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Results for the 6 months to 30 June 2013
Half year results presentation 25 July 2013
Agenda
1. Introduction – Paul Pindar, Chief Executive
2. Financial results – Gordon Hurst, Group Finance Director
3. Major sales update – Maggi Bell, Group Business Development Director
4. Managing growth – Andy Parker, Deputy Chief Executive & Joint COO
5. Acquisition update
6. Summary & outlook – Paul Pindar , Chief Executive
2
H1 2013 key highlights
£2.0bn of major new contracts including our largest win by annual value On track to meet full year organic growth targetPi li t dil l i hi £4 2bPipeline steadily replenishing, now £4.2bnStrong drivers in key established and new markets Solid financial performance, H1 dividend up 10% Operational teams well positioned for recently secured large scale transformation programmes Acquisition strategy supporting organic growth opportunitiesq gy pp g g g pp
High degree of confidence for full year 2013 & 2014
3
Financial results
Gordon HurstGroup Finance Director
Financial results – revenue
Comparative growth 13%5 year H1 compound growth 9%5 year H1 compound growth 9%
2,441 1,1822008
2,744
2,687
1,361
1,311
2010
2009
2,930
2,744
1,607
1,400
2012
2011Half yearFull year
3,352
1,819
0 1 000 2 000 3 000 4 000
2013
2012
0 1,000 2,000 3,000 4,000 £m
Continued revenue growth
5
g
Financial results – revenue by market
Private sector 52% (full year 2012: 53%)Public sector 48% (full year 2012: 47%) 2013 half year (full year 2012):
Central government 11% (11%)
Local government 17% (18%)
Education 8% (8%)( )
Health 5% (6%)
Justice & emergency services 4% (3%)
Defence 3% (1%)Defence 3% (1%)
Insurance 3% (4%)
Life and pensions 15% (17%)
Financial services 8% (6%)Financial services 8% (6%)
Retail, telecoms, utilities 7% (n/a)*
Other private 19% (26%)*
Diverse market spread
6
* Retail, telecoms and utilities previously reported under other private
Diverse market spread
Financial results – H1 revenue growth
£m 6 months to 30 June 2013
£m 6 months to 30 June 2012 Growth
Revenue 1,819 1,607 13%
2013 acquisitions 61 - 4%
2012 acquisitions 96 - 6%
Revenue growth excl. acquisitions 1,662 1,607 3%
Expectation of at least 8% organic growth for full year 2013
7
Financial results – underlying operating profit*
Comparative growth 6%5 year H1 compound growth 11%
311.7
157 0
136.0 2008
386.4
352.4
174.1
157.0
2010
2009
466 7
417.0
214.1
187.8
2012
2011Half yearFull year
466.7
226.8
0 100 200 300 400 500
2013
0 100 200 300 400 500 £m
Continued increasing profitability
8
* Adjusted for new pension standard, IAS19 (R). Excludes non-underlying items being: intangible amortisation, acquisition expenses, net contingent consideration movements,
impairments, non-cash impact of mark to market finance costs.
g p y
Financial results – underlying profit before tax*
Comparative growth 10%5 year H1 compound growth 12%y p g
269.1116.42008
355.7
321.7
159.2
140.0
2010
2009
376.6
355.7
186.4
169.7
2012
2011Half yearFull year
417.0
205.272013
2012
0 100 200 300 400 500 £m
Continued increasing profitability
9
* Adjusted for new pension standard, IAS19 (R). Excludes non-underlying items being: intangible amortisation, acquisition expenses, net contingent consideration movements,
impairments, non-cash impact of mark to market finance costs.
g p y
Financial results – underlying H1 operating margin*
14.1 14.2
15.0
13.1
13.9
13.4 13.3
14.0
n %
12.8
12.0
12.8
12.5
12 0
13.0
ratin
g m
argi
11.5
11.0
12.0
Ope
r
Full yearHalf year
10.0 H1 2008 H1 2009 H1 2010 H1 2011 H1 2012 H1 2013H1 2008 H1 2009 H1 2010 H1 2011 H1 2012 H1 2013
Year
Full year margin expectation: 12.5 – 13.5% range for foreseeable future * Adjusted for new pension standard, IAS19 (R). Excludes non-underlying items being:
intangible amortisation, acquisition expenses, net contingent consideration movements, impairments, non-cash impact of mark to market finance costs.
