The Capita PLC (LON:CPI) (CPI.L) share price is down 12% today after the company released H1 results. They showed a 1% fall in revenue, with EBIT down 28% versus the comparable period on a reported basis. On an underlying basis, though, the company’s EBIT is up 38%, while PBT has moved 46% higher.
Trading in the first half of the year has broadly been in line with expectations. Its strategic initiatives are also going to plan as the company seeks to reposition itself.
The disposal of its Asset Services business for £888 million to Link Group is due to complete in Q4 2017. It has completed the disposal of its transactional specialist recruitment businesses, while its cost initiatives are also on track. It is expected to realise around £57 million in savings by the end of 2018. A new simplified market facing organisation structure has also been implemented.
Capita is confident that the changes it is making will create a stronger and more sustainable business for the long term. It expects underlying PBT before significant new contracts and restructuring to rise modestly in H2.
In the last year the Capita share price has fallen 42%. That’s a worse performance than a range of other large-cap shares, including Diageo plc (LON:DGE) (DGE.L), BAE Systems plc (LON:BA) (BA.L) and Vodafone Group plc (LON:VOD) (VOD.L). For example, Diageo has gained 10%, BAE is up 7% and Vodafone has fallen 6% during the last 12 months.
In my opinion, Capita has turnaround potential. I think it is making good progress with its transformation plan and today’s H1 results are generally positive in my opinion. However, I feel there are better risk to reward opportunities available elsewhere in the market, so Capita is not a stock I’m looking to add to my own portfolio at the moment.