Capita closes loss-making Sipp administration unit

Support services business Capita has announced it is shutting its self-invested pension administration arm, citing stiff competition and increasing regulation as it admitted that the business remains “sub-scale and therefore unviable”,

The firm also said it is selling certain other assets within the insurance and benefits services division in which the Sipps unit sits that are also currently making a loss and are facing similar competitive and regulatory pressures.

Capita said it informed shareholders at its half year results that there are “small parts” of its insurance and benefits services division “which operate in increasingly competitive and highly regulated markets and are loss making”.

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The results said: “Following a detailed review, we have concluded that the route to recovery for these operations would take a long time and accordingly we have taken steps to address this.”

It said it has agreed to sell, subject to Financial Conduct Authority approval, the insurance distribution assets to Markerstudy for an undisclosed sum.

In total the operations being exited comprise approximately £47m of group revenue and are anticipated to make a combined operating loss of £15m in 2013, Capita said. Its “current estimate” is that the combined cash costs, net of tax, from the sale and closure will circa £35m.

As other areas of the group have performed strongly, profit before tax, net of these losses, is expected to remain in line with current market expectations, Capita added.

The results said: “We anticipate that these actions will result in an impairment of goodwill when we conduct our annual impairment test at the end of the year.

“Although these acquisitions generated healthy profits and cash over several years, we recognise that the recent performance of these acquisitions which cost in aggregate £70m is disappointing.”