Capita Regulatory News (CPI)

27 February 2014 Full year results for the year ended 31 December 2013 Strong sales, operational and financial performance Financial highlights Underlying** Underlying** Reported Year on year change Revenue £3,851m* +15% £3,896m Operating profit £516.9m* +11% £312.4m Profit before tax £475.0m* +14% £215.0m Earnings per share 59.4p* +14% 27.05p Total dividend per 26.5p +13% 26.5p share Highlights Delivering sustainable growth - £3.3bn contract wins (2012: £4.0bn), 81% new/19% extensions - Secured largest ever contract win by annual value with Telefónica UK (O2),£1.2bn over 10 years - Highest ever contract win rate of 2 in 3 (by value) - Achieved organic growth of 8% (2012: 3%) - £5.5bn bid pipeline (November 2013: £4.2bn), well diversified across ourtarget markets - £271m spent on 13 acquisitions broadening our operational capability andmarket reach - Swift resolution of 2 underperforming areas within our Insurance & Benefitsdivision Strong financial performance - Revenue* growth of 15% - Underlying operating margin* of 13.4% - Underlying earnings per share* up 14% to 59.4p - Total dividend up 13% to 26.5p - Underlying operating cash conversion rate* of 106% (2012:110%) - Underlying free cash flow* of £312m (2012: £307m) Strong start to 2014 - £588m new contract wins to date including: - £145m contract with Transport for London to deliver the congestion chargingand traffic enforcement schemes - £325m framework contract for Scottish Wide Area Network *On an ongoing basis, 2013 numbers excluding the partial sale of our InsuranceDistribution and planned SIP business closure. Disposal and closure costs,including goodwill, total £146.7m, see note 2 of the preliminary statement.2012 numbers have not been restated on this basis. **Adjusted for new pension standard IAS19(R). Excludesnon-underlying items detailed in note 3 administrative expenses, in the notesto the preliminary statement. Paul Pindar, Chief Executive of Capita plc, commented: "2013 was a year of strong sales, operational and financialperformance. We accelerated our organic growth, sustained good cash generationand are reporting record underlying profits for the 25th successive year. Thisprovides a strong platform for further growth in 2014 under the leadership ofAndy Parker and the wider team." Andy Parker, Deputy Chief Executive of Capita plc commented: "As a consequence of the sales successes in 2013 and to date in2014, along with the acquisitions completed over the previous 12 months, wehave excellent revenue visibility and the ingredients in place to delivercontinued strong growth in 2014. The UK market for customer and businessprocess management remains very encouraging with major opportunities broadlyspread across both our private and public sector markets, as evidenced by ourcurrent bid pipeline. Together this underpins our confidence in the Group'slong term growth prospects." For further information: Analyst & investor presentation The Capita executive management team will host an analyst conference call inLondon at 8.30am UK time today. Please dial into the call in time to allow forregistration Dial-in number: +44 (0)20 3059 8125 Replay: A replay of the conference call will be available for 7 days bydialling +44 (0)121 260 4861 (access code is 9096939#). Capita plc Tel: 020 7799 1525Shona Nichols, Corporate CommunicationsDirector Capita press office Tel: 020 7654 2152 or 020 7654 2399 out of hours FTI Consulting Tel: 020 7269 7291Andrew Lorenz About Capita Capita plc is the UK's leading provider of customer and businessprocess management (BPM) and integrated professional support servicesolutions. With 64,000 people at more than 350 sites, including 73 businesscentres across the UK, Europe, India and South Africa, the Group uses itsexpertise, infrastructure and scale benefits to transform its clients'services, driving down costs and adding value. Capita is quoted on the LondonStock Exchange (CPI.L), and is a constituent of the FTSE 100 with 2013 revenueof £3.9bn. Further information on Capita plc can be found at: www.capita.co.uk Capita plc full year results for the year ended 31 December 2013 Excellent platform for continued strong growth Overview 2013 was an excellent year for Capita, the UK's leading provider ofcustomer and business process management (BPM). We secured major sales wins of£3.3bn, comprising 81% new business and 19% contract extensions, demonstratingthe strength of both our service offering and the buoyant market foroutsourcing in the UK and Ireland. We are seeing particularly high levels ofactivity in the private sector, across utilities, telecoms and financialservices, and also in central government and the justice market. In the full year 2013, underlying revenue on an ongoing basis,increased by 15% to £3,851m[1] (2012: £3,352m). Underlying operating profit[2]rose by 11% to £516.9m[1] (2012: £466.7m) and underlying profit before taxation[2]increased by 14% to £475m[1] (2012: £417.0m). Underlying earnings per share[2]grew by 14% to 59.4p[1] (2012: 52.1p). We have increased our total dividend forthe full year 2013 by 13% to 26.5p per share (2012: 23.5p). The majority of our divisions traded well in 2013, with particularly good performanceacross our Customer Management & International,Workplace Services andProfessional Services divisions. Our Property & Infrastructure and IT Servicesdivisions are improving their performance with new management in place and marketconditions becoming more favourable. Our Insurance & Benefits division has bornehigher expenditure than anticipated on legacy IT systems. Additionally, as announcedin November 2013, we completed the disposal of some of our Insurance Distributionoperations and announced the planned closure of our SIP (Self Invested Pensions)administration business based in Salisbury. During the year, we added further skills and strengthened our position in key targetmarkets through the acquisition of several small to medium sized businesses.Throughout Capita's history, this acquisition approach has enhanced our major salespropositions and fuelled future organic growth in new and existing sectors.During 2013, we acquired 13 companies for a total cost of £271m[3], in areas includingIT and software, debt management,analytics, gamification, change management andlearning and development. Good financial performance - Revenue - In the full year 2013, underlying revenue on an ongoingbasis, increased by 15% to £3,851m[1] (2012: £3,352m). This comprised 8% organicgrowth (net of attrition), 8% from acquisitions, completed in 2012 (3%) and2013 (5%), and -1% arising from business disposals. Operating profit & margin - Underlying operating profit[2] rose by11% in 2013 to £516.9m[1] (2012: £466.7m). We closely manage operating costs toensure that the business is growing profitably, leveraging our scale (inparticular our extensive shared service infrastructure) and maintainingeffective procurement processes and a lean corporate structure. Our valuableclient propositions and our ability to be very selective about theopportunities we pursue allow the Group to generate healthy underlyingoperating margins. We are confident that underlying Group operating marginswill be maintained in the range of 12.5% to 13.5% for the foreseeable future. In 2013, our operating margin[2] was 13.4%[1] (2012: 13.9%) which is at the upperend of our anticipated range of 12.5% - 13.5%, even though 2013 was a busyyear for new