Final Results - Pre-tax Profit Up 36%

Capita Group PLC 22 February 2000 PRELIMINARY RESULTS FOR THE YEAR TO 31 DECEMBER 1999 ANOTHER YEAR OF EXCELLENT GROWTH Highlights: - Strong growth across all markets and opportunities remain at high levels; - Increased penetration of private sector, now representing 34% of Group turnover; - Education now represents 17% of Group turnover and offers significant growth opportunities; - Key alliances signed with Microsoft and Oracle/eLoyalty, further enhancing Capita's position in education and local government. Financial highlights Year to Year to Change 31 Dec 1999 31 Dec 1998 (restated) Turnover £327m £238m + 38% Operating profit £36.4m £27.0m + 35% before amortising goodwill Pre-tax profit £36.3m £26.8m + 36% before amortising goodwill Earnings per share 12.2 pence 8.9 pence + 37% before amortising goodwill Total dividend per share 3.8 pence 2.8 pence + 36% Operating margins 11% 11% - Operating cash inflow £34.3m £25.4m + 35% Announced today: - Strategic alliance with Microsoft to design and develop e-business, e- learning and e-assessment solutions for education, to be delivered through a dedicated education internet portal; - Partnering agreement with Oracle and eLoyalty to market customer relationship management (CRM) solutions to local and central government - having worked successfully together in implementing the first ever fully integrated CRM solution in the UK public sector for Hertfordshire County Council; - Launch of Academy.Direct, a suite of integrated web-enabled applications that allows flexible, remote access to local authorities; - Capita's selection by DETR to develop 'Quality Mark' pilot schemes, aimed at protecting general public from 'cowboy builders'. Rod Aldridge, Executive Chairman of The Capita Group Plc, commented: 'We have enjoyed excellent growth in 1999, and have made significant progress with our strategic agenda. There is now an intense focus on areas where we see substantial growth enabling us to use and enhance our existing skills and to maximise the position we have in the market, both directly and through forging new alliances. 'Our current revenues are substantially higher than the corresponding period 12 months ago and our future growth is underpinned by new business opportunities and our new alliances. We believe shareholders will be pleased with the results for the coming year and our prospects for further strong growth thereafter.' For further information: The Capita Group Plc Rod Aldridge OBE, Executive Chairman Tel: 020 7799 1525 Paul Pindar, Chief Executive Shona Nichols, Group Marketing Director Hogarth Partnership Limited James Longfield/John Olsen Tel: 020 7357 9477 Results Capita has continued to enjoy excellent growth in 1999. We have also made significant progress with our strategic agenda. We enter the new millennium strongly positioned for continued success. In the year ended 31 December 1999, our turnover increased by 38% to £327m (1998: £238m); operating profits before goodwill amortisation rose by 35% to £36.4m (1998: £27.0m as restated) and net profits before taxation and amortisation of goodwill by 36% to £36.3m (1998: £26.8m as restated). Earnings per share before amortising goodwill advanced by 37% to 12.2p. Our businesses continue to produce strong operating cashflow with £34.3m (1998: £25.4m) being generated during the year. During 1999, Capita has implemented new accounting standards relating to provisions, contingent liabilities and contingent assets (FRS12) and financial instruments disclosure (FRS13). In addition, the Group now amortises goodwill arising from acquisitions over the estimated useful economic life as outlined in FRS10. Apart from amortising goodwill arising from acquisitions, none of these changes has had a material impact on the Group's accounts. Dividend The Board is recommending a final dividend of 2.6p net per ordinary share, making a total of 3.8p net (1998: 2.8p net) for the year. This represents a 36% increase on the dividends paid in respect of the 1998 financial year. The total dividend for the year is covered 3.2 times by the earnings per ordinary share, before amortisation of goodwill. The final dividend will be payable on 27th April 2000 to shareholders on the register at the close of business on 24th March 2000. Business Review Capita provides an integrated range of white collar, professional support services on long term contracts across the UK's public and private sectors. Our objective is to improve service quality on behalf of our clients and to reduce their costs of delivery. The services we provide are essential to the smooth running and success of our clients' operations. We focus on sectors where market pressures call for substantial change in service delivery, delivering benefits through enhancing customer interfaces, re- engineering business processes and better use of information technology. Our markets Our chosen areas of business in both the