Capita scoops council contract

Capita Group has netted a 10-year, #100 million contract to establish a centralised business centre providing council tax and housing benefit administration services to four councils.

The support services company has also signalled its intention to broaden its customer base by investing #27 million to acquire a 20.5 per cent stake in UK insurance outsourcing company Eastgate Group.

Rod Aldridge, executive chairman of Capita, said: 'The equity stake in Eastgate gives us an entry into the outsourcing market within the insurance sector.

'Until now, most of our back-office outsourcing business has been in the public sector, but we've always felt the private sector would be interested and that the insurance and banking industries would be the first to take it up. The arrangement with Eastgate has enabled us to gain a presence in the insurance sector much faster than if we tried to develop it ourselves,' he added.

The investment will be funded by a #46.2 million share issue, with the remaining proceeds used to fund additional acquisitions.

Aldridge told PC Dealer: 'We are in advanced discussions with three companies at present, none of which are in the same sector as Eastgate. They are in areas core to our existing business.'

He said 72 per cent of Capita's business was derived from providing services to the public sector and 28 per cent from the private sector.

Capita's deal with the Brighton and Hove, Lewes, Tandridge and Wealden councils could evolve into a joint venture or equity arrangement and the company hopes to extend the partnership to include other local governments, he added.