Investor
presentation
Capita plc
October 2017
Contents
Overview of 2017 and investment
proposition3 – 4
An introduction to Capita 5 - 13
Business development 14 – 24
Financials 25 - 52
Summary and outlook 53 – 54
IFRS 15 appendix 55 - 65
2 | 2017 Investor presentation
Overview of 2017
Executed plans to reposition the Group
• New, market-facing simplified organisation structure implemented
• Disposals of Capita Asset Services and specialist recruitment
• Driving through benefits of restructuring programme – cost initiatives progressed
Early adopted IFRS 15 from 1 January 2017
H1 trading broadly in line with expectations
• Turnaround of IT Services better than expected
• Some businesses still underperforming
• BPM market remained subdued in the public sector but win rate improved
New CEO Jon Lewis starts 1 December
H2 outlook
• We expect underlying pre-tax profits to rise modestly in H2 2017 compared to H1 2017
3 | 2017 Investor presentation
Capita investment proposition: fundamental attractions
Capita is the leader in a large
addressable market expected
to grow at 3% per annum to
2019*
High visibility: 87% of revenue
is contracted
Cash generative, with good
margins and return on capital
employed
Our scale, unique breadth of
capabilities and track record of
delivery are competitive
advantages
4 | 2017 investor presentation *Source: Ovum 2016
An introduction to Capita
5 | 2017 Investor presentation
Capita at a glance
Business overview
• Capita is the UK’s leading provider of technology-enabled business process and customer management, IT,
software and professional services, with a growing presence in Northern Europe
• We generate revenue in three ways:
• Long term contracts ranging from 2 to 15 years duration: 71% of revenue
• Short term contracts less than 2 years: 16% of revenue
• Transactional businesses: 13% of revenue
• We sell into both the private (53%) and public (47%) sectors and are organised into 5 divisions which deliver
our services on a day-to-day basis
• 73,000 employees across the UK, Ireland, N. Europe, India and South Africa support our customers from a
mix of onshore, nearshore and offshore delivery centres
We operate in a large, growing addressable market
• UK addressable market £140bn per annum of which £13.9bn is outsourced*
• Market growth expected to be 3% to 2019*
• Structural drivers of growth include the transformation and modernisation of services, digitisation, fiscal
pressure and clients’ need to improve customer experience
Our scale, unique breadth of capabilities and track record of delivery are competitive advantages
* Source: Ovum6 | 2017 Investor presentation
External facingExternal & internal facing External & internal facing
Organisation structure
PRIVATE SECTOR PARTNERSHIPSBusiness process and customer management services for
corporates, primarily across telecoms, retail, automotive, travel
and insurance and retail banking sectors. Includes UK &
European operations and near and offshore centres
PUBLIC SERVICES PARTNERSHIPSBusiness process and customer management specialist services
for public sector organisations including defence, health and
welfare benefit administration and real estate and property
services
PROFESSIONAL SERVICESHigh growth commercial businesses and partnership models and
services to attract develop and retain workforces
ASSET SERVICESShareholder solutions, fund solutions, trust and corporate services
and debt and banking solutions
DIGITAL &
SOFTWARE
SOLUTIONSSector and task
specific software
and services,
digital data and
emerging
technology
solutions
IT SERVICESSpecialist
network
solutions, IT
management
and
infrastructure
services and IT
equipment
solutions
*
*Disposal in progress
7 | 2017 Investor presentation
Divisional structure
£m to Dec 2016
Revenue £1544m £1124m £717m £420m £532m
% of Group 35% 26% 16% 10% 12%
Operating Profit * £122m £9m £115m £136m £56m
% of Group 28% 2% 26% 31% 13%
Operating Margin 7.9% 0.8% 16.0% 32.4% 10.5%
Digital & Software
Solutions
Professional
Services
Public Services
Partnerships
Private Sector
PartnershipsIT Services
*Underlying operating profit before overheads and restructuring costs
Networking Solutions
Managed IT andEnterprise Services
Technology Solutions (reselling)
Managed Print Solutions
Education Software
Secure Software & Technology
Financial Software
Local Government Software
AMT-Sybex
Applications Support, Evolvi & digital businesses
Capita Resourcing
Learning Services
Security Watchdog
Communications
RPP Army Recruiting
Axelos
Business Travel
Fera (science)
Supplier Assessment
Parking Services
ElectronicMonitoring
DWP PIP
TfL Congestion Charging
DCC Smart Metering
NHS PCSE
DefenceInfrastructure Organisation
Central Government Services
Local Government Services
Real Estate & Infrastructure
Enforcement
Customer Management
Capita Europe
South Africa & India
Insurance Services
Employee Solutions (pensions &
employee benefits)
Retail Banking & Mortgage Solutions
8 | 2017 Investor presentation
Competitive position
