Capita reassures on accounting policy

Saeed Shah
Friday 06 December 2013 06:21
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Capita Group, the outsourcing specialist, yesterday sought to put an end to two weeks of steep share price falls by insisting its accounting policies were "conservative" and that it would meet profit forecasts.

The company has suffered both from the general climate of suspicion over accounting policies, after the Enron and WorldCom scandals, and a specific attack on its numbers from the Centre of Financial Research and Analysis. Capita will report its financial results on 25 July.

"As part of the interim results presentation Capita will demonstrate that the company has consistently adopted more conservative accounting policies than those required by the relevant accounting standards," Capita said.

The market has generally become concerned about any company that, like Capita, is involved in bidding for large projects. Amey, another support services operator, has seen its share price decimated after admitting the implementation of a new accounting standard, called UITF 34, would have a severe impact on earnings. The issue concerns the booking of bid costs, which are now required to be taken as a cost through a company's profit and loss account.

"The board believes that Capita's policies are robust, appropriate and consistently more conservative than those required by the relevant accounting standards and is fully committed to maintaining this cautious and prudent approach in the future," the company said.

In addition, the Centre of Financial Research suggested that Capita may encourage its acquisition targets to book lots of exceptional costs ahead of a deal going through – in order to flatter performance once owned by Capita. There was also a story that said the company could face legal action over short-comings in its work for the Criminal Records Bureau. Capita has denied both these allegations.

Capita said yesterday that it was "confident" about meeting or exceeding full-year market profits forecasts, which envisage earnings per share growth of 30 per cent. The company's shares closed up 3 per cent to 254.5p, having fallen from about 300p over the past couple of weeks.

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