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 £1.7bn. 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 £4.0bn (July 2012: £4.1bn), 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 £1.7bn (November 2011 IMS: 16 new contracts totalling £1.3bn) of which 76%
relates to new contract wins and 24% to renewals.
Major contracts worth over £50m 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 £50m
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 £
154m. Our existing IT Services contract that commenced in 2010 was also
extended concurrent with the new contract bringing additional revenues of £
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 £140m 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 £152m 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 £161m
over 3 to 5 years, including a full customer management service for
Debenhams plc, another major UK retailer and Scottish Power.
Contracts worth between £10-50m include:
* 8 customer management contracts in the motor, retail and utilities markets
worth in aggregate £124m 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 £42m over 10 years.
* UK Border Agency - selected to deliver contact management services, worth
up to £30m 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 £20m 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 £21m 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.
Bid pipeline: This pipeline is a snapshot of major bid opportunities, worth £
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 £4.0bn (July 2012: £4.1bn). 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.
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 £178m. 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 £16m and Reliance
Secure Task Management, a medical assessment and criminal justice support
services firm, for £20m. 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.