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Capita Group PLC (CPI)

  Print      Mail a friend       Annual reports

Thursday 26 February, 2009

Capita Group PLC

Final Results

                                                               26 February 2009


                             THE CAPITA GROUP PLC                              


            Preliminary Results for the year ended 31 December 2008            


                  STRONG PERFORMANCE AND EXCELLENT PROSPECTS                   


Financial Highlights

                        Year ended 31         Year ended 31         Change
                        December 2008         December 2007               
Turnover                £2,441m               £2,073m               +18%  
Underlying operating    £320.9m               £271.3m               +18%  
profit *                                                                  
Underlying profit       £277.2m               £238.4m               +16%  
before tax *                                                              
Underlying earnings per 33.26p                28.10p                +18%  
Total dividend per      14.4p                 12.0p                 +20%  


* excludes intangible amortisation of £18.6m (2007: £9.7m) and the non-cash
impact of mark to market movement on callable swaps of £32m


Key points


Excellent organic growth. Major contract wins and renewals of £1.24bn in 2008
(2007: £1.89bn). £610m contracts secured in first 7 weeks of 2009.

Bid pipeline stands at £3.1bn (Feb 2008: £2.5bn); markets remain highly active.

Continued operating margin progression: increased by 6 basis points to 13.15%
(2007: 13.09%).

Strong underlying operating cash flow up by 17% to £392m (2007: £334m).

20% dividend increase, maintaining our progressive dividend policy.


Paul Pindar, Chief Executive of Capita Group Plc, commented:


"Capita delivered a strong performance in 2008. Organic growth was excellent
with a wide range of new major contracts secured in the year and with
businesses across the Group delivering robust results.


Despite the economic climate, we believe Capita is well placed to continue its
growth. Current conditions present a healthy flow of opportunities for us. Our
pipeline of sales prospects, strong forward visibility of revenues from our
long term contracts and consistent operational performance position us well for
further strong progress.


Prospects for Capita in 2009 are encouraging.  Our success in the first few
weeks of 2009, a high level of sales activity and a strong demand for
outsourcing in the current economic conditions underpin our outlook for
continued growth in 2009 and thereafter."


For further information:


The Capita Group Plc                             Tel: 020 7799 1525        
Paul Pindar, Chief Executive                                               
Shona Nichols, Corporate Communications Director                           
Capita Press Office                              Tel: 0207 654 2152 or     
                                                 0870 2400 488 out of hours
Financial Dynamics                               Tel: 020 7269 7121        
Andrew Lorenz                                                              





                             The Capita Group Plc                              

           Preliminary Statement for the year ended 31 December 2008           


Capita delivered a strong performance in 2008. Organic growth was excellent
with a wide range of new major contracts secured in the year and with
businesses across the Group delivering robust results.


In the year ended 31 December 2008, turnover increased by 18% to £2,441m (2007:
£2,073m). Underlying operating profit* rose by 18% to £320.9m (2007: £271.3m)
and underlying profit before taxation* increased by 16% to £277.2m (2007: £
238.4m). Underlying earnings per share* grew by 18% to 33.26p (2007: 28.10p). 


Underlying operating cash flow** rose by 17% to £392m (2007: £334m). We have
increased our total dividend for the year by 20% to 14.4p (2007: 12.0p).  We
have returned £69m to shareholders through purchasing our own shares. In total,
including the proposed final dividend, we will be returning £156m (2007: £272m)
to shareholders in respect of the 2008 financial year.


* underlying profit excludes intangible amortisation of £18.6m (2007: £9.7m)
and the non-cash impact of mark to market movement on callable swaps of £32m

** underlying cash flow excludes an exceptional additional pension contribution
to the Group Final Salary Pension Scheme of £10m.



Building value for shareholders


In addition to the financial measures reported above we focus on a number of
other key financial measures to ensure we build value for shareholders on a
consistent basis over the long term:


Margins - We have continued our long term trend of improving operating margins
(before amortisation) which have increased by 6 basis points during the period
to 13.15%. We have achieved this progression even though we invested heavily in
our Life & Pensions business and implemented a record number of major new


Cash flow - The strength of our business model continues to be reflected in our
excellent underlying cash flow, with £392m (2007: £334m) generated by
operations in the period, representing an operating profit to cash conversion
rate of 122% (2007: 123%). Our underlying free cash flow increased by 19% to £
219m (2007: £184m).


