RE: The times7 Aug 2021 02:15
(Due to the character limit, I’ll post this over more than one comment).
The article says:
Capita moves back into the black in delayed turnaround
The delayed turnaround at Capita has finally begun with a return to the black and the promise of rising revenues by the end of the year.
The City, for now however, remains circumspect with shares in the government contractor and corporate IT services company still firmly in the so-called 90 per cent club of stocks trading at less than one tenth of where they have been in better days.
Three and a half years into a turnaround of the company by the former oil industry executive Jon Lewis, the chief executive, it reported comparable half-year profits of £45 million for the first half of the year against an £11 million loss last time on flat revenues of £1.6 billion.
For a one-time investor darling now valued on the stock market at only £600 million, net debt has been reduced by forced disposals to £894 million from £1.1 billion but remains high because of pension funding catch-up payments, restructuring costs and, for instance, £105 million of unpaid VAT bills during the pandemic.
“These results are the tangible evidence of delivery on our strategies and priorities,” said Lewis, who launched his life at Capita with a £700 million rescue rights issue from which the shares not only failed to recover but have drifted down further as the pandemic strangled the economy.
“We are seeing increasing revenues, profits and margins, and contract wins. We have removed balance sheet risk and now have sufficient liquidity to meet our debt obligations with sustainable free cash flow.”
Capita has been and remains one of the government’s favourite contractors with annualised revenues of £1.4 billion from the public purse alone, working, for instance, to digitalise the benefits system for the Department of Work and Pensions.
Of £2.5 billion of new contracts the group picked up over the last year, £925 million has come from a major training contract for the Royal Navy and Royal Marines, a big win for a company not just financially but reputationally given its high-profile previous problems with its recruitment contract for the British Army.
“We had already reported the green shoots of recovery and they are now firmly in the propagator and we are seeing growth and momentum building,” Lewis said.
The shares however remain stubbornly close to all time lows, ½p better on the session at 36½p but not much better than this time last year when the company disappointed investors on its rate of recovery.
At these levels the shares are trading on not much higher than six times this year’s earnings, a historical and market-wide low multiple.
Continued...
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