Hiba Mahamadi Wednesday, January 31, 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

Income Recovery Officer

Sandwell Metropolitan Borough Council
Band F, SCP 26-31 (£37,280- £41,771 per annum)
This is an exciting opportunity to join the Income Management Team within the Place Directorate at Sandwell MBC Sandwell, West Midlands
Recuriter: Sandwell Metropolitan Borough Council

Planning Officer (Planning Policy)

Fenland District Council
Band 4-6 £27,694 - £36,363
You will support work on a new local plan and other planning policy work Cambridgeshire
Recuriter: Fenland District Council

Highways Quantity Surveyor Apprentice Level (2 Posts)

Derbyshire County Council
DA1 £24,520 - DA4 £24,726 per annum
Develop your career in Highways Commercial Management! Derbyshire
Recuriter: Derbyshire County Council

Trees and Landscape Officer

London Borough of Richmond upon Thames and London Borough of Wandsworth
£37602 - £45564
Job Title Trees and Landscape ... London
Recuriter: London Borough of Richmond upon Thames and London Borough of Wandsworth

Highways Trainer (2 Posts)

Derbyshire County Council
Grade 10 - £35,422 - £38,730 per annum
Are you passionate about developing people and ensuring compliance across a complex operational service? Derbyshire
Recuriter: Derbyshire County Council
Linkedin Banner