Interim Results

CAPITA GROUP PLC 27 July 1999 The Capita Group Plc INTERIM RESULTS TO 30 JUNE 1999 STRONG PROGRESS ON ALL FRONTS Financial highlights Six months Six months to to Change 30 June 1999 30 June 1998 Turnover £150.2m £117.9m + 27% Operating profit £14.0m £10.6m + 33% Pre-tax profit £14.1m £10.5m + 35% Earnings per share 4.73p 3.43p + 38% Total dividend per share 1.2p 0.9p + 33% Operating margins 9.4% 9.0% Operational highlights * Strong growth experienced across all sectors, with local government particularly buoyant during the period. * £50m, 10 year plus contract announced today with Norfolk County Council to provide IT, payroll, pension and exchequer services. * Other significant contract wins announced during the period include: - £12m, 5 year contract with Hertfordshire County Council to design, build and operate local government's first ever integrated customer services call centre; - £11m, 5 year contract with Kent County Council to administer payroll and pensions for 80,000 employees - the largest ever outsourcing of payroll services by a local authority. * New £2.1m national customer call centre to be set up in Coventry to support Capita's local government operations. * £27m invested in March in the purchase of a strategic stake in Eastgate Group, providing entry into the insurance outsourcing sector. * Additional £26.6m invested during the period in four complementary acquisitions to strengthen existing operations in Human Resources Services, Software Services and Property Services. Rod Aldridge, Executive Chairman of the Capita Group Plc, commented: 'Our excellent first half results reflect our continuing progress in establishing new client relationships and successfully enhancing existing ones. We continue to invest to strengthen the range of services we are able to offer clients and also to improve our own operational efficiency. Our markets remain very active and we are able to choose from a substantial range and volume of opportunities to further develop the Group. We are confident that shareholders will be very satisfied with both the results for the year and our continuing prospects thereafter.' For further information: The Capita Group Plc Rod Aldridge, Executive Chairman Tel: 0171 799 1525 Paul Pindar, Chief Executive Shona Nichols, Group Marketing Director Hogarth Partnership Limited James Longfield/John Olsen Tel: 0171 357 9477 CHAIRMAN'S STATEMENT Results The six months to 30 June 1999 have been highly successful for the Capita Group Plc. Our strong financial results for the half year reflect the progress we have made in establishing many new client relationships and successfully enhancing existing ones. During the period, our turnover increased by 27% to £150.2m (half year to 30 June 1998: £117.9m), operating profits rose by 33% to £14.0m (1998: £10.6m as restated) and net profits before taxation increased by 35% to £14.1m (1998: £10.5m as restated). Earnings per share advanced 38% to 4.73p (1998: 3.43p as restated). Our activities continue to produce strong cash flow with £8.4m generated by operations in the period. Dividend The Board has declared an interim dividend of 1.2p net per share (1998: 0.9p), a 33% increase. The dividend will be payable on 14 October 1999 to shareholders on the register at the close of business on 10 September 1999. The dividend is covered 3.9 times by earnings per share. Business review Capita focuses on providing a broad portfolio of white collar, professional support services on long term contracts to our chosen markets in the UK. Across all our businesses, we have two clear objectives: to enhance service quality on behalf of our clients and to reduce their costs of delivery. We have built up an integrated range of support services that are often essential to the smooth running and success of our clients' operations. Our skills are broad and the scope of contracts for which we can bid is wider than that of most of our competitors. This also enables us to be highly selective. Our chosen markets of the UK's public and private sectors are both active. Indeed, it is estimated that the market for outsourcing services will exceed £8bn by 2002 (source: The Holway Report 1999). Recent research regarding the Business Process Outsourcing (BPO) element of this market, the focus of most of our operations, forecasts a 30% annual growth rate for BPO (source: NelsonHall May 1999). Our local government market has been particularly buoyant during the period, driven by the introduction of Best Value and the wider Modernising Agenda. The Government is also extending this principle across central government. The regime provides the opportunity for the client and service provider to concentrate on establishing the most appropriate infrastructure and partnership to achieve continuous improvement of services that focus on the needs of the customer. It encourages more innovation, the combined delivery of a broader range of council services and longer term relationships with private sector partners. As an example, we recently announced a 5 year contract worth £12m with Hertfordshire County Council to design, build and operate local government's first ever integrated customer services call centre. This centre will provide the community with consistency in response and service, the highest industry standards for call answering and over 70% of calls to be handled without referral. Indeed, following full implementation, we anticipate managing 1.4m calls per annum. This integrated gateway for the public to access their services will put Hertfordshire at the