Private Sector Public Sector Professional
ServicesDigital & Software IT Services
Market
position
UK BPM
Market leader
Share ~24%
Customer Management
(CM)
UK market leader
German top 3
Swiss market leader
UK BPM
Market leader
Share ~41%
Niche strengths in
workplace services,
business travel, best
practice, science and
supply chain
UK Software
Top 5
UK IT Services
Top 10
Market size(Per annum)
UK BPM & CM
£10bn
German CM
EUR3bn
UK BPM
£3.9bn
UK Enterprise software
£10bn
UK IT Services
£27bn
Competitors
TCS
Teleperformance, Webhelp,
Arvato
Aon Hewitt, Mercer
Atos, Cap Gemini, TCS,
DXC, Big 4, Serco,
Agilisys, BT, CGI
Accenture, Randstad,
Impellam, Hays, HRG
Northgate, Steria, RM,
Civica
DXC, Cap Gemini, BT,
Verizon, SCC, Kelway,
Computacenter
Credentials
Strong track record of transforming and managing major
contracts, utilising technology, process re-engineering and wider
capabilities
100m multi-channel customer contacts per annum
21m life policies and 550 occupational pension schemes, with
4m members, administered
Employee benefits solution used by 0.5m client employees
Southampton digital transformation programme won ‘Digital &
Technology Project of the Year’ at 2017 MCA awards
Top 5 multi-disciplinary property consultancy
36m payslips processed per
annum
3m accommodation nights
booked per annum
FERA analyses over 90,000
samples a year
IT and Project Management
methodologies used in >150
countries
Leading supplier of software, digital & IT solutions
More than 22,000 schools use SIMS, our management
information software
155 local authorities use our revenues and benefits
software
Leading provider of control room, case management and
mobile solutions to justice/emergency services
ICT support to >6,500 schools
*Source: Ovum and Nelson Hall9 | 2017 Investor presentation
BPM & CM market growth
13
13.713.9
14.2
14.6
15.1
11.5
12
12.5
13
13.5
14
14.5
15
15.5
2014 2015 2016 2017 2018 2019
£b
n
CAGR: 3.0%
UK BPM & CM annual outsourced
market
23.8 24.726
27.428.8
0
5
10
15
20
25
30
35
2014 2015 2016 2017 2018 2019
€b
n
CAGR: 4.9%
Germany & Switzerland BPS & CM annual outsourced
market
• UK business process and customer management
addressable market worth £140bn*
• Outsourced market £13.9bn* in 2016
• Capita market leader, with 29%* share
• German business process and customer management
outsourced market worth €23.8bn* in 2015
• Capita 3rd largest in German customer management and
market leader in Switzerland
*Source: Ovum and Nelson Hall10 | 2017 Investor presentation
Revenue mix by market
• Diversified mix of public and private sector clients
• Top 40 contracts account for slightly less than 40% of revenue
9%
16%
7%
6%
5%4%11%
9%
11%
5%
17% 8%
17%
7%
6%
6%5%12%
6%
11%
5%
17%
Central Government
Local Government
Education
Health
Justice & Emergency Services
Defence
Insurance, Life & Pensions
Financial Services
Utilities & Telecoms
Retail, Travel & Transport
Other Private
FY 2016 excluding
Asset ServicesFY 2016
Private sector 53%
Public sector 47%Private sector 51%
Public sector 49%
11 | 2017 Investor presentation
Global multi-service delivery infrastructure
On /near-shore platform N. Europe platform Offshore platform Capita Group
• Back office admin
• Customer services
• Life & pensions
• IT, software & data
centre
• Document processing
• Resourcing & training
• Share registration
• Property consultancy
• Claims & policy
administration
• HR administration
Service
offering
• Customer Services
• Life & pension
administration
• Financial services
• Corporate registrars
• Loan administration
• Fund administration
• Data validation & entry
• Claims & policy
administration
• Fund management
administration
• F&A processing
• Payroll processing and
HR
• Property consultancy
• IT services
• Knowledge services
• Customer services
Number of
Business
centres
Location
Number of
employees
• 94 centres worldwide• 80 centres in UK, Ireland
and Channel Islands
• 7 centres in Northern
Europe (Poland, Germany,
Switzerland and Austria)
plus contact centres in
Germany
• 5 centres in India
• 1 centre in South Africa
• 1 centre in Dubai
Global presence
100%
73,000
78%
11%
11%
✓Complex and bespoke
service offering
✓Majority of staff are
professional / semi-
professional (‘white-
collar’)
✓Evidenced by very
limited exposure to /
impact from increasing
minimum wage in the
UK and Germany
56,500 8,250 8,250
12 | 2017 Investor presentation
Technology capabilities
13 | 2017 Investor presentation
• Technology capabilities
• IT & software 37% of profits in H1
2017
• Major contracts include
technology which we have
delivered and/or support
• Portals and software platforms
underpin businesses such as
pensions and employee benefits
• Deploying digital in local
government to improve customer
outcomes
• Automation
• Opportunities with existing and
new clients such as O2
• Working with best in breed niche
software providers – Blue Prism,
Fusion, Automation Anywhere
Business
development
14 | 2017 Investor presentation
Our structure to match current buying behaviour
