REG-Capita PLC: Half-year Report <Origin Href="QuoteRef">CPI.L</Origin> - Part 1
27/07/2016 07:05
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Capita plc
Half year results for the 6 months to 30 June 2016
Financial highlights Underlying (1)2016 Underlying (1)2015 YOY Reported
change 2016
Revenue £2,405m £2,283m +5 % £2,430m
Operating profit £317.6m £288.8m +10 % £236.3m
Profit before tax £285.3m £264.9m +8 % £186.1m
Earnings per share 34.2p 32.0p +7 % 22.4p
Interim dividend per share 11.1p 10.5p +6 % 11.1p
Highlights
Good financial results
• Underlying revenue growth on a like for like basis(1) of 8.8%, including
5.0% organic growth net of attrition
• Underlying operating margin(1) of 13.2% (H1 2015 on a like for like
basis(1): 12.9%)
• Underlying profit before tax(1) up 8% to £285.3m (H1 2015: £264.9m)
• Underlying earnings per share(1) up 7% to 34.2p (H1 2015: 32.0p)
• Interim dividend up 6% to 11.1p (H1 2015: 10.5p)
• Underlying cash flow(1) from operations £388m (H1 2015 £300m), a cash
conversion ratio of 122% (H1 2015: 104%)
• Net debt to annualised EBITDA(1) of 2.49, with headroom of £1.1bn, at end
June 2016
• Post tax ROCE(1) 15.0% (FY 2015: 15.0%)
• Reported profit before tax £186.1m (H1 2015: £146.1m)
• Reported earnings per share 22.4p (H1 2015 17.7p).
Steady flow of major contract wins and acquisitions
• £879m of major contract wins (H1 2015: £1.6bn) including:
- Tesco Mobile customer management services, worth £140m over 5 years
- Five Councils shared services platform, worth £139m over 9 years
- Extension of our relationship with Department for Work and Pensions
Personal Independence Payments (PIP) assessments, worth £210m (based on
volume assumptions)
• Major contract win rate 1 in 2
• Bid pipeline £5.1bn (February 2016: £4.7bn), with a weighted average
contract length of 7 years (February 2016: 6 years)
• 6 acquisitions for a total consideration of £84m, including Trustmarque,
a leading software reseller and provider of cloud services.
Andy Parker, Chief Executive of Capita plc, commented:
“In the first half of 2016, Capita achieved good profit growth driven
organically by major contracts and our trading businesses, and through
acquisitions made part way through 2015. We also delivered strong cash flow
and robust sales and operational performance.
While it is too early to know the impact of the recent EU referendum, it has
created increased uncertainty, particularly in the financial services sector,
and we are continuing to experience some delays in decision making in the
short term. However, we expect this to be more than offset in the medium-term
by incremental opportunities that arise as clients respond to the impacts of
the UK leaving the EU.
The structural drivers for our services remain strong and Capita has a good
track record of operating through political and economic cycles. We are making
steady progress towards achieving around 4% organic growth in 2016 and remain
confident of the strength of our business model in creating continued
profitable growth into the future."
_____________________________________________________________________________________
Analyst & investor presentation:
Andy Parker, Chief Executive of Capita plc will host a presentation of our
results in London at 08:30 UK time today.
There will be a conference call and live webcast of the event, with an
on-demand version available later today at www.capita.com/investors.
Please dial into the call in time to allow for registration.
Conference call:
Participant Dial-in: +44 20 3059 8125
Participant Password: Capita
Replay: A replay of the conference call will be available for 7 days after the
event
Dial-in: + 44 121 260 4861
Access code: 3687471 #
_____________________________________________________________________________________
For further information:
Capita plc Tel: 020 7654 2219
Shona Nichols, Executive Director, Corporate Development & Communications
Andrew Ripper, Head of Investor Relations
Capita Press Office Tel: 020 7654 2399
FTI Consulting Tel: 0203 727 1340
Andrew Lorenz
About Capita
Capita is a leading UK provider of technology enabled customer and business
process services and integrated professional support services. With 75,000
people at over 500 sites, including 94 business centres across the UK, Europe,
India and South Africa, Capita uses its expertise, infrastructure and scale
benefits to transform its clients' services, driving down costs and adding
value. Capita is quoted on the London Stock Exchange (CPI.L), and is a
constituent of the FTSE 100 with 2015 underlying revenue of £4.7 billion.
Further information on Capita can be found at: http://www.capita.com.
Results for the 6 months to 30 June 2016
Overview
Capita is today reporting good financial results for the first half in 2016.
We extended and expanded a number of major contracts, delivered growth from
our trading businesses and made a number of acquisitions which should enhance
our growth going forward.
