Capita Plc Shares Take a Hit Despite Progress on Transformation

FTSE 250 listed Capita Plc Full year 2019 results; Revenue decline reduce Â

Capita Plc is looking forward to acing the market in digital transformation, using its client relationships and core skills to position itself in the growing market. The company has already progressed with two years of its plan into a multi-year transformation, with an objective to become a purpose-led, progressive business. According to market experts, the Global spend on digital transformation is expected to exceed £1.5 trillion by 2022.

The rebuilding of the company started in 2018 with an objective of reorganising business segments and creating centralised functions across the company. The company deleveraged its financial position this year.

The company continued reducing its costs, improve controls and mitigate risk in the fiscal year 2019. Cost competitiveness and efficiency are now embedded throughout the processes of the company as the company was able to generate £105 million of year-on-year savings during 2019.

In order to restructure the company, some of its divisions are now being prepared for disposal and the proceeds shall be utilised to strengthen the company. To address issues of complexity, poor quality and technological deficit, the company has invested in fixing and restructuring internal systems and processes.

(Source: Company’s filings, London Stock Exchange)

The company’s Revenue and profit were in line with the expectations for 2019. The company’s order intake stood at £2.2 billion in the fiscal year 2019. The company’s reported revenue was recorded at £3,678.6 million in the fiscal year 2019.

Underpinned by the strong cost-saving programme, the company’s profit before taxation stood at £275 million in the fiscal year 2019. Due to significant operational improvements, the cash generation of the company was impacted.

The company is positioning itself to benefit from these growth markets and looks forward to evolving as a consulting, digital services and software business. The company is investing in the development of resources to derive growth for the company.

After a quiet start to 2019, the UK outsourcing market reached a 12-month high as the government increased spending between July and September according to some media reports. In both the public and private sectors, £699 million and £938 million worth of agreements were signed in the first and second quarter of 2019 respectively as per media reports.

Public sector spending was 97 per cent of total investment primarily driven by the central government, with deals worth £1.26 billion in the fiscal year 2019 according to the media reports. In addition, down from £449 million in the previous quarter, the private sector agreed outsourcing deals stood at worth £307 million in the third quarter in the fiscal year 2019.

About the company

British outsourcer Capita Plc (LON:CPI) is a professional and support services company that engages in the business of Management of consulting and advisory processes or the delivery of Business Process Management.

The company has six major segments through which it provides its services and solutions to its clients. These six segments include the likes of Software, in which the company is involved in the development and delivery of custom expertise application software and other broader services in the sectors of Education, Local Governments, Public Safety, Utility, Transport, Consulting, Legal and Compliance as well as payments.

The second segment is People solutions through which, the company engages in the provision of Human Resource product offerings across an employee’s entire employment life cycle including the processes like recruitment outsourcing, learning outsourcing, HR Services as well as Pensions and Benefits management.

The third important segment of the company is the Customer Management segment, through which, the company is involved in the delivery of multi-channel customer engagement services most important for the perusal of the telecommunications sector, the retail sector as well as the utility and power services sectors.

The company also engages in the supply of remediation, grievance redressal and complaints management as well as collections services, including services like TV Licensing. Through its Government Services segment, the company engages in the business of delivery and transformation of business services that leverage high technology which would include the operation and execution of large and complex contracts.

The company is also in the business of providing support in the execution of services like revenue management, benefits and back-end operations, Information Technology, Human Resources, Financial Management to local regulators and authorities as well as to organisations working in the healthcare and education spaces.

 The company’s other segments include IT and Networks, which basically provides cyber and network-based services and Specialist services that engage in the provision of a plethora of services from its sixteen separate businesses in this segment.

Daily Chart as at Mar-06-20, before the market close (Source: Thomson Reuters)

On 06th March 2020, while writing at 04:02 PM GMT, Capita Plc’s shares were clocking a current market price of GBX 71.84 per share. The company’s market capitalisation was at £1.29 billion at the time of writing.

On 16^th December 2019, the shares of Capita Plc have touched a new peak of GBX 185.25 and reached the lowest price level of GBX 72.60 on 05th March 2019 in the last 52 weeks. The company’s shares were trading at 61.22 per cent lower from the 52-week high price mark and 1.05 per cent lower the 52-week low price mark at the current trading level as can be seen in the price chart.

The stock’s traded volume was hovering around 15,598,987 at the time of writing before the market close. The company’s 5-day stock's daily average traded volume was 10,286,951.20; 30 days daily average traded volume- 4,967,351.20 - and 90-days daily average traded volume – 4,091,967.72. The volatility of the company’s stock was 17 per cent more as compared with the index taken as the benchmark, as the beta of the company’s stock was recorded at 1.17.

The shares of the company have delivered a negative return of 44.36 per cent in the last week. On a Year to date basis, the shares of the Group plunged by 56.16 per cent. Since last year, the shares of the company have given 39.06 per cent of a negative return to investors.