UK’s Capita turns to shareholders to fund business relaunch

LONDON: British outsourcing company Capita is raising £700mil (US$980mil) from investors to reshape a business that new chief executive Jon Lewis said had failed to adequately control costs and had grown unwieldy through acquisitions.

Lewis, who took over in December, said Capita was going to do “fewer things better”, with £300mil of disposals lined up for this year and more in the following two years before it returns to revenue growth from 2020.

“Capita needs an injection of discipline,” he said on a call with analysts.

The group, which employs 70,000 staff pri- marily in Britain where it focuses on providing IT services, ran into problems after a downturn and problems on contracts following years of acquisition-led growth.

It is one of a number of British service companies to have run into problems by chasing contracts on slim margins. The most spectacular casualty was building and outsourcer Carillion which collapsed earlier this year.

“We are open for business. It’s the end of a difficult chapter but there is a well-defined plan and it’s about executing on that plan,” Lewis told Reuters in a telephone interview.

Shares in the group were trading up 9.1% at 174 pence at 0840 GMT yesterday.

Capita, which runs the London congestion charge and collects BBC licence fee payments, has issued a series of profit warnings which have lopped off two thirds of its around £1bil market value in the last year as it has struggled with underperforming contracts.

It announced the terms of its three-for-two rights issue yesterday, three days ahead of expectations, along with a full-year pre-tax loss of £513mil (US$719mil).

The issue will raise £662mil in proceeds partly to pay off about £1bil in net debt and already has the backing of two of its key investors – Woodford, with a 10% stake, and Invesco, with a 9% stake.

New shares will be offered at 70 pence, a 34% discount to the theoretical ex-rights price of 105.9 pence calculated in reference to the closing price on Friday.

Lewis aims to simplify and unify an unwieldy structure in which more than 250 different business units have operated separately.

Capita handles services for companies and governments such as human resources, recruitment and customer management services to help them save costs and time and will reorganise into five basic business units. — Reuters