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Capita Group PLC (CPI)

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Thursday 20 July, 2006

Capita Group PLC

Interim Results

Capita Group PLC
20 July 2006


20 July 2006

                              THE CAPITA GROUP PLC
                 Interim Results for the 6 months to 30 June 2006

                    CONSIDERABLE PROGRESS IN FIRST 6 MONTHS

Financial Highlights


                           6 months to         6 months to            Change
                          30 June 2006        30 June 2005

Turnover                       £845.0m             £687.3m             +23%
Operating profit*              £103.2m              £81.0m             +27%
Profit before tax*              £92.4m              £74.5m             +24%
Earnings per share*             10.47p               8.06p             +30%
Interim dividend per share        2.7p                2.1p             +29%

Key points

• Operating margins* increased to 12.2% (2005: 11.8%)
• Operating cash flow of £121.5m (2005: £95.4m)
• £806m major contract wins and renewals in first 7 months of 2006
• Replenished bid pipeline of £2.8bn
• Active public and private sector markets
• Share buybacks of 7.2% of issued share capital returns £214m to shareholders


* before share based payment charge of £4.1m and amortisation of separately 
  identifiable intangible assets of £3.2m


Rod Aldridge, Non-Executive Chairman of The Capita Group Plc, commented:

'Capita has made considerable progress in the first 6 months of the year,
reflected in another period of excellent financial results. There is good
visibility of Capita's financial performance for 2006 and the Board believes
shareholders will be very pleased with the results for the year as a whole.

'Our businesses are in superb shape to deliver incremental growth and the market
for BPO opportunities continues to be extremely active. The Board therefore
anticipates delivering strong growth in 2007.'

For further information:

The Capita Group Plc                                Tel: 020 7799 1525
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


Chairman's Statement


Results

Capita has made considerable progress during the 6 months to 30 June 2006. We
have secured a significant volume of new business, thereby strengthening our
position as the UK's market leader in providing business process outsourcing
(BPO) services to the public and private sectors.

During the period, turnover increased by 23% to £845.0m (6 months to 30 June
2005: £687.3m). Operating profits before the share based payment charge and
amortisation of separately identifiable intangible assets rose by 27% to £103.2m
(2005: £81.0m) and net profits before taxation, share based payment charge and
intangible amortisation grew by 24% to £92.4m (2005: £74.5m). Earnings per share
before share based payment charge and intangible amortisation grew by 30% to
10.47p (2005: 8.06p).

We remain very excited by the continued opportunities to develop the Group and
we will continue to build long term, sustainable value for our shareholders,
customers and our employees.

Creating value for shareholders

To ensure we are creating value for shareholders, we focus on a number of key
measures. We believe that the disciplines set out below collectively form an
integral part of building value for our shareholders on a consistent basis over
the long term.

  • We have continued our long term trend of improving operating margins,
    which have again increased during the period to 12.2% (2005: 11.8%). This is
    a pleasing performance given the higher than usual level of implementation
    costs associated with the start up of a record number of new contracts. The
    improving margin reflects the continued increase in economies of scale in
    the business.

  • The strength of Capita and its business model is reflected in our
    excellent underlying cash flow, with £121.5m (2005: £95.4m) generated by
    operations, representing an operating profits to operating cash conversion
    rate of 118% (2005: 118%).

  • 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, we met
    this objective with net capital expenditure being 3.9% (2005: 4.1%) of
    revenue.

  • We focus on driving a steadily increasing return on capital, which in
    turn should exceed our cost of capital. Over the last 12 months, our post
    tax return on average capital employed (including debt) has improved to
    18.7% (12 months to 30 June 2005: 17.2%). This compares to our weighted
    average cost of capital which is currently estimated at 7.8%.

  • A key element in the creation of shareholder value is a progressive
    dividend policy. The Board has declared an interim dividend of 2.7p net per
    ordinary share (2005: 2.1p), a 29% increase. The dividend will be payable on
    6 October 2006 to shareholders on the register at the close of business on 1
    September 2006.

