British outsourcing group Capita said it would raise cash through a rights issue, cut the dividend, sell assets and plug a hole in its pension after a slowdown in trading forced it to cut profit forecasts again, hammering its shares.
Just two weeks after rival Carillion collapsed under a weight of debt, Capita said it needed to restructure and retrench after lowering its 2018 profit by 30 per cent, or around £120 million, only 7 weeks after the company had reiterated it.
Capita’s shares plunged 47 per cent.
Employing 73,000 people to provide professional services and IT to public and private sector customers, including more than 1,100 in Ireland, Capita started to struggle in 2016 when it admitted taking on more work than it could profitably handle.
Its problems intensified after a slowdown in business decision-making after Britain's vote to leave the European Union in June 2016. The group said on Wednesday it had seen a further deterioration in decision making since December.
Most of its Irish staff work in the area of information technology outsourcing as well as back-office services to the life and pensions sector. In July 2016, for example, it was awarded the contract to manage IT solutions for up to five years with the Department of Justice and Equality.
Capita opened its first office in the Republic in 2000 following its purchase of IRG Registrars, providing share registration and employee-share-scheme services to some of the State’s main publicly quoted companies.
The business has become best known in recent years for managing and administering loans on an outsourced basis for banks, Nama and buyers of loans sold during the crisis.
Some 40 per cent of Capita’s clients in Ireland are in the public sector, including Irish Rail and Fáilte Ireland.
Parliamentary questions raised by Sinn Féin TD David Cullinane in 2017 confirmed that at that time, the company held Irish State contracts across a range of departments and state agencies worth almost €140 million.
Early in 2016, it took over the management of the legacy loans of Dutch-owned ACCBank, which stopped doing business in 2013 and handed back its banking licence.
In October of the same year, the Central Bank fined the group’s Capita Life and Pensions Services (Ireland) unit €1.15 million for acting as an investment business firm for almost a decade without proper authorisations from the regulators in Republic.
The 34-year-old company is looking to raise around £700 million through a rights issue and said it would suspend its dividend and sell some assets to enable it to invest in the business and reduce debt and improve its pension deficit.
"Capita needs to change its approach," said Jonathan Lewis, the company's new chief executive who took over in December after Capita issued several profit warnings last year.
Capita said underlying pretax profit, before significant new contracts and restructuring costs, were expected to be between £270 million and £300 million, compared with analysts’ average forecast of £406 million, according to Reuters data. – Additional reporting Reuters
