Final Results
27 February 2014
Full year results for the year ended 31 December 2013
Strong sales, operational and financial performance
Financial highlights Underlying** Underlying** Reported
Year on year
change
Revenue £3,851m* +15% £3,896m
Operating profit £516.9m* +11% £312.4m
Profit before tax £475.0m* +14% £215.0m
Earnings per share 59.4p* +14% 27.05p
Total dividend per 26.5p +13% 26.5p
share
Highlights
Delivering sustainable growth
- £3.3bn contract wins (2012: £4.0bn), 81% new/19% extensions
- Secured largest ever contract win by annual value with Telefónica UK (O2),
£1.2bn over 10 years
- Highest ever contract win rate of 2 in 3 (by value)
- Achieved organic growth of 8% (2012: 3%)
- £5.5bn bid pipeline (November 2013: £4.2bn), well diversified across our
target markets
- £271m spent on 13 acquisitions broadening our operational capability and
market reach
- Swift resolution of 2 underperforming areas within our Insurance & Benefits
division
Strong financial performance
- Revenue* growth of 15%
- Underlying operating margin* of 13.4%
- Underlying earnings per share* up 14% to 59.4p
- Total dividend up 13% to 26.5p
- Underlying operating cash conversion rate* of 106% (2012:110%)
- Underlying free cash flow* of £312m (2012: £307m)
Strong start to 2014
- £588m new contract wins to date including:
- £145m contract with Transport for London to deliver the congestion charging
and traffic enforcement schemes
- £325m framework contract for Scottish Wide Area Network
*On an ongoing basis, 2013 numbers excluding the partial sale of our Insurance
Distribution and planned SIP business closure. Disposal and closure costs,
including goodwill, total £146.7m, see note 2 of the preliminary statement.
2012 numbers have not been restated on this basis.
**Adjusted for new pension standard IAS19(R). Excludes
non-underlying items detailed in note 3 administrative expenses, in the notes
to the preliminary statement.
Paul Pindar, Chief Executive of Capita plc, commented:
"2013 was a year of strong sales, operational and financial
performance. We accelerated our organic growth, sustained good cash generation
and are reporting record underlying profits for the 25th successive year. This
provides a strong platform for further growth in 2014 under the leadership of
Andy Parker and the wider team."
Andy Parker, Deputy Chief Executive of Capita plc commented:
"As a consequence of the sales successes in 2013 and to date in
2014, along with the acquisitions completed over the previous 12 months, we
have excellent revenue visibility and the ingredients in place to deliver
continued strong growth in 2014. The UK market for customer and business
process management remains very encouraging with major opportunities broadly
spread across both our private and public sector markets, as evidenced by our
current bid pipeline. Together this underpins our confidence in the Group's
long term growth prospects."
For further information:
Analyst & investor presentation
The Capita executive management team will host an analyst conference call in
London at 8.30am UK time today. Please dial into the call in time to allow for
registration
Dial-in number: +44 (0)20 3059 8125
Replay: A replay of the conference call will be available for 7 days by
dialling +44 (0)121 260 4861 (access code is 9096939#).
Capita plc Tel: 020 7799 1525
Shona Nichols, Corporate Communications
Director
Capita press office Tel: 020 7654 2152 or
020 7654 2399 out of
hours
FTI Consulting Tel: 020 7269 7291
Andrew Lorenz
About Capita
Capita plc is the UK's leading provider of customer and business
process management (BPM) and integrated professional support service
solutions. With 64,000 people at more than 350 sites, including 73 business
centres across the UK, Europe, India and South Africa, the Group uses its
expertise, infrastructure and scale benefits to transform its clients'
services, driving down costs and adding value. Capita is quoted on the London
Stock Exchange (CPI.L), and is a constituent of the FTSE 100 with 2013 revenue
of £3.9bn. Further information on Capita plc can be found at: www.capita.co.uk
Capita plc full year results for the year ended 31 December 2013
Excellent platform for continued strong growth
Overview
2013 was an excellent year for Capita, the UK's leading provider of
customer and business process management (BPM). We secured major sales wins of
£3.3bn, comprising 81% new business and 19% contract extensions, demonstrating
the strength of both our service offering and the buoyant market for
outsourcing in the UK and Ireland. We are seeing particularly high levels of
activity in the private sector, across utilities, telecoms and financial
services, and also in central government and the justice market.
In the full year 2013, underlying revenue on an ongoing basis,
increased by 15% to £3,851m[1] (2012: £3,352m). Underlying operating profit[2]
rose by 11% to £516.9m[1] (2012: £466.7m) and underlying profit before taxation[2]
increased by 14% to £475m[1] (2012: £417.0m). Underlying earnings per share[2]
grew by 14% to 59.4p[1] (2012: 52.1p). We have increased our total dividend for
the full year 2013 by 13% to 26.5p per share (2012: 23.5p).
The majority of our divisions traded well in 2013, with particularly good performance
across our Customer Management & International,Workplace Services and
Professional Services divisions. Our Property & Infrastructure and IT Services
divisions are improving their performance with new management in place and market
conditions becoming more favourable. Our Insurance & Benefits division has borne
higher expenditure than anticipated on legacy IT systems. Additionally, as announced
in November 2013, we completed the disposal of some of our Insurance Distribution
operations and announced the planned closure of our SIP (Self Invested Pensions)
administration business based in Salisbury.
During the year, we added further skills and strengthened our position in key target
markets through the acquisition of several small to medium sized businesses.
Throughout Capita's history, this acquisition approach has enhanced our major sales
propositions and fuelled future organic growth in new and existing sectors.
During 2013, we acquired 13 companies for a total cost of £271m[3], in areas including
IT and software, debt management,analytics, gamification, change management and
learning and development.
Good financial performance
- Revenue - In the full year 2013, underlying revenue on an ongoing
basis, increased by 15% to £3,851m[1] (2012: £3,352m). This comprised 8% organic
growth (net of attrition), 8% from acquisitions, completed in 2012 (3%) and
2013 (5%), and -1% arising from business disposals.
Operating profit & margin - Underlying operating profit[2] rose by
11% in 2013 to £516.9m[1] (2012: £466.7m). We closely manage operating costs to
ensure that the business is growing profitably, leveraging our scale (in
particular our extensive shared service infrastructure) and maintaining
effective procurement processes and a lean corporate structure. Our valuable
client propositions and our ability to be very selective about the
opportunities we pursue allow the Group to generate healthy underlying
operating margins. We are confident that underlying Group operating margins
will be maintained in the range of 12.5% to 13.5% for the foreseeable future.
In 2013, our operating margin[2] was 13.4%[1] (2012: 13.9%) which is at the upper
end of our anticipated range of 12.5% - 13.5%, even though 2013 was a busy
year for new contract implementations. The major contract implementations
undertaken during the year, including the 2 largest in Capita's history with
Staffordshire County Council and Telefónica UK (O2), are progressing well.
