Capita Plc · LSE:CPI
Capita — FY2021 Earnings Presentation
37 slides from Capita's earnings presentation, Mar 10, 2022
Slide 1: Full year results 2021
Full year results 2021 10 March 2022
Slide 2: Disclaimer
Disclaimer This full-year results statement is prepared for and addressed only to the Company's shareholders as a whole and to no other person. The Company, its Directors, employees, agents and advisers accept and assume no liability to any person in respect of this update save as would arise under
Slide 3: Overview of 2021
Overview of 2021 A year of significant change, with the transformation now complete; platform now in place to drive sustainably improving financial performance. New, simpler and stronger A stronger business starting to Generating positive cash flow business deliver revenue growth • More client-focus
Slide 4: The transformation phase is done
The transformation phase is done Simplify Strengthen Succeed • Two core, client facing divisions • Stronger leadership and • Progressive, purpose-led, governance responsible business • Strong positions with growth potential • Investment in asset base, • Delivering consistent, reliable technology and
Slide 5: Platform in place to drive long-term success
Platform in place to drive long-term success Two core divisions Market leading positions Focused on our clients Public + Experience #1 UK Government software & IT supplier Service Client UK & Ire CX market; Focus on #1 no. 3 in EMEA verticals centricity via senior client partners In strong markets D
Slide 6: Financial results
Financial results Tim Weller All figures included within this presentation are on an adjusted basis, unless otherwise stated. 6
Slide 7: Financial highlights
Financial highlights • Revenue growth despite continued headwinds £m £m £m Key financial metrics FY21 FY20 Change from Covid-19 Revenue 3,008.5 2,995.5 13.0 • Profit improvement reflecting stabilised revenue and ongoing efficiency delivery Profit before tax 93.5 5.4 88.1 • Cash generated from operat
Slide 8: Revenue
Revenue £m • Contract losses (3.5% of FY20 Revenue) halved year-on-year reflecting sustained focus on retention and service delivery. Losses concentrated to Capita (3.5%) Experience • Scope and volume reductions reflect pandemic related work in 2020 (c.£50m) and projects in Capita Experience which d
Slide 9: Profit before tax by driver
Profit before tax by driver • 2020 one-offs include contract asset impairments £m in Capita Experience and Capita Public Service and contract provisions • Profit from contract wins not yet offsetting profit effect of contract losses • 2021 one-offs include net impact of early termination of contract
Slide 10: Divisional financial performance
Divisional financial performance Cash generated from Revenue £m Operating profit £m Margin % operations £m FY21 FY20 FY21 FY20 FY21 FY20 FY21 FY20 Capita Public Service 1,410.4 1,273.0 98.3 12.9 7.0% 1.0% 120.0 95.6 Capita Experience 1,184.7 1,307.7 69.1 80.9 5.8% 6.2% 55.8 145.0 Capita Portfolio 41
Slide 11: Reported profit before tax
Reported profit before tax • Business exits reflect the ESS and AXELOS disposals (£420m profit on disposal) and classification of AMT Sybex, Secure Solutions and Services and Speciality Insurance businesses as held-for-sale. Trustmarque’s results are included in adjusted results as it did not meet t
Slide 12: Cash flow and net debt movement
Cash flow and net debt movement £m 2021 2020 • Operating cashflow / EBITDA conversion 63% (2020: EBITDA 295.1 228.4 129%) – reduction reflects shorter public sector payment cycles and advance receipts in 2020 Working capital (123.5) 40.6 unwinding in 2021 Other 13.8 26.2 • Capital investment reduced
Slide 13: Cash flow headwinds abating
Cash flow headwinds abating • 2021 reported free cash flow impacted by a number of one-off items which we have set out below • Deferred VAT benefit c.£120m in full year 2020 largely reversed in 2021 • Pension deficit contributions of £30m in each of 2022 and 2023 and £15m p.a. from 2024 to 2026 to d
Slide 14: Strengthening the balance sheet
Strengthening the balance sheet £m £m Liquidity 2021 2020 • Existing RCF maturing 31 August 2022 supplemented Revolving credit facility (RCF) 385.7 452.0 with £300m RCF maturing 31 August 2023 Backstop liquidity facilities - 150.0 • Disposal proceeds of £95m received to date in 2022 with further pro
Slide 15: Outlook
Outlook 2022 Medium term Revenue growth Mid-single digit EBITDA margin High-single digit Cash conversion 70% - 80% Net debt1 : EBITDA 1x 1 Pre-IFRS16 net debt Core Capita expected to grow revenue, EBITDA and free cash flow over the medium term; positive free cash flow in 2022 15
Slide 16: CEO update
CEO update Jon Lewis 16
Slide 17: Our Purpose is our licence to operate
Our Purpose is our licence to operate • Having a Net Zero commitment is a basic requirement for government contracting • Every government contract of a certain size has 10% of the contract award criteria defined by social value scores A responsible and responsive employer A guardian for future gener
Slide 18: Delivering the transformation
Delivering the transformation A simpler, stronger, more predictable business At the start of the £1.8bn of cash raised We have simplified and transformation and generated strengthened Capita Organic Free Cash • Unfocused Flow • Focused Rights Issue • Unsustainable debt burden • Net debt reduced by £
Slide 19: Focus on delivery for clients has already delivered benefits
