Capita endured a nasty fall as the City continued to ponder its chances of recovery after a string of profit warnings. Shares in the FTSE 250 support services group slid 34p to 553p after UBS said that it was “less convinced” by the company’s long-term prospects.
Analysts at the Swiss broker maintained their “neutral” rating for Capita as they predicted short-term stabilisation. Expected disposal announcements could reduce leverage, raising about £710 million.
“This will be an essential step in reassuring investors, as is stabilising profits after underlying declines,” they said, raising their target price from 540p to 580p, adding that next week’s trading statement “should reiterate cost savings to neutralise a circa 10 per cent underlying profit decline”.
However, UBS said it was less persuaded by Capita’s prospects after next year, which it said would depend on “rejuvenation”. A new chief executive “will need to be found quickly” as Andy Parker parts ways with the company after its relegation from the FTSE 100. Analysis by the Swiss broker found that employee satisfaction at Capita was among the lowest in its sector “and falling”.
London’s mid-cap index was under pressure before the general election tomorrow, slumping by 213.83 points, or 1.08 per cent, to 19,654.84. A Survation poll for Good Morning Britain on ITV was said to have heightened investor concern over the result. The survey had the Tories one point ahead of Labour, at 41.5 per cent and 40.4 per cent, respectively, raising the prospect of a hung parliament.
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AO World, soon to be relegated to the small-cap index, fell 15½p to 129½p after warning of tough trading conditions in the UK.
The leaderboard was littered with mining stocks, as gold prices jumped to a seven-week high. Hochschild gained 17p to 314p, Acacia climbed 11p to 296¾p and Kaz Minerals rose 15p to 486¼p. Miners also dominated the FTSE 100, which fell 0.81 points, or 0.01 per cent, to 7,524.95. Fresnillo jumped 52p to £16.74, Randgold Resources gained 200p to £77 and Anglo American increased 19p to £10.45.
It might serve you well in Milan, Paris and New York, but buying Burberry is still unfashionable in the City of London. HSBC downgraded from “hold” to “reduce” yesterday, amid fears that it will take longer to recover than the market expects. Burberry slipped 67p to £17.43.
“We would sit this one out,” analysts advised clients, highlighting the “many uncertainties” faced by Marco Gobbetti, who will succeed Christopher Bailey as chief executive next month. “We believe the group needs new life in terms of design and merchandising,” they said, adding that the “jury is still out” on whether Mr Bailey can deliver this with a few colleagues as chief creative officer.
Shares in ITV slid from 214¼p to 150½p in two days of trading after Britain voted to leave the EU last June. Investors were concerned that advertising would be hit by the uncertainty thrown up by the referendum result. As election jitters swept through the Square Mile last night, the broadcaster closed at its lowest level since takeover speculation carried it above 200p last year, shedding 4¾p to 183½p.
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Merlin Entertainments continued to struggle after the terrorist attack on London Bridge. The operator of the London Eye and Alton Towers fell 16p to 508p amid fears over the impact of the incident on tourism.
Payday for Convatec backers
The private equity backers that brought Convatec to the stock market have offloaded £805 million worth of shares in the medical products company.
Nordic Capital and Avista sold 250 million shares through a placing at 322p a share, a slight discount to Monday’s closing price of 344p, a record high for the stock.
The disposal comes after a strong performance on the London Stock Exchange since Convatec floated at 225p in October and following an earlier sale at the end of March, when the two investors sold almost 20 per cent of the company at 260p a share to Novo A/S, an investment vehicle linked to the Novo Nordisk Foundation, a charitable division of the Danish pharmaceuticals group. A separate 300 million shares were sold at the time. Nordic retains a 7.3 per cent stake and Avista just under 3 per cent.
The shares drifted towards the placing price, closing down 13½p at 330½p, valuing the FTSE 100 company at about £6.4 billion.
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The Berkshire-based company, which was London’s biggest float last year, published encouraging maiden annual results in March.
Wall Street report
America’s traders shied away from risk before tomorrow’s general election in Britain and the European Central Bank’s policy meeting. The Dow Jones industrial average shed 47.81 points to 21,136.23 and the S&P 500 fell 0.3 per cent to 2,429.33.
