Capita - Was 2016 a blip or the beginning of a downturn?
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Capita’s difficulties could continue as the public sector market hardens. Our research shows that tenders in Capita’s key categories are declining in average value while the volume of tenders is increasing, so Capita will need to bid more often for contracts that generate less revenue.
Capita’s public sector business in has grown significantly in four out of the five last years, from £497.3m in 2012 to £973.5m in 2016. However, from 2015 to 2016 there was a decline of 14% from £1.13bn in 2015 to £973.4m in 2016 with the biggest drop being in local government. This includes a significant drop from £180.8m in 2015 to £25.1m in 2016 for Capita’s biggest local government client, Essex County Council. These slides reveal more about Capita's public sector revenues.
Capita owed its growth to some considerable contracts with local government and a strategy of acquiring small, specialist businesses well-suited to working in this environment. However, Capita is now moving to streamline1 its structure after issuing three profit warnings in 2016.2 In March 2017 its CEO resigned after a year long profit slump.3
The firm has secured £318m in contracts and extensions this year, compared to £458m this time last year. However, things are looking up and shares have rallied by 13.8%.4 This comes as a new shortlist for CEO is drawn up, internal restructuring gathers momentum and Capita looks set to take over British Airways’ call centre after the airline suffered a chaotic IT failure over the end of May bank holiday.5
Capita appears to be in a stronger position now than it was in six months ago and 2016 could well prove to be a temporary downturn in the company’s fortunes. The company hopes 2017 will be a ‘transitional year’ after which it will be revitalised and begin to grow again.6 Capita says its pipeline stands at £3.8bn,7 but if the value of tenders continues to fall, this may be wishful thinking. It seems likely that Capita will struggle to regain the revenue it made in the public sector in 2015.
About the analysis
Spend Network has conducted an analysis of Capita’s business with 216 different public bodies. Analysis covers Central and Local Government.
Our analysis was conducted using our unique database of spending and contracts across the public sector. With over 203m lines of data, we know exactly who spent what with whom and what they bought.
We provide bespoke research and intelligence for the public sector market, we work directly with Government, suppliers and investors to help our clients make better decisions.
1 http://www.recruiter.co.uk/news/2017/03/capita-streamline-after-%E2%80%98disappointing%E2%80%99-performance
2 https://www.cnbc.com/amp/2017/06/13/reuters-america-update-1-britains-capita-pins-hopes-on-second-half-of-2017-to-improve-fortunes.html
3 https://www.digitallook.com/news/news-and-announcements/capita-ceo-resigns-as-full-year-profits-slump--2553608.html
4 https://www.ft.com/content/551c51fc-1639-324a-82a5-fd9a96aa0110
5 https://www.theguardian.com/business/2017/jun/13/ba-capita-call-centres-it-meltdown-airline-outsourcing-flight-cancellations
6 https://uk.reuters.com/article/uk-capita-outlook-idUKKBN1940MK
7 http://www.telegraph.co.uk/business/2016/07/27/capitas-pipeline-recovers-despite-worries-in-financial-services/
