(Adds source, updates shares)
EDINBURGH Dec 9 Shares in Capita fell
for a second day on Friday after a profit warning and decision
to sell its asset management business left analysts questioning
the British outsourcing group's strategy.
Capita, which offers IT-led administration services to help
companies cut costs, announced the sale of its CAS asset
management services arm on Thursday, one of its most lucrative
units with a profit margin of around 25 percent.
Shares fell 1.1 percent to 479 pence having fallen by 14 pct
Analysts at Barclays expressed doubts about the company's
ability to keep step with an increasingly competitive, complex
and risky industry at a time of belt-tightening.
Britain's vote to leave the European Union has slowed the
pace of decision-making by customers in the public and private
sector, prompting analysts to look closer at the quality of
Capita's contracts and 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.
CAS is worth at least 700 million pounds according to
analysts, with one source familiar with the matter putting the
price tag at up to 1 billion pounds ($1.26 billion).
Described by many as one of Capita's "crown jewels", the
sale is aimed at paying off debt while revenues wane, with the
Brexit vote throwing trade relations and labour supply into
The unit has a good portfolio of financial services clients
and is attracting interest from private equity funds and some
industry players, mainly outsourcing companies such as Tata
Consultancy Services, the source familiar with the matter said.
A spokesman for Capita said Chief Executive Andy Parker had
reiterated his confidence on Thursday that the strategy was the
right one even as the shares fell on news of the planned sale.
Analysts at brokerage Stifel were sceptical.
"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," they said, cutting
their recommendation on the shares to "hold" from "buy" with a
price target of 500 pence.
Other analysts noted a likely exit from Britain's FTSE 100
index of leading shares after Capita's 60 percent fall in value
in the last year.
($1 = 0.7948 pounds)
(Additional reporting by Pamela Barbaglia in London; Editing by
Keith Weir and Elaine Hardcastle)