Capita delivers 3% organic growth in FY12

UK BPS market leader Capita met its targets for 3% organic growth in FY12, reversing the 7% organic decline it notched up last year. Headline revenue for the twelve months to 31 December was up 14% to £3.35bn, driven by the acquisition of 14 companies over the year (see here and work back).

Growth has however come at the expense of profits. After taking into account amortization, impairment and other costs, operating profits fell 4.1% to £340.9m, pushing Capita’s margin down almost 2 percentage points to 10.2% vs. 12.1% in FY11. Underlying operating profits, which exclude the nasty bits, were nonetheless up 10% to £471.7m.

As we pointed out back in November, Capita has been showing good signs of recovery after a couple of difficult years (see Capita on track thanks to buoyant BPS business). It actually achieved record contract wins totalling £4bn for the year, double that in FY11 – helped of course by its largest ever contract with Staffordshire County Council (see Staffordshire £1.7bn megadeal Capita’s largest ever). Particularly encouraging is that 90% of these wins are new contracts so will contribute to Capita’s organic growth going forwards. Capita also announced it had won a two-year extension to its Civil Service training contract won last February, taking it through to 2016 (see Capita wins £100m Civil Service training contract).

Interestingly, Capita has now changed the criteria of its bid pipeline. This means it now counts all bids worth between £25m and £1bn vs. those between £10m and £500m previously. This has helped it to show a further increase in its pipeline to £5.2bn at the year end. Under the old criteria it would have counted £4.8bn. Either way the pipeline has grown in real terms, up from £4bn in November.

Not everything is going swimmingly though (see Capita on track, but problem areas still need addressing). Property services, parts of IT services and general insurance are all struggling (see Capita acquiring Northgate MS puts spotlight back on ITS). Capita also lost a flagship central government deal to TCS of course(see here). General insurance was singled out as having 'a poor year' with lower revenue and profits. Capita has now strengthened both the leadership and sales team to ‘reinvigorate’ these operations. However as we point out in our soon to be published report into general insurance BPS, Capita’s problems lie deeper than that, and it is losing market share to nimbler rivals The Innovation Group and Quindell Portfolio (see TIG Q1 in line and Quindell converts all pilots to outsourcing contracts).

We will have plenty more to say later for TechMarketView subscribers in UKHotViewsExtra.