The next Carillion? Shares in outsourcing firm Capita collapsed 45% in their worst day ever

pulse

January 31, 2018 9:48 AM

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

Shares in outsourcing firm Capita plunged 40% on Wednesday.
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, saw its shares plunge more than 40% on Wednesday 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 "

"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 sold off aggressively during early trading, before stabilising at a loss of around 45% for the rest of the day. It was the worst day in the firm's history in terms of stock performance.

Here's the chart:

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.

"Too complex, too diverse and just haemorrhaging cash – no we’re not talking about Carillion, but fellow outsourcer in a spot of bother, Capita," Neil Wilson, senior market analyst at ETX Capital added.

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