Half Year Results 2024
Improved margin with good progress on cost reductions underpinning unchanged underlying full year profit expectations
“In my first six months I have been working with colleagues to identify and action many initiatives that will make Capita a better company. Our teams are passionate about the delivery of critical services to our clients, their customers and to wider society. Our focus is on ensuring that the value we create for those stakeholders is reflected in the financial performance of the business and I am excited about the future and the progress we've made in a short period of time.
"We are implementing changes that will make us more competitive and drive growth, by becoming more efficient and spending less, digitising our offerings and leveraging technology partnerships. This, together with more precision in delivery and evolving our culture, is enabling us to accelerate execution.
"We are on track to deliver on our cost reduction programme, having taken action to deliver £100m out of the £160m of annualised cost reductions we expect to achieve by
"We have much more to do, but I am pleased that Capita is making encouraging progress in its journey to deliver its medium-term financial targets and create sustainable value for all its stakeholders”.
H1 2024 Financial results adjusted for business exits, including Capita One
• Adjusted revenue 1 decreased by 9% to £1,201.5m (H1 2023: £1,324.4m) reflecting the non-repeat of one-off benefits in H1 2023 in Experience and the impact of previously announced contract losses
• Adjusted operating profit 1 increased 33% to £54.2m , benefitting from the successful implementation of ongoing cost reduction programme
• Reported profit before tax of £60.0m (H1 2023 loss: £67.9m) boosted by £38.1m gains on the sale of businesses, including Fera
• Free cash outflow excluding business exits* of £51.9m (H1 2023 outflow: £64.3m) reflecting costs associated with the cost reduction programme and final pension deficit reduction contributions
• Net financial debt (pre-IFRS 16): adjusted EBITDA 1 ratio 1.1x
Good momentum in delivery of positive cash flow in medium term
•
Targeting £160m of annualised cost reductions, to be delivered by
• At the half year, actions taken to deliver £100m of these savings, with associated cash cost of £19.7m
• Operating cash flow* in H1 2024 improved by 75% to £51.4m reflecting reduced deferred income releases
Contract wins
• Total contract value won £934.4m (2023: £1,317.0m ), reflecting a lower level of bid activity
• Book to bill ratio of 0.8x (2023: 1.0x)
• Contract win rate of 48% versus 63% last year, partially reflecting our focus on ensuring contracts are bid at an appropriate margin in line with the Group's medium-term operating margin target
Outlook for full year 2024
• Expect a low to mid-single digit percentage adjusted revenue reduction, reflecting delayed operational go-live on certain contracts and a more focused approach to bidding
• Expect modest adjusted operating margin improvement reflecting continued benefit of cost reduction programme, pay review phasing and H2 2023 bonus release; underpinning profit expectations
• Adjusted operating profit 1 and free cash outflow excluding business exits* outlook unchanged on an underlying basis. Pro-forma outflow of between £90m and £110m following Capita One disposal, with £50m cost associated with cost reduction programme
• Capita One disposal to complete in Q3 with net proceeds of c.£180m; minimal year end net financial debt
Six months ended 30June 2024
Financial Reported Reported Adjusted1 Adjusted1
highlights 2024 Reported 2023 Adjusted12024 2023
POP change POP change
Revenue £1,237.3m £1,477.0m (16%) £1,201.5m £1,324.4m (9%)
Operating
profit/ £43.9m £(35.8)m n/a £54.2m £40.9m 33%
(loss)
Operating 3.5% (2.4)% n/a 4.5% 3.1% 45%
margin
EBITDA £101.7m £85.6m 19% £102.2m £97.1m 5%
Profit/
(loss) £60.0m £(67.9)m n/a £31.6m £18.3m 73%
before tax
Basic
earnings/ 3.14p (5.06)p n/a 2.19p 2.68p (18%)
(loss) per
share
Operating £73.5m £34.2m 115% £51.4m £29.3m 75%
cash flow*
Free cash £(44.6)m £(84.0)m 47% £(51.9)m £(64.3)m 19%
flow*
Net debt £(521.9)m £(544.6)m 4% £(521.9)m £(544.6)m 4%
Net
financial
debt £(166.4)m £(166.2)m —% £(166.4)m £(166.2)m —%
(pre-IFRS
16)
1 Capita reports results on an adjusted basis to aid understanding of business performance.
* Adjusted operating cash flow and free cash flow exclude the impact of business exits (refer to note 9).
Investor presentation
A presentation for institutional investors and analysts hosted by
Webcast link:
https://webcast.openbriefing.com/capita-hy24/
For further information:
Helen Parris , Director of Investor Relations T +44 (0) 7720 169 269
Stephanie Little , Deputy Head of Investor Relations T +44 (0) 7541 622 838
Elizabeth Lee , Group Head of External Communications T +44 (0) 7936 332 957
Capita press office T +44 (0) 2076 542 399
LEI no. CMIGEWPLHL4M7ZV0IZ88.
Chief Executive Officer's review
H1 2024 Summary
Since joining Capita in January this year, I have spent time embedding myself within the organisation and working with colleagues to identify and put in place the many initiatives which will result in a “Better Capita”. At a time of dynamic change for the Group I continue to be impressed by the passion that our teams have in their continued delivery of critical services to our clients, their customers or service users and society.
However, as I said in March as part of my initial impressions, while the business has strong foundations, the value Capita creates for its customers has not been translated into positive financial performance and this will be a clear area of focus going forwards. We have worked, at speed, to identify key priorities and opportunities for future operational and financial improvement and we’ve outlined our medium-term priorities.
The key components of being more competitive and funding our growth, as outlined in March, are through becoming more efficient and spending less, digitising our offerings, leveraging technology partnerships strongly, being more precise in our delivery, improving governance and evolving our culture. We are now accelerating the execution of actions which will deliver on these priorities.
As we work to improve our financial performance in this transformation, our first priority is to increase the operating margin of the Group, with sustainable cash generation and revenue growth to follow. We were pleased to have delivered strong progress on that front in the first half, with the Group’s adjusted operating margin improving to 4.5% from 3.1% , predominantly as a result of the cost reduction programme we commenced in 2023.
In June, we held a Capital Markets Event, at which we set out the Group’s strategic themes of “Better Efficiencies, Better Technology, Better Delivery and Better Company” and the strategic priorities for the two divisions of Capita Public Service and Capita Experience.
We also set out the Group’s medium-term financial targets which are: delivering low to mid-single digit revenue growth per annum; operating (EBIT) margin of 6 – 8%; and positive free cash flow from 2025, with operating cash conversion of 65% to 75%; net financial debt leverage of ≤1x and continued reduction in lease liabilities from the Group’s ongoing property rationalisation.
The Group’s transformation will be delivered in three waves: firstly quick wins to fund the journey as we reduce our costs; secondly going back to basics to improve our processes and infrastructure; and thirdly building for the future as we reinvest c.£50m of the £160m of efficiencies we generate from the cost savings programme to accelerate growth.
As we look forward, and strive to improve profitability, the Group will be more focused and prioritise those business sectors in which we have strong expertise, win today and where we see material opportunities in the future – these are across our Public Service business and also the Contact Centre and Pension Solutions businesses in Capita Experience.
We have identified some service lines which will be managed for value, including closed book Life & Pensions, Mortgage Services, networks and standalone software activities. The service lines identified as managed for value represented c.25% of the Group’s revenue in 2023. We are exploring options to derive value from these service lines such as delivery through partners, radical transformation and, in some cases, exit of the activity or service line.
In line with this strategy, in July, we announced the sale of the standalone software business Capita One to
Better technology - relationships with hyperscalers
We have a great opportunity to drive the Group’s transformation through re-establishing and strengthening Capita’s relationship with technology hyperscalers. We have been very active in the first six months of the year, working and partnering with hyperscalers to develop AI and generative AI solutions which will improve consumer experiences while delivering greater efficiency across both internal and external processes. This will allow the Group to minimise its capital expenditure, while increasing the pace of operational performance improvement to customers.
During H1 we agreed a number of partnerships and collaborations including with Microsoft, ServiceNow, Salesforce and
We have a number of solutions already delivering across the contract portfolio, for example, on our
Following a successful design and pilot process this year, in June, we launched CapitaContact with the
Within the contact centre business in Capita Experience, we have developed Agent Suite a cutting-edge generative AI customer experience solution, which can be used across multiple platforms, with two components, Agent Assist and Call Sight. These solutions will allow contact centre agents to deliver personalised, efficient and effective customer service and support. So far, using this tool, we’ve seen a reduction in the average handling times of calls by c.20% and improved first call resolution rates by more than 15%.
Elsewhere, we are exploring further opportunities with hyperscalers, such as delivery of Virtual Ward capabilities with
Better efficiencies - transformation and cost reduction programme
At the start of this year, the Group established a programme management office to deliver a company-wide transformation which will be spread across the three waves; funding the journey, back to basics and building for the future.
To fund the journey, the Group is targeting £160m of annualised cost reductions, to be delivered by
The savings delivered to date across the Group have been realised across a number of areas with the majority (£79m) from organisational simplification and headcount reduction. Other savings were achieved from offshoring (£4m), procurement (£11m) and further property rationalisation (£6m). We expect the majority of the remaining savings to be delivered from further organisational simplification.
The transformation initiatives are primarily expected to improve the cost efficiency of Capita Public Service and Capita Experience with a smaller impact on the corporate centre, reflecting the proportional split of the group’s cost base. The biggest margin improvement opportunity is in the contact centre business in Capita Experience, which delivered an operating margin of below 1% for the year ended
The programme management office is also focused on initiatives which will deliver performance improvement across the Group. Examples of areas being targeted include process improvement through digitisation, automation and increasing sales effectiveness through the simplification of our go to market and sales processes.
As outlined at the Capital Markets Event in June, we anticipate reinvestment over the period to the end of 2025 of c.£50m on an annualised basis of the cost savings we generate, in driving growth through technology and ensuring price competitiveness.
Better company - cultural transformation and our people
Creating the right environment for our people will underpin our success throughout the transformation journey and will help improve delivery through increased engagement and reduced attrition. Since joining, I’ve travelled to meet colleagues across our geographies and I’ve seen first-hand the passion our colleagues have for the work they do, throughout the organisation.
The Group has embarked on a multi-year journey to build a culture where everyone is united in achieving Capita's goals while also nurturing their individual career aspirations.
We have a wide-ranging colleague engagement plan including initiatives at both a group and divisional level. To ensure we understand the existing culture across the Group, we have conducted a company-wide culture survey so we can take informed and decisive actions as we plan for 2025 and into the medium term. We are also launching our leadership playbook and development programme which will help us nurture and develop talent through all levels of the organisation.
Staff attrition remains a key focus area. We’ve seen a continued reduction in attrition across the Group, with 12-month voluntary attrition reducing from 24% at the end of 2023, to 22% as at
Our people priorities for the second half of the year are completion of the Group’s culture survey, development of our three core training academies for Management & Leadership, Data & Technology and Sales, and continuing to celebrate our cultural wins and role models throughout the Group, in line with our #bebrilliantbeyou campaign.
Better delivery - operational performance
Delivering consistently and effectively for our clients is an important cornerstone to our future success. Delivering the right service first time reduces excess cost and avoids financial penalties which will help improve the Group’s margin.
In the first half of 2024, we maintained our operational performance with average KPI performance above 90% in both divisions. In areas where KPI performance was not met during the first half of the year, we are implementing specific remediation actions to ensure we meet the high standards Capita expects to deliver.
Highlights from our operational delivery in the first half of the year include:
•
In Capita Public Service, on the division’s contract to deliver
•
Also in Capita Public Service, on the
•
In Capita Experience, across our delivery centres we handled over 16 million calls for clients in the
•
To support future delivery and growth in Capita Experience, we opened two new global delivery centres in
As we move into the second half of the year, we are focused on delivering the complex transition and mobilisation requirements of our new contracts with the
Growth
In the first six months of 2024, a lower value of bid activity resulted in a reduction of Total Contract Value (TCV) won across both divisions. In H1 2024, the Group won contracts with TCV of £934.4m , down 29% from £1,317m in the same period in 2023. Reflecting the reduced TCV won, the Group’s In Year Revenue (IYR) generated from the wins in H1 was 36% lower at £391.6m. The Group’s book to bill was 0.8x (H1 2023: 1.0x).
Significant wins in the period included the renewal of contracts in Capita Experience with two major European telecoms providers, one with an expanded scope, with a combined TCV of more than £250m. There was success in the Defence, Learning, Fire and Security vertical of Capita Public Service with a further expansion of scope on the
In order to improve the Group’s margin performance in line with the medium-term operating margin target, we remain focused on ensuring that contracts are bid at an appropriate margin. As such, we have seen a reduction in total win rate to 48% from 63% in the same period last year across all opportunities.
Renewal rates increased to 95% from the 69% seen in H1 2023 but there was a reduction in the win rate on new logos and expansions of existing scopes to 34% from 57% in 2023. Improving the Group’s win rate on new wins and expanded scopes is an area of focus for the second half of the year and into 2025. However, we are focusing efforts on our priority markets and service offerings which will deliver our medium-term operating margin target, which may limit revenue growth in the short term. We expect to see improvements in contract win rates as our partnerships with hyperscalers are fully embedded into our contract offerings and as our pricing becomes more competitive through delivery of our cost reduction programme.
The order book at
30
The pipeline for the remainder of 2024 continues to build and there are opportunities with a TCV of over £2bn closing in the second half the year. While this is slightly lower than the value seen in previous years at this point, the pipeline for 2025 remains strong, and is at the highest level seen at the same point in recent years. In July, Capita Pension Solutions renewed an eight year £48m TCV contract with the Royal Mail Statutory Pension Scheme. Elsewhere across the Group, material opportunities in the second half of the year include potential contracts with Ofgem and the Home Office within Capita Public Service and a number of opportunities within the Energy & Utilities vertical in the Contact Centre business of Capita Experience.
Capita is well placed to support in the delivery of the new
Financial results - revenue and profit
Adjusted revenue 1 decreased 9.3% period on period to £1,201.5m (H1 2023: £1,324.4m). Public Service reduced 2.8% to £688.5m, as the division saw revenue reductions from the ending of contracts in Local Public Service, Scottish Wide Area Networks and Electronic Monitoring.
As expected, revenue in Experience reduced 16.8% to £513.0m, reflecting the non-repeat of one-off benefits in H1 23 following the transition of the
Reported revenue declined 16% to £1,237.3m reflecting the core business reductions coupled with the disposal of remaining Capita Portfolio businesses in the prior year.
Adjusted operating profit increased 33% to £54.2m reflecting the benefit from the ongoing cost reduction programme which more than offset the profit impact of the revenue trends.
The adjusted operating margin for the Group was 4.5% improving from 3.1% in the same period in 2023.
