Capita feasting on public sector business

Outsourcing behemoth Capita is confident of growing revenue this year and beyond as it takes advantage of a buoyant outsourcing market in the UK public sector.

Revenue in the first half of 2012 came in at £1,607m, up 15% from £1,400m in the first half of 2011.

Underlying profit before tax rose by a tenth to £190.7m from £174.0m the year before, but once one-off items are factored in, profit growth was more pedestrian, with reported profit before tax climbing to £143.8m from £141.4m the year before.

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Underlying figures exclude intangible amortisation and acquisition expenses of £47.4m, up from £33.8m in the first half of 2011.

Underlying earnings per share rose 10% to 24.19p from 21.95p last year, paving the way for a 10% increase in the interim dividend to 7.9p from 7.2p.

The market for outsourcing remains buoyant, particularly across the UK public sector where the group is seeing a high level of sales activity. During the first half of 2012, Capita secured major long term contracts totalling £1.3bn (up from £1.1bn of contract wins in the corresponding period of 2011), of which 74% related to new contract wins and 26% to contract renewals, maintaining an average win rate of one in two.

The all important bid pipeline is down to £4.1bn, however, from £4.6bn back in February.

The group said most of its business units are trading well but there are three flies in the ointment: property consultancy; some parts of Capita's information technology services offerings; some parts of Capita's insurance services businesses.

The group's underlying operating margin declined to 13.5% from 13.8% in the first half of 2011, but Capita said this was due to the assimilation of certain new large contracts and acquisitions, with their expected initial transformation and integration costs.

"With organic growth returning as expected, cash conversion improving and a good pipeline of potential acquisitions, Capita is positioned well for further growth," Chief Executive Paul Pindar claimed.

"As a result of stronger major contract sales performance over the past 18 months, together with the contribution from recent acquisitions, we have clear visibility of revenue growth in 2012. These factors, coupled with the current buoyant sales environment, underpin our confidence in full year performance and provide a strong platform for further progression in 2013," Pindar added.

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