Capita Plc · LSE:CPI
Capita — FY2011 Earnings Presentation
47 slides from Capita's earnings presentation, Feb 23, 2012
Slide 1: Results for the year ended 31 December 2011
Results for the year ended 31 December 2011 Annual Results Presentation 23 February 2012
Slide 2: Agenda
Agenda 1. 2011 & 2012 summary – Paul Pindar, Chief Executive 2. Financial results – Gordon Hurst, Group Finance Director 3. Creating gggrowth – Paul Pindar 4. Our ICT & emergency services – Mark Wyllie, Executive Director, capability IT Services & Consulting 5. Value creation going forward – Paul Pi
Slide 3: 2011 key points
2011 key points A challenging g g yyear Underestimated the severity of Government austerity measures But – our best ever year for major contract wins (£2,011m) And we’ve also built presence in a new market – emergency services Our most active year for acquisitions Excellent progress on c
Slide 4: Which leads us to 2012
Which leads us to 2012 Week 1 – it can only y get g better..... And it has – 2 significant projects where we are recommended supplier An A estimated i d £620 £620m off major j contracts after f 7 weeks k So our 2012 new market is - defence Trading across some businesses remains tough And
Slide 5: Financial results
Financial results Gordon Hurst Group Finance Director
Slide 6: Financial results – revenue
Financial results – revenue Annual growth 7% 5 year compound growth 11% 1/2 Year 2006 Full Year 1,739 2007 2,073 2008 2,441 2009 2,687 2010 2,744 2011 2,930 0 500 1,000 1,500 2,000 2,500 3,000 3,500 £m
Slide 7: Financial results – revenue by market
Financial results – revenue by market Private sector 52% (2010: 50%) Public sector 48% (2010: 50%) Central government 9% (9%) Local government 18%* (20%) Education 11% (15%) ( ) Health 5% (4%) Emergency services 3% (-) Transport 2% (2%) Life & pensions 19% (18%) Insurance 6% (7%) Financial services
Slide 8: Financial results – revenue growth
Financial results – revenue growth £m £m 2011 2008 £m2007 £m 2010 Growth £m 2008 Growth Turnover 2,930 2,744 7% 2011 acquisitions 187 - (7%) 2010 acquisitions 189 2001 (36) 2003- 2004 (7%) Turnover growth excl. acquisitions Disposals 2,554 - 2,744 (7%) % Key specific contract declines: National Stra
Slide 9: Financial results – underlying profit before tax
Financial results – underlying profit before tax* Annual growth 6% 5 year compound growth 14% 1/2 Year 2006 Full Year 200.1 2007 238.4 2008 277.2 2009 325.1 2010 364.2 2011 385.2 0 100 200 300 400 £m * Excludes non-underlying items being: intangible amortisation, acquisition expenses and release of
Slide 10: Financial results – underlying operating profit
Financial results – underlying operating profit * Annual growth 8% 5 year compound growth 14% 1/2 Year Full Year 2006 225.1 2007 271.3 2008 320.9 2009 357.7 2010 395.1 2011 427.4 0 100 200 300 400 500 £m * Excludes non-underlying items being: intangible amortisation, acquisition expenses and release
Slide 11: Underlying operating margin
Operating p g margin g Financial results – underlying operating margin* margin Annual increase 19 bpts 15.00 14.59 14.40 14 00 14.00 Margin % 13.00 13.31 13.09 13.15 12.95 M 12.00 11 00 11.00 10.00 2006 2007 2008 2009 2010 2011 * Excludes non-underlying items being: intangible amortisation, acquisit
Slide 12: Financial results – notable items affecting operating profit
Financial results – notable items affecting g operating profit £m £m2008 Growth 2011 Past pension service credit including RPI to CPI change 24 Increased cost of historic insurance claims in captive (14) Increased restructuring and redundancy costs relative to prior years (8) 2010 acquisitions (7%)
Slide 13: Financial results – underlying earnings per share
Financial results – underlying y g earnings g pper share* Annual growth 8% 5 year compound growth 16% 1/2 Year 2006 Full Year 23.10 2007 28.10 2008 33.26 2009 38.75 2010 44.98 2011 48.49 0 10 20 30 40 50 60 Pence * Excludes non-underlying items being: intangible amortisation, acquisition expenses an
Slide 14: Financial results – dividends
Financial results – dividends Annual growth 7% 5 year compound growth 19% Dividend cover 2.27 1/2 Year 2006 Full Year 9.0 2007 12.0* 2008 14.4 2009 16.8 2010 20.0 2011 21.4 0 5 10 15 20 25 Pence * excluding 25p special dividend
Slide 15: Financial results – cash flow statement
Financial results – cash flow statement £m 2011 £m 2010 Cash flow from operations before settlements 364 442 Net interest paid (42) (32) Taxation paid (63) (71) Capital expenditure ((102)) (98) Free cash flow 157 241 Settlement of Arch cru & Cumbria CC pension deficit (28) - Acquisitions (362) (216)
Slide 16: Financial results – cash flow from operating activities