We use surplus cash to add value in 3 main ways: through acquisitions, share
buybacks and dividends:


Acquisitions - Acquisitions help us to enter new markets where we can grow
organically, strengthen existing market positions and build economies of scale,
or access a new customer base. In 2008, we spent £147.4m on 12 acquisitions.
The current economic climate is creating a healthy pipeline of acquisition
opportunities, particularly in financial services and IT. We expect this to
continue throughout 2009. There is a good volume of opportunities valued at
attractive levels. We will continue to be disciplined when assessing


Share buybacks - Opportunistic share buybacks help us to maintain an efficient
capital structure and minimise our long term cost of capital. In the period to
31 December 2008, the Group bought back 10.4m shares (representing 1.7% of the
issued share capital) at an average price of 659p. Following these buybacks,
there are 611m shares in issue.  The Group has authority to re-purchase up to
10% of its issued share capital and we plan to seek renewal of this authority
at the Annual General Meeting.


Regular dividends - A key element in the creation of shareholder value is a
progressive dividend policy. The Board is recommending a final dividend of 9.6p
per ordinary share (2007: 8.0p), making a total of 14.4p (2007: 12.0p) for the
year. This represents an increase of 20%. The final dividend will be payable on
18 May 2009 to shareholders on the register at the close of business on 14
April 2009. Including the proposed final dividend, Capita's total dividend will
have grown at a compound annual rate of 29% over the 5 years to 31 December
2008. Our confidence in the strength and resilience of Capita's business model
has allowed us to reduce annual dividend cover gradually. We continued this
trend for 2008, reducing cover to 2.31 times (2007: 2.34 times).


Capital expenditure - We aim to contain capital expenditure at or below 4% of
revenue. During the year, we met this objective with net capital expenditure at
3.5% (2007: 3.5%) of revenue. 


Return on capital employed - We focus on driving a steadily increasing return
on capital. During 2008, the post tax return on average capital employed has
improved to 20.4% (2007: 19.6%). This compares to our post tax estimated
weighted average cost of capital which is 8.2%.



Additional financial information


Pension payment - Following our recent tri-annual funding valuation, we have
decided to make an exceptional additional pension contribution of £50m into our
final salary pension scheme. £10m was paid in December 2008 and £40m in January
2009. The tri-annual valuation showed a £26m deficit at 6 April 2008 and we
have estimated that the deficit has increased as at 31 December 2008. We
believe that this is an appropriate payment to make at this time to reduce
significantly our estimated deficit.


Interest rate profile - We aim to maintain a balanced interest rate risk
profile. We have £679m* of private placement debt (£100m matures later this
year and £579m matures between 2012 and 2018). In February 2008, Capita
executed a series of callable swaps to convert from a variable rate based upon
paying six month LIBOR to a fixed rate of interest of 5.25% on £479m of private
placement debt. Following the dramatic fall in interest rates at the end of
2008 and an increase in the implied volatilities, these swaps show a negative
mark to market value of £32m at 31 December 2008. This represents a non-cash
accounting loss in the year that will reverse as the mark to market valuation
will tend towards zero as the swaps approach maturity or cancellation. The
Group maintains a balanced interest rate risk profile by way of the remaining
private placement debt of £200m and a revolving credit facility of £245m that
both pay floating rate interest. As at 31 December 2008, all of this credit
facility was unutilised.


Group interest cover for the year ended 31 December 2008 was 7.4 times.


                   * see note 6 in the attached detailed financial information.


Our marketplace


The market for business process outsourcing ("BPO") in the UK and Ireland
continues to provide strong growth opportunities. Industry analysts estimate
the total potential market at £94.2bn per annum. In 2008, the total UK BPO
market was £5.6bn (2007: £5.1bn), representing only 6% of the total potential
market. The BPO market is forecast to grow at 9% per annum until 2012†.


With our recent strong performance in securing new business, we have extended
the leading positions we hold in the majority of our markets, particularly
local government and life and pensions. We remain the clear market leader in
the overall UK BPO market with 25.5% (2007: 22%) market share† and in 2008 our
private sector/public sector revenue split was 52%/48% (2007: 48%/52%).


In the current economic climate, we expect an increasing number of
organisations will review their business models and explore where outsourcing
could lower costs and offer more service flexibility. With our scale and
expertise, we are well placed to help these clients create more adaptable,
lower cost operating models while improving service quality. Furthermore, our
financial strength and stability is becoming a key competitive advantage.


With strong demand for outsourcing continuing across our chosen markets, we
will remain focused on selecting opportunities where we believe we can meet
clients' expectations, maintain controlled growth and achieve a reasonable
return for the Group.


                                                             †source: Ovum 2008


Generating profitable growth


We generate profitable growth by winning business from new and existing
customers in the UK and Ireland and supplement this by acquiring businesses
that broaden our skill base and extend our market reach.


Organic growth 


We have a centrally managed Major Sales Team and sales teams within each of our
businesses focused upon securing growth from both existing and new customers.


Our Major Sales Team pursues complex, long term contracts which bring together
a wide range of the Group's skills and generate high quality, recurring
revenues. Securing and renewing major contracts is an important component of
our growth.