The Group increased underlying(1) revenue by 5% to £2,405m (H1 2015:
£2,283m) and underlying revenue on a like for like(1) basis by 8.8%,
comprised 5.0% organic growth net of attrition and 3.8% from acquisitions.
Organic growth was driven by the benefit from new contracts started in the
second half of 2015 and good underlying performances from our divisions.
Underlying operating profit(1) rose by 10% to £317.6m (H1 2015: £288.8m) and
underlying profit before tax(1) increased by 8% to £285.3m (H1 2015:
£264.9m). Reported profit before tax was £186.1m (H1 2015: £146.1m), after
the amortisation of intangibles. Underlying earnings per share(1) rose by 7%
to 34.2p (H1 2015: 32.0p) and we increased our dividend for the half year by
6% to 11.1p (H1 2015: 10.5p).
To date this year, we have secured major contracts with an aggregate value of
£879m (H1 2015: £1.6bn). Our win rate was 1 in 2 by value. The bid pipeline
currently stands at £5.1bn (February 2016: £4.7bn), comprised of 36 bids
with a weighted average contract length of 7 years. We continue to have a
large active prospect list of opportunities behind the pipeline.
We invested a total of £84m, excluding deferred and contingent
considerations, in acquiring 6 businesses in the period. The largest of these
was Trustmarque, a software reseller and IT services provider, which sells,
installs and manages software and cloud products and has a strong relationship
with Microsoft. We also completed the disposals of Capita Medical Reporting
and Fish Administration, both of which were considered to be non-core going
forwards and were held for sale over the 2015 year end.
Financial review
Revenue – the Group increased underlying revenue(1) by 5% to £2,405m (H1
2015: £2,283m). Underlying revenue on a like for like basis(1), excluding
results from businesses exited and assets held for sale in both years,
increased by 8.8% including 5.0% organic growth net of attrition and 3.8% from
acquisitions. Our Integrated Services, Digital & Software Solutions,
Commercial Services and Asset Services divisions all delivered strong organic
growth, driven by the benefit of new major contracts such as Primary Care
Support England and The Co-operative Bank and good underlying trading.
Attrition was 3.4%, including the planned completion of transformation work on
Telefónica UK (O2), which resulted in a decline in revenue in the Customer
Management division. Revenue also declined in the Insurance & Benefits
Services division due to disposals.
Operating profit – underlying operating profit(1) increased by 10% to
£317.6m (H1 2015: £288.8m). There were strong performances from our
Strategic Services, Commercial Services and Digital & Software Solutions
divisions and Asset Services also performed well. Profits declined in the
Customer Management and Insurance & Benefits divisions, as a result of the
aforementioned impacts from the end of transformation work and disposals,
respectively.
Operating margin - underlying operating margin(1) was 13.2% (H1 2015: 12.7%),
reflecting the positive impact of exiting businesses which lacked strategic
fit. Underlying operating margin on a like for like basis(1) increased by
30bps to 13.2% (H1 2015: 12.9%). We expect underlying Group operating margin
to be maintained in the range of 13.0% to 14.0% for the full year and the
foreseeable future.
Net finance costs - the underlying net interest charge(1) was £32.3m (H1
2015: £23.9m). We expect underlying interest costs to be in the range of
£60m to £65m in 2016, reflecting an increase in our average cost of debt, as
interest rate swaps run off on some of our private placement debt.
Profit before tax - underlying profit before tax(1) increased by 8% to
£285.3m (H1 2015: £264.9m).
Non-underlying charges - non-underlying charges were £99.2m (H1 2015
£118.8m), including the amortisation of acquired intangibles and
mark-to-market of fixed rate interest rate swaps.
Reported profit before tax - reported profit before tax(1) increased by 27% to
£186.1m (H1 2015: £146.1m), reflecting the reduction in non-underlying
charges outlined above.
Earnings per share - underlying earnings per share(1) rose by 7% to 34.2p (H1
2015: 32.0p), after non-controlling interests of £5.4m (H1 2015: £4.0m). Our
underlying tax rate was 18.5% (H1 2015: 18.5%).
Dividend – the Board has declared an interim dividend of 11.1p per ordinary
share (H1 2015: 10.5p), representing an increase of 6%. The interim dividend
will be payable on 30 November 2016 to shareholders on the register at the
close of business on 21 October 2016.
Cash flow – underlying cash flow from operations(1) was £388m (H1 2015:
£300m), representing an underlying operating profit to cash conversion ratio
of 122% (H1 2015: 104%). We continue to target annual cash conversion ratio at
or above 100% for the foreseeable future. Net capital expenditure was £88m
(H1 2015: £57m) and we continue to expect capital expenditure in the full
year to be lower than in 2015. Underlying free cash flow(1) was £236m (H1
2015: £181m).
