February 27, 2014 / 9:26 AM / in 4 years

UPDATE 1-Capita sees buoyant outsourcing market in 2014

(Adds CEO comments, background)

By Li-mei Hoang

LONDON, Feb 27 (Reuters) - British outsourcing company Capita posted a 14 percent rise in annual profits on Thursday and said it was confident about its prospects in 2014 after winning 588 million pounds ($978.3 million) worth of new contracts so far this year.

Capita, which runs services ranging from the Ministry of Defence pension scheme to police radio systems, has avoided recent scandals over the private provision of public services that have damaged rivals such as G4S and Serco.

“We’re seeing a pretty buoyant market place across our key markets, particularly some of the private sector markets that we are focusing in, such as utilities and telecoms,” Deputy Chief Executive Andy Parker told Reuters.

“The pipeline in the public sector still remains strong particularly in the justice arena and local government - although we would probably expect that to be more a second half opportunity and financial services is picking up again for us,” he said.

Shares in Capita were up more than 3 percent at 0809 GMT, making it the biggest gainer on the FTSE 100 index.

Capita and other outsourcing companies face constant scrutiny over the quality of the services they provide to government and the public. A fiasco over the tagging of criminals led last year to a government review of contracts held by support service companies.

But Capita said it had made a strong start to 2014, highlighting new contract wins with Transport for London to deliver road congestion charging and traffic enforcement.

“We would expect a good flow of new deals coming to market out of central government ... and we would probably see a number of those this year,” said Parker, who will take over the role of CEO from Paul Pindar on March 1.

He did not say whether the troubles of Capita’s rivals were helping it secure more contracts.

Capita said revenue grew 8 percent on an organic basis last year, in line with expectations.

Profit before tax rose 14 percent to 475 million pounds from 215 million pounds in 2012, beating an average estimate of 447.67 million in a Thomson Reuters poll of 20 analysts.

Numis analyst Mike Murphy said the company’s prospects for the coming year were positive.

“The bid pipeline has risen to an impressive 5.5 billion pounds, implying an underlying 50 percent increase which bodes well for growth,” he said. ($1 = 0.6011 British Pounds) (Editing by Tom Pfeiffer)

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