REG-Capita PLC: Half-year Report <Origin Href="QuoteRef">CPI.L</Origin> - Part 2
27/07/2016 07:05
- Part 2: For the preceding part double click ID:nPRrQ9C74a
Insurance & Benefits Services 14.9 20.2
Underlying trading result 317.6 288.8
- Non-underlying trading 4 — (3.7 )
Total trading result 317.6 285.1
Non-trading items:
Intangible amortisation 5 (75.2 ) (80.5 )
Acquisition costs 5 (5.5 ) (8.7 )
Asset Services settlement provision — (12.3 )
Business exit provision 4 — (12.2 )
Contingent consideration movement 5 (0.6 ) (1.3 )
Operating profit 236.3 170.1
Net finance cost 6 (50.1 ) (22.3 )
Loss on disposal 4 (0.1 ) (1.7 )
Profit before tax 186.1 146.1
Income tax expense (34.1 ) (27.4 )
Profit for the period 152.0 118.7
4 Business exits
2016 business exits
In the 2015 Annual Report, we disclosed that the Group was in an active
process to sell a specialist insurance business, a health business and a
justice business and was therefore treating these businesses as a disposal
group held for sale. During the period, the disposal of two of these
businesses has been completed.
None of these business exits meet the definition of “discontinued
operations” as stipulated by IFRS 5, which requires disclosure and
comparatives to be restated where the relative size of a disposal or business
closure is significant, which is normally understood to mean a reported
segment. Accordingly, the separate presentation described below does not fall
within the requirements of IFRS 5 concerning discontinued operations.
Income statement impact
Non-trading
Trading £m Cash Non-cash Total Total
£m £m £m £m
Revenue 24.6 — — — 24.6
Cost of sales (17.9 ) — — — (17.9 )
Gross profit 6.7 — — — 6.7
Administrative expenses (6.7 ) — — — (6.7 )
Operating profit — — — — —
Profit/(loss) on business disposal (see below) 39.6 (39.7 ) (0.1 ) (0.1 )
Profit/(loss) before tax — 39.6 (39.7 ) (0.1 ) (0.1 )
Taxation — — — — —
Profit/(loss) after tax — 39.6 (39.7 ) (0.1 ) (0.1 )
Trading revenue and costs represent the current year trading performance of
these businesses being exited or disposed.
There are no cumulative income or expenses included in Other Comprehensive
Income relating to the disposal group.
Profit/(loss) on business disposal Cash Non-cash Total
£m £m £m
Disposal group assets — 63.7 63.7
Disposal group liabilities — (20.0 ) (20.0 )
Total net assets disposed of — 43.7 43.7
Cash (net of cash disposed of) 19.6 — 19.6
Deferred consideration receivable 20.0 — 20.0
Fair value of residual interest — 4.0 4.0
Proceeds on disposal 39.6 4.0 43.6
Profit/(loss) on business disposal 39.6 (39.7 ) (0.1 )
Assets and liabilities of disposal group held for sale
As at 30 June As at 31 December 2015
2016
£m £m
Property, plant and equipment 0.1 0.7
Intangible assets — 32.7
Trade and other receivables 4.2 50.7
Assets held for sale 4.3 84.1
Trade and other payables (9.1 ) (40.4 )
Liabilities held for sale (9.1 ) (40.4 )
2015 business exits
In the 6 months to 30 June 2015, the Group exited some of its small non-core
health businesses.
Income statement impact Non-trading
Trading £m Cash Non-cash Total £m Total
£m £m £m
Revenue 6.2 — — — 6.2
Cost of sales (9.1 ) — — — (9.1 )
Gross profit (2.9 ) — — — (2.9 )
Administrative expenses (0.8 ) (7.7 ) (4.5 ) (12.2 ) (13.0 )
Operating loss (3.7 ) (7.7 ) (4.5 ) (12.2 ) (15.9 )
Loss on business disposal — (1.7 ) — (1.7 ) (1.7 )
Loss before tax (3.7 ) (9.4 ) (4.5 ) (13.9 ) (17.6 )
Taxation 0.7 1.5 0.5 2.0 2.7
Loss after tax (3.0 ) (7.9 ) (4.0 ) (11.9 ) (14.9 )
Trading revenue and costs represent the trading performance of these
businesses in the period to the date of exit.
