Final Results

Capita Group PLC 21 February 2002 21 February 2002 THE CAPITA GROUP PLC Preliminary results for the year ended 31st December 2001 RECORD PROFITS GROWTH & RECORD SALES WINS Highlights: - Strong growth throughout the period, with turnover increasing by 52% to £691m (2000: £453m) and operating profit by 45% to £77.1m (2000: £53.1m) - Operating margins of 11.2% (2000: 12%), a strong performance given record levels of new contracts implemented during the year - Strong operating cashflow of £90m, with an operating profit to cash conversion rate of 117% - Earnings per share increased by 39% to 7.8p (2000: 5.6p) - Final dividend per share of 1.5p, giving a total of 2.25p (2000: 1.65p) for the year - Record £744m of major new contract wins - winning one out of every two bids - Current pipeline of bid opportunities worth £1bn - Strong demand for services across all of Capita's chosen markets - estimated size of current UK business process outsourcing (BPO) market exceeds £50bn - Record levels of new business secured in 2001 already underpin strong organic growth for 2002 and 2003 Rod Aldridge, Executive Chairman of The Capita Group Plc, commented: 'I am delighted to announce such strong results today. 2001 was another year of record growth for the Group and demonstrates the strength of the Capita business model. Our breadth of services, track record and national capacity are unrivalled and give us a leading position in winning business from new and existing clients. The record value of new contracts we have won over the past year means that our targeted revenues for 2002 and 2003 are already underpinned. Furthermore, the market for our services continues to expand rapidly. The year has started strongly, with current trading materially ahead of the corresponding period last year and we are very confident of the Group's prospects for the year as a whole and for our continued future growth.' Financial highlights: Year ended Year ended Change 31st December 2001 31st December 2000 Turnover £691m £453m + 52% Operating profit* £77.1m £53.1m + 45% Pre-tax profit* £72.1m £51.2m + 41% Earnings per share* 7.80p 5.60p + 39% Total dividend per share 2.25p 1.65p + 36% *before amortising goodwill A conference call for investors will be held at 15.30 London time today: Dial in for UK participants: +44 20 8400 6313 Dial in for US participants: +1 303 262 2141 Conference title: Capita Chairperson: Rod Aldridge For further information: The Capita Group Plc Tel: 020 7799 1525 Rod Aldridge OBE, Executive Chairman Press Office: 020 7544 3141 Paul Pindar, Chief Executive Shona Nichols, Group Marketing Director Issued by: Finsbury Tel: 020 7251 3801 Morgan Bone Mark Harris Chairman's Statement Preliminary results for the year ended 31st December 2001 Results The Group has made superb progress in the year ended 31st December 2001 and, once again, has achieved record results. Group turnover increased by 52% to £691m (2000: £453m), operating profits before goodwill amortisation rose by 45% to £77.1m (2000: £53.1m) and net profits before taxation and amortisation of goodwill increased by 41% to £72.1m (2000: £51.2m). Operating margins were 11.2% (2000: 12%), a strong performance given the record level of new major contracts we have implemented during the year. Earnings per share before amortisation of goodwill grew by 39% to 7.80p (2000: 5.60p). Two other financial measures demonstrate the strength of Capita's performance. First, pre tax return on average capital employed increased to 18.9% (2000: 18.0%). Secondly, we enjoyed excellent cashflow, with £90m generated by operations in the year, representing an operating profits to cash conversion rate of 117%. Dividend The Board is recommending a final dividend of 1.5p per ordinary share, making a total of 2.25p (2000: 1.65p) for the year. This represents a 36% increase on dividends paid in respect of the 2000 financial year. The total dividend for the year is covered 3.5 times by the earnings per ordinary share before amortisation of goodwill. The final dividend will be payable on 26th April 2002 to shareholders on the register at the close of business on 2nd April 2002. Creating Growth During 2001, we have continued our three complementary approaches to securing growth. First, we seek to secure major contracts to deliver complex projects that use our skills across the Group and which generate high quality recurring revenues. Secondly, each of our individual businesses is structured to generate incremental growth through the development of existing accounts and new business wins. Thirdly, we continue to make strategic acquisitions to strengthen the Group's presence within a specific market and to broaden its service capability. We have exceeded our internal targets during the year in