Results for the half year ended 30 June 2016 27 July 2016 Capita plc
Agenda Key highlights & trading considerations Andy Parker, Chief Executive Financial results Nick Greatorex, Group Finance Director Maggi Bell, Group Business Development Director Business development Acquisitions and outlook Andy Parker, Chief Executive 2
Key highlights | H1 2016 Good financial performance • Revenue up 8.8% on a like for like* basis, including organic growth of 5.0% • Underlying operating margin 13.2% • Underlying profit before tax up 8% and EPS up 7% • Interim dividend increased by 6% • Operating cash flow up 29% Driving growth from major sales and divisions • Bid pipeline £5.1bn total contract value • £879m of major new contracts and extensions secured in half year • Improved contribution to growth from divisional businesses Acquisitions and disposals • Announced 6 acquisitions for aggregate spend of £84m • Trustmarque adds cloud capability and strong relationship with Microsoft • Completed disposals of two businesses held for sale Continued good performance * Excludes 2015 disposals 3 and businesses held for sale
Current trading considerations EU referendum impact too early to assess • Increased uncertainty, particularly in financial services sector • Expecting and identifying incremental medium-term opportunities arising from the UK leaving the EU 2016 Outlook • Strong pipeline of bid opportunities, delays in some decision making continues • Targeting organic revenue of around 4% Structural drivers for our services remain strong Positioned for continued growth 4
Financial results Nick Greatorex Group Finance Director
Financial results | underlying income* statement 30 June 2016 £m 6 months to £m 6 months to Change June 2016 June 2015 Total underlying revenue 2,405 2,283 5% 289 10% Operating profit 318 Interest (32) (24) 35% 265 8% Profit before tax 285 Taxation (53) (49) 8% Profit after interest and tax 232 216 8% Non controlling interests (5) (4) 35% Profit attributable to 212 7% shareholders 227 Weighted number of shares (millions) 663 662 Basic EPS (pence) 34.24 32.03 7% Dividend (pence) 11.1 10.5 6% * Excludes non-underlying items which include: Intangible amortisation, impairments, net contingent consideration movements, other non-recurring items, non-cash 6 mark-to-market finance costs
Financial results | revenue £m £m 6 months to 6 months to Change • Organic growth 5.0% 30 June 30 June 2016 2015 • 5 year H1 compound growth 11% Total reported revenue 2,430 2,289 6.2% Small non-core health - (6) disposals in H1 2015 Half year Small non-core health & 1,400 2011 insurance disposals in H2 - (19) 2,930 Full year 2015 1,607 2012 Businesses held as 3,352 (25) (54) available for sale 1,819 2013 3,851 Total revenue of 2,405 2,210 8.8% continuing activities 2,071 2014 4,372 2015 acquisitions (67) - (3.0)% 2,283 2015 4,674 2016 acquisitions (17) - (0.8)% 2,405 2016 Total organic growth 2,321 2,210 5.0% 0 2,000 4,000 6,000 £m Continued steady growth 7
Financial results | revenue by market Public sector % revenue Retail, Utilities & Telecoms 14% New Justice & EmergencyServices 4% Defence 4% 2% Private 7% 7% sector 54% 15% 50% 46% 7% Insurance 4% FY 2010 H1 2016 Education 8% 11% Health • Increased diversification 9% 5% reducing risk Central government 9% 18% Financial Services • Central government proportion reduced to 8% Life & Pensions 16% 20% Local government • Increasing private sector contribution Other Private 20% • No material* contract rebids 20% until 2019 FY 2010 H1 2016 Increased market diversification * >1% of previous year’s revenue 8
Financial results | underlying profit measures* Operating profit Profit before tax • Comparative growth 10% • Comparative growth 8% • 5 year H1 compound growth 11 % • 5 year H1 compound growth 11% 169.7 187.8 2011 2011 376.6 417.0 186.4 214.1 2012 2012 417.0 466.7 205.2 226.8 2013 2013 475.0 516.9 238.0 260.2 2014 2014 535.7 576.3 264.9** 288.8** 2015 2015 585.5*** 639.0*** 285.3 317.6 2016 2016 0 100 200 300 400 500 600 700 0 100 200 300 400 500 600 700 £m £m • * Excludes non-underlying items which include: Intangible amortisation, impairments, net contingent consideration movements, other non-recurring items, non-cash mark-to-market finance costs • ** The H1 2015 comparatives include the results from businesses disposed or held for disposal in H2 2015 9 • *** The FY 2015 comparatives exclude the businesses disposed of or held for disposal in 2015