contract implementations. The major contract implementationsundertaken during the year, including the 2 largest in Capita's history withStaffordshire County Council and Telefónica UK (O2), are progressing well. As previously disclosed, in H2 2013, we completed the disposal ofsome of our Insurance Distribution operations and announced the plannedclosure of our SIP (Self Invested Pensions) administration business based inSalisbury. This followed a detailed review which concluded that the route torecovery for these businesses would take a long time and we therefore actedswiftly to resolve this. In 2013, these operations generated £45m of Grouprevenue and made a combined operating loss of £14.4m. The combined non-tradingcash cost, net of tax, from the sale and planned closure is £38.5m. The losson disposal was £82.1m including £62.4m from impairment of goodwill andintangible assets. - Cash flow[2] - In 2013, £546m[1] (2012: £515m) of cash flow wasgenerated by operations representing an operating profit to cash conversionratio (defined as underlying cash generated from operations divided byunderlying operating profit for the year) of 106%[1] (2012: 110%). This reflectsthe Group's focus on cash generation and the success of the measuresintroduced across the business in 2012 which are now firmly embedded in ourfinancial and operating reporting structure. We believe that we can achieve anannual cash conversion ratio at or around 100% for the foreseeable future. Free cash flow[2] (defined as operating cash flow, less net capitalexpenditure, interest and taxation for the year) was £312m excluding businessdisposal and planned closure (2012: £307m), despite the higher capitalexpenditure on new contract implementations. - Dividends - The Board is recommending a final dividend of 17.8pper ordinary share (2012: 15.6p), making a total of 26.5p for the year (2012:23.5p) representing an increase for the year of 13%. The final dividend willbe payable on 28 May 2014 to shareholders on the register at the close ofbusiness on 22 April 2014. Including the proposed final dividend, Capita'stotal dividend will have grown at a compound annual rate of 13% over the 5years to 31 December 2013. Dividend cover is 2.2 times for 2013. - Capital expenditure - We aim to contain net capital expenditureat or below 4% of revenue. In 2013, we met this objective, with net capex at3.7% of annual revenue (2012: 2.9%). The higher level of capex is theconsequence of a record level of new contract implementations in the year.There are currently no indications of significant capex requirements in ourbusiness forecasts or bid pipeline that would take us over our 4% threshold. - Return on capital employed[2] - We focus on driving a healthyreturn on capital. During 2013, our post-tax return on average capitalemployed was 15.5%[1] (2012: 15.8%). This compares to our estimated post-taxWACC which is 7.7%. In 2014, subject to shareholder approval at the Annual GeneralMeeting, Board Directors' incentive schemes additionally have ROCE targets,alongside EPS targets, to align further their interests with those of ourshareholders. - Debt profile - As at 31 December 2013, we have £1,134m of privateplacement bond debt of which only £11m matures in 2014 with the remaindergradually maturing to 2021. In addition, we have £200m of bank debt under a 2year term loan facility maturing in July 2015, offset by £158m of cash held ondeposit. Our aim continues to be to keep the ratio of net debt to EBITDA inthe range of 2 to 2.5 over the long term and we would be unlikely to incurborrowings which would reduce interest cover below 7 times. At 31 December2013, our annualised net debt to EBITDA ratio[2] was 2.02[1] (2012:1.91) withannualised interest cover[2] at 12.3[1] times (2012:9.4 times). - Total shareholder returns - Over the 10 year period to 31December 2013, Capita has delivered £1.4bn (net of £274m equity raising inApril 2012) to shareholders through dividends, share buybacks and a specialdividend. Capita's total shareholder return over the same period is 425%compared to 115% for the FTSE 100. [1]On an ongoing basis, 2013 numbers excluding the partial sale of our InsuranceDistribution and planned SIP business closure, see note 2 of the preliminarystatement. 2012 numbers have not been restated on this basis. [2] Adjusted for new pension standard IAS19 (R). Excludesnon-underlying items detailed in note 3 administrative expenses, in the notesto the preliminary statement. [3] As previously announced and excludes investment in Axelos,Entrust and Fire Service College (public sector subsidiary partnerships). Delivering profitable organic growth We generate profitable growth by winning business from new andexisting customers and through acquiring businesses that enhance ourpropositions and broaden our capability and market reach. 2013 was a strong year of sales performance and 2014 has startedwell with 5 contracts worth £588m in aggregate secured to date. Major contracts - to date in 2014 - Transport for London (TfL) - secured a 5 year contract withTransport for London (TfL) to operate and enforce the congestion charging, lowemission zone and traffic enforcement notice processing schemes. Capita willtake responsibility for the schemes in November 2015, following a period ofimplementation which commences in 2014. The overall agreement, including theimplementation period, is expected to generate revenue of approximately £145mto Capita. - Scottish Wide Area Network (SWAN) - signed a framework contractto deliver the SWAN, a single public services network for the use of allpublic service organisations within Scotland. The contract value for SWAN isup to £325m over 9 years. More than 4,600 sites will be connected to theinitial network including schools, hospitals, GP surgeries, pharmacists andlocal council offices. Key benefits include reduced costs, improved serviceand the ability to share data across organisations, fostering co-operativeworking. This places Capita at the heart of public service delivery inScotland, providing a platform to offer additional services and build ourbusiness here. 3 other major contracts: We signed an interim services agreement with theMinistry of Justice to take on responsibility for the frontline delivery ofthe existing electronic tagging operations prior to implementation of the newelectronic monitoring contract. This involves the transfer of around 1,000employees to Capita under TUPE regulations in February and March 2014. We alsosecured a new contract with Genesis Housing Association and an extension toour Metropolitan Police radio managed services contract. Major contracts - 2013 The 17 new and extended major contracts secured in 2013 are worth£3.3bn in aggregate (2012: 35 contracts totalling £4.0bn) and represent a 2 in3 win rate for the Group. Contracts include: - Telefónica UK (O2) - a 10 year strategic partnership to delivercustomer management services. Building on our existing long term partnership,we will manage O2's customer service centres and support O2 as it enhances andexpands its digital service offering to customers. This 10 year relationshipis worth approximately £1.2bn and commenced on 1 July 2013. - Cabinet Office/Axelos - selected by the Cabinet Office to jointlydevelop, deliver and commercialise the Government's portfolio of project andIT management training tools. The partnership, now branded Axelos, isanticipated to triple current revenues of approximately £40m