Deutsche Bank has cut its price target on Capita from 320p to 260p, retaining a Hold rating on the UK outsourcer after the group's Civil Service Pension Scheme failures triggered a material earnings downgrade.
The German bank's London-based analyst David Brockton, in a note, argued that while Capita says it now has the processes, automation and technology in place to clear the contract backlog, the remediation costs have become so severe that generating any profit on the contract over its ten-year lifetime will be extremely difficult without a significant expansion in scope.
The central concern, according to DB, is that the financial damage may not be fully captured in the disclosed £25m to £40m reduction in 2026 adjusted operating profit and £35m to £50m reduction in free cash flow, with analyst Brockton warning that the real-life consequences for Civil Service pension customers have created reputational harm that could still translate into additional financial consequences for the business.
The half-year results, due 4 August, represent the next key marker, with analysts expecting greater detail on KPI penalty exposure, remediation cost phasing and evidence that service arrears are being cleared; the stock closed at 221p, implying the revised target still carries modest upside.
