It is a perhaps testament to the scale of the challenges facing Capita (CPI) that the group's share price rose by 17 per cent on the day it announced a 43 per cent fall in adjusted half-year earnings. It would be safe to assume that the market had been expecting worse, but the group’s returns were only slightly ahead of broker forecasts. The outlook for the stock remains bleak.
Last year the group completed the first stage of its turnaround strategy - raising more than £1.1bn through a rights issue and disposals - and is now looking to return to growth. The group is targeting double-digit operating profit margins and at least £200m of sustainable free cash flow by 2020. The group has managed to stem its adjusted free cash outflow, which fell to £20.2m at the half year, against £109m at June 2018. This was achieved despite a 16 per cent rise in net capital expenditure linked to improvements in IT systems and infrastructure.
The order book fell to £6.7bn from £7.1bn back in December, but post-period-end Capita won two major contracts: a £525m fire and rescue service with the Ministry of Defence and a £145m extension to its benefit assessments contract with the Department for Work and Pensions in Northern Ireland.
Broker Panmure Gordon is forecasting adjusted EPS of 12.6p for the full year, down from 16.2p in 2018.
| CAPITA (CPI) | ||||
| ORD PRICE: | 137p | MARKET VALUE: | £ 2.29bn | |
| TOUCH: | 137-137.4p | 12-MONTH HIGH: | 161p | LOW: 98.7p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 9 | |
| NET ASSET VALUE: | 0.1p* | NET DEBT: | £624m** | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 2.01 | 42.3 | 4.86 | nil |
| 2019 | 1.85 | 31.2 | 1.36 | nil |
| % change | -8 | -26 | -72 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £1.6bn, or 95p a share **Net debt does not include lease liabilities of £592m | ||||
