The next Carillion? Shares in outsourcing firm Capita plunge 30% after profit warning

London,
City
John Sibley,
Reuters

• 
  Shares in outsourcing firm Capita plunge 30% on
  Wednesday morning.
  


• 
  Fall comes after the FTSE 250-listed firm issued a
  profit warning, announced plans for a rights issue, and
  suspended its dividend in a single announcement.
  


• 
  "Today, Capita is too complex, it is driven by a
  short-term focus and lacks operational discipline and financial
  flexibility," the firm's CEO Jonathan Lewis said in a
  surprisingly frank statement.
  


• 
  Capita, like Carillion, which collapsed earlier in
  January, has numerous government contracts.
  

---

LONDON — Capita, an outsourcing firm with a substantial
involvement in government contracts, has seen its shares plunge
almost 30% on Wednesday morning after the FTSE 250-listed firm

issued a profit warning, announced plans for a rights issue, and
suspended its dividend in a single announcement.

Described by the company in an announcement to the stock market
as a "multi-year transformation programme" Capita said the
announcements are part of a plan to fix the firms issues after it
"underinvested in the business," and placed "too much emphasis on
acquisitions to drive growth."

"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 demand," Jonathan Lewis, Capita's CEO said in a
surprisingly frank statement.

"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."

"Capita needs to change its approach."

Shares are selling off aggressively during early trading. Around
20 minutes after the open, shares are down more than 30%, as the
chart below illustrates:

Investing.com

Less than a month after the collapse of Carillion, Capita's
bad news is likely to be a source of worry for the government as
the firm is involved in many of the same business areas, and
has
numerous contracts with the central government.

Among Capita's contracts are administering the pensions of
Britain's teachers, working with the Cabinet Office, running the
UK's electronic tagging service for criminals on behalf the
Ministry of Justice, and running numerous helplines for the
Department for Work and Pensions.

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