Capita Plc · LSE:CPI
Capita — H1 2013 Earnings Presentation
41 slides from Capita's earnings presentation, Jul 25, 2013
Slide 1: Results for the 6 months to 30 June 2013
Results for the 6 months to 30 June 2013 Half year results presentation 25 July 2013
Slide 2: Agenda
Agenda 1. Introduction – Paul Pindar, Chief Executive 2. Financial results – Gordon Hurst, Group Finance Director 3. Major sales update – Maggi Bell, Group Business Development Director 4. Managing growth – Andy Parker, Deputy Chief Executive & Joint COO 5. Acquisition update – Paul Pindar , Chief E
Slide 3: H1 2013 key highlights
H1 2013 key highlights £2.0bn of major new contracts including our largest win by annual value On track to meet full year organic growth target Pipeline Pi li steadily t dil replenishing, l i hi now £4.2bn £4 2b Strong drivers in key established and new markets Solid financial performance,
Slide 4: Financial results
Financial results Gordon Hurst Group Finance Director
Slide 5: Continued revenue growth
Financial results – revenue Comparative growth 13% 5 year H1 compound growth 9% 1,182 2008 2,441 1,311 2009 2,687 1,361 2010 2,744 1,400 Half year 2011 2,930 Full year 1,607 2012 3,352 1,819 2013 0 1 000 1,000 2 000 2,000 3 000 3,000 4 000 4,000 £m Continued revenue ggrowth 5
Slide 6: Diverse market spread
Financial results – revenue by market Private sector 52% (full year 2012: 53%) Public sector 48% (full year 2012: 47%) 2013 half year (full year 2012): Central government 11% (11%) Local government 17% (18%) Education 8% (8%) ( ) Health 5% (6%) Justice & emergency services 4% (3%) Defence 3% (1%) In
Slide 7: Expectation of at least 8% organic growth for full year 2013
Financial results – H1 revenue growth £m 6 months to £m 6 months to Growth 30 June 2013 30 June 2012 Revenue 1,819 1,607 13% 2013 acquisitions 61 - 4% 2012 acquisitions 96 - 6% Revenue growth excl. acquisitions 1,662 1,607 3% Expectation of at least 8% organic growth for full year 2013 7
Slide 8: Continued increasing profitability
Financial results – underlying operating profit* Comparative growth 6% 5 year H1 compound growth 11% 136.0 2008 311.7 157 0 157.0 2009 352.4 174.1 2010 386.4 Half year 187.8 2011 417.0 Full year 214.1 2012 466 7 466.7 226.8 2013 0 100 200 300 400 500 £m Continued increasingg profitability p y * Adju
Slide 9: Continued increasing profitability
Financial results – underlying profit before tax* Comparative growth 10% 5y year H1 compound p growth g 12% 116.4 2008 269.1 140.0 2009 321.7 159.2 2010 355.7 169.7 Half year 2011 376.6 Full year 186.4 2012 417.0 205.27 2013 0 100 200 300 400 500 £m Continued increasingg profitability p y * Adjusted
Slide 10: Underlying H1 operating margin
Financial results – underlying H1 operating margin* 15.0 14.2 14.1 13.9 14.0 13.4 13.3 Operrating margin % 13.1 13.0 12.8 12.8 12.5 12.0 12 0 12.0 11.5 Full year Half year 11.0 10.0 H1 2008 H1 2009 H1 2010 H1 2011 H1 2012 H1 2013 Year Full yyear margin g expectation: p 12.5 – 13.5% range g for fores
Slide 11: Continued growth in earnings
Financial results – underlying earnings per share* Comparative growth 9% 5 year H1 compound growth 13% 14.0 2008 32.3 16.7 2009 38.3 19.1 2010 43 9 43.9 21.4 Half year 2011 47.4 Full year 23.7 2012 52.1 25.8 2013 0 10 20 30 40 50 60 pence Continued ggrowth in earnings g * Adjusted for new pension st
Slide 12: Continued growth in dividends
Financial results – dividends Comparative growth 10% 5y year H1 compound p growth g 13% 4.8 2008 14.4 5.6 2009 16.8 6.6 2010 20 0 20.0 7.2 Half year 2011 21.4 Full year 7.9 2012 23.5 8.7 2013 0 5 10 15 20 25 pence Continued ggrowth in dividends 12
Slide 13: Strong focus on cash management
Financial results – cash flow statement £m 6 months to £m 6 months to 30 June 2013 30 June 2012 Cash flow from operations 242 201 Net interest paid (19) (23) Taxation paid (12) (29) C it l expenditure Capital dit (47) (54) Free cash flow 164 95 Acquisition of subsidiary undertakings and businesses (
Slide 14: Anticipate medium to long term annual cash conversion of around 100%
