1st Aug 2019 10:19
(Alliance News) - Outsourcing services company Capita PLC on Thursday reported a drop in first half revenue and profit, in line with expectations, and said that it is making progress on in its business transformation programme.
The company, which provides support services to local authorities, schools and health organisations, also retained its annual guidance. It remains on track to record pretax profit of between GBP265 million and GBP295 million for 2019 and cost savings of GBP175 million by end 2019.
Capita also reiterated its 2020 targets of double-digit operating profit margins and at least GBP200 million of sustainable free cash flows.
Shares in Capita were trading 15% higher at 133.35 pence each on Thursday in London.
For the six months ended June 30, the company recorded pretax profit of GBP31.2 million, down from GBP42.3 million in the year ago period. Revenue declined 8% to GBP1.85 billion from GBP2 billion the year before.
The decrease in profit and revenue was attributed to structurally challenged contracts in local government and life insurance. A number of contract losses including Prudential and Marsh in specialist services and Home Office escorting in government services also contributed the decline in earnings.
The company is not recommending the payment of an interim dividend, with dividend payments also not paid in the first half of 2018.
The outsourcer said it "recognises the importance of regular dividend payments" and will consider the payment of dividends once it is generating sufficient sustainable free cash flow.
Capita believes it is making good progress on executing its new strategy. The outsourcer has won several new contracts within the first half, including contracts from the Ministry of Defence's fire and rescue service, the UK Department for Work & Pensions and the Department of Communities in Northern Ireland.
"We have made significant progress in a short period of time. There is still much work to do but the foundations we are laying now will put us in a position to succeed and grow. There is huge potential for our business as companies invest more in digital transformation. With Capita's credentials and client-base, the long-term opportunity for growth is significant." said Chief Executive Officer Jon Lewis.
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