Capita shock profit warning, Wizz Air loses altitude

“The FTSE 100 stabilised after yesterday’s big sell off as investors braced themselves for the latest interest rate announcement from the US Federal Reserve,” says AJ Bell Investment Director Russ Mould.

Capita

“Outsourcer Capita lost nearly a third of its market value this morning, its biggest ever one day fall, as new chief executive Jonathan Lewis looks to clear the decks by cancelling the dividend, announcing plans for a dilutive £700m rights issue and flagging future disposals. Pre-tax profit for 2018, excluding exceptional items, is guided at between £270m and £300m against analyst expectations for around £400m.

“New management often take the opportunity to rebase expectations, but it is rare for their actions to be quite as drastic as those Lewis has outlined. Today’s news is likely to lead to renewed focus on the wider outsourcing sector after Carillion’s collapse earlier this month.

Wizz Air

“The rising cost of fuel on surging oil prices saw budget airline Wizz Air lose altitude this morning. Investors ignored record headline figures to focus on a 56% fall in statutory pre-tax profit in the third quarter from €33m to €14.6m. Fuel costs increased 33% to €118.8m and there was guidance for further increases in 2018.

“Although airlines will often hedge their exposure to oil prices, today’s update is a reminder of the extent to which the industry’s profits are at the mercy of external factors.”

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