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Capita eyes Europe for growth

Outsourcer Capita won some big public sector contracts during the first half.
July 29, 2015

A series of acquisition-related costs, as well as a write-off of goodwill following the sale of some loss-making non-core businesses, depressed Capita's (CPI) pre-tax profits during the first half. Strip these out and underlying operating profit grew 11 per cent to £289m. The group's asset services and digital software and solutions division put in a particularly strong performance, helping boost organic revenue by 3 per cent.

IC TIP: Buy at 1257p

The outsourcing giant secured £1.6bn in new contracts during the first half, most notably as sole provider on the £1bn NHS England primary care support services framework, initially valued at £400m over the next seven to 10 years. Despite success in winning public sector contracts, management says around 55 per cent of the company's revenue comes from the private sector. The group added another £300m onto its bid pipeline, which stood at £5.4bn at the end of the first half.

During the period Capita spent £279m on 11 acquisitions, including customer contact management business avocis, which has bases in Germany, Austria and Switzerland. Following the acquisition the group formed Capita Europe, bringing its operations on the continent under one umbrella. This comes on top of a wider reorganisation of the outsourcer’s businesses, in part designed to drive cross-selling among its clients.

Broker Investec Securities expects adjusted EPS of 71.9p this year, up from 64.6p in 2014.

CAPITA (CPI)

ORD PRICE:1,257pMARKET VALUE:£8.4bn
TOUCH:1,256-1,257p12-MONTH HIGH:1,336pLOW: 1,001p
DIVIDEND YIELD:2.4%PE RATIO:36
NET ASSET VALUE:119p*NET DEBT:194%

Half-year to 30 JunTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20142.0715218.609.60
20152.2914617.6910.50
% change+11-4-5+9

Ex-div:22 Oct

Payment:30 Nov

*includes intangible assets of £2.8bn, or 427p a share