Irish warning as Capita shares plummet 50%
An Irish trade union has issued a stark warning about Government contracts after the shares of British services giant Capita crashed almost 50% following a profits warning.
Unite said the profit alert “should ring alarm bells” as it called for an end to outsourcing of State contracts to private firms.
It claimed Capita, which has around €140m in state contracts, could become Ireland’s Carillion, the British outsourcing giant which collapsed last month.
Unite’s Jackie Pollock said Capita’s contracts include developing the national postcode system Eircode and servicing Anglo Irish Bank loans for Nama. In the North, it provides services to Stormont departments.
According to its accounts, 70% of Capita’s 73,000 staff is in the UK, with the rest based in the Republic, northern Europe, India, South Africa, and Dubai.
Capita provides IT services to companies and governments to cut costs.
Like Carillion, Capita provides vital services in Britain from running the system that pays NHS dentists to hospital triage support, and helping retailers manage online shopping sites. Its clients include Transport for London’s congestion charge, the BBC, Tesco Bank, and retailer John Lewis.
It cited estimates that the customer management market in the UK and Ireland was worth £5.2bn (€5.94bn), of which it had a share of around 16%.
Capita lost 40% of its market value after its new boss slashed profit forecasts and set out plans to raise cash to avoid the same fate as collapsed rival Carillion.
Just two weeks after Carillion perished under a pile of debt, Capita , which provides IT services to companies and governments to cut costs, said it needs a complete overhaul and to retrench.
The company cut its 2018 profit forecast by 30% only seven weeks after reiterating it despite a string of warnings last year.
Under new chief executive Jonathan Lewis who arrived in December, Capita said it would raise around £700m
(€796m) in a rights issue in 2018, scrap the dividend and sell assets to enable it to boost investment, focus on contract profitability, and plug a hole in its pensions scheme.
Capita’s shares crash wiped £970m off its market value and left the stock down 85% since mid-2015.
“Capita needs to change its approach,” said Mr Lewis. “We cannot continue to focus on the incredibly broad array of disparate businesses. The strategic review we’re undertaking will cause Capita to shrink, cause Capita to focus.”
Like Carillion, Capita provides vital services in Britain from running the system that pays NHS dentists to hospital triage support, and helping retailers manage online shopping sites.
The news sent shockwaves through a sector still reverberating from Carillion’s demise in mid-January .
The UK Labour Party called for the government to take steps to oversee Capita, a major beneficiary of public sector contracts. “We cannot afford another Carillion,” said MP Jon Trickett.
A government spokesman told reporters it was monitoring the health of suppliers: “We do not believe that any of our strategic suppliers, including Capita, are in a comparable position to Carillion,” said the spokesman.
British outsourcing has grown rapidly since the 1980s and is now dominated by giants such as G4S, Serco, Capita, and Mitie who employ hundreds of thousands of staff to provide services to the public and private sector.
Many were hit after they took on work at wafer-thin margins during the financial crisis, leaving little room for error.
Uncertainty over Britain’s departure from the EU has compounded the sector’s problems.
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