Non-trading costs include the costs of exiting a number of small non-core
health businesses and ongoing stranded costs such as IT, property lease and
redundancy payments. It is expected that these expenses will be incurred over
the next twelve months.
Included within non-trading administrative expenses in the table above are:
£m
Provision made in respect of business exit costs 7.7
Accelerated depreciation on business exit 1.0
Accelerated amortisation on business exit 2.2
Working capital derecognised on business exit 1.3
Total 12.2
The table below summarises the loss on disposal:
£m
Cash 1.7
Total net assets disposed of 1.7
Net proceeds received £nil —
Loss on business disposal (1.7 )
5 Administrative expenses
Included within administrative expenses in the other non-underlying column
are:
6 months to 30 June 2016 6 months to 30 June 2015
Cash in year Cash in future Non-cash Total Cash in year Cash in future Non-cash Total
Notes £m £m £m £m £m £m £m £m
Amortisation of acquired intangibles — — 75.2 75.2 — — 80.5 80.5
Contingent consideration movements 12 — — 0.6 0.6 — — 1.3 1.3
Asset Services settlement provision 10 — — — — — 12.3 — 12.3
Professional fees regarding acquisitions 3.3 2.0 — 5.3 4.1 4.1 — 8.2
Stamp duty paid on acquisitions 0.2 — — 0.2 0.5 — — 0.5
Total 3.5 2.0 75.8 81.3 4.6 16.4 81.8 102.8
6 Net finance costs
6 months to 6 months to
30 June 2016 30 June 2015
£m £m
Interest receivable (0.1 ) (0.1 )
Bonds 18.0 14.7
Fixed rate interest rate swaps - realised 5.9 1.8
Finance lease 0.1 0.2
Bank loans and overdrafts 5.2 4.1
Net interest cost on defined benefit pension schemes 3.2 3.2
Interest payable 32.4 24.0
Underlying net finance costs 32.3 23.9
Fixed rate interest rate swaps – mark to market 22.8 (3.3 )
Discount unwind on public sector subsidiary partnership payment 1.1 1.1
Fair value movement in trade investments 0.1 —
Non-designated foreign exchange forward contracts – mark to market (7.3 ) 0.5
Derivatives’ counterparty credit risk adjustment – mark to market 0.9 0.2
Derivatives’ own credit risk adjustment – mark to market 0.2 (0.1 )
Non-underlying net finance costs 17.8 (1.6 )
Total net finance costs 50.1 22.3
7 Earnings per share
Basic earnings per share have been calculated using the weighted average
number of shares in issue during the period of 663.2m (30 June 2015:
661.6m). The diluted average number of shares is 666.9m (30 June 2015:
665.1m) having adjusted the weighted average number of shares for shares yet
to be issued that will be dilutive.
The profits used to calculate the measures are the underlying profit
attributable to shareholders of £227.1m (30 June 2015: £211.9m) and the
total profit attributable to shareholders of £148.9m (30 June 2015:
£117.0m).
As at 26 July 2016, there were 665.0m shares in issue.
8 Dividends
The interim dividend of 11.1p (2015: 10.5p) per share (not recognised as a
liability at 30 June 2016) will be payable on 30 November 2016 to ordinary
shareholders on the register at the close of business on 21 October 2016.
The dividend disclosed in the statement of changes in equity represents the
final ordinary dividend of 21.2p (2015: 19.6p) per share as proposed in the 31
December 2015 financial statements and approved at the Group’s AGM (not
recognised as a liability at 31 December 2015).
9 Business combinations
The Group has made a number of acquisitions in the period which are shown in
aggregate below:
Provisional fair value to Group
£m
Property, plant and equipment 1.3
Intangible assets 28.0
Trade and other receivables < 1 year 40.4
Cash and cash equivalents 12.3
Trade and other payables < 1 year (31.4 )
Accruals < 1 year (34.5 )
Provisions (1.4 )
Income tax (2.5 )
Deferred tax (3.3 )
Employee benefits liability (0.1 )
Finance lease (0.8 )
Net assets 8.0
Goodwill arising on acquisition 88.3
96.3
Discharged by:
Cash consideration paid 88.1
Contingent consideration accrued 8.2
96.3
The full exercise to determine the fair value of intangible assets acquired is
still to be completed, thus the above numbers are provisional. In respect of
the acquisitions made in 2016, 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 4
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 £4m and £13m. The Group has
included £8.2m 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.
Further cash consideration was paid in respect of previous acquisitions of
£15.7m.
