Interim Results

Capita Group PLC 28 July 2005 28 July 2005 THE CAPITA GROUP PLC Interim Results for the six months to 30 June 2005 Pleasing progress in first Six months Financial Highlights (restated for IFRS) Six months ended Six months ended Change 30 June 2005 30 June 2004 Turnover £687m £617m* +11% Operating profit** £81.0m £68.8m +18% Profit before tax** £74.5m £63.3m +18% Earnings per share** 8.06p 6.75p* +19% Interim dividend per share 2.10p 1.75p +20% Key points • Operating margins** increased to 11.8% (2004: 11.1%) • Operating cash flow of £95.4m (2004: £81.9m) • £240m major contract wins and renewals in first 7 months of 2005 • Bid pipeline of £3.4bn • Active public and private sectors markets • Offshore BPO capabilities enhanced with second business centre opened in Mumbai * excluding discontinued operations ** before share based payment charge, intangible amortisation and one-off items Rod Aldridge, Executive Chairman of The Capita Group Plc, commented: 'Capita has made encouraging progress in the first 6 months of the year, reflected in another period of strong financial results. 'The components for a highly successful 2005 are in place and we believe shareholders will be pleased with Capita's results for the year as a whole. Furthermore, the ingredients are also in place for delivering strong growth in 2006. Our businesses are in excellent shape for generating incremental growth and the market for BPO opportunities across both the private and public sectors continues to be buoyant. We are confident we will make the most of these opportunities while continuing to maintain high levels of selectivity.' For further information: The Capita Group Plc Tel: 020 7799 1525 Rod Aldridge, Executive Chairman Paul Pindar, Chief Executive Shona Nichols, Corporate Communications Director Capita Press Office Tel: 0870 2400 488 Financial Dynamics Tel: 020 7269 7291 Andrew Lorenz/Richard Mountain THE CAPITA GROUP PLC Interim Results for the six months to 30 June 2005 Chairman's Statement Results Capita has made encouraging progress during the 6 months to 30 June 2005. This is reflected in both the strengthening of our position as the UK's market leader in providing business process outsourcing (BPO) services to the public and private sectors and in the delivery of another period of strong financial results. Capita now prepares accounts in accordance with International Financial Reporting Standards (IFRS). Consequently, in the results below, the comparatives have been restated to reflect this change. During the period, turnover increased by 11% to £687m (half year to 30 June 2004: £617m excluding discontinued operations). Operating profits before the share based payment charge and before amortisation of separately identifiable intangible assets ('intangibles') and one-off items rose by 18% to £81.0m (2004: £68.8m) and net profits before taxation, share based payment charge, intangible amortisation and one-off items increased by 18% to £74.5m (2004: £63.3m). Earnings per share before share based payment charge, intangible amortisation and one-off items grew by 19% to 8.06p (2004: 6.79p excluding discontinued operations). We are committed to the continued development of the Group, building sustainable value for our stakeholders, primarily our shareholders, customers and our employees. Building value for shareholders We focus on a number of key measures to ensure that we are creating value for our shareholders: * we have continued our long-term trend of improving operating margins, which have again increased during the period to 11.8% (2004: 11.1 per cent). For the year as a whole, we expect operating margins to be comfortably ahead of the level achieved in 2004 of 12.5% * the strength of Capita and its business model is reflected in our cash flow, with £95.4m generated by operations, representing an operating profit to operating cash conversion rate of 118% (2004: 119%). * we aim to contain capital expenditure at or below 4% of revenue, although there may be rare occasions when we exceed this where our financial strength can be used to our competitive advantage. During the period, capital expenditure rose slightly to 4.1% of revenue, following investment in advanced IT platforms to support future growth across our insurance and life and pensions businesses * we focus on driving a steadily increasing return on capital, which in turn should exceed our cost of capital. Over the last 12 months, the post tax return on average capital employed (including debt) has improved to 17.2% (12 months to 30 June 2004: 15.5%). This compares to our weighted average cost of capital which is 8.5% * we have continued with our strategy of acquiring small, realistically priced businesses which complement or develop our current service offerings. Total committed spend on 5 acquisitions to date this year has been £44.3m (net of cash acquired). Further information is provided later in the statement * a core plank in the creation of shareholder value is a progressive dividend policy. The Board has declared an interim dividend of 2.1p net per ordinary share (2004: 1.75p), a 