Capita Plc · LSE:CPI
Capita — FY2008 Earnings Presentation
52 slides from Capita's earnings presentation, February 2009
Slide 1: Results for the year ended 31 December 2008
Results for the year ended 31 December 2008
Slide 2: Highlights
Highlights Paul Pindar Chief Executive
Slide 3: Highlights
Highlights Excellent organic growth Continued margin progression Strong free cash flow High volume of contract wins Active markets – £3.1bn bid pipeline 20% dividend increase Well positioned for 2009
Slide 4: Financial results
Financial results Gordon Hurst Group Finance Director
Slide 5: Financial results - turnover
Financial results - turnover Annual growth 18% 5 year compound growth 18% 1/2 Year 2003 Full Year 1,081 2004 1,282 2005 1,436 2006 1,739 2007 2,073 2008 2,441 0 500 1,000 1,500 2,000 2,500 3,000 £m
Slide 6: Financial results – turnover by market
Financial results – turnover by market Private sector 52% (2007: 48%) Public sector 48% (2007: 52%) Life and pensions 16% (11%) Insurance 8% (10%) 5 2 16 11 Financial services 5% (4%) Corporate 23% (23%) 8 10 Local government 20% (20%) 5 Central government 10% (12%) Education 11% (13%) 20 23 Transpo
Slide 7: Financial results performance – organic growth
Financial results performance – organic – organic growthgrowth £m 2008 £m 2007 Growth % Turnover 2441 2073 18% 2008 acquisitions (84) - (4%) 2007 acquisitions 2001 (38) 2002 - 2003 2004 (2%) Organic 2319 2073 12%
Slide 8: Financial results – resilient income streams
Financial results – resilient income streams Provision of essential services across both public and private sectors Non discretionary areas of spend Existing revenues resilient in current economic climate Revenues substantially underpinned by long term contracts No dominant clients – a goo
Slide 9: Financial results – underlying profit before tax
Financial results – underlying profit before tax* Annual growth 16% 5 year compound growth 18% 1/2 Year 2003 121.2 Full Year 2004 143.9 2005 169.6 2006 200.1 2007 238.4 2008 277.2 0 50 100 150 200 250 300 £m * excluding intangible amortisation and non-cash impact of mark to market movement on callab
Slide 10: Financial results – underlying operating profit
Financial results – underlying operating profit* Annual growth 18% 5 year compound growth 20% 1/2 Year 2003 131.4 Full Year 2004 155.8 2005 183.1 2006 225.1 2007 271.3 2008 320.9 0 50 100 150 200 250 300 350 £m * excluding intangible amortisation and non-cash impact of mark to market movement on cal
Slide 11: Financial results – underlying operating margin
Operatingresults Financial margin– underlying operating margin* Annual increase 6 bpts 14.00 13.00 13.09 13.15 12.95 12.76 Margin % 12.00 12.16 12.15 11.00 10.00 9.00 2003 2004 2005 2006 2007 2008 * excluding intangible amortisation
Slide 12: Financial results – underlying earnings per share
Financial results – underlying earnings per share* Annual growth 18% 5 year compound growth 21% 1/2 Year 2003 13.04 Full Year 2004 15.37 2005 18.60 2006 23.10 2007 28.10 2008 33.26 0 10 20 30 40 Pence * excluding intangible amortisation and non-cash impact of mark to market movement on callable swap
Slide 13: Financial results – dividends
Financial results – dividends Annual growth 20% 5 year compound growth 29% Dividend cover 2.31 1/2 Year 2003 4.0 Full Year 2004 5.4 2005 7.0 2006 9.0 2007 12.0* 2008 14.4 0 5 10 15 20 Pence * excluding 25p special dividend
Slide 14: Financial performance – dividend cover
Financial performance – dividend cover* 4.00 3.26 2.85 3.00 2.66 2.57 2.34 2.31 Cover 2.00 1.00 0.00 2003 2004 2005 2006 2007 2008 * EPS figure used is before intangible amortisation and non-cash mark to market movement on callable swaps
Slide 15: Financial results – cash flow statement
Financial results – cash flow statement £m 2008 £m £m 2007 2006 Underlying cash flow from operating activities* 392 334 Net interest paid (38) (32) Taxation paid (49) (46) Capital expenditure (86) (72) Underlying free cash flow 219 184 Exceptional pension payment (10) - Acquisitions and disposals (1
Slide 16: Financial results – cash flow from operating activities
Financial results – cash flow from operating activities Annual growth 17% 5 year compound growth 20% 1/2 Year 2003 158 Full Year 2004 200 2005 232 2006 279 2007 334 2008 392 0 100 200 300 400 500 £m exceptional additional pension contribution £50m (2004), £10m (2008)
Slide 17: Financial results – free cash flow
Financial results – free cash flow Annual growth 19% 5 year compound growth 21% 1/2 Year 2003 83 Full Year 2004 106 2005 127 2006 154 2007 184 2008 219 0 50 100 150 200 250 £m exceptional additional pension contribution £50m (2004). £10m (2008)
Slide 18: Financial results – capex as % turnover
Financial results – capex as % turnover 7 6 5 %4 3.6 3.7 3.6 3 3.4 3.5 3.5 2 1 0 2003 2004 2005 2006 2007 2008
Slide 19: Financial results – underlying net return on capital
Net return Financial on capital results – underlying net return on capital* 24 19.6 20.4 20 18.5 17.1 Actual 16.1 % return 16 14.6 WACC 12 8 8.5 8.5 8.2 8.4 8.6 8.2 4 2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008 PBIT 131 156 183 225 271 321 Avg capital (£m) 645 696 776 880 998 1150 Ta