Group Business Development
• Team, evolved, increased, agile
• Closely aligned to and feeding market facing
divisions
• Directing and supporting divisional sales teams
DIVISIONS
Additional Campaigns
• High value, replicable solutions
• Work alongside model
• Applies to new and existing
clients
DIGITAL &
SOFTWARE
SOLUTIONS
Business Sales
Teams
IT
SERVICES
Business
Sales Teams
PRIVATE SECTOR PARTNERSHIPS
Business Sales Teams
PUBLIC SERVICES PARTNERSHIPS
Business Sales Teams
PROFESSIONAL SERVICES
Business Sales Teams
Major Outsourcing Deals
• Technology enabled
partnerships
• JV or transfer to Capita
• Public and Private sectors
15 | 2017 Investor presentation
Buying behaviour: major deals and campaigns
Division Sector Major deals:
propensity to
buy (Mar
2017)
Campaigns:
propensity to
buy (Mar
2017)
Public sector
partnerships
Local
government
Public sector
partnerships
Health
Public sector
partnerships
Central
government
Public sector
partnerships
Defence
Private sector
partnerships
Telco and
media
Private sector
partnerships
Financial
services
Private sector
partnerships
Germany
Professional
Services
Science
• Strong propensity to buy major deals in private
sector
• Central government remains quiet
• Significant opportunities for campaigns in local
government
16 | 2017 Investor presentation
Buying behaviours remain largely the same but with some
improvements
Division Sector Major deals:
propensity to
buy
Campaigns:
propensity to
buy (Mar
2017)
Campaigns:
propensity to
buy (Sept
2017)
Public sector
partnerships
Local
government
Public sector
partnershipsHealth
Public sector
partnerships
Central
government
Public sector
partnershipsDefence
Private sector
partnerships
Telco and
media
Private sector
partnerships
Financial
services
Private sector
partnershipsGermany
Professional
ServicesScience
Central government
• Total spend through Crown Commercial
Service (CCS) frameworks was £6.0bn in
Central Government in 2016/17– up £1.1bn
from the previous year
• Already represented on >20 CCS frameworks
– plus >100 other public sector frameworks
• Success in bidding a number of new key
frameworks
Customer management - Telco and media
• Of 55 deals included in NelsonHall’s BPS
Market Development Contract Database over
the last 2 years, 38 deals were <£25m
Science
• Since the creation of our joint venture with
Defra, by recognising the market desire for
repeatable solutions, we have increased
commercial revenues by 47%
Source: CCS Annual Report and Accounts 2016/17
Source: Capita analysis of data from NelsonHall BPS Market Development Contract Database (August 2017) & Ovum IT Services Contracts Analytics
Database (August 2017)
March 2017 September
2017
17 | 2017 Investor presentation
Campaign progress: local government
£45m wins YTD; £206m new opportunities
*Campaigns have a conversion rate of >50%
Digital & software Regeneration
People
development &
support
Procurement
18 | 2017 Investor presentation
Campaign progress: local government criteria for success
3. Multiple clients
within the market
1. Deep understanding of
clients’ challenges
2. Trusted to deliver
tangible results
Key success
criteria
19 | 2017 Investor presentation
Customer management: market and approach
Market growing by 4%
Source: NelsonHall Global BPS Market Forecast: 2017 – 2021, Customer Management Services Market Forecast by Region: 2017 – 2021
Source: NelsonHall Global BPS Market Forecast: 2017 – 2021, Estimated Customer Management Services Market Shares U.K. & Ireland: 2016
2017
(forecast)
2021
(forecast)
Split by service type, £m CAGR 017-21, %
3,751
4,4294%
2%
5%
10%
3%Order fulfilment support
Technical support
Customer care
13%
8%4%
3%
3%
3%
2%
2%
2%2%
Capita Teleperformance
Concentrix Webhelp
Sitel Convergys
Tech Mahindra Firstsource
Teletech Arvato Bertelsmann
UK Market Share - Top 10
Customer care
Technical support
Revenue generationRevenue generation
Order fulfilment support
20 | 2017 Investor presentation
Customer management: market and approach
0
50
100
150
200
250
300
350
£m
£25m
16 deals
£1,418m
38 deals
£329m
Overall deal flow in the UK (Sep 2015 - Aug 2017)
Source: Capita analysis of data from NelsonHall BPS Market Development Contract Database (August 2017) & Ovum IT Services Contracts
Analytics Database (August 2017)
Te
sco
Mo
bile
Deb
en
ha
ms
Th
ree
Vo
lksw
ag
en
Th
e P
en
sio
ns
Reg
ula
tor
RS
CP
A
Fir
st R
ail
Th
am
es W
ate
r
Rosse
nd
ale
Bo
rou
gh
Cou
ncil
Wins to date £116m
Decisions in next 6
months£500m
Pipeline (>£25m) £1,062m
Prospects £995m
21 | 2017 Investor presentation
Using technology to deliver customer excellence
22 | 2017 Investor presentation
£3.8bn (26 deals) in >£25m
deals
£3.1bn (28 deals) in >£25m
deals
Average term: 7 yrs Average term: 5.5 yrs
Annualised value: £550m Annualised value: £550m
2016 win rate 1 in 3 (by value)2017 YTD win rate 1 in 2 (by
value)
78% new
22% rebids/extensions
79% new
21% rebids/extensions
61% private
39% public
52% private
48% public
What does this mean for our pipeline?
