Capita Cautions Of Short-Term Growth But Still Upbeat

22nd Jul 2010 07:24

By Anita Likus Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Capita Group PLC (CPI.LN), the U.K.'s largest provider of business services, on Thursday reported a 15% increase in first-half underlying pretax profit and said that it is well placed to continue growing, but cautioned that public spending pressures could impact growth in the short term. "Whilst the current pressures on public spending may potentially affect growth in the short term in a small number of our trading activities, the need for our public sector clients to achieve substantial cost efficiencies offers significant opportunities for the group going forwards,". said Chief Executive Paul Pindar in a statement. He said, "There is buoyant demand for outsourcing across both the private and public sectors, with the most active markets in our strong bid pipeline remaining local government and life and pensions." The company, which provides outsourcing operations to central and local government, the financial services industry and corporations, reported a bid pipeline to June 30 of GBP4.4 billion, up from GBP3.7 billion in February. However, major contract wins and renewals fell to GBP523 million from GBP814 million in the same period last year. The company has so far been resilient in the recession, with strong demand for its services as businesses and governments increasingly turned to outsourcing to cut costs. But while outsourcing companies look like they have escaped any impact from the U.K. government's plan to cut public spending by GBP6.2 billion, the relief might be short lived. Capita reported pretax profit for the first half ended June 30 of GBP163.1 million, up from GBP141.7 million in the same period a year ago. Revenue rose 4% to GBP1.36 billion. The profit excludes intangible amortization and acquisition costs of GBP18.2 million as well as non-cash impact of movements of financial instruments. Operating margin increased to 13.1% from 12.2%. It has declared an 18% rise in first-half dividend to 6.6 pence. Capita shares closed Wednesday at 710 pence, giving the company market capitalization of GBP4.37 billion. The stock has fallen 12% in value in the past three months on fears that U.K. government savings to tackle the deficit will hit the company. -By Anita Likus, Dow Jones Newswires; +44 20 7842 9407; [email protected] (END) Dow Jones Newswires July 22, 2010 02:24 ET (06:24 GMT)