29th Feb 2008 07:00
29 February 2008 THE CAPITA GROUP PLC Preliminary Results for the year ended 31 December 2007 STRONG PERFORMANCE AND EXCELLENT PROSPECTSFinancial Highlights Year ended 31 Year ended 31 Change December 2007 December 2006 Turnover ‚£2,073m ‚£1,739m +19%Operating profit * ‚£271.3m ‚£225.1m +21%Profit before tax * ‚£238.4m ‚£200.1m +19%Earnings per share* 28.1p 23.1p +22%Total dividend per 12.0p 9.0p +33%share
*before intangible amortisation of ‚£9.7m (2006: ‚£6.9m)
Key points
- Excellent organic growth: record major contract wins and renewals of ‚£1.89bn in 2007 (2006: ‚£1.37bn)
- Following an unprecedented ‚£1.5bn of client decisions over the last 3 months, bid pipeline stands at ‚£2.5bn (Feb 2007: ‚£2.6bn). Markets remain highly active
- Continued operating margin progression: increased by 14 basis points to 13.1% (2006: 12.9%)
- Strong operating cash flow up by 20% to ‚£334m (2006: ‚£279m)
- 33% dividend increase plus special dividend of 25p per share paid in October 2007
- ‚£272m returned to shareholders, including the proposed final dividend.
Paul Pindar, Chief Executive of The Capita Group Plc, commented:
"Capita performed strongly in 2007 with a record level of new major contracts in the year.
We enter 2008 with confidence. There is strong demand for outsourcing and our businesses across the Group are experiencing good trading conditions.
Our successes in 2007 and progress in the first few weeks of thisyear underpin our continued growth in 2008. With healthy sales prospects andconsistently good operational performance, we are positioned well for furtherstrong performance thereafter."For further information:The Capita Group Plc Tel: 020 7799 1525Paul Pindar, Chief ExecutiveShona Nichols, Corporate CommunicationsDirectorCapita Press Office Tel: 0207 654 2152 or 0870 2400 488 out of hours Financial Dynamics Tel: 020 7269 7121Andrew Lorenz The Capita Group Plc Preliminary Statement for the year ended 31 December 2007
Capita performed strongly in 2007. Organic growth was excellent with businesses across the Group performing well and with a record level of new major contracts secured in the year.
In the year ended 31 December 2007, turnover increased by 19% to‚£2,073m (2006: ‚£1,739m). Operating profit before amortisation rose by 21% to‚£271.3m (2006: ‚£225.1m) and profit before taxation and amortisation increasedby 19% to ‚£238.4m (2006: ‚£200.1m). Earnings per share before amortisation grewby 22% to 28.1p (2006: 23.1p).
Operating cash flow rose by 20% to ‚£334m (2006: ‚£279m). We have increased our total dividend for the year by 33% to 12.0p (2006: 9.0p). Additionally, we paid a special dividend of 25p per share in October 2007, returning ‚£155m to shareholders. (The special dividend was accompanied by a commensurate share consolidation.) We have also returned a further ‚£44m to shareholders through purchasing our own shares. In total, including the proposed final dividend, we will be returning ‚£272m (2006: ‚£279m) to shareholders in respect of the 2007 financial year.
Building value for shareholders
To ensure we build value for shareholders on a consistent basis over the long term, we focus on a number of key financial measures:
- Margins - We have continued our long term trend of improving operating margins (before amortisation) which have increased by 14 basis points during the period to 13.1%. This is due to a combination of factors including operational leverage, increased use of our offshore facilities, a continued focus on sharing IT platforms and rationalising infrastructure.
- Cash flow - The strength of our business model continues to be reflected in our excellent underlying cash flow, with ‚£334m (2006: ‚£279m) generated by operations in the period, representing an operating profit to cash conversion rate of 123% (2006: 124%). Our free cash flow increased by 19% to ‚£184m (2006: ‚£154m).
We use surplus cash to add value in 3 main ways - through acquisitions, share buybacks and dividends:
- Acquisitions - Acquisitions help us to enter new markets where wecan grow organically, strengthen existing market positions and build economiesof scale, or access a new customer base. In 2007, we spent ‚£114m on 12acquisitions and investments and our pipeline of potential acquisition targetsremains at a healthy level. While continuing to be highly selective, weanticipate a similar volume of small to medium sized transactions in 2008.- Share buybacks - Opportunistic share buybacks help us to maintainan efficient capital structure and minimise our long term cost of capital. Inthe period to 31 December 2007, the Group bought back 6.6m shares(representing 1.1% of the issued share capital) at an average price of 665p.Following these buybacks, there are 609m shares in issue. The Group hasauthority to re-purchase up to 10% of its issued share capital and we plan toseek renewal of this authority at the Annual General Meeting.- Regular dividends - A key element in the creation of shareholdervalue is a progressive dividend policy. The Board is recommending a finaldividend of 8.0p per ordinary share (2006: 6.3p), making a total of 12.0p(2006: 9.0p) for the year. This represents an increase of 33%. The finaldividend will be payable on 9 May 2008 to shareholders on the register at theclose of business on 28 March 2008. Including the proposed final dividend,Capita's total dividend will have grown at a compound annual rate of 32% overthe 5 years to 31 December 2007. Our confidence in the strength and resilienceof Capita's business model has allowed us to reduce annual dividend covergradually. For 2007 we continued this trend, reducing cover to 2.35 times(2006: 2.6 times).- Special dividends - Taking account of the Company's strong cashflows, potential acquisition pipeline and other potential investmentopportunities, in July 2007 the Board declared a special dividend of 25p pershare - returning ‚£155m of surplus capital to shareholders. This was paid inaddition to the interim dividend of 4.0p on 19 October 2007.We also undertook a share consolidation, issuing 30 new shares forevery 31 old shares. The principal purpose of this was to ensure that (subjectto normal market movements) the market price of each new ordinary sharematched what the share price would have been if the special dividend had notbeen paid. This means that earnings per share and share prices can still becompared fairly with previous financial periods.
Group interest cover for the year ended 31 December 2007 was 8 times.
- Capital expenditure - We aim to contain capital expenditure at or below 4% of revenue. During the year, we met this objective with net capital expenditure at 3.5% (2006: 3.6%) of revenue.
- Return on capital employed - We focus on driving a steadily increasing return on capital. During 2007, the post tax return on average capital employed has improved to 19.6% (2006: 18.5%). This compares to our estimated weighted average cost of capital which is 8.6%.
Our marketplace
The market for Business Process Outsourcing ("BPO") in the UK andIreland continues to provide strong growth opportunities. Industry analystsestimate the total potential market at ‚£94.8bn per annum. In 2007, servicesoutsourced totalled an estimated ‚£5.1bn (2006: ‚£4.6bn), representing only 5%of the total potential market. The BPO market is forecast to grow at 10% perannum until 2011*.
We are superbly positioned to exploit this market potential. Our increasing scale and capability provide us with a clear competitive edge across our markets and enable us to present compelling propositions to clients. With our recent strong performance in securing new business, we have extended the leading positions we hold in the majority of our markets, particularly local government and life and pensions. We remain the clear market leader in the overall UK BPO market with 22% (2006: 21%) market share*.
Generating profitable growth
We generate profitable growth by winning business from new and existing customers in the UK and Ireland and supplement this by acquiring businesses that broaden our skill base and extend our market reach.
Organic growth
Each of our businesses employs sales teams focused upon securing growth from both existing and new customers. Performance across these businesses was strong in 2007.
Our centrally managed Major Sales Team pursues complex, long term contracts worth over ‚£10m which require a wide range of the Group's skills and generate high quality, recurring revenues. Securing and renewing major contracts is an important component of our growth.
Our sales performance in 2007 was excellent. We secured 8 major contracts with a total value of ‚£1.89bn (2006: ‚£1.37bn) and we maintained our 1 in 2 win rate.
Major contracts won in 2007 include:
- Swindon Borough Council - to deliver a wide range of local
government services in a partnership worth ‚£243m over 15 years. (This
contract had previously been estimated to be worth ‚£140m over 10 years
when we were selected as preferred bidder in October 2006). The contract
commenced on 1 February 2007 and a smooth transition was achieved. - Southampton City Council - to develop a 10 year strategic partnership worth ‚£290m to deliver a wide range of services including customer services, IT and property and to administer procurement, HR, payroll and revenues and benefits. The contract commenced on 1 October 2007. - Service Birmingham - was set up by Birmingham City Council and
Capita to support ICT and business transformation within the Council. A 10
year, ‚£475m contract to deliver ICT transformation was signed in April
2006. ICT transformation is substantially completed and key performance
indicators (KPIs) are consistently being met. Governance arrangements were
also put in place for additional business transformation programmes to be
proposed and implemented. The first was approved in July 2006 and related
to Corporate Services and the programme is on target to deliver cashable
savings of ‚£28m in 2007/2008. In May 2007, the Council approved the
business case to transform Customer Services, with a budget of ‚£142m over
10 years. Service Birmingham was successful at the Computing Awards 2007,
being awarded IT Outsourced Project and IT Professional of the Year. - Resolution plc - selected as strategic partner to deliver customer services, IT services, policy servicing, claims and new business processing for 4.5 million policyholders and future new business. The
contract is worth ‚£580m over 12 years and involves both closed and open
book policies. Service commenced on 1 August 2007 and has already been performing well in the first few months. Approximately 2,000 Resolution staff transferred to Capita. - Prudential - strategic outsourcing partner to administer 7 million
mature life and pensions policies including group and individual pensions,
investment bonds and life and endowment policies. The contract is worth
approximately ‚£722m over 15 years. Capita will provide customer servicing,
policy administration, new business processing, claims activity and
related IT support to Prudential UK.
Approximately 1,750 Prudential staff working in the UK will transfer to Capita and Capita will acquire business and assets from Prudential, for a consideration of ‚£25m, including part of the business of PPMS, Prudential's offshore operation based in Mumbai, involving the transfer of 1,250 staff and resulting in the doubling of Capita's offshore operations.
2008 has started well: In January, we announced that we had been selected as preferred operations outsourcing partner by Marsh Ltd.
- Marsh Ltd - selected as preferred operations outsourcing partner
to transform and deliver Marsh's back office administration services based
in Norwich. Final negotiations are taking place and the proposed
partnership is estimated to be worth approximately ‚£200m to Capita over 10
years. Under the agreement, Capita will provide support and processing services to enhance Marsh's broking activities to clients across its business. Following due consultation, approximately 650 Marsh employees will transfer under TUPE to Capita and the current offshored work will be transferred from the current external provider in India to Capita's
offshore facilities. Service commencement is anticipated to be early April
2008.
Today, we are pleased to announce that Capita has been selected as preferred partner for British Islamic Insurance Holdings ("BIIH"). We have also signed an additional contract with eircom and been awarded a one year extension to the Teachers' Pension Scheme contract to September 2011, a contract that we have been administering successfully since 1996.
- British Islamic Insurance Holdings - selected as preferred
outsourcing partner for its insurance and other financial products in the
UK. Final negotiations are taking place and the proposed partnership is
estimated to be worth approximately ‚£87m to Capita over 8 years. Under the
agreement, Capita will sell policies on behalf of BIIH both direct to
consumers and via independent financial advisers, provide customer
relations and processing services and an IT platform from which to launch
new products. Service commencement, subject to regulatory approvals and contract, is anticipated to be early April 2008. - eircom - Ireland's leading telecoms provider, has signed a further
contract with Capita to deliver part of its directory enquiry service. The
contract is worth ‚£17m over a 5 year term and will be run from eircom's
existing call centre in Cork. The service will commence in March 2008. - Accordingly, in the first 8 weeks of 2008, we have won major contracts with an aggregate value of ‚£314m.Bid pipeline: Within the past 3 months awards have been maderegarding ‚£1.5bn of contract opportunities in our bid pipeline of which Capitahas won 68% by value. As a consequence, our bid pipeline currently stands at‚£2.5bn (Feb 2007: ‚£2.6bn) but is already being replenished at a healthy rate,reflecting the quality of business opportunities across our markets.The bid pipeline only includes bid situations in which we areshortlisted as one of four or fewer competitors and caps our largest bids at‚£500m. Behind this is an active prospect list of opportunities which are yetto reach a shortlist stage.
