Outsourcing giant Capita has reported a 10% rise in profits and a record pipeline of contract bids as it predicted that Government austerity measures will serve to increase demand for its services.
Capita, which manages TV licensing for the BBC and provides a criminal records service for the Home Office, said it performed well in 2010 in a challenging environment which saw its customers delay major decisions about contracts amid cuts in spending.
Despite the squeeze, the group’s profit margins increased as it moved more of its work to India as part of efficiency savings.
Shares rose 8% after it announced that turnover increased by 2% to £2.7 billion and underlying operating profits lifted 10% to £395.1 million in 2010.
Capita is a diverse business whose expertise spans IT services for local government and the education sector, property consulting and human resources.
Although major contract wins and renewals reduced by 20% to £795 million amid the financial squeeze, the group has a record £4.7 billion of contract bids in place and secured £244 million of work in the first seven weeks of 2011.
Chief executive Paul Pindar said: “We enter 2011 with a record bid pipeline, increasing activity across the public and private sectors and some encouraging new contract wins.
“The need for our public sector clients to achieve substantial cost savings and for private sector clients to increase their efficiency to remain competitive offers significant opportunities for the group going forward.”
Caroline de La Soujeole, an analyst at Seymour Pierce, said: “We are increasingly confident that we will see a turnaround in Capita’s fortunes in 2011, with public sector outsourcing activity reported to be accelerating.”
She added that a 19% increase in the dividend sent “a clear message that the good times will continue to roll”.
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