Results for the 6 months to 30 June 2009 - Capita
41
Results for the 6 months to 30 June 2009
Transcript of Results for the 6 months to 30 June 2009 - Capita
Results for the 6 months to 30 June 2009
Agenda
Introduction: Paul Pindar, Chief Executive
Financial results: Gordon Hurst, Group Finance Director
Generating growth: Paul Pindar, Chief Executive
Fuelling future growth: Simon Pilling, Chief Operating Officer
Prospects: Paul Pindar, Chief Executive
Highlights
Strong profit growth
Continued margin improvement
Excellent cash flow despite current economic environment
Sales wins at £814m, up 30%
Active market – both sales and acquisitions
India achieves critical mass and profitability
“A consistent strategy, consistently applied”
Financial results
Gordon Hurst
Group Finance Director
Financial results - turnover
Comparative growth 11%
2,441
2,073
1,739
1,436
1,282
1,311
1,182
985
845
687
617
0 500 1,000 1,500 2,000 2,500 3,000
2009
2008
2007
2006
2005
2004
£m
1/2 YearFull Year
Financial results - turnover by market
11
20
12
358
16
4
21
Local government 20% (20%)
Education 12% (11%)
Health 3% (2%)
Transport 5% (5%)
Insurance 8% (8%)
Life and pensions 16% (16%)
Financial services 4% (5%)
Other corporates 21% (23%)
Public sector 51% (2008: 48%)Private sector 49% (2008: 52%)
Central government 11% (10%)
2009 half year (2008 year end)
Financial results - half year organic growth
2001 (36) 2003 2004
1182Organic
£m 2008
1182
£m 2007 Growth
Turnover
2009 acquisitions
2008 acquisitions
8%
(2%)
(1%)
11%1311
(10)
(29)
1272
-
-
£m 6 months to 30 June 2008
£m 6 months to 30 June 2009 £m 2008Growth
Financial results - resilient income streams
Provision of essential services across both public and private sectors
Non discretionary areas of spend
Revenues substantially underpinned by long term contracts and recurring revenues
No dominant clients – a good spread of clients across our 9 chosen markets
No major contract rebids until 2012
Financial results - underlying profit before tax*
Comparative growth 18%
277.2
238.4
200.1
169.6
141.7
120.2
103.8
88.3
71.3
61.0143.9
0 50 100 150 200 250 300
2009
2008
2007
2006
2005
2004
£m
1/2 Year
Full Year
* excluding intangible amortisation and non-cash impact of mark to market movement on callable swaps
Financial results - underlying operating profit*
Comparative growth 14%
320.9
271.3
225.1
183.1
155.8
159.6
140.6
118.9
99.1
77.8
66.5
0 50 100 150 200 250 300 350
2009
2008
2007
2006
2005
2004
£m
1/2 Year
Full Year
* excluding intangible amortisation and non-cash impact of mark to market movement on callable swaps
Financial results – underlying half year operating margin*
12.211.9
12.1
11.7
11.3
10.8
9
10
11
12
13
2004 2005 2006 2007 2008 2009
%
* excluding intangible amortisation
Financial results - sustaining our margin
Focus: remains on steadily improving operating margin
Drivers:Increasingly valuable services delivered
Efficient use of our operational infrastructure
Increasing shared use of IT infrastructure
Benefits of scale
Financial results - underlying earnings per share*
Comparative growth 17%
16.92
14.46
12.13
9.96
7.72
6.6315.37
33.26
28.10
23.10
18.60
0 10 20 30 40
2009
2008
2007
2006
2005
2004
Pence
1/2 Year
Full Year
* excluding intangible amortisation and non-cash impact of mark to market movement on callable swaps
Financial results - dividends
Comparative growth 17%
9.0
7.0
5.4
2.7
2.1
12.0*
14.4
4.0
4.8
1.8
5.6
0 5 10 15
2009
2008
2007
2006
2005
2004
Pence
1/2 Year
Full Year
* excluding 25p special dividend
Financial results - cash flow statement
Cash flow from operating activities
Net interest paid
Taxation paid
Capital expenditure
Free cash flow
£m 6 months to 30 June 2008
174
(20)
(19)
(33)
102
Share option proceeds 17
Acquisitions and disposals
Equity dividends paid
Share buybacks
Proceeds on sale of investments in insurance captive
(55)
(49)
(66)
-
£m 6 months to 30 June 2009
198
122
(36)
(21)
(19)
2
-
(59)
(98)
13
Decrease in cash in the period
Other financing -
(51)
2
(158)
Bonds repaid (100) -
Exceptional pension payment -(40)
392
334
232
200
198
174
145
122
95
82
279
0 100 200 300 400 500
2009
2008
2007
2006
2005
2004
£m
1/2 Year
Full Year
Financial results - cash flow from operating activities
Comparative growth 14%
Exceptional additional pension contribution £50m (2004), £10m (2008), £40m (2009)
Financial results - free cash flow
219
184
154
127
106
122
102
83
58
38
40
0 50 100 150 200 250
2009
2008
2007
2006
2005
2004
£m
1/2 Year
Full Year
Comparative growth 20%
Exceptional additional pension contribution £50m (2004), £10m (2008), £40m (2009)
Financial results - half year capex as % of turnover
%
3.6%4.1% 3.9%
