The_Times__6_March_2020

the times | Friday March 6 2020 2GM 45

Business

‘Sins of past’ haunt Capita chief and drive shares down by third

Robert Lea Industrial Editor Capita employs 63,000 people. It pro-
vides services that have been privatised
by the government and works for com-
panies who would rather outsource ca-
pabilities like call centres and IT
support to a third party. Its roles include
collecting the BBC licence fee.
Originally a buyout in the 1980s from
Cipfa, the accounting institute, Capita
grew under Tony Blair’s Labour gov-
ernment and became a stock market

darling. However, by the middle of the

last decade it had fallen prey to overex-

pansion, overstaffing, strategic drift

and what its new chief executive, the

turnaround expert Jon Lewis, refers to

as the “sins of the past”.

After a £700 million rights issue to

save the company just weeks after he

joined in 2018, Mr Lewis, 58, had prom-

ised that in 2020 Capita would return to

growth, harvesting £200 million of

cash, the best metric on which to meas-

ure a company such as Capita.

However, yesterday he had to admit

that free cashflow projections for 2020

were now £160 million. That, coupled

with his comments about the turn-

around challenge being “complex” and

requiring “more investment than we

had expected in 2018”, spooked

markets. Mr Lewis described the share

price fall as “a massive overreaction”.

ITV shares tumbled to eight-year lows
after warning that airlines and travel
companies had cut their advertising
spending sharply in the wake of the
coronavirus outbreak.
The broadcaster said advertising rev-
enues would fall by 10 per cent next
month as travel operators and carriers
postponed some of their TV campaigns.
The Covid-19 outbreak has put a chill
on marketing spending, which had
bounced after the Conservatives’ deci-
sive victory in the December general
election. ITV said that advertising sales
fell by 1.5 per cent to £1.77 billion last
year but would rise by 2 per cent in the
first quarter.
Dame Carolyn McCall, who has run
ITV since the start of 2018, said: “It is
too difficult to asses the further impli-
cations of coronavirus but we continue
to monitor the situation closely.” She

cent to £729 million due to the slide in

advertising income and investment in

initiatives such as its Britbox streaming

service. The company held its dividend

flat at 8p a share.

The higher-than-expected profit was

driven by its production division, which

makes programmes such as Love Island

and Coronation Street for its own chan-

nels and rival broadcasters. Turnover at

ITV Studios rose by 9 per cent to

£1.82 billion last year.

ITV was formed in 2004 through the

merger of Granada and Carlton, but its

history stretches back to the origins of

Britain’s commercial television indus-

try in the 1950s. Over the past decade it

acquired a number of production

houses, including Talpa Media, the

maker of The Voice, to reduce its expo-

sure to the advertising market.

ITV Studios is one of the largest inde-

pendent producers in the English lan-

guage. It generated more income than

advertising for the first time last year.

In November ITV launched Britbox,

an online television streaming service

to rival Netflix, in partnership with the

BBC. The broadcasters are aiming to

shore up their audiences in an era of

ITV shares hit

as travel firms

cut advert cash

said the company was keeping tabs on

rugby’s Six Nations Championship,

which is a key source of advertising rev-

enues.

Organisers have postponed Ireland’s

men’s and women’s matches against

Italy, which were scheduled to be

played in Dublin this weekend, and

concerns are growing that other games

will be cancelled. This summer’s Euro

2020 championships are also at risk.

“There’s no point going through

what the implications might be, as it

changes every day,” Dame Carolyn

said, adding that there had been no sign

of a slowdown outside the travel sector.

Yet the advertising warning over-

shadowed stronger-than-forecast

annual results and sent shares down

14p, or 12 per cent, to 102½p.

