Capita takes Covid hit amid search for buyer for £500m education arm

Capita expects to take a big hit to its top line from the coronavirus pandemic, the outsourcing giant said as it looks for a buyer for its multimillion-pound education software business.

The professional services company has been forced to furlough around 5% of its staff, and has seen revenue drop by the same amount because of Covid-19, it announced on Thursday.

Overall, revenue is expected to be 10% lower in the first half of the financial year.

The firm had already flagged half of the decline, after it lost several contracts with local governments last year.

The news comes a week after Capita said it is looking for a buyer for its education software business in a bid to focus on some of its core business.

It is understood to be looking for around £500 million from the sale of the unit, which produces earnings before interest, tax depreciation and amortisaion (Ebitda) of around £50 million each year.

“We will retain our software assets that are catalysts for growing our other services and plan to dispose of the standalone software products that have little overlap or cross-sell with the rest of Capita,” the company said.

As part of this, it also agreed a £56.5 million deal to sell its legal software arm to Access UK.

Both sales will help Capita to drill down into its core by selling off units that are standalone to the rest of the company and struggle to pitch other services to their customers.

The business said that around 60% of its staff are working from home, with 35% still in the office, with social distancing in place.

The rest have been furloughed, but Capita has not borrowed any cash from the government-backed coronavirus loan schemes.

“Capita and its people have, like thousands of other businesses, faced numerous challenges and uncertainties over the past three months,” said chief executive Jon Lewis.

“Thanks to the hard work and professionalism of our colleagues, we have delivered a strong operational response to the Covid-19 crisis.

“This has only been possible due to the actions we have taken over the past two years to simplify and strengthen the organisation – to rebuild trust with clients, fix legacy issues, improve contract execution, invest in our people, improve systems and controls, reduce risk and cut cost.

“It means we have been able to deliver a resilient first-half performance, underpinned by a large number of long-term contracts delivering critical services to government and to a blue-chip, private sector client base.”