Our sales performance in 2008 was excellent. We secured and extended 17 major
contracts with a total value of £1.24bn (2007: 8 contracts totalling £1.89bn)
and we maintained our 1 in 2 win rate.



Major contracts won in 2008 include:


  * Life and pensions: A contract worth £137m over 10 years to provide
    administrative services for 1.1 million Abbey Life life and pensions
    policies. The deal involves the transfer of 300 Bournemouth-based staff to
    Capita under TUPE and service commences in March 2009.


  * Insurance: 2 contracts:


A contract to deliver Marsh UK's back office administration functions based in
Norwich and Pune, India, worth £187m over 10 years. Services were transitioned
smoothly in July 2008 and we are exploring how the partnership can be widened
to support Marsh further.


We also signed a deal with Principle Insurance Holdings to provide outsourced
services for Principle's motor and home insurance. As part of the contract,
worth in excess of £80m over 8 years, Capita is providing an IT platform from
which to launch and sell Sharia compliant insurance (or Takaful) products
direct to consumers in the UK.


  * Local government: 4 contracts:


A strategic partnership with Sefton Metropolitan Borough Council, valued at £
70m over 10 years, to deliver a wide range of property and highway services.
Service commenced in July 2008.


A joint venture, Capita Glamorgan Consultancy, created to deliver a wide range
of highways, transportation and associated environmental management and other
related services. The contract is worth £75m to Capita over 15 years.


With Service Birmingham, an additional contract, worth £110m over 8 years, to
manage and transform Birmingham City Council's contact centre. Service
commenced on 1 July 2008.


A 7 year contract with Sheffield City Council worth over £200m. The
partnership, which may be extended by 3 further 2 year periods, will improve
services and help drive business transformation for the benefit of everyone in
the City.


  * Central government: 2 contracts:


A 10 year contract with the Health and Safety Executive (HSE), worth £14m per
year, to administer a new gas installer registration scheme in Great Britain.
The HSE installer site has gone live and installers can now register with the
new Gas Safe Register™ scheme. The consumer facing website is due to go live on
1 April 2009.


A contract with the Department of Health, worth £60m over 3 years, to deliver
NHS Choices, the NHS' online presence. The contract, which may be extended by a
further 2 years, represents a significant step forward for Capita in the health
marketplace and provides a platform for further growth in this market.


We also secured a further 8 contracts worth between £10m and £50m with an
aggregate value of £154m.


2009 has started well. In the first 8 weeks of 2009, we have been selected to
deliver major contracts with an aggregate value of £610m, including being the
preferred partner to administer 3.2m mature life and pensions policies for AXA
Sun Life in a contract anticipated to be worth £500m over 15 years and
contracts with Breckland District Council, Charnwood Borough Council, eircom
and Threadneedle.


Bid pipeline: Alongside these contract wins, our bid pipeline has been
replenished and reflects the quality of business opportunities across our
markets. The bid pipeline currently stands at £3.1bn (Feb 2008: £2.5bn) and
only includes bid situations in which we are shortlisted as 1 of 4 or fewer
competitors and caps our largest bids at £500m.


Contract renewals: We have only one material contract (defined as having annual
revenue in excess of 1% of 2008 turnover) due for renewal before the end of


Stimulating growth through acquisition 


A key element of our growth is the acquisition of small to medium sized
companies which extend our presence in existing marketplaces or provide a
foothold in a new market. We have substantial experience of integrating
acquired businesses and achieving synergies with our existing operations.


In 2008, we completed 12 acquisitions for a total consideration of £147.4m,


ComputerLandUK - which provides managed IT services and products across both
the public and private sectors, was purchased in March for £27.8m (net of cash
acquired).  This acquisition adds substantially to the breadth and depth of
Capita's existing capability, particularly through the bringing together of
both companies' managed IT services. Capita will be able to re-direct IT spend
both by the Group and clients through ComputerLand. This will retain spend
within the Group and offers enhanced propositions to existing and new clients.
A healthy pipeline of cross-selling opportunities has already been identified
and discussions initiated.


LancasterInsurance Services - specialises in insurance administration for
classic cars.  The acquisition of Lancaster at the end of March for £16.5m (net
of cash acquired), adds both new, specialist expertise and important cost
synergies to Capita's personal insurance intermediary and administration
business. The business has been integrated swiftly and is performing well.


ABS Network Solutions Limited - acquired in October for £13.6m (net of cash
acquired). ABS Networks provides IP (internet protocol) based business
networking solutions and brings CISCO accreditations and capability in emerging
technologies.  This acquisition enables Capita to enhance further its network
services business and the strong relationship that ABS has with CISCO will
enable cost savings in spend on CISCO equipment across the Group.