10 Provisions
Business exit provision Asset services settlement provision Claims and litigation provision Property provision Other Total
£m £m £m £m £m £m
At 1 January 2016 21.7 23.4 30.6 35.3 7.4 118.4
Utilisation (11.3 ) (22.2 ) (3.7 ) (2.7 ) — (39.9 )
Provided in the period (net) — — 5.1 — 1.8 6.9
Provisions acquired — — — 1.4 — 1.4
At 30 June 2016 10.4 1.2 32.0 34.0 9.2 86.8
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. The provision is expected to unwind
over 1-2 years.
Asset Services settlements relate to two matters:
1. Arch Cru: The parties to the CF Arch Cru Funds 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.
2. Connaught: The potential costs in resolving matters relating to Connaught
Income Series 1 Fund (“The 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, which for its part, the Group has settled in 2016 for a sum
of £18.5m.
The Financial Conduct Authority (FCA) 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 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, the likely timeline for conclusion of this
matter is uncertain.
During the year, the Group has incurred £1.1m in respect of professional fees
in relation to these matters.
Giving due consideration to these claims, the Group has a provision of £1.2m
at 30 June 2016 (At 31 December 2015: £23.4m).
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 insurance 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 operations and
existing provisions where more information on the progress of the claim has
become apparent. The Group's exposure to claims is mitigated by having 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 can not give an estimate of the period over
which the provision will unwind.
Property provisions: includes a discounted provision for the difference
between the market value of the property leases acquired in 2011 with Ventura
and Vertex Private Sector 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 potential claims 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.
11 Additional cash flow information
Operating cash flow for the 6 months ended 30 June 2016 2015
Note £m £m
Cash flows from operating activities
Operating profit before interest and taxation from continuing operations 236.3 170.1
Adjustment for underlying non-cash items:
Depreciation 40.8 43.3
Amortisation of intangible assets (treated as depreciation) 8.8 6.3
Share based payment expense 5.0 5.4
Employee benefits (1.8 ) (1.2 )
(Profit)/loss on sale of property, plant and equipment — 0.3
Adjustment for non-underlying non-cash items:
Accelerated depreciation on business closure 4 — 1.0
Accelerated amortisation on business exit 4 — 2.2
Other assets written-off on business exit 4 — 1.3
Amortisation of intangible assets recognised on acquisition 5 75.2 80.5
Contingent consideration 5 0.6 1.3
Asset Services settlement provision — 12.3
Business exit provision — 7.7
Non-underlying trading — 3.1
Movement in underlying provisions (net) 0.5 3.6
Net movement in payables and receivables 22.3 (36.9 )
Cash generated from operations before non-underlying cash items (see cash flow statement) 387.7 300.3
Income tax paid (34.9 ) (41.9 )
Net interest paid (29.1 ) (20.7 )
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
Free cash flow before non-underlying items 235.8 181.0
Reconciliation of net cash flow to movement in net funds/(debt)
Net debt at 1 January 2016 Acquisitions in 2016 Cash flow movements Non-cash flow movements Net debt at 30 June 2016
£m £m £m £m £m
Cash (+) 85.3 12.3 393.4 8.9 499.9
Bonds* (1,749.4 ) — 70.0 (163.7 ) (1,843.1 )
Currency swaps in relation to US $ denominated bonds* 213.9 — — 128.7 342.6
Interest rate swaps in relation to GBP denominated bonds* 6.9 — — 2.4 9.3
Long term bank loans (300.0 ) — (500.0 ) — (800.0 )
Obligations under finance leases (7.0 ) (0.8 ) 2.4 — (5.4 )
Underlying net debt (1,750.3 ) 11.5 (34.2 ) (23.7 ) (1,796.7 )
Fixed rate interest rate swaps (67.0 ) — — (22.8 ) (89.8 )
Deferred consideration (21.5 ) — 6.7 — (14.8 )
(1,838.8 ) 11.5 (27.5 ) (46.5 ) (1,901.3 )
(+) Cash comprises cash, cash equivalents and overdrafts.
* The aggregate bond fair value above of £1,843.1m (30 June 2015:
£1,567.2m) includes the GBP value of the US$ denominated bonds. 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 swaps are being used to hedge the exposure to changes in the
fair value of GBP denominated bonds. The sum of these items held at fair value
equates to the underlying value of the Group’s bond debt of £1,491.2m (30
June 2015: £1,400.9m).
