Just two weeks after Carillion disappeared under a pile of debt and failed contracts, Capita has reignited the issue of outsourcing key government services after it warned on profits and announced a £700m rights issue.
While the government insisted Capita would not be the next Carillion, shareholders were not so sure and at the close of play on London Stock Exchange on Wednesday, shares in the company were down 47.53% at 182.5p.
Restructuring – rights issue
Chief executive, Jonathan Lewis (left) - who only arrived at the helm in December - announced a massive restructuring that will include keener focus on core services and disposals of uncompetitive units, presumably at the expense of some of its 73,000 staff.
The cost of such an overhaul was to be funded by a capital raising that will ask shareholders to part with £700m, as well as denying them of regular dividend payments.
While comparisons with Carillion were understandable, the government attempted to play such observations down.
Not another Carillion
A spokesman for the government said suppliers were being monitored: "We do not believe that any of our strategic suppliers including Capita are in a comparable position to Carillion."
Ken Odeluga, market analyst at City Index, also played down the comparison.
He said: "An important difference between Capita and Carillion is that the latter’s problems were linked to under-bidding on major contracts but Capita’s originate in routine services.