Capita Plc · LSE:CPI
Capita — FY2009 Earnings Presentation
49 slides from Capita's earnings presentation, March 2010
Slide 1: Results for the year ended 31 December 2009
Results for the year ended 31 December 2009
Slide 2: Highlights
Highlights Paul Pindar Chief Executive
Slide 3: Highlights
Highlights Excellent profit growth Continued margin progression Strong free cash flow 17% dividend increase Increasing market leadership Active markets – £3.7bn bid pipeline Strongly positioned for 2010
Slide 4: Financial results
Financial results Gordon Hurst Group Finance Director
Slide 5: Financial results - turnover
Financial results - turnover Annual growth 10% 5 year compound growth 16% 1/2 Year 2004 Full Year 1,282 2005 1,436 2006 1,739 2007 2,073 2008 2,441 2009 2,687 0 500 1,000 1,500 2,000 2,500 3,000 £m
Slide 6: Financial results – turnover by market
Financial results – turnover by market Private sector 50% (2008: 52%) Public sector 50% (2008: 48%) Life and pensions 18% (16%) Insurance 8% (8%) 3 3 18 12 Financial services 4% (5%) Other corporates 20% (23%) 8 10 Local government 22% (20%) 4 Central government 10% (10%) Education 12% (11%) 22 20 T
Slide 7: Financial results – organic growth
Financial results – organic growth £m 2009 £m 2008 Growth % Turnover 2687 2441 10% 2009 acquisitions (79) - (3%) 2008 acquisitions 2001 (40) 2002 - 2003 2004 (2%) Organic 2568 2441 5%
Slide 8: Financial results – revenue attrition
Financial results – revenue attrition 2009 (£m) 2010 (£m) London Congestion Charging 17 48 Taken in-house 32 31 DTI Miners Claims run-off 25 20 Project completions - 55 Business disposals - 39 74 193
Slide 9: Financial results – underlying profit before tax
Financial results – underlying profit before tax* Annual growth 17% 5 year compound growth 18% 1/2 Year 2004 143.9 Full Year 2005 169.6 2006 200.1 2007 238.4 2008 277.2 2009 325.1 0 50 100 150 200 250 300 350 £m * excluding intangible amortisation, non-cash impact of mark to market movement on finan
Slide 10: Financial results – underlying operating profit
Financial results – underlying operating profit* Annual growth 11% 5 year compound growth 18% 1/2 Year 2004 155.8 Full Year 2005 183.1 2006 225.1 2007 271.3 2008 320.9 2009 357.7 0 100 200 300 400 £m * excluding intangible amortisation, non-cash impact of mark to market movement on financial instrum
Slide 11: Financial results – underlying operating margin
Operating margin Financial results – underlying operating margin* Annual increase 16 bpts 14.00 13.00 13.31 13.09 13.15 12.95 12.76 Margin % 12.00 12.16 11.00 10.00 9.00 2004 2005 2006 2007 2008 2009 * excluding intangible amortisation, non-cash impact of mark to market movement on financial instrum
Slide 12: Financial results – underlying earnings per share
Financial results – underlying earnings per share* Annual growth 17% 5 year compound growth 20% 1/2 Year 2004 15.37 Full Year 2005 18.60 2006 23.10 2007 28.10 2008 33.26 2009 38.75 0 10 20 30 40 50 Pence * excluding intangible amortisation, non-cash impact of mark to market movement on financial ins
Slide 13: Financial results – dividends
Financial results – dividends Annual growth 17% 5 year compound growth 25% Dividend cover 2.31 1/2 Year 2004 5.4 Full Year 2005 7.0 2006 9.0 2007 12.0* 2008 14.4 2009 16.8 0 5 10 15 20 Pence * excluding 25p special dividend
Slide 14: Financial results – dividend cover
Financial results – dividend cover* 4.00 2.85 3.00 2.66 2.57 2.34 2.31 2.31 Cover 2.00 1.00 0.00 2004 2005 2006 2007 2008 2009 * EPS used is excluding intangible amortisation, non-cash impact of mark to market movement on financial instruments loss on disposal of business and exceptional costs relat
Slide 15: Financial results – cash flow statement
Financial results – cash flow statement £m 2009 £m £m 2008 2006 Cash flow from operating activities* 437 392 Net interest paid (31) (38) Taxation paid (58) (49) Capital expenditure (68) (86) Free cash flow 280 219 Exceptional pension payment (40) (10) Acquisitions (173) (180) Disposals 8 - Equity di
Slide 16: Financial results – cash flow from operating activities
Financial results – cash flow from operating activities Annual growth 11% 5 year compound growth 17% 1/2 Year 2004 200 Full Year 2005 232 2006 279 2007 334 2008 392 2009 437 0 100 200 300 400 500 £m exceptional additional pension contribution £50m (2004), £10m (2008), £40m (2009)
Slide 17: Financial results – free cash flow
Financial results – free cash flow Annual growth 28% 5 year compound growth 21% 1/2 Year 2004 106 Full Year 2005 127 2006 154 2007 184 2008 219 2009 280 0 50 100 150 200 250 300 £m exceptional additional pension contribution £50m (2004). £10m (2008), £40m (2009)
Slide 18: Financial results – capex as % turnover
Financial results – capex as % turnover 7 6 5 %4 3.4 3.6 3.6 3 3.5 3.5 2 2.5 1 0 2004 2005 2006 2007 2008 2009