IBS OPENSystems - acquired in July for £69.6m (net of cash acquired).  IBS
provides software systems and related services for the management of social
housing and the collection and payment of revenues and benefits to local
authorities and housing associations in the UK. This acquisition has been
referred by the Office of Fair Trading to the Competition Commission and we are
fully engaged with them in their review.



In the first 2 months of 2009 we have spent a further £13.6m on 2 acquisitions,
a trust administration business, FMS and a healthcare intelligence and quality
improvement services business, CHKS Limited.



A focus on our most active and emerging markets


Our most active markets remain life and pensions and local government. Central
government, a market which has been less active in recent times, is also
starting to offer some interesting opportunities.


  * Life and pensions: Capita is the leader in this market. Our scale, focus on
    customer service and investment in specialist technology makes us a
    compelling choice as an outsourcing partner. 2008 saw the successful
    transfer of 3,000 staff located in the UK and Mumbai to Capita with the
    Prudential contract. Consequently, we now have a resource of 10,000 people
    across our life and pensions operations. Including our proposed strategic
    partnership with AXA announced this year, we will be responsible for
    administering 26 million policies in total. The market is highly active and
    continues to offer many new contract opportunities.


  * Local government: As local authorities seek to provide flexible, quality
    public services within tight budgets, many are exploring the benefits that
    can be delivered through strategic outsourcing partnerships. Our unrivalled
    breadth of services and experience across local government has enabled us
    to win a number of multi-service and major business transformation
    contracts in 2008. Our ability to offer a wide spectrum of property
    consultancy services also positions us strongly in this market, as
    evidenced within our contracts with Southampton CC, Sefton MBC, the Capita
    Glamorgan Consultancy and Breckland DC. In 2009, we expect a continuing
    steady flow of opportunities in this market. 


  * Central government: In 2008, 2 of our major contract wins were with central
    government departments - the Gas Safe Register™ for the Health and Safety
    Executive and NHS Choices for the Department of Health. This market is
    beginning to gain momentum. We believe that greater demands on public
    spending will bring an increased requirement to deliver high quality public
    services at reduced cost.  We are well placed to help achieve this.


  * Health: Following our success in winning the contract to deliver NHS
    Choices, which gives us insight into health issues and policy as well as
    engagement at a central government and health trust level, we are
    increasing our focus on the health market. It is acknowledged that an
    increase in private sector involvement is required in order to deliver the
    transformation in the health sector demanded by the Government and public
    alike. We are exploring ways in which Capita's proven experience in
    providing key non-clinical services can be extended further across the
    health market.



Increasing scale and capabilities of our offshore operation


Our offshore operation in India is developing strongly both in scale and scope
of services and allows us to offer clients a flexible, efficient, blended
onshore/offshore delivery model. It has played a significant role in helping to
secure major new business, including contracts with Marsh and Abbey Life.


Following the transfer of 1,700 people from Prudential's Indian operation to
Capita in October 2008, we now have 3 sites in Mumbai and we have also
established a new site in Pune. This year, as part of the proposed AXA
partnership, 600 people will transfer from their Indian operations to Capita -
200 employees will join our Pune operation and 400 will transfer to a new
facility in Bangalore. Following this transfer, we will have 3,600 people in
India. By the end of 2009, we expect to have over 4,500 staff in India.


Economic sensitivities


In the current volatile economic climate, areas of our business that may be
more sensitive to economic weakness are unit and investment trust
administration where fees are related to the value of funds under
administration, some of our recruitment businesses (particularly our search and
selection business) and elements of our property consultancy business. However,
much of our activity in these areas is underpinned by long term contracts and
involves the supply of essential public services. The areas potentially
affected represent less than 10% of our Group revenues and this risk has been
factored into our 2009 business planning process.


Valuing our people


Capita celebrates 25 years of operation this year and the Board would like to
take this opportunity to thank all the talented employees across our history
who have played a key role in Capita's consistent growth. Whether our people
join us through direct recruitment, contracts or acquisitions, their hard work,
commitment and enthusiasm play a vital role in helping us to meet client
expectations and in supporting our growth. In 1984, the company had 2
employees. Today, we have over 36,000 whose combined contribution fuels the
continued success of the Group.


We are continuing to invest in senior management to support the growth we
anticipate going forward. In 2008, we recruited 62 senior managers taking our
senior management team to 433.


Group Board


To support our growth, we made some changes to the Board in 2008.  In March
2008, Martin Bolland joined Capita as a Non-Executive Director and is now
Senior Independent Director. He has already made an excellent contribution to
the business. At the end of September 2008, Peter Cawdron stepped down as
Non-Executive Director, after serving 11 years on the Board. We thank him for
his valuable contribution and wish him well.


