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Leadership / Finance and procurement

Capita to Save £20 Million by Permanently Shutting 25 Premises

The realignment of working practices continues, as more news filters through on the decisions being made by business leaders about their real estate footprints in the wake of the COVID-driven shift to remote working.

The consequences and length of the shift to remote is a challenge many CIOs are grappling with, even as CEOs mull longer-term strategic decisions about property leases and the remote-office split for newly distributed teams.

(A June 2020 study by Xerox found that 58 percent of businesses are planning to change their previous work from home policies, with 56 percent increasing technology budgets to support a hybrid remote / in-office workforce).

Outsourcing firm Capita was the latest to offer some detail on its approach. The company revealed on an earnings call this week that it has already saved £4 million by shutting 168 of its 294 properties around the UK. The savings are enticing and can be sharply ramped up, CEO Jonathan Lewis admitted.

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He told investors: “We have already decided to [permanently] close 25 of our properties around the country [particularly] reducing our central London footprint.

The decision will save Capita £20 million by 2022, he said.

capita buildings real estate
Capita broke out segment earnings in more granular detail for the first time in H1 2020.

The announcement came as Capita reported pre-tax losses for the first half of £28.5 million (versus pre-tax profits of £31.2 million in H1 2019).

“Sustainable free cash flow generation is still two years away”, Lewis said, telling analysts on the earnings call that “we are not wedded to a particular scale of revenue. We are focussed on free cash flow and margin improvement.”

He added: “We’ve quickly recalibrated our disposal programme. You can expect us to announce further non core disposals in the coming months.”

Proceeds will be used to strengthen Capita’s balance sheet by reducing net debt and pension liabilities. The company has had some success in trimming net debt (down £257 million in H1) but it remains above £1 billion.

CEO Lewis has been focussed on rebuilding the company’s reputation for delivery and said relationships with government stakeholders had improved significantly. Capita is eyeing major opportunities in H2 including a £1 billion project to transform Navy training through increasing use of digital technology.
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CBR Staff Writer

CBR Online legacy content.