20% increase. Over the last five years, we have grown Capita's annual dividend at a compound rate of 33%. The dividend will be payable on 7 October 2005 to shareholders on the register at the close of business on 9 September 2005. The interim dividend is covered 3.8 times by earnings per share before share based payment charge, intangible amortisation and one-off items * at our Annual General Meeting in April, shareholders renewed our authority to repurchase up to 10% of our issued share capital. To date this year, the Group has bought back 5 million shares (representing 0.8% of the issued share capital) at an average price of 373p. Creating organic growth We have two complementary approaches to creating organic growth. First, our centrally managed major sales team seeks to secure contracts typically with a value of £10m or above. These contracts are complex, integrated projects that require a wide range of the Group's skills and which generate high quality, recurring revenues. Secondly, each of our businesses employs sales teams focused upon securing growth from both new and existing customers, including developing our major contract relationships. Across the Group, we have more than 20,000 customers and our retention rate remains excellent. Organic Growth: securing major contracts Securing and renewing major contracts is an important component of our growth. This year, we have announced £140m of major contract wins and renewals, comprising a 3 year contract with eircom, a 10 year contract with Chester Street Insurance, a 21 month extension to our Office Services contract with the Department for Work and Pensions ('DWP'), a 3 year extension to our Norwich Union Clubline contract and a 12 year contract extension with Mendip District Council. I am pleased to report today that Capita has been selected to deliver a major service transformation programme for Harrow Council in a proposed 10 year partnership, estimated by the Council to be in the region of £100m, with initial works in excess of £45m over the first 3 years. Consequently, this makes a total of £240m additional business announced in the first 7 months of 2005, representing £154m in new business and £86m in contract extensions. Harrow Council has selected Capita as its preferred partner in the Council's Business Transformation initiative. Key elements of this innovative, incremental partnership will involve the support and development of a contact centre and 'one stop shop', a programme to enhance its internal operational systems and processes, integrated Management Information Services and associated ICT infrastructure and systems management. In the 4 1/2 years to 31 December 2009, we have only 3 material contracts (defined as having annual revenue in excess of 1% of 2004 turnover) due for renewal. The first of these falls due on 1 August 2006. We are now involved in bids to extend all 3 of these contracts. Recent progress in converting our bid pipeline into secured contracts has been affected by two specific factors. First, the May General Election had a minor impact on delaying central government opportunities. Secondly, the possibility of VAT becoming chargeable on the provision of certain outsourcing services to the financial services sector has resulted in a pause in some of our bids in the life and pensions and insurance markets. We have relegated a small number of these opportunities to our prospects list due to the current uncertainty regarding speed of bid progression. However, we believe the position regarding the application of VAT in these markets is becoming clearer and that the level of savings we are able to provide for the finance industry is sufficiently large that a more normal rate of progress will prevail in the second 6 months. Our major contract bid pipeline remains at a substantial level, having been replenished at a healthy rate. We are currently working on live major bids with a total value of £3.4bn across the public and private sectors. This total only includes bid situations in which Capita is shortlisted as one of 4 or fewer competitors and caps our largest bids at £500m. Organic Growth: developing major contracts Client satisfaction with high levels of service across our major contracts is enabling us to expand these partnerships. For example: * as an addition to our TV Licensing contract, we have agreed funding with the BBC for field generated sales, which is worth up to £7.5m over 2 years. Together with the BBC and its other partners, we have introduced measures to make payment easier and more efficient and further reduced the evasion rate from 5.7% to 5% (31 March 2004 to 31 March 2005; of the 0.7% reduction, 0.3% is due to the downward revision by BARB of the estimate of the number of households with televisions). As a result, improvements in licence fee collection have increased revenue to the BBC by £19m for the year ended 31 March 2005 * our revenues administration contract for Westminster City Council, initially awarded in 1994, has been extended for a further 31 months to the end of October 2008 * we have been, subject to contract, awarded a £5m contract