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Capita Group is merging two of its 'outsourcing' firms to create what it claims will be a£50 million operation by ...
Capita Group is merging two of its 'outsourcing' firms to create what it claims will be a £50 million operation by the end of next year. Computer services firm Telecom Capita is being merged with Capita Managed Services in response to the group's belief in a sharp increase in the number of councils intending to contract out finance and computing functions as a combined operation. The trend is growing despite the government dropping plans to lump the two together under compulsory competitive tendering.

Richard Childs, managing director of Capita Managed Services, told LGC the new set up would give it the flexibility to meet demands from councils, encompassing financial services, computer facilities management and software programmes.

'We have reached the point where the cost benefits of having small entrepreneurial subsidiaries cease to become an option', he said. The merger comes into effect in January and the firm will trade as Capita Managed Services. It will involve concentrating the firm's operations at five data processing centres in Oxfordshire, Wiltshire, Cardiff, a new site in Kent and an expanded operation at its base in Bromley. Its business plan discussed this week anticipates turnover in the outsourcing division, which is dominated by Telecom Capita and Managed Services, to reach £27m for the year ending 31 December. Its half yearly results to June showed a fall in profits for the division of £64,000 to just over £1m.

Turnover of the new set up is planned to grow to £50m next year, and the staff complement is expected to increase from 700 to 1,000. 'This makes us by far and away the largest outsourcing firm in local government', said Mr Childs. The new operation includes West Wiltshire Software, which Telecom Capita bought in August for £4m. Capita growth plans partly depend on winning an initial contract at a council and then persuading it to privatise other parts of their operations across the range of services offered by the new combined company.

'We are trying to tie people into the firm . . . but being realistic the market will catch up', Mr Childs said. Capita, ITnet, CSL and P- Sec have been invited to bid for Southwark LBC's £10m contract to run its financial services. It will be the biggest financial services deal in local government (LGC, 1 October).
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