Half Year Results
24 July 2008
THE CAPITA GROUP PLC
Half year results for the 6 months to 30 June 2008
STRONG PERFORMANCE
Financial highlights
Interim 2008 Interim 2007 Change
Turnover £1,182m £985m 20%
Operating profit £140.6m £118.9m 18%
Profit before tax £120.2m £103.8m 16%
Earnings per share 14.46p 12.13p 19%
Interim dividend per
share 4.8p 4.0p 20%
Key points
* Excellent organic growth including £626m major contracts secured in the
first 6 months of 2008 (first 6 months of 2007: £1.15bn)
* A further £187m of new and extended major contracts secured in July 2008
* Margins at 11.9% (6 months to 30 June 2007: 12.1%)
* Strong free cash flow - up by 23% to £102m (6 months to June 2007: £83m)
* 20% increase in half year dividend to 4.8p per share
* Buoyant bid pipeline of £3bn (Feb 2008: £2.5bn): markets remain highly
active
* 8 acquisitions completed to date in 2008 at a cost of £128.8m.
Paul Pindar, Chief Executive of The Capita Group Plc, commented:
"Capita has made strong progress in 2008. Our businesses across the Group have
performed well and we have secured new and renewed major contracts worth £626m
in the first 6 months of the year. The second half of the year has also started
strongly with a further £187m of new and renewed contracts secured in July
2008.
We remain very positive about future growth. Our markets continue to generate
an encouraging volume of opportunities and our operational performance is
consistently strong. Our successes in 2007 and progress in the first half of
2008 mean that the ingredients for a successful year are already in place. We
are now focused on building a strong platform for continued growth in 2009 and
beyond."
For further information:
The Capita Group Plc Tel: 020 7799 1525
Paul Pindar, Chief Executive
Shona Nichols, Corporate Communications Director
Capita Press Office Tel: 0870 2400 488
Financial Dynamics Tel: 020 7269 7121
Andrew Lorenz
The Capita Group Plc
Half year results for the 6 months to 30 June 2008
Capita, the UK's leading business process outsourcing ("BPO") and professional
services company, has made strong progress in 2008. Our businesses across the
Group have performed well and we have secured new and renewed major contracts
worth £626m in the first 6 months of the year. The second half of the year has
also started strongly with a further £187m of new and renewed contracts secured
in July 2008.
In the period ended 30 June 2008, turnover increased by 20% to £1,182m (6
months to 30 June 2007: £985m). Operating profit before amortisation rose by
18% to £140.6m (2007: £118.9m) and profit before taxation and amortisation
increased by 16% to £120.2m (2007: £103.8m). Earnings per share before
amortisation grew by 19% to 14.46p (2007: 12.13p).
Operating cash flow rose by 20% to £174m (2007: £145m). We have increased our
interim dividend by 20% and we propose to pay 4.8p per share. We have also
returned a further £66m to shareholders through purchasing our own shares.
Building value for shareholders
To ensure we build value for shareholders on a consistent basis over the long
term, we focus on a number of key financial measures:
* Margins - our focus remains on generating steadily improving operating
margins. In the period, operating margins (before amortisation) were 11.9%
(2007: 12.1%). This has been achieved against a background of unprecedented
growth in our Life & Pensions business. We have invested heavily in the
period in recruiting senior management to position us well for further
growth in this market and we have also invested significantly to ensure the
successful implementation of several new contracts. The long term trend for
margins remains positive.
* Cash flow - the strength of our business model is reflected in our
excellent underlying cash flow, with £174m (2007: £145m) generated by
operations in the period, representing an operating profit to cash
conversion rate of 124% (2007: 122%). Our free cash flow increased by 23%
to £102m (2007: £83m).
We use surplus cash to add value in 3 main ways - through acquisitions, share
buybacks and dividends:
- Acquisitions - acquisitions help us to enter new markets where we can grow
organically, strengthen existing market positions and build economies of
scale, or access a new customer base. To date in 2008, we have spent a
total of £128.8m on 8 acquisitions. We will continue with our strategy of
acquiring small to medium-sized businesses which are priced at a level
which adds value for our shareholders. Current market conditions are
fuelling our pipeline of potential acquisitions and we therefore expect to
be equally active in acquiring suitable businesses in the second half of
the year.
