(Alliance News) - Capita PLC on Wednesday reported a narrowed annual loss for 2020 as it outlined a new simplified structure and expects to return to organic revenue growth in 2021.
Shares in the London-headquartered outsourcer were 2.4% higher in London on Wednesday morning at 47.27 pence each.
"We started 2020 expecting to continue to strengthen the business operationally and to deliver more evidence of improvement – to be reflected in modest revenue growth and significant free cash flow generation. We continued to make progress with many aspects of our transformation, but the impact of Covid-19 set us back and increased some of the challenges we faced," Capita said.
For 2020, Capita's pretax loss narrowed to GBP49.4 million from GBP62.6 million in 2019.
Revenue dropped 10% to GBP3.32 billion from GBP3.68 billion, but administrative expenses were reduced by 22% to GBP716.2 million from GBP921.8 million.
Capita returned to free cash flow in 2020, of GBP303.8 million, compared to outflow of GBP213.0 million in 2019.
Total contract value won in the period was GBP3.1 billion - up GBP233 million on 2019 - and this is set to rise following a GBP1 billion contract to train the Royal Navy for the next 12 years.
Capita noted the total contract value in its core units rose 11% in 2020.
"Our contract renewal rate of 90%, based on further improved client relationships, was a key driver. As would be expected we also lost some contracts that impacted the second half of 2020 and will have a further impact in 2021," Capita explained.
The company's order book declined to GBP5.9 billion in 2020 from GBP6.7 billion in 2019, with GBP2.4 billion recognised as revenue in the year and GBP1.6 billion won in order book-qualifying revenue. Book-to-bill ratio rose to 0.94 times from 0.79, and this increases to 1.26 times with the Royal Navy training contract.
Chief Executive Jon Lewis said he was pleased with Capita's "robust" response to the pandemic.
"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," he added.
Lewis continued: "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."
The two core units will be Capita Public Service and Capita Experience, which will focus on distinct market and client needs and a third Portfolio unit. The third unit will comprise an enlarged portfolio of "valuable but non-core businesses", Capita said, of which it intends to exit when appropriate, with proforma revenue of around GBP700 million.
Capita expects to net GBP500 million from these sales in 2021 but is targeting GBP700 million total sales.
"The outlook for 2021 is promising, with a strong unweighted pipeline of GBP9.7 billion, from GBP8.0 billion in 2019 - out of a total unweighted pipeline of GBP18.2 billion, up from GBP16.9 billion in 2019, including a big increase in Government Services. It also includes contract bids that were delayed from 2020, such as the GBP925 million Royal Navy training contract which has now been won," Capita said.
Lewis added: "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."
Capita also said Non-Executive Director Andrew Williams will step down at the upcoming annual general meeting.
By Paul McGowan; paulmcgowan@alliancenews.com
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Capita (CPI)