Contract renewals: There are now no material contracts (defined as having annual revenue in excess of 1% of 2007 turnover) due for renewal in 2008 and 2009.
Stimulating growth through acquisition
A key element of our growth is the acquisition of small to mediumsized companies which extend our presence in existing marketplaces or providea foothold in a new market. We have substantial experience of integratingacquired businesses and achieving synergies with our existing operations. In2007 we completed 12 acquisitions and investments including:
- Harry Weeks - a business travel software company specialising in
online rail ticketing solutions for corporates and travel intermediaries,
was acquired in February for ‚£21m and further extends our business travel
administration offering. The corporate facing product has been enhanced,
rebranded and launched in early 2008 and is successfully supporting the
ongoing growth of Capita Business Travel. The core technology, currently
used by in excess of 70% of the travel management community, has seen
further growth and now stands alone under the newly named company, Evolvi
Rail Systems. - CMGL - purchased for ‚£32m in March 2007, expands our offering and client base in the outsourced claims and insurance management services
arena, particularly within the discontinued business market. The business
has now been successfully integrated with Capita London Market Services.
It has developed a healthy new business pipeline and is well placed to deliver strong organic growth during 2008 and 2009. - PricewaterhouseCoopers CI LLP - a trust administration business providing trust formation and ongoing administration services in
accordance with Jersey, Guernsey and English law, acquired for ‚£12.75m.
The business has been successfully integrated with Capita's other trust administration businesses in Jersey. - Higham Dunnett Shaw (HDS) - acquired for a consideration of ‚£15m. The acquisition adds valuable new expertise and capacity to Capita
Hartshead's group pensions administration business. It provides a number
of synergies with our existing service and adds important new services,
such as expertise in the bulk purchase annuities market. Furthermore, the
acquisition enhances our propositions when bidding for major life and
pensions outsourcing opportunities, due to its particular experience in
policy and client retention. We are now well placed to provide a full
end-to-end service for clients of all sizes and achieve significant
economies of scale.
A focus on some of our markets
Four of our target markets merit further comment. Life andpensions, general insurance and local government were our most active marketsin 2007 and are expected to remain so in 2008. Conversely, central governmentwas our quietest market in 2007.
- Life and pensions: Since our entry into this market in 2002,
through contract wins and acquisitions, we have created a business
employing 7,000 people. With the start of the Prudential contract this
year, we will be administering 22 million policies and have a resource of
10,000 people. This positions us as clear market leader administering over
half of the policies outsourced to date. The market remains highly active
with only 35% of all policies outsourced to date. - General insurance: We entered this market in November 2000 and again have expanded our service offering through a combination of acquisitions and contracts. Services now range across the entire back
office and customer interface. The scale and breadth of the business now
position us well to provide clients with extensive outsourced and managed
services solutions. This is demonstrated by our recent selection by Marsh
Ltd to become their preferred operations outsourcing partner and our ability to set up an entire new service infrastructure for BIIH. - Local government: We have been supporting local authorities ever since Capita's formation and have now built up an unrivalled span of
services and delivery models to help transform the way local authorities
work. Over the past 2 years, this breadth of services has resulted in us
winning several transformation contracts encompassing the entire back
office and customer service infrastructure for clients such as Birmingham
and Southampton City Councils and Swindon Borough Council. - Central government: Across Government there remains constant pressure to increase efficiency while simultaneously enhancing service
quality. In the short term, we expect growth in this market to be mainly
fuelled by requirements for outsourcing to deliver new service infrastructures for new initiatives rather than transforming existing administration infrastructure.
