London-Based International Company Plunges Into A Downward Trend After Disappointing Profit Warning
Shares of the international business process outsourcing and professional services company have recently plunged to a 10-year low. The decline in the shares of Capita PLC (LON:CPI) was led by a disappointing profit outlook warning.
Capita is known for being a provider of IT business services to companies and establishments such as retailers, utilities, investing, banks, and health services,
The profit warning showed that the company is set to start selling their assets in less than three months including a huge chunk of their Capita Asset Services division among others. The sale of the major asset is set to give the company an operating profit of around £60 million although their restructuring is set to cost the company around £50 million from this current quarter until the first nine months of 2017.
The sale of some of their assets also is believed by the company to free them from some of their own debt.
The London-based international company will also be initiating a bigger restructuring program for the company this according to Capita’s chief executive Andy Parker. The restructuring is set to be held through the reorganization of their eleven divisions into only six divisions. Capita is also set to layoff more than 2,000 employees or jobs. In the previous year, Capita also reported a lower pre-tax profit from £292.4 million to only £112.1 million.
Compared to the analysts' profit forecasts of around £535 million to £555 million, Capita is now releasing a profit forecast of only £515 million leading to another disappointing profit warning. Capita has changed their profit forecast into much more disappointing results four months ago. The profit warning then led the shares of Capita to drop by around 30%.
Despite the downgrade in their profit expectations, the company announced that they are still well provided with different sources of revenue including their current long-term contracts while the restructuring will benefit the company in the latter part of 2017 until 2018.
Capita Shares
From the recent trading session prior to the profit warning, Capita shares were trading up at around 563.00 from an opening price of 550.00 before it dropped to a ten-year low, The downgrade in their profit clearly led the investors into a panic causing Capita stocks to be oversold. The RSI Indicator dipped below the level 30 showing an oversold stock.
The most recent trading session shows that the stock have dropped by 2.27% more from Thursday’s trading showing a decline of 8% from Wednesday’s session. The most recent candle is now trading at around 474.20 compared to Wednesday’s trading session high of 564.50.
Capita is currently at a serious risk of declining further as this is not the second time this year that the company issued a disappointing profit downgrade.
Capita’s market value plunged to £3.3 billion by 12.9% earlier last September on their first profit warning with their shares trading at around the 490 level.