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"fact-452": {
"value": "h and cash equivalents at the beginning of the period 101.5 141.1 Effect of exchange rates on cash and cash equivalents 0.4 4.0 Cash and cash equivalents at 31 December 177.2 101.5 Cash and cash equivalents comprise: Cash 4.5.4 396.8 317.6 Overdrafts 4.5.4 (219.6) (231.9) Cash, net of overdrafts, included in disposal group assets and liabilities held-for-sale 2.8 \u2014 15.8 Total 177.2 101.5 Cash generated from/(used by) operations before business exits 2.10 116.5 (109.7) Free cash flow before business exits 2.10 29.0 (218.6) 1. The 2021 cash flow has been restated to include \u00a327.2m of cash, received from the purchasers of subsidiaries when sold to settle inter-company balances, within investing activities, which were previously included within operating activities. This results in an increase in net cash flow from investing activities by \u00a327.2m and decrease in net cash flows from operating activities, cash generated from operations, and free cash flow by the same amount. There is no impact on the reported net movement in cash and cash equivalents. The accompanying notes are an integral part of these consolidated financial statements. Section 1: Basis of preparation This section sets out the Group\u2019s accounting policies relating to these consolidated financial statements as a whole. Where an accounting policy is specific to one note, the policy is described in the note to which it relates. This section also includes details of new accounting standards, amendments and interpretations including their effective dates and explanation on the expected impact to the financial position and performance of the Group. For ease of reference, this symbol has been used to denote any accounting policies included within the notes: Denotes accounting policies These financial statements consolidate those of Capita plc (the Company or the Parent Company) and all of its subsidiaries (the Group). Capita plc is a public limited company incorporated in England and Wales whose shares are publicly traded. The principal activities of the Group are given in the strategic report on pages 16 to 25. These consolidated financial statements of Capita plc for the year ended 31 December 2022 were authorised for issue in accordance with a resolution of the directors on 2 March 2023. These consolidated financial statements are presented in British pounds sterling and all values are rounded to the nearest tenth of a million (\u00a3m) except where otherwise indicated. Statement of compliance These consolidated financial statements have been prepared in accordance with UK-adopted International Financial Reporting Standards (IFRSs) and the Disclosure and Transparency Rules of the UK's Financial Conduct Authority. Basis of consolidation These consolidated financial statements comprise the financial statements of the Group at 31 December each year. Subsidiaries are consolidated from the date on which control is transferred to the Group until control is transferred out of the Group. Where there is a loss of control of a subsidiary, these consolidated financial statements include the results for that part of the reporting year during which Capita plc had control and the profit or loss on disposal is calculated as the difference between the fair value of the consideration received and the carrying amount of the net assets (including goodwill) disposed of. Losses applicable to the non-controlling interests in subsidiaries are attributed to the non-controlling interests even if that results in the non-controlling interests having a deficit balance. Investments in associates are accounted for using the equity method. Under the equity method, the investment in the entity is stated as a one line item at cost plus the investor\u2019s share of retained post-acquisition profits or losses and other changes in net assets less any impairment. Going concern In determining the appropriate basis of preparation of the financial statements for the year ended 31 December 2022, the Board is required to consider whether the Group and Parent Company can continue in operational existence for the foreseeable future. The Board has concluded that it is appropriate to adopt the going concern basis, having undertaken a rigorous assessment of the financial forecasts, key uncertainties, sensitivities, and mitigations as set out below. Accounting standards require that \u2018the foreseeable future\u2019 for going concern assessment covers a period of at least twelve months from the date of approval of these financial statements, although those standards do not specify how far beyond twelve months a Board should consider. In its going concern assessment, the Board has considered the period from the date of approval of these financial statements to 31 August 2024 (\u2018the going concern period\u2019) and which aligns with the expiry of the revolving credit facility (RCF). The base case financial forecasts used in the going concern assessment are derived from the 2023-2024 business plans as approved by the Board in January 2023. The going concern assessment considers the Group\u2019s sources and uses of liquidity and covenant compliance throughout the period under review. The value of the Group\u2019s committed RCF was \u00a3288.4m at 31 December 2022 and it expires on 31 August 2024. In February 2023, the Group executed a committed bridge facility of \u00a350m with three of its relationship banks providing additional liquidity from 1 January 2024. The committed bridge facility has an expiry date of 31 December 2024 and is subject to covenants, which are the same as those in the RCF. Both the RCF and the \u00a350m bridge facility incorporate provisions such that they will partially reduce in quantum as a consequence of specified transactions, including disposals, equity raises or other refinancing. Given the track record of the Group extending the RCF in prior years, including in 2022, and the committed bridge facility executed in February 2023, the Board is confident that the RCF will be extended or refinanced and be of a sufficient quantum well ahead of its expiry in August 2024. Financial position at 31 December 2022 As detailed further in the Chief Financial Officer\u2019s review in the strategic report, as at 31 December 2022 the Group had net debt of \u00a3482.4m (2021: \u00a3879.8m), net financial debt (pre-IFRS 16) of \u00a384.9m (2021: \u00a3431.4m), liquidity of \u00a3405.2m (2021: \u00a3392.4m) and was in compliance with all debt covenants. Board assessment Base case scenario Under the base case scenario, completion of the Group\u2019s transformation programme has simplified and strengthened the business and facilitates further efficiency savings enabling sustainable growth in revenue, profit and cash flow over the medium term. This enables the generation of positive free cash flows, and, when combined with the proceeds from the Board approved disposal programme and available committed facilities allows the Group to manage scheduled debt repayments. The most material sensitivity to the base case is the risk of not delivering the planned revenue growth. As previously announced, the Board\u2019s plan is to establish an optimal capital structure to support the execution of the Group\u2019s strategy and to dispose of businesses that do not align with that strategy. The completion of the disposal programme requires agreement from third parties, and major disposals may be subject to shareholder and lender approval. Such agreements and approvals, are outside the direct control of the Company and as such, the inclusion of the effect of any potential future disposals in the Group\u2019s projections is inappropriate for going concern assessment purposes in accordance with IAS 1 Presentation of Financial Statements. Section 1: Basis of preparation continued
The base case projections used for going concern assessment purposes reflect business disposals completed up to the date of approval of
these financial statements but do not reflect the benefit of any further disposals that are in the pipeline. The liquidity headroom assessment in
the base case projections reflects the Group\u2019s existing committed financing facilities and debt redemptions and does not reflect any potential
future refinancing, other than in respect of the current RCF as noted above.
The base case financial forecasts demonstrate liquidity headroom and compliance with all debt covenant measures throughout the going
concern period to 31 August 2024.
Severe but plausible downside scenario
In considering severe but plausible downside scenarios, the Board has taken account of the potential adverse financial impacts resulting from
the following risks:
\u2022 revenue growth falling materially short of plan;
\u2022 operating profit margin expansion not being achieved;
\u2022 additional inflationary cost impacts which cannot be passed on to customers;
\u2022 unforeseen operational issues leading to contract losses and cash outflows;
\u2022 increased interest rates;
\u2022 reduction in deferred cash consideration in respect of completed disposals;
\u2022 non-availability of the Group\u2019s non-recourse receivables financing facility; and
\u2022 unexpected financial costs and penalties linked to incidents such as data breaches and/or cyber-attacks.
The likelihood of simultaneous crystallisation of the above risks is considered by the directors to be relatively low. Nevertheless in the event that
simultaneous crystallisation were to occur, the Group would need to take action to mitigate the risk of insufficient liquidity and covenant
headroom. In its assessment of going concern, the Board has considered the mitigations, under the direct control of the Group, that could be
implemented including reductions in capital investment, substantially reducing (or removing in full) bonus and incentive payments and
significantly reducing discretionary spend. Taking these mitigations into account, the Group\u2019s financial forecasts, in a severe but plausible
downside scenario, demonstrate sufficient liquidity headroom and compliance with all debt covenant measures throughout the going concern
period to 31 August 2024.
Adoption of going concern basis
Reflecting the Board\u2019s confidence in the benefits expected from the completion of the transformation programme and ability to obtain further
RCF financing beyond its existing committed funding facilities coupled with its ability to implement appropriate mitigations should the severe but
plausible downside materialise, the Group continues to adopt the going concern basis in preparing these financial statements. The Board has
concluded that the Group and Parent Company will be able to continue in operation and meet their liabilities as they fall due over the period to
31 August 2024.
Foreign currency translation
The functional and presentation currency of Capita plc and its UK subsidiaries is the British pound sterling (\u00a3). Transactions in foreign
currencies are initially recorded at the functional currency exchange rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the functional currency exchange rate ruling at the balance sheet date. All differences are
taken to the consolidated income statement with the exception of differences on foreign currency borrowings that provide a hedge against a net
investment in a foreign operation. These are taken directly to equity until the disposal of the net investment, at which time they are recognised
in the consolidated income statement.
Tax charges and credits attributable to exchange differences on those borrowings are also taken directly to equity. Non-monetary items that are
measured at historical cost in a foreign currency are translated using the exchange rate at the date of initial transaction. Non-monetary items
measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
The functional currencies of overseas operations include the euro, Indian rupee, South African rand, and the US dollar. At the reporting date,
the assets and liabilities of the overseas operations are retranslated into the presentation currency of Capita plc at the exchange rate ruling on
the balance sheet date and their income statements are translated using the weighted average exchange rate for the year.
The exchange differences arising on the retranslation are taken directly to a separate component of equity. On disposal of a foreign operation,
the deferred cumulative foreign currency translation difference recognised in equity relating to that particular foreign operation is recognised in
the consolidated income statement.
Current versus non-current classification
The Group presents assets and liabilities in the balance sheet based on whether they are current or non-current.
An asset is current when it is:
\u2022 Expected to be realised or intended to be sold or consumed in the normal operating cycle;
\u2022 Held primarily for the purpose of trading;
\u2022 Expected to be realised within twelve months after the reporting period; or
\u2022 Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting
period.
All other assets are classified as non-current.
A liability is current when:
\u2022 It is expected to be settled in the normal operating cycle;
\u2022 It is held primarily for the purpose of trading;
\u2022 It is due to be settled within twelve months after the reporting period; or
\u2022 There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Group classifies all other liabilities as non-current.
Section 1: Basis of preparation continued Recoverable amount of non-current assets At each reporting date, the Group assesses whether there is any indication that a non-current asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of the asset\u2019s recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The recoverable amount is the higher of an asset\u2019s, or cash-generating unit\u2019s, fair value less costs to sell and its value in use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Significant accounting judgements, estimates and assumptions The preparation of financial statements in accordance with generally accepted accounting principles requires the directors to make judgements and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported income and expense during the presented periods. Although these judgements and assumptions are based on the directors\u2019 best knowledge of the amount, events or actions, actual results may differ. As described in note 2.1, given the level of judgement and estimation involved in assessing the future profitability of contracts, it is reasonably possible that outcomes within the next financial year may be different from management\u2019s assumptions and could require a material adjustment to the carrying amounts of contract assets and, onerous contract provisions. The impact of climate change has been considered in the preparation of these financial statements across a number of areas, including our evaluation of the critical accounting estimates and judgements which are detailed below, consistent with the risks and opportunities set out in the strategic report on pages 49 to 53. None of these risks had a material effect on the critical accounting estimates or on the consolidated financial statements of the Group. The Group will continue developing its assessment of the impact that climate change may have on the assets and liabilities recognised and presented in its financial statements. The key sources of uncertainty that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year are summarised below and set out in more detail in the related note: \u2022 Contract accounting (note 2.1) \u2013 Impairment of contract fulfilment assets \u2013 Customer and onerous contract provisions \u2022 Deferred tax asset recognition (note 2.6) \u2022 Impairment of goodwill (note 3.4) \u2022 Measurement of defined benefit pension obligations (note 5.2) The key areas where significant accounting judgements have been made are summarised below and set out in more detail in the related note: \u2022 Capitalisation of contract fulfilment assets (note 3.1) \u2022 Measurement of goodwill (note 3.4) For ease of reference, this symbol has been used to denote significant accounting judgements and estimates where they occur within the note: Denotes significant accounting judgements, estimates and assumptions New standards and interpretations adopted The accounting policies adopted are consistent with those of the previous financial year. In addition, the Group has adopted the amendments to standards which are listed below. These amendments were either not applicable or not material to the Group, except for the impact of the Amendments to IAS 37 detailed further below. International Accounting Standards (IAS/IFRS) Effective date Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) 1 January 2022 Annual Improvements to IFRS Standards 2018 - 2020 1 January 2022 Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) 1 January 2022 Reference to the Conceptual Framework (Amendments to IFRS 3) 1 January 2022 Onerous contracts \u2013 cost of fulfilling a contract (amendments to IAS 37) An onerous contract is a contract under which the unavoidable costs (ie the costs that the Group cannot avoid because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The amendments specify that when assessing whether a contract is onerous or loss-making, an entity needs to include costs that relate directly to a contract to provide goods or services, which include both incremental costs (eg the costs of direct labour and materials) and an allocation of costs directly related to contract activities (eg depreciation of equipment used to fulfil the contract as well as costs of contract management and supervision). General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. The Group has adopted the amendment which resulted in a change in accounting policy for performing an onerous contract assessment. Previously, the Group included only incremental costs to fulfil a contract when determining whether that contract was onerous. The revised policy requires inclusion of both incremental costs and an allocation of other direct costs. In accordance with the transitional provisions, the Group applies the amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments (the date of initial application) and has not restated its comparative information. Section 1: Basis of preparation continued
The adoption of the amended standard has resulted in a reduction in retained earnings at 1 January 2022 of \u00a321.7m, comprising an increase of
\u00a318.8m in onerous contract provisions and an impairment of contract related assets of \u00a32.9m. The additional onerous contract provision
recognised is tax deductible, however, no deferred tax asset has been recognised reflecting the probable level of future taxable profits that will
be available against which the assets can be utilised at 1 January 2022.
Impact of amendments to IAS 37
1 January 2022
\u00a3m
Property, plant and equipment (0.5)
Contract fulfilment assets (2.4)
Total assets (2.9)
Provisions (current) (10.6)
Provisions (non-current) (8.2)
Total liabilities (18.8)
Retained earnings (21.7)
Total equity (21.7)
New standards and interpretations not yet adopted
The International Accounting Standards Board (IASB) has issued the following standards, amendments and interpretations with an effective
date after the date of these consolidated financial statements. These are effective for annual reporting periods beginning on or after the date
indicated:
International Accounting Standards (IAS/IFRS)
Effective date
IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts 1 January 2023
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
1 January 2023
Definition of Accounting Estimates (Amendments to IAS 8) 1 January 2023
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) 1 January 2023
Sale or contribution of assets between an investor and its associate or joint venture (Amendments to IFRS 10 and
IAS 28) 1 January 2023
The Group is assessing the impact of these new standards and the Group\u2019s financial reporting will be presented in accordance with these
standards from the effective date.
IFRS 17 Insurance Contract and amendments to IFRS 17 Insurance Contracts
IFRS 17 Insurance Contracts (IFRS 17) is a comprehensive new accounting standard for insurance contracts covering recognition,
measurement, presentation and disclosure, and will replace IFRS 4 Insurance Contracts (IFRS 4). IFRS 17 applies to all types of insurance
contracts (ie life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees
and financial instruments with discretionary participation features.
The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In
contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies, IFRS 17 provides a
comprehensive model for insurance contracts, covering all relevant accounting aspects.
IFRS 17 is effective for reporting periods beginning on or after 1 January 2023 and must be applied retrospectively unless impracticable, in
which case the Group has the option of using either the modified retrospective approach or the fair value approach. Based on initial analysis
performed, it is not anticipated that this new accounting standard will have a material impact on the way the Group recognises its provisions in
relation to insurance contracts.
Section 1: Basis of preparation continued
The adoption of the amended standard has resulted in a reduction in retained earnings at 1 January 2022 of \u00a321.7m, comprising an increase of
\u00a318.8m in onerous contract provisions and an impairment of contract related assets of \u00a32.9m. The additional onerous contract provision
recognised is tax deductible, however, no deferred tax asset has been recognised reflecting the probable level of future taxable profits that will
be available against which the assets can be utilised at 1 January 2022.
Impact of amendments to IAS 37
1 January 2022
\u00a3m
Property, plant and equipment (0.5)
Contract fulfilment assets (2.4)
Total assets (2.9)
Provisions (current) (10.6)
Provisions (non-current) (8.2)
Total liabilities (18.8)
Retained earnings (21.7)
Total equity (21.7)
New standards and interpretations not yet adopted
The International Accounting Standards Board (IASB) has issued the following standards, amendments and interpretations with an effective
date after the date of these consolidated financial statements. These are effective for annual reporting periods beginning on or after the date
indicated:
International Accounting Standards (IAS/IFRS)
Effective date
IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts 1 January 2023
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
1 January 2023
Definition of Accounting Estimates (Amendments to IAS 8) 1 January 2023
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) 1 January 2023
Sale or contribution of assets between an investor and its associate or joint venture (Amendments to IFRS 10 and
IAS 28) 1 January 2023
The Group is assessing the impact of these new standards and the Group\u2019s financial reporting will be presented in accordance with these
standards from the effective date.
IFRS 17 Insurance Contract and amendments to IFRS 17 Insurance Contracts
IFRS 17 Insurance Contracts (IFRS 17) is a comprehensive new accounting standard for insurance contracts covering recognition,
measurement, presentation and disclosure, and will replace IFRS 4 Insurance Contracts (IFRS 4). IFRS 17 applies to all types of insurance
contracts (ie life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees
and financial instruments with discretionary participation features.
The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In
contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies, IFRS 17 provides a
comprehensive model for insurance contracts, covering all relevant accounting aspects.
IFRS 17 is effective for reporting periods beginning on or after 1 January 2023 and must be applied retrospectively unless impracticable, in
which case the Group has the option of using either the modified retrospective approach or the fair value approach. Based on initial analysis
performed, it is not anticipated that this new accounting standard will have a material impact on the way the Group recognises its provisions in
relation to insurance contracts.
Section 2: Results for the year
This section contains notes related to the financial performance of the Group. These include:
2.1 Contract accounting
2.2 Revenue including segmental revenue
2.3 Operating profit
2.4 Adjusted operating profit and adjusted profit before tax
2.5 Segmental information
2.6 Taxation
2.7 Earnings/(loss) per share
2.8 Business exits and assets held-for-sale
2.9 Discontinued operations
2.10 Cash flow information
Denotes accounting policies
Denotes significant accounting judgements, estimates and assumptions
Key highlights
Reported revenue Reported free cash flow
\u00a33,014.6m \u00a324.5m
(2021: \u00a33,182.5m) (2021: \u00a3(264.3)m)
Reported profit before tax
Reported earnings per share
(EPS) \u2013 continuing operations
\u00a361.4m 4.47p
(2021: profit \u00a3285.6m) (2021: 13.33p)
Adjusted revenue
1
Aim: Achieve long-term organic revenue
growth
Free cash flow before business exits
1
Aim: Achieve sustainable, long-term positive
free cash flow growth generation
\u00a32,845.8m \u00a329.0m
(2021: \u00a32,777.8m) (2021: \u00a3(218.6)m)
Adjusted profit before tax
1
Aim: Achieve long-term growth in profit
Adjusted earnings per share (EPS)
1
Aim: Achieve long-term growth in EPS
\u00a373.8m 6.20p
(2021: loss \u00a3122.8m) (2021: (7.74)p)
1. Definitions of the alternative performance measures and related KPIs can be found in section 8.2.
Section 2: Results for the year continued
In 2022 the Group\u2019s adjusted revenue
1
increased year on year. Adjusted profit before tax
1
significantly improved year on year following
completion of the significant restructuring programme in 2021 and provisions and impairments during 2021 in our closed book Life & Pensions
business. The higher level of profit supplemented by a lower cash outflow from movements in working capital and a reduction in capital
expenditure and materially lower deferred VAT repayments and pension deficit contributions, resulting in free cash inflow before business exits
1
of \u00a329.0m (2021: \u00a3218.6m outflow).
The Group had additional cash inflow of \u00a34.1m (2021: \u00a336.2m inflow) arising from those businesses sold in the year, primarily Pay360 and
businesses in the Capita Portfolio division, offset by additional pension deficit payments triggered by these disposals totalling \u00a38.6m (2021:
\u00a381.9m).
Revenue
Adjusted revenue
1
increased by 2.4% year-on-year.
The adjusted revenue increased as a result of the following:
\u2022 Capita Public Service: growth from contract wins, including a contract to supply laptops to teachers in Northern Ireland as well as the
annualised benefit of the Royal Navy training contract, increased growth in existing contracts in Central Government, and completion of a
full test cycle on the Standards Testing Agency contract, offsetting contract hand-backs in Local Public Services;
\u2022 Capita Experience: stabilisation in revenue, with the impact of significant prior year contract losses offset by positive revenue
contributions in particular from new client wins in International and with ScottishPower; and
\u2022 Capita Portfolio: growth in transactional revenue mainly from Travel and Enforcement following the turnaround in these Covid-19
impacted businesses.
The difference of \u00a3168.8m between adjusted revenue of \u00a32,845.8m and reported revenue of \u00a33,014.6m is related to business exits in the year
(refer to note 2.8).
For additional information, which does not form part of these consolidated financial statements, the Chief Financial Officer\u2019s review in the
strategic report includes further information in respect of the movement.
Profit before tax
The adjusted result before tax
1
improved by \u00a3196.6m year-on-year to a profit of \u00a373.8m.
The adjusted profit before tax
1
increased as a result of the profit impact of the following:
\u2022 Capita Public Service: benefits from the wins in 2022, the annualised benefit of the Royal Navy training contract and the non-recurrence
of Electronic Monitoring programme costs in 2021; offset by a reduction on the British Army recruitment (RPP) contract resulting from
transition to the next phase of service delivery;
\u2022 Capita Experience: flow through of prior year losses including 3UK, William Hill and in closed book Life & Pensions business. 2021 was
impacted by provisions and impairments in our closed book Life & Pensions business and completion of significant restructuring;
\u2022 Capita Portfolio: benefits from post Covid-19 recovery in transactional businesses and the non-repeat of 2021 restructuring costs, offset
by operational investment in certain businesses; and
\u2022 Capita plc: benefits from the end of the transformation programme (2021 included \u00a3128.0m of significant restructuring) and efficiencies
realised; offset by the effect of the announced intention to repay the 2021 furlough related income (\u00a34.9m).
Adjusted profit before tax
1
excludes a number of specific items so users of these consolidated financial statements can more clearly understand
the financial performance of the Group. Reported profit before tax was \u00a361.4m (2021: profit \u00a3285.6m). The year-on-year reduction has arisen
from a lower gain on business disposals and a higher impairment of goodwill. A reconciliation of the adjusted profit before tax
1
to reported loss
before tax is detailed in note 2.4.
Reported operating loss for the year was \u00a379.6m (2021: loss \u00a386.6m). Details of items charged/credited in arriving at the reported operating
loss can be found in note 2.3.
For additional information, which does not form part of these consolidated financial statements, the Chief Financial Officer\u2019s review in the
strategic report includes further information in respect of the movement.
Taxation
The income tax credit of \u00a331.8m on adjusted profit before tax
1
of \u00a373.8m (2021: charge of \u00a34.0m on adjusted loss before tax of \u00a3122.8m)
differs from the notional tax charge at the UK corporation tax rate of 19%, mainly due to adjustments in the carrying value of recognised
deferred tax assets.
Earnings per share
The movement in reported basic earnings per share and adjusted basic earnings per share
1
for continuing operations was a result of the
performance explained above.
Dividend
The Board is not recommending the payment of a final dividend (2021: \u00a3nil). However, the Board recognises the importance of regular dividend
payments to investors in forming part of their total shareholder return and will consider the payment of dividends when the Group is generating
sufficient sustainable free cash flow.
1. Definitions of the alternative performance measures and related KPIs can be found in section 8.2.
Section 2: Results for the year continued
In 2022 the Group\u2019s adjusted revenue
1
increased year on year. Adjusted profit before tax
1
significantly improved year on year following
completion of the significant restructuring programme in 2021 and provisions and impairments during 2021 in our closed book Life & Pensions
business. The higher level of profit supplemented by a lower cash outflow from movements in working capital and a reduction in capital
expenditure and materially lower deferred VAT repayments and pension deficit contributions, resulting in free cash inflow before business exits
1
of \u00a329.0m (2021: \u00a3218.6m outflow).
The Group had additional cash inflow of \u00a34.1m (2021: \u00a336.2m inflow) arising from those businesses sold in the year, primarily Pay360 and
businesses in the Capita Portfolio division, offset by additional pension deficit payments triggered by these disposals totalling \u00a38.6m (2021:
\u00a381.9m).
Revenue
Adjusted revenue
1
increased by 2.4% year-on-year.
The adjusted revenue increased as a result of the following:
\u2022 Capita Public Service: growth from contract wins, including a contract to supply laptops to teachers in Northern Ireland as well as the
annualised benefit of the Royal Navy training contract, increased growth in existing contracts in Central Government, and completion of a
full test cycle on the Standards Testing Agency contract, offsetting contract hand-backs in Local Public Services;
\u2022 Capita Experience: stabilisation in revenue, with the impact of significant prior year contract losses offset by positive revenue
contributions in particular from new client wins in International and with ScottishPower; and
\u2022 Capita Portfolio: growth in transactional revenue mainly from Travel and Enforcement following the turnaround in these Covid-19
impacted businesses.
The difference of \u00a3168.8m between adjusted revenue of \u00a32,845.8m and reported revenue of \u00a33,014.6m is related to business exits in the year
(refer to note 2.8).
For additional information, which does not form part of these consolidated financial statements, the Chief Financial Officer\u2019s review in the
strategic report includes further information in respect of the movement.
Profit before tax
The adjusted result before tax
1
improved by \u00a3196.6m year-on-year to a profit of \u00a373.8m.
The adjusted profit before tax
1
increased as a result of the profit impact of the following:
\u2022 Capita Public Service: benefits from the wins in 2022, the annualised benefit of the Royal Navy training contract and the non-recurrence
of Electronic Monitoring programme costs in 2021; offset by a reduction on the British Army recruitment (RPP) contract resulting from
transition to the next phase of service delivery;
\u2022 Capita Experience: flow through of prior year losses including 3UK, William Hill and in closed book Life & Pensions business. 2021 was
impacted by provisions and impairments in our closed book Life & Pensions business and completion of significant restructuring;
\u2022 Capita Portfolio: benefits from post Covid-19 recovery in transactional businesses and the non-repeat of 2021 restructuring costs, offset
by operational investment in certain businesses; and
\u2022 Capita plc: benefits from the end of the transformation programme (2021 included \u00a3128.0m of significant restructuring) and efficiencies
realised; offset by the effect of the announced intention to repay the 2021 furlough related income (\u00a34.9m).
Adjusted profit before tax
1
excludes a number of specific items so users of these consolidated financial statements can more clearly understand
the financial performance of the Group. Reported profit before tax was \u00a361.4m (2021: profit \u00a3285.6m). The year-on-year reduction has arisen
from a lower gain on business disposals and a higher impairment of goodwill. A reconciliation of the adjusted profit before tax
1
to reported loss
before tax is detailed in note 2.4.
Reported operating loss for the year was \u00a379.6m (2021: loss \u00a386.6m). Details of items charged/credited in arriving at the reported operating
loss can be found in note 2.3.
For additional information, which does not form part of these consolidated financial statements, the Chief Financial Officer\u2019s review in the
strategic report includes further information in respect of the movement.
Taxation
The income tax credit of \u00a331.8m on adjusted profit before tax
1
of \u00a373.8m (2021: charge of \u00a34.0m on adjusted loss before tax of \u00a3122.8m)
differs from the notional tax charge at the UK corporation tax rate of 19%, mainly due to adjustments in the carrying value of recognised
deferred tax assets.
Earnings per share
The movement in reported basic earnings per share and adjusted basic earnings per share
1
for continuing operations was a result of the
performance explained above.
Dividend
The Board is not recommending the payment of a final dividend (2021: \u00a3nil). However, the Board recognises the importance of regular dividend
payments to investors in forming part of their total shareholder return and will consider the payment of dividends when the Group is generating
sufficient sustainable free cash flow.
1. Definitions of the alternative performance measures and related KPIs can be found in section 8.2.
Section 2: Results for the year continued
Free cash flow before business exits
1
Adjusted operating profit to free cash flow before business exits
1
2022
\u00a3m
2021
\u00a3m
Adjusted operating profit
1
102.9 (77.7)
Add: depreciation/amortisation and impairment of property, plant and equipment and intangible assets 135.9 220.7
Adjusted EBITDA 238.8 143.0
Working capital (32.7) (113.6)
Non-cash and other adjustments (44.7) 38.6
Operating cash flow before business exits
1
161.4 68.0
Deferred VAT repayment (14.9) (104.1)
Pension deficit contributions (30.0) (73.6)
Cash generated/(used) by operations before business exits
1
116.5 (109.7)
Net capital expenditure (43.6) (51.2)
Interest/tax paid (43.9) (57.7)
Free cash flow before business exits
1
29.0 (218.6)
Adjusted EBITDA increased by 67% reflecting the improvement in adjusted profit
1
explained earlier offset by the significant reduction in
depreciation, amortisation and impairment of property, plant and equipment and intangible assets, largely driven by the Group\u2019s property
rationalisation programme and the step-down in impairment charges following the \u00a353.5m write-down of finance system investment in 2021.
Cash generated from operations before business exits
1
benefited from the improvement in adjusted EBITDA, a lower working capital outflow
compared with 2021, materially lower deferred VAT repayments and pension deficit contributions; offset by a reduction in non-cash and other
adjustments.
The lower working capital outflow arises from contracts moving into the operational phase and increased utilisation of non-recourse trade
receivables financing in 2022.
The reduction in non-cash and other adjustments reflects utilisation of customer contract provisions in 2022 compared with provision
recognition in 2021, and the utilisation of the remaining restructuring provision.
Free cash flow before business exits
1
for the year ended 31 December 2022 was an inflow of \u00a329.0m (2021: outflow \u00a3218.6m). The
improvement reflected the above increase in cash generated from operations before business exits
1
, and a reduction in capital expenditure,
and net interest paid in respect of leases and the Group's private placement loan notes.
Adjusted operating cash conversion
1
increased to 68% (2021: 48%).