UK's public and private sectors are very active. Indeed, it is estimated that the market for outsourcing services will exceed £8bn by 2002 (source: The Holway Report 1999) and that the Business Processing Outsourcing element of this market, the major focus of our business, will grow at an annual rate of 40%. Accordingly, it is important that we are selective in determining which markets and activities we choose to pursue and, equally importantly, which we do not. In this regard, we have continued our withdrawal from activities which are either maturing or of lower added value. For example, we have transferred responsibility for a substantial part of our mainframe computer business to Cap Gemini and we have completely withdrawn from our remaining blue-collar activities. There is now an intense focus on areas where we see substantial growth enabling us to use and enhance our existing skills and to maximise the position we have in the market, either directly or through forging new alliances. Local Government Our local government market is buoyant, driven by the Government's determination to modernise services and to make local authorities more responsive and accountable to the communities they serve. In pursuit of these goals, the Government has adopted a set of policies to address performance in local government services. The Government has made it clear in legislation, best value guidance, education intervention activity and in its messages to local government that it expects the private sector to have a major involvement in providing services on behalf of local authorities. Due to our leading market position and innovative style, many authorities are approaching us to discuss how they might develop wide-ranging partnerships to meet these objectives. This is exemplified by our partnership with Norfolk County Council for the delivery of IT, payroll, pension and exchequer services. Worth £50m over 10 years, the contract provides the basis for the creation of a Business Centre in Norwich to provide further services to the County, to the surrounding local authorities and to other public and private bodies. The contract has started well and already a number of other opportunities have been identified. Capita has also implemented, on time and within budget, the first ever local authority multi-channel customer services call centre for Hertfordshire County Council, providing the public with a single gateway to council services. The service, in a contract worth £12m over 5 years, includes the first integrated customer relationship management (CRM) solution to be fully implemented in the UK public sector. This truly 'joined-up' service can respond in a unique way to each customer, resulting in a quality, responsive information service for the public. Detailed reporting enables the Council to support, plan and resource their services more effectively. The target for 70% of all calls to the centre to be resolved immediately without being referred has been surpassed and currently, with the services we presently run, stands at 84%. The centre is anticipated to handle 3 million incoming calls per annum by October 2001 and full internet access will shortly be available for residents. This centre has attracted considerable interest throughout local government and has quickly become a valuable reference site for Capita. We anticipate designing, building and operating similar centres for other customers. Recent research has indicated that a further 200 local authorities (50% of the market) will, in conjunction with the private sector, establish customer contact centres over the next three years (source: Gartner 1999) and the preferred model is likely to be the multi-channel service centre. This is recognised as a core component of the Modernising Government agenda. As a consequence of our successful collaboration on the Hertfordshire contract, I am pleased to announce that Capita has signed a partnering agreement with Oracle, which has extensive e-government experience, and eLoyalty (a CRM systems integration company, listed on NASDAQ). Joint teams will market, sell, deliver and administer multi-channel customer service centres throughout the public sector market, providing quality, responsive public services with flexible access - whether by phone, paper correspondence, email, internet or interactive TV. Our £2.1m internal project to develop a national customer centre to support our local government operations is nearing completion. Many of the administrative support transactions which we had previously conducted at sites throughout the UK are now processed at the centre in Coventry where customers can contact us through a range of media, spanning paper correspondence through to email. Transfer of all the services concerned will be concluded in March 2000 enabling a further improvement in the quality of services we provide to our clients whilst also creating economies of scale for the Group. Initiatives to