Published: Thu, February 01, 2018
Markets | By Erika Turner

"Too complex": Profit warning triggers share slide at outsourcing giant Capita

Capita's woes comes after construction group and outsourcing rival Carillion collapsed into liquidation earlier this month, leaving the taxpayer on the hook for billions of pounds of projects and pension liabilities.

Capita's shares were down 42 percent by 1113 GMT, wiping 970 million pounds off its market value and taking the stock down 85 percent since a peak in mid-2015.

Lewis said one immediate priority was to strengthen Capita's balance sheet through a combination of cost savings, non-core disposals and new equity.

Centamin gained 0.3 percent after the gold miner said it would pay out its entire cash flow generated in 2017 via a final dividend.

It employs around 73,000 people.

He said: "Significant change is required for Capita's next stage of development".

Most of its Irish staff work in the area of information technology outsourcing as well as back-office services to the life and pensions sector. "We can not afford another Carillion", lawmaker Jon Trickett said.

"The government must take serious steps to oversee the activities of Capita, which is the third major outsourcing company in the last month to issue profit warnings".

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"It's essential the Government completes this quickly and is prepared to bring services and contracts in-house if they are at risk".

The firm is expecting full-year profits for this year of between £270m and £300m, well below analyst expectations of £400m.

Capita, meanwhile, did not specify which contracts were problematic but pointed to a lower number of new contracts being awarded for smaller amounts, in a more sluggish business operating environment.

"These headwinds are particularly expected to impact upon the financial performance of the Private Sector Partnerships, in both Insurance Services and Customer Management, Public Services Partnerships and IT Services division".

Commenting on Capita's update Neil Wilson, senior market analyst at ETX Capital, said: "New CEO Jonathan Lewis is having a proper clear out to fix the business before it heads the way of its erstwhile peer". Following today's price slump the company has a market capitalisation of about £1.4bn and net debts of £1.15bn.

The company had relied too much on acquisitions of other firms to drive growth and had also seen weakness in new sales, he added.

Capita's problems had been sown over a long period, said Lewis, who has a reputation for turning around firms, such as oil services company Amec Foster Wheeler, where he cut costs to boost profitability.

Capita had a IAS19 pensions deficit of £381m at 30 June 2017 but said it is now undertaking a triennial review of its pension scheme - noting its current expectation is the actuarial deficit after this review will be "significantly below" the last disclosed IAS19 deficit number.

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