Net debt - net debt at end June 2016 was £1,901m (H1 2015: £1,761m)
including £90m fixed rate interest rate swaps (H1 2015: £60m) and £15m
deferred consideration (H1 2015: £16m). As at 30 June 2016 we had a total of
£1,491m outstanding private placement bond debt, of which £105m matures in
the next 12 months and the remainder at various maturities to 2027. In
addition, we had £800m of drawn bank debt, of which £200m is repayable in
the next 12 months. We had headroom of £1.1bn at end June 2016, including an
undrawn £600m revolving credit facility which matures in August 2020.
At 30 June 2016, our net debt to annualised EBITDA(1) ratio was 2.49 (H1 2015:
2.52) and annualised interest cover(1) was 12.3 times (H1 2015: 16.5 times).
We aim to keep the ratio of net debt to EBITDA in the range of 2 to 2.5 over
the long term and we would be unlikely to incur borrowings which would reduce
underlying interest cover below 7 times.
Return on capital employed – our post-tax return on average capital
employed(1) (ROCE) was 15.0% (FY 2015: 15.0%), based upon the 12 month rolling
position from our last reporting date to 30 June, which compares to our
estimated post-tax weighted average cost of capital (WACC) of 7.1%.
Our organisational structure
To further align ourselves and match relevant management expertise with
clients and the markets in which we operate as we continue to grow, we have
made a number of changes to our organisational structure. The key change is
the formation of two divisions: Commercial Services, which includes a number
of our high growth businesses and contracts, such as AXELOS and
Constructionline; and Strategic Services, which includes several of our
central government contracts, such as the Defence Infrastructure Organisation
and our Indian offshore business. These changes are reflected in the segmental
reporting in these results.
Sales and business development review
Our Group Business Development team focuses upon major outsourcing, partnering
and asset commercialisation contracts, shaping and bidding for opportunities
across our 11 target vertical markets. We have made a solid start to the year,
securing 11 contracts with an aggregate value of £879m in the year to date.
Our win rate was 1 in 2 by value.
Major contracts announced to date in 2016
Private sector
• Tesco Mobile - selected by leading mobile telecommunications company Tesco
Mobile to form an initial 5 year strategic partnership for customer management
services, including customer care, technical support, sales, upgrades and
retention. The contract is expected to be worth £140m over 5 years, starting
from 1 August.
• Debenhams Retail plc - extended its existing customer services partnership
with Capita Customer Management, worth £72m to 1 September 2022.
• Other private sector contracts - we have also extended our contract with
Volkswagen for customer management and extended a contract with a major
financial services client.
Local government
• Five Councils: South Oxfordshire, Vale of White Horse, Hart, Havant and
Mendip District Councils - selected to introduce an innovative flexible shared
services platform, delivering a suite of corporate services, including
revenues and benefits, customer services, HR, ICT and procurement, worth
£139m over 9 years.
• Blackburn with Darwen Council - signed a new technical services
partnership, expected to be worth at least £60m for an initial term of five
years, with the ability to extend for another 5 years. The contract includes
highways and property services and a wider £2bn framework, which allows other
public organisations to directly procure Capita's services for infrastructure
and development projects.
• Urban Vision - Salford City Council extended Urban Vision, a joint venture
between itself, Capita and Galiford Try. The partnership delivers services
such as property, regulatory planning, engineering infrastructure, and design
and highway operations to over 240 clients across both the public and private
sectors. The extension is expected to be worth £60m to Capita over 3 years to
2020.
Central government
• Department for Work and Pensions - agreed a 2 year extension of our PIP
contract, worth £210m to 2019 (based on volume assumptions).
• The Pensions Regulator - agreed an extension to its partnership with
Capita for a further three years to ensure the continued successful roll-out
of automatic enrolment to small and micro employers. The contract extension is
worth an additional £37m over three years and will run from October 2018.
Bid pipeline
Our bid pipeline shows the total contract value of our major sales bids at a
specific point in time, which we disclose 3 times a year. It contains all bids
with total contracted revenue worth between £25m and a capped ceiling of
£1bn, where we have been short-listed to the last 4 or fewer. The total
contract value of the bid pipeline currently stands at £5.1bn (February 2016:
£4.7bn), comprised of 36 bids including 92% new business and 8% renewals and
extensions, with a weighted average contract length of 7 years. We are seeing
steady activity in both the private sector (50% of the pipeline), particularly
in telecoms, retail and financial services, and the public sector (50% of the
pipeline), in defence, local government, and transport and infrastructure. We
continue to have a large, active prospect list of opportunities behind the
pipeline and there are no material contracts, defined as having forecast
annual revenue in excess of 1% of 2015 revenue, up for rebid until 2019.
