Capita in crisis talks as chief’s repair job stalls
CAPITA bosses are locked in crisis talks with new advisers as they battle to turn the struggling company around.
The troubled contractor is in discussions with accountants PwC about a fresh plan to overhaul its operations.
Chief executive Jon Lewis is already in the middle of an overhaul that started in 2018.
But he has admitted a shakeup is harder and more expensive than anticipated.
In March, Capita said the £720m restructuring budget was not enough and it would need another £80m as it swung to a £63m annual loss.
Restructuring has been further derailed by the pandemic, which has slowed down its plans to sell off businesses.
Lewis has now approached several advisory companies for help – though none have yet been hired.
Capita has around 61,000 employees and works in dozens of industries. The firm runs everything from the London congestion charge to collecting the BBC licence fee.
The wide reach has come at a cost, and after years of acquisition it put out a string of profit warnings in early 2018.
Lewis, with a reputation as a turnaround specialist, was brought in to rescue it and has raised £700m from shareholders and launched a strategy to sell businesses so it can focus on high-tech and consulting.
But Capita’s complexity has slowed down sales and driven up costs. Robin Speakman, investment analyst at Shore Capital Markets, said Lewis and his team had also realised how little had been invested.
In December it sold an education software business for £400m – far less than many thought it worth.
It is planning to raise £200m by selling several companies including prestigious property group GL hearn and its events and translation divisions.
But the process has been put on hold during the pandemic.
Speakman said Capita’s £1bn net debt was another challenge. he said: ‘The restructuring needs to put it in a place where it can self-finance and it can’t do that with the amount of debt it’s been carrying.
‘What emerges from the sales is a much smaller Capita – much less diversified, less of a conglomerate. But it will need to invest in the company.
‘The risk is that the competition doesn’t exactly stand still and it needs to be in a better place than that.’ Capita and PwC declined to comment.