By Li-mei Hoang
LONDON (Reuters) - Britain's Capita (L:CPI) expects a buoyant outsourcing market to keep the company on track to hit its full-year revenue target, it said after announcing a 16 percent rise in first-half profit.
The company is targeting organic revenue growth of 8 percent, two thirds of which it expects to come from existing businesses and the remainder from acquisitions. The concensus forecast in a Thomson Reuters poll of 15 analysts was for full-year revenue of 4.33 billion pounds, which would represent a 12.5 percent increase on the company's 2013 revenue.
"We are confident it's going to be at least 8 percent," Chief Executive Andy Parker told Reuters after Wednesday's results announcement sent the company's shares nearly 4 percent higher, making Capita the biggest gainer on the blue-chip FTSE 100 index <.FTSE>.
Parker, who took over from industry veteran Paul Pindar in March, said Capita had achieved strong trading since the second half of 2012 and that the outlook remains buoyant after its 1.3 billion pounds of major contract wins in the first half of this year.
Capita, one of the sector's market leaders in Britain, has benefited as central and local government and private sector companies have outsourced work to cut costs in the face of tighter budgets. It has also avoided the scandals over the private provision of public services that have damaged rivals G4S (L:GFS) and Serco (L:SRP).
Founded 30 years ago, the company has grown rapidly over the past 15 years from a local authority contractor that now operates in 11 different markets across Britain.
Pretax profit rose 16 percent to 238 million pounds in the first half and the group's bid pipeline - representing potential orders from new business pitches - stood at a record 5.7 billion pounds.
PITCH WIN RATE
Capita said its pipeline typically reflects the health of the outsourcing market and can be a useful indicator of its potential growth. The company's win rate on big pitches during the first half of the year was above 66 percent.
The company has also spent 240 million pounds on acquisitions this year and Parker said it could spend an additional 100 million pounds if the right opportunities arise.
"I think the maximum for the rest of the year would be up to another 100 million pounds ... If a really good opportunity came, then we'd look at it, we'll assess it, we'd make a decision then. Probably top end, we might get to 350 million," he said.
Capita recently completed a small acquisition in Germany as a first step to expand beyond its domestic market, which accounts for 96 percent of its revenue.
Parker told Reuters in a interview on Friday that the company is considering expanding a customer management business in Germany after speaking to existing customers with German parents, such as energy group RWE (DE:RWEG).
"A number of our customers have a German link and its partly a very small acquisition ... to give us a base, to see if we can extend our market reach into that German customer management business and customer management market," Parker said on Wednesday.
Wednesday's results were welcomed by Whitman Howard analyst Stephen Rawlinson, who said: "Half-year numbers released this morning show a great start to Andy Parker's reign as CEO.
"Revenue is up 13.9 percent to 2.1 billion pounds, 11 percent organic growth we are told, and the margins are a tad higher with operating profit up 14.7 percent to 260 million.
"We turned buyers on Capita six months ago and have no reason to alter that view."
(Editing by David Goodman)