Capita share price: Group updates on recent trading
Capita (LON:CPI) has updated investors on its recent trading this morning.
**Highlights from the company statement:**
Capita has made a solid start to 2016, having secured £458m aggregate major contracts, acquired four companies and disposed of two businesses which were held for sale over the year end. The combination of increased organic growth across our divisional businesses and the steady conversion of our bid pipeline provides us with greater visibility and confidence of achieving our target organic revenue growth of at least 4% this year, and we are on track to meet consensus expectations for 2016. We continue to manage the business to deliver strong EPS growth, cash flow and return on capital.
Organic growth, sales and business development
To date in 2016, Capita has secured contracts with an aggregate value of £458m including: the five district councils shared services contract worth £139m over nine years; preferred bidder to become technical services partner to Blackburn with Darwen Council; a new incremental growth structured customer management contract with Debenhams; and extensions of a major financial services client contract, our Volkswagen contract and our Urban Vision joint venture. Additionally, across Capita Europe we continue to build on our strong sales pipeline and recently signed a contract with airberlin, a new client in a new industry sector.
Our bid pipeline, last reported at £4.7bn on 25 February 2016, remains active in both the private sector, particularly in telecoms and financial services, and the public sector, in defence, local government, science and health. Whilst some of these contract decisions are taking a little longer than expected to come through, we expect a flow of bid outcomes over the rest of this year and the prospect list of opportunities behind our pipeline remains strong.
Alongside major contracts, our renewed focus on new sales and client expansion across our divisional businesses will positively contribute to organic growth in 2016, helping to minimise the effect of the higher level of planned contract step downs and attrition this year, and will provide an underpinning platform for future growth.
Our annualised net debt to EBITDA ratio in 2015 was 2.5, before the benefit of cash received on assets held for sale. Capita has a highly cash generative business model and we expect to fund our regular flow of small to medium sized acquisitions whilst maintaining leverage in the range of 2 to 2.5 in 2016. We continue to expect capital expenditure to be lower than last year.
With divisional growth building on the success of last year, our steady progress in securing major new and extended contracts, further anticipated conversion of our bid pipeline and a good pipeline of potential small to medium sized acquisitions, we are on track to meet consensus expectations in 2016. We will continue to manage the business to deliver strong EPS growth, cash flow and return on capital and remain confident about the significant structural growth opportunities in our markets going forward.
As of 07:04 BST, Tuesday, 10 May, Capita PLC share price is 1,024.00p.