Capita's 'boring' tag under threat after profit warning
London-listed giant warns it will take 'immediate steps to reduce the cost base' as slowdown in technology reseller division drags on second-half performance
Capita, a firm renowned for its boringly consistent profit growth, issued its first-ever profit warning this morning, laying the blame partly at the door of its technology reseller business.
The outsourcing giant's shares crashed 20 per cent after it warned that underlying pre-tax profits for its full year to December 2016 will limp in between £59m and £79m behind its previous estimate.
Organic growth for the year is now set to hit one per cent, down from its previous estimate of four per cent.
The London-listed firm said it had been affected by a slowdown in its IT enterprise services division, "in particular" its technology reseller business, which recently acquired Trustmarque, and its Workplace Services division.
"Since the half-year, our expectation for profits from these businesses for the full year has reduced by around £30m," it stated. "Capita is taking immediate steps to reduce the cost base in the underperforming businesses, which should benefit 2017."
One-off costs incurred on its Transport for London congestion charging deal and "continued delays in client decision making" have also contributed to the second-half slowdown, Capita said.
Capita is a holder of a prestigious "Holway Boring Award"', an honour bestowed by analyst Richard Holway on tech firms that enjoy 10 or more years of uninterrupted earnings-per-share growth.
But one of Holway's colleagues at TechMarketView admitted its status is now in jeopardy.
"Our chairman Richard Holway says that Capita is at risk of losing its coveted Boring Award for uninterrupted EPS growth," said TechMarketView research director John O'Brien.
"Capita has been the stand-out performer among UK SITS players since it IPOed in 1991, and is the only remaining holder of the Holway Boring Award. If EPS does indeed drop in FY16, it would truly be the end of an era."