* H1 pretax profit up 18 percent to 141.7 million sterling
* Raises half-year dividend by 17 percent to 5.6 pence
* Says confident about FY prospects
* Shares down 2.7 percent by 0950 GMT (Adds company, analyst comment, shares)
By Rhys Jones
LONDON, July 23 (Reuters) - British outsourcing group Capita posted an 18 percent rise in first-half profit but fell short of expectations, despite benefiting from the recession as government and companies continue to farm out work to cut costs.
Britain's biggest back-office outsourcer, which takes payments from UK television licence holders and produces payslips, on Thursday reported a pretax profit of 141.7 million pounds ($232.2 million) on revenues 11 percent higher at 1.31 billion pounds for the six months to the end of June.
Shares in Capita, which have risen 10 percent in the last quarter, were down 2.7 percent at 693.50 pence at 0950GMT, valuing the group at around 4.4 billion pounds.
"Pretax profit was below the 144.3 million pounds we expected and with profits likely to come under pressure over the coming months, we downgrade our pretax profit forecast to 320.3 million from 332.3 million," said Panmure analyst Mike Allen.
Broker Seymour Pierce downgraded Capita to 'hold' from 'buy' on worries that the tough economic climate would have a negative effect on future contacts and next year's growth prospects.
However, Chief Executive Paul Pindar expects the group to meet analysts' consensus profit target of 320 million pounds for the year because demand for outsourcing continues to be buoyant across the public and private sectors.
"We certainly expect to meet analyst expectations for 2009. I think the consensus number is sensible and would represent around 17 percent growth which would be a reasonable performance in this economic climate," Pindar told Reuters in an interview.
The group, which completed nine acquisitions worth 92.7 million pounds in the first-half, said it would make more purchases over the next six months.
"There are acquisition opportunities we are doing due diligence on as we speak so I think you will see further acquisition activity from us in the second half. There will be a focus on IT and financial services," said Pindar.
Capita, which also collects business taxes and handles medical calls for insurance companies, expects to grow its revenues from central government in the near future as pressure to cut costs mounts.
"Central government has been slower to respond to budgetary pressures than local government but that is changing. In the first half our share of turnover from central government crept up to 11 percent from 10 percent and I see that trend continuing for the next three or four years," said Pindar.
Capita increased the interim dividend by 17 percent to 5.6 pence per share and said operating margins had jumped to 12.2 percent from 11.9 percent in the previous half-year period.
The company said it had a bid pipeline of around 3 billion pounds and that it had won new contracts with AXA Sun Life and Britain's Office for National Statistics, among others, during the period.
Fellow back-office outsourcer Serco last month said it had sustained high-levels of activity in the first-half and it was on track to meet expectations for 2009. ($1=.6103 Pound) (Editing by John Stonestreet and Rupert Winchester)