Capita’s price target has been slashed by 40% to 675p given the uncertainty UBS sees over IT spending.

“B2B spending is clearly under pressure, and despite Capita's plans to structurally reposition weak units we struggle to see scope for a sudden rebound.”

Capital shares fell 4% to 608p and Hays dropped 1.5% to 133.3p.

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Fri, 07 Oct 2016 11:07:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/167078/broker-slashes-capita-target-due-to-brexit-concerns-167078.html
<![CDATA[News - Time to sell Capita? ]]> https://www.proactiveinvestors.co.uk/companies/news/166779/time-to-sell-capita-166779.html Sell Capita. That’s all Panmure Gordon analyst Michael Donnelly took from the “excruciating” analyst call yesterday with the beleaguered FTSE 100 firm.

On Thursday Capita PLC (LON:CPI) warned profits would be hit by one-off costs of up to £25mln after it was late to implement new IT systems for the congestion charge contract with TfL. Shares plummeted 25%.

Panmure Gordon today slashed its 2017 earnings target by 8% and issued a 530p target price, almost 25% slimmer than where shares are currently trading.

Panmure’s Donnelly said the post profit warning conference call managed to address none of his concerns.

The profit warning cited the tech reselling business as the major cause of the slowdown, which he said remained overvalued and will be impaired in due course.

“Given the overwhelming preponderance of tech businesses that CPI has acquired since 2008, it puts at risk the quality of the acquired growth, now that organic growth has all but disappeared.”

“A further point that is going to be done to death by other analysts guessing when the rights issue is coming, is that CPI has operating leases that we value at £430-530mln (discounting at 7%-1.5%), so – if capitalised – they increase reported net debt by circa 25%.”

Donnelly also noted that the acquisitions were “very, very worrying”.

“The conference call led us to believe that the resellers causing the problem were those acquired since 2008 and not Trustmarque acquisition (so the Trustmarque warning, presumably, has yet to come).”

Shares were trading at 668p, down over 4%.

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Fri, 30 Sep 2016 14:03:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/166779/time-to-sell-capita-166779.html
<![CDATA[News - Capita shares slump after shock profit warning ]]> https://www.proactiveinvestors.co.uk/companies/news/166677/capita-shares-slump-after-shock-profit-warning-166677.html Shares in outsourcing group Capita Group (LON:CPI) plummeted by almost a third on Thursday morning after the London congestion charge operator issued a surprise profit warning.

Capita – which also recruits for the army and NHS – has been forced to take a £25mln hit for a delayed congestion charge contract and also warned that it may face legal action on a mortgage admin system for the Co-op Bank.

The FTSE 100 firm told investors that it now expected underlying pre-tax profits would fall between £535mln and £555mln for 2016 as a result. That’s more than 10% down on the £614mln it had previously forecasted.

“Our performance in the second half of the year to date has been below expectations, as a result of a slowdown in specific trading businesses, one-off costs incurred on the Transport for London congestion charging contract and continued delays in client decision making.”

Capita inked a £145mln, five-year deal with Transport for London back in 2014 to run the London congestion charge’s back-office and customer services centre.

However, the outsource group was hit by substantial delays as it rolled out a new IT system for TfL and has set aside £20-£25mln as a penalty for missing its target.

Chief executive Andy Parker added that there was a “high degree of risk” of litigation with Co-Op.

Capita won a £325mln, ten-year contract with the bank last year to take over mortgage staff from its administration firm, Western Mortgage Services.

Parker was adamant that his firm was “still hitting targets and delivering for this bank”.

Shares tumbled 27% to 700p.

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Thu, 29 Sep 2016 09:04:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/166677/capita-shares-slump-after-shock-profit-warning-166677.html
<![CDATA[News - Capita starts 2016 well despite deal win delays ]]> https://www.proactiveinvestors.co.uk/companies/news/125732/capita-starts-2016-well-despite-deal-win-delays-125732.html Support services group Capita PLC (LON:CPI) reported a good start to 2016 but said it was facing delays in winning contracts.

Capita said it had won work worth £458mln in aggregate including a £139mln local council shared services deal and preferred bidder status to become technical services partner to Blackburn with Darwen council.

It also landed contracts with Debenhams, extensions of deals with companies such as Volkswagen and a deal with Air Berlin, a new client in a new industry sector.

But Capita added that decisions on some potential new contracts "are taking a little longer than expected to come through."

The group said internal growth in its divisions and steady contract wins gave it greater visibility and confidence of achieving target organic revenue growth of at least 4% this year,.

"We are on track to meet consensus expectations for 2016. We continue to manage the business to deliver strong EPS growth, cash flow and return on capital," it said.

