Capita Share Price: A Thorough Insight

Capita is a UK-based outsourcing and professional services company operating since 1984. With over 60,000 employees, Capita delivers critical services across the private and public sectors, helping clients transform operations, improve customer experience, and harness innovation.

In this article, we’ll provide an overview of what Capita does, the various companies it owns, a closer look at the Capita share price outlook, and the factors that made it decline for several years.

What Does Capita Do?

Capita provides business process management and outsourcing solutions across a wide range of sectors. Some of their services include:

• Customer management - Providing customer service centres, helpdesk support, and other customer experience services.
• Business process outsourcing - Managing finance & accounting functions, procurement, HR services, and other essential back-office processes for clients.
• Digital transformation - Helping organizations upgrade technology, harness data, and improve cybersecurity.
• Software as a service - Developing and delivering cloud-based software tools and applications.

Some major clients of Capita include the UK Home Office, BBC, Transport for London, DFS, British Gas, and HSBC Bank. They aim to handle complex and critical operations for such clients to help them reduce costs, boost efficiency, and deliver better services.

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What Companies Are Owned By Capita?

As a large holding company, Capita owns equity stakes in several subsidiary businesses across sectors like software, recruitment, insurance, and financial services. Some of the major companies owned by Capita today include:

• Akinika - Back-office debt collection & revenue generation services
• Eclipse - Legal services & solutions for the insurance sector
• Pay360 - Cloud-based payment solutions, and many more.

Many of these businesses provide specialized services and leverage Capita’s scale and resources to enhance their offerings. Their vertical integration across such companies gives Capita an extensive presence across UK enterprise services.

Current Outlook On Capita Share Price

Capita has a declining profit and revenue for 2022 based on the report of Morningstar, a platform that reports on investments from the investor’s point of view. However, the Capita share price rose on news that the company had significantly reduced debt. Capita’s profits plunged 79% to £61.4 million, down from £285.6 million the previous year. Meanwhile, revenue fell 5.3% to £3.01 billion. The drops in profit and revenue were attributed to challenging market conditions.

However, Capita delivered some positive news by cutting its net debt by 45% year-over-year to £482.4 million. This debt reduction resonated with investors, lifting the Capita share price 7.4% in early London trading. Though financial performance weakened, Capita’s ability to shore up its balance sheet provided a measure of encouragement. No dividend was paid, maintaining Capita’s recent history of withholding shareholder payouts as it focuses on restructuring efforts.

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Reasons For The Decline In Capita Share Price Over The Years

Financial Troubles And Falling Profits

Capita issued multiple profit warnings between 2017 and 2020 as new contracts dried up. This resulted in declining revenues, squeezed margins, and spiralling losses, leading to a severely eroded Capita share price value. Investments weren’t delivering expected returns while debt piled up.

Failure Of Some Large Outsourcing Contracts

Poor execution plagued certain major BPO contracts won by Capita. One such contract was the £700m Primary Care Support contract with NHS England, plagued by poor service quality issues. These issues resulted in millions of pounds in fines, contract restructuring, and a negative impact on investor perception.

The contract was intended to provide administrative support to primary care providers, but the service quality issues led to delays and errors in processing payments and handling patient records. As a result, the company faced significant criticism from the public and the healthcare industry and saw its Capita share price decline.

Market Uncertainty Around Brexit’s Impact

The prolonged uncertainty around Brexit’s impact on UK industries further dampened investor outlook on a Capita share price. Brexit necessity also led some clients to withdraw from signing long-term outsourcing deals, which made Capita struggle on a crucial contract pipeline.

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Turnaround Efforts To Revitalize Capita Share Price

In response to the challenges, Capita hired turnaround specialist Jon Lewis as CEO in 2017 to stabilize the struggling giant. He instituted major changes, including:

Steps To Cut Costs And Refocus The Business

This included rationalizing office sites, moving services offshore, centralizing support functions, and stripping away management layers to reduce expenses. The core focus returned to competencies in customer experience.

Strategic Reviews And Divestments

The company evaluates the performance and outlook of each division and identifies entities that may not align with its long-term goals or have an unclear outlook.

In line with this approach, Capita has closed down several entities in the past that did not meet its strategic objectives. Additionally, the company has identified non-core assets that could be divested to raise funds and reduce debt. Two such assets placed for sale were Europace and Supplier Assessment Services, sold for a total of £700m.

The long road to recovery remains as Capita faces pending lawsuits and contract profitability challenges. However, the wide-ranging transformation strategy demonstrates serious intent to rebuild the business and increase the Capita share price. Achieving consistent free cash flow and stabilizing the balance sheet is critical before re-earning investor trust.

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To Bring This To A Close

Capita faces numerous financial and operational challenges from overexpansion, challenging macroeconomic conditions, and issues with executing large client contracts. These pitfalls have severely eroded investor confidence and driven down the Capita share price over recent years.

However, the new leadership has set a significant turnaround strategy centred on cost-cutting, streamlining business divisions, and strengthening the balance sheet. Though the path remains long, the wide-ranging revitalization plan promises to recover profits, boost free cash flows, and rebuild shareholder value.

We encourage traders looking to trade Capita shares to thoroughly research the progress of turnaround initiatives and study financial reports for at least the next few quarters before making investment decisions. Examining trading volumes and price momentum closer to major news events also helps gauge changing market perceptions.

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“When considering “CFDs” for trading and price predictions, remember that trading CFDs involves a significant risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be considered investment advice.”