Capita Plc · LSE:CPI
Capita — FY2022 Earnings Presentation
40 slides from Capita's earnings presentation, Mar 1, 2023
Slide 1: 2022 Full Year Results
2022 Full Year Results
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: Strategy is delivering
Turnaround in financial performance Strategy is • Group is growing with increasing momentum (4% revenue growth in H2) delivering - A simplified more focused business - Competitive solutions mean we are winning in our markets and verticals - Cemented our reputation for delivering to clients • Profit
Slide 4: Moving from stabilisation to acceleration phase
Moving from stabilisation to acceleration phase 2018 - 2021 2022 2023 Transformation Stabilisation Acceleration • Ten to two core, client facing • Embedded operating model • Improving new client win rate divisions • Cemented reputation for • Improving sales incentives • Strong positions with growth
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 highlights
Financial highlights £m £m • Increasing revenue growth (1% H1; 4% H2) Key financial metrics 2022 2021 Change • Swing from loss to profit before tax driven by Revenue 2,845.8 2,777.8 2.4% completion of the significant restructuring programme in 2021 Operating profit/(loss) 102.9 (77.7) n/a • Strong i
Slide 7: Capita Public Service
Capita Public Service Revenue £m 2022 2021 Change • Won contract to procure and distribute laptops to teachers in Revenue 1,445.3 1,410.4 2.5% Northern Ireland and annualised benefit of Royal Navy training Divisional operating profit 91.5 93.2 (1.8)% • Increased growth in existing contracts in Centr
Slide 8: Capita Experience
Capita Experience Revenue £m 2022 2021 Change • Stable revenue (2021: 10% decline) Revenue 1,150.7 1,140.9 0.9% • Impact of significant prior year contract losses offset by positive 38.5 8.9 332.6% Divisional operating profit revenue contributions in particular from new client wins in International
Slide 9: Profit before tax
Profit before tax • Increase in adjusted profit before tax driven by £m 2022 2021 Change completion of the significant restructuring programme in 2021 and growth in both Adjusted profit/(loss) before tax 73.8 (122.8) 196.6 contractual and transactional revenues Business exits 158.3 429.0 (270.7) • 2
Slide 10: Cash flow and net debt movement
Cash flow and net debt movement • Reduction in working capital outflow primarily reflects £m 2022 2021 contracts moving into the operational phase and increased EBITDA 238.8 143.0 utilisation of the non-recourse receivable financing facility Working capital (32.7) (113.6) • Non-cash and other adjust
Slide 11: Liquidity
Liquidity £m £m • RCF undrawn at 31 December 2022 Liquidity 2022 2021 • RCF extended to August 2024 Revolving credit facility (RCF) 288.4 385.7 Less: drawing on committed facilities - (40.0) • Private placement note debt maturities totalling £227m paid in 2022 and £39m to date in 2023 (all net of Av
Slide 12: Strengthened balance sheet
Strengthened balance sheet Cash from disposals Ongoing successful execution of the non-core business disposal programme has realised net cash proceeds totalling c.£1.3bn since 1 January 2018 Debt repaid Repayment of c.£1.7bn of debt, including £250m of lease liabilities, since 1 January 2018 Ongoing
Slide 13: Progress on our non-core disposal programme
Progress on our non-core disposal programme Business Technology Property Pay360 CTI Fera People Software Travel Solutions Processes launched for remaining pillars targeting sale by half year, depending on market conditions Focus on maximising proceeds Net proceeds received in 2022: £388m 2022 Revenu
Slide 14: Cost savings
Cost savings Improved Continuous Reduced property Opportunities execution improvement footprint for 2023 Successful execution of Integrated delivery function 137 properties vacated Continued programme to major contract delivery in each division since 2019 reduce number of legal entities within the G
Slide 15: 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 Similar level in 2023. Growing over 2023, continuing moment
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 • People increasingly want to work for a purpose led, responsible business • Our social value commitments support our win rates with clients • Committed to net zero by 2035 A responsible and responsive employer A guardian for future generations • eNPS people sur
Slide 18: Employee net promoter score increased by 15 points
Employee net promoter score increased by 15 points What we are focused on: Driving up employee engagement through: • Employee communications • Training and development 85% of our home-based or • Competitive employee value proposition = Employee engagement +9 points hybrid employees say their working
Slide 19: Growth acceleration
Accelerating our enablers for growth 2022 2023 performance outlook New 11% £0.9bn Growth acceleration clients Win rate* Weighted pipeline £2.9bn Growth on account TCV won in 2022 across all growth 75% £0.3bn Win rate* Weighted pipeline categories Renewals 97% £1.0bn Win rate* Weighted pipeline Over
Slide 20: Higher quality contract portfolio to drive higher margins
Higher quality contract portfolio to drive higher margins Enhanced value BPO Digital BPS • Capitalising on digitisation shift • Increased competitiveness Capita = increased margins and Experience contract stickiness • Underpinned by digital capability in Technology and Software Solutions Enhanced va
Slide 21: Capita Public Service overview
Capita Public Service overview Strategic partner and market leader in both UK Public Sector Software and IT Services (SITS) and Business Process Services (BPS)1 We use applied digital transformation, BPS and technology services to improve the productivity and citizen experience of public services Wi