Reported profit before tax was £60.0m (H1 2023 loss: £67.9m) principally reflecting, gains on the sale of businesses ( £38.1m), compared with a loss of £19.9m in H1 2023, the non-repeat of £42.2m goodwill impairment and £21.8m costs associated with the Group's cyber incident in 2023.
Financial results - free cash flow and net debt
Cash generated by operations before business exits 1 improved 273% to £19.0m reflecting the improved EBITDA and a lower level of working capital outflows reflecting the non-repeat of 2023's non-cash one-off income statement credits and reduced deferred income releases. The cash cost associated with the Group's cost reduction programme offset reduced pension deficit contributions and cyber costs.
Free cash outflow excluding business exits 1 improved to an outflow of £51.9m from an outflow in 2023 of £64.3m, reflecting the improved cash generated by operations and reduced interest and tax costs which offset an increase in capital expenditure.
Pre-IFRS 16 net financial debt
1
was £166.4m (31
Post-IFRS 16 net debt was £521.9m (31
Full-year outlook
We expect the Group to show a low to mid-single digit percentage adjusted revenue reduction for full year 2024, reflecting delayed operational go-live on certain contracts and a lower level of in year revenue from contract wins as we concentrate our business development activity on the Group’s focus business segments. At a divisional level, we expect a high single to low double digit percentage revenue reduction in Experience with Public Service revenue expected to be broadly in line with 2023.
We continue to expect a modest full year adjusted operating margin improvement reflecting the continued benefit of the ongoing cost reduction programme, the phasing of the Group's annual salary review and the release of the annual bonus accrual in H2 2023.
Our adjusted operating profit and free cash flow excluding business exits expectations for the full year remain unchanged on an underlying basis, with proforma free cash outflow before business exits of £90m to £110m adjusted for the Capita One disposal. Our operating cash conversion, is expected to be in line with our previous guidance at c.60% to c.70%.
As the Capita One disposal is expected to complete towards the end of August, we expect minimal net financial debt at the 2024 year end.
___________________________________________
1 Refer to alternative performance measures in the appendix
Divisional performance review
The following divisional financial performance is presented on an adjusted revenue 1 and adjusted operating profit 1 basis. Reported profit is not included, because the Board assesses divisional performance on adjusted results. The basis of preparation of the adjusted figures and KPIs is set out in the Alternative Performance Measures (APMs) summary in the appendix to this statement.
Public Service
Capita Public Service is the number one strategic supplier of Software and IT Services (SITS) and business process services (BPS) to the
The division is structured around three market verticals: Local Public Service; Defence, Learning, Fire & Security and Central Government.
Markets and strategy
The core addressable market of Capita Public Service is £16.4bn 2 , growing at approximately 4% 2 per annum. Demand for our services across the public sector continues to shift towards digitally enabled services which improve productivity for the Government and the overall citizen user experience while offering 24/7 delivery and more optionality for service delivery methods.
As outlined at the recent Capital Markets Event, the division has identified four key propositions which offer substantial sales potential across the public sector client groups in the
Better delivery and efficiencies
Capita Public Service continues to simplify its operating and delivery model to improve end-to-end delivery. We are working to create a sustainable operating model which allows us to deliver services at the quality and price clients expect.
Public Service has continued to deliver consistently for clients, with KPI performance in the first half of the year maintained at 95%.
Operational highlights in the first half of the year include:
• Within Central Government, we have processed more than 995,000 medical records on our contract with Primary Care Support England
•
Within the Defence vertical of Capita Public Service, we managed over 1,500 fire and rescue incidents on our contract delivering the Defence,
• In Local Public Service, we collected over £2.5bn revenue for local councils and processed over £0.4bn in housing benefit and council tax relief
Moving forwards, the division is focused on building standardised repeatable propositions, leveraging the scale of our hyperscaler partners while using our domain knowledge and expertise. This will in turn reduce cost to serve and improve market impact.
In the first half of the year, we launched CapitaContact following a successful pilot with the
Looking to our future growth ambitions, we are exploring expansion into international markets using our existing infrastructure, to increase the division's addressable market and accelerate growth. We have a number of pilots for growth in this area for example into the National Preparedness market in the
Growth
Across the first half of 2024, Public Service won TCV of £561.6m, down 26% from the same period last year. IYR was £318.9m, broadly similar to the same period in the prior year. The division’s win rate across all opportunities was 39%, down from 78% in 2023, as we saw a reduction in win rate in new and expanded scopes of work, reflecting our focus on ensuring that contracts are bid at an appropriate margin. The division's book to bill ratio was 0.8x.
The division saw success in Defence, Learning, Fire and Security with further expansion on the
The unweighted pipeline for Public Service, across all close dates is £8.4bn, from £7.5bn at the end of 2023, reflecting the timing of certain contract tenders. There are a number of opportunities in the second half of the year, including material opportunities with Ofgem, the Home Office and the Health & Safety Executive. As look to 2025, the division has material opportunities with the Ministry of Defence and with
The divisional order book stands at £3,400m, a decrease of £146m from the year end, reflecting the revenue recognised in the period which more than offset wins in the period.
Divisional financial summary 2024 2023 % change Adjusted revenue1 (£m) 688.5 708.0 (2.8)% Adjusted operating profit1 (£m) 47.1 26.2 79.8% Adjusted operating margin1 (%) 6.8% 3.7% 83.8% Adjusted EBITDA1 (£m) 66.7 46.8 42.5% Operating cash flow excluding business exits1 (£m) 49.8 33.7 47.8% Order book (£m) (comparative at 31 December 2023) 3,400.0 3,546.0 (4.1)% Total contract value secured (£m) 561.6 758.1 (25.9)%
Adjusted revenue
1
reduced 2.8% to £688.5m, refle
cting the ending of contracts in Local Public Services, Scottish Wide Area Network and Electronic Monitoring, non-repeat of temporary contract activity in Royal Navy Training offset by volume growth on our contract with
Adjusted operating profit 1 increased 79.8% to £47.1m, as t he benefit from the successful implementation of the cost reduction programmes was partly offset by lower revenue.
Operating cash flow excluding business exits 1 increased by 47.8% to £49.8m, reflecting a step up in cash-backed EBITDA.
Outlook
We expect revenue growth to be delivered in the second half of the year as we commence operational delivery on a number of contracts including Functional Assessment Services with the
The division is expected to show margin improvements across the year driven by the benefit from the ongoing cost reduction programme.
Experience
Capita Experience comprises two focused business areas; the Contact Centre business and Capita Pension Solutions and a selection of businesses, including closed book Life & Pensions, which are being managed for value.
Markets and strategy
The Contact Centre business is one of Europe’s leading customer experience businesses, operating in the
The Pension Solutions business in the
Better delivery and efficiencies
Experience has maintained its operational delivery with average KPI performance in the first half of the year of 89%, 94% excluding the Pension Solutions business.
Operational highlights from the first half of the year include:
• On a Telecoms client which is served from our global delivery centres, we have improved total call handling time by 29% and exceeded the contract's target level of sales as a service
•
We have answered over 225,000 calls for the RSPCA in the
The Contact Centre business is implementing a significant reorganisation and digitisation plan to improve its operating margin, closer to peers in the market.
The call and contact centre industry continues to evolve rapidly through technological advancement and shifting consumer expectations. The introduction of generative AI offers the potential to deliver lower cost solutions and enhance human agent productivity which will improve customer experience and operating margin.
In the first half of the year Capita Experience launched nine new customer service bundles offering repeatable, modular and scalable solutions which can easily be tailored to clients' needs and requirements, while providing quicker market entry. In the next year we will launch a number of additional service bundles targeting specific sector needs. We expect these bundles to continue to increase our market coverage.
To improve the margin performance in the division, Experience is increasing the use of off and nearshore service delivery options. Since the start of the year the division has increased in offshoring use from 45% to 60% in the operational support function which is closely aligned to peer benchmarks.
In the medium term, we are exploring options to expand the Contact Centre contract portfolio in adjacent international markets in EMEA, using our existing infrastructure. To drive cost efficiency we are exploring further expansion of our multi-lingual capabilities in
In the Pension Solutions business, there is growing demand for automation and digital platforms with scheme members looking for a seamless user experience across their chosen platforms. This year we launched the Capita Digital Pensions platform utilising Microsoft Dynamics 365, which uses data insights to provide a hyper personalised member experience. This is a step change in our service offering which will help the business expand into adjacent segments and international markets.
Growth performance and key wins
In the first six months of 2024, Experience won deals with a TCV of £372.8m down 33% from the same period in 2023, IYR was £72.7m, down 76% from the prior period. The book to bill for Experience was 0.7x.
Experience saw success within the Telecoms, Media & Technology vertical with the renewal of contracts with two major European telecoms providers, one with an expanded scope. The two contracts combined have a TCV of more than £250m.
The total unweighted pipeline for the division as at 30 June remains at £3.0bn. Increasing the pipeline is a key focus for the division, and we are undertaking a detailed review to understand future pipeline opportunities in all geographies in which we operate to ensure we are well placed to drive growth. We also anticipate growth from the launch of our service bundles and our partnerships with hyperscalers as they increase the range of our market offerings.
In July, the Pension Solutions business renewed a contract with the Royal Mail Statutory Pensions Scheme with a TCV of £48m. There are a number of opportunities expected to close in the second half of the year across the Contact Centre business, spread across the market verticals served.
The divisional order book stands at £1,529m, a decrease of £770m from £2,299m at year-end, reflecting the increased number of contracts won in the division which are framework agreements, which do not meet the accounting criteria for order book recognition, including the two contracts with European telecoms clients which this year resulted in the de-recognition of £388m from the order book.
Divisional financial summary 2024 2023 % change Adjusted revenue1 (£m) 513.0 616.4 (16.8)% Adjusted operating profit1 (£m) 25.1 39.1 (35.8)% Adjusted operating margin1 (%) 4.9% 6.3% (22.2)% Adjusted EBITDA1 (£m) 52.4 70.2 (25.4)% Operating cash flow excluding business exits1 (£m) 26.1 28.9 (9.7)% Order book (£m) (comparative at 31 December 2023) 1,529.4 2,299.4 (33.5)% Total contract value secured (£m) 372.8 558.9 (33.3)%
Adjusted revenue
1
decreased by 16.8% to £513.0m, reflecting the non-repeat of the one-off benefits in 2023 from the
Adjusted operating profit 1 decreased by 35.8% to £25.1m due to the non-recurrence of revenue one-offs, which resulted in a c.£30m profit benefit in H1 2023 and lower revenue, partly offset by lower overheads, including reduced property footprint.
Operating cash flow excluding business exits 1 reduced by 9.7% to £26.1m with operating cash conversion increasing from 41.2% to 49.8% reflecting the non-cash nature of the 2023 one-offs, which were offset by the benefit from the cost reduction programme.
Outlook
For the full year we expect a high single to low double digit revenue percentage decline.
As the division benefits from the cost reduction programme initiatives, we expect its operating margin to improve in the second half of the year.
___________________________________________
1 Refer to alternative performance measures in the appendix
2 TechMarketView
3
4 External market research including ONS,
Chief Financial Officer's review
Financial Reported results Adjusted1results
highlights
30 June 30 June POP change 30 June 2024 30 June 2023 POP change
2024 2023
Revenue £1,237.3m £1,477.0m (16)% £1,201.5m £1,324.4m (9)%
Operating
profit/ £43.9m £(35.8)m n/a £54.2m £40.9m 33%
(loss)
Operating 3.5% (2.4)% n/a 4.5% 3.1% 45%
margin
EBITDA £101.7m £85.6m 19% £102.2m £97.1m 5%
Profit/
(loss) £60.0m £(67.9)m n/a £31.6m £18.3m 73%
before tax
Basic
earnings/ 3.14p (5.06)p n/a 2.19p 2.68p (18)%
(loss) per
share
Operating £73.5m £34.2m 115% £51.4m £29.3m 75%
cash flow*
Free cash £(44.6)m £(84.0)m 47% £(51.9)m £(64.3)m 19%
flow*
Net debt £(521.9)m £(544.6)m 4% £(521.9)m £(544.6)m 4%
Net
financial
debt £(166.4)m £(166.2)m —% £(166.4)m £(166.2)m —%
(pre-IFRS
16)
* Adjusted operating cash flow and free cash flow exclude the impact of
business exits (refer to note 9).
Overview
Adjusted revenue 1 reduction of 9% reflected previously announced contract hand-backs and losses, and the impact of one-off benefits in the first half of 2023 in Experience.
Public Service revenue reduction reflected previously announced contracts ending in Local Public Services, Scottish Wide Area Network and Electronic Monitoring together with the non-repeat of temporary contract activity in Royal Navy Training offset by increases on our contract with
The step-up in adjusted profit before tax 1 reflected the benefit from the ongoing cost reduction programme, which delivered a reduction in indirect support and overhead costs, more than offsetting the impact of the revenue trends noted above.
Adjusted earnings per share 1 reduced as the increase in adjusted profit before tax 1 was offset by a lower adjusted income tax credit of £5.3m (2023: £25.3m). The reduced adjusted tax credit in the current year reflected a lower deferred tax asset release, due to fewer material changes, period-on-period, to the factors impacting the deferred tax asset recognition model.
The reported profit before tax of £60.0m (2023: loss £67.9m), reflects the improvement in adjusted profit before tax
1
detailed above, lower costs incurred in resolving the
The swing to reported earnings per share reflected the significant improvement in profit before tax and the lower reported income tax charge. The reported tax charge at 30
Cash generated from operations excluding business exits 1 increased, as expected, by 273% to £19.0m, driven by an improvement in operating cash flow, reduction in pension deficit contributions and costs in relation to the cyber incident in the first half of 2023, partly offset by a cash outflow from the costs to deliver the cost reduction programme.
Free cash flow excluding business exits
1
in the six months ended 30
The increase in reported free cash flow reflects the above increase in free cash flow excluding business exits 1 , a cash inflow from business exits, and reduction in pension deficit contributions triggered by disposals.
During the first half of 2024 we completed the disposal of the Group’s 75% shareholding in
In
In
Liquidity as at 30
Financial review
Adjusted results
Capita reports results on an adjusted basis to aid understanding of business performance. The Board has adopted a policy of disclosing separately those items that it considers are outside the underlying operating results for the particular period under review and against which the Group’s performance is assessed internally. In the Board's judgement, these items need to be disclosed separately by virtue of their nature, size and/or incidence for users of the financial statements to obtain an understanding of the financial information and the underlying in-period performance of the business.