improve access to public services not only include major step changes such as call and contact centres, but also key applications which ensure that existing services and technologies can be accessed by new media and communication channels. Capita intends to be at the heart of this process, and accordingly I am pleased to announce the launch of Academy.Direct. This is a suite of integrated Web-enabled applications tailored for Local Government within the areas of Revenues, Benefits, Housing and Finance, allowing remote access through call centres, digital TV, one stop kiosks, DIP applications and WAP devices, thus giving councils a single intelligent gateway for all local authority transactions. The early components of the project are underway with delivery planned in the fourth quarter of 2000. This product will be available to Academy's installed base of 500 systems in local authorities and housing associations and will also be implemented in our national information centre. Central Government The Government has also established an intensive modernisation agenda focused on improving access to central government services and dismantling traditional service boundaries. Aggressive targets have been set which require 50% of deliverable services to be accessible electronically by 2005, with the aim that all services suitable for electronic delivery must be available via electronic means by 2008. This will require large parts of central government departments to review the way that they presently deliver services. Across the Central Government sector, we have continued to win, deliver and gain further contracts to design and implement new ways of delivering services for the Benefits Agency, the Passport Agency, the Department for Education and Employment (DfEE) and the Department of the Environment, Transport and the Regions (DETR). In 1998, the DETR selected Capita to develop its Constructionline service through a public/private partnership to secure quality property and construction services to be used by central government departments, agencies, health authorities and local authorities. This seven year concession has been a success with over 9,000 contractors and consultants registered, and is making a real contribution to improving standards within the construction industry. The register is used by over 550 public sector authorities. I am delighted to announce today that Capita has been chosen by the DETR to support the development and operation of two pilot schemes in Birmingham and Somerset for the Government's 'Quality Mark' scheme. This is a sister project to Constructionline, launched with the objective of 'Combating Cowboy Builders' and aimed at serving the general public. We anticipate launching the pilots to the public during the second quarter. If the pilots are successful, the Quality Mark scheme will be rolled out nationally. This is a major opportunity for Capita to play a key role in a high profile consumer protection scheme. Education The education market, which now represents 17% of the Group's turnover, is undergoing significant change. Capita intends to play a major role in re- shaping the way in which services are delivered by Local Education Authorities and schools. We already hold a significant position in the market. We are the UK market leader in education support services and we administer the teacher's pension scheme involving 1.3 million current and retired teachers. In the fourth quarter, we strengthened our position further through the acquisitions of Capstan Limited and LHR Education Limited for an aggregate consideration of £25m. Both of these businesses specialise in placing supply teachers on short and long term assignments in schools throughout the UK. The market for supply teachers now exceeds £300m per annum and is showing strong and consistent growth. Our Learning Network product developed to train teachers on IT as part of the New Opportunities Fund (NOF) project has been completed and our sales campaign is progressing well, increasing our penetration in this market. In May, we launched TP-Online, an online administration service for teachers' pensions. This allows schools to transfer information such as teachers' employment history and salary details securely over the Internet. This service also enables registered employers to validate online the status of potential employees against the DfEE's List 99, a register of people barred from working with children. We have also released software to Web- enable our schools administration systems, particularly our schools attendance module, and now provide online comprehensive software support. To take these and other developments a stage further, I am pleased to announce today that Capita and Microsoft have formed a strategic alliance to design and develop e-business solutions for education. The two companies will be working together on a number of linked initiatives with the aim of developing a comprehensive