In August 2008, Simon Pilling, who previously shared the role of Joint Chief
Operating Officer with Paddy Doyle, took on this role exclusively and became
Capita's Chief Operating Officer. Paddy Doyle decided to move to a part time
role and from 1 January 2009, he is working 2 days per week for Capita and
remains an active Executive Group Board member. Also in August 2008, Maggi Bell
joined the Board as Business Development Director. She adds significant value
to our Board as we continue to broaden and strengthen the Board's skills.


Future prospects


Despite the economic climate, we believe Capita is well placed to continue its
growth. Current conditions present a healthy flow of opportunities for us. Our
pipeline of sales prospects, strong forward visibility of revenues from our
long term contracts and consistent operational performance position us well for
further strong progress.


Prospects for Capita in 2009 are encouraging.  Our success in the first few
weeks of 2009, a high level of sales activity and a strong demand for
outsourcing in the current economic conditions underpin our outlook for
continued growth in 2009 and thereafter.





Preliminary Statement


Consolidated income statement

for the year ended 31 December 2008                                                       


                                                               2008                             2007
                                               Amortisation                     Amortisation        
                                               and callable                     and callable        
                                   Underlying         swaps   Total Underlying         swaps   Total
                             Notes         £m            £m      £m         £m            £m      £m
Continuing operations:                                                                              
Revenue                          1    2,441.4             - 2,441.4    2,073.3             - 2,073.3
Cost of sales                         1,757.8             - 1,757.8    1,498.5             - 1,498.5
Gross Profit                            683.6             -   683.6      574.8             -   574.8
Administrative expenses          2      362.7          18.6   381.3      303.5           9.7   313.2
Operating profit                 1      320.9        (18.6)   302.3      271.3         (9.7)   261.6
Net finance costs                3     (43.5)        (32.0)  (75.5)     (34.1)             -  (34.1)
Investment (loss)/income                (0.2)             -   (0.2)        1.2             -     1.2
Profit before tax                       277.2        (50.6)   226.6      238.4         (9.7)   228.7
Income tax expense                     (74.9)          14.1  (60.8)     (66.0)           3.5  (62.5)
Profit for the year                     202.3        (36.5)   165.8      172.4         (6.2)   166.2
Attributable to:                                                                                    
Equity holders of the parent            202.3        (36.5)   165.8      172.4         (6.2)   166.2
Minority interest                           -             -       -          -             -       -
                                        202.3        (36.5)   165.8      172.4         (6.2)   166.2
Earnings per share               4                                                                  
- basic                                33.26p       (6.00)p  27.26p     28.10p       (1.01)p  27.09p
- diluted                              32.96p       (5.95)p  27.01p     27.63p       (0.99)p  26.64p



Consolidated statement of recognised income and expense

 for the year ended 31 December 2008                          2008  2007
                                                                £m    £m
Actuarial (losses)/gains on defined benefit pension schemes (48.1)  25.4
Exchange difference on translation of foreign operations       5.9   1.1
Gains on cash flow hedges                                     20.1   5.6
Tax on items taken directly to equity                         23.3 (5.0)
Net income recognised directly in equity                       1.2  27.1
Profit for the year                                          165.8 166.2
Total income and expense for the period                      167.0 193.3
Attributable to:                                                        
Equity holders of the parent                                 167.0 193.3
Minority interest                                                -     -
                                                             167.0 193.3



Consolidated balance sheet

 at 31 December 2008                                               2008            2007
                                                                    £m               £m
Non-current assets                                                                     
Property, plant and equipment                                     238.3           193.4
Intangible assets                                                 907.0           745.7
Financial assets                                                  332.4            60.6
Trade and other receivables                                         8.1            11.1
Employee benefits                                                     -            20.3
Deferred taxation                                                   3.0             1.4
                                                                1,488.8         1,032.5
Current assets                                                                         
Financial assets                                                    5.2             0.9
Trade and other receivables                                       583.6           456.4
Cash                                                               86.7             0.8
                                                                  675.5           458.1
Total assets                                                    2,164.3         1,490.6
Current liabilities                                                                    
Trade and other payables                                          690.4           556.9
Financial liabilities                                             116.5            57.7
Provisions                                                          2.3             1.8
Income tax payable                                                 40.4            36.3
                                                                  849.6           652.7
Non-current liabilities                                                                
Trade and other payables                                            9.6             9.2
Financial liabilities                                             882.7           480.2
Provisions                                                          1.0             0.8
Employee benefits                                                  24.5            15.9
                                                                  917.8           506.1
Total liabilities                                               1,767.4         1,158.8
Net assets                                                        396.9           331.8
Capital and reserves                                                                   
Issued share capital                                               12.8            12.6
Share premium                                                     410.4           374.9
Shares held in Trust                                              (0.2)               -
Capital redemption reserve                                          1.8             1.8
Foreign currency translation                                        6.6             0.7
Net unrealised gains reserve                                       18.5             4.0
Retained earnings                                                (53.0)          (62.2)
Equity shareholders' funds                                        396.9           331.8
Minority interest                                                     -               -
Total equity                                                      396.9           331.8


Included in aggregate financial liabilities is an amount of £953.1m (2007: £
461.1m) which represents the fair value of the Group's bonds which should be
considered in conjunction with the aggregate value of currency and interest
rate swaps of £274.3m included in financial assets (2007: £19.1m included in
financial liabilities and £1.1m in financial assets; aggregate £18.0m). 
Consequently, this gives an effective liability of £678.8m (2007: £479.1m).






