24th Feb 2005 07:00
Capita Group PLC24 February 2005 24 February 2005 THE CAPITA GROUP PLC Preliminary Results for the year ended 31 December 2004 Record Results - Record Bid Pipeline Financial Highlights Year ended Year ended Change 31 December 2004 31 December 2003 Turnover £1,285m £1,081m +19%Profit before tax* £148.2m £121.2m +22%Earnings per share* 16.05p 13.04p +23%Total dividend per share 5.35p 4.00p +34% Key points • Operating margins' enhanced to 12.5% (2003: 12.2%)• Underlying operating cash flow increased to £200m (2003: £158m)• £28m returned to shareholders through share buy backs• Future dividends to be increased in line with earnings growth• 12 major contracts won in 2004 with a value of £1.36bn, up 122% over 2003• Major contracts won in first 8 weeks of 2005 total £110m• Record bid pipeline of £3.8bn, up 41% on corresponding period * Before amortising goodwill and exceptional items Rod Aldridge, Executive Chairman of The Capita Group Plc, commented: "Capita has again returned record results. All our key financial metrics were strongly ahead and we were especially pleased with the strength of our cash generation. "Capita is well placed to make continued progress in 2005. Our existing revenues are strongly underpinned, our sales pipeline is at a record level and the Group is trading strongly. We believe that shareholders will be pleased by our performance in 2005 and beyond." For further information: The Capita Group Plc Tel: 020 7799 1525Rod Aldridge, Executive ChairmanPaul Pindar, Chief ExecutiveShona Nichols, Group Marketing DirectorCapita Press Office Tel: 0870 2400 488 Financial Dynamics Tel: 020 7269 7291David Yates / Richard Mountain Preliminary Results Statement for the year ended 31 December 2004 Chairman's Statement Results Capita made excellent progress during 2004. We have strengthened our position asthe UK's market leader in providing Business Process Outsourcing (BPO) servicesto the public and private sectors and have returned record results for our 16thconsecutive year as a public company. In the year ended 31 December 2004, turnover increased by 19% to £1,285m (2003: £1,081m), operating profits before exceptional items and goodwill amortisation rose by 22% to £160.1m (2003: £131.4m) and net profits beforeexceptional items, goodwill amortisation and taxation increased by 22% to£148.2m (2003: £121.2m). Earnings per share before exceptional items andgoodwill amortisation grew by 23% to 16.05p (2003: 13.04p). Underlying operatingcash flow (excluding the exceptional pension contribution referred to below)remained strong, rising by 26% to £200m (2003: £158m). We have increaseddividends by 34% and returned a further £28m to shareholders through purchasingour own shares. We have chosen to make an exceptional pension contribution of £50m into ourfinal salary pension scheme, where investment returns grow in a tax efficientenvironment. This reduces our FRS17 deficit to £16.4m (net of tax) as at 31December 2004 and provides further security for our staff. We continue to build and strengthen the Group, delivering sustainable value toour stakeholders: primarily our shareholders, customers and employees. Building value for shareholders To assess our progress in building value for shareholders, we focus on a numberof key measures. We met each of these in 2004, as outlined below. We have continued to enhance our operating margins, which improved during theyear to 12.5% (2003: 12.2%). This reflects the increasing sophistication andvalue of the services we provide to customers, our continued focus on seekingefficiencies in service delivery and greater internal economies of scale. The strength of Capita's business model is reflected in our excellent underlying cash flow, with £200m (2003: £158m) generated by operations in the year, representing an operating profit to underlying cash conversion rate of 125% (2003: 120%). Our underlying free cash flow increased by 28% to £106m (2003: £83m). We aim to contain capital expenditure at or below 4% of revenue, although theremay be rare occasions when we exceed this where the financial strength of Capitacan be used as a competitive advantage. In 2004, we achieved this objective withnet capital expenditure being 3.6% (2003: 3.4%) of annual revenue. We also focus on driving a steadily increasing return on capital, which in turnshould exceed our cost of capital. During 2004, the post tax return on averagecapital employed (including debt) has improved to 16.2% (2003: 14.6%). Thisexceeds our cost of capital which is 8.5%. We believe these disciplines form an integral part of building value for ourshareholders on a consistent basis, over the long term. Over the 10 years to 31December 2004, the value of the Group has increased from £89m to £2.4bn. Totalshareholder return in this period has been 22 fold, equivalent to a 36% compoundannual return. We also intend to create shareholder value through a progressive dividendpolicy. The Board is recommending a final dividend of 3.6p per ordinary share,making a total of 5.35p(2003: 4.0p) for the year. This represents a 34% increaseon dividends paid in respect of the 2003 financial year. Over the 10 years to 31December 2004, we have grown Capita's annual dividend at a compound rate of 31%.The final dividend will be paid on 6 May 2005 to shareholders on the register atthe close of business