1. Definitions of the alternative performance measures and related KPIs can be found in section 8.2.
Section 2: Results for the year continued 2.1 Contract accounting At 31 December 2022, the Group had the following results and balance sheet items related to long-term contracts: Notes 2022 \u00a3m 2021 \u00a3m Long-term contractual revenue 1 2.2 2,236.2 2,325.2 Non-current and current deferred income 640.7 794.7 Non-current contract fulfilment assets 3.1.3 263.0 286.7 Non-current and current onerous contract provision 52.8 45.8 1. The 2021 comparative has been re-presented to reflect the recategorisation of certain contracts between contract types (long-term contractual, short-term contractual and transactional (point-in-time)) following a review in 2022. Background The Group operates diverse businesses. The majority of the Group\u2019s revenue is from contracts greater than two years in duration (long-term contractual), representing 74% of Group revenue in 2022 (2021: 73%). These long-term contracts can be complex in nature given the breadth of solutions the Group offers and the transformational activities involved. Typically, Capita takes a customer\u2019s process and transforms it into a more efficient and effective solution which is then operated for the customer. The outcome is a high quality solution that addresses a customer\u2019s needs and is delivered consistently over the life of the contract. The Group recognises revenue on long-term contracts as the value is delivered to the customer, which is generally evenly over the contract term, regardless of any restructuring and transformation activity. Capita will often incur greater costs during the transformation phase with costs diminishing over time as the target operating model is implemented and efficiencies realised. This results in lower profits or losses in the early years of contracts and potentially higher profits in later years as the transformation activities are successfully completed and the target operating model fully implemented (the business as usual (BAU) phase). The inflection point is when the contract becomes profitable. Contract fulfilment assets are recognised for those costs qualifying for capitalisation. The utilisation of these assets is recognised over the contract term. The timing of cash receipts from customers typically matches when the costs are incurred to transform, restructure and run the service. This results in income being deferred and released as the Group continues to deliver against its obligation to provide services and solutions to its customers. An example, showing the revenue, cost, profit and cash profit of a typical long-term contract lifecycle is as follows: Significant accounting judgements, estimates and assumptions Due to the size and complexity of some of the Group\u2019s contracts, there are significant judgements to be applied, specifically in assessing: (i) the recoverability of contract fulfilment assets; and (ii) the completeness of the customer and onerous contract provisions. These judgements are dependent on assessing the contract\u2019s future profitability and give rise to a key source of estimation uncertainty. It is possible that outcomes within the next financial year may be different from management\u2019s assumptions and could require a material adjustment to the carrying amounts of contract assets and onerous contract provisions. It should be noted that while management must make judgements in relation to applying the revenue recognition policy and recognition of related balance sheet items (trade receivables; deferred income; and accrued income), these are not considered significant judgements (refer to note 2.2 for the Group\u2019s policies). J Contract lifetime profit IFRS 15 revenue Cash received V Operating model at service commencement pa Target operating model Deferred income Restructuring Transformation phase BAU phase Inflection point Initial loss Time Higher level of uncertainty in lifetime profitability Reduced level of uncertainty in lifetime profitability Operating costs Fixed asset depreciation and contract fulfilment asset utilisation Section 2: Results for the year continued 2.1 Contract accounting continued Assessing contract profitability In assessing a contract\u2019s future lifetime profitability, management must estimate forecast revenue and costs to both transform and run the service over the remaining contract term. The ability to accurately forecast the outcomes involves estimates in respect of: costs to be incurred; cost savings to be achieved; impact of inflation; future performance against any contract-specific key performance indicators (KPIs) that could trigger variable consideration or service credits; and the outcome of any commercial negotiations. The level of uncertainty in the estimated future profitability of a contract is directly related to the stage of the life-cycle of the contract and the complexity of the performance obligations. Contracts in the transformation stage and pre-inflection stages are considered to have a higher level of uncertainty because of: \u2022 the ability to accurately estimate the costs to deliver the transformed process; \u2022 the dependency on the customer to agree to the specifics of the transformation: for example, where they are involved in certifying that the new process or the new technical solution designed by Capita meets their specific requirements; and \u2022 the assumptions made to forecast expected savings in the target operating model. Those contracts which are post-inflection and in BAU stage tend to have a much lower level of uncertainty in estimating future profitability. Recoverability of contract fulfilment assets and completeness of onerous contract provisions Management first assesses whether the contract assets are impaired and then further considers whether an onerous contract exists. For half and full year reporting, the Audit and Risk Committee specifically reviews the material judgements and estimates, and the overall approach in respect of the Group\u2019s major contracts, including comparison against previous forecasts. Major contracts include those that are material in size or risk to the Group\u2019s results. An assessment of which contracts are major contracts is performed twice a year, and to enable comparability the prior period balances below are re-presented to reflect the same scope as the current period. Other contracts are reported to the Audit and Risk Committee as deemed appropriate. These contracts are collectively referred to as \u2018major contracts\u2019 in the remainder of this note. The major contracts contributed \u00a31.4 billion (2021: \u00a31.3 billion) or 49% (2021: 47%) of Group adjusted revenue. Non-current contract fulfilment assets at 31 December 2022 were \u00a3263.0m, of which \u00a3106.3m (2021: \u00a3118.6m) relates to major contracts with ongoing transformational activities. The remainder relates to contracts post transformation and includes non-major contracts. The major contracts, both pre- and post-transformation, are rated according to their financial risk profile, which is linked to the level of uncertainty over future assumptions. For those that are in the high and medium rated risk categories the associated non-current contract fulfilment assets were, in aggregate, \u00a340.4m at 31 December 2022 (2021: \u00a341.9m). The recoverability of these assets is dependent on no significant adverse change in the key contract assumptions arising during the next financial year. The balance of deferred income associated with these contracts was \u00a3116.5m at 31 December 2022 (2021: \u00a3126.6m) and is forecast to be recognised as performance obligations continue to be delivered over the life of the respective contracts. Onerous contract provisions associated with these contracts were \u00a342.5m at 31 December 2022 (2021: \u00a339.5m). Following these reviews, and reviews of smaller contracts across the business, as outlined in note 3.1.3, contract fulfilment asset impairments of \u00a33.8m (2021: \u00a37.3m) were identified and recognised within cost of sales, of which \u00a30.5m (2021: \u00a3nil) relates to contract fulfilment assets added during the period, and net onerous contract provisions of \u00a31.7m (2021: \u00a332.0m) were identified and recognised in cost of sales. As discussed in note 1, the adoption of the amendment to IAS 37 resulted in additional onerous contract provisions being required, as well as contract asset impairments. On adoption of the amended standard the cumulative effect was recognised as an opening balance adjustment to retained earnings. Given the quantum of the relevant contract assets and liabilities, and the nature of the estimates noted above, management has concluded that it is reasonably possible, that outcomes within the next financial year may be different from management\u2019s current assumptions and could require a material adjustment to the carrying amounts of contract assets and onerous contract provisions. However, as noted above, \u00a3106.3m of non-current contract fulfilment assets relates to major contracts with ongoing transformational activities; and, \u00a340.4m of non-contract fulfilment assets and \u00a342.5m of onerous contract provisions relate to the highest and medium rated risk category. Due to the level of uncertainty, combination of variables and timing across numerous contracts, it is not practical to provide a quantitative analysis of the aggregated judgements that are applied, and management do not believe that disclosing a potential range of outcomes on a consolidated basis would provide meaningful information to a user of the financial statements. Due to commercial sensitivities, the Group does not specifically disclose the amounts involved in any individual contract. Certain major transformation contracts have key milestones during the next twelve months and an inability to meet these key milestones could lead to reduced profitability and a risk of impairment of the associated contract assets. These contracts include Royal Navy training and TfL Road User Charging. Additional information, which does not form part of these consolidated financial statements, on the results and performance of the underlying divisions including the outlook on certain contracts is set out in the divisional performance review. Section 2: Results for the year continued Section 2: Results for the year continued
2.2 Revenue including segmental revenue
Accounting policies
Revenue
The Group generates revenue largely in the UK and Europe. The Group operates a diverse range of businesses and accordingly applies a
variety of methods for revenue recognition, based on the principles set out in IFRS 15.
The revenue and profits recognised in any period are based on the delivery of performance obligations and an assessment of when control is
transferred to the customer.
Revenue is recognised either when the performance obligation in the contract has been performed (\u2018point-in-time\u2019 recognition) or \u2018over time\u2019 as
control of the performance obligation is transferred to the customer.
For all contracts, the Group determines if the arrangement with a customer creates enforceable rights and obligations. This assessment results
in certain Master Service Agreements (MSA) or Frameworks not meeting the definition of a contract under IFRS 15 and as such the individual
call-off agreements, linked to the MSA, are treated as individual contracts.
The Group enters into contracts which contain extension periods, where either the customer or both parties can choose to extend the contract
or there is an automatic annual renewal, and/or termination clauses that could impact the actual duration of the contract. Judgement is applied
to assess the impact that these clauses have when determining the appropriate contract term. The term of the contract impacts both the period
over which revenue from performance obligations may be recognised and the period over which contract fulfilment assets and capitalised costs
to obtain a contract are expensed.
For contracts with multiple components to be delivered such as transformation, transitions and the delivery of outsourced services,
management applies judgement to consider whether those promised goods and services are:
(i) distinct \u2013 to be accounted for as separate performance obligations;
(ii) not distinct \u2013 to be combined with other promised goods or services until a bundle is identified that is distinct; or,
(iii) part of a series of distinct goods and services that are substantially the same and have the same pattern of transfer to the customer.
At a contract\u2019s inception the total transaction price is estimated, being the amount to which the Group expects to be entitled and has rights to
under the contract. This includes an assessment of any variable consideration where the Group\u2019s performance may result in additional
revenues based on the achievement of agreed KPIs. Such amounts are only included based on the expected value, or the most likely outcome
method, and only to the extent that it is highly probable that no revenue reversal will occur.
The transaction price does not include estimates of consideration resulting from change orders for additional goods and services unless these
are already agreed.
Once the total transaction price is determined, the Group allocates this to the identified performance obligations in proportion to their relative
standalone selling prices and recognises revenue when (or while) those performance obligations are satisfied.
The Group infrequently sells standard products with observable standalone prices due to the specialised services required by customers,
consequently the Group applies judgement to determine an appropriate standalone selling price. More frequently, the Group sells customers
bespoke solutions, and in these cases the Group typically uses the expected cost-plus margin or a contractually stated price approach to
estimate the standalone selling price of each performance obligation.
The Group may offer price step downs during the life of a contract, but with no change to the underlying scope of services to be delivered. In
general, any such variable consideration, price step down or discount is included in the total transaction price to be allocated across all
performance obligations unless it relates to only one performance obligation in a contract.
For each performance obligation to be recognised over time, the Group applies a revenue recognition method that faithfully depicts the Group\u2019s
performance in transferring control of the goods or services to the customer. This decision requires assessment of the real nature of the goods
or services that the Group has promised to transfer to the customer. The Group applies the relevant output or input method consistently to
similar performance obligations in other contracts.
When using the output method, the Group recognises revenue on the basis of direct measurements of the value to the customer of the goods
and services transferred to date relative to the remaining goods and services under the contract. This is a faithful depiction of the transfer of
services since the service delivered to the customer is unchanged. Where the output method is used, in particular for long-term service
contracts where the series guidance is applied, the Group often uses a method of time elapsed which requires minimal estimation. Certain
long-term contracts use output methods based upon estimations of: user numbers; service activity levels; or fees collected.
When transfer of control is most closely aligned to Group efforts in delivering the service, the input method is used to measure progress and
revenue is recognised in direct proportion to costs incurred. This is a faithful depiction of the transfer of services because costs (or other inputs)
most accurately reflect the incremental benefits received by the customer from efforts to date.
If performance obligations in a contract do not meet the over time criteria, the Group recognises revenue at a point-in-time when the service or
good is delivered.
Contract modifications
The Group\u2019s contracts are often amended for changes in contract specifications and requirements. Contract modifications exist when the
amendment either creates new, or changes existing, enforceable rights and obligations. The effect of a contract modification on the transaction
price and the Group\u2019s measure of progress for the performance obligation to which it relates, is recognised as an adjustment to revenue in one
of the following ways:
a) prospectively as an additional separate contract;
b) prospectively as a termination of the existing contract and creation of a new contract;
c) as part of the original contract using a cumulative catch up; or,
d) as a combination of (b) and (c).
In respect of contracts for which the Group has decided there is a series of distinct goods and services that are substantially the same and
have the same pattern of transfer where revenue is recognised over time, the modification will always be treated under either (a) or (b); (d) may
arise when a contract has a part-termination and a modification of the remaining performance obligations.
The facts and circumstances of any contract modification are considered individually because the types of modifications will vary contract by
contract and may result in different accounting outcomes.
Judgement is applied in relation to the accounting for such modifications where the final terms or legal contracts have not been agreed prior to
the period end because management needs to determine if a modification has been approved and if it either creates new, or changes existing,
enforceable rights and obligations of the parties. Depending upon the outcome of such negotiations, the timing and amount of revenue
recognised may be different in the relevant accounting periods. Modification and amendments to contracts are undertaken through an agreed
formal process. For example, if a change in scope has been approved but the corresponding change in price is still being negotiated,
management uses judgement to estimate the change in total transaction price. Importantly, any variable consideration is only recognised to the
extent that it is highly probable that no revenue reversal will occur. For example, if pricing is subject to indexation based on an external metric
(such as CPI or RPI) then the revenue related to the indexation will only be recognised once the relevant indexation is confirmed. Future
indexation will not be recognised because it is not highly probable that a significant reversal of an indexation adjustment will not occur.
Principal versus agent
The Group has arrangements with some of its customers whereby it needs to determine if it acts as a principal or an agent because more than
one party is involved in providing the goods and services to the customer. The Group is a principal if it controls a promised good or service
before transferring that good or service to the customer. The Group is an agent if its role is to arrange for another entity to provide the goods or
services. Factors considered in making this assessment are most notably: the discretion the Group has in establishing the price for the
specified good or service; whether the Group has inventory risk; and whether or not the Group is primarily responsible for fulfilling the promise
to deliver the service or good.
This assessment of control requires judgement particularly in relation to certain service contracts. An example is the provision of certain
recruitment and learning services where the Group may be assessed to be agent or principal dependent upon the facts and circumstances of
the arrangement and the nature of the services being delivered.
Where the Group is acting as a principal, revenue is recorded on a gross basis. Where the Group is acting as an agent, revenue is recorded on
a net basis, recognising only the commission or fee earned as revenue.
Licences
Software licences delivered by the Group can either be right to access (active) or right to use (passive) licences, which determines the timing of
revenue recognition. The assessment of whether a licence is active or passive involves judgement.
The key determinant of an active licence is whether or not the Group is required to undertake continuing activities that significantly affect the
licensed intellectual property (or the customer has a reasonable expectation that it will do so) and the customer is, therefore, exposed to
positive (or negative) impacts resulting from those changes. Where the Group is responsible for any maintenance, continuing support, updates
and upgrades, and accordingly the sale of the initial software is not distinct. All other licences which have significant standalone functionality
are treated as passive licences.
When software upgrades are sold as part of the software licence agreement (ie software upgrades are promised to the customer), the Group
applies judgement to assess whether the software upgrades are distinct from the licence (ie a separate performance obligation). If the
upgrades are considered fundamental to the ongoing use of the software by the customer, the upgrades are not considered distinct and not
accounted for as a separate performance obligation.
For each contract that includes a separate licence performance obligation, the Group considers all the facts and circumstances in determining
whether the licence revenue is recognised over time (active) or at a point-in-time (passive) from the go-live date of the licence.
Deferred and accrued income
The Group\u2019s customer contracts include a diverse range of payment schedules dependent upon the nature and type of goods and/or services
being provided. This can include performance-based payments or progress payments as well as regular monthly or quarterly payments for
ongoing service delivery. Payments for transactional goods and services may be at delivery date, in arrears or part payment in advance. The
long-term service contracts tend to have higher cash flows early in the contract to cover transformational activities.
Where payments received are greater than the revenue recognised up to the reporting date, the Group recognises a deferred income contract
liability for this difference. Where payments received less than the revenue recognised up to the reporting date, the Group recognises an
accrued contract income asset for this difference.
At each reporting date, the Group assesses whether there is any indication that accrued contract income assets may be impaired by
considering whether or not any revenue reversal could occur. Where an indicator of impairment exists, the Group makes a formal estimate of
the asset\u2019s recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and
is written down to its recoverable amount.
Contract types
The Group disaggregates revenue from contracts with customers by contract type, because management believe this best depicts how the
nature, amount, timing, and uncertainty of the Group\u2019s revenue and cash flows are affected by economic factors. Categories are: long-term
contractual \u2013 greater than two years; short-term contractual \u2013 less than two years; and transactional. The years being measured from the
service commencement date.
Long-term contractual \u2013 greater than two years
The Group provides a range of services in the majority of its reportable segments under contracts with a duration of more than two years. The
nature of contracts or performance obligations within this revenue type includes:
(i) long-term outsourced service arrangements in the public and private sectors; and
(ii) active software licence arrangements.
The majority of long-term contractual agreements form part of a series of distinct goods and services because they are substantially the same
service; and have the same pattern of transfer, since the series constitutes services provided in distinct time increments (eg daily, monthly,
quarterly or annually), and therefore treats the series as one performance obligation.
Short-term contractual \u2013 less than two years
The nature of contracts or performance obligations within this revenue type includes:
(i) short-term outsourced service arrangements in the public and private sectors; and
(ii) software maintenance contracts.
Section 2: Results for the year continued
2.2 Revenue including segmental revenue continued
The Group has assessed that maintenance and support (ie on-call support, remote support) for software licences is a performance obligation
that can be considered capable of being distinct and separately identifiable in a contract if the customer has a passive licence. These recurring
services are substantially the same because the nature of the promise is for the Group to \u2018stand ready\u2019 to perform maintenance and support
when required by the customer. Each day of \u2018standing ready\u2019 is distinct from each subsequent day and is transferred in the same pattern to the
customer.
Transactional (point-in-time) contracts
The Group delivers a range of goods or services in all reportable segments that are transactional services for which revenue is recognised at
the point-in-time when control of the goods or services has transferred to the customer. This may be at the point of physical delivery of goods or
services and acceptance by the customer or when the customer obtains control of an asset or service in a contract with customer-specified
acceptance criteria.
The nature of contracts or performance obligations within this revenue type includes:
(i) provision of IT hardware goods;
(ii) passive software licence agreements;
(iii) commission received as agent from the sale of third-party software; and
(iv) fees received in relation to the delivery of professional services.
Section 2: Results for the year continued
2.2 Revenue including segmental revenue continued
The Group has assessed that maintenance and support (ie on-call support, remote support) for software licences is a performance obligation
that can be considered capable of being distinct and separately identifiable in a contract if the customer has a passive licence. These recurring
services are substantially the same because the nature of the promise is for the Group to \u2018stand ready\u2019 to perform maintenance and support
when required by the customer. Each day of \u2018standing ready\u2019 is distinct from each subsequent day and is transferred in the same pattern to the
customer.
Transactional (point-in-time) contracts
The Group delivers a range of goods or services in all reportable segments that are transactional services for which revenue is recognised at
the point-in-time when control of the goods or services has transferred to the customer. This may be at the point of physical delivery of goods or
services and acceptance by the customer or when the customer obtains control of an asset or service in a contract with customer-specified
acceptance criteria.
The nature of contracts or performance obligations within this revenue type includes:
(i) provision of IT hardware goods;
(ii) passive software licence agreements;
(iii) commission received as agent from the sale of third-party software; and
(iv) fees received in relation to the delivery of professional services.
Section 2: Results for the year continued
2.2 Revenue including segmental revenue continued
2.2.1 Segmental revenue
The Group\u2019s operations are managed separately according to the nature of the services provided, with each segment representing a strategic
business division offering a different package of client outcomes across the markets the Group serves. Capita plc is a reconciling item and not
an operating segment. A description of the service provision for each segment can be found in the strategic report on pages 16 to 25.
The tables below present revenue for the Group\u2019s business segments as reported to the Chief Operating Decision Maker. The Group
comprises two core trading divisions - Capita Public Service and Capita Experience - and a third division - Capita Portfolio - which comprises
non-core businesses that the Group intends to exit in due course. Comparative information has been re-presented to reflect businesses exited
during 2022.
Adjusted revenue, excluding results from businesses exited in both years (adjusting items), was \u00a32,845.8m (2021: \u00a32,777.8m), an increase of
2.4% (2021: increase 0.1%).
Year ended
31 December 2022 Notes
Capita
Public
Service
\u00a3m
Capita
Experience
\u00a3m
Capita
Portfolio
\u00a3m
Capita
plc
\u00a3m
Total
adjusted
\u00a3m
Adjusting
items
\u00a3m
Total
reported
\u00a3m
Continuing operations
Long-term contractual 1,157.3 986.2 33.1 \u2014 2,176.6 59.6 2,236.2
Short-term contractual 236.7 150.0 37.7 \u2014 424.4 70.4 494.8
Transactional (point-in-time) 51.3 14.5 179.0 \u2014 244.8 38.8 283.6
Total segment revenue 1,445.3 1,150.7 249.8 \u2014 2,845.8 168.8 3,014.6
Trading revenue 1,487.5 1,190.9 334.2 \u2014 3,012.6 \u2014 3,012.6
Inter-segment revenue (42.2) (40.2) (84.4) \u2014 (166.8) \u2014 (166.8)
Total adjusted segment
revenue 1,445.3 1,150.7 249.8 \u2014 2,845.8 \u2014 2,845.8
Business exits \u2013 trading 2.8 \u2014 33.3 135.5 \u2014 \u2014 168.8 168.8
Total segment revenue 1,445.3 1,184.0 385.3 \u2014 2,845.8 168.8 3,014.6
Year ended
31 December 2021 (Re-presented)
1
Continuing operations
Long-term contractual 1,115.3 982.2 38.5 \u2014 2,136.0 189.2 2,325.2
Short-term contractual 211.1 152.7 42.9 \u2014 406.7 127.7 534.4
Transactional (point-in-time) 84.0 6.0 145.1 \u2014 235.1 87.8 322.9
Total segment revenue 1,410.4 1,140.9 226.5 \u2014 2,777.8 404.7 3,182.5
Trading revenue 1,443.5 1,226.9 265.4 \u2014 2,935.8 \u2014 2,935.8
Inter-segment revenue (33.1) (86.0) (38.9) \u2014 (158.0) \u2014 (158.0)
Total adjusted segment
revenue 1,410.4 1,140.9 226.5 \u2014 2,777.8 \u2014 2,777.8
Business exits \u2013 trading 2.8 \u2014 43.9 360.8 \u2014 \u2014 404.7 404.7
Total segment revenue 1,410.4 1,184.8 587.3 \u2014 2,777.8 404.7 3,182.5
1. The 2021 comparative figures have been re-presented to reflect the recategorisation of certain contracts between contract types (long-term contractual, short-term contractual and
transactional (point-in-time)) following a review in 2022.
Geographical location
The table below presents revenue by geographical location.
2022 2021
United
Kingdom
\u00a3m
Other
\u00a3m
Total
\u00a3m
United
Kingdom
\u00a3m
Other
\u00a3m
Total
\u00a3m
Revenue 2,718.6 296.0 3,014.6 2,882.4 300.1 3,182.5
Section 2: Results for the year continued
2.2 Revenue including segmental revenue continued
2.2.2 Order book
The tables below show the order book for each division, categorised into long-term contractual (contracts with length greater than two years)
and short-term contractual (contracts with length less than two years). The length of the contract is calculated from the start of the service
commencement date. The figures represent the aggregate amount of currently contracted transaction price allocated to the performance
obligations that are unsatisfied or partially unsatisfied. Revenue expected to be recognised upon satisfaction of these performance obligations
is as follows:
Order book
31 December 2022
Capita
Public
Service
\u00a3m
Capita
Experience
\u00a3m
Capita
Portfolio
\u00a3m
Capita
plc
\u00a3m
Total
\u00a3m
Long-term contractual 2,916.7 2,465.3 201.9 \u2014 5,583.9
Short-term contractual 68.3 61.4 91.6 \u2014 221.3
Total 2,985.0 2,526.7 293.5 \u2014 5,805.2
Order book
31 December 2021
Capita
Public
Service
\u00a3m
Capita
Experience
\u00a3m
Capita
Portfolio
\u00a3m
Capita
plc
\u00a3m
Total
\u00a3m
Long-term contractual 3,172.8 2,170.0 417.1 \u2014 5,759.9
Short-term contractual
113.5 101.8 140.2 \u2014 355.5
Total 3,286.3 2,271.8 557.3 \u2014 6,115.4
The table below shows the expected timing of revenue to be recognised on long-term contractual orders at 31 December 2022:
Time bands of expected revenue recognition
from long-term contractual orders
Capita
Public
Service
\u00a3m
Capita
Experience
\u00a3m
Capita
Portfolio
\u00a3m
Capita
plc
\u00a3m
Total
\u00a3m
< 1 year 843.3 708.3 25.2 \u2014 1,576.8
1\u20135 years 1,417.0 1,489.8 62.6 \u2014 2,969.4
> 5 years 656.4 267.2 114.1 \u2014 1,037.7
Total 2,916.7 2,465.3 201.9 \u2014 5,583.9
Prior year comparative information is not presented for the expected timing of revenue recognition because it is a forward looking disclosure
and therefore management does not believe that such disclosure provides meaningful information to a user of the consolidated financial
statements.
The order book represents the consideration that the Group will be entitled to receive from customers when the Group satisfies its remaining
performance obligations under the contracts. However, the total revenue that will be earned by the Group will also include non-contracted
volumetric revenue, future indexation linked to an external metric, new wins, scope changes, and anticipated contract extensions. These
elements have been excluded from the above tables because they are not contracted. Additionally, revenue from contract extensions is
excluded from the order book unless they are pre-priced extensions whereby the Group has a legally binding obligation to deliver the
performance obligations during the extension period. The total revenue related to pre-priced extensions included in the tables above amounted
to \u00a3577.0m (2021: \u00a3668.0m). The amounts presented do not include orders for which neither party has performed, and each party has the
unilateral right to terminate a wholly unperformed contract without compensating the other party.
Of the \u00a35.6 billion (2021: \u00a35.8 billion) revenue to be earned on long-term contracts, \u00a34.2 billion (2021: \u00a34.3 billion) relates to major contracts.
This amount excludes revenue that will be derived from frameworks (transactional \u2018point-in-time\u2019 contracts), non-contracted volumetric revenue,
non-contracted scope changes and future unforeseen volume changes from these major contracts, which together are anticipated to contribute
an additional \u00a30.7 billion (2021: \u00a32.3 billion) of revenue to the Group over the life of these contracts.
The Group performs various services for a number of UK Government ministerial departments and considers these individual ministerial
departments to be separate customers due to the limited economic integration between each ministerial department. No single customer
makes up more than 10% of the Group\u2019s revenues.
2.2.3 Deferred income
The Group\u2019s deferred income balances solely relate to revenue from contracts with customers. Revenue recognised in the reporting period that
was included in the deferred income balance at the beginning of the period was \u00a3831.4m (2021: \u00a3941.1m).
Movements in the deferred income balances were driven by transactions entered into by the Group within the normal course of business during
the year (2021: other than the accelerated revenue recognised of \u00a323.1m on early termination of contracts in Capita Experience and agreed
reduction in scope on a contract in Capita Public Service).
Section 2: Results for the year continued
2.2 Revenue including segmental revenue continued
2.2.2 Order book
The tables below show the order book for each division, categorised into long-term contractual (contracts with length greater than two years)
and short-term contractual (contracts with length less than two years). The length of the contract is calculated from the start of the service
commencement date. The figures represent the aggregate amount of currently contracted transaction price allocated to the performance
obligations that are unsatisfied or partially unsatisfied. Revenue expected to be recognised upon satisfaction of these performance obligations
is as follows:
Order book
31 December 2022
Capita
Public
Service
\u00a3m
Capita
Experience
\u00a3m
Capita
Portfolio
\u00a3m
Capita
plc
\u00a3m
Total
\u00a3m
Long-term contractual 2,916.7 2,465.3 201.9 \u2014 5,583.9
Short-term contractual 68.3 61.4 91.6 \u2014 221.3
Total 2,985.0 2,526.7 293.5 \u2014 5,805.2
Order book
31 December 2021
Capita
Public
Service
\u00a3m
Capita
Experience
\u00a3m
Capita
Portfolio
\u00a3m
Capita
plc
\u00a3m
Total
\u00a3m
Long-term contractual 3,172.8 2,170.0 417.1 \u2014 5,759.9
Short-term contractual
113.5 101.8 140.2 \u2014 355.5
Total 3,286.3 2,271.8 557.3 \u2014 6,115.4
The table below shows the expected timing of revenue to be recognised on long-term contractual orders at 31 December 2022:
Time bands of expected revenue recognition
from long-term contractual orders
Capita
Public
Service
\u00a3m
Capita
Experience
\u00a3m
Capita
Portfolio
\u00a3m
Capita
plc
\u00a3m
Total
\u00a3m
< 1 year 843.3 708.3 25.2 \u2014 1,576.8
1\u20135 years 1,417.0 1,489.8 62.6 \u2014 2,969.4
> 5 years 656.4 267.2 114.1 \u2014 1,037.7
Total 2,916.7 2,465.3 201.9 \u2014 5,583.9
Prior year comparative information is not presented for the expected timing of revenue recognition because it is a forward looking disclosure
and therefore management does not believe that such disclosure provides meaningful information to a user of the consolidated financial
statements.
The order book represents the consideration that the Group will be entitled to receive from customers when the Group satisfies its remaining
performance obligations under the contracts. However, the total revenue that will be earned by the Group will also include non-contracted
volumetric revenue, future indexation linked to an external metric, new wins, scope changes, and anticipated contract extensions. These
elements have been excluded from the above tables because they are not contracted. Additionally, revenue from contract extensions is
excluded from the order book unless they are pre-priced extensions whereby the Group has a legally binding obligation to deliver the
performance obligations during the extension period. The total revenue related to pre-priced extensions included in the tables above amounted
to \u00a3577.0m (2021: \u00a3668.0m). The amounts presented do not include orders for which neither party has performed, and each party has the
unilateral right to terminate a wholly unperformed contract without compensating the other party.
Of the \u00a35.6 billion (2021: \u00a35.8 billion) revenue to be earned on long-term contracts, \u00a34.2 billion (2021: \u00a34.3 billion) relates to major contracts.
This amount excludes revenue that will be derived from frameworks (transactional \u2018point-in-time\u2019 contracts), non-contracted volumetric revenue,
non-contracted scope changes and future unforeseen volume changes from these major contracts, which together are anticipated to contribute
an additional \u00a30.7 billion (2021: \u00a32.3 billion) of revenue to the Group over the life of these contracts.
The Group performs various services for a number of UK Government ministerial departments and considers these individual ministerial
departments to be separate customers due to the limited economic integration between each ministerial department. No single customer
makes up more than 10% of the Group\u2019s revenues.
2.2.3 Deferred income
The Group\u2019s deferred income balances solely relate to revenue from contracts with customers. Revenue recognised in the reporting period that
was included in the deferred income balance at the beginning of the period was \u00a3831.4m (2021: \u00a3941.1m).
Movements in the deferred income balances were driven by transactions entered into by the Group within the normal course of business during
the year (2021: other than the accelerated revenue recognised of \u00a323.1m on early termination of contracts in Capita Experience and agreed
reduction in scope on a contract in Capita Public Service).
Section 2: Results for the year continued
2.3 Operating profit
2.3.1 Items charged/(credited) to reported operating profit
Notes
2022
\u00a3m
2021
\u00a3m
Depreciation of property, plant and equipment 3.2 40.9 48.6
Depreciation of right-of-use assets 3.5 56.0 68.2
Impairment of property, plant and equipment 3.2 4.7 1.9
(Reversal of impairment)/impairment of right-of-use assets 3.5 (2.7) 13.3
Amortisation of intangible assets 3.3 41.5 57.7
Impairment of intangible assets 3.3 5.9 58.7
Impairment of goodwill 3.4 169.0 16.1
Impairment of disposal group assets held-for-sale 2.8 \u2014 44.1
Loss on sale of property, plant and equipment and intangibles 2.10.1 3.5 0.7
Foreign exchange differences 6.9 (0.2)
Contract fulfilment asset utilisation, impairment and derecognition 3.1.3 85.7 107.8
Contract termination gains \u2014 (4.7)
The net of: accelerated deferred income unwind, and contract fulfilment asset utilisation \u2014 (7.5)
Onerous contract provisions (net of additions and releases) 1.7 32.0
Contract fulfilment asset utilisation, impairment and derecognition: the Group continually monitors and reviews its major contracts to
identify any indicators of impairment of contract fulfilment assets. During the year, management has recognised an impairment against costs
capitalised as contract fulfilment assets totalling \u00a33.8m (2021: \u00a37.3m) in cost of sales.
Contract termination gains: customer contracts usually contain provisions to compensate the Group for exit costs and future profits in the
event of early termination. There were no in-year customer contract terminations for customer convenience that led to associated exit fees
being earned by Capita (2021: \u00a34.7m in Capita Experience) and recorded as income during the year.
The net of: accelerated deferred income unwind and contract fulfilment asset utilisation: during 2022 the Group recognised no gains or
losses (2021: gain \u00a37.5m) related to the net of accelerated deferred income unwinds and contract fulfilment asset utilisation. In 2021 the gains
primarily related to a contract in Capita Experience where a contract was terminated earlier than planned and the agreed reduction in scope of
a contract in Capita Public Service.
Onerous contract provisions: during 2022 the Group recognised a net loss of \u00a31.7m related to onerous contract provisions (refer to note 3.6)
in Capita Experience (2021: \u00a332.0m loss related to contracts in Capita Experience).
2.3.2 Fees payable to auditors
The amounts included in the table below relate to fees payable to KPMG LLP and its associates:
2022
\u00a3m
2021
\u00a3m
Audit and audit-related services
The audit of the Parent Company and the Group\u2019s consolidated financial statements 5.1 5.1
The audit of the financial statements of the Group\u2019s subsidiary companies 1.0 1.9
Total audit and audit-related services 6.1 7.0
Non-audit services
Other assurance services 1.6 1.5
Total non-audit services 1.6 1.5
Total audit and non-audit services 7.7 8.5
The non-audit fees in respect of 2022 related to the review of interim results, and services as reporting accountant for the disposal of Pay360
Limited. In respect of 2021, the non-audit fees related to the review of interim results, and services as reporting accountant for the disposal of
AXELOS Limited.
Section 2: Results for the year continued
2.4 Adjusted operating profit and adjusted profit before tax
Accounting policies
IAS 1 permits an entity to present additional information for specific items to enable users to better assess the entity\u2019s financial performance.
The Board has adopted a policy to disclose separately those items that it considers are outside the underlying operating results for the
particular year under review and against which the Group\u2019s performance is assessed internally. In the Board\u2019s judgement, these need to be
disclosed separately by virtue of their nature, size and/or incidence, for users of the consolidated financial statements to obtain an
understanding of the financial information and the underlying in-year performance of the Group. Accordingly, these items are also excluded
from the discussion of divisional performance in the strategic report. This policy is kept under review by the Board and the Audit and Risk
Committee and is discussed in the committee\u2019s report on pages 90 to 98. The Board considers alternative performance measures (APMs) to be
helpful to the reader, but notes that APMs have certain limitations, including the exclusion of significant recurring items, and may not be directly
comparable with similarly titled measures presented by other companies.
From 1 January 2022, the Board has limited the items excluded from the adjusted results to: business exits; amortisation and impairment of
acquired intangibles; impairment of goodwill; and, certain mark-to-market valuation changes that impact net finance expense/income; because
the adjusted metrics provide a more representative measure of the underlying performance of the business post completion of the Group-wide
transformation.
In prior years, the Board excluded other items from the adjusted results because they were material and required separate disclosure for users
of the financial statements to obtain a proper understanding of the financial information and the underlying performance of the business. These
items included: significant restructuring; contract-related provisions and impairments; and, certain litigation and claims.