In accordance with the above policy, the trading results of business exits, along with the non-trading expenses (including the income statement charges in respect of major cost reduction programmes) and gain or loss on disposals, have been excluded from adjusted results. To enable a like-for-like comparison of adjusted results, the 2023 comparatives have been re-presented to exclude business exits in the second half of 2023 and the first six months of 2024. As at 30
Reconciliations between adjusted and reported operating profit, profit before tax and free cash flow excluding business exits are provided on the following pages and in the notes to the financial statements.
Adjusted revenue
Public
Experience Total
Adjusted revenue1bridge by division Service
£m £m
£m
Six months ended 30June 2023 708.0 616.4 1,324.4
Net reduction (19.5) (103.4) (122.9)
Six months ended 30June 2024 688.5 513.0 1,201.5
Adjusted revenue 1 reduction of 9% was impacted by the following:
•
Public Service (2.8% reduction):
cessation of contracts in Local Public Services, Scottish Wide Area Network and Electronic Monitoring, non-repeat of temporary contract activity in Royal Navy Training offset by increases on our road user charging contract with
•
Experience
(16.8% reduction)
: reflecting previously announced deferred income benefit from the award of a new contract with
Order book
The Group’s consolidated order book was £4,929.4m at 30
Adjusted profit before tax
Public Capita
Experience Total
Adjusted profit before tax1bridge by division Service plc
£m £m
£m £m
Six months ended 30June 2023 26.2 39.1 (47.0) 18.3
Net growth/(reduction) 20.9 (14.0) 6.4 13.3
Six months ended 30June 2024 47.1 25.1 (40.6) 31.6
Adjusted profit before tax 1 increased in 2024 driven by the following:
• Public Service: strong improvement in profit resulting from lower overheads as a result of the successful implementation of the cost reduction programme;
• Experience: reflects the non-repeat of 2023 one-offs (c.£30m) and lower revenue, partly offset by lower overheads, including reduced property footprint, as part of the cost reduction programme; and
•
Adjusted tax credit
The adjusted income tax credit for the period was £5.3m (six months ended
Cash generated from operations and free cash flow
Adjusted operating profit to free cash flow excluding 30June 2024 30 June 2023
business exits1
£m £m
Adjusted operating profit1 54.2 40.9
Add: depreciation/amortisation and impairment of 48.0 56.2
property, plant and equipment and intangible assets
Adjusted EBITDA1 102.2 97.1
Working capital (30.4) (63.9)
Non-cash and other adjustments (20.4) (3.9)
Operating cash flow excluding business exits1 51.4 29.3
Adjusted operating cash conversion1 50% 30%
Pension deficit contributions (6.3) (15.0)
Cyber incident (6.4) (9.2)
Cost reduction programme (19.7) —
Cash generated from operations excluding business 19.0 5.1
exits1
Net capital expenditure (21.2) (24.8)
Interest/tax paid (22.6) (17.3)
Net capital lease payments (27.1) (27.3)
Free cash flow excluding business exits1 (51.9) (64.3)
Working capital improvement is principally driven by a lower level of deferred income releases in the period (c.£40m reduction period-on-period). Non-cash and other adjustments includes provision spend of around £15m, including around £8m in respect of closed book Life & Pensions contracts, broadly in line with 2023. Within this line in 2023 there was a benefit of around £13m adjusting for the non-cash effect of net new provisions established through EBITDA in that period.
Cash generated from operations excluding business exits 1 reflects the above and the direct cash flow impact of the cyber incident in the first half of 2023 (£6.4m) and the cash costs of delivering the cost reduction programme (£19.7m). The £6.3m of pension deficit contributions are in line with the deficit funding contribution schedule previously agreed with the scheme trustees as part of the 2020 triennial valuation. In aggregate, including accelerated pension deficit contributions resulting from business disposals, the Group has made pension deficit contributions of £20.8m in the period and, reflecting the most recent triennial funding agreement, no further deficit contributions are expected in the second half of 2024 and beyond.
Free cash flow excluding business exits
1
for the six months ended 30
Reported results
Adjusted to reported profit
As noted above, to aid understanding of our underlying performance, adjusted operating profit 1 and adjusted profit before tax 1 exclude a number of specific items, including the amortisation and impairment of acquired intangibles and goodwill, the impact of business exits and the impact of the cyber incident and cost reduction programme.
Adjusted1to reported results Operating (loss)/profit (Loss)/profit before tax
bridge
30June 2024 30 June 2023 30June 2024 30 June 2023
£m £m £m £m
Adjusted1 54.2 40.9 31.6 18.3
Amortisation and impairment (0.1) (0.1) (0.1) (0.1)
of acquired intangibles
Impairment of goodwill — (42.2) — (42.2)
Net finance costs/(income) — — (0.4) (2.2)
Business exits (2.4) (12.6) 36.7 (19.9)
Cyber incident 0.4 (21.8) 0.4 (21.8)
Cost reduction programme (8.2) — (8.2) —
Reported 43.9 (35.8) 60.0 (67.9)
Business exits
Business exits include the effects of businesses that have been sold or exited during the period and the results of businesses held-for-sale at the reporting date.
In accordance with our policy, the trading results of these businesses, along with the non-trading expenses and gain on disposal, were included in business exits and therefore excluded from adjusted results. To enable a like-for-like comparison of adjusted results, the 2023 comparatives have been re-presented to exclude businesses classified as business exits from 1
At 30
•
the disposal of the Group’s 75% shareholding in
• the Capita One standalone software business which was identified as a "managed for value" activity, and was in the process of being sold and met the held-for-sale criteria.
In addition to the above disposals, the Group intends to exit the Mortgage Services business and corporate venture business, Capita Scaling Partner, both in Capita Experience, and the trading results and non-trading expenses of these businesses have been excluded from adjusted results. The Capita Scaling Partner business managed the Group’s investment in start-up and scale-up companies. The Group sold one of the Capita Scaling Partner investments during the first half of the year realising a gain of £0.3m. The Group will seek to maximise value from the remaining investments, which had a carrying value of £19.3m at
Cyber incident
The Group has continued to incur exceptional costs associated with the
Cost reduction programme
We announced the implementation of a major cost reduction programme in
A charge of £8.2m has been recognised in the six months ended 30
Further detail of the specific items charged in arriving at reported operating profit and profit before tax for 2024 is provided in note 4 to the condensed consolidated financial statements.
Reported tax charge
The reported income tax charge for the period of £7.1m (2023: charge of £16.8m) reflects changes in the accounting estimate of recognised deferred tax assets and tax-exempt profits on disposal. The prior period charge is higher reflecting a decrease in the recognised deferred tax asset, due to the impact of business disposals.
Free cash flow 1 to free cash flow excluding business exits 1
30June 2024 30 June 2023
£m £m
Free cash flow1 (44.6) (84.0)
Business exits (21.8) 4.1
Pension deficit contributions triggered by disposals 14.5 15.6
Free cash flow excluding business exits1 (51.9) (64.3)
Free cash flow was higher than free cash flow excluding business exits 1 reflecting free cash flows generated by business exits, partly offset by pension deficit contributions triggered by the disposal of certain businesses.
Movements in net debt
Net debt at 30
30June 2024 31 December 2023
Net debt
£m £m
Opening net debt (545.5) (482.4)
Cash movement in net debt 56.8 (9.0)
Non-cash movements (33.2) (54.1)
Closing net debt (521.9) (545.5)
Remove closing IFRS 16 impact 355.5 363.4
Net financial debt (pre-IFRS 16) (166.4) (182.1)
Cash and cash equivalents net of overdrafts 85.4 67.6
Financial debt net of swaps (251.8) (249.7)
Net financial debt /adjusted EBITDA1(both pre-IFRS 1.1x 1.2x
16)
Net debt (post-IFRS 16)/adjusted EBITDA1 2.4x 2.4x
Net financial debt (pre-IFRS 16) reduced by £15.7m to £166.4m at 30
The Group was compliant with all debt covenants at 30
Capital and financial risk management
Financial instruments used to fund operations and to manage liquidity comprise USD and GBP private placement loan notes, revolving credit facility (RCF), leases and overdrafts.
30June 2024 31 December 2023
Available liquidity1
£m £m
Revolving credit facility (RCF) 250.0 260.7
Less: drawing on committed facilities — —
Undrawn committed facilities 250.0 260.7
Cash and cash equivalents net of overdrafts 85.4 67.6
Less: restricted cash (42.3) (46.0)
Available liquidity1 293.1 282.3
In
In addition, the Group has in place non-recourse trade receivable financing, utilisation of which has become economically more favourable than drawing under the RCF as prevailing interest rates have increased. As such, the Group has continued its use of the facility across the year with the value of invoices sold under the facility at 30
At 30
Going concern
The Board closely monitors the Group’s funding position throughout the year, including compliance with covenants and available facilities to ensure it has sufficient headroom to fund operations. In addition, to support the going concern assumption the Board conducts a robust assessment of the projections, considering also the committed facilities available to the Group.
The Group continues to adopt the going concern basis in preparing these condensed consolidated financial statements as set out in note 1 to the condensed consolidated financial statements.
Pensions
The latest formal valuation for the Group’s main defined benefit pension scheme (the Scheme), was carried out as at 31
The valuation of scheme liabilities (and assumptions used) for funding purposes (the actuarial valuation) are specific to the circumstances of each scheme. It differs from the valuation and assumptions used for accounting purposes, which are set out in IAS
19 and shown in these condensed consolidated financial statements. The main difference is in assumption principles being used based in the different regulatory requirements of the valuations. Management estimates that at 30
The net defined benefit pension position of all reported defined benefit schemes for accounting purposes increased from a surplus of £26.8m at 31
Balance sheet
Consolidated net assets were £170.4m at 30
The increase predominantly reflects the decrease in net debt and increase in the pension surplus set out above.
_____________________________________
1 Refer to alternative performance measures in the appendix
Forward looking statements
This half year results statement is prepared for and addressed only to the Company's shareholders as a whole and to no other person. The Company, its Directors, employees, agents and advisors accept and assume no liability to any person in respect of this trading update except as would arise under English law. Statements contained in this trading update are based on the knowledge and information available to Capita’s Directors at the date it was prepared and therefore facts stated and views expressed may change after that date.
This document and any materials distributed in connection with it may include forward-looking statements, beliefs, opinions or statements concerning risks and uncertainties, including statements with respect to Capita’s business, financial condition and results of operations. Those statements, and statements which contain the words "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning, reflect Capita’s Directors' beliefs and expectations and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and which may cause results and developments to differ materially from those expressed or implied by those statements and forecasts.
No representation is made that any of those statements or forecasts will come to pass or that any forecast results will be achieved. You are cautioned not to place any reliance on such statements or forecasts. Those forward-looking and other statements speak only as at the date of this trading update. Capita undertakes no obligation to release any update of, or revisions to, any forward-looking statements, opinions (which are subject to change without notice) or any other information or statement contained in this trading update. Furthermore, past performance cannot be relied on as a guide to future performance.
No statement in this document is intended as a profit forecast or a profit estimate and no statement in this document should be interpreted to mean that earnings per Capita share for the current or future financial years would necessarily match or exceed the historical published earnings per Capita share.
Nothing in this document is intended to constitute an invitation or inducement to engage in investment activity. This document does not constitute or form part of any offer for sale or subscription of, or any solicitation of any offer to purchase or subscribe for, any securities nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract, commitment or investment decision in relation thereto. This document does not constitute a recommendation regarding any securities.
Principal risks and uncertainties
The principal risks and uncertainties faced by the Group and its approach to internal control and risk management are set out on pages 57 to 63 of the 2023 Annual Report and Accounts which is available on the Group’s website at www.capita.com/investors/results-reports-and-presentations.
Risk title Risk description
1 Deliver profitable growth Attract new clients and retain existing
clients on appropriate commercial terms.
Deliver services to clients in
2 Contract performance accordance with contractual and legal
obligations.
3 Innovation Innovate and develop new customer value
propositions with speed and agility.
4 People attraction and retention Attract, develop, engage and retain the
right talent.
5 Financial stability Maintain financial stability and achieve
financial targets.
Protect our systems, networks and
6 Cyber security programs from unauthorised use and
access.
Comply with regulatory and contractual
7 Environment, Social and Governance requirements to drive a purpose driven
(ESG) organisation with the right focus on
governance.
Protect the safety and health of all
8 Safety and Health Capita's employees and manage our duty
of care to them, the people we work with
and those affected by our activities.
Manage our data effectively (both
9 Data Governance and Data Privacy clients and Capita) as a strategic asset
across the organisation.
Statement of Directors’ responsibilities
The Board of directors confirms, to the best of its knowledge, that these condensed consolidated financial statements have been prepared in accordance with IAS
34 as adopted for use in the
The names and functions of the Board of directors of
By order of the Board
Chief Executive Officer Chief Financial Officer
1
Condensed consolidated income statement
For the six months ended 30
30June 2024 30 June 2023
Notes
£m £m
Revenue 3 1,237.3 1,477.0
Cost of sales (973.2) (1,138.4)
Gross profit 264.1 338.6
Administrative expenses (220.2) (374.4)
Operating profit/(loss) 3 43.9 (35.8)
Share of results in associates and investment 1.4 —
gains
Net finance expense 5 (23.4) (25.5)
Gain/(loss) on disposal of businesses 8 38.1 (6.6)
Profit/(loss) before tax 60.0 (67.9)
Income tax charge 6 (7.1) (16.8)
Total profit/(loss) for the period 52.9 (84.7)
Attributable to:
Owners of the Company 53.0 (84.4)
Non-controlling interests (0.1) (0.3)
52.9 (84.7)
Earnings/(loss) per share 7
– basic 3.14p (5.06)p
– diluted 3.07p (5.06)p
Adjusted operating profit 4 54.2 40.9
Adjusted profit before tax 4 31.6 18.3
Adjusted basic earnings per share 7 2.19p 2.68p
Adjusted diluted earnings per share 7 2.14p 2.68p
Condensed consolidated statement of comprehensive income
30June 2024 30 June 2023
For the six months ended 30 June 2024 Notes
£m £m
Total profit/(loss) for the period 52.9 (84.7)
Other comprehensive income/(expense)
Items that will not be reclassified subsequently
to the income statement
Actuarial loss on defined benefit pension schemes (3.5) (26.6)
Tax effect on defined benefit pension schemes 0.8 6.1
Loss on fair value of investments — (0.1)
Items that will or may be reclassified
subsequently to the income statement
Exchange differences on translation of foreign 0.2 (3.4)
operations
Gain/(loss) on cash flow hedges 4.8 (1.6)
Cash flow hedges recycled to the income statement (0.9) (1.2)
Tax effect on cash flow hedges (1.0) 0.7
Other comprehensive income/(expense) for the 0.4 (26.1)
period net of tax
Total comprehensive income/(expense) for the 53.3 (110.8)
period net of tax
Attributable to:
Owners of the Company 53.4 (110.2)
Non-controlling interests (0.1) (0.6)
53.3 (110.8)
The accompanying notes are an integral part of these condensed consolidated financial statements.