As previously disclosed, in H2 2013, we completed the disposal of
some of our Insurance Distribution operations and announced the planned
closure of our SIP (Self Invested Pensions) administration business based in
Salisbury. This followed a detailed review which concluded that the route to
recovery for these businesses would take a long time and we therefore acted
swiftly to resolve this. In 2013, these operations generated £45m of Group
revenue and made a combined operating loss of £14.4m. The combined non-trading
cash cost, net of tax, from the sale and planned closure is £38.5m. The loss
on disposal was £82.1m including £62.4m from impairment of goodwill and
intangible assets.
- Cash flow[2] - In 2013, £546m[1] (2012: £515m) of cash flow was
generated by operations representing an operating profit to cash conversion
ratio (defined as underlying cash generated from operations divided by
underlying operating profit for the year) of 106%[1] (2012: 110%). This reflects
the Group's focus on cash generation and the success of the measures
introduced across the business in 2012 which are now firmly embedded in our
financial and operating reporting structure. We believe that we can achieve an
annual cash conversion ratio at or around 100% for the foreseeable future.
Free cash flow[2] (defined as operating cash flow, less net capital
expenditure, interest and taxation for the year) was £312m excluding business
disposal and planned closure (2012: £307m), despite the higher capital
expenditure on new contract implementations.
- Dividends - The Board is recommending a final dividend of 17.8p
per ordinary share (2012: 15.6p), making a total of 26.5p for the year (2012:
23.5p) representing an increase for the year of 13%. The final dividend will
be payable on 28 May 2014 to shareholders on the register at the close of
business on 22 April 2014. Including the proposed final dividend, Capita's
total dividend will have grown at a compound annual rate of 13% over the 5
years to 31 December 2013. Dividend cover is 2.2 times for 2013.
- Capital expenditure - We aim to contain net capital expenditure
at or below 4% of revenue. In 2013, we met this objective, with net capex at
3.7% of annual revenue (2012: 2.9%). The higher level of capex is the
consequence of a record level of new contract implementations in the year.
There are currently no indications of significant capex requirements in our
business forecasts or bid pipeline that would take us over our 4% threshold.
- Return on capital employed[2] - We focus on driving a healthy
return on capital. During 2013, our post-tax return on average capital
employed was 15.5%[1] (2012: 15.8%). This compares to our estimated post-tax
WACC which is 7.7%.
In 2014, subject to shareholder approval at the Annual General
Meeting, Board Directors' incentive schemes additionally have ROCE targets,
alongside EPS targets, to align further their interests with those of our
shareholders.
- Debt profile - As at 31 December 2013, we have £1,134m of private
placement bond debt of which only £11m matures in 2014 with the remainder
gradually maturing to 2021. In addition, we have £200m of bank debt under a 2
year term loan facility maturing in July 2015, offset by £158m of cash held on
deposit.
Our aim continues to be to keep the ratio of net debt to EBITDA in
the range of 2 to 2.5 over the long term and we would be unlikely to incur
borrowings which would reduce interest cover below 7 times. At 31 December
2013, our annualised net debt to EBITDA ratio[2] was 2.02[1] (2012:1.91) with
annualised interest cover[2] at 12.3[1] times (2012:9.4 times).
- Total shareholder returns - Over the 10 year period to 31
December 2013, Capita has delivered £1.4bn (net of £274m equity raising in
April 2012) to shareholders through dividends, share buybacks and a special
dividend. Capita's total shareholder return over the same period is 425%
compared to 115% for the FTSE 100.
[1]On an ongoing basis, 2013 numbers excluding the partial sale of our Insurance
Distribution and planned SIP business closure, see note 2 of the preliminary
statement. 2012 numbers have not been restated on this basis.
[2] Adjusted for new pension standard IAS19 (R). Excludes
non-underlying items detailed in note 3 administrative expenses, in the notes
to the preliminary statement.
[3] As previously announced and excludes investment in Axelos,
Entrust and Fire Service College (public sector subsidiary partnerships).
Delivering profitable organic growth
We generate profitable growth by winning business from new and
existing customers and through acquiring businesses that enhance our
propositions and broaden our capability and market reach.
2013 was a strong year of sales performance and 2014 has started
well with 5 contracts worth £588m in aggregate secured to date.
Major contracts - to date in 2014
- Transport for London (TfL) - secured a 5 year contract with
Transport for London (TfL) to operate and enforce the congestion charging, low
emission zone and traffic enforcement notice processing schemes. Capita will
take responsibility for the schemes in November 2015, following a period of
implementation which commences in 2014. The overall agreement, including the
implementation period, is expected to generate revenue of approximately £145m
to Capita.
- Scottish Wide Area Network (SWAN) - signed a framework contract
to deliver the SWAN, a single public services network for the use of all
public service organisations within Scotland. The contract value for SWAN is
up to £325m over 9 years. More than 4,600 sites will be connected to the
initial network including schools, hospitals, GP surgeries, pharmacists and
local council offices. Key benefits include reduced costs, improved service
and the ability to share data across organisations, fostering co-operative
working. This places Capita at the heart of public service delivery in
Scotland, providing a platform to offer additional services and build our
business here.
3 other major contracts: We signed an interim services agreement with the
Ministry of Justice to take on responsibility for the frontline delivery of
the existing electronic tagging operations prior to implementation of the new
electronic monitoring contract. This involves the transfer of around 1,000
employees to Capita under TUPE regulations in February and March 2014. We also
secured a new contract with Genesis Housing Association and an extension to
our Metropolitan Police radio managed services contract.
Major contracts - 2013
The 17 new and extended major contracts secured in 2013 are worth
£3.3bn in aggregate (2012: 35 contracts totalling £4.0bn) and represent a 2 in
3 win rate for the Group. Contracts include:
- Telefónica UK (O2) - a 10 year strategic partnership to deliver
customer management services. Building on our existing long term partnership,
we will manage O2's customer service centres and support O2 as it enhances and
expands its digital service offering to customers. This 10 year relationship
is worth approximately £1.2bn and commenced on 1 July 2013.
- Cabinet Office/Axelos - selected by the Cabinet Office to jointly
develop, deliver and commercialise the Government's portfolio of project and
IT management training tools. The partnership, now branded Axelos, is
anticipated to triple current revenues of approximately £40m per annum by year
10 and became fully operational from 1 January 2014.
- Carphone Warehouse - contract to provide all Carphone Warehouse's
non-store customer contact in a number of different areas across the business
and support all aspects of its customer service strategy. The contract is
worth around £160m over 10 years and commenced on 1 April 2013.
- London Borough of Barnet - contract to deliver development and
regulatory services including highways management, planning and development,
regeneration and environmental health and trading standards services. The
contract, which will be delivered by our Property & Infrastructure business,
is expected to be worth approximately £154m over 10 years and commenced on 1
October 2013.
- Civil Service Learning agreement - extension to existing contract
with the Cabinet Office, worth at least £60m over 2 years to end March 2016.
- National Asset Management Agency (NAMA) - appointed as primary and special
loan servicer on the NAMA loans acquired under the NAMA Act 2009, previously
managed on behalf of NAMA by the special liquidators, Irish Bank Resolution
Corporation (IBRC). The contract is worth around £69m over 4 years.
