Capita
plc
Full
Year Results 2024
Growing momentum against our strategic priorities; full
year results in line with guidance and market
expectations
Capita plc CEO Adolfo
Hernandez said:
"2024 has
been a transformative year for Capita as we position ourselves to
take advantage of the tremendous opportunities that lie ahead. On
joining the business a year ago, it was clear to me from my time in
the technology industry that AI brings the potential to
revolutionise how we deliver services to our customers. Everything
we have seen since has
only strengthened that belief. It was also clear that we needed to
do much more to bring our costs down to enable the company to be
more competitive.
"Today’s results show progress on both fronts. We have accelerated
our cost cutting, while nearly doubling our customer net promoter
score. We have put in place a strong new management team dedicated
to harnessing the transformative potential of AI and struck
encouraging new collaborations with hyperscalers to bring cutting
edge technology to some of the most important challenges our
customers face.
"Our 'Better Capita' strategy - focusing on Better Technology,
Better Delivery, Better Efficiency and Better Company - is bearing
fruit but we must redouble our efforts to ensure this great
business delivers the financial performance it is capable
of.”
2024 Financial Results
•
Adjusted revenue1
declined 8.0% to £2.4bn (2023: 1.1% growth), reflecting the impact
of prior year losses, volume reductions in the Contact Centre
business and cessation of lower margin service lines
•
Public Service division adjusted revenue1
decreased by 0.9%,
•
Experience division now reporting under three segments:
◦
Contact Centre adjusted revenue1
decreased by 18.4% principally due to volume reductions in the
telecommunications vertical
◦
Pension Solutions adjusted revenue1
grew 5.1%
reflecting increased volumes and benefit from
indexation,
and
◦
Regulated Services adjusted revenue1
decreased 26.9% as we
make good progress exiting the closed book Life & Pensions
business
•
Adjusted operating profit1
increased 5.5%
to £95.9m (2023: £90.9m), as the positive impact of the cost
reduction programme of c.£90m more than offset the revenue
reduction seen across the Group
•
Reported
operating loss of
£9.9m (2023
loss:
£52.0m) reflecting
the
£27.9m cost
associated with our successful cost reduction programme and
non-cash goodwill impairment of
£75.1m recognised in
the Contact Centre business reflecting lower volumes in the
telecommunications vertical
•
Reported profit before tax of £116.6m (2023 loss: £106.6m) boosted
by the disposal of Capita One and Fera
•
Free cash outflow, excluding the impact of business
exits1,
of £122.3m (2023 outflow: £123.6m), including the final pension
deficit payments, reduced costs associated with the cyber incident,
the cash cost associated with the Group's cost reduction programme
and a more prudent approach to working capital
management
•
Net financial debt (pre-IFRS 16) of £66.5m (2023: £182.1m), with
net financial debt/adjusted EBITDA1
(both pre-IFRS 16) ratio of 0.5x
•
Following repayment of £53.6m of US private placement loan notes in
January 2025, in March 2025, the Group issued £94.2m equivalent of
US private placement loan notes across three tranches maturing
between 2028 and 2030 with an average interest rate of 7.4%, to
extend our funding maturity profile and underpin the Group's
transformation strategy
Continued momentum to deliver positive free cash flow from
the end of 2025
•
Delivered annualised cost savings of £140m ahead of plan
•
Underpinned by December 2024
announcement that total cost reduction target increased from £160m
to up to £250m by December 2025,
driven by increasing use of AI and generative AI which will
fundamentally improve our operating model
Renewal rate significantly improved
•
Total
contract value won £1,513m (2023: £2,952m), reflecting lower level
of contract bidding activity and focus on improving the Group’s
cost competitiveness
•
Customer net
promoter score improved to +28 points, up 12 points from
2023
•
The Group’s
renewal rate grew to 92%, up from 51% in 2023, underlining strong
client relationships and consistent delivery of high-quality
solutions
|
Financial highlights
|
|
|
|
|
|
|
|
|
Reported
results
|
Adjusted1
results
|
|
|
31
December 2024
|
31 December
2023
|
Reported
YoY
change
|
31
December 2024
|
31 December
2023
|
Adjusted1
YoY change
|
|
Revenue
|
£2,421.6m
|
£2,814.6m
|
(14.0)%
|
£2,369.1m
|
£2,575.8m
|
(8.0)%
|
|
Operating
(loss)/profit
|
£(9.9)m
|
£(52.0)m
|
81.0%
|
£95.9m
|
£90.9m
|
5.5%
|
|
Operating
margin
|
(0.4)%
|
(1.8)%
|
140bps
|
4.0%
|
3.5%
|
50bps
|
|
EBITDA
|
£166.2m
|
£144.5m
|
15.0%
|
£186.1m
|
£196.5m
|
(5.3)%
|
|
Profit/(loss)
before tax
|
£116.6m
|
£(106.6)m
|
n/a
|
£50.0m
|
£40.9m
|
22.2%
|
|
Basic
earnings/(loss) per share
|
4.54p
|
(10.60p)
|
n/a
|
2.11p
|
(0.20p)
|
n/a
|
|
Operating cash
flow*
|
£86.3m
|
£81.2m
|
6.3%
|
£72.0m
|
£82.7m
|
(12.9)%
|
|
Free cash
flow*
|
£(122.7)m
|
£(154.9)m
|
20.8%
|
£(122.3)m
|
£(123.6)m
|
1.1%
|
|
Net
debt
|
£(415.2)m
|
£(545.5)m
|
£130.3m
|
£(415.2)m
|
£(545.5)m
|
£130.3m
|
|
Net financial
debt (pre-IFRS 16)
|
£(66.5)m
|
£(182.1)m
|
£115.6m
|
£(66.5)m
|
£(182.1)m
|
£115.6m
|
*
Adjusted
operating cash flow and free cash flow exclude the impact of
business exits (refer to note 10).
1. Refer to
the alternative performance measures (APMs) in the
Appendix.
Outlook for 2025
Adolfo Hernandez said: “In 2025, the Better
Capita strategy we set in 2024 continues. Our strategy strengthens
our future prospects and confidence in our medium-term targets. We
have leading market positions and are a critical supplier to the UK
Government. We have long term customer focused relationships that
are increasingly moving from transactional to more
strategic.
We have
strong technology partnerships with hyperscalers, which offers low
risk access to new products and markets. We have a strong contract
pipeline with £5bn of opportunities with an AI/technology underpin,
are building a portfolio of reference cases for AI and have a
proven ability to deliver large, complex, critical and selective
bespoke services. Embedding technology and innovation will become a
key growth driver, which combined with our cost saving programmes
to drive further efficiencies will make Capita more competitive and
aid its return to growth.”
Financial guidance for 2025
•
Expect adjusted revenue1
to be broadly in line with 2024 overall, with growth in Public
Service and Pension Solutions offset by reduced revenue in Contact
Centre and conscious decline in closed book Life & Pensions as
we look to exit that business
•
Small increase in adjusted operating margin1,
due to continued progress with the efficiency programmes, partly
offset by agreed exits from closed book Life & Pensions
contracts
•
Free cash outflow, before the impact of business
exits1
of £45m – £65m, including a £55m outflow to deliver the cost
reduction programme, with cash conversion 55 - 65%. We expect the
group to be free cash flow positive, before the impact of business
exits1
from the end of 2025
•
Medium term
targets unchanged. Deliver an adjusted operating
margin1
of 6-8%,
operating cash conversion of 65% to 75% and delivering low to
mid-single digit adjusted revenue1
growth per
annum
This announcement contains inside information.
Investor
presentation
A presentation for institutional investors and analysts hosted by
Adolfo Hernandez, CEO and
Pablo Andres, CFO, will be held at
the Novotel, 3 Kingdom Street, Paddington
London W2 6BD at 09:00am UK
time, 5 March 2025. There will also
be a live webcast (link below) which will subsequently be available
on demand. The presentation slides will be published on our website
at 07:00am and a full transcript will
be available the following day.
Participant webcast:
https://webcast.openbriefing.com/capita-fy24/
For further
information:
|
Capita
|
|
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
|
|
Madeleine
Little, Group Head of External Communications
|
T +44 (0) 7860
343 604
|
|
Capita press
office
|
T +44 (0) 2076
542 399
|
|
Brunswick
|
|
Dan Roberts
& Jonathan Glass
|
T + 44 (0) 2074
045 959
|
LEI no.
CMIGEWPLHL4M7ZV0IZ88.
Chief
Executive Officer's review
Introduction
Since joining
Capita as CEO at the start of 2024, I have spent significant time
engaging with key stakeholders of the Group, including customers
and colleagues across all Capita geographies. I have seen the high
value that we deliver consistently to customers, the criticality of
our services and the skills and passion of our teams when it comes
to delivering better outcomes on behalf of our customers. This is a
great foundation to work from.
2024 has been
a very busy year learning about the business, actioning many
initiatives which will be key for Capita’s business and financial
improvement journey, and building new, strong partnerships with
technology hyperscalers. This culminated in June with the launch of
our new strategy, which redefines our focus to deliver a Better
Capita underpinned by our strategic themes of Better Technology,
Better Delivery, Better Efficiency and Better Company.
In short, our
value proposition needs to be more competitive and differentiated,
through a lower cost base, automation and innovation. We are
removing unnecessary costs to put us in a position to fund our
profitable growth. Better Capita means becoming more efficient and
spending less, digitising our offerings by having more standardised
and repeatable propositions, strongly leveraging technology
partnerships, being more precise in our delivery, and evolving
governance and our culture.
Our first
medium-term financial target is to improve the adjusted operating
margin1
of the Group
to between 6% and 8%, with sustainable positive free cash flow,
excluding the impact of business exits1,
and adjusted revenue1
growth to
follow. I am therefore very pleased to report that we improved our
adjusted operating margin1
from 3.5% in
2023 to 4.0% in 2024. We expect this to increase further in 2025 as
we see the positive impact from our cost reduction programme which
continues to progress well.
In June we
set out other medium-term financial targets to deliver: getting
smaller to get stronger to then be able to deliver low to
mid-single digit adjusted revenue1
growth per
annum; positive free cash flow, excluding the impact of business
exits1,
from the end of 2025, with operating cash conversion of 65% to 75%;
maintaining net financial debt leverage of ≤1x; and, importantly, a
continued reduction in lease liabilities from the Group’s ongoing
property rationalisation.
There is
still a lot to be done in 2025, but I am pleased to say that many
of the changes made during 2024 are now beginning to bear fruit. We
are making good progress in taking actions which will deliver our
medium-term targets, but we recognise there is more to do to
improve the Group’s financial performance.
One of the
achievements I am most proud of in 2024 is the improvement that we
saw in our customer net promoter score across all areas of the
business, with the Group score improving to +28 points, up from +16
points in 2023, one of the highest scores the Group has seen in a
number of years. This is a critical achievement for us given the
nature of our business.
A
key priority for me is to support and accelerate Capita’s
transformation by embedding artificial intelligence and generative
(gen) AI into both our internal operations and teams and into our
offerings and customer delivery processes on behalf of our
customers. We are not a technology company but we are building and
leveraging our deep partnerships and solutions with technology
hyperscalers such as Microsoft, AWS, ServiceNow and Salesforce to
co-create solutions built around specific client needs, that we
both know well and have strong leadership in, to fully leverage and
complement Capita’s reach, domain and sector knowledge. I’m pleased
with the progress in this area to date, for example, in 2024 we
developed and launched a number of products at speed that are
already delivering for initial clients and these will be rolled out
to a number of clients in 2025 and will be embedded in our contract
tenders moving forward.
As we look
forward to 2025 and beyond, we will continue with the same areas
and themes unveiled at the Capital Markets Day in 2024, such as:
finding additional efficiencies; improving our sales effectiveness;
increasing differentiation of our services, products and value
propositions through innovation, further automation, and higher
quality of delivery; and continuing to build a better Capita, with
and for our colleagues, after a challenging year of changes and
difficult decisions.
I
am increasingly confident in the progress and potential of our
business improvement journey and the feedback we are receiving from
our customers.
Our key strategic pillars
Better technology – partnering with
hyperscalers
With gen AI
driving a significant technological revolution globally, a critical
part of our strategy moving forward is to enable our customers to
take advantage of its possibilities, deploy it in their business
processes and do it safely, ethically and supported by a national
trusted partner like Capita. This will transform how we deliver
complex processes at scale and will enable us to leverage our deep
understanding of our customers' business processes. To accelerate
this and leverage their wealth of capabilities and deep investments
in AI, we are partnering with hyperscalers to extend their basic
solutions with our expertise and data to deliver solutions that
will improve productivity and reduce delivery costs. For example,
AI is providing greater choice in servicing methods, reducing
average handling times for customer calls and increasing first time
resolutions in our contact centres. Partnering with hyperscalers
while leveraging our process and sector knowledge is enabling us to
offer best in class technology, both cost effectively and swiftly,
ensuring we remain competitive in a rapidly changing
market.
The adoption
of AI across the Group will be the cornerstone of our operational
evolution and in November we welcomed Sameer Vuyyuru to the Executive Team as Chief AI
and Product Officer. Sameer’s role will focus on driving product
innovation and delivering scalable and repeatable products and AI
solutions that deliver better outcomes for clients and
Capita.
The key
principle for our AI solutions is to augment and amplify humans. We
are enhancing roles by removing repetitive tasks and streamlining
workflows, allowing our people more time for human-centric tasks
that require human empathy and judgement. We are already delivering
a range of solutions across the contract portfolio, with a number
of further solutions being designed in collaboration with our
hyperscaler partners. Our new technology platforms are already
creating a better employment experience and greater job
satisfaction as delivery teams provide a more productive and
personalised experience to clients and their customers.
For example,
earlier this year, following a successful design and pilot we
launched the CapitaContact platform with the London Borough of Barnet in the Local Public
Service part of Capita Public Service. This gen AI-powered contact
centre solution leverages Amazon Connect to provide a simplified
customer experience for a wide range of queries. Overall, our
progress in technological and AI enablement positions Capita very
well to meet our customers’ evolving requirements. For example, the
UK Government’s priorities, as outlined in the recent budget and
subsequent Blueprint for Modern Digital Government, are clearly
focused on making people’s lives easier, establishing firmer
foundations, achieving smarter delivery and driving higher
productivity and efficiency. Examples this year of our innovations
in our Public Service business include the Capita Accelerate tool
embedded in the Recruiting Partnering Project for the British Army,
for which we have a number of potential other use cases, and our
virtual wards capacity which reduces the strain on hospital beds
and in-person treatment and therefore has the potential to reduce
NHS waiting lists.
In the
Contact Centre business, we have developed AgentSuite: a
cutting-edge gen AI customer experience solution comprising two
components, Agent Assist and Call Sight. These provide real time
sentiment analysis, AI generated prompts to aid call handlers and
reduce post-call administration time with automatically populated
call notes. In the Contact Centre business, around 50% of agents
are now utilising AI and gen AI technology in their day-to-day
roles.
Within our
Pension Solutions business we are transforming user experience with
the creation of our new digital pensions platform. Incorporating
technology from Microsoft Dynamics and Amazon Connect it will
provide an improved and fully personalised experience for the
pension member. This product will become part of our core offering
for all future pension administration contract tenders.
We are also
standardising and centralising high-volume, low-complexity sales
processing across the Group through an enabling optimised sales
(EOS) project. This will result in a scalable platform, integrated
with Salesforce, to drive business value and aid growth in the long
term.
In addition,
I am very pleased with our recent announcement in January 2025, that the Group would be one of the
first companies in Europe to use
Salesforce’s Agentforce AI for complex business tasks. Agentforce
is a sophisticated AI system that creates ‘Agents’ capable of
performing automated tasks and engaging in user conversations. Our
initial release will introduce the Capita Career Assistant, an AI
bot to aid our recruitment process, helping potential applicants
find suitable jobs, and automating parts of the hiring process like
matching skills, screening applications, scheduling interviews, and
updating records. Through 2025, this solution will expand upstream
to address additional steps in high-volume recruitment. For an
organisation like Capita that
hires around 10,000 colleagues each year this
offers significant quality, speed, cost and candidate experience
benefits. It is our intention to deliver this managed platform to
customers who face similar challenges with high-volume
recruitment.
We know our
customers entrust us to hold, manage and process some of their most
valuable and sensitive data and we are taking a responsible
approach to AI to deliver leading and safe AI solutions working
with trusted partners with appropriate governance as we continue to
invest in our cyber security across the year. All AI adopted by
Capita must adhere to our AI principles (inclusive, trustworthy,
transparent, accountable, secure, governed and adaptive), which
govern the secure, fair and ethical use of AI. Our principles
reflect our values and incorporate worldwide recognised guidelines
as well as compliance with the EU AI Act. We have further launched
a gen AI oversight committee, ensuring human oversight of all
critical decisions and appropriate ethics review at Executive
level. We are committed to providing continuous training to
colleagues across the organisation on the responsible use of
AI.
Better delivery – a consistent approach
Delivering
consistently and effectively for our customers is a key part of
making a Better Capita. Delivering the right service the first time
means a better service to the customer and reduced excess cost to
us.
Across 2024,
the Group maintained its KPI performance with an average
performance above 90%. In areas where KPI performance was not met
during the year, we implemented specific remediation actions to
ensure we meet the high standards our customers expect.
As mentioned
earlier, we saw our customer net promoter score improve across all
areas of the business with the Group score improving to +28 points,
up from +16
points in 2023. There was a particularly
strong performance in the Experience businesses which saw a
19-point improvement. Areas where clients suggested improvement
included further understanding of the Group’s approach to AI and
digital offerings, as well as some improvements to systems and
processes, which was somewhat expected and our existing plans will
address. Operational highlights in 2024 included:
•
In Public Service, as part of the division’s contract to deliver
Royal Navy training, we partnered with Metaverse VR to deliver
eleven new Warship Bridge Simulators across three Royal Navy
locations in the UK, more than doubling the Navy’s simulator
capacity;
•
Also in Public Service, on the Standards and Testing Agency
contract, we printed and delivered 11 million test papers to
schools for SATs week, hitting every milestone on time, including
the marking and delivery of 99.9% of scripts;
•
In Pension Solutions, we saw the number of members engaging with
pensions via digital channels increase by more than 200%, allowing
more efficient communication, while reducing our costs to
deliver;
•
In our Contact Centre business, across our delivery centres we
handled more than 32 million calls for clients in the UK,
Ireland, Germany and Switzerland; and
•
To support future delivery and growth in the Contact Centre
business, we opened two new global delivery centres in Bulgaria and South
Africa. This expansion will enable the division to meet the
increasing demand for multilingual services to broaden our market
opportunities.
While our
contract delivery has been largely consistent across 2024, there
were two specific historic contracts where we encountered delays
from our original planned mobilisation dates. They both had
significant impacts on 2024 revenue and profit performance but will
benefit 2025.
In the
Contact Centre business, certain delivery issues have led to the
reduction of volumes on one particular contract. Action was taken
to remediate this swiftly and we have the opportunity to regain
volumes in the future.
We've made
good progress with the business areas we identified within our
manage for value category at our Capital Markets Day in
June 2024. In September 2024 we completed the disposal of
Capita One, realising net proceeds of c.£180m and in December 2024 we announced the disposal of the
Group's mortgage servicing business assets, a transaction which we
expect to complete in Q2 2025.
In 2024, we
agreed a number of transition agreements for contracts in the
closed book Life & Pensions business unit, within the Regulated
Services division, where we've seen continued volume reductions as
expected. There is now one client remaining and we are actively
engaged in discussions to resolve the challenges in this business.
The division continues to have a cash cost to the Group of around
£20m per annum.
Better efficiencies - moving at pace
At the start of the transformation, the Group established a
programme management office to deliver the company-wide
transformation and associated cost efficiency savings with the
transformation split into three waves: funding the journey; back to
basics; and building for the future.
In March 2024 we announced targeted
cost savings of £160m to be delivered by June 2025, to help deliver a medium-term Group
adjusted operating margin of 6 – 8%. So far, we have taken actions
which will deliver annualised cost savings of £140m. The majority
of these savings have been achieved through efficiencies and
synergies in our processes and technology, property
rationalisation, and organisational changes that align with the
business we need to become.
During 2024, based on the positive results from the increasing use
of AI and gen AI at the heart of this transformation, we continued
to identify significant cost opportunities within the Group. As
announced in December 2024, this
enabled us to increase our cost reduction target from £160m to up
to £250m to be delivered by December
2025, with a further £55m cash cost to achieve these savings
to be incurred in 2025.
A proportion of the additional targeted savings will be delivered
via natural employee attrition as we further simplify the business,
particularly within the Contact Centre business where, in line with
peers, employee attrition has historically been higher. For
example, in December 2024 attrition
was 29% on a 12-month rolling basis, compared to 16% for the rest
of the Group. The additional savings will be achieved though
further simplification and centralisation of internal processes and
are expected to help offset the gross £16m of in-year incremental
employers' National Insurance Contribution (£20m on an annualised
basis) in 2025.
These savings provide further confidence in the delivery of our
medium-term margin target and we expect to generate positive free
cash flow from the end of 2025. We continue to expect a
reinvestment of c.£50m of the savings across 2025, which will drive
growth through technology and ensure the Group’s ongoing price
competitiveness moving forwards.
Better company - launching our culture change
programme
This year I have spent a significant amount of time meeting
colleagues across the geographies in which we operate, and I have
seen first-hand the passion our colleagues have for the work they
do. I am very impressed by that passion, and the skills and
experience that our team bring to bear. Our colleagues, and the
skills and talent they have, are a key enabler of our
transformation and business improvement journey and they are highly
valued by our customers.
With a major ongoing transformation programme, and many difficult
decisions around pay reductions and reorganisation, this year was
understandably difficult for our people. This was reflected in the
Group’s eNPS score which reduced by 29 points to -33 points (in
particular recommending Capita as an employer to friends and
family). More pleasingly we saw employee engagement, a more
reflective measure during a transformation, of 64%, just a 3-point
reduction on the prior year and 81% of employees feel they can be
themselves at work. I am also pleased to see that the Group’s
rolling 12-month voluntary attrition at the end of December has
reduced to 21.7% compared with 25.3% in the prior 12 months which,
as previously outlined, will help deliver a proportion of our
recently announced cost savings target.
Following completion of, and feedback from, our Group-wide culture
survey in 2024, we have embarked on a multi-year culture
improvement journey across all levels within the organisation
aiming to build a culture in which everyone is united in achieving
Capita’s goals, while nurturing their individual career
aspirations. As part of this journey, during the year we launched
our leadership playbook and development programme which will help
us nurture and develop talent through all levels of the
organisation. This journey will be based on both local and Group
led initiatives to ensure a personalised and tailored experience
for all colleagues.
In 2025, our people agenda is a key priority and we have a plan to
further improve the employee value proposition.
Total contract value and growth
Across 2024, we focused on both improving the Group’s cost
competitiveness and on maintaining rigour around bidding processes
to ensure that contracts were bid at an acceptable margin. We
expected revenue reductions while we strengthened capabilities and
improved margins to enable profitable growth in the
future.
As a result, we saw a lower level of contract bidding activity and
the Group saw its total contract value (TCV) won reduce to £1,513m
from £2,952m in 2023. With the lower TCV, the Group’s book to bill
reduced to 0.6x from 1.1x in the prior year, with 0.7x in Public
Service, 0.7x in the Contact Centre business and 0.8x in Pension
Solutions.
As a first step for future growth, the Group’s renewal rate across
2024 improved strongly to 92%, up from 51% in 2023, following some
material losses in 2023 which were lost on price. Public Service
delivered an 87% renewal rate, up from 40% in the prior year, with
Experience (across its three sub-divisions) at 95%, up from 61% in
2023. The Group’s high renewal rate underlines our strong client
relationships and consistent delivery of high-quality solutions.
Maintaining a high renewal rate, while ensuring our margin target
is met, is a priority looking forward.
There is a major opportunity to increase the Group’s win rate on
new and expanded scopes of work, which in 2024 reduced to 18% from
69% in 2023. In addition to greater focus on rebuilding the sales
pipeline and a rejuvenated suite of AI/digital solutions, as we
continue to improve efficiencies as part of the Group’s cost
reduction programme, we will become more price competitive which
together will improve the Group’s win rate on new and expanded
scopes of work. Across all opportunities the win rate by value was
32% (2023: 62%), 23% in Public Service and 62% in
Experience.
Significant contract wins in the year included the renewal of two
European telecoms clients, one with an expanded scope, with a TCV
of more than £250m TCV, a further extension on the Data
Communications Company Licence with a TCV of £135m and a renewal
with the Royal Mail in Pension Solutions with a TCV of more than
£50m following a competitive tender. There were expansions of scope
with contracts with the Royal Navy and in Local Public
Service.
The total unweighted pipeline across all years, as of
31 December
2024 was £11,121m, an increase from £10,329m at
31 December
2023, despite the unsuccessful outcome on the material
opportunity to deliver the Armed Forces Recruitment Programme with
the Ministry of Defence in 2024, which was lost on price and a bid
we priced to deliver the highest quality, without risk to our Armed
Forces. We will continue to deliver the Recruiting Partnering
Programme for the British Army to the contract transition date in
2027.
Within the Group, there are material opportunities across 2025 with
the Department for Work and Pensions, framework opportunities with
the Crown Commercial Service and a number of UK-based utility
companies.
Of the total unweighted pipeline of £11,121m, more than £5bn
relates to opportunities with a significantly higher technology and
AI/gen AI underpin including material opportunities with the Home
Office, HMRC and Transport for London.
We have seen a number of early successes so far in 2025, with the
renewal of the Gas Safe Register contract with a TCV of £89m and
further expansion of scope with the Royal Navy in Public
Service.
The Group’s
order book, as measured by IFRS 15, was £4,241m, at 31 December 2024, a reduction of £1,642m from
£5,883m at 31 December
2023. This reduction reflected £809m order book additions,
indexation and scope changes, offset by £1,838m revenue recognised
and a £225m reduction from business disposals and contract
terminations. In 2024, we won a number of material contracts which
are framework agreements which do not meet the accounting criteria
for order book recognition, and these contracts resulted in £388m
being derecognised from the order book.
