Interim Results
Capita Group PLC
28 July 2005
28 July 2005
THE CAPITA GROUP PLC
Interim Results for the six months to 30 June 2005
Pleasing progress in first Six months
Financial Highlights (restated for IFRS)
Six months ended Six months ended Change
30 June 2005 30 June 2004
Turnover £687m £617m* +11%
Operating profit** £81.0m £68.8m +18%
Profit before tax** £74.5m £63.3m +18%
Earnings per share** 8.06p 6.75p* +19%
Interim dividend per share 2.10p 1.75p +20%
Key points
• Operating margins** increased to 11.8% (2004: 11.1%)
• Operating cash flow of £95.4m (2004: £81.9m)
• £240m major contract wins and renewals in first 7 months of 2005
• Bid pipeline of £3.4bn
• Active public and private sectors markets
• Offshore BPO capabilities enhanced with second business centre opened in Mumbai
* excluding discontinued operations
** before share based payment charge, intangible amortisation and one-off items
Rod Aldridge, Executive Chairman of The Capita Group Plc, commented:
'Capita has made encouraging progress in the first 6 months of the year,
reflected in another period of strong financial results.
'The components for a highly successful 2005 are in place and we believe
shareholders will be pleased with Capita's results for the year as a whole.
Furthermore, the ingredients are also in place for delivering strong growth in
2006. Our businesses are in excellent shape for generating incremental growth
and the market for BPO opportunities across both the private and public sectors
continues to be buoyant. We are confident we will make the most of these
opportunities while continuing to maintain high levels of selectivity.'
For further information:
The Capita Group Plc Tel: 020 7799 1525
Rod Aldridge, Executive Chairman
Paul Pindar, Chief Executive
Shona Nichols, Corporate Communications Director
Capita Press Office Tel: 0870 2400 488
Financial Dynamics Tel: 020 7269 7291
Andrew Lorenz/Richard Mountain
THE CAPITA GROUP PLC
Interim Results for the six months to 30 June 2005
Chairman's Statement
Results
Capita has made encouraging progress during the 6 months to 30 June 2005. This
is reflected in both the strengthening of our position as the UK's market leader
in providing business process outsourcing (BPO) services to the public and
private sectors and in the delivery of another period of strong financial
results.
Capita now prepares accounts in accordance with International Financial
Reporting Standards (IFRS). Consequently, in the results below, the comparatives
have been restated to reflect this change.
During the period, turnover increased by 11% to £687m (half year to 30 June
2004: £617m excluding discontinued operations). Operating profits before the
share based payment charge and before amortisation of separately identifiable
intangible assets ('intangibles') and one-off items rose by 18% to £81.0m (2004:
£68.8m) and net profits before taxation, share based payment charge, intangible
amortisation and one-off items increased by 18% to £74.5m (2004: £63.3m).
Earnings per share before share based payment charge, intangible
amortisation and one-off items grew by 19% to 8.06p (2004: 6.79p excluding
discontinued operations).
We are committed to the continued development of the Group, building sustainable
value for our stakeholders, primarily our shareholders, customers and our
employees.
Building value for shareholders
We focus on a number of key measures to ensure that we are creating value for
our shareholders:
* we have continued our long-term trend of improving operating margins,
which have again increased during the period to 11.8% (2004: 11.1 per cent).
For the year as a whole, we expect operating margins to be comfortably ahead
of the level achieved in 2004 of 12.5%
* the strength of Capita and its business model is reflected in our cash
flow, with £95.4m generated by operations, representing an operating profit
to operating cash conversion rate of 118% (2004: 119%).
* we aim to contain capital expenditure at or below 4% of revenue, although
there may be rare occasions when we exceed this where our financial strength
can be used to our competitive advantage. During the period, capital
expenditure rose slightly to 4.1% of revenue, following investment in
advanced IT platforms to support future growth across our insurance and life
and pensions businesses
* we focus on driving a steadily increasing return on capital, which in turn
should exceed our cost of capital. Over the last 12 months, the post tax
return on average capital employed (including debt) has improved to 17.2%
(12 months to 30 June 2004: 15.5%). This compares to our weighted average
cost of capital which is 8.5%
* we have continued with our strategy of acquiring small, realistically
priced businesses which complement or develop our current service offerings.