- Department of Energy and Climate Change (DECC) - Selected by the Department
of Energy and Climate Change for the smart meter communication licence,
responsible for the effective overall management, implementation and evolution
of the data and communications infrastructure and service. The arrangement is
expected to generate revenues to Capita of some £175m over 12 years (with an
option to be extended for a further 6 years).
- Ministry of Justice (MoJ) - selected as preferred bidder for the new
electronic monitoring and field support services contract and also the role of
overall services and systems integrator. Our assessment is that the contract
will generate revenues to Capita of some £400m over the initial 6 year
contract term, based on the anticipated increase in the use of tags beyond the
current numbers of monitored individuals. The new service is expected to start
later in 2014 following a set up and mobilisation period.
- RWE npower plc (trading as npower) - secured a partnership to provide both
front office customer management and back office services. Capita will take
responsibility for part of npower's customer service operation and deliver a
business transformation programme that will enhance customer service for
npower's domestic business. The contract is expected to be worth approximately
£120m over 7 years and commenced in February 2014.
- Southampton City Council - awarded an extension to our existing 10 year
strategic partnership, which originally commenced in October 2007, by a
further 5 years to September 2022. The extension of the contract will generate
additional revenue to Capita of approximately £124m.
Major contracts worth between £25m-£50m:
- We have secured contracts worth a total of £381m, including with the
Department for Work and Pensions (DWP), Croydon Council, Scottish Power Energy
Retail, University of Strathclyde and the Department of Communications, Energy
and Natural Resources in Ireland.
For further details on our contract wins, visit www.capita.co.uk
Buoyant sales outlook for 2014
Bid pipeline: The pipeline now stands at £5.5bn (November 2013: £4.2bn) and
comprises 25 bids across our target markets, with particular activity in the
private sector, particularly telecoms and financial services, and in the
justice market and the wider public sector. Behind the pipeline is an active
prospect list of opportunities, including a number of bids which are expected
to reach shortlist stage shortly.
Our bid pipeline contains all bids worth £25m or above, with bids capped at
£1bn and where we have been shortlisted to the last 4 or fewer. We announce
the value of the pipeline three times a year and it is therefore a snapshot at
a specific point in time.
Contract rebids: We have one material contract up for rebid in 2015 (arising
from a recent acquisition) and then no further material rebids for the next 5
years (defined as having forecast annual revenue in excess of 1% of 2013
revenue).
Market update: We operate predominantly in the BPM market in the UK
and Ireland, a market with significant growth potential. Having diversified
our activities over 11 distinct markets and with a growing private sector
footprint, we have an increasing ability to move across our markets to focus
on the most active and interesting ones to fuel continued strong growth.
In 2013, we commissioned new market research from Ovum, one of the
UK's leading independent industry analysts. Ovum estimates that Capita's total
addressable market for customer management and BPM in the UK is £126bn per
year, of which only £11.9bn was outsourced in 2013 (2012: £11.4bn), 72% in the
private sector and 28% in the public sector. For the full year 2013, Capita's
revenue was split 52% private and 48% public sector. Having been formed
initially in the public sector, over time we would expect Capita's revenues to
continue to accelerate in the private sector to reflect the respective market
opportunity.
We continually look for changes in sector dynamics across our 11
target markets which may create a catalyst for potential outsourcing
opportunities. Our newer market sectors - customer management, defence,
justice and emergency services - are showing significant potential alongside
our more established market sectors.
The rapid increase in digital communication, including the rise in
use of mobile technology and social media, is having a significant impact on
the behaviour and expectations of people and consequently our public and
private sector clients need to adapt the way in which they communicate and
deliver services. Alongside our existing skills, we have enhanced our digital,
behavioural science, analytics and change management capabilities both
internally and through acquisitions to address this need, helping
organisations across both sectors to better meet their customers' needs and
remain at the forefront of their markets.
In the private sector, commercial organisations are facing pressure
to maintain their competitive position by driving down operational costs and
introducing new products and services to market faster, while maintaining high
levels of customer service and retention. Changing legislation, for example in
the financial services, utilities and banking sectors, is stimulating
increased interest in our customer and administration services and we are
constantly evolving our propositions to ensure that we can meet these changing
requirements.
The public sector is facing many similar dynamics with ongoing
pressure to reduce budgets while maintaining and adapting frontline services.
Demographic changes, including the ageing population and an increasing number
of children in care, are also creating some specific challenges for public
sector organisations, particularly local, health and education authorities,
and they are therefore increasingly looking to partner with the private sector
to find new service solutions.
Central government has reduced spend through austerity measures but
is still having to seek further transformation change to meet the growing
needs of the public sector within severe cost constraints. Outsourcing in all
its various models is being used to address these challenges, from traditional
outsourcing to transformational partnerships and joint ventures. We anticipate
that there may be a pause in central government new outsourcing initiatives
during the election period in 2015, but we are currently not seeing any
slowdown in bidding activity across our key Government departments of
interest. Local government activity is expected to progress steadily as normal
through the election period.
Enhancing capabilities and broadening our reach through
acquisitions
The strength of our offering is a result of the proactive
development of the Group's capability and infrastructure, both internally and
through selective acquisition, ensuring that we have the right resources in
place to deliver tailored service models for our clients. In 2013, we acquired
13 companies for a total cash consideration of £271m3. These organisations are
also enhancing our sales propositions, helping to address our clients'
challenges and creating further organic growth in the following areas:
Analytics and gamification: With the increasing use of analytics, behavioural
science and the application of game dynamics to inform and deliver our customer
and employee change programmes, we acquired G2G3 a provider of immersion and
simulation-based training for organisations in the UK and overseas. The
application of game dynamics and game thinking to non-game activities is a
rapidly growing method for training employees and helping customers engage
efficiently with services. G2G3 is continuing to develop simulations for global
organisations as well as for Capita's existing and new clients across police,
emergency services, justice, defence, nuclear and oil and gas industries.
We also strengthened our analytics capability though the acquisition of Euristix,
a boutique data analytics and risk management business. Euristix provides portfolio
management, value realisation, diagnostics and due diligence services to debt and
financial services clients, together with debt purchasers. These skills are an
essential component of both debt management and wider customer services.
Debt management: We extended our resources in this area by acquiring iQor UK
(now rebranded Akinika), a provider of outsourced debt collection services to
both the public and private sectors in the UK, for an enterprise value of £42m.
Akinika helps companies and organisations to manage high risk customers and
ensure revenue collection, an area where we are seeing strong potential for
growth. Combined with our existing skills and Euristix (see above), we have
established a comprehensive end to end debt management offering for both
the private and public sectors.
IT & Software: The majority of our service solutions are IT enabled and we
have continued to strengthen our products, services and resources and extended
our geographic reach. Headquartered in Northern Ireland, Northgate Managed
Services (NMS), a provider of cloud-based, infrastructure solutions and
specialist managed services to public, private and third sector organisations,
was acquired by Capita for an enterprise value of £65m.
