Capita shares plunge after surprise profit warning

30 September 2016 | Jamie Harris

Outsourcing firm Capita has announced that its full year pre-tax profits for 2016 are expected to be between £59 million and £79 million lower than originally estimated.

Despite good profit growth for the first half of the year, Capita has said that its H2 2016 performance has been below expectations due to a number of factors, including “continued delays in client decision making”, and less activity following the EU referendum in June.

In particular, Capita says it has been impacted by a slow-down in its IT Enterprise Services and Workplace Services divisions; the expected full-year profits from these divisions have been reduced by £30 million.

The group’s underlying profit before tax is now expected to be between £535 million and £555 million for the full year to December 2015.

As a result, Capita is taking steps to reduce the cost base within its underperforming businesses.

Excluding exceptional one-off costs, Capita says it remains confident in the strength of its business model, and aims to return to profit growth in 2017.

City commentators are noting that the trading update was the outsourcer’s first ever profit warning, and yesterday Capita’s shares dropped 28 percentage points as a result.

The news follows FM services competitor Mitie, which also predicted a fall in operating profit, due to “significant economic pressures”.

Both Serco and G4S also saw their shares fall on Thursday morning after Capita’s announcement.

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