Total committed spend on 5 acquisitions to date this year has been £44.3m
(net of cash acquired). Further information is provided later in the
statement
* a core plank in the creation of shareholder value is a progressive
dividend policy. The Board has declared an interim dividend of 2.1p net per
ordinary share (2004: 1.75p), a 20% increase. Over the last five years, we
have grown Capita's annual dividend at a compound rate of 33%. The dividend
will be payable on 7 October 2005 to shareholders on the register at the
close of business on 9 September 2005. The interim dividend is covered 3.8
times by earnings per share before share based payment charge, intangible
amortisation and one-off items
* at our Annual General Meeting in April, shareholders renewed our authority
to repurchase up to 10% of our issued share capital. To date this year, the
Group has bought back 5 million shares (representing 0.8% of the issued
share capital) at an average price of 373p.
Creating organic growth
We have two complementary approaches to creating organic growth. First, our
centrally managed major sales team seeks to secure contracts typically with a
value of £10m or above. These contracts are complex, integrated projects that
require a wide range of the Group's skills and which generate high quality,
recurring revenues. Secondly, each of our businesses employs sales teams focused
upon securing growth from both new and existing customers, including developing
our major contract relationships. Across the Group, we have more than 20,000
customers and our retention rate remains excellent.
Organic Growth: securing major contracts
Securing and renewing major contracts is an important component of our growth.
This year, we have announced £140m of major contract wins and renewals,
comprising a 3 year contract with eircom, a 10 year contract with Chester Street
Insurance, a 21 month extension to our Office Services contract with the
Department for Work and Pensions ('DWP'), a 3 year extension to our Norwich
Union Clubline contract and a 12 year contract extension with Mendip District
Council.
I am pleased to report today that Capita has been selected to deliver a major
service transformation programme for Harrow Council in a proposed 10 year
partnership, estimated by the Council to be in the region of £100m, with initial
works in excess of £45m over the first 3 years. Consequently, this makes a total
of £240m additional business announced in the first 7 months of 2005,
representing £154m in new business and £86m in contract extensions.
Harrow Council has selected Capita as its preferred partner in the Council's
Business Transformation initiative. Key elements of this innovative, incremental
partnership will involve the support and development of a contact centre and
'one stop shop', a programme to enhance its internal operational systems and
processes, integrated Management Information Services and associated ICT
infrastructure and systems management.
In the 4 1/2 years to 31 December 2009, we have only 3 material contracts
(defined as having annual revenue in excess of 1% of 2004 turnover) due for
renewal. The first of these falls due on 1 August 2006. We are now involved in
bids to extend all 3 of these contracts.
Recent progress in converting our bid pipeline into secured contracts has been
affected by two specific factors. First, the May General Election had a minor
impact on delaying central government opportunities. Secondly, the possibility
of VAT becoming chargeable on the provision of certain outsourcing services to
the financial services sector has resulted in a pause in some of our bids in the
life and pensions and insurance markets. We have relegated a small number of
these opportunities to our prospects list due to the current uncertainty
regarding speed of bid progression. However, we believe the position regarding
the application of VAT in these markets is becoming clearer and that the level
of savings we are able to provide for the finance industry is sufficiently large
that a more normal rate of progress will prevail in the second 6 months.
Our major contract bid pipeline remains at a substantial level, having been
replenished at a healthy rate. We are currently working on live major bids with
a total value of £3.4bn across the public and private sectors. This total only
includes bid situations in which Capita is shortlisted as one of 4 or fewer
competitors and caps our largest bids at £500m.
Organic Growth: developing major contracts
Client satisfaction with high levels of service across our major contracts is
enabling us to expand these partnerships. For example:
* as an addition to our TV Licensing contract, we have agreed funding with
the BBC for field generated sales, which is worth up to £7.5m over 2 years.