extension to handle additional customer calls for Dixons Group plc, following our success in swiftly raising the service performance of its customer contact centre * the Criminal Records Bureau ('CRB'), which has met all its Public Service Standards for issuing Disclosures since June 2003, continues to increase its capacity and capability. It issued the one millionth Disclosure after 10 months of operation, the second million in 6 months and the third in only 5 months. It is anticipated that the CRB will issue in excess of 2.7m Disclosures in 2005. One key enhancement to the service is the I-PLX (Interim Police Local Cross-Referencing) database, developed and maintained by Capita in conjunction with the CRB Agency. I-PLX will help to improve the sharing of information across the Criminal Justice Service * our contract to administer Transport for London's Central London Congestion Charging Scheme has met in excess of 90% of its Key Performance Indicators every month this year. Over 50% of all charge purchases are now made via the web or SMS texting, the two most cost effective channels. The public consultation exercise regarding the extension of the charging zone to the West of London ended on 15 July 2005 and the Mayor's decision on whether the Western Extension will go ahead is currently scheduled for autumn of this year. Organic growth: Divisions The businesses across our divisions are delivering pleasing organic growth from a loyal and growing client base. They focus on continuously evolving their product and service offerings to position themselves at the leading edge of their marketplaces. In the period, Capita Symonds has secured some key roles delivering multi disciplinary property consultancy services across a number of significant projects for clients including the Ministry of Defence, the Highways Agency, Lansdowne Road Stadium Development Company and South Lancashire Council. The projects, worth a total £1.52bn, will generate estimated fees of £16m to Capita Symonds. The company was also involved in supporting London's 2012 Olympic and Paralympic Games Bid, providing a full range of environmental, planning, transport and engineering support. Following the Bid's success, Capita Symonds is now bidding with partners to participate in initiatives to ensure that London has all facilities and an appropriate transport infrastructure in place for the Games. Other parts of the Group may also benefit from the increased requirement foradministration, customer services and resources in the run up to 2012. Our Resourcing businesses have strengthened their performance in the period, gaining positions on a number of framework and master vendor agreements and increasing market share across many areas. Veredus has secured integrated commissions worth nearly £1m to recruit and develop executive teams to deliver improved services across central and local government organisations, including the Serious Organised Crime Agency, the Department for Education and Skills, Northamptonshire and Bedfordshire County Councils. Our software businesses have performed well, particularly our local government business which has established a strong position in the market with its ability to build supportive partnerships with councils who join forces to benefit from shared IT and software infrastructures and e-government services. For example, Adur and Horsham District Councils are being provided with Academy revenue systems running on a shared platform, even though the Councils are not geographically neighbouring. In the period, Capita Software Services secured new contracts worth £3.7m, including a contract worth in excess of £1m over 5 years with Glasgow City Council, the largest Scottish local authority in the UK. The contract is to provide new council tax and benefits software and support, including Academy Streetwise Mobile Computing and Citizen self-service modules. Capita Consultancy continues to not only play an integral role in supporting our major BPO contracts, but also in delivering transformation programmes across central and local government. For example, in the period, the consultancy secured and extended contracts worth a total of £3m for the DWP, the General Medical Council, Bolton Metropolitan Council and Poole District Council. It was also awarded the 2005 Management Consultancies Association Gold Award for Change Management for our work with DWP on Pension Credit. We have experienced strong trading conditions across our financial services offering. Our life & pensions operations continue to deliver cost efficiencies and high levels of customer service by using effective business processes and proprietary IT infrastructures. Our pensions administration operation, Capita SIP Services (formerly Capita PPML), is undertaking a £7m investment programme to position the business at the forefront of the self invested pensions market. The business will have unparalleled online capabilities, including a new investment administration platform for improved asset recording and fund accounting, and will therefore be well positioned to benefit from opportunities in the run up to pensions simplification next year. Capita Hartshead has performed particularly well, securing over 30 new contracts and extensions worth in excess of £8.6m with a range of clients across the public and private sectors, including Alliance & Leicester, BP Oil, AWG Plc, Baring Asset Management, British Shipbuilders and the House of Commons. Our operations focused on financial and HR administration secured over £9.3m of new contracts and extensions. New contracts for our share plan, investor relations and unit trust administration businesses were secured with clients including ITV, easyJet, PartyGaming plc, Admiral Group plc and Banco Santander. Capita Registrars secured nearly half of all company flotations over the period, equating to 63% of flotations by market capitalisation. We continue to develop new and innovative services in this area, for example, our Director's Interests and Monitoring Service (DIMS), which helps companies to comply with the Companies Act 1985 and the new Disclosure Rules. Our HR & payroll business performed strongly in the first half of the year with new and extended contracts secured with clients including NAAFI, Royal Bank of Scotland and GlaxoSmithKline. Apart from our volume loss adjusting operation, our insurance businesses have grown strongly in the period, particularly the legal and assistance services, London Markets and our integrated claims administration offering. As volume loss adjusting services are increasingly being displaced by in-house, desktop adjusting services, we have repositioned our adjusting operation to focus on specialised major and complex loss working with commercial insurers. Capita's combined insurance services offering now establishes us as an independent insurance intermediary focused on delivering the core, added value elements of end to end claims handling. We have also achieved clear market differentiation by developing the most advanced claims administration SAP platform in the industry. This provides clients with increased flexibility to meet peaks and troughs in demand and introduces claims casework management which enhances transparency of claims management, increases fraud detection and accelerates the settlement of claims. Organic Growth: Offshore Capabilities To meet the increasing requirement to offer offshore delivery options in our major contract bid proposals and to add further value to existing clients and our own businesses, we are rapidly building our offshore BPO capabilities. We have recently established a second, modern business centre in Mumbai, comprising 100,000 square feet of space, bringing our total space in India to 120,000 square feet. To service our current flow of offshore work, we are increasing the number of employees from 130 to 300 by the year end. The business centres focus on delivering back office administration processes and infrastructure. With Capita's ability to deliver strong project management, business process re-engineering and change management, these lower cost facilities provide an alternative service delivery model to clients wishing to maximise efficiency whilst maintaining high levels of service performance. We are currently providing both standalone offshore processes in India and also seamlessly combining offshore and UK onshore outsourced services for clients and the Group. Acquisitions We are enjoying a healthy flow of acquisition opportunities, with the pricing environment more favourable than 6 months ago. Our approach remains cautious and we continue to focus on smaller opportunities, which are priced at a level which adds value to the Group. During the period, we completed 3 acquisitions, investing a total of £8.3m (net of cash acquired), including: * In February, we invested £4m to acquire Buchanan Consulting Engineers a leading development and transport planning consultancy. The business has been successfully integrated into Capita Symonds and reinforces its position as one of the leading transport and infrastructure planning consultancies * In June, we acquired Randall Lyons, a leading UK provider of web based information management solutions and bureau scanning services, for an initial consideration of £4.2m and a potential deferred element of up to £3m dependent upon performance. The products and expertise of Randall Lyons combined with Capita's existing services enable us to offer a comprehensive web-enabled solution to the storage, retrieval and handling of all types of documents and images, assisting customers to move efficiently to a paperless environment. In July 2005, we have announced a further 2 acquisitions: * On 12 July, we concluded the acquisition of BMI Health Services for £10m. This business will be merged with Capita's existing health solutions company which we acquired from Aon in 2004. This business has already grown successfully under Capita's ownership in the last 12 months and we believe a strong occupational health offering has significant market potential going forward. The combined business will be positioned as the leading and largest provider of occupational health services to the public and private