ICT based education operating system for UK schools building on the infrastructure provided for the National Grid For Learning. All services will be accessed through a dedicated education internet portal which will co-ordinate and deliver all aspects of e- learning, e-assessment, e-commerce and e-services. Private Sector We continue to increase penetration of the private sector which now represents 34% of the Group's turnover. The contracts are of a varied nature covering IT operations, HR services, property services and consultancy. We have now established business relationships with over 300 substantial corporate clients, creating an ideal platform to extend our presence in this market. Whilst there still remains less interest than in the public sector to outsource integrated packages of white-collar services on long term contracts, we believe that changes in technology and the need to reduce costs to remain competitive will generate further opportunities for the Group's wide range of services. This is particularly true in the insurance industry where 80% of employees work in the back office. Capita is well placed to benefit from the changes that are taking place through our 20.5% shareholding in the Eastgate Group, the market leader in the outsourcing of insurance administration. Operational Review Our IT service teams have successfully designed, implemented and enhanced a number of complex projects this year. In July, we reported on the successful implementation of a newly created public information centre in Belfast for the BBC, a contract worth £30m over 5 years, enabling the public to make contact through multiple routes and supporting call advisors through extensive networked information databases. The service, which is operational 365 days a year, 24 hours a day, handles over 2 million contacts from the public each year. Capita also designed and implemented the IT infrastructure for a new booking system for the Driving Standards Agency (DSA) for practical and theory driving tests. For the Society of Motor Manufacturers and Traders, a completely new IT system was recently provided, involving the decommissioning of its mainframe and the migration to a client server system allowing on-line browsing of national reports. Both systems are designed to increase efficiency and enhance services to the public. Our Human Resources activities, spanning payroll, pensions, recruitment and outplacement, have enjoyed an outstanding year. The business has been developed to provide a portfolio of complementary HR activities to mirror those found within client organisations. It has expanded successfully into the private sector from its public sector roots. During the year, our business development team has secured many notable new customers in the private sector including British Airports Authority, CIS, Tate & Lyle and British Airways. Contract extensions have also been secured with the Shipbuilders Industry Pension Scheme and Bookers. In addition to this, Capita RAS, our recruitment business, has had a highly successful year winning large scale recruitment projects to assist the Greater London Authority, the University for Industry and the Working Family Credit Unit. Capita RAS is now responsible for 40% of all public sector recruitment and placement activity serviced by external providers. We created our HR business in 1995 and in its first year it generated revenues of £3m. Four years later, our policy of seeking strong organic growth, allied with small selective acquisitions, has created a division with annual revenues in excess of £100m with a further substantial increase already underpinned for the year 2000. We have not only broadened our service offering, but also entered new market sectors including IT, project management and supply teacher placement. Our Property services are similarly well positioned for the new millennium. Having completed our withdrawal from blue-collar service lines, our strategy of offering a broad portfolio of property consultancy disciplines has been enhanced with the acquisitions of Edward Roscoe Associates, a leading telecommunications engineering consultancy, and MPM Adams, a project management company, for an aggregate £9m. We have secured many prestigious assignments during the year including work for Cellnet, Orange and Ericsson in the mobile phone market, Asda, BT, Barclays Bank, Capital Shopping Centres, Railtrack, Standard Life and the Department of Social Security. EU and UK legislation concerning environmental and energy management issues has led to increased demand for our specialist skills in these areas. The new requirements for improved access for the disabled have resulted in two major local authority consultancy projects for Hertfordshire and Worcestershire County Councils. We are also retained as a consultant to the DETR and DTI funded Environmental and Energy helpline, designed to help companies formulate modern efficient energy strategies. Our