  • There may be circumstances in which market conditions allow us to add
    further value for shareholders through share buybacks, thus ensuring we have
    an efficient capital structure which will minimise our long term cost of
    capital. At our Annual General Meeting in April, shareholders renewed our
    authority to re-purchase up to 10% of our issued share capital. To date this
    year, the Group has bought back 47m shares (representing 7.2% of the issued
    share capital) at an average price of £4.53. Through this means, £214m has
    been returned to shareholders over the last 5 months.

  • We continue to see a very healthy flow of acquisition opportunities. Our
    focus remains firmly on small to medium sized transactions, priced at a
    level which adds value for shareholders. During the period, we undertook 7
    transactions, investing a total of £36.2m (net of cash acquired). Our
    pipeline of potential acquisitions is very encouraging and it is likely
    there will be further small acquisitions in the second half of the year.

Creating organic growth & developing through acquisitions

Of the 23% increase in turnover in the first 6 months of 2006, 17% was achieved
through organic growth and the remaining 6% was derived from acquisitions.

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 existing and new customers. Customers range across our 8 chosen
markets (local government, central government, education, transport, health,
life & pensions, insurance and other private sector organisations) and our
retention rate is exemplary.

Additionally, we achieve growth through acquiring businesses which enable us to
build on our existing capabilities or establish a presence in a new market area.

   • Securing major contracts

Securing and renewing major contracts is an important component of our growth.
This year, we have announced £655m of major contract wins and renewals,
including a 10 year contract worth £132m with the BBC, a 3 year contract worth
£120m with the DTI, a 7 year contract worth £120m with DSG international plc and
a 15 year contract worth £100m with Fujitsu, as part of a consortium providing
services to the Northern Ireland Civil Service.

We are continuing to enjoy a buoyant period of activity and I am pleased to
report today that we have signed a number of new contracts with new and existing
clients:

o        Rossendale Borough Council - we have been selected as preferred
supplier to provide revenues and benefits administration and customer services
to the Council in a contract worth £12.6m over 10 years.

o        Westminster City Council - our revenues and benefits administration
contract has been re-awarded for an additional 7 years to 2015 in a contract
worth £50m to the Group.

o        In December 2005, Birmingham City Council chose Capita as their
strategic partner to support business transformation and ICT within the Council.
A special purpose vehicle, Service Birmingham, was set up by Capita and a 10
year, £475m contract to deliver ICT transformation was signed in April 2006.
Governance arrangements were also put in place for additional business
transformation programmes to be proposed and implemented. The business case for
the first of these programmes, to transform corporate services, was approved
this week. This programme is additional to the initial ICT contract and has been
allocated a budget of £88m over 3 years. Delivery of the corporate services
transformation programme will be supported by Service Birmingham and its
sub-contractor Axon.

As a consequence of this activity, the total value of major contracts won and
extended in the first 7 months of 2006 totals £806m (2005: £240m), representing
£624m in new business and £182m in contract extensions and re-awards.

In the 4.5 years to 31 December 2010, we have only 4 material contracts (defined
as generating annual revenue in excess of 1% of 2005 turnover) due for renewal.
The first of these falls due in 2007 and we are currently involved in a bid to
extend this.

Over the last 8 months, there has been a significant volume of contract
decisions and Capita has been successful in the majority of these. As a
consequence, a key focus in recent months has been to replenish the bid
pipeline, which we have done successfully. We are currently working on live
major bids with a total value of £2.8bn 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.

Very strong revenue growth for 2006 is already underpinned. We are now focused
on securing further strong growth for 2007.