Slide 19: Financial results – underlying net return on capital
Net return Financial on capital results – underlying net return on capital* 24 20.3 20.6 19.6 20 18.5 17.1 Actual 16.1 % return 16 WACC 12 8 8.5 8.2 8.4 8.6 8.2 7.9 4 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 PBIT 156 183 225 271 321 358 Avg capital (£m) 696 776 880 998 1155 1271 T
Slide 20: Financial results – free cash flow return on capital
Financial results – free cash flow return on capital* 24 24.5 21.6 22.3 20 19.9 % return 18.2 16 17.0 12 8 4 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 FCF (pre interest) 118* 141 176 216 257* 311* Avg capital (£m) 696 776 880 998 1155 1271 * excluding additional pension contributio
Slide 21: Financial results – balance sheet gearing
Financial results – balance sheet gearing £m 2009 £m 2008 Net debt Bond debt † 582 679 Bank facilities drawn / (deposit) (182) (87) Loan notes 3 4 Bank term loan 200 - Other 2 - Total net debt 605 596 Interest cover 10.9x 7.4x Net debt to EBITDA 1.5 1.6 † Underlying net debt after impact of currency
Slide 22: Financial results – Arch cru funds
Financial results – Arch cru funds Capita Financial Managers (CFM) predominantly provides administration services, but also acts as the Authorised Corporate Director (ACD) to some investment funds CFM is ACD to 2 UK OEICs – the Arch cru funds Investment Manager was Arch Financial Products LLP,
Slide 23: Fuelling growth through contract wins and acquisitions
Fuelling growth through contract wins and acquisitions Paul Pindar Chief Executive
Slide 24: Fuelling growth – contracts won in 2009
Fuelling growth – contracts won in 2009 Client Contract type Value Duration (£m) AXA Sun Life New contract 523 15 years Learning and Skills Council (LSC) New contract 68 4 years Office for National Statistics (ONS) New contract 25 2.5 years DCSF: National Strategies Extension 64 1 year BBC Audience
Slide 25: Fuelling growth – AXA Sun Life update
Fuelling growth – AXA Sun Life update £523m over 15 years To administer 3.2m mature life and pensions policies and provide customer service, policy administration, claims activity and related IT support Service commencement: June 2009. 1,150 employees transferred in UK New office opened in Ban
Slide 26: Fuelling growth – NHS BSA
Fuelling growth – NHS BSA £100m over 7 years To provide processing and payments of 40m dental claims (DCSS), made annually in England and Wales, and a managed IT service (MITI) to support the Authority MITI to transform and manage IT infrastructure to support NHS BSA and its activities including
Slide 27: Fuelling growth – contracts secured in 2010
Fuelling growth – contracts secured in 2010 Client Type Aviva International in Ireland New AXA (insurance administration services) New DWP Records Management Extension Constructionline Extension Building Schools for the Future – a number of contracts New Nottinghamshire County Council New Total valu
Slide 28: Fuelling growth – rebid of existing major contracts
Fuelling growth – rebid of existing major contracts Year Contract Value per annum (£m) 2010 None 2011 None 2012 TV Licensing* 50 CRB* 40 2013 None 2014 None Criteria: more than 1% of 2009 turnover *Revenues based on original contract value National Strategies contract due to end 31 March 2011 and wi
Slide 29: Fuelling growth – bid activity
Fuelling growth – bid activity Our markets Most active Local government Ongoing activity Life and pensions Increasing activity Health and financial services Greatest potential Central government Bid pipeline* of £3.7bn comprising 26 bids (Feb 2009: £3.1bn; 23 bids) Current win rate down from 1:2
Slide 30: Fuelling growth – acquisitions
Fuelling growth – acquisitions In 2009, assessed over 100 opportunities and completed 12 acquisitions We continue to acquire small to medium sized companies that: – strengthen existing market positions – create new market opportunities – create further economies of scale – generate sustainable,
Slide 31: Fuelling growth – 2009 major acquisitions
Fuelling growth – 2009 major acquisitions Acquisition Business area Value (£m) FMS Trust administration 2.0 + 1.1 CHKS Health services 11.6 Hero Insurance Services Insurance 15.0 NHS Membership Services Financial services 2.0 MMB Property services 4.9 Capmark Services Europe Financial services 10.0
Slide 32: Fuelling growth – 2010 year to date acquisitions
Fuelling growth – 2010 year to date acquisitions Acquisition Business area Value (£m) Inventures Property services 6.8 + 5 NB Real Estate Property services 10.0 +10 Total spent on 2 acquisitions in 2010: £16.8m
Slide 33: Fuelling growth – NB Real Estate