In June 2016, the Group repaid USD$130m of Series B private placement notes at
maturity, equivalent to £70.0m. Of the Group’s bond debt, £105m matures
in the next 12 months and the remainder at various maturities to 2027. In the
period ended 30 June 2016, the Group borrowed £500m on a term loan which
matures in July 2017; of the £800m of Term Loans, £200m is repayable in the
next 12 months. In addition as at 30th June, the Group had an undrawn £600m
revolving credit facility which matures in August 2020.
Net debt at 1 January 2015 Acquisitions in 2015 Cash flow movements Non-cash flow movements Net debt at 30 June 2015
£m £m £m £m £m
Cash (+) 29.1 — 76.7 (0.3 ) 105.5
Unsecured loan notes (0.2 ) — 0.1 — (0.1 )
Bonds* (1,306.8 ) — (279.5 ) 19.1 (1,567.2 )
Currency swaps in relation to US $ denominated bonds* 175.0 — — (16.1 ) 158.9
Interest rate swaps in relation to GBP denominated bonds* 9.8 — — (2.4 ) 7.4
Long term bank loans (300.0 ) — — — (300.0 )
Short term bank loans — — (80.0 ) — (80.0 )
Acquired debt — (41.5 ) 41.5 — —
Obligations under finance leases (11.9 ) — 2.7 (0.1 ) (9.3 )
Underlying net debt (1,405.0 ) (41.5 ) (238.5 ) 0.2 (1,684.8 )
Fixed rate interest rate swaps (63.3 ) — — 3.3 (60.0 )
Deferred consideration (23.1 ) — 6.9 — (16.2 )
(1,491.4 ) (41.5 ) (231.6 ) 3.5 (1,761.0 )
12 Financial instruments
Carrying values and fair values of financial instruments
The following table analyses by classification and category the Group’s
financial instruments (excluding short term debtors, creditors, fund
payables/receivables and cash in hand) that are carried in the financial
statements. The values below represent the carrying amounts. The fair values
are the same as the carrying values other than nine fixed rate bonds totalling
£477.0m
(31 December 2015: £445.9m), included below in the bond value of £1,843.1m
(31 December 2015: £1,749.4m), with a carrying value of £477.0m (31 December
2015: £445.9m) and a fair value of £501.4m (31 December 2015 £445.0m).
As at 30 June 2016 Available-for-sale At fair value through the income statement Loans and receivables Derivatives used for hedging Other financial liabilities Total
£m £m £m £m £m £m
Financial assets
Unlisted equity securities 9.4 — — — — 9.4
Investment loan — — 5.0 — — 5.0
Deferred consideration receivable — — 20.0 — — 20.0
Cash flow hedges — — — 0.1 — 0.1
Non-designated foreign exchange forwards and swaps — 3.6 — — — 3.6
Interest rate swaps in relation to GBP denominated bonds — — — 9.3 — 9.3
Currency swaps in relation to US$ denominated bonds — — — 342.6 — 342.6
9.4 3.6 25.0 352.0 — 390.0
Financial liabilities
Overdrafts — — — — 435.1 435.1
Bonds — — — — 1,843.1 1,843.1
Bank loans — — — — 800.0 800.0
Cash flow hedges — — — 9.1 — 9.1
Non-designated foreign exchange forwards and swaps — 6.8 — — — 6.8
Foreign exchange swaps held for foreign net investment — — — 8.8 — 8.8
Contingent consideration — — — — 31.3 31.3
Deferred consideration — — — — 14.8 14.8
Obligations under finance leases — — — — 5.4 5.4
Public sector subsidiary partnership payment — — — — 57.6 57.6
Put options of non-controlling interests — — — — 139.0 139.0
Fixed rate interest rate swaps — 89.8 — — — 89.8
— 96.6 — 17.9 3,326.3 3,440.8
As at 31 December 2015 Available-for-sale At fair value through the income statement Loans and receivables Derivatives used for hedging Other financial liabilities Total
£m £m £m £m £m £m
Financial assets
Unlisted equity securities 4.6 — — — — 4.6
Investment loan — — 5.0 — — 5.0
Non-designated foreign exchange forwards and swaps — 0.3 — — — 0.3
Foreign exchange swaps held for foreign net investment — — — 0.2 — 0.2
Interest rate swaps in relation to GBP denominated bonds — — — 6.9 — 6.9
Currency swaps in relation to US$ denominated bonds — — — 213.9 — 213.9
4.6 0.3 5.0 221.0 — 230.9
Financial liabilities
Overdrafts — — — — 448.7 448.7
Bonds — — — — 1,749.4 1,749.4
Long term bank loans — — — — 300.0 300.0
Cash flow hedges — — — 14.8 — 14.8
Non-designated foreign exchange forwards and swaps — 9.9 — — — 9.9
Contingent consideration — — — — 31.5 31.5
Deferred consideration — — — — 21.5 21.5
Obligations under finance leases — — — — 7.0 7.0
