Capita shares crashed more than -45% today following a profits warning and news the company was taking major steps to simplify itself. Mid-afternoon Capita shares were selling at 187.25p having closed at 347.80p yesterday. Capita has abandoned its dividend commitment and will plan a rights issue this year. More below.
The City of London got a further setback today with the EU apparently rejecting a Brexit trade deal for the UK’s financial services industry, arguing that the EU would gain from a downsized City of London. The EU is pushing for “equivalence”. The confidential discussions have ruled out any special deal – at least for the moment.
Over in the US stocks recovered somewhat from yesterday’s lows: mid-afternoon London time the Dow Jones was +0.65% higher at 26,245 while the Nasdaq was +0.40% higher at 7,430. Apple, Microsoft and Facebook all saw strong gains though Apple shares at $167.61 remain substantially down from the last week.
The pound continued its come-back, rising +0.45% to 1.4209 with the euro rising the same amount against the dollar (spot price 88.89). Shire and Persimmon saw near -3% falls tonight while Johnson Matthey shares were up +4.6%.
- UK FTSE 100 7,533.55 -0.72%
- DAX 13,178.10 -0.15%
- CAC 40 5,476.09 +0.04%
- Euro Stoxx 395.35 -0.19%
- Dow 26,224.61 +0.57%
- S&P 500 2,828.56 +0.22%
- Nasdaq 7,427.09 +0.33%
- Nikkei 225 23,098.29 -0.83%
- Gold 1,347.20 +0.54%
- Oil WTI 64.22 -0.45%
Capita another Carillion?
The Capita update this morning was ugly. Part of the problem for outsourcer Capita is its sprawl and bloat. It’s simply unable to be effective. The dividend suspension and rights offer had echoes of Carillion’s collapse. Though both are – were – outsourcers, Capita is focused far more on the front-of-office IT end, rather than the hardcore construction side.
While Capita’s public sector is significant, 53% of Capita’s revenues were private-sector sourced according to its 2016 annual report. It’s thought it has around £1.2bn in cash reserves though, like Carillion, reserves can be gobbled through quickly. But it's still expected to make £300m in profits.
“Capita is too complex,” admitted boss Jonathan Lewis earlier (he joined in December). “It is driven by a short-term focus and lacks operational discipline and financial flexibility.” At least the Capita boss is playing it straight. One concern: Capita's auditor is KPMG. Just like Carillion.
M&S to close more stores
M&S confirmed earlier it was ridding itself of 14 stores at a cost of several hundred jobs. The news is not unexpected. M&S had a pretty shocking Christmas with sales of clothing and food – unusual given that food is traditionally M&S’ safe haven – both down.
“Stores will always be an integral part of our customer experience, alongside M&S.com, but we have to ensure we have the right offer in the right locations," Sacha Berendji, M&S’ retail operations director said. Several stores will close in April, including Birkenhead, Bournemouth and Redditch.