"2017 has been a difficult year of unprecedented change for Capita. Against a challenging backdrop in many of our markets, we began to address the underlying problems preventing Capita and its people from achieving their full potential."
SIR IAN POWELL
We have strengthened our leadership and governance, undertaken a strategic review and have launched a fully underwritten Rights Issue to position Capita well for the future.
Capita is a key part of the UK corporate landscape, both in its own right and as the provider of essential services to businesses and public-sector institutions in every sector of the economy.
The multi-year transformation process being led by Jon and his team will lead to a more sustainable, focused business operating with strong values to deliver great services to our clients. The Board and I are fully committed to the Rights Issue and the new strategy underpinned by the multi-year transformation plan to strengthen and simplify the business and deliver future success for the company, our employees, shareholders and clients.
"We have the building blocks to create a great business; one that consistently delights its clients, has operational discipline and generates sustainable free cash flow. We are now executing the plan to deliver this."
There is a lot to be excited about: talented people, a blue-chip client base, great technology and the ability to deliver value-adding services but the more I have observed and learnt, the more I have realised there is considerable work to be done to position Capita for future, sustainable success.
Capita will simplify its business by focusing on key growth markets, realigning its organisational structure to mirror these markets and to significantly reduce costs at the same time as improving operational efficiency.
Capita will strengthen its businesses and capabilities by making selected investments in order to drive improvements to both Capita’s expertise in digital, analytics and automation and its programme delivery and operational excellence. Capita will also ensure that it has the right leadership team and capital structure in place to support the delivery of the new strategy.
Underlying profits were in line with expectations. Reported profits in 2017 were impacted by significant non‑underlying items and cash flow was weaker in the second half of the year.
Reported revenue decreased by 3% to £4,234.6m.
Reported loss before tax of £(513.1)m includes a charge for specific items of £852.8m, arising from impairment of goodwill, intangible assets, other non-current assets & investment loans.
Free cash flow from continuing operations after non-underlying expenses was £37.7m.
Reported loss per share in 2017 was (80.1)p.
The majority of our revenue is underpinned by contracts with customers.
The order book represents the consideration to which the Group will be entitled to receive from customers when the Group satisfies the remaining performance obligations in its contracts.
"Reported profits in 2017 were impacted by significant non‑underlying items and cash flow was weaker in the second half of the year."
CHIEF FINANCIAL OFFICER
Underlying profits were in line with expectations, with improved profitability in the Private Sector Partnerships, Public Services Partnerships and IT Services divisions partially offset by lower profits in the Digital and Software Solutions division and higher central costs.
However, reported profits were impacted by a number of significant nonunderlying items, including goodwill and other asset impairments and the Asset Services settlement provision in relation to Connaught. There was a significant gain on the disposal of the Capita Asset Services businesses, which was treated as a discontinued operation.
Capita has early adopted IFRS 15, the new revenue recognition standard, and this report on our performance in 2017 against the comparative period in 2016 is under the new standard.
We are currently reporting our financial performance across five separate operating divisions.
Customer management, Capita Europe, life, pensions, insurance and employee solutions.
Central and local public services and contracts, real estate property and infrastructure
HR, corporate and specialist services and commercialised public sector assets and joint ventures
Application software and solutions across public sector, utilities and financial services
IT infrastructure, applications solutions and consulting services
Following the arrival of our new CEO in December 2017, a comprehensive strategy review was undertaken.
A key aim of our new strategy is to strengthen our businesses and capabilities by making selected investments in order to drive improvements in both Capita’s expertise in digital, analytics and automation and its programme delivery and operational excellence. We will also seek to ensure that we have the right leadership team and capital structure in place to support the delivery of its new strategy.
We have built a detailed, multi-year transformation plan in order to execute the new strategy, encompassing strategy implementation, cost competitiveness, capital structure, targeted investment, organisational alignment and re-igniting sales.
We believe that the near-term parts of this transformation are driven mostly by elements in our control and that there is a great amount of value to be extracted just from doing the basics better. The strategy has been designed to win the business which Capita can execute well, which will help make Capita’s business more predictable and lower risk. The investments made into the business are expected to provide a stable and strong platform for growth which in turn can provide sustainable free cash flow in the medium term.
The financial impact of our strategy will be significant: