Capita plc: Interim Management Statement

12 May 2014 


                   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 2014. This statement
coincides with Capita's Annual General Meeting which is taking place today at
11am.

Update on performance

We have made a strong start to 2014 securing £1.1bn of major new sales wins
(IMS May 2013: £660m) including contracts with Transport for London, Scottish
Wide Area Network, John Lewis and the Ministry of Defence. Our bid pipeline,
which stood at £5.5bn as at 27 February 2014, remains strong with a good level
of replenishment following recent contract wins. The bid pipeline currently
comprises opportunities across our target markets, particularly in the private
sector, primarily telecoms and financial services, in the justice market and
the wider public sector. To date in 2014, we have also acquired 6 complementary
businesses for a total consideration of £201m, taking us into new market
segments and extending our capabilities. These acquisitions play a key role in
our major bid propositions to clients in our existing and new markets and
therefore support the delivery of future organic growth.

We are making good progress across our key financial metrics as anticipated in
our full year results statement issued on 27 February 2014. As a result of our
strong major sales performance in 2013 and to date in 2014 and our good
operational performance, we are well placed to achieve organic growth and
operating margins in line with consensus market expectations for the full year
2014. We remain on track to deliver an annual cash conversion ratio at or
around 100% and net capital expenditure at or below 4% of full year revenue.

Delivering profitable organic growth

We continue to generate profitable growth by winning business with new and
existing clients. To date in 2014, we have secured 7 new and extended major
contracts with an aggregate value of £1.1bn including:

  * John Lewis - selected by John Lewis to provide its online contact centre.
    Under the agreement, which is worth £93.5m over 5 years, Capita will
    support John Lewis' online growth strategy and deliver a digital service,
    built around John Lewis' customers, that integrates with the full range of
    customer contact channels.
      * Ministry of Defence (MOD) - selected as preferred bidder to be the
    Strategic Business Partner for the Defence Infrastructure Organisation
    (DIO). Capita will lead a partnership comprising two integrated
    sub-contractors, URS and PA Consulting. The 10-year partnership, which
    could be worth around £400m to Capita, will lead the management and
    transformation of the UK's national and international defence
    infrastructure.
      * Scottish Wide Area Network (SWAN) - signed a framework contract to deliver
    SWAN, a single public services network for the use of all public service
    organisations within Scotland. The contract value for SWAN is up to £325m
    over 9 years. More than 4,600 sites will be connected to the initial
    network including schools, hospitals, GP surgeries, pharmacists and local
    council offices. Key benefits include reduced costs, improved service and
    the ability to share data across organisations, fostering co-operative
    working. This places Capita at the heart of public service delivery in
    Scotland, providing a platform to offer additional services and build our
    business here.
      * Transport for London (TfL) - secured a 5 year contract with TfL to operate
    and enforce the congestion charging, low emission zone and traffic
    enforcement notice processing schemes. Capita will take responsibility for
    the schemes in November 2015, following a period of implementation which
    commences in 2014. The overall agreement, including the implementation
    period, is expected to generate revenue of approximately £145m to Capita.


  * £118m other major contracts worth £25m - £50m: secured an interim 
services 


    agreement with the Ministry of Justice to take on responsibility for the
    frontline delivery of the existing electronic tagging operations prior to
    implementation of the new electronic monitoring contract. This involved the
    transfer of around 1,000 employees to Capita under TUPE regulations in
    February and March 2014. We have also secured a new contract with Genesis
    Housing Association and an extension to our Metropolitan Police radio
    managed services contract.