Acquisitions support our growth strategy
Capita makes acquisitions to build capability in existing markets, enter new
markets and enhance our future organic growth potential, largely focusing upon
small to medium sized businesses. We aim to drive value creation for
shareholders through our acquisition strategy and seek to achieve a 15% post
tax ROCE after integration into the Group. In the first half of 2016 we
invested a total of £84m, excluding deferred and contingent considerations,
in acquiring 6 businesses. We also completed the disposals of Capita Medical
Reporting and Fish Administration, both of which were considered to be
non-core going forward and were held for sale over the 2015 year end.
Trustmarque adds capability in cloud computing: in June we acquired
Trustmarque, a software reseller and provider of software asset management, IT
and cloud services, for £57m. Trustmarque has a strong relationship with
Microsoft, being the most accredited and largest Microsoft public sector
licensing specialist and partner for public sector cloud in the UK. The
business is targeting strong growth in strategic cloud consultancy and has
identified a £5bn addressable UK market for these cloud services, including
MS O365 and MS Azure. With benefits from cross selling, cost savings and
market growth, Trustmarque is expected to achieve Capita's target post-tax
return on investment of 15% in 2018.
Enhancing our payments offering: in January we acquired the online payments
business of PayPoint plc, an eCommerce payment services provider to private
sector customers, for £14m. Services include payment gateway, fraud
management, data security and intelligent checkout reporting. These will
enhance our existing payments business which processes some £3.5bn of
transactions per annum in local government, housing, education, health,
utilities and the private sector. The business will be combined with our
existing Pay360 business which will help us to realise our full potential as a
market leading independent payment service provider.
Orange Bus adds scale in digital transformation: in March we acquired Orange
Bus, a specialist digital agency, which adds additional skills and scale to
our existing digital transformation, business processing and CRM propositions.
With this enhanced digital capability, we are ideally placed to help clients
across both the public and private sectors to improve the use of their digital
channels to benefit both their organisations and their end customers.
Building analytics and software capability in health: Health Analytics is an
award-winning Cambridge-based company whose specialist software uses clinical
and financial information to help Clinical Commissioning Groups and social
care organisations to make more informed decisions about the care they
deliver. In combination with our existing business intelligence and analytics
services, the acquisition will enable Capita to grow its business across the
NHS and support commissioners to deliver significant improvements in patient
outcomes.
Group Board
On 4 July 2016, we announced the appointment of Ian Powell as Non-Executive
Director and Chairman Designate from 1 September 2016. Ian will succeed Martin
Bolland as Non-Executive Chairman on 1 January 2017. Until end of June 2016,
Ian Powell was Chairman and Senior Partner of PricewaterhouseCoopers LLP (PwC)
UK. He has broad financial, commercial and regulatory experience and led PwC's
interactions with the UK Government and other public sector organisations.
Martin Bolland, who announced his intention to stand down in February 2016,
will step down after six years as Non-Executive Chairman and eight years as a
Non-Executive Director of Capita plc on 31 December 2016.
Future prospects
In the first half of 2016, Capita achieved good profit growth driven
organically by major contracts and our trading businesses, and through
acquisitions made part way through 2015. We also delivered strong cash flow
and robust sales and operational performance.
While it is too early to know the impact of the recent EU referendum, it has
created increased uncertainty, particularly in the financial services sector,
and we are continuing to experience some delays in decision making in the
short term. However, we expect this to be more than offset in the medium-term
by incremental opportunities that arise as clients respond to the impacts of
the UK leaving the EU.
The structural drivers for our services remain strong and Capita has a good
track record of operating through political and economic cycles. We are making
steady progress towards achieving around 4% organic growth in 2016 and remain
confident of the strength of our business model in creating continued
profitable growth into the future.