on 8 April 2005. Last year, we stated our intention toreduce annual dividend cover to no more than 3 times by 2006. Our confidence inCapita's business model and resultant cash flow is such that we have now met ourobjective of 3 times cover in 2004. There may also be circumstances in which market conditions allow us to addfurther value for shareholders through share buybacks, thus ensuring we have anefficient capital structure which will minimise our long term cost of capital.During 2004, the Group bought back 8.9m shares (representing 1.3% of the issuedshare capital) at an average price of £3.07. The Group has authority torepurchase up to 10% of its issued share capital and we plan to seek renewal ofthis authority at the AGM. Our marketplace The UK BPO market is buoyant across our chosen markets with strong drivers forcontinued future growth. Industry analysts are predicting compound annual growthrates of 11% to 13% for the total UK BPO market until 2008(1). Organisations inboth the public and private sectors are seeking to improve productivity and toenhance customer service. Capita is well placed to assist in meeting thesechallenges by working with customers on a long term basis to deliver change. We work across 8 markets, being local government, central government, education,transport, health, life & pensions, insurance and other private sectororganisations (including financial services). Capita remains ranked as the no.1provider of BPO services in the UK, with an increased market share by annualvalue of contracts of 26.4% (2003: 24.3%). We have also maintained our no.1rankings in local government and finance (including insurance and life &pensions), and achieved a no.1 ranking in central government for the first time,increasing our market share in each of these sectors(2). Creating organic growth We have 2 complementary approaches to creating organic growth. The first, ourcentrally managed major sales team, seeks to secure contracts typically with avalue of £10m or above. These contracts are complex, integrated projects thatrequire a wide range of the Group's skills and which generate high quality,recurring revenues. Secondly, each of our businesses employs sales teams focusedupon securing growth from both existing and new customers. Organic growth: major contracts Major contracts are a key component of our growth. Over the past year, we havecontinued to invest in this area, both to strengthen the sales team and thesales support team who are integral to our bidding process. Our sales performance in 2004 was excellent. We secured 12 major contracts withan aggregate value of £1.36bn, an increase of 122% over 2003. Significant newcontracts won include a 2 1/2 year contract with the Department of Trade andIndustry, a 10 year contract with Winterthur Life, a 5 year contract with DixonsGroup plc, a 7 year contract with the Department for Work and Pensions ("DWP"),a 20 year contract with The Children's Mutual, a 5 year contract to deliverNational Strategies for the Department for Education and Skills ("DfES") and a12 year partnership with Salford City Council. 2005 has started well. In January, we announced that we had signed a 3 yearcontract worth £14m with eircom. Capita will support and assist in growingeircom's broadband and added value telephone services through the management of200 call centre staff, based in Dublin. We continue to enjoy a buoyant period of activity and I am pleased to reporttoday 3 further major contract wins totalling £96m, of which £40m is a newcontract and £56m are extensions to existing contracts. Consequently, the totalvalue of major contracts won in the first 8 weeks of 2005 is £11om. The new contract is with Chester Street Insurance Holdings Limited to administertheir liability claims run-off. Chester Street is in a Scheme of Arrangement andthe Scheme Administrators are Dan Schwarzmann and Mark Batten ofPricewaterhouseCoopers. The contract is anticipated to generate revenues toCapita of approximately £40m over a 10 year term. The contract commences in midMay 2005 and will involve the transfer to Capita of some 50 members of staffbased in Leeds. We have also extended 2 of our major existing relationships, reflecting our highlevels of operational performance and customer service. Our contract to run arange of key office services for the DWP has now been extended until December2006, with total revenues of £44m over the additional 21 month period. Our contract tomanage Norwich Union's Clubline, first awarded in 1995, has been extended for afurther 3 years. The contract will cover existing services and additional volumegrowth following the recently formed General Insurance partnership betweenNorwich Union and Barclays. Based on estimated volumes, the contract isanticipated to generate revenues of £12m over the term of the contract. Our contract to deliver Transport for London's ("TfL") Central London CongestionCharging Scheme has now completed its second year of operation. Half of the 27million payments made each year are now received via the web or SMS texting,providing a convenient and efficient charge payment service. TfL is consideringthe possibility of exercising its option to extend the contract for anadditional year to February 2009 which, under the terms of the existingcontract, would yield estimated additional revenues of circa £38m. We