Capita plc · LSE:CPI
Capita — FY2023 Earnings Presentation
30 slides from Capita's earnings presentation, May 2024
Slide 1: Full Year Results 2023
Full Year Results 2023
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: CEO introduction
CEO introduction Adolfo Hernandez 3
Slide 4: Exciting new chapter for Capita and the industry
Exciting new chapter for Capita and the industry Opportunity to become a leading business in 1 Digital transformation is vital this growing market Capita plays a significant part in society in 2 Pivotal role the UK and internationally where we operate We deliver complex solutions for many of 3 Our e
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 overview
Financial overview • Results in line with our trading update in December Challenging year - • Finalisation of £500m Portfolio disposal programme with taking action to drive sale of Fera financial performance • Extension of RCF to 2026 and £100m USPP issuance – improvement extended funding maturity p
Slide 7: Financial highlights
Financial highlights £m 2023 2022 Change • Revenue growth driven by marginal increase in Public Service, stronger growth in Experience from Revenue 2,642.1 2,609.0 1.3% benefit of one-off commercial settlement in H1 23 Operating profit 106.5 78.0 36.5% • Operating profit reflects commercial settleme
Slide 8: Capita Public Service
Capita Public Service Revenue £m 2023 2022 Change • Marginal increase reflects scope increases and improved trading on Revenue 1,458.6 1,454.8 0.3% a number of contracts including Royal Navy training and Personal Independence Payments, and indexation Operating profit 89.3 93.7 (4.7)% • Offset by han
Slide 9: Capita Public Service – key wins and opportunities
Capita Public Service – key wins and opportunities TCV secured Book to bill ratio £1.9bn 1.3x 2022: £1.2bn 2022: 0.8x Opportunities won including New and expanded scope win rate1 Renewal win rate1 78% 2022: 53% 41% 2022: 91% Weighted pipeline Order book Key pipeline opportunities £1.3bn £3.5bn 2022:
Slide 10: Capita Experience
Capita Experience Revenue £m 2023 2022 Change • Growth driven by improved international trading, indexation and H1 1,183.5 1,154.2 2.5% Revenue one-off benefit relating to commercial settlement in closed book Life & Pensions Operating profit 50.9 35.7 42.6% • Offset by contract losses, primarily Co-
Slide 11: Capita Experience – key wins and opportunities
Capita Experience – key wins and opportunities TCV secured Book to bill ratio £1.1bn 0.9x Opportunities 2022: £1.4bn 2022: 1.2x won including New and expanded scope win rate1 Renewal win rate1 53% 2022: 17% 61% 2022: 99% Weighted pipeline Order book Key pipeline opportunities £0.6bn £2.3bn European
Slide 12: Adjusted to reported reconciliation
Adjusted to reported reconciliation • Business exits reflect Portfolio non-core £m 2023 2022 Change business disposal programme Adjusted profit before tax 56.5 49.8 6.7 • No further goodwill impairment from that Business exits (38.8) 182.3 (221.1) recognised at half year Impairment of goodwill (42.2
Slide 13: Cash flow and net debt movement
Cash flow and net debt movement • Lower operating cash conversion driven by: £m 2023 2022 EBITDA 214.6 204.4 • Working capital which reflects £9m outflow from step down in usage of non-recourse facilities (2022: £28m inflow) and Working capital (110.7) (30.7) £20m reduction in accrual for variable p
Slide 14: Liquidity
Liquidity • Private placement note (PPN) debt maturities of £113m £m 2023 2022 repaid in 2023 (all net of swaps) Revolving credit facility (RCF) 260.7 288.4 • RCF extended to 31 December 2026 and undrawn at Less: drawing on committed facilities - - year end Available committed facilities 260.7 288.4
Slide 15: Free cash flow
Free cash flow • 2023 free cash flow impacted by a number of non-recurring outflows • Wave 1 of cost reduction announced in November 2023 – net £60m annualised savings from Q1 2024 • Focused on indirect support and overhead – £27m redundancy and other costs (£6m in 2023, £21m in 2024) • Wave 2 of co
Slide 16: 2024 Capita outlook
2024 Capita outlook • Experience: mid-single digit revenue reduction – continued attrition in closed book Life & Pensions and non-repeat of H1 commercial settlement Revenue • Public Service: mid-single digit revenue increase – increased scope on existing customers and new wins • Overall Group broadl
Slide 17: Financial overview
Financial overview • Results in line with our trading update in December Challenging year - • Finalisation of £500m Portfolio disposal programme with taking action to drive sale of Fera financial performance • Extension of RCF to 2026 and £100m USPP issuance – improvement extended funding maturity p
Slide 18: CEO initial observations
CEO initial observations Adolfo Hernandez 18
Slide 19: Capita familiarisation
Capita familiarisation First seven weeks spent understanding the business, competitive positions, opportunities and lessons from the past: Meeting with Reviewing Assessing Increased internal leadership and business technology estate, communication management opportunities innovation and and engageme
Slide 20: Strong foundations on which to re-build
Strong foundations on which to re-build Talented and Human + AI Excellent Automation, passionate customer list Data Analytics colleagues and Gen AI Complexity of Large and solutions and growing application of markets technology (>£40bn1) 1. Software and IT Services, Business Process Outsourcing and
Slide 21: What needs to change?
What needs to change? Refocusing Standardised, Technology repeatable and efficient What we do and how Innovative solutions Widespread use of we do it for customers technology supported by large tech partners More digitally enabled outcomes for our customers which is more efficient and profitable, be
Slide 22: Key components to be more competitive and fund growth
Key components to be more competitive and fund growth • We spend too much running the business – need to drive efficiency • Move from non-standard to repeatable customer solutions 1 More efficient and spend less • Standardise our internal processes • Improvements will flow in competitiveness, qualit
Slide 23: Our priorities
Our priorities Short term focus on driving the changes we need in 2024, leading to success in 2025 and beyond Strategy components: More efficient and Digitise our offerings Leverage technology More precision in our Governance and spend less partnerships strongly delivery evolved culture Underpinned
Slide 24: Q&A
Q&A 24
Slide 25: Appendix
Appendix
Slide 26: Divisional financial performance
Divisional financial performance £m Revenue Operating profit/(loss) Operating profit margin Operating cash flow 2023 2022 2023 2022 2023 2022 2023 2022 Capita Public Service 1,458.6 1,454.8 89.3 93.7 6.1% 6.4% 107.1 102.3 Capita Experience 1,183.5 1,154.2 50.9 35.7 4.3% 3.1% 32.7 36.1 Divisional tot
Slide 27: Order book bridge
Order book1 bridge £m Relevant to approximately 80% of revenue base • Additions in 2023 include Functional Assessment Service, British Army Recruiting Partnering Project, City of London Police and Transport for London Road User Charging within Public Service and Civil Service Pension Scheme and Vatt
Slide 28: Revenue bridge by driver
Revenue bridge by driver £m 28
Slide 29: 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 efficiencies made in cost base, and step down in deferred income release Non-cash and other adjust
Slide 30: 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