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23 April 2018

Capita plc 2017 Full Year Results

Financial summary

  • As previously announced, Capita has early adopted IFRS 15, the new revenue recognition standard, and this report on our performance in 2017 is under the new standard.
  • Underlying revenue declined by (4.3)%. Underlying revenue fell on a like-for-like basis1 by (0.6)% including (1.5)% organic decline.
  • Underlying profit before tax1 increased by 43% to £383.0m (2016: £268.5m) and underlying profit before tax before significant new contracts and restructuring costs increased by 23% to £400.9m (2016: £325.7m), in line with expectations.
  • Reported loss before tax of £(513.1)m was impacted by £850.7m of specific non-underlying items, including £551.6m goodwill impairment and a number of other asset impairments and provisions. The events and circumstances leading to the goodwill impairment are summarised in the financial review overleaf.
  • There was a £445.4m gain on the disposal of the Capita Asset Services businesses, which has been treated as a discontinued operation and, as such, is not included in the below table.
  • Free cash flow from continuing operations before non-underlying expenses was £38.0m (2016: £397.3m). Free cash flow was constrained by the partial normalisation of cash management activity to avoid June and December peaks and a reduction of deferred income in the second half of the year.
  • Net debt at end December 2017 was £1,117.0m (2016: £1,778.8m).
Year ended 31 December
Financial highlights - continuing operations Reported 2017 Reported 2016 Underlying1 2017 Underlying1 2016 Underlying 
YOY change
Revenue £4,234.6m £4,368.6m £4,167.9m £4,357.3m (4)%
Operating profit/(loss) (£420.1m) (£16.1m) £447.4m £334.6m 34%
Profit/(loss) before tax (£513.1m) (£89.8m) £383.0m £268.5m 43%
Earnings/(loss) per share (80.14)p (14.27)p 45.61p 31.68p 44%
Total dividend per share 11.1p 31.7p 11.1p 31.7p (65)%
Free cash flow £37.7m £367.3m £38.0m £397.3m (90)%

The following table sets out the main differences between reported and underlying profit for 2017

2017 reported operating loss bridge to underlying operating profit
Reported operating loss (£420.1m)
Impairment of goodwill £551.6m
Impairment of other non-current assets £63.5m
Impairment of life and pension assets £61.2m
Claims and litigation provisions £30.0m
Amortisation and impairment of acquired intangibles £124.3m
Business exits £14.7m
Other £22.2m
Underlying operating profit £447.4m

 

Strategy and transformation plan

Today, Capita is separately publishing an update on its strategy and transformation plan, which includes the announcement of the launch of a rights issue to raise gross proceeds of £701m, which is fully underwritten by Citigroup Global Markets Limited and Goldman Sachs International.

Current trading

Capita continues to expect that its underlying pre-tax profits1, before significant new contracts, restructuring costs and implementation costs of the strategy, will be between £270m and £300m for the year ending 31 December 2018.  Trading in the first quarter was in line with our full year guidance.

1 Refer to appendix for calculation of Alternative Performance Measures

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