The comparatives have been re-presented on the same basis, with significant restructuring (\u00a3147.5m), certain litigation and claims (credit
\u00a32.3m) and contract related provisions and impairments (\u00a343.1m) now included within adjusted results for the year ended 31 December 2021.
The items below are excluded from the adjusted results:
Operating
profit/(loss)
Profit/(loss)
before tax
Notes
2022
\u00a3m
2021
\u00a3m
(Re-presented
4
)
2022
\u00a3m
2021
\u00a3m
(Re-presented
4
)
Reported (79.6) (86.6) 61.4 285.6
Amortisation and impairment of acquired intangibles 3.3 5.1 7.7 5.1 7.7
Impairment of goodwill 3.4 169.0 11.5 169.0 11.5
Net finance (income)/costs 4.3 \u2014 \u2014 (3.4) 1.4
Business exits 2.8 8.4 (10.3) (158.3) (429.0)
Adjusted 102.9 (77.7) 73.8 (122.8)
1. Adjusted operating profit increased by 232.4% (2021: increased 26.6%) and adjusted profit before tax increased by 160.1% (2021: increased 15.1%). Adjusted operating profit of \u00a3102.9m
(2021: loss \u00a377.7m) was generated on adjusted revenue of \u00a32,845.8m (2021: \u00a32,777.8m) resulting in an adjusted operating margin of 3.6% (2021: (2.8)%).
2. The tax credit on adjusted profit before tax is \u00a331.8m (2021: \u00a34.0m charge) resulting in adjusted profit after tax of \u00a3105.6m (2021: \u00a3126.8m loss).
3. The adjusted operating loss and adjusted loss before tax for 2021 have been re-presented for the impact of business exits during 2022 and the change in adjusting items. This has resulted
in adjusted operating profit decreasing from \u00a3139.1m to a loss of \u00a377.7m and adjusted profit before tax decreasing from \u00a393.5m to a loss of \u00a3122.8m.
4. 2021 adjusted results have been re-presented - please refer to further detail above.
Amortisation and impairment of acquired intangible assets: the Group recognised acquired intangible amortisation of \u00a35.1m (2021: \u00a37.7m)
and impairment of \u00a3nil (2021: \u00a3nil). These charges are excluded from the adjusted results of the Group because they are non-cash items
generated from historical acquisition related activity.
Impairment of goodwill: the Group carries on its balance sheet significant balances related to goodwill. Goodwill is subject to annual
impairment testing and any impairment charges are reported separately because they are non-cash items generated from historical acquisition
related activity.
Net finance costs: net finance costs excluded from adjusted profits relate to movements in the mark-to-market value of forward foreign
exchange contracts to cover anticipated future costs and therefore have no equivalent offsetting transaction in the accounting records, also
refer to note 4.2.2.
Business exits: the trading result of businesses exited, or in the process of being exited, and the gain or loss on disposals are excluded from
the Group's adjusted results to enable comparability of the Group\u2019s adjusted results. Individual businesses within the Portfolio Division will be
treated as held-for-sale (and therefore a business exit) when the disposal is highly probable and expected to complete within twelve months of
the balance sheet date.
Section 2: Results for the year continued
2.4 Adjusted operating profit and adjusted profit before tax
Accounting policies
IAS 1 permits an entity to present additional information for specific items to enable users to better assess the entity\u2019s financial performance.
The Board has adopted a policy to disclose separately those items that it considers are outside the underlying operating results for the
particular year under review and against which the Group\u2019s performance is assessed internally. In the Board\u2019s judgement, these need to be
disclosed separately by virtue of their nature, size and/or incidence, for users of the consolidated financial statements to obtain an
understanding of the financial information and the underlying in-year performance of the Group. Accordingly, these items are also excluded
from the discussion of divisional performance in the strategic report. This policy is kept under review by the Board and the Audit and Risk
Committee and is discussed in the committee\u2019s report on pages 90 to 98. The Board considers alternative performance measures (APMs) to be
helpful to the reader, but notes that APMs have certain limitations, including the exclusion of significant recurring items, and may not be directly
comparable with similarly titled measures presented by other companies.
From 1 January 2022, the Board has limited the items excluded from the adjusted results to: business exits; amortisation and impairment of
acquired intangibles; impairment of goodwill; and, certain mark-to-market valuation changes that impact net finance expense/income; because
the adjusted metrics provide a more representative measure of the underlying performance of the business post completion of the Group-wide
transformation.
In prior years, the Board excluded other items from the adjusted results because they were material and required separate disclosure for users
of the financial statements to obtain a proper understanding of the financial information and the underlying performance of the business. These
items included: significant restructuring; contract-related provisions and impairments; and, certain litigation and claims.
The comparatives have been re-presented on the same basis, with significant restructuring (\u00a3147.5m), certain litigation and claims (credit
\u00a32.3m) and contract related provisions and impairments (\u00a343.1m) now included within adjusted results for the year ended 31 December 2021.
The items below are excluded from the adjusted results:
Operating
profit/(loss)
Profit/(loss)
before tax
Notes
2022
\u00a3m
2021
\u00a3m
(Re-presented
4
)
2022
\u00a3m
2021
\u00a3m
(Re-presented
4
)
Reported (79.6) (86.6) 61.4 285.6
Amortisation and impairment of acquired intangibles 3.3 5.1 7.7 5.1 7.7
Impairment of goodwill 3.4 169.0 11.5 169.0 11.5
Net finance (income)/costs 4.3 \u2014 \u2014 (3.4) 1.4
Business exits 2.8 8.4 (10.3) (158.3) (429.0)
Adjusted 102.9 (77.7) 73.8 (122.8)
1. Adjusted operating profit increased by 232.4% (2021: increased 26.6%) and adjusted profit before tax increased by 160.1% (2021: increased 15.1%). Adjusted operating profit of \u00a3102.9m
(2021: loss \u00a377.7m) was generated on adjusted revenue of \u00a32,845.8m (2021: \u00a32,777.8m) resulting in an adjusted operating margin of 3.6% (2021: (2.8)%).
2. The tax credit on adjusted profit before tax is \u00a331.8m (2021: \u00a34.0m charge) resulting in adjusted profit after tax of \u00a3105.6m (2021: \u00a3126.8m loss).
3. The adjusted operating loss and adjusted loss before tax for 2021 have been re-presented for the impact of business exits during 2022 and the change in adjusting items. This has resulted
in adjusted operating profit decreasing from \u00a3139.1m to a loss of \u00a377.7m and adjusted profit before tax decreasing from \u00a393.5m to a loss of \u00a3122.8m.
4. 2021 adjusted results have been re-presented - please refer to further detail above.
Amortisation and impairment of acquired intangible assets: the Group recognised acquired intangible amortisation of \u00a35.1m (2021: \u00a37.7m)
and impairment of \u00a3nil (2021: \u00a3nil). These charges are excluded from the adjusted results of the Group because they are non-cash items
generated from historical acquisition related activity.
Impairment of goodwill: the Group carries on its balance sheet significant balances related to goodwill. Goodwill is subject to annual
impairment testing and any impairment charges are reported separately because they are non-cash items generated from historical acquisition
related activity.
Net finance costs: net finance costs excluded from adjusted profits relate to movements in the mark-to-market value of forward foreign
exchange contracts to cover anticipated future costs and therefore have no equivalent offsetting transaction in the accounting records, also
refer to note 4.2.2.
Business exits: the trading result of businesses exited, or in the process of being exited, and the gain or loss on disposals are excluded from
the Group's adjusted results to enable comparability of the Group\u2019s adjusted results. Individual businesses within the Portfolio Division will be
treated as held-for-sale (and therefore a business exit) when the disposal is highly probable and expected to complete within twelve months of
the balance sheet date.
Section 2: Results for the year continued
2.5 Segmental information
The Group\u2019s operations are managed separately according to the nature of the services provided, with each segment representing a strategic
business division offering a different package of client outcomes across the markets the Group serves. Capita plc is a reconciling item and not
an operating segment. A description of the services provided by each segment can be found in the strategic report on pages16 to 25.
The tables below present profit for the Group\u2019s business segments. For segmental reporting, the costs of the central functions have been
allocated to the segments using appropriate drivers such as adjusted revenue, adjusted profit or headcount. Comparative information has been
re-presented to reflect businesses exited during 2022 and the change in definition of what the Board excludes from adjusted results (refer to
note 2.4).
Information on segmental revenue can be found in note 2.2.
Year ended
31 December 2022 Notes
Capita
Public
Service
\u00a3m
Capita
Experience
\u00a3m
Capita
Portfolio
\u00a3m
Capita
plc
\u00a3m
Total
adjusted
\u00a3m
Adjusting
items
\u00a3m
Total
reported
\u00a3m
Adjusted operating profit
2.4
91.5 38.5 16.2 (43.3) 102.9 \u2014 102.9
Business exits \u2013 trading
2.8
\u2014 4.3 10.4 \u2014 \u2014 14.7 14.7
Total trading result 91.5 42.8 26.6 (43.3) 102.9 14.7 117.6
Non-trading items:
Business exits \u2013 non-trading
2.8
\u2014 (23.1) (23.1)
Other adjusting items
2.4
\u2014 (174.1) (174.1)
Operating profit/(loss) 102.9 (182.5) (79.6)
Interest income 8.9
Interest expense (40.6)
Share of results in associates
and investment gains 5.8
Gain on business disposal 166.9
Profit before tax 61.4
Supplementary Information
Depreciation and amortisation
3.2
3.3
3.5
38.5 67.2 19.4 3.3 128.4 10.0 138.4
Impairment of property, plant
and equipment, intangible
assets and right-of-use assets
\u2014 7.7 \u2014 (0.2) 7.5 0.4 7.9
Contract fulfilment assets
utilisation, impairment and
derecognition
3.1.3 67.2 16.3 0.8 \u2014 84.3 1.4 85.7
Onerous contract provisions 2.3 \u2014 1.7 \u2014 \u2014 1.7 \u2014 1.7
Section 2: Results for the year continued
2.5 Segmental information continued
Year ended
31 December 2021 Notes
Capita
Public
Service
\u00a3m
Capita
Experience
\u00a3m
Capita
Portfolio
\u00a3m
Capita
plc
\u00a3m
Total
adjusted
\u00a3m
Adjusting
items
\u00a3m
Total
reported
\u00a3m
Re-presented
1
Adjusted operating profit
2.4
93.2 8.9 (0.1) (179.7)
(77.7)
\u2014 (77.7)
Business exits \u2013 trading
2.8
\u2014 6.9 72.4 \u2014 \u2014 79.3 79.3
Total trading result 93.2 15.8 72.3 (179.7) (77.7) 79.3 1.6
Non-trading items:
Business exits \u2013 non-trading
2.8
\u2014 (69.0) (69.0)
Other adjusting items
2.4
\u2014 (19.2) (19.2)
Operating loss (77.7) (8.9) (86.6)
Interest income 4.7
Interest expense (51.6)
Share of results in associates
and investment gains (0.6)
Gain on business disposal 419.7
Profit before tax 285.6
Supplementary Information
Depreciation and amortisation
3.2
3.3
3.5
42.2 78.8 21.8 6.6 149.4 25.1 174.5
Impairment of property, plant
and equipment, intangible
assets and right-of-use assets
3.3 5.5 2.6 59.9 71.3 2.6 73.9
Contract fulfilment assets
utilisation, impairment and
derecognition
3.1.3 64.5 21.8 2.0 \u2014 88.3 19.5 107.8
Onerous contract provisions 2.3 \u2014 32.0 \u2014 \u2014 32.0 \u2014 32.0
1. 2021 adjusted results have been re-presented - please refer to note 2.4 for further details.
Geographical location
The table below presents the carrying amount of non-current assets (excluding deferred tax, financial assets and employee benefits) by the
geographical location of those assets.
2022 2021
United
Kingdom
\u00a3m
Other
\u00a3m
Total
\u00a3m
United
Kingdom
\u00a3m
Other
\u00a3m
Total
\u00a3m
Non-current assets 1,320.9 20.6 1,341.5 1,791.3 27.7 1,819.0
Section 2: Results for the year continued
2.5 Segmental information continued
Year ended
31 December 2021 Notes
Capita
Public
Service
\u00a3m
Capita
Experience
\u00a3m
Capita
Portfolio
\u00a3m
Capita
plc
\u00a3m
Total
adjusted
\u00a3m
Adjusting
items
\u00a3m
Total
reported
\u00a3m
Re-presented
1
Adjusted operating profit
2.4
93.2 8.9 (0.1) (179.7)
(77.7)
\u2014 (77.7)
Business exits \u2013 trading
2.8
\u2014 6.9 72.4 \u2014 \u2014 79.3 79.3
Total trading result 93.2 15.8 72.3 (179.7) (77.7) 79.3 1.6
Non-trading items:
Business exits \u2013 non-trading
2.8
\u2014 (69.0) (69.0)
Other adjusting items
2.4
\u2014 (19.2) (19.2)
Operating loss (77.7) (8.9) (86.6)
Interest income 4.7
Interest expense (51.6)
Share of results in associates
and investment gains (0.6)
Gain on business disposal 419.7
Profit before tax 285.6
Supplementary Information
Depreciation and amortisation
3.2
3.3
3.5
42.2 78.8 21.8 6.6 149.4 25.1 174.5
Impairment of property, plant
and equipment, intangible
assets and right-of-use assets
3.3 5.5 2.6 59.9 71.3 2.6 73.9
Contract fulfilment assets
utilisation, impairment and
derecognition
3.1.3 64.5 21.8 2.0 \u2014 88.3 19.5 107.8
Onerous contract provisions 2.3 \u2014 32.0 \u2014 \u2014 32.0 \u2014 32.0
1. 2021 adjusted results have been re-presented - please refer to note 2.4 for further details.
Geographical location
The table below presents the carrying amount of non-current assets (excluding deferred tax, financial assets and employee benefits) by the
geographical location of those assets.
2022 2021
United
Kingdom
\u00a3m
Other
\u00a3m
Total
\u00a3m
United
Kingdom
\u00a3m
Other
\u00a3m
Total
\u00a3m
Non-current assets 1,320.9 20.6 1,341.5 1,791.3 27.7 1,819.0
Section 2: Results for the year continued
2.6 Taxation
Accounting policies
Tax on the profit or loss for year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it
relates to items recognised directly in equity or other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively
enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences except:
\u2022 where the deferred tax liability arises from the initial recognition of goodwill;
\u2022 where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and,
at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
\u2022 in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the
timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability
is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
Significant accounting judgements, estimates and assumptions
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the
extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused
tax assets and unused tax losses can be utilised, except where the deferred tax asset relating to the deductible temporary difference arises
from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss. This involves an assessment of when those assets are likely to reverse, and a judgement
as to whether or not there will be sufficient taxable profits available to offset the assets when they do reverse. This requires assumptions
regarding future profitability and is therefore inherently uncertain. To the extent assumptions regarding future profitability change, there may be
an increase or decrease in the amounts recognised in respect of deferred tax assets as well as in the amounts recognised during the year in
which the change occurs.
Sensitivities and additional information relating to deferred tax assets/liabilities are provided in note 2.6.2.
2.6.1 Income tax credit
There is a reported income tax credit for the period of \u00a314.6m on reported profit before tax of \u00a361.4m (2021: reported income tax charge of
\u00a361.5m on reported profit of \u00a3285.6m), and an adjusted income tax credit for the period of \u00a331.8m on adjusted profit before tax of \u00a373.8m
(2021: adjusted tax charge of \u00a34.0m on adjusted loss of \u00a3122.8m). The most significant reconciling items, explaining the difference from the
standard UK rate of 19%, are changes in the accounting estimate of recognised deferred tax assets, non-taxable profit on disposals and non-
deductible goodwill impairment.
The forecast future adjusted effective tax rate, before and assuming no material changes to tax laws in the jurisdictions in which Capita
operates, is expected to be broadly in line with the UK corporation tax rate, with an increase for taxable profits in higher tax rate jurisdictions.
However, management anticipates that in the short term, the continued divestment programme may impact the future effective tax rate
because the profits of divested businesses fall outside of the assessment of future taxable profits, impacting the recognisable deferred tax
asset assessment.
The major components of income tax charge/(credit) are set out below:
2022 2021
Consolidated income statement
Total
reported
\u00a3m
Included in
adjusted profit
\u00a3m
Not included in
adjusted profit
\u00a3m
Total
reported
\u00a3m
Included in
adjusted profit
\u00a3m
Not included in
adjusted profit
\u00a3m
Current income tax
Current income tax charge 14.0 12.6 1.4 27.2 (14.5) 41.7
Adjustment in respect of prior years (1.2) (1.2) \u2014 3.8 3.8 \u2014
Deferred tax
On origination and reversal of temporary differences (36.7) (52.5) 15.8 76.1 60.3 15.8
Effect of changes in tax rate on deferred tax balances 3.0 3.0 \u2014 (39.0) (39.0) \u2014
Adjustment in respect of prior years 6.3 6.3 \u2014 (6.6) (6.6) \u2014
Total (14.6) (31.8) 17.2 61.5 4.0 57.5
Section 2: Results for the year continued
2.6 Taxation continued
Consolidated statement of comprehensive income and consolidated statement of changes in equity
2022
\u00a3m
2021
\u00a3m
Current income tax movement on cash flow hedges \u2014 (2.0)
Deferred tax movement on cash flow hedges 1.6 (0.2)
Deferred tax movement in relation to actuarial changes on defined benefit pension schemes 5.2 32.2
Current income tax movement on defined benefit pension scheme contributions (7.2) (11.5)
Effect of rate change on deferred tax on defined benefit pension schemes \u2014 (2.6)
Current income tax deduction on the exercise of share options \u2014 (0.4)
(0.4) 15.5
The reconciliation between the total tax charge/(credit) and the accounting profit multiplied by the UK corporation tax rate is as follows:
Total tax Current tax
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
Profit before tax from continuing operations 61.4 285.6 61.4 285.6
Notional charge at UK corporation tax rate of 19% 11.7 54.3 11.7 54.3
Adjustments in respect of current income tax of prior years a (1.2) 3.8 (1.2) 3.8
Adjustments in respect of deferred tax of prior years b 6.3 (6.6) \u2014 \u2014
Non-deductible expense/(non-taxable income) \u2013 adjusted c (2.3) 3.7 (2.3) 3.7
Non-deductible expenses \u2013 business exit d* 2.3 1.5 2.3 1.5
Non-taxable income \u2013 specific items \u2014 (1.1) \u2014 (1.1)
Profit on disposal of business e* (31.6) (51.7) (31.6) (51.7)
Non-deductible goodwill impairment f* 32.0 11.4 32.0 11.4
Difference in rate recognition of temporary differences 3.1 (39.0) \u2014 \u2014
Tax provided on unremitted earnings g 1.3 1.1 \u2014 3.2
Attributable to different tax rates in overseas jurisdictions h 0.5 (0.1) 0.5 (0.1)
Movement in deferred tax unrecognised note 2.6.2 (36.7) 84.2 \u2014 \u2014
Fixed asset timing differences \u2014 \u2014 6.8 (2.0)
Current tax impact on other timing differences \u2014 \u2014 (6.4) 0.2
Carry forward/(utilisation) of losses in current period i \u2014 \u2014 1.0 7.8
At the effective total tax rate of (23.8)% (2021: 21.5%) and the effective current tax rate
of 20.8% (2021: 10.9%) j (14.6) 61.5 12.8 31.0
Tax (credit)/charge reported in the income statement (14.6) 61.5 12.8 31.0
* These \u00a32.7m (2021: \u00a3(39.9)m) of reconciling items relate to reported tax charge only, with no impact on the adjusted tax charge. Further details are given (*) below.
a The \u00a31.2m prior year credit adjustment includes: (i) a \u00a31.2m release of uncertain tax positions due to the relevant entity being put into liquidation; (ii) a \u00a36.3m credits which have a
corresponding impact within deferred tax of prior years; and (iii) a \u00a36.0m credit to adjust for finalisation of submitted tax returns.
b Adjustments in respect of deferred tax of prior years mainly relate to \u00a36.3m of charges which have a corresponding impact within current income tax of prior years.
c Relates mainly to a one-off tax deduction triggered due to the adoption of IAS 37. Refer to section 1 for further details.
d* Business exit: relates to non-deductible closure costs associated with the sale of entities. Refer to note 2.8 for further details.
e* Relates to the application of the tax exemption on accounting profits from the sale of entities. Refer to note 2.8.1 for further details.
f* Relates to the intangible asset impairments as detailed further in note 3.4.
g Movement in the deferred tax liability recognised on the unremitted earnings of those subsidiaries affected by withholding taxes.
h Relates to the difference between tax payable at higher rates in India and South Africa, and tax payable at lower rates in other trading jurisdictions (Poland, Isle of Man and UAE).
i Relates to the (utilisation)/carry forward of tax losses during the current period.
j The current tax charge of \u00a312.8m (2021: \u00a331.0m) results in an effective current tax rate of 20.8%, which is different from the UK statutory rate of tax of 19% predominantly due to: tax
impact of non-taxable profits from disposals of businesses; non-deductible goodwill impairment; and losses carried forward. The impact of differing overseas tax rates is minimal and
covered in footnote (h).
Section 2: Results for the year continued
2.6 Taxation continued
Consolidated statement of comprehensive income and consolidated statement of changes in equity
2022
\u00a3m
2021
\u00a3m
Current income tax movement on cash flow hedges \u2014 (2.0)
Deferred tax movement on cash flow hedges 1.6 (0.2)
Deferred tax movement in relation to actuarial changes on defined benefit pension schemes 5.2 32.2
Current income tax movement on defined benefit pension scheme contributions (7.2) (11.5)
Effect of rate change on deferred tax on defined benefit pension schemes \u2014 (2.6)
Current income tax deduction on the exercise of share options \u2014 (0.4)
(0.4) 15.5
The reconciliation between the total tax charge/(credit) and the accounting profit multiplied by the UK corporation tax rate is as follows:
Total tax Current tax
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
Profit before tax from continuing operations 61.4 285.6 61.4 285.6
Notional charge at UK corporation tax rate of 19% 11.7 54.3 11.7 54.3
Adjustments in respect of current income tax of prior years a (1.2) 3.8 (1.2) 3.8
Adjustments in respect of deferred tax of prior years b 6.3 (6.6) \u2014 \u2014
Non-deductible expense/(non-taxable income) \u2013 adjusted c (2.3) 3.7 (2.3) 3.7
Non-deductible expenses \u2013 business exit d* 2.3 1.5 2.3 1.5
Non-taxable income \u2013 specific items \u2014 (1.1) \u2014 (1.1)
Profit on disposal of business e* (31.6) (51.7) (31.6) (51.7)
Non-deductible goodwill impairment f* 32.0 11.4 32.0 11.4
Difference in rate recognition of temporary differences 3.1 (39.0) \u2014 \u2014
Tax provided on unremitted earnings g 1.3 1.1 \u2014 3.2
Attributable to different tax rates in overseas jurisdictions h 0.5 (0.1) 0.5 (0.1)
Movement in deferred tax unrecognised note 2.6.2 (36.7) 84.2 \u2014 \u2014
Fixed asset timing differences \u2014 \u2014 6.8 (2.0)
Current tax impact on other timing differences \u2014 \u2014 (6.4) 0.2
Carry forward/(utilisation) of losses in current period i \u2014 \u2014 1.0 7.8
At the effective total tax rate of (23.8)% (2021: 21.5%) and the effective current tax rate
of 20.8% (2021: 10.9%) j (14.6) 61.5 12.8 31.0
Tax (credit)/charge reported in the income statement (14.6) 61.5 12.8 31.0
* These \u00a32.7m (2021: \u00a3(39.9)m) of reconciling items relate to reported tax charge only, with no impact on the adjusted tax charge. Further details are given (*) below.
a The \u00a31.2m prior year credit adjustment includes: (i) a \u00a31.2m release of uncertain tax positions due to the relevant entity being put into liquidation; (ii) a \u00a36.3m credits which have a
corresponding impact within deferred tax of prior years; and (iii) a \u00a36.0m credit to adjust for finalisation of submitted tax returns.
b Adjustments in respect of deferred tax of prior years mainly relate to \u00a36.3m of charges which have a corresponding impact within current income tax of prior years.
c Relates mainly to a one-off tax deduction triggered due to the adoption of IAS 37. Refer to section 1 for further details.
d* Business exit: relates to non-deductible closure costs associated with the sale of entities. Refer to note 2.8 for further details.
e* Relates to the application of the tax exemption on accounting profits from the sale of entities. Refer to note 2.8.1 for further details.
f* Relates to the intangible asset impairments as detailed further in note 3.4.
g Movement in the deferred tax liability recognised on the unremitted earnings of those subsidiaries affected by withholding taxes.
h Relates to the difference between tax payable at higher rates in India and South Africa, and tax payable at lower rates in other trading jurisdictions (Poland, Isle of Man and UAE).
i Relates to the (utilisation)/carry forward of tax losses during the current period.
j The current tax charge of \u00a312.8m (2021: \u00a331.0m) results in an effective current tax rate of 20.8%, which is different from the UK statutory rate of tax of 19% predominantly due to: tax
impact of non-taxable profits from disposals of businesses; non-deductible goodwill impairment; and losses carried forward. The impact of differing overseas tax rates is minimal and
covered in footnote (h).
Section 2: Results for the year continued
2.6 Taxation continued
2.6.2 Deferred tax
A change to the main UK corporation tax rate was substantively enacted on 24 May 2021. The rate applicable from 1 April 2023 increases from
19% to 25%. The net UK deferred tax assets for the period to 31 December 2022, and the prior period, have been calculated based on this
rate.
Deferred tax relates to the following:
Credited/(charged) to
At
1 January
\u00a3m
Income
statement
\u00a3m
OCI and
changes in
equity
\u00a3m
Other
movements
2
\u00a3m
At
31 December
\u00a3m
Deferred tax assets
Fixed assets which qualify for tax relief 77.3 12.2 \u2014 1.3 90.8
Deferred income (0.1) 1.2 \u2014 (1.1) \u2014
Provisions and other timing differences 14.7 (3.7) (1.6) 1.1 10.5
Pension schemes 19.8 (8.7) (5.2) \u2014 5.9
Share-based payments 3.8 (0.4) \u2014 (2.1) 1.3
Tax losses
1
63.3 27.2 \u2014 (9.1) 81.4
178.8 27.8 (6.8) (9.9) 189.9
Jurisdictional netting (2.8) (0.4)
Net deferred tax assets 176.0 27.8 (6.8) (9.9) 189.5
Deferred tax liabilities
Acquired intangibles (0.7) 0.5 \u2014 \u2014 (0.2)
Contract fulfilment assets (4.4) 0.4 \u2014 1.8 (2.2)
Unremitted earnings (3.6) (1.3) \u2014 \u2014 (4.9)
(8.7) (0.4) \u2014 1.8 (7.3)
Jurisdictional netting 2.8 0.4
Net deferred tax liabilities (5.9) (0.4) \u2014 1.8 (6.9)
Net deferred tax 170.1 27.4 (6.8) (8.1) 182.6
1. Mainly trading losses available to shelter future profits and deferred interest.
2. Other movements includes business disposals.
The main movements in the net deferred tax asset are due to the income statement tax credit arising on the change in the accounting estimate
of deferred tax, the deferred tax charge to other comprehensive income (OCI) and income statement on the defined benefit pension scheme
surplus recognised for accounting purposes, and the deferred tax assets disposed of on the sale of subsidiaries.
For the purpose of recognising deferred tax on the pension scheme surplus, withholding tax at 35% would apply for any surplus being refunded
to the Group at the end of the life of the scheme. Corporation tax at 25% would apply for any surplus expected to unwind over the life of the
scheme. Management have concluded that the corporation tax rate should apply to the recognition of deferred tax on the pension scheme
surplus, reflecting the Group\u2019s intention regarding the manner of recovery of the asset.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the assets can
be utilised. The recoverability of deferred tax assets is supported by the deferred tax liabilities against which the reversal can be offset and the
expected level of future profits in the countries concerned.
The recognition of deferred tax assets for 2022 has been based on the forecast accounting profits in the 2023-2025 business plans (BP)
approved by the Board. This is the same plan used to derive forecast cash flows for the goodwill impairment test, per note 3.4. A long-term
growth rate of 2.2%, as used for impairment test purposes, has been applied to years beyond 2025. A reducing probability factor has also been
applied to future profits for the potential decrease in reliability of forecasts extrapolated for later years, such that profits beyond seven years of
the balance sheet date have not been considered probable for the purpose of assessing deferred tax asset recognition.
Historic tax losses make up the majority of the deferred tax asset. These losses mainly arose due to the adoption of IFRS 15, Covid-19 related
downward pressures on the profits and tax deductible restructuring costs in previous years. Based on the above adjusted forecasts,
management have concluded that an additional deferred tax asset should be recognised this year. The impact of this is an adjustment to
recognise additional deferred tax assets of \u00a336.7m. This is net of \u00a316.7m change in the deferred tax asset estimate due to the reduction in
future taxable profits on disposal of taxable subsidiaries, reflected in the tax arising on business exits (see note 2.8).
Deferred tax asset recognition is reliant on the accuracy of management\u2019s forecasts and the assumptions that underlie them. Management
have considered the severe but plausible downsides, applied to the base-case projections, to gauge sensitivity and identify a reasonable
possible alternative result. This scenario identified a further potential reduction in recognised deferred tax assets of approximately \u00a317m.
Further disposals, planned as part of the simplification agenda, could also reduce the recognised deferred tax asset in future periods, which
management currently estimate at approximately \u00a341m.
The Group has unrecognised tax losses and other temporary differences that are available for offset against future taxable profits of the
companies in which the losses or other temporary differences arose, but have not been recognised because their recoverability is uncertain.
The table below shows the amounts split between UK and non-UK jurisdictions.
Section 2: Results for the year continued
2.6 Taxation continued
2022
\u00a3m
Gross
Amount
2021
\u00a3m
Gross
Amount
At 31 December
UK:
Tax losses 332.7 498.0
Other temporary timing differences 113.9 99.7
446.6 597.7
Non-UK:
Tax losses 60.8 44.9
Other temporary timing differences 11.6 14.8
72.4 59.7
Total 519.0 657.4
Assets have no time expiry, but some losses are subject to specific loss restriction rules. \u00a339.9m (2021: \u00a350.7m) of the losses were incurred by
companies acquired by the Group and are not a result of the Group\u2019s trading performance.
Dividends received from subsidiaries are largely exempt from UK tax but may be subject to dividend withholding taxes levied by the overseas
tax jurisdictions in which the subsidiaries operate. The gross temporary differences of those subsidiaries affected by such potential taxes is
\u00a358.4m (2021: \u00a342.8m). A deferred income tax liability of \u00a34.9m (2021: \u00a33.6m) has been recognised on the unremitted earnings of those
subsidiaries affected by such potential taxes because the Group is able to control the timing of reversal and it is anticipating dividends to be
distributed. The earnings remitted during the year have resulted in a reduction in the closing deferred tax liability.
2.6.3 Uncertain tax positions
The Group files income tax returns in several jurisdictions and some of those returns are open to, or subject to, tax authority audits or
examinations. Tax returns contain matters that could be subject to differing interpretations of applicable tax laws and regulations and the
resolution of tax positions, through negotiations with relevant tax authorities or through litigation, can take several years. Tax uncertainties are
assessed throughout the year and specifically at the year-end with any associated provisions recognised considering the specific
circumstances of each risk, including the merits of technical aspects, previous experience with tax authorities, recent tax law and if relevant,
external specialist advice. The Group applies judgement in quantifying uncertainties over income tax treatments in accordance with this criteria.
Income tax receivable of \u00a39.9m at 31 December 2022 is net of a \u00a32.9m (2021: \u00a34.1m) liability in relation to uncertain tax positions. The Group
released \u00a31.2m (2021: \u00a31.7m ) of uncertain tax positions during 2022 relating to tax risks which are no longer considered likely to arise, due to
the relevant entity being put into liquidation. The release is disclosed as a current income tax prior year adjustment.
Expiry of statute of limitations, or conclusion of tax audits could result in a further release of the provision in the next financial year. While it is
difficult to predict the ultimate outcome in some cases, and there are a range of different outcomes, the Group does not currently anticipate that
there will be any material impact on the Group\u2019s financial position or results of operations during the next financial year.
2.6.4 Global minimum tax
In December 2021, the OECD released the Pillar II global minimum tax draft legislative framework which ultimately seeks to introduce a global
minimum corporation tax rate of 15%. Following consultation the UK Government has proposed that Pillar II will first apply to accounting
periods beginning on or after 31 December 2023, but at the time of signing these financial statements no tax jurisdiction Capita operates in had
enacted or substantively enacted laws to implement the Pillar II framework.
As disclosed in our Responsible Taxation report, which can be found in the Responsible Business area of the Capita website, Capita has
minimal profits arising in jurisdictions with a low tax rate. A high level impact assessment of a potential top-up tax, chargeable in respect of
profits in jurisdictions which have an effective tax rate lower than 15%, suggests that Capita may be subject to some top-up tax due to a trading
legal entity in the Isle of Man which has a statutory corporate tax rate lower than 15%. There has been a lack of Pillar II legislative progress
globally, with the UK only having draft legislation currently available. As such, Capita is unable to determine the impact of the framework with
any degree of certainty.