1 Refer to appendix for calculation of Alternative Performance Measures
Half year condensed consolidated income statement
for the 6 months ended 30 June 2016
Notes 30 June 2016 30 June 2015
Non-underlying Non-underlying
Underlying Business exit Other non-underlying Total Underlying Business exit Other non-underlying Total
£m £m £m £m £m £m £m £m
Continuing operations:
Revenue 3 2,405.4 24.6 — 2,430.0 2,282.7 6.2 — 2,288.9
Cost of sales (1,716.9 ) (17.9 ) — (1,734.8 ) (1,641.9 ) (9.1 ) — (1,651.0 )
Gross profit 688.5 6.7 — 695.2 640.8 (2.9 ) — 637.9
Administrative expenses 4,5 (370.9 ) (6.7 ) (81.3 ) (458.9 ) (352.0 ) (13.0 ) (102.8 ) (467.8 )
Operating profit 3 317.6 — (81.3 ) 236.3 288.8 (15.9 ) (102.8 ) 170.1
Net finance costs 6 (32.3 ) — (17.8 ) (50.1 ) (23.9 ) — 1.6 (22.3 )
Loss on disposal 4 — (0.1 ) — (0.1 ) — (1.7 ) — (1.7 )
Profit before tax 3 285.3 (0.1 ) (99.1 ) 186.1 264.9 (17.6 ) (101.2 ) 146.1
Income tax expense (52.8 ) — 18.7 (34.1) (49.0 ) 2.7 18.9 (27.4 )
Profit for the period 232.5 (0.1 ) (80.4 ) 152.0 215.9 (14.9 ) (82.3 ) 118.7
Attributable to:
Owners of the Company 227.1 (0.1 ) (78.1 ) 148.9 211.9 (14.9 ) (80.0 ) 117.0
Non-controlling interests 5.4 — (2.3 ) 3.1 4.0 — (2.3 ) 1.7
232.5 (0.1 ) (80.4 ) 152.0 215.9 (14.9 ) (82.3 ) 118.7
Earnings per share 7
– basic 34.24 p (0.02) p (11.78) p 22.44 p 32.03 p (2.25) p (12.09) p 17.69 p
– diluted 34.05 p (0.01) p (11.71) p 22.33 p 31.86 p (2.24) p (12.03) p 17.59 p
Half year condensed consolidated statement of comprehensive income
for the 6 months ended 30 June 2016
30 June 2016 30 June 2015
£m £m £m £m
Profit for the period 152.0 118.7
Other comprehensive (expense)/income
Items that will not be reclassified subsequently to profit or loss
Actuarial loss on defined benefit pension schemes (88.9 ) (31.3 )
Deferred tax effect 16.0 6.3
(72.9 ) (25.0 )
Items that will or may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations 36.9 (15.9 )
Net investment hedge (20.0 ) —
Gain/(loss) on cash flow hedges 4.2 (1.0 )
Reclassification adjustments for losses included in the income statement 1.5 1.4
Income tax effect (1.0 ) (0.1 )
4.7 0.3
21.6 (15.6 )
Other comprehensive (expense)/income for the period net of tax (51.3 ) (40.6 )
Total comprehensive income for the period net of tax 100.7 78.1
Attributable to:
Owners of the Company 97.6 76.4
Non-controlling interests 3.1 1.7
100.7 78.1
Half year condensed consolidated balance sheet
at 30 June 2016
30 June 2016 31 December 2015
£m £m
Non-current assets
Property, plant and equipment 417.1 406.0
Intangible assets 2,930.3 2,810.0
Financial assets 326.0 186.6
Deferred taxation 28.0 18.8
Trade and other receivables 80.8 86.1
3,782.2 3,507.5
Current assets
Financial assets 64.0 44.3
Disposal group assets held for sale 4.3 84.1
Funds assets 358.1 161.7
Trade and other receivables 1,078.0 1,011.9
Cash 935.0 534.0
2,439.4 1,836.0
Total assets 6,221.6 5,343.5
Current liabilities
Trade and other payables 1,240.1 1,144.0
Overdrafts 435.1 448.7
Financial liabilities 379.0 230.8
Disposal group liabilities held for sale 9.1 40.4
Funds liabilities 358.1 161.7
Provisions 57.9 69.4
Income tax payable 56.2 46.2
2,535.5 2,141.2
Non-current liabilities
Trade and other payables 35.0 29.3
Financial liabilities 2,626.7 2,163.4
Deferred taxation 18.9 19.0
Provisions 28.9 49.0
Employee benefits 275.3 188.3
2,984.8 2,449.0
Total liabilities 5,520.3 4,590.2
Net assets 701.3 753.3
Capital and reserves
Issued share capital 13.8 13.8
Share premium 501.3 500.7
Employee benefit trust and treasury shares (0.3 ) (0.3 )
Capital redemption reserve 1.8 1.8
Foreign currency translation reserve (4.3 ) (21.2 )
Cash flow hedging reserve (7.3 ) (12.0 )
Retained earnings 123.4 196.5
Equity attributable to owners of the Company 628.4 679.3
Non-controlling interests 72.9 74.0
Total equity 701.3 753.3
Half year condensed consolidated statement of changes in equity
for the 6 months ended 30 June 2016
Share capital Share premium Employee benefit trust & treasury shares Capital redemption reserve Retained earnings Foreign currency translation reserve Cash flow hedging reserve Total Non-controlling interests Total equity
£m £m £m £m £m £m £m £m £m £m
