The group, whose public sector contracts include working with the emergency services, in healthcare and with the police and justice systems, said that it would auction off non-core assets over the coming two years.

Capita, which also works in the private sector for banks, insurers, retailers and telecoms groups, said that it would press ahead with a cost-cutting drive, including reducing its administrative expenses and centralising its contract procurement processes.

Companies in the outsourcing sector, particularly those with large government contracts, face wafer-thin profit margins and cutbacks in Whitehall spending. Private sector clients are also cutting costs.

Capita’s warning comes weeks after Carillion, whose main customer was the government, collapsed into liquidation, triggering a string of investigations into the circumstances of its demise.

Shares in Capita had fallen by 46 per cent to 188p by late afternoon trading in London today valuing the group at £1.3 billion. They have dropped 30 per cent over the past year during which the company issued several profit warnings.

The outsourcer said it plans for a “multi-year transformation programme” just over two months after Jonathan Lewis was appointed as its new chief executive. Capita said today that under its new boss, it had initiated a process of change that covered “strategy, cost competitiveness, sales IT and our capital structure, to improve the performance of Capita over the medium to long term”.

Mr Lewis said: “Capita has underinvested in the business and there has been too much emphasis on acquisitions to drive growth. As our markets have evolved, the group has not responded. Today, Capita is too complex, it is driven by a short-term focus and lacks operational discipline and financial flexibility.”

Capita’s decision to suspend its dividend payments so promptly stands in contrast to Carillion, however, which has come under fire for continuing to reward shareholders even when it was in financial difficulties.

Capita said today that although trading in its 2017 financial year had been in line with its expectations profits before tax in 2018 were now likely to come in between £270 million and £300 million.

Before today’s warning, analysts had pencilled in profits for 2018 of about £400 million.

The company said that it would be raising cash through a rights issue this year. It said that the precise amount it needed to raise was not yet clear but that it had agreed a standby underwriting facility with banks for up to £700 million. When banks underwrite a capital raising it means they guarantee that the money will come in even if it means they have to buy up unwanted shares.

Mr Lewis said: “An immediate priority is to strengthen the balance sheet through a combination of cost savings, non-core disposals and new equity. My initial review of our cost base highlights that over the next few years there is significant scope for cost efficiencies but also the need to spend more where there has been underinvestment.

“We have identified a small number of quality business that do not fit with our core skills for which there will be better owners and a process to maximise value will commence shortly.”

Among the businesses Capita plans to offload are Parkingeye, a car park management company, and Constructionline, a register for contractors and consultants in the UK.

Capita forecast that its net debt at the end of 2017 would be around £1.15 billion and that it would aim to reduce its gearing.

The company is also in the process of a review of its pension scheme. Capita currently expects that the deficit in the scheme will be below the most recently disclosed figure of £381 million.