- Share buybacks - opportunistic share buybacks help us to maintain an
efficient capital structure and minimise our long term cost of capital. In
the period to 30 June 2008, the Group has bought back 10m shares
(representing 1.6% of the issued share capital) at an average price of
662p. Following these buybacks, there are 605m shares in issue.
Shareholders renewed the Group's authority to purchase up to 10% of issued
share capital at our AGM in May 2008.
- Half year dividend - the Board has declared a half year dividend of 4.8p
per ordinary share (2007: 4.0p), representing an increase of 20%. The
dividend will be payable on 3 October 2008 to shareholders on the register
at the close of business on 29 August 2008.
* Capital expenditure - we aim to contain capital expenditure at or below 4%
of revenue. During the period, we met this objective with net capital
expenditure at 2.8% (2007: 3.2%) of revenue.
* Return on capital employed - we focus on driving a steadily increasing
return on capital. Over the last 12 months, the post tax return on average
capital employed (including debt) has improved to 20.2% (12 months to 30
June 2007: 18.6%). This compares to our estimated weighted average cost of
capital which is 8.2%.
Our marketplace
The market for BPO in the UK and Ireland provides strong growth opportunities.
Industry analysts estimate the total potential market at £94.8bn per annum with
only 5% of this market outsourced in 2007 (£5.1bn).*
We continue to increase our scale and capability providing us with a strong
competitive edge across our markets and enabling us to present ever more
compelling propositions to clients. With our recent strong performance in
securing new business, we have extended the leading positions we hold in the
majority of our markets. We remain the clear market leader in the overall UK
BPO market.
Our most active markets remain local government and life and pensions. We are
also developing some exciting opportunities in new markets.
The current challenging economic climate is increasing organisations' interest
in exploring alternative outsourced business delivery models. This has resulted
in a lengthening of our prospects and suspects lists, the fuel for potential
major contracts in following years.
Generating profitable growth
We generate profitable growth by winning business from new and existing
customers in the UK and Ireland and supplement this by acquiring businesses
that broaden our skill base and extend our market reach.
Organic growth
Each of our businesses employs sales teams focused upon securing growth from
both existing and new customers. Solid performance has been achieved across the
Group in the first half of the year, particularly in our IT services business
and in Capita Symonds, our property consultancy business.
Our centrally managed Major Sales Team pursues complex, long term contracts
worth over £10m which require a wide range of the Group's skills and generate
high quality, recurring revenues. Securing and renewing major contracts remains
an important component of our growth.
Our sales performance to date in 2008 has been excellent. In the first 6
months, we have secured 8 new and renewed major contracts with a total value of
£626m (6 months to 2007: £1.15bn). These include:
* Marsh Ltd - to transform and deliver Marsh UK's back office administration
functions based in Norwich. Capita is providing support and processing
services to enhance Marsh's broking activities to clients across its
business. The contract is worth £187m over 10 years and services were
transitioned smoothly on 1 July 2008. Alongside this, joint work has been
initiated to explore how the partnership could be widened to support Marsh
further.
*Source: Ovum 2007
* Principle Insurance Holdings, (formerly British Islamic Insurance Holdings
/ BIIH) - to provide outsourced services for Principle's motor and home
insurance. Capita is providing front and back office services and an IT
platform from which to launch and sell Sharia compliant insurance (or
Takaful) products on behalf of Principle direct to consumers in the UK. The
contract is worth in excess of £80m over 8 years based upon projected
product volumes.
* Sefton Metropolitan Borough Council - preferred bidder to develop a 10 year
strategic partnership to deliver a wide range of property and highways
services. The contract, valued at approximately £70m, will be delivered by
Capita's property and infrastructure consultancy, Capita Symonds. Service
commencement is expected to be on 1 October 2008.
* Capita Glamorgan Consultancy - Bridgend, Merthyr and Rhondda Cynon Taf
County Borough Councils' joint venture with Capita's property and
infrastructure consultancy, Capita Symonds, to deliver a wide range of
highways, transportation, associated environmental management and other
related services. The contract is worth £75m over 15 years.
