It is of little surprise that shares in Capita (CPI) were marked down following these figures. The bad news included the impairment of assets in the group's life and pensions division, together with costs associated with a number of business exits. Disregard these one-off effects and gross profit was up 8 per cent to £1.31bn, but the market may well have noted the decline in the value of contracts secured in the early part of this year.
Capita has secured £251m of contracts so far in 2016 against £1.1bn in the same period last year, although the prior performance could be seen as exceptional. More worryingly, Capita's bid pipeline has shrunk from its December trading statement, while the average contract duration is also lower than last year's rate.
The decision to jettison a number of non-core lower-growth businesses should bolster underlying cash flow, although last year's cash conversion ratio of 108 per cent demonstrates that Capita is having no trouble optimising the rate of receivables. The re-jigged business mix also underpinned an increase in Capita's margin target range, while management is looking to drive organic revenue growth of at least 4 per cent in 2016.
Analysts at Peel Hunt expect adjusted EPS of 76.1p in 2016, compared with 70.7p in 2015.
| CAPITA (CPI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,023p | MARKET VALUE: | £6.78bn | |
| TOUCH: | 1,022-1,024p | 12-MONTH HIGH: | 1,336p | LOW: 1,008p |
| DIVIDEND YIELD: | 3.1% | PE RATIO: | 129 | |
| NET ASSET VALUE: | 103p* | NET DEBT: | £1.84bn | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 2.90 | 303 | 39.2 | 21.4 |
| 2012 | 3.40 | 281 | 36.0 | 23.5 |
| 2013 | 3.90 | 215 | 27.1 | 26.5 |
| 2014 | 4.38 | 292 | 35.8 | 29.2 |
| 2015 | 4.84 | 112 | 8.0 | 31.7 |
| % change | +10 | -62 | -78 | +9 |
Ex-div: 20 Apr Payment: 31 May *Includes intangible assets of £2.81bn, or 424p a share | ||||