per annum by year10 and became fully operational from 1 January 2014. - Carphone Warehouse - contract to provide all Carphone Warehouse'snon-store customer contact in a number of different areas across the businessand support all aspects of its customer service strategy. The contract isworth around £160m over 10 years and commenced on 1 April 2013. - London Borough of Barnet - contract to deliver development andregulatory services including highways management, planning and development,regeneration and environmental health and trading standards services. Thecontract, which will be delivered by our Property & Infrastructure business,is expected to be worth approximately £154m over 10 years and commenced on 1October 2013. - Civil Service Learning agreement - extension to existing contractwith the Cabinet Office, worth at least £60m over 2 years to end March 2016. - National Asset Management Agency (NAMA) - appointed as primary and specialloan servicer on the NAMA loans acquired under the NAMA Act 2009, previouslymanaged on behalf of NAMA by the special liquidators, Irish Bank ResolutionCorporation (IBRC). The contract is worth around £69m over 4 years. - Department of Energy and Climate Change (DECC) - Selected by the Departmentof Energy and Climate Change for the smart meter communication licence,responsible for the effective overall management, implementation and evolutionof the data and communications infrastructure and service. The arrangement isexpected to generate revenues to Capita of some £175m over 12 years (with anoption to be extended for a further 6 years). - Ministry of Justice (MoJ) - selected as preferred bidder for the newelectronic monitoring and field support services contract and also the role ofoverall services and systems integrator. Our assessment is that the contractwill generate revenues to Capita of some £400m over the initial 6 yearcontract term, based on the anticipated increase in the use of tags beyond thecurrent numbers of monitored individuals. The new service is expected to startlater in 2014 following a set up and mobilisation period. - RWE npower plc (trading as npower) - secured a partnership to provide bothfront office customer management and back office services. Capita will takeresponsibility for part of npower's customer service operation and deliver abusiness transformation programme that will enhance customer service fornpower's domestic business. The contract is expected to be worth approximately£120m over 7 years and commenced in February 2014. - Southampton City Council - awarded an extension to our existing 10 yearstrategic partnership, which originally commenced in October 2007, by afurther 5 years to September 2022. The extension of the contract will generateadditional revenue to Capita of approximately £124m. Major contracts worth between £25m-£50m: - We have secured contracts worth a total of £381m, including with theDepartment for Work and Pensions (DWP), Croydon Council, Scottish Power EnergyRetail, University of Strathclyde and the Department of Communications, Energyand Natural Resources in Ireland. For further details on our contract wins, visit www.capita.co.uk Buoyant sales outlook for 2014 Bid pipeline: The pipeline now stands at £5.5bn (November 2013: £4.2bn) andcomprises 25 bids across our target markets, with particular activity in theprivate sector, particularly telecoms and financial services, and in thejustice market and the wider public sector. Behind the pipeline is an activeprospect list of opportunities, including a number of bids which are expectedto reach shortlist stage shortly. Our bid pipeline contains all bids worth £25m or above, with bids capped at£1bn and where we have been shortlisted to the last 4 or fewer. We announcethe value of the pipeline three times a year and it is therefore a snapshot ata specific point in time. Contract rebids: We have one material contract up for rebid in 2015 (arisingfrom a recent acquisition) and then no further material rebids for the next 5years (defined as having forecast annual revenue in excess of 1% of 2013revenue). Market update: We operate predominantly in the BPM market in the UKand Ireland, a market with significant growth potential. Having diversifiedour activities over 11 distinct markets and with a growing private sectorfootprint, we have an increasing ability to move across our markets to focuson the most active and interesting ones to fuel continued strong growth. In 2013, we commissioned new market research from Ovum, one of theUK's leading independent industry analysts. Ovum estimates that Capita's totaladdressable market for customer management and BPM in the UK is £126bn peryear, of which only £11.9bn was outsourced in 2013 (2012: £11.4bn), 72% in theprivate sector and 28% in the public sector. For the full year 2013, Capita'srevenue was split 52% private and 48% public sector. Having been formedinitially in the public sector, over time we would expect Capita's revenues tocontinue to accelerate in the private sector to reflect the respective marketopportunity. We continually look for changes in sector dynamics across our 11target markets which may create a catalyst for potential outsourcingopportunities. Our newer market sectors - customer management, defence,justice and emergency services - are showing significant potential alongsideour more established market sectors. The rapid increase in digital communication, including the rise inuse of mobile technology and social media, is having a significant impact onthe behaviour and expectations of people and consequently our public andprivate sector clients need to adapt the way in which they communicate anddeliver services. Alongside our existing skills, we have enhanced our digital,behavioural science, analytics and change management capabilities bothinternally and through acquisitions to address this need, helpingorganisations across both sectors to better meet their customers' needs andremain at the forefront of their markets. In the private sector, commercial organisations are facing pressureto maintain their competitive position by driving down operational costs andintroducing new products and services to market faster, while maintaining highlevels of customer service and retention. Changing legislation, for example inthe financial services, utilities and banking sectors, is stimulatingincreased interest in our customer and administration services and we areconstantly evolving our propositions to ensure that we can meet these changingrequirements. The public sector is facing many similar dynamics with ongoingpressure to reduce budgets while maintaining and adapting frontline services.Demographic changes, including the ageing population and an increasing numberof children in care, are also creating some specific challenges for publicsector organisations, particularly local, health and education authorities,and they are therefore increasingly looking to partner with the private sectorto find new service solutions. Central government has reduced spend through austerity measures butis still having to seek further transformation change to meet the growingneeds of the public sector within severe cost constraints. Outsourcing in allits various models is being used to address these challenges, from traditionaloutsourcing to transformational partnerships and joint ventures. We anticipatethat there may be a pause in central government new outsourcing initiativesduring the