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.
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> Mark does not own shares in Capita.