REG-Capita PLC: Final Results <Origin Href="QuoteRef">CPI.L</Origin> - Part 3
25/02/2016 07:10
- Part 3: For the preceding part double click ID:nPRrO741Ab
accruals - 3.1 - - - 3.1
At 31 December 2015 21.7 23.4 30.6 35.3 7.4 118.4
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.
Business exit provision: The provision relates to the cost of exiting
businesses through disposal or closure. As described in note 2, in 2015,
additional provision was made in light of the program of business exits
completed or in an active sales process. The provision is expected to unwind
over the next 3 years.
Asset Services settlements provision: relates to two matters:
1. Arch Cru: The parties to the CF Arch Cru Funds group litigation have
entered into a full and final settlement of the proceedings on confidential
terms. It is expected this matter will be completed by the close of 2016.
1. Connaught: The potential costs in resolving the matter relating to
Connaught Income Series 1 Fund ("The Fund"), of which CFM was the Operator
until September 2009, when it was replaced by another Operator company
unrelated to Capita (following which CFM had no further involvement with
the Fund). The Fund went into liquidation in 2012 and its liquidator has
bought a claim against both former Operators. The Financial Conduct
Authority (FCA) was supporting the negotiations being undertaken between
all parties but on 10 March 2015 confirmed that it had withdrawn from the
negotiations and has decided to formally review the activities of both
Operators. At this time no conclusion has been reached on whether any
wrongdoing has occurred and whether any enforcement action will be taken.
Whilst there can be no certainty that a liability will not arise in respect
of this matter, the Group is unable to determine what the outcome of the
FCA review might be and as such no provision for a potential outflow of
funds has been made. Due to the requirement to await the outcome of the
formal review commenced by the FCA, this matter is now likely to come to a
conclusion later in 2016.
Giving due consideration to available information regarding these claims the
Group has made a further provision of £17.2m representing an increased
settlement value for the Arch Cru matter and further legal and professional
fees. The Group has incurred £21.7m in respect of compensation payments and
professional fees in relation to these matters in the year.
Claims and litigation provision: In addition to the Asset services settlement
provision the Group is exposed to other claims and litigation. The Group makes
a provision when a claim has been made where it is more probable than not that
a loss might occur. These provisions are reassessed regularly to ensure that
the level of provisioning is consistent with the claims that have been
reported. The range of values attached to these claims, can be significant and,
where obligations are probable and estimable, provisions are made representing
the Group's best estimate of the expenditure to be incurred. The Group
robustly defends its position on each claim and they are often settled for
amounts significantly smaller than the initial claim and may result in no
transfer of economic benefits.
In the period, the Group has settled a number of liabilities which it had
provided for in previous years. Additionally, it has made provision for new
claims, which originate due to the nature of the Group's activities and revised
existing provisions where more information on the progress of the claim has
become apparent. The Group's exposure to claims is mitigated by having in place
a number of large insurers providing cover for the Group's activities, albeit
insurance recoveries are only recognised as an asset at the point the recovery
is virtually certain. No such assets are recognised currently. Due to the
nature of these claims the Group cannot give an estimate of the period over
which this provision will unwind.
Property provision: Includes a provision, on a discounted basis, for the
difference between the market value of property leases acquired in 2011 with
the Ventura and Vertex Private Sector acquisitions and the lease obligations
committed to at the date the leases were signed by the previous owners. This is
in accordance with IFRS 3 (revised) which requires the use of fair value
measurement. The remaining property provision is made on a discounted basis for
the future rent expense and related cost of leasehold property (net of
estimated sub-lease income) where the space is vacant or currently not planned
to be used for ongoing operations. The expectation is that this expenditure
will be incurred over the remaining periods of the leases which range from 1 to
24 years.
Other provision: relates to provisions in respect of other potential exposures
arising due to the nature of some of the operations that the Group provides.
These are likely to unwind over a period of 1 to 3 years.