Pipeline (As announced March 2017)
Today’s pipeline Pipeline and prospects
0 3,000 6,000
DSS
IT Services
ProfessionalServices
Public ServicesPartnership
Private SectorPartnerships
9 deals won in 2017 YTD with total value of £403m
IFRS 15 pipeline treatment:
• Order book: £2.2bn
• Frameworks: £300m
• Expected growth: £600m
23 | 2017 Investor presentation
Driving Capita’s future growth
Adapting to buying behaviours of our markets
Investing in markets where we are strong
Driving additional growth through campaigns
Continuing to build on major deal
success
Focusing on win rate
70,000 people contributing to the development and growth of Capita24 | 2017 Investor presentation
H1 2017 financial
results
30 | 2017 Investor presentation
Underlying income statement
• Underlying revenue decreased by 3.1%
• Underlying profit before tax of £195m
• Interim dividend 11.10p, in line with 2016
• Excludes Capita Asset Services – a discontinued
operation
£m
6 months
to 30 June
2017*
£m
6 months
to 30 June
2016**
Change
Revenue 2,066 2,131 (3.1%)
Operating profit 228 166 37.6%
Operating profit
margin11.1% 7.8% 3.3%
Interest (33) (32) 3.4%
Profit before tax 195 134 45.8%
Profit attributable to
shareholders153 107 42.7%
Basic eps (pence) 22.92p 16.12p 42.2%
Interim dividend
(pence)11.10p 11.10p -
*Excludes non-underlying items which include: intangible amortisation, impairments, net contingent consideration movements, other non-recurring items,
non-cash mark to market finance costs
**The 2016 comparatives include the results from businesses disposed in H2 2016 and H1 2017, and exclude the results from a justice business which
was held for sale in 2015 and moved back into underlying in H2 2016 following an incomplete sale process
31 | 2017 Investor presentation
Revenue
• 1.0% like for like growth from continuing
underlying activities
• 0.5% underlying organic decrease
• Excludes Capita Asset Services – a discontinued
operation
£m
6 months
to 30 June
2017
£m
6 months
to 30 June
2016
Change
Total reported revenue 2,127 2,156 (1.3)%
2016 disposals (8)
2017 disposals (61) (102)
Like for like revenue
from continuing
underlying activities
2,066 2,046 1.0%
2016 acquisitions (24) - (1.2)%
2017 acquisitions (7) - (0.3)%
Organic revenue on
continuing basis2,035 2,046 (0.5)%
32 | 2017 Investor presentation
Overall Group underlying revenue split*
• Revenue split – based on IFRS 15 definitions:
• 71% long term contractual – 2 years or longer
• 16% short term contractual – less than 2 years
• 13% transactional
• Considerable variation by division
• Reduction in transactional share following specialist
recruitment disposal
17%
16%
67%
H1 2016
Transactional
Contractual < 2 years
Contractual > 2 years
13%
16%
71%
H1 2017
Transactional
Contractual < 2 years
Contractual > 2 years
*Excludes Capita Asset Services, a discontinued operation33 | 2017 Investor presentation
Revenue from continuing underlying activities H1 16 to H1
17
H1 16 2,046
H1 172,066
13 10 1319
14
14 8 31
(20)(20)
(26)(18)
(8) (10)
1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200
HY
201
6 r
evenue
BB
C T
VL
DW
P P
IP
Co-o
p
Civ
il S
erv
ice
Lea
rnin
g
Centr
al gov c
ontr
acts
Netw
ork
Solu
tion
s
Oth
er
ITS
Real E
sta
te &
Infr
ast
Rem
edia
tio
n S
erv
ices
Em
plo
yee S
olu
tions
Tesco M
obile
mo
bilc
om
-debitel
Oth
er
Acquir
ed
revenue
HY
201
7 r
evenue
34 | 2017 Investor presentation
Underlying operating profit H1 16 to H1 17
H1 16166
H1 17228
29 7
2014
15
1615
15
3
(4)
(6) (7)(4)
(9)(6) (3) (5)
(15)(10)
(3)
0
50
100
150
200
250
300
BB
C T
VL
DW
P P
IP
Co
-op
TfL
PC
SE
DIO
Ce
ntr
al G
ov c
ontr
acts
Ne
twork
So
lutio
ns
Oth
er
ITS
Re
al E
sta
te &
Infr
a
Re
med
iation
Serv
ice
s
Em
plo
yee
So
lution
s
DS
S
Specia
list
Rec. (e
xited)
mo
bilc
om
-debitel
IAS
19 p
ensio
ns c
harg
e
Bonu
s a
ccru
al
Pro
fessio
nal fe
es
Oth
er
Acq
uire
d
H1
20
17
Un
der
lyin
go
per
atin
g p
rofi
t
H1
20
16
Un
der
lyin
go
per
atin
g p
rofi
t
35 | 2017 Investor presentation
Underlying operating profit bridge to reported operating
profit
228
63
(53)
(11)(37)
(64)
(1)
0
100
200
300
Underlying operatingprofit
Capita Asset Servicesseparation and exit
costs
Other business exitcosts
Capita Asset Servicesprovision
Amortisation Acquisitions Reported operatingprofit
Recurring items
Exceptional items
£m
36 | 2017 Investor presentation
Restructuring costs summary
