Capita Plc · LSE:CPI
Capita — H1 2009 Earnings Presentation
41 slides from Capita's earnings presentation, August 2009
Slide 1: Results for the 6 months to 30 June 2009
Results for the 6 months to 30 June 2009
Slide 2: Agenda
Agenda Introduction: Paul Pindar, Chief Executive Financial results: Gordon Hurst, Group Finance Director Generating growth: Paul Pindar, Chief Executive Fuelling future growth: Simon Pilling, Chief Operating Officer Prospects: Paul Pindar, Chief Executive
Slide 3: Highlights
Highlights Strong profit growth Continued margin improvement Excellent cash flow despite current economic environment Sales wins at £814m, up 30% Active market – both sales and acquisitions India achieves critical mass and profitability “A consistent strategy, consistently applied”
Slide 4: Financial results
Financial results Gordon Hurst Group Finance Director
Slide 5: Financial results - turnover
Financial results - turnover Comparative growth 11% 617 1/2 Year 2004 Full Year 1,282 687 2005 1,436 845 2006 1,739 985 2007 2,073 1,182 2008 2,441 1,311 2009 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 Public sector 51% (2008: 48%) Private sector 49% (2008: 52%) Central government 11% (10%) Local government 20% (20%) 11 21 Education 12% (11%) Health 3% (2%) 20 4 Transport 5% (5%) Insurance 8% (8%) 16 Life and pensions 16% (16%) 12 Financial services 4% (5%) 8
Slide 7: Financial results - half year organic growth
Financial results - half year organic growth £m 6 months to £m 6 months to £m 20082009 £mJune 2007 Growth £m 2008 30 June 30 2008 Growth Turnover 1311 1182 11% 2009 acquisitions (10) - (1%) 2008 acquisitions (29) 2001 (36) - 2003 2004 (2%) Organic 1272 1182 8%
Slide 8: Financial results - resilient income streams
Financial results - resilient income streams Provision of essential services across both public and private sectors Non discretionary areas of spend Revenues substantially underpinned by long term contracts and recurring revenues No dominant clients – a good spread of clients across our 9 ch
Slide 9: Financial results - underlying profit before tax
Financial results - underlying profit before tax* Comparative growth 18% 61.0 1/2 Year 2004 143.9 Full Year 71.3 2005 169.6 88.3 2006 200.1 103.8 2007 238.4 120.2 2008 277.2 141.7 2009 0 50 100 150 200 250 300 £m * excluding intangible amortisation and non-cash impact of mark to market movement on c
Slide 10: Financial results - underlying operating profit
Financial results - underlying operating profit* Comparative growth 14% 66.5 1/2 Year 2004 155.8 Full Year 77.8 2005 183.1 99.1 2006 225.1 118.9 2007 271.3 140.6 2008 320.9 159.6 2009 0 50 100 150 200 250 300 350 £m * excluding intangible amortisation and non-cash impact of mark to market movement o
Slide 11: Financial results - underlying half year operating margin
Financial results – underlying half year operating margin* 13 12 12.2 12.1 11.9 11.7 % 11 11.3 10.8 10 9 2004 2005 2006 2007 2008 2009 * excluding intangible amortisation
Slide 12: Financial results - sustaining our margin
Financial results - sustaining our margin Focus: remains on steadily improving operating margin Drivers: Increasingly valuable services delivered Efficient use of our operational infrastructure Increasing shared use of IT infrastructure Benefits of scale
Slide 13: Financial results - underlying earnings per share
Financial results - underlying earnings per share* Comparative growth 17% 6.63 1/2 Year 2004 15.37 Full Year 7.72 2005 18.60 9.96 2006 23.10 12.13 2007 28.10 14.46 2008 33.26 16.92 2009 0 10 20 30 40 Pence * excluding intangible amortisation and non-cash impact of mark to market movement on callable
Slide 14: Financial results - dividends
Financial results - dividends Comparative growth 17% 1.8 1/2 Year 2004 5.4 Full Year 2.1 2005 7.0 2.7 2006 9.0 4.0 2007 12.0* 4.8 2008 14.4 5.6 2009 0 5 10 15 Pence * excluding 25p special dividend
Slide 15: Financial results - cash flow statement
