Capita share price: 4 things to watch out for in its 2018 results
The outsourcing company had a challenging 2018 in the wake of Carillion, but investors are interested to see what progress has been made in its full-year results on Thursday.
Capita has had a challenging 12 months of trading in 2018, with the company struggling to turn itself around in the wake Carillion’s collapse in January amid a myriad of headwinds.
Investors will be looking to see if the company’s new management has made any headway in its full-year results on Thursday, after Capita was forced to issue two profit warnings over the course of last year, with its share price still hovering dangerously close to a record low.
Capita earnings guidance
Capita is expected to report earnings of 13.2p a share, down 52.5% over the year, with revenues forecasted to fall by as much as 5% to £3.9 billion in its full-year 2018 results.
It will be interesting to see if the company is able to exceed expectations with Capita managing to beat estimates for earnings in five of its last eight trading updates.
New C-Suite leadership
Investors will be keen to see how the company’s new leadership team is handling the pressure at Capita, with CEO Jonathan Lewis taking the helm in December 2017 and CFO Patrick Butcher being appointed to the board as early as January.
A vote of confidence in Capita’s new management came from Barclays, who recently restarted its coverage of the outsourcing services group with an ‘overweight’ rating and 160p target.
‘Capita is investable for the first time in over five years,’ the bank said in a note to investors.
Barclays went on to say that it felt that leadership at the company had been ‘upgraded’ and that ‘attention is shifting from firefighting to self-help story delivery’.
In the wake of Carillion there was renewed government and investor focus on members of the outsourcing industry and it quickly became apparent that Capita had troubles of its own, forcing the company to embark on a major restructuring initiative aimed at saving more than £175 million by the end of 2020.
Unsurprisingly, in April of last year, the company’s management was quick to announce that it would have to make a ‘modest’ reduction in headcount to reduce expenditure and a £700 million rights issue was followed by a slow disposal of non-core assets.
Investors will be eager to see the cost-cutting measures reflected in the company’s balance sheet and see what more needs to be done in this area to hit its target by the end of 2020.
Life after Carillion
Capita itself warned on profits in January 2018, shortly after the collapse of rival Carillion, only to have to issue a second warning to shareholders in August after the company’s profits fell by as much as 60% in the H1.
The latter half of last year provided little in the way of reprieve, however; with the company coming under heavy fire after it failed to send some 48,000 letters to women telling them of cervical screening dates or containing test results.
After all that, it is reasonable to believe that the worst is firmly behind Capita, with the company having success in winning new business of late and its full-year results providing an opportunity for its new leadership team to plot a course for its future rather than lamenting about the past.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
See an opportunity to trade?
Go long or short on more than 17,000 markets with IG.
Trade CFDs on our award-winning platform, with low spreads on indices, shares, commodities and more.
Live prices on most popular markets