At 1 January 2015 13.8 499.0 (0.3 ) 1.8 354.7 (4.3 ) (14.8 ) 849.9 65.6 915.5
Profit for the period — — — — 117.0 — — 117.0 1.7 118.7
Other comprehensive income/(expense) — — — — (25.0 ) (15.9 ) 0.3 (40.6 ) — (40.6 )
Total comprehensive income/(expense) for the period — — — — 92.0 (15.9 ) 0.3 76.4 1.7 78.1
Share based payment — — — — 5.4 — — 5.4 — 5.4
Income tax deduction on exercise of share options — — — — 1.4 — — 1.4 — 1.4
Deferred income tax relating to share based payments — — — — 2.3 — — 2.3 — 2.3
Investment in non-controlling interest — — — — — — — — 6.7 6.7
Put option of non-controlling interest acquired — — — — (9.8 ) — — (9.8 ) — (9.8 )
Fair value movement in put option of non-controlling interest — — — — (4.2 ) — — (4.2 ) — (4.2 )
Shares issued — 1.9 — — — — — 1.9 — 1.9
Equity dividends paid — — — — (129.7 ) — — (129.7 ) (1.2 ) (130.9 )
At 30 June 2015 13.8 500.9 (0.3 ) 1.8 312.1 (20.2 ) (14.5 ) 793.6 72.8 866.4
At 1 January 2016 13.8 500.7 (0.3 ) 1.8 196.5 (21.2 ) (12.0 ) 679.3 74.0 753.3
Profit for the period — — — — 148.9 — — 148.9 3.1 152.0
Other comprehensive income/(expense) — — — — (72.9 ) 16.9 4.7 (51.3 ) — (51.3 )
Total comprehensive income/(expense) for the period — — — — 76.0 16.9 4.7 97.6 3.1 100.7
Share based payment — — — — 5.0 — — 5.0 — 5.0
Income tax deduction on exercise of share options — — — — 0.9 — — 0.9 — 0.9
Deferred income tax relating to share based payments — — — — (11.7 ) — — (11.7 ) — (11.7 )
Fair value movement in put option of non-controlling interests — — — — (2.4 ) — — (2.4 ) — (2.4 )
Shares issued — 0.6 — — — — — 0.6 — 0.6
Equity dividends paid — — — — (140.9 ) — — (140.9 ) (4.2 ) (145.1 )
At 30 June 2016 13.8 501.3 (0.3 ) 1.8 123.4 (4.3 ) (7.3 ) 628.4 72.9 701.3
Half year condensed consolidated cash flow statement
for the 6 months ended 30 June 2016
30 June 2016 30 June 2015
Notes £m £m
Cash generated from operations before non-underlying cash items 11 387.7 300.3
Non-underlying trading — (3.1 )
Asset Services settlement provision cash paid (22.2 ) (2.0 )
Business exit provision cash paid (11.3 ) (7.0 )
Gwent pension settlement (3.3 ) —
Cash generated from operations 350.9 288.2
Income tax paid (34.9 ) (41.9 )
Net interest paid (29.1 ) (20.7 )
Net cash inflow from operating activities 286.9 225.6
Cash flows from investing activities
Purchase of property, plant and equipment (50.1 ) (41.9 )
Purchase of intangible assets (37.8 ) (15.0 )
Proceeds from sale of property, plant and equipment — 0.2
Acquisition of public sector subsidiary partnerships — (20.0 )
Acquisition of subsidiary undertakings and businesses (91.6 ) (232.6 )
Debt repaid on acquisition of subsidiary undertakings — (41.5 )
Cash acquired with subsidiary undertakings 12.3 11.8
Proceeds on disposal of subsidiary undertakings 25.0 —
Cash disposed of with subsidiary undertakings (5.4 ) (1.7 )
Deferred consideration paid (6.7 ) (6.9 )
Contingent consideration paid (9.0 ) (27.7 )
Purchase of financial assets (1.0 ) (0.2 )
Net cash outflow from investing activities (164.3 ) (375.5 )
Cash flows from financing activities
Issue of ordinary share capital 0.6 1.9
Dividends paid 8 (145.1 ) (130.9 )
Capital element of finance lease rental payments 11 (2.4 ) (2.7 )
Proceeds on issue of bonds 11 — 279.5
Proceeds from bank loans 11 500.0 80.0
Repayment of bonds 11 (70.0 ) —
Repayment of loan note — (0.1 )
Financing arrangement costs — (1.1 )
Net cash inflow from financing activities 283.1 226.6
Net increase in cash and cash equivalents 405.7 76.7
Cash and cash equivalents at the beginning of the period 85.3 29.1
Impact of movement in exchange rates 11 8.9 (0.3 )
Cash and cash equivalents at 30 June 499.9 105.5
Cash and cash equivalents comprise:
Cash at bank and in hand 935.0 458.7
Overdraft (435.1 ) (353.2 )
Total 11 499.9 105.5
Notes to the half year condensed consolidated financial statements
for the 6 months ended 30 June 2016
1 Corporate information
Capita plc is a public limited company incorporated in England and Wales whose
shares are publicly traded. The half year condensed consolidated financial
statements of the Company and its subsidiaries (‘the Group’) for the 6
months ended 30 June 2016 were authorised for issue in accordance with a
resolution of the Directors on 26 July 2016.
