Capita share price soars despite revenue tumble

Outsourcing giant says discussions are ongoing in its plan to sell off its education software unit

Capita saw its share price jump 20 per cent this morning despite revealing that its revenue has dropped in its third quarter.

The outsourcing giant saw its turnover tumble over 10 per cent year-on-year to £802m for the three month period ending 30 September 2020.

However, investors were happy to see that operating profit has jumped 200 per cent to £36m and adjusted EBITDA rose from £11m to £15m, due largely to cost saving measures.

Figures were in line with Capita's expectations, it stated in a trading update, adding that the majority of its revenues have "remained resilient". It attributed the decline in revenue to reductions in its transactional business due to COVID-19 and contract losses it previously announced in 2019.

The organisation also stated that discussions are "ongoing" regarding the process of offloading its Education Software Solutions business.

Capita reiterated that there remains a high level of uncertainty in the market because of the ongoing and future impact of COVID-19 and that this uncertainty makes forecasting difficult. Trading has, however, remained in line with its expectations for Q3, it added.

"Our focus on our colleagues' wellbeing and client service delivery has helped us deliver a resilient performance across most of our operations," stated CEO Jon Lewis.

"Despite the ongoing challenges caused by COVID-19, Capita has continued to trade in line with our expectations.

"We continue to make progress to strengthen the balance sheet with the disposal of non-core assets, including the proposed sale of our education software business.

"We remain focused on building towards a more focused, sustainable Capita for the long term."

However, further contract losses are coming Capita's way as network giant Three last week revealed plans to bring its customer services in-house, cutting short its £70m, seven-year outsourcing contract with the firm which was signed in 2016.