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Capita profit warning sees concern grow for top government contractors

01 February 2018

Following the profit warning issued by Capita yesterday, questions continue to be asked about the government's largest service providers and its procurement methods.

With the Capita story featured across the national media, continuing reference was made to the recent failure of Carillion.

According to This Is Money, Capita won nearly 200 public sector contracts worth £194m since it posted its previous profit warning in September 2016.

It is also featured on the government's preferred supplier list since January 2015 and therefore able to bid for contracts within a framework with an estimated value of £4.2bn.

Falling from a high of just over £13 in July 2015, Capita's share price was recorded at £2.60 following its recent profit warning.

Analysis of other large government service providers, such as Serco and Interserve, showed that these companies had also suffered significant drops in their share price.

While Serco had seen its share price fall from £6.27 in mid 2014 to 92p this week, Interserve had experienced similar misfortune with a drop of over £6 over the last four years, falling to £1.08 most recently.

Further commentary has discussed the companies that may gain new contracts due to the issues being experienced after the Carillion collapse.

Mitie was the favourite in the FM contract sector, while Balfour Beatty and Costain were thought to be set to gain new contracts in construction.

With further details continuing to emerge on the Carillion demise, an investigation has been announced to study why auditor KPMG did not raise concerns over the company's financial position and its lack of investment in employee pensions at a much earlier date.

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