Consolidated cash flow statement

 for the year ended 31 December 2008                                   2008     2007
                                                                         £m       £m
Cash flows from operating activities                                                
Operating profit on continuing activities                                           
before interest and taxation                                          302.3    261.6
Depreciation                                                           50.0     46.1
Amortisation of other intangible assets                                             
(treated as depreciation)                                               1.5      1.5
Amortisation of intangible assets created                                           
on acquisition                                                         18.6      9.7
Share based payment expense                                             9.2      8.6
Pension charge                                                         19.3     15.2
Pension contributions                                                (28.5)   (21.0)
Loss/(Profit) on sale of property, plant and                                        
equipment                                                               1.1    (0.1)
Investment loss                                                         0.2        -
Movement in provisions                                                (2.2)      0.9
Increase in receivables                                              (90.7)   (71.4)
Increase in payables                                                  111.2     82.9
Cash generated from operations before                                               
exceptional additional pension contribution                           392.0    334.0
Income tax paid                                                      (48.6)   (45.8)
Exceptional additional pension contribution                          (10.0)        -
Net Interest paid                                                    (38.4)   (31.9)
Cash generated from operations after income tax,                                    
interest and exceptional additional pension contribution              295.0    256.3
Net cash used in investing activities                                               
Purchase of property, plant and equipment                            (86.4)   (67.9)
Proceeds from sale of property, plant and equipment                     0.3      1.0
Purchase of intangible fixed assets                                       -    (5.0)
Acquisition of subsidiary undertakings and businesses               (188.4)   (94.7)
Cash acquired with subsidiary undertakings                              8.9      4.4
Disposal/(Purchase) of financial assets                                23.1    (4.4)
Investment loan                                                       (6.2)   (16.6)
Return on investment in Joint Venture                                   0.1        -
                                                                    (248.6)  (183.2)
Net cash used in financing activities                                               
Issue of ordinary share capital                                        35.7     67.2
Share buybacks                                                       (68.4)   (43.9)
Share transaction costs                                               (0.4)    (0.5)
Dividends paid                                                       (78.0)  (218.6)
Capital element of finance lease rental payments                      (0.2)    (0.4)
Instalment debtor movement                                              0.7     20.4
Asset based securitised financing                                         -   (17.8)
Repayment of loan notes and long term loans                           (3.3)   (34.6)
Proceeds on issue of bonds                                            200.2    100.9
Financing arrangement costs                                           (0.7)    (0.3)
                                                                       85.6  (127.6)
Net increase in cash and cash equivalents                             132.0   (54.5)
Cash and cash equivalents at the beginning of the period             (45.3)      9.2
Cash and cash equivalents at 31 December                               86.7   (45.3)
Cash and cash equivalents comprise:                                                 
Overdraft                                                                 -   (46.1)
Cash at bank and in hand                                               86.7      0.8
Total                                                                  86.7   (45.3)




Notes to the Preliminary Statement

for the year ended 31 December 2008


1. Segmental information


The Group's operations are organised and managed separately according to the
nature of the services provided, with each segment representing a strategic
business unit offering a different package of related services across the
Group's markets.


Before eliminating sales between business units on consolidation, the Group
accounts for sales between business units as if they were to a third party at
market rates.


The tables below present revenue and result for the Group's business segments
for the years 2008 and 2007.
All operations in 2008 are continuing.


Year ended 31 December 2008

                                                                     ICT and                               
                    HR    Property Insurance Investor Integrated Partnership   Life & Professional         
             Solutions Consultancy  Services Services   Services    Services Pensions     Services    Total
revenue             £m          £m        £m       £m         £m          £m       £m           £m       £m
Total segment                                                                                               
revenue          278.5       284.2     263.6    173.9      393.4       464.8    489.0        378.9  2,726.3 
revenue          (20.3)      (22.0)    (17.4)        -      (6.0)     (125.4)   (26.1)       (67.7)  (284.9)
Third party                                                                                                 
revenue          258.2       262.2     246.2    173.9      387.4       339.4    462.9        311.2  2,441.4 
Result after                                                                                                
depreciation      25.3        24.0      32.7     40.3       58.4        35.7     56.5         57.2    330.1 
Share based                                                                                                 
payment           (1.1)       (1.2)     (1.6)    (0.7)      (2.3)       (0.7)    (0.8)        (0.8)    (9.2)
amortisation      (0.2)       (1.4)     (3.7)    (3.7)      (1.2)       (1.6)    (3.5)        (3.3)   (18.6)
                  24.0        21.4      27.4     35.9       54.9        33.4     52.2         53.1    302.3 
Net finance costs (before callable                                                                          
swaps)                                                                                                (43.5)
swaps                                                                                                 (32.0)
loss                                                                                                   (0.2)
Profit before                                                                                               
tax                                                                                                   226.6 
Corporation taxation                                                                                  (60.8)
Profit after                                                                                                
tax                                                                                                   165.8 



