Results centre

Key document

Half year results statement 2016

(pdf, 1.2MB)
Key document

Half year results presentation 2016

(pdf, 578KB)
Key document

Annual Report 2015

(pdf, 4.6MB)

H1 2016 financial highlights

Financial highlights Underlying*
2016
Underlying*
2015
YOY change Reported
2016
Revenue £2,405m £2,283m +5% £2,430m
Operating profit £317.6m £288.8m +10% £236.3m
Profit before tax £285.3m £264.9m +8% £186.1m
Earnings per share 34.2p 32.0p +7% 22.4p
Interim dividend per share 11.1p 10.5p +6% 11.1p

* Refer to appendix for calculation of Alternative Performance Measures.

H1 2016 highlights

Good financial results

  • Underlying revenue growth on a like for like basis1 of 8.8%, including 5.0% organic growth net of attrition
  • Underlying operating margin1 of 13.2% (H1 2015 on a like for like basis:1 12.9%)
  • Underlying profit before tax1 up 8% to £285.3m (H1 2015: £264.9m)
  • Underlying earnings per share1 up 7% to 34.2p (H1 2015: 32.0p)
  • Interim dividend up 6% to 11.1p (H1 2015: 10.5p)
  • Underlying cash flow1 from operations £388m (H1 2015 £300m), a cash conversion ratio of 122% (H1 2015: 104%)
  • Net debt to annualised EBITDA1 of 2.49, with headroom of £1.1bn, at end June 2016
  • Post tax ROCE1 15.0% (FY 2015: 15.0%)
  • Reported profit before tax £186.1m (H1 2015: £146.1m)

Steady flow of major contract wins and acquisitions

  • £879m of major contract wins (H1 2015: £1.6bn) including:
    • Tesco Mobile customer management services, worth £140m over 5 years
    • Five Councils shared services platform, worth £139m over 9 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 2
  • Bid pipeline £5.1bn (February 2016: £4.7bn), with a weighted average contract length of 7 years (February 2016: 6 years)
  • 6 acquisitions for a total consideration of £84m, including Trustmarque, a leading software reseller and provider of cloud services.

Andy Parker, Chief Executive of Capita plc, commented:

“In the first half of 2016, Capita achieved good profit growth driven organically by major contracts and our trading businesses, and through acquisitions made part way through 2015. We also delivered strong cash flow and robust sales and operational performance.

While it is too early to know the impact of the recent EU referendum, it has created increased uncertainty, particularly in the financial services sector, and we are continuing to experience some delays in decision making in the short term. However, we expect this to be more than offset in the medium-term by incremental opportunities that arise as clients respond to the impacts of the UK leaving the EU.

The structural drivers for our services remain strong and Capita has a good track record of operating through political and economic cycles. We are making steady progress towards achieving around 4% organic growth in 2016 and remain confident of the strength of our business model in creating continued profitable growth into the future."

(1) Refer to appendix for calculation of Alternative Performance Measures

H1 2016 overview

Capita is today reporting good financial results for the first half in 2016. We extended and expanded a number of major contracts, delivered growth from our trading businesses and made a number of acquisitions which should enhance our growth going forward.

The Group increased underlying1 revenue by 5% to £2,405m (H1 2015: £2,283m) and underlying revenue on a like for like1 basis by 8.8%, comprised 5.0% organic growth net of attrition and 3.8% from acquisitions. Organic growth was driven by the benefit from new contracts started in the second half of 2015 and good underlying performances from our divisions. Underlying operating profit1 rose by 10% to £317.6m (H1 2015: £288.8m) and underlying profit before tax1 increased by 8% to £285.3m (H1 2015: £264.9m). Reported profit before tax was £186.1m (H1 2015: £146.1m), after the amortisation of intangibles. Underlying earnings per share1 rose by 7% to 34.2p (H1 2015: 32.0p) and we increased our dividend for the half year by 6% to 11.1p (H1 2015: 10.5p). 

To date this year, we have secured major contracts with an aggregate value of £879m (H1 2015: £1.6bn). Our win rate was 1 in 2 by value. The bid pipeline currently stands at £5.1bn (February 2016: £4.7bn), comprised of 36 bids with a weighted average contract length of 7 years. We continue to have a large active prospect list of opportunities behind the pipeline. 

We invested a total of £84m, excluding deferred and contingent considerations, in acquiring 6 businesses in the period. The largest of these was Trustmarque, a software reseller and IT services provider, which sells, installs and manages software and cloud products and has a strong relationship with Microsoft. We also completed the disposals of Capita Medical Reporting and Fish Administration, both of which were considered to be non-core going forwards and were held for sale over the 2015 year end.

(1) Refer to appendix for calculation of Alternative Performance Measures

Sales and future prospects

Bid pipeline: Our bid pipeline shows the total contract value of our major sales bids at a specific point in time, which we disclose 3 times a year. It contains all bids with total contracted revenue worth between £25m and a capped ceiling of £1bn, where we have been short-listed to the last 4 or fewer. The total contract value of the bid pipeline currently stands at £5.1bn (February 2016: £4.7bn), comprised of 36 bids including 92% new business and 8% renewals and extensions, with a weighted average contract length of 7 years. We are seeing steady activity in both the private sector (50% of the pipeline), particularly in telecoms, retail and financial services, and the public sector (50% of the pipeline), in defence, local government, and transport and infrastructure. We continue to have a large, active prospect list of opportunities behind the pipeline and there are no material contracts, defined as having forecast annual revenue in excess of 1% of 2015 revenue, up for rebid until 2019.

Summary and future prospects: In the first half of 2016, Capita achieved good profit growth driven organically by major contracts and our trading businesses, and through acquisitions made part way through 2015. We also delivered strong cash flow and robust sales and operational performance. 

While it is too early to know the impact of the recent EU referendum, it has created increased uncertainty, particularly in the financial services sector, and we are continuing to experience some delays in decision making in the short term. However, we expect this to be more than offset in the medium-term by incremental opportunities that arise as clients respond to the impacts of the UK leaving the EU.

The structural drivers for our services remain strong and Capita has a good track record of operating through political and economic cycles. We are making steady progress towards achieving around 4% organic growth in 2016 and remain confident of the strength of our business model in creating continued profitable growth into the future.

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