Capita to form joint venture with UK Cabinet Office

FTSE 100-listed business process management provider Capita will form a joint venture company with the UK Cabinet Office to commercialise the government's portfolio of best management practice training tools.

The UK government currently has a proprietary portfolio of best management practice training tools, including PRINCE2 - a project management methodology - and ITIL - an approach to IT service management.

Capita said that the products were widely used in the public sector and increasingly used across private sector organisations and internationally, with revenues being generated through royalties from training materials and fees from accredited training, examination and certification organisations.

Through the business partnership, Capita and the Cabinet Office have established a 51%/49% joint venture organisation that will own the intellectual property of this portfolio of products and assume the management and support of the accredited service organisations.

Capita is paying the Cabinet Office an upfront cash payment of £10m and three deferred cash payments of £9.4m over the first three years for a 51% shareholding in the joint venture, which will own in perpetuity the intellectual property of the portfolio of products.

The group said that it anticipated that the joint venture would triple the current revenues of approximately £40m per annum by year 10, through further commercialising and developing the product portfolio in existing and new markets, and generate healthy margins.

Paul Pindar, Chief Executive Officer of Capita, stated: "We are thrilled to be selected as a partner in this innovative business model that uniquely combines assets and capabilities from the government, Capita, current employees and the ecosystem of the existing and new SME service providers."

"The commercial,technical and innovation skills that we bring to the JV will help to create a thriving business capable of delivering real value to all parties and releasing a secure and growing income to the government."

He added that the commercial success of the joint venture would not only be shared by the joint shareholders, but also the employees, who would share a performance bonus pot of 5.0% of the joint venture's pre-tax profits.

Francis Maude, Minister for the Cabinet Office said: "The state is littered with potential businesses which could be bringing in revenue, creating jobs and driving economic growth. We are committed to getting Britain ahead in the global race, which is why we want to exploit these hidden gems and use the profits to protect our frontline public services."

Capita's share price was up 1.86% to 878.50p at 08:12 on Friday.

MF