Outsource firm Capita warns on revenue

Outsourcing group Capita yesterday warned that spending pressure on cash-strapped clients meant it would only deliver “reasonable” 2011 revenue growth, undermining hopes for its longer-term prospects and sending its shares to a two-and-a-half-year low.

The firm, which administers the licence fee for the BBC and provides a criminal records service for the Home Office, said a decline in revenue generated from contracts would be offset by a 14 per cent contribution from acquisitions to leave expected full-year revenue growth at about 7 per cent. It also said a strong bid pipeline left it more positive for 2012.

Chief executive Paul Pindar said: “We are aware that 2011 has been a tough year. The sales that we win in 2011 will be the raw material for creating organic growth in 2012.

“We are expecting a flow of decisions all the way through to our results in February.”

But some analysts questioned the company’s prospects as outsourcing companies contend with a squeeze on public sector spending and delays to work. as customers work out how best to save money.

Analyst David Brockton at banking group Espirito Santo maintained his “sell” rating on the stock. “We continue to believe that timing [and the likely outcome] of these new wins remains uncertain and as acquisitive spend slows, these awards are increasingly required to meet 2012 expectation for a return to organic growth,” he said.