Continuing to enhance our offering to the justice market, we acquired STL
Technologies, a provider of software and ICT to the criminal justice system,
including courts and the police, and to asylum and immigration tribunals. STL
specialises in case management applications for organisations including Her
Majesty's Courts Service, the Ministry of Justice, the Scottish Court Service
and case preparation and custody applications for West Midlands Police.
Extending our footprint in the education market, we acquired MLS, a provider
of library and resource management systems.
Opening up a new market segment for Capita, we acquired ParkingEye, a provider
of technology based car parking services, for an enterprise value of £57.5m.
ParkingEye's automatic number plate recognition (ANPR) based management system
is used by clients to provide remote enforcement, management information and
alerting systems.
Change management & learning and development: As the skills, behaviours and
productivity of workforces are key to the success of services and organisations,
we have broadened our services across recruitment, development and change
management. We acquired Blue Sky Performance Improvement, a UK based learning
and development business that specialises in behaviour change and improved
employee productivity. Blue Sky provides bespoke, high quality solutions for
executive level employees through to field-based and frontline employees for
private and public sector clients, including 20% of the FTSE 100 such as
British Gas, BT, Barclays, RBS and RSA.
Focusing on ensuring training investment is deployed efficiently and increasing
skills across young people, we acquired two further companies. KnowledgePool
Group, a provider of learning managed services, manages all learning activity
and operations through a single channel that maximises return on training investment
for its clients. The company delivers three core service components of supplier
management, training administration and learning consultancy. Creating Careers,
a provider of accredited e-learning to further and secondary education students
via distance learning, focuses on providing those who have disengaged from traditional
education techniques with a route to accredited, nationally recognised qualifications.
Our organisational structure
To further support our clients and the markets in which we operate, we have made
some further minor changes to our operational structure for 2014 and from 1 January
2014, we now operate in 9 market facing or service specific divisions. Our delivery
network now includes 73 multi-service delivery centres in the UK, the Channel Islands
and Europe and offshore in India, South Africa and Dubai. By offering onshore,
nearshore, offshore or blended service delivery options in a time zone that suits
our clients, we can provide maximum flexibility, quality and cost savings in our
sales propositions.
Our Board and people
The Board would like to take this opportunity to thank all our
people for their hard work and dedication which ensures that we can continue
to deliver quality services for clients. Our employees join us through direct
recruitment, contracts or acquisitions and their commitment and enthusiasm
play a vital role in helping us to meet client expectations and sustain our
growth.
As announced in November 2013, Paul Pindar is stepping down as
Chief Executive and from the Capita Group Board with effect from 28 February
2014. Paul has played a key role in Capita's successful growth since joining
the Company in 1987, including 22 years as Managing Director and Chief
Executive. The Board warmly thanks him for his significant contribution to the
success of Capita and wishes him all the best for the future.
In line with Capita's senior management succession plan, Andy
Parker will succeed Paul as Chief Executive from 1 March 2014. Dawn
Marriott-Sims, formerly Executive Director of Capita's Workplace Services
division, was appointed to the Group Board succeeding Andy as Joint COO with
effect from 1 January 2014.
Following 10 years as a Non Executive Director, Martina King has
decided to retire from the Board in May 2014. The Board thanks her for her
strong contribution to the Board and as Chair of the Remuneration Committee
and wishes her all future success.
Future prospects
2013 was a year of strong sales, operational and financial
performance. We accelerated our organic growth, sustained good cash generation
and delivered record underlying profits for the 25th successive year.
As a consequence of the sales successes in 2013 and to date in
2014, along with the acquisitions completed over the previous 12 months, we
have excellent revenue visibility and the ingredients in place to deliver
continued strong growth in 2014. The UK market for customer and business
process management remains very encouraging with major opportunities broadly
spread across both our private and public sector markets, as evidenced by our
current bid pipeline. Together this underpins our confidence in the Group's
long term growth prospects.
[1]On an ongoing basis, 2013 numbers excluding the partial sale of our Insurance
Distribution and planned SIP business closure, see note 2 of the preliminary
statement. 2012 numbers have not been restated on this basis.
[2] Adjusted for new pension standard IAS19 (R). Excludes
non-underlying items detailed in note 3 administrative expenses, in the notes
to the preliminary statement.
[3] As previously announced and excludes investment in Axelos,
Entrust and Fire Service College (public sector subsidiary partnerships).
-Ends-
Consolidated income statement
for the year ended 31 December 2013
2013 2012
Note Underlying Business Other
£m disposal/ non-underlying Restated
closure
(note 2) (note 3) Total Underlying Non-underlying Total
£m £m £m £m £m £m
Continuing operations:
Revenue 3,850.9 45.3 - 3,896.2 3,351.8 - 3,351.8
Cost of sales 2,780.9 46.7 - 2,827.6 2,411.0 - 2,411.0
Gross profit 1,070.0 (1.4) - 1,068.6 940.8 - 940.8
Administrative expenses 553.1 63.2 139.9 756.2 474.1 130.8 604.9
Operating profit 516.9 (64.6) (139.9) 312.4 466.7 (130.8) 335.9
Net finance costs 4 (41.9) - 26.6 (15.3) (49.7) (4.8) (54.5)
Loss on business - (82.1) - (82.1) - - -
disposal
Profit before tax 475.0 (146.7) (113.3) 215.0 417.0 (135.6) 281.4
Income tax expense (90.3) 14.8 32.4 (43.1) (85.3) 33.3 (52.0)
Profit for the year 384.7 (131.9) (80.9) 171.9 331.7 (102.3) 229.4
Attributable to:
Owners of the Company 389.1 (131.9) (80.0) 177.2 331.7 (102.3) 229.4
Non-controlling (4.4) - (0.9) (5.3) - - -
interests
384.7 (131.9) (80.9) 171.9 331.7 (102.3) 229.4
Earnings per share
- basic 5 59.40p (20.14)p (12.21)p 27.05p 52.12p (16.08)p 36.04p
- diluted 5 58.71p (19.90)p (12.07)p 26.74p 51.55p (15.90)p 35.65p
Consolidated statement of comprehensive income
for the year ended 31 December 2013
£m 2013 £m 2012
£m Restated
£m
Profit for the year 171.9 229.4
Other comprehensive income/(expense):
Items that will not be reclassified
subsequently to profit or loss:
Actuarial gain/(loss) on defined benefit 10.9 (19.8)
pension schemes
Income tax effect (9.2) 0.6
1.7 (19.2)
Items that will or may be reclassified
subsequently to profit or loss:
Exchange differences on translation of 0.3 (5.8)
foreign operations
Losses on cash flow hedges arising during (10.3) (11.3)
the year
Reclassification adjustments for 2.6 (1.2)
losses/(gains) included in the income
statement
Income tax effect 0.9 2.7
(6.8) (9.8)
(6.5) (15.6)
Other comprehensive expense for the year net (4.8) (34.8)
of tax
Total comprehensive income for the year net 167.1 194.6
