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Capita, the outsourcing group in the middle of a restructuring, is losing its chief executive as it reported a sharp fall in annual profit even following two recent warnings.
Andy Parker, who has run the company for three years, is to step down later this year, the company announced today. For now, he says “we are determined to turn this performance around”.
Underlying pre-tax profit, a measure which strips out restructuring costs, was £475.3m, well below the group’s expectations despite two profit warnings late last year. Capita had said in December it expected annual pre-tax profits in the current financial year to be at least £515m.
Reported pre-tax profit was £74.8m, down 33 per cent year-on-year on slightly higher revenues of £4.9bn.
Capita said 2017 would be a “transitional year for the business” but warned that difficult times would remain for at least the first half, “which we expect to be slightly weaker than the second half of last year excluding the write down of accrued income.”
For the full year, we expect a similar trading performance to 2016 before the impact of the expected increase in pension charge. This excludes the write down of accrued income and the potential impact from planned disposals.
However, the group protected its annual dividend, keeping the total payout to investors at 31.7p for the year, the same as 2015.
The company is selling two divisions – one that sells assets to financial services companies, as well as a specialist recruitment business – as it seeks to reduce debt and simplify operations. It is also moving some jobs to India, where it already provides back-office processing services for UK companies, and increasingly automating parts of its business.
Capita is not the only outsourcer to have struggled this year. Its rival Mitie has also issued three profits warnings over the past six months, blaming the rising living wage and cuts to lack authority budgets for a collapse in profits as well as a slowdown in new contracts awarded in the wake of Britain’s decision to leave the European Union.
The industry has long been prone to high-profile blowups because of its role in delivering services for government. Rivals Serco and G4S are recovering after being ejected from the FTSE100 in the wake of a scandal that saw them overcharge the government for the electronic tagging of prisoners – a role that Capita has now taken over.