Capita share price: Company updates on half-year performance
Capita (LON:CPI) has updated investors on its half-year performance this morning.
**Highlights from Capita’s statement:**
Revenue – the Group increased underlying revenue1 by 5% to £2,405m (H1 2015: £2,283m). Underlying revenue on a like for like basis1, excluding results from businesses exited and assets held for sale in both years, increased by 8.8% including 5.0% organic growth net of attrition and 3.8% from acquisitions. Our Integrated Services, Digital & Software Solutions, Commercial Services and Asset Services divisions all delivered strong organic growth, driven by the benefit of new major contracts such as Primary Care Support England and The Co-operative Bank and good underlying trading. Attrition was 3.4%, including the planned completion of transformation work on Telefónica UK (O2), which resulted in a decline in revenue in the Customer Management division. Revenue also declined in the Insurance & Benefits Services division due to disposals.
Operating profit – underlying operating profit1 increased by 10% to £317.6m (H1 2015: £288.8m). There were strong performances from our Strategic Services, Commercial Services and Digital & Software Solutions divisions and Asset Services also performed well. Profits declined in the Customer Management and Insurance & Benefits divisions, as a result of the aforementioned impacts from the end of transformation work and disposals, respectively.
Operating margin – underlying operating margin1 was 13.2% (H1 2015: 12.7%), reflecting the positive impact of exiting businesses which lacked strategic fit. Underlying operating margin on a like for like basis1 increased by 30bps to 13.2% (H1 2015: 12.9%). We expect underlying Group operating margin to be maintained in the range of 13.0% to 14.0% for the full year and the foreseeable future.
Net finance costs – the underlying net interest charge1 was £32.3m (H1 2015: £23.9m). We expect underlying interest costs to be in the range of £60m to £65m in 2016, reflecting an increase in our average cost of debt, as interest rate swaps run off on some of our private placement debt.
Profit before tax – underlying profit before tax1 increased by 8% to £285.3m (H1 2015: £264.9m).
Non-underlying charges – non-underlying charges were £99.2m (H1 2015 £118.8m), including the amortisation of acquired intangibles and mark-to-market of fixed rate interest rate swaps.
Reported profit before tax – reported profit before tax1 increased by 27% to £186.1m (H1 2015: £146.1m), reflecting the reduction in non-underlying charges outlined above.
Earnings per share – underlying earnings per share1 rose by 7% to 34.2p (H1 2015: 32.0p), after non-controlling interests of £5.4m (H1 2015: £4.0m). Our underlying tax rate was 18.5% (H1 2015: 18.5%).
Dividend – the Board has declared an interim dividend of 11.1p per ordinary share (H1 2015: 10.5p), representing an increase of 6%. The interim dividend will be payable on 30 November 2016 to shareholders on the register at the close of business on 21 October 2016.
Andy Parker, Chief Executive of Capita plc, commented:
“In the first half of 2016, Capita achieved good profit growth driven organically by major contracts and our trading businesses, and through acquisitions made part way through 2015. We also delivered strong cash flow and robust sales and operational performance.
While it is too early to know the impact of the recent EU referendum, it has created increased uncertainty, particularly in the financial services sector, and we are continuing to experience some delays in decision making in the short term. However, we expect this to be more than offset in the medium-term by incremental opportunities that arise as clients respond to the impacts of the UK leaving the EU.
The structural drivers for our services remain strong and Capita has a good track record of operating through political and economic cycles. We are making steady progress towards achieving around 4% organic growth in 2016 and remain confident of the strength of our business model in creating continued profitable growth into the future.”
As of 07:03 BST, Wednesday, 27 July, Capita PLC share price is 989.00p.
