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Troubled outsourcer Capita drafts in Carillion adviser Lazard

Outsourcing giant Capita, collector of TV licence fees and a major government contractor, has drafted in the adviser which served construction company Carillion in the months before its collapse.

Capita, which issued a major profit warning last week wiping almost £1bn off its market value, has hired investment bank Lazard to advise on its financing options, Sky News has reported.

The outsourcer has tried to distance itself from Carillion, which collapsed into liquidation just months after issuing its own profit warning. Yet the hiring of Lazard may be seen as a concession that the company is in turmoil.

Read more: Capita shares sink as government insists contractor is not another Carillion

The individuals from Lazard working for Capita, however, will be largely different from the team which dealt with Carillion, sources told Sky News.

Lazard's appointment shows that Capita may yet decide not to pursue a mammoth £700m rights issue to raise cash, the announcement of which helped send shares spiralling last week.

But the companies woes have already hit some hard. Fund manager Neil Woodford has taken a £1bn hit to his flagship fund in the first weeks of 2018 as a number of holdings, including Capita, have performed poorly.

Read more: Silk purses and sow's ears: Woodford sticks to his guns despite Capita being a "poor investment"

Another fund manager on the other hand, Royal London, has praised the outsourcer for increasing transparency and changing its board to boost independence.

Capita focuses on high-value, technology-enabled contracts, unlike Carillion which was largely aimed at construction and facilities management.

Though most analysts have recommended investors sell Capita stock, the hesitant consensus seems to be that the business will recover – although that process will likely be painful and drawn out.

"Capita has now admitted that it has problems, a prescription has been written, but the cure is still to be taken," said Robin Speakman, an analyst at Shore Capital. "In short, high risk is our perception. We believe that the sightline on recovery is likely to be long."

Lazard had not responded to a request for comment at the time of writing.

Read more: After recent profit warnings, could Capita be the next Carillion?

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