have alsorecently entered into a supplemental agreement with TfL to extend certainexisting services as part of the proposed Western Extension Zone, subject to theoutcome of a public consultation and confirmation of the necessary scheme ordersby the Mayor of London. As a consequence of this activity, we will have no material contracts (definedas having annual revenue in excess of 1% of 2004 turnover) due for renewal in2005 and only one in both 2006 and 2007. Our major contract bid pipeline continues to be buoyant. We are currentlyworking on a record level of major bids with a total value of £3.8bn acrossboth the private and public sectors, a 41% increase on the corresponding period.This total only includes bid situations in which Capita is short listed as oneof 4 or fewer competitors and caps our largest bids at £500m. Organic growth: Group businesses Group businesses have continued to perform strongly, building their marketshares in both the private and public sectors. Private SectorIn the private sector, we have developed strong positions by building on corecontracts and acquisitions that provided us with initial footprints in thismarket. Capita Registrars and Capita Financial Group have expanded rapidly since ouroriginal entrance into this market in April 2000, with the acquisition of IRG.Capita Registrars is now the UK's leading share registrar with the greatestnumber of client relationships. Capita Financial Group, following its recentcontract to administer a range of savings products on behalf of Canada Life, isnow positioned as a significant player in its field, administering aggregatefunds of £9bn. The acquisition of 2 specialist insurance services companies, combined with ourability to win BPO contracts, has enabled Capita to rapidly position itself as acomprehensive insurance utility, providing specialist services and outsourcingsolutions to the insurance market. We are once again rated as the no. 1insurance BPO & IT provider in 2004.2 Capita Insurance Services is now thelargest claims handler in the country, administering £11bn of liabilities onbehalf of our clients. Our specialist and added value services, such ascorporate and complex loss adjusting, London Markets, legal services and medicalhelplines, continue to perform well. The volume loss adjusting market remainschallenging, but with the introduction of our new SAP technology platform andour exclusive license to deploy the leading voice-risk analyser, we are betterplaced to differentiate ourselves in this market. Capita Life & Pensions has performed well. Since signing our landmark contractwith Lincoln Financial in 2002, the business is now established as a leadingadministrator of both open and closed books. We have delivered the highestlevels of service, increasing policy retention whilst also providing significantsavings, often exceeding 25%, to our clients in the UK and Ireland. Ourevergreen contract with Lincoln Life has been expanded through Lincolnoutsourcing further customer services to Capita, resulting in an uplift inannual revenues of 10%. Our Child Trust Fund ("CTF") operation, set up to administer the Government'snew voucher savings scheme for children, has started smoothly. We are nowproviding administration services for 28 approved CTF partners, representing a40% plus potential market share. The cost effective IT platform and businessprocesses that we have established to support CTFs, position us well to supportother charge-capped products. We are now applying this model to ourSelf-Invested Personal Pensions ("SIPP") operation, where we currently hold a20-25% market share. This will enable us to capitalise on new opportunities inthe run up to pensions simplification in 2006. Public SectorPublic sector organisations continue to seek our support to assist them in meetingchallenging Government targets for improved efficiency and customer service. We focus on streamlining and enhancing existing services, as well as designing,constructing and managing service infrastructures for new initiatives. A key element of re-engineering services is the more effective use oftechnology. Following the success of our automated 24 hour telephone andinternet payment service, we have now developed a mobile payments solution whichallows councils to carry out rent collection via a handheld device. It isestimated that up to 2 hours will be saved per collection. There is alsoconsiderable scope to roll this product out across other services to reducecosts and increase customer service. For local authorities seeking sustainable productivity and flexible servicedelivery models, we have established 6 local government shared services centres.The centres initially serviced one host client and now contain expert teams whoservice multiple clients. Each centre provides either revenue processing,benefits administration or customer contact services. More than 30 localauthorities are now benefiting from the economies of scale and high levels ofservice that these centres are delivering. Mirroring this model, the centralrecords storage operation that we are developing for the DWP, will not only beused to drive through productivity and service improvements for the Department,but will also provide Capita with a state of the art facility to supportadditional customers. In 2004, our education businesses performed strongly. Capita