Together with the BBC and its other partners, we have introduced measures to
make payment easier and more efficient and further reduced the evasion rate
from 5.7% to 5% (31 March 2004 to 31 March 2005; of the 0.7% reduction, 0.3%
is due to the downward revision by BARB of the estimate of the number of
households with televisions). As a result, improvements in licence fee
collection have increased revenue to the BBC by £19m for the year ended 31
March 2005
* our revenues administration contract for Westminster City Council,
initially awarded in 1994, has been extended for a further 31 months to the
end of October 2008
* we have been, subject to contract, awarded a £5m contract extension to
handle additional customer calls for Dixons Group plc, following our success
in swiftly raising the service performance of its customer contact centre
* the Criminal Records Bureau ('CRB'), which has met all its Public Service
Standards for issuing Disclosures since June 2003, continues to increase its
capacity and capability. It issued the one millionth Disclosure after 10
months of operation, the second million in 6 months and the third in only 5
months. It is anticipated that the CRB will issue in excess of 2.7m
Disclosures in 2005. One key enhancement to the service is the I-PLX
(Interim Police Local Cross-Referencing) database, developed and maintained
by Capita in conjunction with the CRB Agency. I-PLX will help to improve the
sharing of information across the Criminal Justice Service
* our contract to administer Transport for London's Central London
Congestion Charging Scheme has met in excess of 90% of its Key Performance
Indicators every month this year. Over 50% of all charge purchases are now
made via the web or SMS texting, the two most cost effective channels. The
public consultation exercise regarding the extension of the charging zone to
the West of London ended on 15 July 2005 and the Mayor's decision on whether
the Western Extension will go ahead is currently scheduled for autumn of
this year.
Organic growth: Divisions
The businesses across our divisions are delivering pleasing organic growth from
a loyal and growing client base. They focus on continuously evolving their
product and service offerings to position themselves at the leading edge of
their marketplaces.
In the period, Capita Symonds has secured some key roles delivering multi
disciplinary property consultancy services across a number of significant
projects for clients including the Ministry of Defence, the Highways Agency,
Lansdowne Road Stadium Development Company and South Lancashire Council. The
projects, worth a total £1.52bn, will generate estimated fees of £16m to Capita
Symonds. The company was also involved in supporting London's 2012 Olympic and
Paralympic Games Bid, providing a full range of environmental, planning,
transport and engineering support.
Following the Bid's success, Capita Symonds is now bidding with partners to
participate in initiatives to ensure that London has all facilities and an
appropriate transport infrastructure in place for the Games. Other parts of the
Group may also benefit from the increased requirement foradministration,
customer services and resources in the run up to 2012.
Our Resourcing businesses have strengthened their performance in the period,
gaining positions on a number of framework and master vendor agreements and
increasing market share across many areas. Veredus has secured integrated
commissions worth nearly £1m to recruit and develop executive teams to deliver
improved services across central and local government organisations, including
the Serious Organised Crime Agency, the Department for Education and Skills,
Northamptonshire and Bedfordshire County Councils.
Our software businesses have performed well, particularly our local government
business which has established a strong position in the market with its ability
to build supportive partnerships with councils who join forces to benefit from
shared IT and software infrastructures and e-government services. For example,
Adur and Horsham District Councils are being provided with Academy revenue
systems running on a shared platform, even though the Councils are not
geographically neighbouring. In the period, Capita Software Services secured new
contracts worth £3.7m, including a contract worth in excess of £1m over 5 years
with Glasgow City Council, the largest Scottish local authority in the UK. The
contract is to provide new council tax and benefits software and support,
including Academy Streetwise Mobile Computing and Citizen self-service modules.
Capita Consultancy continues to not only play an integral role in supporting our
major BPO contracts, but also in delivering transformation programmes across
central and local government. For example, in the period, the consultancy
secured and extended contracts worth a total of £3m for the DWP, the General
Medical Council, Bolton Metropolitan Council and Poole District Council. It was
also awarded the 2005 Management Consultancies Association Gold Award for Change
Management for our work with DWP on Pension Credit.
We have experienced strong trading conditions across our financial services
offering. Our life & pensions operations continue to deliver cost efficiencies
and high levels of customer service by using effective business processes and
proprietary IT infrastructures.
Our pensions administration operation, Capita SIP Services (formerly Capita
PPML), is undertaking a £7m investment programme to position the business at the
forefront of the self invested pensions market. The business will have
unparalleled online capabilities, including a new investment administration
platform for improved asset recording and fund accounting, and will therefore be
well positioned to benefit from opportunities in the run up to pensions
simplification next year. Capita Hartshead has performed particularly well,
securing over 30 new contracts and extensions worth in excess of £8.6m with a
range of clients across the public and private sectors, including Alliance &
Leicester, BP Oil, AWG Plc, Baring Asset Management, British Shipbuilders and
the House of Commons.
