Capita plc announces 2020 Full Year Results

• Capita responded robustly to the challenges of 2020, including the Covid-19 crisis, delivering strong adjusted free cash flow and better than expected net debt, as well as winning £3.1bn of contract value.
• Capita is now a much better business than at the start of the transformation, with materially improved client relationships and growth prospects.
• Next stage is to simplify further: two core divisions focused on distinct growth markets and client needs.
  • Capita Public Service will be one of Government’s largest strategic suppliers and focused on six areas where we already have strong positions
  • Capita Experience will build on our significant share of the UK and European customer experience markets with a blue-chip client base
• A third division comprising an expanded portfolio of non-core businesses which will realise significant proceeds.
• To support the balance sheet, our focus remains on efficient cash management, realising non-core disposals of £700m and planning to put in place a longer-term financing solution.
• We are planning that Capita will return to organic revenue growth this year and achieve sustainable cash generation in 2022.

2020 Financial outcome

• Results in line with expectations set out at the half year
• Adjusted revenue decrease mainly due to Covid-19 impact and 2019 contract losses
• Adjusted profit before tax decline resulting from change in profit mix from prior-year revenue losses and the net impact of Covid-19, partially offset by cost savings 
• Adjusted free cash flow better due to higher cash conversion and improved and sustainable cash collection
• Net debt better than expected. Gearing ratios well within covenants
  
   

_{[1] Refer to alternative performance measures (APMs) in the Appendix.
[2] Adjusted results for both 2020 and 2019 exclude Education Software Solutions (ESS) as it is a business exit at 31 December 2020. ESS adjusted revenue and adjusted profit before tax in 2020 were £90.6m and £51.3m respectively. Covenant calculations adjust for ESS being excluded from EBITDA.}
 

Outlook

• Despite national lockdown through Q1 we are still targeting our first year of organic revenue growth for six years 
• Improving profitability and cash from trading operations, offset by reversal of VAT savings, pension commitments and significant ongoing restructuring charges
• Targeting disposal proceeds of £700m, with £500m in 2021
• New simpler structure supports inflection to sustainable cash generation in 2022
• Continue to build a more focused, client-centric and streamlined business, delivering improving returns to investors

Jon Lewis, Chief Executive Officer said:

“I’m pleased with our robust response to the Covid-19 crisis and the challenges of 2020, protecting our business, client services and – most importantly – our people, whom I would like to thank for their hard work and commitment.

“Despite the challenges, we have continued to make good progress, improving client relationships and winning significant new contracts. Capita is a much better business than it was three years ago when we began our transformation.

“We are now building on that stronger foundation to move onto the next phase of our transformation by simplifying from six divisions to three. Two core divisions will be focused on the needs of our government and blue-chip customer experience clients, in growing markets where we know we can win. The third will comprise a portfolio of non-core businesses from which we are targeting significant disposal proceeds.

“We are planning a return to organic revenue growth this year and sustainable cash generation in 2022, as we continue to build a more focused, client-centric and streamlined Capita for the long term.”

Board Governance

As part of ensuring we follow best practice we look to regularly refresh our Board to ensure that we have the relevant skills and experience to reflect our transforming business. As previously announced, we have welcomed both David Lowden and Neelam Dhawan to our Board as Senior Independent Director and Non-executive Director, respectively. Andrew Williams, who has been a Non-executive Director since January 2015, has decided that he will not put himself forward for re-election at the forthcoming Annual General Meeting. The Board would like thank Andrew for his significant contribution and support over the past 6 years.

Investor presentation

A presentation for institutional investors and analysts hosted by Jon Lewis, CEO and Gordon Boyd, Interim CFO, will be held at 08:30am UK time, 17 March 2021. This will be a live audio webcast at https://www.capita.com/about-capita/investor-centre and will subsequently be available on demand. The presentation slides will be published on our website at 07:00am and a full transcript will be available the following day.

Webcast link: https://webcast.openbriefing.com/capita-fy20/