Delivering better outcomes 1 2016 Annual Review civica.com Welcome to Civica Civica is a market leader in business-critical software, digital solutions and outsourcing services that help teams and organisations around the world to transform the way they work. 2 Civica 2016 Annual Review Contents 2 Welcome to Civica 4 2016 Group business highlights 6 Chairman’s letter 8 A changing landscape 10 Agenda for growth 11 Acquisitions & developments 12 Business review 16 Operational review 22 Our people & values 28 Markets review 30 Local & regional government 34 Government & national security 38 Health & care 42 Housing & asset management 46 Education & libraries 50 Regulated markets 54 Financial review 56 2016 highlights 61 Key performance indicators 62 Group information 3 civica.com 2016 Group business highlights For the year ended 30 September 2016 Note: For key performance indicators see page 61. Group revenues Recurring revenues £267.7million £132.6 million Increased 14% Increased 16% EBITDA margin Operating cash flow 20.6% 91.1% of EBITDA Increased from 20.0% Increased from 89% Digital solutions revenues Closing order book £44.8million £815 million Increased 150% Increased 10% 4 Revenues by geographical region UK & Ireland £217.6 million 16% Asia Pacific £44.7 million 6% USA £5.4 million 13% Civica 2016 Annual Review Civica at a glance A strong and stable partner helping our customers to deliver efficient high quality services and better outcomes. More than 3,500 Helping 2 million people professionals every day Supporting 2,000 Streamlining services major customers in to 100 million people 10 countries and businesses Producing 15 years of Systems to administer unbroken growth £120 billion annually 5 civica.com Chairman’s letter I am very pleased to report that this has been an excellent In addition to investments in product and service year for the Civica Group both financially and operationally. development and to ensure a scalable operating platform The business has continued to deliver strong, profitable for the future, the Group made three acquisitions. These and cash-generative growth – its 15th consecutive year of included established digital specialists IPL and SFW, which growth – while increasing the scale of involvement with has enabled Civica to create a dedicated digital division customers and extending core capabilities in line with comprising more than 800 people, ideally placed to market opportunity. respond to rapid advances in the use of technology and automation, which is driving significant change for During 2016 Civica grew overall revenues by 14 per cent all customers. to a record £267.7 million, producing 18 per cent EBITDA growth and excellent cash generation. These results reflect Our people and culture set Civica apart, and we continue the ongoing successful execution of the Group’s clear our investment in key initiatives to develop and support the strategy which is delivering value for all of our stakeholders. team around the world, from our Academy programme to graduate and apprentice schemes. We also strengthened We achieved good growth across each of our core our leadership team during the year, including Wayne Story areas of business-critical software, digital solutions and taking on responsibility for the operation of the business outsourcing, winning more than 85 new name customers. as chief executive. 6 Successes included the Group’s largest contract to date with the Victorian state government in Australia, our I would like to take this opportunity on behalf of the Board largest business process outsourcing partnership in the to thank all of our people for their contribution, their UK and our largest sale in the USA, demonstrating our enthusiasm and their commitment to support customers strength globally. and the further development of Civica. With the company in such a strong position to support developing customer At the same time we proceeded to put in place the building needs, we remain ambitious for the future and continue to blocks to sustain our leadership position and our class- see a very positive outlook. leading performance. Simon Downing, Executive Chairman Civica 2016 Annual Review Global capability, local focus Civica is a leading partner for the public sector and regulated private sector markets around the world. We provide critical software applications, digital solutions and technology-based services which help our customers to address sustained and significant change and to transform the way they work. Government Local & Housing Health Education Regulated & National Regional & Care Markets Security Government Business-critical software Digital solutions Managed & outsourced services 7 civica.com A changing landscape For all organisations the pace of change and expectation is accelerating and significant cultural, economic and “Civica’s knowledge and technological developments are altering many of today’s norms. In particular, the digital revolution is driving rapid understanding makes and far-reaching change which is set to re-shape both the customer experience and also the underlying business them an important model. There is no doubt that technology will play a leading role in helping to achieve urgent service and partner for automating financial goals. and transforming critical services.” Our vision Councillor Julian Thompson-Hill Lead Member for Finance, Denbighshire County Council Our vision is to help organisations achieve better outcomes through more connected and efficient ways of working enabled by the use of digital technology and automation. We aim to be the leading IT-based services partner in our chosen markets, putting ideas into action alongside our customers through a unique combination of people, technology and business process expertise. Civica is exploring the future imperatives and models of the changing landscape through a series of reports and guides (see www.civica.co.uk/changinglandscapes). 8 A core set of themes will shape organisations Skills, partnerships & resources The changing citizen Pervasive technology The role of the organisation Civica 2016 Annual Review Our markets Civica operates internationally across the public sector Civica’s deep market knowledge, our track record and and in regulated markets including travel & transport, most importantly our people and culture underpin the financial & legal services, telecoms and utilities. As well as Group’s leading position. We have worked closely with facilitating the provision of modern high quality services, customers to develop existing products and innovative improved regulation and greater efficiency through our solutions, and to demonstrate how re-designed processes software applications and cloud-based solutions, the coupled to effective IT systems can help to achieve company also takes a wider role in helping re-model core improved services and support new business models. activities through strategic partnerships focused on digital transformation and business process outsourcing. We expect the demand for digital solutions and technology-based services to continue as organisations In response to major upheaval across the public sector strive to respond to the changing landscape and to meet there is increasing recognition that re-designed digital cost and efficiency challenges. Civica is well placed to services, increased automation and greater collaboration offer effective, value-adding and transformational solutions are imperative, with organisations looking to increase to our customers, and to build on a stronger platform and the involvement of trusted partners. The private sector local market opportunity in the UK and internationally. is similarly focused on developing new ways of working to deliver a better customer experience and increased competitiveness. In all areas there is also a continuing move to the cloud and a desire to derive greater value from data. 9 Increasing pace of change Platform solutions Key outcomes Funding & policy pressures Software-based efficiency Higher quality services Growing & ageing population Digital transformation Better customer experience Social & technological change Flexible cloud foundation Significant cost savings Skills & capacity Platform-based outsourcing Sustainable future model civica.com Agenda for growth We aim to sustain our market-leading performance internationally through the development and deployment of specialist software and technology-based services in markets where we have significant expertise. Our capabilities are aligned to continued demand for customer solutions to improve, modernise and ultimately transform core activities while achieving efficiencies. Drivers of future growth “Platform” focus across markets Investment in people & culture 10% CAGR 98,000 hours 2014 – 2016 revenue growth of learning & development • Grow use of software applications globally to implement • Sustained employee support and development policy, automate business activities and improve efficiency • Leadership development programmes: ‘Inspirational • Extend digital solutions at scale in response to Leadership’, ‘Raising the Bar’ and ‘Potential’ accelerating pace of digital transformation • Hub office network, e.g. South West Hub occupancy • Expand platform-based outsourcing to deliver step increased 83% change improvement and savings for customers Scalable product R&D capability Scalable operations capability 55% increase 24/7 in new product investment multi-country support launched • Continue planned investment in product development • Continue planned