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.