Education Serviceshas enhanced its software products to assist in reducing the administrativeburden on schools and further education establishments. This year's productinnovations included software enhancements to support the increasing need totackle truancy and provide personalised learning. Capita Strategic EducationServices has had a particularly strong year. In October 2004, the team wasinstrumental in securing the contract to support the delivery of NationalStrategies, in relation to Primary and Key Stage 3, on behalf of the DfES. Itswork assisting Local Education Authorities (LEAs) to raise standards in learninghas continued to grow. Education Leeds, our strategic partnership with LeedsCity Council, received positive recognition from both OFSTED and the AuditCommission this year. Education Leeds was established in 2001 following acritical inspection report which judged the LEA as "poor". The recent inspectionreport noted significant progress and rated the LEA as "highly satisfactory"with good capacity for further improvement. We have also continued to deliver strong operational support for centralgovernment education initiatives in 2004. In partnership with the DfES, we havedelivered the service infrastructure and administered the first year of theGovernment's new Education Maintenance Allowance ("EMA"). Capita assessesapplications for EMA, receives payment instructions from schools and collegesand transfers funds to students' bank accounts, as well as delivering telephoneand internet information services. The service was introduced smoothly and hasresulted in over 284,000 young people receiving EMA payments this academic year,totalling some £136m. Across our Resourcing businesses we have generated revenue growth of 7%, but asa consequence of market contraction in certain sectors, particularly centralgovernment high volume campaigns, margins have been under pressure. During 2004,we recruited new management into these businesses and believe that the prospectsgoing forward are more encouraging. Acquisitions Although we continue to review a good volume of acquisition opportunities, ourapproach remains cautious and selective. Our focus remains firmly on smalltransactions, priced at a level which adds value for shareholders. In thecurrent pricing environment, we anticipate activity in this area will berelatively low. During 2004, we completed 7 transactions, investing a total of£47.6m (net of cash acquired). Of this sum, £30.6m (£27.7m net of cash acquired) was used to acquire theSymonds Group (Holdings) Ltd. Symonds has been integrated with Capita's existingproperty consultancy. The enlarged company, Capita Symonds Ltd, providesconsultancy, management and design services to the property and infrastructuremarkets and is now ranked as the 7th largest multidisciplinary consultancy inthe UK. We are pleased by the progress of the company. In July, we completed the acquisition of PPML from Winterthur Life for £9m(£7.7m net of cash acquired). Our focus over the last 8 months has been toupgrade materially the quality of service in order to maximise the opportunitiesarising from pension simplification in 2006. The team at PPML has done anexcellent job in this regard and we are excited by the opportunities for growthin the SIPP market. In November, we acquired Brownsword Ltd, a leading provider of claimsinvestigation services to the insurance market, paying an initial considerationof £5m and assuming debt of £3.5m. A potential deferred consideration of up to£5m may be payable upon the achievement of certain targets. The acquisition anda separate 10 year license agreement with Digilog, enable Capita to use a marketleading voice-risk analyser across the finance, insurance and public sectors inthe UK and Ireland. The technology enables valid claims to be processed moreswiftly, whilst claims requiring further investigation are diverted throughadditional verification processes. In the insurance sector, it has alreadyimproved the speed of claims processing for valid claimants, enhancing customersatisfaction and delivering significant savings. It also acts as a majordeterrent for individuals who consider making fraudulent claims. This month, we paid £307,000 to increase our interest in our Capita Mastek BPOjoint venture in India from 60% to 90%. This operation will now trade as CapitaOffshore Services Limited. We view the opportunities for developing an offshoreBPO operation with increasing optimism and as BPO is Capita's core business, wefelt it was appropriate to take greater control over the development of thisoperation. Disposals During the year, the Group disposed of its print business, CTD Capita and itsprimary healthcare operation which was acquired with AON Health Solutions inApril 2004. The Group received an aggregate cash consideration of £3.1m, givingrise to an exceptional loss of £1.9m. New International Financial Reporting Standards ("IFRS") IFRS will be adopted in Capita's consolidated accounts for the year ending 31December 2005. The Group will publish accounts under IFRS from our 2005 Interimresults and restate 2004 figures for comparative purposes. There are three key impacts for Capita: * Share Based Payments (SBPs) will result in a charge to the 2005 profit and loss account of circa £5m (2004 comparator circa £4m). * The expense of the Group's final salary pension