Capita is committed to paying its fair share of tax in all jurisdictions. As a conscientious taxpayer, Capita will continue to monitor the legislative
progress in all the jurisdictions it operates in.
2.6.5 Capita\u2019s responsible approach to taxation
Capita has an open and positive working relationship with HMRC, has a designated customer compliance manager, and is committed to
prompt disclosure and transparency in all dealings with HMRC and overseas tax authorities. The Group does not have a complex tax structure,
nor does it pursue aggressive tax avoidance activities. The Group has a low-risk rating from HMRC, re-assessed in 2021, and has been
awarded the Fair Tax Mark for its tax disclosures from 2018 to 2021. The Group has operations in a number of countries outside the UK. All
Capita operations outside the UK are trading operations and pay the appropriate local taxes on these activities. Further detail, regarding
Capita's tax strategy can be found on the Policies & Principles area of the Capita website (https://www.capita.com/our-company/about-capita/
policies-and-principles).
Capita contributed \u00a3153.2m (2021: \u00a3162.3m ) in taxes from its UK operations during 2022. This consisted of a net repayment of \u00a32.6m (2021:
net repayment of \u00a30.5m) of UK corporation tax; \u00a315.0m (2021: \u00a318.1m) incurred in irrecoverable VAT; \u00a3124.8m (2021: \u00a3125.5m) in employer
national insurance contributions (NIC); and \u00a316.0m (2021: \u00a319.3m) in other levies including business rates, import duties, the apprenticeship
levy and environmental taxes. Additionally, the Group\u2019s 2022 UK VAT payments were \u00a3315.1m (2021: \u00a3318.7m). A further \u00a314.9m VAT was
remitted in 2022, which was VAT deferred from 2020 under HMRC\u2019s Covid-19 deferral scheme: The Group also collected \u00a3272.8m (2021:
\u00a3287.8m) of Capita UK employee payroll taxes (PAYE and NIC). Capita entities in overseas jurisdictions paid \u00a38.5m (2021: \u00a315.0m)
corporation tax, which mainly covers corporate income tax on local profits.
Section 2: Results for the year continued
2.6 Taxation continued
2022
\u00a3m
Gross
Amount
2021
\u00a3m
Gross
Amount
At 31 December
UK:
Tax losses 332.7 498.0
Other temporary timing differences 113.9 99.7
446.6 597.7
Non-UK:
Tax losses 60.8 44.9
Other temporary timing differences 11.6 14.8
72.4 59.7
Total 519.0 657.4
Assets have no time expiry, but some losses are subject to specific loss restriction rules. \u00a339.9m (2021: \u00a350.7m) of the losses were incurred by
companies acquired by the Group and are not a result of the Group\u2019s trading performance.
Dividends received from subsidiaries are largely exempt from UK tax but may be subject to dividend withholding taxes levied by the overseas
tax jurisdictions in which the subsidiaries operate. The gross temporary differences of those subsidiaries affected by such potential taxes is
\u00a358.4m (2021: \u00a342.8m). A deferred income tax liability of \u00a34.9m (2021: \u00a33.6m) has been recognised on the unremitted earnings of those
subsidiaries affected by such potential taxes because the Group is able to control the timing of reversal and it is anticipating dividends to be
distributed. The earnings remitted during the year have resulted in a reduction in the closing deferred tax liability.
2.6.3 Uncertain tax positions
The Group files income tax returns in several jurisdictions and some of those returns are open to, or subject to, tax authority audits or
examinations. Tax returns contain matters that could be subject to differing interpretations of applicable tax laws and regulations and the
resolution of tax positions, through negotiations with relevant tax authorities or through litigation, can take several years. Tax uncertainties are
assessed throughout the year and specifically at the year-end with any associated provisions recognised considering the specific
circumstances of each risk, including the merits of technical aspects, previous experience with tax authorities, recent tax law and if relevant,
external specialist advice. The Group applies judgement in quantifying uncertainties over income tax treatments in accordance with this criteria.
Income tax receivable of \u00a39.9m at 31 December 2022 is net of a \u00a32.9m (2021: \u00a34.1m) liability in relation to uncertain tax positions. The Group
released \u00a31.2m (2021: \u00a31.7m ) of uncertain tax positions during 2022 relating to tax risks which are no longer considered likely to arise, due to
the relevant entity being put into liquidation. The release is disclosed as a current income tax prior year adjustment.
Expiry of statute of limitations, or conclusion of tax audits could result in a further release of the provision in the next financial year. While it is
difficult to predict the ultimate outcome in some cases, and there are a range of different outcomes, the Group does not currently anticipate that
there will be any material impact on the Group\u2019s financial position or results of operations during the next financial year.
2.6.4 Global minimum tax
In December 2021, the OECD released the Pillar II global minimum tax draft legislative framework which ultimately seeks to introduce a global
minimum corporation tax rate of 15%. Following consultation the UK Government has proposed that Pillar II will first apply to accounting
periods beginning on or after 31 December 2023, but at the time of signing these financial statements no tax jurisdiction Capita operates in had
enacted or substantively enacted laws to implement the Pillar II framework.
As disclosed in our Responsible Taxation report, which can be found in the Responsible Business area of the Capita website, Capita has
minimal profits arising in jurisdictions with a low tax rate. A high level impact assessment of a potential top-up tax, chargeable in respect of
profits in jurisdictions which have an effective tax rate lower than 15%, suggests that Capita may be subject to some top-up tax due to a trading
legal entity in the Isle of Man which has a statutory corporate tax rate lower than 15%. There has been a lack of Pillar II legislative progress
globally, with the UK only having draft legislation currently available. As such, Capita is unable to determine the impact of the framework with
any degree of certainty.
Capita is committed to paying its fair share of tax in all jurisdictions. As a conscientious taxpayer, Capita will continue to monitor the legislative
progress in all the jurisdictions it operates in.
2.6.5 Capita\u2019s responsible approach to taxation
Capita has an open and positive working relationship with HMRC, has a designated customer compliance manager, and is committed to
prompt disclosure and transparency in all dealings with HMRC and overseas tax authorities. The Group does not have a complex tax structure,
nor does it pursue aggressive tax avoidance activities. The Group has a low-risk rating from HMRC, re-assessed in 2021, and has been
awarded the Fair Tax Mark for its tax disclosures from 2018 to 2021. The Group has operations in a number of countries outside the UK. All
Capita operations outside the UK are trading operations and pay the appropriate local taxes on these activities. Further detail, regarding
Capita's tax strategy can be found on the Policies & Principles area of the Capita website (https://www.capita.com/our-company/about-capita/
policies-and-principles).
Capita contributed \u00a3153.2m (2021: \u00a3162.3m ) in taxes from its UK operations during 2022. This consisted of a net repayment of \u00a32.6m (2021:
net repayment of \u00a30.5m) of UK corporation tax; \u00a315.0m (2021: \u00a318.1m) incurred in irrecoverable VAT; \u00a3124.8m (2021: \u00a3125.5m) in employer
national insurance contributions (NIC); and \u00a316.0m (2021: \u00a319.3m) in other levies including business rates, import duties, the apprenticeship
levy and environmental taxes. Additionally, the Group\u2019s 2022 UK VAT payments were \u00a3315.1m (2021: \u00a3318.7m). A further \u00a314.9m VAT was
remitted in 2022, which was VAT deferred from 2020 under HMRC\u2019s Covid-19 deferral scheme: The Group also collected \u00a3272.8m (2021:
\u00a3287.8m) of Capita UK employee payroll taxes (PAYE and NIC). Capita entities in overseas jurisdictions paid \u00a38.5m (2021: \u00a315.0m)
corporation tax, which mainly covers corporate income tax on local profits.
Section 2: Results for the year continued
2.7 Earnings/(loss) per share
Accounting policies
Basic earnings/(loss) per share are calculated by dividing net profit for the period attributable to ordinary equity holders of the Parent Company
by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings/(loss) per share are calculated by dividing the net profit for the period attributable to ordinary equity holders of the Parent
Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary
shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
2022 2021
Continuing
operations
p
Total
operations
p
Continuing
operations
p
Total
operations
p
Basic earnings/(loss) per share
\u2013 reported 4.47 4.47 13.33 13.52
\u2013 adjusted
1
6.20 6.20 (7.74) (7.74)
Diluted earnings/(loss) per share
\u2013 reported 4.40 4.40 13.15 13.33
\u2013 adjusted
1
6.09 6.09 (7.74) (7.74)
1. 2021 adjusted results have been re-presented. Please refer to note 2.4 for further details.
The following tables show the earnings and share data used in the basic and diluted earnings/(loss) per share calculations:
2022 2021
Continuing
operations
\u00a3m
Total
operations
\u00a3m
Continuing
operations
\u00a3m
Total
operations
\u00a3m
Reported profit before tax for the period 61.4 61.4 285.6 288.7
Income tax credit/(charge)
2.6
14.6 14.6 (61.5) (61.5)
Reported profit for the period 76.0 76.0 224.1 227.2
Less: Non-controlling interest (1.2) (1.2) (2.5) (2.5)
Total profit attributable to shareholders 74.8 74.8 221.6 224.7
Adjusted profit/(loss) before tax for the period
1
2.4
73.8 73.8 (122.8) (122.8)
Income tax credit/(charge)
2.6.1
31.8 31.8 (4.0) (4.0)
Adjusted profit/(loss) for the period
1
105.6 105.6 (126.8) (126.8)
Less: Non-controlling interest (2.0) (2.0) (1.9) (1.9)
Adjusted profit/(loss) attributable to shareholders
1
103.6 103.6 (128.7) (128.7)
1. 2021 adjusted results have been re-presented. Please refer to note 2.4 for further details.
2022
m
2021
m
Weighted average number of ordinary shares (excluding trust and treasury shares) for basic earnings per share 1,671.7 1,661.9
Dilutive potential ordinary shares:
Employee share options 30.0 23.9
Weighted average number of ordinary shares (excluding trust and treasury shares) adjusted for the effect of dilution 1,701.7 1,685.8
The earnings per share figures are calculated based on earnings attributable to ordinary equity holders of the Parent Company, and therefore
exclude non-controlling interest. The earnings per share is calculated on a total reported and an adjusted basis. The earnings per share for
business exits and specific items are reconciling items between total reported and adjusted earnings per share.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date on which
these consolidated financial statements were authorised for issue.
Section 2: Results for the year continued
2.8 Business exits and assets held-for-sale
Accounting policies
Business exits
Business exits are businesses that have been sold, exited during the period, or are in the process of being sold or exited in accordance with the
Group's strategy. None of these business exits meet the definition of \u2018discontinued operations\u2019 as stipulated by IFRS 5, which requires
comparative financial information to be restated where the relative size of a disposal or business closure is significant, which is normally
understood to mean a reported segment.
However, the trading result of these businesses, non-trading expenses, and any gain/loss on disposal, have been excluded from adjusted
results. To enable a like-for-like comparison of adjusted results, the 2021 comparatives have been re-presented to exclude the businesses
classified as business exits during 2022.
Assets held-for-sale
The Group classifies a non-current asset (or disposal group) as held-for-sale if its carrying amount will be recovered principally through a sale
transaction rather than continued use. For this to be the case, the asset (or disposal group) must be available for immediate sale in its present
condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be highly probable.
For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset (or disposal group), and
an active programme to locate a buyer and complete the plan must have been initiated. Further, the asset (or disposal group) must be actively
marketed for sale at a price that is reasonable in relation to its current fair value, and, the sale should be expected to be completed within one
year from the date of classification.
Based on the above requirements, individual businesses within the Portfolio Division will only reach the criteria to be treated as held-for-sale
when their disposal is seen to be highly probable, and expected to complete within the following twelve months. At 31 December 2022 no
disposals were deemed to have met this threshold. At 31 December 2021, the disposals of three businesses (AMT Sybex software, Secure
Solutions and Services (SSS), and Speciality Insurance) were deemed to have met this threshold.
2022 business exits
Business exits at 31 December 2022 primarily comprised:
Business Disposal completed on
AMT Sybex 1 January 2022
Secure Solutions and Services 3 January 2022
Trustmarque 31 March 2022
Speciality Insurance 29 April 2022
Real estate and infrastructure consultancy 22 September 2022
Optima Legal Services 30 November 2022
Pay360 1 December 2022
Capita Translation and Interpreting 29 December 2022
Further disposals are planned as part of the simplification agenda. Since these disposals did not meet the definition of business exits or assets
held-for-sale at 31 December 2022, their trading results were included within adjusted results. However, exit costs related to those disposals,
which include professional fees, salary costs and separation planning costs, are included within business exit non-trading administrative
expenses.
2022 2021
Income statement impact
Trading
\u00a3m
Non-trading
\u00a3m
Total
\u00a3m
Trading
\u00a3m
Non-trading
\u00a3m
Total
\u00a3m
Revenue 168.8 \u2014 168.8 404.7 \u2014 404.7
Cost of sales (135.3) \u2014 (135.3) (269.0) \u2014 (269.0)
Gross profit 33.5 \u2014 33.5 135.7 \u2014 135.7
Administrative expenses (18.8) (23.1) (41.9) (56.4) (69.0) (125.4)
Operating profit/(loss) 14.7 (23.1) (8.4) 79.3 (69.0) 10.3
Net finance costs (0.2) \u2014 (0.2) (0.7) (0.3) (1.0)
Gain on business disposal \u2014 166.9 166.9 \u2014 419.7 419.7
Profit before tax 14.5 143.8 158.3 78.6 350.4 429.0
Taxation (2.8) (14.7) (17.5) (16.1) (43.0) (59.1)
Profit after tax 11.7 129.1 140.8 62.5 307.4 369.9
Trading revenue and costs represent the current period trading performance of the above businesses up to the point of being disposed or
exited, and in the comparative those businesses disposed of during 2021 (ESS, Life Insurance and Pensions Servicing business in Ireland, and
the AXELOS joint venture with the UK Government). Trading expenses primarily comprise payroll costs of \u00a396.9m (2021: \u00a3217.6m) and
information technology costs of \u00a323.2m (2021: \u00a365.2m).
Included within non-trading administrative expenses is \u00a3nil (2021: \u00a39.3m) of amortisation of acquired intangibles which, in accordance with the
Group\u2019s policy, were excluded from the Group\u2019s adjusted results and have been reclassified to business exits because they relate to
businesses sold or being exited. Other non-trading administrative expenses include: asset impairments of \u00a3nil (2021: \u00a353.1m); disposal project
costs of \u00a314.4m (2021: \u00a38.9m); other costs including staff and redundancy costs of \u00a38.7m (2021: \u00a34.7m); and, other income of \u00a3nil (2021:
\u00a37.0m).
Section 2: Results for the year continued
2.8 Business exits and assets held-for-sale
Accounting policies
Business exits
Business exits are businesses that have been sold, exited during the period, or are in the process of being sold or exited in accordance with the
Group's strategy. None of these business exits meet the definition of \u2018discontinued operations\u2019 as stipulated by IFRS 5, which requires
comparative financial information to be restated where the relative size of a disposal or business closure is significant, which is normally
understood to mean a reported segment.
However, the trading result of these businesses, non-trading expenses, and any gain/loss on disposal, have been excluded from adjusted
results. To enable a like-for-like comparison of adjusted results, the 2021 comparatives have been re-presented to exclude the businesses
classified as business exits during 2022.
Assets held-for-sale
The Group classifies a non-current asset (or disposal group) as held-for-sale if its carrying amount will be recovered principally through a sale
transaction rather than continued use. For this to be the case, the asset (or disposal group) must be available for immediate sale in its present
condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be highly probable.
For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset (or disposal group), and
an active programme to locate a buyer and complete the plan must have been initiated. Further, the asset (or disposal group) must be actively
marketed for sale at a price that is reasonable in relation to its current fair value, and, the sale should be expected to be completed within one
year from the date of classification.
Based on the above requirements, individual businesses within the Portfolio Division will only reach the criteria to be treated as held-for-sale
when their disposal is seen to be highly probable, and expected to complete within the following twelve months. At 31 December 2022 no
disposals were deemed to have met this threshold. At 31 December 2021, the disposals of three businesses (AMT Sybex software, Secure
Solutions and Services (SSS), and Speciality Insurance) were deemed to have met this threshold.
2022 business exits
Business exits at 31 December 2022 primarily comprised:
Business Disposal completed on
AMT Sybex 1 January 2022
Secure Solutions and Services 3 January 2022
Trustmarque 31 March 2022
Speciality Insurance 29 April 2022
Real estate and infrastructure consultancy 22 September 2022
Optima Legal Services 30 November 2022
Pay360 1 December 2022
Capita Translation and Interpreting 29 December 2022
Further disposals are planned as part of the simplification agenda. Since these disposals did not meet the definition of business exits or assets
held-for-sale at 31 December 2022, their trading results were included within adjusted results. However, exit costs related to those disposals,
which include professional fees, salary costs and separation planning costs, are included within business exit non-trading administrative
expenses.
2022 2021
Income statement impact
Trading
\u00a3m
Non-trading
\u00a3m
Total
\u00a3m
Trading
\u00a3m
Non-trading
\u00a3m
Total
\u00a3m
Revenue 168.8 \u2014 168.8 404.7 \u2014 404.7
Cost of sales (135.3) \u2014 (135.3) (269.0) \u2014 (269.0)
Gross profit 33.5 \u2014 33.5 135.7 \u2014 135.7
Administrative expenses (18.8) (23.1) (41.9) (56.4) (69.0) (125.4)
Operating profit/(loss) 14.7 (23.1) (8.4) 79.3 (69.0) 10.3
Net finance costs (0.2) \u2014 (0.2) (0.7) (0.3) (1.0)
Gain on business disposal \u2014 166.9 166.9 \u2014 419.7 419.7
Profit before tax 14.5 143.8 158.3 78.6 350.4 429.0
Taxation (2.8) (14.7) (17.5) (16.1) (43.0) (59.1)
Profit after tax 11.7 129.1 140.8 62.5 307.4 369.9
Trading revenue and costs represent the current period trading performance of the above businesses up to the point of being disposed or
exited, and in the comparative those businesses disposed of during 2021 (ESS, Life Insurance and Pensions Servicing business in Ireland, and
the AXELOS joint venture with the UK Government). Trading expenses primarily comprise payroll costs of \u00a396.9m (2021: \u00a3217.6m) and
information technology costs of \u00a323.2m (2021: \u00a365.2m).
Included within non-trading administrative expenses is \u00a3nil (2021: \u00a39.3m) of amortisation of acquired intangibles which, in accordance with the
Group\u2019s policy, were excluded from the Group\u2019s adjusted results and have been reclassified to business exits because they relate to
businesses sold or being exited. Other non-trading administrative expenses include: asset impairments of \u00a3nil (2021: \u00a353.1m); disposal project
costs of \u00a314.4m (2021: \u00a38.9m); other costs including staff and redundancy costs of \u00a38.7m (2021: \u00a34.7m); and, other income of \u00a3nil (2021:
\u00a37.0m).
Section 2: Results for the year continued
2.8 Business exits and assets held for sale continued
2.8.1 Disposals
During 2022 the Group disposed of eight businesses: AMT Sybex, Secure Solutions and Services, Trustmarque, Speciality Insurance, Real
estate and infrastructure consultancy, Optima Legal Services, Pay360 and Capita Translation and Interpreting. During 2021 the Group
disposed of three businesses: ESS, Life Insurance and Pensions Servicing business in Ireland and AXELOS.
.
The assets and liabilities disposed of and the related gain on disposal are as follows:
2022
\u00a3m
2021
\u00a3m
Property, plant and equipment 0.2 0.2
Intangible assets 20.4 20.0
Goodwill 178.3 65.7
Right-of-use assets 0.2 \u2014
Income tax recoverable and deferred tax assets 7.6 \u2014
Contract fulfilment assets 2.8 0.1
Trade and other receivables 136.6 2.6
Cash and cash equivalents 55.9 8.2
Disposal group assets held-for-sale 143.0 120.2
Trade and other payables (127.0) (6.7)
Deferred income (38.6) (2.9)
Lease liabilities (0.3) \u2014
Deferred consideration payable \u2014 (22.8)
Loans payable
1
\u2014 (26.0)
Capita group loan balances (102.3) (27.2)
Income tax payable and deferred tax liabilities (0.7) (4.3)
Provisions (0.4) \u2014
Disposal group liabilities held-for-sale (135.4) (57.5)
Net identifiable assets sold 140.3 69.6
Non-controlling interests (0.3) (3.4)
140.0 66.2
Sales price:
received in cash 330.0 508.6
deferred receivable 10.5 \u2014
Less: disposal costs (33.3) (25.5)
Net sales price 307.2 483.1
Realisation of cumulative currency translation difference (0.3) 2.8
Gain on business disposals 166.9 419.7
Net cash inflow
Proceeds received 330.0 508.6
Less disposal costs:
income statement charge (33.3) (25.5)
change in accrued disposal costs during the year 9.9 \u2014
Settlement of receivables due from disposed subsidiaries:
disposal of subsidiaries in the period 102.3 27.2
disposal of subsidiaries classified as held-for-sale 54.5 \u2014
Total proceeds received net of disposal costs paid 463.4 510.3
Total cash held by subsidiaries when sold
Cash held by subsidiaries when sold (55.9) (8.2)
Cash held by subsidiaries classified as held-for-sale (19.6) (17.7)
Total cash held by subsidiaries when sold (75.5) (25.9)
Net cash inflow 387.9 484.4
1. The loan payable represents an interest bearing loan payable by AXELOS Limited to HM Government in connection with a dividend payable by this company. The loan is subject to interest
at 6%pa and was settled on completion of the disposal on 29 July 2021.
Disposal costs of \u00a37.1m, relating to businesses disposed of in the year, were recognised in prior years and are excluded from the above gain
on business disposals.
Section 2: Results for the year continued
2.8 Business exits and assets held for sale continued
As part of the disposal of Trustmarque to One Equity Partners in March 2022, Capita entered into a five year agreement committing to procure
a sufficient amount of the Group's IT and technology requirements through Trustmarque as a reseller of such services to enable Trustmarque
to realise a specified level of gross profits over the period of that agreement. The price paid for these purchases will be equivalent to that paid
by other customers of Trustmarque, and the Group expects to have sufficient demand to meet the commitment. It is currently estimated that the
total expenditure with Trustmarque under this agreement over the five year period will be approximately \u00a3300m of which less than 25% is
expected to be capital in nature.
During 2022, management identified that the net assets of a business held-for-sale at 31 December 2021 and used to assess for impairment
were incorrectly determined when comparing to the expected net disposal proceeds. This resulted in an overstatement of a goodwill impairment
charge recognised within business exits (\u00a319.0m) and consequently, an understatement of assets held-for-sale at 31 December 2021. This
error did not impact the adjusted results of the Group.
Management has considered IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and concluded that the impact of this
error is not deemed material since it would not influence the economic decisions of primary users of the consolidated financial statements, not
least because the business has been disposed of in the current period, and therefore, the correction of the impairment has been recognised in
the current period within the gain on business disposal.
2.8.2 Disposal group assets and liabilities held-for-sale
Disposal group assets and liabilities held-for-sale at 31 December 2021 comprised the AMT Sybex, Secure Solutions and Services and
Speciality Insurance businesses, whose disposals were completed during the first half of 2022. At 31 December 2022, no disposals were
deemed to have met the threshold to be treated as held-for-sale.
2022
\u00a3m
2021
\u00a3m
Property, plant and equipment \u2014 0.4
Intangible assets \u2014 14.4
Goodwill \u2014 44.2
Contract fulfilment assets \u2014 32.6
Trade and other receivables \u2014 10.7
Accrued income \u2014 5.1
Prepayments \u2014 5.2
Cash and cash equivalents \u2014 15.8
Income tax receivable and deferred tax assets \u2014 10.4
Disposal group assets held-for-sale \u2014 138.8
Trade and other payables \u2014 1.6
Other taxes and social security \u2014 1.6
Accruals \u2014 3.4
Deferred income \u2014 69.8
Income tax payable and deferred tax liabilities \u2014 2.3
Provisions \u2014 2.4
Disposal group liabilities held-for-sale \u2014 81.1
Business exit cash flows
Businesses exited and being exited had a cash generated from operations inflow of \u00a39.9m (2021: cash inflow of \u00a343.1m).
2.9 Discontinued operations
Capita completed the disposal of its Asset Services businesses, including Capita Financial Managers Limited (CFM), to the Link Group on
3 November 2017. The disposal met the definition of a discontinued operation as stipulated by IFRS 5.
In 2021 the income of \u00a33.1m related to a reduction in provisions following reassessments of the likely future costs to be incurred by the Group.
No further material movements in provisions related to the disposal of the Asset Services business are anticipated.
The earnings per share impact from discontinued operations is nil p (2021: 0.19p) on basic earnings per share and nil p (2021: 0.18p) on
diluted earnings per share.
Section 2: Results for the year continued
2.8 Business exits and assets held for sale continued
As part of the disposal of Trustmarque to One Equity Partners in March 2022, Capita entered into a five year agreement committing to procure
a sufficient amount of the Group's IT and technology requirements through Trustmarque as a reseller of such services to enable Trustmarque
to realise a specified level of gross profits over the period of that agreement. The price paid for these purchases will be equivalent to that paid
by other customers of Trustmarque, and the Group expects to have sufficient demand to meet the commitment. It is currently estimated that the
total expenditure with Trustmarque under this agreement over the five year period will be approximately \u00a3300m of which less than 25% is
expected to be capital in nature.
During 2022, management identified that the net assets of a business held-for-sale at 31 December 2021 and used to assess for impairment
were incorrectly determined when comparing to the expected net disposal proceeds. This resulted in an overstatement of a goodwill impairment
charge recognised within business exits (\u00a319.0m) and consequently, an understatement of assets held-for-sale at 31 December 2021. This
error did not impact the adjusted results of the Group.
Management has considered IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and concluded that the impact of this
error is not deemed material since it would not influence the economic decisions of primary users of the consolidated financial statements, not
least because the business has been disposed of in the current period, and therefore, the correction of the impairment has been recognised in
the current period within the gain on business disposal.
2.8.2 Disposal group assets and liabilities held-for-sale
Disposal group assets and liabilities held-for-sale at 31 December 2021 comprised the AMT Sybex, Secure Solutions and Services and
Speciality Insurance businesses, whose disposals were completed during the first half of 2022. At 31 December 2022, no disposals were
deemed to have met the threshold to be treated as held-for-sale.
2022
\u00a3m
2021
\u00a3m
Property, plant and equipment \u2014 0.4
Intangible assets \u2014 14.4
Goodwill \u2014 44.2
Contract fulfilment assets \u2014 32.6
Trade and other receivables \u2014 10.7
Accrued income \u2014 5.1
Prepayments \u2014 5.2
Cash and cash equivalents \u2014 15.8
Income tax receivable and deferred tax assets \u2014 10.4
Disposal group assets held-for-sale \u2014 138.8
Trade and other payables \u2014 1.6
Other taxes and social security \u2014 1.6
Accruals \u2014 3.4
Deferred income \u2014 69.8
Income tax payable and deferred tax liabilities \u2014 2.3
Provisions \u2014 2.4
Disposal group liabilities held-for-sale \u2014 81.1
Business exit cash flows
Businesses exited and being exited had a cash generated from operations inflow of \u00a39.9m (2021: cash inflow of \u00a343.1m).
2.9 Discontinued operations
Capita completed the disposal of its Asset Services businesses, including Capita Financial Managers Limited (CFM), to the Link Group on
3 November 2017. The disposal met the definition of a discontinued operation as stipulated by IFRS 5.
In 2021 the income of \u00a33.1m related to a reduction in provisions following reassessments of the likely future costs to be incurred by the Group.
No further material movements in provisions related to the disposal of the Asset Services business are anticipated.
The earnings per share impact from discontinued operations is nil p (2021: 0.19p) on basic earnings per share and nil p (2021: 0.18p) on
diluted earnings per share.
Section 2: Results for the year continued
2.10 Cash flow information
Accounting policies
Cash and short-term deposits in the balance sheet comprise cash at bank and in-hand and short-term deposits with an original maturity of three
months or less. In the consolidated cash flow statement, cash and cash equivalents consist of cash and short-term deposits net of outstanding
bank overdrafts and include cash and overdrafts within disposal group assets and liabilities held-for-sale. Cash at bank earns interest at fixed
and floating rates based on prevailing bank deposit rates.
2.10.1 Additional cash flow information
2022 2022 2021 2021
Restated
2
Restated
2
Notes
\u00a3m
exits
\u00a3m
Reported
\u00a3m
Before
business exits
\u00a3m
Cash flows from operating activities:
Reported operating loss 2.4 (79.6) (79.6) (86.6) (86.6)
Less: business exit operating loss/(profit) 2.8 \u2014 8.4 \u2014 (10.3)
Total operating loss (79.6) (71.2) (86.6) (96.9)
Adjustments for non-cash items:
Depreciation 3.2, 3.5 96.9 96.7 117.1 115.7
Amortisation of intangible assets 3.3 41.5 36.8 57.7 41.4
Share-based payment expense 5.1 5.4 5.4 1.2 1.2
Employee benefits 5.2 9.0 9.0 8.9 8.9
Loss on sale of property, plant and equipment and intangible assets 2.3 3.5 3.5 0.7 0.7
Amendments and early terminations of leases (4.7) (4.7) \u2014 \u2014
Impairment of disposal group assets \u2014 \u2014 44.1 \u2014
Impairment of non-current assets 176.9 176.5 90.0 82.8
Other adjustments:
Movement in provisions (42.1) (47.9) 21.9 36.2
Pension deficit contributions (38.6) (30.0) (155.5) (73.6)
Other contributions into pension schemes (10.0) (10.0) (8.4) (8.4)
Movements in working capital:
Trade and other receivables (41.0) 18.6 (5.2) (10.0)
Non-recourse trade receivables financing 28.0 28.0 (5.7) (5.7)
Trade and other payables 84.8 25.9 17.0 20.6
VAT deferral (14.9) (14.9) (104.1) (104.1)
Deferred income (116.0) (124.2) (116.9) (62.9)
Contract fulfilment assets (non-current) 18.7 19.0 (24.7) (55.6)
Cash generated from/(used by) operations 117.8 116.5 (148.5) (109.7)
Adjustments for free cash flows:
Income tax paid (7.9) (6.5) (17.7) (17.7)
Net interest paid (38.0) (37.4) (40.1) (40.0)
Net cash inflows/(outflow) from operating activities 71.9 72.6 (206.3) (167.4)
Purchase of property, plant and equipment 3.2 (20.6) (16.8) (25.6) (18.7)
Purchase of intangible assets 3.3 (27.3) (27.3) (32.5) (32.5)
Proceeds from sale of property, plant and equipment and intangible assets
0.5 0.5 0.1 \u2014
Free cash flow
1
24.5 29.0 (264.3) (218.6)
1. Definitions of the alternative performance measures and related KPIs can be found in section 8.2.
2. The 2021 cash flow has been restated to include \u00a327.2m of cash, received from the purchasers of subsidiaries when sold to settle inter-company balances, within investing activities, which
were previously included within the operating activities. This results in an increase in net cash flow from investing activities by \u00a327.2m and decrease in net cash flows from operating
activities, cash generated from operations, and free cash flow by the same amount. There is no impact on the reported net movement in cash and cash equivalents.
Section 2: Results for the year continued
2.10 Cash flow information continued
2.10.2 Free cash flow and cash generated from operations (alternative performance measures - refer to section 8.2)
From 1 January 2022, the Board considers free cash flow, and cash generated from operations before business exits, to be alternative
performance measures because these metrics provide a more representative measure of the sustainable cash flow of the Group.
These measures are analysed below:
Free cash flow
Cash generated/(used) by
operations
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
Reported 24.5 (264.3) 117.8 (148.5)
Business exits (4.1) (36.2) (9.9) (43.1)
Pension deficit contributions triggered by disposals 8.6 81.9 8.6 81.9
Before business exits 29.0 (218.6) 116.5 (109.7)
A reconciliation of net cash flow to movement in net debt is included in note 2.10.3.
Business exits: the cash flows of businesses exited, or in the process of being exited, and the proceeds from disposals, are disclosed outside
the adjusted results. The 31 December 2021 results have been re-presented for those businesses exited, or in the process of being exited,
during the period from 1 January 2022 to 31 December 2022 to enable comparability of the adjusted results.
Pension deficit contributions triggered by disposals: the Trustee of the Capita Pension and Life Assurance Scheme (the Scheme) has
agreed with the Group to accelerate the payment of future agreed deficit contributions on a pound for pound basis in the event of disposal
proceeds being used to fund mandatory prepayments of debt. During the year, the disposal of the Trustmarque business led to accelerated
deficit contributions of \u00a35.9m being paid into the Scheme (plus up to a further \u00a314.5m in accelerated contributions will be required to be paid by
31 March 2024). In addition, an accelerated deficit contribution of \u00a32.7m was paid into the Scheme during the year as a result of the disposal of
the Axelos business in 2021 (2021: Pension deficit contributions of \u00a381.9m triggered by: the disposal of the ESS business which led to
accelerated deficit contributions of \u00a350.2m; and the disposal of the Parking Eye business in 2018, where actual settlement of accelerated deficit
contributions of \u00a331.7m was deferred until 2021).
