Capita's pipeline 'buoyant'

22nd Jul 2010 07:03

Outsourcing giant Capita said pressures on public spending may affect growth in the short term but it is confident its ability to deliver cost efficiencies will stand it in good stead."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," said Paul Pindar, chief executive of Capita, which provides services such as administering the TV license system.The company had a good first half to 2010, beating market expectations with underlying pre-tax profit of £163.1m, up from £141.7m the year before. Broker Charles Stanley had forecast profit of £155m and only modest organic turnover growth.Turnover rose 4% to £1,361m from £1,311m a year earlier despite major contract wins and renewals being lower in the first half of 2010 at £523m, versus £814m the year before.The bid pipeline stood at £4.4bn, up from £3.7bn at the end of June 2009. The bid pipeline is currently made up of 23 bids with an average contract duration of 8 years.Operating margin (before amortisation) was 13.1%, up from 12.2% at the interim stage in 2009. Cash flow remained strong and continues to provide the wherewithal for the company's acquisition strategy. Underlying free cash flow increased by 15% to £140m (2009: £122m)."Our pipeline of sales prospects, forward visibility of revenues from our long term contracts and consistent operational performance position us well for further progress in 2010 and thereafter," Pindar maintained.Capita has won 17 new contracts and extensions to date with an aggregate value of £523m, including an agreement to provide IT services to Harrow Council and an arrangement to provide services for broadband to Nottinghamshire County Council.It hopes to continue targeting the public sector and thinks that it can help the government achieve its aim to cut costs by a quarter in government departments. The interim dividend has been increased by 18% to 6.6p from 5.6p.