AUS
NZ
UK
CA
USA
IND
Capita plc (LON:CPI) has unveiled its financial results for the first half of 2024, highlighting a significant increase in adjusted operating profit despite a decline in adjusted revenue. The results reflect ongoing cost reduction efforts and strategic business exits, including the sale of Capita One.
Financial Highlights
- Adjusted Revenue: The company experienced a 9% decrease in adjusted revenue, falling to £1,201.5 million from £1,324.4 million in H1 2023. This decline was influenced by the non-repeat of one-off benefits from the previous year and impacts from previously announced contract losses.
- Adjusted Operating Profit: Adjusted operating profit rose by 33% to £54.2 million, benefiting from the successful execution of the cost reduction program.
- Reported Profit Before Tax: Capita reported a profit before tax of £60.0 million, a substantial turnaround from the £67.9 million loss reported in H1 2023. This improvement was bolstered by £38.1 million in gains from the sale of businesses, including Fera.
- Free Cash Outflow: The company reported a free cash outflow of £51.9 million, improved from £64.3 million in the previous year. This outflow reflects costs associated with the ongoing cost reduction program and final pension deficit contributions.
- Net Financial Debt: The net financial debt to adjusted EBITDA ratio stood at 1.1x (pre-IFRS 16), indicating stable financial leverage.
Outlook for Full Year 2024
- Revenue and Margin Expectations: Capita expects a low to mid-single digit percentage reduction in adjusted revenue for the full year, influenced by delayed contract go-lives and a more selective approach to bidding. However, modest improvements in adjusted operating margin are anticipated, supported by continued benefits from the cost reduction program and adjustments from H2 2023 bonus releases.
- Cash Flow and Debt: The outlook for adjusted operating profit and free cash outflow remains unchanged on an underlying basis. The pro-forma free cash outflow, following the disposal of Capita One, is projected to be between £90 million and £110 million, with £50 million allocated to cost reduction efforts. The Capita One disposal, expected to complete in Q3, will generate net proceeds of approximately £180 million, resulting in minimal year-end net financial debt.
Contract Wins and Activity
- Contract Wins: Capita secured contracts with a total value of £934.4 million, a decrease from £1,317.0 million in 2023. The lower bid activity contributed to a book-to-bill ratio of 0.8x, down from 1.0x the previous year.
- Contract Win Rate: The contract win rate was 48%, compared to 63% last year, reflecting a strategic focus on bidding for contracts with appropriate margins in line with the Group's medium-term operating margin targets.
