Shares in outsourcing group Capita Group (LON:CPI) plummeted by almost a third on Thursday morning after the London congestion charge operator issued a surprise profit warning.
Capita – which also recruits for the army and NHS – has been forced to take a £25mln hit for a delayed congestion charge contract and also warned that it may face legal action on a mortgage admin system for the Co-op Bank.
The FTSE 100 firm told investors that it now expected underlying pre-tax profits would fall between £535mln and £555mln for 2016 as a result. That’s more than 10% down on the £614mln it had previously forecasted.
“Our performance in the second half of the year to date has been below expectations, as a result of a slowdown in specific trading businesses, one-off costs incurred on the Transport for London congestion charging contract and continued delays in client decision making.”
Capita inked a £145mln, five-year deal with Transport for London back in 2014 to run the London congestion charge’s back-office and customer services centre.
However, the outsource group was hit by substantial delays as it rolled out a new IT system for TfL and has set aside £20-£25mln as a penalty for missing its target.
Chief executive Andy Parker added that there was a “high degree of risk” of litigation with Co-Op.
Capita won a £325mln, ten-year contract with the bank last year to take over mortgage staff from its administration firm, Western Mortgage Services.
Parker was adamant that his firm was “still hitting targets and delivering for this bank”.
Shares tumbled 27% to 700p.