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CPI Capita Plc

13.29
-0.03 (-0.23%)
Last Updated: 14:29:43
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Capita Plc LSE:CPI London Ordinary Share GB00B23K0M20 ORD 2 1/15P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -0.03 -0.23% 13.29 13.22 13.31 13.43 12.91 13.20 5,865,053 14:29:43
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Business Services, Nec 3.01B 74.8M 0.0444 3.00 224.38M

Capita PLC H1 2020 Market Update

25/06/2020 7:00am

UK Regulatory


 
TIDMCPI 
 
LEI no. CMIGEWPLHL4M7ZV0IZ88 
 
                                  CAPITA PLC 
 
                             H1 2020 MARKET UPDATE 
 
25 June 2020 
 
Summary 
 
  * We have delivered a strong operational response to COVID-19 impact, working 
    with colleagues and clients to protect service delivery; 60% of our people 
    are working from home and 35%, who cannot work from home, are operating 
    safely from our offices and client sites that have remained open 
  * Revenue in H1 is expected to be around 10% lower than 2019, of which 5% 
    relates to COVID-19 
      + A small decline in trading was expected in the first half due to 
        contract losses reported in 2019; the first quarter was broadly in line 
        with expectations 
      + We have recorded contract wins, extensions and renewals such as Irish 
        Water, Teachers Pensions and Ministry of Justice Electronic Monitoring 
      + COVID-19 impact: 
          o resilient performance in the majority of our operations from 
            long-term contracts with a stable government and blue-chip customer 
            base; 
          o COVID-related DWP and NHS call centre work; 
          o partially offsetting the impact of weaknesses in transactional and 
            volume-related revenue, such as travel, face-to-face training, 
            resourcing and enforcement. 
  * Cost savings of at least GBP45m already delivered in the first half to 
    mitigate financial impact; significant further cost savings to be delivered 
    in H2 
  * Improvement in cash generation, including around GBP120m benefit from 
    Government VAT deferral scheme, has provided support to liquidity 
    facilities of GBP602m 
  * We continue to expect to remain compliant with debt covenants at H1 
  * Simplifying the software portfolio and strengthening the balance sheet 
      + Focusing our software capability where aligned to existing consulting, 
        digital BPO services and vertical markets 
      + Sale of Eclipse Legal Services due to complete shortly 
      + Decision to commence process to dispose of Education Software Solutions 
      + Proceeds will significantly strengthen Capita's balance sheet 
 
Jon Lewis, Chief Executive Officer said 
 
"Capita and its people have, like thousands of other businesses, faced numerous 
challenges and uncertainties over the past three months. 
 
"But, thanks to the hard work and professionalism of our colleagues, we have 
delivered a strong operational response to the COVID-19 crisis. This has only 
been possible due to the actions we have taken over the past two years to 
simplify and strengthen the organisation - to rebuild trust with clients, fix 
legacy issues, improve contract execution, invest in our people, improve 
systems and controls, reduce risk and cut cost. 
 
"It means we have been able to deliver a resilient first-half performance, 
underpinned by a large number of long-term contracts delivering critical 
services to government and to a blue-chip, private sector client base. 
 
"We have implemented cost and cash preservation initiatives to mitigate the 
financial impact of COVID-19, while liquidity remains strong, and cash 
generation from operations has improved significantly compared with 2019." 
 
H1 trading and COVID-19 impact by division1 
 
Software - We have seen resilience in the Education, Capita One and AMT Sybex 
businesses but the payments business in particular has experienced a steep fall 
in transactions in end markets. In March we secured a seven year GBP19m 
healthcare decisions contract with a UK regional NHS service. We expect revenue 
for the half year, including the impact of COVID-19, to be up by around cGBP2m. 
 
People Solutions - HR Solutions, Pensions Administration and Army Recruitment 
have been stable but Learning and Resourcing have been hard hit. There has been 
a small benefit from our work for NHS Returners and some eLearning contracts. 
We are pleased to have renewed the Teachers' Pension Scheme for another four 
years, worth GBP60m. We expect revenue for the half year, including the impact of 
COVID-19, to be down by around GBP30m. 
 
