Home Business News Capita warns on profit as it sets out drastic shake-up

Capita warns on profit as it sets out drastic shake-up

16
0

Outsourcing firm Capita’s shares have plunged over a third after it announced a major shake-up and warned on profits.New chief executive Jonathan Lewis said the firm had become “too complex” and “driven by a short term focus” and needed to change its approach.The firm, which issued several profit warnings last year, has once again cut its profit forecast and detailed plans to raise £700m via issuing new shares.The move comes after outsourcing rival Carillion collapsed earlier this month.Capita operates the London congestion charge and collects the TV licence fee on behalf of the BBC.Shares in the firm were trading 37% lower after the announcement.Mr Lewis, who took the helm two months ago, has been charged with turning around the firm’s fortunes.He said “a thorough review” of the firm had shown it worked across too many markets and services meaning it was difficult to “maintain a competitive advantage” in every business.The company had relied too much on acquisitions of other firms to drive growth and had also seen weakness in new sales, he added.Balance sheet priorityMr Lewis said his initial priority was to “strengthen the balance sheet”.He has outlined a wide-ranging overhaul including cost cutting, and a programme to sell-off unprofitable businesses. The firm has also said it won’t pay a dividend to shareholders this year.The firm is expecting full-year profits for this year of between £270m and £300m, well below analyst expectations of £400m.Neil Wilson, senior analyst at ETX, said signs of problems had been building at the firm, including the loss of “a lucrative and profitable contract with the Prudential” in January.
Source: BBC