Outsourcing giant Capita has announced plans for an investor cash-call and further cost cutting as it warned over a hefty hit to 2018 profits.
New chief executive Jonathan Lewis, who took up the role on December 1, said “significant change” was needed to get Capita back on track.
He said an “immediate priority” was to strengthen the group’s balance sheet, with plans to raise as much as £700 million in a rights issue, as well as slashing costs after finding “significant scope” for savings and aims to sell off unprofitable businesses.
Capita will also suspend its shareholder dividend payout as part of the raft of “self-help” measures.
Shares in Capita plunged as much as 35% after its profit warning and cash-call announcement.
It warned full-year profits for 2018 would be between £270 million and £300 million as cost actions taken so far would not be enough to offset lost contracts and wider woes in the business.
Mr Lewis said: “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.”
He added: “Cost savings and non-core disposals alone will not be enough. We have also taken the significant decision to suspend the dividend and seek equity.”
The group also revealed that trading had worsened since the group’s last update at the end of last year.
It said: “We have continued to experience delays in decision making and weakness in new sales.”
It is braced for a “significant” blow to profits, with the troubles expected to be hit particularly across its private sector partnerships arm – in both insurance services and customer management – as well as its public services partnerships and IT services divisions.