Interim Management Statement

12 May 2014 Capita plc - Interim management statement Capita plc ('Capita'), the UK's leading customer and business processmanagement (`BPM') company, is today issuing its interim management statementcovering trading and financial progress to date in 2014. This statementcoincides with Capita's Annual General Meeting which is taking place today at11am. Update on performance We have made a strong start to 2014 securing £1.1bn of major new sales wins(IMS May 2013: £660m) including contracts with Transport for London, ScottishWide Area Network, John Lewis and the Ministry of Defence. Our bid pipeline,which stood at £5.5bn as at 27 February 2014, remains strong with a good levelof replenishment following recent contract wins. The bid pipeline currentlycomprises opportunities across our target markets, particularly in the privatesector, primarily telecoms and financial services, in the justice market andthe wider public sector. To date in 2014, we have also acquired 6 complementarybusinesses for a total consideration of £201m, taking us into new marketsegments and extending our capabilities. These acquisitions play a key role inour major bid propositions to clients in our existing and new markets andtherefore support the delivery of future organic growth. We are making good progress across our key financial metrics as anticipated inour full year results statement issued on 27 February 2014. As a result of ourstrong major sales performance in 2013 and to date in 2014 and our goodoperational performance, we are well placed to achieve organic growth andoperating margins in line with consensus market expectations for the full year2014. We remain on track to deliver an annual cash conversion ratio at oraround 100% and net capital expenditure at or below 4% of full year revenue. Delivering profitable organic growth We continue to generate profitable growth by winning business with new andexisting clients. To date in 2014, we have secured 7 new and extended majorcontracts with an aggregate value of £1.1bn including: * John Lewis - selected by John Lewis to provide its online contact centre. Under the agreement, which is worth £93.5m over 5 years, Capita will support John Lewis' online growth strategy and deliver a digital service, built around John Lewis' customers, that integrates with the full range of customer contact channels. * Ministry of Defence (MOD) - selected as preferred bidder to be the Strategic Business Partner for the Defence Infrastructure Organisation (DIO). Capita will lead a partnership comprising two integrated sub-contractors, URS and PA Consulting. The 10-year partnership, which could be worth around £400m to Capita, will lead the management and transformation of the UK's national and international defence infrastructure. * Scottish Wide Area Network (SWAN) - signed a framework contract to deliver SWAN, a single public services network for the use of all public service organisations within Scotland. The contract value for SWAN is up to £325m over 9 years. More than 4,600 sites will be connected to the initial network including schools, hospitals, GP surgeries, pharmacists and local council offices. Key benefits include reduced costs, improved service and the ability to share data across organisations, fostering co-operative working. This places Capita at the heart of public service delivery in Scotland, providing a platform to offer additional services and build our business here. * Transport for London (TfL) - secured a 5 year contract with TfL to operate and enforce the congestion charging, low emission zone and traffic enforcement notice processing schemes. Capita will take responsibility for the schemes in November 2015, following a period of implementation which commences in 2014. The overall agreement, including the implementation period, is expected to generate revenue of approximately £145m to Capita. * £118m other major contracts worth £25m - £50m: secured an interim services agreement with the Ministry of Justice to take on responsibility for the frontline delivery of the existing electronic tagging operations prior to implementation of the new electronic monitoring contract. This involved the transfer of around 1,000 employees to Capita under TUPE regulations in February and March 2014. We have also secured a new contract with Genesis Housing Association and an extension to our Metropolitan Police radio managed services contract. Bid pipeline: As at 27 February 2014, the bid pipeline stood at £5.5bn(November 2013: £4.2bn) comprised of 25 bids (94% new business and 6% renewals)and is being steadily replenished following recent contract wins. The pipelineis a snapshot of major bid opportunities worth £25m or above, capped at £1bnand where we have been shortlisted by the client to the last 4 bidders orfewer. We announce the pipeline three times each year, in February, July andNovember. Our current major bid win rate remains at its highest ever level. Contract rebids: We have one material contract up for rebid in 2015 (arisingfrom a recent acquisition) and then no further material rebids for the next 5years (defined as having forecast annual revenue in excess of 1% of 