   • Major contract update

In the first half of the year, we have successfully transferred a number of
complex services. These include:

o        Our contract with Zurich's UK Life business, which commenced in
February of this year, is progressing well. The 2 stage transition programme was
delivered smoothly, an excellent achievement given the scale of the operation.
In the first 5 months of the contract, we have delivered improvements in service
and quality.

o        The BBC HR contract, supporting certain recruitment, payroll and HR
administration and occupational health services, commenced in April. The
creation of a centralised HR services centre in Belfast is on schedule to go
live from September. The focus of the contract is to re-engineer processes and
introduce systems which will support the BBC's e-enablement of HR services and
its drive for cost efficiencies.

o        Our additional contract with DSG international plc to run their
technical support centre in Nottingham commenced in March. All staff have been
transferred and the initial transformation plan is on schedule to complete at
the end of July. In the first 4 months under our management, we are already
meeting or exceeding all service performance targets and have introduced a
number of technology and quality initiatives to improve the customer experience.

   • Development across our businesses

Our major businesses across the Group have maintained or grown market share in
the first half through securing new business and developing existing
relationships. In the financial services, insurance, property and software
services markets, we have also expanded through acquisition. Some business
highlights from the first half are detailed below.

We have performed strongly across the local government and education markets. In
particular, Capita Local Government Services has enjoyed an exceptionally
buoyant period, achieving a strong run of contract wins and extensions including
council tax and benefits administration contracts with Havant Borough Council
and business rates collection for the Royal Borough of Kensington & Chelsea.

Capita Hartshead, our occupational pensions administration business, has made
good progress, securing £14m of new business and contract renewals in the first
half of the year. New contracts include pensions administration for Bombardier
Transportation UK Ltd, TDG plc and Delta Pensions Nominees Limited with a
combined membership in excess of 42,000 people. We have also signed a contract
with the Pension Protection Fund ('PPF') to provide compensation administration
and payment services. The PPF was established by the Government to pay
compensation to members of eligible defined benefit pension schemes, where there
is a qualifying insolvency event in relation to the employer.

Wherever possible, we draw together services from across our businesses to add
further value for clients. For example, our 'Enabler' programme which draws on
the capabilities of our life & pensions, SIPP, unit trust and general insurance
administration services and recently acquired software firms, Quay Software and
Webline, will deliver electronic trading for providers and advisers, improving
control, cutting costs and enhancing service.

Also in the financial services arena, we recently acquired the investment fund
administration businesses of Sinclair Henderson from iimia Investment Group
Plc. The acquisition adds significantly to Capita's current fund administration
capabilities, with the enlarged business having combined assets under
administration of some £25 billion. As a result, Capita Financial Group will
administer approximately 20 per cent of the authorised open ended funds in the
UK and will be positioned in second place in the investment trust administration
market.

Capita Symonds is now the 5th largest multidisciplinary property and
infrastructure consultancy in the UK. The business has grown well over the first
6 months of the year, securing a number of new contracts. In March, Capita
Symonds was named as preferred bidder for Lancashire County Council's flagship
Building Schools for the Future programme as part of the Catalyst Education
consortium. We will provide partnering and education services as lead consultant
for the design team. In May, the BBC selected Capita Symonds to supply project
management and planning supervision services for a wide range of small to
medium-sized construction projects across its UK property portfolio. For a
combination of reasons, we took the decision to withdraw from our Dubai Rapid
Link contract and we have provided in full for the costs of our early exit.
Consequently, margins for Capita Symonds are lower than last year, but are
anticipated to recover in the second half of the year.

Board changes

This will be the 35th and final time that I have presented results to
shareholders as I intend to retire from the Group on 31 July 2006. Under my
chairmanship, Capita has grown from a start up in 1984 to a FTSE 100 company
today and has shaped the BPO marketplace in the UK.

During Capita's 17 years as a public company, shareholders have enjoyed a total
shareholder return of 165 times, equating to a 35% per annum compound return.
Our employee numbers have grown from 98 to 26,000 and it has been my privilege
to work with some exceptionally talented and committed people. Our client base
has grown from a handful to over 25,000 organisations across the UK and these
relationships are hugely valued and enduring.

