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Capita set for record major contract wins in 2011

The outsourcing specialist Capita expects to shrug off the economic headwinds hitting its clients and cuts in the public sector to secure a record year for major contracts.

Yet the group, which runs the BBC licence fee and the Criminal Records Bureau, revealed underlying revenues would be 7 per cent lower for the year. The results statement spooked investors, sending the stock tumbling 4 per cent.

Capita announced yesterday it had secured 16 new and extended contracts in the 10 months to the end of October, worth a total of £1.6bn, as companies look to outsource operations to slash their costs.

A series of bid decisions are set to come up at the end of the year and if it sustains the historic success rate "we expect to deliver more than double the level of major wins secured in 2010 and indeed to have our best ever year in terms of major contract wins". This would beat the previous £1.8bn high point in 2007.

Major 2011 contract wins include the administration of the Teachers' Pension Scheme for seven more years, administration of vehicle tax and insurance evasion for the Driver and Vehicle Licensing Agency and a significant contract with the Pension Regulator.

Capita "is having a successful year in respect of new major contracts and renewals, reflecting the operational track record of the group and the demand for outsourcing across our tight markets," it said in its interim management statement.

The good news was tempered as Capita said prevailing pressure on spending "continues to affect adversely a small number of our trading activities and is also constraining discretionary additional revenue from existing clients". It has carried out a series of deals in the past two years, which will add 14 per cent to overall revenues, with the group expecting a "reasonable" 7 per cent growth in the full year.

Robert Morton, at Investec, said it had been a "reasonable year for contract wins," but added: "The expected pick-up in the second half is clearly not coming through at the levels hoped for earlier in the year."