*UKHotViewsExtra* Capita’s tale of two divisions

Capita published its 2021 results this morning, which outline a return to revenue growth for the business for the time in around six years, as it concluded its three-year transformation programme. Adjusted revenue for the Group increased 0.4% to £3,009m, up from £2,996m 12 months ago. Profitability also improved with adjusted operating profits up 172% to £139.1m (FY20 £51.1m), whilst adjusted EBITDA grew 29% to £295.1m (FY20 £228.4m).

Whilst the headline numbers are moving in the right direction, the real story is very much a tale of two divisions. Capita is now structured into two main operating divisions – Public Service and Experience. Capita Public Service, which principally serves the Public Sector, grew adjusted revenue by 10.8% to £1,410.4m, following a range of good contract wins including its Royal Navy training contract mega deal (see here). It also benefited from the first full year of its Defence Fire & Rescue contract with the MoD and the commencement of DWP’s JETS scheme. There was also a recovery in its Local Government business where contract losses significantly reduced, and its software business improved.

By contrast, Capita’s Experience division (which mainly serves the private sector) is some 18 months behind Public Service in its “business improvement journey” and saw adjusted revenue decline -9.4% to £1,184.7m with contract attrition from the likes of Tesco Bank, Phoenix, VW Group and First Group. There were also volume decreases in its closed book Life and Pensions business as contracts “ran off” as well as reductions in some Covid-19 projects.

Capita has a third division called ‘Portfolio’, which contains a range of businesses and assets that it is looking to divest. Businesses here delivered revenue of £413m last year and where growh was flat. However, Capita has been making very good progress with its disposals easily exceeding its £700m target, well ahead of schedule. Indeed, Capita also announced this morning that its £115m disposal of Trustmarque to One Equity Partners had been cleared by the Department for Business, Energy and Industrial Strategy (see Capita agrees to sells Trustmarque). Good news for Capita is a £197m reduction in its net debt to £880m (FY 2020 £1,077m).

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Posted by Marc Hardwick at '09:53' - Tagged: results   bpo   bps   Capita