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Capita jumps on MoD contract win, plus £160mln sale of non-core supplier assessment business

The outsourcing group said the sale is in line with its strategy of simplifying its business and to focus on key growth markets and added that it will use the injection of funds to reduce its indebtedness
Capita building
Capita also confirmed that it has been selected as the winning bidder for the MoD's Defence Fire and Rescue Project

Capita PLC (LON:CPI) shares jumped 6% higher on Tuesday, lifted by two pieces of good news, with the group confirming an Ministry of Defence (MoD) contract win and a non-core disposal.

The FTSE 250-listed outsourcing group has agreed to sell its Supplier Assessment Services unit for £160mln in cash. The unit, which includes the Constructionline operation, is being bought by funds affiliated with Warburg Pincus. 

READ: Capita raises £681mln to help pay down debts

The group said the sale is in line with its strategy of simplifying its business and to focus on key growth markets. Capita added that it will use the injection of funds to reduce its indebtedness.

Jon Lewis, Capita's chief executive commented: “This transaction marks a further step in executing the strategy announced in April aimed at simplifying and strengthening the business to deliver future success and contributing to realising £300mln from non-core disposals in 2018."

The company noted that the unit being sold had underlying revenue and operating profit of £14mln and £6mln respectively last year, and it had gross assets valued at £26mln.

Outsourcing of military fire and rescue services

In a later brief separate announcement, Capita also acknowledged a recent statement by the MoD and confirmed that it has been selected as the winning tenderer for the Defence Fire and Rescue Project. The firm simply said: "Further details will be provided when appropriate."

In early afternoon trading, Capita shares were 6,1% higher at 161.6p.

The contract to outsource military fire and rescue services to Capita could prove controversial, however, with unions already having been warned over the move according to media reports.

The Forces Network website said that the Prospect union warned that the decision to press ahead with privatisation was wrong while lessons were still being learnt from the collapse earlier this year of engineering giant Carillion PLC (LON:CLLN).

And the website also reported that Unite national officer Jim Kennedy said: "There is absolutely no business case for these essential and highly dedicated workers to have their jobs outsourced and privatised. The Government remains addicted to the failed model of privatising and outsourcing."

 --  Adds MoD contract statement, share price  --
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