Capita Share Price Rallied 12.9% on Move To Fire 900 Employees

The Capita PLC (LON: CPI) share price rallied  12.9% after the business process outsourcing and professional services company revealed that it had started taking measures to actualise its goal of reducing its annual operating costs by £40 million. The company intends to fire about 900 employees to meet its ambitious cost-saving goal. 

Moreover, Capita is embarking on a comprehensive organisational review, laying the foundation for employee consultation programs to commence shortly. These programs are expected to generate even more significant cost savings, to the tune of £60 million annually, starting from the first quarter of 2024.

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However, the proposed organisational changes primarily impact indirect support functions and overhead roles, potentially putting approximately 900 positions at risk of redundancy. While these changes promise long-term gains in efficiency and profitability, they come with short-term exceptional costs estimated at around £27 million.

The above costs are expected to be reflected in the income statement for the fiscal year ending on December 31, 2023, with the cash impact slated for the first quarter of 2024.

Despite these strategic shifts and cost-saving initiatives, Capita remains on course and is trading in line with its expectations. The company continues to demonstrate positive operational and financial performance, solidifying its competitive position in the market.

Capita’s success is further underscored by its ability to secure contracts, with a total contract value (TCV) reaching an impressive £2.85 billion year-to-date. This figure surpasses the TCV for the entire year of 2022, which stood at £2.59 billion.

Looking ahead, Capita is set to provide a pre-close statement on December 14, 2023, offering further insights into its progress and prospects. The Full Year Results announcement is scheduled for March 6, 2024, and will provide a comprehensive overview of the company’s performance and the realisation of its strategic objectives.

Jon Lewis, Capita’s Chief Executive Officer, said: “We are, today, announcing the accelerated delivery of the efficiency savings announced in our Half Year Results with a £20m increase in overhead cost reduction to £60m on an annualised basis from Q1 2024. As part of the organisational review which underpins the programme we are announcing today, we continue to identify further areas of cost efficiency and will pursue these during 2024.”

Capita share price. 

The Capita share price rallied 12.86% to trade at 21.59p from Monday’s closing price of 19.13p.