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Capita slips as sales fall short of expectations

CAPITA, Britain&rsquo;s largest outsourcing company, was the FTSE&rsquo;s worst performer yesterday on the back of a disappointing update that drew attention to its high trading multiple.<br /><br />The company&rsquo;s paper lost 5.2 per cent to close the day at 721p after it revealed a slower than expected rate of organic growth.<br /><br />Capita won &pound;1bn of work over the 10 months to October, compared with &pound;1.2bn last year. Acquisition spend was &pound;98m year-to-date, which analysts believed was too low to compensate for the lack of natural expansion. <br /><br />While revenues are expected to show modest growth this year, observers said the overall package did not match up to Capita&rsquo;s price-to-earnings multiple of 18 times.<br /><br />Robert Morton, analyst at Investec, said: &ldquo;What management was saying about second half revenue growth wasn&rsquo;t quite enough to justify the substantial premium to the market.&rdquo;<br /><br />Uncertainty over public sector spending next year also detracts from the company&rsquo;s prospects, said Panmure Gordon analyst Mike Allen.<br /><br />Capita insisted less than 10 per cent of its revenue was generated by businesses vulnerable to a weaker economy. However, Capita Financial Managers, which administers nearly 600 funds, has taken hits from increasing IT and regulatory costs.<br />