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Sunday share tips: Capita, Town Centre Securities

By Alexander Bueso

Date: Sunday 26 Feb 2017

Sunday share tips: Capita, Town Centre Securities

(ShareCast News) - A "dizzying" acquisition spree since 2006 at Capita saw revenues more than double, but left behind a balance sheet so complex that the firm would need to go much farther to convince investors it was now on the right path than just promising a 'simpler Capita', The Times's Tempus said.
The company brought on board Sir Ian Powell, who ran PwC UK, in September 2016 and he took over as Chairman last month.

Not soon after Powell arrived, the support services giant launched a first profit warning, which it blamed on Brexit, sending its shares diving.

Capita - which had also been left with "dangerously" high debt - was now also facing its ouster from the Footsie, Tempus pointed out.

Its acquistion spree over the past decade had also resulted in a complex company in operating terms, with business units ranging from managing mortgages for the Co-op Bank to tagging criminals, the tipster added.

Even worse, signs had appeared recently that its biggest client, Westminster, was losing patience following criticism from Whitehall's accounting watchdog.

"It will take more than the company's "Simpler Capita" strategy to convince the City the company is back on track. Powell will likely need a new top team to do it. Sell," Tempus said.

Midas touted Town Centre Securities's long-term outperformance and generous dividends, telling readers they could expect the same in coming years.

The family-owned and run regional property business's focus was centred on Leeds and Manchester.

It's popular Merrion Centre in Leeds, its flagship development, received more than 10.0m visitors per year and included tenants such as Morrisons, Sainsbuty's and Boots.

Town Centre was also selectively buying some properties in the less flashier parts of London's suburbs as part of the shift in its portfolio away from Glasgow and Edinburgh, the paper pointed out.

The company run by Edward Ziff, the founder's son, was also involved in various development projects which Midas said would boost property valuations and income over the next few years.

True, the business derived over 75% of its income from the North, which had not enjoyed the boom seen in the South East.

Nonetheless, the North was expected to be more resilient in the next few years, Midas said.

Furthermore, brokers were forecasting full-year profits would be 20% ahead in 2017 with more growth seen in 2018 and beyond.

"The company has outperformed larger rivals over the past five and ten years, combining conservatism with a determination to deliver sustainable growth and generous dividends. Looking ahead, that combination makes the shares a strong, long-term bet," The Mail on Sunday's Midas column said.


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