Capita's IT arm turns corner, but overall business struggles

Share price plummets over 11 per cent after H1 revenue drops

Capita's IT services division turned a corner in the first half of this year by returning to growth, but the overall Capita business saw an underlying revenue decline of three per cent to £2.07bn.

The drop in revenue saw Capita's share price fall by over 11 per cent on the London Stock Exchange.

Underlying operating profit however jumped 38 per cent to £228.4m, attributed to "a significant improvement" in the IT services division.

The results come just a week after CEO Andy Parker stepped down.

Nick Greatorex, interim CEO at Capita, said: "In the first half of 2017, we made good progress on executing the plans laid out at the end of last year to reposition the group.

"We announced the sale of our asset services businesses, completed the disposal of our specialist recruitment business and commenced a number of cost initiatives.

"We remain confident that these actions are making Capita a simpler business, well positioned for the future under new leadership."

IT turnaround

Despite the broader business struggling, Capita was optimistic about the turnaround of its IT services division - once the albatross around its neck.

The IT division was held responsible for Capita's first ever profit warning last year, and was a key factor in Parker announcing his departure in March after the outsourcer's full-year profits fell £100m in 2016.

However in H1 Capita saw revenue for the division up 13.6 per cent to £273.9m

Capita said: "The turn-around of our IT services division progressed better than expected, following restructuring of the management team and operating model, but we continued to be impacted by weakness in a number of discretionary services.

"We improved our major contract win rate in a relatively subdued business process management market in the public sector."