Year ended 31 December 2007

                                                                      ICT and                               
                     HR    Property Insurance Investor Integrated Partnership   Life & Professional         
              Solutions Consultancy  Services Services   Services    Services Pensions     Services    Total
Revenue              £m          £m        £m       £m         £m          £m       £m           £m       £m
Total segment                                                                                               
revenue           243.2       244.6     260.5    158.2      413.2       352.0    274.1        340.7  2,286.5 
revenue           (18.2)      (12.7)    (19.0)    (1.3)      (8.2)      (92.5)   (10.5)       (50.8)  (213.2)
Third party                                                                                                  
revenue           225.0       231.9     241.5    156.9      405.0       259.5    263.6        289.9  2,073.3 
Result after                                                                                                
depreciation       22.3        20.4      30.3     37.9       58.3        28.3     33.7         48.7    279.9 
Share based                                                                                                 
payment            (1.0)       (1.1)     (1.2)    (0.6)      (2.5)       (0.6)    (0.8)        (0.8)    (8.6)
amortisation       (0.1)       (0.7)     (2.6)    (1.3)      (1.6)           -    (1.5)        (1.9)    (9.7)
                   21.2        18.6      26.5     36.0       54.2        27.7     31.4         46.0    261.6 
Net finance                                                                                                 
costs                                                                                                  (34.1)
income                                                                                                   1.2 
Profit before                                                                                               
tax                                                                                                    228.7 
Corporation taxation                                                                                   (62.5)
Profit after                                                                                                
tax                                                                                                    166.2 


Notes to the Preliminary Statement

for the year ended 31 December 2008


2. Administrative expenses


Included in the middle column disclosed on the face of the consolidated income
statement, against the line item administrative expenses, is the following:


                                                                           2008        2007
                                                                             £m          £m
Intangible amortisation                                                    18.6         9.7 
                                                                           18.6         9.7 


3. Net finance costs

Included in the middle column disclosed on the face of the consolidated income
statement, against the line item net finance costs, is the following:


                                                                             2008      2007
                                                                               £m        £m
Mark to market callable swaps                                                32.0         -
                                                                             32.0         -


In February 2008, Capita executed a series of interest rate callable swaps to
convert from paying a rate based on 6 month LIBOR to fixed rate interest on its
bonds (private placement debt) of £479m as follows: firstly, in respect of the
2 tranches totalling £100m maturing in 2009, swaps at a fixed rate of 5.22%;
secondly, in respect of all other tranches - maturing between 2012 and 2017 -
callable swaps (giving the counterparty the option to cancel the trades in
September/December 2009 and semi-annually thereafter) at a weighted average
fixed rate of 4.64%. At this time, 6 month LIBOR was 5.625% and prevailing
market expectations suggested that swap rates would not fall below 4.64%. At
the time the transactions were entered into 4.64% was considered to represent
good value as a long term cost of funds. The value of this callable derivative
was £32m and is recognised as a financial liability at the balance sheet date.


4. Earnings per share


Basic earnings per share amounts are calculated by dividing net profit for the
year attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year.


Diluted earnings per share amounts are calculated by dividing the net profit
for the year attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the year plus the
weighted average number of ordinary shares that would be issued on the
conversion of all the dilutive potential ordinary shares into ordinary shares.


The following reflects the income and share data used in the basic and diluted
earnings per share computations:


                                                                            2008       2007
                                                                              £m         £m
Net profit attributable to ordinary equity                                                 
holders of the parent from operations                                      165.8      166.2 


                                                                         2008            2007
                                                               Number million  Number million
Weighted average number of ordinary shares                                                  
(excluding trust shares) for basic earnings per share                   608.3           613.6 
Dilutive potential ordinary shares:                                                         
Employee share options                                                    5.5            10.3
Weighted average number of ordinary shares                                                  
(excluding trust shares) adjusted for the effect of dilution            613.8           623.9


There have been no other transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of completion of these
financial statements.

