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O2 and TFL outsourcer Capita shares plunge on profits warning and major shake up

Capita shares have plunged over 40% after the outsourcing firm warned on profits and announced a major shake-up.

New chief executive Jonathan Lewis said the company had become “too complex” and “driven by a short-term focus” and needed to change its approach.

Capita, which issued a series of profit warnings last year, has again cut its profit forecast and revealed plans to raise £700m by issuing new shares.

The move comes after outsourcing rival Carillion collapsed earlier this month.

Capita operates the London congestion charge, runs the government’s Jobseekers Allowance helpline and administers the teachers’ pension scheme. It also collects the TV licence fee on behalf of the BBC.

By late afternoon, its shares were down 42% at 201p, their lowest level for 15 years, prompting calls from Labour and trade unions for urgent government action to avoid “another Carillion”.

A Cabinet Office spokeswoman said as a “strategic supplier” Capita was always monitored by the government.

The firm employs 70,000 people, approximately 50,000 of which are in the UK.

According to Tussell, a firm which analyses UK public sector contracts, Capita won 154 government contracts last year.

‘Strategic supplier’

Mr Lewis, who took over two months ago, said a review had found the company worked across too many markets and services, meaning it was difficult to “maintain a competitive advantage” in every business.

Capita had relied too much on acquisitions to drive growth and had also seen weakness in new contracts, he added.

The company does have some financial strengths. It can call on £1bn in cash and credit facilities, has a significantly higher profit margin than Carillion did and has been taking steps to reduce its debt burden.