• Cost initiatives remain on track to deliver
cumulative benefit of £57m by end 2018
• Provision expected to be near 100% utilised
by end 2017, with spend concentrated in H2
• Phasing of benefits more weighted to 2018
• Restructuring table shown before re-
investment in and benefit of automation and
offshoring
As at H1 2017* 2016 Q4 H1 2017 H2 2017 2018-19
£m
P&L charge 57.2 - - -
Cash (9.6) (13.7) (33.2) (0.7)
Profile spend 17% 24% 58% 1%
Closing provision 47.6 33.9 0.7 -
Incremental
benefit2.0 5.8 22.7 26.7
Cumulative
benefit2.0 7.8 30.5 57.2
*Based on continuing underlying activities37 | 2017 Investor presentation
Underlying operating margin
Focus on improving operating margin through:
New wins
Robust sales process
Offshoring and investment
Cost efficiency through strategic relocation of operations
Finance transformation
Long-term transformation programme in place
Procurement
New system development to maximise opportunities for centralised function
Property
Long-term consolidation plan progressing
38 | 2017 Investor presentation
Revised segmental reporting format*
Central costs no longer allocated across divisions and now reported separately
Revenue Operating Profit Operating Margin
H1 2017
(£m)
H1 2016
(£m) Change
H1 2017
(£m)
H1 2016
(£m) Change H1 2017 H1 2016 Change
Private Sector Partnerships 791 739 7.0% 82 47 74.5% 10.3% 6.3% 4.0%
Public Services Partnerships 539 586 (8.1)% 46 4 940.9% 8.5% 0.8% 7.7%
Professional Services 251 261 (3.9)% 51 41 25.5% 20.4% 15.6% 4.8%
Digital & Software Solutions 207 209 (0.9)% 59 67 (13.1)% 28.3% 32.3% (4.0)%
IT Services 274 241 13.6% 46 15 202.0% 16.9% 6.3% 10.6%
Group trading & central
functions5 10 (55) (14)
Total 2,066 2,046 1.0% 228 160 42.5% 11.1% 7.8% 3.3%
*H1 17 & H1 16 comparatives based on continuing underlying activities39 | 2017 Investor presentation
Private Sector Partnerships
HY17 HY16 Movement
Revenue £791m £739m 7.0%
Profit £82m £47m 74.5%
Margin 10.3% 6.3% 4.0%
4%
20%
76%
Revenue split
Transactional
Contracts < 2 years
Contracts > 2 years
• Commencement of mobilcom-debitel and Tesco
Mobile contracts
• Increase in BBC TV Licence revenue and profit
after contract modification in 2016
• Improved profitability following Co-op
negotiations in 2016
Outlook
• Customer management divisional pipeline remains
strong, with some delays around client decisions
• Employee solutions pipeline is strong, however,
trading is yet to improve
• Discussions continue regarding strategic review being
performed a major life and pensions client
H1 17 & H1 16 comparatives based on continuing underlying activities40 | 2017 Investor presentation
Public Services Partnerships
HY17 HY16 Movement
Revenue £539m £586m (8.1)%
Profit £46m £4m 940.9%
Margin 8.5% 0.8% 7.7%
13%
16%
71%
Revenue split
Transactional
Contracts < 2 years
Contracts > 2 years
• Revenue fall due to central government contracts
and lower trading in real estate, partially offset by
DWP PIP
• One-off benefit in DIO owing to contract
modification
• PCSE transformation spend lower in 2017
• Inflection point reached on TfL contract in 2017
Outlook
• PCSE is improving, with investment in the
transformation of the service to continue
• Challenges remain with the recovery in real estate
• Local government is forecast to improve
• Not expected to recognise the benefit of any DIO gain
share relating to the period up to the re-shaping of the
contract
H1 17 & H1 16 comparatives based on continuing underlying activities41 | 2017 Investor presentation
Professional Services
HY17 HY16 Movement
Revenue £251m £261m (3.9)%
Profit £51m £41m 25.5%
Margin 20.4% 15.6% 4.8%
38%
18%
44%
Revenue split
Transactional
Contracts < 2 years
Contracts > 2 years
• Loss of part of Civil Service Learning contract
• Improved performance in RPP and FERA
Outlook
• One-off property commercialisation in H2 2016 will
not repeat
• Improved performance, including FERA, anticipated
to continue
• Mixed performance of trading businesses expected
H1 17 & H1 16 comparatives based on continuing underlying activities42 | 2017 Investor presentation
Digital & Software Solutions
HY17 HY16 Movement
Revenue £207m £209m (0.9)%
Profit £59m £67m (13.1)%
Margin 28.3% 32.3% (4.0)%
2%8%
90%
Revenue split
Transactional
Contracts < 2 years
Contracts > 2 years
• Profit lower as a result of two major long-term
active software licences ending in H2 2016
