London’s Capita returns to profit, driven by new government contract wins of £2.6bn
London-headquartered Capita has reported a recovery in the first half of the year from its pandemic-induced losses a year earlier, as contract cancellations were replaced with £2.6bn worth of new contract wins.
Adjusted profit before tax for the six months to 30 June increased by £56.4m – or 508 per cent – to £45.3m, bouncing back from losses of £11.1m a year earlier.
Capita said this fuelled by cost savings of £78.5m, which offset revenue losses and allowed the company to resume its employee bonus scheme.
The outsourcing firm said it was on track for revenue growth at the full year end, buoyed by £2.6bn worth of new contracts won in the first half – an increase of 70 per cent on last year’s £1.5bn worth.
Revenue expectations were met in the first half at £1,584.7m, in line with its £1,582.1m in the same period last year, and in year revenue won was up 13 per cent to £769m from £680m a year earlier.
Capita fattened its balance sheet as it slimmed down in the first half, reaping the benefits of its sale of Education Software Solutions (ESS) to private equity firm Montague and its UK government joint venture Axelos.
The completed disposal of ESS brought in £299m in February and a further £45m in July, while its shedding of Axelos brought in £182.2m in July.
“We have continued to deliver a good operational performance, won significant new business and have a strong pipeline of opportunities to come in the second half,” said chief executive officer John Lewis.
“We have also reduced our net debt, completing £536m of disposals already this year – with more to come.
Capita is on track to deliver organic revenue growth in 2021 for the first time in six years, according to Lewis, who forecast the business will generate sustainable free cash flow in 2022.