Fuelling growth – NB Real Estate Rationale: adds further services, clients and expertise to Capita Symonds, our property consultancy business Commercial property management specialists Capita Symonds + NB Real Estate = full service proposition across the real estate lifecycle. Front end advisory
Slide 34: Operational update
Operational update Simon Pilling Chief Operating Officer
Slide 35: Operational update – optimising operational efficiency and resources
Operational update – optimising operational efficiency and resources We optimise our infrastructure by: – migrating and integrating systems – sharing resources – rationalising premises In 2009, significant steps forward particularly across our Life & Pensions business: – consolidation of call ce
Slide 36: Operational update – Capita India
Operational update – Capita India 5 sites in India: 3 in Mumbai, 1 in Pune, 1 in Bangalore 3,800 people in India, 10% of overall headcount New site in Bangalore opened September 2009 – transfer of operations and 550 employees for AXA contract Same values, technical infrastructure and operati
Slide 37: Operational update – Capita India's service capabilities
Operational update – Capita India’s service capabilities Life Lifeand andpensions pensions Integrated Integratedservices services Financial Financialservices services FTEs 2300* 700* 300* • Life and pensions • Insurance admin • Fund accounting • Corporate pensions • Central government • Fund adminis
Slide 38: Operational update – building an end to end service in IT Services
Operational update – building an end to end service in IT Services Capita IT Services revenues generated in 2 ways: – Capita businesses and contracts 70% – Contracts won externally 30% Acquired businesses with niche skills to build end to end service capability – design, build and operate across
Slide 39: Operational update – building an end to end service in IT Services
Operational update – building an end to end service in IT Services • Network management • Supporting Group sales, Capita businesses • Unified communications and their contracts and external client base • Business Critical Services supporting BPO • Advanced accreditations • Extensive portfolio and an
Slide 40: Operational update – scope of our IT capabilities
Operational update – scope of our IT capabilities
Slide 41: Operational update – enhancement of our IT capabilities
Operational update – enhancement of our IT capabilities June 2009: Carillion IT Services (CITS) Enhances ability to secure Building Schools for the Future (BSF) contracts: Durham BSF, Rochdale BSF, Wolverhampton BSF (preferred supplier) Increases our UK and market coverage Awarded Cisco Custom
Slide 42: Market update – public sector
Market update – public sector Our markets Drivers for outsourcing Benefits of working with Capita • Increased pressure on public spending • Experienced service • Requirement to deliver provider and solid track • Central government quality frontline services record delivering public • Local governmen
Slide 43: Market update – public sector BPO opportunities
Market update – public sector BPO opportunities Central government BPO acknowledged as key lever in Whitehall cost reduction Approximately 125,000 of 490,000 civil servants employed in transactional and administrative work Departments with the greatest administrative spend: DWP, HMRC, MoD, Hom
Slide 44: Market update – private sector
Market update – private sector Our markets Drivers for outsourcing Benefits of working with Capita • Increased pressure to drive down operational • Experienced service costs without compromising provider delivering higher • Life and pensions customer service productivity and enhanced • Insurance ope
Slide 45: Market update – private sector BPO opportunities
Market update – private sector BPO opportunities Life and pensions and Insurance Twin pressures of speed of new product launch delivered at low cost still prevail Utilities Acute regulatory pressure on reducing costs, and improving service for consumers, is driving demand for new solutions Banki
Slide 46: Operational update – key achievements and recognition
Operational update – key achievements and recognition Partnership with Prudential awarded Outsourcing Partnership of the Year at the 2009 National Outsourcing Association Awards Prudential and Zurich awarded five star status at the 2009 Financial Adviser Service awards Contact Centre Provider
Slide 47: Prospects
Prospects Paul Pindar Chief Executive
Slide 48: Prospects – ingredients for continued growth
Prospects – ingredients for continued growth Strong trading across the Group Continued healthy demand for outsourcing High level of sales activity Optimisation of infrastructure and growth of offshore capability Strongly positioned for 2010 and beyond
Slide 49: Results for the year ended 31 December 2009
Results for the year ended 31 December 2009