2016 financial summary: a challenging year
- Underlying revenue growth on a like-for-like basis1 of 3.4% including 0.1% organic growth
- Underlying cash flow from operations1 £750m (2015: £686m), a cash conversion ratio of 139% (2015: 108%)
- Free cash flow after non-underlying items1 £409m (2015: £304m)
- Underlying profit before tax1 down 19% to £475.3m (2015: £585.5m), including the recently announced £39.6m write down of accrued income with regard to our 2016 review of contracts
- Reported profit before tax £74.8m (2015: £112.1m)
- Underlying earnings per share1 down 20% to 56.67p (2015: 70.73p)
- Reported earnings per share down 30% to 5.55p (2015: 7.96p)
- Total dividend unchanged at 31.7p (2015: 31.7p)
Major contracts: existing relationships extended and first strategic partnership in Europe
- £1.3bn of major contract wins and extensions (2015: £1.8bn) including:
- mobilcom-debitel customer services strategic partnership, worth £197m over 7 years
- Extension of our relationship with Department for Work and Pensions Personal Independence Payments (PIP) assessments, worth £210m (based on volume assumptions)
- Major contract win rate 1 in 3
- Bid pipeline £4.0bn (December 2016: £3.8bn), with a weighted average contract length of 7 years (December 2016: 7 years)
Decisive actions position us better to exploit our fundamental strengths and return to growth
- Business review: commenced process to exit the majority of Capita Asset Services and Specialist Recruitment businesses to increase focus on technology-enabled business process and customer management and reduce leverage
- New leaner, simpler organisation and management structure: customer facing, with better alignment of sales and operations, shorter reporting lines, less complexity and more transparency
- Performance improvement initiatives: cost actions and turn-around commenced in IT Services
- Growth agenda: sales teams re-shaped to drive growth through both major contracts and additional new, high value replicable services to new and existing clients in the public and private sectors.
Andy Parker, Chief Executive of Capita plc, commented:
“2016 was a challenging year and Capita delivered a disappointing performance. We are determined to turn this performance around. We have taken quick and decisive action to reduce our cost base, increase management accountability, simplify the business, strengthen the balance sheet, and return the Group to profitable growth.
We remain very confident that our target markets continue to offer long term structural growth. Capita is well placed in these markets with our unique set of complementary capabilities and the talent of our people. The bid pipeline of major contract opportunities remains active, and we are also seeing success in providing additional new, high value, replicable services to clients.
The proposed sale of our Asset Services businesses and Specialist Recruitment businesses are on track. We have received good interest and, following regulatory approvals where required, we remain confident in concluding these transactions this year, which will leave us with a more focussed Group and significantly strengthen our balance sheet.
We expect 2017 to be a transitional year for the business, as we complete our disposals, bed down the structural changes inside the business, and re-position Capita for a return to growth in 2018”
(1) Refer to appendix for calculation of Alternative Performance Measures