respect of each of these three approaches. Major Contracts 2001 was another record year, with Capita signing £744m of major new contracts. Our success rate on major contracts has been one out of every two contracts bid for, compared to an industry average of one in five. This success is due to the breadth of Capita's service offering, the way we lead and shape our chosen sales opportunities and our track record of service delivery. Selectivity remains a key factor. The year has started well. On 7th February 2002, we signed the Group's largest ever contract, a 10-year partnership with the BBC to administer TV Licensing. The base contract is worth £500m over the term, with additional performance related elements which could materially increase the overall value of the contract. The 1,500 people involved with customer service and field operations will transfer from Consignia to Capita in July 2002. Drawing on our proven strengths and experience of transitioning and transforming complex services, we are strongly positioned to deliver an enhanced, effective TV Licensing service. The service incorporates multi-channel contact centres, back office administration, IT services and field operations resulting in revenue collection in excess of £2bn per annum. In December 2001, Capita was nominated as the preferred bidder by Transport for London (TfL) to administer the proposed congestion charging scheme. Confirmation of whether the scheme will proceed is expected before mid March 2002. The scheme is subject to public consultation, but if it proceeds, it is estimated to be worth £230m over the first 5 years of operation and has a potential two-year extension. The contract would require Capita to deliver and manage the customer services infrastructure. This includes multi-channel customer service centres which will enable payment through telephone, web and interactive voice recognition, the back office administration processes and the network to enable payments to be made at retail outlets, such as shops, kiosks and petrol stations. TfL retains an option until 15th March 2002 to enter into the formal contract and, until a decision is taken whether or not the scheme will proceed, Capita has been authorised by TfL to continue development work. The earliest go-live date for the scheme is February 2003. An announcement will be made when TfL makes its final decision. To place our sales performance in context, Capita has now secured major new contracts to a value of £2bn since January 2000, excluding the TfL arrangements referred to above. This is comfortably in excess of the level required to sustain our internal growth model. Indeed, our target for 2002 of £500m for major contracts has been achieved 6 weeks into the year. We currently have a pipeline of bid opportunities worth in excess of £1bn, spanning both the public and private sectors. We therefore expect 2002 to be another buoyant year for major contract wins. Furthermore, Capita has also extended all material contracts due for renewal up to October 2003. As a consequence, strong organic growth for both 2002 and 2003 is underpinned. Incremental New Business Our second important means of growth is generated by our business units winning work from existing and new clients. Across our extensive client base, we have maintained our 95% client retention rate. Our clients consistently renew and extend their relationships with us, reflecting high customer satisfaction levels. All our businesses are seeing strong demand for the services they offer. Our advisory and consultancy services experienced a healthy year, securing new business from clients such as National Police Training, the Law Society, and Bolton Metropolitan Borough Council. Our specialist treasury, leasing and housing teams, who advise the majority of UK metropolitan authorities, won or renewed over 300 contracts with local authorities and housing associations in 2001. Capita's IT business has successfully won and expanded client relationships with new and existing customers, as well as becoming an increasingly integral part of the IT delivery for Capita's major contracts. For example: Capita is working with Norfolk County Council on several additional IT projects and a change management consultancy proposal concerning e-government; our contract with the Society of Motor Manufacturers and Traders is being extended once again and a long term contract has been established with the National Criminal Intelligence Service. Our local government and housing software business is reaping the benefit of the increasing requirement from local authorities for integrated on-line service transactions for citizens. For example, a five year contract with South Northamptonshire Council worth £5m, supports e-government initiatives