UK outsourcing firm Capita PLC (LON:CPI) has agreed to sell its parking management business as part of a turnaround plan that involves offloading non-core assets.
Capita will sell Parking Eye to a vehicle owned by Macquarie and funds advised by MML Capital Partners for £235mln in cash.
The company said it expects to raise more than £400mln from non-core disposals this year, ahead of its £300mln target.
“This transaction marks a further step in executing the strategy announced in April aimed at simplifying and strengthening the business to deliver future success,” said Capita chief executive Jon Lewis.
Last year Parking Eye generated revenue of £40mln and operating profit of £14mln.
The disposal of Parking Eye comes a month after the group revealed it was selling its Supplier Assessment Services unit to funds affiliated with Warburg Pincus for £160mln.
Lewis laid out his strategy to focus on core areas of the business in April after admitting the company was “too complex” and “too widely spread across multiple markets and services”, making it challenging to maintain a competitive advantage in every business.
His plan was unveiled alongside the company’s full-year results, which revealed a wider loss after contracts were terminated without securing new ones to replace them.
In May, Capita raised £681.4mln for its rights issue designed to pay down debts as well as plugging a pension deficit and boosting investment.
Capita wins £109mln contract
In a separate announcement on Thursday, Capita said it has been awarded a £109mln contract with the Department for Education’s Standards and Testing Agency (STA).
Under the six-year contract, Capita will manage the administration, processing and support for all primary school national curriculum assessment (NCA) tests in England.
The group said the contract will cover the 2020 to 2024 test cycles and will begin in September 2019 after a “phased implementation and transition” from September of this year.
Capita will print, distribute and collate more than nine million test papers each year for key stage 1 and key stage 2 tests. It will also provide the phonics screening check and administer the marking of four million key stage 2 test papers annually.
Capita’s digital service will be supplied to 16,000 schools and 4,000 test markers, allowing users access a secure portal to review the status of the test process, obtain results and update and download records in one place.
“Capita is an established and experienced partner to the education sector and this contract further reinforces our strategy,” Lewis said.
“We look forward to using our technology and service management capabilities to identify and deliver efficiencies and improvements ensuring both value for money and a positive experience for schools across England.”
Shares rose 4.5% to 168p in morning trading.
ShoreCap retains 'hold' rating
Shore Capital analyst Robin Speakman said the contract award is a "welcome win" for the company in the public sector.
"However, we still caution that the public sector market for contracts remains subdued and is likely to remain so for the immediate future; Capita’s new contract flow still remains below its revenue and profit replacement rate and so continues to weigh on reported financials," the analyst said.
Speakman said the disposal of Parking Eye is also welcome news. ShoreCap left its rating at 'hold' and target price at 160p ahead of the group's interims on August 1.
"With financial results demonstrating a decline in financial results to present for a while yet, we retain a 'hold' stance for the present," Speakman said.