Results round-up: Capita, Schroders, Merlin Entertainments, Cobham

It was exits all round for outsourcing firm Capita as it lost a chief executive and a place in the FTSE 100, all while delivering another under par financial performance with reported full year profits slumping by 33% to £74.8m.

Chief executive Andy Parker declared he was off after 16 years at the stricken organisation to pursue other interests after a string of earnings warnings had investors calling for his departure.

The company, criticised over its behaviour when carrying out its TV Licensing contract, said Parker would go later in the year as it failed to hit profit forecasts yet again with underlying pre-tax profits down 19% to £475.3m, well short of the £515m estimated in December.

Revenue was up 1% to £4.9bn, while the dividend was held at 31.7p a share. A further £400m in charges now sits on the company's balance sheet.

A report in the Daily Mail alleged Capita was running an aggressive incentive scheme to maximise collection of fees from non-payers of the TV licence. Under a bonus scheme, Capita’s enforcement officers were reportedly told to catch more than 28 licence fee evaders each week, as part of the company’s £58m contract to collect the charge.

Capita runs IT systems across the private and public sector, including London's congestion charge. It has undergone a heavy cost cutting and disposal programme and said it would take a £58.3m charge over contracts. It added that it was offloading its asset services unit.

The company said the UK's decision to leave the European Union in last June's referendum had "compounded" delays in client decision making.

"Although the referendum decision may continue to limit central government activity in 2017, we expect new opportunities to emerge over the medium term, as the UK's administrative responsibilities increase over time," Capita said.

It added that the headwinds faced in the second half of 2016 will affect trading performance in the first half of 2017, which it expected to be slightly weaker than the second half of last year excluding the write down of accrued income. Capita said it did not see a return to growth until 2018.

Schroders

Schroders reported a sharp rise in full-year assets under management, in part due to the weakness in the pound, and hiked its dividend payout, but net inflows fell short of analysts' forecasts.

AuM jumped 27% to £397.1bn, in part due to weakness in Sterling, which added £42.0bn to the full-year tally, with
acquisitions contributing a further £6.7bn.

That drove a 6% rise in profit before tax and exceptionals to £644.7m (consensus: £626.0m), with the equivalent figure for 2015 at £609.7m.

Before exceptionals, earnings per share were higher to 186.3p from 176.5 one year ago.

Schroder's boss, Peter Harrison, highlighted the firm's strong investment performance, adding that he saw a number of opportunities for growth.

"We have made good progress against our strategic objectives and see a number of future growth opportunities. Our diversified business model, a strong financial position and willingness to invest behind the business means we are well placed to take advantage of these opportunities, despite the challenges faced by the industry," Harrison added.

Improvement on the bottom line was exclusive to its asset management arm, which saw PBT rise 4.9% to £553.9m, whereas in Wealth Management PBT dropped from £60.5m to £56.3m.

In a separate announcement, Schroders said that Philip Mallinckrodt, Group Head of Private Assets and Wealth Management, had relinquished his executive responsibilities on 1 March but would remain as a non-executive Director on the Board of Schroders.

Merlin Entertainments

Legoland and Alton Towers owner Merlin Entertainments reported a rise in revenue and an increase in visitors for 2016 following a recovery in its resort theme parks.

Revenue grew 11.7% in 2016, or 3.6% on a constant currency basis, to £1.45bn, compared to the previous year, as visitors increased 1.3% to 65.1m.

This resulted in a 7.7% rise in earnings before interest, tax, depreciation and amortisation (EBITDA) of £451m, although on a constant currency basis EBITDA fell 1.8% due to challenging trading in a number of key markets which was not fully offset by actions taken during the year to mitigate against costs.

This was also similar to operating profit which rose 3.6%, but fell 6.2% on constant currency, to £320m and pre-tax profit was up 3.4% on actual rates to £277m.

Like-for-like revenue growth in the resort theme parks operating group was up 4.3% and the company said that there the recovery at Alton Towers was well underway after the accident in June 2015, with strong performances from the wider estate.

LFL revenue grew 1.6% in the Legoland parks operating group.

Adjusted earnings per share rose 9.3% to 20.8p and the company declared a dividend of 7.1p, up 9.2%.

The FTSE 100 company is currently involved in transforming its theme parks into destination resorts, rolling out new Midway attractions in the US, Turkey, Indian and Germany and has new Legoland developments in Dubai and Japan in the works.

Cobham

Cobham is planning its second £500m rights issue in less than a year, after it sank to a huge £848m loss for 2016, though its shares rose as the defence specialist avoided a sixth profit warning in 15 months.

Having conducted a sizeable kitchen-sinking exercise only two weeks ago as part of its fifth profit warning in just over a year, the company said its outlook was otherwise unchanged from then, though management continued to fee delivery of a similar performance to that of 2016 in 2017 "may be challenging".

With new chief executive David Lockwood appointed in December and chairman Michael Wareing in November, board feels its ability to forecast performance in 2017 "not as strong as it should be", which leads it to provide no guidance for the year apart from that it offers "a wide range of potential outcomes".

Despite a rights issue in June last year that raised a net £490.6m, net debt was still £1.03bn at year end, down by £178.6m on the prior year.

Under previous leadership the company used a quarter of the previous £500m cash call to pay last year's interim dividend.

Cobham's net debt-to-EBITDA ratio at the year end was 3 times, slightly higher than at 31 December 2015, but still within the upper threshold of its banking covenants.

Lockwood and Wareing warned in February that the balance sheet is "not strong enough" to support the operations of the group, given the important role it plays in many customer programmes, hence the need for the new rights issue, which will be completed in the second quarter of 2017 and used to pay down borrowings on the revolving credit facilities.

A "deeply disappointed" Wareing said that even though the board has already undergone significant change over recent months, "it is my intention to effect a rolling programme of material board changes over the next two years" in order to add new and experienced non-executive directors.