Interim Management Statement

18 November 2013

                   Capita plc - interim management statement                   

Capita plc (Capita), the UK's leading customer and business process management
(BPM) company, is today issuing its interim management statement covering
trading and financial progress to date in 2013.

Summary update on performance

Major sales: Capita has achieved strong sales performance this year to date,
securing £2.9bn of major new contract wins with clients including the
Department of Energy and Climate Change, the Ministry of Justice and the
Cabinet Office and, in the private sector, with Carphone Warehouse and
Telefónica UK (O2).

Sales activity is buoyant and we are seeing high activity across the retail,
utilities and telecoms sectors and in central government, particularly across
defence and the justice areas. Our bid pipeline currently stands at £4.2bn
(July 2013: £4.2bn) with a number of bids at a relatively mature stage of the
procurement process and a good weight of opportunities at earlier stages in and
just outside of the bid pipeline.

Following a record level of sales wins over the previous 18 months, we are
experiencing strong organic growth in 2013 and we remain on track to achieve
our target of 8% organic growth for the full year (2012: 3%). In turn, our
sales success has resulted in a high volume of new contract implementations,
including the 2 largest contracts in Capita's history with Staffordshire County
Council and O2, which transferred to Capita in April 2013 and July 2013
respectively.

Financial performance: Our key financial metrics remain very healthy. In
particular:

Cashflow: The Group has strong control over operating cashflow and we are
confident that the conversion rate of operating profit to operating cash will
exceed 100% for 2013.

Margins: As stated previously, we believe that our underlying Group operating
margin can be maintained in the range of 12.5% to 13.5% for the foreseeable
future. We anticipate that the underlying Group operating margin for the full
year 2013 will be comfortably within this range and ahead of the half year
margin of 12.5%.

Acquisitions: During the year to date, we have acquired 13 complementary
businesses for a total consideration of £271m, enhancing and expanding our
sales proposition to clients and supporting the delivery of future organic
growth.

 

Delivering organic growth

To date in 2013, we have secured 15 new major contracts with an aggregate value
of £2.9bn (November 2012 IMS: £1.7bn), comprised of 95% new business and 5%
renewals. Since our half year results in July 2013, we have announced the
following new contracts:

  * National Asset Management Agency (NAMA) - appointed as primary and special
    loan servicer on the NAMA loans acquired under the NAMA Act 2009,
    previously managed on behalf of NAMA by the special liquidators, Irish Bank
    Resolution Corporation (IBRC). The contract is worth around £69m over 4
    years.
   
  * Department of Energy and Climate Change (DECC) - selected as successful
    applicant for the smart meter communication licence which became effective
    from September 2013. The arrangement is expected to generate revenues to
    Capita of some £175m over 12 years with an option to be extended for a
    further 6 years.
   
  * Ministry of Justice (MoJ) - selected as preferred bidder for the electronic
    monitoring and field support services contract and also the role of overall
    services and systems integrator. We expect the contract to generate
    revenues to Capita of some £400m over the initial six year contract term,
    based on the anticipated increase in the use of tags beyond the current
    numbers of monitored individuals. Further significant growth is expected
    through the expansion of services to other government departments and
    agencies.
   
  * Other major new contracts - we have secured contracts worth a total of £
    253m, including with the Department for Work and Pensions (DWP), Croydon
    Council, Scottish Power Energy Retail and the Department of Communications,
    Energy and Natural Resources in Ireland.
   
Bid pipeline: The pipeline is a snapshot of major bid opportunities, worth £25m
or above and capped at £1bn, where we have been shortlisted by the client to
the last 4 bidders or fewer. The bid pipeline currently stands at £4.2bn (July
2013: £4.2bn) comprised of 30 bids of which 93% relates to new contracts and 7%
to renewals. The pipeline contains opportunities from across all our target
markets.

Contract rebids: Over the next 5 years, there are no material contracts due for
rebid (defined as having forecast annual revenue in excess of 1% of 2012
revenue). The next major contract due for renewal will be the Phoenix contract
in 2019.

