Business outsourcing group Capita achieved a 'reasonable' level of revenue growth in 2011 and expects this to accelerate this year as the value of new and extended contracts more than doubled.
Shares rose strongly early on, trading 4.87% higher at 722p in the opening minutes on Thursday.
Turnover grew by 7% from £2,744m to £2,930m in the year ended December 31st, slightly ahead of Panmure Gordon's forecast of £2,900m. However, on an organic basis, revenues fell by 7% "due to the combination of these challenging trading conditions and due to an unusually high level of revenue attrition."
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Reported operating profit rose from £347.3m to £355.5m but was held back by "unusually" high restructuring costs (including redundancies) and the settlement of certain historic captive insurance claims. On an underlying basis, which excludes some items including intangible amortisation and acquisition expenses, operating profits increased by 8% from £395.1m to £427.4m. Reported profit before tax eased from £309.8m to £302.9m.
The underlying operating margin improved from 14.4% to 14.59%, ahead of Panmure's 14.54% estimate.
"2011 was a challenging year in which we achieved reasonable revenue growth and maintained our underlying operating margin. However, it was also a successful year for Capita in respect of major sales wins, with a record total value of £2.0bn new and extended contracts secured during the year (2010: £0.8bn)," according to Chief Executive Paul Pindar.
"We already have good visibility of stronger revenue growth this year due to renewed organic growth from our major contract sales performance in 2011 and to date in 2012 and the contribution from acquisitions," he said.
Nevertheless, the group said that its performance during the year was, like so many others, affected by the challenging economic environment and the austerity measures implemented by the government. "This adversely affected a number of our trading activities, including our property consultancy and parts of our IT and resourcing businesses, and also resulted in lower discretionary revenue being generated from existing clients."
The board is recommending a final dividend of 14.2p per share (2010: 13.4p) taking the total dividend up 7% from 20p to 21.4p.
BC
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