LONDON, UK: Capita plc has agreed to sell its standalone software business via the sale of Capita One Limited by Capita Business Services Ltd to Orchard Information Systems Limited, a wholly-owned subsidiary of the MRI Software LLC in a deal that values Capita One Limited at £200m on a cash-free, debt-free basis. This represents a c.10x multiple on 2023 EBITDA for Capita One of c.£21m.

The disposal will result in the Capita group receiving expected gross cash proceeds of approximately £207m upon completion of the disposal. Prior to completion, the Group also expects to receive a cash dividend of £4.8m from Capita One.

Capita One provides local authorities, local education authorities and housing associations with revenues & benefits, social housing management and education management software. It helps local authorities drive efficiency, maximise revenue collection, and deliver essential public services as cost effectively as possible.

The sale of Capita One follows an evaluation of certain activities currently carried out by Capita that are not core to the Group’s future strategy. As announced on 13 June 2024 at Capita’s Capital Markets Event, standalone software activities, including the Capita One business, are part of the Group’s activities that are being “managed for value”.

The disposal will realise material value for Capita’s shareholders and the net cash proceeds will provide the Group with additional cash resources to strengthen its financial position and further reduce indebtedness, as well as funding for its transformation journey.

Although short term pro forma results are expected to be impacted by the disposal, Capita is maintaining its medium-term guidance for the continuing Group based on the benefits of the cost saving and technology initiatives previously outlined.

MRI Software is a leading provider of real estate software solutions that transform the way communities live, work and play. The buyer intends to support Capita One’s growth plans and further develop its product portfolio and customer base.

The total assets of Capita One as at 31 December 2023 were £67m and the revenue and profit before tax for the year then ended were £55m and £19m respectively. The EBITDA and operating cash conversion of Capita One for the year ended 31 December 2023 were c.£21m and 92% respectively. Capita One is expected to have cash of c.£18m assuming Completion towards the end of August.

Adolfo Hernandez, CEO, Capita, said: “As I outlined recently at our Capital Markets Event, Capita’s strategy is to become a more focused company, prioritising businesses where we can deliver material opportunities in the future, with greater simplification and cost reduction.

“Capita One is a high-quality business that has performed exceptionally well. Under its new owner, it is well positioned to benefit from investment in its strategic growth.

“We remain committed to the local public service market but want to see Capita One be set up for continued success with an owner that can deliver the investment it needs.”

Barclays Bank PLC, acting through its Investment Bank (`Barclays’) is acting as sole financial advisor and sole sponsor to Capita on the transaction.