Slide 20: Financial results – underlying free cash flow return on capital
Financial results – underlying free cash flow return on capital* 24 20 21.6 22.3 19.9 % return 18.2 16 17.0 14.4 12 8 4 2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008 FCF (pre interest) 93 118* 141 176 216 257* Avg capital (£m) 645 696 776 880 998 1150 * excluding additional pension con
Slide 21: Financial results – balance sheet gearing
Financial results – balance sheet gearing £m 2008 £m 2007 Net debt Bond debt 679† 479 Bank facilities drawn / (deposit) (87) 45 Loan notes 4 2 Total net debt 596 526 Interest cover 7.4x 8x Net debt to EBITDA 1.6 1.7 † Underlying net debt after impact of currency and interest swaps
Slide 22: Financial results – Group debt facilities profile
Financial results – Group debt facilities profile Debt £m Maturity Interest profile Bond 100† June 2009 Fixed* Club facility 245 Dec 2011 Variable Bond 25† June 2012 Fixed callable swap* Bond 354† June 2013 to 2017 Fixed callable swap* Bond 200† June 2015 to 2018 Variable Total facilities 924 - -
Slide 23: Financial results - pension funding
Financial results - pension funding Tri-annual funding valuation – deficit at 6 April 2008: £26m Estimated change since 6 April 2008: - Fall in assets: £50m - Increased liabilities due to interest rate fall: £24m Estimated deficit at 31 December 2008: £100m £50m special payment: - December 2
Slide 24: Financial results - returns to shareholders in respect of 2008
Financial results - returns to shareholders in respect of 2008 10.4m shares (1.7% of share capital) cancelled at average of 659p - Cost £69m (including stamp duty) Shares in issue at 31 December 2008 – 611m Including proposed final dividend, £156m returned to shareholders in respect of 2008
Slide 25: Fuelling growth through contract wins and acquisitions
Fuelling growth through contract wins and acquisitions Paul Pindar Chief Executive
Slide 26: Fuelling growth – contracts won in 2008
Fuelling growth – contracts won in 2008 Marsh Ltd Principle Insurance Sefton MBC Capita Glamorgan Service Holdings* Consultancy** Birmingham New contract New contract New contract New contract Additional contract £187m Over £80m £70m £75m £110m 10 years 8 years 10 years 15 years 8 years Health and N
Slide 27: Fuelling growth – Abbey Life
Fuelling growth – Abbey Life £137m over 10 years To provide administrative services for 1.1m Abbey Life life and pensions policies 300 employees based in Bournemouth to transfer under TUPE Capita will deliver a business transformation programme and provide a robust, modern technology platform
Slide 28: Fuelling growth – Sheffield City Council
Fuelling growth – Sheffield City Council Over £200m, over 7 years Strategic partnership to improve services and help drive business transformation for the benefit of everyone in the City Second generation outsourcing - won contract from incumbent Over 500 employees transferred under TUPE Ser
Slide 29: Fuelling growth – contracts secured in 2009
Fuelling growth – contracts secured in 2009 AXA Sun Life Contracts £10m - £50m Preferred partner 4 deals £500m Aggregate value: 15 years £110m Total value of contracts secured to date in 2009: £610m
Slide 30: Fuelling growth – AXA Sun Life
Fuelling growth – AXA Sun Life £500m over 15 years Preferred partner to administer 3.2m mature life and pensions policies To provide customer service, policy administration, claims activity and related IT support Approx 1,900 employees will join Capita: – 1,300 in the UK – 400 in Bangalore – 2
Slide 31: Fuelling growth – rebid of existing major contracts
Fuelling growth – rebid of existing major contracts 2009 2010 2011 None DCSF*: None National Strategies £35m p.a. 2012 2013 TV Licensing None £50m p.a. CRB £40m p.a. Criteria: more than 1% of 2008 turnover – revenues p.a. based on original contract value * Formerly DfES
Slide 32: Fuelling growth – bid activity
Fuelling growth – bid activity Bid pipeline* of £3.1bn comprising 23 bids (Feb 2008: £2.5bn; 25 bids) Most active markets: life and pensions and local government with central government gaining momentum Health market – well positioned for development following NHS Choices contract win Curren
Slide 33: Fuelling growth – acquisitions
Fuelling growth – acquisitions In 2008, assessed over 100 opportunities and completed 12 acquisitions We continue to acquire small to medium sized companies that: – strengthen existing market positions – create new market opportunities – create further economies of scale – generate sustainable,
Slide 34: Fuelling growth – 2008 major acquisitions
Fuelling growth – 2008 major acquisitions ComputerLand UK Lancaster IBS OPENSystems ABS Network Insurance Services Solutions IT services Insurance admin Software IT services £27.8m* £16.5m* services £13.6m* £69.6m* Acquisitions below £10m 8 acquisitions Aggregate value: £19.9m Total spent on 12 acqu
Slide 35: Fuelling growth – 2009 year to date acquisitions
