Capita shares fall to two-year low on smaller bid pipeline

(Adds CEO comment, background and detail)

By Li-mei Hoang

LONDON, Feb 25 (Reuters) - Shares (Berlin: DI6.BE - news) in Capita (LSE: CPI.L - news) slumped to a two-year low on Thursday after the British outsourcing group posted a lower estimate of new work it was bidding for in the coming year.

Capita, which runs services ranging from the Ministry of Defence pension scheme to police radio systems, said its bid pipeline had fallen to 4.7 billion pounds ($6.6 billion) from 5.1 billion last year.

Shares in the company, which posted a 9 percent rise in underlying pretax profit, reversed an early rise to be down more than 6 percent at their lowest since February 2014, making them the biggest faller on the FTSE 100 index.

"Capita has produced a good set of results but expectations have been at a high level for some time and these figures might be seen at the low end of the range," said Whitman Howard analyst Stephen Rawlinson.

Capita, one of the major outsourcing companies in Britain, has benefited in recent years as central and local government and private-sector companies, facing tighter budgets, have outsourced work to cut costs.

It (Other OTC: ITGL - news) has also avoided scandals over the private provision of public services that have damaged rivals such as G4S (Copenhagen: G4S.CO - news) and Serco.

Chief Executive Andy Parker told Reuters that although the bid pipeline has decreased, the value that the contracts could deliver was up by 100 million pounds compared with a year earlier.

"If we look from where we were a year ago, the annual value of the bids in pipeline is over 100 million pounds. So although it looks like it's down, actually the value that it can deliver is up."

Parker also said he aimed to maintain the same level of 4 percent like-for-like revenue growth in the coming year, which would be driven by strong demand for its digital and software solutions and asset services businesses.

The company posted an underlying pretax profit of 586 million pounds for the year ended Dec. 31, in line with expectations, compared with 536 million for the same period a year earlier.

Capita also reported revenue of 4.7 billion pounds and operating profit of 639 million, up 7 and 11 percent respectively. ($1 = 0.7178 pounds) (Editing by David Holmes)