Capita Plc · LSE:CPI
Capita — FY2014 Earnings Presentation
43 slides from Capita's earnings presentation, Feb 26, 2015
Slide 1: Results for the year ended 31 December 2014
Results for the year ended 31 December 2014 Full year results presentation 26 February 2015 1
Slide 2: Agenda
Agenda Key highlights Andy Parker, Chief Executive Consistently driving success Gordon Hurst, Group Finance Director & financial results Nick Greatorex, Group Finance Director from 1 March Business development Maggi Bell, Group Business Development Director Platform for growth, Andy Parker, Chief Ex
Slide 3: Key highlights
Key highlights Continued strong financial & operational performance in 2014 • Revenue up 14% • Organic revenue growth of 9% (2013: 8%) • Profit before tax up 13% • EPS and total dividend up 10% • Free cash flow up 18% • £1.7bn of major new contracts secured in year • 17 acquisitions totalling £310m:
Slide 4: Consistently driving success
Consistently driving success Gordon Hurst Group Finance Director 4
Slide 5: Total shareholder return: strong 10 year track record
Consistently driving success | total shareholder return TSR chart over the past 10 years Strong 10 year track 400 record Assumes £100 investment at the beginning of the period Capita 350 • Total shareholder return 269% 300 • £1.5bn cash returned to shareholders 250 200 FTSE 100 Index 150 100 50 0 20
Slide 6: Business in good shape for future growth
Consistently driving success Strategy of controlled growth • Organic growth complemented by value adding acquisitions • Financial & commercial discipline on contracts • Healthy return on capital Consistently increasing our addressable market • Recent examples in Europe, mortgage admin & scientific s
Slide 7: Financial results
Financial results Nick Greatorex Group Finance Director from 1 March 2015 7
Slide 8: Revenue: our growth record continues
Financial results | revenue • Annual growth 14% • 5 year compound growth 10% 2009 2,687 2010 2,744 2011 2,930 Half year 2012 3,352 Full year 2013 3,851 2014 4,372 * 0 1,000 2,000 3,000 4,000 5,000 £m Our growth record continues * Revenue excluding Occupational Health disposal of £6m 8
Slide 9: Revenue growth: strong organic growth
Financial results | revenue growth £m 2014 £m 2013 Growth Underlying revenue including Occupational Health business sold 4,378 3,851 13.7% Occupational Health business sold (6) (9) 0.1% Total revenue on continuing basis 4,372 3,842 13.8% 2013 acquisitions (59) - (1.5%) 2014 acquisitions (115) - (3.0
Slide 10: Revenue by market: working across diversified markets
Financial results | revenue by market • Private sector 52% (2013: 52%) • Public sector 48% (2013: 48%) Central government 10% (10%) Local government 16% (16%) Education 10% (10%) Health 4% (5%) Justice & Emergency services 5% (4%) Defence 3% (3%) Insurance 2% (3%) Life and pensions 10% (13%) Financi
Slide 11: Underlying operating profit: strong growth
Financial results | underlying operating profit* • Annual growth 11% • 5 year compound growth 10% 2009 352.4 2010 386.4 2011 417.0 Half year 2012 Full year 466.7 2013 516.9 2014 576.3** 0 100 200 300 400 500 600 £m *Excludes non-underlying items being: intangible amortisation, acquisition expenses,
Slide 12: Underlying profit before tax: increasing profitability
Financial results | underlying profit before tax* Annual growth 13% 5 year compound growth 11% 2009 321.7 2010 355.7 2011 376.6 Half year 2012 417.0 Full year 2013 475.0 2014 535.7** 0 100 200 300 400 500 600 £m *Excludes non-underlying items being: intangible amortisation, acquisition expenses, ass
Slide 13: Underlying operating margin
Financial results | underlying operating margin* 16.0 15.0 14.2 14.1 13.9 14.0 13.1 13.4 % 13.2** 13.0 12.0 11.0 10.0 2009 2010 2011 2012 2013 2014 *Excludes non-underlying items being: intangible amortisation, acquisition expenses, asset services provisions, net contingent consideration movements,
Slide 14: Underlying earnings per share
Financial results | underlying earnings per share* • Annual growth 10% • 5 year compound growth 11% 2009 38.3 2010 43.9 2011 47.4 Half year 2012 52.1 Full year 2013 59.4 2014 65.2** 0 10 20 30 40 50 60 70 pence *Excludes non-underlying items being: intangible amortisation, acquisition expenses, asse
Slide 15: Dividends growing strongly
Financial results | dividends • Annual growth 10% • 5 year compound growth 12% • Dividend cover 2.2x* • Dividend yield 2.5%** 2009 16.8 2010 20.0 2011 21.4 Half year 2012 23.5 Full year 2013 26.5 2014 29.2 0 5 10 15 20 25 30 pence *Dividend cover is calculated using earnings per share excluding the