* Service Birmingham - additional arrangement signed to manage and transform
Birmingham City Council's contact centre in order for the people of
Birmingham to access council services in a simpler and more efficient way.
The contract is worth £110m over 8 years and service commenced on 1 July
2008.
* Health and Safety Executive (HSE) - preferred bidder for a minimum 5 year
contract to operate a new gas installer registration scheme in Great
Britain, replacing the current CORGI scheme. The contract is worth £14m per
year. The new scheme will renew focus on gas safety and aims to raise
awareness of gas safety issues amongst gas consumers. Final negotiations
are taking place, with the operation of the scheme due to start on 1 April
2009.
Today, we are delighted to announce that in July 2008 we have secured a further
£187m of additional new contracts and extensions from new and existing clients,
including the re-award of the Constructionline contract and additional work for
the Criminal Records Bureau and the Swindon Borough Council Partnership and:
* Department of Health NHS Choices - chosen as preferred partner to develop
and deliver NHS Choices, the digital channel to connect citizens and
intermediaries with the NHS. The contract is subject to finalisation and is
expected to be worth £60m over 3 years, with an option to extend for a
further 2 years. This represents a significant step forward for Capita in
the health marketplace and provides a strong platform for further growth in
this market.
To date this year, we have therefore secured new major work from existing and
new clients worth a total of £813m, maintaining our win rate of 1:2 by value.
Alongside these contract wins, our bid pipeline has been actively replenished
and reflects the quality of business opportunities across our markets. The
pipeline currently stands at £3bn (February 2008: £2.5bn) and only includes bid
situations in which Capita is shortlisted as 1 of 4 or fewer competitors and
caps the largest bids at £500m. Behind this is an active prospect list of
opportunities which are yet to reach a shortlist stage.
We have no material rebids of our contracts (defined as having annual revenue
in excess of 1% of 2007 turnover) until 2010.
Stimulating growth through acquisition
A key element of our growth is the acquisition of small to medium sized
companies which extend our presence in existing marketplaces or provide a
footprint in a new market. We have substantial experience of integrating
acquired businesses and achieving synergies with our existing operations. In
the current climate we are seeing many interesting opportunities. To date in
2008, we have acquired 8 businesses for a total consideration of £128.8m
including:
* ComputerLand UK - provides managed IT services and products across both the
public and private sectors, was purchased in March for £27.8m (net of cash
acquired). This acquisition adds substantially to the breadth and depth of
Capita's existing capability, particularly through the bringing together of
both companies' managed IT service. Capita will be able to re-direct IT
spend by Capita businesses and clients through ComputerLand, retaining
spend within the Group and to offer enhanced propositions to existing and
new clients. A healthy pipeline of cross-selling opportunities has already
been identified and discussions initiated.
* Lancaster Insurance Services - specialises in broking insurance for classic
cars. The acquisition of Lancaster at the end of March for £16.5m, adds
both new, specialist expertise and important cost synergies to Capita's
personal insurance intermediary and administration business. The business
has been integrated swiftly and has performed well in its first 3 months
within the Group.
* IBS OPENSystems - completed in July, acquired for £69.6m (net of cash
acquired). IBS is a leading provider of software systems and related
services for the management of social housing and the collection and
payment of revenues and benefits to local authorities and housing
associations in the UK. This acquisition adds to the breadth and depth of
Capita's existing capabilities, particularly in the provision of housing
systems for local authorities and housing associations. The businesses and
product sets will be brought together over time, enhancing our market
offering and realising significant cost benefits.
Maintaining operational performance
Expanding capabilities
As illustrated above, we have continued to develop steadily the scale and
breadth of our capabilities in 2008. This enables us to produce compelling
propositions for clients in terms of cost certainty, service efficiency,
improvement and flexibility and a choice of onshore, offshore or blended
service delivery.
Capita in India is growing rapidly. We are fitting out a new site in a new
city, Pune, a location with a good transport infrastructure and a highly
skilled graduate workforce. The first operation to be run from this site will
be the offshore services for Marsh UK. In Mumbai, from October 2008, we will
have 3 sites following the transfer of PPMS to Capita as part of the Prudential
contract. We are already operating a combined management team across the sites
to ensure the smooth transfer of the Prudential offshore services and to
immediately benefit from the combined skills of both operations. By the end of
2008, we will have over 3,000 people working in India and we anticipate a
continued high level of growth here. Our new contracts, particularly in the
life and pensions market, add further scale to our offshore operations and
provide us with the opportunity to leverage this for the benefit of our clients
and the Group.
