Capita warns of pressure on margins despite strong 2012

City A.M. Reporter
BRITAIN’S largest outsourcing firm Capita yesterday warned of pressure on margins this year after the company reported a rise in full year profits and a return to organic sales growth.

The company, which earns 47 per cent of its revenue from the public sector, produced a 10 per cent rise in underlying pre-tax profit to £425.6m, slightly ahead of expectations of £413.4m in a poll of 20 analysts.

But margins dipped to 14.07 per cent from 14.59 per cent and Capita said that it expected a further fall in 2013 to levels seen before 2010 and 2011.

Chief executive Paul Pindar said this was because of start-up costs associated with the high level of new contracts won and not the result of increased competition in bids.

“I would accept that our margins are higher than others in the industry but personally I feel that they are very defendable,” he said.

The group, which runs a range of contracts from back office IT to front line disability assessments, returned to organic revenue growth of three per cent, up from a seven per cent shrinkage last year. Pindar said Capita was set to more than double that next year.

Capita said that the big opportunities lay in defence, health and justice as departments were under pressure to reduce budgets while maintaining frontline services.

It is currently bidding on a record £5.2bn worth of contracts and has signed more than £3bn of new deals in the last four months.