Capita Plc · LSE:CPI
Capita — H1 2015 Earnings Presentation
40 slides from Capita's earnings presentation, Jul 29, 2015
Slide 1: Results for the half year ended 30 June 2015
Results for the half year ended 30 June 2015 29 July 2015 Capita plc 1
Slide 2: Agenda
Agenda Key highlights & strategy Andy Parker, Chief Executive Financial results Nick Greatorex, Group Finance Director Acquisitions & Andy Parker, Chief Executive Capita Europe Maggi Bell, Group Business Development Director Business development Martin Prescott, Strategic Sales Chris Sellers, Strate
Slide 3: Key highlights
Key highlights Good financial performance • Revenue up 10%, including organic growth of 3% • Operating margin 12.7% • Profit before tax and EPS up 11% • Interim dividend increased by 9% Milestone contracts and acquisitions in health, science and Europe • £1.6bn of major new contracts secured in half
Slide 4: Strategy for growth and value creation
Strategy for growth and value creation Focus on profitable organic growth • Leveraging our scale, breadth of capabilities and track record of transformation and delivery • Increasing emphasis upon technology enabled business process services • Targeting more growth and asset based bid opportunities
Slide 5: Aligning ourselves with clients and growth markets
Strategy for growth and value creation | New organisational structure Aligning similar capabilities and client communities together Digital & Software Solutions • Software, digital, IT assurance and document services • Strong positions in education, local government and justice and emergency service
Slide 6: Financial results
Financial results Nick Greatorex Group Finance Director
Slide 7: Underlying income statement June 2015
Financial results | underlying income statement 30 June 2015 (£m) 6 months to (£m) 6 months to Change June 2015 June 2014 Revenue 2,283 2,071 10% Operating profit 289 260 11% Interest (24) (22) 8% Profit before tax 265 238 11% Taxation (49) (44) 11% Profit after interest and tax 216 194 11% Non cont
Slide 8: Financial results: revenue
Financial results | revenue • Organic growth 3.2% • 5 year H1 compound growth 11% £m £m 6 months to 6 months to Change 30 June 2015 30 June 2014 Half year Total reported revenue 2,289 2,071 10.5% 1,361 2010 2,744 Full year Occupational Health – exited - (4) 1,400 in H2 2014 2011 2,930 Small non-core
Slide 9: Underlying profit measures
Financial results | underlying profit measures* Operating profit Profit before tax • 5 year H1 compound growth 11% • 5 year H1 compound growth 11% 174.1 159.2 2010 2010 386.4 355.7 187.8 169.7 2011 2011 417.0 376.6 214.1 186.4 2012 2012 466.7 417.0 226.8 205.2 2013 2013 516.9 475.0 260.2** 238.0** 2
Slide 10: Underlying H1 operating margin
Financial results | underlying H1 operating margin* 15.0 14.1 14.2 13.9 14.0 Operating margin % 13.4 13.3 13.4 13.2*** 13.0 12.8 12.7 12.5 12.6** Full year 12.0 Half year 11.0 H1 2010 H1 2011 H1 2012 H1 2013 H1 2014 H1 2015 Year 12.5 – 13.5% range for foreseeable future * Excludes non-underlying ite
Slide 11: Underlying returns per share
Financial results | underlying returns per share Underlying earnings per share* Dividend per share • 5 year H1 compound growth 11% • 5 year H1 compound growth 10% 19.1 6.6 2010 2010 43.9 20.0 21.4 7.2 2011 2011 47.4 21.4 23.7 7.9 2012 2012 52.1 23.5 25.8 8.7 2013 2013 59.4 26.5 28.9** 9.6 2014 2014
Slide 12: Segmental reporting: restructuring into divisions
Segmental reporting | restructuring in the year into 9 divisions Alignment of similar capabilities or clients, achieve synergies in like businesses and the benefit of concentration of management expertise Divisional revenue 400 350 H1 2014 300 H1 2015 250 £m 200 150 100 50 0 Digital & Integrated Loc
Slide 13: Targeting annual cash conversion at or around 100%
Financial results | underlying cash flow from operating activities £m 6 months to £m 6 months to 30 June 2015 30 June 2014 Operating profit* 289 260 Depreciation 49 42 Share based payment 5 6 Pensions (1) - Movements in provisions 4 - Movements in working capital (46) (17) Cash flow from operations
