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| Capita capitalises on robots before new chair Powell powers in Capita capitalises on robots before new chair Powell powers in | |
| (3 days later) | |
| The march of the robots has begun. After it has axed a couple of thousand jobs, including by outsourcing posts to India (groan), Capita wants to ramp up “a proprietary robotic solution to achieve scale automation across some of our operations”. Let’s hope chief executive Andy Parker uses plainer language, rather than management blurb, when he explains to affected staff in call-centres why they are being replaced by machines. | The march of the robots has begun. After it has axed a couple of thousand jobs, including by outsourcing posts to India (groan), Capita wants to ramp up “a proprietary robotic solution to achieve scale automation across some of our operations”. Let’s hope chief executive Andy Parker uses plainer language, rather than management blurb, when he explains to affected staff in call-centres why they are being replaced by machines. |
| Mind you, Parker’s hold on his own position looks less than secure. His worry is not a robot but Ian Powell, a big cheese out of PwC, who arrives as chairman in January. In the five months since Powell’s appointment was announced, Capita has blown its status as the star turn of the outsourcing sector. Thursday’s profit warning was the second in three months. The shares are down 60% this year and stand at a 10-year low. | Mind you, Parker’s hold on his own position looks less than secure. His worry is not a robot but Ian Powell, a big cheese out of PwC, who arrives as chairman in January. In the five months since Powell’s appointment was announced, Capita has blown its status as the star turn of the outsourcing sector. Thursday’s profit warning was the second in three months. The shares are down 60% this year and stand at a 10-year low. |
| Any incoming chairman would want to know if this catastrophe for shareholders could have been avoided. The case for the defence is that Capita has suffered a series of unfortunate accidents, such as a Brexit-related slowdown, delays in installing IT for the London congestion zone and upheaval in a recruitment business. Add them all up, though, and Capita, even on the latest prediction, will still make pre-tax profits this year of £515m, only about £100m less than expected in the summer. | Any incoming chairman would want to know if this catastrophe for shareholders could have been avoided. The case for the defence is that Capita has suffered a series of unfortunate accidents, such as a Brexit-related slowdown, delays in installing IT for the London congestion zone and upheaval in a recruitment business. Add them all up, though, and Capita, even on the latest prediction, will still make pre-tax profits this year of £515m, only about £100m less than expected in the summer. |
| The shortfall has done so much damage to the share price only because Capita was running with too much debt. Borrowings are approaching 2.9 times top-line profits, well beyond the company’s definition of a prudent cap. A slowdown in spending by clients made the ratios balloon. It looks as if the company believed its own hype about the predictable nature of its revenues. If so, that could have been avoided. | The shortfall has done so much damage to the share price only because Capita was running with too much debt. Borrowings are approaching 2.9 times top-line profits, well beyond the company’s definition of a prudent cap. A slowdown in spending by clients made the ratios balloon. It looks as if the company believed its own hype about the predictable nature of its revenues. If so, that could have been avoided. |
| Parker’s solution is to sell Capita Asset Services, a registrar business that also serves the fund-management industry. If the division fetches £700m, debt ratios will look healthier and Parker may achieve his primary goal of avoiding a dividend cut. Yet you can understand why investors are rattled. Capita Asset Services used to be seen as a prized business but has suddenly been declared “non-core”. Meanwhile a second profits warning within three months suggests Capita’s ability to read its own markets is not what it once was. Powell’s verdict is keenly awaited. | Parker’s solution is to sell Capita Asset Services, a registrar business that also serves the fund-management industry. If the division fetches £700m, debt ratios will look healthier and Parker may achieve his primary goal of avoiding a dividend cut. Yet you can understand why investors are rattled. Capita Asset Services used to be seen as a prized business but has suddenly been declared “non-core”. Meanwhile a second profits warning within three months suggests Capita’s ability to read its own markets is not what it once was. Powell’s verdict is keenly awaited. |
