27th Mar 2020 10:42
(Alliance News) - Capita PLC on Friday withdrew its 2020 financial guidance given's Covid-19's "unpredictable level of disruption", with the virus expected to have an overall net negative effect on the business.
Shares in Capita were down 5.6% at 35.40 pence in London in morning trading.
The outsourcing firm has contracts such as recruitment for the British Army as well as with bodies such as the NHS and the UK Home Office.
It said it was withdrawing its guidance issued on March 5 "in light of the unpredictable level of disruption caused by Covid-19".
Although it is difficult to make any certain predictions, Capita said it believes its current financial arrangements and actions taken to mitigate the impact of Covid-19 mean it has enough liquidity to meet its half-year bank covenants and continue to operate.
The covenants governing its dollar and euro private placement notes are set at 3.0 times and 3.5 times net debt to earnings before interest, tax, depreciation, and amortisation, respectively. They are tested at the half-year and full-year marks.
Capita's mitigating actions include cutting central overhead costs as much as possible, shrinking discretionary expenditure, closing a number of UK offices, and reducing the number of contractors it uses. It has also temporarily cut senior management salaries by a "significant" amount.
Such actions are forecast to have a more than GBP100 million mitigation effect on any profit impact from 2020 before any government support.
As at Wednesday this week, Capita had GBP450 million of liquidity. It has access to a GBP425 revolving credit facility plus a further GBP150 million additional facility, of which GBP150 million was drawn on Wednesday. Capital said this reflected "the typical seasonal requirements of the business".
While it is looking into "more than 100 situations to support the UK government Covid-19 response", and is expecting only a limited impact for its UK public sector, utilities, financial services, and telecoms contracts, the rest of its business will take a greater hit.
More severely impacted business areas include: "face-to-face training, resourcing, contact centres for retail and leisure clients, consulting and our corporate travel agency."
Chief Executive Jon Lewis said: "We serve millions of people every day at Capita, for our private sector clients and through our work in partnership with the government which has intensified in recent days as we support efforts to combat the coronavirus outbreak.
"We are committed to making sure we run our business as seamlessly as we can during this very difficult period.
"We are taking some tough, but prudent, cost-cutting decisions to protect our financial position and ensure we remain resilient as a business for the long term."
By Anna Farley; annafarley@alliancenews.com
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