Capita PLC shares rose on Friday after the company reported that it won a contract extension with Barnet Council and disposed of its subsidiary Pay360 Ltd to Access PaySuite.
Shares were trading 6.6% higher at 27.20 pence each on Friday morning in London.
The London-based outsourcing services secured a contract extension with the north London council that is worth £42.7 million.
With indexation and potential additional work, however, the contract could be worth up to £57 million, it added.
The extended contract begins at the start of September 2023, which is when its current 10-year deal with Barnet Council is scheduled to end.
Under the contract, Capita will provide human resources and accounts payable services, as well as IT and customer services, and revenue and benefits services, for a further year to the end of August 2024.
Separately, Capita said it agreed to dispose of Pay360 to the division of Access Group.
The deal values Pay360 at £150 million on a cash-free, debt-free basis. This represents a 14.3 times multiple of its 2021 earnings before interest, tax, depreciation, and amortisation of £10.5 million.
Capita expects to receive gross proceeds of £156 million upon completion. The sale will help reduce its debt, provide additional liquidity, and allow it to enhance its digital offerings for clients, the company said. Further, the disposal is part of Capita’s strategy to build a more focused and sustainable business for the long term, it said.
Pay360 is a Financial Conduct Authority-regulated payments business with roughly 2,500 customers.
‘The sale is a great opportunity for the new owners to help Pay360 realise its full potential, and our colleagues at Pay360 will also benefit from the focus that this change of ownership will bring. Capita will utilise the cash proceeds of the sale to benefit our digital offerings for clients and further reduce net debt,’ Chief Executive Jon Lewis commented.
Capital had net debt of £710.4 million on June 30, down from £879.8 million on December 31 last year.
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