Capita continues on its 'Boring' way

My love affair with Capita continues unabated.

Results for the full year to 31st Dec 08 show the usual ‘Boring’ consistency that we have learnt to expect. See Capita FY PBT up 19% on strong outsourcing demand. The 22% increase in EPS represents the latest in an unbroken record of EPS growth stretching back to their IPO in 1989 (and probably beyond). Only one other quoted UK SITS company – Sage – has such an unblemished record and therefore a coveted Holway ‘Boring Award’. An incredible achievement. Other headlines show revenues up 19% to break £2b (£2.07b) for the first time with PBT up 19% at £238.4m.

On top of that the outlook looks equally rosy with “record contract wins” eg Resolution (£580m/12 yrs) and Prudential (£722m/15 yrs). Indeed today they also announced a £87m/8 yr contract with British Islamic Insurance Holdings. Capita’s forward order book is so strong and long that, as Pindar told me some time ago, the best way he could find of boosting profitability for the next few years was to stop selling! (Which, of course, he would never do)

Even our concerns about a lack of offshore capability has been partially addressed as the Pru contract has doubled Capita’s Mumbai headcount to c2500.

As I said earlier this week (see Is it a Bear?) , BPO is one of those sectors that does even better in times of economic woe. Capita, in my view, is the ultimate “safe haven in troubled times”. Of course, I’m not the first to realise that. Capita’s stock price already has that premium built in. Even so, Capita is the ‘best’ performer in the Holway Tech Portfolio this year – purely because it hasn’t fallen like the rest! Anyway, my friend Paul Pindar hates me calling Capita a ‘tech stock’ – probably rightly given what is happening in the wider tech world right now.

Also note that Martin Bolland has joined as a NED. Martin was with Alchemy for ten years to Dec 07. Many (like me) expected him to take over from Jon Moulton and his resignation was therefore something of a' surprise'. Martin is highly regarded and should make a major contribution to Capita’s ‘deal-making’ capabilities.