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Share Name Share Symbol Market Type Share ISIN Share Description
Capita Plc LSE:CPI London Ordinary Share GB00B23K0M20 ORD 2.066666P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  7.56 19.77% 45.80 45.35 45.88 47.80 37.70 37.70 34,547,066 16:35:18
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Support Services 3,918.4 272.6 18.4 2.5 764

Capita PLC COVID-19 Market Statement

27/03/2020 9:24am

UK Regulatory (RNS & others)


 
TIDMCPI 
 
This statement contains inside information 
 
                            COVID-19 market update 
 
COVID-19 brings many challenges and is a net negative for Capita[DEL:::DEL] 
 
  * Our priority in these unprecedented and challenging times is to protect the 
    well-being of all colleagues 
 
  * Capita has a range of core services that our clients depend on and which 
    underpin a high proportion of our revenue, but some parts of the business 
    will be adversely affected 
 
  * We are taking robust and wide-ranging action to protect our financial 
    position 
 
  * We currently have more than GBP450m of liquidity 
 
    In light of the unpredictable level of disruption caused by COVID-19, we 
    are withdrawing our financial guidance for 2020 issued on 5 March. 
 
    Precise forecasting is challenging in these uncertain times. The Board 
    believes that, based on a wide range of scenarios undertaken by management, 
    our existing financing arrangements and mitigating actions discussed below 
    currently provide sufficient liquidity and enable Capita to meet covenants 
    at the half year, and operate through these unprecedented times. We will 
    update the market further if appropriate. 
 
Safeguarding our people 
 
Our priority in these unprecedented and challenging times is to protect the 
well-being of all colleagues, while continuing to serve our clients and the 
communities in which we operate. 
 
We are focused on doing our utmost to keep all our people and their families 
safe and healthy, and to support them during these times. 
 
Many of our colleagues support front-line services for the UK Government and 
clients in sectors including utilities, telecommunications and financial 
services, who continue to need these services. 
 
We have made arrangements for as many of our colleagues as possible to work 
from home and have been increasing our capacity to support remote working every 
day. 
 
The only people now working at a Capita site in the UK are key workers, as 
defined by the UK Government, or who are within an exceptional category of 
people providing other essential services - and for whom it remains not 
possible to work from home. Where working from an office is still necessary, we 
are following all government guidance on health and safety. 
 
In India, South Africa and Europe we continue to make progress with enabling 
greater numbers of our colleagues to work remotely. 
 
Business update 
 
Capita has a range of core services and mission-critical infrastructure that 
our clients depend on and which underpin a high proportion of our revenue. In 
2019, half of our revenues were related to services to the UK Government. The 
Group order book at 31 December 2019 was GBP6.7bn. 
 
In the last few weeks we have secured new work including a three-year extension 
to a Ministry of Justice contract (worth GBP114m). Capita also won new projects 
for a high street bank (worth GBP33m over three years) and a healthcare contract 
win in the Software division (worth GBP19m over seven years). 
 
We are currently exploring more than 100 situations to support the UK 
Government COVID-19 response with additional services. This includes 
contributing resource to healthcare call centres as well as being part of an 
initiative to set up health testing centres. Some private sector clients have 
also asked for additional help to respond to higher demand from their 
customers. 
 
The business remains focused on operational delivery and regulatory compliance. 
Where we are providing key services, we are receiving strong support from our 
major clients including the UK public sector, telecoms, utilities and financial 
services and we expect limited financial impact in these areas. 
 
However, the rest of our business is expected to be more adversely impacted by 
COVID-19, including significant, although temporary, impact in areas such as 
face-to-face training, resourcing, contact centres for retail and leisure 
clients, consulting and our corporate travel agency. 
 
Management actions 
 
We have therefore decided to take robust and wide-ranging action to protect our 
financial position in this unprecedented situation, including prudent 
cost-saving measures to offset the impact of expected revenue reduction, 
including: 
 
  * Central overhead costs will be reduced to the bare minimum whilst ensuring 
    operational oversight and regulatory compliance are maintained. 
 