sectors in the UK. * On 25 July, we announced the acquisition of BDML Connect Ltd from the insurance group BDML, subject to final FSA approval. The business will be acquired for an initial cash consideration of £26m with a deferred consideration of up to £9m, dependent on future business performance in the 30 months to 31 December 2007. BDML Connect delivers personal lines insurance services on behalf of major affinity brands such as Norwich Union, Admiral Insurance and RAC. The acquisition enhances Capita's insurance capabilities, positioning us strongly in the affinity market with the ability to provide end to end services, from sales and claims administration to policy, across a broad range of personal lines products. Our pipeline of potential businesses to be acquired is encouraging and it is likely there will be further acquisitions in the second half. Divisional structure In our statement in February 2005, we announced the appointment of two new Divisional Executive Directors. These appointments were made to support Capita's growth going forward. We now operate Capita through 7 divisions, comprising 5 operating divisions and 2 support divisions (being major sales & marketing and central support functions). As a consequence of this and the requirement to comply with the new International Financial Reporting Standards, we are now providing shareholders with increased detail regarding the performance of individual parts of Capita's business. Accordingly, these results analyse our performance across the 5 operating divisions and additionally, our Business Services Division is reported financially as 2 separate business segments, being our Property Consultancy and Resourcing operations. Therefore, we are reporting across 6 areas of business as opposed to the 4 areas reported last year. Valuing our people Yet again, our people have made an enormous contribution to Capita's continued progress. We have a stable and consistent management team, a low turnover of senior people and an excellent team spirit and attitude throughout the company. I would like to thank our staff for the vital part they play in Capita's continued success. Future prospects The components for a highly successful 2005 are already in place and we believe shareholders will be pleased with the results for the year as a whole. Furthermore, the ingredients are also in place for delivering strong growth in 2006. Our businesses are in excellent shape for generating incremental growth and the market for BPO opportunities across both the private and public sectors continues to be buoyant. We are confident that we will make the most of these opportunities while continuing to maintain high levels of selectivity. Rodney M Aldridge, OBE Executive Chairman Interim 2005 under IFRS - the Capita Group Plc Consolidated income statement for the six months ended 30 June 2005 2005 2004 Before Amortisation amortisation share-based share-based payment and Before payment and loss on amortisation Amortisation loss on disposal of and share- and share- disposal of discontinued based based discontinued operation payment payment Total operation Total Notes £Million £Million £Million £Million £Million £Million ------------------------------------------------------------------------------------------------------------------ Continuing operations: Revenue 1 687.3 - 687.3 617.3 - 617.3 ================================================================================================================== Operating profit 1 81.0 (4.4) 76.6 68.8 (3.0) 65.8 Finance costs (6.5) - (6.5) (5.5) - (5.5) ------------------------------------------------------------------------------------------------------------------ Profit from continuing operations before tax 74.5 (4.4) 70.1 63.3 (3.0) 60.3 Income tax expense (20.9) 1.3 (19.6) (17.9) 1.0 (16.9) ------------------------------------------------------------------------------------------------------------------ Profit for the period from continuing operations 53.6 (3.1) 50.5 45.4 (2.0) 43.4 ------------------------------------------------------------------------------------------------------------------ Discontinued operations: Loss for the period from discontinued operation - - - (0.3) (0.7)* (1.0) ------------------------------------------------------------------------------------------------------------------ Profit for the period 53.6 (3.1) 50.5 45.1 (2.7) 42.4 ================================================================================================================== Attributable to: Equity holders of the parent 53.4 (3.1) 50.3 45.1 (2.7) 42.4 Minority interest 0.2 - 0.2 - - - ------------------------------------------------------------------------------------------------------------------ 53.6 (3.1) 50.5 45.1 (2.7) 42.4 ================================================================================================================== Earnings per share (EPS) - Basic 4 8.06p (0.47)p 7.59p 6.75p (0.40)p 6.35p ================================================================================================================== - Diluted 4 7.92p (0.46)p 7.46p 6.71p (0.40)p 