Slide 16: Underlying cash flow from operating activities
Financial results | underlying cash flow from operating activities** £m 2014 £m 2013 Underlying operating profit* 576 517 Depreciation 87 78 Share based payment 11 10 Pensions (1) 2 Movements in provisions (17) (12) Loss on sale of property, plant & equipment 1 2 Movements in working capital (13) (5
Slide 17: Cash flow statement: growing free cash flow
Financial results | cash flow statement £m 2014 £m 2013 Underlying cash flow from operations 644 546 Net interest paid (36) (37) Taxation paid (94) (53) Capital expenditure (146) (144) Underlying free cash flow 368 312 Non-underlying expense (25) (9) Free cash flow 343 303 Acquisition of subsidiary
Slide 18: Free cash flow growth and long term shareholder value
Financial results | free cash flow growth 400 11% p.a. growth over last 10 years 368* 350 £2.4bn free cash flow generated over last 10 years 307 300 280 312 Ordinary dividends £1,293m 250 241 Special dividends 219 £m £1.8bn £1.5bn returned to returned to 200 184 Share buy backs £523m shareholders sh
Slide 19: Balance sheet gearing
Financial results | balance sheet gearing Cash Non-Cash 2013 2014 Maturity movements movements Net debt £m £m £m £m Yrs Bond debt † 1,134 (11) (1) 1,122 2015 - 2021 Cash in bank (158) 127 2 (29) Term debt 200 100 - 300 £200m Jan 2016 Other 27 (15) - 12 Total underlying net debt 1,203 201 1 1,405 Int
Slide 20: Underlying net return on capital
Financial results | underlying net return on capital* Actual 24.0 WACC 20.0 20.3 19.5 16.0 16.1 % return 15.8 15.5 14.8 12.0 8.0 7.9 7.7 7.5 7.7 7.2 7.0 4.0 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014 Underlying operating profit (£m) 352 386 417 467 517 576 Average capital employed (
Slide 21: Post tax underlying economic profit
Financial results | post tax underlying economic profit* 240 240 Annual growth 14% 220 211 5 year compound growth 9% £m 200 207 180 176 160 171 158 140 120 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014 Underlying operating profit 352 386 417 467 517 576 Capital charge (£m) (100) (115)
Slide 22: Ensuring future continuity
Consistently driving success Going forward focus remains on: • Commercial discipline on new contracts and acquisitions • Cash and working capital management • Effective deployment of capital at appropriate returns • Delivering good returns to shareholders Ensuring future continuity 22
Slide 23: Creating growth: Business development
Creating growth: Business development Maggi Bell Group Business Development Director 23
Slide 24: A strong start to 2015: major contract wins
Creating growth | major contract wins 2014: £1.7bn + 2015: £1.1bn to date 2014 contracts Key features Duration (years) Value (£m) The Co-operative Bank Mortgage servicing 10 325 Service administration and Congestion Charging & Low Emission Zone - TfL 5+1 145 + 30 provision of IT Summary Scottish Wid
Slide 25: Fera: creation of scientific services business with Defra
Creating growth | Fera: creation of scientific services business with Defra Includes 2 public sector agreements for 10 years Public sector subsidiary partnership, 75% owned by Capita 10yr contracted service agreement with Defra Fera 10yr sole provider framework through which scientific services can
Slide 26: NHS England framework for Commissioning Support Services
Creating growth | NHS England framework for Commissioning Support Services Capita lead provider on £3 - 5bn framework Approved supplier on Lot 1 (finance, HR, IT, contracting, business intelligence) and Lot 2 (medicines management) Lead provider framework for Commissioning Support Services All curre
Slide 27: Bid pipeline: targeting opportunities across diversified markets
Creating growth | bid pipeline 30 Telecoms 25 & retail Bid pipeline Financial Local 20 services government • Bid pipeline today of £5.1bn % comprising 28 bids (Nov 2014: £4.1bn, 26 bids) 15 Health Defence • 94% new revenue / 6% extensions/renewals Utilities • Average contract length of 8 years 10 •
Slide 28: Process for value creation
Creating growth | process for value creation Drivers of transformational deals Current bid pipeline £5.1bn Differing commercial models £4,345m • Transformational contracts • Transformational contracts • Future proofing, right sizing, disruptive • Transformational public/private new models partnershi