schemes on Capita's profit and loss account will be similar to that using the current accounting standard. However, any pension scheme surplus or deficit will need to be shown on the balance sheet. * The amortisation of goodwill arising from acquisitions will cease, but will be held on the balance sheet subject to an annual impairment test. Board changes From 1 January 2005, we announced the appointment of Martina King as aNon-Executive Director of the Group. Martina joins Capita following a career atYahoo!, where she was initially Managing Director of Yahoo! UK and more recentlyManaging Director for Europe. We welcome her to the Board and believe she willmake a significant contribution to the Group's strategy. At the end of February, Robert Alcock will be standing down as a Non-ExecutiveDirector, after serving the company for over 11 years. We are very grateful forthe wisdom and assistance that Robert has given us during this period. We have also taken the opportunity to strengthen the Executive Management Boardwhich is responsible for running Capita's divisional operations. With effectfrom 1 January, Bill Dye and Dermot Joyce have become Divisional ExecutiveDirectors. Both Bill and Dermot have made significant contributions to Capita'sgrowth to date and we congratulate them on their new appointments. Valuing our people The principal reason that Capita consistently delivers value for itsshareholders and customers is the energy and passion our staff contribute to theGroup's progress. We enjoy the benefits of a stable and consistent managementteam, a low turnover of senior people and an outstanding team spirit andattitude. These virtues are an important and valued factor when clients decideto work with Capita. We would like to thank all our staff for the important part they play inCapita's continued success and welcome the 5,000 employees who have joined ussince the beginning of 2004. We now employ 23,000 people. Future prospects Capita operates within strongly growing markets across the private and publicsectors, enabling us to maintain a high degree of selectivity regarding thecontracts for which we bid. The Group is well placed to make continued progress in 2005. Our existingrevenues are strongly underpinned, our sales pipeline is at a record level andthe company is trading strongly. We believe that shareholders will be pleased byour performance in 2005 and beyond. Rodney M Aldridge OBEExecutive Chairman (i) Ovum Holway: Market Trends Preview 2005(ii) HI Europe: UK BPO & IT Report 2005 Group profit and loss accountfor the year ended 31 December 2004 2004 2003 Before Goodwill goodwill amortisation amortisation and and Before exceptional exceptional goodwill Goodwill item item Total amortisation amortisation Total Notes £m £m £m £m £m £m---------------- ------ ---------- -------- -------- -------- -------- ------ Turnover 1Continuingoperations 1,214.8 - 1,214.8 1,072.8 - 1,072.8Acquisitions 67.4 - 67.4 - - ----------------- ------ ---------- -------- -------- -------- -------- ------ 1,282.2 - 1,282.2 1,072.8 - 1,072.8Discontinuedoperations 2.9 - 2.9 7.8 - 7.8---------------- ------ ---------- -------- -------- -------- -------- ------ 1,285.1 - 1,285.1 1,080.6 - 1,080.6 Cost of sales 958.8 - 958.8 804.8 - 804.8---------------- ------ ---------- -------- -------- -------- -------- ------Gross profit 326.3 - 326.3 275.8 - 275.8Administrativeexpenses 166.2 29.3 195.5 144.4 27.7 172.1---------------- ------ ---------- -------- -------- -------- -------- ------ 160.1 (29.3) 130.8 131.4 (27.7) 103.7Operatingprofit 1Continuingoperations 156.6 (28.1) 128.5 130.0 (27.0) 103.0Acquisitions 3.8 (1.2) 2.6 1.6 (0.7) 0.9---------------- ------ ---------- -------- -------- -------- -------- ------ 160.4 (29.3) 131.1 131.6 (27.7) 103.9Discontinuedoperations (0.3) - (0.3) (0.2) - (0.2)---------------- ------ ---------- -------- -------- -------- -------- ------ 160.1 (29.3) 130.8 131.4 (27.7) 103.7Loss ondisposal ofbusinesses 2 - (1.9) (1.9) - - -Net interestpayable (11.9) - (11.9) (10.2) - (10.2)---------------- ------ ---------- -------- -------- -------- -------- ------Profit onordinaryactivities before taxation 148.2 (31.2) 117.0 121.2 (27.7) 93.5Taxation onprofit onordinaryactivities (41.6) - (41.6) (34.1) - (34.1)---------------- ------ ---------- -------- -------- -------- -------- ------Profit onordinaryactivities after taxation 106.6 (31.2) 75.4 87.1 (27.7) 59.4Minorityinterest(equity) 0.2 - 0.2 (0.1) - (0.1)---------------- ------ ---------- -------- -------- -------- -------- ------Profit for thefinancial year 106.8 (31.2) 75.6 87.0 (27.7) 59.3Dividends 3 35.4 - 35.4 26.7 - 26.7---------------- ------ ---------- -------- -------- -------- -------- ------Retainedprofit for theyear 71.4 (31.2) 40.2 60.3 (27.7) 32.6---------------- ------ ---------- -------- -------- -------- -------- ------Earnings pershare - Basic 4 16.05 (4.69) 11.36 13.04 (4.15) 8.89---------------- ------ ---------- -------- -------- -------- -------- ------- Diluted 4 15.84 (4.63) 11.21 12.95 (4.12) 8.83---------------- ------ ---------- -------- -------- -------- -------- ------ Balance sheetsat 31 December 2004 Group Company 2004 2003 2004 2003 £m £m £m £m----------------------------- ------ ------ ------- ------- -------Fixed assetsIntangible assets 470.2 451.2 - -Tangible assets 129.1 111.7 7.7 