Shares rose 43p, or 4.2%, to 1067p in early London trading.

 

 

 

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Tue, 10 May 2016 08:35:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/125732/capita-starts-2016-well-despite-deal-win-delays-125732.html
<![CDATA[News - Capita Group off to subdued start to 2016 ]]> https://www.proactiveinvestors.co.uk/companies/news/122968/capita-group-off-to-subdued-start-to-2016-122968.html Outsourcing services conglomerate Capita (LON:CPI) revealed it had got off to a slow start to 2016 this morning.

The company said it had secured £251mln contracts so far this year, down from £1.1bn at the same stage last year, while the bid pipeline total contract value had fallen to £4.7bn from £5.1bn.

The order book situation overshadowed a solid set of results for 2015 in which the company achieved 4.3% organic growth in revenues, which rose to £4,674mln from £4,372mln the year before.

Headline profit before tax climbed 9% to £585.5mln from £535.7mln in 2014. Reported profit before tax, which includes exceptional items, tumbled to £112.1mln from £292.4mln the year before, reflecting business disposals and write-downs on retained assets.

Earnings per share rose in line with pre-tax profits, to 70.73p from 65.15p in the previous year, providing healthy cover for the full-year dividend pay-out of 31.7p (2014: 29.2p).

“We have re-positioned the business away from certain non-core lower growth businesses and enter the current year in a strong strategic and financial position, enabling us to raise our margin target range to between 13.0% and 14.0%,” revealed Andy Parker, chief executive of Capita.

“In 2016, we are targeting organic revenue growth of at least 4%, driven by the combination of growth from our divisional businesses and conversion of our bid pipeline. In the longer term, we remain excited about the significant structural growth opportunities in our markets and will continue to manage the business to deliver strong EPS growth, cash flow and return on capital,” he added.

Shore Capital's Robin Speakman said the revenue number was around £100mln below its estimate, but the underlying profit before tax was in line with its forecasts.

“Net debt also missed our forecast at £1.84bn; we had factored in a better cash performance anticipating a figure of £1.76bn,” Speakman said.

“Investors will look closely at the margin guidance for FY2016F this morning with guidance for the range lifted from 12.5% to 13.5% to 13.0% to 14.0% - we stress that this is likely to be as a result of slow ‘new-business strain’, i.e. more mature contracts in the mix as opposed to new lower margin business coming through – so not necessarily positive in the medium to long-term, in our view,” said Speakman, who has a 'hold' recommendation on the stock.

“Guidance for organic growth this year is set at 4% (in-line with our forecast assumption), which looks a challenge to us in the context of a continued slow central government market with ministers’ attention focused on BREXIT, so a bit of contract hiatus is likely to continue to our minds,” he added.

Panmure Gordon's Michael Donnelly, meanwhile, remained bearish on the stock.

“The impairment is probably not as large as we had feared, but the risk now is that further impairments in other divisions will further occlude what is already an increasingly incomprehensible set of accounts,” Donnelly suggested.

The company's exit from weaker businesses has clearly driven a marginal improvement in metrics, but falling cash generation and conversion should remain a concern for investors as the portfolio is further rebalanced, in Donnelly's view.

Shares in Capita were down 5.6% at 1,011p in mid-morning trading, making them comfortably the worst performers among FTSE 100 constituents.

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Thu, 25 Feb 2016 10:17:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/122968/capita-group-off-to-subdued-start-to-2016-122968.html
<![CDATA[News - Capita PLC shares advance as it expects growth to quicken ]]> https://www.proactiveinvestors.co.uk/companies/news/120341/capita-plc-shares-advance-as-it-expects-growth-to-quicken-120341.html A now leaner business process outsourcer Capita (LON:CPI) is on track to deliver double digit revenue growth in the full year and expects organic growth to quicken next year, it said, sending shares higher.

The FTSE100 group's bid pipeline stands at £5.1bn, which consists of  29 bids, on which decisions are expected within the next 12 months.

It also announced today a new contract worth £62mln to provide customer management services for Unitymedia -  Germany’s second largest broadband and cable provider. It is a seven year deal and starts immediately.

Its bid plans for Xchanging were scuppered last minute two days ago when CSC Computer Sciences International made a rival bid and Capita said it would not revise its 160p per share offer.

But Capita noted today that if that offer lapses, it could  approach Xchanging again.

The firm added it expects underlying operating margin to be within its target range of 12.5% to 13.5% and comfortably ahead of the first half underlying operating margin of 12.7%.

Shares added 0.76% to 1,192p.

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Fri, 11 Dec 2015 08:33:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/120341/capita-plc-shares-advance-as-it-expects-growth-to-quicken-120341.html