Increasing scale and capabilities of our offshore operations
Development of our blended onshore/offshore delivery model providesfurther flexibility and benefits to our clients. Our offshore operation inIndia is developing strongly both in scale and scope of services. In 2007, itbecame Capita's largest multi-client service centre employing more than 1,300staff. In May 2007, we expanded our central Mumbai site by an additional 600seats and the operation now processes more than one million transactions permonth. It is fully representative of the Group's target markets, servicingboth public and private clients and supports a number of our businesses.The offshore operation has played a significant role in helping tosecure major new business, including our contracts with Resolution, Prudentialand Marsh. By the end of 2008, we expect to grow the offshore business to3,000 staff, a year ahead of plan, and will have achieved a major step forwardin scale which can be leveraged to benefit the Group and our clients.We are currently securing an additional site in Pune in India. Thesite will initially have 50,000 sq.ft. fitted out, with an option on a further50,000 sq.ft. and is due to be operational in June 2008. This will provide uswith greater access to employees in a different region, increased operationalflexibility and a robust operational back-up infrastructure.
Valuing our people
Our success is driven by our people. Irrespective of whether theyhave joined us with contracts, through acquisitions or direct recruitment,they play a vital role in helping us meet client expectations and supportingour growth. They are valuable ambassadors for the Group and as such areinstrumental to securing new business. The Board would like to thank everyoneacross the Group for the role they play in Capita's success. We applaud andthank you all warmly for your enthusiasm, hard work and commitment to serviceexcellence.Group Board changesWith effect from 1 March 2008, Martin Bolland will join Capita asNon-Executive Director. Martin is a Chartered Accountant and qualified atPricewaterhouseCoopers in 1980. For the last 10 years, Martin was working withAlchemy Partners LLP, a private equity house which focused on the mid market,of which he was a founding partner. Previously, he held a number of positionsincluding Chief Executive and Vice President Finance within Lonrho Hotels andNon-Executive Director at Jacques Vert plc. Martin's appointment represents asignificant addition to our Board and we look forward to his contribution tothe team.At the end of September 2008, Peter Cawdron will be standing downas Non-Executive Director, after serving 11 years on the Group Board. Peterhas been a valuable member of the Board and his knowledge of the business andinsight have been great assets to the Group. We will miss his input and wishhim every success for the future.
Future prospects
We enter 2008 with confidence. There is strong demand for outsourcing and our businesses across the Group are experiencing good trading conditions.
Our successes in 2007 and progress in the first few weeks of thisyear underpin our continued growth in 2008. With healthy sales prospects andconsistently good operational performance, we are positioned well for furtherstrong performance thereafter. -Ends-*Source: Ovum 2007Preliminary StatementConsolidated income statementfor the year ended 31 2007 2006December 2007 Before Before amortisation Amortisation Total amortisation Amortisation Total Notes ‚£m ‚£m ‚£m ‚£m ‚£m ‚£mContinuing operations:Revenue 1 2,073.3 - 2,073.3 1,738.5 - 1,738.5Cost of sales 1,498.5 - 1,498.5 1,256.5 - 1,256.5 Gross profit 574.8 - 574.8 482.0 - 482.0Administrative expenses 2 303.5 9.7 313.2 256.9 6.9 263.8 Operating profit 1 271.3 (9.7) 261.6 225.1 (6.9) 218.2Finance revenue 1.6 - 1.6 1.0 - 1.0Finance costs (35.7) - (35.7) (26.0) - (26.0)Investment income 1.2 - 1.2 - - -Profit before tax 238.4 (9.7) 228.7 200.1 (6.9) 193.2Income tax expense (66.0) 3.5 (62.5) (55.4) 1.9 (53.5) Profit for the year 172.4 (6.2) 166.2 144.7 (5.0) 139.7 Attributable to:
Equity holders of the 172.4 (6.2) 166.2