• Increased go-lives on AMT-Sybex and secure
software active licence implementations
Outlook
• International sales opportunities being targeted
• Increased offshoring to enhance capability and
efficiency
• Continued investment in developing software
products in target vertical markets broadly in line with
2017 investments
H1 17 & H1 16 comparatives based on continuing underlying activities43 | 2017 Investor presentation
IT Services
HY17 HY16 Movement
Revenue £274m £241m 13.6%
Profit £46m £15m 202.0%
Margin 16.9% 6.3% 10.6%
26%
12%62%
Revenue split
Transactional
Contracts < 2 years
Contracts > 2 years
• Acutest and Trustmarque acquisitions
• Higher level of project completion in network
solutions
• Significant improvement in performance due to
restructuring of management team and operating
model
Outlook
• Trading broadly in line with H2 2016 having put
restructuring in place in 2016
• Second half performance partially reliant on further
project completion of network implementations
H1 17 & H1 16 comparatives based on continuing underlying activities44 | 2017 Investor presentation
ROCE bridge
12.9%
15.2%
2.0%
0.2% 0.2%(0.1)%
FY 2016 Organic profit Working capital Capex less depreciation Acquisitions & disposals H1 2017
45 | 2017 Investor presentation
Capital allocation
Investment grade credit rating
Reduced
leverage
post-Asset
Services
disposal
Disciplined
capital
allocation
Working capital
Capital expenditure
Acquisitions
Dividends
Future investment flexibility
46 | 2017 Investor presentation
Underlying cash flow statement
Cash Flow£m 6 months to
30 June 2017
£m 6 months to
30 June 2016
Operating profit* 228 166**
Depreciation 43 44
Movements in underlying provisions (32) -
Movements in working capital (6) 147
Other 9 (2)
Cash flow from continuing underlying
operations242 355
Net interest paid (29) (29)
Taxation 16 (32)
Capital expenditure (50) (80)
Underlying free cash flow 179 214
Non-underlying expenses 3 (15)
Free cash 182 199
Net acquisition of subsidiary undertakings
and businesses4 (60)
Equity dividends paid - (145)
Other 7 (9)
Cash flow before financing 193 (15)
Financed by£m 6 months to
30 June 2017
£m 6 months to
30 June 2016
Repayment of bonds/fixed rate swaps 118 70
Repayment of/(proceeds from) term loan 30 (500)
Movement in cash and cash equivalents 36 406
Other 9 9
Movement in net debt 193 (15)
*Excludes non-underlying items which include: intangible amortisation, impairments, net contingent consideration movements, other non-
recurring items, non-cash mark to market finance costs
**The 2016 comparatives include the results from businesses disposed in H2 2016 and H1 2017, and exclude the results from a justice business
which was held for sale in 2015 and moved back into underlying in H2 2016 following an incomplete sale process
• Capital expenditure reduced by £30m to £50m
• Underlying free cash flow of £179m
• Net debt decreased by £193m
47 | 2017 Investor presentation
Working capital extract*
June 2017 December 2016
Accrued
Income
(£m)
Deferred
Income
(£m)
Contract
Fulfilment
Assets (£m)
Total
(£m)
Accrued
Income
(£m)
Deferred
Income
(£m)
Contract
Fulfilment
Assets (£m)
Total
(£m)
Private Sector Partnerships 56 (767) 126 (585) 60 (762) 129 (573)
Public Services
Partnerships51 (404) 37 (316) 56 (359) 26 (277)
Professional Services 16 (108) 7 (85) 11 (105) 7 (87)
Digital & Software
Solutions10 (279) 74 (195) 6 (228) 69 (153)
IT Services 28 (141) 63 (50) 28 (137) 62 (47)
Total 161 (1,699) 307 (1,231) 161 (1,591) 293 (1,137)
*H1 17 & FY 16 comparatives based on continuing underlying activities excluding consolidation adjustments and Group trading and
central functions48 | 2017 Investor presentation
Capital expenditure
Disciplined approach to capital expenditure
• Contain and refocus on value for money
• Must meet Group investment hurdle criteria
• Continued focus on software products
• Discretionary spend in 2017 major programmes:
• SIMS 8
• Orbit
• Insurance process improvements
• PoliceWorks
2431
25
80
2316
11
50
Discretionary Contractual Maintenance Total
H1 2016
H1 2017
£m
30% 31%39%46% 32% 22%
49 | 2017 Investor presentation
Contract fulfilment assets - additions
34
6
40
30
7
37
Contracts Software Total
H1 2016
H1 2017
£m
19%
85% 81%
• New asset category created by IFRS 15
• Software CFA represents the spend on live
implementations as the progress towards go-live.
