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Woodford cuts losses on Capita after torrid three years

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Woodford cuts losses on Capita after torrid three years
 

Neil Woodford has cut his losses on Capita (CPI), the outsourcing giant whose problems have contributed to his poor run of performance, after 15 years of owning the stock.

Portfolio updates for October for Woodford's flagship £5.1 billion Equity Income fund and smaller Income Focus fund show the manager has sold the stock.

Woodford has been an investor in Capita since 2003, backing the group with his Invesco Income (UK) and High Income (UK) funds, then launching his Woodford Equity Income fund with the stock as one of his top holdings.

He still holds around 6% of the company's shares through other funds, with the stock a major holding in the St James's Place UK High Income fund he runs for the national financial advice group.

It had been one of his most successful investments, with the shares rising five-fold since he first invested until they peaked at over £13 in the summer of 2015.

But it's been downhill since then, with the stock's troubles a major contributor towards a torrid run of performance for the UK's most famous fund manager.

The stock has tumbled following a series of profit warnings, with the group suspending its dividend and selling assets to plug its pension deficit. The shares were changing hands at just 107p yesterday.

The slide from £13 is exagerrated by the shares' rebasing following a deeply discounted rights issue, but not by much.

Only Provident Financial (PFG) and Prothena (PRTA.O) have weighed more heavily on the Woodford Equity Income fund's returns over  three years. The fund has fallen 13.2% over that period.

Woodford had stood by the stock as problems came to a head at the beginning of the year, admitting that the company had proved a 'poor investment' for his funds, but saying that he would 'not be compounding the previous error by behaving in an irrational and valuation insensitive way now'. He later signalled his support for Capita's deeply-discounted £701 million rights issue.

But Woodford Investment Management's stance on the stock appeared to shift in August, as Capita unveiled its interim results.

Analyst Alex Correia said the operational results were 'poor'.

'This is entirely to be expected given Capita is going through a material transformation phase but, even so, there was a significant capital outflow, revenues declines and margins took a hit.'

Woodford has also been dealing with large outflows from his Equity Income fund, which has halved in size since peaking at £10.2 billion in May last year, and this is understood to have been a factor behind the Capita sale.

The manager has also sold his position in brick maker Forterra (FORT). Equity income rivals James Lowen and Clive Beagles, who have been on the other side of that trade with their JOHCM UK Equity Income fund, said in their latest update the exit had 'cleared a long running overhang' on the stock.

The managers had previously highlighted, without mentioning Woodford by name, that the manager's 'persistent' selling of the shares had weighed on the stock.

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