Slide 29: UK CM and BPM large addressable market
Generating growth | UK CM and BPM large addressable market £bn pa UK CM and BPM market: £129bn* pa 20 £81bn pa addressable in our • 2014 let: only £13bn* pa (10%) most active markets 18 • Capita’s share: 27%* 16 • Unlet: £116bn* pa (90%) 14 • £81bn pa (70%) in Capita’s most 12 active markets 10 8 6
Slide 30: Prospects c£14bn across diversified markets
Generating growth | prospects c£14bn % 25 Telecoms & retail 20 Financial Utilities services UK CM and BPM market Local 15 government Health Targeting sectors and organisations with greatest catalyst for change: 10 Central • Regulatory e.g. Mortgage administration government and utilities Defence • S
Slide 31: Strategy for growth and value creation
Strategy for growth and value creation Andy Parker Chief Executive 31
Slide 32: Consistently executing against our goals
Strategy for growth and value creation Focus on organic growth • Increasing penetration of our large addressable market • Through traditional outsourcing and new models, such as the commercialisation of assets Supported by leveraging our competitive strengths • Scale, breadth of capabilities and rec
Slide 33: Diversifying into new growth markets
Strategy for growth & value creation | expanding market reach Diversifying into new growth markets 33
Slide 34: Delivering on transformational partnering: O2
Strategy for growth & value creation | referenceable performance O2 transformational partnership % calls answered consistently On target at 92-95%, with greater resilience reduction in 12% to cope with customer cost-to-serve reduction in peaks than ever 5,000 call handling before staff with time 2,3
Slide 35: Creating value from commercialising public assets: AXELOS
Strategy for growth & value creation | delivery of operational performance AXELOS performance IP owner and accreditor of best practice products, including PRINCE2® and ITIL® • JV with Cabinet Office, providing exams across 150+ countries, supported by exam institutes and 1,000 training partners Stor
Slide 36: Creating value from our IP
Strategy for growth & value creation | Capita intellectual property Academy Social Housing Alto & Chorus Management Suite HartLink ePayment Creating value from our IP 36
Slide 37: Creating value from our IP
Strategy for growth & value creation | Capita intellectual property • Capita owns a wealth of IP – developed in-house and acquired • IP is a key differentiator and can add value to major bids • Our IP includes: • Education: SIMS school management system used in over 22,000 schools • Emergency servic
Slide 38: Creating a platform for organic growth: 2014 acquisitions
Strategy for growth & value creation | £310m spent on 17 acquisitions in 2014 Reason Acquisition Capabilities / sector Value £m* AMT-Sybex Growing capabilities in utilities sector Software and data / utilities and transport 82.0 + (23.0) (Justice & Secure Services) Updata IT networking and connectiv
Slide 39: Building capability and expanding our market reach
Strategy for growth & value creation | 2014 key acquisitions Updata: IT networking across public sector • IT networking and connectivity services to mainly public sector clients • Partner to Capita on the framework contract to deliver the Scottish Wide Area Network (SWAN) • Updata + Capita’s existin
Slide 40: DACH region BPM market
Strategy for growth & value creation| DACH region BPM market DACH region identified as offering exciting potential for growth & value creation Big addressable market • 110m German speakers in region • BPM addressable market c.€266bn, of which €19.5bn was outsourced in 2014 (source: Nelson Hall) Cont
Slide 41: Bringing together our market capabilities: DACH region
Bringing together our market capabilities | DACH region Big ticket Capita disciplines sales • Customer management • Niche customer management • Customer contact management services consultancy business • Operates Germany & Switzerland Commercial • In-region sales capability • Model office & benchmar
Slide 42: Good platform for growth in 2015 and beyond
Summary and priorities for 2015 and beyond Good visibility of strong organic growth for 2015 High level of sales activity providing good platform for future organic growth in 2015 and beyond Continued development of value creating, intelligence led and IT enabled innovative sales propositions Health
Slide 43: Results for the year ended 31 December 2014
Results for the year ended 31 December 2014 43