of tax
Attributable to:
Owners of the Company 172.4 194.6
Non-controlling interests (5.3) -
167.1 194.6
Consolidated balance sheet Note 2013 2012
£m Restated
As at 31 December 2013 £m
Non-current assets
Property, plant and equipment 419.8 358.3
Intangible assets 2,330.7 1,936.8
Financial assets 166.4 236.2
Deferred taxation - 1.3
Trade and other receivables 77.6 72.7
2,994.5 2,605.3
Current assets
Financial assets 3.1 8.0
Funds assets 100.8 121.2
Trade and other receivables 892.9 834.1
Cash 610.8 747.3
1,607.6 1,710.6
Total assets 4,602.1 4,315.9
Current liabilities
Trade and other payables 1,023.5 968.9
Overdrafts 453.0 440.6
Financial liabilities 79.2 121.5
Funds liabilities 100.8 121.2
Provisions 8 62.2 32.8
Income tax payable 52.5 46.7
1,771.2 1,731.7
Non-current liabilities
Trade and other payables 26.5 12.5
Financial liabilities 1,729.9 1,539.7
Deferred taxation 7.1 -
Provisions 8 52.7 45.8
Employee benefits 118.4 108.1
1,934.6 1,706.1
Total liabilities 3,705.8 3,437.8
Net assets 896.3 878.1
Capital and reserves
Issued share capital 13.8 13.8
Share premium 491.2 470.4
Employee benefit trust & treasury shares (0.4) (0.4)
Capital redemption reserve 1.8 1.8
Foreign currency translation reserve 2.0 1.7
Net unrealised losses reserve (24.1) (17.3)
Retained earnings 350.4 408.1
Equity attributable to owners of the Company 834.7 878.1
Non-controlling interests 61.6 -
Total equity 896.3 878.1
Included in aggregate financial liabilities is an amount of £1,267.3m (2012:
£1,370.1m) which represents the fair value of the Group's bonds which should
be considered in conjunction with the aggregate value of currency and interest
rate swaps of £147.1m included in financial assets and £13.5m included in
financial liabilities (2012: £222.4m included in financial assets and £0.3m
included in financial liabilities). Consequently, this gives an effective
liability of £1,133.7m (2012: £1,148.0m).
Consolidated statement of changes in equity
for the year ended 31 December 2013
Share Share Employee Capital Retained Foreign Cash Total Non-controlling Total
capital premium benefit redemption earnings currency flow £m interests equity
£m £m trust reserve £m translation hedging £m £m
& £m reserve reserve
treasury £m £m
shares
£m
At 1 January 2012 13.0 459.4 (0.4) 1.8 50.3 7.5 (7.5) 524.1 - 524.1
Profit for the - - - - 229.4 - - 229.4 - 229.4
year - restated
Other - - - - (19.2) (5.8) (9.8) (34.8) - (34.8)
comprehensive
expense - restated
Total - - - - 210.2 (5.8) (9.8) 194.6 - 194.6
comprehensive
income for the
year
Share based - - - - 9.1 - - 9.1 - 9.1
payment
Deferred income - - - - 6.2 - - 6.2 - 6.2
tax relating to
share based
payments
Shares issued 0.8 11.0 - - 270.4 - - 282.2 - 282.2
Equity dividends - - - - (138.1) - - (138.1) - (138.1)
paid
At 1 January 2013 13.8 470.4 (0.4) 1.8 408.1 1.7 (17.3) 878.1 - 878.1
Profit for the - - - - 177.2 - - 177.2 (5.3) 171.9
year
Other - - - - 1.7 0.3 (6.8) (4.8) - (4.8)
comprehensive
expense
Total - - - - 178.9 0.3 (6.8) 172.4 (5.3) 167.1
comprehensive
income for the
year
Share based - - - - 10.5 - - 10.5 - 10.5
payment
Deferred income - - - - 8.0 - - 8.0 - 8.0
tax relating to
share based
payments
Shares issued - 20.8 - - - - - 20.8 - 20.8
Equity dividends - - - - (159.1) - - (159.1) - (159.1)
paid
Put option of - - - - (96.0) - - (96.0) - (96.0)
non-controlling
interest
Acquisition of - - - - - - - - 66.9 66.9
subsidiary with
non-controlling
interest
At 31 December 13.8 491.2 (0.4) 1.8 350.4 2.0 (24.1) 834.7 61.6 896.3
2013
Non-controlling interests - This represents the equity in a subsidiary that is
not attributable directly or indirectly to the parent company.
Put option of non-controlling interest - The non-controlling shareholders of
Axelos Limited and Entrust Support Services Limited, which we acquired a
controlling interest in during the year, have an option to put their
shareholding to Capita plc. Accordingly, a liability of £96m has been
recognised and a corresponding entry has been recorded against retained
earnings. The options are exercisable only after a period of 5 years has
elapsed.
Consolidated cash flow statement
for the year ended 31 December 2013
Note 2013 2012
£m Restated
£m
Cash flows from operating activities
Operating profit on continuing activities 312.4 335.9
Adjustment for non-cash items:
Depreciation 74.1 71.7
Accelerated depreciation on business closure 6.0 -
Amortisation of intangible assets (treated as depreciation) 3.3 1.2
Amortisation of intangible assets recognised on acquisition 122.2 95.3
Accelerated amortisation of intangible assets on business 0.2 -
closure
Share based payment expense 10.5 9.1
Employee benefits 2.2 (1.9)
Non-underlying items - see note 3 1.7 25.2
Loss/(profit) on sale of property, plant and equipment 2.1 (0.1)
Movement in provisions (net) 32.0 (18.2)
Net movement in payables and receivables (28.4) (3.1)
Cash generated from operations before settlements 538.3 515.1
Arch Cru (1.2) -
Settlement of Cumbria County Council pension deficit - 0.8
Cash generated from operations 537.1 515.9
Income tax paid (52.9) (62.3)
Net interest paid (37.2) (46.0)
Net cash inflow from operating activities 447.0 407.6
Cash flows from investing activities
Purchase of property, plant and equipment (128.2) (95.5)
Purchase of intangible assets (16.9) (5.8)
Proceeds from sale of property, plant and equipment 1.2 1.4
Acquisition of public sector subsidiary partnerships (38.9) -
Debt repaid on the acquisition of public sector subsidiary (9.1) -
partnerships
Acquisition of other subsidiary undertakings and businesses (243.2) (132.4)
Cash acquired with other subsidiary undertakings 15.8 17.6
Debt repaid on the acquisition of other subsidiaries (5.1) (57.1)
Cash disposed of with other subsidiary undertakings (6.0) -
Contingent consideration paid (14.4) (12.0)
Purchase of financial assets (0.7) -
Investment loan 0.2 0.3
Net cash outflow from investing activities (445.3) (283.5)
Cash flows from financing activities
Issue of ordinary share capital 16.7 284.9
Share transaction costs - (2.7)
Dividends paid (159.1) (138.1)
Capital element of finance lease rental payments 9 (10.0) (1.7)
Repayment of term debt 9 (185.0) (2.3)
Repayment of bonds 9 (88.1) -
Proceeds on issue of term debt 9 200.0 160.3
Proceeds on issue of bonds 9 75.0 -
Revolving credit facility - (178.0)
Financing arrangement costs - (1.5)
Net cash (outflow)/inflow from financing activities (150.5) 120.9
(Decrease)/increase in cash and cash equivalents (148.8) 245.0
Cash and cash equivalents at the beginning of the period 306.7 62.4
Impact of movement in exchange rates (0.1) (0.7)
Cash and cash equivalents at 31 December 157.8 306.7
Cash and cash equivalents comprise:
Cash at bank and in hand 610.8 747.3
Overdrafts (453.0) (440.6)
Total 157.8 306.7
Notes to the financial statements
The 2012 financial statements have been restated to reflect:
- The adoption of IFRS 7 Financial Instruments: Disclosures - Offsetting
Financial Assets and Financial Liabilities (Amendments to IFRS 7) requiring
the Group to gross up its cash at bank and overdraft positions and accordingly
the statement of financial position has been restated to reflect this;
- The adoption of IAS19 Employee Benefits (Revised 2011) - IAS 19R resulting
in a change to the accounting for interest on plan assets and accordingly the
income statement and statement of comprehensive income have been restated; and
- Revisions made to fair value adjustments in the current year that had been
determined provisionally at the immediately preceding balance sheet date.