election period in 2015, but we are currently not seeing anyslowdown in bidding activity across our key Government departments ofinterest. Local government activity is expected to progress steadily as normalthrough the election period. Enhancing capabilities and broadening our reach throughacquisitions The strength of our offering is a result of the proactivedevelopment of the Group's capability and infrastructure, both internally andthrough selective acquisition, ensuring that we have the right resources inplace to deliver tailored service models for our clients. In 2013, we acquired13 companies for a total cash consideration of £271m3. These organisations arealso enhancing our sales propositions, helping to address our clients'challenges and creating further organic growth in the following areas: Analytics and gamification: With the increasing use of analytics, behaviouralscience and the application of game dynamics to inform and deliver our customerand employee change programmes, we acquired G2G3 a provider of immersion andsimulation-based training for organisations in the UK and overseas. Theapplication of game dynamics and game thinking to non-game activities is arapidly growing method for training employees and helping customers engageefficiently with services. G2G3 is continuing to develop simulations for globalorganisations as well as for Capita's existing and new clients across police,emergency services, justice, defence, nuclear and oil and gas industries. We also strengthened our analytics capability though the acquisition of Euristix,a boutique data analytics and risk management business. Euristix provides portfoliomanagement, value realisation, diagnostics and due diligence services to debt andfinancial services clients, together with debt purchasers. These skills are anessential component of both debt management and wider customer services. Debt management: We extended our resources in this area by acquiring iQor UK(now rebranded Akinika), a provider of outsourced debt collection services toboth the public and private sectors in the UK, for an enterprise value of £42m.Akinika helps companies and organisations to manage high risk customers andensure revenue collection, an area where we are seeing strong potential forgrowth. Combined with our existing skills and Euristix (see above), we haveestablished a comprehensive end to end debt management offering for boththe private and public sectors. IT & Software: The majority of our service solutions are IT enabled and wehave continued to strengthen our products, services and resources and extendedour geographic reach. Headquartered in Northern Ireland, Northgate ManagedServices (NMS), a provider of cloud-based, infrastructure solutions andspecialist managed services to public, private and third sector organisations,was acquired by Capita for an enterprise value of £65m. Continuing to enhance our offering to the justice market, we acquired STLTechnologies, a provider of software and ICT to the criminal justice system,including courts and the police, and to asylum and immigration tribunals. STLspecialises in case management applications for organisations including HerMajesty's Courts Service, the Ministry of Justice, the Scottish Court Serviceand case preparation and custody applications for West Midlands Police.Extending our footprint in the education market, we acquired MLS, a providerof library and resource management systems. Opening up a new market segment for Capita, we acquired ParkingEye, a providerof technology based car parking services, for an enterprise value of £57.5m.ParkingEye's automatic number plate recognition (ANPR) based management systemis used by clients to provide remote enforcement, management information andalerting systems. Change management & learning and development: As the skills, behaviours andproductivity of workforces are key to the success of services and organisations,we have broadened our services across recruitment, development and changemanagement. We acquired Blue Sky Performance Improvement, a UK based learningand development business that specialises in behaviour change and improvedemployee productivity. Blue Sky provides bespoke, high quality solutions forexecutive level employees through to field-based and frontline employees forprivate and public sector clients, including 20% of the FTSE 100 such asBritish Gas, BT, Barclays, RBS and RSA. Focusing on ensuring training investment is deployed efficiently and increasingskills across young people, we acquired two further companies. KnowledgePoolGroup, a provider of learning managed services, manages all learning activityand operations through a single channel that maximises return on training investmentfor its clients. The company delivers three core service components of suppliermanagement, training administration and learning consultancy. Creating Careers,a provider of accredited e-learning to further and secondary education studentsvia distance learning, focuses on providing those who have disengaged from traditionaleducation techniques with a route to accredited, nationally recognised qualifications. Our organisational structure To further support our clients and the markets in which we operate, we have madesome further minor changes to our operational structure for 2014 and from 1 January2014, we now operate in 9 market facing or service specific divisions. Our deliverynetwork now includes 73 multi-service delivery centres in the UK, the Channel Islandsand Europe and offshore in India, South Africa and Dubai. By offering onshore,nearshore, offshore or blended service delivery options in a time zone that suitsour clients, we can provide maximum flexibility, quality and cost savings in oursales propositions. Our Board and people The Board would like to take this opportunity to thank all ourpeople for their hard work and dedication which ensures that we can continueto deliver quality services for clients. Our employees join us through directrecruitment, contracts or acquisitions and their commitment and enthusiasmplay a vital role in helping us to meet client expectations and sustain ourgrowth. As announced in November 2013, Paul Pindar is stepping down asChief Executive and from the Capita Group Board with effect from 28 February2014. Paul has played a key role in Capita's successful growth since joiningthe Company in 1987, including 22 years as Managing Director and ChiefExecutive. The Board warmly thanks him for his significant contribution to thesuccess of Capita and wishes him all the best for the future. In line with Capita's senior management succession plan, AndyParker will succeed Paul as Chief Executive from 1 March 2014. DawnMarriott-Sims, formerly Executive Director of Capita's Workplace Servicesdivision, was appointed to the Group Board succeeding Andy as Joint COO witheffect from 1 January 2014. Following 10 years as a Non Executive Director, Martina King hasdecided to retire from the Board in May 2014. The Board thanks her for herstrong contribution to the Board and as Chair of the Remuneration Committeeand wishes her all future success. Future prospects 2013 was a year of strong sales, operational and financialperformance. We accelerated our organic growth, sustained good cash generationand delivered record underlying profits for the 25th successive year. As a consequence of the sales successes in 2013 and to date in2014, along with the acquisitions completed over the previous 12 months, wehave excellent revenue visibility and the ingredients in place to delivercontinued strong growth in 2014. The UK market for customer and businessprocess management remains very encouraging with major opportunities broadlyspread across both our private and public sector markets, as evidenced by ourcurrent bid pipeline. Together this underpins our confidence in the Group'slong term growth prospects. [1]On an ongoing basis, 2013 numbers excluding the partial sale of our InsuranceDistribution and planned SIP business closure, see note 2 of the preliminarystatement. 