On 1 August, Eric Walters will take over the reins as Non-Executive Chairman.
Eric has been a Director of Capita for over 5 years and has a deep understanding
of our business and our culture. I wish Eric well in his new role and I hand
over in confidence, with the knowledge that the company is in the best health
and the best position it has enjoyed in its history.

The value that we have created for our shareholders and other stakeholders in
Capita is a direct result of the competence and commitment that our staff give
to the company. The culture within Capita and its people is a key differentiator
from our competition. We have a stable and consistent management team, a
remarkably low turnover of senior people and an excellent spirit throughout the
company.

I would like to thank everyone for the vital role they play in Capita's success
and to wish them all well for the future.

Future prospects

There is good visibility of Capita's financial performance for 2006 and the
Board believes shareholders will be very pleased with the results for the year
as a whole.

Our businesses are in superb shape to deliver incremental growth and the market
for BPO opportunities continues to be extremely active. The Board therefore
anticipates delivering strong growth in 2007.


Rodney M Aldridge OBE
Non-Executive Chairman





Interim condensed consolidated income statement
for the 6 months to 30 June 2006

                                                            2006                                   2005
                                  Before                                 Before
                            amortisation   Amortisation            amortisation   Amortisation
                               and share      and share               and share      and share
                                   based          based                   based          based
                                 payment        payment    Total        payment        payment    Total

                      Notes           £m             £m       £m             £m             £m       £m

Continuing operations:
Revenue                 3          845.0              -    845.0          687.3              -    687.3

Operating profit        3          103.2          (7.3)     95.9           81.0          (4.4)     76.6

Finance costs                     (10.8)              -   (10.8)          (6.5)              -    (6.5)

Profit from
continuing operations
before taxation                     92.4          (7.3)     85.1           74.5          (4.4)     70.1

Income tax expense                (25.6)            1.7   (23.9)         (20.9)            1.3   (19.6)

Profit for the period               66.8          (5.6)     61.2           53.6          (3.1)     50.5

Attributable to:
Equity holders of the               
parent                              66.9          (5.6)     61.3           53.4          (3.1)     50.3
Minority interest                  (0.1)              -    (0.1)            0.2              -      0.2
                                    66.8          (5.6)     61.2           53.6          (3.1)     50.5
Earnings per          
share (EPS)   
              - Basic   4         10.47p        (0.87)p    9.60p          8.06p        (0.47)p    7.59p
              - Diluted 4         10.29p        (0.86)p    9.43p          7.92p        (0.46)p    7.46p
              






Interim condensed consolidated statement of recognised income and expense
for the 6 months to 30 June 2006

                                                                    2006              2005
                                                                      £m                £m

Actuarial gain/(loss) on defined benefit pension schemes            19.7            (13.7)
Exchange differences on translation of foreign operations          (0.3)             (0.2)
Tax on items taken directly to equity                              (5.5)               4.1
Net income/(expense) recognised directly in equity                  13.9             (9.8)
Profit for the period                                               61.2              50.5
Total income and expense for the period                             75.1              40.7
Attributable to:
Equity holders of the parent                                        65.5              40.5
Minority interest                                                  (0.1)               0.2
                                                                    65.4              40.7





Interim condensed consolidated balance sheet
at 30 June 2006
                                                                    30 June       30 June
                                                                       2006          2005
                                                                               (restated)
                                             Notes                       £m            £m
Non-current assets
Property, plant and equipment                                         163.3         138.3
Intangible assets                                                     605.0         516.4
Financial assets                                                       17.3           0.2
Deferred taxation                                                      15.0          36.6
                                                                      800.6         691.5
Current assets
Trade and other receivables                                           435.9         323.3
Total assets                                                        1,236.5       1,014.8
Current liabilities
Trade and other payables                                              451.3         352.4
Financial liabilities                                                 128.9          60.9
Income tax payable                                                     34.4          24.6
                                                                      614.6         437.9
Non-current liabilities
Financial liabilities                                                 354.8         145.2
Provisions                                                              4.0           4.8
Employee benefits                                                      22.0          54.6
                                                                      380.8         204.6
Total liabilities                                                     995.4         642.5
Net assets                                                            241.1         372.3
Capital and reserves
Issued capital                                 8                       12.6          13.5
Share premium                                  8                      269.2         251.5
Treasury shares                                8                      (0.4)         (0.2)
Capital redemption reserve                     8                        1.1           0.1
Foreign currency translation                   8                          -         (0.1)
Retained earnings                              8                     (41.5)         106.9
Equity shareholders' funds                                            241.0         371.7
Minority interest                              8                        0.1           0.6
Total equity                                                          241.1         372.3