Financial results - revenue and operating
profit
Adjusted
revenue1
declined 8.0%
to £2,369.1m (2023: £2,575.8m). The decline reflected the continued
impact of prior year losses including Electronic Monitoring
Services and our focus on exiting lower margin services, the
non-repeat of the one-off benefits from the Virgin Media O2
contract transition, and a commercial settlement within the
Regulated Services business in
2023. The
telecommunications vertical of the Contact Centre business also saw
lower volumes in 2024. This was partially offset by volume
improvements in Public Service contracts including with Transport
for London and the benefit from indexation.
Reported
revenue declined 14.0% to £2,421.6m (2023:
£2,814.6m) reflecting the above contract movements and impact of
business exits including the Capita One disposal.
Adjusted
operating profit1
increased by
5.5% to £95.9m (2023:
£90.9m), as the c.£90m positive impact of the cost reduction
programme more than offset the revenue reduction seen across the
Group, including the non-repeat of one-offs from the prior year.
The Group adjusted operating margin1
improved to
4.0% from 3.5% in
2023.
Reported
operating loss was £9.9m (2023
loss:
£52.0m), largely reflecting £27.9m of costs to deliver the Group’s
successful cost reduction programme and a £75.1m goodwill
impairment recognised within the Contact Centre
business.
Financial results - free cash flow and net
debt
Free cash flow excluding the impact of business
exits1
was an outflow of £122.3m (2023 outflow: £123.6m), reflecting the
reduction in cash generated by operations and the cash cost to
deliver the ongoing cost reduction programme which was partially
offset by a reduction in cash flows related to the 2023 cyber
incident and pension deficit contributions.
Free cash outflow1
for the Group was £122.7m (2023 outflow: £154.9m), including the
inflow from businesses exited, or being exited of £14.1m in year
offset by £14.5m pension deficit contributions triggered by
disposals.
Net financial debt (pre-IFRS 16) was £66.5m (2023: £182.1m)
benefiting from net proceeds realised on the disposal of Capita One
and Fera of £223.9m which more than offset the Group’s free cash
outflow across the year.
Net debt, including the impact of property leases accounted for
under IFRS 16 was £415.2m in 2024 (2023: £545.5m). Our IFRS 16
lease liability was £348.7m (2023: £363.4m) reducing with property
rationalisation programme and monthly lease payments. The lease
asset receivable related to the lease liability was £95.7m (2023:
£70.3m), reflecting the successful sub-letting of property the
Group is not utilising.
Outlook
As we look forward to 2025 and beyond, we will continue to focus on
the same areas and themes unveiled in June’s Capital Markets Day.
The continued growth of AI and what it can do for organisations and
the UK Government AI plans align well with our strategy. As we
continue to transform, we expect to see adjusted
revenue1
in 2025 to be broadly in line with that of 2024, with growth in
Public Service and Pension Solutions, offset by revenue reductions
in Contact Centre and Regulated Services, as we continue to
actively exit contracts in this business.
I am increasingly confident in the progress and potential of our
business improvement journey, the capabilities and engagement with
our hyperscaler partners, the feedback we are receiving from our
customers, all of which creates a strong foundation for 2025.
Similarly, we are also focused on building a better Capita with,
and for, our colleagues.
As we continue to see the benefit from our cost reduction programme
we expect to see a small increase in the Group adjusted operating
margin1
overall, with good margin improvement in Public Service and Contact
Centre, maintaining double digit margins in Pension Solutions,
offset by a reduction in margin in Regulated Services as we exit
contracts.
With the costs to achieve material cost savings heavily weighted to
H1, we expect a free cash outflow before the impact of business
exits1
of between £45m – £65m including a £55m outflow to deliver the cost
reduction programme, with an improved cash
conversion1
of 55% to 65%. We expect the group to be free cash flow positive,
before the impact of business exits1
from the end of 2025. Reflecting the free cash outflow, we expect
net financial debt to increase. We expect to see a reduction in the
Group’s IFRS 16 lease liability as we continue our property
rationalisation programme and make cash lease payments.
1. Refer to
alternative performance measures (APMs) in the Appendix.
Divisional
performance review
The following
divisional financial performance is presented on an
adjusted1
basis. The
calculation of adjusted figures and our KPIs are contained in the
APMs in the Appendix to this statement.
Public
Service
Markets
and growth drivers
Public
Service is the number one strategic supplier of Software and IT
Services (SITS) and business process services (BPS) to the UK
Government.
The division
is structured around three market verticals: Local Public Service;
Defence & National Preparedness (including Learning); and
Central Government, delivering to their respective client
groups.
Following a
review of the industries served by Public Service, the division’s
core addressable market size is c.£25bn2,
growing at approximately 4% per annum. Digital BPS continues to be
an area of fast growth, with traditional business process
outsourcing currently shrinking. This trend is expected to
continue, reflecting the UK Government's recent announcement on the
use of AI in government processes to ensure delivery of
high-quality, cost-effective services to its citizens.
Public
Service operates in highly fragmented markets with a variety of
services offered. Competitors within the market include but are not
limited to: Atos, G4S, Sopra Steria, CGI, Tata Consulting Services,
Serco, Accenture and Maximus.
Strategy
and better technology
The division
has identified four key propositions that offer substantial sales
potential across the public sector client groups in the UK, through
enhanced repeatability and cost-efficient delivery, particularly in
the areas of modern, technology-enabled business process
outsourcing and National Preparedness. These are Digital Business
Services; Citizen Experience; Workforce Development; and
Place.
Looking
ahead, there is a significant opportunity to drive productivity and
efficiency in line with the UK Government’s strategy of integrating
AI into public services. We are working with technology
hyperscalers to co-create solutions based on our public sector
process knowledge, blending together offerings which are both
technology and people driven.
The division
is focused on building standardised repeatable propositions,
leveraging the scale of our hyperscaler partners while using our
sector specific domain knowledge and expertise. This will in turn
reduce cost to serve and improve market impact. We have a number of
AI and gen AI products embedded in clients across the division,
including the use of Capita Contact and Capita Accelerate, a
natural language processing tool that we are using to analyse
candidates' medical records to allow a faster processing
time.
Our two
client advisory boards, covering all sectors in which the division
operates, continue to help us enhance customer centricity, improve
strategic decision making, aid innovation and strengthen client
relationships. We will continue to build on their use in
2025.
Operational
performance and better delivery
Across the
year, the division's average KPI performance was consistent at 94%.
The division’s standalone cNPS (customer satisfaction) performance
was +28 points with specific positive feedback around account
management and sector experience. An area of improvement was
digital innovation and transformation, which will be a key area of
focus for 2025 as we look to embed technology more consistently
across the division.
The division
saw a £15m cash overspend associated with the delayed mobilisation
of two contracts over the year, which also impacted revenue growth.
One of these contracts went live at the end of 2024.
Operational
highlights across the year included:
•
On the
Standards and Testing Agency contract, we printed and delivered 11
million test papers to schools for SATs week hitting every
milestone on time, including the marking and delivery of 99.9% of
scripts;
•
On the
division’s contract to deliver Royal Navy training, we partnered
with Metaverse VR, to deliver eleven new Warship Bridge Simulators
across three Royal Navy locations in the UK, more than doubling the
Navy’s simulator capacity; and
•
Our British
Army Recruitment Site won best 'Recruiting Website' at the RAD
Awards with the site generating a 100% increase in registration
conversion.
Our
consistent delivery has been a key factor in expanding existing
scopes with clients such as Transport for London and the Royal
Navy. Looking to our long-term growth ambitions, we are exploring
expansion into international markets using our existing
infrastructure. We believe we can increase the division's
addressable market and accelerate growth, particularly in the
Defence and National Preparedness vertical.
Growth
performance
In 2024,
Public Service won TCV of £928.7m down 49.5% from that won
in
2023. The decline
was in part driven by lower levels of contract activity during a
year of political transition, and the benefit in 2023 from contract
award dates moving from 2022 into 2023.
We saw a
further extension on the Data Communications Company Licence with a
TCV of £135m and expansions with the Royal Navy and in Local Public
Service. The division's book to bill ratio was 0.7x.
The total
unweighted pipeline for Public Service at 31 December
2024 was £8,149m, an increase from £7,474m despite our
unsuccessful armed forces recruitment bid, which we lost on price.
The year end weighted pipeline stood at £1,206m, broadly similar to
that in
2023 of
£1,247m.
The
divisional order book at 31 December
2024 was £2,923.4m, a decrease from £3,546.0m in the prior
year, reflecting the revenue recognised in the period which more
than offset wins in the period.
Financial
performance
|
Divisional financial summary
|
2024
|
2023
|
%
change
|
|
Adjusted
revenue1
(£m)
|
1,387.2
|
1,399.9
|
(0.9)%
|
|
Adjusted
operating profit1
(£m)
|
89.1
|
69.6
|
28.0%
|
|
Adjusted
operating margin1
(%)
|
6.4%
|
5.0%
|
|
|
Adjusted
EBITDA1
(£m)
|
125.6
|
111.4
|
12.7%
|
|
Operating cash
flow excluding business exits1
(£m)
|
92.1
|
88.5
|
4.1%
|
|
Order book
(£m)
|
2,923.4
|
3,546.0
|
(17.6)%
|
|
Total contract
value secured (£m)
|
928.7
|
1,840.1
|
(49.5)%
|
Adjusted
revenue1
decreased by
0.9% to £1,387.2m, reflecting the cessation in previous years of
contracts in Local Public Service and Central Government. Revenue
growth was impacted by a more disciplined approach to bidding and
the delayed mobilisation of two contracts in the division. These
offset additional volumes in our Transport for London contract and
the benefit from indexation.
Adjusted
operating profit1
increased
28.0% to £89.1m, delivering an adjusted operating margin of 6.4%,
as the division saw the positive benefit of the Group’s
cost-reduction programme which offset the impact of contract losses
and the £15m profit impact from the conclusion of project work in
2023 and the impact of Ofgem’s price control determination on the
Smart DCC contract.
Operating
cash flow excluding business exits1
increased
4.1% to £92.1m with operating cash conversion of 73.3%
(2023:
79.4%) impacted by the delayed mobilisation and more sustainable
approach to working capital management.
Outlook
For 2025, we
expect the division to deliver low to mid single digit revenue
growth driven by the annualised benefit of new contracts, with
growth expected across all Public Service verticals in
2025.
We expect a
modest improvement in adjusted operating margin driven by revenue
growth and continued benefit from the cost reduction
programme.
1. Refer to
alternative performance measures (APMs) in the Appendix.
2.
TechMarketView.
Capita
Experience
Following a
review of the Group’s offerings, Experience will now report under
three segments, reflecting the different market sectors and end
product offerings of its component parts: 1. Contact Centre; 2.
Pension Solutions; and 3. Regulated Services, which includes closed
book Life & Pensions.
1.
Contact Centre
Markets
and growth drivers
Contact
Centre is one of Europe’s leading customer experience businesses
with a top three market share across EMEA, managing millions of
interactions, with customers in the UK, Ireland, Germany and Switzerland and services delivered across
these geographies and also in India, South
Africa, Poland and
Bulgaria.
The division
is structured around the market sectors it serves: Financial
Services; Telecoms, Media & Technology; Energy & Utilities;
and Retail. The European customer experience market is worth
£33bn2
with the
market expected to grow at 4%2
per
annum.
Our
competitors are mostly global and include entities such as
Teleperformance, Concentrix & Webhelp, Tata Consulting Services
and Foundever.
The customer
experience landscape is evolving at pace driven by changing
technology and shifting consumer expectations. Customers demand an
omni channel experience, multilingual support, and a flexible
service model spanning onshore, nearshore, and offshore
operations.
Strategy
and better technology
Contact
Centre is a customer experience business driven by data and
technology powered by people, operating as a leading regional
player with global quality standards.
This year, it
launched nine customer service bundles including areas such as
retail and collections, offering repeatable, modular and scalable
solutions that can be easily tailored to markets needs and
requirements, while providing quicker market entry. Since the
launch, we have seen an increase in demand, particularly in the
retail market, which has driven an increase in pipeline origination
areas since the launch.
A
key tool launched for the Contact Centre business in 2024 was
AgentSuite, combining two elements of Agent Assist and Call Sight
which provide real time sentiment analysis, AI generated prompts to
aid call handlers and reduce post call administration time with
call notes automatically populated. This tool will be used for the
majority of our clients in the future, and we have seen significant
productivity benefits from the early adopters of this
technology.
We also
launched Sanas, a noise cancellation and harmonisation technology
which allows for clearer communication during traditional voice
calls, improving agent confidence and customer
satisfaction.
At the end of
the year, around 50% of agents within the Contact Centre business
were using our AI and gen AI solutions with significant further
rollout to clients underway for 2025.
At the start
of 2025, the Contact Centre business announced a partnership with
GetVocal AI to drive further improvements in customer experience
for clients. GetVocal AI provides virtual agents that will handle a
range of customer interactions, with the oversight of experienced
Capita agents who are ready to step in for complex queries,
vulnerable customers or escalation.
With a 2024
operating loss of £5.9m, there is a significant opportunity for
Contact Centre to improve
its margins to be in line with
those of its peers. The division is implementing a significant
reorganisation, including delayering internal management structures
and a digitisation plan to reduce costs.
A
key element of the division’s reorganisation is increasing the use
of offshore and nearshore service delivery to meet client needs. In
2024 we opened two new global delivery centres in Bulgaria and South
Africa. This expansion enabled the division to meet the
increasing demand for multilingual services and will broaden our
market opportunities going forward. The Contact Centre business
also increased its offshoring use from 45% to 60% in the
operational support function, which is closely aligned to peer
benchmarks.
Operational
performance and better delivery
Across the
year, the division’s average in-month KPI performance was
consistent with 2023 at 93%. The division’s standalone cNPS
performance was +38 points an improvement of 19 points from the
prior year with positive client feedback received on the division’s
account management and transparency of teams communication. While
delivery and client sentiment has remained strong across the
majority of the portfolio, certain delivery issues have led to the
reduction of volumes on one particular contract. Action was taken
to remediate this swiftly and we have the opportunity to regain
volumes in the future.
Operational
highlights for the year include:
•
To support
future delivery, we opened two new global delivery centres in
Bulgaria and South Africa;
•
We were
awarded Best Network Customer Service for our work with Tesco
Mobile;
•
We handled
more than 32 million calls for clients in the UK, Ireland, Germany and Switzerland;
•
During peak
season in South Africa our teams
managed 3.2 million customer contacts; and
•
Our teams won
a number of awards across 2024 including Accomplished Leader and
Emerging Leader at the CGA Global Women in Leadership Awards. We
have also been nominated for awards such as Employee Engagement at
the UK Customer Satisfaction Awards.
These
achievements underscore our focus on operational excellence,
scalability, and the delivery of quality customer experiences. As
we continue to expand our global footprint and enhance our
capabilities, we are well positioned to drive even greater value
for our clients and their customers.
Growth
performance and key wins
In 2024,
Contact Centre won contracts with a value of
£432.1m down
from
£746.5m in the prior
year, as we saw a reduction in bid activity across the year.
Material wins included two renewals with major European telecoms
clients, one with an expanded scope, with a combined TCV of more
than £250m and
with Tesco Mobile in the UK. The division’s book to bill was
0.7x. There has
been a strong start to 2025 with renewals across all geographies we
operate in.
At
31 December
2024, the
division's unweighted pipeline was £2,243m, a decrease from £2,538m
at the same point in 2023. The weighted pipeline was £295m, down
from £429m in
2023. Increasing
the divisional pipeline is a key area of focus in the medium
term.
The order book at 31 December
2024 was £644.6m, a decrease from £1,399.6m at
31 December
2023, reflecting the revenue recognised in 2024 and the fact
that the material contracts secured in 2024
are framework agreements that do not meet the IFRS 15 accounting
criteria for order book recognition.
Financial
performance
|
Divisional financial summary
|
2024
|
2023
|
%
change
|
|
Adjusted
revenue1
(£m)
|
650.9
|
797.6
|
(18.4)%
|
|
Adjusted
operating profit1
(£m)
|
(5.9)
|
(4.0)
|
(47.5)%
|
|
Adjusted
operating margin1
(%)
|
(0.9)%
|
(0.5)%
|
|
|
Adjusted
EBITDA1
(£m)
|
34.3
|
44.0
|
(22.0)%
|
|
Operating cash
flow excluding business exits1
(£m)
|
0.1
|
20.9
|
(99.5)%
|
|
Order book
(£m)
|
644.6
|
1,399.6
|
(53.9)%
|
|
Total contract
value secured (£m)
|
432.1
|
746.5
|
(42.1)%
|
Adjusted
revenue1
decreased
18.4% to £650.9m, reflecting a number of prior year losses and the
non-repeat of the one-off benefit from the Virgin Media O2 contract
transition in
2023. The
division also saw lower volumes in the Telecommunications vertical
which are expected to remain subdued in 2025.
Adjusted
operating loss1
increased
47.5% to £5.9m as the successful cost savings and reduced overheads
did not offset the prior year impact of the one-off benefit from
the Virgin Media O2 contract transition and lower volumes in the
Telecommunications vertical.
Operating
cash flow excluding business exits1
decreased
99.5% to £0.1m reflecting the decline in EBITDA and the benefit
from payment phasing on the Virgin Media O2 contract in
2023.
Outlook
We expect a
high single-digit revenue reduction in the Contact Centre business
in 2025, reflecting previously announced contract losses and
subdued volumes within the telecommunications vertical.
We expect a
full year margin improvement as the division benefits from
continued cost savings.
1. Refer to
alternative performance measures (APMs) in the Appendix.
2.
NelsonHall.
2.
Pension Solutions
Markets
and growth drivers
Pension
Solutions is our pension administration and consulting business,
with a focus on defined benefit schemes. It administers over 400
public and private sector pension schemes based in the UK in a
market worth £3.6bn2
and with a
projected £1bn of total contract value expected to come to market
in the next three years.
A
key pensions industry trend is the increased member demand for a
seamless user experience with tailored offerings from increased
automation and self-service options around customer needs for a
24/7 service offering and Pension Solutions is well positioned to
benefit from this.
Pension
Solutions also provides consulting, actuarial and data services to
its clients via its 500 expert pension consultants, which accounts
for c.1/3 of its revenue.
Strategy
and better technology
Pension
Solutions has a roadmap to further improve and digitise operations
with the launch of Capita Digital Pension Solutions which we expect
to go live later in 2025. This tool, which utilises Capita
Pension's existing infrastructure and Microsoft Dynamics, uses data
to provide a hyper-personalised member experience. We are also
piloting a number of AI based solutions to provide efficiencies and
speed up member experience.
This is a
step change in our service offering and will help the division to
expand into adjacent segments. Changes in legislation will provide
future opportunities to expand our share in the UK
market.
Operational
performance and better delivery
The KPI
performance for Pension Solutions was 94% (2023: 86%). We saw
further improvements in the division's cNPS with a 25 point
improvement to -3 points.
This year
Pension Solutions continued to increase its reach, completing 4.5
million transactions for members and 39 successful scheme
implementations onto the Pension Solutions Hartlink digital
platform and infrastructure.
Our digital
pensions tool is already modernising how pensions are managed. In
2024 we saw the number of members engaging with pensions via
digital channels increase by more than 200%, and in 2025 we will be
transitioning all clients to paperless communications which we
expect to allow for more efficient communication, while reducing
our costs to deliver.
Growth
performance
In 2024,
Pension Solutions secured contracts with a TCV of £144.9m, down
55.8% from 2023, reflecting the material Civil Service Pension
Scheme win in 2023. The book to bill
for the division was 0.8x. In 2024, we saw contract success with
the renewal of the Royal Mail Pension Scheme with a TCV of
£53m.
The total
unweighted pipeline for the Pension Solutions business at
31 December
2024 was £689m an increase from £231m in 2023, reflecting
our focus on pipeline replenishment and increased tender
opportunities.
The order book at 31 December
2024 was £441.3m,
a small decrease from £461.8m
at 31 December
2023, reflecting the revenue recognised in
2024
which was not offset by wins in 2024.
Financial
performance
|
Divisional financial summary
|
2024
|
2023
|
%
change
|
|
Adjusted
revenue1
(£m)
|
179.0
|
170.3
|
5.1%
|
|
Adjusted
operating profit1
(£m)
|
28.1
|
25.9
|
8.5%
|
|
Adjusted
operating margin1
(%)
|
15.7%
|
15.2%
|
|
|
Adjusted
EBITDA1
(£m)
|
34.1
|
31.2
|
9.3%
|
|
Operating cash
flow excluding business exits1
(£m)
|
33.3
|
21.9
|
52.1%
|
|
Order book
(£m)
|
441.3
|
461.8
|
(4.4)%
|
|
Total contract
value secured (£m)
|
144.9
|
327.6
|
(55.8)%
|
Adjusted
revenue1
increased
5.1% to £179.0m, reflecting volume increases across a number of
clients including the Pension Insurance Corporation (PIC) contract
and the benefit from indexation.
Adjusted
operating profit1
increased by
8.5% to £28.1m reflecting revenue growth and benefit from the cost
reduction programme. The division delivered an adjusted operating
margin of 15.7% (2023:
15.2%).
Operating
cash flow excluding business exits1
increased by
52.1% to £33.3m, driven by improved billing cycles.
Outlook
In 2025, we
expect to see mid-single digit revenue growth across Pension
Solutions driven by growth with existing clients, and the margin
for the division stable.
1. Refer to
alternative performance measures (APMs) in the Appendix.
2. External
market research including ONS, House of Commons Library and
Pensions Policy Institute.
3.
Regulated Services
Regulated
Services includes a number of ‘manage for value’ businesses where
we are exploring exits. The largest of these is the closed book
Life & Pensions business, for which we are making good progress
exiting this business, with one client remaining and transition
agreements for all other clients.
As expected,
we have seen continued volume attrition within the closed book Life
& Pensions business, although our delivery remains strong with
KPI performance across 2024 of 98%. This year we agreed the hand
back conditions for a number of clients, which will be transitioned
over the coming years, and we expect to see a reduction in revenue
as these are transitioned. We now have one remaining client and are
actively engaged in discussion to resolve the challenges in this
area. The division is forecast to have a cash cost to the Group of
around £20m per annum in future years.
Financial
performance
|
Divisional financial summary
|
2024
|
2023
|
%
change
|
|
Adjusted
revenue1
(£m)
|
152.0
|
208.0
|
(26.9)%
|
|
Adjusted
operating profit1
(£m)
|
12.6
|
33.1
|
(61.9)%
|
|
Adjusted
operating margin1
(%)
|
8.3%
|
15.9%
|
|
|
Adjusted
EBITDA1
(£m)
|
18.4
|
39.9
|
(53.9)%
|
|
Operating cash
flow excluding business exits1
(£m)
|
(13.7)
|
(5.7)
|
(140.4)%
|
|
Order book
(£m)
|
231.4
|
438.0
|
(47.2)%
|
|
Total contract
value secured (£m)
|
7.2
|
38.1
|
(81.1)%
|
Adjusted
revenue1
decreased
26.9% to £152.0m, reflecting the non-repeat of the commercial
settlement in the prior year, the impact of contract exits, and
volume reductions as expected.
Adjusted
operating profit1
decreased
61.9% to £12.6m reflecting the non-repeat of the £24m commercial
settlement in the prior year.
Operating
cash outflow excluding business exits1
increased
140.4% to an outflow of £13.7m, driven by the non-repeat of
one-offs in the prior year, including a receipt on a contract
termination.
Outlook
As noted,
this is an area where we are actively exploring exits, therefore we
expect to see a continued revenue and profit decline as we hand
back and transition contracts in this area.
1. Refer to
alternative performance measures (APMs) in the Appendix.
Chief
Financial Officer's review
This
preliminary announcement is extracted from Capita's financial
statements for the year ended 31 December
2024 and the basis of its preparation can be found in the
notes to the financial statements in this announcement.
Overview
Adjusted
revenue1
decline of
8.0% reflects the impact of contract losses in prior years, the
cessation of lower margin service lines, and the reduction in
volumes in the Contact Centre telecommunications
vertical.
Public
Service revenue reduction reflects the continued impact of
previously announced contract losses, delayed mobilisations of two
contracts won in 2023, the double digit profit impact from the
conclusion of project work in 2023 and the impact of Ofgem’s price
control determination on the Smart DCC contract, and a more focused
approach to bidding which impacted current year revenue and profit.
These factors offset additional volumes in our contract with
Transport for London, and the benefit from indexation.
In
Experience, the revenue reduction in the Contact Centre business
reflects the one-off benefit from the Virgin Media O2 contract
transition in 2023, the impact of prior year contract losses, and
lower volumes in the telecommunications vertical. The revenue
growth in the Pension Solutions business reflects volume increases
across a number of clients, including the Pension Insurance
Corporation contract, and the benefit from indexation. The revenue
reduction in the Regulated Services business reflects the one-off
benefit from the prior year commercial settlement, and progress
being made on contract exits as we resolve legacy issues and look
to exit the closed book Life & Pensions business.
The 5.5%
step-up in adjusted operating profit1
reflected the
benefit from the ongoing cost reduction programme, more than
offsetting the impact of the revenue trends noted above and the non
repeat of one-offs from the prior year.
Adjusted
basic earnings per share1
increased to
2.11p (2023: loss per share 0.20p) reflecting the increase in
adjusted operating profit1,
reduction in the net finance costs excluded from adjusted profit,
and the adjusted current tax charge of £10.3m compared to the
adjusted tax charge of £47.4m in the prior year. The adjusted tax
charge in 2024 reflects the changes in the accounting estimate of
recognised deferred tax assets, and a lower current income tax
charge reflecting fewer current year losses carried
forward.
The decline
in reported revenue of 14.0% reflects the reduction in adjusted
revenue1
noted above,
and the impact of businesses exited during 2024 and
2023.
The reported
operating loss of £9.9m (2023: loss £52.0m), reflects the
improvement in adjusted operating profit1
detailed
above, and lower costs incurred in resolving the March 2023 cyber incident (2024: £1.0m; 2023:
£25.3m) and to deliver the significant cost reduction programme
that commenced in the second half of 2023 (2024: £27.9m; 2023:
£54.4m), offset by the increased goodwill impairment charge (2024:
£75.1m; 2023: £42.2m).
