Hiba Mahamadi 31 January 2018

Outsourcing giant Capita announces profit warning and massive debt

Local government outsourcer Capita has launched a major transformation programme as it grapples with a predicted £1bn debt and attempts to generate more cash.

In a bid to raise more cash, the company has decided to suspend dividends, dispose non-core businesses over the next two years and raise up to £700m this year by announcing a rights issue, which allows shareholders to buy more shares at a discounted rate.

A statement issued by the company said that dividends were suspended until it was able to generate a sustainable cash flow and that there was ‘likely to be a significant negative impact upon profits’.

The company expects net debt at the end of 2017 to be around £1.15bn.

Capita’s new chief executive Jonathan Lewis, who took up the post in December, said that the company was too thinly spread out and he needed to simplify the business to strengthen the firm.

Mr Lewis said: ‘Significant change is required for Capita’s next stage of development.

‘We are now too widely spread across multiple markets and services, making it more challenging to maintain a competitive advantage in every business and to deliver world-class services to our clients every time.

‘Today, Capita is too complex.

'It is driven by a short-term focus and lacks operational discipline and financial flexibility.’

Mr Lewis added that Capita had experienced delays in decision-making since December, as well as a 'weakness in new sales'.

Capita has scores of contracts with local authorities, including a joint venture property development company with Barnet LBC and a 15-year regeneration joint venture scheme with Salford City Council.

Leader of Barnet Council, councillor Richard Cornelius, said: 'Capita currently runs approximately 10 per cent of our services by value. They do not run the entire council as some reports have suggested.

'The council regularly reviews the financial status of its major suppliers as part of its contract management and contingency planning arrangements. This is what any responsible local authority would do.'

The warnings come just weeks after infrastructure giant Carillion collapsed, sending shockwaves across the public and private sectors in the UK.

In March, Capita's then chief executive, Andy Parker, stepped down after a 33% drop in pre-tax profits.

SIGN UP
For your free daily news bulletin
Highways jobs

Transport and Major Work Manager

Slough Borough Council
£54,556 to £60,085 per year Inclusive of Local Weighting Allowance of £1096
Drive the future of transport and infrastructure in Slough Slough, Berkshire
Recuriter: Slough Borough Council

Cleaner and Caretaker

North Yorkshire Council
£13.28 - £13.47 per hour
Are you looking for a cleaning role that is a little different? Goole, East Riding of Yorkshire
Recuriter: North Yorkshire Council

Performance Lead for Children and Young People’s Services

North Yorkshire Council
£51,356 - £55,539
North Yorkshire Council is offering an exciting opportunity for a Performance Lead to join our team. Northallerton, North Yorkshire
Recuriter: North Yorkshire Council

Nights Support Worker

Wakefield Council
SCP 12 28,598 - SCP 18 31,537
Are you passionate about making a difference to our citizens and the district that they reside in? Wakefield, West Yorkshire
Recuriter: Wakefield Council

Care Assistant

Wakefield Council
Grade 4 - SCP 6 - SCP 7
Are you caring, compassionate, and friendly? Wakefield, West Yorkshire
Recuriter: Wakefield Council
Linkedin Banner