3.2%2.8% 2.7%
0
1
2
3
4
5
6
7
2004 2005 2006 2007 2008 2009
Financial results - % net return on capital (debt plus equity) – 12 months to 30 June 2009
20.420.018.617.9
15.116.7
7.98.28.17.88.08.54
8
12
16
20
24
2004 2005 2006 2007 2008 2009
% re
turn
ActualWACC
PBIT (normalised)
Avg capital (£m)
Tax (%)
2004 2005 2006 2007 2008
142 167 204 245 293
674 719 823 954 1067
28.2 28.1 27.7 27.7 27.0
2009
340
1220
26.8
Financial results - underlying free cash flow return on capital* (debt plus equity) – 12 months to 30 June 2009
22.7*22.4*
18.817.916.315.3*
4
8
12
16
20
24
2004 2005 2006 2007 2008 2009
% re
turn
FCF (pre interest)
Avg capital (£m)
2004 2005 2006 2007 2008
103 117 179 239
674 719 954 1067
2009
147
823
278
1220
*Excluding additional pension contribution £50m (2004), £10m (2008), £40m (2009)
Financial results - balance sheet gearing
Net debt
Bond debt
Bank facilities drawn
Total net debt
Interest cover
30 June 2007 (£m)
Net debt to EBITDA
Loan notes
579
71
3
653
8.2x
1.7
479
97
6
582
7.5x
1.7
£m 2008 £m 2007£m
30 June 2008£m
30 June 2009
Generating growth through contract wins and acquisitions
Paul Pindar
Chief Executive
Generating growth - contracts secured in first 6 months of 2009
Total value of contracts secured to date in 2009: £814m (Half year 2008: £626m)
AXA Sun Life
New contract
£523m 15 years
Contracts £10m - £50m
6 deals
Aggregate value: £134m
Learning and Skills Council (LSC)
New contract
£68m 4 years
Office for National Statistics (ONS)
New contract
£25m 2.5 years
DCSF: National Strategies
Extension
£64m 1 year
Generating growth - rebid of existing major contracts
Criteria: more than 1% of 2008 turnover *Revenues based on original contract value
2012
TV Licensing £50m p.a.*
CRB £40m p.a.*
2009
None
2013
None
2011
None
2010
None
Generating growth - bid activity
Bid pipeline* of £3bn comprising 24 bids (Feb 2009: £3.1bn; 23 bids)
£814m contract wins to date, up 30%
Win rate down from 1:2 to 1:3
Increased interest in newer markets
Healthy rate of pipeline replenishment
Most active markets: local government, life and pensions and financial sector
Central government starting to offer some interesting opportunities
* shortlisted & individual bids capped at £500m
Generating growth - acquisitions
Acquisitions remain an important element of our business model We continue to acquire small to medium sized companies that:
– strengthen existing market positions– build economies of scale– generate sustainable, quality revenues– bring complementary skills and services– create new market opportunities – access a new customer base– help us to grow organically
Active first half of year with 9 acquisitions completedExpect an active second half
Generating growth - 2009 acquisitions
Total spent on 9 acquisitions in 2009: £93m(Half year 2008: £129m)
FMS
Trust administration£2m (+ £1.1m)
CHKS
Health services
£11.6m
Hero Insurance Services
Insurance
£15m
NHS Membership Services
Financial services
£2m
MMB
Property services
£4.85m
Capmark Services Europe
Financial services
£10m
Andrew Martin Associates
Property services
£2.25m (+ £4m)
Carillion IT Services Ltd
IT services
£36m
Gissings
Pensions administration£9m
Simon Pilling
Chief Operating Officer
Operational update and fuelling future growth
Operational update
New contracts transitioned smoothly and progressing well:
– NHS Choices
– Gas Safe Register
– Sheffield City Council
– AXA Sun Life
– Education Maintenance Allowances
Majority of business performing well and robustly
L&P growing strongly: 25 million policies
Developing existing and new local authority partnerships
Strong demand for innovative education software productsCapita Symonds trading steadily with key new Crossrail infrastructure contract
Operational update
Financial services businesses experiencing mixed trading
Trust administration business performing well
Capita Registrars has made excellent progress. Contracts securedwith:
– Stagecoach Plc
– Northern Foods Plc
– Standard Life Plc
Our collectives and investment trust administration business is feeling effects of the lower stock market valuations and higher regulatory costs
“We remain confident that areas potentially affected by the current weaker economy represent less than 10% of our Group revenues”
Fuelling future growth - Business Centres July 2009
Core client market place
50 business centres
Back office adminLife & pensions Resourcing & trainingProperty consultancy Claims & policy admin HR admin
Nearshore – Ireland, Channel Islands, Gibraltar
Onshore - UK
Additional tax jurisdictions to support clients’ products
5 business centres
Customer servicesLife & pensions adminFinancial servicesCorporate registrars