Condensed consolidated balance sheet
At 30
30June 2024 31 December 2023
Notes £m £m
Non-current assets
Property, plant and equipment 72.7 80.0
Intangible assets 72.2 90.0
Goodwill 448.1 495.7
Right-of-use assets 185.4 208.5
Investments in associates 0.2 0.2
Contract fulfilment assets 2 257.2 257.0
Financial assets 11 115.3 97.2
Deferred tax assets 135.0 140.3
Employee benefits 13 49.7 32.7
Trade and other receivables 10.4 12.3
1,346.2 1,413.9
Current assets
Financial assets 11 31.1 28.1
Income tax receivable 11.8 11.6
Disposal group assets held-for-sale 8 83.2 38.1
Trade and other receivables 386.8 350.7
Cash 11 148.7 155.4
661.6 583.9
Total assets 2,007.8 1,997.8
Current liabilities
Overdrafts 11 74.6 95.0
Trade and other payables 395.6 425.9
Disposal group liabilities held-for-sale 8 46.7 9.7
Income tax payable 4.0 1.3
Deferred income 515.2 501.3
Lease liabilities 11 45.8 51.1
Financial liabilities 11 88.9 10.8
Provisions 10 74.5 101.6
1,245.3 1,196.7
Non-current liabilities
Trade and other payables 5.9 8.5
Deferred income 43.5 36.2
Lease liabilities 11 309.7 312.3
Financial liabilities 11 180.6 267.5
Deferred tax liabilities 7.2 7.2
Provisions 10 40.5 48.6
Employee benefits 13 4.7 5.9
592.1 686.2
Total liabilities 1,837.4 1,882.9
Net assets 170.4 114.9
Capital and reserves
Share capital 12 35.2 35.2
Share premium 12 1,145.5 1,145.5
Employee benefit trust shares 12 (0.4) (0.7)
Capital redemption reserve 1.8 1.8
Other reserves (11.9) (15.0)
Retained deficit (992.5) (1,053.8)
Equity attributable to owners of the Company 177.7 113.0
Non-controlling interests (7.3) 1.9
Total equity 170.4 114.9
The accompanying notes are an integral part of these condensed consolidated financial statements.
Condensed consolidated statement of changes in equity
For the six months ended 30
Employee Total
Share Share benefit Capital Retained Other attributable Non-controlling Total
capital premium trust redemption deficit reserves to the interests equity
shares reserve owners of
£m £m £m £m the parent £m £m
£m £m
£m
At 31 December 34.8 1,145.5 (4.2) 1.8 (843.2) (4.5) 330.2 22.5 352.7
2022
Loss for the — — — — (84.4) — (84.4) (0.3) (84.7)
period
Other
comprehensive — — — — (20.6) (5.2) (25.8) (0.3) (26.1)
expense
Total
comprehensive — — — — (105.0) (5.2) (110.2) (0.6) (110.8)
expense for the
period
Share-based
payment net of — — — — 2.7 — 2.7 — 2.7
deferred tax
effect
Exercise of
share options
under employee — — 3.8 — (3.8) — — — —
long-term
incentive plans
Shares issued 0.4 — (0.4) — — — — — —
Change in
put-options held
by — — — — 2.0 — 2.0 — 2.0
non-controlling
interests
At 30 June 2023 35.2 1,145.5 (0.8) 1.8 (947.3) (9.7) 224.7 21.9 246.6
At 31 December 35.2 1,145.5 (0.7) 1.8 (1,053.8) (15.0) 113.0 1.9 114.9
2023
Profit/(loss) — — — — 53.0 — 53.0 (0.1) 52.9
for the period
Other
comprehensive — — — — (2.7) 3.1 0.4 — 0.4
(expense)/income
Total
comprehensive — — — — 50.3 3.1 53.4 (0.1) 53.3
income/(expense)
for the period
Share-based
payment net of — — — — 2.8 — 2.8 — 2.8
deferred tax
effect
Elimination of
non-controlling
interest on — — — — — — — (9.1) (9.1)
disposal of
businesses (note
8)
Exercise of
share options
under employee — — 0.3 — (0.3) — — — —
long-term
incentive plans
(note 12)
De-recognition
of put-options
held by — — — — 8.5 — 8.5 — 8.5
non-controlling
interests (note
11)
At 30 June 2024 35.2 1,145.5 (0.4) 1.8 (992.5) (11.9) 177.7 (7.3) 170.4
The accompanying notes are an integral part of these condensed consolidated financial statements.
Condensed consolidated cash flow statement
For the six months ended 30
30June 2024 30 June 2023
Notes
£m £m
Cash generated/(used by) from operations 9 26.6 (5.6)
Income tax paid (0.4) (3.2)
Interest received 4.1 3.0
Interest paid (26.3) (21.6)
Net cash inflow/(outflow) from operating 4.0 (27.4)
activities
Cash flows from investing activities
Purchase of property, plant and equipment (7.2) (15.0)
Purchase of intangible assets (14.3) (14.4)
Proceeds from sale of property, plant and — 0.1
equipment, and intangible assets
Proceeds from disposal of associates and joint 0.3 —
ventures
Additions to originated loans receivable (0.5) —
Changes to investments at fair value through — (0.1)
other comprehensive income
Capital element of lease rental receipts 2.8 3.8
Deferred consideration from sale of subsidiary 10.7 —
undertakings
Total proceeds received from disposal of 8 56.0 8.2
businesses, net of disposal costs
Cash held by businesses when sold 8 (6.3) (3.7)
Net cash inflow/(outflow) from investing 41.5 (21.1)
activities
Cash flows from financing activities
Capital element of lease rental payments (29.9) (31.1)
Repayment of private placement loan notes — (48.7)
Proceeds from cross-currency interest rate swaps — 8.2
Repayment of other finance — (0.5)
Proceeds from credit facilities — 41.0
Debt financing arrangement costs — (1.2)
Net cash outflow from financing activities (29.9) (32.3)
Increase/(decrease) in cash and cash equivalents 15.6 (80.8)
Cash and cash equivalents at the beginning of the 67.6 177.2
period
Effect of exchange rates on cash and cash 2.2 (1.5)
equivalents
Cash and cash equivalents at 30 June 85.4 94.9
Cash and cash equivalents comprise:
Cash 148.7 161.3
Overdrafts (74.6) (86.8)
Cash, net of overdrafts, included in disposal 11.3 20.4
group assets and liabilities held-for-sale
Total 85.4 94.9
Alternative performance measures (refer note 1.2
(b))
Cash generated from operations before business 9 19.0 5.1
exits
Free cash flow before business exits 9 (51.9) (64.3)
The accompanying notes are an integral part of these condensed consolidated financial statements.
Notes to the condensed consolidated financial statements
For the six months ended 30
1.1 Corporate information
These condensed consolidated financial statements as at and for the six months ended 30
These condensed consolidated financial statements were authorised for issue by the Board of directors on 1
These condensed consolidated financial statements are presented in British pounds sterling and all values are rounded to the nearest tenth of a million (£m) except where otherwise indicated.
1.2 Basis of preparation, judgements and estimates, and going concern
(a) Basis of preparation
These unaudited condensed consolidated financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the
These condensed consolidated financial statements have been prepared by applying the accounting policies and presentation that were applied in the preparation of the Company’s published consolidated financial statements for the year ended 31
The Group has considered the impact of new, and amendments to, reporting standards which are effective from 1
The Group is in the early stages of its assessment for all other standards, amendments and interpretations that have been issued by the
These condensed consolidated financial statements do not comprise statutory accounts within the meaning of Section
434 of the Companies Act
2006. Statutory accounts for the year ended 31
These condensed consolidated financial statements have been reviewed by the Group's auditors pursuant to the Auditing Practices Board guidance on the Review of Interim Financial Information.
(b) Adjusted results
IAS 1 Presentation of Financial Statements permits an entity to present additional information for specific items to enable users to better assess the entity’s financial performance.
The Board has adopted a policy to separately disclose those items that it considers are outside the underlying operating results for the particular period under review and against which the Group’s performance is assessed internally. In the Board’s judgement, these need to be disclosed separately by virtue of their nature, size and/or incidence for users of the condensed consolidated financial statements to obtain a proper understanding of the financial information and the underlying performance of the Group.
In general, the Board believes that alternative performance measures (APMs) are useful for investors because they provide further clarity and transparency about the Group’s financial performance and are closely monitored by management to evaluate the Group’s operating performance to facilitate financial, strategic and operating decisions. Accordingly, these items are also excluded from the discussion of divisional performance. Refer to the appendix for further details of the Group’s APMs. Those items which relate to the ordinary course of the Group’s operating activities remain within adjusted results.
The Board has limited the items excluded from the adjusted results to: business exits; amortisation and impairment of acquired intangibles; impairment of goodwill; certain net finance expense/income; the costs associated with the cyber incident in
The Board considers free cash flow, and cash generated from operations excluding business exits, after deducting the capital element of lease payments and receipts, to be alternative performance measures because these metrics provide a more representative measure of the sustainable cash flow of the Group.
While the Board considers APMs to be helpful to the reader, it notes that APMs have certain limitations, including the exclusion of significant recurring and non-recurring items, and may not be directly comparable with similarly titled measures presented by other companies.
A reconciliation between reported and adjusted operating profit and profit before tax is provided in note 4, and a reconciliation between reported and free cash flow excluding business exits and cash generated from operations is provided in note 9.
(c) Judgements and estimates
These condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles which require the Board of directors to make judgements and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported income and expense during the presented periods. Although these judgements and assumptions are based on the Board’s best knowledge of the amounts, events or actions, actual results may differ.
The significant judgements and assumptions made by the Board in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 31
Judgements
The key areas where significant accounting judgements have been made and which have the most significant effect on the amounts recognised in the condensed consolidated financial statements, are summarised below and set out in more detail in the related note:
• Contract accounting (note 2) - revenue recognition;
• Capitalisation of contract fulfilment assets (note 2); and
• Adoption of the going concern basis of preparation (note 1.2(d)).
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, which have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year, are summarised below and set out in more detail in the related note. The Group based its assumptions and estimates on parameters available when the condensed consolidated financial statements were prepared.
Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are incorporated into the assumptions when they occur:
• Contract accounting (note 2) - impairment of contract fulfilment assets, and customer and onerous contract provisions;
• Deferred tax asset recognition (note 6);
• Valuation of investments (note 11); and
• Measurement of defined benefit pension obligations (note 13).
(d) Going concern
In determining the appropriate basis of preparation of these condensed consolidated financial statements for the six month period ended 30
Accounting standards require that ‘the foreseeable future’ for going concern assessment covers a period of at least twelve months from the date of approval of these condensed consolidated financial statements, although those standards do not specify how far beyond twelve months a Board should consider. In its going concern assessment, the Board has considered the period from the date of approval of these condensed consolidated financial statements to 31
The base case financial forecasts used in the going concern assessment are derived from financial projections for 2024-2025 as approved by the Board in
The going concern assessment considers the Group’s sources and uses of liquidity and covenant compliance throughout the period under review. The value of the Group’s committed revolving credit facility (RCF) was £250.0m at 30
Financial position at 30
As detailed further in the Chief Financial Officer's review, as at 30
Board assessment
Base case scenario
Under the base case scenario, the Group’s transformation programme and completion of the Portfolio non-core business disposal programme in
The base case projections used for going concern assessment purposes reflect business disposals completed up to the date of approval of these financial statements and the agreed sale of the Capita One business because the completion of the disposal has been assessed to be highly probable. The liquidity headroom assessment in the base case projections reflects the Group’s existing committed financing facilities and debt redemptions and does not reflect any potential future refinancing. The base case financial forecasts demonstrate liquidity headroom and compliance with all debt covenant measures throughout the going concern period to 31
Severe but plausible downside scenario
In considering severe but plausible downside scenarios, the Board has taken account of the potential adverse financial impacts resulting from the following risks:
• revenue growth falling materially short of plan;
• operating profit margin expansion not being achieved;
• targeted cost savings delayed or not delivered;
• unforeseen operational issues leading to contract losses and cash outflows;
• sustained interest rates at current levels;
• non-availability of the Group’s non-recourse trade receivables financing facility; and
• unexpected financial costs linked to incidents such as data breaches and/or cyber-attacks.
The likelihood of simultaneous crystallisation of the above risks is considered by the directors to be low. Nevertheless in the event that simultaneous crystallisation were to occur, the Group would need to take action to mitigate the risk of insufficient liquidity and covenant headroom. In its assessment of going concern, the Board has considered the mitigations, under the direct control of the Group, that could be implemented including reductions or delays in capital investment, and substantially reducing (or removing in full) bonus and incentive payments. The Board considered the impact of the above risks and mitigations on the Group both in the scenario where the Capita One disposal does occur, and if it were not to occur. In the event of the simultaneous crystallisation of risks and the Capita One disposal does not complete, the Board also considered the ability of the Group to refinance a portion of the 2025 maturing debt. Taking these considerations into account, the Group’s financial forecasts, in a severe but plausible downside scenario, demonstrate sufficient liquidity headroom and compliance with all debt covenant measures throughout the going concern period to 31
Adoption of going concern basis
Reflecting the levels of liquidity and covenant headroom in the base case and severe but plausible downside scenarios, the Group continues to adopt the going concern basis in preparing these condensed consolidated financial statements. The Board has concluded that the Group will be able to continue in operation and meet its liabilities as they fall due over the period to 31
2 Contract accounting
At 30
30June 2024 30 June 2023 31 December 2023
Note
£m £m £m
Long-term contractual revenue 3 908.7 1,114.8
Deferred income 558.7 537.5
Contract fulfilment assets 257.2 257.0
(non-current)
Onerous contract provisions 40.6 43.3
Background
The Group operates diverse businesses. The majority of the Group’s revenue is from contracts greater than two years in duration (long-term contractual), representing 73.4% of Group revenue for the six months ended 30
Recoverability of contract fulfilment assets and completeness of onerous contract provisions
Management first assesses whether contract assets are impaired and then further considers whether an onerous contract exists. For half and full year reporting, the
The major contracts are rated by management according to their financial risk profile, which is linked to the level of uncertainty over future assumptions. From the 2024 half year, the major contracts that the
At the full year, those contracts material by virtue of their size relative to the Group, will also be reviewed by the
In the following paragraphs, the amounts disclosed for the current period are only in respect of those major contracts that the
The major contracts contributed £180.2m (30
As noted above, the major contracts, both pre- and post-transformation, are rated according to their financial risk profile. For those that are in the high and medium rated risk categories the associated non-current contract fulfilment assets were, in aggregate £61.4m at 30
Following these reviews, and reviews of smaller contracts across the business, non-current contract fulfilment asset impairments of £0.2m (30
Given the quantum of the relevant contract assets and liabilities, and the nature of the estimates noted above, management has concluded it is reasonably possible, that outcomes within the next financial year may be different from management’s current assumptions and could require a material adjustment to the carrying amounts of contract assets and onerous contract provisions. However, as noted above, £59.8m of non-current contract fulfilment assets relates to major contracts with ongoing transformational activities; and, £61.4m of non-current contract fulfilment assets and £33.7m of onerous contract provisions relate to the highest and medium rated risk category. Due to the level of uncertainty, combination of variables and timing across numerous contracts, it is not practical to provide a quantitative analysis of the aggregated judgements that are applied, and management do not believe that disclosing a potential range of outcomes on a consolidated basis would provide meaningful information to a user of the financial statements. Due to commercial sensitivities, the Group does not specifically disclose the amounts involved in any individual contract.
