Capita will raise £701 million through a rights issue
Outsourcing firm Capita announced it will raise £701 million through a rights issue after reporting a hefty £513.1m annual loss for 2017.
The company reported £850.7 million of one-off costs, mainly related to provisions linked to acquisitions. Revenue dropped by 4% to £4.23 billion.
The proceeds of the new round of funding will go towards reorganisation of the business – reducing debt and ramping up investments. Capita currently has £1.7 billion in debt.
Capita said in a press release that it wants to become a “more focused and predictable, client-centric company, generating sustainable free cash flow.”
The company is targeting annualised cost savings of an initial £175 million by the end of 2020 and achieve proceeds of approximately £300 million from non-core disposals in 2018.
The firm said that it expects its underlying pre-tax profits to be between £270 million and £300 million for the year ending 31 December 2018.
Chief executive Jonathan Lewis said:
“Today we have announced a new strategy to simplify and strengthen Capita.
“We need to simplify Capita by focusing on growth markets and to improve our cost competitiveness. We need to strengthen Capita and plan to invest up to £500 million in our infrastructure, technology and people over the next three years.
“There is a lot to do, but I am confident that the plan is clear and prudent. Capita will become more predictable, have stronger operational discipline and consistently delight its clients.”
Capita rival Carillion went into liquidation in January.
Mr Lewis dismissed any comparisons between what’s happening to Capita with the Carillion collapse.
Lewis told the Press Association: “I get frustrated with that comparison – we are a completely different business,”
He added, “We have £1bn in liquidity, strong cash flow and a new strategy with investor support. We are not in PFI contracts and have nothing like the risk profile.”