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Capita profits wiped out by one-off costs

Capita shares plummet as TV license enforcer profits wiped out by one-time costs of divesting its non-core business

  • Pre-tax profit fell to £100,000 in the first half, from £261 million a year earlier
  • It saw a £92.5m impairment charge on goodwill and lower profits from some divestments
  • It sold four companies in the first half and three more divestments are underway

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Outsourcer Capital city has seen one-time costs wipe out first-half earnings as it continues to divest non-core assets to bolster its balance sheet.

The company, which is responsible for enforcing BBC TV licenses and providing customer support to ScottishPower, saw pre-tax profits fall to £100,000, from £261 million a year earlier.

The sharp decline was due to weaker-than-expected returns on the sale of some of its businesses, a £92.5m impairment charge on goodwill and a decline in operating profit due to business closures.

Falling Profits: Capita Responsible for Enforcing BBC TV Licenses

Falling Profits: Capita Responsible for Enforcing BBC TV Licenses

Revenues fell 6 per cent to £1.52 billion, but Capita expects them to accelerate in the second half thanks to a ‘strong pipeline of more than £5 billion in opportunities’.

“We expect revenue growth to be driven by work we have already secured such as the new ScottishPower contract and the timing of contracts such as the Standards and Testing Agency and the BBC,” it added.

The total value of contracts won was £1.6bn, down from £2.5bn in the first half of 2021, when it was boosted by a major win to provide training services to the Royal Navy.

On an adjusted basis, profits even rose to £37m from £1.1m a year ago, as a result of cost savings and the end of major restructuring charges.

Overall, the group said the results were in line with expectations.

But Capital Shares still fell 6.5 percent to 27.4 pence, while fellow outsourcer Serco was also 4 percent lower at 175p.

Capita has issued a series of profit warnings in recent years and has sold several companies to strengthen its balance sheet.

It sold four companies in the first half, including Trustmarque for £118 million in May, and said money from divestments helped it reduce its mountain of debt to £710 million, from £880 million at the end of December.

Capita added that it would continue to sell its non-core businesses, with three sales currently underway, including that of its payment services company Pay360.

It will use the money to pay off more debt, make further contributions to reducing the shortfall in its defined benefit plan and invest in driving growth in its remaining core businesses.

In the year to date, it has made £223 million on divestments, bringing total revenue from the takedown program to more than £750 million.

“I am pleased with the progress we have made so far this year in Capita,” said CEO Jon Lewis.

“Our performance was in line with our expectations.”

The company posted a pre-tax profit of £286 million in the year to the end of March, compared to a loss of £49 million the year before.

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