"THE CAPITA GROUP PLC – INTERIM MANAGEMENT STATEMENT"
6 May 2009 THE CAPITA GROUP PLC – INTERIM MANAGEMENT STATEMENT The Capita Group Plc ("Capita"), the UK's leading business process outsourcing ("BPO") and professional services company, is today issuing its interim management statement covering the 4 months to 30 April 2009. This statement coincides with its Annual General Meeting which is taking place today. Performance summary for the period from 1 January 2009 to date: Capita has performed well in the first 4 months of 2009. All our key financial metrics remain on track with continued strong cash generation, contained capital expenditure and an efficient capital structure, with relatively low gearing. Our clients are highly selective and, increasingly, they seek outsourcing partners who have not just the expertise and capacity to support them but also the financial strength and stability essential to sustaining a long term partnership. Businesses across the Group are trading well and the market for significant outsourcing opportunities remains buoyant. Some of our businesses serving the financial services sector, particularly our unit and investment trust administration and parts of our registrar businesses are inevitably being affected by the current weakness and restructuring in this sector. However, the pressures across this sector are also resulting in some interesting opportunities for Capita. We remain confident that the areas across the Group that are potentially affected by the current volatile economic climate represent less than 10% of our Group revenues and this risk has been factored into our business plans for 2009. Generating growth organically and through acquisitions We continue to drive forward the profitable growth of the Group both organically and through small to medium sized acquisitions. In the period to date, we have secured major contracts and renewals to deliver outsourced services worth a total of £767m. This includes: - AXA Sun Life – preferred partner to administer approximately 3.2 million life and pensions policies. The deal, which is subject to final agreement of commercial terms, is worth £500m over 15 years. The service is expected to start in June 2009. - Learning and Skills Council (LSC) – to manage the administration of a range of allowances to support learners, including the Education Maintenance Allowance (EMA) and the Adult Learning Grant (ALG). The contract, worth £68m over 4 years until 2013, with an option to extend for a further 2 years, follows on from our announcement in November 2008 that Capita were to take over the service with immediate effect, after the ending of the LSC's contract with its previous provider. - Office for National Statistics – to recruit and train all the temporary ONS workers who will work as field staff for the 2011 Census of Population and Housing in England and Wales, and to administer their pay. The contract will be worth around £25m over 2 and a half years. - Department for Children, Schools and Families (DCSF) – the contract for the management of the National Strategies, has been extended by 1 year from the end of March 2010, when the current 5 year contract is due to end, to 31 March 2011. The Department has indicated that the minimum value of the 1 year contract extension will be £64m. In addition we have successfully won contracts and renewals with Breckland District Council, Charnwood Borough Council, eircom and Threadneedle. We announce the size of our bid pipeline twice a year at our half and full-year results. This is a snapshot of bids, worth £10m or above, where we have been shortlisted to the last 4 or fewer. Our bid pipeline stood at £3.1bn on 26 February 2009. Opportunities in the bid pipeline are progressing to expected timelines and we have a strong set of further opportunities sitting just outside of the pipeline. Our most active markets remain life and pensions, local government and central government. We face no material rebids (greater than 1% of previous year’s revenue) until 2011. Acquisitions continue to form an important part of our growth strategy. To date in 2009, we have acquired 4 businesses for a total consideration of £30.6m: - FMS – a trust administration business, acquired for an initial consideration of £2m, which provides finance and corporate trust services to institutions, multinationals and private individuals. - CHKS and NHS Membership Services – 2 acquisitions: CHKS Limited, a healthcare intelligence and quality improvement services business, and NHS Membership Services, which provides membership services and engagement programmes for over 50 NHS foundation trusts, add further strength to our position in the health market. The 2 businesses were acquired for an aggregate consideration of £13.6m. - Hero Insurance Services – a personal lines broker primarily offering insurance for cars and motorbikes, acquired in March for approximately £15m. There is a good volume of potential acquisitions priced at attractive levels and we expect to acquire further businesses this year that take us into complementary areas and add expertise and value to the Group. Operational delivery and performance Our excellent track record of operational delivery continues to generate strong client references which support our ability to win further business from new clients. The first 4 months has seen the smooth transition of several of our recently won contracts. This includes our 10 year contract with the Health and Safety Executive (HSE), worth £14m per year, to administer a new gas registration scheme in Great Britain. The new scheme, Gas Safe Register, launched on 1 April and so far more than 115,000 gas engineers have registered. Our partnership with Sheffield City Council, a contract worth over £200m over 7 years, has also started well as we help them to improve services and drive business transformation for the benefit of everyone in the City. This contract win further strengthens our leading position in the local government market. Our Life & Pensions operations this year will be responsible for administering 25 million policies in total, approximately 22% of all UK life and pensions policies. The scale of these operations positions us strongly in the market and allows us to create and derive benefits from economies of scale. We remain focused on achieving smooth transfers of recently won business and on achieving operational synergies across our extensive IT infrastructure, customer service operations and through offshoring. Alongside this the life and pensions market presents a strong pipeline of potential bid opportunities. In the recent budget, the Government announced that it is seeking £15bn of efficiency savings across public services. £6bn of savings is being worked towards in the current spending review period and an additional £9bn will be sought between 2011 and 2013/14. The Government’s Operational Efficiency Programme (OEP) has identified that £13.3bn of these savings can be achieved in back office operations, IT and collaborative procurement, with the remainder in asset management and sales, property and local incentives and empowerment. With our strong track record in service transformation and delivery and our expertise in the public sector, we believe we are well positioned to assist government departments as they seek to implement change, re-engineer services and achieve efficiency savings. Outlook Capita remains well placed to continue its growth in 2009. Our pipeline of sales opportunities, strong forward visibility of revenues from our long term contracts and consistent operational performance position us well for further strong progress. Our success in the first 4 months of 2009, a high level of sales activity and a strong demand for outsourcing underpin our outlook for continued growth in the current year and thereafter. -ends- For further information please contact: Paul Pindar, Chief Executive Shona Nichols, Corporate Communications Director Tel: 020 7799 1525 Media enquiries: Caroline Mooney Capita press office Tel: 0207 654 2152 or 0870 2400 488 (out of hours) Andrew Lorenz Financial Dynamics Tel: 020 7269 7121 Notes to editors: The 2009 Annual General Meeting will commence at 11.00am today at Deutsche Bank, Winchester House, 1 Great Winchester Street, London EC2N 2DB. The Capita Group Plc is the UK's leading provider of BPO and integrated professional support service solutions. With 36,000 people at more than 300 sites, including 62 business centres across the UK, Ireland, the Channel Islands and India, the Group uses its expertise, infrastructure and scale benefits to transform its client's services, driving down costs and adding value. Capita is quoted on the London Stock Exchange (CPI.L), and is a constituent of the FTSE100 with revenues for 2008 of £2,441 million. Further information on The Capita Group Plc can be found at: http://www.capita.co.uk