Our operations focused on financial and HR administration secured over £9.3m of
new contracts and extensions. New contracts for our share plan, investor
relations and unit trust administration businesses were secured with clients
including ITV, easyJet, PartyGaming plc, Admiral Group plc and Banco Santander.
Capita Registrars secured nearly half of all company flotations over the period,
equating to 63% of flotations by market capitalisation. We continue to develop
new and innovative services in this area, for example, our Director's Interests
and Monitoring Service (DIMS), which helps companies to comply with the
Companies Act 1985 and the new Disclosure Rules. Our HR & payroll business
performed strongly in the first half of the year with new and extended contracts
secured with clients including NAAFI, Royal Bank of Scotland and
GlaxoSmithKline.
Apart from our volume loss adjusting operation, our insurance businesses have
grown strongly in the period, particularly the legal and assistance services,
London Markets and our integrated claims administration offering. As volume loss
adjusting services are increasingly being displaced by in-house, desktop adjusting
services, we have repositioned our adjusting operation to focus on specialised
major and complex loss working with commercial insurers. Capita's combined
insurance services offering now establishes us as an independent insurance
intermediary focused on delivering the core, added value elements of end to end
claims handling. We have also achieved clear market differentiation by developing
the most advanced claims administration SAP platform in the industry. This provides
clients with increased flexibility to meet peaks and troughs in demand and introduces
claims casework management which enhances transparency of claims management, increases
fraud detection and accelerates the settlement of claims.
Organic Growth: Offshore Capabilities
To meet the increasing requirement to offer offshore delivery options in our
major contract bid proposals and to add further value to existing clients and
our own businesses, we are rapidly building our offshore BPO capabilities. We
have recently established a second, modern business centre in Mumbai, comprising
100,000 square feet of space, bringing our total space in India to 120,000
square feet. To service our current flow of offshore work, we are increasing the
number of employees from 130 to 300 by the year end.
The business centres focus on delivering back office administration processes
and infrastructure. With Capita's ability to deliver strong project management,
business process re-engineering and change management, these lower cost
facilities provide an alternative service delivery model to clients wishing to
maximise efficiency whilst maintaining high levels of service performance. We
are currently providing both standalone offshore processes in India and also
seamlessly combining offshore and UK onshore outsourced services for clients and
the Group.
Acquisitions
We are enjoying a healthy flow of acquisition opportunities, with the pricing
environment more favourable than 6 months ago. Our approach remains cautious and
we continue to focus on smaller opportunities, which are priced at a level which
adds value to the Group.
During the period, we completed 3 acquisitions, investing a total of £8.3m (net
of cash acquired), including:
* In February, we invested £4m to acquire Buchanan Consulting Engineers a
leading development and transport planning consultancy. The business has
been successfully integrated into Capita Symonds and reinforces its position
as one of the leading transport and infrastructure planning consultancies
* In June, we acquired Randall Lyons, a leading UK provider of web based
information management solutions and bureau scanning services, for an
initial consideration of £4.2m and a potential deferred element of up to £3m
dependent upon performance. The products and expertise of Randall Lyons
combined with Capita's existing services enable us to offer a comprehensive
web-enabled solution to the storage, retrieval and handling of all types of
documents and images, assisting customers to move efficiently to a paperless
environment.
In July 2005, we have announced a further 2 acquisitions:
* On 12 July, we concluded the acquisition of BMI Health Services for £10m.
This business will be merged with Capita's existing health solutions company
which we acquired from Aon in 2004. This business has already grown
successfully under Capita's ownership in the last 12 months and we believe a
strong occupational health offering has significant market potential going
forward. The combined business will be positioned as the leading and largest
provider of occupational health services to the public and private sectors
in the UK.
* On 25 July, we announced the acquisition of BDML Connect Ltd from the
insurance group BDML, subject to final FSA approval. The business will be
acquired for an initial cash consideration of £26m with a deferred
consideration of up to £9m, dependent on future business
performance in the 30 months to 31 December 2007. BDML Connect delivers personal
lines insurance services on behalf of major affinity brands such as Norwich
Union, Admiral Insurance and RAC. The acquisition enhances Capita's insurance
capabilities, positioning us strongly in the affinity market with the ability to
provide end to end services, from sales and claims administration to policy,
across a broad range of personal lines products.
