Capita – matching the words with the music

Sometimes it’s a little tricky to match the words with the music in Capita CEO Paul Pindar’s results commentary. In particular, his reference to “organic growth returning as expected” rather jars with the fact that there was no organic growth in H1 – but on the other hand this is an improvement on prior declines (see Capita ‘ups and downs’ in 2011).

The headline story for the UK BPO market leader is a mixed bag. Revenues up by 15% (all through acquisition) to £1.61b, but operating margins lost nearly a point to sit at 10.5%. Nonetheless, Capita kept EPS moving in the right direction, up 5% to 18.6p, and Pindar is “confident “ on full year performance.

Capita’s recently reconstituted IT services business (see Capita: a new force in UK IT services?) shared the profitability pain we expect to see in many UK/European players, with segment margin losing a full point to 9.1% as revenues rose by 10% to £318m. This margin is still better than that of many local players but it’s heading the wrong way! I don’t think management truly understand yet what it means to play in the UK IT services market outside of Capita’s BPO credentials. This will be a ‘character building experience’ for them, I am sure.

As always with Capita’s richly spread portfolio business, there’s a lot happening under the covers. Indeed this very richness of spread is what allows Pindar and his team to balance the troublesome bits against the great bits. So we will delve deeper and let eligible TechMarketView subscription service clients see more in due course.