Capita PLC (LON:CPI) saw its shares leap higher this morning as the outsourcing group said its overall trading in the year to date is in line with expectations, and added that it has also drawn up a shortlist of “strong candidates” to replace its departing chief executive, Andy Parker.
In an AGM statement and trading update, the FTSE 250-listed group said the turnaround of its IT Services business “is progressing better than expected, with improving profitability following the restructuring of the divisional management team and operating model”.
READ: Capita boss quits as outsourcer is demoted from FTSE 100 and reports drop in full year profits
It said there are also “steady signs of improvement” in Capita Europe, its customer management operations in Germany and Switzerland."
However, the firm added, trading across its property, employee benefits consulting and learning services operations is yet to improve.
In early trading, Capita shares jumped over 13%, or 72.5p higher to 623.0p.
Good progress on strategic initiatives
AJ Bell investment director, Russ Mould said: ““Capita is making good progress on the strategic initiatives it laid out at the end of last year which aim to create a simpler business. The new divisional management and market-facing organisation structure has created greater renewed focus on sales, consistent operational performance and customer service.
He added: “Investors will be encouraged that the group is also on track for sustainable profitable growth in 2018 and beyond.”
Capita said its bid pipeline is currently £3.8bn, and added that it is seeing good levels of activity in the private sector, particularly in financial services, transport and telecoms.
Confirming recent media coverage, the group also announced it has “entered a period of exclusive engagement with British Airways to explore forming a potential partnership to support its global customer contact operations, which currently handles approximately 9.5 million calls per year.”
The firm said it continues to expect “the majority of sales decisions by value to come in the second half of this year.”
First half performance to be no lower than the second half of 2016
It reiterated that, taking into consideration accounting changes, it expects its first half performance to be no lower than the second half of 2016, excluding the write-down of accrued income and potential impact from disposals.”
It concluded: “We continue to expect profitability to improve in the second half, reflecting the cumulative benefit from performance improvement initiatives and lower attrition, and our current view that the trading businesses will continue to steadily improve.”
In March, Capita reported a 33% drop in 2016 pre-tax profit to £74.8mln, impacted by weak revenues in both its recruitment and IT services businesses, plus a £50mln write-down of assets.
READ: Capita plans asset sales as it cuts its profit forecast once again
The group also announced that its chief executive Andy Parker was to step down, and lost its blue chip status in March as well. Parker is due to remain in the post until this autumn.
Capita also said it is making “good progress in the search to select a new Chief Executive and the selection process is moving forward with a shortlist of strong candidates.”
The group is one of the largest private sector employers in UK, and has a global workforce of about 73,000.
-- Adds share price, analyst comment --