Our pipeline of potential businesses to be acquired is encouraging and it is
likely there will be further acquisitions in the second half.
Divisional structure
In our statement in February 2005, we announced the appointment of two new
Divisional Executive Directors. These appointments were made to support Capita's
growth going forward. We now operate Capita through 7 divisions, comprising 5
operating divisions and 2 support divisions (being major sales & marketing and
central support functions). As a consequence of this and the requirement to
comply with the new International Financial Reporting Standards, we are now
providing shareholders with increased detail regarding the performance of
individual parts of Capita's business. Accordingly, these results analyse our
performance across the 5 operating divisions and additionally, our Business
Services Division is reported financially as 2 separate business segments, being
our Property Consultancy and Resourcing operations. Therefore, we are reporting
across 6 areas of business as opposed to the 4 areas reported last year.
Valuing our people
Yet again, our people have made an enormous contribution to Capita's continued
progress. We have a stable and consistent management team, a low turnover of
senior people and an excellent team spirit and attitude throughout the company.
I would like to thank our staff for the vital part they play in Capita's
continued success.
Future prospects
The components for a highly successful 2005 are already in place and we believe
shareholders will be pleased with the results for the year as a whole.
Furthermore, the ingredients are also in place for delivering strong growth in
2006. Our businesses are in excellent shape for generating incremental growth
and the market for BPO opportunities across both the private and public sectors
continues to be buoyant. We are confident that we will make the most of these
opportunities while continuing to maintain high levels of selectivity.
Rodney M Aldridge, OBE
Executive Chairman
Interim 2005 under IFRS - the Capita Group Plc
Consolidated income statement
for the six months ended 30 June 2005
2005 2004
Before Amortisation
amortisation share-based
share-based payment and
Before payment and loss on
amortisation Amortisation loss on disposal of
and share- and share- disposal of discontinued
based based discontinued operation
payment payment Total operation Total
Notes £Million £Million £Million £Million £Million £Million
------------------------------------------------------------------------------------------------------------------
Continuing operations:
Revenue 1 687.3 - 687.3 617.3 - 617.3
==================================================================================================================
Operating profit 1 81.0 (4.4) 76.6 68.8 (3.0) 65.8
Finance costs (6.5) - (6.5) (5.5) - (5.5)
------------------------------------------------------------------------------------------------------------------
Profit from continuing
operations before tax 74.5 (4.4) 70.1 63.3 (3.0) 60.3
Income tax expense (20.9) 1.3 (19.6) (17.9) 1.0 (16.9)
------------------------------------------------------------------------------------------------------------------
Profit for the period
from continuing
operations 53.6 (3.1) 50.5 45.4 (2.0) 43.4
------------------------------------------------------------------------------------------------------------------
Discontinued operations:
Loss for the period
from discontinued
operation - - - (0.3) (0.7)* (1.0)
------------------------------------------------------------------------------------------------------------------
Profit for the period 53.6 (3.1) 50.5 45.1 (2.7) 42.4
==================================================================================================================
Attributable to:
Equity holders
of the parent 53.4 (3.1) 50.3 45.1 (2.7) 42.4
Minority interest 0.2 - 0.2 - - -
------------------------------------------------------------------------------------------------------------------
53.6 (3.1) 50.5 45.1 (2.7) 42.4
==================================================================================================================
Earnings per
share (EPS) - Basic 4 8.06p (0.47)p 7.59p 6.75p (0.40)p 6.35p
==================================================================================================================
- Diluted 4 7.92p (0.46)p 7.46p 6.71p (0.40)p 6.31p
==================================================================================================================
EPS excluding
discontinued
operations:
- Basic 4 8.06p (0.47)p 7.59p 6.79p (0.29)p 6.50p
==================================================================================================================
- Diluted 4 7.92p (0.46)p 7.46p 6.75p (0.29)p 6.46p
==================================================================================================================
*This amount represents the loss on the disposal of business of £1.0m (as