1 Segmental information
The Group's operations are organised and managed separately according to the
nature of the services provided, with each segment representing a strategic
business unit offering a different package of related services across the
Group's markets. No operating segments have been aggregated to form the
reportable operating segments below. The information disclosed below
represents the way in which the results of the businesses are reported to the
Group Board. The comparative figures have been restated due to a
reorganisation of the Group's business segments during the year and a
consequent change in the way in which the results of the businesses are
reported to the Group Board.
Before eliminating sales between business units on consolidation, the Group
accounts for sales between business units as if they were to a third party at
market rates.
Year ended 31 December 2013
Health & IT Justice Professional Property & Workplace Asset Customer Insurance Total
Wellbeing Services & Secure Services Infra Services Services Management & & £m
£m £m Services £m structure £m £m International Benefits
£m £m £m Services
£m
Segment
revenue
- Underlying 187.6 590.4 425.4 666.8 297.3 597.5 257.3 518.9 762.2 4,303.4
Total segment
revenue
Inter-segment (24.8) (132.8) (14.0) (110.3) (20.0) (31.5) (10.7) (13.2) (95.2) (452.5)
revenue
Third party 162.8 457.6 411.4 556.5 277.3 566.0 246.6 505.7 667.0 3,850.9
revenue
- Non-underlying - - - - - - - - 45.3 45.3
Non-underlying
trading[1]
Total segment 162.8 457.6 411.4 556.5 277.3 566.0 246.6 505.7 712.3 3,896.2
revenue
Segment result
- Underlying
Result after 22.2 25.5 66.4 131.2 16.0 75.0 65.3 64.1 61.7 527.4
depreciation
Share based (0.4) (0.5) (1.5) (2.7) (0.3) (1.5) (1.3) (1.2) (1.1) (10.5) payment
Underlying 21.8 25.0 64.9 128.5 15.7 73.5 64.0 62.9 60.6 516.9 trading result
- Non-underlying - - - - - - - - (14.4) (14.4)
trading[1]
Total trading 21.8 25.0 64.9 128.5 15.7 73.5 64.0 62.9 46.2 502.5
result
Non-trading
Business disposal & closure costs (50.2)
Intangible (122.2)
amortisation
Acquisition (14.3)
costs
Contingent consideration movements (1.7)
Arch Cru (1.7)
Operating 312.4
profit
Net underlying finance costs (41.9)
Financial instruments - mark to market 25.1
Derivatives own party risk - mark to market 0.1
Derivatives counterparty risk - mark to market 1.4
Loss on business disposal (82.1)
Profit before 215.0
tax
Income tax expense (43.1)
Profit for the year 171.9
[1]See note 2
1 Segmental information (continued)
Year ended 31 December 2012
Segment Health & IT Justice Professional Property & Workplace Asset Customer Insurance Total
revenue Wellbeing Services & Secure Services Infras- Services Services Management & & £m
£m £m Services £m structure £m £m International Benefits
£m £m £m Services
£m
Total segment 198.4 549.6 299.2 550.8 273.4 438.6 250.3 369.6 819.7 3,749.6
revenue
Inter-segment (26.2) (112.4) (12.3) (97.0) (17.6) (27.7) (9.4) (11.6) (83.6) (397.8)
revenue
Third party 172.2 437.2 286.9 453.8 255.8 410.9 240.9 358.0 736.1 3,351.8
revenue
Segment result
Underlying
Result after 33.0 29.7 42.6 113.6 7.4 55.8 63.9 48.7 81.1 475.8
depreciation
Share based (0.4) (0.3) (0.9) (2.2) (0.6) (1.3) (0.6) (0.9) (1.9) (9.1)
payment
32.6 29.4 41.7 111.4 6.8 54.5 63.3 47.8 79.2 466.7
Non-underlying
Intangible (95.3)
amortisation
Acquisition (10.3)
costs
Loan (15.0)
impairment
Goodwill impairment net of contingent consideration (10.2)
movements
335.9
Net underlying finance costs (49.7)
Financial instruments - mark to market (8.7)
Derivatives counterparty risk - mark to 3.9
market
Profit before 281.4
tax
Income tax (52.0)
expense
Profit for the 229.4
year
2 Business disposal/closure
In the year the Group disposed of its insurance distribution businesses and
announced the planned closure of its SIP (Self Invested Pensions)
administration business.
Income statement impact
Non-trading disposal/closure
Trading Cash Non-cash Total Total
£m £m £m £m £m
Revenue 45.3 - - - 45.3
Cost of sales (46.7) - - - (46.7)
Gross loss (1.4) - - - (1.4)
Administrative expenses (13.0) (41.5) (8.7) (50.2) (63.2)
Operating loss (14.4) (41.5) (8.7) (50.2) (64.6)
Loss on business disposal - (6.0) (76.1) (82.1) (82.1)
Loss before tax (14.4) (47.5) (84.8) (132.3) (146.7)
Taxation 3.2 9.0 2.6 11.6 14.8
Loss after tax (11.2) (38.5) (82.2) (120.7) (131.9)
Trading revenue and costs represent the current year trading performance of
these businesses.
Non-trading disposal and closure costs include the costs of running off the
policies in the SIP business and the ongoing stranded costs such as property
lease and redundancy payments. It is expected these expenses will be incurred
over 2 years - see note 8.