across Revenues, Benefits, Finance and Housing. Our LEA, schools and further education management support software business secured significant new sales from its existing client base whilst also extending its penetration of the market in Scotland and Northern Ireland. In response to the market's desire to use on-line communication and transactional services, we have launched Parents Gateway and Education Direct in the year. Parents Gateway securely connects parents on-line to their child's school information. Education Direct is an efficient on-line marketing and sales channel delivering Capita's extensive school support services drawn from across the Group, directly to both individual school's and clusters of schools' purchasing offices. Both services have received encouraging interest and take-up. Following a year of strong growth, Capita Property Consultancy is now ranked in the top 10 UK consultancies in the design, construction and property markets. Framework and partnering agreements have been signed across both the public and private sectors with organisations such as the Metropolitan Police Authority, BT and Mapeley. We have also deepened our involvement in our established market sectors such as the prison, detention, education and healthcare sectors and entered new specialist markets such as telecoms, defence and airports. There has been an increasing demand across our Human Resources businesses for multiple service or fully outsourced solutions. Central Government departments and agencies and local authorities continue to seek innovative HR support services encompassing a widening remit. Essex County Council has awarded Capita a five year contract to provide recruitment response handling services. Through our partnership with Blackburn with Darwen Borough Council, we will be providing a fully outsourced HR service, pulling together the previously decentralised personnel services into a central support unit. Across the private sector, we have experienced a very successful year winning and extending contracts across our full spectrum of HR services with clients such as NatWest, Norwich Union, HBOS and Npower. In Capita IRG, our shareholder services business, we have seen the benefits of our investments in technology, sales and marketing and the smooth integration of a number of small registrar companies that we have acquired. The client base has grown by 20%, including more than half of all quoted UK corporates. Over 30% of this client base has bought further services from across the Group. Additionally, 60% of newly floated companies appointed Capita IRG as their registrar. Capita Share Plan Services is now the market leader in the provision of Share Incentive Plans. In just 18 months, 50 corporate clients have been won, including some of the largest UK companies such as Abbey National and the UK subsidiaries of Coca-Cola, McDonalds and Colgate Palmolive. Acquisitions 2001 was another acquisitive year for Capita. Eight acquisitions were completed for an aggregate net purchase consideration of £83m. All have been integrated into the appropriate business division and are performing well. The two largest transactions were the purchase of McLarens Toplis, the UK's second largest loss adjusting company, for a maximum consideration of £33.2m and the Industrial Society's Learning and Development business for a maximum consideration of £23.75m. The acquisition of McLarens Toplis was completed in June and we are delighted by progress over the last eight months. The company's cost base has been cut significantly and new processes and technology have been introduced. We believe that the actions taken will contribute to strong profit growth in 2002. Capita McLarens now forms a core part of Capita's insurance outsourcing services and has been directly involved in the creation of a strong pipeline of major new contract opportunities. Several key clients have not only renewed their relationships with Capita, but have also significantly extended them. We deliver multiple support services to Norwich Union, ranging from a significant three year contract to provide loss adjusting for their domestic and commercial lines, to 24 hour legal and medical advice services. Our revenues from our insurance operations have gone from zero in March 1999 to a current annualised rate of £160m. Now employing 3,000 staff, we are the UK's market leader in insurance outsourcing and are focused on a market spending £4bn a year on back office services. The acquisition of the Industrial Society's Learning and Development business was concluded in December. The business is a market leader in improving business performance through developing workforce potential. The Government indicated in its November 2001 Pre-Budget Report that it will