Certain major contracts in transformation have key milestones during the next twelve months and an inability to meet these key milestones could lead to reduced profitability and a risk of impairment of the associated contract assets. These include contracts with the
3 Revenue and segmental information
The Group’s operations are managed separately according to the nature of the services provided, with each segment representing a strategic business division offering a different package of client outcomes across the markets the Group serves. Capita plc is a reconciling item and not an operating segment. Inter-segmental pricing is based on set criteria and is either charged on an arm's length basis or at cost.
The tables below present revenue and segmental profit for the Group’s business segments as reported to the Chief Operating Decision Maker. The Group now comprises two divisions - Capita Public Service and Capita Experience - following the completion of the Group's exit of the non-core businesses in the Capita Portfolio division. Comparative information has been re-presented to reflect businesses exited during the second half of 2023 and the first half of 2024. Comparative information has also been re-presented to reflect the move of businesses between segments during the period to enable comparability.
Revenue
Adjusted revenue, excluding results from businesses exited in both periods (adjusting items), was £1,201.5m (30
Capita
Capita Total Adjusting Total
Six months ended Public
Notes Experience adjusted items reported
30 June 2024 Service
£m £m £m £m
£m
Continuing operations
Long-term contractual 570.5 309.7 880.2 28.5 908.7
Short-term contractual 80.6 190.1 270.7 2.6 273.3
Transactional 37.4 13.2 50.6 4.7 55.3
(point-in-time)
Total segment revenue 688.5 513.0 1,201.5 35.8 1,237.3
Trading revenue 700.2 527.9 1,228.1 — 1,228.1
Inter-segment revenue (11.7) (14.9) (26.6) — (26.6)
Total adjusted segment 688.5 513.0 1,201.5 — 1,201.5
revenue
Business exits – trading 8 — — — 35.8 35.8
Total segment revenue 688.5 513.0 1,201.5 35.8 1,237.3
Capita
Capita Total Adjusting Total
Six months ended Public
Notes Experience adjusted items reported
30 June 2023 Service
£m £m £m £m
£m
Continuing operations
Long-term contractual 574.8 496.2 1,071.0 43.8 1,114.8
Short-term contractual 101.8 107.8 209.6 20.1 229.7
Transactional 31.4 12.4 43.8 88.7 132.5
(point-in-time)
Total segment revenue 708.0 616.4 1,324.4 152.6 1,477.0
Trading revenue 719.7 630.8 1,350.5 — 1,350.5
Inter-segment revenue (11.7) (14.4) (26.1) — (26.1)
Total adjusted segment 708.0 616.4 1,324.4 — 1,324.4
revenue
Business exits – trading 8 — — — 152.6 152.6
Total segment revenue 708.0 616.4 1,324.4 152.6 1,477.0
Order book
The tables below show the order book for each division, categorised into long-term contractual (contracts with length greater than two years) and short-term contractual (contracts with length less than two years). The length of the contract is calculated from the service commencement date. The figures present the aggregate amount of the currently contracted transaction price allocated to the performance obligations that are unsatisfied or partially unsatisfied. Revenue expected to be recognised upon satisfaction of these performance obligations is as follows:
Capita
Capita
Order book Public Total
Experience
30June 2024 Service £m
£m
£m
Long-term contractual 3,297.8 1,193.0 4,490.8
Short-term contractual 102.2 336.4 438.6
Total 3,400.0 1,529.4 4,929.4
Capita
Capita Capita
Order book Public Total
Portfolio Experience
31 December 2023 Service £m
£m £m
£m
Long-term contractual — 3,381.1 2,111.2 5,492.3
Short-term contractual 37.2 164.9 188.2 390.3
Total 37.2 3,546.0 2,299.4 5,882.6
The table below shows the expected timing of revenue to be recognised from long-term contractual orders at 30
Capita
Capita
Time bands of expected revenue recognition from Public Total
long-term contractual orders Experience
Service £m
£m
£m
< 1 year 868.1 407.5 1,275.6
1–5 years 1,671.7 581.7 2,253.4
> 5 years 758.0 203.8 961.8
Total 3,297.8 1,193.0 4,490.8
Prior year comparative information is not presented for the expected timing of revenue recognition because it is a forward looking disclosure and therefore management does not believe that such disclosure provides meaningful information to a user of these condensed consolidated financial statements.
The order book represents the consideration that the Group will be entitled to receive from customers when the Group satisfies its remaining performance obligations under the contracts. However, the total revenue that will be earned by the Group will also include non-contracted volumetric revenue, future indexation linked to an external metric, new wins, scope changes and anticipated contract extensions. These elements have been excluded from the figures in the tables above because they are not contracted. Additionally, revenue from contract extensions is also excluded from the order book unless the extensions are pre-priced whereby the Group has a legally binding obligation to deliver the performance obligations during the extension period. The total revenue related to pre-priced extensions included in the tables above amounted to £233.2m (31
Of the £4.5 billion (31
Deferred income
The Group’s deferred income balances solely relate to revenue from contracts with customers. Revenue recognised in the reporting period that was included in the deferred income balance at the beginning of the period was £427.1m (30
Movements in the deferred income balances were driven by transactions entered into by the Group in the normal course of business during the six months ended 30
___________________________________________
1
The prior period amounts in relation to major contracts are as previously presented, and as such reflect the major contracts reviewed by the
Segmental profit
The tables below present profit of the Group’s business segments. For segmental reporting, the costs of central functions have been allocated to the segments using appropriate drivers such as adjusted revenue, adjusted profit or headcount. Comparative information has been re-presented to reflect businesses exited during the second half of 2023 and the first half of 2024.
Capita
Capita Capita Total Adjusting Total
Six months ended Public
Notes Experience plc adjusted items reported
30June 2024 Service
£m £m £m £m £m
£m
Adjusted operating 4 47.1 25.1 (18.0) 54.2 — 54.2
profit
Cost reduction 4 (3.6) 0.5 (5.1) — (8.2) (8.2)
programme
Business exits – 8 — — — — 8.4 8.4
trading
Total trading result 43.5 25.6 (23.1) 54.2 0.2 54.4
Non-trading items:
Business exits – 8 — (10.8) (10.8)
non-trading
Other adjusting 4 — 0.3 0.3
items
Operating profit/ 54.2 (10.3) 43.9
(loss)
Interest income 5 4.9
Interest expense 5 (28.3)
Share of results in
associates and 1.4
investment gains
Gain on business 38.1
disposal
Profit before tax 60.0
Supplementary
information
Depreciation and 18.7 25.8 1.1 45.6 1.4 47.0
amortisation
Impairment of
property, plant and
equipment, 0.9 1.5 — 2.4 8.4 10.8
intangible assets
and right-of-use
assets
Non-current contract
fulfilment assets
utilisation, 27.6 4.8 — 32.4 1.0 33.4
impairment and
derecognition
Onerous contract — 4.2 — 4.2 — 4.2
provisions
Capita
Capita Capita Total Adjusting Total
Six months ended Public
Notes Experience plc adjusted items reported
30 June 2023 Service
£m £m £m £m £m
£m
Adjusted operating 4 26.2 39.1 (24.4) 40.9 — 40.9
profit
Business exits – 8 — — — — 12.5 12.5
trading
Total trading result 26.2 39.1 (24.4) 40.9 12.5 53.4
Non-trading items:
Business exits – 8 — (25.1) (25.1)
non-trading
Other adjusting 4 — (64.1) (64.1)
items
Operating profit/ 40.9 (76.7) (35.8)
(loss)
Interest income 5 4.4
Interest expense 5 (29.9)
Loss on business (6.6)
disposal
Loss before tax (67.9)
Supplementary
information
Depreciation and 19.6 29.1 4.2 52.9 4.9 57.8
amortisation
Impairment of
property, plant and
equipment, 1.0 2.0 0.3 3.3 — 3.3
intangible assets
and right-of-use
assets
Contract fulfilment
assets utilisation, 30.3 7.2 — 37.5 2.7 40.2
impairment and
derecognition
Onerous contract — 1.7 — 1.7 — 1.7
provisions
4 Adjusted operating profit and adjusted profit before tax
The Board has adopted a policy to separately disclose those items that it considers are outside the underlying operating results for the particular period under review and against which the Group’s performance is assessed internally. In the Board’s judgement, these need to be disclosed separately by virtue of their nature, size and/or incidence for users of the consolidated financial statements to obtain a proper understanding of the financial information and the underlying performance of the Group.
In general, the Board believes that alternative performance measures (APMs) are useful for investors because they provide further clarity and transparency about the Group’s financial performance and are closely monitored by management to evaluate the Group’s operating performance to facilitate financial, strategic and operating decisions. Accordingly, these items are also excluded from the discussion of divisional performance. Those items which relate to the ordinary course of the Group’s operating activities remain within adjusted profit.
The items excluded from adjusted profit are discussed further below.
Operating profit/(loss) Profit/(loss) before tax
30June 2024 30 June 2023 30June 2024 30 June 2023
Notes
£m £m £m £m
Reported 43.9 (35.8) 60.0 (67.9)
Amortisation and
impairment of acquired 0.1 0.1 0.1 0.1
intangibles
Impairment of goodwill — 42.2 — 42.2
Net finance expense 5 — — 0.4 2.2
Business exits 8 2.4 12.6 (36.7) 19.9
Cyber incident (0.4) 21.8 (0.4) 21.8
Cost reduction 8.2 — 8.2 —
programme
Adjusted 54.2 40.9 31.6 18.3
1.
Adjusted operating profit of £54.2m (30
2.
The tax impact of the profit before tax adjusting items is a £12.4m charge (30
Amortisation and impairment of acquired intangible assets:
the Group recognised acquired intangible amortisation of £0.1m (30
Impairment of goodwill: the Group carries on its balance sheet significant amounts of goodwill which are subject to annual impairment testing and when any indicators of impairment are identified. Any impairment charges are reported separately because they are non-cash items generated from historical acquisition related activity. The charge is included within administrative expenses.
Net finance expense: net finance expense excluded from adjusted profits relate to movements in the mark-to-market value of forward foreign exchange contracts to cover anticipated future costs and therefore have no equivalent offsetting transaction in the accounting records.
Business exits : the trading result of businesses exited, or in the process of being exited, and the gain or loss on disposals, are excluded from the Group's adjusted results. Note 8 provides further detail regarding which income statement lines are impacted by business exits.
Cyber incident:
the Group has incurred exceptional costs associated with the
Cost reduction programme:
As detailed in the Chief Financial Officer's review, the Group has implemented a significant cost reduction programme. A charge of £8.2m has been recognised in the six months ended 30
Refer to note 9 for the cash flow impact of the above.
5 Net finance expense
The table below shows the composition of net finance costs, including those excluded from adjusted profit:
30June 2024 30 June 2023
Notes
£m £m
Interest income
Interest on cash (1.2) (0.9)
Interest on finance lease assets (2.8) (2.0)
Net interest income on defined benefit pension 13 (0.9) (1.5)
schemes
Total interest income (4.9) (4.4)
Interest expense
Private placement loan notes1 8.2 6.8
Bank loans and overdrafts 5.6 7.0
Cost of non-recourse trade receivables financing 11 2.1 1.4
Interest on finance lease liabilities 10.9 11.0
Discount unwind on provisions 10 0.7 0.8
Total interest expense 27.5 27.0
Net finance expense included in adjusted profit 22.6 22.6
Included within business exits
Bank loans and overdrafts — 0.7
Interest on finance lease liabilities 0.4 0.1
Other financial income — (0.1)
Total included within business exits 8 0.4 0.7
Other items excluded from adjusted profits
Non-designated foreign exchange forward contracts (0.2) 2.3
- change in mark-to-market value
Fair value hedge ineffectiveness2 0.6 (0.1)
Total other items excluded from adjusted profits 0.4 2.2
Net finance expense excluded from adjusted profit 0.8 2.9
Total net finance expense 23.4 25.5
1. Private placement loan notes comprise US dollar and British pound sterling private placement loan notes, and the euro fixed rate bearer notes which were repaid during 2023.
2. Fair value hedge ineffectiveness arises from changes in currency basis, and the movement in a provision for counterparty risk associated with the swaps.
6 Income tax
30June 2024 30 June 2023
Included in Excluded Included in Excluded from
Total adjusted from Total adjusted adjusted
reported profit adjusted reported profit profit
profit
£m £m £m £m £m
£m
Tax (7.1) 5.3 (12.4) (16.8) 25.3 (42.1)
(charge)/credit
Excluding discrete items, the adjusted income tax charge for the six month period is £8.6m (2023: £3.7m) and has been calculated by applying management’s best estimate of the full-year effective tax rate of 27.3% (estimated using full-year profit projections excluding any discrete items) to the adjusted profit before tax for the six months to
Excluding discrete items, the reported tax charge of £6.5m (2023: £6.7m) reflects the £2.1m tax credit on adjusting items. This has been calculated on an item-by-item basis and reflects the tax exempt profit on disposal. The reported tax charge on discrete business exit items relates to the deferred tax relating to the change in estimate of deferred tax assets in respect of divestments, £14.5m (2023: charge of £39.1m), resulting in the total reported tax charge, including discrete items, of £7.1m (2023: charge of £16.8m), on a reported profit before tax of £60.0m (2023: loss of £67.9m).
Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. The recoverability of deferred tax assets is supported by the deferred tax liabilities against which the reversal can be offset and the expected level of future profits in the countries concerned. The recognition of deferred tax assets has been based on the latest financial projections for 2024-2025, using a long-term growth rate of 1.7% and a reducing probability factor applied to future profits, consistent with the approach in recent years. This assessment results in a change in the accounting estimate of deferred tax of £0.2m, which is reflected as a deferred tax charge in adjusting items due to business disposals (£14.5m reduction), and an adjusted tax credit in relation to an increase in taxable profits in the assessment model (£14.3m increase).
