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Capita tumbles as rights issue shares begin trading
Outsourcer Capita loaded 1bn new shares onto the market on Thursday as it completed its £701m rights issue priced at 70p per share, enabling the FTSE 250 firm to carry out its new strategy.
Having warned in January of the significant negative impact on underlying profits from contract and volume attrition, Capita reported a £513m loss before tax for calendar 2017 after a "significant deterioration" in new business wins and business volumes that would continue to weigh on profits in 2018.
With Capita's rights issue a "key component" of its makeover, chief executive Jon Lewis said in April the firm's principal target was to "simplify Capita by focusing on growth markets and to improve our cost competitiveness" and to strengthen by investing up to £500m in infrastructure, technology and people over the next three years.
Capita's transformation programme will use £220m of the £662m net proceeds of the rights issue, of which £150m is earmarked to achieve an "annualised cost competitiveness saving" of £175m, while £157m is needed for agreed pre-payments and make-whole payments for a chunk of US bonds, with the £285m balance of proceeds to be used to support its investment programme.
As of 0900 BST, Capita shares were down 35.16% to 130.15p.