Financial results | underlying H1 operating margin* 15.0 14.2 13.9 14.0 Operating margin % 13.7 13.5** 13.4 13.4 12.9** 13.3 13.0 13.2 12.6 12.5 Full year 12.0 Half year 11.0 H1 2011 H1 2012 H1 2013 H1 2014 H1 2015 H1 2016 Year 13-14% range for full year and the foreseeable future • * Excludes non-underlying items which include: Intangible amortisation, impairments, net contingent consideration movements, other non-recurring items, non-cash mark-to-market finance costs 10 • ** The FY 2014 and H1 2015 comparatives show the value excluding the businesses disposed of or held for disposal in 2015
Financial results | underlying returns per share Underlying earnings per share* Dividend per share • Comparative growth 7% • Comparative growth 6% • 5 year H1 compound growth 10% • 5 year H1 compound growth 9% 21.4 7.2 2011 2011 47.4 21.4 23.7 7.9 2012 2012 52.1 23.5 25.8 8.7 2013 2013 59.4 26.5 28.9 9.6 2014 2014 65.2 29.2 32.0** 10.5 2015 2015 70.7*** 31.7 34.2 11.1 2016 2016 0 10 20 30 40 50 60 70 80 0 5 10 15 20 25 30 35 Pence Pence Half year Full year • * Excludes non-underlying items which include: Intangible amortisation, impairments, net contingent consideration movements, other non-recurring items, non-cash mark-to-market finance costs 11 • ** The H1 2015 comparatives include the results from businesses disposed or held for disposal in H2 2015 • *** The FY 2015 comparatives exclude the businesses disposed of or held for disposal in 2015
Financial results | underlying cash flow from operating activities £m 6 months to £m 6 months to 30 June 2016 30 June 2015 Operating profit* 318 289** Depreciation 50 49 Share based payment 5 5 Pensions (2) (1) Movements in provisions 1 4 Movements in working capital 16 (46) Cash flow from operations 388 300 Operating cash conversion 122% 104% Targeting annual cash conversion at or above 100% • * Excludes non-underlying items which include: Intangible amortisation, impairments, net contingent consideration movements, other non-recurring items, non-cash mark-to-market finance costs 12 • ** The H1 2015 comparatives include the results from businesses disposed or held for disposal in H2 2015
Financial results | underlying cash flow statement £m 6 months to £m 6 months to 30 June 2016 30 June 2015 Cash flow from operations 388 300 Net interest paid (29) (21) Taxation paid (35) (42) Capital expenditure (88) (57) Underlying free cash flow 236 181 Non-underlying costs (37) (12) Free cash 199 169 Acquisition of subsidiary undertakings and businesses (90) (292) Proceeds on disposal of subsidiary undertakings 20 - Acquisition of public sector subsidiary JV arrangements - (20) Equity dividends paid (145) (131) Cash flow before financing (16) (274) Financed by: Repayment/(issue) of bonds 70 (280) New bank debt (500) (80) Other financing 2 2 Deferred consideration 6 7 Movement in cash and cash equivalents 406 77 Movement in net debt (16) (274) 13
Financial results | disciplined approach to uses of cash Working capital At or above 100% cash conversion target Focus on structural WIP reduction Controlled investment in new contracts Capex Discretionary capital investment targeting returns in excess of 25% post tax Acquisitions Targeting 15% threshold return post tax Returns to shareholders Progressive dividend policy driven by EPS growth £145m paid in H1 2016 Controlled uses of cash 14
Financial results | half year capital expenditure by type Discretionary Contractual Maintenance • Discretionary • ROCE 25% or higher 32% 33% • Contractual specific • Bespoke and driven by wins • Maintenance • 1% to 2% of revenue 35% HY 2016 Controlled capital expenditure 15
Financial results | balance sheet gearing – bridge from year end 2015 Cash Non-cash At Dec 2015 At June 2016 movements movements Net debt £m £m £m £m Bond debt * 1,529 (70) 32 1,491 Cash in hand (85) (406) (9) (500) • US$ bonds – swapped to £ Term loans 300 500 - 800 • Euro bonds – net investment Deferred consideration 21 (6) - 15 hedge Fixed rate swaps 67 - 23 90 • £600m RCF fully undrawn at June 2016 Other 7 (2) - 5 Total net debt 1,839 16 46 1,901 Annualised underlying interest cover 14x 12x Underlying net debt to underlying 2.50 2.49 EBITDA Efficient balance sheet * Underlying net debt after impact of currency and interest rate swaps 16
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