Financial results - cash flow statement £m 6 months to £m 6 months to 30 June 2009 30 June 2008 Cash flow from operating activities 198 174 Net interest paid (19) (20) Taxation paid (21) (19) Capital expenditure (36) (33) Free cash flow 122 102 Exceptional pension payment (40) - Acquisitions and dis
Slide 16: Financial results - cash flow from operating activities
Financial results - cash flow from operating activities Comparative growth 14% 82 1/2 Year 2004 200 Full Year 95 2005 232 122 2006 279 145 2007 334 174 2008 392 198 2009 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 Comparative growth 20% 40 1/2 Year 2004 106 Full Year 38 2005 127 58 2006 154 83 2007 184 102 2008 219 122 2009 0 50 100 150 200 250 £m Exceptional additional pension contribution £50m (2004), £10m (2008), £40m (2009)
Slide 18: Financial results - half year capex as % of turnover
Financial results - half year capex as % of turnover 7 6 5 % 4 4.1% 3.9% 3 3.6% 3.2% 2.8% 2.7% 2 1 0 2004 2005 2006 2007 2008 2009
Slide 19: % net return on capital
Financial results - % net return on capital (debt plus equity) – 12 months to 30 June 2009 24 Actual 20.0 20.4 20 WACC 18.6 16.7 17.9 15.1 % return 16 12 8 8.5 8.0 8.1 8.2 7.9 7.8 4 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 PBIT (normalised) 142 167 204 245 293 340 Avg capital (£m)
Slide 20: Underlying free cash flow return on capital
Financial results - underlying free cash flow return on capital* (debt plus equity) – 12 months to 30 June 2009 24 22.4* 22.7* 20 18.8 17.9 16.3 15.3* % return 16 12 8 4 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 FCF (pre interest) 103 117 147 179 239 278 Avg capital (£m) 674 719 82
Slide 21: Financial results - balance sheet gearing
Financial results - balance sheet gearing £m £m £m 20082009 30 June 3030 June £m 2007 2007 June (£m) 2008 Net debt Bond debt 579 479 Bank facilities drawn 71 97 Loan notes 3 6 Total net debt 653 582 Interest cover 8.2x 7.5x Net debt to EBITDA 1.7 1.7
Slide 22: Generating growth through contract wins and acquisitions
Generating growth through contract wins and acquisitions Paul Pindar Chief Executive
Slide 23: Generating growth - contracts secured in first 6 months of 2009
Generating growth - contracts secured in first 6 months of 2009 AXA Sun Life Learning and Skills Office for National DCSF: National Council (LSC) Statistics (ONS) Strategies New contract New contract New contract Extension £523m £68m £25m £64m 15 years 4 years 2.5 years 1 year Contracts £10m - £50m
Slide 24: Generating growth - rebid of existing major contracts
Generating growth - rebid of existing major contracts 2009 2010 2011 None None None 2012 2013 TV Licensing None £50m p.a.* CRB £40m p.a.* Criteria: more than 1% of 2008 turnover *Revenues based on original contract value
Slide 25: Generating growth - bid activity
Generating growth - bid activity Bid pipeline* of £3bn comprising 24 bids (Feb 2009: £3.1bn; 23 bids) £814m contract wins to date, up 30% Win rate down from 1:2 to 1:3 Increased interest in newer markets Healthy rate of pipeline replenishment Most active markets: local government, life a
Slide 26: Generating growth - acquisitions
Generating growth - acquisitions Acquisitions remain an important element of our business model We continue to acquire small to medium sized companies that: – strengthen existing market positions – build economies of scale – generate sustainable, quality revenues – bring complementary skills and
Slide 27: Generating growth - 2009 acquisitions
Generating growth - 2009 acquisitions FMS CHKS Hero Insurance NHS Membership MMB Services Services Trust Health services Insurance Financial services Property services administration £2m (+ £1.1m) £11.6m £15m £2m £4.85m Capmark Services Andrew Martin Carillion IT Gissings Europe Associates Services
Slide 28: Operational update and fuelling future growth