6.31p ================================================================================================================== EPS excluding discontinued operations: - Basic 4 8.06p (0.47)p 7.59p 6.79p (0.29)p 6.50p ================================================================================================================== - Diluted 4 7.92p (0.46)p 7.46p 6.75p (0.29)p 6.46p ================================================================================================================== *This amount represents the loss on the disposal of business of £1.0m (as disclosed in the previous UK GAAP financials) net of tax of £0.3m Consolidated balance sheet at 30 June 2005 (Restated under IFRS) 30 June 30 June 31 December 2005 2004 2004 Notes £Million £Million £Million ------------------------------------------------------------------------------- ASSETS Property, plant and equipment 138.3 119.9 129.1 Intangible assets 6/7 516.4 481.0 500.2 Available for sale financial assets 0.2 0.2 0.2 Deferred taxation 36.6 29.1 32.6 ------------------------------------------------------------------------------- Total non-current assets 691.5 630.2 662.1 ------------------------------------------------------------------------------- Trade and other receivables 167.2 150.9 150.4 Prepayments and accrued income 116.1 120.1 98.7 Cash at bank - 4.8 - ------------------------------------------------------------------------------- Total current assets 283.3 275.8 249.1 ------------------------------------------------------------------------------- TOTAL ASSETS 974.8 906.0 911.2 =============================================================================== EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Issued capital 9 13.5 13.4 13.4 Share premium 9 251.5 246.2 248.1 Treasury shares 9 (13.3) - (0.2) Capital redemption reserve 9 0.1 0.1 0.1 Foreign currency translation 9 (0.1) - 0.1 Retained earnings 9 120.0 88.8 98.4 ------------------------------------------------------------------------------- 371.7 348.5 359.9 ------------------------------------------------------------------------------- Minority interest 9 0.6 0.3 0.4 ------------------------------------------------------------------------------- Total equity 372.3 348.8 360.3 ------------------------------------------------------------------------------- Non-current liabilities Interest-bearing loans and borrowings 145.2 145.1 145.2 Provisions 4.8 6.3 5.5 Employee benefits 54.6 76.8 44.1 ------------------------------------------------------------------------------- 204.6 228.2 194.8 ------------------------------------------------------------------------------- Current liabilities Trade and other payables 109.4 130.8 87.8 Accruals and deferred income 203.0 161.2 196.1 Interest-bearing loans and borrowings 2.3 6.8 6.8 Income tax payable 24.6 30.2 28.4 Overdraft 58.6 - 37.0 ------------------------------------------------------------------------------- 397.9 329.0 356.1 ------------------------------------------------------------------------------- TOTAL LIABILITIES 602.5 557.2 550.9 ------------------------------------------------------------------------------- TOTAL EQUITY AND LIABILITIES 974.8 906.0 911.2 =============================================================================== Consolidated cash flow for the six months ended 30 June 2005 Notes June June 2004 2005 (restated) £m £m ------------------------------------------------------------------------------- Cash flows from operating activities Operating profit before interest and taxation 76.6 65.5 Depreciation 16.5 16.7 Amortisation of intangible assets 1.2 0.7 Share based payment expense 3.2 2.3 Increase in provisions 0.1 0.9 Provisions utilised (0.7) (0.5) Decrease in debtors (35.3) (36.4) Increase in creditors 33.8 32.7 ------------------------------------------------------------------------------- Cash generated from operations 95.4 81.9 ------------------------------------------------------------------------------- Interest paid (6.5) (5.5) Income tax paid (22.4) (12.4) ------------------------------------------------------------------------------- Net cash generated from operating activities 66.5 64.0 ------------------------------------------------------------------------------- Net cash used in investing activities Purchase of fixed assets (24.1) (23.7) Purchase of intangible fixed assets 6 (4.0) - Purchase of subsidiary undertakings and businesses (net of cash acquired) 7 (22.1) (31.4) ------------------------------------------------------------------------------- (50.2) (55.1) Net cash used in financing activities Issue of ordinary share capital 3.5 1.1 Share buybacks (13.1) (0.9) Dividends (23.8) (18.0) Repayment of loans notes and long term loans (4.5) (6.1) ------------------------------------------------------------------------------- (37.9) (23.9) Net decrease in cash and cash equivalents (21.6) (15.0) Cash and cash equivalents at the beginning of the period (37.0) 19.8 ------------------------------------------------------------------------------- Cash and cash equivalents at 30 June (58.6) 4.8 =============================================================================== Cash and cash equivalents comprise: (Overdraft)/cash at bank (58.6) 4.8 ------------------------------------------------------------------------------- Total (58.6) 4.8 =============================================================================== Statement of Recognised Income and Expense for the six months ended 30 June 2005 Notes June 2005 June 2004 £m £m ------------------------------------------------------------------------------- Profit for the period 50.3 42.4 Exchange loss (0.2) - Actuarial (loss)/gain on pension scheme valuations (13.7) 0.6 Taxation 4.1 1.0 ------------------------------------------------------------------------------- 40.5 44.0 =============================================================================== Notes to the consolidated financial statements at 30 June 2005 1. Segmental reporting Analysis of segment revenue Resourcing Commercial Corporate Integrated Professional Property services services services services services services Total ------------------------------------------------------------------------------------------ 2005 £m £m £m £m £m £m £m Continuing 90.4 119.5 110.9 177.5 100.9 88.1 687.3 ------------------------------------------------------------------------------------------ 2004 - restated ------------------------------------------------------------------------------------------ Continuing 88.0 115.8 87.1 155.7 96.9 73.8 617.3 Discontinued - - - 1.9 1.0 - 2.9 ------------------------------------------------------------------------------------------ Total 88.0 115.8 87.1 157.6 97.9 73.8 620.2 ------------------------------------------------------------------------------------------ Analysis of segment result Resourcing Commercial Corporate Integrated Professional Property services services services services services services Total ------------------------------------------------------------------------------------------ 2005 £m £m £m £m £m £m £m Continuing 6.2 10.2 19.3 25.2 12.6 7.5 81.0 ------------------------------------------------------------------------------------------ 2004 - restated ------------------------------------------------------------------------------------------ Continuing 4.5 9.5 14.4 21.6 11.3 7.5 68.8 Discontinued - - - (0.1) (0.2) - (0.3) ------------------------------------------------------------------------------------------ Total 4.5 9.5 14.4 21.5 11.1 7.5 68.5 ------------------------------------------------------------------------------------------ The segments disclosed above differ from those disclosed in the group's most recent set of interim financial statements published for the period ended June 2004. These statements were prepared under UK GAAP and thus are required to be restated to meet the disclosure requirements of IAS-14 Segmental reporting. These requirements mean that the group will now report six divisions. The impact of the changes due to adoption of IAS-14 and also changes due to an internal restructure to better align businesses within the regulatory environment, are as follows: Analysis of segment revenue Resourcing Commercial Corporate Integrated Professional Property services services services services services services Total ------------------------------------------------------------------------------------------ 2004 £m £m £m £m £m £m £m As reported June 2004 167.1 168.2 - 140.1 141.9 - 617.3 Adjustments due to IAS-14 (73.8) - - - - 73.8 - Adjustments due to restructure (5.3) (52.4) 87.1 15.6 (45.0) - - ------------------------------------------------------------------------------------------ As reported June 2005 88.0 115.8 87.1 155.7 96.9 73.8 617.3 ------------------------------------------------------------------------------------------ Analysis of segment result As reported June 2004 11.4 20.1 - 19.2 18.1 - 68.8 Adjustments due to IAS-14 (7.5) - - - - 7.5 - Adjustments due to restructure 0.6 (10.6) 14.4 2.4 (6.8) - - ------------------------------------------------------------------------------------------ As reported June 2005 4.5 9.5 14.4 21.6 11.3 7.5 68.8 ------------------------------------------------------------------------------------------ The major change in the year was the formation of Corporate Services which incorporates the Life & Pensions business and the financial services businesses formerly within Commercial Services with the HR and payroll businesses formerly within Integrated Services. Congestion Charging and the insurance related businesses formerly part of Professional Services have been transferred to Integrated Services and Commercial Services respectively. 2. The interim financial statements have been prepared on the basis of the accounting policies set out in 'Restatement of Financial Information under International Financial Reporting Standards', a separate document that has been published on the Capita website (www.capita.co.uk) and which is also available upon request. Further disclosure concerning the impact of IFRS on the financial statements of the group can also be found in that document including the reconciliations required by IFRS 1 'First Time Adoption of International Financial Reporting Standards'. The accounting policies are drawn up in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. 