Capita PLC (LSE:CPI) shares tumbled almost 16% after the outsourcer apologised for delays in administering the Civil Service Pension Scheme after the government criticised its performance, saying it is assessing the implications of the issue ahead of a trading update later this week.
The London-listed group was responding to a ministerial statement made on Monday by the Paymaster General regarding its contract to administer the scheme.
In a highly critical update to Parliament, Paymaster General Nick Thomas-Symonds said Capita had been "completely unprepared" for taking over the contract and that its systems were "overwhelmed", leaving a backlog that peaked at 120,000 unresolved cases.
He said the government had withheld £9.9 million in payments to Capita and would recover the cost of deploying more than 140 Cabinet Office officials to help clear the backlog, adding that "public money will not fund Capita's failings".
The Cabinet Office minister also said he had instructed officials to examine longer-term options for running the scheme, including bringing it back in-house, although he said terminating the contract immediately would risk "a catastrophic operational vacuum."
Capita said it continued to work with the Cabinet Office to resolve operational problems and acknowledged that service levels had fallen short, particularly for members waiting for bereavement, retirement and pension quotation cases to be processed.
The company said it had now put in place the processes, automation and technology needed to clear the backlog.
Capita said: "Despite the progress made to date, we recognise the service has not been good enough, particularly for members waiting on bereavement, retirement and quotation cases and we are sorry for the distress and inconvenience experienced by those members."
The group added: "We now have the processes, automation and technology in place to work through the backlog."
Capita said it was assessing the implications of the matters raised in the ministerial statement and would update the market if necessary.
It is due to publish a trading statement later this week covering progress against its strategic priorities.
The shares fell 15.9% to 273.50p in early trading on Tuesday.
** UPDATE: Adds share price **