10
y g p g
Financial results – underlying earnings per share*
Comparative growth 9%5 year H1 compound growth 13%5 year H1 compound growth 13%
32.3 14.0 2008
43 9
38.3
19.1
16.7
2010
2009
47.4
43.9
23.7
21.4
2012
2011Half yearFull year
52.1
25.82013
2012
0 10 20 30 40 50 60 pence
Continued growth in earnings
11
* Adjusted for new pension standard, IAS19 (R). Excludes non-underlying items being: intangible amortisation, acquisition expenses, net contingent consideration movements,
impairments, non-cash impact of mark to market finance costs.
g g
Financial results – dividends
Comparative growth 10%5 year H1 compound growth 13%
14.44.82008
y p g
20 0
16.8
6.6
5.6
2010
2009
21.4
20.0
7.9
7.2
2012
2011Half yearFull year
23.5
8.72013
2012
0 5 10 15 20 25 pence
Continued growth in dividends
12
g
Financial results – cash flow statement
£m 6 months to 30 June 2013
£m 6 months to 30 June 2012
Cash flow from operations 242 201
Net interest paid (19) (23)
Taxation paid (12) (29)
C it l dit (47) (54)Capital expenditure (47) (54)
Free cash flow 164 95
Acquisition of subsidiary undertakings and businesses (196) (148)
Acquisition of public sector subsidiary JV arrangements (34)Acquisition of public sector subsidiary JV arrangements (34) -
Equity dividends paid (102) (87)
Share issue net proceeds - 271
Net debt repaid (32) (18)Net debt repaid (32) (18)
Share option proceeds 11 3
Other financing (5) (2)
(Decrease)/increase in cash in the period (194) 114( ) p ( )
Strong focus on cash management
13
Financial results – cash flow from operating activities
£m 6 months to 30 June 2013
£m 6 months to 30 June 2012
Operating profit* 227 214
Depreciation 39 39
Amortisation 1 -
Share based payment 5 5
Pensions 2 (3)
Movements in provisions (1) -
Movements in working capital (31) (54)
Cash flow from operations 242 201
Operating cash conversion 107% 94%
Anticipate achieving medium to long term annual cash conversion of around 100%
*Excludes non-underlying items being intangible amortisation, acquisition expenses and net contingent consideration movements
14
Financial results – half year capex as % turnover
6
7
4
5
2.8 2.7 2.8 2.83.4
2.62
3%
0
1
2008 2009 2010 2011 2012 2013
Controlled capital expenditure
15
p p
Financial results – underlying net return on capital (debt plus equity)*
20
24 Actual
WACC
12 months to 30 June 2013
19.2 19.7 19.717.9
16.1 15.112
16
20
etur
n
8.2 7.9 7.8 7.8 7.2 7.24
8
12
% re
42008 2009 2010 2011 2012 2013
2008 2009 2010 2011 2012 2013
Operating profit (£m) 280 333 370 400 443 479
Avg capital (£m) 1,067 1,234 1,387 1,710 2,181 2,576
Tax (%) 27.0 26.8 26.0 23.5 21.0 19.0
Maintaining healthy returns
16
*Adjusted for new pension standard, IAS19 (R)
g y
Financial results – post tax economic profit*12 th t 30 J 2013
193202190
210 Annual growth 5%
5 year compound growth 12%
12 months to 30 June 2013
146
165 173
193
130
150
170 5 year compound growth 12%
Economic profit
£m
117 90
110
130
2008 2009 2010 2011 2012 20132008 2009 2010 2011 2012 2013
2008 2009 2010 2011 2012 2013
Operating profit (£m) 280 333 370 400 443 479
Average capital (£m) 1,067 1,234 1,387 1,710 2,181 2,576
Tax (%) 27.0 26.8 26.0 23.5 21.0 19.0
WACC (%) 8.2 7.9 7.8 7.8 7.2 7.2
Capital charge (£m) 87.5 97.5 108.2 133.3 157.0 186.0
Tax (£m) 75.6 89.2 96.2 94.0 93.0 91.0
Ri in e n i pr fit
17
* Adjusted for new pension standard, IAS19 (R). Excludes non-underlying items being: intangible amortisation, acquisition expenses, net contingent consideration movements,
impairments, non-cash impact of mark to market finance costs.