Financial results – cash flow from operating activities £m 6 months to £m 6 months to 30 June 2013 30 June 2012 Operating profit* 227 214 Depreciation 39 39 Amortisation 1 - Share based payment 5 5 Pensions 2 (3) Movements in provisions (1) - Movements in working capital (31) (54) Cash flow from ope
Slide 15: Controlled capital expenditure
Financial results – half year capex as % turnover 7 6 5 4 % 3 3.4 2.8 2.7 2.8 2.8 2.6 2 1 0 2008 2009 2010 2011 2012 2013 Controlled capital p expenditure p 15
Slide 16: Maintaining healthy returns
Financial results – underlying net return on capital (debt plus equity)* 12 months to 30 June 2013 24 Actual WACC 20 19.2 19.7 19.7 16 17.9 16.1 eturn 15.1 12 % re 8 8.2 7.9 7.8 7.8 7.2 7.2 4 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 Operating profit (£m) 280 333 370 400 443 479 Av
Slide 17: Rising economic profit
Financial results – post tax economic profit* 12 months th tto 30 J June 2013 210 Annual growth 5% 190 202 5 year compound growth 12% 193 170 173 £m 150 165 146 Economic profit 130 110 117 90 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 Operating profit (£m) 280 333 370 400 443 479 Av
Slide 18: Balance sheet gearing within 2.0–2.5x EBITDA target range
Financial results – balance sheet gearing £m 30 June 2013 £m 30 June 2012 Net debt Bond debt † 1,117 1,151 Cash in bank (126) (186) T Term loan l 185 185 Other (includes Northgate acquired leases) 24 5 Total underlying net debt 1 200 1,200 1 155 1,155 Annualised interest cover 11x 9x Net debt to EBI
Slide 19: Comfortable maturity profile with good headroom
Financial results – debt profile 30 June 2013 debt profile: £1,117m of private placement bond debt with maturities from 2013 to 2021 with a 33%/67% fixed/floating rate mix Only £66m matures before August 2015 £185m 2 year term loan facility maturing in February 2014 £425m revolving credit fa
Slide 20: Financial disciplines creating strong shareholder returns
Capita total shareholder return since IPO 45,000 Return over different time periods 42,004% 40,000 Since IPO 42,004% 35,000 Last 20 years 7,120% Last 15 years 630% 30,000 Last 10 years 499% eturn index 25,000 Last 5 years 83% Total re 20,000 Last 3 years 51% 15,000 Last 12 months 55% Year to date 38
Slide 21: Creating growth: Major sales update
Creating growth: Major sales update Maggi Bell Group Business Development Director
Slide 22: Strong start to 2013
Creating growth – 2013 major contract wins to date Total value to date in 2013: £2.0bn Contract Value (£m) Duration (y) Type Telefónica UK (O2) 1,200 10 New + extension London Borough of Barnet (development and 154 10 New regulatory services) Cabinet Office 400 10 New University of Strathclyde 40 5
Slide 23: Long term, stable revenue base
Existing major contracts due for rebid High degree of revenue visibility Year Contract Original value per annum (£m) 1 2013 None - 2014 None - 2015 None - 2016 None - 2017 None - 2018 None - 2019 Phoenix 48 Long term, stable revenue base Criteria: more than 1% of 2012 full year revenue of £3,352m 1
Slide 24: Well diversified pipeline
Generating growth – bid pipeline Bid pipeline today of £4.2bn comprising 32 bids (Feb 2013: 20 £5.2bn, 27 bids) Local Retail, gov telecoms Central 97% new revenue / 3% extensions & utilities gov Lif & Life Average contract length – 8 years 15 pensions Financial services 10 Justice & % Defence
Slide 25: Strategy for growth
Strategy for growth U d t di client Understanding li t requirements i t and dddesired i d outcomes t ale Sca Transformational partnering Transformational outsourcing Mid-sized / multi service contracts Single service platforms l tf Complexity 25
Slide 26: Strategy for growth – recent wins
Strategy for growth Understanding client requirements and desired outcomes – Recent wins Staffordshire JV ale Sca Cabinet Office IP JV Telefónica UK (O2) Transformational Barnet partnering University of Transformational Strathclyde outsourcing Mid-sized / multi service Carphone C h W h W
Slide 27: Leading and shaping the BPM market
