REG-Capita PLC: Trading update <Origin Href="QuoteRef">CPI.L</Origin>

CapitaAnnouncement

03/10/2016 10:40

Trading update

Capita plc (‘Capita’), the UK’s leading provider of technology-enabled
customer and business process management services, is today issuing a trading
statement covering second half performance to date and the outlook for the
full year 2016.

Summary
Capita achieved good profit growth in the first half of 2016, at which time we
expected organic revenue growth of around 4% for the full year. Subsequently,
our performance in the second half of the year to date has been below
expectations, as a result of a slow-down in specific trading businesses,
one-off costs incurred on the Transport for London (TfL) congestion charging
contract and continued delays in client decision making. As a result, we now
expect revenue growth for the full year to be in the range of 4-5%, including
around 1% organic growth net of attrition, and underlying profit before tax to
be in the range of £535m to £555m for the full year to December 2016,
compared to the current company compiled consensus profit before tax estimate
of £614m.

Divisional trading
The Group has been impacted by a recent slow-down in the IT Enterprise
Services division, in particular our technology reseller business, and
specialist recruitment in the Workplace Services division. Since the half
year, our expectation for profits from these businesses for the full year has
reduced by around £30m. Capita is taking immediate steps to reduce the cost
base in the underperforming businesses, which should benefit 2017. The Digital
& Software Solutions division continues to perform well but, as referenced at
our first half results, our Asset Services division has seen less activity in
the short term, following the EU referendum.

Contract implementations
We have experienced delays on the implementation of new IT systems on the
Transport for London (TfL) congestion charging contract. As a result, we
expect to incur between £20m and £25m of one-off costs, which will be
included in our underlying results. The systems have now gone live, the
contract is performing well operationally and these costs will not recur next
year. Furthermore, we are in a contractual dispute with the Co-op Bank
regarding obligations relating to the transformation of services.  The
ongoing mortgage processing being undertaken by Capita is performing well. 
However, there is a risk of litigation in respect of the transformation.

Major sales
The Group has announced £949m major contract wins in the year to date,
including being recently selected by Three as the preferred bidder for a
contract to provide customer management services in the UK, which is expected
to start in 2017. However, revenue from new major sales in the second half of
this year is likely to be lower than expected, due to continued delays in
decision making and lower conversion of our pipeline.

Financial position
Capita’s net debt to annualised EBITDA ratio at end June 2016 was 2.5. As a
result of the aforementioned trading issues and one-offs we now expect net
debt to EBITDA to be in region of 2.7 at the year end, including a modest
amount of additional acquisition spend. We continue to expect capital
expenditure to be lower than last year and expect net debt at end December to
be similar to net debt at end June. We have good headroom and liquidity.

Outlook
We now expect revenue growth to be in the range of 4-5%, including around 1%
organic growth net of attrition, and underlying profit before tax to be in the
range of £535m to £555m for the full year to December 2016, compared to the
current company compiled consensus profit before tax estimate of £614m. This
outlook excludes the cost of potential restructuring actions and is subject to
the satisfactory resolution of our dispute with the Co-op Bank.

We remain confident of the strength of our business model and aim to return
the Group to profit growth next year, excluding the benefit from TfL one-off
costs dropping out.

-Ends-

This announcement contains inside information.

Analyst conference call:

Andy Parker, Chief Executive of Capita plc will host a conference call in
London at 08:00 UK time today.

Please dial into the call in time to allow for registration.

Conference call:

Participant Dial-in: +44 (0) 20 3139 4830 or +44 (0) 808 2370030 (Toll-free)
 

Participant Pin code: 28213609#

Replay: A replay of the conference call will be available for 7 days after the
event

Dial-in:  + 44 2034262807 or +44 (0) 808 2370026 (Toll free)

Access code: 677468#

For further information:
 

 Capita plc                                                     
 Andrew Ripper, Head of Investor Relations  Tel: 020 7991525    
 Capita Press Office                        Tel: 020 7654 2399  
 FTI Consulting                                                 
 Andrew Lorenz                              Tel: 07775 641 807  
 Nick Hasell                                Tel: 07825 523 383  

About Capita

Capita is a leading UK provider of technology enabled customer and business
process services and integrated professional support services. With 75,000
people at over 500 sites, including 94 business centres across the UK, Europe,
India and South Africa, Capita uses its expertise, infrastructure and scale
benefits to transform its clients' services, driving down costs and adding
value. Capita is quoted on the London Stock Exchange (CPI.L), and is a
constituent of the FTSE 100 with 2015 underlying revenue of £4.7 billion.
Further information on Capita can be found at: http://www.capita.com.



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