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Capita Group PLC (CPI)

  Print      Mail a friend       Annual reports

Thursday 21 February, 2002

Capita Group PLC

Final Results

Capita Group PLC
21 February 2002

21 February 2002

                              THE CAPITA GROUP PLC

           Preliminary results for the year ended 31st December 2001



-         Strong growth throughout the period, with turnover increasing by 52%
          to £691m (2000: £453m) and operating profit by 45% to £77.1m (2000: 

-         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

-         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


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%.


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

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

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

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.


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

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

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.


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)

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

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
                                                                         (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)

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
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                                     113,856           238,681           50,471                403,008
          Net operating assets including               130,611           218,628           68,982                418,221

          Non-operating liabilities                                                                            (136,555)

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
          Associated undertakings                                                                                     75
          Non-operating liabilities                                                                             (75,315)

Non-operating liabilities comprise taxation and dividend liabilities and net

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

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

                                                                                       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

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
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.

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