Government supplier hit hard by spending cuts

Capita expects to post modest turnover for 2010, but says it is on course to recover next year

The impact of the comprehensive spending review has hit government IT supplier Capita harder than it had anticipated, and as a result, the company expects to post underwhelming sales figures for 2010.

"We expect turnover growth for 2010 to be modest due to the unusually high degree of revenue attrition in the year, fewer sales decisions to date in the second half of this year and the short-term impact of current public sector retrenchment on some of our trading businesses," the company wrote in its interim statement.

Capita admitted that pressure on the firm's growth will continue into the first half of 2011. However, it added that projects on the horizon will mean that the impact of the government spending cuts on its business will be short lived.

"The current strength of our bid pipeline and prospect list lead us to believe that the pressures of the current economic climate, on public and private sector organisations, will generate a strong flow of outsourcing opportunities for Capita during 2011 and beyond."

It added that there is an encouraging level of sales activity, strong forward visibility of revenues and consistent operational performance that will help Capita's performance to recover in 2011.