Public sector subsidiary partnership payment — — — — 56.5 56.5
Put options of non-controlling interests — — — — 136.6 136.6
Fixed rate interest rate swaps — 67.0 — — — 67.0
— 76.9 — 14.8 2,751.2 2,842.9
The fair value of financial instruments has been calculated by discounting the
expected future cash flows at prevailing interest rates, except for unlisted
equity securities and investment loans. The valuation models incorporate
various inputs including foreign exchange spot and forward rates and interest
rate curves. Unlisted equity securities and investment loans are held at
amortised cost. The Group enters into derivative financial instruments with
multiple counterparties, all of which are financial institutions with
investment grade credit ratings.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair
value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or
liabilities
Level 2: other techniques for which all inputs which have a significant effect
on the recorded fair value are observable, either directly or indirectly
Level 3: techniques which use inputs which have a significant effect on the
recorded fair value that are not based on observable market data.
As at 30 June 2016, the Group held the following financial instruments
measured at fair value:
30 June 2016 31 December 2015
£m £m
Assets measured at fair value
Disposal group assets held for sale 4.3 84.1
Cash flow hedges 0.1 —
Non-designated foreign exchange forwards and swaps 3.6 0.3
Foreign exchange swaps held for foreign net investment — 0.2
Interest rate swaps in relation to GBP denominated bonds 9.3 6.9
Currency swaps in relation to US$ denominated bonds 342.6 213.9
359.9 305.4
Liabilities measured at fair value
Disposal group liabilities held for sale 9.1 40.4
Bonds 1,366.1 1,303.5
Cash flow hedges 9.1 14.8
Non-designated foreign exchange forwards and swaps 6.8 9.9
Foreign exchange swaps held for foreign net investment 8.8 —
Fixed rate interest rate swaps 89.8 67.0
Public sector subsidiary partnership payment 57.6 56.5
Put options of non-controlling interests 139.0 136.6
Contingent consideration 31.3 31.5
1,717.6 1,660.2
During both periods the Group only had Level 2 assets or liabilities measured
at fair value apart from disposal group assets and liabilities held for sale,
contingent consideration, the public sector subsidiary partnership payment and
the put options of non-controlling interests which are Level 3 liabilities. It
is the Group’s policy to recognise transfers between levels of the fair
value hierarchy at the end of the reporting period during which the transfer
occurred. During the 6 months ended 30 June 2016, there were no transfers
between Level 1 and Level 2 fair value measurements and no transfers into or
out of Level 3 fair value measurements.
Contingent consideration arises in business acquisitions where 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 4 years in duration and will be settled
in cash on their payment date on achieving the performance criteria. The Group
makes provision for such contingent consideration for each acquisition based
on an assessment of 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. A sensitivity analysis was performed on
the expected contingent consideration of £31.3m. The sensitivity analysis
performed adjusted the probability of payment of the contingent amounts. A 10%
increase in the probability of contingent consideration being paid results in
an increase in potential contingent consideration of £3.5m. A 10% decrease in
the probability of the contingent consideration being paid results in a
decrease in potential contingent consideration of £4.0m.
The public sector subsidiary partnership payment liability is an estimate of
the annual preferred payments to be made by Axelos Limited (the partnership
formed with the Cabinet Office) to the Cabinet Office in years 2017 to 2022.
This payment is funded by Axelos Limited and is contingent on profits. The
fair value has been derived by discounting the expected payment at the Group
cost of debt to arrive at its present value. If the discount rate was to
increase/decrease by 1% the present value would decrease/increase by £2.2m.