people Capita's success is founded upon the collective skills and commitment of its 6,700 staff, the majority of whom have transferred from the public sector. There is a strong culture of delivering service excellence to customers which underpins our whole business and creates considerable value for shareholders. On behalf of the Board, I would like to extend my warm thanks to all of our staff for their energy and commitment and for the important role that each plays in the continued success of the Group. Prospects We start the new millennium with confidence, strongly placed to take advantage of market developments. Our current revenues are substantially higher than the corresponding period 12 months ago and our future growth is underpinned by new business opportunities and our new alliances. We believe shareholders will be pleased with the results for the year and our prospects for further strong growth thereafter. R. M. Aldridge OBE Executive Chairman 21st February 2000 Group Profit and Loss Account for the year ended 31st December 19981999 1999 1998 (restated) Goodwill Goodwill Before Amorti- Before Amorti- Note Goodwill sation Total Goodwill sation Total £'000's £'000's £'000's £'000's £'000's £'000's Turnover 1 Continuing 285,768 - 285,768 237,802 - 237,802 operations Acquisitions 41,431 - 41,431 - - - ---------------------------------------------------------- 327,199 - 327,199 237,802 - 237,802 Cost of 221,815 - 221,815 160,727 - 160,727 sales ---------------------------------------------------------- Gross profit 105,384 - 105,384 77,075 - 77,075 Administrat- 69,594 2,992 72,586 50,427 986 51,413 ive expenses ---------------------------------------------------------- Operating profit Continuing 32,608 (2,992) 29,616 26,648 (986) 25,662 operations Acquisitions 3,182 - 3,182 - - - ---------------------------------------------------------- Group 35,790 (2,992) 32,798 26,648 (986) 25,662 operating profit Share of 639 - 639 372 - 372 operating profit in associates Amortisation - (1,123) (1,123) - - - of goodwill arising on acquisition of associate ---------------------------------------------------------- Total 36,429 (4,115) 32,314 27,020 (986) 26,034 operating profit: Group and share of associate Net interest (114) - (114) (220) - (220) payable ---------------------------------------------------------- Profit on 1 36,315 (4,115) 32,200 26,800 (986) 25,814 ordinary activities before taxation Tax on 11,273 - 11,273 8,708 - 8,708 profit on ordinary activities ---------------------------------------------------------- Profit on 25,042 (4,115) 20,927 18,092 (986) 17,106 ordinary activities after taxation Minority 54 - 54 804 - 804 interest (Equity and non equity) ---------------------------------------------------------- Profit for 24,988 (4,115) 20,873 17,288 (986) 16,302 the financial year Dividends 7,921 - 7,921 5,511 - 5,511 ---------------------------------------------------------- Retained 17,067 (4,115) 12,952 11,777 (986) 10,791 profit for the year ========================================================== Earnings per 2 12.20p (2.01)p 10.19p 8.90p (0.51)p 8.39p share - Basic ========================================================== - Diluted 2 11.85p (1.95)p 9.90p 8.68p (0.51)p 8.17p ========================================================== Balance Sheets at 31st December 19981999 Group Company 1999 1998 1999 1998 (restated) £000's £000's £000's £000's Fixed assets Intangible assets 95,175 34,073 - - Tangible assets 22,252 17,512 148 190 Investments 27,340 1,228 205,989 120,338 ------------------------------------------------ 144,767 52,813 206,137 120,528 Current assets Trade investments 224 219 207 219 Debtors due within one 74,863 65,691 19,225 20,571 year Debtors due beyond one 2,867 2,574 - - year Cash at bank and in 1,710 3,642 - - hand ----------------------------------------------- 79,664 72,126 19,432 20,790 Creditors: amounts 101,074 84,592 32,002 23,205 falling due within one year ----------------------------------------------- Net current liabilities (21,410) (12,466) (12,570) (2,415) ----------------------------------------------- Total assets less 123,357 40,347 193,567 118,113 current liabilities Creditors: amounts 6,562 658 4,000 - falling due after more than one year Provisions for 987 2,162 - - liabilities and charges ----------------------------------------------- 115,808 37,527 189,567 118,113 =============================================== Capital and reserves Called up share capital 4,176 3,958 4,176 3,958 Shares to be issued 630 - 630 - Share premium account 131,283 80,499 131,283 80,499 Merger reserve - - 20,893 7,150 Profit and loss account (20,956) (47,605) 32,585 26,506 (net of goodwill written off) ----------------------------------------------- Shareholders' funds 115,133 36,852 189,567 118,113 (Equity) Minority interest (Non 675 675 - - equity) ----------------------------------------------- 115,808 37,527 189,567 118,113 =============================================== Group Statement of Total Recognised Gains and Losses for the year ended 31st December 1999 1999 1998 £ 000's £ 000's Profit attributable to the members of the 20,873 16,302 parent undertaking as restated Exchange adjustments (46) 2 ---------------------- Total recognised gains and losses 20,827 16,304 ========= Prior year adjustments (2,736) ----------- Total recognised gains and losses since last 18,091 annual report =========== Group Cash Flow Statement for the year ended 31st December 19981999 1999 1998 £000's £000's £000's £000's Cash flow from operating 34,349 25,353 activities Returns on investments and Servicing of finance Dividends paid to minorities (43) (693) in subsidiaries Interest received 513 605 Interest element of finance (48) (86) lease payments Interest paid (822) (670) -------- -------- Net cash outflow from returns on investments and servicing of (400) (844) finance Taxation paid (10,864) (6,954) Capital expenditure and financial investment Purchase of tangible fixed (12,283) (9,357) assets Purchase of shares by Employee - (1,728) Benefit Trust Purchase of trade investments (63) (58) Purchase of fixed asset (6,500) - investments Proceeds on sale of fixed 1,695 475 assets -------- -------- Net cash outflow from capital expenditure and financial (17,151) (10,668) investment Acquisitions and disposals Purchase of subsidiary (24,815) (7,537) undertakings Sale of subsidiary undertakings 120 - Cash / (Overdraft) acquired (1,925) 625 with subsidiary undertakings Cash sold with subsidiary (519) - undertaking Purchase of business - (1,615) Pre acquisition deferred consideration paid by (950) - subsidiary undertaking Purchase of interest in (20,647) - associated undertaking Sale of interest in associated 100 - undertaking -------- -------- Net cash outflow from acquisitions and disposals (48,636) (8,527) Equity dividends paid (6,252) (4,447) -------------------------------------- Net cash flow before use of (48,954) (6,087) financing Financing Issue of ordinary share 48,076 660 capital Share issue costs (855) - Redemption of subsidiary - (2,451) undertakings preference shares Capital element of finance (199) (226) lease rental payments Repayment of long term loans - (999) -------- -------- Net cash flow from financing 47,022 (3,016) -------------------------------------- Decrease in cash in the period (1,932) (9,103) ====================================== Notes to the Accounts for the year ended 31st December 19981999 (1) Segmental information Turnover and profit on ordinary activities before taxation Class of Business Human Systems & Customer Resources Software Property Strategic Services Services Services Services Services Total £000's £000's £000's £000's £000's £000's Turnover 1999 Continuing 80,091 70,057 35,768 37,270 78,253 301,439 operations Acquisitions - 35,496 - 5,935 - 41,431 -------------------------------------------------------- 80,091 105,553 35,768 43,205 78,253 342,870 Inter- (108) (1,345) (721) (256) (13,241) (15,671) segment sales -------------------------------------------------------- Third party 79,983 104,208 35,047 42,949 65,012 327,199 sales ======================================================== 1998 Continuing 51,244 63,218 28,463 37,814 69,747 250,486 operations Inter- (75) (1,100) (561) (207) (10,741) (12,684) segment sales -------------------------------------------------------- Third party 51,169 62,118 27,902 37,607 59,006 237,802 sales ======================================================== Profit before tax 1999 Continuing 5,671 9,497 3,360 4,612 9,441 32,581 operations Acquisitions - 2,384 - 711 - 3,095 --------------------------------------------------------- Segment 5,671 11,881 3,360 5,323 9,441 35,676 profit ----------------------------------------------- Associated 639 undertakings Goodwill (4,115) amortised -------- Total 32,200 ======== 1998 (restated) Continuing 3,988 6,575 3,698 4,419 8,102 26,782 operations Associated 18 undertakings Goodwill (986) amortised -------- Total 25,814 ======== Net assets 1999 Continuing 2,296 391 4,080 5,572 1,892 14,231 operations Acquisitions - 718 - 906 - 1,624 --------------------------------------------------------- 2,296 1,109 4,080 6,478 1,892 15,855 ----------------------------------------------- Associated 20,145 undertakings Goodwill 95,175 Non- (15,367) operating liabilities -------- 115,808 ======== 1998 (restated) Continuing 3,296 4,001 1,798 2,423 3,802 15,320 operations Associated (164) undertakings Goodwill 34,073 Non- (11,702) operating liabilities -------- 37,527 ======== The results of the Group are now reported under five business units, rather than simply two divisions. This change reflects our customers' increasing demands to buy integrated services from across the Group and to reflect the internal management of operations. For the analysis of profit before taxation by business unit, the associated undertakings comparative result has been adjusted to