Wednesday, 4 June 2008

"Dullness an asset" at Capita

Can I commend you to read - Dullness set to be an asset as Capita seeks government boost - in today's FT.

Long term Holway readers will know that we invented the Holway Boring Award back in 1993 and gave it to any listed SITS company with a 10 year (or more) unbroken record of EPS growth. Only two companies - Sage and Capita - still retain their Boring Awards. Both have their Boring Award Cups displayed proudly. The word "Boring" took on a whole new meaning as a result with companies being quite proud to be described as "Boring".

I see many echoes of those virtues quoted in today's FT article on Capita.

"Whereas most companies’ chief executives try hard to convey the glamour and excitement of their industries, Paul Pindar of Capita is happy to embrace the austere image of the business-process outsourcing field his company dominates.

That dullness is now starting to look like an asset as consumer confidence fades, and fellow chief executives look enviously to the long-term collection of outsourcing contracts that have allowed Capita to look for growth as most other companies batten down the hatches.

...In spite of its focus, or perhaps because of it, Capita today is often cited as one of the most respected companies in the FTSE 100. It has beguiled the City with its resilient earnings and tidy balance sheets:"

Interestingly, Paul Pindar refuses to apologise for not expanding Capita outside the UK. Pindar reckons the potential BPO market could amount to nearly £100bn a year in the UK alone. Only about £7b of that has been realised; a quarter of it by Capita - the UK BPO leader by a country mile.

"Sticking to the knitting" may indeed be Boring to some. But I cannot count how many companies have come a cropper by believing that, just because they do well in the UK, they have an automatic right to succeed overseas.

One thing the FT article doesn't really point out is that Boring is actually pretty good for shareholders too. Since their IPO in 1989, Capita shares are up 180-times. Not only the all-time best performer in the Holway Portfolio but the best of any FTSE100 company. Sure, at 668p, Capita is down 4.3% YTD. But that is better than the 6.25% decline in the FTSE100 in these 'troubled times'.

If I have one message to Paul it is "Please continue to be Dull and Boring. I like Capita just the way it is".

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