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Capita profits fall less than expected as the outsourcer undergoes major overhaul

Chief executive John Lewis said his transformation plan for Capita still has some way to go
Capita
Capita is on course to meet its 2020 targets

Capita Group PLC (LON:CPI) posted a 26% drop in profit for 2018 that was better than it had expected as it completed the first year of its restructuring.  

The outsourcer said it made an adjusted pre-tax profit of £282.1mln last year, down from £383.1mln in 2017 but slightly higher than its estimates of £250mln-£275mln. Revenue dropped 5% to £3.8bn.  

READ: Capita lowers profit guidance and warns turnaround plan will take time

Capita has been undergoing a major overhaul under chief executive Jonathan Lewis, which has included a £700mln rights issue, the sale of £400mln of unwanted business and cost cuts.

On the back of the revival process, the group met its £70mln cost savings target last year and expects to realise cumulative savings of £175mln by the end of this year.

Further transformation

“Our transformation still has some way to go,” Lewis said.

“But I am very pleased with our progress. Our targets remain on track, and I’m excited about the prospects for a simplified and strengthened Capita.”

Capita’s order book at the end of the year stood at £7.1bn, compared to £8.2bn in 2017. The decline reflected the fact that the order intake of £1.8bn was lower than revenue recognised along with subdued bid activity in 2017.

Order intake largely comprised contract wins and renewals in the customer management division.

For the 2019 financial year, the group expects a pre-tax profit of between £265mln and £295mln.

The company said it was on course to meet its 2020 targets for £175mln cost savings, “double-digit” adjusted EBIT margins and at least £200mln of sustainable annual free cash flow, before exceptional and restructuring charges and additional pension contributions.

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