Offshore - IndiaQuality service delivery operation
4 business centres
Data validation & entryClaims & policy adminFund management adminAccounting & finance processing
Customer servicesIT & softwareShare registration Electronic document processing
Fuelling future growth - Capita India
Quality service delivery operation:- supports Group businesses and clients- valued processes across BPO and KPO- highly productive, quality operations
Mumbai: Abbey Life contract went live in March with the successful transfer of processes from a third party service provider
Bangalore: New office to open September 2009 following the transfer of operations and 225 employees from AXA
3,700 staff by end of 2009
Pune: Site running services for Marsh UK. 325 employees will also join from AXA
Fuelling future growth - IT Services
Positioned as a significant ITO player
Increased capability in-house to support major BPO deals and Group businesses
Increased breadth of specialist IT skills: 2,300 IT employees
Increased UK coverage
Increased focus on IT led BPO contracts
Offer end to end service – design, build and operate across infrastructure and applications
Scale benefits for existing and potential clients
Rationale: increase capacity and breadth of Capita IT services offering
Fuelling future growth - IT Services
March 2008: ComputerLand UKIncreases our Managed Service and desktop offering and keeps spend within the Group – £2.5m savings achieved in 12 months
October 2008: ABS Network SolutionsEnhances our networking and communications offering and enables cost savings across the Group
June 2009: Carillion IT Services Ltd (CITS)Expands clientbase, including Easyjet, BAA and BAE SystemsOpportunity to secure further growth in supporting Building Schools for the Future (BSF)Increases our UK coverage, particularly in ScotlandFurther enhances our capability in IT security based services
Fuelling future growth – Health
Market drivers:Financial pressure from central government to deliver value for money likely to result in increased use of private sector to help drive efficienciesDarzi review – making Patient Experience a key quality measure.We are well placed to assist with achieving these quality improvementsNHS has to deliver significant cost improvements by 2011Growing interest in organisations with the ability to deliver consistent, resilient large scale processing and administration services across areas such as commissioning, Payment by Results and independent contractor management
Rationale: Expand breadth of services and customer relationships through contracts and acquisitions
Fuelling future growth – Health
Current position:Contract wins include NHS Choices, which has started well
Acquisition of CHKS and 2 NHS Membership services businesses adds further strength to our position in the health market
Won contract with Department of Health, worth £5.25m over 3 years, to manage The Information Standard, a new certification scheme for the production of health and social care information. To be launched later this summer
Enthusiastic, dedicated team in place to grow our business in this sector
Pipeline of bid opportunities established
Revenues tripled in less than a year
Future growth opportunities - Central Government
Market Drivers
Operational Efficiency Programme:– £34bn p.a. spend on back office
operations and IT– £89bn p.a. spend on procurement
Targets set to achieve £13.3bn annual savings in these areas by 2011:
– £7.2bn savings: back officeoperations and IT
– £6.1bn savings: procurement
Growing interest by political parties in private sector involvement in implementation and delivery
*Source: Operational Efficiency Programme (OEP) April 2009
£34bn*+
£89bn*
£7.2bn*
£6.1bn*
Future growth opportunities - Central Government
Current position
Unique track record in delivering cost reduction and quality improvements in both public and private sector
Excellent relationships with public sector trade unions
Investment in dedicated senior staff to target key departments and Non Departmental Public Bodies (NDPBs)
Major programme of activity in demonstrating capability to senior ministers and civil servants
Prospects
Paul Pindar
Chief Executive
Prospects
We remain confident regarding our prospects:
– Consistently strong operational performance provides an excellent background for further expansion
– Demand for outsourcing continues to be buoyant
– Encouraging volume of opportunities
Our success in 2008 and progress in the first half of 2009 position us well for a successful year
Now focused on building a strong platform for continued growth in 2010 and beyond
Results for the 6 months to 30 June 2009