2.10.3 Reconciliation of net cash flow to movement in net debt
Overdrafts comprise the aggregate value of overdrawn bank account balances within the Group\u2019s notional interest pooling arrangements.
These aggregate overdrawn amounts are fully offset by surplus balances within the same arrangements.
At 31 December 2022, the Group\u2019s \u00a3288.4m committed revolving credit facility was undrawn (31 December 2021: \u00a340.0m drawn).
Year ended 31 December 2022
Note
Net debt at
1 January
\u00a3m
Cash flow
movements
\u00a3m
Non-cash
movement
2
\u00a3m
Net debt at
31 December
\u00a3m
Cash, cash equivalents and overdrafts 4.5.4 101.5 75.3 0.4 177.2
Other loan notes 4.5 (1.3) 0.6 \u2014 (0.7)
Credit facilities (46.0) 46.0 \u2014 \u2014
Private placement loan notes
1
4.5 (512.9) 242.0 (14.6) (285.5)
Cross-currency interest rate swaps
1
4.5 28.0 (10.1) 6.9 24.8
Lease liabilities 4.4 (448.4) 84.4 (33.5) (397.5)
Total net liabilities from financing activities (980.6) 362.9 (41.2) (658.9)
Deferred consideration 4.5 (0.7) \u2014 \u2014 (0.7)
Net debt 4.1.1 (879.8) 438.2 (40.8) (482.4)
1. The sum of these items equates to the fair value of the Group\u2019s private placement loan note\u2019s debt of \u00a3260.7m (2021: \u00a3484.9m). Cash flow movement in private placement loan notes
includes both repayment of private placement loan notes of \u00a3236.8m (2021: \u00a3232.3m) and finance arrangement costs of \u00a35.2m (2021: \u00a31.9m).
2. Non-cash movement relates to: the effect of changes in foreign exchange on cash; fair value changes on the swaps; amortisation of loan notes issue costs; amortisation of the discount on
the euro debt; and additions and terminations and foreign exchange rate effects on the Group\u2019s leases.
Year ended 31 December 2021
Note
Net debt at
1 January
\u00a3m
Cash flow
movements
\u00a3m
Non-cash
movement
2
\u00a3m
Net debt at
31 December
\u00a3m
Cash, cash equivalents and overdrafts 4.5.4 141.1 (43.6) 4.0 101.5
Other loan notes 4.5 (2.3) 1.0 \u2014 (1.3)
Credit facilities \u2014 (46.0) \u2014 (46.0)
Private placement loan notes 4.5 (765.1) 234.2 18.0 (512.9)
Cross-currency interest rate swaps 4.5 57.5 (19.7) (9.8) 28.0
Interest rate swaps 4.5 0.5 \u2014 (0.5) \u2014
Lease liabilities
3
4.4 (508.1) 106.2 (46.5) (448.4)
Total net liabilities from financing activities (1,217.5) 275.7 (38.8) (980.6)
Deferred consideration 4.5 (0.7) \u2014 \u2014 (0.7)
Net debt 4.1.1 (1,077.1) 232.1 (34.8) (879.8)
3. Cash flow movements in respect of lease liabilities have been re-presented to include net interest paid on finance leases (\u00a323.6m) previously included within non-cash movement.
Section 2: Results for the year continued
2.10 Cash flow information continued
2.10.2 Free cash flow and cash generated from operations (alternative performance measures - refer to section 8.2)
From 1 January 2022, the Board considers free cash flow, and cash generated from operations before business exits, to be alternative
performance measures because these metrics provide a more representative measure of the sustainable cash flow of the Group.
These measures are analysed below:
Free cash flow
Cash generated/(used) by
operations
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
Reported 24.5 (264.3) 117.8 (148.5)
Business exits (4.1) (36.2) (9.9) (43.1)
Pension deficit contributions triggered by disposals 8.6 81.9 8.6 81.9
Before business exits 29.0 (218.6) 116.5 (109.7)
A reconciliation of net cash flow to movement in net debt is included in note 2.10.3.
Business exits: the cash flows of businesses exited, or in the process of being exited, and the proceeds from disposals, are disclosed outside
the adjusted results. The 31 December 2021 results have been re-presented for those businesses exited, or in the process of being exited,
during the period from 1 January 2022 to 31 December 2022 to enable comparability of the adjusted results.
Pension deficit contributions triggered by disposals: the Trustee of the Capita Pension and Life Assurance Scheme (the Scheme) has
agreed with the Group to accelerate the payment of future agreed deficit contributions on a pound for pound basis in the event of disposal
proceeds being used to fund mandatory prepayments of debt. During the year, the disposal of the Trustmarque business led to accelerated
deficit contributions of \u00a35.9m being paid into the Scheme (plus up to a further \u00a314.5m in accelerated contributions will be required to be paid by
31 March 2024). In addition, an accelerated deficit contribution of \u00a32.7m was paid into the Scheme during the year as a result of the disposal of
the Axelos business in 2021 (2021: Pension deficit contributions of \u00a381.9m triggered by: the disposal of the ESS business which led to
accelerated deficit contributions of \u00a350.2m; and the disposal of the Parking Eye business in 2018, where actual settlement of accelerated deficit
contributions of \u00a331.7m was deferred until 2021).
2.10.3 Reconciliation of net cash flow to movement in net debt
Overdrafts comprise the aggregate value of overdrawn bank account balances within the Group\u2019s notional interest pooling arrangements.
These aggregate overdrawn amounts are fully offset by surplus balances within the same arrangements.
At 31 December 2022, the Group\u2019s \u00a3288.4m committed revolving credit facility was undrawn (31 December 2021: \u00a340.0m drawn).
Year ended 31 December 2022
Note
Net debt at
1 January
\u00a3m
Cash flow
movements
\u00a3m
Non-cash
movement
2
\u00a3m
Net debt at
31 December
\u00a3m
Cash, cash equivalents and overdrafts 4.5.4 101.5 75.3 0.4 177.2
Other loan notes 4.5 (1.3) 0.6 \u2014 (0.7)
Credit facilities (46.0) 46.0 \u2014 \u2014
Private placement loan notes
1
4.5 (512.9) 242.0 (14.6) (285.5)
Cross-currency interest rate swaps
1
4.5 28.0 (10.1) 6.9 24.8
Lease liabilities 4.4 (448.4) 84.4 (33.5) (397.5)
Total net liabilities from financing activities (980.6) 362.9 (41.2) (658.9)
Deferred consideration 4.5 (0.7) \u2014 \u2014 (0.7)
Net debt 4.1.1 (879.8) 438.2 (40.8) (482.4)
1. The sum of these items equates to the fair value of the Group\u2019s private placement loan note\u2019s debt of \u00a3260.7m (2021: \u00a3484.9m). Cash flow movement in private placement loan notes
includes both repayment of private placement loan notes of \u00a3236.8m (2021: \u00a3232.3m) and finance arrangement costs of \u00a35.2m (2021: \u00a31.9m).
2. Non-cash movement relates to: the effect of changes in foreign exchange on cash; fair value changes on the swaps; amortisation of loan notes issue costs; amortisation of the discount on
the euro debt; and additions and terminations and foreign exchange rate effects on the Group\u2019s leases.
Year ended 31 December 2021
Note
Net debt at
1 January
\u00a3m
Cash flow
movements
\u00a3m
Non-cash
movement
2
\u00a3m
Net debt at
31 December
\u00a3m
Cash, cash equivalents and overdrafts 4.5.4 141.1 (43.6) 4.0 101.5
Other loan notes 4.5 (2.3) 1.0 \u2014 (1.3)
Credit facilities \u2014 (46.0) \u2014 (46.0)
Private placement loan notes 4.5 (765.1) 234.2 18.0 (512.9)
Cross-currency interest rate swaps 4.5 57.5 (19.7) (9.8) 28.0
Interest rate swaps 4.5 0.5 \u2014 (0.5) \u2014
Lease liabilities
3
4.4 (508.1) 106.2 (46.5) (448.4)
Total net liabilities from financing activities (1,217.5) 275.7 (38.8) (980.6)
Deferred consideration 4.5 (0.7) \u2014 \u2014 (0.7)
Net debt 4.1.1 (1,077.1) 232.1 (34.8) (879.8)
3. Cash flow movements in respect of lease liabilities have been re-presented to include net interest paid on finance leases (\u00a323.6m) previously included within non-cash movement.
Section 3: Operating assets and liabilities
This section shows the operating assets and liabilities used to generate the Group\u2019s trading performance. Liabilities relating to
the Group\u2019s financing activities are contained in Section 4. Current tax and deferred tax assets and liabilities are shown in
note 2.6. Deferred income is shown in note 2.1.
In this section you will find disclosures about:
3.1 Working capital
3.1.1 Trade and other receivables
3.1.2 Trade and other payables
3.1.3 Contract fulfilment assets
3.2 Property, plant and equipment
3.3 Intangible assets
3.4 Goodwill
3.5 Right-of-use assets
3.6 Provisions
Denotes accounting policies
Denotes significant accounting judgements, estimates and assumptions
Key highlights
Note
2022
\u00a3m
2021
\u00a3m
Year on Year
movement
\u00a3m
Working capital (current and non-current): 3.1 (439.1) (502.8) 63.7
Trade and other receivables 3.1.1 446.2 562.8 (116.6)
Trade and other payables 3.1.2 (507.6) (557.6) 50.0
Deferred income 2.1 (640.7) (794.7) 154.0
Contract fulfilment assets 3.1.3 263.0 286.7 (23.7)
Property, plant and equipment 3.2 101.1 129.0 (27.9)
Intangible assets 3.3 106.0 147.3 (41.3)
Goodwill 3.4 605.9 951.7 (345.8)
Right-of-use assets 3.5 249.5 287.9 (38.4)
Provisions 3.6 (127.3) (140.6) 13.3
The decrease in trade and other receivables is primarily driven by a reduction in trade receivables (\u00a382.1m), prepayments (\u00a319.4m) and current
contract fulfilment assets (\u00a313.0m). The reduction in trade and other receivables is largely a result of the disposal of businesses during the year
(\u00a375.2m), alongside a drive in cash collection towards the end of the year. This was offset by an increase in accrued income (\u00a36.9m).
The Group uses non-recourse invoice discounting facilities, with \u00a344.4m of outstanding invoices sold under these facilities at 31 December
2022 (2021: \u00a316.4m).
The decrease in trade and other payables was primarily a result of the disposal of businesses during the year (\u00a354.8m) and repayment of VAT
under the Government\u2019s VAT deferral scheme (\u00a314.9m). This was offset by an increase in other payables (\u00a36.3m).
The decrease in deferred income was a result of the normal reduction in deferred income balances, partially offset by increases from advanced
receipts and higher activity levels on contracts such as Royal Navy training.
Contract fulfilment assets decreased as a result of additions of \u00a367.1m predominantly in Capita Public Service (\u00a344.2m) on contracts including
TfL Networks and Royal Navy training being offset by a utilisation of \u00a381.5m mainly within Capita Public Service (\u00a367.8m), as well as
impairments of \u00a33.8m primarily in Capita Experience.
Property, plant and equipment decreased due to depreciation of \u00a340.7m being partially offset by \u00a320.6m of additions.
Intangible assets decreased due to amortisation of \u00a331.7m being partially offset by \u00a327.3m of additions relating primarily to investment in
capitalised software.
Goodwill decreased primarily as a result of the businesses sold in the year (\u00a3178.3m), and impairment of certain cash generating units in the
Capita Portfolio division (\u00a3169.0m).
The decrease in provisions of \u00a313.3m during the year was predominantly due to new provisions totalling \u00a366.2m, with the largest increases
being additional customer contract provisions (\u00a320.6m) and business exit provisions (\u00a325.0m), being offset by releases and utilisations totalling
\u00a397.9m.
Section 3: Operating assets and liabilities continued
3.1 Working capital
3.1.1 Trade and other receivables
Accounting policies
Trade receivables: Trade receivables are initially recognised at cost (being the same as fair value) and subsequently at amortised cost less
any provision for impairment, to ensure the amounts recognised represent their recoverable amount.
Impairment: For trade receivables, the Group applies the simplified approach permitted by IFRS 9, resulting in trade receivables recognised
and carried at original invoice amount less an allowance for any uncollectible amounts based on expected credit losses. Where the carrying
amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
The Group monitors the level of trade receivables on a monthly basis, continually assessing the risk of default by any counterparty. Each
customer has an external credit score which determines the level of credit provided.
Derecognition: A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised
(ie removed from the Group\u2019s consolidated balance sheet) when (i) the rights to receive the cash flows from the asset have expired; or, (ii) the
Group has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without
material delay to a third party under a \u2018pass-through\u2019 arrangement; and either (a) the Group has transferred substantially all the risk and
rewards of the asset; or, (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset.
Trade receivables that are sold without recourse are derecognised at the point of sale when the risks and rewards of the receivables have been
fully transferred.
Accrued income: Accrued income in relation to contract assets is recognised when payments received from customers are less than the
revenue recognised by the reporting date.
Current Non-current
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
Trade receivables 149.9 232.0 \u2014 \u2014
Other receivables
1
32.6 43.4 5.8 4.0
Current contract fulfilment assets
2
10.7 23.7 \u2014 \u2014
Accrued income 179.1 169.5 \u2014 2.7
Prepayments 58.1 78.5 10.0 9.0
430.4 547.1 15.8 15.7
1. Other receivables includes \u00a30.4m (2021: \u00a31.6m) of accrued interest on cross-currency interest rate swaps.
2. Refer to note 3.1.3 for non-current contract fulfilment assets.
Trade receivables are non-interest bearing and are generally on 30-day terms.
The Group\u2019s accrued income balances solely relate to revenue from contracts with customers. Movements in the accrued income balances
were driven by transactions entered into by the Group in the normal course of business during the year.
Movements in the loss allowance made against receivables were as follows:
2022
\u00a3m
2021
\u00a3m
At 1 January 19.4 11.3
Utilised (4.0) (6.7)
Provided in the year 15.3 15.2
Business disposal (1.0) \u2014
Transfer to disposal group assets held-for-sale \u2014 (0.4)
At 31 December 29.7 19.4
Section 3: Operating assets and liabilities continued
3.1 Working capital
3.1.1 Trade and other receivables
Accounting policies
Trade receivables: Trade receivables are initially recognised at cost (being the same as fair value) and subsequently at amortised cost less
any provision for impairment, to ensure the amounts recognised represent their recoverable amount.
Impairment: For trade receivables, the Group applies the simplified approach permitted by IFRS 9, resulting in trade receivables recognised
and carried at original invoice amount less an allowance for any uncollectible amounts based on expected credit losses. Where the carrying
amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
The Group monitors the level of trade receivables on a monthly basis, continually assessing the risk of default by any counterparty. Each
customer has an external credit score which determines the level of credit provided.
Derecognition: A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised
(ie removed from the Group\u2019s consolidated balance sheet) when (i) the rights to receive the cash flows from the asset have expired; or, (ii) the
Group has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without
material delay to a third party under a \u2018pass-through\u2019 arrangement; and either (a) the Group has transferred substantially all the risk and
rewards of the asset; or, (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset.
Trade receivables that are sold without recourse are derecognised at the point of sale when the risks and rewards of the receivables have been
fully transferred.
Accrued income: Accrued income in relation to contract assets is recognised when payments received from customers are less than the
revenue recognised by the reporting date.
Current Non-current
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
Trade receivables 149.9 232.0 \u2014 \u2014
Other receivables
1
32.6 43.4 5.8 4.0
Current contract fulfilment assets
2
10.7 23.7 \u2014 \u2014
Accrued income 179.1 169.5 \u2014 2.7
Prepayments 58.1 78.5 10.0 9.0
430.4 547.1 15.8 15.7
1. Other receivables includes \u00a30.4m (2021: \u00a31.6m) of accrued interest on cross-currency interest rate swaps.
2. Refer to note 3.1.3 for non-current contract fulfilment assets.
Trade receivables are non-interest bearing and are generally on 30-day terms.
The Group\u2019s accrued income balances solely relate to revenue from contracts with customers. Movements in the accrued income balances
were driven by transactions entered into by the Group in the normal course of business during the year.
Movements in the loss allowance made against receivables were as follows:
2022
\u00a3m
2021
\u00a3m
At 1 January 19.4 11.3
Utilised (4.0) (6.7)
Provided in the year 15.3 15.2
Business disposal (1.0) \u2014
Transfer to disposal group assets held-for-sale \u2014 (0.4)
At 31 December 29.7 19.4
Section 3: Operating assets and liabilities continued
3.1 Working capital continued
There are no customers who represent more than 10% of the total balance of trade receivables.
Ageing of trade receivables
2022
\u00a3m
2021
\u00a3m
Not due 118.5 203.3
Overdue by less than three months 26.9 29.8
Overdue between three and six months 6.3 6.6
Overdue between six and twelve months 9.9 11.4
Overdue more than twelve months 18.0 0.3
Allowance for doubtful debts (29.7) (19.4)
149.9 232.0
Non-recourse trade receivables facilities
The value of the outstanding invoices sold under non-recourse trade receivable facilities was \u00a344.4m at 31 December 2022 (2021: \u00a316.4m).
The cost of selling such invoices totalling \u00a30.8m (2021: \u00a30.6m) was included in administrative expenses in the consolidated income statement.
3.1.2 Trade and other payables
Current Non-current
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
Trade payables 134.9 153.7 0.1 \u2014
Other payables 32.8 26.7 6.5 6.3
Other taxes and social security 85.6 122.9 6.0 5.0
Accruals 239.2 238.9 2.5 4.1
492.5 542.2 15.1 15.4
Trade payables are non-interest bearing and are settled on terms agreed with the suppliers.
The Group aims to pay its suppliers on time in accordance with agreed terms.
Section 3: Operating assets and liabilities continued
3.1 Working capital continued
3.1.3 Contract fulfilment assets
Accounting policies
The Group regularly incurs costs to deliver its outsourcing services in a more efficient way (often referred to as \u2018transformation\u2019 costs). These
costs may include process mapping and design, system development, project management, hardware (generally within the scope of the
Group\u2019s accounting policy for property, plant and equipment), software licence costs (generally within the scope of the Group\u2019s accounting
policy for intangible assets), recruitment costs and training.
Contract fulfilment costs are divided into: (i) costs that give rise to an asset; and (ii) costs that are expensed as incurred.
When determining the appropriate accounting treatment for such costs, the Group firstly considers any other applicable standards. If those
other standards preclude capitalisation of a particular cost, then an asset is not recognised under IFRS 15.
If other standards are not applicable to contract fulfilment costs, the Group applies the following criteria which, if met, result in capitalisation of
costs that: (i) directly relate to a contract or to a specifically identifiable anticipated contract; (ii) generate or enhance resources that will be used
in satisfying (or in continuing to satisfy) performance obligations in the future; and (iii) are expected to be recovered.
The Group has determined that, where the relevant specific criteria are met, the costs for (i) process mapping and design; (ii) system
development; and (iii) project management; are likely to qualify to be capitalised as contract fulfilment assets.
The incremental costs of obtaining a contract with a customer are recognised as a contract fulfilment asset if the Group expects to recover
them. The Group incurs costs such as bid costs, legal fees to draft a contract and sales commissions when it enters into a new contract.
The Group has determined that the following costs may be capitalised as contract fulfilment assets: (i) legal fees to draft a contract after the
Group has been selected as preferred supplier; and (ii) sales commissions directly related to winning a specific contract.
Costs incurred prior to selection as preferred supplier are not capitalised but expensed as incurred.
Utilisation: The utilisation charge is included within cost of sales. The Group utilises contract fulfilment assets over the expected contract
period on a systematic basis that mirrors the pattern in which the Group transfers control of the service to the customer.
Derecognition: A contract fulfilment asset is derecognised either when it is disposed of or when no further economic benefits are expected to
flow from its use or disposal.
Impairment: At each reporting date, the Group determines whether or not the contract fulfilment assets are impaired by comparing the carrying
amount of the asset with the remaining amount of consideration that the Group expects to receive less the costs that relate to providing
services under the relevant contract. In determining the estimated amount of consideration, the Group uses the same principles as it does to
determine the contract transaction price, except that any constraints used to reduce the transaction price are removed for the impairment test.
Significant accounting judgements, estimates and assumptions
Judgement is applied by the Group when determining what costs qualify to be capitalised in particular when considering whether these costs
are incremental and when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether
costs are expected to be recoverable. For example, the Group considers which type of sales commissions are incremental to the cost of
obtaining specific contracts and the point in time when the costs will be capitalised. See note 2.1 for further information.
Movements in non-current contract fulfilment assets were as follows
1
:
2022
\u00a3m
2021
\u00a3m
At 1 January 286.7 294.8
Impact of change in accounting standards \u2013 amendments to IAS 37
2
(2.4) \u2014
At 1 January 2022 on adoption of IAS 37
284.3 294.8
Additions 67.1 132.2
Transfer to assets held-for-sale \u2014 (32.6)
Disposal of business (2.8) (0.1)
Impairment (3.8) (7.3)
Derecognition (0.4) (16.6)
Utilised during the year (81.5) (83.9)
Exchange movement 0.1 0.2
At 31 December 263.0 286.7
1. Refer to note 3.1.1 for current contract fulfilment assets.
2. The Group initially applied the amendments to IAS 37 at 1 January 2022 and the cumulative effect of applying the amendments was recognised as an opening balance adjustment to
retained earnings. Refer to note 1 for further details.
Impairment: In 2022, the Group recognised an impairment of \u00a33.8m (2021: \u00a37.3m) in cost of sales, of which, \u00a30.5m (2021: \u00a3nil) relates to
contract fulfilment assets added during the year.
Derecognition: In 2022, \u00a30.4m (2021: \u00a316.6m) was derecognised in relation to a contract in Capita Experience where the scope of our
services changed due to termination of contracts and the Group had no further use for the assets. In 2021 the derecognition primarily related to
a contract in Capita Public Service due to agreed reduction in scope of the contract and also contracts in Capita Experience where the scope of
our services changed due to termination of contracts and the Group had no further use for the assets .
Section 3: Operating assets and liabilities continued
3.1 Working capital continued
3.1.3 Contract fulfilment assets
Accounting policies
The Group regularly incurs costs to deliver its outsourcing services in a more efficient way (often referred to as \u2018transformation\u2019 costs). These
costs may include process mapping and design, system development, project management, hardware (generally within the scope of the
Group\u2019s accounting policy for property, plant and equipment), software licence costs (generally within the scope of the Group\u2019s accounting
policy for intangible assets), recruitment costs and training.
Contract fulfilment costs are divided into: (i) costs that give rise to an asset; and (ii) costs that are expensed as incurred.
When determining the appropriate accounting treatment for such costs, the Group firstly considers any other applicable standards. If those
other standards preclude capitalisation of a particular cost, then an asset is not recognised under IFRS 15.
If other standards are not applicable to contract fulfilment costs, the Group applies the following criteria which, if met, result in capitalisation of
costs that: (i) directly relate to a contract or to a specifically identifiable anticipated contract; (ii) generate or enhance resources that will be used
in satisfying (or in continuing to satisfy) performance obligations in the future; and (iii) are expected to be recovered.
The Group has determined that, where the relevant specific criteria are met, the costs for (i) process mapping and design; (ii) system
development; and (iii) project management; are likely to qualify to be capitalised as contract fulfilment assets.
The incremental costs of obtaining a contract with a customer are recognised as a contract fulfilment asset if the Group expects to recover
them. The Group incurs costs such as bid costs, legal fees to draft a contract and sales commissions when it enters into a new contract.
The Group has determined that the following costs may be capitalised as contract fulfilment assets: (i) legal fees to draft a contract after the
Group has been selected as preferred supplier; and (ii) sales commissions directly related to winning a specific contract.
Costs incurred prior to selection as preferred supplier are not capitalised but expensed as incurred.
Utilisation: The utilisation charge is included within cost of sales. The Group utilises contract fulfilment assets over the expected contract
period on a systematic basis that mirrors the pattern in which the Group transfers control of the service to the customer.
Derecognition: A contract fulfilment asset is derecognised either when it is disposed of or when no further economic benefits are expected to
flow from its use or disposal.
Impairment: At each reporting date, the Group determines whether or not the contract fulfilment assets are impaired by comparing the carrying
amount of the asset with the remaining amount of consideration that the Group expects to receive less the costs that relate to providing
services under the relevant contract. In determining the estimated amount of consideration, the Group uses the same principles as it does to
determine the contract transaction price, except that any constraints used to reduce the transaction price are removed for the impairment test.
Significant accounting judgements, estimates and assumptions
Judgement is applied by the Group when determining what costs qualify to be capitalised in particular when considering whether these costs
are incremental and when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether
costs are expected to be recoverable. For example, the Group considers which type of sales commissions are incremental to the cost of
obtaining specific contracts and the point in time when the costs will be capitalised. See note 2.1 for further information.
Movements in non-current contract fulfilment assets were as follows
1
:
2022
\u00a3m
2021
\u00a3m
At 1 January 286.7 294.8
Impact of change in accounting standards \u2013 amendments to IAS 37
2
(2.4) \u2014
At 1 January 2022 on adoption of IAS 37
284.3 294.8
Additions 67.1 132.2
Transfer to assets held-for-sale \u2014 (32.6)
Disposal of business (2.8) (0.1)
Impairment (3.8) (7.3)
Derecognition (0.4) (16.6)
Utilised during the year (81.5) (83.9)
Exchange movement 0.1 0.2
At 31 December 263.0 286.7
1. Refer to note 3.1.1 for current contract fulfilment assets.
2. The Group initially applied the amendments to IAS 37 at 1 January 2022 and the cumulative effect of applying the amendments was recognised as an opening balance adjustment to
retained earnings. Refer to note 1 for further details.
Impairment: In 2022, the Group recognised an impairment of \u00a33.8m (2021: \u00a37.3m) in cost of sales, of which, \u00a30.5m (2021: \u00a3nil) relates to
contract fulfilment assets added during the year.
Derecognition: In 2022, \u00a30.4m (2021: \u00a316.6m) was derecognised in relation to a contract in Capita Experience where the scope of our
services changed due to termination of contracts and the Group had no further use for the assets. In 2021 the derecognition primarily related to
a contract in Capita Public Service due to agreed reduction in scope of the contract and also contracts in Capita Experience where the scope of
our services changed due to termination of contracts and the Group had no further use for the assets.
Section 3: Operating assets and liabilities continued
3.2 Property, plant and equipment
Accounting policies
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value.
Depreciation: Depreciation is disclosed as an administrative expense in the consolidated income statement, and is calculated on a straight-line
basis over the estimated useful life of the asset, as follows:
\u2022 Freehold buildings and long leasehold property \u2013 up to 50 years.
\u2022 Leasehold improvements \u2013 period of the lease.
\u2022 Plant and machinery \u2013 3 to 10 years.
Impairment: The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances
indicate that the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated
recoverable amount, the assets are written down to their recoverable amount. The recoverable amount of property, plant and equipment is the
greater of net selling price and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an
asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the
asset belongs. Impairment losses are disclosed as administrative expenses in the consolidated income statement.
Derecognition: An item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected to
arise from the continued use of the asset (retired). Any gain or loss arising on derecognition of the asset, calculated as the difference between
the net disposal proceeds and the carrying value of the asset, is included in the consolidated income statement when the asset is
derecognised.
2022 2021
Leasehold
improvements,
land and
buildings
\u00a3m
Plant and
machinery
\u00a3m
Total
\u00a3m
Leasehold
improvements,
land and
buildings
\u00a3m
Plant and
machinery
\u00a3m
Total
\u00a3m
Cost
At 1 January 99.6 169.1 268.7 103.3 193.2 296.5
Additions 7.7 12.9 20.6 8.1 17.5 25.6
Disposal of business \u2014 (0.4) (0.4) \u2014 (0.8) (0.8)
Disposals \u2013 included in adjusted profit (9.1) (7.4) (16.5) (2.3) (10.0) (12.3)
Disposals \u2013 included in business exits \u2014 \u2014 \u2014 (0.1) (0.4) (0.5)
Transfer to assets held-for-sale \u2014 \u2014 \u2014 (0.1) (0.6) (0.7)
Reclassifications 1.3 (1.8) (0.5) \u2014 (1.9) (1.9)
Asset retirements (3.7) (27.9) (31.6) (8.9) (25.8) (34.7)
Exchange movement 0.2 2.0 2.2 (0.4) (2.1) (2.5)
At 31 December 96.0 146.5 242.5 99.6 169.1 268.7
Depreciation and impairment
At 1 January 40.5 99.2 139.7 41.6 97.7 139.3
Impact of change in accounting standards \u2013 amendments to
IAS 37
1
\u2014 0.5 0.5 \u2014 \u2014 \u2014
At 1 January 2022 on adoption of IAS 37 40.5 99.7 140.2
41.6 97.7 139.3
Depreciation charged in the year - included in adjusted profit 10.1 30.6 40.7 9.3 38.2 47.5
Depreciation charged in the year - included in business exits \u2014 0.2 0.2 0.1 1.0 1.1
Disposal of business \u2014 (0.2) (0.2) \u2014 (0.6) (0.6)
Disposals \u2013 included in adjusted profit (7.3) (6.9) (14.2) (2.0) (9.7) (11.7)
Disposals \u2013 included in business exits \u2014 \u2014 \u2014 (0.1) (0.5) (0.6)
Impairment \u2013 included in adjusted profit 2.0 2.7 4.7 0.6 1.3 1.9
Transfer to assets held-for-sale \u2014 \u2014 \u2014 (0.1) (0.2) (0.3)
Reclassifications 0.8 (0.8) \u2014 \u2014 (0.4) (0.4)
Asset retirements (3.7) (27.9) (31.6) (8.9) (25.8) (34.7)
Exchange movement 0.1 1.5 1.6 \u2014 (1.8) (1.8)
At 31 December 42.5 98.9 141.4 40.5 99.2 139.7
Net book value
At 1 January 59.1 69.9 129.0 61.7 95.5 157.2
At 31 December 53.5 47.6 101.1 59.1 69.9 129.0
1. The Group initially applied the amendments to IAS 37 at 1 January 2022 and the cumulative effect of applying the amendments was recognised as an opening balance adjustment to
retained earnings. Refer to note 1 for further details.
Section 3: Operating assets and liabilities continued
3.2 Property, plant and equipment continued
At 31 December 2022, amounts contracted for but not provided in the financial statements for the acquisition of property, plant and equipment
amounted to \u00a32.7m (2021: \u00a33.6m), relating to building improvements on leased property.
During the prior year the Group exited a number of properties and their related leasehold improvement assets were disposed of for no
consideration. Since these exits were part of the Group wide transformation, the related charge was excluded from adjusted profit. Following
the change in presentation of adjusted results (refer to note 2.4) the related charge has been re-presented and included within adjusted profit.
3.3 Intangible assets
Accounting policies
Intangible assets acquired separately are capitalised at cost and those identified in a business acquisition are capitalised at fair value at the
date of acquisition. In the case of capitalised software development costs, research expenditure is written off to the consolidated income
statement in the period in which it is incurred. Development expenditure is similarly written off until the Group is satisfied as to the technical,
commercial and financial viability of individual projects. Where this condition is satisfied, the development expenditure is capitalised and
amortised over the period during which the Group is expected to benefit.
Following initial recognition, the carrying amount of an intangible asset is its cost less accumulated amortisation and impairment losses. The
useful lives of intangible assets are assessed to be either finite or indefinite. There were no indefinite-lived assets in 2022 or 2021.
Amortisation: Amortisation is charged on assets with finite lives and is disclosed as an administrative expense in the consolidated income
statement. The amortisation method used reflects the expected pattern of consumption of future economic benefits and generally amortised on
a straight-line basis, the amortisation periods used are as follows:
\u2022 Intangible assets acquired in business combinations \u2013 1.5 to 20 years.
\u2022 Intangible assets purchased or internally capitalised \u2013 3 to 20 years.
Impairment: Intangible assets with finite lives are only tested for impairment, either individually or at the cash-generating unit level, where there
is an indicator of impairment.
Derecognition: Intangible assets are derecognised upon disposal or when no future economic benefits are expected to arise from the
continued use of the asset (retired). Any gain or loss arising on derecognition of the asset, calculated as the difference between the net
disposal proceeds and the carrying value of the asset, is included in the consolidated income statement when the asset is derecognised.
The measurement of intangible assets other than goodwill in a business combination: on the acquisition of a business, the identifiable
intangible assets may include licences, customer lists and brands. The fair value of these assets is determined by discounting estimated future
net cash flows generated by the asset because in most cases no active market for the assets exists and therefore no observable value exists.
The use of different assumptions for the expectations of future cash flows and the discount rate would change the valuation of the intangible
assets.
The assessment of costs capitalised as intangible assets to generate future economic benefits: judgement is applied in assessing
whether costs incurred, both internal and external, will generate future economic benefits. Judgements and estimates are applied in
determining the carrying value of the assets, including assumptions made in respect of the status of the programme each asset relates to.
Given the level of judgement and estimation involved in assessing future cash flows, it is reasonably possible that outcomes within the next
financial year may be different from management\u2019s assumptions and require an adjustment to the carrying value of intangible assets.
Section 3: Operating assets and liabilities continued
3.2 Property, plant and equipment continued
At 31 December 2022, amounts contracted for but not provided in the financial statements for the acquisition of property, plant and equipment
amounted to \u00a32.7m (2021: \u00a33.6m), relating to building improvements on leased property.
