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Capita Sees ‘Buoyant’ 2014 on Rising U.K. Demand for Services

Capita Plc rose the most in nine months after the provider of services to companies such as Telefonica SA’s O2 division in the U.K. forecast “buoyant” sales as technology and property businesses respond to an economic recovery.

Capita had a “strong start” to 2014 with new contract wins of 588 million pounds ($978 million), the London-based company said in a statement today. Revenue from information technology businesses is gaining for the first time in several years, while new sales in property services are “probably 20 percent higher than they were this time last year,” incoming Chief Executive Officer Andy Parker said in an interview.

“There are clear signs the economy is picking up,” said Parker, who takes over after Paul Pindar leaves tomorrow. “In our business, we’re seeing probably more than green shoots” of recovery.

Trade, investment and consumer spending led the U.K. economy to a fourth straight quarter of growth at the end of 2013, suggesting the rebalancing sought by Chancellor of the Exchequer George Osborne is under way. Gross domestic product rose 2.7 percent in the fourth quarter from a year earlier, the most in almost six years, the Office for National Statistics said yesterday.

Capita shares rose as much as 6 percent, the biggest intraday gain since May. The stock traded 5.4 percent higher at 1,144 pence at 1:06 p.m. in London, the highest price since at least 1989.

Securing Growth

Capita, which makes about 95 percent of revenue in the U.K., has 5.5 billion-pounds in outstanding contract bids, it said today. New contract wins so far mean the company has already secured about 7 percent organic sales growth for 2014, Chief Financial Officer Gordon Hurst said in an interview.

“We have excellent revenue visibility and the ingredients in place to deliver continued strong growth in 2014,” Parker said in the statement. “The U.K. market for customer- and business-process management remains very encouraging.”

Capita secured its largest-ever contract by annual value last year with Telefonica’s O2, worth 1.2 billion pounds over 10 years. The company, which also provides outsourcing services to government bodies including the U.K. Justice Ministry, took over prisoner tagging work lost by G4S Plc and Serco Group Plc. Capita has about 64,000 workers at more than 350 sites.

New business includes a five-year contract to operate traffic ticketing systems in London, and work on a network for public service organizations in Scotland.

This year, the company is hoping to win U.K. probation services contracts as the government seeks to outsource more of the work. “It’s a buoyant market at the moment,” Parker said.

Underlying revenue grew 15 percent in 2013 from a year earlier to 3.85 billion pounds.

Pindar is stepping down as CEO after 26 years at the company. He is leaving Capita to “establish a portfolio of private equity opportunities,” the company said on Nov. 18.

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