disclosed in the previous UK GAAP financials) net of tax of £0.3m
Consolidated balance sheet
at 30 June 2005
(Restated under IFRS)
30 June 30 June 31 December
2005 2004 2004
Notes £Million £Million £Million
-------------------------------------------------------------------------------
ASSETS
Property, plant and equipment 138.3 119.9 129.1
Intangible assets 6/7 516.4 481.0 500.2
Available for sale financial
assets 0.2 0.2 0.2
Deferred taxation 36.6 29.1 32.6
-------------------------------------------------------------------------------
Total non-current assets 691.5 630.2 662.1
-------------------------------------------------------------------------------
Trade and other receivables 167.2 150.9 150.4
Prepayments and accrued income 116.1 120.1 98.7
Cash at bank - 4.8 -
-------------------------------------------------------------------------------
Total current assets 283.3 275.8 249.1
-------------------------------------------------------------------------------
TOTAL ASSETS 974.8 906.0 911.2
===============================================================================
EQUITY AND LIABILITIES
Equity attributable to equity
holders of the parent
Issued capital 9 13.5 13.4 13.4
Share premium 9 251.5 246.2 248.1
Treasury shares 9 (13.3) - (0.2)
Capital redemption reserve 9 0.1 0.1 0.1
Foreign currency translation 9 (0.1) - 0.1
Retained earnings 9 120.0 88.8 98.4
-------------------------------------------------------------------------------
371.7 348.5 359.9
-------------------------------------------------------------------------------
Minority interest 9 0.6 0.3 0.4
-------------------------------------------------------------------------------
Total equity 372.3 348.8 360.3
-------------------------------------------------------------------------------
Non-current liabilities
Interest-bearing loans and
borrowings 145.2 145.1 145.2
Provisions 4.8 6.3 5.5
Employee benefits 54.6 76.8 44.1
-------------------------------------------------------------------------------
204.6 228.2 194.8
-------------------------------------------------------------------------------
Current liabilities
Trade and other payables 109.4 130.8 87.8
Accruals and deferred income 203.0 161.2 196.1
Interest-bearing loans and
borrowings 2.3 6.8 6.8
Income tax payable 24.6 30.2 28.4
Overdraft 58.6 - 37.0
-------------------------------------------------------------------------------
397.9 329.0 356.1
-------------------------------------------------------------------------------
TOTAL LIABILITIES 602.5 557.2 550.9
-------------------------------------------------------------------------------
TOTAL EQUITY AND LIABILITIES 974.8 906.0 911.2
===============================================================================
Consolidated cash flow
for the six months ended 30 June 2005
Notes June June 2004
2005 (restated)
£m £m
-------------------------------------------------------------------------------
Cash flows from operating activities
Operating profit before interest
and taxation 76.6 65.5
Depreciation 16.5 16.7
Amortisation of intangible assets 1.2 0.7
Share based payment expense 3.2 2.3
Increase in provisions 0.1 0.9
Provisions utilised (0.7) (0.5)
Decrease in debtors (35.3) (36.4)
Increase in creditors 33.8 32.7
-------------------------------------------------------------------------------
Cash generated from operations 95.4 81.9
-------------------------------------------------------------------------------
Interest paid (6.5) (5.5)
Income tax paid (22.4) (12.4)
-------------------------------------------------------------------------------
Net cash generated from operating
activities 66.5 64.0
-------------------------------------------------------------------------------
Net cash used in investing
activities
Purchase of fixed assets (24.1) (23.7)
Purchase of intangible fixed assets 6 (4.0) -
Purchase of subsidiary undertakings
and businesses (net of cash
acquired) 7 (22.1) (31.4)
-------------------------------------------------------------------------------
(50.2) (55.1)
Net cash used in financing
activities
Issue of ordinary share capital 3.5 1.1
Share buybacks (13.1) (0.9)
Dividends (23.8) (18.0)
Repayment of loans notes and long
term loans (4.5) (6.1)
-------------------------------------------------------------------------------
(37.9) (23.9)
Net decrease in cash and cash
equivalents (21.6) (15.0)
Cash and cash equivalents at the
beginning of the period (37.0) 19.8
-------------------------------------------------------------------------------
Cash and cash equivalents at 30
June (58.6) 4.8
===============================================================================
Cash and cash equivalents comprise:
(Overdraft)/cash at bank (58.6) 4.8
-------------------------------------------------------------------------------
Total (58.6) 4.8
===============================================================================
Statement of Recognised Income and Expense
for the six months ended 30 June 2005
