Capita slips as sales fall short of expectations
CAPITA, Britain’s largest outsourcing company, was the FTSE’s worst performer yesterday on the back of a disappointing update that drew attention to its high trading multiple.
The company’s paper lost 5.2 per cent to close the day at 721p after it revealed a slower than expected rate of organic growth.
Capita won £1bn of work over the 10 months to October, compared with £1.2bn last year. Acquisition spend was £98m year-to-date, which analysts believed was too low to compensate for the lack of natural expansion.
While revenues are expected to show modest growth this year, observers said the overall package did not match up to Capita’s price-to-earnings multiple of 18 times.
Robert Morton, analyst at Investec, said: “What management was saying about second half revenue growth wasn’t quite enough to justify the substantial premium to the market.”
Uncertainty over public sector spending next year also detracts from the company’s prospects, said Panmure Gordon analyst Mike Allen.
Capita insisted less than 10 per cent of its revenue was generated by businesses vulnerable to a weaker economy. However, Capita Financial Managers, which administers nearly 600 funds, has taken hits from increasing IT and regulatory costs.