allocate further spending to this area. The business has 45,000 delegates attending its events and more than 4,000 clients, 60% of which are in the private sector. Although it is early days, we are pleased and impressed by the manner in which this business has integrated into our HR operation. We intend to continue our policy of making small acquisitions where we believe we can add value for our shareholders and customers over the long term. Our current pipeline of acquisition opportunities is buoyant and we anticipate further newsflow in the coming months. Operational performance Our record of delivery is excellent. In November, we made a written submission and gave oral evidence to the Public Administration Select Committee investigating the role of the private sector in delivering the modernisation of public services through partnerships. Our submission, which is on public record, had many practical examples of Capita's track record in improving services. Many of our current initiatives are at the leading edge of modernising the way organisations deliver services. These services interact with 33 million people in the UK. The establishment of the Criminal Records Bureau is on track and we have successfully achieved key milestones in the implementation of this project. In line with the contract, the revenue stream began in April 2001 on successful implementation of the registration service and is set to significantly increase with the launch of the High Level Disclosure service in March 2002. Our contract with Abbey National Plc to manage its general insurance back office processes is proceeding well. In September 2001, we successfully released Phase 1 of the Consumer Direct System, enabling Abbey National customers to purchase household insurance over the Internet. We are on target to release Phase 2 in the second quarter of 2002, which will extend the Internet service to include motor insurance and also allow direct access to the system for Abbey's tele-sales units. Already, Abbey National has seen a marked increase in service levels to customers. The Connexions Card, which will be offered to 2.4 million 16-19 year olds throughout the country to encourage them to remain in learning, is progressing to plan. This is the largest rollout of smart card technology in Europe. The back office systems have been built and signed off by the Department for Education & Skills and the security of the system has been reviewed by the Office for Government Commerce. The programmed release of the Card across the country is beginning in the North, South West and East Midlands with the rest of England starting in April. The card will be formally launched in September 2002. To date, 1,200 outlets are offering discounts to young people including the Youth Hostel Association, the British School of Motoring and National Express. We expect to have 3,000 discount outlets by the end of the year. Our 15-year contract with Blackburn with Darwen Borough Council is developing ahead of the shared expectations that the Partnership has for the relationship. The business performance of the centre is already bringing improvements in service quality and in just seven months, 400 new jobs have been created through additional work generated by Capita. The commitment we gave to the Authority was to bring 500 new jobs to the area within five years. The relationship with Cumbria County Council has also progressed well. The business centre is designed to provide a range of services to the Authority and other public sector bodies. At contract commencement in February 2001, the annual turnover was £18.5m. This has grown to £26m for the current year and is projected to grow further in subsequent years. I am pleased to announce today that, due to the success of the partnership, Cumbria County Council has already agreed in principle to an initial one year extension of our contract to 2009. We continue to work with the Department for Education and Skills, the Scottish Executive and the Department of Education in Northern Ireland on Individual Learning Accounts. The IT and administration system that Capita implemented was discussed and designed to meet the client's detailed service specifications. Our Markets Our core markets of Local Government, Education, Central Government and the Private Sector continue to offer tremendous opportunities for growth. Measuring the overall size of these markets is difficult, given the increasing trend to outsource new services and the creation of new markets. However, we believe the potential business process outsourcing (BPO) market exceeds £50bn per annum. The public sector continues to be an important and expanding market for Capita. The Government's determination to reform public services and in particular to extend