Capita issues profit warning

Outsourcing giant Capita has issued a profit warning in the UK and announced a substantial overhaul. BT has a pretty reasonable assessment of what’s going on.

Once again, though, the point of interest for us is the coverage secured by the mainstream press. Here’s our view first. The new CEO appears to have been brought in to turn the business around. There was never any question that this was not going to mean substantial change (a few double negatives in there, for which we apologise, but we hope you get the gist – his job is to change the company).

So he has announced change. This should never have been a surprise. The company has also issued a routine profit warning. At the beginning of a change cycle under a newly-installed CEO who has been there only a month, this is also not a surprise (it’s bad news if you or your company were a shareholder expecting a dividend but it’s not a surprise).

It has nothing to do with Carillion (call us old fashioned but we think it takes more than two companies to set a trend and establish that an entire sector is in decline).

Nonetheless a number of papers are drawing comparisons, and last week the Guardian suggested that the whole sector was coming under scrutiny.

This may well be the case, and Capita has a tough job turning itself around when it’s spread across so many markets. But the idea that this is a surprise or necessarily a sign of trouble elsewhere in the market is as yet unproven.

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