Capita slips on second-half outlook despite 11% rise in first-half profit

Shares in Capita fell on Wednesday, with analysts pointing to disappointment over the outlook for the second half of the year, after the outsourcing group posted an 11% rise in underlying first-half pre-tax profit.

For the six months ended 30 June, underlying pre-tax profit came in at £264.9m, up from £238m in the same period last year, on revenue of £2.28bn, up 10% from £2.07bn, as most of it divisions performed well, with particularly strong growth in Asset Services Solutions and a pleasing initial contribution from Capita Europe.

Underlying earnings per share rose 11% to 32p and the company increased its dividend for the half year by 9% to 10.5p per share.

Capita said it secured £1.6bn of major contract wins in the first half, up from £1.3bn in 2014, including milestone contracts and frameworks in health and science.

However, looking forward, the company said it expects only “a slight increase” in organic growth in the second half, following the delayed start of some new contracts.

In 2016, Capita expects organic growth to accelerate, supported by the conversion of its bid pipeline.

Chief executive Andy Parker said: ““Capita has had a productive first half year, announcing significant contract wins in the health and science sectors and our largest ever acquisition, Avocis in Northern Europe, all of which will contribute substantially to growth going forward."

Berenberg said that with the exception of the disappointing comments on second-half organic growth, the results were largely in line with consensus expectations and the outlook remains stable, supported by a good rate of contract wins and an increase in the bid pipeline.

Berenberg rates the stock at ‘hold’ with a 1,160p price target.

At 15:39, shares were down 2% at 1,260p.