The reported
profit before tax of £116.6m (2023: loss £106.6m), reflects the
improvement in reported operating profit detailed above, the gain
from business exits in the year of
£170.9m
(2023: loss £23.2m) and reduced net finance costs of £46.3m (2023:
£52.2m).
The increase
from a reported basic loss per share to a reported basic earnings
per share reflects the swing to a reported profit before tax noted
above, compounded by the reduction in the reported income tax
charge. The reduction in the reported income tax charge reflects
the reduction in the adjusted tax charge noted above, and a smaller
change in the accounting estimate of recognised deferred tax
assets.
Cash
generated from operations excluding business
exits1
decreased, as
expected, from £26.5m to £16.2m, driven by the impact of
mobilisation delays, a more sustainable approach to working
capital, and an increase in cash costs to deliver the cost
reduction programme, partly offset by a reduction in the direct
cash cost of the 2023 cyber incident and pension deficit
contributions.
Free cash
flow excluding business exits1
in the year
ended 31 December
2024 was an outflow of £122.3m (2023: outflow £123.6m). This
reflects the reduction in cash generated from operations, partly
offset by lower net capital lease payments, following the
rationalisation of our property estate, and lower tax
outflows.
The
improvement in free cash flow1
reflects the
above reduction in free cash outflow excluding business exits, and
a reduction in pension deficit contributions triggered by
disposals, partly offset by the outflow from those businesses being
exited.
In
January 2024, we completed the
disposal of the of the Group’s 75% shareholding in Fera Science
Limited (Fera), realising gross proceeds of £62m. The Group
received net cash proceeds of c.£50m reflecting the total proceeds
less cash held in the entity when the disposal completed on
17 January 2024, and disposal costs.
This was the final disposal of the c.£500m Board-approved Portfolio
programme which was launched in 2021.
In
June 2024, we held a Capital Markets
Day outlining the Group's strategic themes and prioritised business
sectors going forward. During the event, some areas of the Group
were identified as being “managed for value”, and we outlined the
options being pursued, including exploring potential exits.
Standalone software activities were identified as part of the
Group's activities that are being "managed for value", and on
9 July 2024, we announced we had
agreed the sale of Capita One, a standalone software business. The
Group received net cash proceeds of c.£180m reflecting total
proceeds less cash held in the entity when the disposal completed
on 4 September 2024. The net cash
proceeds provide the Group with additional resources to strengthen
its financial position and further reduce indebtedness, as well as
funding for its transformation journey.
In
November 2023, we announced the
implementation of a cost reduction programme expected to deliver
annualised efficiencies of £60m from Q1 2024. In March 2024, we announced that we had identified
additional cost saving opportunities expected to deliver an
additional £100m of annualised cost savings by mid-2025. In
December 2024, reflecting on the
progress made ahead of schedule with £140m annualised savings
already delivered, and increased confidence in the level of
efficiencies that can be delivered, the cost reduction target
increased from £160m to up to £250m by the end of 2025. We
anticipate reinvesting around £50m of the total savings back into
the business to enhance the Group’s technology, service delivery
and pricing proposition.
Liquidity as
at 31 December
2024 was £397.2m, made up of £250.0m of undrawn revolving
credit (RCF) and £147.2m of unrestricted cash and cash equivalents
net of overdrafts. In June 2023, we
extended the maturity of the RCF to 31
December 2026 and the RCF of £250.0m was not drawn upon at
31 December
2024 (2023: undrawn).
Net financial
debt (pre-IFRS 16)
decreased by £115.6m to £66.5m at 31 December
2024, resulting in a net financial debt to adjusted
EBITDA1
(both
pre-IFRS 16) ratio of 0.5x, as a result of the benefit from the
disposal proceeds from Capita One and Fera. This is in line with
the Group’s medium term target ratio of ≤1.0x.
In
March 2025, the Group issued £94.2m
equivalent of US private placement loan notes across three tranches
maturing between 2028 and 2030 with an average interest rate across
the maturities of 7.4%. The proceeds will be used to refinance the
H1 2025 private placement maturities valued at £75.9m and it will
also enhance the future maturity profile of the Group’s debt and
will offer medium term funding to underpin the Group's
transformation strategy.
Summary
of financial performance
|
Financial highlights
|
|
|
Reported
results
|
Adjusted1
results
|
|
|
31
December 2024
|
31 December
2023
|
Reported
YoY
change
|
31
December 2024
|
31 December
2023
|
Adjusted1
YoY
change
|
|
Revenue
|
£2,421.6m
|
£2,814.6m
|
(14.0)%
|
£2,369.1m
|
£2,575.8m
|
(8.0)%
|
|
Operating
(loss)/profit
|
£(9.9)m
|
£(52.0)m
|
81.0%
|
£95.9m
|
£90.9m
|
5.5%
|
|
Operating
margin
|
(0.4)%
|
(1.8)%
|
140bps
|
4.0%
|
3.5%
|
50bps
|
|
EBITDA
|
£166.2m
|
£144.5m
|
15.0%
|
£186.1m
|
£196.5m
|
(5.3)%
|
|
Profit/(loss)
before tax
|
£116.6m
|
£(106.6)m
|
n/a
|
£50.0m
|
£40.9m
|
22.2%
|
|
Basic
earnings/(loss) per share
|
4.54p
|
(10.60p)
|
n/a
|
2.11p
|
(0.20p)
|
n/a
|
|
Operating cash
flow*
|
£86.3m
|
£81.2m
|
6.3%
|
£72.0m
|
£82.7m
|
(12.9)%
|
|
Free cash
flow*
|
£(122.7)m
|
£(154.9)m
|
20.8%
|
£(122.3)m
|
£(123.6)m
|
1.1%
|
|
Net
debt
|
£(415.2)m
|
£(545.5)m
|
£130.3m
|
£(415.2)m
|
£(545.5)m
|
£130.3m
|
|
Net financial
debt (pre-IFRS 16)
|
£(66.5)m
|
£(182.1)m
|
£115.6m
|
£(66.5)m
|
£(182.1)m
|
£115.6m
|
* Adjusted
operating cash flow and free cash flow exclude the impact of
business exits (refer to note 10).
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 directors’ 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 general, the Board believes that alternative
performance measures (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.
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 2024 business exits.
As at 31 December
2024, the following businesses met this threshold and were
classified as business exits and therefore excluded from adjusted
results in both 2024 and 2023: Fera, Capita One, Mortgage Services,
Capita Scaling Partner, and a further business from Capita Public
Service.
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
|
|
Capita
Public
Service
£m
|
Capita
Experience
|
|
|
Adjusted revenue1
bridge by division
|
Contact
Centre
£m
|
Pension
Solutions
£m
|
Regulated
Services
£m
|
Total
£m
|
|
Year
ended 31 December
2023
|
1,399.9
|
797.6
|
170.3
|
208.0
|
2,575.8
|
|
Net
(reduction)/growth
|
(12.7)
|
(146.7)
|
8.7
|
(56.0)
|
(206.7)
|
|
Year
ended 31 December
2024
|
1,387.2
|
650.9
|
179.0
|
152.0
|
2,369.1
|
Adjusted
revenue1
reduced 8.0%
year-on-year. The adjusted revenue1
was impacted
by the following:
•
Public Service (0.9%
reduction): the continued impact of previously announced contract
losses, such as Scottish Wide Area Network and Electronic
Monitoring, the delayed mobilisations of two contracts won in 2023,
the double digit profit impact from the conclusion of project work
in 2023 and the impact of Ofgem’s price control determination on
the Smart DCC contract, and a more focused approach to bidding
impacted the current year. These factors are partly offset by
additional volumes in the division’s contract with Transport for
London, and the benefit from indexation;
•
Experience:
◦
Contact
Centre (18.4%
reduction): reflecting the one-off benefit from the Virgin Media O2
contract transition in the prior year, the impact of prior year
contract losses, and lower volumes in the telecommunications
vertical which we expect to remain subdued in 2025;
◦
Pension
Solutions (5.1%
growth): reflecting volume increases across a number of clients,
including Pension Insurance Corporation contract, and the benefit
from indexation; and
◦
Regulated
Services (26.9%
reduction): reflecting the one-off benefit from the prior year
commercial settlement, and the progress being made on contract
exits as we resolve legacy issues and look to exit the closed book
Life & Pension business.
Order
book
The Group’s
consolidated order book was £4,240.7m at 31 December
2024 (2023: £5,882.6m). During 2024 two European
telecommunications contracts were extended in the year with the
contracts being recognised as framework contracts, which resulted
in £388.1m being derecognised from the order book. Additions from
contract wins, scope changes and indexation in 2024 totalled
£808.8m, including expanded scope on the Royal Navy Training
contract within Public Service and extension of the Royal Mail
Statutory Pension Scheme contract in Pension Solutions, were offset
by the reduction from revenue recognised in the year (£1,837.8m),
contract terminations (£74.6m) and business disposals (£150.2m).
Terminations primarily represent a contract exit within our close
book Life & Pensions business in Regulated Services.
Adjusted
operating profit1
|
|
Capita
Public
Service
£m
|
Capita
Experience
|
Capita
plc
£m
|
|
|
Adjusted operating profit1
bridge by division
|
Contact
Centre
£m
|
Pension
Solutions
£m
|
Regulated
Services
£m
|
Total
£m
|
|
Year
ended 31 December
2023
|
69.6
|
(4.0)
|
25.9
|
33.1
|
(33.7)
|
90.9
|
|
Net
growth/(reduction)
|
19.5
|
(1.9)
|
2.2
|
(20.5)
|
5.7
|
5.0
|
|
Year
ended 31 December
2024
|
89.1
|
(5.9)
|
28.1
|
12.6
|
(28.0)
|
95.9
|
Adjusted
operating profit1
increased in
2024 driven by the following:
•
Public Service: strong
improvement reflects the successful implementation of the cost
reduction programme, offset by the flow through of previously
announced contract losses, and the double digit profit impact from
the conclusion of project work in 2023 and the impact of Ofgem’s
price control determination on the Smart DCC contract;
•
Experience:
◦
Contact
Centre: non-repeat of
the 2023 one-off noted above (£10m), the flow through of revenue
decline, lower volumes in the telecommunications vertical and
continued investment in technology; partially offset by an
underlying margin improvement from lower overheads, including
reduced property footprint, from delivery of the cost reduction
programme;
◦
Pension
Solutions: improved
profit driven by savings from the cost reduction programme and
volume growth;
◦
Regulated
Services: the one-off
benefit from the prior year (£24m), the agreed exit of three
clients resulting in reduced profit in 2024, and the 2023 and 2024
benefit from accelerated deferred income recognition;
and
•
Capita plc: reflects
benefits from the cost reduction programme.
Adjusted
profit before tax1:
Adjusted
profit before tax1
increased
year-on-year to £50.0m (2023: £40.9m) reflecting the above
improvements in adjusted operating profit1
and reduced
net finance costs excluded from adjusted profit of £45.9m (2023:
£50.0m). Lower net finance costs reflect reduced debt levels
following proceeds received for business exits in the year and as a
result of cost reduction initiatives.
Adjusted
tax charge
The adjusted
income tax charge for the year was £10.3m (2023: charge £47.4m).
The reduction is mainly as a result of the changes in the
accounting estimate of recognised deferred tax assets which had
less of an impact in 2024 compared to 2023, and a lower current
income tax charge as a result of fewer current year losses to be
carried forward.
Operating
cash flow excluding business exits1
|
|
|
|
|
|
|
|
|
|
Capita
Public
Service
£m
|
Capita
Experience
|
Capita
plc
£m
|
|
|
Operating cash flow excluding business
exits1
by division
|
Contact
Centre
£m
|
Pension
Solutions
£m
|
Regulated
Services
£m
|
Total
£m
|
|
Year
ended 31 December
2023
|
88.5
|
20.9
|
21.9
|
(5.7)
|
(42.9)
|
82.7
|
|
Net
growth/(reduction)
|
3.6
|
(20.8)
|
11.4
|
(8.0)
|
3.1
|
(10.7)
|
|
Year
ended 31 December
2024
|
92.1
|
0.1
|
33.3
|
(13.7)
|
(39.8)
|
72.0
|
|
Operating
cash conversion1
year ended
31 December
2023
|
79.4%
|
47.5%
|
70.2%
|
(14.3)%
|
(143.0)%
|
42.1%
|
|
Operating cash conversion1
year ended 31 December
2024
|
73.3%
|
0.3%
|
97.7%
|
(74.5)%
|
(151.3)%
|
38.7%
|
Operating
cash flow excluding business exits1
and operating
cash flow conversion1
reduced in
2024 driven by the following:
•
Public Service: operating
cash conversion1
impact by the
delayed mobilisation and more sustainable approach to working
capital management;
•
Experience:
◦
Contact
Centre: operating
cash flow excluding business exits1
reduced
reflecting the decline in EBITDA. 2023 also included a benefit of
payment phasing on the new Virgin Media O2 contract which did not
recur in 2024;
◦
Pension
Solutions: improvement
in operating cash conversion1
driven by
improved billing cycles;
◦
Regulated
Services: decline in
operating cash conversion1
reflects the
decline in operating cash flow excluding business
exits1
due to the
one-offs in the prior year, including receipt on a contract
termination; and
•
Capita plc: the movement
in the usage of the Group’s non-recourse trade receivables
financing facility.
Cash
generated from operations and free cash flow
|
Adjusted operating profit1
to free cash flow excluding business
exits1
|
2024
£m
|
2023
£m
|
|
Adjusted
operating profit1
|
95.9
|
90.9
|
|
Add:
depreciation/amortisation and impairment of property, plant and
equipment, right-of-use assets and intangible assets
|
90.2
|
105.6
|
|
Adjusted
EBITDA1
|
186.1
|
196.5
|
|
Working
capital
|
(105.6)
|
(107.7)
|
|
Non-cash and
other adjustments
|
(8.5)
|
(6.1)
|
|
Operating cash flow
excluding business exits1
|
72.0
|
82.7
|
|
Adjusted
operating cash conversion1
|
39%
|
42%
|
|
Pension deficit
contributions
|
(6.3)
|
(30.0)
|
|
Cyber
incident
|
(5.0)
|
(20.1)
|
|
Cost reduction
programme
|
(44.5)
|
(6.1)
|
|
Cash
generated from operations excluding business
exits1
|
16.2
|
26.5
|
|
Net capital
expenditure
|
(49.5)
|
(52.6)
|
|
Interest/tax
paid
|
(41.3)
|
(45.1)
|
|
Net capital
lease payments
|
(47.7)
|
(52.4)
|
|
Free
cash flow excluding business exits1
|
(122.3)
|
(123.6)
|
Operating
cash flow excluding business exits1
reflect the
impact of mobilisation delays and a more sustainable approach to
working capital.
Cash
generated from operations excluding business
exits1
reflects the
above operating cash flow excluding business
exits1,
the direct cash flow impact of the cyber incident (£5.0m), the cash
cost of delivering the cost reduction programme (£44.5m), and final
pension deficit contributions in respect of the Group’s main
defined benefit pension scheme (HPS) (£6.3m).
The pension
deficit contributions are in line with the deficit funding
contribution schedule previously agreed with the HPS Trustee 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 year. Given the healthy funding position of HPS in
its latest funding valuation (as at 31 March
2023), and the Group having paid all outstanding deficit
contributions in 2024, there are no further agreed deficit
contributions to be paid at this time.
Free cash
flow excluding business exits1
for the year
ended 31 December
2024 was an outflow of £122.3m (2023: outflow £123.6m)
reflecting the reduction in cash generated from operations, partly
offset by lower net capital lease payments, following the
rationalisation of our property estate, and lower tax
outflows.
Reported
results
Adjusted
to reported profit
As noted
above, to aid understanding of our underlying performance, adjusted
operating profit1
and adjusted
profit before tax1
exclude a
number of specific items, including the amortisation and impairment
of acquired intangibles and goodwill, the impact of business exits,
and the impacts of the cyber incident and cost reduction
programme.
|
Adjusted1
to reported results bridge
|
|
Operating
profit/(loss)
|
|
Profit/(loss) before
tax
|
|
|
|
2024
£m
|
2023
£m
|
|
2024
£m
|
2023
£m
|
|
Adjusted1
|
|
95.9
|
90.9
|
|
50.0
|
40.9
|
|
|
|
|
|
|
|
|
|
Amortisation of
acquired intangibles
|
|
(0.2)
|
(0.2)
|
|
(0.2)
|
(0.2)
|
|
Impairment of
goodwill
|
|
(75.1)
|
(42.2)
|
|
(75.1)
|
(42.2)
|
|
Net finance
costs
|
|
—
|
—
|
|
(0.1)
|
(2.2)
|
|
Business
exits
|
|
(1.6)
|
(20.8)
|
|
170.9
|
(23.2)
|
|
Cyber
incident
|
|
(1.0)
|
(25.3)
|
|
(1.0)
|
(25.3)
|
|
Cost reduction
programme
|
|
(27.9)
|
(54.4)
|
|
(27.9)
|
(54.4)
|
|
|
|
|
|
|
|
|
|
Reported
|
|
(9.9)
|
(52.0)
|
|
116.6
|
(106.6)
|
Impairment
of goodwill
In preparing
the consolidated financial statements at 31 December
2024, the Group undertook a detailed impairment review,
following which a goodwill impairment of £75.1m was recognised in
respect of the Contact Centre cash generating unit (CGU). As noted
above the Contact Centre business has seen a reduction in adjusted
revenue1,
increase in adjusted operating loss1,
and reduction in operating cash flow excluding business
exits1.
These trends reflect the one-off benefit from the Virgin Media O2
contract transition in the prior year, and the impact of prior year
contract losses, both of which were reflected in the financial
projections used for impairment testing purposes previously, and
lower than expected volumes in the telecommunications vertical in
the second half of the year, which are expected to remain subdued
during 2025. The profit and cash flow impact of these items was
partially offset by an underlying margin improvement from lower
overheads from delivery of the cost reduction
programme.
The Contact
Centre business also saw a reduction in bid activity across 2024,
and although there has been a strong start to 2025, the business is
expecting a high single-digit revenue reduction in 2025. In
addition, the material contracts secured in 2024 are framework
agreements, which enable the customer to both ramp up and ramp down
volume, providing both an opportunity but also a risk to the
business’s forecast. Whilst delivery and client sentiment has
remained strong across the majority of the portfolio, certain
delivery issues have led to the reduction of volumes on one
particular contract.
There is a
significant opportunity for the Contact Centre business to improve
its margins, to be in line with those of its peers, and is
implementing a significant reorganisation, including delayering
internal management structures and a digitisation plan to reduce
costs. A key element of its reorganisation is increasing the use of
offshore and nearshore service delivery to meet client needs. In
terms of its digitisation plan, the forecast for the business
assumes an increase in the use of its new AI and generative AI
solutions, such as AgentSuite, with significant rollout to clients
underway for 2025. There is a risk with the assumed rollout of
these new technology solutions, such as the pace of technological
change, which brings increased uncertainty in delivery, and
therefore a risk to the business’s forecast.
To reflect
these risks, for the purposes of the impairment test, the business
plan cash flow projections have been risk adjusted in the Contact
Centre CGU from 2025 onwards. This has resulted in the impairment
noted above.
Business
exits
Business
exits include the effects of businesses that have been disposed of
or exited during the period and the results of businesses
held-for-sale at the balance sheet date.
In accordance
with our policy, the trading results of these businesses, along
with the non-trading expenses and gains/(losses) recognised on
business disposals, were classified as 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 the 2024 business exits.
At
31 December
2024 business exits primarily comprised of the disposal
of:
•
the Group’s
75% shareholding in Fera Science Limited which completed on
17 January 2024, and which completed
the Board-approved Portfolio business disposal programme;
and
•
the Capita
One standalone business which was identified as a “managed for
value” activity and which completed on 5
September 2024.
In addition
to the above disposals, the Group intends to exit its corporate
venture business, Capita Scaling Partner, in Capita Experience, and
the trading results and non-trading expenses of this business has
been excluded from adjusted results. The Capita Scaling Partner
business manages the Group’s investments in start-up and scale-up
companies. Four of these investments were sold during the year,
realising a net loss of £7.1m. Following the decision to exit this
business and the losses realised on disposals during 2024, the
Group has evolved its approach to valuing the remaining investments
to take into account recent experiences, and to better reflect
expected disposal proceeds. This has crystallised a net impairment
loss of £4.6m. The Group will seek to maximise value from the
remaining Capita Scaling Partner investments, which at
31 December
2024 had an aggregate carrying value of £4.8m, including
loans receivable by Capita of £0.7m.
Cyber
incident
The Group
incurred residual exceptional costs associated with the
March 2023 cyber incident. These
costs comprise specialist professional fees, recovery and
remediation costs, and investment to reinforce Capita’s cyber
security environment. A charge of £1.0m has been recognised in the
year ended 31 December
2024, which is net of insurance receipts. The cumulative
total net costs incurred in respect of the cyber incident are
£26.3m. Further insurance receipts are anticipated but did not meet
the criteria for recognition at 31 December
2024. No provision has been made for any costs in respect of
potential claims or regulatory penalties in respect of the incident
as it is not possible, at this stage, to reliably estimate their
value.
Cost
reduction programme
The Group
implemented a multi-year cost reduction programme in November 2023 to deliver savings of £60m by Q1
2024. The programme was extended in March
2024, to deliver further savings of £100m by mid-2025. In
December 2024, reflecting on the
progress made ahead of schedule with £140m annualised savings
already delivered, and increased confidence in the level of
efficiencies that can be delivered, the cost reduction target
increased from £160m to up to £250m by the end of 2025.
A
charge of £27.9m has been recognised in the year ended
31 December
2024 for the costs to deliver the cost reduction programme.
This includes redundancy and other costs of £30.5m
(2023:
£23.3m) to deliver a significant reduction in headcount, partly
offset by a credit of £2.6m reflecting the successful exit of a
number of properties which had been provided for in the prior year
(2023: charge of £31.1m arising from the rationalisation of the
Group’s property estate with impairment of right-of-use assets and
property, plant & equipment, and provisions in respect of
onerous property costs). The cumulative cost recognised since the
commencement of the cost reduction programme is £82.3m (2023:
£54.4m), which is included within administrative
expenses.
The cash
outflow in 2024 in respect of the cost reduction programme was
£44.5m (2023: £6.1m), which is included within free cash flow and
cash generated from operations excluding business
exits1.
The cumulative cash outflow since the commencement of the cost
reduction programme in the second half of 2023 is £50.6m. The
additional cost reduction initiatives announced in December 2024, along with those already
announced, are expected to result in cash costs during 2025
totalling an estimated £55m.
Further
detail of the specific items charged in arriving at reported
operating profit and profit before tax for 2024 is provided in note
5.
Net
finance costs
Net finance
costs decreased by £5.9m to £46.3m (2023: £52.2m), primarily
attributable to reduced debt levels following proceeds received for
business exits in the year and as a result of cost reduction
initiatives.
Reported
tax charge
The reported
income tax charge for the year of £36.2m comprises a current tax
charge of £17.8m, reflecting non-deductible goodwill impairments
and non-taxable gains on business exits, plus a deferred tax charge
of £18.4m arising from changes in the accounting estimate of
recognised deferred tax assets and business exits. The prior period
charge of £74.0m comprised a current tax charge of £30.2m,
reflecting non-deductible goodwill impairments and unrecognised
current year tax losses, plus a deferred tax charge of £43.8m,
reflecting the changes in the accounting estimate of recognised
deferred tax assets. The reduction in the reported income tax
charge reflects the reduction in the adjusted tax charge noted
above, and a smaller change in the accounting estimate of
recognised deferred tax assets.
Free
cash flow1
to
free cash flow excluding business exits1
|
Free cash flow1
to free cash flow excluding business
exits1
|
2024
£m
|
2023
£m
|
|
Free
cash flow1
|
(122.7)
|
(154.9)
|
|
Business
exits
|
(14.1)
|
15.0
|
|
Pension deficit
contributions triggered by disposals
|
14.5
|
16.3
|
|
Free
cash flow excluding business exits1
|
(122.3)
|
(123.6)
|
Free cash
flow1
was slightly
higher than free cash flow excluding business
exits1
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
31 December
2024 was £415.2m (2023: £545.5m). The decrease in net debt
over the year ended 31 December
2024 reflects the free cash outflow noted above offset by
the net cash proceeds from the disposal of Fera and Capita One in
the year, and the continued reduction in the Group’s leased
property estate.
|
Net debt
|
2024
£m
|
2023
£m
|
|
Opening
net debt
|
(545.5)
|
(482.4)
|
|
Cash movement in
net debt
|
197.4
|
(9.0)
|
|
Non-cash
movements
|
(67.1)
|
(54.1)
|
|
Closing
net debt
|
(415.2)
|
(545.5)
|
|
Remove closing
IFRS 16 impact
|
348.7
|
363.4
|
|
Net
financial debt (pre-IFRS 16)
|
(66.5)
|
(182.1)
|
|
Cash and cash
equivalents net of overdrafts
|
191.4
|
67.6
|
|
Financial debt
net of swaps
|
(257.9)
|
(249.7)
|
|
Net
financial debt/adjusted EBITDA1
(both
pre-IFRS 16)
|
0.5x
|
1.2x
|
|
Net debt
(post-IFRS 16)/adjusted EBITDA1
|
2.3x
|
2.4x
|
Net debt does
not include finance lease receivables, which at
31 December
2024 were £95.7m (2023: £70.3m) reflecting the successful
sub-letting of property the Group is not utilising.
Net financial
debt (pre-IFRS 16)
decreased by £115.6m to £66.5m at 31 December
2024, resulting in a net financial debt to adjusted
EBITDA1
(both
pre-IFRS 16) ratio of 0.5x as a result of the benefit from the
disposal proceeds from Capita One and Fera. Over the medium term,
the Group is targeting a net financial debt to adjusted
EBITDA1
(both
pre-IFRS 16) ratio of ≤1.0x.
The Group was
compliant with all debt covenants at 31 December
2024.