Strong operational track record
Another key Capita strength is our strong operational track record. We have
experienced a busy period of major contract starts over the past 10 months,
including Southampton City Council, Co-operative Insurance, Resolution and
Prudential, involving the transfer of 5,800 staff. All transitions have been
achieved successfully and we are already making good headway in achieving our
key service transformation milestones. Our strong operational performance has
created highly satisfied and supportive clients happy to act as strong referees
to support and benefit from the future growth of Capita.
Key to Capita's ability to deliver strong operational performance and support
continued growth is the expansion of our pool of skilled, senior managers. We
inherit excellent talent with our major contracts and acquisitions and as
market leader we are able to attract exceptional talent from other companies
operating in our marketplaces. In the first 6 months of this year, we have
recruited 33 senior managers across our business sectors, strengthening our
current teams and creating a strong resource platform to support further
growth.
Optimising resources and infrastructure
Across all our operations we maintain a high degree of focus on optimising our
efficiency and developing resources to support future growth. Recent
initiatives have included purchasing cost control initiatives that maximise and
leverage Group-wide supply contracts, a supplier rationalisation programme and
greater use of technology to control purchasing authorisation. Over £3m of
Group procurement savings have been achieved in the first half of the year,
particularly across IT, car leases and postage. Energy efficiency projects
addressing the use of electricity and gas in our largest sites have resulted in
a reduction in energy use of over 8% and we are on target to achieve a 12%
reduction by the end of 2008. 100% of electricity directly purchased by Capita
is certified as from renewable sources and we are implementing valuable,
innovative energy reduction measures in our office refurbishment projects.
We have an ongoing property rationalisation programme to address the fact that
we continually inherit additional properties through acquisitions and major
contracts. Tangible savings have been achieved by rationalising our property
portfolio so that our divisions now share premises where possible and co-exist
in under-occupied areas of our customers' premises. Although we are making
substantial progress in optimising our infrastructure, there is still a lot
more to do.
Group Board changes
To support our continued growth, we are making some changes to the Group Board
with effect from 1 August 2008.
Simon Pilling, who currently shares the role of Joint Chief Operating Officer
with Paddy Doyle, will take on this role exclusively and will become Capita's
Chief Operating Officer. Since joining Capita in 1999, Simon's professional and
operational skills have enabled him to make a huge contribution to Capita's
development. We wish him well in his new, enlarged role.
Paddy Doyle has decided to make an orderly transition to a part time role.
Paddy's ability and judgement have played a key role in our success and we are
therefore delighted he has agreed to remain an Executive Group Board member, in
both a full time and then part time capacity. Paddy will be full time up to 31
December 2008 and thereafter will move to working 2 days a week for Capita. We
wish Paddy well as he broadens his life outside of Capita while continuing to
have an important role with us in the future.
Maggi Bell has made a tremendous contribution to Capita since joining in 1999.
Initially Maggi ran a number of our businesses, but in recent years, she has
done a superb job as the Group's Sales & Marketing Director. We are delighted
to announce that Maggi is promoted to Capita's Group Board as Business
Development Director. Maggi will make an excellent addition to our Board as we
continue to broaden and strengthen the Board's skills.
Valuing our people
Our people continue to be the bedrock of our success. Their hard work,
commitment, ingenuity and enthusiasm enable us to meet and exceed our clients'
expectations and support our growth. We also offer a warm welcome to the
employees that have joined us since the beginning of 2008 through direct
recruitment, contracts and acquisitions. The Board would like to thank everyone
across the Group for the role they play in Capita's success.
Future prospects
We are very positive about our future growth. Our markets continue to generate
an encouraging volume of opportunities, our sales prospects are exciting and
our operational performance is consistently strong.
Our successes in 2007 and progress in the first half of 2008 mean that the
ingredients for a successful year are already in place. We are now focused on
building a strong platform for continued growth in 2009 and beyond.
