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Shares in Britain's Capita surge as recovery on track
June 13, 2017 / 6:16 AM / 2 months ago

Shares in Britain's Capita surge as recovery on track

LONDON (Reuters) - British outsourcing group Capita (CPI.L) said it expects to improve its profitability and secure more contract wins this year, sending its shares sharply higher as it recovers from a string of profit warnings and the departure of its CEO.

Capita, which specialises in providing IT-enabled business services to banks and investors, the National Health Service, retailers and utilities, said on Tuesday it was making progress finding

a new chief executive to replace Andy Parker, who leaves in September.

It added that the disposal of its asset services business was still on track for the second half of the year.

Both are seen as key to future performance after the company was hit by clients delaying major deals in the wake of Britain's vote to leave the European Union.

Shares were up 14 percent at 0840 GMT at 629 pence compared with a little-changed blue chip FTSE index .FTSE.

Credit Suisse said the statement was "broadly positive".

The overall picture is still mixed for the group, analysts said, but the fact that current forecasts were unchanged and there was no fresh negative news boosted the shares.

While Capita's profitability is recovering in its IT Services division and it is seeing better trading in Germany and Switzerland, its property, employee benefits and learning services operations have yet to improve.

"As previously stated, Capita expects 2017 will be a transitional year for the group," it said.

"Tough conditions continue from the hiatus in the public sector," said Robin Speakman, analyst at Shore Capital, adding that he still saw risks that forecasts could be downgraded.

The group also mentioned the potential early termination of a Ministry of Defence contract which could be retendered and become less profitable.

In March, it announced a bigger-than-expected drop in profits and said it would take until 2018 before it could return to growth.

Capita is trying to become "leaner and simpler", after years in which acquisitions were the main driver of revenue growth and its structure was considered by many analysts to have become unwieldy.

Reporting by Kate Holton and Elisabeth O'Leary; Editing by Mark Potter and Louise Heavens

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