The reduction of Capita’s £381m pension deficit has been signposted as a priority, among other areas, in its multi-year transformation programme.

In an update published today, Capita unveiled its overhaul plans for trading, dividend policy, funding and actions that will be implemented to improve the group’s medium to long-term performance.

While the firm’s pension scheme is currently undergoing a triennial valuation, its current expectation is that the actuarial deficit will “significantly below” the last disclosed IAS19 deficit of £381m at 30 June 2017.

Capita has confirmed that in addition to its annual contribution, it is committed to a further contribution of £21m to its pension scheme in 2018. “We will seek to reduce the remaining deficit as a priority,” it has stated.

While market conditions “remained challenging” Capita’s trading for 2017 was in line with its expectations, the firm outlined. Underlying pre-tax profits, before significant new contracts and restructuring costs for 2018 are expected to be between £270m and £300m, it added.

Furthermore, Capita said it expects to spend around £215m to known commitments, including £66m cash costs on the Connaught settlement, around £50m in relation to the separation of Capita Asset Services (including a pension contribution), contingent considerations, historic litigation and restructuring costs.

Commenting on the firm’s plans, Capita CEO Jonathan Lewis said: “In my first two months I have begun a thorough review of Capita – its structure, its leadership, its contracts and its financial position.

“We have completed the budgeting process for 2018 from which we have set a prudent plan. Since our December update, we have also decided to invest in people, sales and our transformation programme for the long-term benefit of the Group.

“Capita needs to change its approach. I have initiated a transformation programme, appointed a Chief Transformation Officer and formed a new executive committee to drive this change. I believe that this transformation programme can significantly improve the performance of Capita. An immediate priority is to strengthen the balance sheet through a combination of cost savings, non-core disposals and new equity”.

Nonetheless, in the midst of the Carillion talks, Work and Pensions Committee chair Frank Field has voiced his concern regarding Capita’s debt and pension deficit.

“Another day, another outsourcing firm with massive debt, a huge pension deficit, a KPMG audit and the Big Four popping up at every turn in the company’s chequered history. Sadly, Capita goes on the growing list of firms we are investigating to see if their conduct has endangered current and future pensioners’ rights.”

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