Capita to hoover up small pile of SMEs in 2012

Capita is flogging 40 million new ordinary shares in an institutional pacing to fund a "pipeline" of small and medium sized bolt-on biz acquisitions.

The group, whose IT Services arm has told 1,000 workers they are at risk of redundancy, is estimated to raise £280m through the rights issue following an "encouraging start to the year".

Turnover for the first quarter jumped 17 per cent, the company said today in an interim management statement, and it has won £900m worth of contracts in the first 16 weeks of 2012 up from £313m a year ago, it said.

The deals include delivering the Recruiting Partnering Project to the Army and ICT projects with the Royal Navy and the Royal Air Force, the Civil Service Training agreement and five customer management contracts.

The board had expected acquisition activity to slow in 2012 – in the year so far it has consumed six firms for £91m in cash including Bluefin Corporate Consulting and Aviva UK Health – but identified further targets and needs for the proceeds to pursue them.

"We have a strong pipeline of additional small- to medium-sized acquisitions which we believe will generate further value," the firm said.

"Therefore we believe that we could spend at least as much again on complimentary acquisitions during 2012 as we have already spent to date this year."

The firm has £1.17bn of private placement debt, of which £123m matures between now and August 2015. The rest will mature by 2021.

Capita said acquisitions concluded over the last four years had generated a post-tax return on capital of around 14 per cent, and the firm said the current pipeline is capable of providing similar returns.

The new placing, to be managed by the London offices of Citi and Deutsche Bank, represents roughly 6.5 per cent of Capita's existing share capital and is expected to take place on 27 April.

At the same time, Capita confirmed that CEO Paul Pindar is offloading 400,000 ordinary shares alongside the placing to "satisfy a personal settlement".

There are a number of employees who may have a score to settle with Pindar after the IT Services arm entered into consultation with 1,000 individuals as part of a cost-cutting drive. Around 400 people are expected to be laid off. ®