Capita plc · LSE:CPI
Capita — H1 2023 Earnings Presentation
36 slides from Capita's earnings presentation, Aug 1, 2023
Slide 1: Half Year Results 2023
Half 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: Accelerating financial performance
Accelerating financial performance • Growth across all divisions • Delivered increased revenue growth for fourth successive reporting period • Book to bill maintained at 1.0x, now above 1.5x • Profit up more than 30% • No material trading impact from the cyber incident • Reducing employee attrition,
Slide 4: Financial results
Financial results Tim Weller All figures included within this presentation are on an adjusted basis unless otherwise stated 4
Slide 5: Financial highlights
Financial highlights £m £m • Revenue growth of 6% driven by underlying growth, Key financial metrics HY23 HY22 Change transition to new contract with Virgin Media O2 and commercial settlement in closed book Revenue 1,402.4 1,326.0 5.8% Life & Pensions business Operating profit 56.5 39.6 42.7% • Incr
Slide 6: Capita Public Service
Capita Public Service Revenue £m HY23 HY22 Change • Scope increases on Royal Navy Training and increased Revenue 731.0 713.6 2.4% volumes on Personal Independence Payments contracts and indexation Divisional operating profit 39.5 46.8 (15.6)% • Offset by non-recurrence of contract to provide laptops
Slide 7: Capita Experience
Capita Experience Revenue £m HY23 HY22 Change • Growth driven by accelerated deferred income release Revenue 617.6 566.2 9.1% from award of new Virgin Media O2 contract and a commercial settlement in closed book Life & Pensions business Divisional operating profit 39.7 14.5 173.8% Profit Divisional
Slide 8: Profit before tax
Profit before tax • Increase in adjusted profit before tax driven by £m HY23 HY22 Change revenue growth and contract benefits outlined Adjusted profit before tax 33.1 24.7 8.4 on previous slides Business exits (34.7) 66.6 (101.3) • Business exits reflect the continued Portfolio Impairment of goodwil
Slide 9: Cash flow and net debt movement
Cash flow and net debt movement • EBITDA increased 10% reflecting improvement in £m HY23 HY22 profit and reduction in depreciation, amortisation and EBITDA 115.0 104.6 impairment Working capital (65.8) (21.9) • Cash generated from operations reflects non-cash Non-cash and other adjustments (3.9) (26
Slide 10: Progress on our non-core disposal programme
Progress on our non-core disposal programme Business Technology Property Pay360 CTI People Software Fera Travel Solutions Processes launched for remaining pillars targeting sale over the coming months, depending on market conditions Focus on maximising proceeds Net proceeds received1 in 2022: £388m
Slide 11: Liquidity
Liquidity £m £m • Private placement note (PPN) debt maturities totalling Liquidity HY23 FY22 £40m paid in the period (all net of swaps) Revolving credit facility (RCF) 284.0 288.4 • RCF extended to 31 December 2026 Less: drawing on committed facilities (41.0) - • In July issued £101.9m equivalent of
Slide 12: 2023 Core Capita Outlook
2023 Core Capita Outlook • Experience: Contract exits and settlement not expected to repeat in H2 2023 Revenue growth • Public: Growth from extensions and increases in scope on existing clients and new wins • Expected to increase against FY22 from revenue growth and efficiency gains EBITDA • £40m co
Slide 13: CEO update
CEO update Jon Lewis 13
Slide 14: Progress in the acceleration phase
Progress in the acceleration phase 2023 46% £1,357m £650m New client Total contract value In year revenue won win rate won in H1 2022: £534m Acceleration 2022: 11% 2022: £1,413m +22% increase • Improving new client win rate • Improving sales incentives 3% £40m £28m and processes Reduction Future cos
Slide 15: Our purpose is our licence to operate
Our purpose is our licence to operate • People increasingly want to work for a purpose led, responsible business • Our social value commitments support our win rates with clients • Materiality assessment completed to focus resource on priorities for all stakeholders A responsible and responsive empl
Slide 16: Cyber incident: no material impact on contract awards to date
Cyber incident 1 No material impact on contract awards to date 4 Redoubled efforts to ensure we are secure against risk of cyber incidents 2 Sharing learnings and experience transparently with other firms 5 Pre-planned cyber investment now accelerated 3 Cyber was and remains the biggest risk to most
Slide 17: Improving employee attrition trends across the Group
Improving employee attrition trends across the Group Reduced 12 month attrition Improved engagement 3% to 28% +1% to 66% Employee attrition consistently reducing 0.5% each month • Reducing cost of churn • Launch of group wide new employee inductions to increase inclusion Improved Improving our • Sig
Slide 18: Growth acceleration
Building blocks for growth H1 23 performance • £650m IYR won in H1 (22% increase from H1 22) 46% Growth acceleration New • £1,357m TCV won in H1, YTD now clients Win rate* above £2.2bn +54% • Preferred bidder on further £800m Expand 61% in TCV (FAS and DSA, DSA now signed) Win rate* • Over 8,500 dea
