Capita Plc · LSE:CPI
Capita — H1 2022 Earnings Presentation
36 slides from Capita's earnings presentation, Aug 5, 2022
Slide 1: Half year results 2022
Half year results 2022 5 August 2022
Slide 2: Disclaimer
Disclaimer This half-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: First half of 2022 in line with our expectations
First half of 2022 in line with our expectations On track to grow Well positioned for growth in H2 2022 and beyond; stable revenue in the first half revenue • On track to grow revenue: and sustain Good first half for the Experience division, particularly in winning new business; Group book to bill a
Slide 4: Financial results
Financial results Tim Weller All figures included within this presentation are on an adjusted basis or before business exits for cash flow measures, unless otherwise stated. 4
Slide 5: Financial highlights
Financial highlights • Stable revenue with contractual and £m £m £m Key financial metrics HY22 HY21 Change transactional revenue growth partially offset by annualised impact of prior year losses Revenue 1,480.1 1,471.9 8.2 • Increase in profit before tax reflecting Operating profit 52.2 22.5 29.7 st
Slide 6: Revenue
Revenue • HY22 results not affected by any new contract losses, prior period losses included 3UK, Carphone Warehouse, Npower and William Hill • Scope and volume reductions reflect pandemic related work in 2021 (c.£6m) • Impact of indexation on contracts within Experience and Public Service • Growth
Slide 7: Divisional financial performance
Divisional financial performance Cash generated/(used) Revenue £m Operating profit £m Margin % by operations £m HY22 HY21 HY22 HY21 HY22 HY21 HY22 HY21 Capita Public Service 713.6 708.2 46.8 38.4 6.6% 5.4% 58.1 75.5 Capita Experience 592.4 599.9 17.6 28.0 3.0% 4.7% 27.8 16.6 Capita Portfolio 174.1 1
Slide 8: Profit before tax
Profit before tax • Increase in adjusted profit before tax driven by £m HY22 HY21 Change full half year benefit of Royal Navy training and Adjusted profit before tax 37.0 1.1 35.9 JETS, recovery in Portfolio transactional businesses such as Agiito, completion of Business exits 54.3 262.5 (208.2) res
Slide 9: Cash flow and net debt movement
Cash flow and net debt movement • Working capital improvement underpinned by £m HY22 HY21 Change client advances in Experience EBITDA 123.2 100.8 22.4 (29.7) 15.7 • Increase in other operating cash outflow primarily Working capital (14.0) due to movements in provisions, with spend on Other operating
Slide 10: Strengthening the balance sheet
Strengthening the balance sheet £m £m • Existing RCF undrawn at HY Liquidity HY22 FY21 • RCF extended to August 2024 Revolving credit facility (RCF) 358.1 385.7 • Private note debt maturities totalling £82m paid in H1 Less: drawing on facilities - (40.0) with £213m paid in 2021 (all net of swaps) Av
Slide 11: H2 2022 Outlook
H2 2022 Outlook • Public: contractual growth in Education & Learning, Health & Welfare and Local Public Services Revenue growth • Experience: reduced losses, growth from contract wins and extensions • Portfolio: continued Covid-19 recovery • Benefit from positive swing in holiday accrual; cost savin
Slide 12: CEO update
CEO update Jon Lewis 12
Slide 13: Our Purpose is our licence to operate
Our Purpose is our licence to operate • Colleagues increasingly want to work for a responsible employer • Our Social Value commitments drive positive outcomes from our clients A responsible and responsive employer A guardian for future generations • eNPS Pulse update 16 point increase • Ecovadis rat
Slide 14: Stable revenue and good contract wins in H1
Stable revenue and good contract wins in H1 A successful first half for Experience; opportunities weighted to H2 in Public Service £m • Total Contract Value (TCV) of work won £1,611m – increase of 4% adjusting for £925m Royal Navy Training contract in prior year 4% 3,000 2,000 increase in 1,000 0 •
Slide 15: A strong platform to increase new business focus
A strong platform to increase new business focus We have doubled our weighted pipeline for new clients since the start of the year Renewals New scopes of work New clients Won in H1 Opportunities Over £3.7bn of new clients and new scope opportunities in H2 pipeline 15
Slide 16: Structured better to generate future growth and opportunities
Structured better to generate future growth and opportunities Focusing on clients • Our industry verticals and client partner Pipeline growth in top 5 industries in growing market model is driving pipeline growth segments • Our growing consulting business (£40m TCV in H1) is helping position us for
Slide 17: Further embedding our digital capabilities in the medium-term
Further embedding our digital capabilities in the medium-term Public Service Experience Ranked highly in Tech Market View’s UK Software A leader in CX Digital Operations with “advanced AI and IT Services and automation-driven platforms, solutions and services” Investing in automation and scalable an
Slide 18: Client Case Studies – Public Service: HMRC
Client Case Studies – Public Service HMRC Ambition HMRC’s ambition is to become a leading UK Government Department for automation, harnessing the power of technology to make things simpler and easier for people accessing their services and those In 2021, Capita was appointed by the Government to pro
