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March 3, 1999


By CBR Staff Writer

London, UK-based business process outsourcing company Capita Group Plc recently acquired EMIS Ltd, paying 3m pounds for the management and administration software provider.

Capita was briefly concerned that the new Labour government wouldn’t have the same approach to outsourcing as its Conservative Party predecessor, but after a short moratorium, Capita won some key contracts and Paul Pinder, managing director, says things just carried on as if the Tories were still in power.

Most of its revenues derive from government, 42% from local administration, 26% in central power bases. Capita’s higher profile contracts include managing Railtrack’s safety certification and administering the pensions outsourcing for the Metropolitan Police in London. Although the monolithic bureaucracy in procurement makes the government market a difficult one to enter, once inside, there are distinct economic advantages; government always spends so the market is almost recession-proof. Long-term contracts, such as managing teachers’ pensions, worth 70m pounds over 7 years, yield another edge to financial security.

Capita has acquired a string of small, specialized services firms over the last year in a series of purchases: Sector Holdings Ltd, a treasury management adviser, Grosvenor Career Services, a human resourcing agency; Crest Systems Ltd, a public sector revenue organizer, all of which it has used to leverage position in new markets. The company is built around a sound financial approach to potential subsidiaries, says Anthony Miller of Richard Holway Ltd, coupled with an entrepreneurial flair. They are opportunistic, he says, but once they are in an area, they build around it.

The contract for pensions was complemented by the acquisition of Hartshead Solway Ltd, a pension services company. Capita never moves into a market which is entirely alien, explains Gordon Hurst, Capita’s finance director. This thoroughness may stem from the roots of the company, which began life in 1984 as part of the Chartered Institute of Public Finance and Accounting (CIPFA).

After a management buy-out in 1987, the firm progressed from facility management to position itself more recently in business process outsourcing. Instead of fulfilling merely an IT role, it now deals directly with the far more lucrative area of business processing. Growth areas are customer services, responsible for 55m pounds of revenue last year of a total of 237m pounds, as well as human resourcing (60m pounds) and systems and strategy (65m pounds). Software is less visible, representing 35m-40m pounds, with property at a similar level. Capita’s figures for this year show profits of 22.7m pounds, an increase of 54% on revenues that rose 44% to 200m pounds. Staff levels meanwhile have expanded from a starting point of 2 through to 320 when Capita made an initial public offering on the London Stock Exchange in 1991. Now, Capita boasts more than 5,000 personnel and 80 sites, all in the UK.

Perhaps the only sticking point for Capita is the restrictions placed upon it by geography. The UK has been its sole source of income, and UK government is a limited source of contracts. á

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This article is part of ComputerWire’s European Computer Services information service. Some articles from the service are being provided to ComputerGram subscribers for a trial period only.

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