During the prior year the Group exited a number of properties and their related leasehold improvement assets were disposed of for no
consideration. Since these exits were part of the Group wide transformation, the related charge was excluded from adjusted profit. Following
the change in presentation of adjusted results (refer to note 2.4) the related charge has been re-presented and included within adjusted profit.
3.3 Intangible assets
Accounting policies
Intangible assets acquired separately are capitalised at cost and those identified in a business acquisition are capitalised at fair value at the
date of acquisition. In the case of capitalised software development costs, research expenditure is written off to the consolidated income
statement in the period in which it is incurred. Development expenditure is similarly written off until the Group is satisfied as to the technical,
commercial and financial viability of individual projects. Where this condition is satisfied, the development expenditure is capitalised and
amortised over the period during which the Group is expected to benefit.
Following initial recognition, the carrying amount of an intangible asset is its cost less accumulated amortisation and impairment losses. The
useful lives of intangible assets are assessed to be either finite or indefinite. There were no indefinite-lived assets in 2022 or 2021.
Amortisation: Amortisation is charged on assets with finite lives and is disclosed as an administrative expense in the consolidated income
statement. The amortisation method used reflects the expected pattern of consumption of future economic benefits and generally amortised on
a straight-line basis, the amortisation periods used are as follows:
\u2022 Intangible assets acquired in business combinations \u2013 1.5 to 20 years.
\u2022 Intangible assets purchased or internally capitalised \u2013 3 to 20 years.
Impairment: Intangible assets with finite lives are only tested for impairment, either individually or at the cash-generating unit level, where there
is an indicator of impairment.
Derecognition: Intangible assets are derecognised upon disposal or when no future economic benefits are expected to arise from the
continued use of the asset (retired). Any gain or loss arising on derecognition of the asset, calculated as the difference between the net
disposal proceeds and the carrying value of the asset, is included in the consolidated income statement when the asset is derecognised.
The measurement of intangible assets other than goodwill in a business combination: on the acquisition of a business, the identifiable
intangible assets may include licences, customer lists and brands. The fair value of these assets is determined by discounting estimated future
net cash flows generated by the asset because in most cases no active market for the assets exists and therefore no observable value exists.
The use of different assumptions for the expectations of future cash flows and the discount rate would change the valuation of the intangible
assets.
The assessment of costs capitalised as intangible assets to generate future economic benefits: judgement is applied in assessing
whether costs incurred, both internal and external, will generate future economic benefits. Judgements and estimates are applied in
determining the carrying value of the assets, including assumptions made in respect of the status of the programme each asset relates to.
Given the level of judgement and estimation involved in assessing future cash flows, it is reasonably possible that outcomes within the next
financial year may be different from management\u2019s assumptions and require an adjustment to the carrying value of intangible assets.
Section 3: Operating assets and liabilities continued
3.3 Intangible assets continued
2022 2021
Intangible
assets
acquired in
business
combinations
\u00a3m
Capitalised/
purchased
software
\u00a3m
Total
\u00a3m
Intangible
assets
acquired in
business
combinations
\u00a3m
Capitalised/
purchased
software
\u00a3m
Total
\u00a3m
Cost
At 1 January 55.4 222.7 278.1 174.3 314.2 488.5
Disposal of business \u2014 (33.0) (33.0) (61.3) (7.6) (68.9)
Additions \u2014 27.3 27.3 \u2014 32.5 32.5
Disposals \u2013 included in adjusted profit \u2014 (12.2) (12.2) \u2014 (3.0) (3.0)
Disposals \u2013 included in business exits \u2014 \u2014 \u2014 \u2014 (3.4) (3.4)
Transfer to assets held-for-sale \u2014 \u2014 \u2014 (6.8) (16.4) (23.2)
Reclassifications \u2014 0.5 0.5 \u2014 1.9 1.9
Asset retirement (53.1) (11.2) (64.3) (50.3) (94.8) (145.1)
Exchange movement 0.7 0.5 1.2 (0.5) (0.7) (1.2)
At 31 December 3.0 194.6 197.6 55.4 222.7 278.1
Amortisation and impairment
At 1 January 49.6 81.2 130.8 135.4 88.1 223.5
Amortisation charged in the year - included in adjusted profit \u2014 31.7 31.7 \u2014 33.7 33.7
Amortisation charged in the year - excluded from adjusted profit 5.1 \u2014 5.1 7.7 \u2014 7.7
Amortisation charged in the year - included in business exits \u2014 4.7 4.7 9.2 7.1 16.3
Impairment \u2013 included in adjusted profit \u2014 5.5 5.5 \u2014 56.1 56.1
Impairment \u2013 included in business exits \u2014 0.4 0.4 \u2014 2.6 2.6
Disposal of business \u2014 (12.6) (12.6) (46.5) (2.4) (48.9)
Disposals \u2013 included in adjusted profit \u2014 (10.5) (10.5) \u2014 (2.7) (2.7)
Disposals \u2013 included in business exits \u2014 \u2014 \u2014 \u2014 (3.4) (3.4)
Transfer to assets held-for-sale \u2014 \u2014 \u2014 (5.7) (3.1) (8.8)
Reclassifications \u2014 \u2014 \u2014 \u2014 0.4 0.4
Asset retirement (53.1) (11.2) (64.3) (50.3) (94.8) (145.1)
Exchange movement 0.7 0.1 0.8 (0.2) (0.4) (0.6)
At 31 December 2.3 89.3 91.6 49.6 81.2 130.8
Net book value
At 1 January 5.8 141.5 147.3 38.9 226.1 265.0
At 31 December 0.7 105.3 106.0 5.8 141.5 147.3
Intangible assets acquired in business combinations include: committed sales (net book value 2022: \u00a30.7m, 2021: \u00a33.3m); and client lists and
relationships (net book value 2022: \u00a3nil, 2021: \u00a32.5m). Intangible assets capitalised or purchased include capitalised software development
(net book value 2022: \u00a390.9m, 2021: \u00a3120.7m) and purchased software (net book value 2022: \u00a314.4m, 2021: \u00a320.8m).
Impairment included in adjusted profit in 2021 includes \u00a353.5m in respect of areas of a new financial reporting system invested in as part of the
finance transformation that are no longer expected to be used. This charge was previously excluded from adjusted profit, however following the
change in presentation of adjusted results (refer to note 2.4) the related charge has been re-presented and included within adjusted profit.
Section 3: Operating assets and liabilities continued
3.4 Goodwill
Accounting policies
Following initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or
more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Goodwill arising on acquisitions prior to
31 December 1997 remains set off directly against reserves and does not get recycled through the consolidated income statement.
At the acquisition date, any goodwill acquired is allocated to the cash-generating units (CGU) which are expected to benefit from the
combination\u2019s synergies. Impairment is determined by assessing the recoverable amount of the CGU to which the goodwill relates. Where the
recoverable amount of the CGU is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of a CGU and
part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of
the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in these circumstances is measured on the
basis of the relative values of the operation disposed of and the portion of the CGU retained.
Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as transactions with owners in
their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests
are based on a proportionate amount of the net assets of the subsidiary. Any difference between the price paid or received and the amount by
which non-controlling interests are adjusted is recognised directly in equity and attributed to the owners of the Parent company.
Prior to the adoption of IAS 27 (Amended), goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which
represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of
the transaction.
Significant accounting judgements, estimates and assumptions
Measurement and impairment of goodwill: the amount of goodwill initially recognised as a result of a business combination is dependent on
the allocation of the purchase price to the fair value of the identifiable assets acquired and the liabilities assumed. The determination of the fair
value of the assets and liabilities is based, to a considerable extent, on management\u2019s judgement. Allocation of the purchase price affects the
results of the Group because finite lived intangible assets are amortised. The Group determines whether goodwill is impaired on an annual
basis, or more frequently if required, and this requires an estimation of the recoverable amount of the CGUs to which the intangible assets are
allocated utilising an estimation of future cash flows and choosing a suitable discount rate.
2022
\u00a3m
2021
\u00a3m
Cost
At 1 January 1,676.8 1,918.5
Disposal of businesses (255.0) (65.7)
Transfer to disposal group assets held-for-sale \u2014 (177.3)
Exchange movement 1.5 1.3
At 31 December 1,423.3 1,676.8
Accumulated impairment
At 1 January 725.1 798.0
Disposal of businesses (76.7) \u2014
Transfer to disposal group assets held-for-sale \u2014 (89.0)
Impairment \u2013 excluded from adjusted profit 169.0 11.5
Impairment \u2013 included in business exits \u2014 4.6
At 31 December 817.4 725.1
Net book value
At 1 January 951.7 1,120.5
At 31 December 605.9 951.7
Section 3: Operating assets and liabilities continued
3.4 Goodwill
Accounting policies
Following initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or
more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Goodwill arising on acquisitions prior to
31 December 1997 remains set off directly against reserves and does not get recycled through the consolidated income statement.
At the acquisition date, any goodwill acquired is allocated to the cash-generating units (CGU) which are expected to benefit from the
combination\u2019s synergies. Impairment is determined by assessing the recoverable amount of the CGU to which the goodwill relates. Where the
recoverable amount of the CGU is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of a CGU and
part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of
the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in these circumstances is measured on the
basis of the relative values of the operation disposed of and the portion of the CGU retained.
Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as transactions with owners in
their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests
are based on a proportionate amount of the net assets of the subsidiary. Any difference between the price paid or received and the amount by
which non-controlling interests are adjusted is recognised directly in equity and attributed to the owners of the Parent company.
Prior to the adoption of IAS 27 (Amended), goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which
represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of
the transaction.
Significant accounting judgements, estimates and assumptions
Measurement and impairment of goodwill: the amount of goodwill initially recognised as a result of a business combination is dependent on
the allocation of the purchase price to the fair value of the identifiable assets acquired and the liabilities assumed. The determination of the fair
value of the assets and liabilities is based, to a considerable extent, on management\u2019s judgement. Allocation of the purchase price affects the
results of the Group because finite lived intangible assets are amortised. The Group determines whether goodwill is impaired on an annual
basis, or more frequently if required, and this requires an estimation of the recoverable amount of the CGUs to which the intangible assets are
allocated utilising an estimation of future cash flows and choosing a suitable discount rate.
2022
\u00a3m
2021
\u00a3m
Cost
At 1 January 1,676.8 1,918.5
Disposal of businesses (255.0) (65.7)
Transfer to disposal group assets held-for-sale \u2014 (177.3)
Exchange movement 1.5 1.3
At 31 December 1,423.3 1,676.8
Accumulated impairment
At 1 January 725.1 798.0
Disposal of businesses (76.7) \u2014
Transfer to disposal group assets held-for-sale \u2014 (89.0)
Impairment \u2013 excluded from adjusted profit 169.0 11.5
Impairment \u2013 included in business exits \u2014 4.6
At 31 December 817.4 725.1
Net book value
At 1 January 951.7 1,120.5
At 31 December 605.9 951.7
Section 3: Operating assets and liabilities continued
3.4 Goodwill continued
Cash-generating units
Reflecting the way management exercises oversight and monitors the Group\u2019s performance, the lowest level at which goodwill is monitored is
at the divisional level for Capita Public Service and Capita Experience, and at a sub-divisional level for Capita Portfolio. At 31 December 2022
the Group has seven CGUs or groups of CGUs for the purpose of impairment testing of goodwill.
In light of the ongoing disposal processes within the Capita Portfolio division, the CGUs and groups of CGUs relating to the Capita Portfolio
division have been presented in aggregate in the table below, and where relevant in this note. An aggregated disclosure of the carrying value of
goodwill for the Capita Portfolio division with recoverable amount sensitivity disclosed, including the impact on the aggregate impairment
charge recognised, is considered by management to provide meaningful information to the primary users of these consolidated financial
statements.
Carrying amount of goodwill allocated to groups of CGUs:
CGU
Capita Public
Service
\u00a3m
Capita
Experience
\u00a3m
Capita
Portfolio
\u00a3m
Total
\u00a3m
At 1 January
284.6 220.2 446.9 951.7
Business disposals \u2014 (11.9) (166.4) (178.3)
Impairment \u2013 excluded from adjusted profit \u2014 \u2014 (169.0) (169.0)
Exchange movement \u2014 1.5 \u2014 1.5
At 31 December 284.6 209.8 111.5 605.9
Business exits
As set out in note 2.8, eight businesses were fully disposed of during the year. Goodwill relating to three of these businesses had been
reclassified to disposal group assets held-for-sale at 31 December 2021. Goodwill relating to the other disposals is included within the Group\u2019s
brought forward goodwill balances as at 1 January 2022, and has either been impaired during the course of the year, or derecognised as part
of business disposals.
No businesses that the Group intends to dispose of in 2023 met the criteria to be treated as held-for-sale at 31 December 2022.
The impairment test
In undertaking the annual impairment review, the directors considered both internal and external sources of information, and any observable
indications that may suggest that the carrying value of goodwill may be impaired. This included a comparison with the Group\u2019s share price and
market capitalisation.
The Group\u2019s impairment test compares the carrying value of each CGU with its recoverable amount. The recoverable amount of a CGU is the
higher of fair value less cost of disposal, and its value in use, where value in use would typically be the expected cash flows to be generated
from operating the businesses into perpetuity.
At 31 December 2022, no planned disposals met the threshold to be classified as held-for-sale (refer to note 2.8). However, the disposal of
businesses aligned to the People, Business Solutions (excluding one smaller business where the disposal process is less advanced), Travel
and Fera CGUs or groups of CGUs in the Capita Portfolio division were sufficiently advanced that the Board\u2019s judgement was that for
impairment testing purposes the value-in-use of these CGUs or groups of CGUs should be determined based on the future cash flows of the
CGUs or groups of CGUs from continuing use, up to the estimated date of disposal, plus an estimate of the sale proceeds less cost of disposal.
At 30 June 2022, a goodwill impairment of \u00a392.5m was recognised in respect of the People and Property groups of CGUs, and at 31 December
2022, a further goodwill impairment of \u00a376.5m was recognised in respect of the People, Travel and Business Solutions groups of CGUs. The
impairments arose primarily due to the expectation of acquirers factoring in additional investment and costs required to run the businesses
outside of the Group, and general macroeconomic conditions. The Property group of CGUs was disposed of in the second half of 2022.
As at 31 December 2022, the estimated recoverable amount of each remaining Group of CGUs exceeded its respective carrying value. The
key inputs to the calculations are described below, including changes in market conditions.
Forecast cash flows
The cash flow projections prepared for the impairment test are derived from the 2023-2025 business plans (BP) approved by the Board.
Global economic uncertainties continue to lead to increased judgement being applied, particularly in forecasting future financial performance.
Other than for movements in deferred income and contract fulfilment assets, cash flows are adjusted to exclude working capital movements
since the corresponding balances are not included in the CGU carrying amount.
For ongoing disposals that are seen to be sufficiently advanced, forecast cash flows cover both operational cash flows up to the expected date
of disposal, as well as the Board\u2019s best estimate of expected net proceeds at disposal. These have been derived from management\u2019s latest
financial projections and reflect an assessment of the range of bids currently being considered by the Board, the status of these sale processes
and the time horizon over which these transactions are expected to complete.
Allocation of central function costs
The Board has considered an appropriate methodology to apply when allocating central function costs. The methodology applied for the 2022
impairment test was aligned to that applied in reporting segmental performance (refer to note 2.5). The costs of Capita plc, which have not
been allocated as part of segmental reporting, are allocated based on 2023 forecast EBITDA.
Long-term growth rate
The long-term growth rate is based on economic growth forecasts by recognised bodies and this has been applied to forecast cash flows for
years four and five (2026 and 2027) and for the terminal period. The 2022 long-term growth rate is 2.2% (2021: 1.7%).
Section 3: Operating assets and liabilities continued
3.4 Goodwill continued
Discount rates
Management estimates discount rates using pre-tax rates of comparator companies for each CGU or group of CGUs, which reflect the latest
market assumptions for the risk-free rate, the equity risk premium and the net cost of debt, and which are all based on publicly available
external sources.
The table below represents the pre-tax discount rates applied to the cash flows for 2022 and 2021.
Capita Public
Service Capita Experience
Capita Portfolio
People Software Business Solutions Travel Fera
2022 11.8 % 10.4 % 14.3 % 12.1 % 12.1 % 13.0 % 11.2 %
2021 13.0 % 11.6 % 12.4 % 12.8 % 13.3 % 15.7 % 11.9 %
Sensitivity analysis
The impairment testing as described is reliant on the accuracy of management\u2019s forecasts and the assumptions that underlie them; and on the
selection of the discount and growth rates to be applied. To gauge the sensitivity of the result to a change in any one, or combination of the
assumptions that underlie the model, a number of scenarios were developed to identify the range of reasonably possible alternatives and
measure which CGUs are the most susceptible to an impairment should the assumptions used be varied.
Sensitivity scenarios applied estimate the additional impairment required (with all other variables being equal) by: an increase in discount rate
of 1%, or a decrease of 1% in the long-term growth rate (for the terminal period) for the Group in total and each of the CGUs; or, by the severe
but plausible downsides applied to the base-case projections for assessing going concern and viability, without mitigations, for 2023 to 2025,
and the long-term growth rate (2.2%) applied to projected cash flows for 2026, 2027, and the terminal period. We have also considered the
impact of all of the scenarios together, which is also a reasonable possible alternative.
This sensitivity analysis covers CGUs where the associated business\u2019 value-in-use has been calculated based on operating the business into
perpetuity (covering Capita Public Service, Capita Experience, the Portfolio Software pillar, and one smaller business within the Portfolio
Business Solutions pillar where the disposal process is less far advanced). No additional impairments have been identified under any of these
sensitivity scenarios, including the combination sensitivity scenario. However, for the Portfolio Software group of CGUs it is noted that the key
assumption impacting the impairment test is the forecast EBITDA growth included in the BP (compound annual growth rate over the BP period
in excess of 60%). The forecast EBITDA in 2025 would need to reduce by more than 45% before the group of CGUs recoverable amount would
be equal to its carrying amount.
For the businesses in the Capita Portfolio division where for impairment testing purposes the value-in-use has been determined based on the
future cash flows of the CGUs from continuing use up to the estimated date of disposal, plus an estimate of the net sale proceeds (being
businesses aligned to the People, Business Solutions, Travel and Fera CGUs or groups of CGUs), assumptions around the expected sale
proceeds are seen to be the only key assumption impacting the impairment test.
While it is the Board\u2019s intention to complete these disposals in the short-term, where there are presently no signed agreements in place with
any counterparty, there are a range of possible outcomes that could occur, and the actual net proceeds received could be materially higher or
lower than those assumed in the impairment assessment. Given the dependence on commercial negotiations it is not possible to quantify a
reasonably possible change in this key assumption, however a change of 10% in the aggregate net proceeds would have materially altered the
impairment charge recognised. The expected sales proceeds are based on the Board\u2019s best estimate, based on the knowledge existing at the
time of estimation.
Section 3: Operating assets and liabilities continued
3.4 Goodwill continued
Discount rates
Management estimates discount rates using pre-tax rates of comparator companies for each CGU or group of CGUs, which reflect the latest
market assumptions for the risk-free rate, the equity risk premium and the net cost of debt, and which are all based on publicly available
external sources.
The table below represents the pre-tax discount rates applied to the cash flows for 2022 and 2021.
Capita Public
Service Capita Experience
Capita Portfolio
People Software Business Solutions Travel Fera
2022 11.8 % 10.4 % 14.3 % 12.1 % 12.1 % 13.0 % 11.2 %
2021 13.0 % 11.6 % 12.4 % 12.8 % 13.3 % 15.7 % 11.9 %
Sensitivity analysis
The impairment testing as described is reliant on the accuracy of management\u2019s forecasts and the assumptions that underlie them; and on the
selection of the discount and growth rates to be applied. To gauge the sensitivity of the result to a change in any one, or combination of the
assumptions that underlie the model, a number of scenarios were developed to identify the range of reasonably possible alternatives and
measure which CGUs are the most susceptible to an impairment should the assumptions used be varied.
Sensitivity scenarios applied estimate the additional impairment required (with all other variables being equal) by: an increase in discount rate
of 1%, or a decrease of 1% in the long-term growth rate (for the terminal period) for the Group in total and each of the CGUs; or, by the severe
but plausible downsides applied to the base-case projections for assessing going concern and viability, without mitigations, for 2023 to 2025,
and the long-term growth rate (2.2%) applied to projected cash flows for 2026, 2027, and the terminal period. We have also considered the
impact of all of the scenarios together, which is also a reasonable possible alternative.
This sensitivity analysis covers CGUs where the associated business\u2019 value-in-use has been calculated based on operating the business into
perpetuity (covering Capita Public Service, Capita Experience, the Portfolio Software pillar, and one smaller business within the Portfolio
Business Solutions pillar where the disposal process is less far advanced). No additional impairments have been identified under any of these
sensitivity scenarios, including the combination sensitivity scenario. However, for the Portfolio Software group of CGUs it is noted that the key
assumption impacting the impairment test is the forecast EBITDA growth included in the BP (compound annual growth rate over the BP period
in excess of 60%). The forecast EBITDA in 2025 would need to reduce by more than 45% before the group of CGUs recoverable amount would
be equal to its carrying amount.
For the businesses in the Capita Portfolio division where for impairment testing purposes the value-in-use has been determined based on the
future cash flows of the CGUs from continuing use up to the estimated date of disposal, plus an estimate of the net sale proceeds (being
businesses aligned to the People, Business Solutions, Travel and Fera CGUs or groups of CGUs), assumptions around the expected sale
proceeds are seen to be the only key assumption impacting the impairment test.
While it is the Board\u2019s intention to complete these disposals in the short-term, where there are presently no signed agreements in place with
any counterparty, there are a range of possible outcomes that could occur, and the actual net proceeds received could be materially higher or
lower than those assumed in the impairment assessment. Given the dependence on commercial negotiations it is not possible to quantify a
reasonably possible change in this key assumption, however a change of 10% in the aggregate net proceeds would have materially altered the
impairment charge recognised. The expected sales proceeds are based on the Board\u2019s best estimate, based on the knowledge existing at the
time of estimation.
Section 3: Operating assets and liabilities continued
3.5 Right-of-use assets
Accounting policies
At the inception of the lease, the Group recognises a right-of-use asset at cost, which comprises the present value of minimum future lease
payments determined at the inception of the lease. Right-of-use assets are depreciated using the straight-line method over the shorter of
estimated life or the lease term. Depreciation is included within administrative expenses in the consolidated income statement. Amendment to
lease terms resulting in a change in payments or the length of the lease results in an adjustment to the right-of-use asset and corresponding
lease liability. Right-of-use assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not
be fully recoverable.
Right-of-use assets exclude leases with low values and terms of twelve months or less. These leases are expensed to the consolidated income
statement as incurred.
Net Book Value
Property
\u00a3m
Motor vehicles
\u00a3m
Equipment
\u00a3m
Total
\u00a3m
At 1 January 2021 310.0 16.9 15.2 342.1
Addition of new leases 18.2 4.2 \u2014 22.4
Depreciation charged during the year - included in adjusted profit (55.1) (6.5) (6.6) (68.2)
Impairment - included in adjusted profit (13.0) \u2014 (0.3) (13.3)
Disposal (2.2) \u2014 (1.0) (3.2)
Exchange movement (1.7) 0.4 \u2014 (1.3)
Other movements 9.4 0.4 (0.4) 9.4
At 31 December 2021 265.6 15.4 6.9 287.9
Addition of new leases 12.9 2.4 \u2014 15.3
Depreciation charged during the year - included in adjusted profit (45.8) (6.0) (4.2) (56.0)
Reversal of Impairment - included in adjusted profit 2.4 \u2014 0.3 2.7
Disposal of business (0.2) \u2014 \u2014 (0.2)
Disposal (6.3) (1.6) (0.5) (8.4)
Exchange movement 1.4 \u2014 \u2014 1.4
Other movements 7.0 0.4 (0.6) 6.8
At 31 December 2022 237.0 10.6 1.9 249.5
Other movements include amendments to existing leases.
Section 3: Operating assets and liabilities continued
3.6 Provisions
Accounting policies
Provisions are recognised when the Group has a present legal or constructive obligation arising from past events, it is probable that cash will
be paid to settle it, and the amount can be estimated reliably.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows by a rate that
reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is
recognised as a financing cost in the consolidated income statement.
The value of the provision is determined based on assumptions and estimates in relation to the amount, timing and likelihood of actual cash
flows, which are dependent on future events. Where no reliable basis of estimation can be made, no provision is recorded. However, contingent
liabilities disclosures are given when there is a greater than remote probability of outflow of economic benefits. See note 6.2.
On an ongoing basis, management monitor provisions and their accurate estimation when compared to final outcomes.
Significant accounting judgements, estimates and assumptions
As detailed in note 2.1, in respect of onerous customer contract provisions, due to the level of uncertainty, combination of variables and timing
across numerous contracts, it is not practical to provide a quantitative analysis of the aggregated judgements that are applied, and
management do not believe that disclosing a potential range of outcomes on a consolidated basis would provide meaningful information to a
user of the financial statements. Due to commercial sensitivities, the Group does not specifically disclose the amounts involved in any individual
contract.
Provisions
The movements in provisions during the year are as follows:
Restructuring
provision
\u00a3m
Business exit
provision
\u00a3m
Claims and
litigation
provision
\u00a3m
Property
provision
\u00a3m
Customer
contract
provision
\u00a3m
Other
provisions
\u00a3m
Total
\u00a3m
At 1 January 25.6 1.5 13.2 9.7 84.7 5.9 140.6
Impact of change in accounting standards \u2013
amendments to IAS 37
1
\u2014 \u2014 \u2014 \u2014 18.8 \u2014 18.8
At 1 January 2022 on adoption of IAS 37 25.6 1.5 13.2 9.7 103.5 5.9 159.4
Reclassification
2
(25.6) \u2014 \u2014 21.8 (0.5) 4.3 \u2014
Provisions in the year \u2014 25.0 7.6 7.0 20.6 6.0 66.2
Releases in the year \u2014 (1.2) (1.4) (7.8) (17.1) (3.7) (31.2)
Utilisation \u2014 (14.6) (2.4) (11.7) (33.0) (5.0) (66.7)
Disposal of subsidiaries \u2014 \u2014 \u2014 (0.3) \u2014 (0.1) (0.4)
At 31 December \u2014 10.7 17.0 18.7 73.5 7.4 127.3
31 December 2022
\u00a3m
31 December 2021
\u00a3m
Current 75.7 126.6
Non-current 51.6 14.0
127.3 140.6
1. The Group initially applied the amendments to IAS 37 at 1 January 2022 and the cumulative effect of applying the amendments was recognised as an opening balance adjustment to
retained earnings. Refer to note 1 for further details.
2. Following the end of the Group-wide transformation programme, restructuring provision relating to severance and property costs (including unavoidable running costs, such as insurance,
security, and dilapidation costs) where properties have been exited as a result of the transformation programme, have been reclassified to others and property provision respectively as at
1 January 2022.
Section 3: Operating assets and liabilities continued
3.6 Provisions
Accounting policies
Provisions are recognised when the Group has a present legal or constructive obligation arising from past events, it is probable that cash will
be paid to settle it, and the amount can be estimated reliably.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows by a rate that
reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is
recognised as a financing cost in the consolidated income statement.
The value of the provision is determined based on assumptions and estimates in relation to the amount, timing and likelihood of actual cash
flows, which are dependent on future events. Where no reliable basis of estimation can be made, no provision is recorded. However, contingent
liabilities disclosures are given when there is a greater than remote probability of outflow of economic benefits. See note 6.2.
On an ongoing basis, management monitor provisions and their accurate estimation when compared to final outcomes.
Significant accounting judgements, estimates and assumptions
As detailed in note 2.1, in respect of onerous customer contract provisions, due to the level of uncertainty, combination of variables and timing
across numerous contracts, it is not practical to provide a quantitative analysis of the aggregated judgements that are applied, and
management do not believe that disclosing a potential range of outcomes on a consolidated basis would provide meaningful information to a
user of the financial statements. Due to commercial sensitivities, the Group does not specifically disclose the amounts involved in any individual
contract.
Provisions
The movements in provisions during the year are as follows:
Restructuring
provision
\u00a3m
Business exit
provision
\u00a3m
Claims and
litigation
provision
\u00a3m
Property
provision
\u00a3m
Customer
contract
provision
\u00a3m
Other
provisions
\u00a3m
Total
\u00a3m
At 1 January 25.6 1.5 13.2 9.7 84.7 5.9 140.6
Impact of change in accounting standards \u2013
amendments to IAS 37
1
\u2014 \u2014 \u2014 \u2014 18.8 \u2014 18.8
At 1 January 2022 on adoption of IAS 37 25.6 1.5 13.2 9.7 103.5 5.9 159.4
Reclassification
2
(25.6) \u2014 \u2014 21.8 (0.5) 4.3 \u2014
Provisions in the year \u2014 25.0 7.6 7.0 20.6 6.0 66.2
Releases in the year \u2014 (1.2) (1.4) (7.8) (17.1) (3.7) (31.2)
Utilisation \u2014 (14.6) (2.4) (11.7) (33.0) (5.0) (66.7)
Disposal of subsidiaries \u2014 \u2014 \u2014 (0.3) \u2014 (0.1) (0.4)
At 31 December \u2014 10.7 17.0 18.7 73.5 7.4 127.3
31 December 2022
\u00a3m
31 December 2021
\u00a3m
Current 75.7 126.6
Non-current 51.6 14.0
127.3 140.6
1. The Group initially applied the amendments to IAS 37 at 1 January 2022 and the cumulative effect of applying the amendments was recognised as an opening balance adjustment to
retained earnings. Refer to note 1 for further details.
2. Following the end of the Group-wide transformation programme, restructuring provision relating to severance and property costs (including unavoidable running costs, such as insurance,
security, and dilapidation costs) where properties have been exited as a result of the transformation programme, have been reclassified to others and property provision respectively as at
1 January 2022.
Section 3: Operating assets and liabilities continued
3.6 Provisions continued
Business exit provision: The provision relates to the cost of exiting businesses through disposal or closure including professional fees related
to business exits and the costs of separating the businesses being disposed. These are likely to unwind over a period of one to four years.
Claims and litigation provision: The Group is exposed to claims and litigation proceedings arising in the ordinary course of business. These
matters are reassessed regularly and where obligations are probable and estimable, provisions are made representing the Group\u2019s best
estimate of the expenditure to be incurred. Due to the nature of these claims, the Group cannot give an estimate of the period over which this
provision will unwind.
Property provision: The provision relates to unavoidable running costs, such as insurance and security, of leasehold property where the
space is vacant or currently not planned to be used for ongoing operations, and for dilapidation costs. The expectation is that this expenditure
will be incurred over the remaining periods of the leases which vary up to 25 years.
Customer contract provision: The provision includes onerous contract provisions in respect of customer contracts where the costs of fulfilling
a contract (both incremental and costs directly related to contract activities) exceeds the economic benefits expected to be received under the
contract, claims/obligations associated with missed milestones in contractual obligations, and other potential exposures related to contracts
with customers. These provisions are forecast to unwind over periods of up to six years.
The customer contract provision includes \u00a359.7m (2021: \u00a354.5m) in respect of contracts in Capita Experience. The Group has highlighted in
prior reporting the structural challenges associated with the closed book Life & Pensions contracts. These provided for upfront cash inflows to
support initial transformation activities with a much lower level of cash inflow after the transformation phase was completed. Under the Group\u2019s
long-term contract accounting policy, the cash flow profile of these contracts has resulted in deferral of profit into future years which is not
backed by net cash flows (because the relevant cash receipts arose in the early years of contract execution). Additionally, some of the
contracts contain evergreen clauses potentially allowing the customers to extend the contracts indefinitely until the run-off of the underlying life
and pension books is complete.
The closed book Life & Pensions business has remained in structural decline because some customers, with legacy IT systems, have switched
to suppliers who can provide a single digital platform for all their books. The Group has sought to drive efficiencies to mitigate this fall off in
volumes, while supporting customers who have selected new outsource providers or taken the activities back in-house.
The closed books contractual dynamics have led to onerous conditions to service certain of these contracts. Management has been required to
assess the likely length of the remaining contracts, given the pattern and experience of contract terminations while also recognising the
evergreen clauses. Accordingly, the Group has, in prior years, provided for the onerous contract conditions based on the best estimate of the
remaining contract terms.
The Group has continued to support a major customer on the transfer of services to another supplier. This is taking significantly longer than
initially expected. In 2021, management reassessed the lifetime estimate to include not only the onerous contract terms but also the period and
likely costs to support the final handover of services. This assessment was extended across all contracts that contain evergreen clauses,
including those where there are ongoing discussions regarding either termination or transfer of services.
This reassessment, reflecting the developments in the latter half of 2021, provided cover for contracts to extend out to 2026. This resulted in an
increase to the contract provision of \u00a339.5m at 31 December 2021. At 31 December 2022, the provision was increased to provide cover for
contracts to extend out to December 2027 (ie a five-year rolling period).
Other provisions: Relates to provisions in respect of other potential exposures arising as a result of the nature of some of the operations that
the Group provides. These are likely to unwind over periods of up to five years.