Notes June 2005 June 2004
£m £m
-------------------------------------------------------------------------------
Profit for the period 50.3 42.4
Exchange loss (0.2) -
Actuarial (loss)/gain on pension scheme
valuations (13.7) 0.6
Taxation 4.1 1.0
-------------------------------------------------------------------------------
40.5 44.0
===============================================================================
Notes to the consolidated financial statements
at 30 June 2005
1. Segmental reporting
Analysis of segment revenue
Resourcing Commercial Corporate Integrated Professional Property
services services services services services services Total
------------------------------------------------------------------------------------------
2005 £m £m £m £m £m £m £m
Continuing 90.4 119.5 110.9 177.5 100.9 88.1 687.3
------------------------------------------------------------------------------------------
2004 - restated
------------------------------------------------------------------------------------------
Continuing 88.0 115.8 87.1 155.7 96.9 73.8 617.3
Discontinued - - - 1.9 1.0 - 2.9
------------------------------------------------------------------------------------------
Total 88.0 115.8 87.1 157.6 97.9 73.8 620.2
------------------------------------------------------------------------------------------
Analysis of segment result
Resourcing Commercial Corporate Integrated Professional Property
services services services services services services Total
------------------------------------------------------------------------------------------
2005 £m £m £m £m £m £m £m
Continuing 6.2 10.2 19.3 25.2 12.6 7.5 81.0
------------------------------------------------------------------------------------------
2004 - restated
------------------------------------------------------------------------------------------
Continuing 4.5 9.5 14.4 21.6 11.3 7.5 68.8
Discontinued - - - (0.1) (0.2) - (0.3)
------------------------------------------------------------------------------------------
Total 4.5 9.5 14.4 21.5 11.1 7.5 68.5
------------------------------------------------------------------------------------------
The segments disclosed above differ from those disclosed in the group's most
recent set of interim financial statements published for the period ended June
2004. These statements were prepared under UK GAAP and thus are required to be
restated to meet the disclosure requirements of IAS-14 Segmental reporting.
These requirements mean that the group will now report six divisions. The impact
of the changes due to adoption of IAS-14 and also changes due to an internal
restructure to better align businesses within the regulatory environment, are as
follows:
Analysis of segment revenue
Resourcing Commercial Corporate Integrated Professional Property
services services services services services services Total
------------------------------------------------------------------------------------------
2004 £m £m £m £m £m £m £m
As reported
June 2004 167.1 168.2 - 140.1 141.9 - 617.3
Adjustments
due to IAS-14 (73.8) - - - - 73.8 -
Adjustments
due to
restructure (5.3) (52.4) 87.1 15.6 (45.0) - -
------------------------------------------------------------------------------------------
As reported
June 2005 88.0 115.8 87.1 155.7 96.9 73.8 617.3
------------------------------------------------------------------------------------------
Analysis of segment result
As reported
June 2004 11.4 20.1 - 19.2 18.1 - 68.8
Adjustments
due to IAS-14 (7.5) - - - - 7.5 -
Adjustments
due to
restructure 0.6 (10.6) 14.4 2.4 (6.8) - -
------------------------------------------------------------------------------------------
As reported
June 2005 4.5 9.5 14.4 21.6 11.3 7.5 68.8
------------------------------------------------------------------------------------------
The major change in the year was the formation of Corporate Services which
incorporates the Life & Pensions business and the financial services businesses
formerly within Commercial Services with the HR and payroll businesses formerly
within Integrated Services. Congestion Charging and the insurance related
businesses formerly part of Professional Services have been transferred to
Integrated Services and Commercial Services respectively.
2. The interim financial statements have been prepared on the basis of the
accounting policies set out in 'Restatement of Financial Information under
International Financial Reporting Standards', a separate document that has been
published on the Capita website (www.capita.co.uk) and which is also available
upon request. Further disclosure concerning the impact of IFRS on the financial
statements of the group can also be found in that document including the
reconciliations required by IFRS 1 'First Time Adoption of International
Financial Reporting Standards'. The accounting policies are drawn up in
accordance with International Accounting Standards (IAS) and International
Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board.