144.8 (5.0) 139.8parentMinority interest - - - (0.1) - (0.1) 172.4 (6.2) 166.2 144.7 (5.0) 139.7 Earnings per share 3- basic 28.10p (1.01)p 27.09p 23.10p (0.78)p 22.32p- diluted 27.63p (0.99)p 26.64p 22.56p (0.76)p 21.80p
Consolidated statement of recognised income and expense for the year ended 31 December 2007
2007 2006 ‚£m ‚£m Actuarial gains on defined benefit pension 25.4 12.8
schemes
Exchange differences on translation of 1.1 (0.7)foreign operationsGain on available for sale investments - 0.3Gains on cash flow hedges 5.6 -Tax on items taken directly to equity (5.0) 11.0Net income recognised directly in equity 27.1 23.4Profit for the year 166.2 139.7Total income and expense for the period 193.3 163.1Attributable to:Equity holders of the parent 193.3 163.2Minority interest - (0.1) 193.3 163.1Consolidated balance sheetas at 31 December 2007 2007 2006 ‚£m ‚£mNon-current assetsProperty, plant and equipment 193.4 171.0Intangible assets 745.7 630.0Financial assets 60.6 32.6Trade and other receivables 11.1 6.8Employee benefits 20.3 -Deferred taxation 1.4 22.1 1,032.5 862.5 Current assetsFinancial assets 0.9 -Trade and other receivables 456.4 394.9Cash 0.8 9.7 458.1 404.6Total assets 1,490.6 1,267.1 Current liabilitiesTrade and other payables 556.9 449.4Financial liabilities 57.7 50.4Provisions 1.8 1.0Income tax payable 36.3 33.5 652.7 534.3Non-current liabilitiesTrade and other payables 9.2 0.8Financial liabilities 480.2 378.7Provisions 0.8 0.7Employee benefits 15.9 26.8 506.1 407.0 Total liabilities 1,158.8 941.3 Net assets 331.8 325.8 Capital and reservesIssued share capital 12.6 12.3Share premium 374.9 308.1Treasury shares - -Capital redemption reserve 1.8 1.7Foreign currency translation 0.7 (0.4)Net unrealised gains reserve 4.0 -Retained earnings (62.2) 4.0Equity shareholders' funds 331.8 325.7Minority interest - 0.1 Total equity 331.8 325.8 Consolidated cash flow statementfor the year ended 31 December 2007 2007
2006
Notes ‚£m
‚£m
Cash flows from operating activities Operating profit on continuing activities before interest and taxation
261.6
218.2
Depreciation 46.1
42.2
Amortisation of other intangible assets (treated as 1.5
1.2
depreciation)
Amortisation of intangible assets created on acquisition 9.7
6.9Share based payment expense 8.6 8.5Pension charge 15.2 15.9Pension contributions (21.0) (19.1)
(Profit)/loss on sale of property, plant and equipment (0.1)
0.3Movement in provisions 0.9 (1.9)Increase in debtors (71.4) (48.8)Increase in creditors 82.9 55.6
Cash generated from operations 334.0
279.0 Income tax paid (45.8) (40.3)Interest paid (33.5) (23.1)Interest received 1.6 1.0
Net cash generated from operating activities 256.3
216.6
Net cash used in investing activitiesPurchase of property, plant and equipment (67.9)
(63.0)
Proceeds from sale of property, plant and equipment 1.0
1.9
Purchase of intangible fixed assets (5.0)
(1.4)
Acquisition of subsidiary undertakings and businesses (94.7)
(37.6)
Cash acquired with subsidiary undertakings 4.4
1.0
Purchase of financial assets (4.4)
(7.6)Investment loan (16.6) (11.7) (183.2) (118.4)Net cash used in financing activitiesIssue of ordinary share capital 67.2
50.4Share buybacks (43.9) (244.9)Share transaction costs (0.5) (1.2)Dividends paid 4 (218.6) (47.7)
Capital element of finance lease rental payments (0.4)
(0.4)
Instalment debtor movement 5 20.4
-
Asset based securitised financing 5 (17.8)
(0.7)
Repayment of loan notes and long term loans (34.6)
(3.4)Proceeds on issue of bond 100.9 179.1Financing arrangement costs (0.3) (0.9) (127.6) (69.7)
Net (decrease)/increase in cash and cash equivalents 5 (54.5)
28.5
Cash and cash equivalents at the beginning of the period 9.2
(19.3)
Cash and cash equivalents at 31 December (45.3)
9.2
Cash and cash equivalents comprise:Overdraft (46.1) (0.5)Cash at bank and in hand 0.8 9.7Total (45.3) 9.2Notes to the Preliminary Statement31 December 20071. Segmental information
The Group's operations are organised and managed separately according to the nature of the services provided, with each segment representing a strategic business unit offering a different package of related services across the Group's markets.
