Capita PLC Boasts £2bn Secured Deals, Lifts Dividend 10% To Yield 2.4%

Profits and revenues grow at Capita PLC (LON:CPI) in first-half of 2013, but margins slip.

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The shares of Capita (LSE: CPI) dropped 3% to 1,007p during early London trade this morning despite the FTSE 100 outsourcer announcing strong growth in half-yearly sales and reported profits.

Capita, which outsources back-office business tasks for large corporations, announced it had secured £2bn of new business in the first half of 2013. That’s a further £1.3bn of new deals to add to the ones already confirmed by the company in May.

The group’s revenues surged by 13% to reach £1.8bn for the period, while underlying profits grew more narrowly by 6% to £229m. This meant that Capita’s operating margins slid to 12.5% for the period, weighed down by start-up costs for its new contracts, and the expenses to integrate its latest acquisitions.

Looking on the bright side, Capita CEO Paul Pindar remarked:

“The return of strong organic growth, improved cash conversion, a replenished bid pipeline and a good pipeline of potential acquisitions, underpin our confidence in full year performance and provide a strong platform for further progress in 2014 and beyond.”

Underpinning the results, Capita announced it would lift its interim dividend by 10% to 8.7p per share. That means that based on the current price, Capita’s shares offer a trailing yield of 2.4%.

Of course, whether that dividend yield, today’s results and the wider prospects for the outsourcing industry all combine to make shares of Capita a ‘buy’ remains your decision.

As investors in Capita will know, high-growth investment opportunities can provide excellent returns for smart investors, at the right price. These sorts of opportunities can be hard to identify ahead of time, but our team of top analysts believe they’ve uncovered an alternative candidate.

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> Mark does not own shares in Capita.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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