Focus on delivery for clients has already delivered benefits Consistent service delivery 99% Delivery of client SLAs1 in 2021 Focus on our customers +13pts Increase in client NPS since 2018 Failing contract issues resolved +£100m Cash improvement on major contracts2 Winning additional scopes of work
Slide 20: Strong trading in 2021 with momentum into 2022
Strong trading in 2021 with momentum into 2022 TCV1 Growth IYR2 Growth 4 1.3 3 1.2 • Total value of work won increased by 31% in 2021 2 1.1 1 1 • Strong reputation supporting good win rates and new £bn 0 2020 2021 £bn 2020 2021 scopes of work: +29 point cNPS Orderbook Growth Book to Bill ratio 6.2 1
Slide 21: Well set to grow revenue in 2022
Well set to grow revenue in 2022 £bn Pipeline opportunities to drive growth £9.4bn • Continuing strong growth in the pipeline: +7%1 Unweighted New revenue • Growth on account and new logos - 68% of pipeline 2022 Pipeline Transactiona • Strong start to the year with BBC renewal - £456m l • Awarded ye
Slide 22: Reducing cost and improving efficiency
Reducing cost and improving efficiency The new operating model will drive further productivity and structural savings 2018 - 2021 Further opportunities Operational excellence Over Further savings from flexible cost base Structural efficiency £425m Service delivery mix – greater digital input Group a
Slide 23: Contracting model has inbuilt inflation protection
Contracting model has inbuilt inflation protection Exposure by revenue type Transactional 66% ofinflation client contracts include linked escalators Contract - indexation 22% are fixed price, with indexation assumptions built into the contract terms Contract - fixed price 12% ofhedged revenues are t
Slide 24: An engaged and motivated workforce delivers superior client service
An engaged and motivated workforce delivers superior client service Our challenges Our response Recruitment market • Investment in skills and leadership • Tightest market for labour in 50 years1 • Virtual First approach to flexible working accesses new pools of talent External factors driving pay in
Slide 25: Capita Public Service
Capita Public Service We help to address some of societies biggest challenges, creating better outcomes across the UK Our Business Our Market Our Position Capita Public Core Addressable Market 2021 30+ £110bn #1 BPS years of experience Outsourced UK Strategic supplier of Business £1.5bn government s
Slide 26: Serving UK Government
Serving UK Government Together we transform public sector services, deliver better experiences for citizens and make a positive impact on society. We work with Government departments across: Revenue by market vertical (2021) Our Propositions £415m £256m £268m £215m £256m Consult Justice, Central Def
Slide 27: Capita Experience
Capita Experience We are experts in designing, transforming and delivering frictionless experiences for the Life Moments that really matter Our Business Our Market Our Position Revenue by vertical 40+ £244bn+ #1 years of experience Global CX Market1 in CM in UK and No3. in EMEA £479m 20k+ £65bn Fina
Slide 28: Our propositions
Our propositions Differentiated through our unique ability to configure, implement and deliver the right solutions for our Clients. 68% Consult reduction in processing time 13% in accuracy Pioneering the use of artificial intelligence in partnership with Transform 30% Capita is enabling us to improv
Slide 29: Portfolio
Portfolio Portfolio comprises all our non-core businesses that are intended for disposal 1 2 3 Successfully achieved Average multiple of 6x Further disposals to come £750m of proceeds ahead EBITDA achieved in 2022, with the majority of schedule – of which expected by the end of £80m now received in
Slide 30: Summary
Summary • Transformation is done - platform in place • Simplified structure of two core divisions established • Attractive markets, client-centric model and deep sector expertise • Driving revenue growth in 2022 • New operating model creates efficiencies and productivity benefits • Continuing dispos
Slide 31: Q&A
Q&A 31
Slide 32: Appendix
Appendix
Slide 33: Capita Public Service
Capita Public Service Revenue • Royal Navy training & JETS contract wins, full year £m 2021 2020 benefit of DFRP and impact of contract losses Revenue 1,410.4 1,273.0 significantly reduced in 2021 • Transactional recovery in Local Government and Divisional operating profit 98.3 12.9 Capita One Divis
Slide 34: Capita Experience
Capita Experience Revenue • Attrition through contract expiry and some prior year losses £m 2021 2020 including Tesco Bank, Phoenix, VW Group and First Group Revenue 1,184.7 1,307.7 • Reduced business volumes in the closed book Life & Pensions business and reductions following completion of Division
Slide 35: Capita Portfolio
Capita Portfolio Revenue £m 2021 2020 • Improvement in Capita Resourcing, Technology and Enforcement Revenue 413.4 414.8 • Some markets continue to be severely impacted Divisional operating profit 23.8 14.2 by Covid-19 including our Travel businesses Divisional profit margin 5.8% 3.4% (Agiito and Ev
Slide 36: Order book bridge FY20 to FY21
Order book1 bridge FY20 to FY21 Relevant to approximately 75% of revenue base • Includes contracted revenue and software licences • Excludes contract growth and non-contracted revenue • Wins in 2021 include the Royal Navy and Royal Marines training contract (£0.9bn), contract extensions with major E
Slide 37: Modelling assumptions
Modelling assumptions Depreciation & Amortisation Consistent with 2021, c.5% revenue Reduction in working capital outflow, as Covid-19 payments and other contractual Working Capital one-offs normalise in 2022: around half 2021 Cash Tax Modest reduction forecast in 2022 Leases Continued reduction of