Capita Facing Relegation as Sell-Off Continues

Capita has fallen to the bottom of the UK’s leading index for the second day in a row, as investors look to rid themselves of the stock following a profit warning earlier in the week.

UNDEFINED - Friday, December 09, 2016

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The outsourcing group saw its shares fall by 6.6 percent today, with the stock now having dropped by almost one fifth over two days. Over the course of the whole year, the company’s shares have fallen by 62.4 percent, as outsourcing companies are going through a difficult time following the Brexit vote.

Capita cut its profit forecast for the second time in three months on Thursday, warning that it could see profits for the full year fall to as low as £515 million. The sell-off following that profit warning means that the company is now in danger of relegation, and could see itself fall to the FTSE 250 during the next reshuffle.

Robin Speakman, an analyst for Shore Capital, cut the compan’ys earnings forecast to 50p per share (a fall of 20%). He explained that their model suggests that free cash flow for strategic development and debt reduction will remain under pressure after the dividend payment. He also said that the company retains a negative view on Capita, and encouraged investors to take advantage of any recovery in the share price as a chance to exit the stock.

Capita was the biggest mover in the FTSE 100. Overall, the index made some modest gains over the course of the day. In the FTSE 250, Euromoney Institutional Investor was the biggest faller, losing 9.2 percent.


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