forefront of Best Value delivery in this field. In a similar vein, I am delighted to announce today that Capita has been chosen as the strategic service partner to Norfolk County Council for the combined delivery of IT, payroll, pension and exchequer services to the Authority. The partnership, covering a 10 year plus period, is valued in excess of £50m. Under the contract, 150 staff will join Capita who will be responsible for providing payroll services to 33,000 council staff, administering over 12,000 pensions and processing in excess of 500,000 transactions per annum. Capita will establish a Business Centre in Norwich incorporating a sophisticated customer services call centre and advanced business processing, providing a hub for incremental business in the area. Sales activity during the period has principally focused on securing additional contracts from new and current customers rather than extending existing contracts as there are no major renewals scheduled until 2002. Our strategic account development team has achieved some notable new contract wins with our existing customers. At Kent County Council, we have secured an £11m, 5 year contract, to administer payroll and pensions for 80,000 employees across the Council and other local public organisations. This represents the largest ever outsourcing of payroll services by a local authority. With Westminster City Council, with whom we already have 6 contracts, we have signed an additional 5 year contract to provide the IT service supporting its council tax operation. We have also extended existing advisory and administration contracts with the Employment Service, NAAFI and, as part of the Government's welfare reform programme, the Benefits Agency, which has recently awarded further significant consultancy projects to Capita. We continue to increase penetration of the private sector, which now represents over a third of the Group's turnover, through new business development and selective acquisitions. We have signed business and property outsourcing arrangements with a wide range of organisations including BT, BMW, Bass, Halifax, Land Securities and Unilever. One notable contract awarded and implemented in the period was to set up a new safety agency, on behalf of Railtrack Plc, to issue and control safety certification across the UK. This project will run for 5 years and is anticipated to generate revenues of £10m. The education market continues to develop. Our Learning Network product, developed in response to Capita gaining preferred supplier status for the £230m Government scheme to train teachers in the use of computers and on-line technology, is progressing well. Following successful trials, the product will be launched in September. The DfEE has also recently awarded us a contract to assist in the set up of the newly announced University for Industry. Capita will source and recruit the entire team who will run the organisation. This flagship project is at the heart of the Government's strategy for the learning age and is designed to provide universal access to lifelong learning. Operational review Alongside our new contract wins are two further key activities underpinning Capita's success: maintaining our reputation for high quality project implementation and continuous strong operating performance. The six months to 30 June have been a particularly busy and successful period with a record number of project implementations. Three projects merit comment. In April, a newly created, public information centre in Belfast, designed and operated by Capita for the BBC, was opened by Sir Christopher Bland, Chairman of the BBC, in the presence of The Rt Hon Dr Marjorie Mowlam MP, Secretary of State for Northern Ireland. This project will handle over 2.5 million customer contacts per annum and encompasses state of the art technology, supported by newly recruited, high calibre personnel. We are delighted by the progress of this contract implementation. At the same time, we implemented a 3 year contract to provide reception and administrative management services to Trillium, a consortium led by Goldman Sachs, which in turn provides property services to the Benefits Agency. This implementation has also progressed well and the 700 staff who transferred to Capita on 1 April 1999 represent the largest ever TUPE transfer completed by the company. We are also working on an important internal project, costing a total of £2.1m, to develop a national customer centre to support our local government operations. This centre, which we will create in Coventry, will centralise many of the more fundamental transactions carried out at individual sites throughout the UK and will utilise state of the art telephony, scanning and web-based technology. It will improve further both the consistency and quality of service levels we provide to our clients whilst creating economies of scale to reduce costs both for our clients and the Group. The project will generate benefits from the year 2000 and beyond. Capita is now responsible, across both the public and private sectors, for dealing with over 20 million customer contacts per annum. Acquisitions Whilst securing strong organic growth remains the key driver of our business, we continue to enhance our service offering and to seek incremental growth by making small, carefully appraised acquisitions and investments. In March, we invested £27m in respect of the acquisition of 20.5% of the Eastgate Group Ltd. Formed in 1992, Eastgate is the UK market leader in providing a range of outsourcing services to the insurance