Capita shares soar as it reveals recovering pipeline including possible British Airways deal

Shares in outsourcer Capita jumped more than 15pc on Tuesday to their highest price this year so far after the firm said that its turnaround is progressing better than expected.

After a string of profit warnings last year, Capita said it had secured a number of new contracts and was seeing improvement in its struggling IT Services division and across its European operations.

It confirmed that it was in discussions with British Airways to “exploring forming a potential partnership” to run the airline’s customer contact centre, although no final decisions about the contract had been made.

British Airways has denied any link between outsourcing roles and its recent IT meltdown, although unions have suggested that cost cutting and job losses contributed to the problems.

Around 1,100 members of staff are employed by British Airways in two call centres in Newcastle upon Tyne and Manchester. The service came under particular fire as customers struggled to get information about cancelled flights.

Capita has also bolstered its pipeline of work by securing £318m in contracts and extensions so far this year – including work for the Northern Ireland government, the RSPCA and Royal London – adding that it was bidding for work worth a further £3.8bn.

It also said it had “a shortlist of strong candidates” to succeed Andy Parker, who stepped down in March after profits fell by a third.

Capita said that it has made a number of “cost initiatives” since the end of last year, including reductions in overheads, the offshoring of some of its IT support, centralising more of its procurement and reducing its property estate.

It said it expected 2017 to be a “transitional year” for the business, with a return to “sustainable profit growth” by 2018.

“We continue to expect profitability to improve in the second half, reflecting the cumulative benefit from performance improvement initiatives and lower attrition, and our current view that the trading businesses will continue to steadily improve,” it said.

The firm’s share price is still lagging way behind its price this time last year, when shares were worth more than £10 each. Capita lost around 30pc of its value in a single day last September, after an unexpected profit warning.

David Madden, analyst at CMC Markets, said: “The firm was dogged by profits warnings last year, but after making some structural changes it appears to be turning a corner.”

Handpicked links

Hottest stock, Nvidia, gets its most bullish Wall Street forecast yet

Brexit: Europe’s new finance rules put more than 80,000 U.K. jobs at risk