Financial results – cash flow from operating activities £ 2011 £m £m £ £m 2010 2006 Operating profit 427 395 Depreciation 70 71 Share based p payments y 8 10 Pensions (33) (21) Movements in provisions* (9) 7 Movements in working capital (99) (20) Cash flow from operations before settlements** 364 44
Slide 17: Financial results – working capital movement
Financial results – working capital movement Analysis of reduced cash conversion: £m 2011 National Strategies – Deferred income release 27 Life & Pensions – Deferred income release 15 Building Schools for the Future – WIP increases (reverses 2012/13) 15 Service Birmingham – New contract 11 Zurich Gl
Slide 18: Financial results – working capital 2012
Financial results – working capital 2012 Current anticipated major movements: £m 2012 Synetrix services to LGFL, revised payment terms 12 TV Licensing revised payment terms 13 Prudential deferred income release 18 AXA WIP (reduces 2013) 9 TV Licensing new contract WIP (reverses H1 2013) 7 Zurich Glo
Slide 19: Financial results – capex as % turnover
Financial results – capex as % turnover 7 6 5 %4 36 3.6 3 3.5 3 3.5 36 3.6 3 3.5 3 2 2.5 1 0 2006 2007 2008 2009 2010 2011
Slide 20: Financial results – underlying net return on capital
Net return Financial on capital results – underlying y g net return on capital* 24 20 20.3 20.6 20.6 19.6 Actual % return 18.5 16 17.2 WACC 12 8 8.4 8.6 8.2 7.9 7.7 7.5 4 2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011 PBT (£m) 225 271 321 358 395 427 Avg capital (£m) 880 998 1,155 1,271
Slide 21: Financial results – balance sheet gearing
Financial results – balance sheet gearing £m 2011 £m 2010 Net debt Bond debt † 1,176 834 Net bank facilities drawn 105 60 Loan notes 2 2 Other 3 2 Total underlying net debt 1,286 898 Interest cover 10.2x 12.4x Net debt to EBITDA 2.5 1.6* †Underlying net debt after impact of currency and interest swa
Slide 22: Financial results – debt profile
Financial results – debt profile 31 December 2011 debt profile £1,176m of private placement bond debt with maturities from 2012 to 2021 with a 37%:63% fixed/floating rate mix Onlyy £123m matures between June 2012 and August g 2015 £425m revolving credit facility maturing in Dec 2015 of which £
Slide 23: Creating growth through sales & acquisitions
Creating growth through sales & acquisitions Paul Pindar Chief Executive
Slide 24: Creating growth – 2011 major contracts
Creating growth – 2011 major contracts C t Contract t V l (£m) Value (£ ) D Duration ti T Type Teachers’ Pension Scheme 80 7 years Rebid MetLife 149 10 years New & extension Zurich 570 15 +11 years New & extension DVLA 100 5 years New Lambeth Council 50 10 years New & extension The Pensions Regulato
Slide 25: Creating growth – 2012 to date
Creating growth – 2012 to date £620m of contract wins to date in 2012, 89% new revenue: Recommended supplier for the Army Recruiting Partnering Project (RPP) Civil Service training contract 3 customer service management contracts Positive start to 2012
Slide 26: Existing major contracts due for rebid
Existing major contracts due for rebid Y Year C t Contract t Original O i i l value l per annum (£m)* 2012 None - 2013 CRB 40 2014 None - 2015 None - 2016 None - 2017 None - 2018 None - 2019 Phoenix 48 Criteria: more than 1% of 2011 turnover of £2,930m *Revenues based on original contract value
Slide 27: TV Licensing
TV Licensing £560m over 8 years Selected to administer TV Licensing on behalf of the BBC, due to commence July 2012 Delivery of new service model: – Re-engineering current delivery model with greater use of our shared service infrastructure – Harnessing advances in technology & analytics – Creat
Slide 28: Teachers' Pension Scheme
Teachers’ Pension Scheme Teachers £80m over 7 years Appointed by Department of Education to administer the Teachers’ Pension Scheme 2nd largest public sector scheme in England & Wales, with 1.6m members Third consecutive TPS contract, relationship originally commenced in 1996 – our longest run
Slide 29: Generating growth – bid pipeline
G Generating h – bid pipeline i growth i li Bid pipeline today of £4.6bn £4 6bn comprising 35 bids (July 2011: £4.7bn, Central 30 government 30 bids)* 2011 win rate (by value) just below 1:2 % Average contract length – 9 years 20 Local government Defence Life & Pipeline comprises 90% new rev
Slide 30: Creating growth – 2011 acquisitions
Creating growth – 2011 acquisitions Enhancing our capabilities Acquisition Value* Customer management Ventura 65.0 & technology Vertex Private Sector 40.5 Call Centre Technology 15.0 Translation services Applied Language Solutions 7.5 (+60) Salmat Speech Solutions’ UK operations 0.1 Emergency servic
Slide 31: Creating growth – 2011 acquisitions continued