Interim condensed consolidated cash flow statement
for the 6 months to 30 June 2006
                                                                     2006            2005
                                                                               (restated)
                                                         Notes         £m              £m
Cash flows from operating activities
Operating profit on continuing activities before                     
interest and taxation                                                95.9            76.6
Depreciation                                                         21.2            16.5
Amortisation of intangible assets                                     3.2             1.2
Share based payment expense                                           4.1             3.2
Pension charge                                                        7.7             5.3
Pension contributions                                               (8.9)           (8.4)
Movement in provisions                                                0.7           (0.6)
Movement in debtors and creditors                                   (2.4)             1.6
Cash generated from operations                                      121.5            95.4
Income tax paid                                                    (20.0)          (22.4)
Net interest paid                                                  (10.8)           (6.5)
Net cash generated from operating activities                         90.7            66.5
Net cash used in investing activities
Purchase of property, plant and equipment                          (31.9)          (24.1)
Purchase of intangible fixed assets                                 (1.4)           (4.0)
Acquisition of subsidiary undertakings and businesses              (14.6)          (23.0)
Investment                                                         (12.5)               -
Cash acquired with subsidiary undertakings                          (0.3)             0.9
Purchase of trade investments in insurance captives                 (5.2)               -
                                                                   (65.9)          (50.2)
Net cash used in financing activities
Issue of ordinary share capital                            8         11.2             3.5
Share buybacks                                             8      (214.5)          (13.1)
Share transaction costs                                    8        (0.8)               -
Dividends                                                  5       (31.7)          (23.8)
Capital element of finance lease rental payments           7        (0.1)               -
Asset based securitised financing                          7          3.9               -
Repayment of loan notes and long term loans                7        (3.2)           (4.5)
Proceeds on issue of bonds                                 7        102.8               -
                                                                  (132.4)          (37.9)
Net decrease in cash and cash equivalents                         (107.6)          (21.6)
Cash and cash equivalents at the beginning of the period           (19.3)          (26.1)
Cash and cash equivalents at 30 June                              (126.9)          (47.7)
Cash and cash equivalents comprise:
Overdraft                                                  7      (126.9)          (47.7)
Total                                                             (126.9)          (47.7)




Notes to the interim condensed consolidated financial statements
at 30 June 2006


1. Corporate information

The Capita Group Plc is a public limited company incorporated and domiciled in
England whose shares are publicly traded. The interim condensed consolidated
financial statements of the company and its subsidiaries ('the group') were
authorised for issue in accordance with a resolution of the directors on 19 July
2006.


2. Basis of preparation and accounting policies

Basis of preparation

The interim condensed consolidated financial statements for the 6 months to 30
June 2006 have been prepared on the basis of the accounting policies set out in
the group's latest annual financial statements for the year ended 31 December
2005. These 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 with the
exception of IAS 34 Interim Financial Reporting which has not been applied in
these interim condensed consolidated financial statements.

The interim condensed consolidated financial statements do not include all the
information and disclosures required in the annual financial statements and
should be read in conjunction with the group's annual financial statements as at
31 December 2005.

