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Capita Interim Management Statement

Capita Interim Management Statement                         

Capita plc ('Capita'), the UK's leading business process management (BPM') and

professional services company, is today issuing its interim management

statement, covering trading and financial progress to date in 2012.


Capita has achieved a strong sales performance to date in 2012 with record

major contract wins totalling &pound1.7bn. We are experiencing high levels of sales

activity in the UK business process management and customer services

marketplace as evidenced by both our bid pipeline, which has been swiftly

replenished and currently stands at &pound4.0bn (July 2012: &pound4.1bn), and the buoyant

prospects list sitting behind this. We are expecting a number of decisions

regarding bids in the pipeline towards the end of Q4 and in Q1 2013. We remain

well placed to achieve renewed organic growth in line with expectations in 2012

and anticipate further strong progress in 2013.

Performance across our key financial metrics is in line with expectations. At

the beginning of this year, we set ourselves three key objectives for 2012

* achieve continued strong profit performance
* secure organic growth of 3% for the full year
* deliver improved conversion of operating profit to operating cash compared to 2011.

We believe we are on track to achieve all of these.

Securing organic growth

In 2012 to date, we have won 33 major sales contracts with an aggregate value

of &pound1.7bn (November 2011 IMS: 16 new contracts totalling &pound1.3bn) of which 76%

relates to new contract wins and 24% to renewals.

Major contracts worth over &pound50m include:

  * Recruiting Partnering Project (RPP) - partnering with the Ministry of

   Defence to deliver RPP for the Army, and the enabling ICT for the Royal

   Navy and the Royal Air Force, in a contract valued at approximately &pound50m

   per annum over 10 years.


  * Civil Service Learning agreement -selected by the Cabinet Office to manage

   exclusively the provision of training across the Civil Service in a 2 year

   contract, with the option to extend for a further 2 years.


  * West Sussex County Council Support Services partnership - selected to

   deliver a range of services including HR and payroll, finance, office

   services, online service delivery, procurement and pensions administration

   in a 10 year relationship expected to generate revenues of approximately &pound

   154m. Our existing IT Services contract that commenced in 2010 was also

   extended concurrent with the new contract bringing additional revenues of &pound

   18m over an additional 2 years to 2022.


  * Personal Independence Payments (PIP)-awarded one of three regional contracts

   by the Department for Work and Pensions to deliver disability assessments

   across central England and Wales, in a contract anticipated to be worth

   around &pound140m over five years.


  * North Tyneside Council - selected as preferred bidder to provide

   wide-ranging property, highways and maintenance services in a partnership

   designed to deliver both cost savings and improved services to citizens, in

   a contract expected to be worth approximately &pound152m over 15 years, with

   significant opportunities for growth.


  * 3major private sector contracts - our expanded customer management offering

   has secured 3 major contracts to date in 2012, worth in aggregate &pound161m

   over 3 to 5 years, including a full customer management service for

   Debenhams plc, another major UK retailer and Scottish Power.


Contracts worth between &pound10-50m include:

  * 8 customer management contracts in the motor, retail and utilities markets

   worth in aggregate &pound124m over 2 to 5 years.


  * Oxfordshire County Council - Capita Symonds, our property consultancy,

   selected to support Carillion's partnership with the Council in a contract

   worth approximately &pound42m over 10 years.


  * UK Border Agency - selected to deliver contact management services, worth

   up to &pound30m over 4 years, to support the management of the 'overstayer'



  * London Fire and Emergency Planning Authority - selected to provide control

   room services and mobilisation and communications technologies in a

   contract worth approximately &pound20m over 10 years.


  * Southwark Council - awarded a 4 year contract for an IT managed service

   designed to help transform the council and deliver benefits for both

   customers and the workforce.


  * Ministry of Justice - Capita's secure information solutions business has

   been awarded a contract worth around &pound21m over 3 years for the application

   management and hosting of the Criminal Justice System Exchange (CJSE). This

   contract has the potential to be extended up to a maximum 5 year term.


Sales update

Bid pipeline: This pipeline is a snapshot of major bid opportunities, worth &pound

10m or above, where we have been shortlisted by the client to the last 4

bidders or fewer. Notwithstanding the record level of major sales contracts

secured to date in 2012, our bid pipeline has been replenished swiftly and

currently stands at &pound4.0bn (July 2012: &pound4.1bn). The bid pipeline comprises 26

bids, 98% relating to new contracts and 2% renewals. By value, 68% of the bids

in the pipeline are public sector, mainly in central government, local

government, education and defence and 32% are in the private sector, from the

financial services, retail, utilities and telecoms sectors. Behind our bid

pipeline, there is a strong prospect list of opportunities at various stages of

the bid process, including a number which are close to shortlist stage.

Contract rebids: Over the next 7 years to 2019, we only have 2 material

contracts (defined as having forecast annual revenue in excess of 1% of 2011

turnover) due for rebid - the Civil Service Learning agreement in 2014 and the

Phoenixcontract in 2019.

Criminal Records Bureau contract update - We announced in September that the

Home Office is pursuing discussions with another supplier regarding the new

Disclosure and Barring Service (DBS) operations. The CRB has advised Capita of

its intention to extend the current CRB contract with Capita beyond the

original expiry date of 31 March 2013, and the terms of this extension

agreement are now being finalised.

Market update

We are currently seeing a good flow of opportunities from across our public and

private sector markets as organisations look for ways to improve the efficiency

of their operating models and protect frontline services. The public sector is

buoyant, with significant activity across local government and central

government, most notably the Ministry of Justice and Ministry of Defence. There

is also a steady flow of opportunities across the emergency services and health

markets. In the private sector, we are seeing a high level of demand for

customer management services and increasingly additional wider back office

support, particularly from retail, utilities, telecoms and financial services


In recognition of the market potential and strong growth of both our customer

contact management and justice and secure services businesses, we have

separated these areas from their existing divisions to create two further new

divisions. As well as our emphasis on existing markets, we are continuing to

develop our interests in new markets and are currently appointing two senior

market development directors, who will join Capita with expertise in the

defence sector and the banking sector.


The acquisition of small to medium sized businesses continues to supplement

Capita's long term organic growth, providing entry into new markets and

enhancing our sales offering by adding further scale and complementary

capabilities to the Group's propositions for clients.

Acquisitions to date in 2012: we have purchased 14 companies for a total cash

consideration of &pound178m. Since our H1 results announcement in July 2012, we have

completed a number of acquisitions including: Expotel, a UK hotel, business

travel and conference booking agent, for a consideration of &pound16m and Reliance

Secure Task Management, a medical assessment and criminal justice support

services firm, for &pound20m. The acquisition pipeline remains encouraging.

Delivery network: Following the acquisition of Full Circle in July 2012, a

leading contact centre solutions business based in South Africa, we now have

approximately 170 employees, in Cape Town and have already started to provide

new customer management services for an existing client.


We remain on track to deliver strong revenue growth in 2012 as a result of both

major contract wins and acquisitions completed during 2011 and 2012. We are

confident that we will deliver 3% organic growth for the year and an improved

cash conversion rate for 2012 as compared to 2011, with further improvement

anticipated in 2013. We have good revenue visibility for 2013 which, together

with the current buoyant sales environment, underpins our confidence in the

Group's long term performance and growth prospects.


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