FTSE 250 outsourcer Capita, which has been struggling with a slowdown blamed on Brexit, has seen its underlying revenue fall in its half-year results although profits have climbed.
Underlying revenue fell by three per cent, while reported revenue – which includes one-off costs and gains – fell by one per cent.
Underlying operating profit, however, rocketed by 38 per cent, indicating that the company's re-positioning plan may be having some effect. Yet reported operating profit still declined by 28 per cent, leaving a muddy picture.
Why it's interesting
Despite the disappointing reported results, the stronger underlying figures supported Capita's claim that trading was in line with expectations.
Although it only won £403m of major contracts as opposed to £879m in the same period of 2016, its win rate increased from one in three to one in two, showing the quietness of the market.
Yet shares were in freefall this morning, plummeting more than 10 per cent on the open.
Capita is still waiting for a permanent chief executive after Andy Parker stepped down in March. No announcements were made today.
The business is pressing ahead with its turnaround and simplification, having sold its asset services business to Link Group for £888m. It believes it is on track to realise around £57m of savings by the end of 2018.
Capita has adopted the new revenue recognition accounting standard, IFRS 15, which caused it to restate its figures last month and led to a decline in share price.
The new standard led to changes in the timing of revenue and cost recognition, but Capita said this would better align its financial results with the complex services it offers.
What Capita said
“In the first half of 2017, we made good progress on executing the plans laid out at the end of last year to reposition the group: we announced the sale of our asset services businesses, completed the disposal of our specialist recruitment business and commenced a number of cost initiatives,” said interim chief executive Nick Greatorex.
“We remain confident that these actions are making Capita a simpler business, well positioned for the future under new leadership.”