Capita suffers $138Mn loss after 2023 cyberattack
LONDON, UNITED KINGDOM — Outsourcing giant Capita disclosed annual losses exceeding €126.5 million (US$138 million), with the notorious Black Basta group’s cyberattack in March 2023 being a significant contributor to this financial blow.
Initially estimated at €23.7 million (US$25.9 million), the impact of the incident has been revised in the firm’s 2023 annual report to €30 million (US$12 million) to reflect the severe damage it inflicted.
The remaining losses are attributed to various factors, including costs associated with business exits and goodwill impairment.
The cyberattack’s fallout has been devastating. Capita’s share price has plummeted over 54% since the event, eroding investor confidence and slashing the company’s market value by 20%.
Customer relations have also taken a hit, evidenced by a decline in Capita’s net promoter score from +25 to +16. The pensions administration business, in particular, has raised data security concerns in sensitive sectors.
In response, Capita CEO Adolfo Hernandez announced stringent cost-cutting measures aimed at salvaging the company’s financial state.
“Our 2023 financial results have shown some progress. But we have not yet delivered the operational excellence that will let us create the right platform for future growth or achieve our full potential for the benefit of shareholders,” Hernandez stated.
Hernandez outlined plans to slash an additional €118.4 million (US$129 million) in costs by mid-2025, emphasizing the necessity for operational efficiency and technological innovation to enhance Capita’s competitive position and foster growth. However, the specifics of these cost-saving strategies remain undisclosed, fueling speculation about potential job cuts and restructuring.
The company’s proactive approach to cost reduction is evident from the previous year’s elimination of approximately 900 jobs and the consolidation of property leases.
Amidst these financial challenges, Capita has also faced scrutiny over data breaches, with the Information Commissioner’s Office receiving numerous reports from affected organizations. Another breach in May exposed sensitive local council benefit payment details, raising the stakes for Capita to address security issues and uphold its data protection commitments.
Furthermore, Capita has implemented a pay freeze for thousands of workers UK workers to curb costs, delaying April’s pay rises until October. This decision, along with the non-payment of executive bonuses due to missed targets, reflects the company’s dire financial situation.
“Simply put, the great work we do is not showing in the numbers. This is not the position I wish we were in, and one I hope to not be in again,” Hernandez conveyed in a staff memo.
Despite the legal obligation to raise minimum wage salaries, Capita has withdrawn from a scheme supporting the “real living wage,” affecting its lowest-paid employees—a move criticized by the Communication Workers Union as “callous.”
A Capita spokesperson said the firm “had to make some difficult short-term decisions to ensure we are better placed for the future.”
Capita is a transformation and digital services business that helps simplify the links between businesses and customers, governments, and citizens. It secured the #19 spot in the OA500 2024, an objective index of the world’s top 500 outsourcing companies.