2 Basis of preparation, judgements and estimates, accounting policies,
principal risks and uncertainties and going concern
(a) Basis of preparation
The half year condensed consolidated financial statements for the 6 months
ended 30 June 2016 have been prepared in accordance with the Disclosure and
Transparency Rules (DTR) of the Financial Conduct Authority and with IAS 34
Interim Financial Reporting.
The half year 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 2015, which have been prepared in accordance with
IFRSs as adopted by the European Union.
This condensed consolidated half year financial information does not comprise
statutory accounts within the meaning of Section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2015 were approved by
the Board of Directors on 24 February 2016 and delivered to the Registrar of
Companies. The report of the auditors on those accounts was unqualified, did
not contain an emphasis of matter paragraph and did not contain any statement
under Section 498 of the Companies Act 2006.
The half year condensed consolidated financial statements for the 6 months
ended 30 June 2016 have not been audited or reviewed by auditors pursuant to
the Auditing Practices Board guidance on Review of Interim Financial
Information.
(b) Judgements and estimates
In preparing these half year condensed consolidated financial statements,
management make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amount of assets and
liabilities and income and expense. Actual results may differ from these
estimates. The significant judgements made by management in applying the
Group’s accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the consolidated financial statements
as at the year ended 31 December 2015.
(c) Significant accounting policies
The accounting policies adopted in preparation of the half year 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 2015, except for the adoption of the following new amendments and
improvements with an initial date of application of 1 January 2016. None of
these amendments had any material impact on the consolidated financial
statements of the Group.
IFRS 11 Amendments: Accounting for Acquisitions of Interests in Joint
Operations The amendments require an entity acquiring an interest in a joint
operation, in which the activity of the joint operation constitutes a
business, to apply, to the extent of its share, all of the principles on
business combinations accounting in IFRS 3 and other IFRSs that do not
conflict with the requirements of IFRS 11 Joint Arrangements. In addition,
entities are required to disclose the information required by IFRS 3 and other
IFRSs on business combinations.
Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of
Depreciation and Amortisation The amendments clarify the principle in IAS 16
Property, Plant and Equipment and IAS 38 Intangible Assets that revenue
reflects a pattern of economic benefits that are generated from operating a
business (of which the asset is a part) rather than the economic benefits that
are consumed through use of the asset. As a result, a revenue-based method
cannot be used to depreciate property, plant and equipment and may only be
used in very limited circumstances to amortise intangible assets.
Amendments to IAS 27: Equity Method in Separate Financial Statements The
amendments will allow entities to use the equity method to account for
investments in subsidiaries, joint ventures and associates in their separate
financial statements. Entities already applying IFRS and electing to change to
the equity method in their separate financial statements will have to apply
that change retrospectively.
Annual Improvements to IFRSs 2012-2014 Cycle As part of its annual
improvements cycles the International Accounting Standards Board amended
various standards primarily with a view to removing inconsistencies and
clarifying wording.
Amendments to IAS 1 Disclosure Initiative The amendments to IAS 1 clarify,
rather than significantly change, existing IAS 1 requirements. The amendments
relate to: materiality and aggregation; information to be presented in the
statement of financial position and statement of profit or loss and other
comprehensive income; the structure of the notes to the financial statements
and the disclosure of accounting policies.
(d) Principal risks and uncertainties and going concern
The Directors have considered the principal risks and uncertainties affecting
the Group’s financial position and prospects in 2016. As described on pages
48 to 55 of the Group’s Annual Report for 2015, the Group continues to be
exposed to a number of risks and has well established systems and procedures
in place to identify, assess and mitigate those risks.