Rising economic profit
Financial results – balance sheet gearing
£m 30 June 2013 £m 30 June 2012
Net debt
Bond debt † 1,117 1,151
Cash in bank (126) (186)
T l 185 185Term loan 185 185
Other (includes Northgate acquired leases) 24 5
Total underlying net debt 1 200 1 155Total underlying net debt 1,200 1,155
Annualised interest cover 11x 9x
Net debt to EBITDA 2.2 2.2
Comfortably within 2 0 – 2 5x EBITDA target range† Underlying net debt after impact of currency and interest rate swaps
18
Comfortably within 2.0 – 2.5x EBITDA target range
Financial results – debt profile
30 June 2013 debt profile:£1,117m of private placement bond debt with maturities from 2013 to 2021 with a 33%/67% fixed/floating rate mix33%/67% fixed/floating rate mixOnly £66m matures before August 2015£185m 2 year term loan facility maturing in February 2014£425m revolving credit facility maturing in December 2015 of which £nil utilised at 30 June 2013Comfortable with long term ratio of net debt to EBITDA in the range of 2 to 2.5
Comfortable maturity profile : with good headroom
19
Capita total shareholder return since IPO
45,000 42,004%Return over different time periods
35,000
40,000
42,004%Return over different time periods
Since IPO 42,004%
Last 20 years 7,120%
Last 15 years 630%
25,000
30,000
etur
n in
dex
Last 15 years 630%
Last 10 years 499%
Last 5 years 83%
10 000
15,000
20,000
Tota
l re
Last 3 years 51%
Last 12 months 55%
Year to date 38%
0
5,000
10,000
Apr-89 May-92 May-95 May-98 Jun-01 Jun-04 Jun-07 Jul-10 Jul-13
Total return index
Financial disciplines creating strong shareholder returnsSource: Deutsche Bank, Datastream, 11 July 2013
20
p g g
Creating growth: Major sales update
Maggi Bell Group Business Development Director
Creating growth – 2013 major contract wins to date Total value to date in 2013: £2.0bn
Contract Value (£m) Duration (y) Type
Telefónica UK (O2) 1,200 10 New + extension
London Borough of Barnet (development and 154 10 NewLondon Borough of Barnet (development and regulatory services)
154 10 New
Cabinet Office 400 10 New
University of Strathclyde 40 5 New
Civil Service Learning 60 2 Extension
Carphone Warehouse 160 10 New
Overall aggregate value 2,014 80% new business / 20% extensions
Focus on Customer Management client baseWin rate higher than 1 in 2
gg g
Win rate higher than 1 in 2
Strong start to 2013
22
Existing major contracts due for rebidHigh degree of revenue visibility
Year Contract Original value per annum (£m) 1
2013 None -
2014 None -
2015 None -
2016 None -
2017 None -
2018 None -
2019 Phoenix 48
Long term, stable revenue base
23
Criteria: more than 1% of 2012 full year revenue of £3,352m 1 Revenue based on original contract value
Generating growth – bid pipeline
Bid pipeline today of £4.2bn comprising 32 bids (Feb 2013:comprising 32 bids (Feb 2013: £5.2bn, 27 bids)97% new revenue / 3% extensionsAverage contract length 8 years
20Local gov Central
govLif &
Retail, telecoms & utilities
Average contract length – 8 years15
Financial services
Life & pensions
10% Defence Justice &
emergency services Education Health
5
0
Well diversified pipeline
24
Bid pipeline criteria: contains all bids worth £25m or above, capped at £1bn and where we have been shortlisted to the last 4 or fewer
p p
Strategy for growth U d t di li t i t d d i d tUnderstanding client requirements and desired outcomes
ale
Sca
Transformational partnering
Transformational outsourcing
Mid-sized / multi service
Single service l tf
contracts
Complexity
platforms
25
Complexity
Strategy for growth Understanding client requirements and desired outcomes Recent winsUnderstanding client requirements and desired outcomes – Recent wins
ale
Staffordshire JVCabinet Office IP JV
Sca
Transformational partnering
Telefónica UK (O2)Barnet
Transformational outsourcing
University of Strathclyde
Mid-sized / multi service
outsourcing
C h W h
Strathclyde
Single service
servicecontracts
Carphone WarehouseCivil Service Learning
C l it
gplatforms
26
Complexity
Strategy for growth – targeted opportunities
Competitive differentiation: D d t di f t d iti b h iDeep understanding of customer and citizen behaviours
Behavioural insight and analytics Strategic acquisitions
Solution strength and depth Proven track record in growing and developing diverse businesses
Creating additional value from Government assets for the public purse and CapitaCreating additional value from Government assets for the public purse and Capita
Underpinned by: +
Efficient business process management Robust open book accountabilityIntegrator of 'best of breed'gFinancial stability
Leading and shaping the BPM market
27
g p g
Growth opportunities – strong drivers in key markets
Central government Local government Education Health Defence
• Ongoing pressure on departmental spend• Commercialisation of
• Ongoing cost pressure (cumulative effect of last 2 spending reviews – 33
• Change in funding arrangements driving new approach/
• Ongoing budgetary pressures• £90bn managed by
• Clear MOD/Ministerial direction for outsourcing
Central government Local government Education Health Defence
assetsp g
to 50% savings)• Changing demands of local communities –ageing population, digital shift
ppdelivery models
g ynew commercial owners in Clinical Commissioning Groups
gas a strategic tool for the future
digital shift
Justice & emergency
servicesLife & pensions Insurance Financial services Retail, telecoms
& utilities
• Wholesale change in governance – Police & Crime Commissioners.• Home Office, MOJ and austerity continue to d i th f d
• Regulatory and compliance costs driving change • Providers seeking access to latest
