The great fire sale continues as Capita sells government joint venture Axelos for £380m
It's the longest day of the year
Its work with the UK government has once again proven a boon to troubled outsourcer Capita. The business said today it would sell Axelos – the joint venture set up with the Cabinet Office in 2013 – to assessment and certification outfit PeopleCert for £380m.
The sale of Capita's 51 per cent stake in the JV should mean it can trouser £172.5m once all done and dusted.
For Capita, the cash will be used to strengthen the company's balance sheet, pay off some debt and help fund the ongoing running of the operation.
Axelos's work centres around developing methodologies primarily in project, programme, and portfolio management as well as IT and digitally enabled services such as PRINCE2 and ITIL.
In March, Capita announced plans for a hefty reorg by creating specific divisions for private and public-sector customers.
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It also announced a third division of stuff it didn't want that would be earmarked for sale. London-based Axelos – and the 100 or so staff who work there – fell into this third group.
According to tech analyst TMV: "The buyer PeopleCert is already heavily involved in this world, having been the exclusive Examination Institute for the delivery of Axelos's programme across 200 countries since 2018. For PeopleCert it's a vertical integration play that will see the Axelos senior management team transfer over."
It added: "[Axelos] no longer fits into the slimmed down version of Capita at a time when the business needs to raise cash."
Capita chief exec Jon Lewis said that today's deal, announced a couple of hours after dawn on the longest day of the year, formed part of the company's ongoing strategy "to simplify and strengthen Capita."
"The sale will help us simplify Capita by disposing of a non-core business, while the proceeds will help strengthen Capita's balance sheet, as we build towards a more focused, sustainable business for the long term," he said.
News of the sale came as Capita updated investors with its latest numbers, and said first-half trading performance had improved "in line with our expectations."
Financial results for calendar 2020, though also "in line with expectations", showed the extent to which the pandemic hit Capita's multi-year turnaround efforts. Revenue crashed 10 per cent to $3.3bn from £3.67bn in fy'19, although pre-tax losses narrowed to £49.4m from £62.6m.
However, Capita claimed today the business "remains on track to deliver revenue growth in 2021, for the first time in six years, despite the ongoing impact of COVID lockdowns."
It listed a number of deals – including the £925m Royal Navy Training win, the £528m contract extension with "a European telco" that is too shy to name itself, and the £58m Tesco Mobile gig – to highlight a promising first half.
Combined with ongoing cost-cutting measures instituted Lewis – including sales of assets such as its Education Software Solutions (ESS) biz to a private equity buyer for around £400m announced late last year – Capita seems to be holding the fort, for now.
The business said that the sale of other non-core businesses is "also progressing." ®