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UK – Capita full year revenue down 7.4%, but returns to profit as turnaround plans progress

14 March 2019

Capita (CPI: LSE) the UK-based provider of business process outsourcing solutions and professional support services reported revenue decreased by 7.4% for the full year 2018 when compared to the previous year.

The company said its 2018 profit was "slightly ahead" of its expectations as it completed the first year of its five-year transformation programme. The outsourcing firm swung to a £272.6 million pre-tax profit from a £513.1 million loss the year before. Operating Profit stood at £34.9 million from a £420.1 million loss the year prior.

(£ millions) 2018 2017 Change
Revenue 3,918.4 4,234.6 -7.4%
Operating Profit 34.9 -420.1 N/A
Profit Before Tax 272.6 -513.1 N/A

“We’ve successfully completed year one of our multi-year transformation, fixed the basics and are firmly on track,” Jon Lewis, Chief Executive Officer, said. “We’ve strengthened our balance sheet, achieved cost savings, and invested in our people. On top of that, we’ve improved our governance, introduced a ‘One Capita’ operating model, and started turning around challenging contracts. I am particularly proud of our new corporate purpose and refreshed values.”

Last year, Capita had issued a profit warning and announced its plans to raise over £700 million from investors.  The company also stated that it would begin a two-year non-core disposal programme that would sell parts of the business that are not considered core.

In FY 2018 the company said it invested £140 million in infrastructure, products and systems. Capita added that it hits its target of £70 million in-year savings from cost competitiveness.

In 2018 Capita also announced that Nick Greatorex would step down as CFO and in August, the company appointed Patrick Butcher as new CFO.

Looking ahead the company said it will be accelerating cost competitiveness to realise cumulative savings of £175 million by the end 2019. Furthermore, it plans to increase investment in its people, systems and digital capability to support long-term, sustainable growth.

Capita is also targeting a profit before tax of between £265 million and £295 million in 2019

“Our 2020 targets of £175 million initial cost savings, double-digit EBIT margins and at least £200 million of sustainable annual free cash flow, before exceptional and restructuring charges and additional pension contributions, remain unchanged,” the company stated.

“Our transformation still has some way to go. But I am very pleased with our progress. Our targets remain on track, and I’m excited about the prospects for a simplified and strengthened Capita,” Lewis said.

As of last trade, Capita PLC traded at £120.10, up 0.29% on the day and 54.35% above the 52 week low of £77.81 set on 4 April 2018. Based on its current share price the company has a market value of £2.00 billion.

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