Slide 22: Capita Public Service investing in digital solutions
Capita Public Service investing in digital solutions Capita’s expert knowledge of the UK Repeatable propositions for Government Government’s processes means we are uniquely placed to deliver complex digital transformation programmes Technology/ Delivering the UK Skills & Capita has linked our reusab
Slide 23: Capita Public Service growth
Capita Public Service growth Renewals Growth on account New clients 2023* weighted pipeline by opportunity type Over 10,000 opportunities won in 2022 including: £1.2bn Opportunities Renewal New clients in 2023 Growth Combined including: *as at 01/01/23 Capita Public Service has a healthy pipeline of
Slide 24: Capita Experience overview
Capita Experience overview Global Customer Services partner of choice, led by data, enabled by technology, powered by people Focusing on: BPO and BPS across five core market offerings: £277bn global • Lowering cost of service by improving market digital transformation Customer Experience Customer Ex
Slide 25: Capita Experience solutions supported by technology
Capita Experience solutions supported by technology Capabilities aligned to market trends and supporting clients to achieve a frictionless customer experience Voice customer We have processed 18 million transactions services using Robotic Processing Automation (RPA) Cloud Omni- Cloud channel - since
Slide 26: Capita Experience growth
Capita Experience growth Renewals Growth on account New clients 2023* weighted pipeline by opportunity type Over 4,500 opportunities won in 2022 including: £1.0bn Opportunities in 2023 Renewal New clients Growth including: *as at 01/01/23 Strengthening business model with focus on growth on account
Slide 27: Strong operational momentum and a platform in place
Summary Strong operational • Turnaround in our financial performance in 2022 momentum and a • Strongly positioned in growth markets platform in place • Target to at least double Core Capita EBIT margin (2022: 2.9%) over the medium term delivering accelerating financial performance • Balance sheet ma
Slide 28: Q&A
Q&A 28
Slide 29: Appendix
Appendix
Slide 30: Core Capita pro forma revenue, operating profit and cash bridges
Core Capita pro forma revenue, operating profit and cash bridges Reallocation of Pro forma 2022 Portfolio £m Group overheads 2022 • Pro forma financial information Capita Public Service 1,445.3 - - 1,445.3 presents the Group’s 2022 revenue, operating profit and Capita Experience 1,150.7 - - 1,150.7
Slide 31: Core Capita modelling assumptions
Core Capita modelling assumptions Depreciation & amortisation Reduction on 2022, c.4% revenue P&L interest Reduction in 2023 reflecting continued reduction in debt, includes interest on lease liabilities and interest receipt on pension asset Lower cash conversion in 2023 reflecting similar usage of
Slide 32: Divisional financial performance
Divisional financial performance Cash generated Operating profit/(loss) Revenue £m Margin % from/(used by) £m operations £m 2022 2021 2022 20211 2022 20211 2022 20211 Capita Public Service 1,445.3 1,410.4 91.5 93.2 6.3% 6.6% 95.4 66.5 Capita Experience 1,150.7 1,140.9 38.5 8.9 3.3% 0.8% 30.7 (4.8) C
Slide 33: Re-presented 2021 revenue and operating profit bridges
Re-presented 2021 revenue and operating profit bridges Contract-related Previously Significant Litigation and Re-presented £m provisions and Business exits presented 2021 restructuring claims 2021 impairments Revenue Capita Public Service 1,410.4 - - - - 1,410.4 Capita Experience 1,184.8 - - - (43.9
Slide 34: Re-presented 2021 cash generated from/(used by) operations bridge
Re-presented 2021 cash generated from/(used by) operations bridge Non- Previously Pension recourse Significant Litigation Business VAT Re-presented presented deficit trade restructuring and claims exits deferral 2021 £m 2021 payments receivables financing Cash generated from/(used by) operations Cap
Slide 35: Order book bridge 2021 to 2022
Order book1 bridge 2021 to 2022 £m Relevant to approximately c.75% of revenue base • Includes contracted revenue and software licences • Additions in 2022 include the BBC (£0.5bn) and the freenet AG extensions within Experience and Personal Independence Payments and TfL Road User Charging in Public
Slide 36: Revenue bridge by driver
Revenue bridge by driver £m • Contractual one-offs in 2021 related to early termination of contracts in Experience and agreed reduction in scope on a contract in Public Service 36
Slide 37: Managing inflation risk
Managing inflation risk Exposure by revenue type Indexation contracts • timely execution on contractually entitled price increases • engaging incrementally with clients to ensure that contract pricing reflects macro-economic conditions Fixed price • renegotiate existing contracts • no new fixed pric
Slide 38: 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 (2022) Our propositions £421m £294m £253m £243m £234m Consult Justice, Central Def
Slide 39: Delivering customer experiences to clients
Delivering customer experiences to clients At Capita Experience, we deliver best-in-class customer experiences to international clients. Our chosen industries are: Revenue by market vertical (2022) Our propositions £456m £457m Multi Industry: £238m Customer Experience Telecoms, Media & Transformatio
Slide 40: Glossary of terms
Glossary of terms Term Definition Book to bill This is the ratio of TCV sold in the year / external revenue cNPS Customer Net Promoter Score Core Capita Group as currently stands, excluding Capita Portfolio and associated overheads eNPS Employee Net Promoter Score Operating cash conversion Calculate