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Capita restructures to simplify its business

Business services supplier creates two core units that focus on public sector and commercial enterprise customers and will sell off non-core assets

UK IT-led business service provider Capita is restructuring, including selling off assets, after reporting a loss and falling revenues.

The company, a major supplier to the UK government, reported a loss of £49m and a 10% fall in sales at £3.32bn for its financial year ended 31 December 2020.

Despite the first quarter of 2021 being blighted by continued restrictions imposed by governments to control Covid-19, Capita CEO Jon Lewis expects sales growth this year. “We are planning a return to organic revenue growth this year and sustainable cash generation in 2022, as we continue to build a more focused, client-centric and streamlined Capita for the long term,” he said.

To simplify its operations, Capita plans to restructure into two core divisions and sell off assets to raise £700m.

“We are now building on that stronger foundation to move on to the next phase of our transformation by simplifying from six divisions to three,” said Lewis.

Capita plans two core divisions – Capita Public Service to focus on government and Capita Experience to support blue-chip customers. Lewis described these as “growing markets where we know we can win”.

A third division will comprise non-core assets, which Capita is looking to sell. “To support the balance sheet, our focus remains on efficient cash management, realising non-core disposals of £700m and planning to put in place a longer-term financing solution,” the company said in a statement.

Capita is heavily reliant on its contracts with the UK government and the public sector. It works with emergency services, local and central government and the NHS.

For example, the Department for International Trade recently signed a three-year, £2.6m deal with Capita to supply a platform, GrantIS, that will enable the department to distribute grants to small and medium-sized enterprises (SMEs).

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It also won a contract last year to supply the London Underground section of the network infrastructure that will underpin the Home Office’s mobile communications network for emergency services.

Another contract last year saw the Home Office’s law enforcement agency, Border Force, award a £3.1m contract to Capita for the implementation and support of 4G mobile and satellite voice and data communications.

Enterprise clients, which will be in its blue chip division, include the Co-operative Bank, for which Capita run its UK mortgage servicing operation under a 10-year contract worth £325m.

With big businesses digitally transforming and the post-Covid period expected to see this accelerate, service providers with technology assets and expertise could see increased demand this year.

One industry source said Capita relies heavily on partnerships with lots of small IT suppliers for its IT-enabled services. “The big question is, where is its technology, because it’s not obvious,” said the source.

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