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FY 2013 financial highlights

Financial highlights
Underlying**
Underlying**
Year on year
 change
Reported
Revenue £3,851m* +15% £3,896m
Operating profit £516.9m* +11% £340.9m
Profit before tax £475.0m* +14% £215.0m
Earnings per share 59.4p* +14% 27.05p
Total dividend per share 26.5p +13% 26.5p
Free cash flow £312m* +2% £312m
*On an ongoing basis, 2013 numbers excluding the partial sale of our Insurance Distribution 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). Excludes non-underlying items detailed in note 3 administrative expenses, in the notes to the preliminary statement.

FY 2013 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 our target markets
  • £271m spent on 13 acquisitions broadening our operational capability and market reach

Strong financial performance

  • Revenue* growth of 15%
  • Underlying operating margin* of 13.4%
  • Underlying earnings per share* up 14% to 59.4p
  • 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 charging and traffic enforcement schemes 
    • £325m framework contract for Scottish Wide Area Network

*On an ongoing basis, 2013 numbers excluding the partial sale of our Insurance Distribution 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). Excludes non-underlying items detailed in note 3 administrative expenses, in the notes to the preliminary statement.

FY 2013 overview

2013 was an excellent year for Capita, the UK’s leading provider of customer and business process management (BPM). We secured major sales wins of £3.3bn, comprising 81% new business and 19% contract extensions, demonstrating the strength of both our service offering and the buoyant market for outsourcing in the UK and Ireland. We are seeing particularly high levels of activity in the private sector, across utilities, telecoms and financial services, and also in central government and the justice market.

In the full year 2013, underlying revenue on an ongoing basis, increased by 15% to £3,851m1 (2012: £3,352m). Underlying operating profit2 rose by 11% to £516.9m1 (2012: £466.7m) and underlying profit before taxation2 increased by 14% to £475m1 (2012: £417.0m). Underlying earnings per share2 grew by 14% to 59.4p1 (2012: 52.1p). We have increased our total dividend for the 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 performance across our Customer Management & International, Workplace Services and Professional Services divisions. Our Property & Infrastructure and IT Services divisions are improving their performance with new management in place and market conditions becoming more favourable. Our Insurance & Benefits division has borne higher expenditure than anticipated on legacy IT systems. Additionally, as announced in November 2013, we completed the disposal of some of our Insurance Distribution operations 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 target markets through the acquisition of several small to medium sized businesses. Throughout Capita’s history, this acquisition approach has enhanced our major sales propositions and fuelled future organic growth in new and existing sectors. During 2013, we acquired 13 companies for a total cost of £271m3, in areas including IT and software, debt management, analytics, gamification, change management and learning and development.

1 On an ongoing basis, 2013 numbers excluding the partial sale of our Insurance Distribution and planned SIP business closure, see note 2 of the preliminary statement. 2012 numbers have not been restated on this basis.
2 Adjusted for new pension standard IAS19 (R). Excludes non-underlying items detailed in note 3 administrative expenses, in the notes to the preliminary statement.
3 As previously announced and excludes investment in Axelos, Entrust and Fire Service College (public sector subsidiary partnerships).

FY 2013 – outlook and future prospects

Buoyant sales outlook for 2014

Bid pipeline: The pipeline now stands at £5.5bn (November 2013: £4.2bn) and comprises 25 bids across our target markets, with particular activity in the private sector, particularly telecoms and financial services, and in the justice market and the wider public sector. Behind the pipeline is an active prospect list of opportunities, including a number of bids which are expected to reach shortlist stage shortly.

Future prospects

2013 was a year of strong sales, operational and financial performance. We accelerated our organic growth, sustained good cash generation and delivered record underlying profits for the 25th successive year.

We have adjusted the criteria of our bid pipeline from 1 January 2013 to reflect the greater size of the Group and the opportunities we are addressing. Our bid pipeline now contains all bids worth £25m or above, with bids capped at £1bn (previously £10m or above, capped at £500m) and where we have been shortlisted to the last 4 or fewer. Under the previous criteria the bid pipeline today would have stood at £4.8bn (Nov 2012: £4.0bn). We announce the value of the pipeline three times a year and it is therefore a snapshot at a specific point in time.