Before eliminating sales between business units on consolidation, the Group accounts for sales between business units as if they were to a third party at market rates.
The tables below present revenue, result and certain asset and liability information for the Group's business segments for the years 2007 and 2006. All operations in 2007 are continuing.
Year ended 31 December 2007
HR Property Insurance Financial Integrated
ICT and Life & Professional
solutions consultancy and services services advisory pensions services services specialist services services Total services Segment revenue ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£mTotal segment 265.7 244.6 350.0 158.2 317.5 383.3 264.8 302.4 2,286.5revenueInter-segment (19.8) (12.7) (25.5) (1.3) (15.1) (91.4) (9.3) (38.1) (213.2)revenueThird party revenue 245.9 231.9 324.5 156.9 302.4 291.9 255.5 264.3 2,073.3Segment result Result after 24.4 20.4 37.5 37.9 48.8 29.7 32.3 48.9 279.9depreciationShare based payment (1.0) (1.1) (1.5) (0.6) (2.2) (0.7) (0.7) (0.8) (8.6)Intangible (0.1) (0.7) (3.0) (1.2) (1.3) (0.5) (1.4) (1.5) (9.7)amortisation 23.3 18.6 33.0 36.1 45.3 28.5 30.2 46.6 261.6Net finance costs (34.1)Investment income 1.2Profit before tax 228.7Corporation (62.5)taxationProfit after tax 166.2
Year ended 31 December 2006
HR Property Insurance Financial Integrated
ICT and Life & Professional
solutions consultancy and services services advisory pensions services services specialist services services Total services Segment revenue ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£mTotal segment 226.0 225.5 310.1 120.9 317.6 329.3 186.9 249.5 1,965.8revenueInter-segment (20.1) (26.1) (26.9) (0.1) (16.7) (77.0) (2.6) (57.8) (227.3)revenueThird party revenue 205.9 199.4 283.2 120.8 300.9 252.3 184.3 191.7 1,738.5Segment result Result after 18.7 13.9 32.8 32.1 48.7 25.8 23.4 38.2 233.6depreciationShare based payment (1.0) (1.1) (1.5) (0.6) (2.1) (0.7) (0.7) (0.8) (8.5)Intangible - (0.2) (2.2) (0.9) (0.9) (0.4) (1.2) (1.1) (6.9)amortisation 17.7 12.6 29.1 30.6 45.7 24.7 21.5 36.3 218.2Finance costs (25.0)Profit before taxand minorityinterests 193.2Corporation (53.5)taxationMinority interests 0.1Profit after taxand minorityinterests 139.82. Administrative expenses
Included in the middle column disclosed on the face of the consolidated income statement, against the line item administrative expenses, is the following:
2007 2006 ‚£m ‚£mIntangible amortisation 9.7 6.9 9.7 6.93. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit for the year attributable to ordinary equity holders of the parent 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.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
2007 2006
‚£m ‚£mNet profit attributable to ordinary equity holders of the parent from 166.2 139.8continuing operations 2007 2006 Number Number
million million Weighted average number of ordinary shares (excluding treasury shares) for basic earnings per share
613.6 626.3Dilutive potential ordinary shares:Employee share options
10.3 15.0 Weighted average number of ordinary shares (excluding treasury shares) adjusted for the effect of dilution
623.9 641.3