e-government at national and local levels and to improve customer and citizen access to public services plays to Capita's strengths. The Government has repeated its commitment to engage the private sector in public service modernisation and delivery. The Government is also promoting partnership contracts in areas where Capita is the market leader. Capita is not involved in mainstream PFI programmes but instead focuses on public - private partnerships and the provision of specific related services. Central Government has already allocated £350m to local authorities for the development of e-local government. This figure is expected to double next year and to be sustained at this level for the next three years and every local authority has to meet e-targets by 2005. Capita has a unique range of products to assist local authorities in this area. In education, the reform and modernisation of services continues, including the establishment of strategic education partnerships of the kind pioneered by Capita in Leeds and Haringey, and regional education services. Capita has the strongest strategic education capacity in the private sector and works through a unique partnership with the Local Government Association and IdeA, making us ideally placed to assist Local Education Authorities. For Central Government, the modernisation of support services through business process outsourcing continues to be a priority. Capita, being the leading BPO company working in partnership with the public sector, is well placed to gain from these initiatives. In the private sector, the current economic climate is causing organisations, particularly in the financial sector, to review the way they deliver services. All of Capita's core competencies are relevant to this, particularly our ability to re-engineer businesses, our skill in delivering back office services and our proven capability in the customer contact arena. Romtec's latest industry survey demonstrates the progress Capita has achieved over the last year. We are now ranked number one in the UK BPO market (2nd in 2000), the first time we have been ranked as the leading provider. It also confirms we are rated as the number one provider to Local Government and number three in Central Government. Encouragingly, we are ranked for the first time in the private sector Finance Market at number five. Our strengthening position in this segment underpins our confidence that our ranking will rise in the coming years. There is an increasing trend for the market to use outsourcing to secure complex, added value services rather than simply buying commoditised offerings. This trend, coupled with the increased priority that customers give to service quality, as opposed to cost reduction, gives us a high degree of confidence that current margins can be maintained, and possibly improved. Our People Our 13,000 staff are the key ingredient in Capita's excellent performance in 2001. I would like to offer my sincere thanks to all of our staff who contribute to the Group's progress. We welcome all the employees of our newly acquired businesses into Capita, along with those that have joined us through contract wins or by direct recruitment. We are very aware of our need to invest in people to underpin Capita's growth. First, more than 4,000 people have participated during 2001 in our training and development programme in order to enhance their core business skills. In the future, we plan to use our newly acquired Industrial Society Learning and Development business to deliver a large proportion of this programme. Secondly, we have recruited 70 high calibre personnel to join our senior management team. We have also continued to enjoy high levels of staff retention, particularly amongst our most senior people. There is a unique culture that has been developed within our Group. It is based around a number of core values, not least of which is the importance we attach to encouraging a strong team spirit. We believe that this culture has been a strong contributory factor in the record sales successes enjoyed during the year and a central feature of the strong customer relationships that exist across the Group. Many customers have commented that Capita has an open, fair and pragmatic style of doing business. We will continue to give this the highest priority in the future. Prospects Our accountability remains firmly to our customers and to our shareholders. The former have indicated their continued support of our performance through their loyalty, evidenced by an enviable 95% client retention rate. To the latter, we have delivered compound growth in profits of 42% (before tax and goodwill amortisation) over the past five years. Capita's business model has been established and proven over many years. The demand