Shares in outsourcing firm Capita (CPI) hit lows not seen in over two decades after it said its restructuring would take longer and cost more than originally estimated.
Having lost 38% yesterday, Capita shares shed another 23% on Friday to 59p, their lowest level since the late 1990s.
In its results for the year to December, the firm recorded a 4% dip in revenues to £4.68bn and pre-tax losses of £62.6m against profits of £272.6m in the previous year.
Free cash flow improved slightly on 2018 but was still negative to the tune of £213m, making the company reliant on net debt which ballooned to £1.35bn on a reported basis from £466m the previous year.
Chief executive Jon Lewis pointed to the ‘significant progress’ made in simplifying and strengthening the business over the past two years but admitted that ‘transforming an organisation of Capita’s size is a complex challenge, there remains more to do and it is requiring more investment than we had expected in 2018.’
Commenting on the results, Shore Capital analyst Robin Speakman said that while the firm is making progress in its strategic repositioning, ‘we still note that order wins are falling well below a book to bill ratio of 1.0’, meaning that Capita’s new orders are worth less than a year’s turnover.
‘Longer term we retain concerns over the challenge of sustaining a growth profile as AI and robotic process outsourcing takes hold, with new competition likely continuing to emerge, and potentially undermining Capita’s existing outsourcing contract book as contract values fall,’ he added.
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