Creating growth – 2011 acquisitions continued E h Enhancing i our capabilities biliti A Acquisition i iti V l * Value* Health Medical Group (IMG) 9.7 Team24 (recruitment) 24.0 (+2) Tribal health division 16.5 Consultancy Tribal government division Red procurement 1.0 (+1) Xayce (financial services)
Slide 32: Creating growth – acquisitions to date 2012
Creating growth – acquisitions to date 2012 Enhancing our capabilities Acquisition Value* Consultancy Smiths Consulting 10.0 (+2) Insurance Fish Administration 21.0 Occupational health Aviva UK Occupational Health 2.5 3 acquisitions to date in 2012 totalling £34m * Value in brackets represents maxim
Slide 33: Acquiring capability – customer management
A Acquiring i i capability bilit – customer t managementt (Private Sector) May-11 July-11 Sep-11 +130 staff +8,000 staff +1,400 staff Voice telephony, 50m customer contacts End-end outsourced applications and services including acquisition & customer management for customer contact sales support, he
Slide 34: Leveraging our scale & capability
Leveraging our scale & capability Mark Wyllie Executive Director, Director IT Services & Consulting
Slide 35: Entering a new market – emergency services
Entering a new market – emergency services We e est estimate ate annual a ua spe spend d to be £ £15bn 5b in - Police sector - Other emergency services - Amber light services Ideal target market for us g - Significant cost p pressure is driving g a need to be more efficient - Desire to spend hig
Slide 36: Entering a new market – current footprint
Entering a new market – current footprint Sep 11 Jul 11 Apr p 11 £15m* / +45 people £15m Dec 10 £8m* / +30 people £16.5m* / +340 people Leading provider of £86m* / +950 people Secure mobile data integrated back office Accredited advisory solutions permitting services on both management software ICT,
Slide 37: Emergency services – sample credentials
Emergency services – sample credentials Supplying products and services to 52 of 53 UK police forces Managing more than 40% of the radio terminals used by the police including the radio services to support them through the Olympics Delivering Criminal Justice Solutions to more than 50% of UK f
Slide 38: Building our scale & capability – ICT
Building our scale & capability – ICT 2001-02 2008 2009 2010 2011 2012 800 staff +1140 staff +190 staff +300 staff +220 staff +50 staff Business Outsourcing, managed services and Systems Specialist Voice telephony, SAP critical services network infrastructure solutions Integration, provider of appli
Slide 39: Capita ICT - today
Capita ICT - today Ranked 7th largest in UK IT services market* Doubled the size of the business since 2008 9 acquisitions completed over last 4 years 1,850 1 850 clients Over 5,200 IT professionals 8 service centres with over 1,400,000 service interactions >100 IT services in our port
Slide 40: Capita ICT - key capabilities
Capita ICT - 5 key capabilities End User Computing IT outsourcing t i Dynamic hosting Managed ITIL service desk G-cloud Managed desktop R t i t d managed Restricted d hosting h ti Disaster recovery PSN Services Unified Communications WAN \ LAN and Contact C C Centres ISP Services Multimedia contact
Slide 41: Capita ICT - potential
Capita ICT - potential Recent developments - Renewed R d strategy t t & propositions iti - Focusing on key target market sectors - Recruited/developed a new board – top talent from the ICT industry Market - Transformation is increasingly at the core of what Capita does - ICT and business consulting
Slide 42: Value creation going forward
V l creation Value ti going i fforward d Paul Pindar Chief Executive
Slide 43: What are the drivers of shareholder value?
What are the drivers of shareholder value? • Organic growth • Acquisition activity • Headcount efficiencies • Offshoring • Procurement gains • Process automation
Slide 44: Organic growth
Organic growth 10 0 8 6 4 % increase 2 0 2009 2010 2011 2012* 2013* -2 -4 -6 -8 F Focused d on securing i further f h organic i growth h * Analyst consensus forecast
Slide 45: And the others
And the others Acquisition activity - £967m invested in 4yrs to Dec 2011 - post tax returns of approximately 14% Headcount - unremitting focus on creating efficiencies Offshoring - headcount up 65% in 4 yrs to Dec 2011 - Poland launched with 550 seat capacity Procurement gains - acquisition
Slide 46: And the result
And the result Revenue growth 2008: £2,441m +20% 2011: £2,930m Net profits 2008: £277m +39% 2011: £385m Earnings 2008: 33.3p +46% 2011: 48.5p Dividend 2008: 14.4p +49% 2011: 21.4p A resilient business with many value drivers
Slide 47: Results for the year ended 31 December 2011
Results for the year ended 31 December 2011 Annual Results Presentation 23 February 2012