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Capita slumps as hopes of 2018 recovery fade

Capita slumps as hopes of 2018 recovery fade

Capita (CPI) has slumped to the bottom of the FTSE 250 as a subdued update from the outsourcing group dashed hopes of a 2018 recovery.

The shares tumbled 14% to 400p as the group warned the market for contracts was 'subdued' and flagged challenges for a number of its divisions.

The group warned of a 'higher level of contract and volume attrition' in its private sector partnerships business, while the end of two major software licences was likely to hit profits in its digital and software solutions division. 

Performance improved in the public services partnerships division but the group flagged a £22 million contribution from the defence infrastructure organisation that will not recur next year, while a £9 million one-off supplier settlement in its IT services division also boosted the figures.

'We see little positive in Capita's full-year update this morning, with only "thin" guidance for the likely performance of the group for 2018,' said Robin Speakman, analyst at Shore Capital.

'With a challenging environment still evident for Capita, in our opinion, we stick with a "sell" stance.'

Shares in the group have lost two-thirds of their value over the last two years, after the company issued a series of profit warnings in the second half of 2016.

The news will serve as a further blow to Neil Woodford and his successor at Invesco Perpetual, Mark Barnett, who are among the biggest backers of the stock in their Woodford Equity Income and Invesco Perpetual Income and High Income funds.

Capita was joined at the bottom of the FTSE 250 by Sports Direct (SPD), down 7.6% at 354.3p after reporting a fall in margins.

The FTSE 100 meanwhile fell 14 points, or 0.2%, to 7,483, although the day's big movers were to be found outside the blue-chip index.

Among 'small cap' stocks, Lonmin (LMI) surged 23.9% to 79p after South African miner Sibanye-Stillwater agreed to buy the troubled platinum producer.

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