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Investors’ patience is running out for Capita’s turnaround even as education arm’s disposal looms

Jim Armitage
·1-min read
<p>Congested: investors are growing tired of waiting for change</p> (Oli Scarff/Getty)

Congested: investors are growing tired of waiting for change

(Oli Scarff/Getty)

Capita shareholders must be getting fed up with the promise of jam tomorrow.

It’s three years since turnaround guru Jon Lewis turned up to boost the fortunes of the struggling Congestion Charge operator.

Yet for investors, there’s been little to cheer since.

Lewis — a decent chap, it must be said — persuaded them to support a £700 million rights issue. The idea was for a turnaround to develop high margin, tech-led work you’d usually associate with the likes of Accenture.

They were promised a raft of disposals to bring in cash, and an end to the bad contracts previous management had daftly taken on.

But what actually happened?

When he arrived, the shares were 220p, diluted by the 70p-a- share rights issue. They’re now 44p. In the past year alone, they’ve crashed 73% against the broader FTSE All Share’s 15% slide.

Disposals have been too slow. Cashflow targets have been missed. And, as Shore Capital notes, “challenged” contracts remain. Profits and cashflow are way below where they should be.

Today comes welcome news of takeover talks for its education business. If Lewis can get that over the line for the £500 million reported (doubtful), then great.

But shareholders can ask why it, and other sales, have taken so long. In less than a year, Interserve has sold its facilities management and education arms and will have found buyers for most of the rest of its operations by Christmas.

Capita shares fell despite today’s disposal news.

A warning sign that the market’s belief is running out.

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