2013revenue). Securing value enhancing acquisitions The acquisition of small to medium sized businesses supports Capita's long termorganic growth by providing entry into new markets and enhancing our salesoffering by adding further scale and complementary capabilities to the Group'sservice offering. To date in 2014, we have acquired 6 companies for a total cash consideration of£201m. This includes acquisitions that have enhanced our IT and softwarecapabilities and facilitated entry into a new sector for Capita, domesticmortgage processing: Asset Services Division - Acquisition of Crown Mortgage Management (`Crown') aprovider of residential and commercial mortgage administration services tobanks and financial institutions for a cash consideration of £7.5m, subject toregulatory approval. Crown is one of the longest established residential andsmall balance commercial mortgage servicers in the UK and has significantexperience in managing clients' strategies across both performing andnon-performing mortgage assets. Services include commercial servicing,residential primary servicing, new mortgage origination, equity releaseadministration, credit management and due diligence. Capita currently processes£129bn of commercial loans on behalf of banks. The combination of Crown'sspecialist skills with Capita's large scale administration capability andinfrastructure provides us with a strong platform for growth in this sector. IT Services Division - Extended our networking capabilities with theacquisition of IT network services provider Updata Infrastructure (UK) for acash consideration of £80m. Updata provides a range of networking andconnectivity services to mainly public sector clients and is working withCapita on the framework contract to deliver the Scottish Wide Area Network(SWAN). We have expanded our IT reseller offerings with the acquisition ofNetwork Technology Solutions (UK), which provides a range of security solutionsincluding intrusion detection and prevention, data loss prevention and remoteaccess across the private and public sectors (for a cash consideration of £5.7m). Justice & Secure Services Division - To support our growing presence in theutilities sector and enhance our data management capabilities, we have agreedto acquire AMT-SYBEX Group (AMT) a proprietary software business providingsoftware and related services in mobile technology and smart data management tothe utilities and transport sectors. We are acquiring the business for aninitial consideration of £82m on a cash free, debt free basis, plus acontingent consideration of up to £23m (based on the business reaching specificprofit targets over the next 12 months). The acquisition of AMT is subject toregulatory approval. The acquisition of Liberty, a provider of specialistdocument management services primarily for the transport sector, for a cashconsideration of £6.5m, adds further specialist document management services toenhance our technology enabled car parking services proposition. Adding to ourresource management offering, we have acquired Retain International, a providerof resource planning, scheduling and management software, for a cashconsideration of £18.8m. Outlook The UK market for customer and business process management remains highlyactive and Capita is well positioned to secure major outsourcing andtransformational partnership opportunities across an increased number ofprivate and public sector markets. Our unrivalled and growing breadth ofcapability provides us with a greater reach across these diversified marketsand increases our ability to be highly selective regarding the opportunities wepursue. Our bid pipeline remains buoyant and with increasingly strong salesmomentum, particularly across the private sector and local government, there isa good flow of further opportunities which will continue to fuel the bidpipeline and organic growth in 2015 and the following years. We have strong revenue visibility for 2014 and growing visibility already for2015 as a consequence of our sales successes in 2013 and to date in 2014. Thisexcellent sales performance, together with the acquisitions completed over theprevious 12 months and our solid underlying operating performance, gives usconfidence in meeting consensus market expectations for 2014 and provides agood platform for growth in 2015 and beyond. -ends- For further information: Capita plcTel: 020 7654 2219Andy Parker, Chief ExecutiveShona Nichols, Corporate Communications Director Media enquiries only: Capita press officeCaroline MooneyTel: 020 7654 2152 or 020 7654 2399 (out of hours)Email: [email protected] About Capita Capita plc is the UK's leading provider of customer and business processmanagement (BPM) and integrated professional support service solutions. With64,000 people at more than 350 sites, including 73 business centres across theUK, Europe, India and South Africa, the Group uses its expertise,infrastructure and scale benefits to transform its clients' services, drivingdown costs and adding value. Capita is quoted on the London Stock Exchange(CPI.L), and is a constituent of the FTSE 100 with 2013 revenue of £3.9bn.Further information on Capita plc can be found at: www.capita.co.uk