Capita shares plunge to 10-year low as outsourcing firm sells assets
Shares in Capita have plunged to a 10-year low after the outsourcing firm warned over profits and moved to shore up its balance sheet by selling assets.
The FTSE 100 firm said "near-term headwinds", which pegged back its performance this year, would now drag through into the first half of 2017.
It said underlying pre-tax profits, excluding restructuring costs, would reach around £515 million for the full-year, compared to previous forecasts of between £535 million and £555 million.
Annual revenues are expected to come in at £4.8 billion to December 2016.
The warning came as the firm said it would trim away fringe operations, selling the majority of Capita Asset Services and a "small number of other businesses".
Shares were down more than 9% on the London market following the update, reaching levels last seen in July 2006.
Chief executive Andy Parker said the company had embarked on a cost-cutting strategy to help prime the company for future growth.
"I am confident that the markets Capita addresses offer long term structural growth," he added.
"We are however currently facing some near-term headwinds, which continue to make 2016 a challenging year and will affect trading performance in the first half of 2017.
"Our long term contracts provide us with good revenue visibility across the year and the structural and cost reduction actions we are taking now will support progress in the second half of 2017 and into 2018.
"We therefore currently expect a similar trading performance to 2016 in the full year 2017."
Capita said the sale of its hinterland businesses would be complete by the second half of 2017 and contribute £60 million to operating profit and £70 million to earnings.
Pointing to the challenges facing the business, it said its IT enterprise services division would undergo a management and structural overhaul after seeing its performance "weaken further" this year.
The firm said efforts to slash costs would lead to a restructuring bill of around £50 million.