Included within non-trading administrative expenses in the table above are:
£m
Provision made in respect of disposal and closure costs 41.5
Assets written off used exclusively for the activities disposed 8.7
of/closed
Total 50.2
The table below summarises the loss on disposal:
£m
Property, plant and equipment 3.1
Trade and other receivables (excl. accrued income) due in less than 46.4
one year
Accrued income due in less than one year 4.8
Cash 6.0
Trade payables due in less than one year (5.0)
Other payables due in less than one year (35.6)
Intangible assets 4.8
Goodwill 57.6
Total net assets disposed of 82.1
Net proceeds received -
Loss on business disposal 82.1
Consideration was comprised of £1.
3 Administrative expenses
Included within administrative expenses in the non-underlying column are:
2013 2012
£m £m
Non-underlying, non-cash items:
Intangible amortisation 122.2 95.3
Contingent consideration movements (net of goodwill 1.7 10.2
impairment in 2012)
Arch Cru 0.5 -
Impairment of Optima investment loan - 15.0
124.4 120.5
Non-underlying, cash items:
Professional fees re acquisitions 12.9 9.6
Stamp duty paid on acquisitions 1.4 0.7
Arch Cru 1.2 -
15.5 10.3
Total 139.9 130.8
The Group has paid additional costs of £1.2m during the year and has made
provision for further costs of £0.5m in relation to this matter. Having given
due consideration to the ongoing activity in this case the Group considered it
prudent to set aside an amount to cover legal fees that may be incurred in
dealing with this matter.
4 Net finance costs
2013 2012
£m Restated
£m
Bank interest receivable (0.1) (0.3)
Other interest receivable (0.1) (0.2)
Interest receivable (0.2) (0.5)
Bonds 22.9 29.5
Fixed rate interest rate swaps - realised 6.0 9.1
Finance lease 0.8 -
Bank loans and overdrafts 7.7 7.9
Investment expense - 0.1
Net interest cost on defined benefit pension schemes 4.7 3.6
Interest payable 42.1 50.2
Underlying net finance costs 41.9 49.7
Fixed rate interest rate swaps - mark to market (26.3) 8.2
Non-designated foreign exchange forward contracts - mark to 1.2 0.5
market
Derivatives' counterparty risk adjustment - mark to market (1.4) (3.9)
Derivatives' own credit risk adjustment - mark to market (0.1) -
Non-underlying net finance costs (26.6) 4.8
Total net finance costs 15.3 54.5
5 Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the
year attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit
for the year attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the year plus
the weighted average number of ordinary shares that would be issued on the
conversion of all the dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the basic and diluted
earnings per share computations:
2013 2012
£m Restated
£m
Net profit attributable to ordinary equity holders of the parent 177.2 229.4
from operations
2013 2012
Number Number
million million
Weighted average number of ordinary shares (excluding trust and 655.1 636.4
treasury shares) for basic earnings per share
Dilutive potential ordinary shares:
Employee share options 7.7 7.0
Weighted average number of ordinary shares (excluding trust and 662.8 643.4
treasury shares) adjusted for the effect of dilution
There have been no other transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of completion of these
financial statements.
The following additional earnings per share figures are calculated based on
underlying earnings attributable to ordinary equity holders of the parent of
£389.1m (2012: £331.7m) and, after non-underlying costs, earnings of £177.2m
(2012: £229.4m). They are included as they provide a better understanding of
the underlying trading performance of the Group.
2013 2012
p Restated
p
Basic earnings per share - underlying 59.40 52.12
- after non-underlying 27.05 36.04
Diluted earnings per share - underlying 58.71 51.55
- after non-underlying 26.74 35.65
6 Dividends paid and proposed
2013 2012
£m £m
Declared and paid during the year
Ordinary shares (equity):
Final for 2012 paid: 15.6p per share (2011: 14.2p per share) 102.1 86.7
Interim for 2013 paid: 8.7p per share (2012: 7.9p per share) 57.0 51.4
159.1 138.1
Proposed for approval at AGM (not recognised as a liability at 31
December)
Ordinary shares (equity):
Final for 2013: 17.8p per share (2012: 15.6p per share) 116.9 101.3
7 Business combinations
2013 acquisitions
The Group made a number of acquisitions in 2013 which are shown in aggregate.
The fair values of the identifiable assets and liabilities acquired are
disclosed in the table below:
Fair value to Group recognised on acquisition
Public Sector Other Total
Subsidiary acquisitions £m
Partnership £m
£m
Property, plant and equipment 3.9 26.0 29.9
Intangible assets 102.7 187.9 290.6
Trade and other receivables due in less than 3.7 50.9 54.6
one year
Trade and other receivables due in more than - 14.4 14.4
one year
Corporation tax - 1.6 1.6
Cash and cash equivalents - 15.8 15.8
Trade and other payables (exc. accruals) due (2.5) (41.5) (44.0)
in less than one year
Accruals due in less than one year (10.9) (54.9) (65.8)
Trade and other payables (exc. accruals) due - (2.0) (2.0)
in more than one year
Provisions - (5.5) (5.5)
Deferred tax (2.1) (23.0) (25.1)
Employee benefits liability - (14.3) (14.3)
Finance leases - (25.4) (25.4)
Public sector subsidiary partnership payment (52.2) - (52.2)
Long term debt (9.1) (5.1) (14.2)
Net assets 33.5 124.9 158.4
Goodwill arising on acquisition 103.0 162.1 265.1
Non-controlling interest (66.9) (66.9)
69.6 287.0 356.6
Discharged by:
Cash 34.9 232.9 267.8
Equity instruments - 4.1 4.1
Contingent consideration accrued - 26.1 26.1
Deferred consideration accrued 34.7 23.9 58.6
69.6 287.0 356.6
"Public Sector Subsidiary Partnerships" represent a controlling interest in 3
public sector acquisitions in 2013, being 51% of the ordinary share capital of
Axelos Limited and Entrust Support Services Limited and 100% of the ordinary
share capital of Fire Service College Limited.
In all other cases 100% of the ordinary share capital was acquired. The
companies acquired have been mainly in the areas of IT and software, debt
management, analytics, gamification, change management, and learning and
development which complement or extend the Group's existing skill sets and
provide opportunities for growth into these markets. In addition during the
year the Group settled contingent consideration payments with regard to
previous acquisitions amounting to £14.4m, all of which had been accrued.Goodwill has arisen on the acquisitions because the fair value of the acquired
assets was lower than the consideration paid; the goodwill represents the
value to the Group that can be driven from these underlying assets over the
life of the acquired businesses, particularly from synergies, the capabilities
of the acquired workforce, and commercialisation of formerly public sector
assets. The total amount of goodwill recognised in the period that is expected
to be deductible for tax purposes is £103.4m (2012: £3.3m).
The public sector subsidiary partnership payment liability is an estimate of
the annual preferred payments to be made by Axelos Limited (the partnership
formed with the Cabinet Office) to the Cabinet Office in years 4 to 10. This
payment is funded by Axelos Limited and is contingent on profits. The £52.2m
liability has an estimated cash impact, net of tax, of £35.9m. Following these
payments, the new company will pay profits to the partners according to their
stake in the business.
