UPDATE 2-Britain's Capita to raise cash after cutting profit forecasts

* Shares down 32 pct after cutting dividend

* Announces rights issue

* Group cuts 2018 profit forecast by around 30 percent (Adds background, details)

LONDON, Jan 31 (Reuters) - British outsourcing group Capita said it would raise cash through a rights issue, cut the dividend, sell assets and plug a hole in its pension after a slowdown in trading forced it to cut profit forecasts again, hammering its shares.

Just two weeks after rival Carillion collapsed under a weight of debt, Capita said it needed to restructure and retrench after lowering its 2018 profit by 30 percent, or around 120 million pounds, only 7 weeks after the company had reiterated it.

Capita's shares were down more than 32 percent by 0813 GMT.

Employing 73,000 people to provide professional services and IT to public and private sector customers, Capita started to struggle in 2016 when it admitted taking on more work than it could profitably handle.

Its problems intensified after a slowdown in business decision-making after Britain's vote to leave the European Union in June 2016, and the group said on Wednesday it had seen a further deterioration in decision making since December.

The 34-year-old group said it would seek to raise around 700 million pounds ($993 million) through a rights issue and would suspend its dividend and sell some assets to enable it to invest in the business and reduce debt and improve its pension deficit.

"Capita needs to change its approach," said Jonathan Lewis, the company's new chief executive who took over in December after Capita issued several profit warnings last year.

"An immediate priority is to strengthen the balance sheet through a combination of cost savings, non-core disposals and new equity."

Capita said underlying pretax profit, before significant new contracts and restructuring costs, were expected to be between 270 million and 300 million pounds ($426 million), compared with analysts' average forecast of 406 million pounds, according to Reuters data.

Lewis said Capita, which operates primarily in Britain and is one of the country's biggest employers, was spread across too many markets and services.

The news is likely to send shivers through a sector still reeling from the collapse of Carillion, an outsourcing and construction group which went into liquidation earlier this month after its banks pulled the plug.

Like Carillion, Capita provides vital services in Britain from supporting Transport for London, the National Health Service and a raft of private companies.

Capita forecast net debt at the 2017 year-end to be in the region of 1.15 billion pounds. It said the dividend would be suspended until the company generated sustainable free cash flow.

The firm is also undertaking a triennial review of its pension scheme. Its current expectation is that the actuarial deficit after this review will be significantly below the last disclosed deficit of 381 million pounds as at June 30 2017.

"We will seek to reduce the remaining deficit as a priority," it said. ($1 = 0.7051 pounds) (Reporting by Kate Holton, editing by James Davey and Jane Merriman)