2012 numbers have not been restated on this basis. [2] Adjusted for new pension standard IAS19 (R). Excludesnon-underlying items detailed in note 3 administrative expenses, in the notesto the preliminary statement. [3] As previously announced and excludes investment in Axelos,Entrust and Fire Service College (public sector subsidiary partnerships). -Ends- Consolidated income statement for the year ended 31 December 2013 2013 2012 Note Underlying Business Other £m disposal/ non-underlying Restated closure (note 2) (note 3) Total Underlying Non-underlying Total £m £m £m £m £m £mContinuing operations:Revenue 3,850.9 45.3 - 3,896.2 3,351.8 - 3,351.8Cost of sales 2,780.9 46.7 - 2,827.6 2,411.0 - 2,411.0Gross profit 1,070.0 (1.4) - 1,068.6 940.8 - 940.8Administrative expenses 553.1 63.2 139.9 756.2 474.1 130.8 604.9Operating profit 516.9 (64.6) (139.9) 312.4 466.7 (130.8) 335.9Net finance costs 4 (41.9) - 26.6 (15.3) (49.7) (4.8) (54.5)Loss on business - (82.1) - (82.1) - - -disposalProfit before tax 475.0 (146.7) (113.3) 215.0 417.0 (135.6) 281.4Income tax expense (90.3) 14.8 32.4 (43.1) (85.3) 33.3 (52.0)Profit for the year 384.7 (131.9) (80.9) 171.9 331.7 (102.3) 229.4Attributable to:Owners of the Company 389.1 (131.9) (80.0) 177.2 331.7 (102.3) 229.4Non-controlling (4.4) - (0.9) (5.3) - - -interests 384.7 (131.9) (80.9) 171.9 331.7 (102.3) 229.4Earnings per share- basic 5 59.40p (20.14)p (12.21)p 27.05p 52.12p (16.08)p 36.04p- diluted 5 58.71p (19.90)p (12.07)p 26.74p 51.55p (15.90)p 35.65p Consolidated statement of comprehensive income for the year ended 31 December 2013 £m 2013 £m 2012 £m Restated £m Profit for the year 171.9 229.4Other comprehensive income/(expense):Items that will not be reclassifiedsubsequently to profit or loss:Actuarial gain/(loss) on defined benefit 10.9 (19.8)pension schemesIncome tax effect (9.2) 0.6 1.7 (19.2)Items that will or may be reclassifiedsubsequently to profit or loss:Exchange differences on translation of 0.3 (5.8)foreign operationsLosses on cash flow hedges arising during (10.3) (11.3)the yearReclassification adjustments for 2.6 (1.2)losses/(gains) included in the incomestatementIncome tax effect 0.9 2.7 (6.8) (9.8) (6.5) (15.6)Other comprehensive expense for the year net (4.8) (34.8)of taxTotal comprehensive income for the year net 167.1 194.6of taxAttributable to:Owners of the Company 172.4 194.6Non-controlling interests (5.3) - 167.1 194.6 Consolidated balance sheet Note 2013 2012 £m RestatedAs at 31 December 2013 £m Non-current assetsProperty, plant and equipment 419.8 358.3Intangible assets 2,330.7 1,936.8Financial assets 166.4 236.2Deferred taxation - 1.3Trade and other receivables 77.6 72.7 2,994.5 2,605.3Current assetsFinancial assets 3.1 8.0Funds assets 100.8 121.2Trade and other receivables 892.9 834.1Cash 610.8 747.3 1,607.6 1,710.6Total assets 4,602.1 4,315.9Current liabilitiesTrade and other payables 1,023.5 968.9Overdrafts 453.0 440.6Financial liabilities 79.2 121.5Funds liabilities 100.8 121.2Provisions 8 62.2 32.8Income tax payable 52.5 46.7 1,771.2 1,731.7Non-current liabilitiesTrade and other payables 26.5 12.5Financial liabilities 1,729.9 1,539.7Deferred taxation 7.1 -Provisions 8 52.7 45.8Employee benefits 118.4 108.1 1,934.6 1,706.1Total liabilities 3,705.8 3,437.8Net assets 896.3 878.1Capital and reservesIssued share capital 13.8 13.8Share premium 491.2 470.4Employee benefit trust & treasury shares (0.4) (0.4)Capital redemption reserve 1.8 1.8Foreign currency translation reserve 2.0 1.7Net unrealised losses reserve (24.1) (17.3)Retained earnings 350.4 408.1Equity attributable to owners of the Company 834.7 878.1Non-controlling interests 61.6 -Total equity 896.3 878.1 Included in aggregate financial liabilities is an amount of £1,267.3m (2012:£1,370.1m) which represents the fair value of the Group's bonds which shouldbe considered in conjunction with the aggregate value of currency and interestrate swaps of £147.1m included in financial assets and £13.5m included infinancial liabilities (2012: £222.4m included in financial assets and £0.3mincluded in financial liabilities). Consequently, this gives an effectiveliability of £1,133.7m (2012: £1,148.0m). Consolidated statement of changes in equity for the year ended 31 December 2013 Share Share Employee Capital Retained Foreign Cash Total Non-controlling Total capital premium benefit redemption earnings currency flow £m interests equity £m £m trust reserve £m translation hedging £m £m & £m reserve reserve treasury £m £m shares £m At 1 January 2012 13.0 459.4 (0.4) 1.8 50.3 7.5 (7.5) 524.1 - 524.1Profit for the - - - - 229.4 - - 229.4 - 229.4year - restatedOther - - - - (19.2) (5.8) (9.8) (34.8) - (34.8)comprehensiveexpense - restatedTotal - - - - 210.2 (5.8) (9.8) 194.6 - 194.6comprehensiveincome for theyearShare based - - - - 9.1 - - 9.1 - 9.1paymentDeferred income - - - - 6.2 - - 6.2 - 6.2tax relating toshare basedpaymentsShares issued 0.8 11.0 - - 270.4 - - 282.2 - 282.2Equity dividends - - - - (138.1) - - (138.1) - (138.1)paidAt 1 January 2013 13.8 470.4 (0.4) 1.8 408.1 1.7 (17.3) 878.1 - 878.1Profit for the - - - - 177.2 - - 177.2 (5.3) 171.9yearOther - - - - 1.7 0.3 (6.8) (4.8) - (4.8)comprehensiveexpenseTotal - - - - 178.9 0.3 (6.8) 172.4 (5.3) 167.1comprehensiveincome for theyearShare based - - - - 10.5 - - 10.5 - 10.5paymentDeferred income - - - - 8.0 - - 8.0 - 8.0tax relating toshare basedpaymentsShares issued - 20.8 - - - - - 20.8 - 20.8Equity dividends - - - - (159.1) - - (159.1) - (159.1)paidPut option of - - - - (96.0) - - (96.0) - (96.0)non-controllinginterestAcquisition of - - - - - - - - 66.9 66.9subsidiary withnon-controllinginterestAt 31 December 13.8 491.2 (0.4) 1.8 350.4 2.0 (24.1) 834.7 61.6 896.32013 Non-controlling interests - This represents the equity in a subsidiary that isnot attributable directly or indirectly to the parent company. Put option of non-controlling interest - The non-controlling shareholders ofAxelos Limited and Entrust Support Services Limited, which we acquired acontrolling interest in during the year, have an option to put theirshareholding to Capita plc. Accordingly, a liability of £96m has beenrecognised and a corresponding entry has been recorded against retainedearnings. The options are exercisable only after a period of 5 years haselapsed. Consolidated cash flow statement for the year ended 31 December 2013 Note 2013 2012 £m Restated £mCash flows from operating activitiesOperating profit on continuing activities 312.4 335.9Adjustment for non-cash items:Depreciation 74.1 71.7Accelerated depreciation on business closure 6.0 -Amortisation of intangible assets (treated as depreciation) 3.3 1.2Amortisation of intangible assets recognised on acquisition 122.2 95.3Accelerated amortisation of intangible assets on business 0.2 -closureShare based payment expense 10.5 9.1Employee benefits 2.2 (1.9)Non-underlying items - see