for our services has never been stronger and our operational capability is considerable. The record levels of new business secured in 2001 already underpin strong organic growth for 2002 and 2003. This visibility of earnings gives us confidence in our current estimate of £875m turnover for 2002. The year has started strongly with current trading materially ahead of the corresponding period last year and we are confident that shareholders will be pleased by Capita's performance for the year as a whole. The Board believes that the prospects for future growth remain excellent. Rodney M Aldridge, OBE Executive Chairman 20th February 2002 Group Profit and Loss Account for the year ended 31st December 2001 2001 2000 Before Goodwill Before Goodwill Notes Goodwill Amortisation Total goodwill Amortisation Total £000's £000's £000's £000's £000's £000's Turnover 1 Continuing operations 641,940 - 641,940 453,348 - 453,348 Acquisitions 49,263 - 49,263 - - - 691,203 - 691,203 453,348 - 453,348 Cost of sales 483,463 - 483,463 309,951 - 309,951 Gross profit 207,740 - 207,740 143,397 - 143,397 Administrative expenses 130,665 19,106 149,771 88,915 9,815 98,730 Operating profit Continuing operations 73,873 (16,041) 57,832 54,482 (9,815) 44,667 Acquisitions 3,202 (3,065) 137 - - - Group operating profit 77,075 (19,106) 57,969 54,482 (9,815) 44,667 Share of operating loss in - - - (1,358) (1,429) (2,787) associates Total operating profit: Group and share of associates 77,075 (19,106) 57,969 53,124 (11,244) 41,880 Net interest payable (4,943) - (4,943) (1,906) - (1,906) Profit on ordinary activities before taxation 72,132 (19,106) 53,026 51,218 (11,244) 39,974 Tax on profit on ordinary 20,797 - 20,797 14,868 - 14,868 activities Profit on ordinary activities after taxation 51,335 (19,106) 32,229 36,350 (11,244) 25,106 Minority interest (equity) 21 - 21 - - - Minority interest (non-equity) (48) - (48) (48) - (48) Profit for the financial year 51,308 (19,106) 32,202 36,302 (11,244) 25,058 Dividends 14,868 - 14,868 10,763 - 10,763 Retained profit for the year 36,440 (19,106) 17,334 25,539 (11,244) 14,295 Earnings per share - Basic 2 7.80p (2.90)p 4.90p 5.60p (1.73)p 3.87p - Diluted 2 7.44p (2.77)p 4.67p 5.41p (1.66)p 3.75p Balance Sheets at 31st December 2001 Group Company 2001 2000 2001 2000 £000's £000's £000's £000's Fixed assets Intangible assets 403,008 290,965 - - Tangible assets 61,162 37,155 1,543 714 Investments - 450 467,283 374,836 464,170 328,570 468,826 375,550 Current assets Trade investments 5,822 3,456 132 2,634 Debtors due within one year 144,802 109,933 67,218 46,466 Debtors due beyond one year 972 2,025 52 - 151,596 115,414 67,402 49,100 Creditors: amounts falling due within one year 236,499 188,896 117,708 100,537 Net current liabilities (84,903) (73,482) (50,306) (51,437) Total assets less current liabilities 379,267 255,088 418,520 324,113 Creditors: amounts falling due after more than one year 79,064 4,992 77,474 3,000 Provisions for liabilities and charges 18,537 2,949 - - 281,666 247,147 341,046 321,113 Capital and reserves Called up share capital 13,230 13,065 13,230 13,065 Shares to be issued 5,426 4,440 5,426 4,440 Share premium account 237,601 232,813 237,601 232,813 Merger reserve - - 34,183 22,884 Profit and loss account (net of goodwill written off) 24,803 (3,771) 50,606 47,911 Shareholders' funds (equity) 281,060 246,547 341,046 321,113 Minority interest (equity) 6 - - - Minority interest (non-equity) 600 600 - - 281,666 247,147 341,046 321,113 Group Statement of Total Recognised Gains and Losses for the year ended 31st December 2001 2001 2000 £000's £000's Profit attributable to the members of the parent undertaking 32,202 25,058 Exchange adjustments (59) (35) Total recognised gains and losses 32,143 25,023 Prior year adjustment - 934 Total recognised gains and losses since last annual report 32,143 25,957 Group Cash Flow Statement for the year ended 31st December 2001 2001 2000 Notes £000's £000's £000's £000's Cash flow from operating activities 3 90,019 68,910 Returns on investments and servicing of finance Dividends paid to minorities in subsidiaries (48) (48) Interest received 1,108 885 Interest element of finance lease payments (65) (55) Interest paid (5,986) (1,400) Net cash outflow from returns on investments and servicing of finance (4,991) (618) Taxation paid (22,756) (11,331) Capital expenditure and financial investment Purchase of tangible fixed assets (34,328) (17,178) Purchase of current asset investments (18) (2,500) Proceeds on sale of current asset investments 1,915 - Proceeds on sale of fixed assets 938 284 Net cash outflow from capital expenditure and financial investment (31,493) (19,394) Acquisitions and disposals Purchase of subsidiary undertakings (51,470) (73,276) Cash acquired