| Sports Direct’s Hellawell should get out of the spotlight | Sports Direct’s Hellawell should get out of the spotlight |
| Morale of staff at Sports Direct has suffered, says chairman Keith Hellawell, but here’s news to cheer them up: profits have halved but the company can still afford to buy a £40m corporate jet. Employees can even hire it themselves – if they pay “open market rates”, which may deter 99% of the workforce. | Morale of staff at Sports Direct has suffered, says chairman Keith Hellawell, but here’s news to cheer them up: profits have halved but the company can still afford to buy a £40m corporate jet. Employees can even hire it themselves – if they pay “open market rates”, which may deter 99% of the workforce. |
| But the arrangement that will infuriate outside shareholders is surely the deal whereby Sports Direct will buy cosmetics – under that must-have brand Sport FX – from a company where founder Mike Ashley’s 20-year-old daughter, Matilda, is a director. | But the arrangement that will infuriate outside shareholders is surely the deal whereby Sports Direct will buy cosmetics – under that must-have brand Sport FX – from a company where founder Mike Ashley’s 20-year-old daughter, Matilda, is a director. |
| Matilda’s outfit is called Double Take, which is probably what shareholders did. Yes, Sports Direct really has responded to accusations that it is run as a personal fiefdom by doing this deal (other arrangements involve Ashley’s brother and the boyfriend of Ashley’s other daughter). Ashley, it seems, doesn’t care what outsider investors say. | Matilda’s outfit is called Double Take, which is probably what shareholders did. Yes, Sports Direct really has responded to accusations that it is run as a personal fiefdom by doing this deal (other arrangements involve Ashley’s brother and the boyfriend of Ashley’s other daughter). Ashley, it seems, doesn’t care what outsider investors say. |
| Hellawell, though, is jolly angry about the “extreme campaign” that has been “waged” against Sports Direct by the media, politicians and trade unions: “I begin to question whether this intense scrutiny is all ethically motivated.” | Hellawell, though, is jolly angry about the “extreme campaign” that has been “waged” against Sports Direct by the media, politicians and trade unions: “I begin to question whether this intense scrutiny is all ethically motivated.” |
| Unfortunately, the former chief constable of West Yorkshire didn’t say what conclusions he has reached. Here are a few facts to help his inquiries. This paper’s exposé of working conditions at the Shirebrook warehouse was honoured at the British Journalism awards this week. The business select committee’s report was a cross-party affair and supported the thrust of the complaints made by Unite, the trade union, for many years. Sports Direct workers have been awarded £1m in back pay as a result of the scrutiny. The company itself has acknowledged “shortcomings” and pledged to do better. | Unfortunately, the former chief constable of West Yorkshire didn’t say what conclusions he has reached. Here are a few facts to help his inquiries. This paper’s exposé of working conditions at the Shirebrook warehouse was honoured at the British Journalism awards this week. The business select committee’s report was a cross-party affair and supported the thrust of the complaints made by Unite, the trade union, for many years. Sports Direct workers have been awarded £1m in back pay as a result of the scrutiny. The company itself has acknowledged “shortcomings” and pledged to do better. |
| No doubt, life in the spotlight is uncomfortable. But there is a simple remedy, at least for Hellawell. After seven years in the job, and having failed to spot a crisis that was brewing for ages, he could resign. That was the wish of a majority of outside shareholders at September’s annual meeting. | No doubt, life in the spotlight is uncomfortable. But there is a simple remedy, at least for Hellawell. After seven years in the job, and having failed to spot a crisis that was brewing for ages, he could resign. That was the wish of a majority of outside shareholders at September’s annual meeting. |
| Ashley, with his 53% stake, saved his chairman but it remains hard to see how Sports Direct can genuinely claim to have turned a corner while Hellawell remains in post, raging impotently about scrutiny that would be applied to any high-profile public company. | Ashley, with his 53% stake, saved his chairman but it remains hard to see how Sports Direct can genuinely claim to have turned a corner while Hellawell remains in post, raging impotently about scrutiny that would be applied to any high-profile public company. |