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

Road Worker

City of Bradford MDC
Band 6 £20,043 - £22,129 pa
Bradford Metropolitan District Council is looking for two Road Workers to join the Highway Delivery Unit. Bradford, West Yorkshire
Recuriter: City of Bradford MDC

Senior Practitioner - Family Support and Protection

Essex County Council
£41552 - £50290 per annum + + Free Parking & Local Gov Package
Closing Date
Recuriter: Essex County Council

Senior Planning Enforcement Officer

Greater Cambridge Shared Planning
Grade 5, £30,737 - £35,747 per annum
An exciting opportunity has arisen within the Greater Cambridge Planning Enforcement Team Cambourne/Cambridge/Hybrid
Recuriter: Greater Cambridge Shared Planning

Assistant Engineer / Engineer

City of Bradford MDC
£24,920 - £34,373 pa
This is an opportunity to join the highway maintenance team Bradford, West Yorkshire
Recuriter: City of Bradford MDC

Technician - Maintenance Programmes (3 Posts)

Derbyshire County Council
£23,657 - £25,568 per annum - Plus market leading package (see below)
This is an exciting time to join our in-house Highways Service Hybrid
Recuriter: Derbyshire County Council

Partner Content

Circular highways is a necessity not an aspiration – and it’s within our grasp

Shell is helping power the journey towards a circular paving industry with Shell Bitumen LT R, a new product for roads that uses plastics destined for landfill as part of the additives to make the bitumen.

Support from Effective Energy Group for Local Authorities to Deliver £430m Sustainable Warmth Funded Energy Efficiency Projects

Effective Energy Group is now offering its support to the 40 Local Authorities who have received a share of the £430m to deliver their projects on the ground by surveying properties and installing measures.

Pay.UK – the next step in Bacs’ evolution

Dougie Belmore explains how one of the main interfaces between you and Bacs is about to change.