Securing value enhancing acquisitions

Acquisitions play a key role in enabling us to enhance our sales propositions
and take us into new market segments, providing a platform for further organic
growth. To date in 2013, we have acquired 13 businesses, investing a total of £
271m.

Since our H1 results announcement in July 2013, acquisitions include ParkingEye
for £57.5m (Justice and Secure Services division), Write Research for £4m
(Workplace Services division), Contact Associates for £4.5m (Health & Wellbeing
division) and Cymbio for £7m (Health & Wellbeing division). All of these
acquisitions expand our capabilities in our market places and also have the
potential to play valuable roles in our major contract bids.

Our acquisition pipeline contains a number of interesting opportunities and we
anticipate maintaining total acquisition spend of £200m to £250m per annum
going forward. With an increased level of organic growth, we therefore expect
our acquisition activity to play a proportionately smaller part in our overall
revenue growth in future years.

Disposals and closures within the Insurance & Benefit Services division

We informed shareholders at our half year results that there are small parts of
our Insurance & Benefits Services division, some insurance distribution
businesses and our SIP (self invested pensions) administration business, which
operate in increasingly competitive and highly regulated markets and are loss
making. Following a detailed review, we have concluded that the route to
recovery for these operations would take a long time and accordingly we have
taken steps to address this. Today, we announce that we have agreed to sell,
subject to FCA approval, these insurance distribution assets to Markerstudy for
an undisclosed sum and we have taken a decision to close our SIP (Self Invested
Pensions) administration business based in Salisbury which is sub-scale and
therefore unviable.

These operations comprise approximately £47m of Group revenue and are
anticipated to make a combined operating loss of £15m in 2013. As other areas
of the Group have performed strongly, profit before tax, net of these losses,
is expected to remain in line with current market expectations.

Our current estimate is that the combined cash costs, net of tax, from the sale
and closure will be c£35m. This will be disclosed separately in our Preliminary
Accounts for the year ended 31 December 2013. We anticipate that these actions
will result in an impairment of goodwill when we conduct our annual impairment
test at the end of the year.

Although these acquisitions generated healthy profits and cash over several
years, we recognise that the recent performance of these acquisitions which
cost in aggregate £70m is disappointing. However, this should be viewed in the
context of our £1.6bn acquisition programme over the last 10 years, which has
generated significant shareholder value.

Outlook

As a consequence of the sales successes to date in 2013 and the acquisitions
completed in 2012 / 2013, we are on track to deliver strong growth in 2013.
Furthermore, 2014 has the foundations in place today to be a highly successful
year. The UK market for customer management and BPM remains very encouraging
and this underpins our confidence in the Group's long term growth prospects.

See separate Board Update announcement.

                                    -ends-                                     

Analyst & investor conference call

Paul Pindar, Chief Executive of Capita plc, will host an analyst conference
call in London at 8.00am UK time today. Please dial into the call in time to
allow for registration

Dial-in number: [phone]

Participant PIN Code 48662047#

Replay: A replay of the conference call will be available for 7 days by
dialling [phone] (access code is 643128#).

For further information:

Capita plc

Tel: [phone]

Paul Pindar, Chief Executive Officer

Shona Nichols, Corporate Communications Director

Media enquiries only:

Capita press office

Caroline Mooney

Tel: [phone] or 020 7654 2399 (out of hours)

Email: [e-mail]

Capita plc is the UK's leading provider of BPO and integrated professional
support service solutions. With 62,000 people at more than 350 sites, including
70 business centres across the UK, Europe, India and South Africa, the Group
uses its expertise, infrastructure and scale benefits to transform its clients'
services, driving down costs and adding value. Capita is quoted on the London
Stock Exchange (CPI.L), and is a constituent of the FTSE 100 with 2012 revenue
of £3.3 billion. Further information on Capita plc can be found at:
www.Capita.co.uk