As the market moved lower in early trading, it was a tale of two outsourcers.
G4S has jumped to the top of the FTSE 100, up 13p at 277.5, after the security firm reported a 4.2% rise in nine month revenues and unveiled the $135m sale of a US business providing services to the US government, part of its cost cutting programme.
The news follows a better than expected update in August as new chief executive Ashley Almanza gets to grips with the company after a series of contract controversies and disposes of unwanted businesses to concentrate on more profitable areas.
But Capita is down 63p at £10.58 following concerns about its bid pipeline. It said it had won £1.63bn worth of contracts so far this year, but this falls short of the £2.9bn achieved in the same period last year. Recently it lost out to rivals for the Ministry of Justice’s criminal probation services contracts. Liberum said:
Capita’s third quarter reaffirms full year guidance and seeks to reassure over the velocity of bids entering the bid pipeline to recompense for the recent lost Probation opportunity. £1.2bn of new bids has entered the pipeline since the first half, but it is still down to £4.1bn from £5.7bn. This pipeline could still feasibly contribute around 3% to 2015 organic growth, but leaves a near 2% gap relative to our forecasts. Similar to prior fallow organic growth periods, M&A could make up the slack, albeit this arguably deserves a lower rating than organic. Nevertheless, a 2015 EV/EBIT of 14 times and PE of 16 times feels relatively full for a 3 year compound annual growth rate of 10%. We maintain our hold rating.
The company said it expected 8% organic growth for the full year with operating margins between 12.5% and 13.5%. Meanwhile it also announced that finance director Gordon Hurst would step down in February after 27 years at Capita.
Overall the FTSE 100 has fallen 25.53 points to 6601.87, with banks weighing on the index after the latest round of fines. Barclays is down 5.65p at 228.95, HSBC is 5.5p lower at 632p and Royal Bank of Scotland has slipped 0.2p to 377.7p.
Elswhere J Sainsbury has fallen 12.2p at 256.9p despite better than expected figures, as it said it would cut back spending to fund lower prices and said analysts profit forecasts for the full year may be lowered slightly.
Rival Tesco is down 7p at 187.95p on concerns about a price war, while Morrisons has lost 3p to 171p.