5.0Investments - - 254.7 500.8----------------------------- ------ ------ ------- ------- ------- 599.3 562.9 262.4 505.8Current assetsTrade investments 0.2 5.2 0.1 0.1Debtors due within one year 248.1 211.8 331.3 127.4Debtors due after more than one year 56.1 11.9 0.1 -Cash at bank and in hand - 19.8 - ------------------------------ ------ ------ ------- ------- ------- 304.4 248.7 331.5 127.5Creditors: amounts fallingdue within one year 376.9 299.7 85.9 128.5----------------------------- ------ ------ ------- ------- -------Net current (liabilities)/assets (72.5) (51.0) 245.6 (1.0)----------------------------- ------ ------ ------- ------- ------- Total assets less current(liabilities)/assets 526.8 511.9 508.0 504.8 Creditors: amounts falling dueafter more than one year 148.3 152.3 147.4 149.2 Provisions for liabilitiesand charges 17.9 17.4 - ------------------------------ ------ ------ ------- ------- ------- 360.6 342.2 360.6 355.6----------------------------- ------ ------ ------- ------- -------Capital and reservesCalled up share capital 13.4 13.3 13.4 13.3Share premium account 248.1 242.7 248.1 242.7Capital redemption reserve 0.1 0.1 0.1 0.1Merger reserve - - 44.6 44.6Profit and loss account 98.6 86.0 54.4 54.9----------------------------- ------ ------ ------- ------- -------Shareholders' funds (equity) 360.2 342.1 360.6 355.6Minority interest (equity) 0.4 0.1 - ------------------------------ ------ ------ ------- ------- ------- 360.6 342.2 360.6 355.6----------------------------- ------ ------ ------- ------- ------- The accounts were approved by the Board of Directors on 23 February 2005 andsigned on its behalf by: R M Aldridge OBEExecutive Chairman G M HurstGroup Finance Director Group cash flow statementfor the year ended 31 December 2004 2004 2003 Note £m £m £m £mCash flow from operating activitiesbefore additional pension contribution 5 200.0 158.2Exceptional additional pension contribution (50.0) ----------------------------- ------ ------- ------- ------- --------Cash flow from operating activities 150.0 158.2 Returns on investments andservicing of financeInterest received 0.2 0.8Interest element of finance lease payments - (0.1)Interest paid (11.9) (10.9)---------------------------- ------ ------- ------- ------- --------Net cash outflow from returns oninvestments and servicing of finance (11.7) (10.2) Taxation paid (36.0) (28.0)Capital expenditure and financialinvestmentPurchase of tangible fixed assets (46.2) (38.2)Purchase of intangible fixed assets (8.0) -Proceeds on sale of current asset investments 4.9 0.6Proceeds on sale of fixed assets 3.3 1.0---------------------------- ------ ------- ------- ------- --------Net cash outflow from capitalexpenditure and financial investment (46.0) (36.6) Acquisitions and disposalsProceeds on sale of business 3.1 -Purchase of subsidiary undertakings and businesses (51.4) (27.9)Cash acquired with subsidiary undertakings 3.8 2.0Accrued deferred consideration paid (5.0) (1.7)---------------------------- ------ ------- ------- ------- --------Net cash outflow fromacquisitions and disposals (49.5) (27.6) Equity dividends paid (29.6) (22.1)---------------------------- ------ ------- ------- ------- --------Net cash (outflow)/inflow before use of financing (22.8) 33.7 FinancingIssue of ordinary share capital 5.5 2.9Share repurchase (27.7) (12.2)Capital element of finance lease rental payments (0.3) (0.8)Repayment of loan notes and long term loans (11.5) (2.8)---------------------------- ------ ------- ------- ------- --------Net cash outflow from financing (34.0) (12.9)---------------------------- ------ ------- ------- ------- --------(Decrease)/Increase in cash in the period (56.8) 20.8---------------------------- ------ ------- ------- ------- -------- Group statement of total recognised gains and lossesfor the year ended 31 December 2004 2004 2003 £m £m-------------------------------------- ---------- ----------Profit attributable to the members of the Parent company 75.6 59.3Exchange adjustments 0.1 - ---------- ----------Total recognised gains and losses 75.7 59.3 ---------- ---------- Reconciliation of movements in shareholders' fundsfor the year ended 31 December 2004 2004 2003 £m £m-------------------------------------- ---------- ----------Total recognised gains and losses 75.7 59.3Dividends (35.4) (26.7)-------------------------------------- ---------- ---------- 40.3 32.6New share capital subscribed 5.5 4.7Share repurchase (27.7) (12.2)-------------------------------------- ---------- ----------Net movement to shareholders' funds 18.1 25.1 Opening shareholders' funds 342.1 317.0-------------------------------------- ---------- ----------Closing shareholders' funds 360.2 342.1-------------------------------------- ---------- ---------- Notes to the preliminary statementfor the year ended 31 December 2004 1 Segmental information (a) Turnover and profit on ordinary activities before taxation Business Commercial Integrated Professional Services Services Services Services Total £m £m £m £m £m------- ------------------- ------- -------- -------- --------- ---------Turnover 2004 Continuing operations 307.0 364.4 290.0 368.5 1,329.9 Acquisitions 46.1 21.3 - - 67.4------- ------------------- ------- -------- -------- --------- --------- 353.1 385.7 290.0 368.5 1,397.3 Discontinued operations - 1.0 1.9 - 