There have been no other transactions involving ordinary shares or potentialordinary shares between the reporting date and the date of completion of thesefinancial statements.The following additional earnings per share figures are calculated based onearnings attributable to ordinary equity holders of the parent beforeamortisation of ‚£172.4m (2006: ‚£144.8m) and after amortisation of ‚£166.2m(2006: ‚£139.7m). They are included as they provide a better understanding ofthe underlying trading performance of the Group. 2007 2006 P PBasic earnings per share - before amortisation and impairment 28.10 23.10 - after amortisation and impairment 27.09 22.32Diluted earnings per share - before amortisation and impairment 27.63 22.56 - after amortisation and impairment 26.64 21.80
4. Dividends paid and proposed
2007 2006
‚£m ‚£mDeclared and paid during the yearOrdinary shares (equity):Final for 2006 paid: 6.3p per share (2005: 4.9p per share) 39.2 31.1Interim for 2007 paid 4.0p per share (2006: 2.7p per share)
24.7 16.6 Special dividend for 2007: paid 25.0p per share (2006: nil p per share) 154.7 -
218.6 47.7Proposed for approval at AGM (not recognised as a liability at 31December)Ordinary shares (equity):Final for 2007: 8.0p per share (2006: 6.3p per share)
48.7 38.9
5. Reconciliation of net cash flow to movement in net funds/(debt)
At December 2007 Net debt at Acquisitions Non-cash Net debt at 1 in 2007 Cash flow flow 31 January (exc. cash) movements movements December 2007 2007 ‚£m ‚£m ‚£m ‚£m ‚£mCash and cash equivalents 9.7 - (8.9) - 0.8Overdrafts (0.5) - (45.6) - (46.1)Cash 9.2 - (54.5) - (45.3)Loan notes (22.2) - 26.4 (5.9) (1.7)Long term debt - (8.2) 8.2 - -Bonds (372.0) - (100.9) 11.8 (461.1)Currency swaps (6.4) - - (11.7) (18.1)Interest rate swaps - - - 0.1 0.1Finance leases (0.5) (0.1) 0.4 - (0.2)Sub-total net debt (391.9) (8.3) (120.4) (5.7) (526.3)Asset based securitised (27.5) - 17.8 - (9.7)finance (419.4) (8.3) (102.6) (5.7) (536.0)The instalment debtor movement represents the net movement on the underlyingbalances with customers. Net debt at Acquisitions Non-cash Net debt at 1 in 2006 Cash flow flow 31At December 2006 January (exc. cash) movements movements December 2006 2006 ‚£m ‚£m ‚£m ‚£m ‚£mCash and cash equivalents - - 9.7 - 9.7Overdrafts (19.3) - 18.8 - (0.5)Cash (19.3) - 28.5 - 9.2Loan notes (22.7) - 0.5 - (22.2)Long term debt - (2.9) 2.9 - -Bonds (198.6) - (178.6) 5.2 (372.0)Currency swaps (2.6) - - (3.8) (6.4)Interest rate swaps 1.6 - - (1.6) -Finance leases (0.2) (0.7) 0.4 - (0.5)Sub-total net debt (241.8) (3.6) (146.3) (0.2) (391.9)
Asset based securitised finance (28.2) - 0.7
- (27.5) (270.0) (3.6) (145.6) (0.2) (419.4)6. Preliminary announcement
The preliminary announcement is prepared in accordance with International Financial Reporting Standards.
A duly appointed and authorised committee of the Board of Directors approved the preliminary announcement on 28 February 2008.
The announcement represents non-statutory accounts within themeaning of section 240 of the Companies Act 1985. The statutory annualaccounts for the year ended 31 December 2007, upon which an unqualified auditopinion has been given and which did not contain a statement under section235, 237(2) or 237(3) of the Companies Act 1985, will be sent to the Registrarof Companies.
Copies of the announcement can be obtained from the Company's registered office at 71 Victoria Street, Westminster, London, SW1H 0XA.
It is intended that the Annual Report and Accounts will be posted to shareholders on 31 March 2008 and will be available to members of the public at the registered office of the Company from that date.
CAPITA GROUP PLCRelated Shares:
Capita