August 1, 2019 / 7:26 AM / 4 months ago

UPDATE 1-Capita says turnaround on track, sees long-term Brexit opportunities

(Adds details on results, background)

Aug 1 (Reuters) - Outsourcer Capita said on Thursday it was on track to meet its turnaround targets and that Britain’s planned exit from the European Union could present new opportunities for private sector contractors in the longer term.

The company, which provides IT-led services for the public and private sector, also reported a 3.6% fall in pretax profit, in line with its own estimates, and stuck to its forecast for the year.

Shares of the company rose 4.6% to 121.9 pence by 0708 GMT, putting them on course for their first annual gains in four years.

Like a number of other UK outsourcers, Capita has been restructuring its business to control costs and pay down debt after years of acquisitions that made its complex structure unprofitable.

“Capita is now in the second year of a multi-year transformation and we remain on track to hit the targets we set in 2018,” said Jonathan Lewis, who was appointed as top boss in 2017 to help revamp the business.

The company said Brexit was still affecting the volume of new policy initiatives by government departments, but could benefit private sector contractors in the long term.

The company maintained its annual pretax profit forecast of 265 million pounds to 295 million pounds.

For the six months ended June 30, adjusted pretax profit was 126.1 million pounds ($152.81 million), compared with 130.8 million pounds a year earlier. New orders dropped about 10% to 830 million pounds.

The company said it was on track to achieve its 2020 target of double digit operating margins, 175 million pounds in cost savings and at least 200 million pounds in annual free cash flow.

Capita’s broad array of business services include recruiting staff for the British Army and providing customer services to FirstGroup railways and retailer Marks & Spencer.

$1 = 0.8252 pounds Reporting by Yadarisa Shabong in Bengaluru; Editing by Anil D'Silva and Saumyadeb Chakrabarty

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