2.9------- ------------------- ------- -------- -------- --------- --------- 353.1 386.7 291.9 368.5 1,400.2 Inter-segment sales (18.4) (22.1) (2.2) (72.4) (115.1)------- ------------------- ------- -------- -------- --------- --------- Third party sales 334.7 364.6 289.7 296.1 1,285.1------- ------------------- ------- -------- -------- --------- --------- 2003 Continuing operations 278.1 293.1 266.5 336.3 1,174.0Restated Discontinued operations - - 7.8 - 7.8------- ------------------- ------- -------- -------- --------- --------- 278.1 293.1 274.3 336.3 1,181.8 Inter-segment sales (9.1) (7.3) (16.8) (68.0) (101.2)------- ------------------- ------- -------- -------- --------- --------- Third party sales 269.0 285.8 257.5 268.3 1,080.6------- ------------------- ------- -------- -------- --------- --------- Profit before taxation 2004 Continuing operations 18.8 51.1 43.8 42.9 156.6 Acquisitions 3.8 - - - 3.8------- ------------------- ------- -------- -------- --------- --------- 22.6 51.1 43.8 42.9 160.4 Discontinued operations - (0.2) (0.1) (0.3)------- ------------------- ------- -------- -------- --------- --------- Segment profit before goodwill amortised 22.6 50.9 43.7 42.9 160.1 Goodwill amortised (8.1) (17.9) (0.9) (2.4) (29.3)------- ------------------- ------- -------- -------- --------- --------- Segment profit after goodwill amortised 14.5 33.0 42.8 40.5 130.8 Exceptional item - (0.2) (1.7) - (1.9)------- ------------------- ------- -------- -------- --------- --------- Segment profit after goodwill amortised and exceptional item 14.5 32.8 41.1 40.5 128.9------- ------------------- ------- -------- -------- --------- --------- Net interest payable (11.9)------- ------------------- ------- -------- -------- --------- --------- Total 117.0------- ------------------- ------- -------- -------- --------- --------- 2003 Continuing operations 21.7 36.7 36.5 36.7 131.6Restated Discontinued operations - - (0.2) - (0.2)------- ------------------- ------- -------- -------- --------- --------- 21.7 36.7 36.3 36.7 131.4 Goodwill amortised (7.2) (17.3) (0.9) (2.3) (27.7)------- ------------------- ------- -------- -------- --------- --------- Segment profit after goodwill amortised 14.5 19.4 35.4 34.4 103.7------- ------------------- ------- -------- -------- --------- --------- Net interest payable (10.2)------- ------------------- ------- -------- -------- --------- --------- Total 93.5------- ------------------- ------- -------- -------- --------- --------- The comparative figures have been restated due to a minor reorganisation of theGroup's business divisions during the period. Notes to the Preliminary statementfor the year ended 31 December 2004 1 Segmental information (continued) Included within turnover is £46.1m in respect of the acquisition of SymondsGroup (Holdings) Limited, £12.7m in respect of Capita Personal PensionManagement Limited (PPML) and £8.6m in respect of the Healthcare Solutions business ofAON Health Solutions. Other minor acquisitions during the year have beencompletely integrated within existing businesses of the Group. Accordingly, itis not possible to determine their post acquisition results. Business Commercial Integrated Professional Services Services Services Services Total £m £m £m £m £m------------------------- -------- -------- -------- -------- --------Net assets2004 Continuing operations 59.4 13.0 28.5 31.1 132.0 Acquisitions - 0.5 - - 0.5------------------------- -------- -------- -------- -------- -------- Net operating assets excluding intangible assets 59.4 13.5 28.5 31.1 132.5 Intangible assets 133.8 283.2 14.3 38.9 470.2------------------------- -------- -------- -------- -------- -------- Net operating assets including intangible assets 193.2 296.7 42.8 70.0 602.7------------------------- -------- -------- -------- -------- -------- Non-operating liabilities (242.1)------------------------- -------- -------- -------- -------- -------- 360.6------------------------- -------- -------- -------- -------- -------- Business Commercial Integrated Professional Services Services Services Services Total £m £m £m £m £m------------------------- -------- -------- -------- -------- --------Net Assets 2003 Continuing operations 32.3 8.1 7.8 19.1 67.3Restated Discontinued operations - - 4.5 - 4.5------------------------- -------- -------- -------- -------- -------- 32.3 8.1 12.3 19.1 71.8 Goodwill 119.7 279.7 12.9 38.9 451.2------------------------- -------- -------- -------- -------- -------- Net operating assets including goodwill 152.0 287.8 25.2 58.0 523.0------------------------- -------- -------- -------- -------- -------- Non-operating liabilities (180.8)------------------------- -------- -------- -------- -------- -------- 342.2------------------------- -------- -------- -------- -------- -------- Non-operating liabilities comprise taxation, including deferred taxation,dividend liabilities and net debt. 2 Exceptional items During the year the Group disposed of its print business and its primaryhealthcare business which was acquired with AON Health Solutions in April 2004.The Group sold fixed assets of £0.6m, net assets of £4.4m and received cashconsideration of £3.1m. No tax relief has currently been claimed on the exceptional loss of £1.9m. 3 Dividends 2004 2003 £m £m------------------------------------------------------ ---- ----Ordinary shares (equity) - Interim - paid 11.6 8.7 - Final - proposed 23.8 18.0------------------------------------------------------ ---- ---- 35.4 26.7------------------------------------------------------ ---- ---- Final dividend of 3.60p per share (2003: 2.70p per share) to be paid on 6 May2005 to ordinary shareholders on the register on 8 April 2005. This gives atotal dividend for the year of 5.35p per share (2003: 4.00p per share). Notes to the Preliminary statementfor the year ended 31 December 2004 4 Earnings per share Earnings per share is calculated on the basis of earnings of £75.6m (2003:£59.3m) and on the weighted average of 665.4m (2003: 667.1m) shares in issueduring the year, excluding the shares held in the Employee Benefit Trust andthose held as Treasury shares. The diluted profit for the year is based on profit for the year of £75.6m (2003:£59.3m). The number of ordinary shares of 674.3m (2003: 671.8m) is calculated asfollows: 2004 2003 Number million Number million----------------------------------- ----------- ------------Basic weighted average number of shares 665.4 667.1Dilutive potential ordinary shares:Employee share options 8.9 *4.7----------------------------------- ----------- ------------ 674.3 671.8----------------------------------- ----------- ------------ \* The comparative figure for dilutive potential ordinary shares - employee shareoptions has been restated. 2004 2003 p p--------------- ---------------------------------------------- -------- --------Basic earningsper share - before goodwill amortisation and exceptional item 16.05 13.04 - after goodwill amortisation and exceptional item 11.36 8.89--------------- ---------------------------------------------- -------- --------Dilutedearnings pershare - before goodwill amortisation and exceptional item 15.84 12.95 - after goodwill amortisation and exceptional item 11.21 8.83--------------- ---------------------------------------------- -------- -------- The additional earnings per share figures shown here and on the profit and lossaccount are calculated based on earnings before the impact of goodwillamortisation and exceptional items. They are included as they provide a betterunderstanding of the underlying trading performance of the Group. 5 Reconciliation of operating profit to net cash inflow from operatingactivities 2004 2003 £m £m------------------------------------------------------ -------- ------------Operating profit 130.8 103.7Depreciation charge 27.9 24.4Amortisation of other intangible asset (treated asdepreciation) 2.9 -Amortisation of goodwill 29.3 27.7Profit on sale of fixed assets - (0.6)Amounts owed on fixed asset disposals - (1.6)Loss on sale of current asset investment 0.1 0.4Utilisation of provisions (3.4) (1.6)Increase in provisions 2.8 1.4Increase in debtors (14.1) (21.3)Increase in creditors 23.7 25.7------------------------------------------------------ -------- ------------ 200.0 158.2------------------------------------------------------ -------- ------------ Notes to the Preliminary statementfor the year ended 31 December 2004 6 Reconciliation of net cash flow to movement in net funds/(debt) Net debt Net debt at Acquisitions Non-cash at 1 January in 2004 Cash flow flow 31 December 2004 (exc cash) Movements Movements 2004 £m £m £m £m £mCash at bankand in hand 19.8 - (19.8) - -Overdrafts - - (37.0) - (37.0)----------------- -------- -------- -------- -------- ---------Cash 19.8 - (56.8) - (37.0) Loan notes (33.0) (0.4) 6.3 - (27.1)Long term debt - (5.2) 5.2 - -Bonds (124.6) - - (0.1) (124.7)Finance leases (0.5) - 0.3 - (0.2)----------------- -------- -------- -------- -------- --------- Total (138.3) (5.6) (45.0) (0.1) (189.0)----------------- -------- -------- -------- -------- --------- Net debt Net debt at Acquisitions Non-cash at 1 January in 2003 Cash flow flow 31 December 2003 (exc cash) Movements Movements 2003 £m £m £m £m £m Cash at bankand in hand - - 19.8 - 19.8Overdrafts (1.0) - 1.0 - ------------------ -------- -------- -------- -------- ---------Cash (1.0) - 20.8 - 19.8 Loan notes (34.1) (1.7) 2.8 - (33.0)Bonds (124.5) - - (0.1) (124.6)Finance leases (0.9) - 0.8 (0.4) (0.5)----------------- -------- -------- -------- -------- --------- Total (160.5) (1.7) 24.4 (0.5) (138.3)----------------- -------- -------- -------- -------- --------- 7 Preliminary announcement The preliminary announcement is prepared on the same basis as set out in theprevious years annual accounts. A duly appointed and authorised committee of the Board of Directors approved thepreliminary announcement on 23 February 2005. The announcement represents non-statutory accounts within the meaning of section240 of the Companies Act 1985. The statutory annual accounts for the year ended31 December 2004, upon which an unqualified audit opinion has been given andwhich did not contain a statement under section 235, 237(2) or 237(3) of theCompanies Act 1985, will be sent to the Registrar of Companies. Copies of the announcement can be obtained from the Company's registered officeat 71 Victoria Street, Westminster, London, SW1H 0XA. It is intended that the Annual Report and Accounts will be posted toshareholders on 30 March 2005 and will be available to members of the public atthe registered office of the Company from that date. -------------------------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Capita