Slide 14: Underlying cash flow statement
Financial results | underlying cash flow statement £m 6 months to £m 6 months to 30 June 2015 30 June 2014 Cash flow from operations 300 291 Net interest paid (21) (20) Taxation paid (42) (42) Capital expenditure (57) (59) Underlying free cash flow 180 170 Non-underlying expenses (13) (11) Free cash
Slide 15: Controlled capital expenditure below 4%
Financial results | half year capital expenditure as % of revenue 7 6 5 4 % 3 3.4 2.8 2.8 2.8 2.6 2.5 2 1 0 2010 2011 2012 2013 2014 2015 Controlled capital expenditure below 4% 15
Slide 16: Leverage in the range 2 to 2.5
Financial results | balance sheet gearing At 31 Dec Cash Non-cash At 30 June Maturity 2014 movements movements 2015 Net debt £m £m £m £m Yrs Bond debt † 1,122 280 (1) 1,401 2015 – 2027 £600m revolving credit facility Cash in bank (29) (77) - (106) maturing in August 2020 – unused at June 2015 £80m N
Slide 17: Returns significantly in excess of cost of capital
Financial results | underlying net return on capital* Rolling position from last reporting date to 30 June 2015 20 Actual WACC 16 16.1 15.8 15.5 14.8** 14.5 12 % return 8 7.5 7.7 7.0 7.2 7.2 4 2011 2012 2013 2014 H1 2015 12 months to FY 2011 FY 2012 FY 2013 FY 2014 H1 2015 Operating profit (£m) 417
Slide 18: ROCE bridge
ROCE bridge Discontinued & contract items 15.50% Recurring 0.14% 15.00% 0.45% 0.18% 0.05% 0.18% 0.06% 0.12% 14.50% 14.00% 14.80% 14.52% 13.50% 13.00% Year end 2014 Organic profit L&P price DBS contract end Health Acquisitions and Capex > Working capital Interim 2015 growth reductions discontinued de
Slide 19: Acquisitions and Capita Europe
Acquisitions and Capita Europe Andy Parker Chief Executive 19
Slide 20: Building capability & expanding geographic reach
Acquisitions | £279m invested in 11 businesses in H1 2015 Reason Acquisition Capabilities / sector Value £m* Extending the geographic reach of avocis Outsourced customer management services in Germany, 157 existing capabilities (Capita Europe) Switzerland & Austria Constructionline Commercialisation
Slide 21: Exciting new growth platform
Capita Europe | growing existing Capita services/expertise in a new region UK template for European expansion • Ventura/Vertex private sector acquisitions in 2011 used as platform for significant organic growth in Customer Management in the UK – now repeating model in Europe Established outsourc
Slide 22: Capita Europe: capability and scale in Northern Europe
Capita Europe | our capability and scale in Northern Europe Poland 630 FTE Lodz Staff 6,420 FTE Capita Europe formed from combination of avocis, tricontes, Scholand & Beiling and Capita Poland Germany 4,260 FTE Krakow Trusted long term strategic relationships with Dortmund Kiel 80% of our revenu
Slide 23: Significant new & existing client prospects
Capita Europe | priorities for 2015 Retention of industry leading management team, augmented by selective hires Operational integration • Facilitates cross border seamless service from UK to DACH to Poland Standardised Group Sales qualification processes implemented • Identical Board level sup
Slide 24: Increasing software footprint & commercialising assets
Acquisitions | enhancing capability and future growth potential Vertex Mortgage Services: mortgage administration software • Provides mortgage origination and administration software solutions • Clients include major retailers and high street banks in the UK and Canada • Supports our ambition to bec
Slide 25: Creating growth: Business development
Creating growth: Business development Maggi Bell Group Business Development Director 25
Slide 26: A strong start to 2015
Creating growth | major contract wins H1 2015: £1.6bn Duration Value 2015 contracts Key features (years) (£m) High end science Summary Defra (Fera) JV + 10 700 services Strategic partnership Sheffield City Council 6 170 extension • 10 bids won to date in 2015 worth £1.6bn (2014: £1.3bn) Strategic pa
