The third quarter trading statement from Capita confirms it is trading in line with expectations. The pipeline of opportunities going into 2013 looks busy, albeit this will be primarily driven by the public sector in our view. We maintain our forecasts and target price of 620p on the back of these results, but we re-iterate our “sell” recommendation on the shares.
CAROLINE DE LA SOUJEOLE
One of our worries about Capita is over the sustainability of its margins. There were no comments with regards to margins aside from the statement that the company expects to “achieve continued strong performance”. Growth is coming from both the public and private sector, with a “buoyant” public sector, with significant activity across local and central government.
Trading is in line with expectations, with three per cent organic growth anticipated for the full year and further progression likely in 2013. The sales environment remains buoyant in both the public and private sectors. Capita’s competitive position remains as strong as ever and the shares are trading on multiples that do not adequately reflect its defensive characteristics.