Unrecognised temporary differences have increased by £3.4m, resulting in total unrecognised temporary differences as at 30
The estimated full year effective tax rate of 27.3% includes an income tax expense of £0.5m (2023: not applicable) related to Pillar Two income taxes. This charge relates to estimated Pillar Two top-up taxes on profits earned in the
The Group has an open and positive working relationship with HMRC, has a designated customer compliance manager, and is committed to prompt disclosure and transparency in dealings with HMRC and overseas tax authorities. The Group does not have a complex tax structure, supported by legal structure simplification from the entity rationalisation programme. The Group does not pursue aggressive tax avoidance activities and has a low-risk rating from HMRC. The Group has operations in a number of countries outside the
7 Earnings/(loss) per share
Basic earnings/(loss) per share are calculated by dividing the net profit/(loss) for the period attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings/(loss) per share are calculated by dividing the net profit/(loss) for the period attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
30June 2024 30 June 2023
pence pence
Basic earnings/(loss) per share – reported 3.14 (5.06)
– adjusted 2.19 2.68
Diluted earnings/(loss) per share – reported 3.07 (5.06)
– adjusted 2.14 2.68
The following tables show the earnings and share data used in the basic and diluted earnings/(loss) per share calculations:
30June 2024 30 June 2023
Notes £m £m
Reported profit/(loss) before tax for the period 60.0 (67.9)
Income tax (charge)/credit 6 (7.1) (16.8)
Reported profit/(loss) for the period 52.9 (84.7)
Less: Non-controlling interest 0.1 0.3
Total profit/(loss) attributable to shareholders 53.0 (84.4)
Adjusted profit before tax for the period 4 31.6 18.3
Income tax (charge)/credit 5.3 25.3
Adjusted profit for the period 36.9 43.6
Less: Non-controlling interest 0.1 1.1
Adjusted profit attributable to shareholders 37.0 44.7
30June 2024 30 June 2023
£m £m
Weighted average number of ordinary shares (excluding
Employee Benefit Trust shares) for basic earnings per 1,688.1 1,669.4
share
Dilutive potential ordinary shares:
Employee share options 41.1 34.9
Weighted average number of ordinary shares (excluding
Employee Benefit Trust shares) adjusted for the effect 1,729.2 1,704.3
of dilution
At 30
The earnings per share figures are calculated based on earnings attributable to ordinary equity holders of the Parent Company, and therefore exclude non-controlling interest. The earnings per share is calculated on a total reported and an adjusted basis. The earnings per share for business exits and specific items are reconciling items between total reported and adjusted basic earnings per share.
There have been no other transactions involving ordinary shares or potential ordinary shares between the balance sheet date and the date on which these condensed consolidated financial statements were authorised for issue.
8 Business exits and assets held-for-sale
Business exits
Business exits are businesses that have been sold, exited during the period, or are in the process of being sold or exited in accordance with the Group's strategy. None of these business exits meet the definition of ‘discontinued operations’ as stipulated by IFRS 5 Non-current assets held-for-sale and discontinued operations , which requires disclosure and comparatives to be restated where the relative size of a disposal or business closure is significant, which is normally understood to mean a reported segment.
However, the trading results of these businesses, non-trading expenses, and any gain/loss on disposal, have been excluded from adjusted results. To enable a like-for-like comparison of adjusted results, the 30
Assets held-for-sale
The Group classifies a non-current asset (or disposal group) as held-for-sale if its carrying amount will be recovered principally through a sale transaction instead of continued use. For this to be the case, the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be highly probable. For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset (or disposal group), and an active programme to locate a buyer and complete the plan must have been initiated. Further, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value, and the sale should be expected to be completed within one year from the date of classification.
Based on the above requirements, individual businesses will only reach the criteria to be treated as held-for-sale where the disposal is seen to be highly probable and expected to complete within the following twelve months. At 30
2024 business exits
Business exits at 30
Business Disposal completed on Fera17 January 2024 Capita One Held-for-sale at30 June 2024
In addition to the above disposals, as disclosed in the 2023 Annual Report, the Group decided to exit a business in Capita Public Service during the second half of 2023, the trading result and non-trading expenses of that business have been excluded from adjusted results. During the first half of 2024, the Group decided to exit the Mortgage Services business and its corporate venture business (Capita Scaling Partner), both in Capita Experience. The trading results and non-trading expenses of these businesses have been excluded from adjusted results. The Capita Scaling Partner business managed the Group’s investments in start-up and scale-up companies, one of which was sold during the first half of the year realising a gain of £0.3m. The Group will seek to maximise value from the remaining Capita Scaling Partner investments, which at 30
30June 2024 30 June 2023
Income statement impact
Trading Non-trading Total Trading Non-trading Total
£m £m £m £m £m £m
Revenue 35.8 — 35.8 152.6 — 152.6
Cost of sales (27.1) — (27.1) (95.7) — (95.7)
Gross profit 8.7 — 8.7 56.9 — 56.9
Administrative expenses (0.3) (10.8) (11.1) (44.4) (25.1) (69.5)
Operating profit/(loss) 8.4 (10.8) (2.4) 12.5 (25.1) (12.6)
Share of results in
associates and — 1.4 1.4 — — —
investment gains
Net finance income/ (0.4) — (0.4) (0.8) 0.1 (0.7)
(expense)
Gain/(loss) on business — 38.1 38.1 — (6.6) (6.6)
disposal
Profit/(loss) before tax 8.0 28.7 36.7 11.7 (31.6) (19.9)
Taxation (2.0) (12.2) (14.2) (3.0) (39.1) (42.1)
Profit/(loss) after tax 6.0 16.5 22.5 8.7 (70.7) (62.0)
Trading revenue and costs represent the trading performance of the above businesses up to the point of being disposed or exited, and in the comparative those businesses disposed of during 2023 (being: Resourcing, Security Watchdog,
Non-trading administrative expenses comprise: asset impairments of £8.7m (30
Non-trading taxation in 2024 relates to a change in accounting estimate of deferred tax assets, due to businesses being disposed or exited and deductible intangible impairment. Refer to note 6 for further details.
2024 disposals
During the six months ended 30
30June 2024 30 June 2023
£m £m
Property, plant and equipment — 0.1
Intangible assets — 7.9
Goodwill — 1.7
Trade and other receivables — 21.8
Accrued income — 6.4
Prepayments — 1.4
Cash and cash equivalents — 3.7
Disposal group assets held-for-sale 69.9 —
Trade and other payables — (3.7)
Accruals — (8.1)
Other taxes and social security — (1.2)
Deferred income — (3.7)
Income tax payable and deferred tax liability — (0.4)
Capita group loan balances — (15.0)
Disposal group liabilities held-for-sale (42.4) —
Net identifiable assets sold 27.5 10.9
Non-controlling interests (9.1) —
18.4 10.9
Sales price
- received in cash 61.9 3.3
- deferred receivable — 6.7
Less: disposal costs (5.4) (5.7)
Net sales price 56.5 4.3
Gain/(loss) on business disposals 38.1 (6.6)
Net cash inflow
Proceeds received 61.9 3.3
Less disposal costs:
- income statement charge (5.4) (5.7)
- change in accrued disposal costs during the period (0.5) (4.4)
Settlement of receivables due from disposed businesses
- disposal of businesses in the period — 15.0
Total proceeds received net of disposal costs paid 56.0 8.2
Total cash held by businesses when sold
Cash held by businesses when sold — (3.7)
Cash held by businesses classified as held-for-sale (6.3) —
Total cash held by businesses when sold (6.3) (3.7)
Net cash inflow 49.7 4.5
Disposal group assets and liabilities held-for-sale
At 30
30June 2024 31 December 2023
£m £m
Property, plant and equipment — 5.1
Intangibles 10.5 —
Goodwill 47.0 15.0
Contract fulfilment assets 4.7 —
Trade and other receivables 5.4 3.3
Accrued income 0.2 6.1
Prepayments 3.0 1.4
Cash and cash equivalents 11.3 7.2
Income tax receivable and deferred tax assets 1.1 —
Disposal group assets held for sale 83.2 38.1
Trade and other payables 0.4 2.1
Other taxes and social security 0.1 1.6
Accruals 1.5 1.8
Deferred income 43.9 3.6
Income tax payable and deferred tax liabilities 0.8 0.6
Disposal group liabilities held for sale 46.7 9.7
Business exit cash flows
Businesses exited and being exited had a cash generated from operations inflow of £22.1m (30
9 Cash flow information
30June 2024 30 June 2023
Excluding business Reported Excluding business
Note Reported exits1 exits1
£m £m
£m £m
Cash flows from
operating
activities:
Reported operating 4 43.9 43.9 (35.8) (35.8)
profit/(loss)
Add back: business 8 — 2.4 — 12.6
exit operating loss
Total operating 43.9 46.3 (35.8) (23.2)
profit/(loss)
Adjustments for
non-cash items:
Depreciation 34.9 34.9 41.0 39.9
Amortisation of 12.1 10.8 16.8 13.1
intangible assets
Share-based payment 2.8 2.8 2.7 2.7
expense
Employee benefits 13 4.2 4.2 3.9 3.9
Loss on sale of
property, plant and 0.1 0.1 0.1 0.1
equipment and
intangible assets
Amendments and
early terminations (8.4) (8.4) 1.2 1.2
of leases
Impairment of 10.8 2.1 63.6 45.5
non-current assets
Other adjustments:
Movement in (35.4) (30.6) (5.8) (7.3)
provisions
Pension deficit (20.8) (6.3) (30.6) (15.0)
contributions
Other contributions
into pension (4.1) (4.1) (4.5) (4.5)
schemes
Movements in
working capital:
Trade and other (46.7) (43.1) (106.4) (71.7)
receivables
Non-recourse trade
receivables (1.7) (1.7) (4.1) (4.1)
financing
Trade and other (25.8) (28.1) 27.6 21.6
payables
Deferred income 65.7 45.3 25.5 2.3
Contract fulfilment
assets (5.0) (5.2) (0.8) 0.6
(non-current)
Cash generated/
(used by) from 26.6 19.0 (5.6) 5.1
operations
Adjustments for
free cash flows:
Income tax paid (0.4) (0.4) (3.2) 0.6
Interest received 4.1 4.1 3.0 3.0
Interest paid (26.3) (26.3) (21.6) (20.9)
Net cash inflow/
(outflow) from 4.0 (3.6) (27.4) (12.2)
operating
activities
Purchase of
property, plant and (7.2) (6.9) (15.0) (10.5)
equipment
Purchase of (14.3) (14.3) (14.4) (14.4)
intangible assets
Proceeds from sale
of property, plant — — 0.1 0.1
and equipment and
intangible assets
Capital element of
lease rental 2.8 2.8 3.8 3.8
receipts
Capital element of
lease rental (29.9) (29.9) (31.1) (31.1)
payments
Free cash flow1 (44.6) (51.9) (84.0) (64.3)
1. Definitions of the alternative performance measures and related KPIs can be found in the appendix.
Cyber incident:
In relation to the exceptional cyber incident costs referred to in note
4, the cash outflow during the period ended 30
Cost reduction programme:
In relation to the implementation of the cost reduction programme detailed in note
4, the cash outflow during the period ended 30
Free cash flow and cash generated from operations
The Board considers free cash flow, and cash generated from operations excluding business exits, to be alternative performance measures because these metrics provide a more representative measure of the sustainable cash flow of the Group.
These measures are analysed below:
Cash
Free cash generated/
flow (used) by
operations
2024 2023 2024 2023
£m £m £m £m
Reported (including business exits) (44.6) (84.0) 26.6 (5.6)
Business exits (21.8) 4.1 (22.1) (4.9)
Pension deficit contributions triggered by disposals 14.5 15.6 14.5 15.6
Excluding business exits (51.9) (64.3) 19.0 5.1
Business exits:
the cash flows of businesses exited, or in the process of being exited, and the proceeds from disposals, are disclosed outside the adjusted results. The 30
Pension deficit contributions triggered by disposals:
the Trustee of the Group's main defined benefit pension scheme has agreed with the Group to accelerate the payment of future agreed deficit contributions on a pound for pound basis in the event of disposal proceeds being used to fund mandatory prepayments of debt. The disposal of Trustmarque in
Reconciliation of net cash flow to movement in net debt
Overdrafts comprise the aggregate value of overdrawn bank account balances within the Group’s notional interest pooling arrangements. These aggregate overdrawn amounts are fully offset by surplus balances within the same notional pooling arrangements.
At 30
Non-cash
Net debt at Cash flow Net debt at
Six months ended 30June 2024 1 January movements movement1 30June
£m £m £m
£m
Cash, cash equivalents and 67.6 15.6 2.2 85.4
overdrafts
Private placement loan notes (267.0) — (1.5) (268.5)
Unamortised transaction costs on 4.5 — (1.1) 3.4
debt issuance
Carrying value of private placement (262.5) — (2.6) (265.1)
loan notes
Cross-currency interest rate swaps 13.6 — 0.5 14.1
Fair value of private placement loan (248.9) — (2.1) (251.0)
notes
Other finance (0.1) — — (0.1)
Lease liabilities (363.4) 41.2 (33.3) (355.5)
Total net liabilities from financing (612.4) 41.2 (35.4) (606.6)
activities
Deferred consideration payable (0.7) — — (0.7)
Net debt (545.5) 56.8 (33.2) (521.9)
1. The non-cash movement relates to: the effect of changes in foreign exchange rates on cash; fair value changes on the swaps; amortisation of loan notes issue costs; amortisation of the discount on the euro debt; and additions, terminations and foreign exchange rate effects on the Group's leases.
