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Revenue down 7% at year-end 2018 for Capita

Capita has released its results for the year-ended 31st December 2018.

Reported revenue decreased by 7% to £3,918.4m (2017: £4,234.6m). Adjusted revenue, excluding results from businesses exited in both years, was £3,867.6m (2017: £4,091.8m), an organic decline of 5%.

This was due to the limited benefit from contract wins being outweighed by contract losses and scope and volume changes in government services, customer management and specialist services, including the re-shaping of its DIO contract with the Ministry of Defence, and Home Office escorting, on which Capita chose not to re-bid. There was also a decline in transactional revenue in people solutions and IT & networks.

Reported operating profit for the year was £34.9m (2017: loss £420.1m). Adjusted operating profit decreased by 25.1% to £335.3m (2017: £447.5m), as a consequence of the revenue decline year-on-year, due to the limited benefit from contract wins being outweighed by contract losses and scope and volume changes in Government Services, Customer Management and Specialist Services, a decline in People Solutions margin, the re-shaping of the DIO contract in Government Services and a one-off supplier settlement in the prior year in IT & Networks. These were partially off-set by cost savings achieved from the transformation plan announced earlier in 2018 along with the full-year benefits of restructuring begun in prior years, and one-off contract-related profits of £6m on Prudential and £9m on Marsh that arose on the earlier than planned terminations of contracts in Specialist Services. Adjusted operating margin was 8.7% (2017: 10.9%).

Adjusted profit before tax decreased by 26% to £282.1m (2017: £383.1m). Reported profit before tax increased by 153% to £272.6m (2017: loss £513.1m). Both reported and adjusted profit1 in 2017 were impacted by significant impairment.

Adjusted basic earnings per share for continuing operations decreased by 42% to 16.37p (2017: 27.99p) as a result of the performance explained above. The reported basic earnings per share for continuing operations was 17.99p (2017: loss 48.82p).

Net debt at 31st December 2018 was £466.1m (2017: £1,117.0m).

Jon Lewis, chief executive officer, said, “We’ve successfully completed year one of our multi-year transformation, fixed the basics and are firmly on track. We’ve strengthened our balance sheet, achieved cost savings, and invested in our people. On top of that, we’ve improved our governance, introduced a ‘One Capita’ operating model, and started turning around challenging contracts. I am particularly proud of our new corporate purpose and refreshed values.

“The lion’s share of our business is providing digitally-enabled services and software solutions, using a combination of technology, data and insight to help deliver better outcomes for clients. This gives us a strong platform for significant, long-term structural growth.

“Our transformation still has some way to go. But I am very pleased with our progress. Our targets remain on track, and I’m excited about the prospects for a simplified and strengthened Capita.”

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