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Capita Group PLC (CPI)

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Thursday 18 November, 2010

Capita Group PLC

Interim Management Statement


18 November 2010

              THE CAPITA GROUP PLC - INTERIM MANAGEMENT STATEMENT              

The Capita Group Plc ("Capita"), the UK's leading business process outsourcing
("BPO") and professional services company, is today issuing its interim
management statement covering the 10 months to 31 October 2010 and progress to
date.

Update on performance and financial position

Capita has performed well in the second half of 2010. Overall trading remains
very solid even though revenue growth is subdued. The benefits of our focus on
implementing operational efficiencies across the Group, increasing scale and
Indian operations continue to drive forward our margins. We have maintained
strong cash generation, contained capital expenditure and retained an efficient
capital structure, with relatively low gearing. Our bid pipeline is at a record
level and our prospect list is very active, indicating that the market for
significant outsourcing opportunities across both private and public sectors is
buoyant.

We are pleased with the focus and progress of our operations teams who continue
to manage our businesses and contracts efficiently. There has also been good
progress in identifying and smoothly transferring certain business processes to
our Indian operations. Alongside this, acquisition activity has been strong in
the second half of the year and, with a good flow of future acquisition
opportunities, we expect our acquisition activity to remain high in 2011.

Capita has had constructive discussions with the Government regarding how we
can help to reduce operational costs and deliver savings across a number of our
current central government contracts. We have identified how services can be
scoped differently to deliver savings and signed a Memorandum of Understanding
in October with the Government to progress these initiatives. These savings are
not material to the Group's financial expectations.

At the half year, we indicated that pressures on public spending might
potentially affect growth in the short term in a small number of our trading
activities. This is now occurring and will subdue revenue growth in the second
half of the year more than previously anticipated.

Contracts and renewals - To date in 2010, new arrangements and extensions with
an aggregate value of £580m have been secured. Since our half year results, we
have been appointed by West Sussex County Council as the authority's IT
infrastructure partner. The 7 year contract, worth £56m initially, will provide
the Council with a high quality, flexible and sustainable IT service at
significantly lower cost.

We announce the size of our bid pipeline twice a year at our half and full year
results. This is a snapshot of bids, worth £10m or above, where we have been
shortlisted to the last 4 or fewer. Our bid pipeline stood at £4.4bn on 22 July
2010 with 23 opportunities. We face no material rebids (greater than 1% of
previous year's revenue) until 2012.

The opportunities to work with central and local government to deliver greater
cost efficiencies across public services through new outsourcing initiatives
are strong. The recent Comprehensive Spending Review, announced by the
Government in October, highlighted areas and government departments where
significant cost-savings must be achieved. The Government announced that it has
identified £6bn of savings across central government departments as
administration budgets are to be reduced by a third. We believe that
outsourcing will play a key role in delivering these savings objectives.

It was also announced that local government spending will be cut by 7.1% per
annum for the next four years. Local authorities have been under fiscal
pressure for some time and recognise the cost and service improvements
outsourcing can deliver. With our track record in local government, there will
be opportunities to strengthen our existing relationships and form further
strategic partnerships in order to deliver cost efficient services to local
communities.

The continuing financial and competitive pressures across the private sector
are also driving organisations to seek different service and operational
models. We are actively pursuing a number of opportunities notably in financial
services. In particular, we have a number of opportunities in the life and
pensions market where our operating model drives out benefits across both open
and closed books of policies. The changes in ownership and management teams in
this sector had previously slowed the bidding process of certain of these
opportunities, but there is now renewed progress across these bids.

Acquisitions - To date in 2010, we have acquired 9 businesses for a total
consideration of £149.5m. Since our half year results we have made two
acquisitions. National Dental Plan, one of the largest providers of corporate
dental plans in the UK, was acquired for £30m in August. The acquisition adds
further capabilities to our specialist insurance services business, extending
its range of tailored insurance services, including employee benefits schemes,
to both private and public sectors. FirstAssist Services Holdings Ltd, acquired
in September for £12.5m, provides skilled and time-critical telephone advice
and assistance services to the customers and employees of a number of private
and public sector organisations. This acquisition adds further depth and
breadth of expertise to Capita's existing services for the health and workforce
management market. We expect to acquire further businesses before the end of
the year that take us into complementary areas and add expertise and value to
the Group.

Share buybacks: Opportunistic share buybacks help us to maintain an efficient
capital structure and minimise our long term cost of capital. To date in 2010,
the Group has bought back 14.4 million shares (representing 2.3% of the issued
share capital) at an average price of 757.19p per share. Following these
buybacks the Company holds 13,817,448 shares in Treasury and has 613,660,247
shares in issue (excluding shares held in Treasury and the Capita Employee
Benefit Trust). We will continue to buy back shares if opportunities arise and
market conditions allow.

Outlook

We expect turnover growth for 2010 to be modest due to the unusually high
degree of revenue attrition in the year, fewer sales decisions to date in the
second half of this year and the short term impact of current public sector
retrenchment on some of our trading businesses. However, we see the benefits of
the operational efficiencies we have implemented, our increasing scale and our
Indian operations continuing to drive forward our margins for the year.

Whilst short term pressures on growth will remain and continue into the first
half of 2011, the current strength of our bid pipeline and prospect list lead
us to believe that the pressures of the current economic climate (on public and
private sector organisations) will generate a strong flow of outsourcing
opportunities for Capita during 2011 and beyond. This encouraging level of
sales activity, strong forward visibility of revenues and consistent
operational performance position us well for good progress in 2011 and
thereafter.

                                    -ends-                                     

Conference Call:

Paul Pindar, Chief Executive of The Capita Group Plc, will host a conference
call for investors and analysts at 8.30am today. Please dial into the call in
time to allow for registration.

  * Details of the conference call are: dial-in number: +44 (0) 1296 480 180,
    passcode 956830#.
   
  * A replay of the call will be available from midnight today until 2 December
    2010: dial-in number: +44 (0) 207 136 9233, passcode 15272429.
   
For further information please contact:

Paul Pindar, Chief Executive
Shona Nichols, Corporate Communications Director
Tel: 020 7799 1525

Media enquiries:

Caroline Mooney
Capita press office
Tel: 0207 654 2152 or 020 7654 2399 (out of hours)

Nick Hasell
Financial Dynamics
Tel: 020 7269 7191

Notes to editors:

The Capita Group Plc is the UK's leading provider of BPO and integrated
professional support service solutions. With 36,800 people at more than 250
sites, including 60 business centres across the UK, Ireland, the Channel
Islands and India, the Group uses its expertise, infrastructure and scale
benefits to transform its clients' services, driving down costs and adding
value. Capita is quoted on the London Stock Exchange (CPI.L), and is a
constituent of the FTSE100 with revenues for 2009 of £2,687 million.

Further information on The Capita Group Plc can be found at: 

http://www.capita.co.uk