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Capita targets SMEs after public sector losses

Predicts strong performance in 2008

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Capita Group has spat out a bullish 2008 forecast and said private sector deals had pushed up the value of new contracts to £1.89bn for the year, an increase of 38 per cent on 2006.

It said in a trading statement that despite corporate and government spending being squeezed, it was confident opportunities would increase at the IT outsourcing firm.

In the past few months, Capita has won two big contracts with insurance companies.

Just last week it netted a huge deal worth £722m over 15 years with the UK's second largest insurer, Prudential. Under that agreement, the firm will increase its workforce by 3,000.

In October it signed a £270m deal with Co-operative.

Capita said the 12 acquisitions it had made to date in 2007, worth £112m over the year, would help bolster its ambitions for the year ahead.

It added that it was setting its sights on buying up small to medium-sized firms to help extend its footprint in that market.

"Our bid pipeline has been replenished strongly after our record wins this year and our two most active markets remain local government and life and pensions.

"We also believe that our clients' likely emphasis in 2008 upon increasing cost efficiency whilst materially improving service quality will generate an enhanced level of opportunities."

Looking ahead, it said: "With the excellent revenue visibility that we enjoy, we are confident we will deliver a strong performance in 2007 and 2008 and we have a good pipeline of opportunities to fuel growth beyond this."

However, it's not been all good news at the firm. Last week it lost a major public sector contract with the North East Lincolnshire Council because neither side was able to reach a satisfactory agreement on a deal said to be worth £175m.

Capita has also been served a massive blow by losing out to IBM over its contract to administer the Capital's congestion charge on behalf of Transport for London. That contract will end in 2009. ®

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