Capita PLC (LON:CPI) has today announced the departure of chief executive Andy Parker alongside a 33% drop in full year profit, a day after the outsourcing group was ejected from the FTSE 100.
Parker, who has been with Capita for the past 16 years, will step down later this year to “pursue the next phase of his career” once a successor is found.
“2016 has been a difficult year for Capita but the company is now a simpler, more focussed group with a clear service offering and growth strategy, and a plan to achieve a stronger balance sheet,” Parker said in a statement.
“We have achieved a great deal but going forward it is time for a new leader to take Capita through the next steps to renewed and sustainable organic growth.”
The news comes after indexes compiler FTSE Russell announced yesterday that the group would be demoted to the FTSE 250 as part of a quarterly reshuffle. Capita has lost 40% of its value in the past 12 months and has downgraded its profit forecasts twice in three months at the end of 2016.
Profits drop ...
Capita today posted pre-tax profits of £74.8mln on a reported basis in the year to 31 December 2016, down from £112.1mln the previous year.
Revenue rose to £4.9bn from £4.8bn as a steady performance in the digital and software solutions division was offset by organic declines in the specialist recruitment, property, and technology and enterprise solutions businesses.
The dividend was left at 31.7p while free cash flow rose to £40.9mln from £304mln and net debt fell to £1.8bn from £1.9bn.
Major contract wins rose to £1.3bn from £1.8bn, including 46% new business and 54% extensions and renewals.
The group said the uncertainty surrounding last June’s Brexit vote meant there were fewer opportunities coming to the market, particularly in government contracts, and delays in client decision making.
“Although the referendum decision may continue to limit central government activity in 2017, we expect new opportunities to emerge over the medium term, as the UK's administrative responsibilities increase over time,” Capita said in a statement.
Return to growth ...
Capita expects to return to growth in 2018 as it undergoes a restructuring and completes disposals this year.
The group has proposed the sale of its asset services businesses.
Capita said it has received “good interest” for the businesses and the disposals are likely to be completed this year, helping to strengthen the balance sheet.
For fiscal year 2017, Capita expects a similar trading performance to 2016 before the impact in pension charges. The first half of 2017 is likely to face the same headwinds it faced in the second half of 2016, Capita said.
Peel Hunt analyst Christopher Bamberry said: "The 2016 final results are in line with expectations. With the revenue headwinds entering 2017, the operational challenges and constrained balance sheet, we remain wary of investing in Capita despite the shares trading on 9.4x price-earnings ratio and yielding 5.6%."
Peel Hunt reitered a 'reduce' rating and target price of 466p.
Shares fell 9.12% to 513.50p in morning trading.
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