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

Harbour Operative

North Yorkshire Council
£25,614 - £26,847 Per annum
As our Harbour Operative, you will play a key role in promoting the harbour to both visiting and local vessels. Whitby, North Yorkshire
Recuriter: North Yorkshire Council

Bridge Operative

North Yorkshire Council
£26,847 - £28,153 pro rata per
The role has a three-week rota which allows for variety and rotation of weekend working, with additional payments for night and weekend work. Whitby, North Yorkshire
Recuriter: North Yorkshire Council

D1 Licensed Minibus Driver

North Yorkshire Council
£25,614 - £26,847 pro rata per annum
If you love working with people and naturally look out for others, you’re exactly who we’re looking for. Selby, North Yorkshire
Recuriter: North Yorkshire Council

School Crossing Patrol

North Yorkshire Council
£13.28 - £13.92 per hour
We are currently looking for a dedicated School Crossing Patrol officer in Great Ayton who wants to make a real difference to their local community. Easingwold, York
Recuriter: North Yorkshire Council

Principal Lawyer Litigation and Housing

Kirklees Metropolitan Council
£53,051 to £58,258
We are looking for an enthusiastic, hardworking Lawyer to take on a leadership role within our Litigation and Housing Team. Huddersfield, West Yorkshire
Recuriter: Kirklees Metropolitan Council
Linkedin Banner