Capita Plc · LSE:CPI
Capita — H1 2024 Earnings Presentation
33 slides from Capita's earnings presentation, Aug 1, 2024
Slide 1: Half Year Results 2024
Half Year Results 2024
Slide 2: Disclaimer
Disclaimer This presentation and any oral information or accompanying materials provided in connection with it (together, the “Materials”) have been prepared solely for informational purposes for the shareholders of Capita plc (“Capita”), and not for any other purpose or for any other person. Neithe
Slide 3: Our strategic themes: a better Capita
Our strategic themes: a better Capita Efficiencies Technology Delivery Company Improved Clarity on Workforce Delivering value to financial what Capita equipped for customers, employees performance is famous for change and shareholders 3
Slide 4: Delivering our strategic priorities for a better Capita
Demonstrating momentum against our priorities • Delivered 45% improvement in operating margin Delivering • Delivered annualised cost savings of £100m, on track to deliver £160m by June 2025 our strategic • Re-established our relationship with hyperscalers to drive product quality priorities for • De
Slide 5: Financial results
Financial results Tim Weller All figures included within this presentation are on an adjusted basis unless otherwise stated 5
Slide 6: Financial highlights
Financial highlights • Revenue decline from previously announced £m HY24 HY23 Change contract hand-backs, losses and non-recurrence of HY23 one-offs in Experience Revenue 1,201.5 1,324.4 (9.3)% • Operating profit increase reflects benefit from ongoing cost reduction programme, Operating profit 54.2
Slide 7: Adjusted to reported profit reconciliation
Adjusted to reported profit reconciliation • Business exits principally reflect £m HY24 HY23 Change January 2024's sale of Fera which completed Portfolio disposal programme launched in 2021 Adjusted profit before tax 31.6 18.3 13.3 • Cyber incident credit reflects expected insurance recovery - cumul
Slide 8: Capita Public Service
Capita Public Service Revenue £m HY24 HY23 Change • Cessation of contracts in Local Public Service and Scottish Wide Area Network and Electronic Revenue 688.5 708.0 (2.8)% Monitoring • Non-repeat of temporary contract activity in Royal Operating profit 47.1 26.2 79.8% Navy Training • Benefit of inde
Slide 9: Capita Experience
Capita Experience Revenue £m HY24 HY23 Change • Reduction reflects HY23 one-off deferred income benefit from award of new contract with Virgin Media Revenue 513.0 616.4 (16.8)% O2 and commercial settlement in closed book Life & Pensions business Operating profit 25.1 39.1 (35.8)% • Impact of previou
Slide 10: Sales pipeline – focused on 2025
Sales pipeline – focused on 2025 TCV secured Book to bill ratio £0.9bn 0.8x Opportunities European telco H1 2023: £1.3bn H1 2023: 1.0x won including providers New and expanded scope win rate1 Renewal win rate1 34% 95% H1 2023: 57% H1 2023: 69% Key pipeline Total weighted 2025 opportunities in pipeli
Slide 11: Cash flow and net debt movement
Cash flow and net debt movement • Working capital improvement driven by lower level of £m HY24 HY23 deferred income releases (c.£40m reduction period-on- EBITDA 102.2 97.1 period) Working capital (30.4) (63.9) • Non-cash and other adjustments includes provision Non-cash and other adjustments (20.4)
Slide 12: Liquidity & net debt
Liquidity & net debt • RCF committed to 31 December 2026 and £m HY24 FY23 undrawn at half year (HY23: £41m drawn) Revolving credit facility (RCF) 250.0 260.7 • Net financial debt (pre-IFRS 16) reduced £16m since FY23 Less: drawing on committed facilities - - • Net financial debt (pre-IFRS 16): EBITD
Slide 13: 2024 full year outlook
2024 full year outlook • Experience: single to low double digit % reduction • Public Service: broadly in line with 2023 Revenue • Overall Group: low to mid-single digit % reduction – delayed operational go-live on certain contracts and more focused approach to bidding Operating • Modest increase on
Slide 14: CEO update
CEO update Adolfo Hernandez 14
Slide 15: Business focus areas
Business focus areas Capita Public Service Capita Experience Defence, Learning, Local Public Service Central Government Contact Centre Pension Solutions Fire and Security Local authorities, schools, Ministry of Defence, Justice and policing, Financial services, Central Government, housing associatio
Slide 16: Service line mapping
Service line mapping Star Positions Transformation Potential Manage for Value c.45% of FY23 revenue c.30% of FY23 revenue c.25% of FY23 revenue 11% CAGR 2021-23 0% CAGR 2021-23 (5)% CAGR 2021-23 Actions/ Options: • Optimising delivery • Repeat and expand positions/win share • Tech-enablement & autom
Slide 17: Better efficiencies – continued progress delivering cost savings
