Bungling Capita has £1.7bn wiped off in a day
CAPITA, the outsourcing firm that collects payments for London’s congestion charge and the BBC licence fee, saw £1.7bn wiped off its value after issuing a shock profit warning. The FTSE 100 firm, which saw shares plummet 26pc, blamed the disastrous update on corporate customers dithering over future projects and a £25m penalty from Transport for London for the late delivery of an upgrade to its computer system.
It has also become embroiled in a legal spat with another client – the Co-op Bank – in a dispute over payment.
Capita saw its biggest share plunge ever, down 254.5p to 698p, heaping pressure on chief executive Andy Parker.
The firm provides services to banks, the NHS, retailers and utilities, and employs 75,000 staff in the United Kingdom, Europe, South Africa and India. It is the latest outsourcing giant to come unstuck.
Last week shares in arch rival Mitie fell 26pc after the outsourcer, which provides staff for nursing homes and offices, warned ‘significant economic pressures’ would cause first-half sales and profits to fall.
This comes after G4S and Serco have also struggled to recover from a series of scandals related to a raft of doomed contracts.
Parker blamed Britain’s decision to leave the EU on the poor performance. ‘Revenue from new major sales in the second half of this year is likely to be lower than expected due to continued delays in decision making,’ he said.
Analysts at Shore Capital feared there could be more negative news to come. Robin Speakman said client indecision following Brexit was likely to continue for several quarters.
Capita said it now expects underlying profit before tax to be in the range of £535m to £555m for 2016, compared with forecasts of £614m.
Parker said: ‘We remain confident of the strength of our business model and aim to return the group to profit growth next year.’
However, he spooked the City with the latest slew of problems with some of its biggest contracts.
Parker said: ‘We have experienced delays on the implementation of new IT systems on the Transport for London congestion charging contract. ‘As a result, we expect to incur between £20m and £25m of one-off costs, which will be included in our underlying results. The systems have now gone live, the contract is performing well operationally and these costs will not recur next year.’
Capita is the UK’s largest outsourcing firm and the company has managed to win some major new contracts worth £949m in the year to date.
These include being recently selected by Three as the preferred bidder for a contract to provide customer services in the UK. However the gloom continued as Parker claimed the Co-op had not paid its bills and there was a risk of litigation. ‘Furthermore, we are in a contractual dispute with the Co-op Bank regarding obligations relating to the transformation of services.’
The Co-op denied the allegation saying: ‘The bank strongly refutes Capita’s suggestion that they have delivered an element of the transformation programme, which the bank has not paid for.’