Capita's IT division takes profit hit, but wider business is back in the black

Networking and IT unit sees operating income plummet by over a quarter

Capita has reported revenue declines in its two IT divisions, but the wider business showed signs of recovery.

For the year ending 31 December 2018 Capita reported sales of £3.9m, down 7.7 per cent on the previous year.

Operating income, however, swung from a £420m loss to £34.9m as the outsourcing giant continues to implement a radical restructuring plan.

CEO Jon Lewis, who slammed the business when he took over last year, said: "We've successfully completed year one of our multi-year transformation, fixed the basics and are firmly on track.

"We've strengthened our balance sheet, achieved cost savings, and invested in our people. On top of that, we've improved our governance, introduced a ‘One Capita' operating model, and started turning around challenging contracts. I am particularly proud of our new corporate purpose and refreshed values.

"Our transformation still has some way to go. But I am very pleased with our progress. Our targets remain on track, and I'm excited about the prospects for a simplified and strengthened Capita."

Capita groups its main IT businesses into two units - Software, and IT and Networks - while other divisions, for example Government Services, also hold an element of IT.

The Software division - which develops specialised applications - saw adjusted revenue decline 1.3 per cent to £396.4m, but adjusted operating profit climbed 0.6 per cent to £112.4m.

Capita said it is "transforming what was a division of 29 siloed businesses into a single software business".

The outsourcer said it is focusing on offshoring software development, which had led to it building out a hub in India where its costs are lower.

Capita's IT and Networks division saw adjusted revenue drop 2.7 per cent to £404m, while adjusted operating profit plummeted 26.9 per cent to £45.3m.

Capita said that revenue dropped as a result of contract losses and lower managed services business, while profit was hit by a £9m "supplier settlement" and tightening margins.

However, the firm said it has "invested significantly" in its datacentre estate after an outage in 2017.

It also said it has plans to consolidate a number of separate entities into one business.

Capita lumps managed print and hardware reselling into its Specialist Services division along with a number of other businesses. This unit saw sales decline by three per cent to £992.2m.