Shares in Capita gain 3.5 percent, the second biggest blue chip riser, with the FTSE 100 index up 0.2 percent, as the outsourcing group posts a 10 percent rise in first half profit, prompting Numis Securities to upgrade its rating for stock to “add” from “hold”.
Capita, which manages over 21 million life and pension policies and provides radios for UK emergency services, said underlying pretax profit for the six months to June 30 was 190.7 million pounds, ahead of a company compiled consensus of 188 million pounds.
“Good H1 figures which were above our and consensus estimates, cash conversion improvement to 93 percent (was 85 percent in fy 2012) and a positive outlook statement should lead to a positive reaction in the shares today,” Numis says in a note.
The broker points out that cash generation had been a worry to the market and the conversion increase is likely to be taken positively, as is the statement they have clear visibility of revenue growth in 2012 and also a strong platform for growth in 2013.
Capita shares trade on circa 12.8 times current year earnings and, with fears over growth and cash likely to diminish in the short term, Numis says the shares are likely to return to 2012 highs of 760 pence in line with its unchanged target price.
Capita shares move higher in strong volume, at nearly 80 percent of the 90-day daily average by 0947 GMT.
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