Slide 19: Growth success in H1 and opportunities in H2
Growth success in H1 and opportunities in H2 Renewals Expand New clients H2 2023* weighted pipeline Over 8,500 by opportunity opportunities type won in H1 23 including: £1.2bn Expand Renewal Opportunities New Combined in H2 23 including: *as at 01/07/23 Varied pipeline of opportunities in the second
Slide 20: Consistently delivering for clients – Public Service
Consistently delivering for clients – Public Service H1 Performance TCV sold Transforming our capabilities through standardised, repeatable and scalable propositions £760m Book to bill ratio Delivered on key Achieved 200% of metrics for Standards and Testing Agency target job starts on Job Entry Sup
Slide 21: Delivering the UK Government’s priorities
Delivering the UK Government’s priorities Health, Defence, Justice, Local Public Education Learning, Fire Central Govt Services & & Welfare & Security & Transport Schools • Delivering new • Increasing UK • Digital transformation • Levelling up agenda health and career defence budget to of how public
Slide 22: Consistently delivering for clients – Experience
Consistently delivering for clients – Experience H1 Performance Delivering the right solution with the right talent TCV sold 1,000 additional full Generative AI solution on £560m time employees M&S resulted in completion of a third more Book to bill ratio recruited in India for Virgin Media O2 contr
Slide 23: Competitive offerings in UK & European Customer Experience markets
Competitive offerings in UK & European Customer Experience markets Market Banking (incl. Fintech) Retail Market solutions segments Telco and media Manufacturing (% market share) Healthcare & pharma E-commerce Utilies Public Agent augmentation Sales £m (20%) 32,421 £m 27,019 8,109 (25%) Billings and
Slide 24: Technology and Innovation
Technology and Innovation Working with Generative AI is going to play a significant part in the markets we operate in hyper scalers We are working with hyper scalers to embrace their technology, utilising our deep sector process knowledge Developing four new use cases across the Group with Microsoft
Slide 25: Generative AI is a tool to accelerate our strategy
Generative AI is a tool to accelerate our strategy Solution Expected Further Problem Opportunities Description Outcome On a Public Service contract Azure AI Cognitive Process time reduced Processes with high Gen AI for the team currently manually Services creates a by 50% documentation Medical scree
Slide 26: Since the start of the transformation
Since the start of the transformation Capita in 2017 Capita in 2023 • >£1.1bn net financial debt • Reduced level of net financial debt: £166m • 10 divisions, lacking overall strategic direction • Purpose led business with 2 divisions, clear strategy and focus and with a poor management culture and p
Slide 27: Summary
Summary Maintained operational • Delivering consistently for our clients delivery alongside • Improving win rates on new scopes of work and growth on account accelerating growth • Robust financial performance delivered in H1 momentum • Strong balance sheet and liquidity position • Embracing adoption
Slide 28: Q&A
Q&A 28
Slide 29: Appendix
Appendix
Slide 30: Outlook and guidance – Core Capita
Outlook and guidance – Core Capita Revenue (2022 Core EBIT margin (2022 Cash generated by operations Capita1 £2,596.0m) Core Capita1 2.9%) (2022 Core Capita1 £99.4m) Further acceleration of revenue growth in Target to at least double in the Growing over medium term from 2023, continuing momentum fro
Slide 31: Divisional financial performance
Divisional financial performance Operating profit/(loss) Operating cash flow Revenue £m Margin % £m £m HY23 HY22 HY23 HY22 HY23 HY22 HY23 HY22 Capita Public Service 731.0 713.6 39.5 46.8 5.4% 6.6% 52.9 58.1 Capita Experience 617.6 566.2 39.7 14.5 6.4% 2.6% 24.7 20.7 Capita Portfolio 53.8 46.2 0.4 (6
Slide 32: Order book bridge FY22 to HY23
Order book1 bridge FY22 to HY23 Relevant to approximately 80% £m of revenue base • Additions in 2023 include British Army Recruiting Partnering Project, City of London Police and TfL Road User Charging within Public Service and Santander in Experience • Terminations primarily represent a contract ex
Slide 33: Revenue bridge by driver
Revenue bridge by driver £m 33
Slide 34: Core Capita pro forma revenue, operating profit and cash bridges
Core Capita pro forma revenue, operating profit and cash bridges Reallocation of Pro forma HY23 Portfolio £m Group overheads HY23 • Pro forma financial information Capita Public Service 731.0 - - 731.0 presents the Group’s HY23 revenue, operating profit and Capita Experience 617.6 - - 617.6 cash flo
Slide 35: 2023 Core Capita modelling assumptions
2023 Core Capita modelling assumptions Depreciation & amortisation Reduction on 2022, c.4% revenue P&L interest Increase in 2023 reflecting rising interest rates and new PPN issuance despite continued reduction in net debt Working capital Lower cash conversion in 2023 reflecting similar usage of non
Slide 36: 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 cNPS Customer Net Promoter Score Core Capita Group as currently stands, excluding Capita Portf