note 3 1.7 25.2Loss/(profit) on sale of property, plant and equipment 2.1 (0.1)Movement in provisions (net) 32.0 (18.2)Net movement in payables and receivables (28.4) (3.1)Cash generated from operations before settlements 538.3 515.1Arch Cru (1.2) -Settlement of Cumbria County Council pension deficit - 0.8Cash generated from operations 537.1 515.9Income tax paid (52.9) (62.3)Net interest paid (37.2) (46.0)Net cash inflow from operating activities 447.0 407.6Cash flows from investing activitiesPurchase of property, plant and equipment (128.2) (95.5)Purchase of intangible assets (16.9) (5.8)Proceeds from sale of property, plant and equipment 1.2 1.4Acquisition of public sector subsidiary partnerships (38.9) -Debt repaid on the acquisition of public sector subsidiary (9.1) -partnershipsAcquisition of other subsidiary undertakings and businesses (243.2) (132.4)Cash acquired with other subsidiary undertakings 15.8 17.6Debt repaid on the acquisition of other subsidiaries (5.1) (57.1)Cash disposed of with other subsidiary undertakings (6.0) -Contingent consideration paid (14.4) (12.0)Purchase of financial assets (0.7) -Investment loan 0.2 0.3Net cash outflow from investing activities (445.3) (283.5)Cash flows from financing activitiesIssue of ordinary share capital 16.7 284.9Share transaction costs - (2.7)Dividends paid (159.1) (138.1)Capital element of finance lease rental payments 9 (10.0) (1.7)Repayment of term debt 9 (185.0) (2.3)Repayment of bonds 9 (88.1) -Proceeds on issue of term debt 9 200.0 160.3Proceeds on issue of bonds 9 75.0 -Revolving credit facility - (178.0)Financing arrangement costs - (1.5)Net cash (outflow)/inflow from financing activities (150.5) 120.9(Decrease)/increase in cash and cash equivalents (148.8) 245.0Cash and cash equivalents at the beginning of the period 306.7 62.4Impact of movement in exchange rates (0.1) (0.7)Cash and cash equivalents at 31 December 157.8 306.7Cash and cash equivalents comprise:Cash at bank and in hand 610.8 747.3Overdrafts (453.0) (440.6)Total 157.8 306.7 Notes to the financial statements The 2012 financial statements have been restated to reflect: - The adoption of IFRS 7 Financial Instruments: Disclosures - OffsettingFinancial Assets and Financial Liabilities (Amendments to IFRS 7) requiringthe Group to gross up its cash at bank and overdraft positions and accordinglythe statement of financial position has been restated to reflect this; - The adoption of IAS19 Employee Benefits (Revised 2011) - IAS 19R resultingin a change to the accounting for interest on plan assets and accordingly theincome statement and statement of comprehensive income have been restated; and - Revisions made to fair value adjustments in the current year that had beendetermined provisionally at the immediately preceding balance sheet date. 1 Segmental information The Group's operations are organised and managed separately according to thenature of the services provided, with each segment representing a strategicbusiness unit offering a different package of related services across theGroup's markets. No operating segments have been aggregated to form thereportable operating segments below. The information disclosed belowrepresents the way in which the results of the businesses are reported to theGroup Board. The comparative figures have been restated due to areorganisation of the Group's business segments during the year and aconsequent change in the way in which the results of the businesses arereported to the Group Board. Before eliminating sales between business units on consolidation, the Groupaccounts for sales between business units as if they were to a third party atmarket rates. Year ended 31 December 2013 Health & IT Justice Professional Property & Workplace Asset Customer Insurance Total Wellbeing Services & Secure Services Infra Services Services Management & & £m £m £m Services £m structure £m £m International Benefits £m £m £m Services £mSegmentrevenue- Underlying 187.6 590.4 425.4 666.8 297.3 597.5 257.3 518.9 762.2 4,303.4Total segmentrevenueInter-segment (24.8) (132.8) (14.0) (110.3) (20.0) (31.5) (10.7) (13.2) (95.2) (452.5)revenueThird party 162.8 457.6 411.4 556.5 277.3 566.0 246.6 505.7 667.0 3,850.9revenue- Non-underlying - - - - - - - - 45.3 45.3Non-underlyingtrading[1]Total segment 162.8 457.6 411.4 556.5 277.3 566.0 246.6 505.7 712.3 3,896.2revenueSegment result- UnderlyingResult after 22.2 25.5 66.4 131.2 16.0 75.0 65.3 64.1 61.7 527.4depreciationShare based (0.4) (0.5) (1.5) (2.7) (0.3) (1.5) (1.3) (1.2) (1.1) (10.5) paymentUnderlying 21.8 25.0 64.9 128.5 15.7 73.5 64.0 62.9 60.6 516.9 trading result- Non-underlying - - - - - - - - (14.4) (14.4)trading[1]Total trading 21.8 25.0 64.9 128.5 15.7 73.5 64.0 62.9 46.2 502.5resultNon-tradingBusiness disposal & closure costs (50.2)Intangible (122.2)amortisationAcquisition (14.3)costsContingent consideration movements (1.7)Arch Cru (1.7)Operating 312.4profitNet underlying finance costs (41.9)Financial instruments - mark to market 25.1Derivatives own party risk - mark to market 0.1Derivatives counterparty risk - mark to market 1.4Loss on business disposal (82.1)Profit before 215.0taxIncome tax expense (43.1)Profit for the year 171.9 [1]See note 2 1 Segmental information (continued) Year ended 31 December 2012 Segment Health & IT Justice Professional Property & Workplace Asset Customer Insurance Total revenue Wellbeing Services & Secure Services Infras- Services Services Management & & £m £m £m Services £m structure £m £m International Benefits £m £m £m Services £mTotal segment 198.4 549.6 299.2 550.8 273.4 438.6 250.3 369.6 819.7 3,749.6revenueInter-segment (26.2) (112.4) (12.3) (97.0) (17.6) (27.7) (9.4) (11.6) (83.6) (397.8)revenueThird party 172.2 437.2 286.9 453.8 255.8 410.9 240.9 358.0 736.1 3,351.8revenueSegment resultUnderlyingResult after 33.0 29.7 42.6 113.6 7.4 55.8 63.9 48.7 81.1 475.8depreciationShare based (0.4) (0.3) (0.9) (2.2) (0.6) (1.3) (0.6) (0.9) (1.9) (9.1)payment 32.6 29.4 41.7 111.4 6.8 54.5 63.3 47.8 79.2 466.7Non-underlyingIntangible (95.3)amortisationAcquisition (10.3)costsLoan (15.0)impairmentGoodwill impairment net of contingent consideration (10.2)movements 335.9Net underlying finance costs (49.7)Financial instruments - mark to market (8.7)Derivatives counterparty risk - mark to 3.9marketProfit before 281.4taxIncome tax (52.0)expenseProfit for the 229.4year 2 Business disposal/closure In the year the Group disposed of its insurance distribution businesses andannounced the planned closure of its SIP (Self Invested Pensions)administration business. Income statement impact Non-trading disposal/closure Trading Cash Non-cash Total Total £m £m £m £m £m Revenue 45.3 - - - 45.3Cost of sales (46.7) - - - (46.7)Gross loss (1.4) - - - (1.4)Administrative expenses (13.0) (41.5) (8.7) (50.2) (63.2)Operating loss (14.4) (41.5) (8.7) (50.2) (64.6)Loss on business disposal - (6.0) (76.1) (82.1) (82.1)Loss before tax (14.4) (47.5) (84.8) (132.3) (146.7)Taxation 3.2 9.0 2.6 11.6 14.8Loss after tax (11.2) (38.5) (82.2) (120.7) (131.9) Trading revenue and costs represent the current year trading performance ofthese businesses. Non-trading disposal and closure costs include the costs of running off thepolicies in the SIP business and the ongoing stranded costs such as propertylease and redundancy payments. It is expected these expenses will be incurredover 2 years - see note 8. Included within non-trading administrative expenses in the table above are: £mProvision made in respect of disposal and closure costs 41.5Assets written off used exclusively for the activities disposed 8.7of/closedTotal 50.2 The table below summarises the loss on disposal: £mProperty, plant and equipment 3.1Trade and other receivables (excl. accrued income) due in less than 46.4one yearAccrued income due in less than one year 4.8Cash 6.0Trade payables due in less than one year (5.0)Other payables due in less than one year (35.6)Intangible assets 4.8Goodwill 57.6Total net assets disposed of 82.1Net proceeds received -Loss on business disposal 82.1Consideration was comprised of £1. 