UK's Capita flags up to 140 million pound cash outflow in 2024, shares fall
Shares fall 11% to a more than 4-month low of 15.50p
Eleven-month adjusted revenue declines about 8%
Company reiterates annual operating profit forecast
Adds CEO comment in paragraph 6, details on cost savings in paragraph 7
Dec 17 (Reuters) -Britain's Capita CPI.L on Tuesday flagged a free cash outflow of 120 million pounds to 140 million pounds ($152 million-$178 million) in 2024 as the outsourcing firm's exit from low-margin contracts dents revenue, sending its shares sharply lower.
Shares in the FTSE Small Cap .FTSC company fell as much as 11% to a more than four-month low of 15.50 pence in morning trade.
The company said additional cash restructuring costs of 50 million pounds would impact free cash flow in the first half of 2025, with positive and consistent free cash flow expected by the end of next year.
At half-year end, Capita's free cash outflow, excluding business exits, was 51.9 million pounds.
Capita also said it expects a high-single digit adjusted revenue decline for 2024 after guiding to a low to mid-single-digit percentage reduction in August, but retained its annual operating profit outlook on improved margins.
CEO Adolfo Hernandez said the group is focusing on being more selective in contracts while exiting lower-margin ones.
The company said it expects cost savings to jump to 250 million pounds by December next year from a current annual target of 160 million pounds, thanks to the use of AI in its services.
It added that voluntary employee attrition of around 21% will aid further cost savings and reduce the need for job cuts.
The FTSE small cap firm said adjusted revenue fell about 8% in the 11 months to Nov. 30.
The company serves the public and private sectors and operates in eight countries, catering to the defence, learning, local public service and fire and security segments, among others.
The London-headquartered company said an upcoming rise in national insurance contributions in Britain will result in an annual cost of about 20 million pounds.
Earlier this year, Capita unveiled plans to focus on its core segments of public services, contact centres and pension services businesses, and on cost-cutting steps worth about 100 million pounds.
($1 = 0.7875 pounds)
Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Abinaya Vijayaraghavan, Eileen Soreng and Jan Harvey
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