Net debt at Cash flow Non-cash Net debt at
Six months ended 30 June 2023 1 January movements movement 1 30 June
£m £m £m £m
Cash, cash equivalents and 177.2 (80.8) (1.5) 94.9
overdrafts
Private placement loan notes (289.5) 48.7 6.8 (234.0)
Unamortised discount on debt 1.6 — (0.7) 0.9
issuance
Unamortised transaction costs on 2.4 1.2 (1.0) 2.6
debt issuance
Carrying value of private placement (285.5) 49.9 5.1 (230.5)
loan notes
Cross-currency interest rate swaps 24.8 (8.2) (5.4) 11.2
Fair value of private placement (260.7) 41.7 (0.3) (219.3)
loan notes
Other finance (0.7) 0.5 0.1 (0.1)
Credit facilities — (41.0) — (41.0)
Lease liabilities (397.5) 42.2 (23.1) (378.4)
Total net liabilities from (658.9) 43.4 (23.3) (638.8)
financing activities
Deferred consideration payable (0.7) — — (0.7)
Net debt (482.4) (37.4) (24.8) (544.6)
10 Provisions
Cost Business Claims and Customer
reduction exit Property Other
litigation contract Total
provision provision provision provisions
provision provision £m
£m £m £m £m
£m £m
At 1 29.5 7.8 41.4 7.8 58.5 5.2 150.2
January
Provisions
in the 8.0 4.0 4.5 1.5 7.2 2.8 28.0
period
Releases in (3.9) (1.2) (7.4) 0.3 (7.0) (3.0) (22.2)
the period
Utilisation (19.7) (5.2) (6.4) (1.8) (7.4) (1.2) (41.7)
Discount
unwind on — — — — 0.7 — 0.7
provisions
At 30June 13.9 5.4 32.1 7.8 52.0 3.8 115.0
30June 2024 31 December 2023
£m £m
Current 74.5 101.6
Non-current 40.5 48.6
115.0 150.2
Cost reduction provision: The provision represents the cost of reducing headcount where communication to affected employees has crystallised a valid expectation that roles are at risk and it is likely to unwind over the next twelve months. Additionally, it relates to unavoidable running costs of leasehold properties (such as insurance and security) and dilapidation provisions, where properties are exited as a result of the cost reduction programme. These provisions are likely to unwind over periods of up to four years.
Business exit provision: The provision relates to the cost of exiting businesses through disposal or closure including professional fees related to business exits and the costs of separating the businesses being disposed. These are likely to unwind over a period of one to four years.
Claims and litigation provision: The Group is exposed to claims and litigation proceedings arising in the ordinary course of business. These matters are reassessed regularly and where obligations are probable and estimable, provisions are made representing the Group’s best estimate of the expenditure to be incurred. Due to the nature of these claims, the Group cannot give an estimate of the period over which this provision will unwind.
Property provision: The provision relates to unavoidable running costs, such as insurance and security, of leasehold property where the space is vacant or currently not planned to be used, and dilapidation costs, for ongoing operations, and not the cost reduction programme (where such costs are included in the cost reduction provision). The expectation is that this expenditure will be incurred over the remaining periods of the leases which vary up to 22 years.
Customer contract provision: The provision includes onerous contract provisions in respect of customer contracts where the costs of fulfilling a contract (both incremental and costs directly related to contract activities) exceed the economic benefits expected to be received under the contract, claims/obligations associated with missed milestones in contractual obligations, and other potential exposures related to contracts with customers. Customer contract life-time reviews are used to determine the value of an onerous contract provision. The lifetime contract review reflects the forecast of the best estimate of external revenues and costs over the remaining contract term. These provisions are forecast to unwind over periods of up to six years.
The customer contract provision includes £46.4m (31
Other provisions: Relates to provisions in respect of other exposures arising as a result of the nature of some of the operations that the Group provides, including supplier audit and regulatory provisions, and for which an outflow of economic benefits is deemed probable. These are likely to unwind over periods of up to five years.
11 Financial instruments
The Group’s financial assets and liabilities are classified based on the following fair value hierarchy:
• Level-1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
• Level-2: other techniques for which inputs that have a significant effect on the recorded fair value are based on observable (directly or indirectly) market data. With the exception of current financial instruments (which have a short maturity), the fair value of the Group’s level-2 financial instruments was calculated by discounting the expected future cash flows at prevailing interest rates. The valuation models incorporate various inputs including foreign exchange spot and forward rates and interest rate curves. In the case of floating rate borrowings the nominal value approximates to fair value because interest is set at floating rates where payments are reset to market values at intervals of less than one year.
• Level-3: other techniques for which inputs that have a significant effect on the recorded fair value are not based on observable market data.
Other financial instruments, where observable market data is not available, are carried at either amortised cost or cost (undiscounted cash flows) as a reasonable approximation of fair value. During the six months ended 30
The following table analyses, by classification and category, the carrying value of the Group’s financial instruments and identifies the level of the fair value hierarchy for the instruments carried at fair value:
Derivatives
Fair Amortised Non-
FVPL FVOCI used for Total Current
At 30June 2024 Note value cost current
£m £m hedging £m £m
hierarchy £m £m
£m
Financial
assets
Lease n/a — — — 98.8 98.8 5.6 93.2
receivables
Cash flow
hedges -
foreign Level-2 — — 2.3 — 2.3 1.4 0.9
exchange
contracts
Cash flow
hedges - a Level-2 — — 0.4 — 0.4 0.2 0.2
interest rate
swaps
Non-designated
foreign
exchange Level-2 0.4 — — — 0.4 0.4 —
forwards and
swaps
Cross-currency
interest rate a Level-2 — — 15.4 — 15.4 11.7 3.7
swaps
Originated
loans n/a — — — 1.2 1.2 — 1.2
receivable
Financial
assets at fair Level-3 17.9 — — — 17.9 2.5 15.4
value through
P&L
Financial
assets at fair Level-3 — 0.7 — — 0.7 — 0.7
value through
OCI
Deferred
consideration n/a — — — 9.3 9.3 9.3 —
receivable
Cash n/a — — — 148.7 148.7 148.7 —
Cash included
within
disposal group 8 n/a — — — 11.3 11.3 11.3 —
assets
held-for-sale
Total
financial 18.3 0.7 18.1 269.3 306.4 191.1 115.3
assets
Fair Derivatives Non-
FVPL FVOCI used for Amortised Total Current
At 30June 2024 Note value £m £m hedging cost £m current
£m £m £m
hierarchy £m
Financial
liabilities
Private
placement loan a n/a — — — 265.1 265.1 87.4 177.7
notes
Other finance n/a — — — 0.1 0.1 0.1 —
Cash flow
hedges -
foreign Level-2 — — 1.4 — 1.4 0.5 0.9
exchange
contracts
Cash flow
hedges - Level-2 — — 0.5 — 0.5 0.5 —
interest rate
swaps
Non-designated
foreign
exchange Level-2 0.4 — — — 0.4 0.4 —
forwards and
swaps
Cross-currency
interest rate a Level-2 — — 1.3 — 1.3 — 1.3
swaps
Deferred
consideration n/a — — — 0.7 0.7 — 0.7
payable
Overdrafts n/a — — — 74.6 74.6 74.6 —
Lease n/a — — — 355.5 355.5 45.8 309.7
liabilities
Total
financial 0.4 — 3.2 696.0 699.6 209.3 490.3
liabilities
Financial assets measured at amortised cost consist of cash, lease receivables, originated loans and deferred consideration receivable. The carrying value of cash is a reasonable approximation of its fair value due to the short-term nature of the instruments. Lease receivables, originated loans and deferred consideration receivable are measured at amortised cost using the effective interest rate method. Included in other investments are £0.7m (31
The financial assets at Fair Value through Profit and Loss (FVPL) relate to the Group’s minority shareholding in companies as part of Capita Scaling Partner. The assets are revalued when reliable information on fair value becomes available, which is normally at each funding round. As set out in note 8, during the first half of 2024 the Group decided to exit the Capita Scaling Partner business, and the Group will seek to maximise value from the remaining investments. Where the disposal process for an investment is deemed to be sufficiently advanced at
Financial liabilities measured at amortised cost consist of loan notes, overdrafts, lease liabilities, credit facilities and deferred consideration payable. With the exception of certain series within the fixed rate private placement loan notes, the carrying value of financial liabilities are a reasonable approximation of their fair value. This is because either the interest payable is close to market rates or the liability is short-term in nature. The private placement loan note series that remain subject to a fixed rate of interest have an underlying carrying value of £174.1m (31
The Group’s key financial liabilities are set out below:
a. Private placement loan notes
The private placement loan notes were issued in USD and GBP. The Group manages its exposure to foreign exchange and interest rate movements through cross-currency interest rate swaps, interest rate swaps, and cross currency swaps.
b. Bank facilities
The Group's revolving credit facility (RCF) was undrawn at 30
c. Put options of non-controlling interests
The option held by the non-controlling shareholder of
Derivatives
Fair Amortised Non-
At 31 December FVPL FVOCI used for Total Current
2023 Note value cost current
£m £m hedging £m £m
hierarchy £m £m
£m
Financial
assets
Lease n/a — — — 70.3 70.3 6.3 64.0
receivables
Cash flow
hedges -
foreign Level-2 — — 1.8 — 1.8 1.4 0.4
exchange
contracts
Cash flow
hedges - Level-2 — — 0.1 — 0.1 0.1 —
interest rate
swaps
Non-designated
foreign
exchange Level-2 0.3 — — — 0.3 0.3 —
forwards and
swaps
Cross-currency
interest rate a Level-2 — — 14.5 — 14.5 — 14.5
swaps
Originated
loans n/a — — — 0.7 0.7 — 0.7
receivable
Financial
assets at fair Level-3 16.9 — — — 16.9 — 16.9
value through
P&L
Financial
assets at fair Level-3 — 0.7 — — 0.7 — 0.7
value through
OCI
Deferred
consideration n/a — — — 20.0 20.0 20.0 —
receivable
Cash and cash n/a — — — 155.4 155.4 155.4 —
equivalents
Cash and cash
equivalents
included within 4 n/a — — — 7.2 7.2 7.2 —
disposal group
assets
held-for-sale
Total financial 17.2 0.7 16.4 253.6 287.9 190.7 97.2
assets
Fair Derivatives Amortised
At 31 December FVPL FVOCI used for Total Current Non-
2023 Note value hedging cost £m £m current
£m £m £m £m
hierarchy £m
Financial
liabilities
Private
placement loan a n/a — — — 262.5 262.5 — 262.5
notes
Other loan n/a — — — 0.1 0.1 0.1 —
notes
Cash flow
hedges -
foreign Level-2 — — 3.6 — 3.6 1.5 2.1
exchange
contracts
Cash flow
hedges - Level-2 — — 1.2 — 1.2 — 1.2
currency swaps
Cash flow
hedges - Level-2 — — 0.6 — 0.6 0.6 —
interest rate
swaps
Non-designated
foreign
exchange Level-2 0.2 — — — 0.2 0.1 0.1
forwards and
swaps
Cross-currency
interest rate a Level-2 — — 0.9 — 0.9 — 0.9
swaps
Deferred
consideration n/a — — — 0.7 0.7 — 0.7
payable
Put options of
non-controlling c Level-3 — 8.5 — — 8.5 8.5 —
interests
Overdrafts n/a — — — 95.0 95.0 95.0 —
Lease n/a — — — 363.4 363.4 51.1 312.3
liabilities
Total financial 0.2 8.5 6.3 721.7 736.7 156.9 579.8
liabilities
The following table shows the changes from the opening balances to the closing balances for Level-3 fair values.
Put options
Investments
of non-
FVPL and
controlling
FVOCI
interests
£m
£m
At 1 January 8.5 17.6
Change in put-options recognised in retained earnings (8.5) —
Gain in fair value recognised in income statement — 1.0
At 30June — 18.6
Non-recourse trade receivables financing
In the
12 Issued share capital and share premium
Employee
Share Share premium benefit
capital trust
shares
Allotted, called up and fully paid No.m £m £m No.m £m
Ordinary shares of 2 1/15p
At 1 January 1,701.1 35.2 1,145.5 16.8 (0.7)
Issued on exercise of share options — — — (7.7) 0.3
At 30June 1,701.1 35.2 1,145.5 9.1 (0.4)
The Group uses shares held in the
During the six months to 30
The Group has an unexpired authority to repurchase up to 10.0% of its issued share capital.
13 Employee benefits
The total net defined benefit pension position for accounting purposes as at 30
The principal financial assumptions for the accounting valuation as at 30
30June 2024 31 December 2023
Discount rate 5.15% pa 4.55% pa
Rate of price inflation – RPI 3.15% pa 3.05% pa
Rate of price inflation – CPI 2.60% pa 2.45% pa
There were no changes in demographic assumptions since 31
Movements in the total net defined benefit pension position recognised in the balance sheet were as follows:
30June 2024 30 June 2023
£m £m
At 1 January 26.8 39.6
Current service and administration costs (4.2) (3.7)
Termination benefits — (0.2)
Interest income 0.9 1.5
Actuarial gain recognised in OCI1 81.1 50.7
Return on plan assets, excluding interest, recognised (84.6) (77.3)
in OCI
Employer contributions 24.9 40.0
Exchange movement 0.1 —
At 30 June 45.0 50.6
Schemes in a net surplus 49.7 54.2
Schemes in a net deficit (4.7) (3.6)
At 30 June 45.0 50.6
1. The increase in long-dated corporate bond yields, and hence the discount rate, (by around 0.6% pa) reduced the value placed on the liabilities. This was partially offset by the impact of actual inflation over the period being greater than expected and future expected inflation being slightly higher.
The latest formal valuation for the Group’s main defined benefit pension scheme ('HPS', which represents around 96% of the total assets of the defined benefit pension schemes in which the Group participates), was carried out as at 31
The estimated updated funding positions as at 30
The next full actuarial valuation for the HPS is due to be carried out with an effective date of 31
2. These include additional, non-statutory, contributions to meet a secondary funding target with the objective of having sufficient assets to invest in a portfolio of low-risk assets with a low dependency covenant that will generate income to pay members' benefits as they fall due.
14 Related-party transactions
Compensation of key management personnel
30June 2024 30 June 2023
£m £m
Short-term employment benefits 2.9 3.4
Share-based payments 0.9 0.8
3.8 4.2
Gains on share options exercised in the period by Capita
plc Executive Directors were £nil (30
During the period, the Group rendered administrative services to
HPS (Capita's main defined benefit pension scheme) is a related party of the Group.
15 Contingent liabilities
Contingent liabilities represent potential future cash outflows which are either not probable or cannot be measured reliably.
The Group has provided, through the normal course of its business, performance bonds and bank guarantees of £23.8m (31
The Group is reviewing its position in respect of a number of its closed book Life and Pensions contracts. The outcomes and timing of this review, which are uncertain, could result in no change to the current position, the continuation of contracts with amended terms or the termination of contracts. If an operation is terminated, the Group may incur associated costs, accelerate the recognition of deferred income or the impairment of contract assets.
Following the cyber incident in
The Group's entities are otherwise party to legal actions and claims which arise in the normal course of business. The Group needs to apply judgement in determining the merit of litigation against it and the chances of a claim being successfully made. It needs to determine the likelihood of an outflow of economic benefits occurring and whether there is a need to disclose a contingent liability or whether a provision might be required due to the probability assessment.
At any time there are a number of claims or notifications that need to be assessed across the Group. The disparate nature of the Group's entities heightens the risk that not all potential claims are known at any point in time.
16 Post balance sheet events
There have been no material events arising after the reporting date.