3 Administrative expenses Included within administrative expenses in the non-underlying column are: 2013 2012 £m £mNon-underlying, non-cash items:Intangible amortisation 122.2 95.3Contingent consideration movements (net of goodwill 1.7 10.2impairment in 2012)Arch Cru 0.5 -Impairment of Optima investment loan - 15.0 124.4 120.5Non-underlying, cash items:Professional fees re acquisitions 12.9 9.6Stamp duty paid on acquisitions 1.4 0.7Arch Cru 1.2 - 15.5 10.3Total 139.9 130.8 The Group has paid additional costs of £1.2m during the year and has madeprovision for further costs of £0.5m in relation to this matter. Having givendue consideration to the ongoing activity in this case the Group considered itprudent to set aside an amount to cover legal fees that may be incurred indealing with this matter. 4 Net finance costs 2013 2012 £m Restated £mBank interest receivable (0.1) (0.3)Other interest receivable (0.1) (0.2)Interest receivable (0.2) (0.5)Bonds 22.9 29.5Fixed rate interest rate swaps - realised 6.0 9.1Finance lease 0.8 -Bank loans and overdrafts 7.7 7.9Investment expense - 0.1Net interest cost on defined benefit pension schemes 4.7 3.6Interest payable 42.1 50.2Underlying net finance costs 41.9 49.7Fixed rate interest rate swaps - mark to market (26.3) 8.2Non-designated foreign exchange forward contracts - mark to 1.2 0.5marketDerivatives' counterparty risk adjustment - mark to market (1.4) (3.9)Derivatives' own credit risk adjustment - mark to market (0.1) -Non-underlying net finance costs (26.6) 4.8Total net finance costs 15.3 54.5 5 Earnings per share Basic earnings per share amounts are calculated by dividing net profit for theyear attributable to ordinary equity holders of the parent by the weightedaverage number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the net profitfor the year attributable to ordinary equity holders of the parent by theweighted average number of ordinary shares outstanding during the year plusthe weighted average number of ordinary shares that would be issued on theconversion of all the dilutive potential ordinary shares into ordinary shares. The following reflects the income and share data used in the basic and dilutedearnings per share computations: 2013 2012 £m Restated £mNet profit attributable to ordinary equity holders of the parent 177.2 229.4from operations 2013 2012 Number Number million millionWeighted average number of ordinary shares (excluding trust and 655.1 636.4treasury shares) for basic earnings per shareDilutive potential ordinary shares:Employee share options 7.7 7.0Weighted average number of ordinary shares (excluding trust and 662.8 643.4treasury shares) adjusted for the effect of dilution There have been no other transactions involving ordinary shares or potentialordinary shares between the reporting date and the date of completion of thesefinancial statements. The following additional earnings per share figures are calculated based onunderlying earnings attributable to ordinary equity holders of the parent of£389.1m (2012: £331.7m) and, after non-underlying costs, earnings of £177.2m(2012: £229.4m). They are included as they provide a better understanding ofthe underlying trading performance of the Group. 2013 2012 p Restated pBasic earnings per share - underlying 59.40 52.12- after non-underlying 27.05 36.04Diluted earnings per share - underlying 58.71 51.55- after non-underlying 26.74 35.65 6 Dividends paid and proposed 2013 2012 £m £mDeclared and paid during the yearOrdinary shares (equity):Final for 2012 paid: 15.6p per share (2011: 14.2p per share) 102.1 86.7Interim for 2013 paid: 8.7p per share (2012: 7.9p per share) 57.0 51.4 159.1 138.1Proposed for approval at AGM (not recognised as a liability at 31December)Ordinary shares (equity):Final for 2013: 17.8p per share (2012: 15.6p per share) 116.9 101.3 7 Business combinations 2013 acquisitions The Group made a number of acquisitions in 2013 which are shown in aggregate.The fair values of the identifiable assets and liabilities acquired aredisclosed in the table below: Fair value to Group recognised on acquisition Public Sector Other Total Subsidiary acquisitions £m Partnership £m £m Property, plant and equipment 3.9 26.0 29.9Intangible assets 102.7 187.9 290.6Trade and other receivables due in less than 3.7 50.9 54.6one yearTrade and other receivables due in more than - 14.4 14.4one yearCorporation tax - 1.6 1.6Cash and cash equivalents - 15.8 15.8Trade and other payables (exc. accruals) due (2.5) (41.5) (44.0)in less than one yearAccruals due in less than one year (10.9) (54.9) (65.8)Trade and other payables (exc. accruals) due - (2.0) (2.0)in more than one yearProvisions - (5.5) (5.5)Deferred tax (2.1) (23.0) (25.1)Employee benefits liability - (14.3) (14.3)Finance leases - (25.4) (25.4)Public sector subsidiary partnership payment (52.2) - (52.2)Long term debt (9.1) (5.1) (14.2)Net assets 33.5 124.9 158.4Goodwill arising on acquisition 103.0 162.1 265.1Non-controlling interest (66.9) (66.9) 69.6 287.0 356.6Discharged by:Cash 34.9 232.9 267.8Equity instruments - 4.1 4.1Contingent consideration accrued - 26.1 26.1Deferred consideration accrued 34.7 23.9 58.6 69.6 287.0 356.6 "Public Sector Subsidiary Partnerships" represent a controlling interest in 3public sector acquisitions in 2013, being 51% of the ordinary share capital ofAxelos Limited and Entrust Support Services Limited and 100% of the ordinaryshare capital of Fire Service College Limited. In all other cases 100% of the ordinary share capital was acquired. Thecompanies acquired have been mainly in the areas of IT and software, debtmanagement, analytics, gamification, change management, and learning anddevelopment which complement or extend the Group's existing skill sets andprovide opportunities for growth into these markets. In addition during theyear the Group settled contingent consideration payments with regard toprevious acquisitions amounting to £14.4m, all of which had been accrued.Goodwill has arisen on the acquisitions because the fair value of the acquiredassets was lower than the consideration paid; the goodwill represents thevalue to the Group that can be driven from these underlying assets over thelife of the acquired businesses, particularly from synergies, the capabilitiesof the acquired workforce, and commercialisation of formerly public sectorassets. The total amount of goodwill recognised in the period that is expectedto be deductible for tax purposes is £103.4m (2012: £3.3m). The public sector subsidiary partnership payment liability is an estimate ofthe annual preferred payments to be made by Axelos Limited (the partnershipformed with the Cabinet Office) to the Cabinet Office in years 4 to 10. Thispayment is funded by Axelos Limited and is contingent on profits. The £52.2mliability has an estimated cash impact, net of tax, of £35.9m. Following