Section 4: Capital structure and finance costs
This section outlines the Group\u2019s capital structure and financing costs. The Group defines its capital structure as its cash and
cash equivalents, non-current interest bearing loans and borrowings and equity. The Group aims to manage its capital structure
to safeguard the Group\u2019s ability to continue as a going concern, so that it can continue to provide returns to shareholders and
benefits for other stakeholders. The Group manages its capital structure to maintain a sustainable mix of debt and equity that
ensures that the Group can pursue its strategy. The Group makes adjustments to its capital structure in light of changes in
economic conditions and strategic operational risk. To maintain or adjust the capital structure, the Group may return capital to
shareholders through dividends and share buy backs, sell assets, raise additional equity, or arrange additional debt facilities. In
this section you will find disclosures about:
4.1 Net debt, capital and capital management
4.2 Financial risk
4.3 Net finance costs
4.4 Leases
4.5 Financial instruments and the fair value hierarchy
4.6 Issued share capital
4.7 Group composition and non-controlling interests
Denotes accounting policies
Denotes significant accounting judgements, estimates and assumptions
Key highlights
Net financial debt to adjusted EBITDA
1
(both pre-IFRS 16) Available liquidity
Aim: Maintain the ratio of net financial debt to adjusted EBITDA
1
(both pre-IFRS
16) at \u22641.0x times over the long term
0.5x
\u00a3405.2m
(2021: 3.7x) (2021: \u00a3392.4m)
1. Details of all alternative performance measures and related KPIs can be found in section 8.2.
Capital strategy
The Group\u2019s capital strategy is to build a strong and flexible balance sheet, which supports the Group\u2019s strategic objectives, the investment
needed to grow the business and allows for contributions required to reduce pension liabilities.
The Board expects to maintain the ratio of net financial debt to adjusted EBITDA, both on a pre-IFRS 16 basis at
\u22641.0x times.
Liquidity
Available liquidity at 31 December 2022 was \u00a3405.2m (31 December 2021 \u00a3392.4m) and during 2022 adjusted net debt (excluding leases and
restricted cash) reduced by \u00a3346.5m from \u00a3431.4m to \u00a384.9m.
Liquidity remains a key area of focus and in July 2022, the Group signed an extension of the \u00a3300m forward start revolving credit facility (RCF)
with its lending banks for a further twelve months to August 2024. The new facility commenced on 31 August 2022 upon the expiry of the
previous RCF and provides the Group with committed liquidity for the cash fluctuations of the business cycle and an allowance for
contingencies, and incorporates provisions such that it will partially reduce in quantum as a consequence of specified transactions. The RCF
was not drawn upon at 31 December 2022 and had a total committed value of \u00a3288.4m.
A sustainability component has been included in the new facility that can adjust the margin by up to five basis points conditional upon achieving
agreed ESG KPIs. Both of these KPIs have been achieved and as a result a slight reduction in the facility margin was applied.
Net finance costs
Net finance costs have decreased by \u00a315.2m to \u00a331.7m (2021: \u00a346.9m) driven by an increase in interest receivable resulting from the higher
interest rate environment, a decrease in interest payable as a result of debt maturities in 2022 and favourable change in the value of our non-
designated foreign exchange forward contracts.
Section 4: Capital structure and finance costs
This section outlines the Group\u2019s capital structure and financing costs. The Group defines its capital structure as its cash and
cash equivalents, non-current interest bearing loans and borrowings and equity. The Group aims to manage its capital structure
to safeguard the Group\u2019s ability to continue as a going concern, so that it can continue to provide returns to shareholders and
benefits for other stakeholders. The Group manages its capital structure to maintain a sustainable mix of debt and equity that
ensures that the Group can pursue its strategy. The Group makes adjustments to its capital structure in light of changes in
economic conditions and strategic operational risk. To maintain or adjust the capital structure, the Group may return capital to
shareholders through dividends and share buy backs, sell assets, raise additional equity, or arrange additional debt facilities. In
this section you will find disclosures about:
4.1 Net debt, capital and capital management
4.2 Financial risk
4.3 Net finance costs
4.4 Leases
4.5 Financial instruments and the fair value hierarchy
4.6 Issued share capital
4.7 Group composition and non-controlling interests
Denotes accounting policies
Denotes significant accounting judgements, estimates and assumptions
Key highlights
Net financial debt to adjusted EBITDA
1
(both pre-IFRS 16) Available liquidity
Aim: Maintain the ratio of net financial debt to adjusted EBITDA
1
(both pre-IFRS
16) at \u22641.0x times over the long term
0.5x
\u00a3405.2m
(2021: 3.7x) (2021: \u00a3392.4m)
1. Details of all alternative performance measures and related KPIs can be found in section 8.2.
Capital strategy
The Group\u2019s capital strategy is to build a strong and flexible balance sheet, which supports the Group\u2019s strategic objectives, the investment
needed to grow the business and allows for contributions required to reduce pension liabilities.
The Board expects to maintain the ratio of net financial debt to adjusted EBITDA, both on a pre-IFRS 16 basis at \u22641.0x
times.
Liquidity
Available liquidity at 31 December 2022 was \u00a3405.2m (31 December 2021 \u00a3392.4m) and during 2022 adjusted net debt (excluding leases and
restricted cash) reduced by \u00a3346.5m from \u00a3431.4m to \u00a384.9m.
Liquidity remains a key area of focus and in July 2022, the Group signed an extension of the \u00a3300m forward start revolving credit facility (RCF)
with its lending banks for a further twelve months to August 2024. The new facility commenced on 31 August 2022 upon the expiry of the
previous RCF and provides the Group with committed liquidity for the cash fluctuations of the business cycle and an allowance for
contingencies, and incorporates provisions such that it will partially reduce in quantum as a consequence of specified transactions. The RCF
was not drawn upon at 31 December 2022 and had a total committed value of \u00a3288.4m.
A sustainability component has been included in the new facility that can adjust the margin by up to five basis points conditional upon achieving
agreed ESG KPIs. Both of these KPIs have been achieved and as a result a slight reduction in the facility margin was applied.
Net finance costs
Net finance costs have decreased by \u00a315.2m to \u00a331.7m (2021: \u00a346.9m) driven by an increase in interest receivable resulting from the higher
interest rate environment, a decrease in interest payable as a result of debt maturities in 2022 and favourable change in the value of our non-
designated foreign exchange forward contracts.
Section 4: Capital structure and financing costs continued
4.1 Net debt, capital and capital management
4.1.1 Net debt and capital
The components of the Group\u2019s net debt and undrawn available liquidity are summarised below.
Notes
2022
\u00a3m
2021
\u00a3m
Year on Year
movement
Cash and cash equivalents 4.5.4 (396.8) (333.4) (63.4)
Overdraft 4.5.4 219.6 231.9 (12.3)
Lease liabilities 4.4.1 397.5 448.4 (50.9)
Private placement loan notes
1
4.5.2 285.5 512.9 (227.4)
Credit facilities
2
\u2014 46.0 (46.0)
Other loan notes 4.5.2 0.7 1.3 (0.6)
Currency and interest rate swaps 4.5.2 (24.8) (28.0) 3.2
Deferred consideration 4.5.2 0.7 0.7 \u2014
Net debt 482.4 879.8 (397.4)
Undrawn available financing facilities 4.5.2b 288.4 345.7 (57.3)
Capital 770.8 1,225.5 (454.7)
1. Private placement loan notes include US dollar and British pound sterling private placement loan notes, and euro fixed rate bearer notes.
2. 2021: credit facilities includes \u00a340.0m drawing on the RCF.
A reconciliation of net debt shown above to cash flow can be found in note 2.10.3.
The overdrafts are part of a cash pooling arrangement, and the underlying balances can be fully offset by cash balances in the same
arrangement.
During the year, USD and GBP private placement loan notes of \u00a340.5m and \u00a336.7m were repaid at maturity on 22 January 2022 and 22 April
2022 respectively. The associated currency and interest rate swaps also expired on these dates, such that the combined net cash outflow for
these repayments was \u00a367.2m. Additionally, \u00a320.7m of the outstanding EUR fixed rate notes were prepaid during June and July 2022 as a
result of the disposal of Trustmarque with a further repayment at maturity on 10 November 2022 of \u00a3138.8m .
4.1.2 Capital management
Focus on capital management forms an important component of Board meetings, including review of forecast gearing and key covenant tests,
and the mix of funding sources, thereby ensuring sustainability and flexibility. Shareholder returns will be reviewed over time in accordance with
the Group\u2019s generation of sustainable free cash flow.
The Group\u2019s capital management process ensures that it meets the financial covenants of its borrowing arrangements. There are two separate
sets of covenant tests underlying the Group\u2019s financial instruments with the key difference being the treatment of IFRS 16. There have been no
breaches in the financial covenants of any loans or borrowings during the reporting period.
The committed RCF provides the liquidity needed to cover the cash fluctuations of the business cycle, allowing a buffer for contingencies.
Capita plc supports the obligations of its various regulated financial services businesses. The board of each regulated firm is responsible for
ensuring it has embedded capital management frameworks that ensure the availability of adequate financial resources at all times, and all of
them complied with all externally imposed financial services regulatory capital requirements applicable to them.
To provide working capital funding at an economically favourable rate versus the RCF, in the UK, the Group uses a non-recourse invoice
discounting facility, and the value of invoices sold under this arrangement at 31 December 2022 was \u00a336.9m (2021: \u00a33.9m) . Additionally, the
Group's German business uses a non-recourse invoice discounting arrangement for a specific customer contract, and the value of invoices sold
under that arrangement at 31 December 2022 was \u00a37.5m (2021: \u00a312.5m).
Section 4: Capital structure and financing costs continued
4.2 Financial risk
Financial risk management objectives and policies
The Group\u2019s Board of directors has overall responsibility for the establishment and oversight of the Group\u2019s risk management framework, which
is outlined on pages 54 to 63 of the strategic report. The Group\u2019s principal financial instruments comprise cash, bank loans, private placement
loan notes, lease assets and liabilities, and derivatives. The purpose of these is to fund and provide liquidity for the Group\u2019s operations and to
manage its financial risks. The Group has various other financial instruments including trade receivables and trade payables arising from its
operations.
Derivatives comprise cross-currency interest rate swaps, and forward foreign currency contracts executed with its relationship banks, all of
which have investment grade credit ratings. The derivatives\u2019 purpose is to manage interest rate and currency risks arising from the Group\u2019s
operations and its sources of finance. It is the Group\u2019s policy that no speculative trading in financial instruments is undertaken.
The main risks arising from the Group\u2019s financial instruments are liquidity risk, foreign currency risk, interest rate risk, and credit risk. The Board
periodically reviews and agrees policies for managing these risks, which are summarised below.
4.2.1 Liquidity risk
The Group monitors the risk of a liquidity shortage through its business plan and liquidity cycle forecasts and analysis, taking into consideration
the maturity of the Group\u2019s financial instruments, projected cash flows from operations and an allowance for contingencies.
The Group\u2019s policy is to hold cash and undrawn committed facilities at a level sufficient to fund the Group\u2019s operations and its medium-term
plans. Multiple sources of funding are used to maintain a balance between continuity of funding and flexibility without placing reliance on
sources that are not contractually committed.
The Group\u2019s committed bank facilities provide liquidity for the cash fluctuations of the business cycle and an allowance for contingencies. At
31 December 2022 the RCF commitment was \u00a3288.4m (31 December 2021: \u00a3385.7m) and was subsequently reduced to \u00a3284.7m on
4 January 2023 following receipt of proceeds from disposals. The RCF expires on 31 August 2024 and was not drawn upon at 31 December
2022 (31 December 2021: \u00a340.0m drawn).
The size of the available commitment will be right-sized each time the Group either refinances, raises funds through disposals, or raises equity
with the RCF including mandatory cancellation mechanisms that determine the amount of the cancellation in each case. The commitments are
subject to a minimum value of \u00a3180m regardless of the quantum of receipts.
The Group\u2019s core funding is provided by US private placement loan notes and euro fixed-rate bearer notes (\u2018private placement loan notes\u2019), and
to mitigate the risk of needing to refinance in challenging conditions, these have been arranged with a spread of maturities to November 2027.
The bank facilities and private placement loan notes all include provisions that would require repayment in the event of a change of control,
which are typical of these arrangements.
In March 2022 the Group executed a committed backstop bridge facility with one of its relationship banks which provided \u00a370m of additional
liquidity and incorporated provisions such that it would be cancelled or partially reduced in quantum as a consequence of specified
transactions, including on the completion of the announced disposal of Trustmarque. The facility was cancelled on 10 March 2022 following
receipt of the Trustmarque disposal proceeds.
In February 2023, the Group entered into a committed bridge facility of \u00a350m with three of its relationship banks providing additional liquidity
from 1 January 2024. It incorporates provisions such that it will partially reduce in quantum as a consequence of specified transactions. The
committed facility has an expiry date of 31 December 2024 and is subject to covenants, which are the same as those in the RCF.
The tables below summarise the maturity profile of the Group\u2019s financial liabilities based on contractual undiscounted cash flows. All balances
are stated based on the prevailing foreign exchange rates and the contractual interest rates at the end of the reporting period.
At 31 December 2022
Within
1 year
\u00a3m
Between
1\u20132 years
\u00a3m
Between
2\u20133 years
\u00a3m
Between
3\u20134 years
\u00a3m
Between
4\u20135 years
\u00a3m
More than
5 years
\u00a3m
Total
\u00a3m
Overdraft* 219.6 \u2014 \u2014 \u2014 \u2014 \u2014 219.6
Private placement loan notes 75.0 \u2014 91.4 34.7 94.0 \u2014 295.1
Interest on loan notes 9.6 7.9 6.2 4.5 2.6 \u2014 30.8
Lease liabilities 76.1 64.9 49.0 39.7 33.6 296.7 560.0
Deferred consideration \u2014 \u2014 \u2014 \u2014 0.7 \u2014 0.7
Put options of non-controlling interests 9.2 \u2014 \u2014 \u2014 \u2014 \u2014 9.2
Cross-currency interest rate swaps 0.8 0.8 0.8 0.8 \u2014 \u2014 3.2
Other financial instruments 0.7 \u2014 \u2014 \u2014 \u2014 \u2014 0.7
391.0 73.6 147.4 79.7 130.9 296.7 1,119.3
* The Group has a notional cash pool under which the bank may net cash balances with overdrafts held by other Group companies in the arrangements. The overdraft balances shown
above are fully offset by credit balances in the same arrangement.
Section 4: Capital structure and financing costs continued
4.2 Financial risk
Financial risk management objectives and policies
The Group\u2019s Board of directors has overall responsibility for the establishment and oversight of the Group\u2019s risk management framework, which
is outlined on pages 54 to 63 of the strategic report. The Group\u2019s principal financial instruments comprise cash, bank loans, private placement
loan notes, lease assets and liabilities, and derivatives. The purpose of these is to fund and provide liquidity for the Group\u2019s operations and to
manage its financial risks. The Group has various other financial instruments including trade receivables and trade payables arising from its
operations.
Derivatives comprise cross-currency interest rate swaps, and forward foreign currency contracts executed with its relationship banks, all of
which have investment grade credit ratings. The derivatives\u2019 purpose is to manage interest rate and currency risks arising from the Group\u2019s
operations and its sources of finance. It is the Group\u2019s policy that no speculative trading in financial instruments is undertaken.
The main risks arising from the Group\u2019s financial instruments are liquidity risk, foreign currency risk, interest rate risk, and credit risk. The Board
periodically reviews and agrees policies for managing these risks, which are summarised below.
4.2.1 Liquidity risk
The Group monitors the risk of a liquidity shortage through its business plan and liquidity cycle forecasts and analysis, taking into consideration
the maturity of the Group\u2019s financial instruments, projected cash flows from operations and an allowance for contingencies.
The Group\u2019s policy is to hold cash and undrawn committed facilities at a level sufficient to fund the Group\u2019s operations and its medium-term
plans. Multiple sources of funding are used to maintain a balance between continuity of funding and flexibility without placing reliance on
sources that are not contractually committed.
The Group\u2019s committed bank facilities provide liquidity for the cash fluctuations of the business cycle and an allowance for contingencies. At
31 December 2022 the RCF commitment was \u00a3288.4m (31 December 2021: \u00a3385.7m) and was subsequently reduced to \u00a3284.7m on
4 January 2023 following receipt of proceeds from disposals. The RCF expires on 31 August 2024 and was not drawn upon at 31 December
2022 (31 December 2021: \u00a340.0m drawn).
The size of the available commitment will be right-sized each time the Group either refinances, raises funds through disposals, or raises equity
with the RCF including mandatory cancellation mechanisms that determine the amount of the cancellation in each case. The commitments are
subject to a minimum value of \u00a3180m regardless of the quantum of receipts.
The Group\u2019s core funding is provided by US private placement loan notes and euro fixed-rate bearer notes (\u2018private placement loan notes\u2019), and
to mitigate the risk of needing to refinance in challenging conditions, these have been arranged with a spread of maturities to November 2027.
The bank facilities and private placement loan notes all include provisions that would require repayment in the event of a change of control,
which are typical of these arrangements.
In March 2022 the Group executed a committed backstop bridge facility with one of its relationship banks which provided \u00a370m of additional
liquidity and incorporated provisions such that it would be cancelled or partially reduced in quantum as a consequence of specified
transactions, including on the completion of the announced disposal of Trustmarque. The facility was cancelled on 10 March 2022 following
receipt of the Trustmarque disposal proceeds.
In February 2023, the Group entered into a committed bridge facility of \u00a350m with three of its relationship banks providing additional liquidity
from 1 January 2024. It incorporates provisions such that it will partially reduce in quantum as a consequence of specified transactions. The
committed facility has an expiry date of 31 December 2024 and is subject to covenants, which are the same as those in the RCF.
The tables below summarise the maturity profile of the Group\u2019s financial liabilities based on contractual undiscounted cash flows. All balances
are stated based on the prevailing foreign exchange rates and the contractual interest rates at the end of the reporting period.
At 31 December 2022
Within
1 year
\u00a3m
Between
1\u20132 years
\u00a3m
Between
2\u20133 years
\u00a3m
Between
3\u20134 years
\u00a3m
Between
4\u20135 years
\u00a3m
More than
5 years
\u00a3m
Total
\u00a3m
Overdraft* 219.6 \u2014 \u2014 \u2014 \u2014 \u2014 219.6
Private placement loan notes 75.0 \u2014 91.4 34.7 94.0 \u2014 295.1
Interest on loan notes 9.6 7.9 6.2 4.5 2.6 \u2014 30.8
Lease liabilities 76.1 64.9 49.0 39.7 33.6 296.7 560.0
Deferred consideration \u2014 \u2014 \u2014 \u2014 0.7 \u2014 0.7
Put options of non-controlling interests 9.2 \u2014 \u2014 \u2014 \u2014 \u2014 9.2
Cross-currency interest rate swaps 0.8 0.8 0.8 0.8 \u2014 \u2014 3.2
Other financial instruments 0.7 \u2014 \u2014 \u2014 \u2014 \u2014 0.7
391.0 73.6 147.4 79.7 130.9 296.7 1,119.3
* The Group has a notional cash pool under which the bank may net cash balances with overdrafts held by other Group companies in the arrangements. The overdraft balances shown
above are fully offset by credit balances in the same arrangement.
Section 4: Capital structure and financing costs continued
4.2 Financial risk continued
At 31 December 2021
Within
1 year
\u00a3m
Between
1\u20132 years
\u00a3m
Between
2\u20133 years
\u00a3m
Between
3\u20134 years
\u00a3m
Between
4\u20135 years
\u00a3m
More than
5 years
\u00a3m
Total
\u00a3m
Overdraft 231.9 \u2014 \u2014 \u2014 \u2014 \u2014 231.9
Credit facilities 46.0 \u2014 \u2014 \u2014 \u2014 \u2014 46.0
Private placement loan notes 226.9 69.8 \u2014 84.6 32.9 94.6 508.8
Interest on loan notes 15.3 9.2 7.6 6.0 4.5 2.6 45.2
Lease liabilities 82.8 73.0 61.8 46.6 38.1 322.2 624.5
Deferred consideration \u2014 \u2014 \u2014 \u2014 \u2014 0.7 0.7
Put options of non-controlling interests 8.6 \u2014 \u2014 \u2014 \u2014 \u2014 8.6
Cross-currency interest rate swaps 0.6 0.7 0.4 0.4 0.4 \u2014 2.5
Cash flow hedges 0.6 0.6 0.1 \u2014 \u2014 \u2014 1.3
Other financial instruments 1.3 4.3 \u2014 \u2014 \u2014 \u2014 5.6
614.0 157.6 69.9 137.6 75.9 420.1 1,475.1
4.2.2 Foreign currency risk
The Group is not generally exposed to significant foreign currency transaction risk with two exceptions. Firstly, services are provided by the
Group\u2019s operations in India and South Africa and incurred in Indian rupee (INR) and South African rand (ZAR). The Group seeks to mitigate the
short term effect of this exposure by entering into forward foreign exchange contracts to fix the British pounds sterling (GBP) cost of highly
probable transactions over a rolling 24 month period.
At 31 December 2022, the Group held forward foreign exchange contracts against forecast internal monthly INR and ZAR costs expected in the
years up to and including December 2024. These forecast costs have been determined on the basis of the underlying cash flows associated
with the delivery of services under executed customer contracts.
Secondly, the Group holds foreign exchange forwards against committed costs relating to the purchase of cloud software services in US dollars
(USD) in the years up to and including August 2024.
To maximise hedge effectiveness, forward foreign exchange contracts are executed with terms matching the underlying cash flows.
The following table demonstrates the sensitivity of the Group\u2019s profit before tax and equity to a 5% strengthening/(weakening) in INR, ZAR and
USD exchange rates, assuming all other variables are unchanged, that would arise from the resulting changes in the fair value of the Group\u2019s
forward exchange contracts.
USD INR ZAR
Effect on profit
before tax
\u00a3m
Effect on
equity
\u00a3m
Effect on profit
before tax
\u00a3m
Effect on
equity
\u00a3m
Effect on profit
before tax
\u00a3m
Effect on
equity
\u00a3m
2022 \u2014 0.8 \u2014 0.3 1.8 \u2014
2021 \u2014 (3.3) \u2014 (5.3) (3.1) \u2014
4.2.3 Interest rate risk
The Group manages its interest rate exposure, which arises from the Group\u2019s private placement loan notes, cash, deposits and RCF drawings
at variable interest rates through cross-currency interest rate swaps. The swaps are designated fair value hedges against the fair value
changes of the private placement loan notes.
Section 4: Capital structure and financing costs continued
4.2 Financial risk continued
The net level of floating rate interest exposure is managed, to arrive at an acceptable overall interest rate risk profile. The interest rate profile of
the Group\u2019s interest-bearing financial instruments was as follows:
Nominal amounts
At 31 December 2022
Within
1 year
\u00a3m
Between
1\u20132 years
\u00a3m
Between
2\u20133 years
\u00a3m
Between
3\u20134 years
\u00a3m
Between
4\u20135 years
\u00a3m
More than
5 years
\u00a3m
Total
\u00a3m
Fixed rate
Private placement loan notes 27.5 \u2014 29.7 18.6 71.2 \u2014 147.0
Floating rate
Cash in hand (396.8) \u2014 \u2014 \u2014 \u2014 \u2014 (396.8)
Overdraft 219.6 \u2014 \u2014 \u2014 \u2014 \u2014 219.6
Private placement loan notes 38.8 \u2014 46.2 15.5 17.1 \u2014 117.6
Nominal amounts
At 31 December 2021
Within
1 year
\u00a3m
Between
1\u20132 years
\u00a3m
Between
2\u20133 years
\u00a3m
Between
3\u20134 years
\u00a3m
Between
4\u20135 years
\u00a3m
More than
5 years
\u00a3m
Total
\u00a3m
Fixed rate
Private placement loan notes 169.2 27.5 \u2014 29.7 18.6 74.2 319.2
Floating rate
Cash in hand (333.4) \u2014 \u2014 \u2014 \u2014 \u2014 (333.4)
Overdraft 231.9 \u2014 \u2014 \u2014 \u2014 \u2014 231.9
Private placement loan notes 48.5 38.8 \u2014 46.2 15.5 17.1 166.1
Credit facilities 46.0 \u2014 \u2014 \u2014 \u2014 \u2014 46.0
A sensitivity analysis to changes in interest rates shows that a 0.5% increase or decrease in interest rates, assuming all other variables are
held constant, results in an \u00a30.6m (2021: \u00a31.1m) increase or decrease to profit before tax, and no impact on the Group\u2019s equity.
4.2.4 Hedges
Fair value hedges
The Group\u2019s fixed rate USD and GBP private placement loan notes are hedged through a combination of cross-currency interest rate swaps.
The cross-currency interest rate swaps hedge the exposure to changes in the fair value of US dollar denominated loan notes. The loan notes
and their corresponding swaps have the same critical terms including nominal values and maturity dates.
The total loss in the year on the fair value hedges of \u00a33.2m (2021: \u00a330.0m loss) was equal to the loss/gain on the hedged items resulting in no
net gain or loss in the income statement apart from hedge ineffectiveness from credit risk and currency basis risk. This effect of hedge
ineffectiveness resulted in a \u00a30.2m debit (2021: \u00a30.1m credit) to the consolidated income statement, shown in net finance costs, note 4.3.
The impact of the hedged item and the related financial derivatives on the consolidated balance sheet at 31 December 2022 is as follows:
Notional amount
\u00a3m
Carrying amount
\u00a3m
Line item in the
balance sheet
Change in FV used for
measuring ineffectiveness
\u00a3m
Cross-currency interest rate swaps \u2013 assets 102.1 25.8 Financial assets (4.4)
Cross-currency interest rate swaps \u2013 liabilities 15.5 (1.0) Financial liabilities 1.2
24.8 (3.2)
Carrying amount
\u00a3m
Accumulated FV
adjustment
\u00a3m
Line item in the
balance sheet
Change in FV used for
measuring ineffectiveness
\u00a3m
Private placement loan notes 285.5 24.8 Financial Liabilities 3.2
Section 4: Capital structure and financing costs continued
4.2 Financial risk continued
The net level of floating rate interest exposure is managed, to arrive at an acceptable overall interest rate risk profile. The interest rate profile of
the Group\u2019s interest-bearing financial instruments was as follows:
Nominal amounts
At 31 December 2022
Within
1 year
\u00a3m
Between
1\u20132 years
\u00a3m
Between
2\u20133 years
\u00a3m
Between
3\u20134 years
\u00a3m
Between
4\u20135 years
\u00a3m
More than
5 years
\u00a3m
Total
\u00a3m
Fixed rate
Private placement loan notes 27.5 \u2014 29.7 18.6 71.2 \u2014 147.0
Floating rate
Cash in hand (396.8) \u2014 \u2014 \u2014 \u2014 \u2014 (396.8)
Overdraft 219.6 \u2014 \u2014 \u2014 \u2014 \u2014 219.6
Private placement loan notes 38.8 \u2014 46.2 15.5 17.1 \u2014 117.6
Nominal amounts
At 31 December 2021
Within
1 year
\u00a3m
Between
1\u20132 years
\u00a3m
Between
2\u20133 years
\u00a3m
Between
3\u20134 years
\u00a3m
Between
4\u20135 years
\u00a3m
More than
5 years
\u00a3m
Total
\u00a3m
Fixed rate
Private placement loan notes 169.2 27.5 \u2014 29.7 18.6 74.2 319.2
Floating rate
Cash in hand (333.4) \u2014 \u2014 \u2014 \u2014 \u2014 (333.4)
Overdraft 231.9 \u2014 \u2014 \u2014 \u2014 \u2014 231.9
Private placement loan notes 48.5 38.8 \u2014 46.2 15.5 17.1 166.1
Credit facilities 46.0 \u2014 \u2014 \u2014 \u2014 \u2014 46.0
A sensitivity analysis to changes in interest rates shows that a 0.5% increase or decrease in interest rates, assuming all other variables are
held constant, results in an \u00a30.6m (2021: \u00a31.1m) increase or decrease to profit before tax, and no impact on the Group\u2019s equity.
4.2.4 Hedges
Fair value hedges
The Group\u2019s fixed rate USD and GBP private placement loan notes are hedged through a combination of cross-currency interest rate swaps.
The cross-currency interest rate swaps hedge the exposure to changes in the fair value of US dollar denominated loan notes. The loan notes
and their corresponding swaps have the same critical terms including nominal values and maturity dates.
The total loss in the year on the fair value hedges of \u00a33.2m (2021: \u00a330.0m loss) was equal to the loss/gain on the hedged items resulting in no
net gain or loss in the income statement apart from hedge ineffectiveness from credit risk and currency basis risk. This effect of hedge
ineffectiveness resulted in a \u00a30.2m debit (2021: \u00a30.1m credit) to the consolidated income statement, shown in net finance costs, note 4.3.
The impact of the hedged item and the related financial derivatives on the consolidated balance sheet at 31 December 2022 is as follows:
Notional amount
\u00a3m
Carrying amount
\u00a3m
Line item in the
balance sheet
Change in FV used for
measuring ineffectiveness
\u00a3m
Cross-currency interest rate swaps \u2013 assets 102.1 25.8 Financial assets (4.4)
Cross-currency interest rate swaps \u2013 liabilities 15.5 (1.0) Financial liabilities 1.2
24.8 (3.2)
Carrying amount
\u00a3m
Accumulated FV
adjustment
\u00a3m
Line item in the
balance sheet
Change in FV used for
measuring ineffectiveness
\u00a3m
Private placement loan notes 285.5 24.8 Financial Liabilities 3.2
Section 4: Capital structure and financing costs continued
4.2 Financial risk continued
Cash flow hedges
The Group holds a series of non-deliverable forward foreign exchange contracts (NDFs), that are designated as hedges of the highly probable
transactions in INR of the Group\u2019s Indian operations. The terms of the NDFs match the terms of these commitments.
Secondly, the Group holds foreign exchange forward contracts against committed costs relating to the purchase of cloud software services in
US dollars in years up to and including August 2024.
The fair value of cash flow hedging instruments held at 31 December 2022 is shown in note 4.5.2.
The cash flow hedges have been assessed to be highly effective. The cash flow hedging reserve comprises the effective portion of the
cumulative net change in the fair value of the hedging instruments. The following table provides an analysis of components of equity resulting
from cash flow hedge accounting:
2022
\u00a3m
2021
\u00a3m
At 1 January
(0.7) (4.8)
Change in fair value recognised in the consolidated statement of other comprehensive income
11.5 1.3
Reclassified to the consolidated income statement:
recognised in administrative expenses
(5.1)
\u2014
recognised in net finance cost
\u2014
0.6
Change in tax
(1.6)
2.2
At 31 December
4.1
(0.7)
4.2.5 Credit risk
The Group trades only with third parties that are expected to be creditworthy. It is the Group\u2019s policy that all clients who wish to trade on credit
terms are subject to credit verification procedures. The Group manages its operations to avoid any excessive concentration of counterparty risk
and the Group takes all reasonable steps to seek assurance from the counterparties that they can fulfil their obligations. In addition, receivable
balances are monitored on an ongoing basis with the result that the Group\u2019s exposure to credit loss remains low - also refer note 3.1.1.
The carrying values of the Group\u2019s financial assets and contract assets represent its maximum credit exposure.
The mark-to-market movement on derivatives includes the extent to which the fair value of these instruments has been affected by the
perceived change in the creditworthiness of the counterparties (ie the expected credit losses) to those instruments and that of the Group itself
(own credit risk). The Group is comfortable that the risk attached to those counterparties is not significant and believes that the swaps continue
to act as an effective hedge against the movements in the fair value of the Group\u2019s private placement loan notes.
4.3 Net finance costs
The table below shows the composition of net finance costs, including those excluded from adjusted profit:
Notes
2022
\u00a3m
2021
\u00a3m
Interest income
Interest on cash
(1.1)
(0.4)
Interest on finance lease assets (4.2) (4.3)
Net interest income on defined benefit pension schemes 5.2 (3.6) \u2014
Total interest income (8.9) (4.7)
Interest expense
Private placement loan notes
1
12.0 17.9
Cash flow hedges recycled to the income statement \u2014 0.6
Bank loans and overdrafts 9.2 5.4
Interest on finance lease liabilities 22.6 23.8
Net interest expense on defined benefit pension schemes 5.2 \u2014 1.5
Total interest expense 43.8 49.2
Net finance expense included in adjusted profit 34.9 44.5
Included within business exits
Bank loans and overdrafts 0.2
0.7
Discount unwind on public sector subsidiary partnership payment 4.5.2 \u2014
0.4
Other financial (income)/expense \u2014 (0.1)
Other items excluded from adjusted profits
Non-designated foreign exchange forward contracts \u2013 mark-to-market (3.6)
1.5
Fair value hedge ineffectiveness
2
4.2.4 0.2 (0.1)
Net finance (income)/expenses excluded from adjusted profit (3.2) 2.4
Total net finance expense 31.7 46.9
1. Private placement loan notes comprise US private placement loan notes and euro fixed rate bearer notes.
2. Fair value hedge ineffectiveness arises from changes in currency basis, and the movement in a provision for counterparty risk associated with the swaps.
Section 4: Capital structure and financing costs continued
4.4 Leases
Accounting policies
The Group leases various assets, comprising land and buildings, equipment and motor vehicles.
