Capita regains momentum after calls for investor patience
TROUBLED outsourcer
Capita recaptured its momentum after broker Jefferies urged investors to be patient over new boss Jon Lewis’s stuttering turnaround plan.
A 60pc plunge in profits in the first half of the year sent shares sliding 18pc last week as doubts over Lewis’s “multi-year transformation” mounted in the City.
Despite the setback dampening recent “investor euphoria”, analyst Kean Marden said that it was too early for the turnaround specialist parachuted in to deliver cost savings and kickstart the recovery.
The call centre operator had to tap investors in an emergency cash call earlier this year and sell off parts of the business to raise much-needed money.
Capita’s software business will be its “differentiator”, it said. Jefferies analysis indicates that the company will meet a 10pc growth target for earnings before interest, taxes and amortisation, and its aim to reach £200m in free cash flow by 2020 is “achievable”.
The upgrade to “buy” renewed investor confidence, boosting it 7.2p to 135.5p, a 5.6pc rally. Elsewhere, Coca-cola
HBC, the soft drinks giant’s bottling company, inched up after thirsty World Cup watchers and the summer heatwave boosted first-half sales. New boss Zoran
Bogdanovic told investors that the FTSE 100 firm was on track to meet its 2020 targets, as its shares gained 8p to £27.58.
UDG Healthcare jumped 11p to 745.5p after Jefferies upgraded it to “buy” on valuation grounds, while paper and packaging giant
Smurfit Kappa advanced 28p to £32.88 after being reinstated at Credit Suisse with an “outperform” rating.
Cineworld rallied 29.6p to 306p after profits soared in the wake of its takeover of US rival Regal Entertainment. Amigo
Holdings edged down 0.5p to 282.5p despite RBC, Macquarie and JP Morgan initiating coverage of the lender with an “outperform” rating. A slew of blue-chip firms going ex-dividend – the first day when investors are not eligible for a dividend – weighed heavily on the FTSE 100. As global stocks struggled amid rising geopolitical tensions, the index slipped back 34.88 points to 7,741.77.
Meanwhile, US sanctions punishing Moscow for its alleged involvement in the poisoning of former double agent Sergei Skripal and his daughter on UK soil sparked a sell-off of Russian assets.
Russian miners, which were targeted in the US government’s last wave of sanctions, escaped the slump but the rouble fell as much as 2.3pc to a 21-month low. Turkey’s spat with the US government and its inaction over its growing currency crisis sent the lira sliding to fresh lows.
It tumbled a further 3.8pc against the dollar, bringing its total loss in 2018 to 31pc.