3. These financial statements are prepared in accordance with the accounting policies detailed in the 'Restatement of Financial Information under International Financial Reporting Standards' referred to above and were approved by a duly appointed and authorised committee of the Board of Directors on 27 July 2005. The full year accounts, on which the auditors gave an unqualified report and which were prepared under UK GAAP, have been filed with the registrar of Companies. The figures for the six months ended 30 June 2004 and 2005 are un-audited. 4. Earnings per share have been calculated in accordance with IAS-33 Earning per share. The average number of shares in issue during the period was 662.8m (30 June 2004: 667.7m). The diluted earnings per share have been calculated on the diluted profit for the period of £50.3m (30 June 2004 - restated: £43.4m before discontinued operations and £42.4m after) and an average diluted number of shares of 674.6m (30 June 2004 - restated: £671.6m). As at 27 July, there were 659.1m shares in issue. 5. The interim dividend of 2.10p per share will be payable on 7 October 2005 to ordinary shareholders on the register at the close of business on 9 September 2005. The dividend disclosed in the cash flow represents the final ordinary dividend of 3.60p per share as declared in the 31 December 2004 financial statements and agreed at the group's AGM. 6. The Group made a final consideration payment to Aon, with regard to the contract for the administration of miners' personal injury liability claims, of £4.0m. 7. During the year the group has made a number of acquisitions. In each case the group attained 100% control of the voting shares or control over the business, assets and liabilities acquired. The fair value of the identifiable assets and liabilities of the acquisitions, in aggregate, was: Recognised on acquisition Carrying value ------------------------------------------------------------------------------- £m £m Property, plant and equipment 0.1 0.2 Trade receivables 3.0 3.1 Taxation (0.2) (0.2) Trade payables (2.4) (2.2) Cash and cash equivalents 0.9 0.9 ------------------------------------------------------------------------------- Fair value of net assets 1.4 1.8 ============= Goodwill arising on acquisitions 7.8 ------------------------------------------------------------- Cash consideration 9.2 ============================================================= An exercise to determine any intangible assets included within goodwill is yet to be undertaken, this exercise will be completed for the full year financial statements. During the year the group settled final deferred consideration in relation to the previous acquisition of the life and pensions business of Lincoln Financial Group with a payment of £13.8m on which £6.6m had been accrued, resulting in an increase in goodwill of £7.2m. The acquisitions have been completely integrated within the existing businesses of the Group and consequently it is not possible to determine their post acquisition results. 8. Movement in net debt Debt at 1 Other cash flow Non cash January 2005 Debt repaid movements movements Total £m £m £m £m £m -------------------------------------------------------------------------------------- Cash and cash equivalents (37.0) - (21.6) - (58.6) -------------------------------------------------------------------------------------- Cash and cash equivalents (37.0) - (21.6) - (58.6) Loan notes (27.1) 4.4 - - (22.7) Bonds (124.7) - - - (124.7) Finance leases (0.2) 0.1 - - (0.1) -------------------------------------------------------------------------------------- (189.0) 4.5 (21.6) - (206.1) ====================================================================================== 9. Statement of Changes in Equity Profit Capital Foreign and Share Treasury Share redemption currency loss Minority Total capital shares premium reserve reserve reserve Total interest equity £m £m £m £m £m £m £m £m £m ----------------------------------------------------------------------------------------------------------------------- At 1 January 2004 13.4 (0.2) 248.1 0.1 0.1 98.4 359.9 0.4 360.3 Profit for the period - - - - - 50.3 50.3 0.2 50.5 Dividends - - - - - (23.8) (23.8) - (23.8) Exchange differences - - - - (0.2) - (0.2) - (0.2) Share buybacks - (13.1) - - - - (13.1) - (13.1) Issue of share capital 0.1 - 3.4 - - - 3.5 - 3.5 Actuarial losses on defined benefit schemes - - - - - (13.7) (13.7) - (13.7) Share based payment - - - - - 3.2 3.2 - 3.2 Tax taken to equity - - - - - 5.6 5.6 - 5.6 ----------------------------------------------------------------------------------------------------------------------- At 30 June 2005 13.5 (13.3) 251.5 0.1 (0.1) 120.0 371.7 0.6 372.3 ======================================================================================================================= This information is provided by RNS The company news service from the London Stock Exchange RBUAR

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