Capital
and financial risk management
Liquidity
remains an area of focus for the Group. Financial instruments used
to fund operations and to manage liquidity comprise
US private
placement loan notes, revolving credit facility (RCF) and
overdrafts.
|
Available liquidity1
|
2024
£m
|
2023
£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
|
191.4
|
67.6
|
|
Less: restricted
cash
|
(44.2)
|
(46.0)
|
|
Available
liquidity1
|
397.2
|
282.3
|
In
June 2023, the Group extended its RCF
to 31 December
2026. The RCF is for £250.0m and was undrawn at
31 December
2024 (2023: undrawn).
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.
The value of invoices sold under this arrangement at
31 December
2024 was £23.4m (2023: £35.2m). Also in 2024, the Group
implemented a new credit card facility, the outstanding balance of
which was £5.2m at 31 December
2024 (2023 £nil).
At
31 December
2024, the Group had £191.4m (2023: £67.6m) of cash and cash
equivalents net of overdrafts, and £269.3m (2023: £262.5m) of
private placement loan notes.
In
March 2025, the Group issued £94.2m
equivalent of US private placement loan notes across three
tranches: £50m maturing 24 April
2028, USD13m maturing
24 April 2028 and USD43m maturing 24 April
2030, with an average interest rate of 7.4%. The notes rank
pari passu with the existing indebtedness of the Group and include
financial covenants at the same level as those under the revolving
credit facility and existing US private placement loan notes.
Additionally, the placement requires the Group to refinance or
extend the Group’s revolving credit facility, which matures on
31 December 2026, by 31 December 2025.
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 and
Parent Company continue to adopt the going concern basis in
preparing these consolidated financial statements as set out in
Section 1 to the consolidated financial statements.
Viability
assessment
The Board's
assessment of viability over the Group’s three-year business
planning time horizon is summarised in the viability
statement.
Pensions
The latest
formal valuation for the Group’s main defined benefit pension
scheme (HPS), was carried out as at 31 March
2023. This identified a statutory funding surplus of £51.4m.
Given the funding position, the Group and the HPS Trustee agreed
that no further deficit contributions from the Group would be
required other than those already committed as part of the
31 March 2020 actuarial valuation. In
accordance with the schedule of contributions put in place
following the 31 March 2020 actuarial
valuation, the Group has paid £6.3m of regular deficit funding
contributions in 2024 and £14.5m of accelerated deficit reduction
contributions triggered by the disposal of Trustmarque in
2022.
The valuation
of the HPS liabilities (and assumptions used) for funding purposes
(the actuarial valuation) is specific to the circumstances of the
HPS. It differs from the valuation and assumptions used for
accounting purposes, which are set out in IAS 19
and shown in these consolidated financial statements. The main
difference is in assumption principles being used which are a
result of the different regulatory requirements of the valuations.
Management estimates that at 31 December
2024 the net asset of the HPS on a funding basis (ie the
funding assumption principles adopted for the full actuarial
valuation at 31 March 2023 updated
for market conditions at 31 December
2024) was approximately £80.0m (2023: net asset £81.0m) on a
technical provisions basis. The HPS Trustee has also agreed a
secondary more prudent funding target to enable it to reduce the
reliance the HPS has on the covenant of the Group. On this basis,
at 31 December
2024, the funding level was around 100%.
The net
defined benefit pension position of all reported defined benefit
schemes for accounting purposes increased from a surplus of £26.8m
at 31 December
2023 to a surplus of £37.9m at 31 December
2024. The main reason for this movement is the payment of
the above deficit funding contributions.
Consolidated
balance sheet
At
31 December
2024 the Group’s consolidated net assets were £195.7m (2023:
net assets £114.9m).
The movement
is predominantly driven by the reported profit before tax for the
year as explained above, partially offset by the actuarial loss on
the Group’s defined benefit pension schemes.
Share
premium reduction and share consolidation
The Board is
tabling two additional resolutions to the shareholders at the
April 2025 Annual General Meeting,
which if approved, will cancel the entire amount standing to the
credit of the Company’s share premium account and consolidate the
existing ordinary shares at a ratio of 15 for 1, which would
involve every 15 ordinary shares of 2 1/15
pence held by a shareholder being consolidated into one
ordinary share of 31 pence. The first
resolution is being proposed to optimise the structure of the
balance sheet and increase the Company’s distributable reserves.
The Board believe that consolidation of the Company’s ordinary
shares will improve marketability of its shares to
investors.
1. Refer to
alternative performance measures in the Appendix.
Viability
statement
In accordance
with provision 31 of the UK Corporate Governance Code published by
the Financial Reporting Council (FRC) in July 2018, and the FRC Guidance on Risk
Management and Business Reporting, the Board has assessed the
viability of the Group over the three-year period to 31 December 2027.
Period
of assessment
Assessing the
Group’s viability over a three-year period is aligned with the
period of the Group’s business planning process. The Board believes
that a three-year period provides sufficient clarity to consider
the Group’s prospects and facilitates the development of a robust
base case set of financial projections against which the Group’s
viability can be assessed.
Capita’s
strategic plan and priorities
The Group’s
financial performance has not been where it needs to be. At the
Group’s Capital Markets Day in June
2024, the Executive Team announced forward-looking strategic
priorities to improve both operational delivery and financial
performance, alongside introducing the strategic themes of Better
Technology, Better Delivery, Better Efficiencies and Better
Company.
The Group’s
value proposition needs to be more competitive and differentiated,
through a lower cost base, automation and innovation. Unnecessary
costs are being removed to put the Group in a position to fund its
profitable growth. In short, Better Capita means becoming more
efficient and spending less, digitising the Group’s offerings by
having more standardised and repeatable propositions, strongly
leveraging technology partnerships, being more precise in delivery,
and evolving governance and culture.
The Group is
prioritising business sectors where Capita has strong expertise and
sees material opportunities in the future. They are Public Service,
Contact Centre and Pension Solutions. Some areas of the Group are
being managed for value, including Regulated Services, which
primarily comprises the closed book Life & Pensions
business.
The Group’s
medium-term targets, set at the Capital Markets Event in
June 2024, are as follows:
•
Grow adjusted
revenue at low to mid-single digit per annum.
•
Improve
adjusted operating margin to between 6% and 8%.
•
Deliver
positive free cash flow, excluding the impact of business exits,
from the end of 2025, with operating cash conversion of 65% to
75%.
•
Maintaining
net financial debt leverage ≤ 1x.
•
Continued
reduction in lease liabilities from the Group’s ongoing property
rationalisation.
The
base case financial projections
In its
assessment of the Group’s viability, the Board has considered the
following:
•
Adjusted
revenue reduction in 2024 of 8.0%.
•
Adjusted
operating margin improvement from 3.5% to 4.0% in 2024.
•
Free cash
outflow, before the impact of business exits, of £122.3m, and
operating cash conversion of 38.7% in 2024 (2023: £123.6m and 42.1%
respectively).
•
The £140m of
annualised cost savings delivered, ahead of schedule, by
31 December 2024 from the cost
reduction programme, and the announced increase in total annualised
savings of up to £250m by the end of 2025.
•
The revolving
credit facility committed until 31 December
2026 (and assumed to be renewed and/or extended as required
under the terms of the March 2025
private placement loan notes (see note 14) for the duration of the
viability period) and the US private placement debt with maturities
over the period to 2030.
•
Agreement
with the Trustees of the Group’s main defined benefit pension
scheme that no further deficit recovery contributions are required
from the Group in 2025 and beyond.
The foregoing
elements provide the backdrop to the three-year business plan
approved by the Board in February
2025. The main assumptions underpinning the base case
financial projections in the Group’s business plan are set out
below:
•
Further
adjusted revenue growth beyond 2025 broadly in line with market
trends in each of the two core divisions.
•
Operating
profit margin expansion over the business plan period reflecting
the benefit of operating leverage coupled with ongoing efficiency
delivery.
•
Delivery of
further cost savings.
•
A
transition to positive free cash flow from the end of
2025.
•
The cessation
of pension deficit contributions with effect from 2024.
The most
material assumptions, from a viability assessment perspective,
relate to the delivery of adjusted revenue growth, operating profit
margin expansion, and delivery of cost savings.
Principal
risks
The Board and
the Audit and Risk Committee monitor the principal risks facing the
Group, including those that would threaten the execution of its
strategy, financial performance, liquidity and compliance with debt
covenants. The potential financial impacts of the principal risks
crystallising have been taken into account when modelling
sensitivities to assess the viability of the Group. The Group’s
risk review is set out in strategic report within the 2024 Annual
Report and Accounts and outlines the Group’s principal risks,
including mitigating actions and future mitigations.
Viability
scenarios
The
three-year base case financial projections were used to assess debt
covenant compliance and liquidity headroom under different
scenarios. This analysis included assessing the financial impact of
potential adverse financial impacts from the crystallisation of the
principal risks and in line with those considered in the severe but
plausible downside case for the going concern assessment (refer to
section 1 of the consolidated financial statements).
The risks
applied have not been probability weighted but rather consider the
impact should each risk materialise by applying a ‘more likely than
not’ test.
Mitigations
These
wide-ranging risks are unlikely to crystallise simultaneously and
there are mitigations under the direct control of the Group,
including reductions or delays in capital investment, and
substantially reducing (or removing in full) bonus and incentive
payments, that can be actioned to address a combination of risk
crystallisations that may occur under a stressed scenario. The
Board has considered these mitigations in its viability assessment,
however it acknowledges that a sustained use of the mitigations
identified above could have an adverse impact on the Group being
able to achieve its strategic priorities.
Conclusion
Reflecting
the Board’s expectations of improving financial performance, as set
out above, and its confidence in the Group’s ability to extend its
revolving credit facility beyond its December 2026 maturity, the Board has a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the period
of the viability assessment.
Forward
looking statements
This
full-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 advisers accept and
assume no liability to any person in respect of this trading update
save as would arise under English and Welsh 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 or opinions, or statements
concerning risks and uncertainties, including statements with
respect to Capita’s business, financial condition and results of
operations. All statements other than historical facts included in
this announcement may be forward-looking statements. Those
statements and statements which contain the words “plan”, “target”,
“aim”, “continue”, “hope”, “may”, “will”, “would”, “could”,
“should”, “anticipate”, “believe”, “intend”, “estimate”, “expect”
and words of similar meaning, or, in each case, their negative or
other various or comparable terminology, reflect Capita’s
Directors' beliefs and expectations and involve risk and
uncertainty because they relate to events and depend on
circumstances that may or may not 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,
and projections are not guarantees of future performance. 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.
Consolidated
income statement
For the year
ended 31 December
2024
|
|
Notes
|
2024
£m
|
2023
£m
|
|
|
|
|
|
|
Revenue
|
4
|
2,421.6
|
2,814.6
|
|
Cost of
sales
|
|
(1,905.1)
|
(2,222.5)
|
|
Gross
profit
|
|
516.5
|
592.1
|
|
Administrative
expenses (including goodwill impairment of £75.1m (2023:
£42.2m))
|
|
(526.4)
|
(644.1)
|
|
Operating
loss
|
4
|
(9.9)
|
(52.0)
|
|
Share of results
in associates and losses on financial assets
|
9
|
(11.8)
|
—
|
|
Finance
income1
|
6
|
10.0
|
8.7
|
|
Finance
costs1
|
6
|
(56.3)
|
(60.9)
|
|
Gain/(loss) on
disposal of businesses
|
9
|
184.6
|
(2.4)
|
|
Profit/(loss) before
tax
|
|
116.6
|
(106.6)
|
|
Income tax
charge
|
7
|
(36.2)
|
(74.0)
|
|
Total
profit/(loss) for the year
|
|
80.4
|
(180.6)
|
|
Attributable
to:
|
|
|
|
|
Owners of the
Company
|
|
76.7
|
(178.1)
|
|
Non-controlling
interests
|
|
3.7
|
(2.5)
|
|
|
|
80.4
|
(180.6)
|
|
Earnings/(loss) per
share
|
8
|
|
|
|
–
basic
|
|
|
4.54p
|
(10.60)p
|
|
–
diluted
|
|
|
4.41p
|
(10.60)p
|
|
|
|
|
|
|
Adjusted
operating profit
|
5
|
95.9
|
90.9
|
|
Adjusted profit
before tax
|
5
|
50.0
|
40.9
|
|
Adjusted basic
earnings/(loss) per share
|
8
|
2.11p
|
(0.20)p
|
|
Adjusted diluted
earnings/(loss) per share
|
8
|
2.05p
|
(0.20)p
|
1. Finance
income and finance costs have been separately disclosed for the
current year, with the prior year re-presented on the same basis.
Previously these were presented as net finance expenses.
Consolidated
statement of comprehensive income
For the year
ended 31 December
2024
|
|
|
2024
£m
|
2023
£m
|
|
Total
profit/(loss) for the year
|
|
80.4
|
(180.6)
|
|
Other
comprehensive income/(expense)
|
|
|
|
|
Items
that will not be reclassified subsequently to the income
statement
|
|
|
|
|
Actuarial loss
on defined benefit pension schemes
|
|
(11.8)
|
(68.2)
|
|
Tax effect on
defined benefit pension schemes
|
|
2.8
|
15.9
|
|
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 operations
|
|
0.2
|
(2.9)
|
|
Exchange
differences realised on business disposals
|
|
—
|
0.2
|
|
Gain/(loss) on
cash flow hedges
|
|
9.9
|
(8.5)
|
|
Cash flow hedges
recycled to the income statement
|
|
(2.8)
|
(2.0)
|
|
Tax effect on
cash flow hedges
|
|
(1.8)
|
2.6
|
|
|
|
|
|
|
Other
comprehensive expense for the year net of tax
|
|
(3.5)
|
(63.0)
|
|
Total
comprehensive income/(expense) for the year net of
tax
|
|
76.9
|
(243.6)
|
|
Attributable
to:
|
|
|
|
|
Owners of the
Company
|
|
73.2
|
(241.0)
|
|
Non-controlling
interests
|
|
3.7
|
(2.6)
|
|
|
|
76.9
|
(243.6)
|
The
accompanying notes are an integral part of these consolidated
financial statements.
Consolidated
balance sheet
At
31 December
2024
|
|
Notes
|
2024
£m
|
2023
£m
|
|
Non-current
assets
|
|
|
|
|
Property, plant
and equipment
|
|
68.5
|
80.0
|
|
Intangible
assets
|
|
79.8
|
90.0
|
|
Goodwill
|
11
|
372.4
|
495.7
|
|
Right-of-use
assets
|
|
180.7
|
208.5
|
|
Investments in
associates
|
|
—
|
0.2
|
|
Contract
fulfilment assets
|
|
257.5
|
257.0
|
|
Financial
assets
|
|
99.0
|
97.2
|
|
Deferred tax
assets
|
7
|
111.6
|
140.3
|
|
Employee
benefits
|
|
42.9
|
32.7
|
|
Trade and other
receivables
|
|
10.0
|
12.3
|
|
|
|
1,222.4
|
1,413.9
|
|
Current
assets
|
|
|
|
|
Financial
assets
|
|
20.6
|
28.1
|
|
Income tax
receivable
|
|
7.0
|
11.6
|
|
Disposal group
assets held-for-sale
|
9
|
0.1
|
38.1
|
|
Trade and other
receivables
|
|
335.3
|
350.7
|
|
Cash
|
|
253.6
|
155.4
|
|
|
|
616.6
|
583.9
|
|
Total
assets
|
|
1,839.0
|
1,997.8
|
|
Current
liabilities
|
|
|
|
|
Overdrafts
|
|
62.2
|
95.0
|
|
Trade and other
payables
|
|
353.2
|
425.9
|
|
Disposal group
liabilities held-for-sale
|
9
|
0.1
|
9.7
|
|
Income tax
payable
|
|
3.8
|
1.3
|
|
Deferred
income
|
|
435.4
|
501.3
|
|
Lease
liabilities
|
|
42.9
|
51.1
|
|
Financial
liabilities
|
|
88.2
|
10.8
|
|
Provisions
|
12
|
81.4
|
101.6
|
|
|
|
1,067.2
|
1,196.7
|
|
Non-current
liabilities
|
|
|
|
|
Trade and other
payables
|
|
6.7
|
8.5
|
|
Deferred
income
|
|
30.5
|
36.2
|
|
Lease
liabilities
|
|
305.8
|
312.3
|
|
Financial
liabilities
|
|
183.2
|
267.5
|
|
Deferred tax
liabilities
|
7
|
7.0
|
7.2
|
|
Provisions
|
12
|
37.9
|
48.6
|
|
Employee
benefits
|
|
5.0
|
5.9
|
|
|
|
576.1
|
686.2
|
|
Total
liabilities
|
|
1,643.3
|
1,882.9
|
|
Net
assets
|
|
195.7
|
114.9
|
|
Capital
and reserves
|
|
|
|
|
Share
capital
|
|
35.2
|
35.2
|
|
Share
premium
|
|
1,145.5
|
1,145.5
|
|
Employee benefit
trust shares
|
|
(0.3)
|
(0.7)
|
|
Capital
redemption reserve
|
|
1.8
|
1.8
|
|
Other
reserves
|
|
(9.5)
|
(15.0)
|
|
Retained
deficit
|
|
(972.8)
|
(1,053.8)
|
|
Equity
attributable to owners of the Company
|
|
199.9
|
113.0
|
|
Non-controlling
interests
|
|
(4.2)
|
1.9
|
|
Total
equity
|
|
195.7
|
114.9
|
The
accompanying notes are an integral part of these consolidated
financial statements.
Consolidated
statement of changes in equity
For the year
ended 31 December
2024
|
|
Share
capital
£m
|
Share
premium
£m
|
Employee
benefit
trust
shares
£m
|
Capital
redemption
reserve
£m
|
Retained
deficit
£m
|
Other
reserves
£m
|
Total
attributable
to the owners
of
the
parent
£m
|
Non-
controlling
interests
£m
|
Total
equity
£m
|
|
At
31 December 2022
|
34.8
|
1,145.5
|
(4.2)
|
1.8
|
(843.2)
|
(4.5)
|
330.2
|
22.5
|
352.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the
year
|
—
|
—
|
—
|
—
|
(178.1)
|
—
|
(178.1)
|
(2.5)
|
(180.6)
|
|
Other
comprehensive expense
|
—
|
—
|
—
|
—
|
(52.4)
|
(10.5)
|
(62.9)
|
(0.1)
|
(63.0)
|
|
Total
comprehensive expense for the year
|
—
|
—
|
—
|
—
|
(230.5)
|
(10.5)
|
(241.0)
|
(2.6)
|
(243.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
payment
|
—
|
—
|
—
|
—
|
5.5
|
—
|
5.5
|
—
|
5.5
|
|
Tax effect of
share based payment
|
—
|
—
|
—
|
—
|
0.3
|
—
|
0.3
|
—
|
0.3
|
|
Reclassification2
|
—
|
—
|
—
|
—
|
15.9
|
—
|
15.9
|
(15.9)
|
—
|
|
Purchase of
non-controlling interest
|
—
|
—
|
—
|
—
|
1.4
|
—
|
1.4
|
(1.4)
|
—
|
|
Exercise of
share options under employee long term incentive plans
|
—
|
—
|
3.9
|
—
|
(3.9)
|
—
|
—
|
—
|
—
|
|
Shares
issued
|
0.4
|
—
|
(0.4)
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Dividends
paid1
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(0.7)
|
(0.7)
|
|
Changes in
put-options held by non-controlling interests
|
—
|
—
|
—
|
—
|
0.7
|
—
|
0.7
|
—
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
At
31 December
2023
|
35.2
|
1,145.5
|
(0.7)
|
1.8
|
(1,053.8)
|
(15.0)
|
113.0
|
1.9
|
114.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the
year
|
—
|
—
|
—
|
—
|
76.7
|
—
|
76.7
|
3.7
|
80.4
|
|
Other
comprehensive (expense)/income
|
—
|
—
|
—
|
—
|
(9.0)
|
5.5
|
(3.5)
|
—
|
(3.5)
|
|
Total
comprehensive income for the year
|
—
|
—
|
—
|
—
|
67.7
|
5.5
|
73.2
|
3.7
|
76.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
payment
|
—
|
—
|
—
|
—
|
6.0
|
—
|
6.0
|
—
|
6.0
|
|
Tax effect of
share based payment
|
—
|
—
|
—
|
—
|
(0.2)
|
—
|
(0.2)
|
—
|
(0.2)
|
|
Elimination of
non-controlling interest on disposal of businesses
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(9.1)
|
(9.1)
|
|
Exercise of
share options under employee long-term incentive plans
|
—
|
—
|
1.0
|
—
|
(1.0)
|
—
|
—
|
—
|
—
|
|
Parent Company
shares purchased
|
—
|
—
|
(0.6)
|
—
|
—
|
—
|
(0.6)
|
—
|
(0.6)
|
|
Dividends
paid1
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(0.7)
|
(0.7)
|
|
De-recognition
of put-options held by non-controlling interests
|
—
|
—
|
—
|
—
|
8.5
|
—
|
8.5
|
—
|
8.5
|
|
|
|
|
|
|
|
|
|
|
|
|
At
31 December
2024
|
35.2
|
1,145.5
|
(0.3)
|
1.8
|
(972.8)
|
(9.5)
|
199.9
|
(4.2)
|
195.7
|
1. No dividends were declared, paid or proposed in 2024 or
2023 on the Parent Company’s ordinary shares.
2. During the
prior year it was identified that the non-controlling interest
(NCI) proportion of a goodwill impairment charge, which was
recognised in the year ended 31 December
2018, had not been previously allocated within the result
for that year attributable to NCI. The NCI proportion of the
impairment has been reclassified to the NCI reserve in the prior
year.
Share
capital – The balance
classified as share capital is the nominal proceeds on issue of the
Parent Company’s equity share capital, comprising
2 1/15
pence ordinary shares.
Share
premium – The amount
paid to the Parent Company by shareholders, in cash or other
consideration, over and above the nominal value of shares issued to
them less issuance costs.
Employee
benefit trust shares – Shares held
in the employee benefit trust have no voting rights and no
entitlement to a dividend.
Capital
redemption reserve – The Parent
Company can redeem shares by repaying the market value to
shareholders, whereupon the shares are cancelled. Redemption must
be from distributable profits. The Capital redemption reserve
represents the nominal value of the shares redeemed.
Retained
deficit – Net
profits/(losses) accumulated in the Group after dividends are
paid.
Other
reserves – This consists
of the foreign currency translation reserve deficit of £11.0m
(2023: £11.2m deficit) and the cash flow hedging reserve surplus of
£1.5m (2023: £3.8m deficit).
Non-controlling
interests (NCI) – This
represents equity in subsidiaries not attributable directly or
indirectly to the Parent Company.
The
accompanying notes are an integral part of these consolidated
financial statements.
Consolidated
cash flow statement
For the year
ended 31 December
2024
|
|
Notes
|
2024
£m
|
2023
£m
|
|
Cash
generated from operations
|
10
|
16.0
|
8.7
|
|
Income tax
paid1
|
|
(4.0)
|
(8.1)
|
|
Income tax
received1
|
|
5.1
|
0.6
|
|
Interest
received
|
|
8.0
|
6.2
|
|
Interest
paid
|
|
(50.3)
|
(47.7)
|
|
|
|
|
|
|
Net cash
outflow from operating activities
|
|
(25.2)
|
(40.3)
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
Purchase of
property, plant and equipment
|
|
(16.6)
|
(28.8)
|
|
Purchase of
intangible assets
|
|
(33.5)
|
(32.8)
|
|
Proceeds from
sale of property, plant and equipment and intangible
assets
|
|
0.3
|
0.1
|
|
Proceeds from
disposal of associates and joint ventures
|
|
0.3
|
—
|
|
Additions to
originated loans receivable
|
|
(0.5)
|
—
|
|
Changes to
investments at fair value through other comprehensive
income
|
|
—
|
(0.1)
|
|
Proceeds from
sale of investments held at fair value through profit and
loss
|
|
1.4
|
—
|
|
Capital element
of lease rental receipts
|
|
5.9
|
6.0
|
|
Deferred
consideration from sale of subsidiary companies
|
|
20.0
|
1.9
|
|
Total proceeds
received from disposal of businesses, net of disposal
costs
|
9
|
249.1
|
96.8
|
|
Cash held by
businesses when sold
|
9
|
(25.2)
|
(33.4)
|
|
Net cash
inflow from investing activities
|
|
201.2
|
9.7
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
Dividends paid
to non-controlling interests
|
|
(0.7)
|
(0.7)
|
|
Purchase of
Parent Company shares by the Employee Benefit Trust
|
|
(0.6)
|
—
|
|
Capital element
of lease rental payments
|
|
(53.6)
|
(59.1)
|
|
Proceeds on
issue of private placement loan notes
|
|
—
|
103.5
|
|
Cost of
cross-currency swaps
|
|
—
|
(1.6)
|
|
Repayment of
private placement loan notes
|
|
—
|
(121.0)
|
|
Proceeds from
cross-currency interest rate swaps
|
|
3.4
|
8.5
|
|
Repayment of
other finance
|
|
—
|
(0.5)
|
|
Debt financing
arrangement costs
|
|
—
|
(5.4)
|
|
|
|
|
|
|
Net cash
outflow from financing activities
|
|
(51.5)
|
(76.3)
|
|
|
|
|
|
|
Increase/(decrease)
in cash and cash equivalents
|
|
124.5
|
(106.9)
|
|
Cash and cash
equivalents at the beginning of the year
|
|
67.6
|
177.2
|
|
Effect of
exchange rates on cash and cash equivalents
|
|
(0.7)
|
(2.7)
|
|
|
|
|
|
|
Cash and
cash equivalents at 31 December
|
|
191.4
|
67.6
|
|
|
|
|
|
|
Cash and
cash equivalents comprise:
|
|
|
|
|
Cash
|
|
253.6
|
155.4
|
|
Overdrafts
|
|
(62.2)
|
(95.0)
|
|
Cash, net of
overdrafts, included in disposal group assets and liabilities
held-for-sale
|
|
—
|
7.2
|
|
|
|
|
|
|
Total
|
|
191.4
|
67.6
|
|
|
|
|
|
|
Cash generated
from operations excluding business exits
|
10
|
16.2
|
26.5
|
|
Free cash flow
excluding business exits
|
10
|
(122.3)
|
(123.6)
|
1.
