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Capita shares rise as outsourcer says debt will decrease in 2023

Published 12/13/2022, 08:40 PM
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By Scott Kanowsky 

Investing.com -- Shares in Capita PLC (LON:CPI) jumped towards the top of the pan-European Stoxx 600 on Tuesday after the British outsourcing firm said that it expects to bring down debt levels in 2023.

In a trading update, the company said that its ongoing plan to dispose of its portfolio unit - which includes businesses like software, technology and travel that it describes as "non-core" - has led to gains of £462 million (£1 = $1.2284) so far in 2022. It predicts that the total disposal of the portfolio division will be finished in the first half of next year.

“Proceeds from our ongoing disposal programme have helped us further reduce debt; by the middle of 2023, we expect to have completed the disposal of our Portfolio businesses resulting in a very low level of financial net debt,” added Chief Executive Officer Jon Lewis.

Net debt at the end of June stood at £289.3M before factoring in IFRS accounting standards, according to Capita. Post-IFRS net debt is also seen decreasing as the group aims to draw down its property leases and establish what it calls a "virtual first" working model.

Meanwhile, adjusted revenue grew by 2% in the 11 months to November 30, thanks in large part to its key public sector operations.

"This [growth] has been delivered mainly by the full year impact of the Royal Navy training contract as well as revenue growth in Justice, Central Government and Transport, offsetting previously announced Local Government contract exits," Capital said.

Analysts at Citi said the trading announcement was broadly in line with market estimates. They also noted that more than 50% of Capita's enterprise value is tied to net debt, meaning that its overall valuation "could be very sensitive to changes in perception around its financial performance."

Capita will unveil its full-year results in March.

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