REG-Capita PLC: Final Results <Origin Href="QuoteRef">CPI.L</Origin> - Part 2

CapitaAnnouncement

26/02/2015 07:00

- Part 2: For the preceding part double click  ID:nPRrQ74FDa 

own credit risk adjustment - mark to market         (0.1 )    (0.1 )
Non-underlying net finance costs                                 38.1     (26.6 )
Total net finance costs                                          78.7      15.3


5 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:

                                                                 2014      2013
                                                                   £m        £m
Net profit attributable to ordinary equity holders of the
parent from operations                                          235.9     177.2

                                                                 2014      2013
                                                               Number    Number
                                                              million   million
Weighted average number of ordinary shares (excluding trust
and treasury shares) for basic earnings per share               658.9     655.1
Dilutive potential ordinary shares:
Employee share options                                            5.9       7.7
Weighted average number of ordinary shares (excluding trust
and treasury shares) adjusted for the effect of dilution        664.8     662.8

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
underlying earnings attributable to ordinary equity holders of the parent of
£429.3m (2013: £389.1m) and, after non-underlying costs, earnings of £235.9m
(2013: £177.2m). They are included as they provide a better understanding of
the underlying trading performance of the Group.

                                                                 2014      2013
                                                                    p         p
Basic earnings per share - underlying                           65.15     59.40
- after non-underlying                                          35.79     27.05
Diluted earnings per share - underlying                         64.58     58.71
- after non-underlying                                          35.48     26.74


6 Dividends paid and proposed

                                                                 2014      2013
                                                                   £m        £m
Declared and paid during the year
Ordinary shares (equity):
Final for 2013 paid: 17.8p per share (2012: 15.6p per
share)                                                          117.2     102.1
Interim for 2014 paid: 9.6p per share (2013: 8.7p per
share)                                                           63.3      57.0
                                                                180.5     159.1
Proposed for approval at AGM (not recognised as a liability
at 31 December)
Ordinary shares (equity):
Final for 2014: 19.6p per share (2013: 17.8p per share)         129.6     116.9


7 Business combinations

2014 acquisitions

The Group made a number of acquisitions in 2014 which are shown in aggregate.
The fair values of the identifiable assets and liabilities acquired are
disclosed in the table below:

                                                       Fair value recognised
                                                              on acquisition
                                                                          £m
Property, plant and equipment                                           11.6
Intangible assets                                                      159.6
Trade and other receivables due in less than one
year                                                                    56.6
Trade and other receivables due in more than one
year                                                                     3.1
Corporation tax                                                         (1.7 )
Cash and cash equivalents                                               29.7
Trade and other payables (exc. accruals) due in
less than one year                                                     (43.6 )
Accruals due in less than one year                                     (32.7 )
Provisions                                                              (4.8 )
Deferred tax                                                           (26.4 )
Employee benefits liability                                             (2.9 )
Finance leases                                                          (0.1 )
Long term debt                                                         (21.5 )
Net assets                                                             126.9
Goodwill arising on acquisition                                        251.4
                                                                       378.3
Discharged by:
Cash                                                                   318.0
Contingent consideration accrued                                        39.5
Investment loan note                                                    20.8
                                                                       378.3

In all cases 100% of the ordinary share capital was acquired. The companies
acquired have been mainly in the areas of IT and software, customer and debt
management, legal and property services, resourcing, communication and
printing which complement or extend the Group's existing skill sets and
provide opportunities for growth into these markets. In addition during the
year the Group settled £35.5m of deferred consideration and £9.2m of
contingent consideration payments with regard to previous acquisitions, all of
which had been accrued.

Goodwill has arisen on the acquisitions because the fair value of the acquired
assets was lower than the consideration paid; the goodwill represents the
value to the Group that can be driven from these underlying assets over the
life of the acquired businesses, particularly from synergies, and the
capabilities of the acquired workforce. The total amount of goodwill
recognised in the period that is expected to be deductible for tax purposes is
£9.6m (2013: £103.4m).

