The Capita Group Plc Annual Report and Accounts 2009 The Capita Group Plc Annual Report and Accounts 2009 The Capita Group Plc 71 Victoria Street Westminster London SW1H 0XA Redefining T 020 7799 1525 F 020 7799 1526 service Designed and produced by Radley Yeldar Photography by George Brooks Illustration by Ryan Todd Printed by St Ives Westerham This report is printed on Think4 Bright which is made from 50% recovered fibre, diverting waste from landfill and contains material sourced from responsibly managed forests together with recycled fibre, certified in accordance with the FSC (Forest Stewardship Council). Think4 Bright is manufactured under strict environmental management systems, namely the international ISO 14001 standard. 2009 report online www.capitareport2009.co.uk A huge thank you to all our clients and colleagues who contributed to this report. The Capita Group Plc 1 Directors’ report Contents Business review The Directors present the Annual Report for the year ended 31 December Business review 2009 which includes the business review, 2 Our business governance and audited Group accounts 6 How we have performed for the year. Pages 1 to 84 of this Annual Report comprise a Report of the Directors that has been drawn up and presented in 11 Achieving our goal through a clear business strategy accordance with English company law 12 1. Generating profi table growth and the liabilities of the Directors in connection with that report shall be 22 2. Controlling and measuring growth subject to the limitations and restrictions 32 3. Delivering business responsibly provided by such law. Where we refer in this report to other reports or material, 44 4. Targeting growth markets such as a website address, this has been 58 5. Maintaining performance across our divisions done to direct the reader to other Governance sources of Capita information which may be of interest to the reader. Governance Such additional materials do not form 70 Board members part of this Report. 72 Corporate governance 79 Directors’ remuneration report Accounts Accounts 86 Consolidated income statement 87 Consolidated statement of comprehensive income 88 Consolidated balance sheet 89 Consolidated statement of changes in equity 90 Consolidated cash fl ow statement 91 Notes to the consolidated fi nancial statements 124 Statement of Directors’ responsibilities 125 Independent auditors’ report to the members of The Capita Group Plc 126 Five year summary 127 Company balance sheet 128 Notes to the accounts 138 Principal Group investments 139 Independent auditors’ report to the members of The Capita Group Plc 140 Useful information for shareholders Cautionary statement regarding forward-looking statements This Annual Report has been prepared for the members of the Company and no one else. The Company, its Directors, employees or agents do not accept or assume responsibility to any other person in connection with this document and any such responsibility or liability is expressly disclaimed. This Annual Report contains certain 2009 awards forward-looking statements with respect to the principal risks and uncertainties facing the Company. By their Throughout this report we have nature, these statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. There are a number of factors that could cause actual highlighted some of the 50 awards results or developments to differ materially from those expressed or implied by these forward-looking statements we have won or were shortlisted and forecasts. The forward-looking statements refl ect the knowledge and information available at the date of preparation of this Annual Report, and will not be updated during the year. Nothing in this Annual Report should for in 2009. be construed as a profi t forecast. 2 The Capita Group Plc Our business We are at the leading edge of redefi ning and transforming services NHS case study HSE case study Nottingham BSF case study NHS Choices, helping the NHS Gas Safe Register, helping the Improving pupils’ learning to improve the nation’s health. Health and Safety Executive environments to help them Go to page 19 k promote and improve gas safety. fulfi l their potential. Go to page 29 k Go to page 41 k The Capita Group Plc 3 Business review We create and reshape services that both answer the needs of our clients and deliver quality, responsive services to the public. Our clients benefi t from Capita’s expertise, innovation and extensive resources and infrastructure. When they transfer their administration and customer services to us we sign up to delivering an improved service, at a defi ned cost, over a long term contract. We use customer insight and our ability to improve the management of people, processes and IT to achieve a more effi cient alignment of resources and a better customer experience. Our innovative service solutions and record of consistent operational delivery have helped to fuel our growth and position Capita as the leading provider of outsourced and professional support services in the UK and Ireland. Southampton CC case study Prudential case study Transforming services to Delivering services to support improve customers’ experience Prudential’s aim to be ‘the leader while delivering savings across in retirement.’ Southampton City Council. Go to page 65 k Go to page 55 k 4 The Capita Group Plc Our business We operate in growth markets Capita focuses on and leads the We work with clients across the Business Process Outsourcing (BPO) public and private sectors in 9 market in the UK where there are chosen markets. signifi cant opportunities for growth. And we constantly explore new We have an active bid pipeline markets where we can add value. of new business opportunities Go to page 44 k driven by public and private sector organisations increasingly seeking to gain effi ciencies, fl exibility and Capita market split (% of turnover) improved service delivery. Public 50% 1. Local government 22% Bid pipeline* 2. Central government 10% 3. Education 12% £3.7bn, 26 bids 4. Health 3% 2008: £3.1bn, 24 bids 5. Transport 3% Outsourced and potential UK Private 50% BPO market† 6. Life and pensions 18% 7. Insurance 8% Today £6bn 8. Financial services 4% 9. Other corporates 20% Potential £94.2bn 1 9 today 8 2 7 potential 3 56 4 * Where we have been shortlisted to the last 4 or fewer. All bids are capped at £500m. †Ovum 2008 and 2009 The Capita Group Plc 5 Business review Our scale A consistent We create and breadth business model value for all our of expertise drives our growth stakeholders positions us Our straightforward business model We seek to build long term, uniquely focuses on generating growth, both mutually benefi cial relationships organically and through acquisitions. capable of creating value for all our stakeholders – our shareholders, Organic growth is generated by Capita has grown steadily over the clients, employees, suppliers and a centralised major sales team past 25 years, both organically and the communities in which we work. through acquisition, and we now alongside sales teams in each of our have 36,800 people at over 250 businesses. We seek to secure long With strong fi nancial controls, business sites across the UK, Europe term business relationships, adding careful risk management and and India. value to our clients’ operations while effective governance, we work to generating high quality recurring a clear set of KPI targets to grow We use our expertise, infrastructure revenues and delivering a fair return the Group at a rate at which we and scale to drive down costs and for Capita. can consistently deliver what we add value to our clients’ operations. promise and create a sustainable 15 major contracts and extensions business. Our extensive network of business worth a total of £1bn were secured centres – onshore, nearshore and in 2009 (2008: 17 contracts, total Our performance in 2009 illustrates offshore in India – allows us to of £1.24bn). the continued success of our offer our clients fl exible service Acquiring small to medium sized consistent business model. solutions that meet their customers’ Go to page 6 k expectations and help them stay companies allows us to add further at the forefront of their markets. expertise or scale to our operations or helps us to enter new markets. Our business centre network: We smoothly integrate the acquired 52 Onshore: UK business into our operation, generating 5 Nearshore: Ireland, synergies and additional value for Channel Islands, Europe the Group. 5 Offshore: India Total spent on 12 acquisitions in 2009: £177.5m (2008: £147.4m spent on 12 acquisitions). Our clients are served by our 5 divisions: Go to page 12 k – Life & Pensions Services – Integrated Services – Insurance & Investor Services – Professional Services – ICT, Health & Business Services Go to page 34 k 6 The Capita Group Plc How we have performed in 2009 During 2009, the effort made by our 36,800 employees has been outstanding and has contributed to another successful year for the Group Our results Turnover (£m) Underlying profit before tax (£m)* £2,687m +10% £325.1m +17% 5 year compound growth 16% 5 year compound growth 18% 2,687 325.1 2,441 277.2 2,073 238.4 1,739 200.1 1,436 169.6 1,282 143.9 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 *Excluding intangible amortisation, non-cash impact of mark to market movement on financial instruments, loss on disposal of business and exceptional costs relating to the Arch cru funds. Underlying earnings per share (p)* Total dividend per share (p) 38.75p +17% 16.8p +17% 5 year compound growth 20% 5 year compound growth 25% 8 38.75 16.8 33.26 8 14.4 28.10 12.0** 9 23.10 9.0 18.60 9 15.37 7.0 5.4 0 2004 2005 2006 2007 2008 2009 0 2004 2005 2006 2007 2008 2009 *Excluding intangible amortisation, non-cash impact of mark **Excluding 25p special dividend.