Capita reveals hefty loss and £701m rights issue

Its profit was wiped out by a £850.7m charge, which was mainly derived from writing down the value of acquisitions made under its previous management. Some £551.6m of this was made up of goodwill impairment charges.

The business said in its report: “The continued operational and external challenges faced by the group have led to a significant deterioration in new business opportunities from earlier positions. In addition, the group has experienced contract terminations and attrition as highlighted in the divisional performance reviews.”

Capita’s loss the year before was £89.8m, while revenues contracted from £4.36bn in 2016 to £4.23bn 2017, a fall of four percent.

The business process outsourcer, which has £1.7bn of debt, added it would raise £701m through a rights issue to fund a reorganisation of the company. Capita plans to raise around £300m in disposals this year and is targeting cost savings of £175m by the end of 2020.

“Capita’s objective is to become a more focused and predictable, client-centric company, generating sustainable free cash flow,” it said in its annual report. “Capita believes that under its new strategy, through introducing greater rigour in how it operates, together with re-focusing the business on its areas of strength, it will deliver enhanced performance through increased simplification, efficiency, standardisation and focus. The rights issue forms a key component of the new strategy and is being undertaken in order to provide Capita with a sustainable capital base to support its clients and operations.”