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

Senior/Principal Regeneration Officer

Fareham Borough Council
£45,465 - £55,379
Our town centre regeneration is moving from planning to delivery, and we're looking for someone who wants to help make regeneration happen. Fareham, Hampshire
Recuriter: Fareham Borough Council

Deputy Temporary Accommodation and Procurement Manager

London Borough of Richmond upon Thames and London Borough of Wandsworth
£47,730 – £57,837 per annum
Are you an experienced housing professional with a strong understanding of both the private rented sector and homelessness legislation? This is an opportunity to lead one of London's most ambitious accommodation procurement services, helping Richmond a Wandsworth, London
Recuriter: London Borough of Richmond upon Thames and London Borough of Wandsworth

Leaving Care Personal Adviser

Gloucestershire County Council
£34,237 - £37,563 per annum
We are currently recruiting for a Leaving Care Personal Advisers to join our dedicated Leaving Care team in Gloucester, Stroud and Cheltenham. Gloucestershire
Recuriter: Gloucestershire County Council

Family Help Team Leader (SW)

Gloucestershire County Council
£49,817 - £53,051 per annum
You will bring together professionals from different disciplines to provide coordinated and effective support to children and their families. Gloucestershire
Recuriter: Gloucestershire County Council

Education Access Coordinator

Essex County Council
£29512.00 - £34720.00 per annum + + 26 Days Leave & Local Gov Pension
Education Access CoordinatorFixed Term, Full Time£29,512 to £34,720 Per AnnumLocation
Recuriter: Essex County Council
Linkedin Banner