• Contract CFA represents spend on
transformations projects currently ongoing. Key
projects include:
• PCSE
• ENNI extension
• mobilcom-debitel15% 19%
50 | 2017 Investor presentation
Disposals and acquisitions
• Capita Asset Services disposed for £888m gross of £72m transaction expenses, expected to
complete in Q4
• Specialist recruitment disposal completed
• Two small bolt-on acquisitions in software testing and travel
51 | 2017 Investor presentation
Balance sheet gearing
• £193m net debt cash reduction
• Net debt 2.9 times EBITDA
• Bond debt maturity
• £90m in October 2017
• £25m in July 2018
• £128m in September 2018
• Remainder 2019 – 2027
• Bank debt maturity
• £520m September 2018
• £100m May 2019
At 31 Dec
2016
Cash
movement
s
Non-cash
movement
s
At 30 Jun
2017
Net debt £m £m £m £m
Bond debt* 1,596 (35) 7 1,568
Cash in bank (566) (36) 3 (599)
Bank loans 650 (30) - 620
Finance leases 2 (1) - 1
Deferred consideration 11 (6) - 5
Fixed rate swaps 85 (85) - -
Total net debt 1,779 (193) 10 1,596
Net debt/EBITDA** 2.9 2.9
*Underlying net debt after impact of currency and interest rate swaps, excluding fixed rate swaps
**Net debt/EBITDA based on defined debt covenants calculation52 | 2017 Investor presentation
Interest and debt profile
• Net debt benefitting from free cash flow
• Higher coupon fixed rate interest rate swaps
terminated in H1 2017 leading to lower H1 2017
interest cost
• 2017 interest cost expectation (including £9m
pension cost) is £65m-£70m, dependent on
timing of receipt of disposal proceeds
• Undrawn £600m revolving credit facility
maturing 2020/21
• June 2017 liquidity headroom of £1.2bn,
composed of £598.6m cash and £600m
revolving credit facility
2015 2016 H1 2017
Interest rate % 2.9 3.3 2.7
US$ PPN 1,312 1,340 1,300
€ PPN 217 257 268
Term debt 300 650 620
Other (incl. cash) 10 (468) (592)
Total net debt 1,839 1,779 1,596
53 | 2017 Investor presentation
Revenue booked in 2017
• 0.9% growth from acquisitions
• Attrition on major contracts (2.1%)
• Attrition offset by 4.6% growth from contracts
won
• Net organic growth 2.5%
• Still facing headwinds in some trading
businesses
FY (£m) %
Acquisitions
2016 24 0.6%
2017 14 0.3%
Acquired total 38 0.9%
Organic – large contracts
Attrition (89) (2.1)%
Growth pre-2017 153 3.6%
Growth 2017 42 1.0%
Organic total 106 2.5%
Total 144 3.4%
54 | 2017 Investor presentation
IFRS 16 - Leases
• Adoption from 1 January 2019
• Ongoing detailed review of lease contracts
• Expect significant lease liabilities and right of use lease assets to be recognised on the balance sheet
• Expect the profile of income and recognition in relation to these leases to change
• There is no impact on cash flow (except for presentation purposes)
• Reasonable estimate of the impact of IFRS 16 to be provided once detailed reviews completed
55 | 2017 Investor presentation
Pension liability
• Scheme liability of £1.5bn
• Deficit moved from £345m at December 2016 to £381m owing to discount rate moving from 2.8% to 2.6%
• Half year income statement charge increase of £6m, with full year 2017 expected to increase by £12m
• The latest valuation commenced in April 2017, with expected increases in cash contributions from June
2018
• Completed consultation on closure of most of remaining deferred benefit scheme to future accrual
• A one-off £17m contribution agreed as part of the Capita Asset Services disposal
56 | 2017 Investor presentation
2017 financial guidance
RevenueNet long term contract growth booked 2.5%
Headwinds in a number of trading businesses
Trading performance
H2 pre-tax profit expected to increase modestly compared to H1
Cumulative benefits of performance improvement initiatives
Partially offset by some trading businesses
Net interest Expected to be in range of £65m to £70m
Tax rate Underlying rate expected to be around 19%
Cash flowOverall cash flow lower than 2016
Capital expenditure slightly lower than 2016
Leverage
Around the bottom of our 2.0-2.5 target range, prior to the impact of IFRS 15 and
the potential unwind of receivables financing, which would result in leverage
being around the middle of our range
Pension (IAS 19) £12m increase in pension charges, including £2m finance costs
57 | 2017 Investor presentation
Summary and outlook
58 | 2017 Investor presentation
Summary and outlook
2017 actions completed or in progress
• New organisation structure implemented
• Rebuilding confidence and trust
• Disposals announced. CAS to complete in H2
• Cost and performance improvement initiatives
• Early adoption of IFRS 15
• Deleveraging
• New CEO appointed
Capita repositioned
• A simpler business, with a clear strategy
focussed on BPM
• Large growing addressable market
• 87% revenue contract backed
• Strong competitive position
• Cash generative, with good margins and return
on capital
Outlook
• We expect underlying pre-tax profits to modestly rise in H2 2017 compared to H1 2017
• Well positioned for the future under new leadership
59 | 2017 Investor presentation
IFRS 15 appendix
60 | 2017 Investor
presentation
IFRS 15 re-cap – early adoption of IFRS 15
• Adoption in line with our strategy of simplifying the business and improving transparency in a consistent,
prudent and sustainable way
• Significant, complex and far-reaching accounting standard with impact on long-term contracts and
software licences
• More closely aligns our revenue recognition with commercial substance of contracts
• Immediately provides a consistent basis for investors to evaluate our business going forwards
• Will drive even greater focus on performance across Capita
• Consulted widely with advisors, supported by EY and KPMG and their technical teams
• Profitable long-term contract portfolio continues to drive value for the Group
61 | 2017 Investor presentation
IFRS 15 re-cap – key points
No impact on:
Lifetime profitability of contracts
Cash flow of contracts
Majority of transactional businesses
Key impacts:
Revenue more evenly distributed over the life of
contracts and active software licences – timing
of profits re-profiled
Potentially lower profits or losses in early years
on contracts where there are significant upfront
restructuring costs or higher operating costs
prior to transformation – compensating increase
in profits in later years
Balance sheet includes
• New contract fulfilment assets created in the
process of transforming services
• Deferred income in relation to contracts where
payments have been received from clients to
undertake transformation in advance of
delivering planned outcomes
62 | 2017 Investor presentation
Illustrative example - Capita’s outsourcing proposition
Background:
• Saturn’s in-house function cost = £65m p.a.
