Capita plunges £513m into red

Govt contract beneficiary to initiate ‘shake-up’

A FIRM with masses of Government contracts is set to scale back on public sector work after plunging more than £500million into the red.

Outsourcing giant Capita announced a big shake-up yesterday to “simplify” the sprawling company.

Plans include shunning smaller Government deals and only bidding for those where “commercial terms are acceptable”.

Capita raked in £900m of taxpayers’ money last year for everything from running London’s congestion charge and collecting the BBC licence fee to the chaos-ridden tests for the Personal Independent Payments (PIP).

But the company has been left reeling by a series of profit warnings, plus concerns following the collapse of outsourcing and construction firm Carillion.

Capita yesterday announced full-year losses had ballooned from £90m to £513m after slashing the value of its businesses by £850m. New chief executive Jonathan Lewis responded with a major overhaul, including raising £300m from sell-offs and cutting costs by £175m a year.

Capita, which has 50,000 UK employees, also went cap in hand to shareholders for £701m to cut its £1.1billion debt mountain and to invest in the business. However, it had to slash the value of the new shares to get investors interested.

Lewis, on a £725,000 a year salary, said: “There is a lot to do, but I am confident the plan is clear and prudent.” In February, Capita’s Army recruitment deal was branded “unacceptable” by Defence Secretary Gavin Williams. It also decided not to rebid for a Home Office contract to escort deportees on flights. The controversial PIP contract with the Department for Work and Pensions comes up for renewal next year. Share Centre analyst Helal Miah said: “The good news is that Capita’s management have succeeded in keeping the business going.” Capita’s annual report, out yesterday, revealed former boss Andy Parker, who quit in September, got a £667,000 pay-off – including a year’s salary.