Consulting and services group Capita (CPI) announced it had agreed the sale of its AMT Sybex software business to Jonas Software for up to £40 million, lifting its shares 1.7% to 37.7p.

AMT Sybex is the leading provider of critical utilities and infrastructure software in the UK. Its software facilitates efficient and reliable energy provision by balancing supply and demand.

Jonas will pay an initial £23 million on completion of the deal, plus up to an additional £17 million in performance-related payments over the following two years.

In the year to December 2020, AMT Sybex contributed revenues of £40 million and pre-tax earnings of £12 million compared with Capita’s group revenues of £3.3 billion and pre-tax losses of £49.4 million for the same period.

SLIMMING DOWN

In August, Capita reorganised itself into two divisions, Public Service and Experience, with the aim of simplifying the business and generating cost savings of £50 million next year.

As part of its strategy to sharpen its focus and increase its operating leverage, the firm has been selling non-core assets all year. Including the AMT Sybex deal, the firm has generated £643 million in proceeds from asset sales in 2020, more than 90% of its target of £700 million by next June.

As well as selling off non-core units and strengthening its balance sheet, the company has improved its free cash flow generation which will help and cover restructuring costs, which are expected to be between £75 million and £95 million this year, and reduce its net debt which was around £900 million at mid-year.

MAKING GOOD PROGRESS

In its first half results, the firm posted a 70% increase in total contract revenues to £2.57 billion and a book-to-bill ratio of 1.6 times, double the level prior to the pandemic.

A ratio of more than 1 means a company is bringing in more future orders than sales and implies good earnings visibility for the year.

Its reputation, which along with the rest of the outsourcing sector took a knock in the wake of the collapses of Carillion and Interserve, has been gradually improving and in the first half the firm won more than three quarters of the contracts in its bid pipeline.

Investment in its sales team has helped drive contract wins, while its improved delivery has resulted in lower revenue attrition over the lifetime of contracts.

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Issue Date: 24 Dec 2021