Revenues at Britain’s largest free-to-

air commercial broadcaster rose by

3 per cent to £3.3 billion last year. Ad-

justed underlying earnings fell by 10 per

Simon Duke Technology Business Editor

The boss of the gambling operator be-
hind Ladbrokes and Sportingbet has
warned the government that “draco-
nian regulation” such as a mooted £2
stake limit on online casino games will
drive punters to the black market.
Kenny Alexander, chief executive of
GVC Holdings, said customers would
move to operators where there was “ze-
ro responsibility, zero protection and
zero tax being paid to the Treasury”.
Mr Alexander, 50, said the introduc-
tion of a maximum £2 stake, excessive
loss limits and “ultra-draconian”
affordability limits would have the ef-
fect of “reversing the considerable de-
cline in problem gambling that the in-

Dominic Walsh large part to having GKN for the year
compared with eight months of 2018. It
posted a pre-tax profit of £106 million,
compared with a £542 million loss a
year earlier, while adjusted profits rose
from £672 million to £889 million.
Melrose listed on the Aim in 2003
and first entered the FTSE 100 in 2012.
GKN was its biggest acquisition and
was highly controversial, with critics
claiming it was an asset stripper.
Melrose said it had improved operat-
ing margins in GKN Aerospace, which
had also benefited from a strong sector,
with sales up 9 per cent. Sales in the au-
tomotive division fell 6 per cent due to
the weaker market but Melrose said
profits increased in the second half
thanks to higher margins.

rapid change. Disney and Apple have

debuted on-demand digital services

and are pouring billions of dollars into

new productions to compete with

Netflix and Amazon. Underlining the

threat from streaming and other online

platforms such as YouTube and Insta-

gram, ITV said the total number of

hours spent watching its programmes

fell by 4 per cent to 16.3 billion last year.

Dame Carolyn said Britbox had

enjoyed “strong growth” since its

launch and would open in Australia this

year. Britbox US had surpassed 1 mil-

lion subscribers.

Shares in Capita tumbled by more than
a third after its chief executive warned
that turning around the outsourcing
group is proving more difficult and
costing more money than expected.
The company yesterday reported a
£63 million pre-tax loss for 2019 com-
pared with a profit of £273 million a year

ago. Net debt jumped to £791 million

from £466 million, at least £100 million

more than the City had been expecting.

Capita also said that £213 million in

cash went out of the business during the

year and that positive cashflows this

year would be less than forecast.

The shares fell 48.6p, or 38.4 per cent,

to 77.9p on the back of the results, the

lowest since Capita was a nascent gov-

ernment contractor in the late 1990s.

Talpa, which

makes The

Voice UK, was

acquired by

ITV to reduce

its advertising

exposure.

Britbox is

home to the

largest

collection of

Carry On films,

right, available

to stream in

Britain

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ITV

Profits take off at Melrose

after GKN aerospace deal

Emily Gosden

The first full year of ownership of GKN,

the aerospace and engineering group,

has helped Melrose Industries to report

rising revenues and profits.

The industrial turnaround specialist,

which bought GKN in a hostile take-

over in 2018, said the results also

showed the benefits of improvements it

had made to the business.

It said the impact of Covid-19 was un-

certain but that “whilst there will clear-

ly be some impact, the opportunities to

improve GKN in 2020 and beyond

position Melrose well to deliver positive

returns for shareholders in the future”.

Melrose said that revenues increased

by 35 per cent to £11 billion, thanks in

Tough betting regulation a

‘big win for black market’

dustry has delivered over recent years”.

GVC revealed in its annual results

that it expected the number of shop clo-

sures from the cut in the maximum

stake on fixed-odds betting terminals

from £100 to £2 to reach 450, less than

half those anticipated, with the loss of

900 jobs. Mr Alexander said this was

partly down to the success of his “game

of spoof” with rivals such as William

Hill, which closed 700 of its shops last

year, reducing competition.

In the year to December 31, underly-

ing net gaming revenues rose by 3 per

cent to £3.66 billion, with underlying

earnings down 10 per cent to

£678.3 million, £50 million ahead of

forecasts at the start of the year. The

shares lost 17½p, or 2.2 per cent, to 790p.

Test flight for

737 ‘in weeks’

The head of America’s aviation safety

watchdog said he thinks that a certifica-

tion test flight for the Boeing 737 Max

could come soon (Robert Miller writes).

The first test flight since the plane

was grounded a year ago after two jets

crashed, killing 346 people in total, is an

important milestone for the return of

the plane to commercial service.

Stephen Dickson, head of the Federal

Aviation Administration, said: “I think

within a matter of a few weeks we should

be seeing a certification flight.” It has

previously been reported that a certifi-

cation flight was not expected until April

and officials said that was still the case.

Boeing shares rose $1.78, or 0.7 per

cent, to $262.15 in after-hours trading

on Wall Street.