Contingent consideration

In respect of the acquisitions made in 2014, the Group has agreed to pay the
vendors additional consideration dependent on the achievement of performance
targets in the periods post acquisition. These performance periods are of up
to 3 years in duration and will be settled in cash and loan notes on their
payment date on achieving the relevant target. The range of the additional
consideration payment is estimated to be between £30m and £48m. The Group has
included £39.5m as contingent consideration related to the additional
consideration, which represents its fair value at the acquisition date.
Contingent consideration has been calculated based on the Group's expectation
of what it will pay in relation to the post-acquisition performance of the
acquired entities by weighting the probability of a range of payments to give
an estimate of the final obligation.

Acquisition related costs

The Group incurred acquisition related costs of £14.2m related to professional
fees paid for due diligence, general professional fees and legal related
costs. These costs have been included in non-underlying administrative
expenses in the Group's consolidated income statement.


8 Provisions

                                            Asset
                                         Services
                    Disposal/closure   settlement    Insurance     Property
                           provision    provision    provision    provision     Other      Total
                                  £m           £m           £m           £m        £m         £m
At 1 January 2014               41.3          0.7         25.1         36.6      11.2      114.9
Utilisation                    (18.8 )       (4.3 )       (9.6 )       (5.8 )    (9.0 )    (47.5 )
Provided in the year (net)       4.0         28.4          7.0         (0.1 )     0.1       39.4
Provisions acquired               --           --           --          4.7       0.1        4.8
At 31 December 2014             26.5         24.8         22.5         35.4       2.4      111.6

The provisions made above have been shown as current or non-current on the
balance sheet to indicate the Group's expected timing of the matters reaching
conclusion.

The utilisation of the disposal/closure provision relates to ongoing costs
incurred subsequent to the decision in 2013 to dispose of its insurance
distribution business and close its SIP business. The additional provision
provided for in 2014 relates to the additional costs that will be incurred as
part of the disposal of its occupational health business. The provision is
expected to unwind over 2 years.

Asset Services settlements relate to two matters:

1. The potential costs in resolving a claim by those investors who did not
choose to accept the Arch Cru Payment Scheme established in 2011. The Payment
Scheme has had an 87% acceptance rate.

2. The potential costs in resolving matters relating to a fund, of which CFM
was the Operator until September 2009, when it was replaced by an unrelated
company as Operator (following which CFM had no further involvement with the
fund). The fund went into liquidation in 2012 and its liquidator has brought a
claim against both former Operators.

Giving due consideration to these claims the Group has made a provision of
£24.8m at 31 December 2014 (2013: £0.7m). During the year the Group has
incurred £4.3m in respect of professional fees in relation to these matters.
The claims are expected to unwind within one year.


9 Additional cash flow information

Reconciliation of net cash flow to movement in net funds/(debt)

                                   Net debt at Acquisitions                                 Net debt at
                                     1 January      in 2014    Cash flow  Non-cash flow     31 December
                                          2014  (exc. cash)    movements      movements            2014
                                            £m           £m           £m             £m              £m
Cash, cash equivalents and overdrafts    157.8           --       (126.6 )         (2.1 )          29.1
Loan notes                               (10.4 )         --         10.2             --            (0.2 )
Bonds 1                               (1,267.3 )         --         10.6          (50.1 )      (1,306.8 )
Currency swaps in relation to US$
denominated bonds 1                      125.9           --           --           49.1           175.0
Interest rate swaps in relation to
GBP denominated bonds 1                    7.7           --           --            2.1             9.8
Long term debt                              --        (21.5 )       21.5             --              --
Term loan                               (200.0 )         --       (100.0 )           --          (300.0 )
Finance leases                           (17.3 )       (0.1 )        5.5             --           (11.9 )
Underlying net debt                   (1,203.6 )      (21.6 )     (178.8 )         (1.0 )      (1,405.0 )
Fixed rate interest rate swaps           (26.6 )         --           --          (36.7 )         (63.3 )
                                      (1,230.2 )      (21.6 )     (178.8 )        (37.7 )      (1,468.3 )