with subsidiary undertakings 13,265 (4,024) Purchase of business (22,250) (2,534) Purchase consideration paid by subsidiary undertaking (4,606) (3,118) Accrued deferred consideration paid (1,107) - Pre-acquisition deferred consideration paid by subsidiary undertaking (325) (3,000) Purchase of interest in associated undertaking - (2,176) Net cash outflow from acquisitions and disposals (66,493) (88,128) Equity dividends paid (12,131) (9,013) Net cash outflow before use of financing (47,845) (59,574) Financing Issue of ordinary share capital 4,900 103,322 Share issue costs - (1,617) Factored debt - (1,186) Long term loans 4 50,000 - Capital element of finance lease rental payments 4 (1,282) (828) Repayment of long term loans 4 (12,050) (44,997) Net cash inflow from financing 41,568 54,694 Decrease in cash in the period (6,277) (4,880) Notes to the Accounts for the year ended 31st December 2001 1 Segmental information (a) Turnover and profit on ordinary activities before taxation Business Commercial Professional Services Services Services Total £000's £000's £000's £000's Turnover 2001 Continuing operations 305,459 138,258 259,401 703,118 Acquisitions 4,585 44,059 619 49,263 310,044 182,317 260,020 752,381 Inter-segment sales (12,716) (928) (47,534) (61,178) Third party sales 297,328 181,389 212,486 691,203 2000 Continuing operations 247,461 40,124 191,530 479,115 Inter-segment sales (2,928) - (22,839) (25,767) Third party sales 244,533 40,124 168,691 453,348 Profit before tax 2001 Continuing operations 29,124 18,684 26,065 73,873 Acquisitions 596 2,749 (143) 3,202 Segment profit before goodwill amortised 29,720 21,433 25,922 77,075 Goodwill amortised (4,944) (11,144) (3,018) (19,106) Segment profit after goodwill amortised 24,776 10,289 22,904 57,969 Interest payable (4,943) Total 53,026 2000 Continuing operations 25,739 6,542 22,201 54,482 Goodwill amortised (3,735) (4,094) (1,986) (9,815) Profit after goodwill amortised 22,004 2,448 20,215 44,667 Associated undertakings - operating loss (1,358) - goodwill amortised (1,429) Interest payable (1,906) Total 39,974 Net assets 2001 Continuing operations 16,042 (12,628) 23,242 26,656 Acquisitions 713 (7,425) (4,731) (11,443) Net operating assets excluding 16,755 (20,053) 18,511 15,213 goodwill Goodwill 113,856 238,681 50,471 403,008 Net operating assets including 130,611 218,628 68,982 418,221 goodwill Non-operating liabilities (136,555) 281,666 2000 Continuing operations 22,058 (23,734) 33,098 31,422 Goodwill 83,059 172,166 35,740 290,965 Net operating assets including 105,117 148,432 68,838 322,387 goodwill Associated undertakings 75 Non-operating liabilities (75,315) 247,147 Non-operating liabilities comprise taxation and dividend liabilities and net debt. Notes to the Accounts for the year ended 31st December 2001 1 Segmental information (continued) The results of the Group are now reported under three divisions, which differ from those reported in the accounts for the year ended 31st December 2000. The Commercial Services division has been expanded to include Capita Eastgate and the acquisitions of Capita McLarens (formerly McLaren Dick & Company Limited) and Capita Trust Company Limited (formerly Royal & Sun Alliance Trust Company Limited). The Customer Services and Human Resources divisions have been merged under a new Business Services division to take advantage of synergies within the businesses. Recall Recruitment Limited and the training business of the Industrial Society, both acquisitions in the year have been included within this division. A Professional Services division has been formed bringing together the Property Services and Software, Systems and Strategic Services divisions and the acquired business of MyShares Limited with some businesses previously reported under the Commercial Services division. The effect of the above on the 2000 comparatives, was firstly to reduce Business Services turnover by £15,742,000 and operating profit before goodwill by £954,000, and increase net assets by £40,242,000. Secondly, to increase Commercial Services turnover by £763,000 and reduce operating profit before goodwill by £1,013,000, and reduce net assets by £44,614,000. Thirdly, to increase Professional Services turnover by £14,979,000 and operating profit before goodwill by £1,967,000, and net assets by £4,372,000. Included within turnover from acquisitions is £3,833,000 in respect of Recall Recruitment Limited, £619,000 in respect of MyShares Limited, £39,869,000 in respect of Capita McLarens Limited (formerly McLaren Dick & Company Limited), £752,000 in respect of the Industrial Society business, and £4,190,000 in respect of Capita Trust Company Limited (formerly Royal & Sun Alliance Trust Company Limited). Other minor acquisitions during the year have