Capita is hammered by a public sector squeeze

EmbattlEd outsourcer Capita saw more than £300m knocked off its value after warning of a slowdown in jobs from the public sector.

It said the market for major business contracts had been struggling throughout 2017 and profits – excluding restructuring costs – would rise only moderately in the second half of the year.

like its rivals, Capita has been affected by the tightening of budgets in the public sector.

It claimed to have a bid pipeline of around £2.5bn, with decisions due in a matter of months, but admitted these are unlikely to be included in its profits in 2018 due to changes in accounting rules. the gloom continued across its niche divisions.

It said that while its private sector partnerships division is expected to provide good profit growth, it anticipates its performance in 2018 will be hit by an increase in the number of contracts coming to an end.

It added that while its public service partnership division has made ‘encouraging progress’ and improved profitability, a previously forecast contribution of around £22m from the Government’s defence Infrastructure Organisation contract will not recur next year.

Cost-cutting in its It division failed to stem a dip in profits, while the digital and software solutions arm also faces lower profits due to the end of two major software licences.

according to the market consensus, Capita’s full-year profits are expected to come in at £401m, while its profits for 2018 are expected to come in at £417m.

the company will also be hit by a further £66m legal settlement with the Financial Conduct authority. the gloomy update knocked £348m off its value, with shares plummeting 12.6pc, or 58.8p, to 407.1p.

the FTSE 100 finished down by 0.7pc, or 48.39 points, at 7448.12 while the FTSE 250 was also on the slide by 0.3pc, or 55.13 points, to 20006.27.

Industrial packaging firm Bunzl slipped despite revealing that it expects full-year sales to increase by 15pc.

Investors were concerned about amazon’s recent move into business services, and sent shares falling 1.5pc, or 30p, to 2019p.

but traders worked up an appetite for Domino’s, which soared 5.1pc, or 16.4p, to 338.7p after the pizza firm bolstered its stake in domino’s Iceland where it will buy a further 44.3pc stake for £26.6m, taking its share to 95.3pc.

It also approved a £20m share buy-back as part of its strategy to return cash to shareholders.

Imperial leather soap and St tropez fake tan owner PZ Cussons

took a hammering after revealing its first-half profits would fall by 10pc.

the company said weaker trading in its European and african business has weighed on its earnings, with africa further hit by the economic environment and competitive trading conditions.

PZ Cussons’ business in africa accounts for about 43pc of its sales, but trading has been hit by the devaluation of the naira currency in Nigeria.

It said customers in the UK were also shopping more cautiously, though trading across its beauty division – which includes St tropez – had remained robust.

While the firm said it expects performance to pick up in the second half, investors were unconvinced and sent shares down 5.3pc, or 17.3p, to 310.5p.

Cancer treatment firm Scancell soared 14pc, or 1.75p, to 14.25p after revealing a tie-up with Cancer Research UK.

the charity will fund and sponsor a trial of Scancell’s tumour vaccine SCIb2.

DEBENHAMS soared higher after analysts at Investec upgraded it to ‘hold’ from ‘sell’.

The broker said that since shares in the retailer are down 43pc this year, the rewards now outweigh the risk.

Debenhams is implementing a new business strategy which includes increased investment in online and experiences in stores. But the move has so far failed to bear fruit.

Investec’s upgrade gave the chain a much-needed boost, which sent shares up 5.3pc, or 1.75p, to 34.75p.