Newspaper article The Evening Standard (London, England)

C-Charge Group Capita Drives Up Huge Profits; MARKET REPORT

Newspaper article The Evening Standard (London, England)

C-Charge Group Capita Drives Up Huge Profits; MARKET REPORT

Article excerpt


THERE was nothing congested about Capita Group today as spiralling profits saw investors snapping up stock.

A better-than-expected 24% rise in profits had the support services group jumping 341/2p to 509p as the market factored in further growth in sales and profit.

Capita, deeply loathed by some drivers for its role running London's traffic congestion charge, has a reputation among investors for breathtaking profits.

Analysts at Deutsche Bank pronounced today's results "exceptionally strong", upped the target to 550p from 510p and repeated their buy advice.

The 7% rise took Capita to an alltime high. Its shares have not risen above 500p since the back end of 2001. With many investors now upgrading their forecasts, the shares could rise further. Following today's analyst meeting, Panmure Gordon's Charlie Cottam raised his recommendation to a buy from hold, pointing out that with only four existing contracts up for renewal in the next four years any new wins above that will increase turnover rather than replenish it.

He thinks Capita should be able to sustain growth well above 10%. It also has good free cash flow generation, giving it an advantage over rival Serco, 51/2p higher at 320p.

Ben Bernanke's positive pronouncements on inflation trends set the scene for further rises in world markets. In London, the FTSE 100 rose 23.5p to 5801.5p, cheered by the strong trading results from Capita and support for BSkyB.

Sky's broadband strategy saw it add another 151/2p to 5461/2p.

FTSE newcomer Vedanta Resourceswas unchanged at 1316p despite tripling first quarter earnings. Higher costs and royalties were offset by increased sales at higher prices.

Although Vedanta said its projects were continuing on schedule, investors were put off by it admitting it continued to experience "challenges" at its Zambian copper mines.

British Energy, 3p down at 694p, was one of the biggest fallers as the Government confirmed it is actively considering selling it stake in the company.

Below the top tier there were more notable fallers than risers, led by Colt Telecom, which revealed its German and UK voice markets were still tough. …

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