Better efficiencies – continued progress delivering cost savings £100m savings delivered to date: Impact Building for the future Back to basics Reinvest £50m in the 79 business, evolve our Transform our model, accelerate processes and growth and continue Quick wins to fund infrastructure to building
Slide 18: New UK government initial priorities aligned to Capita propositions
New UK government initial priorities aligned to Capita propositions Capita Public Service Government priorities Example initiatives propositions / existing contracts • Modernising HMRC • City of London Police Fraud • Tackling tax avoidance and benefit fraud • Driving productivity and Waste • Procure
Slide 19: Better technology – re-establishing our relationship with hyperscalers
Better technology – re-establishing our relationship with hyperscalers Partnering with hyperscalers Driving efficiency in delivery Our partner to jointly create solutions to and internal processes ecosystem improve and accelerate reducing costs to serve speed to market Building tailored solutions In
Slide 20: Better technology and delivery – case studies
Better technology and delivery – case studies CapitaContact Capita AgentSuite • Generative AI solution with two components • Cloud-based contact centre generative Solution (Agent Assist and Call Sight) AI solution developed with Amazon • Multiplatform Amazon, Genesys, Connect Avaya, Google etc. • Fi
Slide 21: Better technology – how technology improves the business model
Better technology – how technology improves the business model Generative AI, working with hyperscalers, BCG partnership Legacy system: Future outlook: • Mostly voice services – less differentiation • Omni-channel modern offerings • People intensive – higher cost with more risk of • More innovation,
Slide 22: Better company – culture transformation
Better company – culture transformation H1 2023 Benefits: Achievements: comparative: 22% 12-month voluntary attrition 24% Improves contract stability and delivery to clients while reducing cost Designed Empowering our leaders with and launched principles, practices, expectations leadership playbook
Slide 23: Reminder – Capita investment case
Reminder – Capita investment case Strong foundations to build on – Self-sufficient strategy; funded by Significant cost reduction, efficiencies and customer base, knowledge and efficiency improvements, cash generation margin improvement opportunity across all expertise of our people and exiting less
Slide 24: Delivering our strategic priorities for a better Capita
Demonstrating momentum against our priorities • Delivered 45% improvement in operating margin Delivering • Delivered annualised cost savings of £100m, on track to deliver £160m by June 2025 our strategic • Re-established our relationship with hyperscalers to drive product quality priorities for • De
Slide 25: Q&A
Q&A 25
Slide 26: Appendix
Appendix
Slide 27: Leading indicators on journey to reaching medium-term targets
Leading indicators on journey to reaching medium-term targets Leading indicators FY23 Performance Group and divisional overheads as a percentage of revenue 11% Percentage of overall adjusted revenue from contracts using AI or Generative AI N/A Percentage of overall adjusted revenue from contracts wh
Slide 28: Divisional financial performance
Divisional financial performance £m Revenue Operating profit/(loss) Operating margin Operating cash flow HY24 HY23 HY24 HY23 HY24 HY23 HY24 HY23 Capita Public Service 688.5 708.0 47.1 26.2 6.8% 3.7% 49.8 33.7 Capita Experience 513.0 616.4 25.1 39.1 4.9% 6.3% 26.1 28.9 Divisional total 1,201.5 1,324.
Slide 29: Re-presented FY23 revenue and operating profit bridges
Re-presented FY23 revenue and operating profit bridges £m Previously presented Capita Capita Scaling Partner & Re-presented FY23 One Mortgage Services FY23 Revenue Capita Public Service 1,458.6 (52.7) 1,405.9 Capita Experience 1,183.5 (7.6) 1,175.9 Group 2,642.1 (52.7) (7.6) 2,581.8 Operating profit
Slide 30: Revenue bridge by driver
Revenue bridge by driver £m 30
Slide 31: Order book bridge
Order book1 bridge Relevant to approximately 80% £m of revenue base • Additions in 2024 include expanded scope on Royal Navy Training contract within Public Service • Terminations primarily represent a contract exit within our closed book Life & Pensions business • Two European telecoms contract ext
Slide 32: 2024 modelling assumptions
2024 modelling assumptions Depreciation & amortisation Reduction on 2023. Total charge c.4% of revenue P&L interest Broadly in line with 2023 Working capital Improved cash conversion in 2024 reflecting step down in deferred income release Non-cash and other adjustments Increased outflow in 2024 refl
Slide 33: Glossary of terms
Glossary of terms Term Definition Book to bill This is the ratio of TCV sold in the year / external revenue Win rate Win rate is the proportion by value of contracts won as a proportion of those we bid for Operating cash conversion Calculated as operating cash flow excluding business exits divided b