Bid pipeline: As at 27 February 2014, the bid pipeline stood at £5.5bn
(November 2013: £4.2bn) comprised of 25 bids (94% new business and 6% 
renewals)
and is being steadily replenished following recent contract wins. The pipeline
is a snapshot of major bid opportunities worth £25m or above, capped at £1bn
and where we have been shortlisted by the client to the last 4 bidders or
fewer. We announce the pipeline three times each year, in February, July and
November. Our current major bid win rate remains at its highest ever level. 
Contract rebids: We have one material contract up for rebid in 2015 (arising
from a recent acquisition) and then no further material rebids for the next 5
years (defined as having forecast annual revenue in excess of 1% of 2013
revenue). 
Securing value enhancing acquisitions 
The acquisition of small to medium sized businesses supports Capita's long term
organic growth by providing entry into new markets and enhancing our sales
offering by adding further scale and complementary capabilities to the Group's
service offering. 
To date in 2014, we have acquired 6 companies for a total cash consideration of
£201m. This includes acquisitions that have enhanced our IT and software
capabilities and facilitated entry into a new sector for Capita, domestic
mortgage processing: 
Asset Services Division - Acquisition of Crown Mortgage Management (`Crown') a
provider of residential and commercial mortgage administration services to
banks and financial institutions for a cash consideration of £7.5m, subject to
regulatory approval. Crown is one of the longest established residential and
small balance commercial mortgage servicers in the UK and has significant
experience in managing clients' strategies across both performing and
non-performing mortgage assets. Services include commercial servicing,
residential primary servicing, new mortgage origination, equity release
administration, credit management and due diligence. Capita currently processes
£129bn of commercial loans on behalf of banks. The combination of Crown's
specialist skills with Capita's large scale administration capability and
infrastructure provides us with a strong platform for growth in this sector. 
IT Services Division - Extended our networking capabilities with the
acquisition of IT network services provider Updata Infrastructure (UK) for a
cash consideration of £80m. Updata provides a range of networking and
connectivity services to mainly public sector clients and is working with
Capita on the framework contract to deliver the Scottish Wide Area Network
(SWAN). We have expanded our IT reseller offerings with the acquisition of 
Network Technology Solutions (UK), which provides a range of security solutions
including intrusion detection and prevention, data loss prevention and remote
access across the private and public sectors (for a cash consideration of 
£5.7m). 
Justice & Secure Services Division - To support our growing presence in the
utilities sector and enhance our data management capabilities, we have agreed
to acquire AMT-SYBEX Group (AMT) a proprietary software business providing
software and related services in mobile technology and smart data management to
the utilities and transport sectors. We are acquiring the business for an
initial consideration of £82m on a cash free, debt free basis, plus a
contingent consideration of up to £23m (based on the business reaching 
specific
profit targets over the next 12 months). The acquisition of AMT is subject to
regulatory approval. The acquisition of Liberty, a provider of specialist
document management services primarily for the transport sector, for a cash
consideration of £6.5m, adds further specialist document management services 
to
enhance our technology enabled car parking services proposition. Adding to our
resource management offering, we have acquired Retain International, a provider
of resource planning, scheduling and management software, for a cash
consideration of £18.8m. 
Outlook 
The UK market for customer and business process management remains highly
active and Capita is well positioned to secure major outsourcing and
transformational partnership opportunities across an increased number of
private and public sector markets. Our unrivalled and growing breadth of
capability provides us with a greater reach across these diversified markets
and increases our ability to be highly selective regarding the opportunities we
pursue. Our bid pipeline remains buoyant and with increasingly strong sales
momentum, particularly across the private sector and local government, there is
a good flow of further opportunities which will continue to fuel the bid
pipeline and organic growth in 2015 and the following years. 
We have strong revenue visibility for 2014 and growing visibility already for
2015 as a consequence of our sales successes in 2013 and to date in 2014. This
excellent sales performance, together with the acquisitions completed over the
previous 12 months and our solid underlying operating performance, gives us
confidence in meeting consensus market expectations for 2014 and provides a
good platform for growth in 2015 and beyond. 
                                -ends-                                      
For further information: 
Capita plc
Tel: 020 7654 2219
Andy Parker, Chief Executive
Shona Nichols, Corporate Communications Director 
Media enquiries only: 
Capita press office
Caroline Mooney
Tel: 020 7654 2152 or 020 7654 2399 (out of hours)
Email: caroline.mooney@capita.co.uk 
About Capita 
Capita plc is the UK's leading provider of customer and business process
management (BPM) and integrated professional support service solutions. With
64,000 people at more than 350 sites, including 73 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 2013 revenue of £3.9bn.
Further information on Capita plc can be found at: www.capita.co.uk 
END 
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