Income tax
paid and income tax received have been separately disclosed for the
current year, with the prior year re-presented on the same basis.
Previously these were presented as net income tax paid.
The
accompanying notes are an integral part of these consolidated
financial statements.
Notes
to the consolidated financial statements
For the year
ended 31 December
2024
1.1
Corporate information
Capita plc
is a public limited company incorporated in England and Wales whose shares are publicly
traded.
These
consolidated financial statements of Capita plc
for the year ended 31 December
2024 were authorised for issue in accordance with a
resolution of the directors on 4 March
2025.
1.2
Basis of preparation, judgements and estimates, and going
concern
(a)
Basis of preparation
These
consolidated financial statements have been prepared in accordance
with UK-adopted International Accounting Standards (UK-IFRS) and
the Disclosure and Transparency Rules of the UK's Financial Conduct
Authority.
These
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.
These
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 December
2023.
(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 disclose separately those items that it
considers are outside the underlying operating results for the
particular year 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 an 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
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.
Accordingly, these items are also excluded from the discussion of
divisional performance in the strategic report. This policy is kept
under review by the Board and the Audit and Risk
Committee.
Those items
excluded from the adjusted income statement are: business exits;
amortisation and impairment of acquired intangibles; impairment of
goodwill; certain mark-to-market valuation changes that impact net
finance costs/income; the costs associated with the cyber incident
in March 2023, and the costs
associated with the cost reduction programme.
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.
The Board
considers APMs to be helpful to the reader, but 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 5,
and a reconciliation between reported cash generated from
operations and cash generated from operations before business exits
together with the calculation of free cash flow as an APM is
provided in the appendix.
(c)
Judgements and estimates
The
preparation of financial statements in accordance with generally
accepted accounting principles requires the 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 directors’ best knowledge of the
amount, events or actions, actual results may differ.
Given the
level of judgement and estimation involved in assessing the future
profitability of contracts, it is reasonably possible that outcomes
within the next financial year may be different from management’s
assumptions which could require a material adjustment to the
carrying amounts of contract fulfilment assets and onerous contract
provisions.
The impact of
climate change has been considered in the preparation of these
consolidated financial statements across a number of areas,
including our evaluation of the critical accounting estimates and
assumptions which are consistent with the risks and opportunities
set out in the strategic report in the Annual Report. None of these
risks had a material effect on the critical accounting estimates
and assumptions or on the consolidated financial statements of the
Group.
(d)
Going concern
In
determining the appropriate basis of preparation of the financial
statements for the year ended 31 December
2024, the Board is required to consider whether the Group and
Parent Company can continue in operational existence for the
foreseeable future. The Board has concluded that it is appropriate
to adopt the going concern basis, having undertaken a rigorous
assessment of the financial forecasts, key uncertainties,
sensitivities, and mitigations as set out below.
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 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 financial statements
to 30 June
2026 (‘the going concern period’), which aligns with a period end
and covenant test date for the Group.
The base case
financial forecasts used in the going concern assessment are
derived from the 2025-2027 business plan as approved by the Board
in February 2025.
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
31 December
2024.
Financial
position at 31 December
2024
As detailed
further in the Chief Financial Officer’s review, at
31 December
2024 the Group had net debt of £415.2m (2023: £545.5m), net
financial debt (pre-IFRS 16)1
of £66.5m
(2023: £182.1m), available liquidity1
of £397.2m
(2023: £282.3m) and was in compliance with all debt
covenants.
1.2
Basis of preparation judgements and estimates, and going concern
continued
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
January 2024 together with the disposal of Capita One in September
2024, has simplified and strengthened the business and facilitates
further efficiency savings enabling sustainable growth in revenue,
profit and cash flow over the medium term, whilst acknowledging the
expected free cash outflow for 2025. When combined with available
committed facilities, this allows the Group to manage scheduled
debt repayments. The most material sensitivities to the base case
are the risk of not delivering the planned revenue growth and
further efficiency savings being delayed or not delivered from the
Group's previously announced cost reduction programme.
The base case
projections used for going concern assessment purposes reflect
business disposals completed up to the date of approval of these
financial statements. The liquidity headroom assessment in the base
case projections reflects the Group’s existing committed financing
facilities, including the £94.2m of US private placement loan notes
issued in March 2025 (refer to note 14), debt redemptions, and the
intended renewal or extension of the Group’s RCF by 31 December
2025 to meet the requirements of the 2025 US private placement loan
notes. The base case financial forecasts demonstrate liquidity
headroom and compliance with all debt covenant measures throughout
the going concern period to
30 June
2026.
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
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 ensure there is sufficient headroom for debt
covenant purposes. In its assessment of going concern, the Board
has considered the mitigations, under the direct control of the
Group, that could be implemented including, but not limited to,
reductions or delays in capital investment, and substantially
reducing (or removing in full) bonus and incentive payments. The
Board has also assumed that the intended renewal or extension of
the Group’s RCF by 31 December 2025 to meet the requirements of the
March 2025 private placement loan notes is successful. 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 30 June
2026.
Adoption
of going concern basis
Reflecting
the forecasts, coupled with the Board’s ability to implement
appropriate mitigations should the severe but plausible downside
materialise, the Group and Parent Company continues to adopt the
going concern basis in preparing these consolidated financial
statements. The Board has concluded that the Group and Parent
Company will be able to continue in operation and meet their
liabilities as they fall due over the period
to 30 June
2026.
2
Preliminary announcement
A
duly appointed and authorised committee of the Board of Directors
approved the preliminary announcement on 4 March
2025.
The financial
information set out above does not constitute the Group's
consolidated financial statements for the years ended
31 December
2024 or 2023 but is derived from those financial
statements.
Statutory
accounts for 2023 have been delivered to the Registrar of Companies
and those for 2024 will be delivered in due course. The auditor has
reported on those financial statements.
Their report
for the accounts of 2024 was (i) unqualified, (ii) did not include
a reference of any matters to which the auditor drew attention by
way of emphasis without modifying their report and (iii) did not
contain a statement under section 498(2) or (3) of the Companies
Act 2006.
Their report
for the accounts of 2023 was (i) unqualified, (ii) did not include
a reference of any matters to which the auditor drew attention by
way of emphasis without modifying their report and (iii) did not
contain a statement under section 498(2) or (3) of the Companies
Act 2006.
Copies of
this announcement can be obtained from the Company's registered
office at 2 Kingdom Street, London, W2 6BD,
or on the Company's corporate website
www.capita.com/investors.
It is
intended that the Annual Report and Accounts will be posted to
shareholders late March 2025. It will be available to members of
the public at the registered office and on the Company's Corporate
website https://www.capita.com/investors from that date.
1. Refer to
the alternative performance measures (APMs) in the
Appendix.
3
Contract accounting
At
31 December
2024, the Group had the following results and balance sheet items
related to long-term contracts:
|
|
Notes
|
2024
£m
|
2023
£m
|
|
Long-term
contractual revenue
|
4
|
1,871.7
|
2,104.0
|
|
Contract
fulfilment assets (non-current)
|
|
257.5
|
257.0
|
|
Accrued
income
|
|
132.7
|
138.3
|
|
Deferred
income
|
|
465.9
|
537.5
|
|
Onerous contract
provisions
|
|
46.2
|
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 77% of Group revenue in 2024 (2023:
75%).
These
long-term contracts can be complex in nature given the breadth of
solutions the Group offers and the transformational activities
involved. Typically, Capita takes a customer’s process and
transforms it into a more efficient and effective solution which is
then operated for the customer. The outcome is a high quality
solution that addresses a customer’s needs and is delivered
consistently over the life of the contract.
The Group
recognises revenue on long-term contracts as the value is delivered
to the customer, which is generally evenly over the contract term,
regardless of any restructuring and transformation activity
required to deliver the services to the customer. Capita will often
incur greater costs during contract transformation phases with
costs diminishing over time as the target operating model is
implemented and efficiencies realised. This results in lower
profits or losses in the early years of contracts and potentially
higher profits in later years as the transformation activities are
successfully completed and the target operating model fully
implemented (the business as usual (BAU) phase). The inflection
point is when the contract becomes profitable.
Non-current
contract fulfilment assets are recognised for those costs
qualifying for capitalisation. The utilisation of these assets is
recognised over the contract term. The timing of cash receipts from
customers typically matches when the costs are incurred to
transform, restructure and run the service. This results in income
being deferred and released when the Group delivers against its
obligations to provide services and solutions to its
customers.
Assessing
contract profitability
In assessing
a contract’s future lifetime profitability, management must
estimate forecast revenue and costs to both transform and run the
service over the remaining contract term. The ability to accurately
forecast the outcomes involves estimates in respect of: costs to be
incurred; cost savings to be achieved; future performance against
any contract-specific key performance indicators (KPIs) that could
trigger variable consideration or service credits; outcome of any
commercial negotiations; and impact of inflation on the cost base
and the indexation of revenue.
The level of
uncertainty in the estimated future profitability of a contract is
directly related to the stage in the life-cycle of the contract and
the complexity of the performance obligations. Contracts in the
transformation stage are considered to have a higher level of
uncertainty because of:
•
the ability
to accurately estimate the costs to deliver the transformed
process;
•
the
dependency on the customer to agree to the specifics of the
transformation: for example, where they are involved in certifying
that the new process or, the new technical solution, designed by
Capita meets their specific requirements;
•
the
requirement to deliver the key transformation milestones in
accordance with timelines agreed with the customer; and
•
the
assumptions made to forecast expected savings in the target
operating model.
Those
contracts which are in BAU tend to have a much lower level of
uncertainty in estimating future profitability.
Recoverability
of non-current 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 Audit and Risk Committee specifically
reviews the material judgements and estimates, and the overall
approach to this assessment in respect of the Group’s major
contracts, including comparison against previous
forecasts.
The major
contracts are rated by management according to their financial risk
profile, which is linked to the level of uncertainty over future
assumptions. During 2024 the process to determine which major
contracts the Audit and Risk Committee review was updated to
provide better focus, and at half year, the Audit and Risk
Committee review those in the high or medium risk categories, and
at full year those material by virtue of their size relative to the
Group are also reviewed if not already identified.
An assessment
of which contracts are major contracts is performed twice a year.
Other contracts are reported to the Audit and Risk Committee as
deemed appropriate. These contracts are collectively referred to as
‘major contracts’ in the remainder of this note.
In the
following paragraphs, the amounts disclosed for the current period
are only in respect of those major contracts that the Audit and
Risk Committee have reviewed (ie those major contracts which are in
the high or medium risk categories or material by virtue of their
size relative to the Group). The prior year amounts in relation to
major contracts are as previously presented, and as such reflect
the major contracts reviewed by the Audit and Risk Committee for
that year end. The prior period amounts are therefore not directly
comparable to those disclosed for the current year.
The major contracts
contributed £1.0 billion (2023: £1.1 billion) or 42% (2023: 42%) of
Group adjusted revenue. Non-current contract fulfilment assets at
31 December
2024 were £257.5m (2023: £257.0m), of which £119.3m (2023: £125.1m)
relates to major contracts with ongoing transformational
activities.
The remainder relates to contracts post transformation and includes
non-major contracts.
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, £67.8m at
31 December
2024 (2023: £52.8m). The recoverability of these assets is
dependent on no significant adverse change in the
key contract assumptions arising. The balance of deferred income
associated with these contracts was £95.9m at
31 December
2024 (2023: £109.5m) and is forecast to be recognised as
performance obligations
continue to be delivered over
the life of the respective contracts. Onerous contract provisions
associated with these contracts were £35.3m at
31 December
2024 (2023: £37.3m).
Following these reviews, and reviews of smaller contracts across
the business, non-current contract fulfilment asset
impairments of £0.7m
(2023:
£3.4m)
were identified and recognised within adjusted cost of sales, of
which £nil
(2023:
£nil)
relates to non-current contract fulfilment assets added during the
period. Additionally, net onerous contract provisions
of £18.0m
(2023: £9.4m),
were identified and recognised in adjusted cost of sales with a
further £4.1m
(2023: £nil) excluded from adjusted cost of sales as part of
business exits.
3
Contract accounting continued
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 fulfilment assets
and onerous contract provisions. However, as noted above, £119.3m
(2023: £125.1m) of non-current contract fulfilment assets relates
to major contracts with ongoing transformational activities; and,
£67.8m (2023: £52.8m) of non-current contract fulfilment assets and
£35.3m (2023: £37.3m) 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 transformation contracts 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 fulfilment assets. These
include contracts with the City of London Police, BBC, Transport
for London, Health Assessment Advisory Services and the Civil
Service Pension Scheme.
Additional information, which does not form part of these
consolidated financial statements, on the results and performance
of the underlying divisions including the outlook on certain
contracts is set out in the divisional performance
review.
4
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 offering a different package of client services across the
markets the Group serves. Capita plc is a reconciling item and not
an operating segment. A description of the service provision for
each segment can be found in the strategic report in the Annual
Report. 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 for the Group’s operating segments as
reported to the Chief Operating Decision Maker (‘CODM’). The Group
comprises two trading divisions – Capita Public Service and Capita
Experience – and in prior periods the CODM viewed these as two
operating segments because the CODM reviewed operating results to
assess their performance and make decisions about allocation of
resources at this level. Capita Public Service goes to market
through three subdivisions – Local Public Service; Defence,
Learning, Fire and Security; and Central Government – however, the
CODM views these subdivisions as one operating segment. Capita
Experience also comprises three subdivisions – Contact Centre;
Pension Solutions; and Regulated Services. Following the completion
of the exit of the non-core businesses in the Portfolio division,
and the review of the Group’s strategy conducted in 2024, the CODM
now reviews the operating results for each of these three
subdivisions in this division separately, and therefore each
subdivision is now an operating segment. Comparative information
has also been re-presented to reflect the change in operating
segments and to reflect businesses exited during 2024.
Adjusted
revenue, excluding results from businesses exited in both years
(adjusting items), was £2,369.1m (2023: £2,575.8m), a decline of
8.0% (2023: increase 1.1%).
|
|
|
Capita
Public
Service
£m
|
Capita
Experience
|
|
|
|
|
Year
ended
31 December 2024
|
Notes
|
Contact
Centre
£m
|
Pension
Solutions
£m
|
Regulated
Services
£m
|
Total
adjusted
£m
|
Adjusting
items
£m
|
Total
reported
£m
|
|
Continuing
operations
|
|
|
|
|
|
|
|
|
|
Long-term
contractual
|
|
1,148.4
|
408.4
|
127.9
|
148.7
|
1,833.4
|
38.3
|
1,871.7
|
|
Short-term
contractual
|
|
162.0
|
220.3
|
51.1
|
—
|
433.4
|
9.5
|
442.9
|
|
Transactional
(point-in-time)
|
|
76.8
|
22.2
|
—
|
3.3
|
102.3
|
4.7
|
107.0
|
|
Total
segment revenue
|
|
1,387.2
|
650.9
|
179.0
|
152.0
|
2,369.1
|
52.5
|
2,421.6
|
|
Trading
revenue
|
|
1,409.9
|
676.7
|
179.8
|
153.8
|
2,420.2
|
51.8
|
2,472.0
|
|
Inter-segment
revenue
|
|
(22.7)
|
(25.8)
|
(0.8)
|
(1.8)
|
(51.1)
|
0.7
|
(50.4)
|
|
Total
adjusted segment revenue
|
|
1,387.2
|
650.9
|
179.0
|
152.0
|
2,369.1
|
—
|
2,369.1
|
|
Business exits –
trading
|
9
|
—
|
—
|
—
|
—
|
—
|
52.5
|
52.5
|
|
Total
segment revenue
|
|
1,387.2
|
650.9
|
179.0
|
152.0
|
2,369.1
|
52.5
|
2,421.6
|
|
Year
ended
31 December 2023
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
|
|
|
|
|
|
|
|
Long-term
contractual
|
|
1,148.0
|
550.2
|
120.5
|
203.3
|
2,022.0
|
82.0
|
2,104.0
|
|
Short-term
contractual
|
|
195.9
|
231.2
|
49.8
|
1.6
|
478.5
|
24.9
|
503.4
|
|
Transactional
(point-in-time)
|
|
56.0
|
16.2
|
—
|
3.1
|
75.3
|
131.9
|
207.2
|
|
Total segment
revenue
|
|
1,399.9
|
797.6
|
170.3
|
208.0
|
2,575.8
|
238.8
|
2,814.6
|
|
Trading
revenue
|
|
1,422.2
|
830.8
|
170.7
|
209.4
|
2,633.1
|
267.1
|
2,900.2
|
|
Inter-segment
revenue
|
|
(22.3)
|
(33.2)
|
(0.4)
|
(1.4)
|
(57.3)
|
(28.3)
|
(85.6)
|
|
Total adjusted
segment revenue
|
|
1,399.9
|
797.6
|
170.3
|
208.0
|
2,575.8
|
—
|
2,575.8
|
|
Business exits –
trading
|
9
|
—
|
—
|
—
|
—
|
—
|
238.8
|
238.8
|
|
Total segment
revenue
|
|
1,399.9
|
797.6
|
170.3
|
208.0
|
2,575.8
|
238.8
|
2,814.6
|
4
Revenue and segmental information continued
Geographical
location
The Group
generates revenue largely in the UK and Europe. The table below
presents revenue by geographical location.
|
|
2024
|
|
2023
|
|
|
United
Kingdom
£m
|
Rest
of
Europe
£m
|
Other
£m
|
Total
£m
|
|
United
Kingdom
£m
|
Rest
of
Europe
£m
|
Other
£m
|
Total
£m
|
|
Revenue
|
2,150.3
|
271.3
|
—
|
2,421.6
|
|
2,526.0
|
282.5
|
6.1
|
2,814.6
|
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 represent the aggregate
amount of 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
Public
Service
£m
|
Capita
Experience
|
|
|
Order
book
31 December
2024
|
Contact
Centre
£m
|
Pension
Solutions
£m
|
Regulated
Services
£m
|
Total
£m
|
|
Long-term
contractual
|
2,843.1
|
426.1
|
431.2
|
226.1
|
3,926.5
|
|
Short-term
contractual
|
80.3
|
218.5
|
10.1
|
5.3
|
314.2
|
|
Total
|
2,923.4
|
644.6
|
441.3
|
231.4
|
4,240.7
|
|
|
Capita
Portfolio
£m
|
Capita
Public
Service
£m
|
Capita
Experience
|
|
|
Order
book
31 December 2023
|
Contact
Centre
£m
|
Pension
Solutions
£m
|
Regulated
Services
£m
|
Total
£m
|
|
Long-term
contractual
|
—
|
3,381.1
|
1,236.3
|
444.3
|
430.6
|
5,492.3
|
|
Short-term
contractual
|
37.2
|
164.9
|
163.3
|
17.5
|
7.4
|
390.3
|
|
Total
|
37.2
|
3,546.0
|
1,399.6
|
461.8
|
438.0
|
5,882.6
|
The table
below shows the expected timing of revenue to be recognised from
long-term contractual orders at 31 December
2024:
|
|
Capita
Public
Service
£m
|
Capita
Experience
|
|
|
Time
bands of expected revenue recognition from long-term contractual
orders
|
Contact
Centre
£m
|
Pension
Solutions
£m
|
Regulated
Services
£m
|
Total
£m
|
|
< 1
year
|
807.6
|
182.9
|
84.3
|
95.0
|
1,169.8
|
|
1–5
years
|
1,545.3
|
225.0
|
168.2
|
120.1
|
2,058.6
|
|
> 5
years
|
490.2
|
18.2
|
178.7
|
11.0
|
698.1
|
|
Total
|
2,843.1
|
426.1
|
431.2
|
226.1
|
3,926.5
|
The Contact
Centre order book reduction reflects two European
telecommunications contracts that were extended in the period with
the contracts being recognised as framework contracts. This
resulted in £388.1m being derecognised from the order
book.
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 the 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 above tables
because they are not contracted. Additionally, revenue from
contract extensions is excluded from the order book unless they are
pre-priced extensions 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 for major contracts included in the tables above
amounted to £309.0m (2023: £513.8m1).
The amounts presented do not include orders for which neither party
has performed, and each party has the unilateral right to terminate
a wholly unperformed contract without compensating the other
party.
Of the £3.9
billion (2023: £5.5 billion) revenue to be earned on long-term
contracts, £3.1 billion (2023: £3.4 billion1)
relates to major contracts. This amount excludes revenue that will
be derived from frameworks, non-contracted volumetric revenue,
non-contracted scope changes and future unforeseen volume changes
from these major contracts, which together are anticipated to
contribute an additional £0.8-£1.0 billion (2023:£0.5-£0.7
billion1)
of revenue to the Group over the life of these
contracts.
The Group
performs various services for a number of UK Government ministerial
departments and considers these individual ministerial departments
to be separate customers due to the limited economic integration
between each ministerial department. Revenues of £325.8m from one
customer in Capita Public Service represented more than 10% of the
Group’s total revenues (2023: £317.6m from one customer from the
Capita Public Service division represented more than 10% of the
Group’s total revenues).
1.
The prior year amounts in relation to major contracts are as
previously presented, and as such reflect the major contracts
reviewed by the Audit and Risk Committee for that year end (refer
to note 3). Consequently, the prior year amounts are not directly
comparable to those disclosed for the current period.
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 £492.2m (2023: £599.0m).
Movements in
the deferred income balances were driven by transactions entered
into by the Group in the normal course of business during the
current and prior year, other than accelerated revenue recognised
of £9.2m (2023: £9.9m), which primarily related to an early
termination of contracts in the Regulated Services business in
Capita Experience.
4
Revenue and segmental information continued
Segmental
profit
The table
below presents profit by segment.
|
|
|
Capita
Public
Service
£m
|
Capita
Experience
|
|
|
|
|
|
Year
ended
31 December
2024
|
Notes
|
Contact
Centre
£m
|
Pension
Solutions
£m
|
Regulated
Services
£m
|
Capita
plc
£m
|
Total
adjusted
£m
|
Adjusting
items
£m
|
Total
reported
£m
|
|
Adjusted
operating profit/(loss)
|
5
|
89.1
|
(5.9)
|
28.1
|
12.6
|
(28.0)
|
95.9
|
—
|
95.9
|
|
Cost reduction
programme
|
|
(11.3)
|
(5.3)
|
(0.8)
|
(0.5)
|
(10.0)
|
—
|
(27.9)
|
(27.9)
|
|
Business exits –
trading
|
9
|
—
|
—
|
|
|
—
|
—
|
6.4
|
6.4
|
|
Total
trading result
|
|
77.8
|
(11.2)
|
27.3
|
12.1
|
(38.0)
|
95.9
|
(21.5)
|
74.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-trading
items:
|
|
|
|
|
|
|
|
|
|
|
Business exits –
non-trading
|
9
|
|
|
|
|
|
—
|
(8.0)
|
(8.0)
|
|
Other adjusting
items
|
5
|
|
|
|
|
|
—
|
(76.3)
|
(76.3)
|
|
Operating
profit/(loss)
|
|
|
|
|
|
|
95.9
|
(105.8)
|
(9.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
6
|
|
|
|
|
|
|
|
10.0
|
|
Interest
expense
|
6
|
|
|
|
|
|
|
|
(56.3)
|
|
Share of results
in associates and losses on financial assets
|
9
|
|
|
|
|
|
|
|
(11.8)
|
|
Gain/(loss) on
business disposal
|
9
|
|
|
|
|
|
|
|
184.6
|
|
Profit/(loss) before
tax
|
|
|
|
|
|
|
|
|
116.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary
Information
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortisation
|
|
35.8
|
39.3
|
6.0
|
5.2
|
1.7
|
88.0
|
1.9
|
89.9
|
|
Impairment of
property, plant and equipment, intangible, right-of-use assets and
goodwill
|
0.7
|
0.9
|
—
|
0.6
|
—
|
2.2
|
84.0
|
86.2
|
|
Non-current
contract fulfilment assets utilisation, impairment and
derecognition
|
|
57.2
|
5.1
|
3.9
|
0.8
|
—
|
67.0
|
1.3
|
68.3
|
|
Net onerous
contract provisions
|
|
—
|
0.3
|
—
|
17.7
|
—
|
18.0
|
4.1
|
22.1
|
|
|
|
Capita
Public
Service
£m
|
Capita
Experience
|
|
|
|
|
|
Year
ended
31 December 2023
|
Notes
|
Contact
Centre
£m
|
Pension
Solutions
£m
|
Regulated
Services
£m
|
Capita
plc
£m
|
Total
adjusted
£m
|
Adjusting
items
£m
|
Total
reported
£m
|
|
Adjusted
operating profit/(loss)
|
5
|
69.6
|
(4.0)
|
25.9
|
33.1
|
(33.7)
|
90.9
|
—
|
90.9
|
|
Cost reduction
programme
|
|
(7.0)
|
(35.9)
|
(0.5)
|
(0.9)
|
(10.1)
|
—
|
(54.4)
|
(54.4)
|
|
Business exits –
trading
|
9
|
—
|
—
|
|
|
—
|
—
|
12.2
|
12.2
|
|
Total trading
result
|
|
62.6
|
(39.9)
|
25.4
|
32.2
|
(43.8)
|
90.9
|
(42.2)
|
48.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-trading
items:
|
|
|
|
|
|
|
|
|
|
|
Business exits –
non-trading
|
9
|
|
|
|
|
|
—
|
(33.0)
|
(33.0)
|
|
Other adjusting
items
|
5
|
|
|
|
|
|
—
|
(67.7)
|
(67.7)
|
|
Operating
profit/(loss)
|
|
|
|
|
|
|
90.9
|
(142.9)
|
(52.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
6
|
|
|
|
|
|
|
|
8.7
|
|
Interest
expense
|
6
|
|
|
|
|
|
|
|
(60.9)
|
|
Gain/(loss) on
business disposal
|
9
|
|
|
|
|
|
|
|
(2.4)
|
|
Profit/(loss)
before tax
|
|
|
|
|
|
|
|
|
(106.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary
Information
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortisation
|
|
40.3
|
45.5
|
5.3
|
6.7
|
3.6
|
101.4
|
7.4
|
108.8
|
|
Impairment of
property, plant and equipment, intangible, right-of-use assets and
goodwill
|
1.5
|
2.5
|
—
|
0.1
|
0.1
|
4.2
|
65.4
|
69.6
|
|
Non-current
contract fulfilment assets utilisation, impairment and
derecognition
|
|
57.8
|
6.1
|
4.3
|
5.6
|
—
|
73.8
|
10.7
|
84.5
|
|
Net onerous
contract provisions
|
|
—
|
1.6
|
—
|
7.8
|
—
|
9.4
|
—
|
9.4
|
4
Revenue and segmental information continued
Geographical
location
The table
below presents the carrying amount of non-current assets (excluding
deferred tax, financial assets and employee benefits) by the
geographical location of those assets.
|
|
2024
|
|
2023
|
|
|
United
Kingdom
£m
|
Europe
£m
|
Other
£m
|
Total
£m
|
|
United Kingdom
£m
|
Europe
£m
|
Other
£m
|
Total
£m
|
|
Non-current
assets
|
922.6
|
25.0
|
21.3
|
968.9
|
|
1,112.6
|
14.1
|
17.0
|
1,143.7
|
5
Adjusted operating profit and adjusted profit before
tax
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 disclose separately those items that it
considers are outside the underlying operating results for the
particular year 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 an 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
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.