Operational update and fuelling future growth Simon Pilling Chief Operating Officer
Slide 29: Operational update
Operational update New contracts transitioned smoothly and progressing well: – NHS Choices – Gas Safe Register – Sheffield City Council – AXA Sun Life – Education Maintenance Allowances Majority of business performing well and robustly L&P growing strongly: 25 million policies Developing exi
Slide 30: Operational update
Operational update Financial services businesses experiencing mixed trading Trust administration business performing well Capita Registrars has made excellent progress. Contracts secured with: – Stagecoach Plc – Northern Foods Plc – Standard Life Plc Our collectives and investment trust admi
Slide 31: Fuelling future growth - Business Centres July 2009
Fuelling future growth - Business Centres July 2009 Offshore - India Data validation & entry Quality service delivery operation Claims & policy admin Fund management admin Accounting & finance 4 business centres processing Nearshore – Ireland, Channel Islands, Gibraltar Additional tax jurisd
Slide 32: Fuelling future growth - Capita India
Fuelling future growth - Capita India Quality service delivery operation: 3,700 staff by end of 2009 - supports Group businesses and clients - valued processes across BPO and KPO - highly productive, quality operations Mumbai: Abbey Life contract went live in March with the successful transfer of pr
Slide 33: Fuelling future growth - IT Services
Fuelling future growth - IT Services Rationale: increase capacity and breadth of Capita IT services offering Positioned as a significant ITO player Increased capability in-house to support major BPO deals and Group businesses Increased breadth of specialist IT skills: 2,300 IT employees Incr
Slide 34: Fuelling future growth - IT Services
Fuelling future growth - IT Services March 2008: ComputerLand UK Increases our Managed Service and desktop offering and keeps spend within the Group – £2.5m savings achieved in 12 months October 2008: ABS Network Solutions Enhances our networking and communications offering and enables cost savi
Slide 35: Fuelling future growth - Health
Fuelling future growth – Health Rationale: Expand breadth of services and customer relationships through contracts and acquisitions Market drivers: Financial pressure from central government to deliver value for money likely to result in increased use of private sector to help drive efficiencies
Slide 36: Fuelling future growth - Health
Fuelling future growth – Health Current position: Contract wins include NHS Choices, which has started well Acquisition of CHKS and 2 NHS Membership services businesses adds further strength to our position in the health market Won contract with Department of Health, worth £5.25m over 3 years,
Slide 37: Future growth opportunities - Central Government
Future growth opportunities - Central Government Market Drivers Operational Efficiency Programme: £7.2bn* – £34bn p.a. spend on back office operations and IT – £89bn p.a. spend on procurement Targets set to achieve £13.3bn £34bn* annual savings in these areas by 2011: + – £7.2bn savings: back of
Slide 38: Future growth opportunities - Central Government
Future growth opportunities - Central Government Current position Unique track record in delivering cost reduction and quality improvements in both public and private sector Excellent relationships with public sector trade unions Investment in dedicated senior staff to target key departments a
Slide 39: Prospects
Prospects Paul Pindar Chief Executive
Slide 40: Prospects
Prospects We remain confident regarding our prospects: – Consistently strong operational performance provides an excellent background for further expansion – Demand for outsourcing continues to be buoyant – Encouraging volume of opportunities Our success in 2008 and progress in the first half of
Slide 41: Results for the 6 months to 30 June 2009
Results for the 6 months to 30 June 2009