thesepayments, the new company will pay profits to the partners according to theirstake in the business. Contingent consideration In respect of the acquisitions made in 2013, the Group has agreed to pay thevendors additional consideration dependent on the achievement of performancetargets in the periods post acquisition. These performance periods are of upto four years in duration and will be settled in cash and loan notes on theirpayment date on achieving the relevant target. The range of the additionalconsideration payment is estimated to be between £20m and £35m. The Group hasincluded £26.1m as contingent consideration related to the additionalconsideration, which represents its fair value at the acquisition date.Contingent consideration has been calculated based on the Group's expectationof what it will pay in relation to the post-acquisition performance of theacquired entities by weighting the probability of a range of payments to givean estimate of the final obligation. Deferred consideration In respect of the acquisitions made in 2013, the Group has agreed to pay thevendors additional consideration post the year end period. The Group hasincluded £58.6m as deferred consideration, which represents its fair value atthe acquisition date. Acquisition related costs The Group incurred acquisition related costs of £14.3m related to professionalfees paid for due diligence, general professional fees and legal relatedcosts. These costs have been included in non-underlying administrativeexpenses in the Group's consolidated income statement. 8 Provisions Restructuring Insurance Property captive provision provision provision £m Other Total £m £m £m £mAt 1 January 2013 (restated) - 16.0 39.4 23.2 78.6Utilisation (0.2) (13.7) (7.9) (13.4) (35.2)Provided in the year (net) 41.5 22.8 (0.1) 1.8 66.0Provisions acquired - - 5.2 0.3 5.5At 31 December 2013 41.3 25.1 36.6 11.9 114.9 The provisions made above have been shown as current or non-current on thebalance sheet to indicate the Group's expected timing of the matters reachingconclusion. The Group has made the restructuring provision for unavoidable costs whichwill be incurred due to its decisions to dispose of its insurance distributionbusiness and to close its SIP business. The provision is expected to unwindover 2 years. 9 Additional cash flow information Reconciliation of net cash flow to movement in net funds/(debt) Net debt Net debt at Acquisitions Non-cash at 31 1 January in 2013 Cash flow flow December 2013 (exc. cash) movements movements 2013 £m £m £m £m £mCash, cash equivalents and overdrafts 306.7 - (148.8) (0.1) 157.8Loan notes (0.5) - 0.1 (10.0) (10.4)Bonds[1] (1,370.1) - 13.1 89.7 (1,267.3)Revolving credit facility - - - - -Currency swaps in relation to US$ 206.2 - - (80.3) 125.9denominated bonds[1]Interest rate swaps in relation to GBP 15.9 - - (8.2) 7.7denominated bonds[1]Long term debt - (14.2) 14.2 - -Term loan (185.0) - 185.0 - -New Term loan - - (200.0) - (200.0)Finance leases (2.7) (25.4) 10.8 - (17.3)Underlying net debt (1,029.5) (39.6) (125.6) (8.9) (1,203.6)Fixed rate interest rate swaps (52.9) - - 26.3 (26.6) (1,082.4) (39.6) (125.6) 17.4 (1,230.2) Net debt Net debt at at Acquisitions Non-cash 31 1 January in 2012 Cash flow flow December 2012 (exc. cash) movements movements 2012 £m £m £m £m £mCash, cash equivalents and overdrafts 62.4 - 245.0 (0.7) 306.7Loan notes (2.3) - 2.3 (0.5) (0.5)Bonds[1] (1,432.2) - 24.7 37.4 (1,370.1)Revolving credit facility (176.1) - 178.0 (1.9) -Currency swaps in relation to US$ 242.4 - - (36.2) 206.2denominated bonds1Interest rate swaps in relation to 13.5 - - 2.4 15.9GBP denominated bonds1Long term debt - (57.1) 57.1 - -Term loan - - (185.0) - (185.0)Finance leases (3.1) - 1.7 (1.3) (2.7)Underlying net debt (1,295.4) (57.1) 323.8 (0.8) (1,029.5)Fixed rate interest rate swaps (44.7) - - (8.2) (52.9) (1,340.1) (57.1) 323.8 (9.0) (1,082.4) [1] The sum of these items held at fair value equates to the underlying value ofthe Group's bond debt of £1,133.7m (2012: £1,148.0m). The aggregate bond fair value above of £1,267.3m (2012: £1,370.1m) includesthe GBP value of the US$ denominated bonds at 31 December 2013. To remove theGroup's exposure to currency fluctuations it has entered into currency swapswhich effectively hedge the movement in the underlying bond fair value. Theinterest rate swap is being used to hedge the exposure to changes in the fairvalue of GBP denominated bonds. 10 Related party transactions Compensation of key management personnel 2013 2012 £m £mShort term employment benefits 8.1 7.6Pension 0.2 0.1Share based payments 6.0 3.6 14.3 11.3 The following companies are substantial shareholders in the Company andtherefore a related party of the Company (in each case, for the purposes ofthe Listing Rules of the UK Listing Authority). The number of shares held on20th February 2014 was as below: Shareholder No. of % of shares voting rightsBlackRock Inc 36,153,457 5.49Invesco Limited 131,356,538 19.93Legal & General Group Plc 19,818,538 3.01Veritas Asset Management (UK) Limited 42,647,140 6.47 11 Preliminary announcement The preliminary announcement is prepared in accordance with InternationalFinancial Reporting Standards as adopted by the European Union. A dulyappointed and authorised committee of the Board of Directors approved thepreliminary announcement on 26th February 2014. The financial information setout above does not constitute the Company's statutory accounts for the yearsended 31 December 2013 or 2012 but is derived from those accounts. It is notnecessary to include this phrase, but where the client wishes to make anexplicit reference to the fact that the prelim is based upon audited financialstatements, this phrase would be appropriate. Statutory accounts for 2012 havebeen delivered to the registrar of companies, and those for 2013 will bedelivered in due course. The auditor has reported on those accounts; theirreports were (i) unqualified, (ii) did not include a reference to any mattersto which the auditor drew attention by way of emphasis without qualifyingtheir report and (iii) did not contain a statement under section 498 (2) or(3) of the Companies Act 2006. Copies of the announcement can be obtained from the Company's registeredoffice at 71 Victoria Street, Westminster, London SW1H 0XA, or on theCompany's corporate website www.capita.co.uk/investors/Pages/Investors.aspx. It is intended that the Annual Report and Accounts will be posted toshareholders in April 2014. It will be available to members of the public atthe registered office and on the Company's Corporate websitewww.capita.co.uk/investors/Pages/Investors.aspx from that date. 12 Statement of Directors responsibilities The Directors confirm that, to the best of their knowledge the extracts fromthe consolidated financial statements included in this report, which have beenprepared in accordance with International Financial Reporting Standards (IFRS)as adopted by the European Union, IFRIC interpretations and those parts of theCompanies Act 2006 applicable to companies reporting under IFRS, fairlypresents the assets, liabilities, financial position and profit of the Grouptaken as a whole and that the management report contained in this reportincludes a fair review of the development and performance of the business. By order of the Board P R M Pindar G M Hurst Chief Executive Group Finance Director 26 February 2014

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