• Post-transformation, Capita’s Target Operating Model (TOM) cost = £40m p.a.
• Cost to reach TOM = £100m:
• £10m - restructuring
• £40m - transformation/technology/transition (including £10m capital expenditure)
• £50m - operating costs above the TOM prior to the TOM being reached
Capita’s offer to Saturn - 10 year deal:
• Saturn’s cost to keep function in house = £650m
• Capita’s cost £400m + £10m + £40m + £50m = £500m
• Capita will run the function if Saturn pays Capita £550m
• Saturn saving = £100m Capita profit = £50m
Cash:
• The profile of the cash received from Saturn matches the profile of Capita’s spend
63 | 2017 Investor presentation
Contract Saturn - pre-IFRS 15
Operating costs
Transformation £30m
Restructuring
£10m
Transformation phase BAU phase
Va
lue
Time
Contract lifetime profit £50m
Pre-IFRS 15 revenue £550m
Cash received
Op
era
tin
g m
od
el a
t se
rvic
e
com
mencem
ent £65m
pa
Ta
rge
t o
pe
ratin
g
mo
de
l £
40
m
Accrued
income
64 | 2017 Investor presentation
Contract Saturn - IFRS 15
Operating costs
Op
era
tin
g m
od
el a
t se
rvic
e
co
mm
en
ce
me
nt £
65
m p
a
Ta
rge
t o
pe
ratin
g m
od
el
£4
0m
Va
lue
Time
Transformation phase BAU phase
Deferred income
Fixed asset depreciation and contract fulfillment asset utilisation £40m
Initial loss
Restructuring £10m
Contract lifetime profit £50m
IFRS 15 revenue £550m
Cash received
65 | 2017 Investor presentation
Contract Saturn - IFRS 15 (cont.)
• IFRS 15 revenue more evenly spread following the IFRS 15 series guidance and output method of recognition with a single performance obligation (green line)
• Operating costs unchanged (dark blue)
• Fixed asset depreciation and contract fulfilment cost utilisation spread over the contract lifetime (red)
• Restructuring costs expensed with no related revenues (light purple)
• Total profit unchanged, but profile over the contract lifetime different (yellow)
• Results in lower profits or losses (orange) in early stage of long term contracts
• Cash received unchanged (blue line)
• Increased deferred income as cumulative cash receipts greater than cumulative revenue recognised
66 | 2017 Investor presentation
Software - contract level analysis
Contract endContract inception Contract endContract inception
Maintenance revenue
Maintenance cost
(expensed in-period)
Licence revenue
Installation revenue
Installation cost
(expensed in-period)
Maintenance revenue
Maintenance cost
(expensed in-period)
Licence revenue
Installation revenue
Installation cost
(expensed in-period)
Cash Cash
} Gross profit
} Cost
Typical Software
contract – Pre-IFRS
15 accounting
Typical Software
contract - IFRS 15
accounting
Go-live dateGo-live date
67 | 2017 Investor presentation
Underlying income statement
Pre-IFRS 15 IFRS 15
£m
Six months
ended June
2016*
£m
Six months
ended December
2016*
£m
Year ended
December 2016*
£m
Six months
ended June
2016*
£m
Six months
ended December
2016*
£m
Year ended
December 2016*
Revenue 2,258 2,324 4,582 2,131 2,226 4,357
Operating profit 290 191 481 166 169 335
Interest (32) (34) (66) (32) (34) (66)
Profit before tax 257 158 415 134 135 269
Profit attributable to
shareholders204 122 326 107 104 211
Basic eps (pence) 30.70 18.36 49.06 16.12 15.56 31.68
*Excludes specific items which include: intangible amortisation, impairments, net contingent consideration movements, other non-recurring items, non-cash mark to market finance costs
All Pre-IFRS 15 are based on discontinued operations
68 | 2017 Investor presentation
Underlying PBT bridge FY 2016
415
269
(9) (1)
(31)(49)
(31) (59)(19)
14
39
-
50
100
150
200
250
300
350
400
450
2016 FY Pre-IFRS 15 PBT
Active Licences- DSS*
Networks PoC -PiT*
Accrued Incomereduction as not
"highlyprobable"*
Pricesmoothing*
Transformationcosts
expensed*
Contractmodification*
Other* 2016 FY PBTrestated
Restructuring
provisions
Accrued
income
write back
*These movements taken together are as a result of the impact on revenue of the application of IFRS 15
69 | 2017 Investor presentation
Balance sheet 2016
• Contract fulfilment assets created
• Deferred income significantly increased
• Deferred tax asset increase
• Net liabilities on the consolidated Group balance sheet
• Capita plc company balance sheet unchanged
£m
Year ended
December 2016
Pre-IFRS 15
£m
Year ended
December 2016
IFRS 15
Contract fulfilment assets
non-currentN/A 241
Contract fulfilment assets
currentN/A 42
Accrued income – Current 364 189
Accrued income – Non
current80 -
Deferred income – Current (321) (1,375)
Deferred income – Non-
current(14) (217)
Net deferred tax 10 193
Net assets/(liabilities) 483 (553)
70 | 2017 Investor presentation