-Ends-
The Capita Group Plc is the UK's leading provider of integrated professional
support service solutions. The Group's service capabilities encompass customer
services, financial services, human resource services, software services,
systems and strategic support and property services delivered to both public
sector and private organisations. With over 32,200 employees at more than 300
offices across the UK, Ireland and India, Capita is quoted on the London Stock
Exchange (CPI.L), and is a constituent of the FTSE100 with revenues for 2007 of
£2,073 million.
Further information on The Capita Group Plc can be found at: http://
www.capita.co.uk
Half year statement
Half year condensed consolidated income statement
for the 6 months ended 30 June 2008
30 30
June June
2008 2007
Before Before
amortisation Amortisation Total amortisation Amortisation Total
Notes £m £m £m £m £m £m
Continuing
operations:
Revenue 3 1,182.5 - 1,182.5 985.0 - 985.0
Cost of sales 852.4 - 852.4 711.9 - 711.9
Gross profit 330.1 - 330.1 273.1 - 273.1
Administrative
expenses 189.5 4.9 194.4 154.2 4.1 158.3
Operating profit 3 140.6 (4.9) 135.7 118.9 (4.1) 114.8
Finance costs (20.2) - (20.2) (15.1) - (15.1)
Investment loss (0.2) - (0.2) - - -
Profit before tax 120.2 (4.9) 115.3 103.8 (4.1) 99.7
Income tax expense (32.5) 1.4 (31.1) (28.8) 1.7 (27.1)
Profit for the
period 87.7 (3.5) 84.2 75.0 (2.4) 72.6
Attributable to:
Equity holders of
the parent 87.7 (3.5) 84.2 75.0 (2.4) 72.6
Earnings per share
- basic 4 14.46p (0.58)p 13.88p 12.13p (0.38)p 11.75p
- diluted 4 14.29p (0.57)p 13.72p 11.85p (0.37)p 11.48p
Half year condensed consolidated statement of recognised income
and expense
for the 6 months ended 30 June 2008
30 June 30 June
2008 2007
£m £m
Actuarial (losses)/gains on defined benefit
pension schemes (0.5) 34.9
Exchange differences on translation of
foreign operations 0.8 (0.1)
Gain on available for sale investments - 1.5
Losses on cash flow hedges (21.8) -
Tax on items taken directly to equity 7.5 (9.2)
Net (expense)/income recognised directly
in equity (14.0) 27.1
Profit for the period 84.2 72.6
Total income and expense for the
period 70.2 99.7
Attributable to:
Equity holders of the parent 70.2 99.7
Half year condensed consolidated balance sheet
for the 6 months ended 30 June 2008
30 June 31 December
2008 2007
Notes £m £m
Non-current assets
Property, plant and equipment 203.4 193.4
Intangible assets 851.1 745.7
Financial assets 61.1 60.6
Trade and other receivables 14.8 11.1
Employee benefits 25.0 20.3
Deferred taxation 7.5 1.4
1,162.9 1,032.5
Current assets
Financial assets - 0.9
Trade and other receivables 580.3 456.4
Cash 12.4 0.8
592.7 458.1
Total assets 1,755.6 1,490.6
Current liabilities
Trade and other payables 754.8 556.9
Financial liabilities 226.1 57.7
Provisions 1.2 1.8
Income tax payable 46.1 36.3
1,028.2 652.7
Non-current liabilities
Trade and other payables 5.8 9.2
Financial liabilities 397.1 480.2
Provisions 0.2 0.8
Employee benefits 17.3 15.9
420.4 506.1
Total liabilities 1,448.6 1,158.8
Net assets 307.0 331.8
Capital and reserves
Issued share capital 7 12.7 12.6
Share premium 7 391.5 374.9
Employee benefit trust 7 (0.2) -
Capital redemption reserve 7 1.8 1.8
Foreign currency translation 7 1.5 0.7
Net unrealised gains reserve 7 (11.7) 4.0
Retained earnings 7 (88.6) (62.2)
Equity shareholders' funds 307.0 331.8
Half year condensed consolidated cash flow statement
for the 6 months ended 30 June 2008
30 June 30 June
2008 2007
Notes £m £m
Cash flows from operating activities
Operating profit on continuing activities
before interest and taxation 135.7 114.8
Depreciation 25.4 21.5
Amortisation of intangible assets 4.9 4.1
Share based payment expense 3.7 4.1
Pension charge 9.2 7.3
Pension
contributions (13.0) (10.3)
Movement in
provisions (1.7) (0.6)
Movement in debtors and creditors 9.6 4.4
Cash generated from operations 173.8 145.3
Income tax paid (18.8) (15.2)
Net interest (20.2) (15.1)
paid
