Capita highlights earnings resilience as cost savings offset pandemic revenue hit

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Capita PLC (LON:CPI) has said revenue reductions in its previous quarter due to the impact of the coronavirus pandemic have been mitigated by cost actions as the outsourcing group also reported higher revenues during the period.

In a trading update for the three months to September 30, the FTSE 250 firm said the business had performed in line with its expectations and reported adjusted earnings (EBITDA) of £115mln, up from £111mln a year ago, while revenues fell to £803mln from £902mln.

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Capita said the greater part of its revenues have “remained resilient” over the quarter, however, the pandemic had impacted its transactional businesses such as travel and training, which had added to contract losses announced in 2019.

Meanwhile, the company said it is continuing to proceed with the disposal of its Education Software Solutions business and that discussions are ongoing.

Looking ahead, Capita said its markets are continuing to experience a “high level of uncertainty” due to the pandemic, which in turn made forecasting challenging. However, it added that trading has remained in line with its forecasts and that it expected to be able to comply with its debt covenants at December 31.

“Our focus on our colleagues’ wellbeing and client service delivery has helped us deliver a resilient performance across most of our operations. Despite the ongoing challenges caused by [coronavirus], Capita has continued to trade in line with our expectations”, chief executive Jon Lewis.

“We continue to make progress to strengthen the balance sheet with the disposal of non-core assets, including the proposed sale of our education software business. We remain focused on building towards a more focused, sustainable Capita for the long term”, he added.

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