industry. Since formation, it has administered $8bn of insurance claims. It now handles 1 million general insurance claims and 3 million telephone calls per annum. The insurance sector is new to Capita and we will extend our presence carefully as our knowledge grows. However, early indications confirm that the current corporate activity and financial pressures within the insurance sector offer substantial potential for outsourcing services. Within the Education sector, Capita is the market leader in providing administrative software and services to primary and secondary schools and to Local Education Authorities. We acquired Emis Ltd in February and Dolphin Computing Services Ltd in June for £8m in aggregate. Both companies distribute administrative software to the Higher and Further Education sectors and Capita is now also the established leader in this segment. We see strong opportunities for organic growth from these businesses. During this period, we also strengthened our Human Resources services through the £14.6m purchase of Oldham & Tomkins, a company providing professional IT and project management staff on long term assignment. The acquisition complements our existing recruitment services and brings a valuable resource and highly developed internet based recruitment system. Our Property Services capability was further strengthened through the £4m acquisition of MPM Adams, a leading project management company based in Scotland. Our people Once again, I would like to pay tribute to the outstanding contribution made by our 6,500 staff. We have engendered a superb team spirit within Capita and this strength, coupled with our 'can do' mentality, allows us to tackle successfully many demanding projects. It is our culture to place high priority upon ensuring that we meet, and if possible surpass, our customers' expectations. I would like to express the Board's appreciation to all our staff. We place considerable focus on continuing to strengthen our senior team across the Group. Skills such as project management, financial management and account development remain at the heart of our business and we are investing heavily in both developing our existing skills and adding to them through recruitment. More people than ever will participate in Capita's internal training programmes over the next 12 months and we anticipate doubling the number of participants on our graduate training programme. Prospects The Board remains extremely encouraged by Capita's future prospects. We are able to choose from a substantial range and volume of opportunities in pursuit of developing the Group further. We are confident that shareholders will be very satisfied with both the Results for the full year and our prospects thereafter. R M Aldridge OBE Executive Chairman THE CAPITA GROUP PLC SUMMARY INTERIM RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 1999 Six months Six months Year to to 30 Jun to 30 Jun 31 Dec 1999 1998 1998 (As (As restated) restated) Notes £'000 £'000 £'000 Turnover 1 Continuing operations 141,463 117,907 237,802 Acquisitions 8,764 - - -------- -------- -------- 150,227 117,907 237,802 ======== ======== ======== Other operating income Income from interests in associated undertakings 82 707 372 ======== ======== ======== Operating profit Continuing operations 13,404 10,567 27,020 Acquisitions 643 - - -------- -------- -------- 14,047 10,567 27,020 Continuing operations: Net interest receivable/(payable) 16 (83) (220) Profit on disposal of fixed asset investments 52 - - -------- -------- -------- Profit before taxation 1 14,115 10,484 26,800 Taxation 4,526 3,388 8,708 -------- -------- -------- Profit after taxation 9,589 7,096 18,092 Minority interest 22 470 804 -------- -------- -------- Profit for the period 9,567 6,626 17,288 Dividends 2,481 1,748 5,511 -------- -------- -------- Retained profit for the period 7,086 4,878 11,777 ======== ======== ======== Earnings per share 3 4.73p 3.43p 8.90p ======== ======== ======== Diluted earnings per share 3 4.59p 3.35p 8.68p ======== ======== ======== Dividend per share 4 1.2p 0.9p 2.8p ======== ======== ======== THE CAPITA GROUP PLC SUMMARY BALANCE SHEET AS AT 30TH JUNE 1999 30 Jun 30 Jun 31 Dec 1999 1998 1998 (As (As restated) restated) £'000 £'000 £'000 Fixed assets 111,989 22,672 53,799 Current assets Trade investments 299 494 219 Debtors 85,297 56,357 68,265 Cash at bank 3,593 9,268 3,642 -------- ------- -------- 89,189 66,119 72,126 -------- ------- -------- Creditors: Amounts falling due within one year 93,199 68,988 84,592 -------- ------- -------- Net current liabilities (4,010) (2,869) (12,466) -------- ------- -------- Total assets less current liabilities 107,979 19,803 41,333 Creditors: Amounts falling due after more than one year 6,183 784 658 Provision for charges and liabilities 1,889 2,223 2,162 -------- ------- -------- 99,907 16,796 38,513 ======== ======= ======== Shareholders funds Called up share capital - Ordinary 4,133 3,884 3,958 Share premium and other reserves 95,099 11,236 33,880 Minority interests 675 1,676 675 -------- ------- -------- 99,907 16,796 38,513 ======== ======= ======== THE CAPITA GROUP PLC SUMMARY GROUP CASH FLOW FOR THE SIX MONTHS ENDED 30TH JUNE 1999 Six months Six months Year to to 30 Jun to 30 Jun 31 Dec 1999 1998 1998 (As (As restated) restated) £'000 £'000 £'000 Cashflow from operating activities 8,373 7,251 25,353 Returns on investment and servicing of finance 24 (952) (844) Taxation paid (539) (642) (6,954) Capital expenditure and financial investment (6,300) (2,338) (10,668) Subscription for loan