Cash generated from operations
after interest 134.8 115.0
Net cash used in investing activities
Purchase of property, plant and equipment (33.0) (31.7)
Investment loan (2.0) -
Acquisition of subsidiary undertakings
and businesses (66.0) (54.0)
Cash acquired with subsidiary undertakings 13.5 2.4
Purchase of financial assets - (4.6)
(87.5) (87.9)
Net cash used in financing activities
Issue of ordinary share capital 7 16.7 26.7
Share buybacks 7 (66.2) (29.4)
Share
transaction 7 (0.4) (0.1)
costs
Dividends paid 5 (48.8) (39.2)
Capital element of finance lease
rental payments 8 (0.1) (0.2)
Asset based securitised financing
arrangement 0.6 8.3
Repayment of loan notes and long
term loans 8 (0.4) (33.2)
(98.6) (67.1)
Net decrease in cash and cash
equivalents (51.3) (40.0)
Cash and cash equivalents at the
beginning of the period (45.3) 9.2
Cash and cash equivalents at
30 June (96.6) (30.8)
Cash and cash equivalents comprise:
Overdraft 8 (109.0) (30.8)
Cash at bank and in hand 8 12.4 -
Total (96.6) (30.8)
Notes to the half year condensed consolidated financial statements
for the 6 months ended 30 June 2008
1. Corporate information
The Capita Group Plc is a public limited company incorporated in England and
Wales whose shares are publicly traded. The half year condensed consolidated
financial statements of the company and its subsidiaries (`the Group') for the
6 months ended 30 June 2008 were authorised for issue in accordance with a
resolution of the Directors on 23 July 2008.
2. Basis of preparation and accounting policies
(a) Basis of preparation
The half year condensed consolidated financial statements for the 6 months
ended 30 June 2008 have been prepared in accordance with the Disclosure and
Transparency Rules (DTR) of the Financial Services Authority and with IAS 34
Interim Financial Reporting.
The half year condensed consolidated financial statements do not include all
the information and disclosures required in the annual financial statements and
should be read in conjunction with the Group's annual financial statements as
at 31 December 2007, which have been prepared in accordance with IFRSs as
adopted by the European Union.
This condensed consolidated half year financial information does not comprise
statutory accounts within the meaning of section 240 of the Companies Act 1985
(section 434 of the Companies Act 2006). Statutory accounts for the year ended
31 December 2007 were approved by the Board of Directors on 28 February 2008
and delivered to the Registrar of Companies. The report of the auditors on
those accounts was unqualified, did not contain an emphasis of matter paragraph
and did not contain any statement under section 237 of the Companies Act 1985
(section 498 of the Companies Act 2006).
The half year condensed consolidated financial statements for the 6 months to
30 June 2008 have not been audited or reviewed by auditors pursuant to the
Auditing Practices Board guidance on Review of Interim Financial Information.
(b) Significant accounting policies
The accounting policies adopted in the preparation of the half year condensed
consolidated financial statements are consistent with those followed in the
preparation of the Group's annual financial statements for the year ended 31
December 2007, except for the adoption of the new interpretation, noted below.
Adoption of this interpretation did not have any effect on the financial
statements of the Group.
IFRIC 12 Service Concession Arrangements
This interpretation, which is effective for annual periods beginning on or
after 1 January 2008, provides guidance on the application of existing
International Financial Reporting Standards on the accounting by operators for
public-to-private service concession arrangements. Service concession
arrangements being arrangements whereby a government or other body grants
contracts for the supply of public services, such as roads, energy
distribution, prisons or hospitals, to private operators.
