Capital pulled out of Capita

Thursday, 29 September: FTSE indices down the market cap. spectrum were pushed higher as the OPEC consortium reached a deal to reduce output, prompting oil & natural resources companies to rally on the news. Market participants largely expected a ‘more of the same’ outcome with regard to the OPEC meeting concluding last night, therefore the decision surprised those in the market and induced buying in oil and related assets.After rallying late yesterday and today, Brent crude stood 7% higher for the week thus far, at $49.55/bbl shortly after the close in London.

Capita(-28%) lost over a quarter of its value after essentially issuing a profit warning. The business revised underlying pretax profit down to the £535-555m range, compared to the existing company-compiled consensus of £614m. This outlook excluded the cost of potential restructuring the group may undertake, and is subject to a dispute with the Co-op bank being resolved in a satisfactory manner. The FTSE 100 company took a one-off charge related to the Transport for London Congestion Charge contract and said its IT Enterprise Services unit had experienced a slowdown in activity. Organic revenue growth for the full year was pegged back to 1.0%, compared to its previous forecast of 4.0% following what management described as a ‘solid’ first half of the year.

Further UK economic data released today cast further light on the state of the UK economy, highlighting that consumer confidence is present on the high street for now, despite a slowdown in mortgage approvals whilst the corporate environment is more uncertain. The number of mortgage approvals fell close to a two-year low in August, a potential sign the housing market may have cooled slightly following the EU referendum vote. Meanwhile, its seems Brits were content to splash out more on big ticket items, as lending to businesses was clipped. Data for August showed lending to consumers rose to £4.5bn, from £3.8bn a month earlier, whilst business lending to non-financial businesses decreased by £0.4bn, compared with a £2.2bn increase in July.

At the close European indices were mixed with the FTSE 100 +1.02%, the CAC 40 +0.26%, and the DAX 30 -0.31%.

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