Slide 19: Client Case Study – Experience
Client Case Study – Experience Consumer Electronics Delivering our promise of premium CX We are consistently delivering best-in-class customer experience How did we do it? Optimised Homeworking “Smiley Face” Dashboard Assisted Customer HY 22 RESULTS Enabling greater agility, Agent level feedback pla
Slide 20: Reducing cost and improving efficiency
Reducing cost and improving efficiency Operational Continuous Reduced property Savings from new excellence improvement footprint structure Successful execution of major Integration of our 2 delivery 1.1m sq. ft disposed 25% Group overhead savings of contract delivery: Royal Navy, organisations – e.g
Slide 21: 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 22: We are addressing the needs of our colleagues
We are addressing the needs of our colleagues Our challenges in 2022 What we are doing • Invested in our recruitment function Recruitment market • Enhancing our Employee Value Proposition - Manager Tightest labour market in 50 years1 Passport, Career Path Framework, Leadership Council, apprenticeshi
Slide 23: Good progress on strengthening the balance sheet
Good progress on strengthening the balance sheet Strong momentum in our non-core disposal programme Business Technology Property People Software Travel FERA Pay360 Solutions 4 processes launched in 2022 to date, readiness activities continue in all pillars Majority to be sold this year 2021 Revenue:
Slide 24: Summary
Summary The first half of the year was in line with our expectations Continuing to make progress as we embed our operating structure: • Establishing a strong and growing pipeline of revenue opportunities • Building a portfolio of better quality contracts • Inflation risk mitigated • Opportunities fo
Slide 25: Q&A
Q&A 25
Slide 26: Appendix
Appendix 2
Slide 27: Public Service
Public Service Our Market Our Strategy Key Achievements in H1 £109bn Delivering better citizen service at a Operational lower cost Record satisfaction score on Scottish Wide spending with private organisations by Central and Local Government in 2019 Area Network Leveraging the operating model – clie
Slide 28: Capita Public Service
Capita Public Service Revenue £m HY22 HY21 • Won contract to supply laptops to teachers in Northern Revenue 713.6 708.2 Ireland, annualised benefit of Royal Navy training and JETS and impact of contract losses significantly Divisional operating profit 46.8 38.4 reduced in 2022 Divisional profit marg
Slide 29: Experience
Experience Our Market Our Strategy Key Achievements in H1 £244bn+ Global CX Market Delivering life moments that matter Operational Go-live on ScottishPower delivered on time Global CX BPO Market New operating model delivering end to £65bn (28% and growing) end contract value New sites opened in Pola
Slide 30: Capita Experience
Capita Experience Revenue £m HY22 HY21 • Attrition through contract expiry and some prior year Revenue 592.4 599.9 losses including 3UK, Carphone Warehouse, Npower and William Hill Divisional operating profit 17.6 28.0 • Wins in international markets and ScottishPower Divisional profit margin 3.0% 4
Slide 31: Capita Portfolio
Capita Portfolio Revenue £m HY22 HY21 • Continued recovery from Covid-19 in Agiito and Revenue 174.1 163.8 Enforcement Divisional operating profit 3.0 3.0 Profit Divisional profit margin 1.7% 1.8% • Revenue growth and non-repeat of 2021 EBITDA 17.9 19.4 restructuring costs, offset by commitment to r
Slide 32: Re-presented HY21 revenue and operating profit bridges
Re-presented HY21 revenue and operating profit bridges Previously Significant Litigation Business Re-presented £m presented1 restructuring and claims exits HY21 HY21 Revenue Capita Public Service 708.2 - - - 708.2 Capita Experience 599.9 - - - 599.9 Capita Portfolio 276.6 - - (112.8) 163.8 Capita pl
Slide 33: Re-presented HY21 cash generated/(used) by operations bridge
Re-presented HY21 cash generated/(used) by operations bridge Non- Previously Pension recourse Significant Litigation Business VAT Re-presented presented1 deficit trade restructuring and claims exits deferral HY21 £m HY21 payments receivables financing Cash generated/(used) by operations Capita Publi
Slide 34: Order book bridge FY21 to HY22
Order book1 bridge FY21 to HY22 £m Relevant to approximately 75% of revenue base • Includes contracted revenue and software licences • Wins in 2022 include the BBC (£0.5bn) extension within Experience and Northern Ireland’s Education Authority extension within Public Service • Disposals driven by co
Slide 35: Profit before tax by driver
Profit before tax by driver • Margin effect of revenue losses, scope and £m volume, transactional changes and contract wins net £4m negative • Ramp up mainly in the second quarter from new wins not yet offsetting the impact of contract losses • Impact of revenue indexation on contracts within Public
Slide 36: Modelling assumptions
Modelling assumptions Depreciation & Amortisation Consistent with 2021, c.5% revenue Reduction in working capital outflow, as Covid-19 payments and Working Capital other contractual one-offs normalise in 2022: around half 2021 Increase in provision outflows, reflecting payment of Other operating cas