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: email@example.com 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
Capita plc: Interim Management Statement
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