Capita plc experienced a steep decline in its share price during today’s trading session, with the stock falling 15.5% to 274.46p after the UK government publicly criticised the company’s performance on two major public-sector pension contracts.
Paymaster General Nick Thomas-Symonds told Parliament that Capita was "completely unprepared" when it assumed responsibility for administering the Civil Service Pension Scheme (CSPS). The minister described the company’s systems as "overwhelmed" and disclosed that the case backlog had peaked at 120,000 unresolved items, a disruption affecting 1.7 million scheme members.
At the same time, the government confirmed it would terminate Capita’s contract to administer the Royal Mail Statutory Pension Scheme. The decision was attributed to Capita’s failure to meet key transition milestones and a lack of confidence in the company’s ability to complete the work.
The ministerial statement also outlined immediate financial consequences for Capita. The government said it had withheld 9.9 million in milestone payments and would seek to recover the costs of deploying more than 140 Cabinet Office officials who were sent in to help manage the CSPS backlog. The Paymaster General emphasised that "public money will not fund Capita’s failings."
Capita acknowledged shortcomings in its delivery of services, specifically pointing to reduced service levels for members waiting on bereavement settlements, retirement processing, and pension quotations. The company apologised for the distress caused to affected scheme members and said it was analysing the implications of the ministerial remarks. Capita added it would update the market as required and noted a trading statement was due later in the week.
Market context provided little relief for investors. US equities were trading higher, with both the S&P 500 and the Nasdaq in positive territory, indicating the Capita sell-off was driven by company-specific political and contractual risk rather than weak broader market conditions.
Further scrutiny looms: a joint parliamentary committee session scheduled for July 8 will bring together the Public Accounts Committee and the Public Administration and Constitutional Affairs Committee to question the Paymaster General. That prospect kept additional regulatory and political risk in focus for investors.
The convergence of a terminated government contract, withheld payments, the prospect of a high-profile parliamentary hearing, and an unresolved backlog on the remaining CSPS contract created a concentrated set of challenges for Capita. Shares, which were already well below their 52-week high of 415p, moved nearer the bottom of their annual trading range following today’s drop, underscoring investor concern about the durability of Capita’s public-sector revenue base - a core element of the company’s business model.
Summary
The UK government criticised Capita’s management of two public-sector pension contracts, cancelled the Royal Mail contract, withheld payments and revealed a large backlog affecting 1.7 million members. Capita apologised and said it would update the market; a trading statement is due later in the week. The developments prompted a sharp share price fall despite positive broader market moves.