• Increasingly complexproducts & enquiries, trend for online quotes/ comparison sites• Potential to cross/up
• Regulatory & structural changes –utilities smart metering • Evolving digital landscape/customer
• New entrants, established providers and re-insurers post-RDR • Employee benefits –drive the reform agenda access to latest
technologyPotential to cross/up
sell productslandscape/customer behaviours
Employee benefits strong growth potential
Creating opportunities in key growth markets Creating opportunities in key growth markets
28
Managing growth
Andy ParkerDeputy Chief Executive & Joint COO
Operational structure - management breadth Paul Pindar
CEOMartina King
Non-Executive DirectorMartin Bolland
Non-Executive ChairmanPaul Bowtell
Non-Executive Director
Gillian SheldonNon-Executive Director
Snr Independent Director
Maggi BellGroup Business Vic Gysin Gordon Hurst Andy Parker
Deputy CEO & JointGroup Business Development Director Joint COO Group Finance Director Deputy CEO & Joint
COO
Group Acquisitions
Strategic Sales &
Marketing
Customer Management
& International
Investor & Banking Services
Insurance & Benefits Services
Integrated Services
Professional Services IT Services Health &
Wellbeing Property Services
Workplace Services
Justice & Secure
Services
Customer Management
Shareholder Services
Life & Pensions
TrustServices
Insurance Distribution
Debt Management
BBC IT Services Health& Wellbeing
Property & infrastructure
Specialist Recruitment
CRB 1 Managed ServicesGroup IT / IS
Local Government
Services
Capita Software Services
Secure Information Solutions
ProductsOrganisational Health
International
Barnet property
CFGCapita India
CapitaPoland
Asset Services
CMA / MGA Operations
g
Central Government
Services
Consultancy
Development Solutions
HR Solutions
Services
Children’s Services
SecureBorder
Services
Document & Information
S iG2G3
property
Medical reporting
Health Advisory
Corporate Insurance
Poland
CapitaSouth Africa
Services Operations
Employee Benefits Services
RPP
Screening
Service Bi i h
Travel Services
Tascor
Translation & Interpreting
Life & TascorMedicals
Services
Strategic Partnerships
Financial Software
PIPO2
Advisory
RPP
IT Professional
Services
Birmingham
Barnet
Services Interpreting
Staffordshire JV
PIP
CarphoneWarehouse
Cabinet
CSL
30
Barnet Office JV
1 Now Disclosure & Barring Service
Staffordshire County Council JV
Live on 1 April 2013 seamless launch and transitionLive on 1 April 2013, seamless launch and transitionCreation of new brand, Entrust, for delivery of services to schools and academies across the UKIT t f ti k d t i i f t t dIT transformation work underway to improve infrastructure and provide new online channelsSignificant potential, UK education support services market estimated at £16bn per annumestimated at £16bn per annumEngaged in a number of major leads with new education clientsAlready securing new business within the region:
Further 22 schools signed up for technology supportSuccess in moving into a Diocese frameworkNow selling school improvement services to a neighbouring Unitary authorityauthority
Leading change : creating new platforms for growth
31
Cabinet Office IP JV – creating a growth business
JV to own, deliver and commercialise the Government's Best Management Practice portfolio (including PRINCE2® and ITIL®)51% Capita owned / 49% Cabinet Office owned51% Capita owned / 49% Cabinet Office ownedJV owns IP portfolio in perpetuity Target to triple annual revenue of approx £40m by year 10Growth from further developing the product portfolio in existing and new marketsJV assumed management of current contracts on 1 July 2013 with full
ti l d li f 1 J 2014operational delivery from 1 January 2014JV new brand, AXELOS, Global Best Practice
Creating value from public assets
32
Cabinet Office IP JV – creating a growth business
Capita’s track record of transformation and successful acquisition and growth ofCapita s track record of transformation and successful acquisition and growth of small to medium businesses was recognised in the bidNow working with product users, trainers and examiners to leverage expertiseContinue to provide a common ‘language’ for IT and project management practices forContinue to provide a common language for IT and project management practices for large corporates, public sector and SMEs in UK and internationally
Investing in quality Key routes to growth• Grow international markets
Building a global brand • PRINCE2: exams in 21 languages,
over 120 countries • ITIL: exams in 21 languages, over
150 countries
g q y• Ensure continued international
recognition • Invest in new creative talent and
innovation – gamification, simulation analytics digital
• Grow international markets• Invest in existing products• Develop new products• Build online global community• Create tailored solutions
150 countries simulation, analytics, digital channels
Creating value from public assets
33
g p
Cabinet Office IP JV – significant growth potential
Targeting g g+£120m annual
revenue by year 10
1. Grow international markets
Established: UK, US, Australia, parts of the EU Immediate targets: Brazil, IndiaFuture targets: China, Middle East, parts of the EU
2 In est in2. Invest in existing products Developing PRINCE2® and ITIL® product portfolios
3. Develop new products
Developing new product portfolios based on additional best management practice IP
4. Build online community Developing a global, online community of practitioners for each product set
5. Create tailored solutions
Targeting major employers and organisations with tailored product offerings
Years 0 1 3 5 7 9 10Current revenue:
£40m p.a.Current revenue:
£40m p.a.
