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Capita shares jump after £888m funds sale

Shares in outsourcing giant rise as analysts hail high price secured for fund administration business.

 
Capita shares jump after £888m funds sale

Capita (CPI) has sold its fund administration business for £888 million as the outsourcing giant attempts to raise cash and return to growth after a string of profit warnings.

Australian firm Link Administration Holdings has bought Capita Asset Services, which administers around £50 billion of fund assets. Funds administered by the division include those run by Woodford Investment Management, Lindsell Train and Miton.

Administrators are responsible for the day-to-day running of funds, including creating and redeeming their shares dependent on demand, and are responsible for regulatory issues.

Shares in Capita rose 2.7% to 710p on the news, as analysts hailed the high price secured for the business. 'Capita has secured an excellent price for the disposal of Capita Asset Services,' said Julian Cater, analyst at Numis. 'This will significantly de-gear the balance sheet,' he added, arguing a rights issue was now unlikely. Cater retained his 'buy' rating and upped his target price to 850p.

Jefferies analyst Kean Marden agreed. 'We recently upgraded to "buy" as we sensed that Capita was deeply unloved but risk/reward was slowly improving,' he said, adding that the next catalyst would be the announcement of a new chief executive, following the ousting of Andy Parker in March.

Cater said that while Capita Asset Services showed stable growth and delivered high margins, it had little overlap with the rest of the group and was more capital intensive.

The division was also the source of costly problems for Capita, as it provided administration services for the failed Arch Cru and Connaught funds.

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