The principal risks include those arising from: significant failures in
internal control systems; lack of corporate financial stability; failures in
information security controls; legal and regulatory risk; adverse
financial/business performance; failure to innovate; increased internal
business complexity; adverse changes in the national or international
political landscape; operational issues leading to reputational risk;
operational IT risks; failure to effectively manage the Group’s talent and
human resources; and weaknesses in the acquisition and contracting life cycle.
These risks have not changed significantly over the first 6 months of 2016,
other than risks related to adverse changes in the national or international
political landscape. These risks have increased in the first 6 months of 2016
as a result of the UK referendum decision to leave the European Union.
While it is too early to know the full impact it has created increased
uncertainty, particularly in the financial services sector, and we are
continuing to experience some delays in decision making in the short term. We
expect this to be more than offset in the medium-term by incremental
opportunities that arise as clients respond to the impacts of the UK leaving
the EU.
The impact on these financial statements is primarily due to the increased
volatility in the financial markets following the referendum result. The
measurement of financial instruments at fair value at 30 June 2016 has
increased the volatility of non-underlying net finance costs, principally due
to weakness of sterling and lower UK gilt and swap yields. Operationally the
Group continues to hedge to mitigate its exposure to financial market
volatility.
The Group has considerable financial resources together with long term
contracts with a wide range of public and private sector clients and
suppliers. As a consequence, the Directors believe the Group is well placed to
manage its business risks successfully.
After making enquiries and in accordance with the FRC’s “Guidance on Risk
Management, Internal Control and Related Financial and Business Reporting
2014”, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable
future. Accordingly, they consider it appropriate to continue to adopt the
going concern basis in preparing the half year condensed consolidated
financial statements. There are no material uncertainties to the Group’s
ability to continue to do so over a period of not less than 12 months from the
date of this report.
3 Segmental information
The following tables present revenue and profit information regarding the
Group’s operating segments for the six months ended 30 June 2016 and 2015
respectively. The comparative figures have been restated due to a
reorganisation of the Group’s business segments and a consequent change in
the way in which the results of the business are reported to the Group Board.
6 months ended 30 June 2016 2015
Total revenue Inter- segment revenue External revenue Total revenue Inter- segment revenue External revenue
Analysis of segment revenue £m £m £m £m £m £m
Digital & Software Solutions 292.2 (35.8 ) 256.4 249.6 (34.4 ) 215.2
Integrated Services 173.7 (16.2 ) 157.5 87.5 (15.6 ) 71.9
Commercial Services 147.5 (11.2 ) 136.3 132.6 (10.8 ) 121.8
Strategic Services 217.8 (21.2 ) 196.6 214.3 (20.4 ) 193.9
Local Government, Property & Health 365.9 (44.6 ) 321.3 343.8 (42.5 ) 301.3
Workplace Services 260.8 (25.2 ) 235.6 252.9 (24.1 ) 228.8
IT Enterprise Services 334.5 (41.4 ) 293.1 314.8 (39.7 ) 275.1
Asset Services 264.3 (35.8 ) 228.5 229.0 (34.3 ) 194.7
Customer Management 270.3 (8.7 ) 261.6 322.4 (8.4 ) 314.0
Capita Europe 98.2 (0.3 ) 97.9 82.3 (0.2 ) 82.1
Insurance & Benefits Services 291.6 (71.0 ) 220.6 351.5 (67.6 ) 283.9
Underlying segment revenue 2,716.8 (311.4 ) 2,405.4 2,580.7 (298.0 ) 2,282.7
Non-underlying revenue 24.6 — 24.6 6.2 — 6.2
Total segment revenue 2,741.4 (311.4 ) 2,430.0 2,586.9 (298.0 ) 2,288.9
Note 6 months to 30 June 2016 6 months to 30 June 2015
Analysis of segment profit £m £m
Digital & Software Solutions 65.0 53.8
Integrated Services 12.5 7.3
Commercial Services 23.2 18.9
Strategic Services 35.8 26.3
Local Government, Property & Health 32.6 30.8
Workplace Services 23.3 22.9
IT Enterprise Services 23.1 22.9
Asset Services 51.2 46.2
Customer Management 25.7 31.1
Capita Europe 10.3 8.4
- More to follow, for following part double click ID:nPRrQ9C74bRecent news on Capita
See all newsREG-Capita Plc: Confirmation of the cancellation of the Company's Share Premium Account
AnnouncementREG-Capita Plc: Director/PDMR Shareholding
AnnouncementREG-Capita Plc: Total Voting Rights
AnnouncementREG-Capita Plc: Contract
AnnouncementREG-Capita Plc: Director/PDMR Shareholding
Announcement