3. These financial statements are prepared in accordance with the
accounting policies detailed in the 'Restatement of Financial Information under
International Financial Reporting Standards' referred to above and were approved
by a duly appointed and authorised committee of the Board of Directors on 27
July 2005. The full year accounts, on which the auditors gave an unqualified
report and which were prepared under UK GAAP, have been filed with the registrar
of Companies. The figures for the six months ended 30 June 2004 and 2005 are
un-audited.
4. Earnings per share have been calculated in accordance with IAS-33
Earning per share. The average number of shares in issue during the period was
662.8m (30 June 2004: 667.7m). The diluted earnings per share have been
calculated on the diluted profit for the period of £50.3m (30 June 2004 -
restated: £43.4m before discontinued operations and £42.4m after) and an average
diluted number of shares of 674.6m (30 June 2004 - restated: £671.6m). As at 27
July, there were 659.1m shares in issue.
5. The interim dividend of 2.10p per share will be payable on 7 October
2005 to ordinary shareholders on the register at the close of business on 9
September 2005. The dividend disclosed in the cash flow represents the final
ordinary dividend of 3.60p per share as declared in the 31 December 2004
financial statements and agreed at the group's AGM.
6. The Group made a final consideration payment to Aon, with regard to the
contract for the administration of miners' personal injury liability claims, of
£4.0m.
7. During the year the group has made a number of acquisitions. In each
case the group attained 100% control of the voting shares or control over the
business, assets and liabilities acquired.
The fair value of the identifiable assets and liabilities of the acquisitions,
in aggregate, was:
Recognised on
acquisition Carrying value
-------------------------------------------------------------------------------
£m £m
Property, plant and equipment 0.1 0.2
Trade receivables 3.0 3.1
Taxation (0.2) (0.2)
Trade payables (2.4) (2.2)
Cash and cash equivalents 0.9 0.9
-------------------------------------------------------------------------------
Fair value of net assets 1.4 1.8
=============
Goodwill arising on acquisitions 7.8
-------------------------------------------------------------
Cash consideration 9.2
=============================================================
An exercise to determine any intangible assets included within goodwill is yet
to be undertaken, this exercise will be completed for the full year financial
statements.
During the year the group settled final deferred consideration in relation to
the previous acquisition of the life and pensions business of Lincoln Financial
Group with a payment of £13.8m on which £6.6m had been accrued, resulting in an
increase in goodwill of £7.2m.
The acquisitions have been completely integrated within the existing businesses
of the Group and consequently it is not possible to determine their post
acquisition results.
8. Movement in net debt
Debt at 1 Other cash flow Non cash
January 2005 Debt repaid movements movements Total
£m £m £m £m £m
--------------------------------------------------------------------------------------
Cash and cash
equivalents (37.0) - (21.6) - (58.6)
--------------------------------------------------------------------------------------
Cash and cash
equivalents (37.0) - (21.6) - (58.6)
Loan notes (27.1) 4.4 - - (22.7)
Bonds (124.7) - - - (124.7)
Finance leases (0.2) 0.1 - - (0.1)
--------------------------------------------------------------------------------------
(189.0) 4.5 (21.6) - (206.1)
======================================================================================
9. Statement of Changes in Equity
Profit
Capital Foreign and
Share Treasury Share redemption currency loss Minority Total
capital shares premium reserve reserve reserve Total interest equity
£m £m £m £m £m £m £m £m £m
-----------------------------------------------------------------------------------------------------------------------
At 1 January 2004 13.4 (0.2) 248.1 0.1 0.1 98.4 359.9 0.4 360.3
Profit for the period - - - - - 50.3 50.3 0.2 50.5
Dividends - - - - - (23.8) (23.8) - (23.8)
Exchange differences - - - - (0.2) - (0.2) - (0.2)
Share buybacks - (13.1) - - - - (13.1) - (13.1)
Issue of share capital 0.1 - 3.4 - - - 3.5 - 3.5
Actuarial losses on
defined benefit schemes - - - - - (13.7) (13.7) - (13.7)
Share based payment - - - - - 3.2 3.2 - 3.2
Tax taken to equity - - - - - 5.6 5.6 - 5.6
-----------------------------------------------------------------------------------------------------------------------
At 30 June 2005 13.5 (13.3) 251.5 0.1 (0.1) 120.0 371.7 0.6 372.3
=======================================================================================================================
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