Capita’s shares have plunged by more than 40% after the outsourcing giant issues a profit warning, a £700m cash call and a series of disposals, including the planned sale of Constructionline
The company, which covers everything from real estate and infrastructure to running London’s Congestion Charge and collecting the TV licence fee on behalf of the BBC, suspended its dividend as it forecast that profits this year will be between £270m and £300m, well below expectations.
Chief executive Jonathan Lewis, who was appointed in December, said the business has become too spread out over multiple markets and too focused on the short-term, with a lack of investment and an over-reliance on acquisitions to drive growth.
Capita will look to raise up to £700m this year by issuing new shares.
A “non-core disposal programme” will also be carried out over the next two years. As part of this, Capita will look to sell-off Constructionline, which provides procurement and supply chain management services, and car park management company ParkingEye. The proceeds of the disposals will be used to reduce debt in the short term and invest in the core business over time.
“Capita needs to change its approach,” Lewis said.
“I have initiated a transformation programme, appointed a chief transformation officer and formed a new executive committee to drive this change. I believe that this transformation programme can significantly improve the performance of Capita.
“An immediate priority is to strengthen the balance sheet through a combination of cost savings, non-core disposals and new equity. My initial review of our cost base highlights that over the next few years, there is significant scope for cost efficiencies across a number of areas but also the need to spend more where there has been underinvestment. We have identified a small number of quality businesses that do not fit with our core skills for which there will be better owners and a process to maximise value will commence shortly.
“Cost savings and non-core disposals alone will not be enough. We have also taken the significant decision to suspend the dividend and seek equity.
“We have the building blocks to create a great business; one that consistently delights its customers, has operational discipline and generates sustainable cash flow. My team and I are now working hard putting in place the plan to deliver it.”