been completely integrated within existing businesses of the Group. Accordingly, it is not possible to determine their post acquisition results. Included in 'Continuing operations' above within the Property Services Division is £nil (2000: £1,739,000) of turnover generated in Europe, and £nil profit or loss before tax (2000: £9,000 loss before tax) generated in Europe. These operations ceased in the previous year. A small amount of turnover and profit before tax was generated within the Republic of Ireland but otherwise all other turnover and profit before tax was generated within the United Kingdom. The net assets of the Group are based in the United Kingdom apart from a small amount of net assets in the Republic of Ireland (2000: net liabilities of £389,000 in Europe). Notes to the Accounts for the year ended 31st December 2001 2 Earnings per share Earnings per share is calculated on the basis of earnings of £32,202,000 (2000: £25,058,000) and on the weighted average of 657,517,000 (2000: 648,030,000) shares in issue during the year, excluding the shares held in the Employee Benefit Trust. The diluted profit for the year is based on profit for the year of £32,250,000 (2000: £25,106,000), being profit for the year after adjusting for dividends payable of £48,000 (2000: £48,000) on the convertible preference shares of a subsidiary undertaking. The number of ordinary shares of 690,076,000 (2000: 672,478,000) is calculated as follows: 2001 2000 000's 000's Basic weighted average number of shares 657,517 648,030 Dilutive potential ordinary shares: Employee share options 28,929 21,307 Shares to be issued in respect of deferred consideration 1,107 888 Convertible preference shares of a subsidiary undertaking 2,523 2,523 690,076 672,478 The additional earnings per share figures shown on the profit and loss account are calculated based on earnings before the impact of goodwill amortisation. They are included as they provide a better understanding of the underlying trading performance of the Group. 3 Reconciliation of operating profit to net cash inflow from operating activities 2001 2000 £000's £000's Operating profit before interest 57,969 44,667 Depreciation charge 15,440 9,379 Amortisation of goodwill 19,106 9,815 Provision against trade investments 12 73 Employee Benefit Trust amortisation 375 1,001 (Profit)/loss on sale of fixed assets (550) 75 Profit on sale of current asset investment (169) - Utilisation of provisions (1,073) (463) Increase in debtors (15,666) (11) Increase in creditors 14,575 4,374 90,019 68,910 4 Reconciliation of net cash flow to movement in net funds/(debt) Net debt at Acquisitions Net debt at 1st January in 2001 Cash flow Non-cash 31st December 2001 (exc cash) Movements flow 2001 £000's £000's £000's Movements £000's £000's Overdrafts (3,170) - (6,277) - (9,447) (3,170) - (6,277) - (9,447) Loan notes (47,636) (14,597) 12,050 - (50,183) Long-term loans - - (50,000) - (50,000) Finance leases (1,533) (685) 1,282 (617) (1,553) Total (52,339) (15,282) (42,945) (617) (111,183) Notes to the Accounts for the year ended 31st December 2001 4 Reconciliation of net cash flow to movement in net funds/(debt) (continued) Net funds at Acquisitions Net debt at 1st January in 2000 Cash flow Non-cash 31st December 2000 (exc cash) Movements flow 2000 £000's £000's £000's Movements £000's £000's Cash at bank and in hand 1,710 - (1,710) - - Overdrafts - - (3,170) - (3,170) 1,710 - (4,880) - (3,170) Factored debts (1,186) - 1,186 - - Loan notes (16,128) (50,378) 18,870 - (47,636) Long term loans - (26,127) 26,127 - - Finance leases (811) (1,183) 828 (367) (1,533) Total (16,415) (77,688) 42,131 (367) (52,339) 5 Preliminary announcement The preliminary announcement is prepared on the same basis as set out in the previous year's annual accounts. A duly appointed and authorised committee of the Board of Directors approved the preliminary announcement on 20th February 2002. The announcement represents non statutory accounts within the meaning of S240 of the Companies Act 1985. The statutory annual accounts for the year ended 31st December 2001, upon which an unqualified audit opinion has been given and which did not contain a statement under section 235, 237(2) or 237(3) of the Companies Act 1985, will be sent to the Registrar of Companies. Copies of the announcement can be obtained from the Company's registered office at 71 Victoria Street, Westminster, London, SW1H 0XA. It is intended that the Annual Report and Accounts will be posted to shareholders on 25th March 2002 and will be available to members of the public at the registered office of the Company from that date. This information is provided by RNS The company news service from the London Stock Exchange

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