Slide 27: Targeting opportunities across diversified markets
Creating growth | bid pipeline 40 Telecoms 35 & retail 30 Bid pipeline Financial 25 services • Bid pipeline today of £5.4bn comprising 30 bids % (Feb 2015: £5.1bn, 28 bids) 20 • 97% new revenue / 3% extensions/renewals Health 15 Defence • Weighted average contract length of 8 years • Private sector
Slide 28: Growing opportunities across health support services
Contract win | NHS England Primary Care Support Services (PCSS) £1bn Sole Provider Framework includes £400m contract Selected as preferred bidder to become sole provider for Primary Care Support Services framework for NHS England Primary Care Support Services Framework has a maximum total value of £
Slide 29: Growth businesses
Creating growth | changing shape of new opportunities Transformational Growth businesses partnering/outsourcing Transformational Growth partnering/ businesses • Long term contracted revenues outsourcing • Plus opportunity to significantly • Large contracted revenues • Technology enabled, significant
Slide 30: Creating growth: Business development
Creating growth: Business development Martin Prescott Strategic Sales 30
Slide 31: Exciting opportunities across telecoms
Business growth | telecommunications in UK & DACH Scale of opportunity: UK DACH region Change drivers: industry pressures 26.4m 46.8m • Significant competitive pressures households households • Traditional revenues under threat 83m 123m • Seeking to harness new sources of revenue Active mobile phone
Slide 32: Telecommunications in UK & DACH
Business growth | telecommunications in UK & DACH Our capability Our approach • Scale platform coupled with digital capability • Proactive targeting • Business transformation expertise • Existing and new customers in UK and DACH • Multi-channel customer experience & design • Board level engagement •
Slide 33: Scale and capability across financial services
Business growth in financial services | drivers & capability Industry drivers 20m policies – £400bn assets under administration, Our capability Global Market Leader • Increased regulatory intervention 20m policies – £400bn assets under administration, Life & pensions • Capital adequacy provisioning
Slide 34: Market leadership in UK mortgage servicing
Business growth | commercial & residential mortgage servicing UK addressable market £1.8bn* pa June 2015 Acquisition of Vertex Nov 2014 Mortgage Services and The Co-operative Omiga platform Bank preferred May 2014 supplier Acquisition of Our capability Crown Mortgage Services • Scale transformation
Slide 35: Creating growth: Business development
Creating growth: Business development Chris Sellers Strategic Sales 35
Slide 36: Opportunities across the entire NHS budget
Creating growth | routes to market in health Capita addressable health market £10bn £115bn pa non-clinical pa Primary care Central NHS management NHS Trusts & arm’s length bodies programmes £4bn pa £3bn pa £3bn pa £5bn pa Strategic partnerships PCS framework LPF framework Routes to • CLCH • Core PCS
Slide 37: Additional value created
Creating added value| commercialisation of property assets 100% Long term tenants • Clients have extensive property assets Additional value created 75% Build • Local authorities, utilities, NHS & retail 60% GL Hearn • Property has previously been viewed as enabler of service delivery Existing Capita
Slide 38: Outlook
Outlook Andy Parker Chief Executive 38
Slide 39: Good platform for growth in 2015 and beyond
Summary and outlook On track to deliver low double digit revenue growth in 2015 Good sales activity and trading businesses provide platform for organic growth beyond this year More solutions becoming technology enabled Healthy pipeline of value enhancing acquisitions Continually investing in key peo
Slide 40: Results for the half year ended 30 June 2015
Results for the half year ended 30 June 2015 40