notes (6,500) - - Acquisitions and disposals (38,017) (3,626) (8,527) Equity dividends paid (3,761) (2,718) (4,447) -------- ------- ------- Net cash flow before financing (46,720) (3,025) (6,087) Financing 46,671 (452) (3,016) -------- ------- ------- Decrease in cash in the period (49) (3,477) (9,103) ======== ======= ======= GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE SIX MONTHS ENDED 30TH JUNE 1999 Six months Six months Year to to 30 Jun to 30 Jun 31 Dec 1999 1998 1998 (As (As restated) restated) £'000 £'000 £'000 Profit attributable to the members of the parent undertaking 9,567 6,626 17,288 Exchange adjustment 1 (10) 2 ------ ------ ------ Total recognised gains and losses relating to the period 9,568 6,616 17,290 ====== ====== ====== THE CAPITA GROUP PLC NOTES TO THE FINANCIAL STATEMENTS 1. Analysis of turnover by business unit: Six months Six months Year to to 30 Jun to 30 Jun 31 Dec 1999 1998 1998 (As (As restated) restated) £'000 £'000 £'000 Continuing Activities Customer Services 40,981 23,981 51,169 Human Resources Services 33,043 30,837 62,118 Software Services 17,196 15,700 32,902 Systems & Strategic Services 31,177 28,023 54,006 Property Services 19,066 19,366 37,607 Acquisitions Human Resources Services 7,334 - - Property Services 1,430 - - -------- ------- ------- 150,227 117,907 237,802 ======== ======= ======= Analysis of profit before taxation by business unit: Continuing Activities Customer Services 2,733 1,849 3,988 Human Resources Services 3,584 2,491 6,575 Software Services 2,483 2,107 5,198 Systems & Strategic Services 2,605 2,261 6,602 Property Services 1,933 1,806 4,419 Acquisitions Human Resources Services 445 - - Property Services 198 - - Associated undertakings 82 (30) 18 Sale of fixed asset investments 52 - - -------- ------- ------- Profit before taxation 14,115 10,484 26,800 ======== ======= ======= The results of the Group are now reported under five business units, rather than simply two divisions. This change reflects our customers' increasing demands to buy integrated services from across the Group and to reflect the internal management of operations. For the analysis of profit before taxation by business unit, the associated undertakings comparative result has been adjusted to exclude businesses that are now subsidiary undertakings of the Group. 2. The interim financial statements have been prepared on the basis of the accounting policies set out in the Group's 1998 statutory accounts, except for adoption of the new accounting standard FRS12. The statements were approved by a duly appointed and authorised committee of the Board of Directors on 26th July 1999. Comparative figures for the year to 31st December 1998 have been extracted from the full accounts of the Group, as restated following the adoption of FRS12. Those accounts, on which the auditors gave an unqualified report, have been filed with the Registrar of Companies. The figures for the six months to 30th June 1998 and 1999 are unaudited. 3. Earnings per share have been calculated on an average number of shares in issue during the period of 202,252,000 (30th June 1998: 192,955,000). The diluted earnings per share have been calculated on the diluted profit for the period of £9,567,000 (30th June 1998: £6,648,000) and an average diluted number of shares in issue during the period of 208,862,000 (30th June 1998: 198,314,000). As at 26th July 1999, there were 206,737,623 shares in issue. 4. The interim dividend of 1.2p per share will be payable on the 14th October 1999 to Ordinary shareholders on the register at the close of business on 10th September 1999. 5. The new accounting standard FRS12 sets out detailed rules on the recognition, measurement and disclosure of provisions and contingencies. With regard to the Capita Group, the only area requiring adjustment in order to comply with the new standard is in respect of leasehold properties, with the requirement that a provision be made for the present value of the likely future outflows in respect of empty or under let leasehold properties. To reflect the changes necessary to comply with the standard the comparatives and opening balances for the six months ended 30th June 1998 and 31st December 1998 have been restated as follows: 30 Jun 1998 31 Dec 1998 ============ ============ Provisions £'000 £'000 £'000 £'000 As previously reported 586 412 FRS12 - Brought forward adjustment 1,531 1,531 Charged in period 106 219 ------- ------ 1,637 1,750 ------ ------ Restated for FRS 12 2,223 2,162 ------ ------ 30 Jun 1998 31 Dec 1998 ============ ============ Share Premium and other reserves £'000 £'000 £'000 £'000 As previously reported 12,873 35,630 FRS12 - Brought forward adjustment (1,531) (1,531) Charged in period (106) (219) ------- ------- (1,637) (1,750) ------- ------- Restated for FRS 12 11,236 33,880 ------- ------- 6. Our Year 2000 Compliance Programme is well advanced in identifying, prioritising and ensuring all our essential systems are Year 2000 compliant. Our review has covered the potential risks to the Group from the failure of systems of other parties, and where applicable we have initiated formal communication with these other parties. The progress of the Year 2000 Compliance Programme is closely monitored by the Board and senior management from across the Group. 7. Copies of this interim report will be sent to all shareholders. Further copies can be obtained from the Company's registered office, 71 Victoria Street, Westminster, London SW1H 0XA.

Companies

Capita (CPI)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today