Strategy for growth – targeted opportunities Competitive differentiation: Deep D understanding d t di off customer t and d citizen iti b behaviours h i Behavioural insight and analytics Strategic acquisitions Solution strength and depth Proven track record in growing and developing diverse bus
Slide 28: Creating opportunities in key growth markets
Growth opportunities – strong drivers in key markets Central government Local government Education Health Defence • Ongoing pressure on • Ongoing cost pressure • Change in funding • Ongoing budgetary • Clear MOD/Ministerial departmental spend (cumulative effect of last arrangements driving pressures
Slide 29: Managing growth
Managing growth Andy Parker Deputy Chief Executive & Joint COO
Slide 30: Operational structure - management breadth
Operational structure - management breadth Gillian Sheldon Martina King Martin Bolland Paul Pindar Paul Bowtell Non-Executive Director Non-Executive Director Non-Executive Chairman CEO Non-Executive Director Snr Independent Director Maggi Bell Vic Gysin Gordon Hurst Andy Parker Group Business Joint
Slide 31: Leading change: creating new platforms for growth
Staffordshire County Council JV Live on 1 April 2013 2013, seamless launch and transition Creation of new brand, Entrust, for delivery of services to schools and academies across the UK IT transformation t f ti work k underway d to t improve i infrastructure i f t t and d provide new online ch
Slide 32: Creating value from public assets
Cabinet Office IP JV – creating a growth business JV to own, deliver and commercialise the Government's Best Management Practice portfolio (including PRINCE2® and ITIL®) 51% Capita owned / 49% Cabinet Office owned JV owns IP portfolio in perpetuity Target to triple annual revenue of approx £
Slide 33: Creating value from public assets
Cabinet Office IP JV – creating a growth business Capita Capita’s s track record of transformation and successful acquisition and growth of small to medium businesses was recognised in the bid Now working with product users, trainers and examiners to leverage expertise Continue to provide a co
Slide 34: Cabinet Office IP JV – significant growth potential
Cabinet Office IP JV – significant growth potential Targeting g g +£120m annual revenue by year 10 1. Grow Established: UK, US, Australia, parts of the EU international Immediate targets: Brazil, India markets Future targets: China, Middle East, parts of the EU 2. In 2 Invest est in Developing PRINC
Slide 35: Shaping the BPM market: evolving client relationships
Customer management – moving up the value chain Then: Now: C Characteristics off Characteristics of typical Ventura/ Improve customer Capita customer Vertex (private experience management sector) t ) contract t t Support digital shift contract t t Reduce costs Pay per seats Future proof delivery
Slide 36: Telefónica UK (O2)
Telefónica UK (O2) Largest single contract win by annual value at £1.2bn over 10 years Commenced July 2013, seamless transfer of 2,300 O2 employees and migration of wider outsourced supply chain scope Strategic partnership to create enhanced customer outcomes, drive digital services capability
Slide 37: Acquisition update
Acquisition update Paul Pindar Chief Executive
Slide 38: 2013 acquisitions to date: 9 acquisitions totalling £198m
Creating growth – 2013 acquisitions to date 9 acquisitions totalling £198m Enhancing Acquisition Rationale Value capability – £m* Division IT Services Northgate Provides cloud-based, infrastructure and specialist managed services to 65.0 Managed Services public, private and third sectors. Customer i
Slide 39: Summary & outlook
Summary & outlook Paul Pindar Chief Executive
Slide 40: Delivering long term, sustainable growth
Strongly positioned for growth High level of sales activity in both traditional and new customer management and BPM markets Continuing to join-up, join-up deploy and develop our internal capabilities Focusing on smooth delivery of recent major contract wins Maintaining strong financial disci
Slide 41: Results for the 6 months to 30 June 2013
Results for the 6 months to 30 June 2013