(Adds further details, debt, share price)
By Elisabeth O'Leary
LONDON, March 2 Capita's chief executive
Andy Parker resigned on Thursday, after the British outsourcing
group reported a bigger than expected drop in profits and said
it would take until 2018 before it could return to growth.
Parker said 2016 had been a "challenging year and Capita
delivered a disappointing performance".
Capita, which specialises in providing IT-enabled business
services to banks and investors, the National Health Service,
retailers and utilities, has issued a string of profit warnings
in the last year as clients delay awarding major deals in the
wake of Britain's vote to leave the European Union.
It reported a 19 percent fall in its underlying pre-tax
profit to 475.3 million pounds ($585 million) in 2016, missing
the recently reduced target for at least 515 million pounds.
The shares, down 47 percent in the last six months, fell a
further 8 percent to 520 pence on Thursday, when the stock was
relegated from Britain's FTSE 100 share index because
of its recent decline in market value.
"Comfort around the sustainability of the underlying
business and a route towards growth is required before the
shares will rerate significantly, in our view" said Matt Walker,
analyst at Canaccord Genuity.
"We expect 2017 to be a transitional year for the business,
as we complete our disposals, bed down the structural changes
inside the business, and re-position Capita for a return to
growth in 2018," Parker said.
The company is pressing ahead with a decision to sell its
prized asset management services arm Capita Asset Services, with
the sale expected to be completed in the second half of the
year, Parker said.
He told Reuters in an interview that dividends were
sustainable and a rights issue was not a necessity. The business
strategy, which was decided by the board and not by the CEO,
would remain unchanged, he said.
The total dividend payout for 2016 was maintained at 31.7
pence a share.
But analysts said the company's direction would continue to
be questioned, as it reported a marked slowdown in its contract
wins last year, securing 1.3 billion pounds worth of new work in
2016, compared with 1.8 billion pounds in 2015.
Capita is trying to become "leaner and simpler", after years
in which acquisitions were the main driver of revenue and its
structure was considered by many analysts to have become
Meanwhile a "comprehensive and detailed" review and overhaul
of contract profitability was being undertaken, management told
an analysts' presentation.
Its gearing of net debt to adjusted core earnings (EBITDA)
stood at 2.9 times at the end of last year, which the company
said was within its relevant ratios.
Capita said Parker, who joined Capita in 2001 and became
chief executive three years ago, will leave the company later
this year after helping the board to find a successor.
($1 = 0.8145 pounds)
(Editing by Kate Holton, Greg Mahlich)