Significant accounting policies

The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements are consistent with those followed in the
preparation of the group's annual financial statements for the year ended 31
December 2005, except for the adoption of the following amendments mandatory for
annual periods beginning on or after 1 January 2006:
     
•    IAS 39 - Financial Instruments: Recognition and Measurement ('IAS 39') - 
     Amendment for financial guarantee contracts - which amended the scope of
     IAS 39 to include financial guarantee contracts issued. The amendment 
     addresses the treatment of financial guarantee contracts by the issuer. 
     Under IAS 39, as amended, financial guarantee contracts are recognised 
     initially at fair value and generally remeasured at the higher of the 
     amount determined in accordance with IAS 37 Provisions, Contingent 
     Liabilities and Contingent Assets and the amount initially recognised less, 
     when appropriate, cumulative amortisation recognised in accordance with IAS 
     18 Revenue;
     
•    IAS 39 - Amendment for hedges of forecast intragroup transactions - which 
     amended IAS 39 to permit the foreign currency risk of a highly probable
     intragroup forecast transaction to qualify as the hedged item in a cash 
     flow hedge, provided that the transaction is denominated in a currency 
     other than the functional currency of the entity entering into that 
     transaction and that the foreign currency risk will affect the financial 
     statements;
     
•    IAS 39 - Amendment for the fair value option - which restricted the use of 
     the option to designate any financial asset or any financial liability to
     be measured at fair value through profit and loss.

The adoption of these amendments did not affect the group results of operations
or financial position.

3. Segmental reporting

Analysis of segment revenue

                 Resourcing Commercial Corporate Integrated Professional  Property
                   Services   Services  Services   Services     Services  Services     Total
2006                     £m         £m        £m         £m           £m        £m        £m
Continuing            101.2      141.2     146.5      214.7        140.3     101.1     845.0

2005
Continuing            105.0      119.5      96.3      177.5        100.9      88.1     687.3





Notes to the interim condensed consolidated financial statements
at 30 June 2006


3. Segmental reporting (continued)

Analysis of segment result

                 Resourcing Commercial Corporate Integrated Professional  Property
                   Services   Services  Services   Services     Services  Services     Total
2006                     £m         £m        £m         £m           £m        £m        £m
Continuing              9.8       14.3      25.6       30.6         17.7       5.2     103.2

2005
Continuing              8.5       10.2      17.0       25.2         12.6       7.5      81.0


During the year the group transferred its human resource and payroll business
from the Corporate Services to the Resourcing Services division. The impact of
this change on the comparatives was to increase revenue in Resourcing Services
by £14.6m and the segment result by £2.3m and to reduce the equivalent items in
Corporate Services by the same amount.

     
4.   Earnings per share

Earnings per share have been calculated in accordance with IAS 33 Earnings per
share. The average number of shares in issue during the period was 638.6m (30
June 2005: 662.8m). The diluted earnings per share have been calculated on the
diluted profit for the period of £61.3m (30 June 2005 - £50.3m) and an average
diluted number of shares of 649.9m (30 June 2005 - £674.6m). As at 19 July,
there were 611.1m shares in issue.


5.   Dividends paid and proposed

The interim dividend of 2.70p (2005: 2.10p) per share (not recognised as a
liability at 30 June 2006) will be payable on 6 October 2006 to ordinary
shareholders on the register at the close of business on 1 September 2006. The
dividend disclosed in the cash flow represents the final ordinary dividend of
4.90p (2005: 3.60p) per share as proposed in the 31 December 2005 financial
statements and approved at the group's AGM (not recognised as a liability at 31
December 2005).

     
6.   Business combinations

The group has made a number of acquisitions in the period which are shown in
aggregate. The book and fair values of the assets acquired are disclosed in the
table below.

