Capita to sell recruitment arm to Endless

The troubled outsourcing group Capita (LSE: CPI.L - news) is in advanced talks about the sale of its recruitment division as it seeks to reshape itself under a new leadership team.

Sky News has learnt that Capita, which lost its FTSE-100 status following a tumultuous 2016, has entered exclusive negotiations to offload the business to Endless, a specialist turnaround investor.

The talks are understood to value Capita Specialist Recruitment at roughly £25m, according to people close to the sale process, which is being handled by the professional services firm BDO.

The division handles recruitment activity in areas such as social care, IT, education and energy.

While the price is not material to Capita, investors and analysts are likely to interpret a deal as evidence that a turnaround plan under the company's new chairman, Ian Powell, is starting to gather pace.

Sources said an announcement about the sale to Endless was likely in the coming weeks.

It will come as Capita progresses the auction of its much larger fund administration unit, which could fetch more than £600m.

A number of bidders including CVC Capital Partners and Link, an Australian company, are in the closing stages of that sale process.

The disposals come as Mr Powell conducts a search for a new chief executive of the company, which has roles in activities such as monitoring London's congestion charge and supervising the collection of the TV Licence Fee.

Sky News revealed in March that Capita would seek a new boss to replace Andy Parker, whose three years at the helm have been punctuated by a string of profit warnings.

The company is one of the largest private sector employers in Britain, and has a global workforce of about 73,000.

A number of big City shareholders in Capita had been demanding Mr Parker's scalp for several months, following a slump in its share price.

Rival outsourcers such as Mitie and Serco have also experienced tough trading conditions and faced significant costs to clean up poorly managed contracts.

A slowdown in spending by some public sector clients has affected investor sentiment towards the sector.

Earlier this year, Capita said it would take a £50m charge on a range of contracts but insisted it would have "no adverse impact on cash or future trading".

The company was heavily criticised during the spring for its conduct while discharging the TV Licensing contract, with Lord Hall, the BBC director-general, demanding urgent answers from Capita about its track record.

Capita and Endless declined to comment.