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Capita plc - Interim management statement

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 2013. This statement coincides with Capita's Annual General Meeting which is taking place today.

Update on performance

Capita has made a positive start to the year securing &pound660m of new major sales wins including contracts with the Cabinet Office, Carphone Warehouse and the University of Strathclyde. Our bid pipeline remains strong and comprises opportunities across our target markets, particularly in central and local government and in the private sector, primarily in retail, utilities and financial services. To date in 2013, we have also acquired 7 complementary businesses for a total consideration of &pound165m, enhancing our propositions to clients in our existing and developing markets and supporting the delivery of further organic growth.

We are making good progress across our key financial metrics as anticipated in our preliminary results statement issued on 28 February 2013. Due to our strong major sales performance in 2012 and to date in 2013, we are well placed to achieve organic growth in line with expectations for the full year 2013.

Delivering organic growth

In the first 19 weeks of 2013, we have secured 4 new major contracts with an aggregate value of &pound660m (2012 Q1 IMS: 6 new contracts totalling &pound823m (1)). These include:

  * Cabinet Office - selected to form a joint venture (JV) with the Cabinet Office to deliver and commercialise the Government's proprietary portfolio of leading and globally renowned best management practice training tools,  including PRINCE2&reg, an established and proven project management  methodology, and ITIL&reg, the most widely accepted approach to IT service management in the world.

The JV, in which Capita holds 51%, will own in perpetuity the intellectual property (IP) of the portfolio and assume the management of the ecosystem of accredited service organisations through which revenue is currently generated. It is anticipated that the JV will triple revenues of approximately &pound40m per annum by year 10, through further commercialising and developing the product portfolio in existing and new markets in the UK and internationally, and will generate healthy margins.

  * Civil Service Learning agreement - extension to existing contract with the Cabinet Office, worth at least &pound60m over 2 years to end March 2016.

  * Carphone Warehouse - contract to provide all non-store customer contact in a number of different areas across the business and support all aspects of customer service strategy. The contract is worth around &pound160m over 10 years and commenced on 1 April 2013.

  * University of Strathclyde - We are delighted to have secured a major contract in the university sector. This is a sector which we believe has exciting potential. We have been selected as strategic technology partner to support the delivery of significant communications and technology improvements in a contract estimated to be worth up to &pound40m over 5 years  Capita will work with the University of Strathclyde to design and deliver a long term ICT strategy to integrate and rationalise ICT processes and resources to better support the University. 

Bid pipeline: This pipeline is a snapshot of major bid opportunities, worth &pound25m or above and capped at &pound1bn, where we have been shortlisted by the client to the last 4 bidders or fewer. As at February 2013, the bid pipeline stood at &pound5.2bn (November 2012: &pound4.8bn) comprised of 27 bids of which 98% related to new contracts and 2% to renewals. The pipeline contains opportunities from across all our 10 target markets.

Contract rebids: Over the next 5 years, there are no material contracts due for rebid (defined as having forecast annual revenue in excess of 1% of 2012 revenue). The next major contract due for renewal will be the Phoenix contract in 2019.

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 2013, we have acquired 7 companies across a number of areas including justice and emergency services, customer management, education and workplace services for a total cash consideration of &pound165m.

Outlook

The market for customer management and BPM remains very active in the UK with government and commercial organisations under pressure to maintain and develop efficient operational models which deliver quality services while achieving value for money.

 This buoyant sales environment underpins our confidence in the Group's long term performance and growth prospects. We remain on track to deliver strong growth in 2013 as a result of major contract wins and acquisitions completed during 2012 and to date in 2013 and anticipate continued strong progress into 2014 and beyond.

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