Capita PLC on Thursday said its annual profit fell steeply while revenue declined, although it did manage to significantly reduce net debt across 2022.

Shares in Capita were up 7.4% to 31.26 pence each in London on Thursday morning.

The London-based outsourcing services provider said 2022 pretax profit dropped 79% to £61.4 million from £285.6 million in 2021, while earnings before interest, tax, depreciation and amortisation fell 6% to £235.7 million from £222.3 million.

Revenue also decreased by 5.3% to £3.01 billion from £3.18 billion, while gain on business fell 60% to £166.9 million from £419.7 million.

No dividend payments were declared as a result, unchanged from a year earlier.

Despite declining operating performance, Capita reported it reduced its net debt on December 31 by 45% to £482.4 million from £879.8 million a year earlier.

‘This was an important year for Capita in which we demonstrated the financial benefits of our strategy to focus on the two core markets we serve best,’ said Chief Executive Officer Jon Lewis.

‘Revenue growth accelerated, we improved profitability and generated positive free cash flow; and our successful disposals programme has meant we have significantly strengthened the balance sheet.’

Looking ahead, it said it believes it is a resilient business amid a challenging macroeconomic environment, expecting acceleration of revenue growth in its Capita Public Service division.

It added its 2023 net financial debt against Ebitda target remains less than 1.0 times compared to 0.5 times in 2022, alongside expecting a reduced level of net financial debt following completion of its disposal programme.

Core Capita earnings before interest and tax margin, excluding portfolio business is expected to at least double from 2.9% in 2022 over the medium term, helped by revenue growth and mix coupled with ongoing efficiency delivery, Capita said.

It also expects cash generated by operations in 2023 to be broadly in line with 2022, with increasing investment in digital solutions ‘in a disciplined and focused manner’ and capital expenditure expected to be between £50 million and £60 million in 2023.

This is alongside expected incremental growth in free cash flow over the medium term from continued profit growth, reduction in pension deficit payments and interest costs, Capita said.

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