Capita shares tumble on news of modest growth

Capita, the UK outsourcing group, said it expected modest growth in second-half underlying pre-tax profit despite a subdued market for new contracts throughout 2017.

The company said trading during the year to date had been in line with its own expectations as it secured major contracts with an aggregate total of £471m. Since the half year, Capita said it had won a new seven-year contract with the Cabinet Office to administer the Royal Mail Statutory Pension Scheme.

Bid pipeline

Capita said its bid pipeline was currently worth £2.5bn and expected a number of bid decisions in the coming months.

Under its restructuring programme, announced in 2016, further progress had been made in reducing costs and rationalising estate, the cumulative benefits of which were expected to total £57m by the end of 2018.

The company, which appointed Jonathan Lewis (left) as chief executive to start at the beginning of this month, announced that it expected to record a number of asset impairments during 2017.

Outlook

The company said: "We continue to expect underlying pre-tax profits, before significant new contracts and restructuring, to rise modestly in the second half of this year, compared to the first half of 2017.

"Over the course of next year, we will communicate the new programme to broaden the transformation of Capita. This will include plans to focus the business and allocation of capital and resources on the markets which offer the best growth prospects."

Market reaction

Investors were unimpressed, however, and the stock shed nearly 12% to 411.77p in early trade on the London Stock Exchange.