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Capita to undergo major shake-up amid profit warning

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Outsourcing giant and council service provider Capita has issued a profit warning ahead of a major shake-up of its business.

Capita’s shares have plummeted by 40% this morning, after its chief executive Jonathan Lewis warned the business has become “too complex” and “needs to change its approach”.

Capita provides a wide range of services for councils including providing services in children’s and adults’ social care, housing, and back office functions, among others.

After a thorough review of the business Mr Lewis, who has been Capita’s chief executive for two months, said “significant change” is needed to secure the future of the business as it is “too widely spread across multiple markets and services, making it more challenging to maintain a competitive advantage in every business”.

He added: “Today, Capita is too complex, it is driven by a short-term focus and lacks operational discipline and financial flexibility.

“Capita needs to change its approach.”

While “there is significant scope for cost efficiencies across a number of areas”, Mr Lewis also said he had “identified a small number of quality businesses that do not fit with our core skills for which there will be better owners”. However, Mr Lewis warned: “Cost savings and non-core disposals alone will not be enough.”

Capita, which has a pension deficit of £381m, has forecast pre-tax profits of between £270m and £300m in the full year to December 2018. According to Thomson Reuters data, analysts had been expecting a profit of £406m.

The news comes a little more than two weeks after construction firm Carillion collapsed.

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