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.

Devolutions clean air dividend image

Devolution's clean air dividend

Jane Burston of Clean Air Fund argues that tackling air pollution is one of the clearest ways for local leaders to prove devolution can transform lives.
SIGN UP
For your free daily news bulletin
Highways jobs

Apprentice Highways Operative

Durham County Council
£15,434 per annum NMW in first year of apprenticeship
Earn. Learn. Qualify. Do you want to earn while you learn, with the chance of progression once you qualify? Do you want the opportunity to grow, deve Durham
Recuriter: Durham County Council

Residential Workers - Casual

Durham County Council
Grade 7 £30,024 - £33,699 pro rata to hours worked. Pay award pending.
Residential Workers - Casual Contract Opportunities are available across the County Durham Area We have opportunities available to join the casual p Durham
Recuriter: Durham County Council

Residential Workers

Durham County Council
Grade 7, £30,024 - £33,699 per annum. Pay award pending.
Residential Workers - Opportunities are available across the County Durham Area Salary
Recuriter: Durham County Council

Team Leaders

Durham County Council
Grade 8 £32,597 - £36,363 per annum (pay award pending)
Team Leaders – Opportunities are available across the County Durham Area   Salary
Recuriter: Durham County Council

Casual Tutor

London Borough of Richmond upon Thames and London Borough of Wandsworth
£35.75 per hour
Casual Tutor£35.7... Wandsworth, London
Recuriter: London Borough of Richmond upon Thames and London Borough of Wandsworth
Linkedin Banner