Organic growth was excellent with businesses across the Group performing well and with a record level of new major contracts secured in the year.
In the year ended 31 December 2007, turnover increased by 19% to £2,073m (2006: £1,739m). Operating profit before amortisation rose by 21% to £271.3m (2006: £225.1m) and profit before taxation and amortisation increased by 19% to £238.4m (2006: £200.1m). Earnings per share before amortisation grew by 22% to 28.1p (2006: 23.1p).
Operating cash flow rose by 20% to £334m (2006: £279m). We have increased our total dividend for the year by 33% to 12.0p (2006: 9.0p). Additionally, we paid a special dividend of 25p per share in October 2007, returning £155m to shareholders. We have also returned a further £44m to shareholders through purchasing our own shares. In total, including the proposed final dividend, we will be returning £272m (2006: £279m) to shareholders in respect of the 2007 financial year.
Building value for shareholders
To ensure we are building value for shareholders, we focus on a number of key measures alongside profitability: operating margins, cash flow, capital expenditure, return on capital employed, gearing and economic profit. We also focus on maintaining a conservative but efficient capital structure. Collectively they form an integral part of building value for our shareholders on a consistent basis over the long term. We have set out our aims and performance regarding these disciplines in
Controlling and measuring growth.
Generating profitable growth
We generate profitable growth by winning business from new and existing customers and supplement this by acquiring businesses that broaden our skill base and extend our market reach.
Major contracts: Our sales performance in 2007 was excellent. We secured eight major contracts with a total value of £1.89bn (2006: £1.37bn) and we maintained our one in two win rate. See
Driving profitable organic growth.
In the first eight weeks of 2008, we have been awarded major contracts with an aggregate value of £314m.
This included two general insurance contracts with Marsh Ltd and British Islamic Insurance Holdings, an additional contract with eircom and an extension to the Teachers’ Pension Scheme contract.
Bid pipeline: In the three months to the end of February 2008, awards have been made regarding £1.5bn of contract opportunities in our bid pipeline of which Capita has won 68% by value. As a consequence, our bid pipeline in February 2008 stands at £2.5bn (Feb 2007: £2.6bn) but is a ready being replenished at a healthy rate, reflecting the quality of business opportunities across our markets.
Behind this is an active prospect list of opportunities which are yet to reach a shortlist stage.
Contract renewals: There are now no material contracts (defined as having annual revenue in excess of 1% of 2007 turnover) due for renewal in 2008 and 2009.
Stimulating growth through acquisition: A key element of our growth is the acquisition of small to medium sized companies which extend our presence in existing market places or provide a foothold in a new market. In 2007 we completed 12 acquisitions and investments.
Increasing scale and capabilities of our offshore operations: Our offshore operation in India has played a significant role in helping to secure major new business, including our contracts with Resolution, Prudential and Marsh. By the end of 2008, we expect to grow the offshore business to 3,000 staff, a year ahead of plan, and will have achieved a major step forward in scale which can be leveraged to benefit the Group and our clients. See
Building scale and capacity for further details.
Valuing our people
Our success is driven by our people. They play a vital role in helping us meet client expectations and supporting our growth. The Board would like to thank everyone across the Group for the role they play in Capita’s success. We applaud and thank you all warmly for your enthusiasm, hard work and commitment to service excellence.
Group Board changes
With effect from 1 March 2008, Martin Bolland joins Capita as Non-Executive Director. Martin is a Chartered Accountant and spent the last 10 years working with Alchemy Partners LLP, a private equity house, of which he was a founding partner. Martin’s appointment represents a significant addition to our Board and we look forward to his contribution to the team.
At the end of September 2008, Peter Cawdron will be standing down as Non-Executive Director, after serving 11 years on the Group Board. Peter has been a valuable member of the Board. We will miss his input and wish him every success for the future.
Future prospects
We enter 2008 with confidence. There is strong demand for outsourcing and our businesses across the Group are experiencing good trading conditions.
Our successes in 2007 and progress in the first few weeks of this year underpin our continued growth in 2008. With healthy sales prospects and consistently good operational performance, we are positioned well for further strong performance thereafter.