3. Segmental information
Six months Six months to
to 30
30 June 2008 June 2007
Analysis of segment revenue £m £m
HR Solutions 127.9 123.4
Property Consultancy 126.2 112.3
Insurance and Specialist
Services 155.9 149.3
Financial Services 80.3 74.8
Integrated Services 142.2 152.4
ICT and Multi Service Centres 169.8 124.3
Life & Pensions 229.4 105.8
Professional Services 150.8 142.7
1,182.5 985.0
Analysis of segment result
HR Solutions 12.1 12.0
Property Consultancy 10.1 8.9
Insurance and Specialist
Services 15.5 13.6
Financial Services 17.8 16.5
Integrated Services 19.5 20.7
ICT and Multi Service Centres 19.2 15.7
Life & Pensions 23.8 11.2
Professional Services 22.6 20.3
140.6 118.9
The comparative figures have been restated due to a reorganisation of the
Group's business divisions during the period. The Directors decided this was
necessary to better manage the growth in the business and to enhance service
provision across the Group. The Group's ongoing operations are not subject to
seasonal variations.
4. Earnings per share
The average number of shares in issue during the period was 606.7m (30 June
2007: 618.1m). The diluted earnings per share have been calculated on the
profit for the period of £84.2m (30 June 2007: £72.6m) and an average diluted
number of shares of 613.7 (30 June 2007: 632.7m). As at 23 July 2008, there
were 605.5m shares in issue.
5. Dividends paid and proposed
The interim dividend of 4.8p (2007: 4.0p) per share (not recognised as a
liability at 30 June 2008) will be payable on 3 October 2008 to ordinary
shareholders on the register at the close of business on 29 August 2008. The
dividend disclosed in the cash flow statement represents the final ordinary
dividend of 8.0p (2007: 6.3p) per share as proposed in the 31 December 2007
financial statements and approved at the Group's AGM (not recognised as a
liability at 31 December 2007).
6. Business combinations
The Group has made a number of acquisitions in the period, which are shown in
aggregate below:
Book Fair value Provisional
values adjustments fair
value to
Group
£m £m £m
Property, plant
and equipment 2.0 (0.3) 1.7
Deferred tax 1.4 - 1.4
Debtors 25.7 (0.6) 25.1
Cash and short
term deposits 13.5 - 13.5
Creditors (20.8) (0.7) (21.5)
Provisions (0.5) (0.3) (0.8)
Corporation tax (0.5) 0.1 (0.4)
Net assets 20.8 (1.8) 19.0
Goodwill
arising
on acquisition 111.0
130.0
Discharged by:
Cash 63.0
Loan notes 3.5
Deferred
consideration
accrued 63.5
130.0
The full exercise to determine the intangible assets acquired is still to be
completed, thus the above numbers are provisional; this exercise will be
finalised for the full year financial statements. Further cash consideration of
£3.0m was paid in respect of deferred consideration relating to previous
acquisitions. The full amount had been accrued in the previous year and
consequently there was no impact on goodwill. Loan notes of £1.4m were issued
during the period in respect of deferred consideration that was accrued for in
the previous year. This also had no impact on goodwill.
The contribution to the Group's profit before amortisation and tax in the six
months to 30 June 2008 from these acquisitions was £2m. If the acquisitions had
been included from the beginning of the period, the Group's profit before
amortisation and tax would have been £121.9m.
