Shares in UK outsourcing group Capita fell 38% today after the group lowered its profit forecast for 2018 by about £120m ($170m) – a fall of 30%. The shares are now trading at 213p, about a fifth of their level last September.
Its new chief executive said Capita is "too complex" and "is driven by a short-term focus and lacks operational discipline".
The company, which has a turnover of £4.9bn, makes half its income from running public services, including pension schemes for teachers and Royal Mail workers and London’s Congestion Charge.
The company’s share performance since August
Its Real Estate and Infrastructure division carries out a wide range of activities, from design to facilities management, and it runs the Constructionline vetting service for those wishing to employ a contractor.
Fears over the financial health of Capita have been heightened by the fall of Carillion. However, its financial difficulties are not as severe. Following today’s price slump the company has a market capitalisation of about £1.4bn and net debts of £1.15bn. Its pension deficit stands at £381m.
It has already announced plans for the £700m rights issue to reduce its debt pile and will suspend dividend payments.
Jonathan Lewis, who took over the chief executive role in December, accompanied today’s profit warning with a root-and-branch critique of the company’s performance.
Capita runs the Constructionline service that aims to weed out cowboy builders
He said: "Today, Capita is too complex, it is driven by a short-term focus and lacks operational discipline and financial flexibility." He added that the company was "too widely spread", had under-invested and there had been "too much emphasis on acquisitions to drive growth".
The company will now enter a lengthy restructuring programme, which will include the disposal of non-core assets and the raising of equity from shareholders. The aim is to "increase the focus of our resources on a smaller number of markets with the best prospects". He also announced the creation of the post of "transformation officer" to drive the changes. Â
Top image courtesy of Capita