Outsourcer Capita to raise £700 million as losses deepen
Capita has reported a £513m annual loss as the outsourcing firm set out plans to revive its indebted business. Profits were wiped out by £850m of one-off costs, mainly from writing down the value of acquisitions made under its previous management.
The company said it would raise £701m through a rights issue to fund a reorganisation of the business. Shares closed 13% higher at 180.8p in London, valuing Capita at just over £1.2bn.
It operates the London congestion charge and runs an electronic tagging service for the Ministry of Justice, The loss compares with a £89.8m deficit in 2016, while revenues last year fell by 4% to £4.2bn
However, new chief executive Jonathan Lewis dismissed any comparison to Carillion, the services and outsourcing group that went bust earlier this year.
“I get frustrated with that comparison – we are a completely different business,” Mr Lewis said.
“We have £1bn in liquidity, strong cash flow and a new strategy with investor support. We are not in PFI contracts and have nothing like the risk profile.”
Mr Lewis has announced a major overhaul of the company which has debt totalling £1.7bn. The rights issue will reduce borrowings as well as fund investment.
Under its new strategy, Capita plans to raise about £300m disposals this year and is targeting cost savings of £175m by the end of 2020. The company collects the licence fee on behalf of the BBC and recently won a five-year extension to provide audience services to the broadcaster.
Commenting on Capita’s future, Mr Lewis said the business was “fundamentally strong” but “needs to evolve”. He added: “We need to simplify Capita by focusing on growth markets and to improve our cost competitiveness. We need to strengthen Capita and plan to invest up to £500m in our infrastructure, technology and people over the next three years.”