Capita, the debt-laden outsourcing company behind the London congestion charge and the BBC licence fee, has been forced into a £701m cash call to shore up its finances.

Less than four months after the collapse of Carillion raised concerns over the health of the British outsourcing sector, Capita flagged further distress by announcing a £513m loss for last year and a heavily discounted rights issue. The company is issuing 1bn new shares at 70p, compared with a share price of 181p at close of trading on Monday.

The company’s new chief executive, Jonathan Lewis, who took over in December, dismissed comparisons with Carillion, which went bust in January with only £29m in the bank after it was brought down by hospital and road-building projects.

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

Capita said proceeds from the rights issue – £662m once fees to advisers are deducted – would be used to pay down a £1.1bn debt burden, invest in technology and fund its turnaround plan.

The company also announced its annual loss had ballooned from £90m in 2016, owing to restructuring costs, write-offs and problems with several contracts.

According to Tim Wainwright, industrial products sector leader at the global accountancy firm EY, outsourcers have been squeezed by the need to provide services ever more cheaply, even as their costs have risen.

Capita’s shares slumped in January when it issued a profit warning, cancelled its dividend and said it would need to tap investors for cash. News of the fundraising sent the shares 13% higher on Monday but they are still down by more than two-thirds over the past year.

Key investors Investec and Woodford, run by the star investment manager Neil Woodford, who together own nearly a fifth of Capita, are backing the cash call.

Capita, which employs 70,000 people around the world, reiterated that it expected to make underlying pre-tax profits, excluding restructuring costs, of £270m to £300m this year. It said its trading in the first quarter was consistent with this guidance, which included £70m of cost savings for the first time.

Lewis said: “Today we have announced a new strategy to simplify and strengthen Capita. The rights issue is a key component of this new strategy. There is a lot to do but I am confident that the plan is clear and prudent.”

Capita is narrowing its focus from 40 sectors to five, looking to raise £300m from selling off non-core businesses this year, and is targeting £175m of cost savings by the end of 2020. Lewis aims to simplify and unify an unwieldy structure in which more than 250 different business units have operated separately.

He said his reshaped Capita would focus on five divisions: software, HR, customer management, government and IT services – the areas where long-term profitable growth is available in the outsourcing sector.

The company said it had been hit by cost overruns on a contract to provide NHS England’s primary care support services, penalties and extra costs related to the Transport for London congestion charge contract and contractual disputes in relation to its mortgage servicing deal with the Co-operative Bank.

In recent years, Capita has developed software for some clients that could not be used elsewhere, often became obsolete quickly and led to write-offs.

City analysts gave the new strategy a cautious welcome. Andrew Gibb at RBC said: “All the strategic commentary looks sensible – namely changing divisional structure again and focusing on areas with competitive advantage.

“As trading [is] no worse than feared and rights [issue is] underwritten, there is some relief. However, a very complicated and costly transformation plan needs to be executed in market conditions that will remain tough.”

Michael Hewson, the chief market analyst at the spreadbetting firm CMC Markets UK, said: “Only last week the company renewed its contract with the BBC to collect the licence fee, so while this week’s loss doesn’t make for pleasant reading, the announcement does appear to suggest that management have a turnaround plan that might work, and the confidence of shareholders in pulling it off.”