Accordingly, these items are also excluded from the discussion of
divisional performance in the strategic report. This policy is kept
under review by the Board and the Audit and Risk
Committee.
The Board
considers APMs to be helpful to the reader, but 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.
Those items
excluded from the adjusted income statement are: business exits;
amortisation and impairment of acquired intangibles; impairment of
goodwill; certain mark-to-market valuation changes that impact net
finance costs/income; the costs associated with the cyber incident
in March 2023, and the costs associated with the cost reduction
programme.
|
The items
below are excluded from the adjusted results:
|
|
Operating
profit/(loss)
|
|
Profit/(loss) before
tax
|
|
|
Notes
|
2024
£m
|
2023
£m
|
|
2024
£m
|
2023
£m
|
|
Reported
|
|
(9.9)
|
(52.0)
|
|
116.6
|
(106.6)
|
|
|
|
|
|
|
|
|
|
Amortisation and
impairment of acquired intangibles
|
|
0.2
|
0.2
|
|
0.2
|
0.2
|
|
Impairment of
goodwill
|
|
75.1
|
42.2
|
|
75.1
|
42.2
|
|
Net finance
costs
|
6
|
—
|
—
|
|
0.1
|
2.2
|
|
Business
exits
|
9
|
1.6
|
20.8
|
|
(170.9)
|
23.2
|
|
Cyber
incident
|
|
1.0
|
25.3
|
|
1.0
|
25.3
|
|
Cost reduction
programme
|
|
27.9
|
54.4
|
|
27.9
|
54.4
|
|
|
|
|
|
|
|
|
|
Adjusted
|
|
95.9
|
90.9
|
|
50.0
|
40.9
|
1. Adjusted
operating profit increased by 5.5% (2023: increased 36.5%) and
adjusted profit before tax increased by 22.2% (2023: increased
13.5%). Adjusted operating profit of £95.9m (2023: profit £90.9m)
was generated on adjusted revenue of £2,369.1m (2023: £2,575.8m)
resulting in an adjusted operating margin of 4.0% (2023:
3.5%).
2. The tax
charge on adjusted profit before tax is £10.3m (2023: £47.4m
charge) resulting in adjusted profit after tax of £39.7m (2023:
£6.5m loss).
3. The
adjusted operating profit and adjusted profit before tax for 2023
has been re-presented for the impact of business exits during 2024
and the change in adjusting items. This has resulted in adjusted
operating profit decreasing from £106.5m to £90.9m and adjusted
profit before tax decreasing from £56.5m to £40.9m.
Amortisation
and impairment of acquired intangible assets:
the Group
recognised acquired intangible amortisation of £0.2m (2023: £0.2m).
These charges are excluded from the adjusted results of the Group
because they are non-cash items generated from historical
acquisition related activity. The charge is included within
administrative expenses.
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 changes are reported
separately because they are non-cash items generated from
historical acquisition related activity. The charge is included
within administrative expenses.
Net
finance costs: net finance
costs 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, also refer to
note 6.
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 9 provides further detail regarding which
income statement line items are impacted by business
exits.
Cyber
incident: The Group has
incurred exceptional costs associated with the March 2023 cyber
incident. These costs comprise specialist professional fees,
recovery and remediation costs and investment to reinforce Capita’s
cyber security environment. A charge of £1.0m, net of insurance
receipts, has been recognised in the year ended
31 December
2024 (2023: charge of £25.3m). Cumulatively the net costs incurred
total £26.3m and are included within administrative expenses.
Further insurance receipts are anticipated but did not meet the
criteria for recognition at 31 December 2024. Refer to
note 13
contingent liabilities.
Cost
reduction programme: The Group
implemented a multi-year cost reduction programme in November 2023
to deliver savings of £60m by Q1 2024. The programme was extended
in March 2024, to deliver further savings of £100m by mid-2025. In
December 2024, reflecting on the progress made ahead of schedule
with £140m annualised savings already delivered, and increased
confidence in the level of efficiencies that can be delivered, the
cost reduction target increased from £160m to £250m by the end of
2025.
The Group
exercises judgement in assessing whether the actions being taken to
deliver these savings are exceptional as opposed to business as
usual, and therefore whether or not the costs to deliver the
savings should be excluded from the Group's adjusted results. The
assessment considers the nature of the activity being undertaken,
in particular, whether it was anticipated in the original bid to
win a customer contract. Investment in new technology that supports
the delivery of customer contracts are considered business as usual
and are not excluded from the Group’s adjusted results.
5
Adjusted operating profit and adjusted profit before tax
continued
A
charge of £27.9m (2023: £54.4m) has been recognised in the year
ended 31 December
2024 for the costs to deliver the cost reduction programme. This
includes redundancy and other costs of £30.5m (2023: £23.3m) to
deliver a significant reduction in headcount, partly offset by a
credit of £2.6m reflecting the successful exit of a number of
properties which had been provided for in the previous year (2023:
charge of £31.1m arising from the rationalisation of the Group’s
property estate with impairment of right-of-use assets and
property, plant & equipment, and provisions in respect of
onerous property costs). The cumulative cost recognised since the
commencement of the cost reduction programme is £82.3m (2023:
£54.4m), which is included within administrative
expenses.
Refer to
note 10
for the cash flow impact of the above.
6
Net finance costs
The table below shows the composition of net finance costs,
including those excluded from adjusted profit:
|
|
|
2024
£m
|
2023
£m
|
|
Finance
income
|
|
|
|
|
Interest income
|
|
|
|
|
Interest on
cash
|
|
(2.3)
|
(1.9)
|
|
Interest on
finance lease assets
|
|
(5.6)
|
(4.1)
|
|
Net interest
income on defined benefit pension schemes
|
|
(2.1)
|
(2.7)
|
|
Total
finance income
|
|
(10.0)
|
(8.7)
|
|
|
|
|
|
|
Finance
costs
|
|
|
|
|
Interest expense
|
|
|
|
|
Private
placement loan notes1
|
|
20.0
|
16.3
|
|
Bank loans and
overdrafts
|
|
8.5
|
14.1
|
|
Cost of
non-recourse trade receivables financing
|
|
3.4
|
3.7
|
|
Interest on
finance lease liabilities
|
|
22.4
|
22.3
|
|
Discount unwind
on provisions
|
|
1.6
|
2.3
|
|
Total
interest expense
|
|
55.9
|
58.7
|
|
|
|
|
|
|
Finance
costs included within business exits
|
|
|
|
|
Interest on
finance lease liabilities
|
|
0.3
|
—
|
|
Finance
costs excluded from adjusted profits
|
|
|
|
|
Non-designated
foreign exchange forward contracts – change in mark-to-market
value
|
|
(0.4)
|
3.2
|
|
Fair value hedge
ineffectiveness2
|
|
0.5
|
(1.0)
|
|
Total
finance costs excluded from adjusted profit
|
|
0.4
|
2.2
|
|
|
|
|
|
|
Total
finance costs
|
|
56.3
|
60.9
|
|
|
|
|
|
|
Net
finance costs included in adjusted profit
|
|
45.9
|
50.0
|
|
|
|
|
|
|
Total
net finance costs
|
|
46.3
|
52.2
|
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.
7
Taxation
Income
tax charge
The reported
income tax charge for the period is £36.2m on reported profit
before tax of £116.6m (2023: reported income tax charge of £74.0m
on reported loss of £106.6m), and an adjusted income tax charge for
the period of £10.3m on adjusted profit before tax of £50.0m (2023:
adjusted tax charge of £47.4m on adjusted profit of £40.9m). This
includes £0.2m (2023: £nil) relating to Pillar Two current income
taxes. The most significant reconciling items, explaining the
difference from the standard UK corporation tax rate of 25.0% for
the period (2023: 23.5%) are non-taxable profits on disposal of
businesses, non-deductible impairments, changes in the accounting
estimate of recognised deferred tax assets and unrecognised losses,
and other temporary differences carried forward.
The forecast
future adjusted effective tax rate, before and assuming no material
changes to tax laws in the jurisdictions in which Capita operates,
is expected to be broadly similar to the UK corporation tax rate,
with an increase for taxable profits in higher tax rate
jurisdictions.
The major
components of the income tax charge are set out below:
|
|
2024
|
2023
|
|
Consolidated income
statement
|
Total
reported
£m
|
Included
in
adjusted
profit
£m
|
Not
included in
adjusted
profit
£m
|
Total
reported
£m
|
Included
in
adjusted
profit1
£m
|
Not included
in
adjusted
profit1
£m
|
|
|
|
|
|
|
|
|
|
Current
income tax
|
|
|
|
|
|
|
|
Current income
tax charge/(credit)
|
15.3
|
13.6
|
1.7
|
26.2
|
26.4
|
(0.2)
|
|
Adjustment in
respect of prior years
|
2.5
|
2.5
|
—
|
4.0
|
4.0
|
—
|
|
Deferred
tax
|
|
|
|
|
|
|
|
On origination
and reversal of temporary differences
|
19.5
|
(4.7)
|
24.2
|
43.9
|
17.1
|
26.8
|
|
Effect of
changes in tax rate on deferred tax balances
|
—
|
—
|
—
|
(0.4)
|
(0.4)
|
—
|
|
Adjustment in
respect of prior years
|
(1.1)
|
(1.1)
|
—
|
0.3
|
0.3
|
—
|
|
|
|
|
|
|
|
|
|
Total
charge
|
36.2
|
10.3
|
25.9
|
74.0
|
47.4
|
26.6
|
1. To enable
a like-for-like comparison of adjusted results, the 2023
comparatives have been re-presented to exclude the businesses
classified as business exits during 2024 from adjusted profit.
Refer to note 9.
|
Consolidated
statement of comprehensive income and consolidated statement of
changes in equity
|
2024
£m
|
2023
£m
|
|
Deferred tax
movement on cash flow hedges
|
1.8
|
(2.6)
|
|
Deferred tax
movement in relation to actuarial changes on defined benefit
pension schemes
|
7.0
|
3.3
|
|
Current income
tax movement on defined benefit pension scheme
contributions
|
(9.8)
|
(19.2)
|
|
Deferred tax
movement in relation to share-based payments
|
0.2
|
(0.1)
|
|
Current income
tax deduction on the exercise of share options
|
—
|
(0.2)
|
|
|
|
|
|
Total
credit
|
(0.8)
|
(18.8)
|
7
Taxation continued
The
reconciliation between the total tax charge and the accounting
profit multiplied by the UK weighted average corporation tax rate
is as follows:
|
|
|
Total
tax
|
|
Current
tax
|
|
|
|
2024
£m
|
2023
£m
|
|
2024
£m
|
2023
£m
|
|
Profit/(loss)
before tax
|
|
116.6
|
(106.6)
|
|
116.6
|
(106.6)
|
|
Notional
charge/(credit) at UK corporation tax rate of 25.0% (2023:
23.5%)
|
|
29.2
|
(25.1)
|
|
29.2
|
(25.1)
|
|
Adjustments in
respect of current income tax of prior years
|
a
|
2.5
|
4.0
|
|
2.5
|
4.0
|
|
Adjustments in
respect of deferred tax of prior years
|
b
|
(1.1)
|
0.3
|
|
—
|
—
|
|
Non-deductible
expenses/(non-taxable income) – adjusted
|
|
5.0
|
0.2
|
|
5.0
|
0.2
|
|
Non-deductible
expenses – business exit
|
c*
|
2.7
|
4.9
|
|
2.7
|
4.9
|
|
Non-deductible
expenses – specific items
|
|
—
|
1.7
|
|
—
|
1.7
|
|
(Profit)/loss on
disposal of businesses
|
d*
|
(46.1)
|
0.6
|
|
(46.1)
|
0.6
|
|
Pillar Two
income taxes
|
|
0.2
|
—
|
|
0.2
|
—
|
|
Non-deductible
goodwill impairment
|
e*
|
18.7
|
9.9
|
|
18.7
|
9.9
|
|
Difference in
rate recognition of temporary differences
|
|
—
|
(0.4)
|
|
—
|
—
|
|
Tax provided on
unremitted earnings
|
f
|
(0.5)
|
0.2
|
|
—
|
—
|
|
Attributable to
different tax rates in overseas jurisdictions
|
g
|
(0.5)
|
(4.3)
|
|
(0.1)
|
(2.9)
|
|
Movement in
unrecognised temporary differences
|
|
26.1
|
82.0
|
|
—
|
—
|
|
Fixed asset
temporary differences
|
|
—
|
—
|
|
4.2
|
5.7
|
|
Current tax
impact on other temporary differences
|
|
—
|
—
|
|
(3.5)
|
(0.4)
|
|
Carry forward of
losses in current period
|
h
|
—
|
—
|
|
5.0
|
31.6
|
|
At the effective
total tax rate of 31.0% (2023: (69.4)%) and the effective current
tax rate of 15.3% (2023: (28.3)%)
|
i
|
36.2
|
74.0
|
|
17.8
|
30.2
|
|
Tax
charge reported in the income statement
|
|
36.2
|
74.0
|
|
17.8
|
30.2
|
*
These
£(24.7)m (2023: £15.4m) of reconciling items relate to the reported
tax charge only, with no impact on the adjusted tax charge. Further
details are given below.
a
The £2.5m
prior year charge adjustment includes: (i) £1.1m charge which has a
corresponding impact within deferred tax of prior years; and, (ii)
a £1.4m charge to adjust for finalisation of submitted tax returns
and withholding tax claims in Ireland for which there is no
opposite deferred tax credit in relation to the temporary
difference true-up because these are unrecognised.
b Adjustments
in respect of deferred tax of prior years mainly relate to £1.1m of
charges which have a corresponding impact within current income tax
of prior years.
c* Business
exit: relates to non-deductible closure costs associated with the
sale of entities. Refer to note 9
for further details.
d*
Relates to
the gain/loss on disposal of entities in the current year. Refer to
note 9
for further details.
e*
Relates to
the goodwill impairments as detailed further in
note 11.
f Movement
on the deferred tax liability recognised on the unremitted earnings
of those subsidiaries affected by withholding taxes.
g Mainly
relates to withholding tax and tax payable at rates which are lower
than the UK such as Switzerland and Ireland.
h Relates
to the carry forward of losses and non-deductible interest in the
period.
i The
current tax charge of £17.8m (2023: £30.2m) results in an effective
current tax rate of 15.3%, which is different from the UK statutory
rate of tax of 25% predominantly due to a non-taxable gain on the
profit on disposal of businesses during the year, non-deductible
goodwill impairment, unrecognised losses and interest disallowance
carried forward, and expenses not deductible for tax purposes,
including non-qualifying depreciation and capital related costs.
The impact of differing overseas tax rates is covered in footnote
g.
Deferred
tax
Deferred tax
relates to the following:
|
|
|
Credited/(charged)
to
|
|
|
|
At
1 January
£m
|
Income
statement
£m
|
OCI
and
changes
in
equity
£m
|
Other
movements2
£m
|
At
31 December
£m
|
|
Deferred
tax assets
|
|
|
|
|
|
|
Fixed assets
which qualify for tax relief
|
87.2
|
(8.5)
|
—
|
(0.9)
|
77.8
|
|
Provisions and
other temporary differences
|
11.3
|
(1.3)
|
(1.8)
|
—
|
8.2
|
|
Pension
schemes
|
1.8
|
(3.4)
|
(7.0)
|
—
|
(8.6)
|
|
Share-based
payments
|
1.5
|
—
|
(0.2)
|
—
|
1.3
|
|
Tax
losses1
|
36.7
|
(6.0)
|
—
|
—
|
30.7
|
|
|
138.5
|
(19.2)
|
(9.0)
|
(0.9)
|
109.4
|
|
Jurisdictional
netting
|
1.8
|
|
|
|
2.2
|
|
Net deferred tax
assets
|
140.3
|
(19.2)
|
(9.0)
|
(0.9)
|
111.6
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
|
|
|
|
|
Acquired
intangibles
|
(0.1)
|
—
|
—
|
—
|
(0.1)
|
|
Contract
fulfilment assets
|
(0.2)
|
0.1
|
—
|
—
|
(0.1)
|
|
Unremitted
earnings
|
(5.1)
|
0.7
|
—
|
(0.2)
|
(4.6)
|
|
|
(5.4)
|
0.8
|
—
|
(0.2)
|
(4.8)
|
|
Jurisdictional
netting
|
(1.8)
|
|
|
|
(2.2)
|
|
Net deferred tax
liabilities
|
(7.2)
|
0.8
|
—
|
(0.2)
|
(7.0)
|
|
|
|
|
|
|
|
|
Net
deferred tax
|
133.1
|
(18.4)
|
(9.0)
|
(1.1)
|
104.6
|
1. Mainly
trading losses available to shelter future profits and deferred
interest.
2. Other
movements includes business disposals.
7
Taxation continued
The main
movement in the net deferred tax asset is the income statement tax
charge arising on the change in the accounting estimate of deferred
tax.
On
6 April
2024, it was announced that the free-standing tax charge that
applies to authorised surplus payments to sponsoring employers of a
registered defined benefit pension scheme will reduce from 35% to
25%. This was substantively enacted retrospectively from
11 March
2024. Therefore, for the purpose of recognising deferred tax on the
pension scheme surplus, withholding tax at 25%
(2023: 35%)
would apply for any surplus being refunded to the Group at the end
of the life of the scheme. Corporation tax at 25% would apply for
any surplus expected to unwind over the life of the scheme.
Management have concluded that the corporation tax rate should
apply to the recognition of deferred tax on the pension scheme
surplus, reflecting the Group’s intention regarding the manner of
recovery of the asset.
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 taxable
profits available to offset the assets when they
reverse.
The
recognition of deferred tax assets at 31 December
2024 has been based on the forecast accounting profits in the
2025-2027 business plan approved by the Board. This is the same
plan used to derive forecast cash flows for the goodwill impairment
test (refer to note 11). A long-term growth rate of 1.6%, as used
for impairment test purposes, has been applied to the years beyond
2027. A reducing probability factor has also been applied to future
profits for the potential decrease in reliability of forecasts
extrapolated for later years, such that profits beyond seven years
of the balance sheet date have not been considered probable for the
purpose of assessing deferred tax asset recognition.
Unused tax
losses make up a significant proportion of the temporary
differences available to be utilised in future periods. These
losses mainly arose due to the historic adoption of
IFRS 15,
previous Covid-19 related downward pressures on profits and tax
deductible restructuring costs, cyber costs and pension
contributions. Based on the forecast accounting profits, management
have concluded that some of the deductible temporary differences
and unused tax losses are not recognisable due to uncertainty in
their recoverability. There is a decrease in the amounts previously
recognised in respect of deferred tax assets and an increase in
unrecognised temporary differences arising during the year. The
impact of this is a debit to the income statement of £18.4m, and a
debit to OCI and changes in equity of £9.0m. This is included in
the movement in unrecognised temporary differences of £26.1m in the
tax reconciliation table above, which also includes unrecognised
current year temporary differences (mainly losses) of £5.7m. The
reported income statement charge includes £26.0m change in the
deferred tax asset estimate due to the reduction in future taxable
profits on disposal of taxable subsidiaries, reflected in the tax
arising on business exits (see note 9).
Deferred tax
asset recognition depends on the reliability of management’s
forecasts and the assumptions that underlie them. Management have
considered the severe but plausible downsides applied to the
base-case projections for assessing going concern and viability, to
gauge sensitivity and identify a reasonable possible alternative
result. This scenario identified a further potential reduction in
recognised deferred tax assets of approximately £7.6m.
The Group has
unrecognised tax losses and other temporary differences that are
available for offset against future taxable profits of the
companies in which the losses or other temporary differences arose
but have not been recognised because their recoverability is
uncertain. The table below shows the amounts split between UK and
non-UK jurisdictions.
|
|
2024
£m
Gross
Amount
|
2023
£m
Gross
Amount
|
|
UK:
|
|
|
|
Tax
losses
|
667.6
|
628.7
|
|
Other temporary
timing differences
|
239.2
|
140.2
|
|
|
906.8
|
768.9
|
|
Non-UK:
|
|
|
|
Tax
losses
|
64.0
|
67.4
|
|
Other temporary
timing differences
|
12.4
|
11.2
|
|
|
76.4
|
78.6
|
|
Total
|
983.2
|
847.5
|
The £135.7m
increase in unrecognised tax losses and other temporary differences
reflects the decrease in amounts previously recognised in respect
of deferred tax assets, and unrecognised temporary differences
arising during the year due to: deferred interest; tax deductible
cost reduction programme expenses; and pension
contributions.
Assets have
no time expiry, but some losses are subject to specific loss
restriction rules. £41.8m (2023: £28.8m) of the losses were
incurred by companies acquired by the Group and are not a result of
the Group’s trading performance.
Dividends
received from subsidiaries are largely exempt from UK tax but may
be subject to dividend withholding taxes levied by the overseas tax
jurisdictions in which the subsidiaries operate. The gross
temporary differences of those subsidiaries affected by such
potential taxes is £45.6m (2023: £48.4m). A deferred tax liability
of £4.5m (2023: £5.1m) has been recognised on the unremitted
earnings of those subsidiaries affected by such potential taxes
because the Group is able to control the timing of reversal and it
is anticipating dividends to be distributed. The earnings remitted
during the year have resulted in a reduction in the closing
deferred tax liability.
8
Earnings/(loss) per share
Basic
earnings/(loss) per share are calculated by dividing 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 year.
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 year 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.
|
|
|
2024
|
2023
|
|
|
|
pence
|
pence
|
|
Basic
earnings/(loss) per share
|
–
reported
|
4.54
|
(10.60)
|
|
|
–
adjusted
|
2.11
|
(0.20)
|
|
Diluted
earnings/(loss) per share
|
–
reported
|
4.41
|
(10.60)
|
|
|
–
adjusted
|
2.05
|
(0.20)
|
The following
tables show the earnings and share data used in the basic and
diluted earnings/(loss) per share calculations:
|
|
|
2024
|
2023
|
|
|
|
£m
|
£m
|
|
Reported
profit/(loss) before tax for the period
|
|
116.6
|
(106.6)
|
|
Income tax
(charge)/credit
|
7
|
(36.2)
|
(74.0)
|
|
Reported
profit/(loss) for the period
|
|
80.4
|
(180.6)
|
|
Less:
Non-controlling interest
|
|
(3.7)
|
2.5
|
|
Total
profit/(loss) attributable to shareholders
|
|
76.7
|
(178.1)
|
|
|
|
|
|
|
Adjusted profit
before tax1
for the
period
|
5
|
50.0
|
40.9
|
|
Income tax
(charge)/credit
|
7
|
(10.3)
|
(47.4)
|
|
Adjusted
profit/(loss) for the period
|
|
39.7
|
(6.5)
|
|
Less:
Non-controlling interest
|
|
(4.1)
|
3.1
|
|
Adjusted
profit/(loss) attributable to shareholders
|
|
35.6
|
(3.4)
|
1.
Definitions of the alternative performance measures and related key
performance indicators (KPIs) can be found in the
Appendix.
|
|
2024
m
|
2023
m
|
|
Weighted average
number of ordinary shares (excluding Employee Benefit Trust shares)
for basic earnings per share
|
1,690.4
|
1,680.9
|
|
Dilutive
potential ordinary shares:
|
|
|
|
Employee share
options
|
50.1
|
—
|
|
Weighted average
number of ordinary shares (excluding Employee Benefit Trust shares)
adjusted for the effect of dilution
|
1,740.5
|
1,680.9
|
At
31 December
2024 no (2023: 35,795,731) options were excluded from the diluted
weighted average number of ordinary shares calculation because
their effect would have been anti-dilutive. Under
IAS 33
Earnings
per Share, potential
ordinary shares are treated as dilutive when, and only when, their
conversion to ordinary shares would decrease earnings per share or
increase loss per share from continuing operations.
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 consolidated financial statements were authorised for
issue.
9
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 meets the
definition of ‘discontinued operations’ as stipulated by
IFRS 5
Non-current
assets held-for-sale and discontinued
operations, which
requires comparative financial information 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 result 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 2023
comparatives have been re-presented to exclude the businesses
classified as business exits during 2024.
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 31 December
2024 one business (the Group’s mortgage servicing business) was
deemed to have met this threshold. At 31 December
2023 one business (the Group’s 75% shareholding in Fera Science
Limited (Fera)) was deemed to have met this threshold.
2024
business exits
Business
exits at 31 December
2024 primarily comprised the following business
disposals:
|
Business
|
|
Disposal
completed on
|
|
Fera
|
|
17 January
2024
|
|
Capita
One
|
|
5 September
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
2023. During 2024, the Group decided to exit its corporate venture
business (Capita Scaling Partner) in Capita Experience, and a
further business from Capita Public Service. The trading results
and non-trading expenses of these businesses have also been
excluded from adjusted results.