                                                                Book values   Fair value to
                                                                                      Group
                                                                         £m              £m
Intangible assets                                                         -             9.1
Property, plant and equipment                                           2.6             1.8
Deferred tax                                                            0.1             0.1
Debtors                                                                 5.4             5.2
Cash and short term deposits                                          (0.3)           (0.3)
Creditors                                                             (8.0)           (8.2)
Corporation tax                                                       (0.1)           (0.1)
Long term loans                                                       (2.9)           (2.9)
Net assets                                                            (3.2)             4.7
Goodwill arising on acquisition                                                         6.8
                                                                                       11.5
Discharged by:
Cash                                                                                   11.5
                                                                                       11.5

The full exercise to determine the intangible assets acquired is still to be
completed, thus the above numbers are provisional; this exercise will be
finalised for the full year financial statements. Further cash consideration was
paid in respect of deferred consideration accrued on previous acquisitions of
£3.0m, there was no impact on goodwill. As required by IAS 12, deferred taxation
has been calculated on intangible assets provisionally recognised. The impact of
this is to create a deferred tax liability of £2.7m and to increase goodwill by
the same amount.




Notes to the interim condensed consolidated financial statements
at 30 June 2006

     
7.   Movement in net debt
                                                         
                                Debt at 1                Other cash
                                  January Acquisitions         flow    Non cash 30 June 2006   
                                     2006    in period    movements   movements        Total
                                       £m           £m           £m          £m           £m
Overdrafts                         (19.3)        (0.3)      (107.3)           -      (126.9)
Cash and cash equivalents          (19.3)        (0.3)      (107.3)           -      (126.9)
Loan notes                         (22.7)            -          0.2           -       (22.5)
Bonds                             (198.6)            -      (102.8)       (0.7)      (302.1)
Long term loans                         -        (2.9)          2.9           -            -
Finance leases                      (0.2)            -          0.1           -        (0.1)
Sub-total net debt                (240.8)        (3.2)      (206.9)       (0.7)      (451.6)
Asset based securitised            (28.2)            -        (3.9)           -       (32.1)
financing
                                  (269.0)        (3.2)      (210.8)       (0.7)      (483.7)

In the period the group issued $190,000,000 of fixed rate bonds. The group
entered into cross currency swaps to convert these dollar issues into sterling
equivalents paying variable rate interest.

                                                        Other cash
                                 Debt at 1                    flow    Non cash 30 June 2005
                              January 2005               movements   movements        Total
                                        £m                      £m          £m           £m
Overdrafts                          (26.1)                  (21.6)           -       (47.7)
Cash and cash equivalents           (26.1)                  (21.6)           -       (47.7)
Loan notes                          (27.1)                     4.4           -       (22.7)
Bonds                              (123.0)                       -           -      (123.0)
Finance leases                       (0.2)                     0.1           -        (0.1)
                                   (176.4)                  (17.1)           -      (193.5)

     
8.   Capital and reserves - reconciliation of movements 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 2005       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    (0.2)    251.5        0.1    (0.1)   106.9   371.7      0.6   372.3

At 1 January 2006       13.4    (0.4)    258.1        0.2      0.3   125.8   397.4      0.2   397.6
Profit for the period      -        -        -          -        -    61.3    61.3    (0.1)    61.2
Dividends                  -        -        -          -        -  (31.7)  (31.7)        -  (31.7)
Exchange differences       -        -        -          -    (0.3)       -   (0.3)        -   (0.3)
Share buybacks         (0.9)        -        -        0.9        - (215.3) (215.3)        - (215.3)
Issue of share capital   0.1        -     11.1          -        -       -    11.2        -    11.2
Actuarial gains on
defined benefit schemes    -        -        -          -        -    19.7    19.7        -    19.7
Share based payment        -        -        -          -        -     4.2     4.2        -     4.2
Tax taken to equity        -        -        -          -        -   (5.5)   (5.5)        -   (5.5)
At 30 June 2006         12.6    (0.4)    269.2        1.1        -  (41.5)   241.0      0.1   241.1

     
9.   The 2005 comparatives have been restated. This is to reflect the treatment 
     of the activities of Capita Financial Managers Limited who act as an
     authorised trust manager.



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