Capita PLC (LSE:CPI) returned to profit in 2021 and posted its first adjusted revenue increase in six years, a trend that it expects to continue.
In reported terms, the business outsourcing company posted a pre-tax profit of £285.6mln for the year to 31 December 2021 from a loss of £49.4mln the year before, and revenue dropped to £3.18bn from £3.32bn.
However, revenue rose 0.4% to £3bn on an adjusted basis, with pre-tax profit rising to £93.5mln from £5.4mln, the company said in a statement.
It said revenue growth was supported by major contract wins in both core divisions, particularly the Royal Navy and RSPCA training contracts. These offset contract losses, primarily from 2020, in the Experience division, where revenue declined by 9.4%, and the net revenue loss of COVID-19 contracts won in 2020.
The Public Service division saw revenue growth of 10.8% during the year, but the Portfolio division declined by 0.3%.
Debt has been reduced to £880mln from £1.07bn in 2020, funded by operating cash flow and disposals, with further debt reduction planned for this year.
The group secured £3.8bn of total contract value in 2021, a 31% increase versus 2020. Its programme of disposals also exceeded its £700mln target ahead of schedule.
Capita anticipates revenue growth in 2022, positive free cash flow and continued strengthening of the balance sheet.
The group said it expects revenue growth to be underpinned by strong contract performance in 2021, its order book, lower attrition, a growing new business pipeline in both Public Service and Experience and continuing recovery from COVID-affected businesses.
It expects slightly lower profit margins in 2022, partly reflecting the impact of prior year contract losses.
Capita forecast revenue growth in the mid-single digits and high-single digit EBITDA margins for the core business in the medium term.
In a separate statement, Capita announced it received clearance from the Department for Business, Energy and Industrial Strategy to sell an IT services business to One Equity Partners for £115mln.
This January, Capita announced it had agreed a deal to sell Trustmarque, which provides IT services including software and hardware re-sale. Capita bought the York-based business, with a turnover of £120mln, for £57mln in 2016. The deal is expected to close this month.