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

Targeted Early Help Practitioner

Wakefield Council
Grade 7 - Grade 8, 18.5 hours, Temporary
We are looking for an enthusiastic individual to work part of a multidisciplinary team to support the delivery of the Targeted Early Help Wakefield, West Yorkshire
Recuriter: Wakefield Council

Apprentice - Business & Administration

Essex County Council
Up to £14567.00 per annum
Apprentice - Business & AdministrationFixed Term, Full Time£14,567 per annumLocation
Recuriter: Essex County Council

Youth Worker (North/West)

Oxfordshire County Council
£31537 - £34434
About Us We believe in relationships that make a difference and creating the space for young people to feel seen, heard, and supported. If you’re passionate about supporting young people, this is where you belong. The Targeted Youth Support Service (TY Oxfordshire
Recuriter: Oxfordshire County Council

Engagement and Customer Support Officer

Derbyshire County Council
Grade 9 £32,347 - £34,317 per annum
Are you passionate about delivering exceptional customer service and creating engaging communications? Derbyshire
Recuriter: Derbyshire County Council

Engagement and Customer Support Manager

Derbyshire County Council
Grade 11 £39,865 - £43,270 per annum
Are you passionate about delivering outstanding customer service and building strong stakeholder relationships? Derbyshire
Recuriter: Derbyshire County Council
Linkedin Banner