* Outsourcing sector now facing greater scrutiny
* Pindar to be replaced by Deputy Chief Executive Parker
* Capita seen on track for 8 percent revenue growth
By Christine Murray
LONDON, Nov 18 Capita's veteran boss
Paul Pindar, who built a small IT consultancy into Britain's
largest outsourcing group, is to step down after 26 years with
the company, walking away from a sector facing greater scrutiny
for being too reliant on a few major firms.
Pindar, 54, a trained accountant who leaves the firm ten
times larger by revenue than when he took command in 1999, will
be replaced by Deputy Chief Executive Andy Parker on March 1,
He leaves the group in a strong position, on track for 8
percent organic revenue growth in 2013 and with a good
relationship with Britain's government, from which it gets 15
percent of its revenue.
"Paul has been instrumental to the success that Capita has
achieved and therefore his departure is a disappointment," said
Liberum Capital analyst David Brockton. "I would be very
surprised if this was a board decision, this will be Paul's own
decision to leave."
Among countless contracts, Capita evaluates whether
disability claimants deserve benefits, runs the pension scheme
for the Ministry of Defence, provides radios for police forces
and designed tunnel portals for London's Crossrail trains.
Importantly, Capita has been spared scandals which have hit
some of its big rivals, such as Serco and G4S.
But it could still face a more difficult future as scepticism
grows about the role of a small number of giant contractors in
providing public services.
Last week, a government auditor's review of Britain's use of
big companies to run services ranging from prisons to hospitals
raised questions about whether the rise of a few major
contractors was in the public interest.
Thanks to its rapid expansion, Capita is woven into just
about every facet of life in Britain, where it earns 96 percent
of its revenue.
Pindar told Reuters in an interview in April that he joined
Capita two years before it listed on the USM in 1989, a
precursor to today's AIM market, valued at 4 million pounds,
with shares worth just 3 pence.
At that time it was primarily a consulting business,
providing advice to central and local government, but it soon
morphed from being advisers to what Pindar calls "doers".
Using its vast infrastructure, including offshore centres in
India, Poland and South Africa, the firm says it is able to run
services from property to payroll cheaper than they were before.
Shares in Capita, which has its head office in London's
Whitehall district amongst government departments, are nearly
six times higher than when Pindar took over in 1999.
Although conceived under former Prime Minister Margaret
Thatcher's watch, Capita's share price multiplied more than ten
fold under Tony Blair's New Labour government. It had revenues
in 2012 of 3.4 billion pounds.
Thanks to Pindar the firm is now much less reliant on the
public sector, earning half its revenue from private firms such
as Telefonica's O2, which will pay Capita 1.2 billion
pounds over the next ten years to run its call centres.
"I'd like to say to you that it was part of a grand strategy
but the reality is it's not," Pindar, who is moving to private
equity, said in the interview earlier this year.
Pindar's replacement, Andy Parker, joined the group in 2001
and was appointed to the board as joint chief operating officer
in January 2011.
"Andy has been identified as the stand out candidate for our
new chief executive for some time," Chairman Martin Bolland told
analysts on a call.
Analysts said they did not expect to see immediate changes
in the group's strategy once Parker took over, though Caroline
de la Soujeole from Cantor Fitzgerald said the firm could
eventually look at expanding into continental Europe.
Shares in the group fell in early trading on Monday and were
down 0.8 percent, to give it a valuation of 6.4 billion pounds.
The upbeat trading update from Capita on Monday stands in
contrast to those recently issued by rival outsourcing companies
G4S and Serco, both accused of fraud by Britain's government
over a contract to monitor convicts with electronic tags.
In an interview with Reuters last week, the man running the
government review of G4S and Serco said that the state would
continue to contract out public services.
The industry received a vote of confidence on Monday as
Invesco, which owns 22 percent of Capita, raised its stake in
troubled rival Serco.
But public sector austerity, originally seen by analysts as
a great opportunity for outsourcing companies, has been less of
a boon to the sector than expected as it has increased scrutiny
of the previously low profile industry.
Along with executives from G4S, Serco and Atos,
Pindar will face a public grilling by a parliamentary committee
on Wednesday, with questions likely to focus on the lack of
competition and transparency in the sector.
"Whatever the government wants to do, you still have public
opinion that you have to contend with," analyst de La Soujeole