exclude businesses that are now subsidiary undertakings of the Group. The effect of this adjustment has been to increase the 1998 Customer Services profit before tax by £401,000. Included in turnover from acquisitions is £29,367,000 in respect of Capita Tomkins Limited, £5,268,000 in respect of MPM Capita Limited, £6,129,000 in respect of Capstan Limited and £667,000 in respect of Roscoe Capita Limited. LHR Education Limited was purchased on the 30th December 1999 and consequently there is no impact on the results for the year. Since acquisition the acquired businesses of EMIS Limited and Dolphin Computer Systems (Holdings) Limited 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 segment is £2,070,000 (1998 £1,867,000) of turnover generated in Europe, and £387,000 loss before tax (1998 £287,000 profit before tax) generated in Europe. All other turnover and profit before tax was generated within the United Kingdom. The net assets of the Group are all based in the United Kingdom, except for net liabilities of £259,000 (1998 assets of £257,000) in Europe. Non operating liabilities comprise taxation and dividend liabilities. (2) Earnings per share Earnings per share is calculated on the basis of earnings of £20,873,000 (1998 restated £16,302,000) and on the weighted average of 204,824,000 (1998 194,306,000) 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 £20,927,000 (1998 £16,345,000), being profit for the year after adjusting for dividends payable of £54,000 (1998 £43,000) on the convertible preference shares of a subsidiary undertaking. The number of ordinary shares of 211,323,000 (1998 199,742,000) is calculated as follows: 1999 1998 000's 000's Basic weighted average number of shares 204,824 194,306 Dilutive potential ordinary shares: Employee share options 5,501 4,490 Shares to be issued in respect of 52 - deferred consideration Convertible preference shares of a 946 946 subsidiary undertaking --------------------- 211,323 199,742 ===================== The additional earnings per share figures shown on the Profit and Loss 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 1999 1998 (restated) £000's £000's Operating profit before interest 32,798 25,662 Depreciation charge 6,757 3,927 Amortisation of goodwill 2,992 986 Provision against trade investments 75 - Employee Benefit Trust amortisation 533 500 (Profit)/Loss on sale of fixed assets (35) 38 Utilisation of provisions (1,226) (942) Increase in provisions - 708 Decrease/(Increase) in debtors 4,926 (22,548) (Decrease)/Increase in creditors (12,471) 17,022 --------------------- 34,349 25,353 ===================== (4) Reconciliation of net cash flow to movement in net funds Acqui- Net funds sitions Non cash Net funds at 1 Jan In 1999 Cash flow flow At 31 1999 (Exc.cash) Movements Movements Dec 1999 £ 000's £000's £ 000's £ 000's £ 000's Cash at bank and 3,642 - (1,932) - 1,710 in hand Factored debts - (1,186) - - (1,186) Loan notes - (16,128) - - (16,128) Finance leases (413) (424) 199 (173) (811) -------- -------- -------- -------- -------- Total 3,229 (17,738) (1,733) (173) (16,415) ======== ======== ======== ======== ======== Acqui- Net funds sitions Non cash Net funds at 1 Jan In 1998 Cash flow flow At 31 1998 (Exc.cash) Movements Movements Dec 1998 £ 000's £000's £ 000's £ 000's £ 000's Cash at bank and 12,745 - (9,103) - 3,642 in hand Other debt (999) - 999 - - Finance leases (578) (37) 226 (24) (413) -------- -------- -------- -------- -------- Total 11,168 (37) (7,878) (24) 3,229 ======== ======== ======== ======== ======== (5) Preliminary Announcement The preliminary announcement is prepared on the same basis as set out in previous year's annual accounts, except for the adoption of new accounting standards and changes in accounting policy. FRS12 'Provisions and Contingencies', and FRS13 'Derivatives and other Financial Instruments: Disclosures' have been adopted from the beginning of the year. To reflect the changes necessary to comply with FRS12 the Group has changed its accounting policy on surplus properties, in addition the Group has changed its policy on Goodwill. Opening balances and comparatives have been restated where applicable. The preliminary announcement was approved by a duly appointed and authorised committee of the Board of Directors on 21st February 2000. This 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 1999, upon which an unqualified audit opinion has been given and which did not contain a statement under section 237(2) or 237(3) of the Companies Act 1985, will be sent to the Registrar of Companies. Copies of this announcement can be obtained from the Company's registered office at 71 Victoria Street, Westminster, London SW1H OXA. It is intended that the Annual Report and Accounts will be posted to shareholders on 20th March 2000 and will be available to members of the public at the registered office of the Company from that date.

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