Customer Management - We have managed to shift to remote working basis for over 
70% of the division and so maintain high service levels to our clients. 
Challenges have occurred in specific client end-markets (e.g. retail and 
gambling). Opportunities to support COVID-related projects have arisen in NHS 
call centre and DWP support. We have won a major new piece of work from a UK 
retail bank worth GBP33m over three years. We expect revenue for the half year, 
including the impact of COVID-19, to be down by around GBP10m. 
 
Government - Revenues have been resilient in many verticals: Health and 
Welfare, Transport, Defence, Justice; but there has been an impact in Local 
Government (parking, leisure centres, rates collection), Entrust (outdoor 
education) and Fera (less testing from private companies). However, we have 
also supported several COVID projects such as for the DWP and various NHS 
schemes. We were pleased to have been awarded the Ministry of Justice 
Electronic Monitoring scheme contract extension worth GBP114m over three years. 
We expect revenue for the half year, including the impact of COVID-19, to be 
down by around GBP60m. 
 
Technology Solutions - Operations in the existing business have been broadly 
stable but transactional revenue and new business have been affected. We have 
seen increasing interest in automation as a result of COVID and the team was 
responsible for Capita's successful move to remote working for 35,000 
colleagues. During the period we have won a GBP24m one-year contract to implement 
the TfL Emergency Services Network infrastructure. We expect revenue for the 
half year, including the impact of COVID-19, to be down by around GBP35m. 
 
Specialist Services - The division has been significantly impacted by COVID-19, 
particularly in those businesses whose end markets have been severely affected 
(Travel and Events, Enforcement, Real Estate and Infrastructure) and 30% of our 
colleagues in this division are on furlough. We expect revenue for the half 
year, including the impact of COVID-19, to be down by around GBP40m. 
 
Consulting - we have been getting good traction in certain verticals such as 
cyber and justice and the business is expected to grow this year. However, we 
are now working in the most challenging markets in recent memory. We have 
refocused the business to reflect this new outlook onto a smaller range of 
vertical markets and capabilities. We look forward to accelerating growth as 
demand picks up again in the future. 
 
Simplifying the portfolio and strengthening the balance sheet 
 
Following a strategic review of our Software division over the past year, we 
made a decision to focus on a portfolio of core software capabilities which are 
better aligned with and support our consulting, transformation and digital BPO 
services, and the vertical markets of the rest of the Group. 
 
We will retain our software assets that are catalysts for growing our other 
services and plan to dispose of the standalone software products that have 
little overlap or cross-sell with the rest of Capita. 
 
As a result, we initiated the disposal of Eclipse Legal Systems ("Eclipse"), a 
standalone legal process software product in January. Last Friday we announced 
we had agreed to sell Eclipse to Access UK Limited for GBP56.5m and this 
transaction is due to complete shortly. 
 
We have also announced our intention to dispose of Education Software Services 
("ESS") during 2020. ESS is a standalone provider of management information 
system (MIS) software for the education sector. 
 
Proceeds from both of these disposals will be used to strengthen the company 
balance sheet by reducing net debt and pension liabilities. Further disposals 
will be considered in due course. 
 
Outlook 
 
Precise forecasting is challenging in these uncertain times. 
 
We expect trading over the rest of the year to remain resilient, given the 
client base and the long-term nature of our contracts. 
 
Before the benefit from Government VAT deferral scheme, we still expect cash 
generation to improve compared to last year as cash from trading operations 
improves and capital expenditure reduces. In addition, restructuring spend also 
reduces. 
 
The disposal of the Eclipse business and the planned disposal of Education 
Software Services will strengthen the balance sheet and we are committed to 
creating a more focused and sustainable Capita for the future. 
 
Liquidity remains good. Liquidity at 23 June was GBP832million, made up of GBP402m 
representing the undrawn part of credit facilities and GBP430m of cash net of 
overdrafts2. We will be repaying GBP165m of private placement notes when they 
mature on 30 June. We estimate that liquidity at 30 June will be more than GBP 
640m when we take into account the effect of this debt maturity, further 
operating cash inflows and the reduction in the backstop liquidity facility as 
a result of the receipt of the Eclipse disposal proceeds. 
 
