Capita threatens further layoffs as part of savings plans worth a further £100 million

Outsourcing giant Capita has raised the specter of further layoffs as it announced plans to cut costs by a further £100 million after posting losses last year.

The group, a major contractor for the government and local authorities, said it was pushing ahead with a “rapid” cost-cutting plan as it faces a £107 million loss for 2023 following a drop in revenue and a £25 million hit from a cyberattack.

The company, which employs around 47,000 people, said it aims to save a further £100 million a year by mid-2025.

Capita is already cutting around 900 jobs as part of existing plans to save £60 million a year on costs, announced last November.

It is believed that the recent cost-cutting drive could also impact employment, but Capita did not provide details on where the savings would be made.

A further update on the plans will be provided at a capital markets event in June.

Shares in the company, which manages broadcasting fees for the BBC and recruits staff for the army, fell by around a fifth in Wednesday morning trading after worse-than-expected results and the company warned it was unlikely to see revenues rise in 2024.

It said revenue on an underlying basis was expected to be “broadly in line with the previous year”.

Adolfo Hernandez, Capita's recently appointed CEO, said: “We need to rapidly reduce our cost base and are on track to deliver the £60 million annualised net cost savings announced in November from the first quarter of 2024.”

“Today we are announcing further £100 million in material efficiency improvements to improve our competitive position.

“I look forward to announcing further details of Capita’s future strategy in June.”

The results showed that the pre-tax losses in 2023 follow a profit of £61.4 million in 2022 and come after revenue fell 6.6% to £2.8 billion.

In addition, a cyberattack last year pushed the company into the red, costing it £25 million when hackers broke into the company's systems and accessed the personal information of some employees and customers.

Around 90 organisations have written to the Information Commissioner's Office informing them of a possible breach of their data protection.

In addition to the job cuts announced so far, Capita is also downsizing its office network: 19 locations will be closed and a further 14 will be consolidated by 2023 to better enable home office work.

These measures resulted in the company reducing its office space by almost a third (31%) over the last three years.