*UKHotViewsExtra* Capita’s challenging H1

2020 was the year that Capita was supposed to return to revenue growth - then came Covid. The BPO leader’s trading update from the end of June gave us a “heads up” on what to expect in today’s first half results, that show adjusted revenue declined by 9% to £1,652m (H1 2019 £1,816m), impacted by 2019 contract losses and of course Covid. Profits have also taken a hit, with adjusted operating profit down 61% to £57.6m (H1 2019 £146.1m). It also now means that Capita will not generate sustainable cash flow for at least 1-2 years. The firm also has scheduled debt repayments of around £500m between July 2020 and December 2022 that have to be met.

In response to this, Capita has taken the decision to sell some software assets that it deems “non-core”, to shore up the balance sheet. To date, this has seen Eclipse Legal Systems sold to Access UK for £56.5m and the Education Software business, including its SIMS schools management information system, put up for sale (see here). The need to raise cash has accelerated some pretty tough decisions that have included £57m worth of cost cutting in the first six months.

Operationally Capita responded to the crisis well, shifting 50,000 people to work from home, across nearly 300 offices that have accelerated flexible working patterns that were already becoming increasingly common within the business. It also did a good job delivering some of the critical Covid contracts that were sent its way - supporting the rapid recruitment and clearance of NHS workers returning to help with Covid was a particular highlight..........

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Posted by Marc Hardwick at '09:29' - Tagged: results   Capita