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Debenhams adds to Capita's record contract wins

IT services provider signed contracts worth £1.3 billion in total in the first half of 2012

Capita reported a record value of contract wins in the first half of 2012, with new contracts signed with retailer Debenhams and utility company Scottish Power.

In its financial results for the first six months of 2012, the IT services company said it won contracts worth £1.3 billion in total, up from £1.1 billion the same time last year.

The value represents 24 new and extended major contracts, with public and private sector organisations. The majority (74 percent) were new contracts, while just over a quarter (26 percent) were contract renewals. Seventeen of the contracts were worth between £10 million and £50 million.

A full customer management service for Debenhams, Scottish Power and another major UK retailer made up Capita's three major private sector contracts, worth an aggregated £161 million over three to five years.

"Combining the expertise and infrastructure of Capita with the recently-acquired Ventura and Vertex Private Sector enables us to offer compelling customer management propositions and to identify and bid for large-scale opportunities. This would not previously have been possible as separate entities.

"Capita also has the scope to expand these customer management relationships by providing further services to this private sector client base. We expect to see a high level of activity in this area going forward," the company said in its results.

Public sector contracts Capita signed in the period included a military recruitment contract with the Ministry of Defence - which the company described as its first significant partnering contract in the defence sector. Capita will deliver the Recruiting Partnering Project (RPP) and the enabling ICT platform for the Army, Royal Navy and Royal Air Force as part of a 10-year, £50 million contract.

Another central government contract win was with the Cabinet Office, to provide training across the civil service. The contract, which began in April, is expected to generate revenues of £50 million for the company over two years, and also contribute to £90 million in annual savings that the government's training agency, Civil Service Learning, has been asked to deliver.

Meanwhile, in local government, Capita last month signed a back office outsourcing contract with West Sussex County Council, with work due to start in September.

"Our existing IT services contract [with West Sussex] that commenced in 2010 has also been extended concurrent with the new contract, bringing additional revenues of £18 million over an additional two years to 2022," Capita said in its results.

Capita recorded a 15 percent increase in revenue for the six months to 30 June, from £1.4 billion last year to £1.6 billion. Its pre-tax profit had also increased, by 10 percent, from £174 million to £190.7 million.

"As a result of stronger major contract sales performance over the past 18 months, together with the contribution from recent acquisitions, we have clear visibility of revenue growth in 2012," said Paul Pindar, chief executive of Capita.

TechMarketView analyst Anthony Miller, described the company's results as a "mixed bag".

"Revenues up by 15 percent, all through acquisition, to £1.6 billion, but operating margins lost nearly a point to sit at 10.5 percent. Nonetheless, Capita kept EPS [earnings per share] moving in the right direction, up five percent to 18.6p," he said.

Miller added: "Capita's recently reconstituted IT services business shared the profitability pain we expect to see in many UK and European players, with segment margin losing a full point to 9.1 percent as revenues rose by 10 percent to £318 million. This margin is still better than that of many local players, but it's heading the wrong way!

"I don't think management truly understand yet what it means to play in the UK IT services market outside of Capita's BPO [business process outsourcing] credentials. This will be a character-building experience for them, I am sure."


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