Outsourcer Capita has seen one-off costs wipe out profits in its first half as it continues to offload non-core businesses to strengthen its balance sheet.
The company, which is responsible for enforcing BBC TV licences and provides customer support services for ScottishPower, saw pre-tax profit plunge to £100,000, from £261million a year earlier.
It put the sharp fall down to weaker-than-expected returns from the sale of some of its businesses, a £92.5million goodwill impairment and a reduction in operating profit due to business exits.
Falling profits: Capita is responsible for enforcing BBC TV licences
Revenues fell 6 per cent to £1.52billion, but Capita expects them to accelerate in the second half thanks to a ‘strong pipeline of over £5billion of opportunities’.
‘We expect revenue growth to be driven by work that 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 won contracts was £1.6billion, down from £2.5billion in the first half of 2021, when it was boosted by a big win to provide training services to the Royal Navy.
On an adjusted basis, profit actually jumped to £37million, from £1.1million a year ago, reflecting cost cuts and the end of major restructuring expenses.
Overall, the group said that its results were in line with expectations.
But Capita shares still fell 6.5 per cent to 27.4p, with fellow outsourcer Serco also 4 per cent lower at 175p.
Capita issued a string of profit warnings in recent years and has been selling off several businesses to bolster its balance sheet.
It sold off four businesses in the first half, including Trustmarque for £118million in May, and said cash from disposals helped it reduce its debt mountain to £710million, from £880million at the end of December.
Capita added it would continue selling off its non-core businesses, with three sales currently in progress, including that of its payments services business Pay360.
It will use the cash to repay more debt, make further deficit reduction contributions to its defined benefit pension scheme and invest in driving growth in the remaining core businesses.
In the year to date, it has made £223million from disposals, taking total receipts from the disposal programme to over £750million.
‘I am pleased with the progress we have continued to make across Capita so far this year,’ chief executive Jon Lewis said.
‘Our performance has been in line with our expectations.’
The company turned a pre-tax profit of £286million in the year to the end of March, compared to a loss of £49million the year before.
Share or comment on this article:
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.