5th Mar 2020 08:55
(Alliance News) - Outsourcer Capita PLC is making "significant" progress in its transformation, it said Thursday, though it has warned more spending is required than originally thought.
Shares were down 15% on Thursday morning at 107.20 pence each in London.
Capita, which has contracts such as recruitment for the British Army as well as with bodies such as the NHS and the UK Home Office, made a slew of profit warnings during 2018 and secured an emergency rescue rights issue worth GBP700 million the same year.
In 2019, Capita said the reduction in revenue is now slowing, with second half revenue rising in four out of its six divisions year-on-year. The order book at the end of 2019 was GBP6.72 billion, down 5.4% on the same date a year prior.
London-headquartered Capita's 2019 revenue declined by 6.1% to GBP3.68 billion, compared to a 7.3% yearly decline in 2018. Adjusted revenue, taking into account accounting changes, fell 4% to GBP3.65 billion.
Capita swung to a pretax loss of GBP62.6 million in 2019, it continued, following a GBP272.6 million pretax profit in 2018. Adjusted, pretax profit fell 2% to GBP275.0 million. The loss came after Capita booked a more than GBP300 million gain on a disposal in 2018.
Capita booked a cash outflow of GBP213.0 million in the year, narrowed from GBP260.5 million, which it said was due to investment into "delivering operational improvements".
"Over the past two years, we have made significant progress with our multi-year transformation at Capita to create the foundations for long-term, sustainable success. We have continued to simplify and strengthen the business, fix legacy issues, rebuild trust with clients, take out cost, reduce risk, and invest in our growth capability," said Chief Executive Jon Lewis.
"Transforming an organisation of Capita's size is a complex challenge; there remains more to do and it is requiring more investment than we had expected in 2018."
This means, Capita said, progress has yet to translate into improved financial performance. Revenue and profit met expectations in 2019, but it has warned on 2020 cash flow.
Capita sees "modest organic growth" and sustainable free cash flow of GBP160 million in 2020, a figure Capita said is "disappointing".
The company will also be considering the sale of non-core assets to simplify the portfolio and "recycle capital".
By George Collard; [email protected]
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