The following additional earnings per share figures are calculated based on
earnings attributable to ordinary equity holders of the parent before
amortisation and callable swap valuation of £202.3m (2007: £172.4m) and after
amortisation and callable swap valuation of £165.8m (2007: £166.2m). They are
included as they provide a better understanding of the underlying trading
performance of the Group.


                                                                              2008      2007
                                                                                 p         p
Basic earnings per share     - underlying                                    33.26     28.10
   - after amortisation and callable swaps                                   27.26     27.09
Diluted earnings per share   - underlying                                    32.96     27.63
   - after amortisation and callable swaps                                   27.01     26.64


5. Dividends paid and proposed


                                                                                 2008   2007
                                                                                   £m     £m
Declared and paid during the year                                                          
Ordinary shares (equity):                                                                  
   Final for 2007 paid: 8.0p per share (2006: 6.3p per share)                    48.8   39.2
   Interim for 2008 paid: 4.8p per share (2007: 4.0p per share)                  29.2   24.7
   Special dividend for 2007: paid 25.0p per share                                  -  154.7
                                                                                 78.0  218.6
Proposed for approval at AGM (not recognised as a liability at 31 December)                
Ordinary shares (equity):                                                                  
   Final for 2008: 9.6p per share (2007: 8.0p per share)                         58.6   48.8


6. Reconciliation of net cash flow movements in net funds / (debt)


                                                                 Net                                  Net debt
                                                             Debt at Acquisitions            Non-cash    at 31
                                                           1 January      in 2008 Cash flow      flow December
                                                                2008  (exc. cash) movements movements     2008
At December 2008                                                  £m           £m        £m        £m       £m
Cash and cash equivalents                                        0.8            -      85.9         -     86.7
Overdrafts                                                    (46.1)            -      46.1         -        -
Cash                                                          (45.3)            -     132.0         -     86.7
Loan notes                                                     (1.7)            -       3.3     (5.3)    (3.7)
Bonds †                                                      (461.1)            -   (199.5)   (292.5)  (953.1)
Currency swaps in relation to US$ denominated bonds †         (18.1)            -         -     287.7    269.6
Interest rate swaps in relation to GBP denominated bonds †       0.1            -         -       4.6      4.7
Finance leases                                                 (0.2)            -       0.2         -        -
Sub-total net debt                                           (526.3)            -    (64.0)     (5.5)  (595.8)
Asset based securitised finance*                               (9.7)            -     (0.7)         -   (10.4)
Callable swaps                                                     -            -         -    (32.0)   (32.0)
                                                             (536.0)            -    (64.7)    (37.5)  (638.2)


The aggregate bond fair value above of £953.1m (included in financial
liabilities) includes the GBP value of the US$ denominated bonds at 31 December
2008. To remove the Group's exposure to currency fluctuations it has entered
into currency swaps which effectively hedge the movement in the underlying bond
fair value. The interest rate swap is being used to hedge the exposure to
changes in the fair value of GBP denominated bonds. The combined fair value of
the swaps, of £274.3m, is included in financial assets.


†The sum of these items held at fair value equates to the underlying value of
the Group's bond debt of £678.8m.


*The asset based securitised finance movement represents the net movement on
the underlying balances with customers.


                                                               Net                                  Net debt
                                                           Debt at Acquisitions            Non-cash    at 31
                                                         1 January      in 2007 Cash flow      flow December
                                                              2007  (exc. cash) movements movements     2007
At December 2007                                                £m           £m        £m        £m       £m
Cash and cash equivalents                                      9.7            -     (8.9)         -      0.8
Overdrafts                                                   (0.5)            -    (45.6)         -   (46.1)
Cash                                                           9.2            -    (54.5)         -   (45.3)
Loan notes                                                  (22.2)            -      26.4     (5.9)    (1.7)
Long term debt                                                   -        (8.2)       8.2         -        -
Bonds                                                      (372.0)            -   (100.6)      11.5  (461.1)
Currency swaps  in relation to US$ denominated bonds         (6.4)            -         -    (11.7)   (18.1)
Interest rate swaps in relation to GBP denominated bonds         -            -         -       0.1      0.1
Finance leases                                               (0.5)        (0.1)       0.4         -    (0.2)
Sub-total net debt                                         (391.9)        (8.3)   (120.1)     (6.0)  (526.3)
Asset based securitised finance                             (27.5)            -      17.8         -    (9.7)
                                                           (419.4)        (8.3)   (102.3)     (6.0)  (536.0)


7. Preliminary announcement


The preliminary announcement is prepared in accordance with International
Financial Reporting Standards.


A duly appointed and authorised committee of the Board of Directors approved
the preliminary announcement on 25 February 2009.


The announcement represents non-statutory accounts within the meaning of
section 240 of the Companies Act 1985. The statutory annual accounts for the
year ended 31 December 2008, 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 26 March 2009 and will be available to members of the public at
the registered office of the Company from that date.