CAPITA is to raise £701 million in a rights issue after revealing a £513m pre-tax loss, but chief executive Jon Lewis said he was frustrated at comparisons with collapsed outsourcing giant Carillion.

Information technology specialist Capita, which employs about 3,500 staff in Scotland, is also looking at making £175m annual cost savings by the end of 2020, and £300m from disposals.

The rights issue comes as the group embarks on a new strategy which will reduce costs by “[delivering] enhanced performance through increased simplification, efficiency, standardisation and focus”.

Kevin Scott: Comparisons will be made between Capita and Carillion, but it is public sector provision which should be scrutinised

The losses for 2017 came after the group was hit with £850m in one-off costs, driven by the write down the valuation of previous acquisition. Losses widened from £90m last year. Revenue was down 4.3 per cent to £4.2 billion.

The new strategy will see greater discipline in how it operates, and would ultimately “simplify and strengthen” the group.

Revealing the rights issue, the company’s new management team was highly critical of the recent strategy of the group, saying it has become too complex.

“It has expanded beyond its core skills and failed to keep pace with a rapidly changing marketplace,” said the directors. “It has lacked a clear medium and long-term strategy, instead taking short-term decisions to pursue near-term growth and in-year profitability at the expense of planning for long-term sustainability.”

Mr Lewis said the rights issue was a key component of the new strategy and will give Capita a stronger capital base.

“We need to simplify Capita by focusing on growth markets and to improve our cost competitiveness,” he said. “We need to strengthen Capita and plan to invest up to £500 million in our infrastructure, technology and people over the next three years.

“There is a lot to do, but I am confident that the plan is clear and prudent. Capita will become more predictable, have stronger operational discipline and consistently delight its clients.”

Kevin Scott: Comparisons will be made between Capita and Carillion, but it is public sector provision which should be scrutinised

However, speaking to the Press Association he questioned any comparison with Carillion, which collapsed in January with up to £1.5 billion in debt.

“I get frustrated with that comparison - we are a completely different business,” he said. “We have £1 billion in liquidity, strong cash flow and a new strategy with investor support. We are not in PFI contracts and have nothing like the risk profile.”

Two weeks after Carillion collapsed, Capita issued a profit warning on the back of contract attrition and cost increases.

Shares in the company have been on the slide since last summer, before dropping 54% after January’s profit warning. The price recovered slightly yesterday, climbing 13.1% to close at 180.8p.

In line with its drive for simplification, Capita has reorganised its divisional structure around five markets: software, human resources, customer management, Government services and IT Services. It has also introduced a specialist services division.

Kevin Scott: Comparisons will be made between Capita and Carillion, but it is public sector provision which should be scrutinised

The group continues to expect underlying pre-tax profits of between £270m and £300m for the 2018 year. Among Capita’s major contracts is collecting the licence fee on behalf of the BBC, running control room and dispatch for the emergency services, and proving information technology (IT) services for the police and justice departments.

In Scotland, Capita set up the Scottish Wide Area Network (SWAN) to establish a single shared and common IT infrastructure across Scotland’s public sector. Capita has approximately 6,000 sites connected and is currently working to reach 7,500 sites, including in remote areas.