  * Discretionary expenditure has been materially reduced, specifically in 
    areas such as travel, marketing, non-essential training and recruitment. 
 
  * We have temporarily closed a number of our offices around the UK which are 
    not required for the provision of essential services and are planning to 
    move rent payments to a monthly in advance basis (from quarterly). 
 
  * We have reduced the number of contractors we use by reallocating and 
    prioritising internal resources. 
 
  * Significant temporary reductions of salary by senior management and the 
    Board 
 
    These actions are expected to mitigate any profit impact by more than GBP100m 
    in 2020 before taking into account the furlough support from Government. 
 
    We employ over 40,000 people in the UK. Where, as a result of COVID-19, any 
    of these cannot work from home and are not required to come into their 
    normal workplace, their roles will be furloughed in accordance with the UK 
    Government scheme and they will receive 80% of base salary, up to GBP2,500 
    per month. 
 
    We have also identified cash management actions to maximise the liquidity 
    available to the business in the short term, including: 
 
  * A number of planned restructuring initiatives and un-committed capital 
    expenditure have been put on hold indefinitely, saving GBP25m this year. 
 
  * Making use of the HMRC policy to defer VAT payments of c.GBP100m to 2021. 
 
Liquidity and balance sheet 
 
Capita had more than GBP450m of liquidity as at 25 March and is taking all 
necessary measures to protect its financial position. 
 
The group has access to significant liquidity comprising a revolving credit 
facility of GBP452m and an additional facility of GBP150m. As at 25 March, GBP150m of 
this was drawn, reflecting the typical seasonal requirements of the business. 
 
At 31 December 2019, the group had debt excluding lease liabilities and swaps 
of GBP991m, of which GBP233m is scheduled for repayment in June and September 
2020. At 31 December 2019 headline net debt (net debt excluding lease 
liabilities) was GBP791m and headline net debt to adjusted EBITDA was 2.0x 
(excluding the impact of IFRS 16). 
 
The covenants1 that govern the US and Euro private placement notes are set at 
3.0x and 3.5x net debt to EBITDA respectively, with the calculations based on 
hybrid and frozen GAAP and described in detail in our Annual Report. These are 
tested at the half year and full year. 
 
In addition to the above we are continuing to progress with non-core disposals 
and it remains our intention to extend the Group's debt maturities when market 
conditions improve. 
 
Jon Lewis, Chief Executive Officer, said: 
 
"Our priority in these unprecedented and challenging times is to protect the 
well-being of all colleagues, while continuing to provide services to our 
clients and customers, and the communities in which we operate. 
 
"We serve millions of people every day at Capita, for our private sector 
clients and through our work in partnership with the Government which has 
intensified in recent days as we support efforts to combat the coronavirus 
outbreak. 
 
"We are committed to making sure we run our business as seamlessly as we can 
during this very difficult period. 
 
"We are taking some tough, but prudent, cost-cutting decisions to protect our 
financial position and ensure we remain resilient as a business for the long 
term." 
 
Change of Date for AGM 
 
Recognising the UK Government's guidance regarding COVID-19, we have taken the 
decision to delay our AGM from 12 May to 25 June.   Further details will be 
communicated through the Notice of Meeting in the usual way. 
 
 1. Under the RCF and Euro fixed rate bearer notes covenants at 31 December 
    2019 the Group's adjusted net debt to adjusted EBITDA ratio was 2.2x (2018: 
    1.2x) compared to a maximum permitted value of 3.5x. Under the US private 
    placement loan notes covenant calculations, at 31 December 2019 the Group's 
    adjusted net debt to adjusted EBITDA ratio was 1.7x compared to a maximum 
    permitted value of 3.0x 
 
 
 
END 
 

(END) Dow Jones Newswires

March 27, 2020 05:24 ET (09:24 GMT)

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