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Capita shares plunge 40% after profit warning

Atkins is to focus on the role of technology in its growth plans

Shares in major government outsourcer Capita plunged 41% this morning following a profit warning two weeks after rival firm Carillion collapsed.

The company has suspended dividend payments and slashed its profit expectations for 2017/18 to between £270M and £300M, some way below previous analyst expectations of £400M. 

Chief executive Jonathan Lewis admitted that the company had been “driven by short-term focus and lacks operational discipline and financial flexibility”.

On the back of this morning’s stock market announcement, Capita’s share price fell from 347p yesterday to 189p this morning. At the time of writing they had recovered slightly to just over 200p.

Capita, which was on the design team for Crossrail, is involved in planning, designing, building and managing transport infrastructure as well as other public services. It was awarded the HS2 Phase 2b Lot 2 civils design and environmental services as part of a joint venture with Aecom and Ineco in February last year.

Lewis said this morning: “Significant change is required for Capita’s next stage development. We are now too widely spread across multiple markets and services, making it more challenging to maintain a competitive advantage in every business and to deliver world class services to our clients every time.

“Capita has underinvested in the business and there has been too much emphasis on acquisitions to drive growth.

“As our markets have evolved, the Group has not responded consistently to new customer demands. Since December, we have continued to experience delays in decision making and weakness in new sales.

“Today, Capita is too complex, it is driven by a short-term focus and lacks operational discipline and financial flexibility.”

Trade Union Congress (TUC) general secretary Frances O’Grady has called for a risk assessment of outsourcing firms, saying “we can’t afford another Carillion”.

Lewis said he had undertaken a review of the businesses structure, leadership, contracts and financial position since he joined the company two months ago. He has appointed a Chief Transformation Officer to oversee a transformation programme through cost savings, non-core disposals and new equity. 

 

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