Outsourcing giant Capita sees share price plummet after profit warning

Posted On: 
31st January 2018

Outsourcing giant Capita saw its share price plummet by over 40% this morning following a profit warning for 2018.

Capita's share price took a hammering after news of the profit warning this morning

The latest blow will raise fears of a Carillion-style crisis at the firm, which had already seen 30% of its share value wiped off in the 12 months prior to today’s announcement.

Capita operates across both central and local government, with some 226 contracts awarded in the last two years alone – ten times the number given to Carillion in the same period.

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New chief executive Jonathan Lewis said the firm had been become “driven by a short-term focus” and lacked “operational discipline and financial flexibility”.

He has proposed a new rights issue to try and raise £700m of extra capital to shore up the company’s position.

Mr Lewis has also taken what he called “the significant decision” to suspend paying out any dividends to shareholders.

Shadow Cabinet Office minister Jon Trickett raised the spectre of another outsourcing crisis, saying: "We cannot afford another Carillion.

"The Government must take serious steps to oversee the activities of Capita, which is the third major outsourcing company in the last month to issue profit warnings.

"The Tories' privatisation dogma risks lurching our public services from crisis to crisis, threatening jobs, taxpayers' money and leaving people without the services they need.”

The head of the TUC, Frances O’Grady, called for ministers to urgently look at all big outsourcing companies’ finances.

“Today’s profit warning from Capita is really worrying,” she said.

“That’s why the TUC is calling for an urgent risk assessment of all large outsourcing firms.

“It’s essential the government completes this quickly and is prepared to bring services and contracts in-house if they are at risk."