The troubled outsourcer first announced it would be raising up to £700m of additional funds to tackle its cash woes back in January, after issuing a profit warning for FY 18.
On Monday it confirmed plans to raise an additional £1m, bringing the total to £701m, via a 3-for-2 fully underwritten rights issue of circa one billion new shares.
At an issue price of 70p, the new shares represent a discount of 56.2% to the firm’s previous closing price of 159.8p.
The update on its rights issue came as the company reported net losses of £513m, which was consistent with its previous guidance. Capita expects underlying profits for 2018 to be somewhere between £270m and £330m.
Fund managers Neil Woodford and Mark Barnett remain some of the biggest shareholders in the FTSE 250 outsourcer, with Woodford Investment Management owning 10% and Invesco Perpetual 11% of the business, behind Veritas Asset Management which owns 13%.
Capita is one of several Woodford-holdings trying to raise additional funds this year after enduring a volatile start to the year.
Last month, the star manager decided to ditch his longstanding holding in AJ Bell as it announced it was going to float on the London Stock Exchange and he declined to participate in Atom Bank’s rights issue, which some suggested hinted at a liquidity problem.
According to a WIM spokesperson, Woodford has supported follow-on and new funding rounds in more than 20 companies within the past six months, despite the outflows his flagship equity income fund has seen.
Capita should still be avoided
Despite Capita’s cash troubles, Helal Miah, analyst at The Share Centre, said “the overall picture looks reasonably good” at the firm, noting that operating profits over the first quarter rose 34% to £447m.
Markets seemed to agree, as Capita’s shares were up 12.5% at 179.8p by midday trading on Monday. The outsourcer’s shares are still down 55% year-to-date.
Fourteen out of 16 Bloomberg analysts recommended the stock as a “hold”, with only one recommending it as a “buy” and another as a “sell”.
“The good news is that Capita’s management have succeeded in keeping the business going, unlike rival Carillion,” said Miah. “Irrefutably, management accepted the business’ position and took action to come clean to investors, with the aim to turn the business around.”
Although the shares have staged a modest recovery, Miah said “the company should still be avoided for the time being”.
“There is too much uncertainty around the business despite the fact that the operating performance has been in-line with their reduced guidance. The new management need to prove that they have got a grasp of the situation and have the capability to turn this business around. It will not be paying a dividend for some time so traditional income investors will look elsewhere.”
