EDINBURGH Dec 9 Shares in Capita fell
further on Friday after a profit warning and the decision to
sell its asset management business left investors questioning
the British outsourcing group's strategy.
The company's financial problems since the vote to leave the
European Union, which has slowed the pace of decision-making by
customers in the public and private sector, has prompted
investors to look closer at the quality of some of its contracts
and its method of shoring up its balance sheet.
Barclays brokerage arm referred to a contract to manage
London's traffic congestion charge and a mortgage management
contract at Co-op Bank, flagged as problematic by Capita in
"(..) are they genuine one-offs or do they point to a
growing risk appetite which has reduced the margin for error?"
it said in a note to clients. Barclays has an "equal weight"
rating on Capita and a 525 pence price target.
Capita, which offers IT-led admin services to help companies
cut costs, shocked investors on Thursday by announcing the sale
of its CAS asset management services arm, one of its most
lucrative units with a profit margin of around 25 percent.
The disposal of CAS, thought by brokers to be worth at least
700 million pounds ($880 million) and described by many as one
of the company's "crown jewels", is aimed at paying off debt
while revenues wane because of a slowdown in spending in the
wake of Britain's vote to leave the European Union.
"The outcome of the business review lacks substance and our
confidence in the management team's ability to turn round Capita
is low. More decisive action is required," said brokerage
Stifel, who cut the stock to "hold" from "buy" with a price
target of 500 pence.
Shares were down a further 2.3 percent at 474.2 pence at
1424 GMT having fallen by 14 pct on Thursday.
Others noted a likely exit from Britain's FTSE 100 index of
leading shares after it lost 60 percent of its value in the last
year. They also expressed doubts about the company's ability to
keep step with an increasingly competitive, complex and risky
industry at a time of belt-tightening.
A spokesman for Capita said Chief Executive Andy Parker had
reiterated his confidence that the strategy was the right one
even as the shares fell sharply on Thursday.
($1 = 0.7948 pounds)
(Reporting by Elisabeth O'Leary; Editing by Keith Weir)