                                   Net debt at Acquisitions                                 Net debt at
                                     1 January      in 2013    Cash flow  Non-cash flow     31 December
                                          2013  (exc. cash)    movements      movements            2013
                                            £m           £m           £m             £m              £m
Cash, cash equivalents and overdrafts    306.7           --       (148.8 )         (0.1 )         157.8
Loan notes                                (0.5 )         --          0.1          (10.0 )         (10.4 )
Bonds 1                               (1,370.1 )         --         13.1           89.7        (1,267.3 )
Currency swaps in relation to US$
denominated bonds 1                      206.2           --           --          (80.3 )         125.9
Interest rate swaps in relation to
GBP denominated bonds 1                   15.9           --           --           (8.2 )           7.7
Long term debt                              --        (14.2 )       14.2             --              --
Term loan                               (185.0 )         --        185.0             --              --
New term loan                               --           --       (200.0 )           --          (200.0 )
Finance leases                            (2.7 )      (25.4 )       10.8             --           (17.3 )
Underlying net debt                   (1,029.5 )      (39.6 )     (125.6 )         (8.9 )      (1,203.6 )
Fixed rate interest rate swaps           (52.9 )         --           --           26.3           (26.6 )
                                      (1,082.4 )      (39.6 )     (125.6 )         17.4        (1,230.2 )

1 The sum of these items held at fair value equates to the underlying value of
the Group's bond debt of £1,122.0m (2013: £1,133.7m).

The aggregate bond fair value above of £1,306.8m (2013: £1,267.3m) includes
the GBP value of the US$ denominated bonds at 31 December 2014. 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.


10 Related party transactions

Compensation of key management personnel

                                                   2014    2013
                                                     £m      £m
Short term employment benefits                      9.0     8.1
Pension                                             0.2     0.2
Share based payments                                6.8     6.0
                                                   16.0    14.3
The following companies are substantial shareholders in the Company and
therefore a related party of the Company (in each case, for the purposes of
the Listing Rules of the UK Listing Authority). The number of shares held on
18th February 2015 was as below:

                                                    No. of  % of voting
Shareholder                                         shares       rights
Marathon Asset Management LLP                   22,933,805         3.46
Woodford Investment Management LLP              35,060,250         5.30
Invesco Asset Management                        68,877,348        10.41
Veritas Asset Management LLP                    48,291,643         7.30
Legal & General Investment Management           19,920,066         3.01
11 Post balance sheet event

Subsequent to the balance sheet date, the Group is in the process of acquiring
Avocis, a leading provider of customer contact management services in Germany,
Switzerland and Austria, for a consideration of £157m on a cash/debt free
basis.

12 Preliminary announcement

The preliminary announcement is prepared in accordance with International
Financial Reporting Standards as adopted by the European Union. A duly
appointed and authorised committee of the Board of Directors approved the
preliminary announcement on 25th February 2015. The financial information set
out above does not constitute the Company's statutory accounts for the years
ended 31 December 2014 or 2013 but is derived from those accounts. Statutory
accounts for 2013 have been delivered to the registrar of companies, and those
for 2014 will be delivered in due course. The auditor has reported on those
accounts; their reports were (i) unqualified, (ii) did not include a reference
to any matters to which the auditor drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under section
498 (2) or (3) of the Companies Act 2006.

Copies of the announcement can be obtained from the Company's registered
office at 71 Victoria Street, Westminster, London SW1H 0XA, or on the
Company's corporate website www.capita.co.uk/investors/Pages/Investors.aspx.

It is intended that the Annual Report and Accounts will be posted to
shareholders in April 2015. It will be available to members of the public at
the registered office and on the Company's Corporate website
www.capita.co.uk/investors/Pages/Investors.aspx from that date.

13 Statement of Directors responsibilities

The Directors confirm that, to the best of their knowledge the extracts from
the consolidated financial statements included in this report, which have been
prepared in accordance with International Financial Reporting Standards, as
adopted by the European Union, (IFRS), IFRIC interpretations, and those parts
of the Companies Act 2006 applicable to companies reporting under IFRS, fairly
presents the assets, liabilities, financial position and profit of the Group
taken as a whole and that the management report contained in this report
includes a fair review of the development and performance of the business.

By order of the Board

A Parker             G M Hurst
Chief Executive      Group Finance Director

25 February 2015




END

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