The Board believes that, based on a wide range of scenarios reviewed by 
management, our existing financing arrangements and mitigating actions taken 
and planned provide sufficient liquidity and enable Capita to comply with its 
banking covenants at the full year, and operate through these unprecedented 
times. 
 
Notes 
 
1 Restated 2019 divisional revenue is disclosed in the table below 
 
The tables below show the 2019 divisional adjusted revenue represented for 
reorganisations during the first half of 2020. Neither have been represented 
for business exits arising in 2020 or IFRS 16 Leases 
 
GBPm                                         Adjusted revenue 
 
                                             HY19               FY19 
 
Software                                    177.9              359.9 
 
People Solutions                            271.6              542.5 
 
Customer Management                         585.1            1,181.7 
 
Government Services                         424.4              793.4 
 
Technology Solutions                        224.2              449.8 
 
Specialist Services                         143.2              295.7 
 
Group Support Services                       12.1               24.4 
 
Total                                      1838.5            3,647.4 
 
 
 
GBPm             Software People    Customer    Government Technology Specialist Group    Total 
                        Solutions Management  Services   Solutions  Services   Support  Group 
                                                                               Services 
 
2019 Adjusted  375.4    500.5     802.4       777.9      429.3      744.5      17.4     3,647.4 
revenue 
 
Axelos          -       47.6       -           -           -        (47.6)       -      - 
 
Capita         -         -        -           -          20.5       (20.5) 
Intelligent 
Communications 
 
FERA            -       -         -           36.2       -          (36.2)     -        - 
 
Irish BPO      -        -         36.3        -          -          (36.3)     -        - 
 
Life &         -         -        265.2        -         -          (265.2)    -        - 
Pensions 
 
Mortgage       -        -         74.7        -          -          (74.7)     -        - 
Services 
 
PageOne        (10.2)   -         -           -           -         10.2       -        - 
 
Tascor         -         -         -          (26.0)     -          26.0        -       - 
 
Other          (5.3)    (5.6)     3.0         5.3         -         (4.5)      7.1      - 
 
Restated as    359.9    542.5     1,181.7     793.4      449.8      295.7      24.4     3,647.4 
per 2020 
structure 
 
2 "Cash net of overdrafts" excludes cash required to be maintained for 
regulatory purposes and cash held in joint venture companies 
 
Notes to editor: 
 
ESS is the largest management information system (MIS) provider in the market; 
it provides 'back office' software and services for schools, as well as 
universities and further education colleges. 
 
SIMS - a proprietary, off-the-shelf MIS for managing pupil, staff and parent 
data - is used in 21,000 schools in England, Wales and Northern Ireland, as 
well as over 700 independent schools in the UK and worldwide. 
 
Other ESS products include Unit-E (used by 130 FE colleges) and Agilit-E (30 
universities in the UK and Ireland), as well as Reading Cloud (a library 
management system used by 15,000 schools). 
 
In 2019 ESS's revenue was GBP95m and adjusted EBITDA was GBP49m. 
 
Conference call 
 
There will be a conference call for analysts and investors at 0830 on Thursday 
25th June. 
 
Pre-registration link for participants: 
 
https://www.incommglobalevents.com/registration/client/4403/agm-market-update/ 
 
Participant dial-in details: 
 
United Kingdom 0800 640 6441 
 
United Kingdom (Local) 020 3936 2999 
 
All other locations +44 20 3936 2999 
 
Access code 795493 
 
For more information please contact: 
 
Investor enquiries 
Stuart Morgan 
Tel: 07989 665484 
Email: IRteam@capita.co.uk 
 
Media enquiries 
Capita external communications 
Tel: 0207 654 2399 
Email: media@capita.co.uk 
 
 
 
END 
 

(END) Dow Jones Newswires

June 25, 2020 02:00 ET (06:00 GMT)

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