7. Capital and reserves - reconciliation of movements in equity
Foreign Net
Employee Capital currency unrealised
Share Share benefit redemption Retained translation gains Total Minority
capital premium trust reserve earnings reserve reserve equity interests Total
£m £m £m £m £m £m £m £m £m £m
At 1
January
2007 12.3 308.1 - 1.7 4.0 (0.4) - 325.7 0.1 325.8
Total
recognised
income and
expense for
the year - - - - 99.8 (0.1) - 99.7 - 99.7
Share based
payment - - - - 4.1 - - 4.1 - 4.1
Purchase of
own
shares -
cancelled (0.1) - - 0.1 (29.4) - - (29.4) - (29.4)
Share
transaction
costs - - - - (0.1) - - (0.1) - (0.1)
Shares
issued 0.3 26.4 - - - - - 26.7 - 26.7
Equity
dividends
paid - - - - (39.2) - - (39.2) - (39.2)
At 30 June
2007 12.5 334.5 - 1.8 39.2 (0.5) - 387.5 0.1 387.6
At 1
January
2008 12.6 374.9 - 1.8 (62.2) 0.7 4.0 331.8 331.8
Total
recognised
income and
expense for
the year - - - - 85.1 0.8 (15.7) 70.2 - 70.2
Share based
payment - - - - 3.7 - - 3.7 - 3.7
Purchase of
own
shares - - (0.2) - (66.0) - - (66.2) - (66.2)
Share
transaction
costs - - - - (0.4) - - (0.4) - (0.4)
Shares
issued 0.1 16.6 - - - - - 16.7 - 16.7
Equity
dividends
paid - - - - (48.8) - - (48.8) (48.8)
At 30 June
2008 12.7 391.5 (0.2) 1.8 (88.6) 1.5 (11.7) 307.0 - 307.0
8. Movement in net debt
Net Acquisitions
debt at in period Cash flow Non-cash Net debt at
1 (exc. Cash) movements flow 30
January movements June 2008
2008
£m £m £m £m £m
Cash and cash
equivalents 0.8 - 11.6 - 12.4
Overdrafts (46.1) - (62.9) - (109.0)
Cash (45.3) - (51.3) - (96.6)
Loan notes (1.7) - 0.4 (4.9) (6.2)
Bonds (461.1) - - (2.1) (463.2)
Currency
swaps (18.1) - - 2.6 (15.5)
Interest rate
swaps 0.1 - - (0.5) (0.4)
Finance
leases (0.2) - 0.1 - (0.1)
Sub-total net
debt (526.3) - (50.8) (4.9) (582.0)
Asset based
securitised
finance (9.7) - 1.4 - (8.3)
(536.0) - (49.4) (4.9) (590.3)
Net Acquisitions
debt at in period Cash flow Non-cash Net debt at
1 (exc. Cash) movements flow 30
January movements June 2007
2007
£m £m £m £m £m
Cash and cash
equivalents 9.7 - (9.7) - -
Overdrafts (0.5) - (30.3) - (30.8)
Cash 9.2 - (40.0) - (30.8)
Loan notes (22.2) - 22.2 (5.9) (5.9)
Long term
debt - (11.0) 11.0 - -
Bonds (372.0) - - 29.3 (342.7)
Currency
swaps (6.4) - - (28.5) (34.9)
Interest rate
swaps - - - (0.8) (0.8)
Finance
leases (0.5) - 0.2 - (0.3)
Sub-total net
debt (391.9) (11.0) (6.6) (5.9) (415.4)
Asset based
securitised - (8.3) - (35.8)
finance (27.5)
(419.4) (11.0) (14.9) (5.9) (451.2)
9. Capital commitments
At 30 June 2008, amounts contracted for but not provided in the financial
statements for the acquisition of property, plant and equipment amounted to £
nil (2007: £nil).
10. Related party transactions
Transactions between the company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. The only related party transactions requiring disclosure are details of
key management personnel compensation (including Directors of the parent
company). These details are set out in the table below.
Compensation of key management personnel (including Directors of parent
company)
Six months Six months
to to 30
30 June June 2007
2008
Short term employment benefits 1.5 1.9
Post employment benefits 0.1 0.1
Share based payments 2.3 1.9
3.9 3.9
Gains on share options exercised in the period by key management personnel
totalled £8.7m (2007: £2.3m).
Statement of Directors' responsibilities
The Directors confirm, to the best of their knowledge, that this condensed set
of financial statements has been prepared in accordance with IAS 34 as adopted
by the European Union and that the Half Year Management Report includes a fair
review of the information required by Rules 4.2.7 and 4.2.8 of the Disclosure
and Transparency Rules of the United Kingdom Financial Services Authority.
The names and functions of the Directors of The Capita Group Plc are as listed
in the Group's Annual Report for 2007. A list of current directors is
maintained on the Group website: www.capita.co.uk.
By order of the Board
P R M Pindar G M Hurst
Chief Executive Group Finance
Director
23 July 2008
Friday, 22nd November 2024
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