The Capita
Scaling Partner business manages the Group’s investments in
start-up and scale-up companies. Of these investments, during the
year, two associates were sold realising a net gain of £0.3m and
two other investments were sold realising a loss of £7.4m which are
included within ‘share of results in associates and losses on
financial assets’ in the table below. Also included is a net loss
of £4.6m in relation to the revaluation of the remaining Capita
Scaling Partner investments and a loss of £0.1m being the share of
the results of the associates before they were sold. Following the
decision to exit the Capita Scaling Partner business in the first
half of the year and the losses realised on disposals in the second
half of 2024, the Group has evolved its approach to valuing the
remaining investments to take into account recent experiences, and
to better reflect expected disposal proceeds. The Group will seek
to maximise value from the remaining Capita Scaling Partner
investments, which at 31 December
2024 had an aggregate carrying value of £4.8m
(2023: £17.8m),
including loans receivable by Capita of £0.7m
(2023: £0.7m).
|
|
2024
|
|
2023
(Re-presented)1
|
|
Income
statement impact
|
Trading
£m
|
Non-trading
£m
|
Total
£m
|
Trading
£m
|
Non-trading
£m
|
Total
£m
|
|
Revenue
|
52.5
|
—
|
52.5
|
|
238.8
|
—
|
238.8
|
|
Cost of
sales
|
(44.5)
|
—
|
(44.5)
|
|
(160.0)
|
—
|
(160.0)
|
|
Gross
profit
|
8.0
|
—
|
8.0
|
|
78.8
|
—
|
78.8
|
|
Administrative
expenses
|
(1.6)
|
(8.0)
|
(9.6)
|
|
(66.6)
|
(33.0)
|
(99.6)
|
|
Operating
profit/(loss)
|
6.4
|
(8.0)
|
(1.6)
|
|
12.2
|
(33.0)
|
(20.8)
|
|
Share of results
in associates and losses on financial assets
|
—
|
(11.8)
|
(11.8)
|
|
—
|
—
|
—
|
|
Finance
costs
|
(0.3)
|
—
|
(0.3)
|
|
—
|
—
|
—
|
|
Gain/(loss) on
disposal of businesses
|
—
|
184.6
|
184.6
|
|
—
|
(2.4)
|
(2.4)
|
|
Profit/(loss) before
tax
|
6.1
|
164.8
|
170.9
|
|
12.2
|
(35.4)
|
(23.2)
|
|
Taxation
|
(1.7)
|
(24.3)
|
(26.0)
|
|
0.3
|
(27.6)
|
(27.3)
|
|
Profit/(loss) after
tax
|
4.4
|
140.5
|
144.9
|
|
12.5
|
(63.0)
|
(50.5)
|
1. To enable
a like-for-like comparison of adjusted results, the 2023
comparatives have been re-presented to include the businesses
classified as business exits during 2024.
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 period also those businesses disposed of during 2023
(being: Resourcing, Security Watchdog, PageOne, Software,
Enforcement, and Travel).
Trading
expenses primarily comprise payroll costs of £29.4m (2023: £152.4m)
and information technology costs of £15.8m (2023: £39.2m), and in
the comparative period, the de-recognition of non-current contract
fulfilment assets of £8.2m on the early termination of a customer
contract for a business in Capita Public Service that was first
treated as a business exit in 2023.
Non-trading
administrative expenses include: asset impairments of £8.7m (2023:
£25.4m); disposal project costs of £1.1m (2023: £5.6m); other costs
including staff and redundancy costs of £nil (2023: £2.6m); and,
other income of £1.8m (2023: £0.6m). The asset impairments include
goodwill within assets held-for-sale of £nil (2023: £18.1m);
property, plant and equipment of £0.2m (2023: £7.1m); intangible
assets of £8.5m (2023: £nil); and, right-of-use-assets of £nil
(2023: £0.2m).
9
Business exits and assets held-for-sale
continued
2024
disposals
During 2024
the Group disposed of two businesses: the Group's 75% shareholding
in Fera, and Capita One. During 2023 the Group disposed of six
businesses: Resourcing, Security Watchdog, PageOne, Software,
Enforcement and Travel.
The
gain/(loss) arising was determined as follows:
|
|
2024
£m
|
2023
£m
|
|
Property, plant
and equipment
|
—
|
0.3
|
|
Intangible
assets
|
—
|
8.6
|
|
Goodwill
|
—
|
3.2
|
|
Right-of-use
assets
|
—
|
0.2
|
|
Income tax
recoverable and deferred tax assets
|
—
|
0.8
|
|
Trade and other
receivables
|
—
|
78.6
|
|
Cash and cash
equivalents
|
—
|
14.6
|
|
Disposal group
assets held-for-sale1
|
157.8
|
78.2
|
|
Trade and other
payables
|
—
|
(36.6)
|
|
Deferred
income
|
—
|
(3.9)
|
|
Lease
liabilities
|
—
|
(0.2)
|
|
Capita group
loan balances
|
—
|
(42.7)
|
|
Income tax
payable and deferred tax liabilities
|
—
|
(1.1)
|
|
Disposal group
liabilities held-for-sale1
|
(82.9)
|
(33.5)
|
|
Net
identifiable assets sold
|
74.9
|
66.5
|
|
Non-controlling
interests
|
(9.1)
|
—
|
|
|
|
|
|
|
65.8
|
66.5
|
|
|
|
|
|
Sales
price:
|
|
|
|
received in
cash
|
269.8
|
68.4
|
|
deferred
receivable
|
—
|
11.4
|
|
Less: disposal
costs
|
(19.4)
|
(15.5)
|
|
|
|
|
|
Net
sales price
|
250.4
|
64.3
|
|
|
|
|
|
Realisation of
cumulative currency translation difference
|
—
|
(0.2)
|
|
|
|
|
|
Gain/(loss) on
disposal of businesses
|
184.6
|
(2.4)
|
|
|
|
|
|
Net cash
inflow
|
|
|
|
Proceeds
received
|
269.8
|
68.4
|
|
Less
disposal costs:
|
|
|
|
income statement
charge
|
(19.4)
|
(15.5)
|
|
change in
accrued disposal costs during the year
|
(1.3)
|
(8.1)
|
|
|
|
|
|
Settlement of
receivables due from disposed businesses:
|
|
|
|
disposal of
businesses in the period
|
—
|
42.7
|
|
disposal of
businesses classified as held-for-sale
|
—
|
9.3
|
|
|
|
|
|
Total
proceeds received net of disposal costs paid
|
249.1
|
96.8
|
|
|
|
|
|
Total
cash held by businesses when sold
|
|
|
|
Cash held by
businesses when sold
|
—
|
(14.6)
|
|
Cash held by
businesses classified as held-for-sale
|
(25.2)
|
(18.8)
|
|
|
|
|
|
Total
cash held by businesses when sold
|
(25.2)
|
(33.4)
|
|
|
|
|
|
Net cash
inflow
|
223.9
|
63.4
|
1. 2024
balances in respect of disposal group assets and liabilities
held-for-sale relate to Fera and Capita One which were transferred
to held-for-sale on 31 December
2023 and 30 June
2024 respectively, prior to their disposals in 2024. The 2023
balances relate to three businesses (PageOne, Software and
Enforcement) that were transferred to held-for-sale on
30 June
2023, and were subsequently sold on 31 July
2023.
Disposal
costs of £3.5m, relating to businesses disposed of in the year,
were recognised in prior years and are excluded from the above gain
on disposal of businesses.
9
Business exits and assets held-for-sale
continued
Disposal
group assets and liabilities
At
31 December
2024, the mortgage servicing business was deemed to have met the
threshold to be treated as held-for-sale (2023: the Fera business
was deemed to have met the held-for-sale threshold).
|
|
2024
£m
|
2023
£m
|
|
Property, plant
and equipment
|
0.1
|
5.1
|
|
Goodwill
|
—
|
15.0
|
|
Trade and other
receivables
|
—
|
3.3
|
|
Accrued
income
|
—
|
6.1
|
|
Prepayments
|
—
|
1.4
|
|
Cash and cash
equivalents
|
—
|
7.2
|
|
|
|
|
|
Disposal
group assets held-for-sale
|
0.1
|
38.1
|
|
|
|
|
|
Trade and other
payables
|
—
|
2.1
|
|
Other taxes and
social security
|
—
|
1.6
|
|
Accruals
|
0.1
|
1.8
|
|
Deferred
income
|
—
|
3.6
|
|
Income tax
payable and deferred tax liabilities
|
—
|
0.6
|
|
|
|
|
|
Disposal
group liabilities held-for-sale
|
0.1
|
9.7
|
Business
exit cash flows
Businesses
exited and being exited had a cash generated from operations inflow
of £14.3m up to the date of exit (2023: cash outflow of £1.5m). A
reconciliation of cash generated from/(used) by operations
excluding business exits, is included within note 10.
10
Cash flow information
Additional
cash flow information
|
|
|
|
2024
|
|
2023
|
|
|
Notes
|
Reported
£m
|
Excluding
business
exits1
£m
|
Reported
£m
|
Excluding
business
exits1
£m
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Reported
operating loss
|
5
|
(9.9)
|
(9.9)
|
(52.0)
|
(52.0)
|
|
Less: business
exit operating loss
|
9
|
—
|
1.6
|
—
|
20.8
|
|
Total
operating loss
|
|
(9.9)
|
(8.3)
|
(52.0)
|
(31.2)
|
|
|
|
|
|
|
|
|
Adjustments for
non-cash items:
|
|
|
|
|
|
|
Depreciation
|
|
66.5
|
66.4
|
79.5
|
77.9
|
|
Amortisation of
intangible assets
|
|
23.4
|
21.8
|
29.3
|
23.7
|
|
Share-based
payment expense
|
|
6.0
|
6.0
|
5.5
|
5.5
|
|
Employee
benefits
|
|
8.5
|
8.5
|
7.7
|
7.7
|
|
Loss on sale of
property, plant and equipment and intangible assets
|
|
1.7
|
1.7
|
0.7
|
0.7
|
|
Amendments and
early terminations of leases
|
|
(6.8)
|
(6.8)
|
3.0
|
3.0
|
|
Impairment of
assets held-for-sale
|
|
—
|
—
|
18.1
|
—
|
|
Impairment of
non-current assets
|
|
86.2
|
77.5
|
69.6
|
62.3
|
|
|
|
|
|
|
|
|
Other
adjustments:
|
|
|
|
|
|
|
Movement in
provisions2
|
|
(31.2)
|
(29.9)
|
23.0
|
15.7
|
|
Pension deficit
contributions
|
|
(20.8)
|
(6.3)
|
(46.3)
|
(30.0)
|
|
Other
contributions into pension schemes
|
|
(8.4)
|
(8.4)
|
(9.2)
|
(9.2)
|
|
|
|
|
|
|
|
|
Movements in working
capital2:
|
|
|
|
|
|
|
Trade and other
receivables
|
|
16.4
|
18.3
|
(30.1)
|
(4.1)
|
|
Non-recourse
trade receivables financing
|
|
(11.8)
|
(11.8)
|
(9.2)
|
(9.2)
|
|
Trade and other
payables
|
|
(65.2)
|
(60.6)
|
(8.5)
|
(5.5)
|
|
Deferred
income
|
|
(33.2)
|
(46.4)
|
(77.4)
|
(80.5)
|
|
Contract
fulfilment assets (non-current)
|
|
(5.4)
|
(5.5)
|
5.0
|
(0.3)
|
|
|
|
|
|
|
|
|
Cash
generated from operations
|
|
16.0
|
16.2
|
8.7
|
26.5
|
|
|
|
|
|
|
|
|
Adjustments for free
cash flows:
|
|
|
|
|
|
|
Income tax
paid3
|
|
(4.0)
|
(4.0)
|
(8.1)
|
(4.2)
|
|
Income tax
received3
|
|
5.1
|
5.1
|
0.6
|
0.6
|
|
Interest
received
|
|
8.0
|
7.9
|
6.2
|
6.2
|
|
Interest
paid
|
|
(50.3)
|
(50.3)
|
(47.7)
|
(47.7)
|
|
Net cash
outflow from operating activities
|
|
(25.2)
|
(25.1)
|
(40.3)
|
(18.6)
|
|
|
|
|
|
|
|
|
Purchase of
property, plant and equipment
|
|
(16.6)
|
(16.3)
|
(28.8)
|
(26.4)
|
|
Purchase of
intangible assets
|
|
(33.5)
|
(33.5)
|
(32.8)
|
(26.3)
|
|
Proceeds from
sale of property, plant and equipment and intangible
assets
|
|
0.3
|
0.3
|
0.1
|
0.1
|
|
Capital element
of lease rental receipts
|
|
5.9
|
5.9
|
6.0
|
6.0
|
|
Capital element
of lease rental payments
|
|
(53.6)
|
(53.6)
|
(59.1)
|
(58.4)
|
|
|
|
|
|
|
|
|
Free
cash flow1
|
|
(122.7)
|
(122.3)
|
(154.9)
|
(123.6)
|
1.
Definitions of the alternative performance measures and related key
performance indicators (KPIs) can be found in the
Appendix.
2. These
movements exclude items that have been adjusted for elsewhere
within the cash flow statement. For example, balances transferred
to held-for-sale or relate to a business disposal. As such these
movements may not directly agree to the year-on-year movements
within the balance sheet.
3. Income tax
paid and income tax received have been separately disclosed for the
current year, with the prior year re-presented on the same basis.
Previously these were presented as net income tax paid.
Cyber
incident: In relation
to the exceptional cyber incident costs referred to in
note 5,
the net cash outflow during the year ended 31 December
2024 was £5.0m (2023: £20.1m) and is included within free cash flow
excluding business exits, and cash generated from operations
excluding business exits. The cumulative net cash outflow since the
incident in the first half of 2023 is £25.1m.
Cost
reduction programme: In relation
to the implementation of the cost reduction programme detailed in
note 5, the cash outflow during the year ended
31 December
2024 was £44.5m (2023: £6.1m), and is included within free cash
flow excluding business exits, and cash generated from operations
excluding business exits. The outflow in the current year was less
than the expected outflow included in the 2023 Annual Report of
£50m due to a delay in the timing of some payments. The cumulative
cash outflow since the commencement of the cost reduction programme
in the second half of 2023 is £50.6m. The cost reduction
initiatives are expected to result in cash costs during 2025
totalling an estimated £55m.
10
Cash flow information continued
Free
cash flow and cash generated from operations (alternative
performance measures - refer to Appendix)
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. Comparative amounts have been
re-presented.
These
measures are analysed below:
|
|
Free
cash flow
|
Cash
generated/(used) by operations
|
|
|
2024
£m
|
2023
£m
|
2024
£m
|
2023
£m
|
|
Reported
(including business exits)
|
(122.7)
|
(154.9)
|
16.0
|
8.7
|
|
Business
exits
|
(14.1)
|
15.0
|
(14.3)
|
1.5
|
|
Pension deficit
contributions triggered by disposals
|
14.5
|
16.3
|
14.5
|
16.3
|
|
|
|
|
|
|
|
Excluding business
exits
|
(122.3)
|
(123.6)
|
16.2
|
26.5
|
A
reconciliation of net cash flow to movement in net debt is
included below.
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 2023 results have been re-presented for those
businesses exited, or in the process of being exited, during 2024
to enable comparability of the adjusted results.
Pension
deficit contributions triggered by disposals:
the Trustee
of the Group’s main defined benefit pension scheme (HPS) has an
agreement with the Group that if there is a future deficit in the
scheme, the Group will 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 Trustmarque disposal in March 2022 resulted in an accelerated
deficit contribution of £14.5m being paid during 2024. The disposal
of Pay360 and Capita Translation and Interpreting in the second
half of 2022 and Resourcing in 2023 resulted in accelerated deficit
contributions of £16.3m being paid during 2023. Given the healthy
funding position of HPS in its latest funding valuation, the Group
has paid all outstanding deficit contributions at this
time.
Reconciliation
of net cash flow to movement in net debt
|
Year
ended 31 December
2024
|
Net debt
at
1
January
£m
|
Cash
flow
movements
£m
|
Total
Non-cash
movement
£m
|
Net debt
at
31
December
£m
|
|
Cash, cash
equivalents and overdrafts
|
67.6
|
124.5
|
(0.7)
|
191.4
|
|
Private
placement loan notes
|
(267.0)
|
—
|
(4.9)
|
(271.9)
|
|
Unamortised
transaction costs on debt issuance
|
4.5
|
—
|
(1.9)
|
2.6
|
|
Carrying value
of private placement loan notes
|
(262.5)
|
—
|
(6.8)
|
(269.3)
|
|
Cross-currency
interest rate swaps
|
13.6
|
(3.4)
|
2.0
|
12.2
|
|
Fair value of
private placement loan notes
|
(248.9)
|
(3.4)
|
(4.8)
|
(257.1)
|
|
Other
finance
|
(0.1)
|
—
|
—
|
(0.1)
|
|
Lease
liabilities
|
(363.4)
|
76.3
|
(61.6)
|
(348.7)
|
|
|
|
|
|
|
|
Total
net liabilities from financing activities
|
(612.4)
|
72.9
|
(66.4)
|
(605.9)
|
|
Deferred
consideration payable
|
(0.7)
|
—
|
—
|
(0.7)
|
|
|
|
|
|
|
|
Net
debt
|
(545.5)
|
197.4
|
(67.1)
|
(415.2)
|
|
Year ended
31 December 2023
|
Net debt
at
1
January
£m
|
Cash
flow
movements
£m
|
Total
Non-cash
movement
£m
|
Net debt
at
31
December
£m
|
|
Cash, cash
equivalents and overdrafts
|
177.2
|
(106.9)
|
(2.7)
|
67.6
|
|
Private
placement loan notes
|
(289.5)
|
17.5
|
5.0
|
(267.0)
|
|
Unamortised
transaction costs on debt issuance
|
4.0
|
5.4
|
(4.9)
|
4.5
|
|
Carrying value
of private placement loan notes
|
(285.5)
|
22.9
|
0.1
|
(262.5)
|
|
Cross-currency
interest rate swaps
|
24.8
|
(6.9)
|
(4.3)
|
13.6
|
|
Fair value of
private placement loan notes
|
(260.7)
|
16.0
|
(4.2)
|
(248.9)
|
|
Other
finance
|
(0.7)
|
0.5
|
0.1
|
(0.1)
|
|
Lease
liabilities
|
(397.5)
|
81.4
|
(47.3)
|
(363.4)
|
|
|
|
|
|
|
|
Total net
liabilities from financing activities
|
(658.9)
|
97.9
|
(51.4)
|
(612.4)
|
|
Deferred
consideration payable
|
(0.7)
|
—
|
—
|
(0.7)
|
|
|
|
|
|
|
|
Net
debt
|
(482.4)
|
(9.0)
|
(54.1)
|
(545.5)
|
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
31 December
2024,
the Group’s £250.0m
committed revolving credit facility was undrawn
(31 December
2023: undrawn).
11
Goodwill
At 31
December 2024, the carrying value of goodwill was £372.4m (2023:
£495.7m). The decrease is primarily due to a £75.1m impairment of
the Contact Centre cash generating unit (CGU) and the disposal of
Capita One (£47.0m).
Cash-generating
units
In line with
the determination in the second half of the year that the Capita
Experience division comprises three operating segments: Contact
Centre, Pension Solutions and Regulated Services (refer to the
divisional performance), the Group has reviewed the historical
assessment of CGUs and the allocation of goodwill. Reflecting the
way management now exercises oversight and monitors the Group’s
performance, the Board concluded that the lowest level at which
goodwill is monitored is at the divisional level for Capita Public
Service, and at a sub-divisional level for Capita Experience in
line with the aforementioned operating segments, and goodwill has
been reallocated to these groups of CGUs (hereafter referred to as
CGU) accordingly.
Where
possible, goodwill was reallocated to the new CGUs by transferring
the goodwill balance created on acquisition of the business to the
CGU in which the business now primarily resides under the new
organisational structure. In some cases, it was not possible to
clearly determine a single CGU in which the acquired business now
primarily resides, and in these instances the relevant goodwill was
allocated to the CGU that best reflected the original balance. The
opening goodwill balance as at 1 January
2024 has been reallocated to these CGUs for comparable
purposes.
Carrying
amount of goodwill allocated to CGUs:
|
|
Capita
Public
Service
£m
|
Capita
Experience
|
|
|
CGU
|
Contact
Centre
£m
|
Pension
Solutions
£m
|
Regulated
Services
£m
|
Total
£m
|
|
At 1
January
|
286.4
|
148.6
|
60.7
|
—
|
495.7
|
|
Transfer to
assets held-for-sale1
|
(47.0)
|
—
|
—
|
—
|
(47.0)
|
|
Impairment –
excluded from adjusted profit
|
—
|
(75.1)
|
—
|
—
|
(75.1)
|
|
Exchange
movement
|
—
|
(1.2)
|
—
|
—
|
(1.2)
|
|
At
31 December
|
239.4
|
72.3
|
60.7
|
—
|
372.4
|
1. Transfers
to disposal group assets held-for-sale in the year ended
31 December
2024 is in respect of Capita One that was transferred at
30 June
2024 and subsequently sold during the second half of the
year.
The
impairment test
The Group’s
impairment test compares the carrying value of each CGU with its
recoverable amount. The recoverable amount of a CGU is the higher
of fair value less cost of disposal, and its value in use. As the
Group continues to implement the Group-wide cost reduction
programme first announced in November 2023 and referred to in
note 5,
and continues to be committed to evaluating additional cost savings
opportunities, it has been determined that at 31 December
2024, fair value less costs of disposal will generate the higher
recoverable amount.
The valuation
of CGUs under fair value less costs of disposal assumes that a
third-party acquirer will undertake a similar plan to derive
similar benefits in the business going forward. The enterprise
value of each CGU is dependent on the successful implementation of
the cost reduction programme.
Fair value
less costs of disposal for each CGU has been estimated using
discounted cash flows. The fair value measurement was categorised
as a Level-3 fair value based on the inputs in the valuation
technique used. The costs of disposal have been estimated based on
the Groups’ significant disposals in recent years.
In 2024, the
Contact Centre business has seen a reduction in its adjusted
revenue1,
increase in its adjusted operating loss1
and reduction
in its operating cash flow excluding business
exits1.
These trends reflect the one-off benefit from the Virgin Media O2
contract transition in the prior year and the impact of prior year
contract losses, both of which were reflected in the financial
projections used for impairment testing purposes previously, and
lower than expected volumes in the telecommunications vertical in
the second half of 2024, which are expected to remain subdued
during 2025. The profit and cash flow impact of these items was
partially offset by an underlying margin improvement from lower
overheads from delivery of the cost reduction programme.
The Contact
Centre business also saw a reduction in bid activity across 2024,
and although there has been a strong start to 2025, the business is
expecting a high single-digit revenue reduction in 2025. In
addition, the material contracts secured in 2024 are framework
agreements, which enable the customer to both ramp-up and ramp-down
volume, providing both an opportunity but also a risk to the
business’s forecast. Whilst delivery and client sentiment has
remained strong across the majority of the portfolio, certain
delivery issues have led to the reduction of volumes on one
particular contract.
As detailed
in the strategic review, there is a significant opportunity for the
Contact Centre business to improve its margins to be in line with
those of its peers, and it is implementing a significant
reorganisation, including delayering internal management structures
and a digitisation plan to reduce costs. A key element of its
reorganisation is increasing the use of offshore and nearshore
service delivery to meet client needs. In terms of its digitisation
plan, the forecast for the business assumes an increase in the use
of its new AI and generative AI solutions, such as AgentSuite, with
significant rollout to clients underway for 2025. There is a risk
with the assumed rollout of these new technology solutions, such as
the pace of technological change, which brings increased
uncertainty in delivery, and therefore a risk to the business’s
forecast.
To reflect
these risks from the perspective of a market participant
perspective, and taking account of the historical performance of
the business and inherent uncertainty in forecasting, for the
purposes of the impairment test, the business plan cash flow
projections have been risk adjusted in the Contact Centre CGU from
2025 onwards.
Forecast
cash flows
The cash flow
projections prepared for the impairment test are derived from the
2025-2027 business plan approved by the Board, which are prepared
on a nominal basis. Key assumptions in the business plan include
the delivery of planned revenue growth and the benefits that the
cost reduction programme is anticipated to deliver. As noted above,
for the purposes of the impairment test, the business plan cash
flow projections have been risk adjusted in the Contact Centre CGU
from 2025 onwards.
The going
concern severe but plausible downside scenarios have taken account
of the potential adverse financial impacts resulting from the
following risks, which include the key assumptions noted
above:
◦
revenue
growth falling materially short of plan;
◦
operating
margin expansion not being achieved;
◦
targeted cost
savings delayed or not delivered;
◦
unforeseen
operational issues leading to contract losses and cash outflows;
and
◦
unexpected
financial costs linked to incidents such as data breaches and/or
cyber-attacks.
11
Goodwill continued
As such, the
below sensitivity analysis includes assessing the impact of these
crystallising on the impairment test performed.
Forecast cash
flows have been adjusted for movements in deferred income and
contract fulfilment assets. An adjustment has also been made to the
2025 cash flows to reflect the assumed build-up in working capital
to reach a normalised working capital position for each
CGU.
Allocation
of central function costs
The Board has
considered an appropriate methodology to apply when allocating
central function costs. The methodology applied for the 2024
impairment test was aligned to that applied in reporting segmental
performance (refer to note 4). The remaining Group related costs of
Capita plc, which have not been allocated as part of segmental
reporting, are allocated to CGUs for impairment testing purposes
based on 2025 forecast earnings before interest, tax, depreciation
and amortisation (EBITDA).
Long-term
growth rate
The long-term
growth rate is based on economic growth forecasts by recognised
bodies and this has been applied to forecast cash flows for years
four and five (2028 and 2029) and for the terminal period. The 2024
long-term growth rate is 1.6% (2023: 1.7%).
Discount
rates
Management
estimates discount rates using nominal pre-tax rates of comparator
companies for each CGU. The discount rates reflect the latest
market assumptions for the risk-free rate, the equity risk premium
and the net cost of debt, and which are all based on publicly
available external sources.
The pre-tax
discount rates applied to the Contact Centre cash flows for 2024
was 11.2% (2023: 9.2% being that used for the aggregated Capita
Experience group of CGUs at 31 December
2023).