Independent review report to
Conclusion
We have been engaged by
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended
Basis for conclusion
We conducted our review in accordance with International Standard on Review Engagements (
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention that causes us to believe that the directors have inappropriately adopted the going concern basis of accounting, or that the directors have identified material uncertainties relating to going concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with ISRE (
Directors’ responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the
As disclosed in note 1.2, the annual financial statements of the Group are prepared in accordance with
The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted for use in the
In preparing the condensed set of financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Our conclusion, including our conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the DTR of the
for and on behalf of
Chartered Accountants
E14 5GL
1
Appendix: Alternative performance measures
The Group presents various alternative performance measures (APMs) because internally the performance of the Group is reported and measured on this basis. This includes Key Performance Indicators (KPIs) such as adjusted revenue, adjusted profit before tax, adjusted basic/diluted earnings per share, free cash flow excluding business exits, and gearing ratios. In general, the Board believes that the APMs are useful for investors because they provide further clarity and transparency of the Group’s financial performance and are closely monitored by management to evaluate the Group’s operating performance to facilitate financial, strategic and operating decisions.
These APMs should not be viewed as a complete picture of the Group’s financial performance which is presented in the reported results. The exclusion of certain items may result in a more favourable view when costs such as acquired intangible amortisation, costs relating to the cyber incident in
Closest Definition,
APM equivalent Purpose and
IFRS Reconciliation
measure
Income
statement
Calculated as revenue less any revenue relating to
Revenue businesses that have been sold, or exited during the
year or prior year; or, are in the process of being
sold, or exited.
Adjusted
revenue This measure of revenue is used internally in respect
of the Group’s continuing business (being the Group’s
continuing activities, which exclude business exits)
and the Board believes it is a good indication of
ongoing performance.
The table below shows a reconciliation between
reported and adjusted revenue, as well as adjusted
revenue growth/(decline):
30June 30 June
2024 2023
Reported revenue
per the income £1,237.3m £1,477.0m
statement
Deduct: business (£35.8m) (£152.6m)
exits (note 3)
Adjusted revenue £1,201.5m £1,324.4m
Adjusted revenue (9.3)% 4.8%
(decline)/growth
Operating Calculated as reported operating profit excluding
Adjusted profit items determined by the Board to be outside underlying
operating operations. These items are detailed in note 4.
profit
A reconciliation of reported to adjusted operating
profit is provided in note 4.
Calculated as the adjusted operating profit divided by
Operating adjusted revenue.
profit
Adjusted margin This measure is an indicator of the Group’s operating
operating efficiency.
profit
margin The table below shows the components, and calculation,
of adjusted operating profit margin:
30June 30 June
2024 2023
Adjusted revenue a £1,201.5m £1,324.4m
Adjusted
operating profit b £54.2m £40.9m
(note 4)
Adjusted
operating profit b/a 4.5% 3.1%
margin
Calculated as adjusted operating profit for the six
month period before: depreciation, amortisation and
Adjusted No direct impairment of property, plant and equipment,
EBITDA equivalent intangible assets and right-of-use assets; net finance
costs; and the share of results in associates and
investment gains (other than those already excluded
from adjusted operating profit).
The directors believe that adjusted Earnings before
Interest, Tax, Depreciation and Amortisation (EBITDA)
is a useful measure for investors because it is
closely monitored by management to evaluate Group and
divisional operating performance.
This measure has been calculated pre and post the
impact of IFRS 16 to enable investors to understand
the impact of the Group’s lease portfolio on adjusted
EBITDA.
The table below shows the calculation of adjusted
EBITDA:
Post IFRS16 Pre IFRS16
30June 30 June 30June 30 June
2024 2023 2024 2023
Adjusted profit £31.6m £18.3m £32.4m £19.2m
before tax
Add back:
adjusted net £22.6m £22.6m £14.5m £13.6m
finance costs
(note 5)
Add back:
adjusted
depreciation and £12.9m £16.4m £12.9m £16.4m
impairment of
property, plant
and equipment
Add back:
depreciation and
impairment of £22.3m £26.5m £—m £—m
right-of-use
assets
Add back:
adjusted
amortisation and £12.8m £13.3m £12.8m £13.3m
impairment of
intangibles
Adjusted EBITDA £102.2m £97.1m £72.6m £62.5m
Adjusted EBITDA 8.5% 7.3% 6.0% 4.7%
margin
Alternative performance measures continued
Closest Definition,
APM equivalent Purpose and
IFRS Reconciliation
measure
Income statement
continued
Calculated as profit or loss before tax excluding the
items detailed in note 4 which include: business exits
Profit/ (trading results, non-trading expenses, and any gain/
Adjusted (loss) (loss) on business disposal); acquired intangible
profit/ before tax amortisation; impairment of goodwill and acquired
(loss) intangibles; costs of the cyber incident in March 2023;
before tax and expenses associated with the cost reduction
programme.
A reconciliation of reported to adjusted profit before
tax is provided in note 4.
Profit/ Calculated as the above adjusted profit or loss before
(loss) tax, less the tax credit or expense on adjusted profit or
Adjusted after tax loss.
profit/
(loss) The table below shows a reconciliation:
after tax
30June 30 June
2024 2023
Adjusted
profit before £31.6m £18.3m
tax (note 4)
Tax on
adjusted £5.3m £25.3m
profit (note
6)
Adjusted
profit after £36.9m £43.6m
tax
Basic Calculated as the adjusted profit or loss for the period
earnings after tax less non-controlling interests divided by the
Adjusted per share weighted average number of ordinary shares outstanding
basic during the period.
earnings
per share The Board believes that this provides an indication of
basic earnings per share of the Group on adjusted profit
after tax.
For the calculation of adjusted basic earnings per share
refer to note 7.
Calculated as the adjusted profit or loss for the period
after tax less non-controlling interests divided by the
Diluted weighted average number of ordinary shares outstanding
Adjusted earnings during the period plus the weighted average number of
diluted per share ordinary shares that would have been issued on the
earnings conversion of all the dilutive potential ordinary shares
per share into ordinary shares.
The Board believes that this provides an indication of
diluted earnings per share of the Group on adjusted
profit after tax.
For the calculation of adjusted diluted earnings per
share refer to note 7.
Cash flows and net
debt
Calculated as the cash flows generated from operations
Cash flows excluding the items detailed in note 9 which includes:
generated/ Cash business exits (trading results, non-trading expenses)
(used) by generated/ and pension deficit contributions which have been
operations (used) by triggered by disposals.
excluding operations
business A reconciliation of reported to cash generated/(used) by
exits operations excluding business exits is provided in note
9.
Free cash flow is calculated as cash generated from
operations after: capital expenditure; income tax and
interest; and the proceeds from the sale of property,
plant and equipment and intangible assets; and the
Free cash capital element of lease payments and receipts. Free cash
flow and Net cash flow excluding business exits has the same calculation
free cash flows from but is excluding the impact of business exits.
flow operating
excluding activities Free cash flow and free cash flow excluding business
business exits are measures used to show how effective the Group
exits is at generating cash and the Board believes they are
useful for investors and management to measure whether
the Group is generating sufficient cash flow to fund
operations, capital expenditure, non-lease debt
obligations, and dividends.
A reconciliation of net cash flows from operating
activities to free cash flow and free cash flow excluding
business exits and a reconciliation of free cash flow to
free cash flow excluding business exits are provided in
note 9.
Calculated as operating cash flow excluding business
exits divided by adjusted EBITDA.
No direct
Operating equivalent The Board believes that this measure is useful for
cash flow investors because it is closely monitored by management
and to evaluate the Group’s operating performance and to make
operating financial, strategic and operating decisions.
cash
conversion Reported Excluding business
exits
30June 30 June 30June 30 June
2024 2023 2024 2023
EBITDA a £101.7m £85.6m £102.2m £97.1m
Add back:
EBITDA element
of cyber £8.1m £21.8m £—m £—m
incident and
cost reduction
programme
Working
capital (note (£13.5m) (£58.2m) (£32.8m) (£51.3m)
9)
Add back:
Working
capital
element of £2.4m (£12.6m) £2.4m (£12.6m)
cyber incident
and cost
reduction
programme
Non-cash and
other (£40.8m) (£2.4m) (£36.0m) (£3.9m)
adjustments
(note 9)
Add back:
Non-cash
element of
cyber incident £15.6m £—m £15.6m £—m
and cost
reduction
programme
(note 10)
Operating cash b £73.5m £34.2m £51.4m £29.3m
flow
Operating cash b/a 72.3% 40.0% 50.3% 30.2%
conversion
Alternative performance measures continued
Closest Definition,
APM equivalent Purpose and
IFRS measure Reconciliation
Cash flows and net debt
continued
Calculated as the sum of any undrawn committed
facilities and the net cash, cash equivalents net of
Available No direct overdrafts, less any restricted cash. Restricted cash is
liquidity equivalent defined as any cash held that is not capable of being
applied against consolidated total borrowings (inclusive
of cash required to be held under FCA regulations and
cash represented by non-controlling interests).
30June 31
2024 December
2023
Revolving
credit £250.0m £260.7m
facility (RCF)
Less: drawing on committed £—m £—m
facilities (note 11)
Undrawn
committed £250.0m £260.7m
facilities
Cash and cash equivalents £85.4m £67.6m
net of overdrafts (note 9)
Less:
restricted (£42.3m) (£46.0m)
cash
Available £293.1m £282.3m
liquidity
Calculated as the net of the Group’s: cash, cash
Net debt Borrowings, equivalents and overdrafts; private placement loan
cash, notes; other finance; currency and interest rate swaps;
derivatives, lease liabilities; and deferred consideration.
lease
liabilities The Board believes that net debt enables investors to
and deferred see the economic effect of debt, related hedges and cash
consideration and cash equivalents in total and shows the indebtedness
of the Group.
The calculation of net debt is provided in note 9.
Net Calculated as the sum of the Group’s: cash, cash
financial No direct equivalents and overdrafts; the fair value of the
debt equivalent Group’s private placement loan notes; other loan notes;
(pre-IFRS and deferred consideration.
16)
The Board believes that this measure of net debt allows
investors to see the Group's net debt position excluding
its IFRS 16 lease liabilities.
30June 31
2024 December
2023
Net debt (note £521.9m £545.5m
9)
Remove: IFRS16
impact (note (£355.5m) (£363.4m)
9)
Net financial
debt (pre-IFRS £166.4m £182.1m
16)
This ratio is calculated as net debt divided by adjusted
No direct EBITDA over a rolling twelve month period including
equivalent business exits not yet completed at the balance sheet
date.
Gearing:
net debt The Board believes that this ratio is useful because it
to shows how significant net debt is relative to adjusted
adjusted EBITDA.
EBITDA
ratio This measure has been calculated including and excluding
the impact of IFRS 16 leases on EBITDA and net debt
because the Board believes this provides useful
information to enable investors to understand the impact
of the Group’s lease portfolio on its gearing ratio.
The table below shows the components, and calculation,
of the net debt / net financial debt (post and pre IFRS
16) to adjusted EBITDA ratio:
Post IFRS16 Pre IFRS16
Rolling twelve 30June 31 30June 31
month period 2024 December 2024 December
20231 20231
Adjusted £200.7m £214.6m £137.5m £146.2m
EBITDA
EBITDA in
respect of
business exits £20.7m £8.2m £20.7m £8.2m
not yet
completed
Adjusted
EBITDA
(including £221.4m £222.8m £158.2m £154.4m
business exits
not yet
completed)
Net debt / net £521.9m £545.5m £166.4m £182.1m
financial debt
Net debt / net
financial debt 2.4x 2.4x 1.1x 1.2x
to adjusted
EBITDA ratio
1. To ensure the consistent presentation of the ratios between periods, the
2023 comparatives have not been restated.
Comparatives re-presented
Alternative performance measures continued
The below measures are submitted to the Group’s lenders and the Board believes these measures provide a useful insight to investors. The 31
Source
Covenants (based on 30June 2024 31December 2023
rolling twelve months)
Adjusted operating £103.0m £106.5m
profit1
Add back: covenant £77.5m £64.1m
adjustments2
Adjusted EBITA a1 £180.5m £170.6m
Adjusted EBITA £180.5m £170.6m
Add back: covenant £64.5m £70.9m
adjustments3
Covenant calculation – b1 £245.0m £241.5m
adjusted EBITDA
Adjusted EBITA (US PP Adjusted for difference
covenants) a2 £172.3m £162.4m in exceptional items
treatment
Adjusted EBITDA (US PP Adjusted for difference
covenants) b2 £236.8m £233.3m in exceptional items
treatment
Adjusted interest (£50.0m) (£50.0m)
charge
Add back: covenant £4.4m £3.8m
adjustments
Borrowing costs c1 (£45.6m) (£46.2m)
Less: IFRS 16 impact £17.3m £18.2m
Borrowing costs c2 (£28.3m) (£28.0m)
(excluding IFRS 16)
Adjusted
EBITA/Borrowing costs
with adjusted EBITA
5.1 Interest cover (US including the impact of
PP covenant) a2/c2 6.1x 5.8x IFRS 16 and the
borrowing costs
excluding the impact of
IFRS 16. Minimum
permitted value of 4.0
Adjusted
EBITA/Borrowing costs
with adjusted EBITA
5.2 Interest cover including the impact of
(other financing a1/c2 6.4x 6.1x IFRS 16 and the
agreements) borrowing costs
excluding the impact of
IFRS 16. Minimum
permitted value of 4.0
Net debt £521.9m £545.5m Line information in
note 9
Add back: covenant £53.6m £53.2m
adjustments4
Less: IFRS 16 impact (£355.5m) (£363.4m) Line information in
note 9
Covenant calculation -
adjusted net debt d1 £220.0m £235.3m
(excluding IFRS 16)
Adjusted net
debt/adjusted EBITDA
6.1 Adjusted net debt with adjusted net debt
to post IFRS 16 excluding the impact of
adjusted EBITDA ratio d1/b2 0.9x 1.0x IFRS 16 and adjusted
(USPP covenant) EBITDA including the
impact of IFRS 16.
Maximum permitted value
of 3.0
Adjusted net
debt/adjusted EBITDA
6.2 Adjusted net debt with adjusted net debt
to adjusted EBITDA excluding the impact of
ratio (other financing d1/b1 0.9x 1.0x IFRS 16 and adjusted
agreements) EBITDA including the
impact of IFRS 16.
Maximum permitted value
of 3.5
1. Adjusted operating profit excludes items that are separately disclosed and considered to be outside the underlying operating results for the particular period under review and against which the Group’s performance is assessed.
2. Covenant adjustments include adjustments for business exits, exceptional costs, share-based payment and pension adjustments, and removal of profits owned by minority interests.
3. Covenant adjustments include adjustments for depreciation and earnings related to disposed entities.
4. Covenant adjustments include adjustments relating to restricted cash and cash in businesses held-for-sale.
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