Fuelling growth – 2009 year to date acquisitions FMS CHKS Trust Health services administration £2m (+ £1.1m) £11.6m Total spent on 2 acquisitions in 2009: £13.6m
Slide 36: Fuelling growth – CHKS
Fuelling growth – CHKS Rationale: adding depth and breadth of expertise to our existing services for the health market Healthcare intelligence and quality improvement services to healthcare professionals Clients: 90 NHS trusts Services include data and performance management, benchmarking, acc
Slide 37: Operational update
Operational update Simon Pilling Chief Operating Officer
Slide 38: Business centre infrastructure – February 2009
Business centre infrastructure – February 2009 Offshore - India Data validation & entry Quality service delivery operation Claims & policy admin Fund management admin Accounting & finance 4 business centres processing Nearshore – Ireland, Channel Islands, Gibraltar Additional tax jurisdictio
Slide 39: Offshore – Capita India
Offshore – Capita India Operations in India Largest Capita multi-client centre. Clients include BBC, CRB, Prudential, Marsh, Pearl and Zurich Established scale and capability – 8.3m back office transactions undertaken annually People in India 3,600 employees in India by end May 2009 30% of s
Slide 40: Offshore – year on year growth
Offshore – year on year growth TV LICENSING Back office processes CAPITA IT SERVICES First voice process ZURICH MARSH Multiclient helpdesk Broker support New business, administration CRIMINAL RECORDS BUREAU Accounting and servicing Data processing Technical services CAPITA GROUP FINANCE Bank reconci
Slide 41: Current climate – resilient position
Current climate – resilient position Fuels demand for outsourcing: – clients looking to cut cost base and gain flexible resources Business areas potentially sensitive <10% of Capita revenues, including: – fund administration – elements of our recruitment businesses and property consultancy Gro
Slide 42: Market update – life and pensions
Market update – life and pensions A clear leader administering approx 26m policies in total* Key attributes: Our scale, focus on customer service, investment in specialist technology and depth of expertise and resource The market is highly active and continues to offer strong new contract oppo
Slide 43: Life & pensions – market size & share
Life & pensions – market size & share Total market Estimated UK policies in force (excluding group schemes and CTF): circa 113m Outsourced market Number of policies outsourced to date estimated to be 39m – 44m (c.35% of market) Capita Current contracts – 26m policies Circa 23% of the total market
Slide 44: Market update – local government
Market update – local government Relationships established with majority of 468 UK local authorities Leading market position with 10 strategic partnerships and over 40 other BPO contracts Key attributes: Extensive breadth of services and understanding of market alongside key transformation ski
Slide 45: Market update – Capita in local government
Market update – Capita in local government Cumbria Salford Strategic Property partnership consultancy Blackburn Coventry with Darwen Customer service Strategic centre of excellence partnership Sheffield Strategic Harrow partnership Strategic partnership Bromley Birmingham Revenue collection Strategi
Slide 46: Market update – central government
Market update – central government Increasingly favourable market conditions for BPO – market gaining momentum 2008 – 2 major contract wins in central government Pendulum swinging from “investment” to “cost managed” led public sector reform HM Treasury’s Operational Efficiency Programme to i
Slide 47: Market update – health
Market update – health Footprint in the health market – contracts: NHS Choices and existing relationships. Acquisitions: MMO and CHKS Key attributes: experience and capacity in key non-clinical services – administration, technology and customer focused expertise Focused on delivering the trans
Slide 48: Market update – structure of the health market
Market update – structure of the health market Total spend: est. £100bn p.a. Department of Total of 463 Administration, monitoring, Health organisations intelligence and customer service: est. £6bn p.a. Arms Length Bodies (23 NDPBs Monitor Strategic Health and SpHAs) (the Foundation Authorities Trus
Slide 49: Capita people – breadth and depth of capability
Capita people – breadth and depth of capability Life & Financial Pensions Insurance Services Health Central Govt Local Govt Education STAFF Administration & Claims Management 10,000 Business Process Re-engineering 1,000 Finance & Accounting 2,000 Customer Service 8,500 Document Services 3,000 HR 3,0
Slide 50: Prospects
Prospects Paul Pindar Chief Executive
Slide 51: Prospects – ingredients for continued growth
Prospects – ingredients for continued growth Solid trading progress across the Group Current economic climate increasing focus on outsourcing Our big ticket and business sales teams are very active Well positioned for 2009 and beyond
Slide 52: Results for the year ended 31 December 2008
Results for the year ended 31 December 2008