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Capita said on Thursday that it still expects underlying profits to rise in the second half of 2017 despite muted demand for business outsourcing services.
The FTSE 250 company said trading for the year to date has been “in line with our expectations.” Underlying earnings, which excludes significant new contracts and restructuring costs, are expected to rise “modestly” in the July – December period, matching Capita’s previous forecast.
Still, Capita noted that “major business process management contracts has remained subdued throughout 2017, particularly in the public sector.” Capita said that since the end of June, it had won a new seven-year contract to administer the Royal Mail Statutory Pension Scheme as well as the extension of its customer management contract with British Gas to April 2019.
The value of its bid pipeline is £2.5bn, with decisions expected in the coming months. However, Capita said thanks to new IFRS 15 accounting rules, successful bids will not add to 2018 profits but “are expected to create value for shareholders over their lifetime.”
Jon Lewis, who took over as chief executive at the start of this month, has looked to bolster Capita’s turnround plan after a larger-than-expected fall in profits reported in March led to the ousting of former head Andy Parker.
Capita said on Thursday that it has continued to make progress on short and long term cost-saving programmes. It still expects the cumulative benefit to be £57m by the end of next year. It is also broadening the plans “including the identification of further opportunities to improve cost competitiveness”. It expects restructuring charges this year of around £18m.