LONDON ) - Early contract wins and a buoyant sales market are making British outsourcing firm Capita confident of better growth prospects this year after a 6 percent profit rise for 2011 that was underpinned by acquisitions.
Capita, which runs contact centres and customer services for customers such as BBC TV licensing, The Pension Services and the Criminal Records Bureau, said underlying pretax profit for 2011 was 385.2 million pounds ($603.48 million), helped by a 341 million pounds spend on 21 firms to help support earnings in tough UK markets.
The firm won contracts totalling a record 2 billion pounds in 2011 but over half came in the form of less profitable renewals. This, coupled with government budget cuts, contract delays and increasing competition, saw organic revenues decline 7 percent. Group revenue rose 7 percent to 2.93 billion pounds.
The FTSE 100 listed group have started 2012 in different fashion, however, seeing off rival Serco as preferred bidder on a deal to run recruitment services for the British Army, and on Wednesday securing a contract to manage the provision of training across the Civil Service.
Going forward we've probably got increased grounds for optimism, Capita Chief Executive Paul Pindar told Reuters on Thursday, summing up 2011 as challenging.
In the first seven weeks of the year we have secured 5 major contracts with an aggregate value of 620 million pounds, so we sit here today already knowing that we will have a return to organic growth.
This visibility and the current buoyant sales environment, underpin our confidence in good growth prospects and performance for 2012 and beyond.
Shares in Capita, which raised its full-year dividend by 7 percent to 21.4 pence, were up 2.6 percent to 706.75 pence at 0946 GMT.
The tone of outlook is positive, the pipeline has been rapidly replenished, the contract win rate so far this year is good and the operating margin is higher than expected, JP Morgan Cazenove analysts wrote, adding that they expected Capita to rise on the back of it.
Pindar said he was quietly confident of hitting a city consensus of 3 percent organic growth in 2012 and added that it was more likely to return to it in the second half.
The consensus for overall revenue growth for 2012 is forecast at 12 percent, according to the firm.
Capita, which also manages over 23 million life, savings and pension policies, said its bid pipeline -- half of which is made up of central government and defence work -- now stands at 4.6 billion pounds, with around two-thirds likely to boost revenue this year if the company is successful in securing it.
Having splashed out record levels on acquisitions in 2011, the group said the expectation of more work this year meant it would reduce spending in 2012 to between 100 and 200 million pounds.
I think in the first year of government the coalition went for quick wins, doing a lot of obvious things around cutting out discretionary expenditure, which is partly what hurt us in 2011, they have done a lot around headcount controls and they have hit their financial targets, Pindar said.
In order to go further than hitting their financial targets they now need to do some more fundamental things and that's the reason we think there is an uptick in activity in our market.
Pindar added that the firm had not seen a material difference in margins in new work won despite analysts' austerity-led concerns that this might happen.
The group, which employs around 45,000 people, said its small financial services operation in Poland was operational and that it was considering adding infrastructure in South Africa as well this year. The firm said it was in discussions with a potential customer regarding the move.
(Editing by James Davey and Andrew Callus)