Newspaper article The Journal (Newcastle, England)

Capita Woes See Firm's Shares Hit 15-Year Low

Newspaper article The Journal (Newcastle, England)

Capita Woes See Firm's Shares Hit 15-Year Low

Article excerpt

Byline: BUSINESSholly williams business@ncjmedia.co.uk

OUTSOURCING giant Capita has seen its shares plunge to a 15-year low after warning over profits and announcing an investor cash call as part of a major overhaul.

New chief executive Jonathan Lewis, who took up the role on December 1, admitted the group had become "far too complex" and said "significant change" was needed to get Capita back on track.

Shares in the firm crashed more than 42% to lows not seen since early February 2003, with calls from Labour and trade unions for urgent Government action to avoid "another Carillion".

However, the Government claimed the company is not in a "comparable position to Carillion", adding that it is monitoring the firm's financial health.

A spokeswoman said: "We monitor the financial health of all of our strategic suppliers, including Capita.

"We are in regular discussions with all of these companies regarding their financial position. We do not believe that any of our strategic suppliers are in a comparable position to Carillion."

Capita said 2018 profits would now fall short of expectations, at between PS270m and PS300m, as cost actions taken so far would not be enough to offset lost contracts and wider woes in the business.

Mr Lewis said an "immediate priority" was to strengthen the group's balance sheet, with plans to raise as much as PS700m in a rights issue, as well as slashing costs and selling off unprofitable businesses.

Capita - which operates a raft of publicsector contracts and has a significant presence in the North East - will also suspend its shareholder dividend payout as part of the raft of "self-help" measures.

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.

Shadow Business Secretary Jon Trickett said the Government needed to take "serious steps to oversee the activities of Capita". "We cannot afford another Carillion," he added.

The Trades Union Congress (TUC) also called on the Government to carry out an "urgent risk assessment of all large outsourcing firms". …

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