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Capita PLC Sheds 35%

Sun, 26th May 2019

Capita PLC was one of the major fallers of the day, shedding 35% during the first half of the trading day. The company released an update on its transformation progress over the two months following the appointment of its CEO.

Although the company believes that it is possible for there to be a turnaround, and the potential to develop a much better business, there is still some significant change required. The company is looking to improve its financial position - and this means that it will be suspending dividends until it has sustainable free cash flow.

The company announced that it plans a rights issue this year, but the exact amount that it hopes to raise is not clear. It has standby underwriting in place for amounts up to £700 million. The company is seeking to run a non-core disposal programme which will take place over a period of two years and will also cut assets, to focus on a much smaller number of areas. By simplifying the business, it is hoped that it will enjoy better operational discipline, and become more flexible.

Capita is looking for cost savings, and also hoping to invest into some areas where it feels there has been insufficient investment over the last few years. The goal is to improve the company’s long term stability, and to bring in greater profits. This financial year, it expects to see underlying pre-tax profits (before new contracts and restructuring costs) to be somewhere between £270 million and £300 million.

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