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

Administration Officer

Durham County Council
Grade 4 £25,583 - £26,824 Pro-rata
WHATS INVOLVED A vacancy has arisen within Business Services for a temporary Administration Officer. You will provide a comprehensive, robust adminis Spennymoor
Recuriter: Durham County Council

Registered Homes Manager

Durham County Council
Grade 14 £50,269 - £54,495 plus £2,500 recruitment/retention allowance and £3,500 market supplement. The salary with additional payments equate to an earning potential per annum of £60,495 at the top of the grade.
Registered Manager – The Beacon Salary
Recuriter: Durham County Council

Cleaner

Durham County Council
£24,796 pro rata
Cleaner  Full time, 37 hours per week, term time only. Salary Grade 1 (£24,796 pro rata)  Permanent subject to a successful probationary period. Requi Durham
Recuriter: Durham County Council

Operations Manager

Durham County Council
Grade 10 £38,220 - £41,771
Help launch County Durham’s newest cultural landmark. Opening in summer 2026, The Light will bring together art, science, history, creativity and com Durham
Recuriter: Durham County Council

Travel Planning Officer

Durham County Council
Grade 9 - £35,412 to £39,152
We have an opportunity available as a Travel Planning Officer to join our Integrated Passenger Transport Team.   WHAT IS INVOLVED? You will work with Durham
Recuriter: Durham County Council
Linkedin Banner