Sensitivity
analysis
The
impairment testing as described is reliant on the reliability of
management’s forecasts and the assumptions that underlie them; and
on the selection of the discount and growth rates to be applied. To
gauge the sensitivity of the result to a change in any one, or
combination of the assumptions that underlie the model, a number of
scenarios were developed to identify the range of reasonably
possible alternatives and measure which CGUs are the most
susceptible to an impairment should the assumptions used be varied.
The most material sensitivities to the cash flow forecasts are the
risk of not delivering the planned revenue growth and efficiency
savings from the Group's cost reduction programme.
The table
below shows the additional impairment required (with all other
variables being equal) through: an increase in discount rate of 1%,
or a decrease of 1% in the long-term growth rate (for the terminal
period) for the Contact Centre CGU; or, through the severe but
plausible downsides applied to the base-case projections for
assessing going concern and viability, without mitigations, for
2025 to 2027, and the long-term growth rate (1.6%) applied to the
2027 downside cash flows to generate projected cash flows for 2028,
2029, and the terminal period. We have also considered the impact
of all the scenarios together, which is also a reasonable possible
alternative.
|
|
1%
increase in discount rate
|
Long-term growth
rate decrease by 1%
|
Severe
but plausible downside
|
Combination
sensitivity
|
|
|
£m
|
£m
|
£m
|
£m
|
|
Contact
Centre
|
(23.2)
|
(17.4)
|
(18.1)
|
(55.1)
|
|
|
|
|
|
|
Comparison
to share price and market capitalisation
The company’s
market capitalisation indicates an enterprise value that continues
to be significantly less than the Group’s sum-of-the-parts CGU
valuation based upon the model prepared for impairment testing
purposes at 31 December
2024. The directors gave consideration as to why this might be the
case and the reasonableness of the assumptions used in the
impairment model, and whether these points could indicate
additional indicators of impairment in respect of the Group’s
goodwill balances.
The factors
considered included: the differing basis of valuations (including
that third parties value the services sector on income statement
multiples versus long-term view using a discounted cash flow for
the basis of impairment testing under accounting standards),
sum-of-the-parts view and the multiples achieved on recent
disposals, general market assumptions of the sector which can
ignore the liquidity profile and specific risks of an entity, and
other specific items impacting the market’s view of the Group at
the moment, including the on-going cost reduction
programme.
Taking these
points into consideration, the Board is comfortable that there is
no further impairment in respect of goodwill to be recognised at
31 December
2024, despite the continuing low market capitalisation of the
Group.
12
Provisions
The movements in provisions during the year are as
follows:
|
|
Cost
reduction
provision
£m
|
Business
exit
provision
£m
|
Claims
and
litigation
provision
£m
|
Property
provision
£m
|
Customer
contract
provision
£m
|
Other
provisions
£m
|
Total
£m
|
|
At 1
January
|
29.5
|
7.8
|
41.4
|
7.8
|
58.5
|
5.2
|
150.2
|
|
Reclassification
between categories
|
—
|
—
|
—
|
—
|
0.2
|
(0.2)
|
—
|
|
Provisions in
the year
|
19.7
|
7.0
|
5.6
|
7.4
|
28.4
|
4.6
|
72.7
|
|
Releases in the
year
|
(5.0)
|
(1.8)
|
(11.4)
|
(1.9)
|
(6.4)
|
(2.9)
|
(29.4)
|
|
Utilisation
|
(34.9)
|
(6.6)
|
(5.4)
|
(6.9)
|
(19.0)
|
(1.7)
|
(74.5)
|
|
Unwinding of
discount and changes in the discount rate
|
—
|
—
|
—
|
—
|
0.4
|
—
|
0.4
|
|
Exchange
movement
|
(0.2)
|
—
|
—
|
—
|
0.1
|
—
|
(0.1)
|
|
|
|
|
|
|
|
|
|
|
At 31 December
|
9.1
|
6.4
|
30.2
|
6.4
|
62.2
|
5.0
|
119.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December
2024
£m
|
31 December 2023
£m
|
|
Current
|
|
|
|
81.4
|
101.6
|
|
Non-current
|
|
|
|
37.9
|
48.6
|
|
|
|
|
|
|
|
|
|
|
|
|
119.3
|
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. Refer to
note 5
for further details on the cost reduction programme.
Business exit provision:
The provision relates to the cost of exiting businesses through
disposal or closure 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 detailed
in note 5 (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)
exceeds 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
life-time 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
five years.
The customer
contract provision includes £43.9m (2023: £40.5m) in respect of
contracts in the closed book Life & Pensions business, which
the Group is seeking to exit, in the Regulated Services business in
Capita Experience. The closed books and contractual dynamics have
led to onerous conditions to service certain of these contracts.
Management has been required to assess the likely length of these
contracts, given the pattern and experience of contract
terminations while also recognising the evergreen clauses (which
potentially allow the customer to extend the contracts indefinitely
until the run-off of the underlying life and pension books is
complete). Accordingly, the Group has, as in prior years, provided
for the onerous contract conditions based on the best estimate of
the remaining contract terms and the period until the final
handover of services. At 31 December
2024,
£35.4m of the
provision, which is in respect of contracts with the one remaining
customer where an earlier exit is not yet highly probable, was
increased to provide cover for the contracts to extend out to
December 2029 (ie a five year rolling period), reflecting the
current best estimate of the remaining term and likely costs to
continue service delivery. The remaining £8.5m of the provision
relates to a contract where the earlier exit is highly probable at
31 December
2024, and comprises an onerous contract provision for the remaining
term and likely costs to continue service delivery, and a provision
to cover the cost to exit the contract and handover these
services.
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.
13
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 £24.7m (2023: £22.5m). On adoption of
IFRS 17 the Group had the option to apply either IFRS 17 or IFRS 9
for external debt guarantees, of which the Group elected to apply
IFRS 9. The Group accounts for performance guarantees under IAS 37
as they do not meet the criteria to be recognised as an insurance
contract.
The Group is
reviewing its position in respect of the contracts with the
remaining last customer for its closed book Life & 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 fulfilment assets.
13
Contingent liabilities continued
At the date of approval of these consolidated financial statements,
we remain in dialogue with the Information Commissioner’s Office
(ICO) and are responding to the ICO's information requests
following the cyber incident in March 2023. No formal action has
been taken by the ICO in connection with the cyber incident and
there have been no preliminary findings regarding fault that could
lead to any potential regulatory penalty. The Group has received
notification of potential claims for damages by or on behalf of
individuals whose data may have been exfiltrated as part of the
incident. The Group has received only one substantive claim in
relation to the cyber incident, which was issued by Barings Law on
4 April 2024. The Group continues to vigorously defend itself
against this and any other claims which may be issued. At the date
of these financial statements, the Group do not consider future
cash outflows in relation to the one substantive claim issued by
Barings Law to be probable, and consequently no provision has been
recorded. At the date of approval of these financial statements, it
is not possible to reliably estimate the value of any existing,
potential or future claim or penalty against the Group.
The Group’s entities are parties 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 successfully being 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.
14
Post balance sheet events
The following events occurred after 31 December
2024,
and before the approval of these consolidated financial statements,
but have not resulted in adjustment to the 2024
financial results:
Repayment of private placement loan
notes
US dollar and British pound sterling private placement loan notes
of USD74.3m and £7.4m respectively were repaid at maturity on
22 January
2025, as per their contractual values. Net of swaps
the repayments were £53.6m.
Issue
of private placement loan notes
In March
2025, the Group issued £94.2m equivalent of US private placement
loan notes across three tranches: £50m maturing 24 April 2028,
USD13m maturing 24 April 2028 and USD43m maturing 24 April 2030,
with an average interest rate of 7.4%. The notes rank pari passu
with the existing indebtedness of the Group and include financial
covenants at the same level as those under the revolving credit
facility and existing US private placement loan notes.
Additionally, the placement requires the Group to refinance or
extend the Group’s revolving credit facility, which matures on 31
December 2026, by 31 December 2025.
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 March 2023, expenses associated with the
cost reduction programme and impairments of goodwill are excluded.
These measures may not be comparable when reviewing similar
measures reported by other companies.
|
APM
|
Closest
equivalent IFRS measure
|
Definition, Purpose
and Reconciliation
|
|
|
|
|
|
Income
statement
|
|
|
|
|
|
|
|
Adjusted
revenue
|
Revenue
|
Calculated as
revenue less any revenue relating to businesses that have been
sold, or exited during the year or prior year; or, are in the
process of being sold, or exited.
|
|
|
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 reduction:
|
|
|
|
|
|
|
2024
|
2023
|
|
|
|
Reported revenue
per the income statement
|
|
|
£2,421.6m
|
£2,814.6m
|
|
|
|
Deduct: business
exits (note 9)
|
|
|
£(52.5)m
|
£(238.8)m
|
|
|
|
Adjusted
revenue
|
|
|
£2,369.1m
|
£2,575.8m
|
|
|
|
Adjusted revenue
(reduction)/growth
|
|
|
(8.0)%
|
1.1%
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
Operating
profit
|
Calculated as
reported operating profit excluding items determined by the Board
to be outside underlying operations. These items are detailed in
note 5.
|
|
|
A reconciliation
of reported to adjusted operating profit is provided in note
5.
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit margin
|
Operating
margin
|
Calculated as
the adjusted operating profit divided by adjusted
revenue.
|
|
This measure is
an indicator of the Group’s operating efficiency.
|
|
The table below
shows the components, and calculation, of adjusted operating
margin:
|
|
|
|
|
|
2024
|
2023
|
|
|
|
Adjusted
revenue
|
a
|
£2,369.1m
|
£2,575.8m
|
|
|
|
Adjusted
operating profit (note 5)
|
|
b
|
£95.9m
|
£90.9m
|
|
|
|
Adjusted
operating margin
|
|
b/a
|
4.0%
|
3.5%
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
No
direct equivalent
|
Calculated as
adjusted operating profit for the last twelve months before:
depreciation, amortisation and impairment of property, plant and
equipment, intangible assets and right-of-use assets; net finance
costs; and the share of results in associates and losses on
financial assets (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
IFRS 16
|
Pre
IFRS 16
|
|
|
|
|
2024
|
2023
|
2024
|
2023
|
|
|
|
Adjusted profit
before tax
|
£50.0m
|
£40.9m
|
£58.0m
|
£41.4m
|
|
|
|
Add back:
adjusted net finance costs (note 6)
|
£45.9m
|
£50.0m
|
£29.1m
|
£31.8m
|
|
|
|
Add back:
adjusted depreciation and impairment of property, plant and
equipment
|
£25.8m
|
£30.7m
|
£25.8m
|
£30.7m
|
|
|
|
Add back:
depreciation and impairment of right-of-use assets
|
£42.2m
|
£50.5m
|
£—m
|
£—m
|
|
|
|
Add back:
adjusted amortisation and impairment of intangibles
|
£22.2m
|
£24.4m
|
£22.2m
|
£24.4m
|
|
|
|
Adjusted
EBITDA
|
£186.1m
|
£196.5m
|
£135.1m
|
£128.3m
|
|
|
|
Adjusted EBITDA
margin
|
7.9%
|
7.6%
|
5.7%
|
5.0%
|
|
|
|
|
|
|
|
|
Alternative
performance measures continued
|
APM
|
Closest
equivalent IFRS measure
|
Definition, Purpose
and Reconciliation
|
|
|
|
|
|
Income
statement continued
|
|
|
|
|
|
|
Adjusted
profit/(loss) before tax
|
Profit/(loss) before
tax
|
Calculated as
profit or loss before tax excluding the items detailed in
note 5, which include: business
exits (trading results, non-trading expenses, and any gain/(loss)
on business disposal); acquired intangible amortisation; impairment
of goodwill and acquired intangibles; costs of the cyber incident
in March 2023; and expenses associated with the cost reduction
programme.
|
|
|
|
A reconciliation
of reported to adjusted profit before tax is provided in note
5.
|
|
|
|
|
|
|
|
|
|
Adjusted
profit/(loss) after tax
|
Profit/(loss) after
tax
|
Calculated as
the above adjusted profit or loss before tax, less the tax expense
on adjusted profit or loss.
|
|
|
The table below
shows a reconciliation:
|
|
|
|
|
|
2024
|
2023
|
|
|
|
Adjusted profit
before tax (note 5)
|
|
|
£50.0m
|
£40.9m
|
|
|
|
Tax on adjusted
profit (note 7)
|
|
|
£(10.3)m
|
£(47.4)m
|
|
|
|
Adjusted
profit/(loss) after tax
|
|
|
£39.7m
|
£(6.5)m
|
|
|
|
|
|
|
|
|
|
Adjusted
basic earnings per share
|
Basic
earnings per share
|
Calculated as
the adjusted profit or loss for the year after tax less
non-controlling interests divided by the weighted average number of
ordinary shares outstanding during the year.
|
|
|
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
8.
|
|
|
|
|
|
|
|
|
|
Adjusted
diluted earnings per share
|
Diluted
earnings per share
|
Calculated as
the adjusted profit or loss for the year after tax less
non-controlling interests divided by the weighted average number of
ordinary shares outstanding during the year plus the weighted
average number of ordinary shares that would have been issued on
the conversion of all the dilutive potential ordinary shares 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
8.
|
|
|
|
|
|
|
|
|
|
Cash
flows and net debt
|
|
|
|
|
|
|
Cash
flows generated/(used) by operations excluding business
exits
|
Cash
generated/(used) by operations
|
Calculated as
the cash flows generated from operations excluding the items
detailed in note 10 which includes: business
exits (trading results, non-trading expenses) and pension deficit
contributions which have been triggered by disposals.
|
|
|
A reconciliation
of reported to cash generated/(used) by operations excluding
business exits is provided in note 10.
|
|
|
|
|
|
|
|
|
|
Free
cash flow and free cash flow excluding business
exits
|
Net cash
flows from operating activities
|
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 capital element of lease payments and receipts. Free cash flow
excluding business exits has the same calculation but is excluding
the impact of business exits.
|
|
Free cash flow
and free cash flow excluding business exits are measures used to
show how effective the Group 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 10.
|
|
|
|
|
|
|
|
|
Alternative
performance measures continued
|
APM
|
Closest
equivalent IFRS measure
|
Definition, Purpose
and Reconciliation
|
|
|
|
|
|
|
Cash
flows and net debt continued
|
|
|
|
Operating cash flow
and operating cash conversion
|
No
direct equivalent
|
Operating cash
flow calculated as reported/adjusted EBITDA less working capital
and non-cash and other adjustments excluding business exits,
pension deficit contributions, cyber incident and cost reduction
programme.
|
|
Operating cash
conversion calculated as operating cash flow divided by adjusted
EBITDA.
|
|
The Board
believes that this measure is useful for investors because it is
closely monitored by management to evaluate the Group’s operating
performance and to make financial, strategic and operating
decisions.
|
|
|
|
|
Reported
|
Excluding business
exits
|
|
|
|
|
2024
|
2023
|
2024
|
2023
|
|
|
Operating
(loss)/profit
|
|
£(9.9)m
|
£(52.0)m
|
£95.9m
|
£90.9m
|
|
|
Depreciation
|
|
£66.5m
|
£79.5m
|
£66.4m
|
£77.9m
|
|
|
Amortisation of
intangible assets
|
|
£23.4m
|
£29.3m
|
£21.6m
|
£23.5m
|
|
|
Impairment of
assets held-for-sale
|
|
£—m
|
£18.1m
|
£—m
|
£—m
|
|
|
Impairment of
non-current assets
|
|
£86.2m
|
£69.6m
|
£2.2m
|
£4.2m
|
|
|
EBITDA
|
a
|
£166.2m
|
£144.5m
|
£186.1m
|
£196.5m
|
|
|
Add back: EBITDA
element of cyber incident and cost reduction programme
|
|
£28.7m
|
£63.8m
|
£—m
|
£—m
|
|
|
|
Trade and other
receivables (note 10)
|
|
£16.4m
|
£(30.1)m
|
£18.3m
|
£(4.1)m
|
|
|
|
Non-recourse
trade receivables financing (note 10)
|
|
£(11.8)m
|
£(9.2)m
|
£(11.8)m
|
£(9.2)m
|
|
|
|
Trade and other
payables (note 10)
|
|
£(65.2)m
|
£(8.5)m
|
£(60.6)m
|
£(5.5)m
|
|
|
|
Deferred income
(note 10)
|
|
£(33.2)m
|
£(77.4)m
|
£(46.4)m
|
£(80.5)m
|
|
|
|
Contract
fulfilment assets (non-current) (note 10)
|
|
£(5.4)m
|
£5.0m
|
£(5.5)m
|
£(0.3)m
|
|
|
|
Add back:
Working capital element of cyber incident and cost reduction
programme
|
|
£0.4m
|
£(8.1)m
|
£0.4m
|
£(8.1)m
|
|
|
|
Working
capital
|
|
£(70.1)m
|
£(64.5)m
|
£(105.6)m
|
£(107.7)m
|
|
|
|
Share-based
payment expense (note 10)
|
|
£6.0m
|
£5.5m
|
£6.0m
|
£5.5m
|
|
|
|
Employee
benefits (note 10)
|
|
£8.5m
|
£7.7m
|
£8.5m
|
£7.7m
|
|
|
|
Loss on sale of
property, plant and equipment and intangible assets (note
10)
|
|
£1.7m
|
£0.7m
|
£1.7m
|
£0.7m
|
|
|
|
Amendments and
early terminations of leases (note 10)
|
|
£(6.8)m
|
£3.0m
|
£(6.8)m
|
£3.0m
|
|
|
|
Movement in
provisions (note 10)
|
|
£(31.2)m
|
£23.0m
|
£(29.9)m
|
£15.7m
|
|
|
|
Other
contributions into pension schemes (note 10)
|
|
£(8.4)m
|
£(9.2)m
|
£(8.4)m
|
£(9.2)m
|
|
|
|
Non-cash element
of cyber incident and cost reduction programme
|
|
£20.4m
|
£(29.5)m
|
£20.4m
|
£(29.5)m
|
|
|
|
Non-cash and
other adjustments
|
|
£(9.8)m
|
£1.2m
|
£(8.5)m
|
£(6.1)m
|
|
|
|
Operating cash
flow
|
b
|
£86.3m
|
£81.2m
|
£72.0m
|
£82.7m
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash
conversion
|
b/a
|
51.9%
|
56.2%
|
38.7%
|
42.1%
|
|
|
|
|
|
|
|
|
|
|
Available
liquidity
|
No
direct equivalent
|
Calculated as
the sum of any undrawn committed facilities and the net cash, cash
equivalents net of overdrafts, less any restricted cash. Restricted
cash is 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).
|
|
|
|
|
|
|
|
2024
|
2023
|
|
|
|
Revolving credit
facility (RCF)
|
|
|
|
£250.0m
|
£260.7m
|
|
|
|
Less: drawing on
committed facilities
|
|
|
|
£—m
|
£—m
|
|
|
|
Undrawn
committed facilities
|
|
|
|
£250.0m
|
£260.7m
|
|
|
|
Cash and cash
equivalents net of overdrafts
|
|
|
|
£191.4m
|
£67.6m
|
|
|
|
Less: restricted
cash
|
|
|
|
£(44.2)m
|
£(46.0)m
|
|
|
|
|
|
|
|
|
|
|
|
|
Available
liquidity
|
|
|
|
£397.2m
|
£282.3m
|
|
|
|
|
|
|
|
|
|
|
Net
debt
|
Borrowings, cash,
derivatives, lease liabilities and deferred
consideration
|
Calculated as
the net of the Group’s: cash, cash equivalents and overdrafts;
private placement loan notes; other finance; currency and interest
rate swaps; lease liabilities; and deferred
consideration.
|
|
The Board
believes that net debt enables investors to see the economic effect
of debt, related hedges and cash and cash equivalents in total and
shows the indebtedness of the Group.
|
|
|
|
|
|
|
|
|
|
The calculation
of net debt is provided in note 10.
|
|
|
|
|
|
|
|
|
|
Alternative
performance measures continued
|
APM
|
Closest
equivalent IFRS measure
|
Definition, Purpose
and Reconciliation
|
|
|
|
|
|
Cash
flows and net debt continued
|
|
|
|
|
|
|
Net
financial debt (pre-IFRS 16)
|
No
direct equivalent
|
Calculated as
the sum of the Group’s: cash, cash equivalents and overdrafts; the
fair value of the Group’s private placement loan notes; other loan
notes; and deferred consideration.
|
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2024
|
2023
|
|
|
|
Net debt (note
10)
|
|
|
£415.2m
|
£545.5m
|
|
|
|
Remove: IFRS16
impact
|
|
|
£(348.7)m
|
£(363.4)m
|
|
|
|
Net financial
debt (pre-IFRS 16)
|
|
|
£66.5m
|
£182.1m
|
|
|
|
|
|
|
|
|
|
Gearing:
net debt to adjusted EBITDA ratio
|
No
direct equivalent
|
This ratio is
calculated as net debt divided by adjusted EBITDA over a rolling
twelve month period including business exits not yet completed at
the balance sheet date.
|
|
The Board
believes that this ratio is useful because it shows how significant
net debt is relative to adjusted EBITDA.
|
|
|
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
IFRS 16
|
Pre IFRS
16
|
|
|
|
|
2024
|
2023
1
|
2024
|
2023
1
|
|
|
|
Adjusted
EBITDA
|
£186.1m
|
£214.6m
|
£135.1m
|
£146.2m
|
|
|
|
EBITDA in
respect of business exits not yet completed
|
£(7.7)m
|
£8.2m
|
£(7.7)m
|
£8.2m
|
|
|
|
Adjusted EBITDA
(including business exits not yet completed)
|
£178.4m
|
£222.8m
|
£127.4m
|
£154.4m
|
|
|
|
Net debt/net
financial debt
|
£415.2m
|
£545.5m
|
£66.5m
|
£182.1m
|
|
|
|
|
|
|
|
|
|
|
|
Net debt/net
financial debt to adjusted EBITDA ratio
|
2.3x
|
2.4x
|
0.5x
|
1.2x
|
|
|
|
|
|
|
|
|
1. To ensure
consistent presentation of the ratios between years, the 2023
comparatives have not been restated.
|
|
New APM in
the year
|
|
Definition
updated in the year
|
|
Comparatives
re-presented
|
Appendix
- Covenants
The below
measures are submitted to the Group’s lenders and the directors
believe these measures provide a useful insight to investors. The
31 December
2023 comparatives have not been re-presented because they are not
required to be re-presented for covenant purposes.
|
|
|
2024
|
2023
|
Source
|
|
Covenants
|
|
|
|
|
|
Adjusted
operating profit1
|
|
£95.9m
|
£106.5m
|
Line information
in note 5
|
|
Add back:
covenant adjustments2
and
amortisation
|
|
£54.1m
|
£64.1m
|
|
|
Adjusted
EBITA
|
a1
|
£150.0m
|
£170.6m
|
|
|
Less:
IFRS 16 impact
|
|
£(8.8)m
|
£(17.7)m
|
|
|
Adjusted EBITA
(excluding IFRS 16)
|
a2
|
£141.2m
|
£152.9m
|
|
|
|
|
|
|
|
|
Adjusted
EBITA
|
|
£150.0m
|
£170.6m
|
Line item
above
|
|
Add back:
covenant adjustments3
and
amortisation
|
|
£55.8m
|
£70.9m
|
|
|
Covenant
calculation – adjusted EBITDA
|
b1
|
£205.8m
|
£241.5m
|
|
|
Less: IFRS 16
impact
|
|
£(51.1)m
|
£(68.4)m
|
|
|
Covenant
calculation – adjusted EBITDA (excluding IFRS 16)
|
b2
|
£154.7m
|
£173.1m
|
|
|
|
|
|
|
|
|
Adjusted EBITA
(US PP covenants)
|
a3
|
£150.0m
|
£162.4m
|
Adjusted for
difference in exceptional items treatment
|
|
Adjusted EBITDA
(US PP covenants)
|
b3
|
£205.8m
|
£233.3m
|
Adjusted for
difference in exceptional items treatment
|
|
|
|
|
|
|
|
Adjusted
interest charge
|
|
£(45.9)m
|
£(50.0)m
|
Line information
in note 6
|
|
Add back:
covenant adjustments4
|
|
£2.0m
|
£3.8m
|
|
|
Borrowing
costs
|
c1
|
£(43.9)m
|
£(46.2)m
|
|
|
Less: IFRS 16
impact
|
|
£16.8m
|
£18.2m
|
|
|
Borrowing costs
(excluding IFRS 16)
|
c2
|
£(27.1)m
|
£(28.0)m
|
|
|
|
|
|
|
|
|
5.1
Interest cover (US PP covenant)
|
a3/c2
|
5.5x
|
5.8x
|
Adjusted
EBITA/Borrowing costs with adjusted EBITA including the impact of
IFRS 16 and the borrowing costs excluding the impact of IFRS 16.
Minimum permitted value of 4.0
|
|
5.2
Interest cover (other financing agreements)
|
a2/c2
|
5.2x
|
5.5x
|
Adjusted
EBITA/Borrowing costs with both variables excluding IFRS 16.
Minimum permitted value of 4.0
|
|
|
|
|
|
|
|
Net
debt
|
|
£415.2m
|
£545.5m
|
Line information
in note 10
|
|
Add back:
covenant adjustments5
|
|
£44.2m
|
£53.2m
|
|
|
Less: IFRS 16
impact
|
|
£(348.7)m
|
£(363.4)m
|
|
|
Covenant
calculation - adjusted net debt (excluding IFRS 16)
|
d1
|
£110.7m
|
£235.3m
|
|
|
|
|
|
|
|
|
6.1
Adjusted net debt to post IFRS 16 adjusted EBITDA ratio (US PP
covenant)
|
d1/b3
|
0.5x
|
1.0x
|
Adjusted net
debt/adjusted EBITDA with adjusted net debt excluding the impact of
IFRS 16 and adjusted EBITDA including the impact of IFRS 16.
Maximum permitted value of 3.0
|
|
6.2
Adjusted net debt to adjusted EBITDA ratio (other financing
agreements)
|
d1/b2
|
0.7x
|
1.4x
|
Adjusted net
debt/adjusted EBITDA with both variables excluding IFRS 16. Maximum
permitted value of 3.0
|
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 for interest income and interest
expense.
5. Covenant
adjustments include adjustments relating to restricted cash and
cash in businesses held-for-sale.