34
Customer management – moving up the value chain
Then: C f
Now:
Improve customer experience
Support digital shift
Characteristics of typical Ventura/ Vertex (private
t ) t t
Characteristics of Capita customer management
t tSupport digital shift Reduce costs
Future proof delivery capability
sector) contract contract Pay per seats 0 – 5 year contract length
Understand clients’ business models, support them in achieving desired outcomes
0 – 10% margins One of many suppliers Based on volume rather than value add
gStreamline customer management operations 5 – 10 year partnershipsAverage Group BPM marginsAverage Group BPM margins Potential to sell in other Capita services
Shaping the BPM market : evolving client relationships
35
Telefónica UK (O2)
Largest single contract win by annual value at £1.2bn over 10 yearsCommenced July 2013, seamless transfer of 2,300 O2 employees and migration of wider outsourced supply chain scopewider outsourced supply chain scopeStrategic partnership to create enhanced customer outcomes, drive digital services capability and support future business growthM t i t + d li f t i t O2’Manage core customer service centres + deliver a range of support services to O2’s retained operations
Adopt ‘best of breed’ Add value by leveragingour expertise in customer
Enhance employeet d
- integrate channels to realise customer
- enhance customer experience and deliver
- deliver service excellence as part of a
penabling technologies to: our expertise in customer
insight, data + analytics to: engagement and opportunity to:
Delivering large scale bespoke solutions for our clients
realise customer experience, quality, flexibility & cost benefits
experience and deliver operational effectiveness and improved profitability
excellence as part of a growing customer management business
36
Delivering large scale, bespoke solutions for our clients
Acquisition update
Paul Pindar Chief Executive
Creating growth – 2013 acquisitions to date9 acquisitions totalling £198m
Enhancing Acquisition Rationale Value capability –Division
£m*
IT Services Northgate Managed Services
Provides cloud-based, infrastructure and specialist managed services to public, private and third sectors.
65.0
Customer Management & International
iQor UK Provides `late stage' debt recovery expertise complementing our existing early and final stage businesses.
42.0
Euristix Provider of data analytics and risk management including portfolio management, value realisation, diagnostics and due diligence services.
9.0 + (3.0)
Justice & Secure Services
STL Technologies Provider of software and ICT to the criminal justice system. 6.1
G2G3 Provider of immersion and simulation-based training for industry and thepolice and emergency services.
3.5 + (10.5)
Workplace Services
Blue Sky Training Provides bespoke, high quality learning & development solutions for executive level, field based and contact centre employees.
7.2 + (4.8)
KnowledgePool Provider of learning managed services, including supplier management, training administration and learning consultancy.
24.5
Creating Careers UK market leader for developing and supplying accredited online qualifications for the further education and secondary sectors.
24.0 + (6.0)
Professional Services
MLS Provider of library and resource management systems to the UK education sector.
16.5 + (4.0)
38
* Value in brackets represents maximum contingent consideration
Summary & outlook
Paul Pindar Chief Executive
Strongly positioned for growth
High level of sales activity in both traditional and new customer management and BPM marketsContinuing to join-up deploy and develop our internal capabilitiesContinuing to join-up, deploy and develop our internal capabilitiesFocusing on smooth delivery of recent major contract wins Maintaining strong financial discipline and an entrepreneurial, open culture as the business growsthe business grows Well positioned for 2013 and 2014
Delivering long term, sustainable growth
40
Results for the 6 months to 30 June 2013