The put options of the non-controlling interests are measured at amortised
cost based on the expected redemption value of the shares that will be paid in
cash by the Group. This value is determined by reference to the expected
date of exercise of the options, which is then discounted to arrive at a
present value. The sensitivity of the valuation to movements in both the
discount rate and the cash flows that have been used to calculate it, are as
follows: a 10% increase/decrease in the earnings potential of the business
results in a £13.7m increase/decrease in the valuation; a 1%
increase/decrease in the discount rate applied to the valuation results in a
£4.0m decrease/£4.2m increase in the valuation.
The following table shows the reconciliation from the opening balances to the
closing balances for level 3 fair values:
Contingent consideration Subsidiary partnership payment Put options of Disposal group held for sale Disposal group held for sale
non-controlling interests - assets - liabilities
£m £m £m £m £m
At 1 January 2016 31.5 56.5 136.6 (84.1 ) 40.4
Arising from business combinations in the period 8.2 — — — —
Profit and loss movement - administrative expenses 0.6 — — — —
Discount unwind - net finance costs — 1.1 — — —
Movement of put options recognised in equity — — 2.4 — —
Fair value of assets and liabilities transferred — — — 79.8 (31.3 )
Utilised (9.0 ) — — — —
At 30 June 2016 31.3 57.6 139.0 (4.3 ) 9.1
13 Capital commitments
At 30 June 2016, amounts contracted for but not provided in the financial
statements for the acquisition of property, plant and equipment amounted to
£0.2m (30 June 2015: £0.2m).
14 Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.
Compensation of key management personnel (including Directors of the parent
company)
6 months 30 June 2016 6 months 30 June 2015
£m £m
Short term employment benefits 3.5 3.3
Post employment benefits 0.1 0.1
Share based payments 2.4 3.9
6.0 7.3
Gains on share options exercised in the period by key management personnel
totalled £9.9m (30 June 2015: £7.1m).
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
17 July 2016 was as below:
Shareholder No. of shares % of voting rights
Invesco Asset Management 61,616,805 9.24%
The Capital Group Companies, Inc. 55,981,114 8.39%
Veritas Asset Management LLP 48,834,701 7.32%
Woodford Investment Management LLP 44,910,793 6.73%
BlackRock, Inc. 38,001,975 5.70%
Baillie Gifford & Co Limited 36,621,386 5.49%
15 Contingent liabilities
The Group has provided, through the normal course of its business, performance
bonds and bank guarantees of £97.4m (31 December 2015: £88.1m).
Statement of Directors’ responsibilities
The Directors confirm, to the best of their knowledge, that this condensed set
of financial statements has been prepared in accordance with IAS 34 as adopted
by the European Union and that the Half Year Management Report includes a fair
review of the information required by Rules 4.2.4, 4.2.7 and 4.2.8 of the
Disclosure and Transparency Rules of the United Kingdom Financial Conduct
Authority.
The names and functions of the Directors of Capita plc are as listed in the
Group’s Annual Report for 2015. A list of current Directors is maintained on
the Group website: www.capita.com.
By order of the Board
A Parker A N
Greatorex
Chief Executive Group Finance Director
26 July 2016
Appendix - Alternative Performance Measures (APMs) used in the half yearly
report for the 6 months to 30 June 2016
The Group presents various APMs as the Directors believe that these are useful
for users of the financial statements in helping to provide a balanced view
of, and relevant information on, the Group’s financial performance, position
and cash flows. These APMs are mainly measures which disclose the
‘underlying’ performance of the Group excluding specific items which are
regarded as non-underlying. The Group separately presents intangible
amortisation, asset impairments, acquisition contingent consideration
movements, acquisition expenses, the financial impact of business exits or
businesses in the process of being exited, movements in the mark to market
valuation of certain financial instruments and other specific items in the
income statement which, in the Directors’ judgement, need to be disclosed
separately (see notes 4, 5 and 6) by virtue of their nature, size and
incidence in order for users of the financial statements to obtain a proper
understanding of the financial information and the underlying performance of
the business.
In addition, the Group presents other APMs including Key Performance
Indicators (KPIs) such as return on capital employed and interest cover by
which we monitor our performance and others such as organic and acquisition
revenue growth which provide useful information to users which is not
otherwise readily available from the financial statements.
APMs presented in HY 2016 2016 2015 % change Source or calculation
Total revenue as reported £2,430.0 m £2,288.9 m 6.2 % Line item in income statement
Businesses held for sale (£24.6 m) (£6.2 m) Line item in income statement
Underlying revenue £2,405.4 m £2,282.7 m 5.4 % Line item in income statement
Small non-core health & insurance disposals in
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