Contingent consideration
In respect of the acquisitions made in 2013, the Group has agreed to pay the
vendors additional consideration dependent on the achievement of performance
targets in the periods post acquisition. These performance periods are of up
to four years in duration and will be settled in cash and loan notes on their
payment date on achieving the relevant target. The range of the additional
consideration payment is estimated to be between £20m and £35m. The Group has
included £26.1m as contingent consideration related to the additional
consideration, which represents its fair value at the acquisition date.
Contingent consideration has been calculated based on the Group's expectation
of what it will pay in relation to the post-acquisition performance of the
acquired entities by weighting the probability of a range of payments to give
an estimate of the final obligation.
Deferred consideration
In respect of the acquisitions made in 2013, the Group has agreed to pay the
vendors additional consideration post the year end period. The Group has
included £58.6m as deferred consideration, which represents its fair value at
the acquisition date.
Acquisition related costs
The Group incurred acquisition related costs of £14.3m related to professional
fees paid for due diligence, general professional fees and legal related
costs. These costs have been included in non-underlying administrative
expenses in the Group's consolidated income statement.
8 Provisions
Restructuring Insurance Property
captive provision
provision provision £m Other Total
£m £m £m £m
At 1 January 2013 (restated) - 16.0 39.4 23.2 78.6
Utilisation (0.2) (13.7) (7.9) (13.4) (35.2)
Provided in the year (net) 41.5 22.8 (0.1) 1.8 66.0
Provisions acquired - - 5.2 0.3 5.5
At 31 December 2013 41.3 25.1 36.6 11.9 114.9
The provisions made above have been shown as current or non-current on the
balance sheet to indicate the Group's expected timing of the matters reaching
conclusion.
The Group has made the restructuring provision for unavoidable costs which
will be incurred due to its decisions to dispose of its insurance distribution
business and to close its SIP business. The provision is expected to unwind
over 2 years.
9 Additional cash flow information
Reconciliation of net cash flow to movement in net funds/(debt)
Net debt Net debt
at Acquisitions Non-cash at 31
1 January in 2013 Cash flow flow December
2013 (exc. cash) movements movements 2013
£m £m £m £m £m
Cash, cash equivalents and overdrafts 306.7 - (148.8) (0.1) 157.8
Loan notes (0.5) - 0.1 (10.0) (10.4)
Bonds[1] (1,370.1) - 13.1 89.7 (1,267.3)
Revolving credit facility - - - - -
Currency swaps in relation to US$ 206.2 - - (80.3) 125.9
denominated bonds[1]
Interest rate swaps in relation to GBP 15.9 - - (8.2) 7.7
denominated bonds[1]
Long term debt - (14.2) 14.2 - -
Term loan (185.0) - 185.0 - -
New Term loan - - (200.0) - (200.0)
Finance leases (2.7) (25.4) 10.8 - (17.3)
Underlying net debt (1,029.5) (39.6) (125.6) (8.9) (1,203.6)
Fixed rate interest rate swaps (52.9) - - 26.3 (26.6)
(1,082.4) (39.6) (125.6) 17.4 (1,230.2)
Net debt
Net debt at
at Acquisitions Non-cash 31
1 January in 2012 Cash flow flow December
2012 (exc. cash) movements movements 2012
£m £m £m £m £m
Cash, cash equivalents and overdrafts 62.4 - 245.0 (0.7) 306.7
Loan notes (2.3) - 2.3 (0.5) (0.5)
Bonds[1] (1,432.2) - 24.7 37.4 (1,370.1)
Revolving credit facility (176.1) - 178.0 (1.9) -
Currency swaps in relation to US$ 242.4 - - (36.2) 206.2
denominated bonds1
Interest rate swaps in relation to 13.5 - - 2.4 15.9
GBP denominated bonds1
Long term debt - (57.1) 57.1 - -
Term loan - - (185.0) - (185.0)
Finance leases (3.1) - 1.7 (1.3) (2.7)
Underlying net debt (1,295.4) (57.1) 323.8 (0.8) (1,029.5)
Fixed rate interest rate swaps (44.7) - - (8.2) (52.9)
(1,340.1) (57.1) 323.8 (9.0) (1,082.4)
[1] The sum of these items held at fair value equates to the underlying value of
the Group's bond debt of £1,133.7m (2012: £1,148.0m).
The aggregate bond fair value above of £1,267.3m (2012: £1,370.1m) includes
the GBP value of the US$ denominated bonds at 31 December 2013. To remove the
Group's exposure to currency fluctuations it has entered into currency swaps
which effectively hedge the movement in the underlying bond fair value. The
interest rate swap is being used to hedge the exposure to changes in the fair
value of GBP denominated bonds.
10 Related party transactions
Compensation of key management personnel
2013 2012
£m £m
Short term employment benefits 8.1 7.6
Pension 0.2 0.1
Share based payments 6.0 3.6
14.3 11.3
The following companies are substantial shareholders in the Company and
therefore a related party of the Company (in each case, for the purposes of
the Listing Rules of the UK Listing Authority). The number of shares held on
20th February 2014 was as below:
Shareholder No. of % of
shares voting
rights
BlackRock Inc 36,153,457 5.49
Invesco Limited 131,356,538 19.93
Legal & General Group Plc 19,818,538 3.01
Veritas Asset Management (UK) Limited 42,647,140 6.47
11 Preliminary announcement
The preliminary announcement is prepared in accordance with International
Financial Reporting Standards as adopted by the European Union. A duly
appointed and authorised committee of the Board of Directors approved the
preliminary announcement on 26th February 2014. The financial information set
out above does not constitute the Company's statutory accounts for the years
ended 31 December 2013 or 2012 but is derived from those accounts. It is not
necessary to include this phrase, but where the client wishes to make an
explicit reference to the fact that the prelim is based upon audited financial
statements, this phrase would be appropriate. Statutory accounts for 2012 have
been delivered to the registrar of companies, and those for 2013 will be
delivered in due course. The auditor has reported on those accounts; their
reports were (i) unqualified, (ii) did not include a reference to any matters
to which the auditor drew attention by way of emphasis without qualifying
their report and (iii) did not contain a statement under section 498 (2) or
(3) of the Companies Act 2006.
Copies of the announcement can be obtained from the Company's registered
office at 71 Victoria Street, Westminster, London SW1H 0XA, or on the
Company's corporate website www.capita.co.uk/investors/Pages/Investors.aspx.
It is intended that the Annual Report and Accounts will be posted to
shareholders in April 2014. It will be available to members of the public at
the registered office and on the Company's Corporate website
www.capita.co.uk/investors/Pages/Investors.aspx from that date.
12 Statement of Directors responsibilities
The Directors confirm that, to the best of their knowledge the extracts from
the consolidated financial statements included in this report, which have been
prepared in accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union, IFRIC interpretations and those parts of the
Companies Act 2006 applicable to companies reporting under IFRS, fairly
presents the assets, liabilities, financial position and profit of the Group
taken as a whole and that the management report contained in this report
includes a fair review of the development and performance of the business.
By order of the Board
P R M Pindar G M Hurst
Chief Executive Group Finance Director
26 February 2014
---------------------------------
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