Jefferies downgrades Capita until visibility improves

(ShareCast News) - Jefferies downgraded outsourcer Capita to 'hold' from 'buy' and slashed the price target to 465p from 815p until visibility improves."Until visibility improves we downgrade from buy to hold and will revisit subject to working capital, bid pipeline and disposal momentum over the next three to six months."Last week, Capita announced that it will offload the majority of its Asset Services division and a number of other non-core businesses, and cut jobs. It also downgraded its full-year guidance for underlying pre-tax profit to "at least £515m" from a previously lowered range of £535m to £555m.This followed a major profit warning in September."Balance sheet risks should subside if non-core assets are divested for £740-820m but given profit/free cash flow headwinds and narrowing headroom with the 3.5x leverage covenant, 2017 is a highly uncertain year," Jefferies said.The bank said second-half working capital looks weak despite lower revenue and the shrinking bid pipeline supports its scepticism that revenue growth will review.In addition, it noted concerns about the number and public profile of underperforming contracts.At 0910 GMT, the shares were down 0.1% to 452.10p. Capita