9 Additional cash flow information
Operating cash flow for the year ended 31 December 2015
2015 2014
Note £m £m
Cash flows from operating activities
Operating profit before interest and taxation from continuing 206.6 388.9
operations
Adjustment for underlying non-cash items:
Depreciation 82.1 77.8
Amortisation of intangible assets (treated as depreciation) 13.2 9.1
Share based payment expense 11.4 11.0
Employee benefits (1.9 ) (1.0 )
(Profit)/loss on sale of property, plant and equipment (1.2 ) 0.9
Adjustment for non-underlying non-cash items:
Accelerated depreciation on business closure 0.1 -
Accelerated amortisation on business exit 2 2.2 -
Other assets written-off on business exit 2 1.4 -
Re-measurement of businesses held for disposal 2 116.4 -
Amortisation of intangible assets recognised on acquisition 3 165.0 147.1
Impairment of property, plant & equipment 3 76.7 -
Impairment of goodwill 3 28.3 -
Contingent consideration 3 (5.4 ) (9.4 )
Asset Services settlement provision 8 17.2 32.4
Business exit provision 8 16.8 -
Movement in underlying provisions (net) 8 5.7 (17.4 )
Xchanging transactions 3 (3.7 ) -
Net movement in payables and receivables (45.1 ) 1.8
Cash generated from operations before non-underlying cash 685.8 641.2
items
Reconciliation of net cash flow to movement in net funds/(debt)
Net debt Acquisitions Cash flow Non-cash Net debt
at in 2015 movements flow at
1 January (exc. cash) movements 31
2015 December
2015
£m £m £m £m £m
Cash, cash equivalents and overdrafts 29.1 - 57.3 (1.1 ) 85.3
Loan notes (0.2 ) - 0.2 - -
Bonds1 (1,306.8 ) - (399.6 ) (43.0 ) (1,749.4 )
Currency swaps in relation to US$ 175.0 - - 38.9 213.9
denominated bonds1
Interest rate swaps in relation to GBP 9.8 - - (2.9 ) 6.9
denominated bonds1
Long term debt - 48.3 (48.3 ) - -
Term loan (300.0 ) - - - (300.0 )
Finance leases (11.9 ) (0.1 ) 5.0 - (7.0 )
Underlying net debt (1,405.0 ) 48.2 (385.4 ) (8.1 ) (1,750.3 )
Fixed rate interest rate swaps (63.3 ) - - (3.7 ) (67.0 )
Deferred consideration (23.1 ) (10.0 ) 11.6 - (21.5 )
(1,491.4 ) 38.2 (373.8 ) (11.8 ) (1,838.8 )
Net debt Acquisitions Cash flow Non-cash Net debt
at in 2014 movements flow at
1 January (exc. cash) movements 31
2014 December
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 )
Bonds1 (1,267.3 ) - 10.6 (50.1 ) (1,306.8 )
Currency swaps in relation to US$ 125.9 - - 49.1 175.0
denominated bonds1
Interest rate swaps in relation to GBP 7.7 - - 2.1 9.8
denominated bonds1
Long term debt - (21.5 ) 21.5 - -
Term loan (200.0 ) - (100.0 ) - (300.0 )
New term loan - - - - -
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 )
Deferred consideration (58.6 ) - 35.5 - (23.1 )
(1,288.8 ) (21.6 ) (143.3 ) (37.7 ) (1,491.4 )
1 The sum of these items held at fair value equates to the underlying value of
the Group's bond debt of £1,528.6m (2014: £1,122.0m).
The aggregate bond fair value above of £1,749.4m (2014: £1,306.8m) includes the
GBP value of the US$ denominated bonds at 31 December 2015. 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.
During the year the Group issued US$294m, £97m and EUR310m of bond debt
(combined value of £496.6m) with a maturity profile between 7 and 12 years.
Additionally it extended the maturity of £200m of its existing term loan debt
to January 2017. The Group repaid US$80m and £57m of its bond debt (combined
value £97m) on maturity in the year.
The Group has available to it a committed Revolving Credit Facility of £600m
maturing in August 2020. In addition in December 2015, the Group negotiated a £
600m Credit Facility maturing in June 2017. Both of these facilities are
available for the Group's immediate use and in both cases £nil was drawn down
at 31 December 2015 (2014: £nil drawn down on the £600m Revolving Credit
Facility).
10 Related party transactions
Compensation of key management personnel
2015 2014
£m £m
Short term employment benefits 11.9 9.0
Pension 0.2 0.2
Share based payments 6.0 6.8
18.1 16.0
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 2016 was as below:
Shareholder No. of % of
shares voting
rights
Invesco Asset Management 53,674,295 8.08
Veritas Asset Management LLP 41,859,611 6.30
BlackRock Inc 37,899,583 5.70
Woodford Investment Management LLP 36,810,693 5.54
11 Post balance sheet event
Subsequent to the balance sheet date, the Group disposed of 80.1% of the shares
in a health business, Capita Medical Reporting Limited for a cash consideration
of £1 and £20m deferred consideration. The remaining 19.9% will be recorded as
a financial asset as the Group does not retain any significant influence over
the business.
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 24th February 2016. The financial information set
out above does not constitute the Company's statutory accounts for the years
ended 31 December 2015 or 2014 but is derived from those accounts. Statutory
accounts for 2014 have been delivered to the registrar of companies, and those
for 2015 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 2016. 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 N Greatorex
Chief Executive Group Finance Director
24th February 2016
END
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