The determination whether an arrangement is, or contains, a lease is based on whether the contract conveys a right to control the use of an
identified asset for a period of time in exchange for consideration.
The following sets out the Group\u2019s lease accounting policy for all leases with the exception of leases with low value and term of twelve months
or less which are expensed to the consolidated income statement.
The Group as a lessee \u2013 Right-of-use assets and lease liabilities
The accounting policy for right-of-use assets is included in note 3.5.
The Group recognises lease liabilities where a lease contract exists and right-of-use assets representing the right to use the underlying leased
assets.
At the commencement of a lease, the Group recognises the lease liability measured at the present value of the lease payments to be made
over the lease term.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because
the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of the lease liability is increased to
reflect the accretion of interest and reduced for the lease payments made. The incremental borrowing rate is the rate of interest that the Group
would have to pay to borrow, over a similar term and with a similar security, the funds necessary to obtain an asset of a similar value to the
right-of-use asset in a similar economic environment. Incremental borrowing rates are determined monthly and depend on the term, country,
currency and commencement date of the lease. The incremental borrowing rate is determined based on a series of inputs including: the risk-
free rate based on swap market data; a country-specific risk adjustment; a credit risk adjustment; and an entity-specific adjustment where the
entity risk profile is different to that of the Group.
The lease liability is subsequently remeasured (with a corresponding adjustment to the related right-of-use asset) when there is a change in
future lease payments due to a renegotiation or market rent review, a change of an index or rate or a reassessment of the lease term.
Lease payments are apportioned between a finance charge and a reduction of the lease liability based on the constant interest rate applied to
the remaining balance of the liability. Interest expense is included within net finance costs in the consolidated income statement.
Lease payments comprise fixed payments, including in-substance fixed payments such as service charges and variable lease payments that
depend on an index or a rate, initially measured using the minimum index or rate at inception date. The payments also include any lease
incentives and any penalty payments for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease term determined comprises the non-cancellable period of the lease contract. Periods covered by an option to extend the lease are
included if the Group has reasonable certainty that the option will be exercised, and periods covered by an option to terminate are included if it
is reasonably certain that this will not be exercised.
The Group has elected to apply the practical expedient in IFRS 16 paragraph 15 not to separate non-lease components such as service
charges from lease rental charges.
The Group as a lessor
When the Group acts as a lessor, it determines at lease commencement whether the lease is a finance lease or an operating lease.
To classify each lease, the Group makes an overall assessment of whether the lease transfers to the lessee all of the risks and rewards of
ownership in relation to the underlying asset. If this is the case, then the lease is a finance lease. If not, then it is an operating lease.
The Group acts as an intermediate lessor of property assets and equipment. When the Group is an intermediate lessor, it accounts for its
interests in the head lease and the sub-lease separately. It assesses whether the sub-lease is a finance or operating lease in the context of the
right-of-use asset arising from the head lease.
In instances where the Group is the intermediate lessor and the sub-lease is classified as a finance lease, the Group recognises a net
investment in sub-leases for amounts recoverable from the sub-lessees while derecognising the respective portion of the right-of-use asset.
The lease liability is retained on the balance sheet. The net investment in sub-leases is classified as current or non-current finance assets in the
consolidated balance sheet according to whether or not the amounts will be recovered within twelve months of the balance sheet date. Finance
income recognised in respect of net investment in sub-leases is presented within net finance costs in the consolidated income statement and
the capital element of lease rental received is presented within investing activities in the consolidated cash flow statement.
The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term. The Group
accounts for finance leases as finance lease receivables, using an incremental borrowing rate where the interest rate implicit in sub-lease is not
easily determinable.
Section 4: Capital structure and financing costs continued
4.4 Leases
Accounting policies
The Group leases various assets, comprising land and buildings, equipment and motor vehicles.
The determination whether an arrangement is, or contains, a lease is based on whether the contract conveys a right to control the use of an
identified asset for a period of time in exchange for consideration.
The following sets out the Group\u2019s lease accounting policy for all leases with the exception of leases with low value and term of twelve months
or less which are expensed to the consolidated income statement.
The Group as a lessee \u2013 Right-of-use assets and lease liabilities
The accounting policy for right-of-use assets is included in note 3.5.
The Group recognises lease liabilities where a lease contract exists and right-of-use assets representing the right to use the underlying leased
assets.
At the commencement of a lease, the Group recognises the lease liability measured at the present value of the lease payments to be made
over the lease term.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because
the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of the lease liability is increased to
reflect the accretion of interest and reduced for the lease payments made. The incremental borrowing rate is the rate of interest that the Group
would have to pay to borrow, over a similar term and with a similar security, the funds necessary to obtain an asset of a similar value to the
right-of-use asset in a similar economic environment. Incremental borrowing rates are determined monthly and depend on the term, country,
currency and commencement date of the lease. The incremental borrowing rate is determined based on a series of inputs including: the risk-
free rate based on swap market data; a country-specific risk adjustment; a credit risk adjustment; and an entity-specific adjustment where the
entity risk profile is different to that of the Group.
The lease liability is subsequently remeasured (with a corresponding adjustment to the related right-of-use asset) when there is a change in
future lease payments due to a renegotiation or market rent review, a change of an index or rate or a reassessment of the lease term.
Lease payments are apportioned between a finance charge and a reduction of the lease liability based on the constant interest rate applied to
the remaining balance of the liability. Interest expense is included within net finance costs in the consolidated income statement.
Lease payments comprise fixed payments, including in-substance fixed payments such as service charges and variable lease payments that
depend on an index or a rate, initially measured using the minimum index or rate at inception date. The payments also include any lease
incentives and any penalty payments for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease term determined comprises the non-cancellable period of the lease contract. Periods covered by an option to extend the lease are
included if the Group has reasonable certainty that the option will be exercised, and periods covered by an option to terminate are included if it
is reasonably certain that this will not be exercised.
The Group has elected to apply the practical expedient in IFRS 16 paragraph 15 not to separate non-lease components such as service
charges from lease rental charges.
The Group as a lessor
When the Group acts as a lessor, it determines at lease commencement whether the lease is a finance lease or an operating lease.
To classify each lease, the Group makes an overall assessment of whether the lease transfers to the lessee all of the risks and rewards of
ownership in relation to the underlying asset. If this is the case, then the lease is a finance lease. If not, then it is an operating lease.
The Group acts as an intermediate lessor of property assets and equipment. When the Group is an intermediate lessor, it accounts for its
interests in the head lease and the sub-lease separately. It assesses whether the sub-lease is a finance or operating lease in the context of the
right-of-use asset arising from the head lease.
In instances where the Group is the intermediate lessor and the sub-lease is classified as a finance lease, the Group recognises a net
investment in sub-leases for amounts recoverable from the sub-lessees while derecognising the respective portion of the right-of-use asset.
The lease liability is retained on the balance sheet. The net investment in sub-leases is classified as current or non-current finance assets in the
consolidated balance sheet according to whether or not the amounts will be recovered within twelve months of the balance sheet date. Finance
income recognised in respect of net investment in sub-leases is presented within net finance costs in the consolidated income statement and
the capital element of lease rental received is presented within investing activities in the consolidated cash flow statement.
The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term. The Group
accounts for finance leases as finance lease receivables, using an incremental borrowing rate where the interest rate implicit in sub-lease is not
easily determinable.
Section 4: Capital structure and financing costs continued
4.4 Leases continued
4.4.1 The Group as a lessee
Amounts recognised on the balance sheet Note
2022
\u00a3m
2021
\u00a3m Type of financial instrument
Lease liabilities 397.5 448.4 Financial liabilities
The lease liability includes \u00a35.0m (2021: \u00a318.8m) of future lease payments (undiscounted) for leases with termination options that could be
exercised but are recognised at full term. The potential future cash outflows of \u00a313.2m (2021: \u00a323.1m) (undiscounted) have not been included
in the lease liability because the Group is reasonably certain that the leases will not be extended. The total cash outflow for leases was \u00a384.4m
(2021: \u00a3106.2m) consisting of interest paid of \u00a322.6m (2021: \u00a323.6m) and capital element of \u00a361.8m (2021: \u00a382.6m).
Right-of-use assets are discussed in note 3.5, the maturity analysis of lease liabilities is included in note 4.2 and interest expense in note 4.3.
4.4.2 The Group as a lessor
Amounts recognised on the balance sheet
2022
\u00a3m
2021
\u00a3m Type of financial instrument
Lease receivables 76.3 82.1 Financial assets
The maturity analysis of lease receivables, including the undiscounted lease payments to be received, is as follows:
2022
\u00a3m
2021
\u00a3m
Within 1 year 9.8 10.8
Between 1-2 years 9.7 9.6
Between 2-3 years 8.2 9.6
Between 3-4 years 7.7 8.2
Between 4-5 years 4.0 7.7
More than 5 years 70.2 73.0
Total undiscounted lease payments receivable 109.6 118.9
Unearned finance income (33.3) (36.8)
Net investment in lease receivables 76.3 82.1
The expenses related to short-term leases, leases of low-value assets and income from sub-leases are immaterial and therefore there is no
separate disclosure.
During 2020, the Group sublet a leased property. The sub-lease includes an option for the lessee to terminate the lease earlier than the
Group\u2019s lease with its landlord. Management assessed it was reasonably certain that the break clause will not be exercised and, accordingly,
determined that the sub-lease is a finance lease. This resulted in the recognition of a finance lease receivable of \u00a370.5m as of 31 December
2022. This judgement was based on a number of factors as prescribed within IFRS 16 \u2018Leases\u2019 such as incentive to lessee, importance of the
location to the lessee\u2019s operations, shorter non-cancellable period of lease and the lessee\u2019s planned modifications to, and customisation of, the
property.
Section 4: Capital structure and financing costs continued
4.5 Financial instruments and the fair value hierarchy
Accounting policies
Financial instruments \u2013 classification of financial instruments
The Group classifies its financial instruments in the following measurement categories:
\u2022 those to be measured subsequently at fair value, either through other comprehensive income (FVOCI) or through profit or loss (FVPL); and
\u2022 those to be measured at amortised cost.
The classification depends on the Group\u2019s business model for managing the financial assets and the contractual terms of the cash flows.
Financial instruments \u2013 initial recognition
At initial recognition, the Group measures a financial instrument at its fair value plus, in the case of a financial instrument not at FVPL,
transaction costs that are directly attributable to the acquisition of the financial instrument. Transaction costs of financial instruments carried at
FVPL are expensed in the consolidated income statement.
Financial instruments with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment
of principal and interest.
Purchases and sales of financial instruments are recognised on their trade date (ie the date the Group commits to purchase or sell the
instrument). Financial instruments are derecognised when the rights to receive/pay cash flows from the financial instrument have expired or
have been transferred such that the Group has transferred substantially all risks and rewards of ownership.
Debt instruments
Debt instruments are initially recognised at fair value less directly attributable transaction costs and are subsequently remeasured depending
on the Group\u2019s business model for managing the liability and the cash flow characteristics of the liability. There are three measurement
categories into which the Group classifies its debt instruments:
\u2022 Amortised cost: instruments that are held for collection/payment of contractual cash flows are measured at amortised cost where those
cash flows represent solely payments of principal and interest. Interest income/expense from these financial instruments is included in net
finance costs using the effective interest rate method.
\u2022 FVOCI: instruments that are held for collection/payment of contractual cash flows and for selling the financial instrument are measured at
FVOCI where the instrument\u2019s cash flows represent solely payments of principal and interest. Movements in the carrying amount are taken
through consolidated Other Comprehensive Income (OCI), except for the recognition of impairment gains or losses, interest income and
foreign exchange gains/losses, which are recognised in the consolidated income statement. When the financial instrument is derecognised,
the cumulative gain/loss previously recognised in OCI is reclassified to the consolidated income statement and recognised in other gains/
(losses).
\u2022 FVPL: instruments that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain/loss on a debt instrument that is
measured at FVPL is recognised in the consolidated income statement and presented within net finance costs.
The Group reclassifies debt instruments when, and only when, its business model for managing those instruments changes.
Equity instruments
Investments in equity instruments are initially recognised at fair value and are subsequently remeasured at fair value with the movement
recognised through the consolidated income statement, except where an election has been made for the movement to be recognised through
OCI. An election can be made on initial recognition of equity instruments that are neither held-for-trading or instruments acquired as part of a
business combination. Once an election has been made all movements in fair value, with the exception of dividends, are presented through
OCI and there is no subsequent reclassification of fair value gains/losses to the consolidated income statement following the derecognition of
the investment. Dividends from such investments continue to be recognised in the consolidated income statement as other income when the
Group\u2019s right to receive payments is established.
Impairment
The Group assesses, on a forward looking basis, the expected credit losses associated with its financial instruments carried at amortised cost
and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
Derivatives
Derivative financial instruments are initially recognised at fair value and are subsequently remeasured at fair value at the end of each reporting
period with the movement recognised through the consolidated income statement, except where derivatives qualify for cash flow hedge
accounting. The effective proportion of cash flow hedges is recognised in OCI and presented in the hedging reserve within equity. The
cumulative gain/loss is subsequently reclassified to the consolidated income statement in the same period that the relevant hedged transaction
is realised.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time
to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in
the period they occur. Borrowing costs consist of interest and other costs incurred in connection with the borrowing of funds.
Investments in equity instruments are initially recognised at fair value and are subsequently remeasured at fair value with the movement recognised through the consolidated income statement, except where an election has been made for the movement to be recognised through OCI. An election can be made on initial recognition of equity instruments that are neither held-for-trading or instruments acquired as part of a business combination. Once an election has been made all movements in fair value, with the exception of dividends, are presented through OCI and there is no subsequent reclassification of fair value gains/losses to the consolidated income statement following the derecognition of the investment. Dividends from such investments continue to be recognised in the consolidated income statement as other income when the Group\u2019s right to receive payments is established. rchy continued 4.5.1 Fair value hierarchy The Group\u2019s financial assets and liabilities are classified based on the following fair value hierarchy: \u2022 Level-1: quoted (unadjusted) prices in active markets for identical assets or liabilities. \u2022 Level-2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly. With the exception of current financial instruments (which have a short maturity), the fair value of the Group\u2019s level-2 financial instruments were calculated by discounting the expected future cash flows at prevailing interest rates. The valuation models incorporate various inputs including foreign exchange spot and forward rates and interest rate curves. In the case of floating rate borrowings the nominal value approximates to fair value because interest is set at floating rates where payments are reset to market values at intervals of less than one year. \u2022 Level-3: techniques using inputs that have a significant effect on the recorded fair value which are not based on observable market data. Other financial instruments, where observable market data is not available, are carried at either amortised cost or cost (undiscounted cash flows) as a reasonable approximation of fair value. During the year ended 31 December 2022, there were no transfers between fair value levels. 4.5.2 Financial instruments and their fair value hierarchy classification The following table analyses, by classification and category, the carrying value of the Group\u2019s financial instruments and identifies the level of the fair value hierarchy for the instruments carried at fair value: At 31 December 2022 Note Fair value hierarchy FVPL \u00a3m FVOCI \u00a3m Derivatives used for hedging \u00a3m Amortised cost \u00a3m Total \u00a3m Current \u00a3m Non- current \u00a3m Financial assets Lease receivables 4.4.2 n/a \u2014 \u2014 \u2014 76.3 76.3 5.9 70.4 Cash flow hedges 4.2.4 Level-2 \u2014 \u2014 5.4 \u2014 5.4 3.0 2.4 Non-designated foreign exchange forwards and swaps Level-2 5.3 \u2014 \u2014 \u2014 5.3 4.4 0.9 Cross-currency interest rate swaps a Level-2 \u2014 \u2014 25.8 \u2014 25.8 8.3 17.5 Originated loans receivable n/a \u2014 \u2014 \u2014 0.5 0.5 \u2014 0.5 Financial assets at fair value through P&L Level-3 17.2 \u2014 \u2014 \u2014 17.2 \u2014 17.2 Financial assets at fair value through OCI Level-3 \u2014 0.8 \u2014 \u2014 0.8 \u2014 0.8 Deferred consideration receivable n/a \u2014 \u2014 \u2014 10.5 10.5 2.0 8.5 22.5 0.8 31.2 87.3 141.8 23.6 118.2 Other financial assets Cash 4.5.4 n/a \u2014 \u2014 \u2014 396.8 396.8 396.8 \u2014 Total financial assets 22.5 0.8 31.2 484.1 538.6 420.4 118.2 Financial liabilities Private placement loan notes a n/a \u2014 \u2014 \u2014 285.5 285.5 74.6 210.9 Other loan notes n/a \u2014 \u2014 \u2014 0.7 0.7 0.7 \u2014 Non-designated foreign exchange forwards and swaps Level-2 0.1 \u2014 \u2014 \u2014 0.1 0.1 \u2014 Cross-currency interest rate swaps a Level-2 \u2014 \u2014 1.0 \u2014 1.0 \u2014 1.0 Deferred consideration payable n/a \u2014 \u2014 \u2014 0.7 0.7 \u2014 0.7 Put options of non-controlling interests d Level-3 \u2014 9.2 \u2014 \u2014 9.2 9.2 \u2014 0.1 9.2 1.0 286.9 297.2 84.6 212.6 Other financial liabilities Overdrafts 4.5.4 n/a \u2014 \u2014 \u2014 219.6 219.6 219.6 \u2014 Lease liabilities 4.4.1 n/a \u2014 \u2014 \u2014 397.5 397.5 55.6 341.9 Total financial liabilities 0.1 9.2 1.0 904.0 914.3 359.8 554.5 Section 4: Capital structure and financing costs continued 4.5 Financial instruments and the fair value hierarchy continued Financial assets measured at amortised cost consist of cash, lease receivables, originated loans and deferred consideration receivable. The carrying value of cash is a reasonable approximation of its fair value due to the short-term nature of the instruments. Lease receivables, originated loans and deferred consideration receivable are measured at amortised cost using the effective interest rate method. Included in other investments are \u00a30.8m (31 December 2021: \u00a30.8m) of strategic investments in unlisted equity securities which are not held-for-trading and the Group elected to recognise at Fair Value through Other Comprehensive Income (FVOCI). During the period no dividends were received from, and no disposals were made of, strategic investments. The financial assets at Fair Value through P&L (FVPL) relate to the Group\u2019s minority shareholding in companies as part of Capita Scaling Partners. The assets are revalued when reliable information on fair value becomes available, which is normally at each funding round. Financial liabilities measured at amortised cost consist of loan notes, overdrafts, lease liabilities, credit facilities and deferred consideration payable. With the exception of certain series within the fixed rate private placement loan notes, the carrying value of financial liabilities are a reasonable approximation of their fair value. This is because either the interest payable is close to market rates or the liability is short-term in nature. The private placement loan note series that remain subject to a fixed rate of interest have an underlying carrying value of \u00a3144.9m (2021: \u00a3320.7m) and a fair value of \u00a3130.2m (2021: \u00a3278.2m). The carrying value of overdrafts is a reasonable approximation of fair value reflecting the short-term nature of the instruments. Lease liabilities and deferred consideration payable are measured at amortised cost using the effective interest rate method. The Group\u2019s key financial liabilities are set out below: a. Private placement loan notes The private placement loan notes were issued in US dollars, pounds sterling, and euros at fixed interest rates. The Group manages its exposure to foreign exchange and interest rate movements through cross-currency interest rate swaps, interest rate swaps, and forward foreign exchange contracts. b. Bank facilities Details of the Group\u2019s bank facilities are provided in the Liquidity section above. At 31 December 2022, the total value of committed facilities was \u00a3288.4m, of which none was drawn (2021: total facilities of \u00a3385.7m of which \u00a340.0m was drawn). c. Public sector subsidiary partnership payment The public sector subsidiary partnership payment liability represented the annual deferred payments to be made by AXELOS Limited. This liability was derecognised when AXELOS Limited was sold on 26 July 2021. d. Put options of non-controlling interests The liability at 31 December 2022 represents the present value of the cost to acquire the non-controlling interest in Fera Science Limited (see note 4.7). The option held by the non-controlling shareholder of Fera Science Limited has been exercisable since April 2021. A sensitivity analysis assuming a 10% increase/decrease in the earnings potential of the business results in a \u00a30.9m increase/decrease in the valuation. The option to acquire the non-controlling interest in AXELOS Limited expired without being exercised on 28 February 2021, and the related liability was de-recognised. Upon inception of the option agreements, management determined that changes in the carrying amount would be recognised within equity. This has been applied consistently for all options entered into. Section 4: Capital structure and financing costs continued
4.5 Financial instruments and the fair value hierarchy continued
Financial assets measured at amortised cost consist of cash, lease receivables, originated loans and deferred consideration receivable. The
carrying value of cash is a reasonable approximation of its fair value due to the short-term nature of the instruments. Lease receivables,
originated loans and deferred consideration receivable are measured at amortised cost using the effective interest rate method. Included in
other investments are \u00a30.8m (31 December 2021: \u00a30.8m) of strategic investments in unlisted equity securities which are not held-for-trading
and the Group elected to recognise at Fair Value through Other Comprehensive Income (FVOCI). During the period no dividends were
received from, and no disposals were made of, strategic investments.
The financial assets at Fair Value through P&L (FVPL) relate to the Group\u2019s minority shareholding in companies as part of Capita Scaling
Partners. The assets are revalued when reliable information on fair value becomes available, which is normally at each funding round.
Financial liabilities measured at amortised cost consist of loan notes, overdrafts, lease liabilities, credit facilities and deferred consideration
payable. With the exception of certain series within the fixed rate private placement loan notes, the carrying value of financial liabilities are a
reasonable approximation of their fair value. This is because either the interest payable is close to market rates or the liability is short-term in
nature. The private placement loan note series that remain subject to a fixed rate of interest have an underlying carrying value of \u00a3144.9m
(2021: \u00a3320.7m) and a fair value of \u00a3130.2m (2021: \u00a3278.2m). The carrying value of overdrafts is a reasonable approximation of fair value
reflecting the short-term nature of the instruments. Lease liabilities and deferred consideration payable are measured at amortised cost using
the effective interest rate method.
The Group\u2019s key financial liabilities are set out below:
a. Private placement loan notes
The private placement loan notes were issued in US dollars, pounds sterling, and euros at fixed interest rates. The Group manages its
exposure to foreign exchange and interest rate movements through cross-currency interest rate swaps, interest rate swaps, and forward foreign
exchange contracts.
b. Bank facilities
Details of the Group\u2019s bank facilities are provided in the Liquidity section above. At 31 December 2022, the total value of committed facilities
was \u00a3288.4m, of which none was drawn (2021: total facilities of \u00a3385.7m of which \u00a340.0m was drawn).
c. Public sector subsidiary partnership payment
The public sector subsidiary partnership payment liability represented the annual deferred payments to be made by AXELOS Limited. This
liability was derecognised when AXELOS Limited was sold on 26 July 2021.
d. Put options of non-controlling interests
The liability at 31 December 2022 represents the present value of the cost to acquire the non-controlling interest in Fera Science Limited (see
note 4.7). The option held by the non-controlling shareholder of Fera Science Limited has been exercisable since April 2021. A sensitivity
analysis assuming a 10% increase/decrease in the earnings potential of the business results in a \u00a30.9m increase/decrease in the valuation.
The option to acquire the non-controlling interest in AXELOS Limited expired without being exercised on 28 February 2021, and the related
liability was de-recognised. Upon inception of the option agreements, management determined that changes in the carrying amount would be
recognised within equity. This has been applied consistently for all options entered into.
Section 4: Capital structure and financing costs continued
4.5 Financial instruments and the fair value hierarchy continued
At 31 December 2021 Note
Fair value
hierarchy
FVPL
\u00a3m
FVOCI
\u00a3m
Derivatives
used for
hedging
\u00a3m
Amortised
cost
\u00a3m
Total
\u00a3m
Current
\u00a3m
Non-
current
\u00a3m
Financial assets
Lease receivables 4.4.2 n/a \u2014 \u2014 \u2014 82.1 82.1 6.6 75.5
Cash flow hedges 4.2.4 Level-2 \u2014 \u2014 0.9 \u2014 0.9 0.7 0.2
Non-designated foreign exchange forwards and
swaps Level-2 1.8 \u2014 \u2014 \u2014 1.8 0.8 1.0
Cross-currency interest rate swaps a Level-2 \u2014 \u2014 30.2 \u2014 30.2 9.4 20.8
Originated loans receivable n/a \u2014 \u2014 \u2014 0.5 0.5 \u2014 0.5
Financial assets at fair value through P&L Level-3 8.4 \u2014 \u2014 \u2014 8.4 \u2014 8.4
Financial assets at fair value through OCI Level-3 \u2014 0.8 \u2014 \u2014 0.8 \u2014 0.8
10.2 0.8 31.1 82.6 124.7 17.5 107.2
Other financial assets
Cash
n/a \u2014 \u2014 \u2014 317.6 317.6 317.6 \u2014
Cash included within disposal group assets held-
for-sale 2.8 n/a \u2014 \u2014 \u2014 15.8 15.8 15.8 \u2014
Total financial assets 10.2 0.8 31.1 416.0 458.1 350.9 107.2
Financial liabilities
Private placement loan note a n/a \u2014 \u2014 \u2014 512.9 512.9 226.3 286.6
Other loan notes n/a \u2014 \u2014 \u2014 1.3 1.3 0.3 1.0
Credit facilities b Level-2 \u2014 \u2014 \u2014 46.0 46.0 46.0 \u2014
Cash flow hedges 4.2.4 Level-2 \u2014 \u2014 1.8 \u2014 1.8 0.8 1.0
Non-designated foreign exchange forwards and
swaps Level-2 4.7 \u2014 \u2014 \u2014 4.7 4.3 0.4
Cross-currency interest rate swaps a Level-2 \u2014 \u2014 2.2 \u2014 2.2 \u2014 2.2
Deferred consideration payable n/a \u2014 \u2014 \u2014 0.7 0.7 \u2014 0.7
Put options of non-controlling interests d Level-3 \u2014 8.6 \u2014 \u2014 8.6 8.6 \u2014
4.7 8.6 4.0 560.9 578.2 286.3 291.9
Other financial liabilities
Overdrafts 4.5.4 n/a \u2014 \u2014 \u2014 231.9 231.9 231.9 \u2014
Lease liabilities 4.4.1 n/a \u2014 \u2014 \u2014 448.4 448.4 61.6 386.8
Total financial liabilities 4.7 8.6 4.0 1,241.2 1,258.5 579.8 678.7
Section 4: Capital structure and financing costs continued
4.5 Financial instruments and the fair value hierarchy continued
The following table shows the reconciliation from the opening balances to the closing balances for Level-3 fair values.
Subsidiary
partnership
payment
\u00a3m
Put options
of non-
controlling
interests
\u00a3m
Investments
FVPL and
FVOCI
\u00a3m
At 1 January 2021 27.1 99.7 2.3
Payments made (4.7) \u2014 \u2014
Change in put-options recognised in other comprehensive income
1
\u2014 (91.1) \u2014
Additions \u2014 \u2014 0.3
Reclassification from other investment categories \u2014 \u2014 4.3
Gain in fair value recognised in income statement \u2014 \u2014 2.2
Gain in fair value recognised in other comprehensive income \u2014 \u2014 0.1
Discount unwind recognised in the income statement 0.4 \u2014 \u2014
Business disposal (22.8) \u2014 \u2014
At 31 December 2021 \u2014 8.6 9.2
Change in put-options recognised in other comprehensive income \u2014 0.6 \u2014
Additions \u2014 \u2014 2.3
Reclassification from other investment categories \u2014 \u2014 0.4
Gain in fair value recognised in income statement \u2014 \u2014 5.9
Gain in fair value recognised in other comprehensive income \u2014 \u2014 0.2
At 31 December 2022 \u2014 9.2 18.0
1. The option to acquire the non-controlling interest in AXELOS Limited expired without being exercised on 28 February 2021, and the related liability was de-recognised
4.5.3 Borrowings
Details of the Group\u2019s current RCF facility are shown in the above liquidity section (see note 4.5.2b).
Borrowing costs of \u00a32.4m were capitalised in the year (2021: \u00a31.9m). At 31 December 2022, the Group\u2019s private placement loan note series
had a GBP equivalent underlying carrying value of \u00a3260.5m (2021: \u00a3484.8m) (see note 4.5.2a) analysed as follows:
Maturity Denomination
Interest rate
%
Nominal value
Ccy\u2019m
27 October 2023 GBP 2.520 27.5
22 January 2025 GBP 3.540 7.4
22 April 2025 GBP 3.670 22.3
27 October 2026 GBP 2.770 18.6
22 January 2027 GBP 3.580 23.8
Total GBP denominated GBP 99.6
22 January 2023 USD 3.450 39.4
27 October 2023 USD 3.370 17.8
22 January 2025 USD 3.650 74.3
27 October 2026 USD 3.590 19.3
22 January 2027 USD 3.800 27.5
Total USD denominated
1
USD 178.3
10 November 2027 EUR 3.625 53.4
Total euro denominated
2
EUR 53.4
1. USD denominated loan notes have a GBP equivalent underlying carrying value of \u00a3117.2m. The Group has entered into cross-currency interest rate swaps for the USD issues to achieve a
floating rate of interest based on SONIA. Further disclosure on the Group\u2019s use of hedges is included in note 4.2.
2. Euro denominated loan notes have a GBP equivalent underlying carrying value of \u00a345.8m.
Section 4: Capital structure and financing costs continued
4.5 Financial instruments and the fair value hierarchy continued
The following table shows the reconciliation from the opening balances to the closing balances for Level-3 fair values.
Subsidiary
partnership
payment
\u00a3m
Put options
of non-
controlling
interests
\u00a3m
Investments
FVPL and
FVOCI
\u00a3m
At 1 January 2021 27.1 99.7 2.3
Payments made (4.7) \u2014 \u2014
Change in put-options recognised in other comprehensive income
1
\u2014 (91.1) \u2014
Additions \u2014 \u2014 0.3
Reclassification from other investment categories \u2014 \u2014 4.3
Gain in fair value recognised in income statement \u2014 \u2014 2.2
Gain in fair value recognised in other comprehensive income \u2014 \u2014 0.1
Discount unwind recognised in the income statement 0.4 \u2014 \u2014
Business disposal (22.8) \u2014 \u2014
At 31 December 2021 \u2014 8.6 9.2
Change in put-options recognised in other comprehensive income \u2014 0.6 \u2014
Additions \u2014 \u2014 2.3
Reclassification from other investment categories \u2014 \u2014 0.4
Gain in fair value recognised in income statement \u2014 \u2014 5.9
Gain in fair value recognised in other comprehensive income \u2014 \u2014 0.2
At 31 December 2022 \u2014 9.2 18.0
1. The option to acquire the non-controlling interest in AXELOS Limited expired without being exercised on 28 February 2021, and the related liability was de-recognised
4.5.3 Borrowings
Details of the Group\u2019s current RCF facility are shown in the above liquidity section (see note 4.5.2b).
Borrowing costs of \u00a32.4m were capitalised in the year (2021: \u00a31.9m). At 31 December 2022, the Group\u2019s private placement loan note series
had a GBP equivalent underlying carrying value of \u00a3260.5m (2021: \u00a3484.8m) (see note 4.5.2a) analysed as follows:
Maturity Denomination
Interest rate
%
Nominal value
Ccy\u2019m
27 October 2023 GBP 2.520 27.5
22 January 2025 GBP 3.540 7.4
22 April 2025 GBP 3.670 22.3
27 October 2026 GBP 2.770 18.6
22 January 2027 GBP 3.580 23.8
Total GBP denominated GBP 99.6
22 January 2023 USD 3.450 39.4
27 October 2023 USD 3.370 17.8
22 January 2025 USD 3.650 74.3
27 October 2026 USD 3.590 19.3
22 January 2027 USD 3.800 27.5
Total USD denominated
1
USD 178.3
10 November 2027 EUR 3.625 53.4
Total euro denominated
2
EUR 53.4
1. USD denominated loan notes have a GBP equivalent underlying carrying value of \u00a3117.2m. The Group has entered into cross-currency interest rate swaps for the USD issues to achieve a
floating rate of interest based on SONIA. Further disclosure on the Group\u2019s use of hedges is included in note 4.2.
2. Euro denominated loan notes have a GBP equivalent underlying carrying value of \u00a345.8m.
Section 4: Capital structure and financing costs continued
4.5 Financial instruments and the fair value hierarchy continued
4.5.4 Cash, cash equivalents and overdrafts
The Group has a notional cash pool under which the bank may net cash balances with overdrafts held by other Group companies in the
arrangements. The overdraft balances shown below are fully offset by credit balances in the same arrangement. The Group\u2019s gross cash
position is shown in the table below:
2022
\u00a3m
2021
\u00a3m
Cash and cash equivalents 396.8 317.6
Overdrafts (219.6) (231.9)
Cash, net of overdrafts, included in disposal group assets and liabilities held for sale \u2014 15.8
Cash, cash equivalents and overdrafts 177.2 101.5
4.6 Issued share capital
Allotted, called up and fully paid
2022
\u2116 m
2021
\u2116 m
2022
\u00a3m
2021
\u00a3m
Ordinary shares of 2 1/15p each
At 1 January 1,684.1 1,671.1 34.8 34.5
Issue of share capital \u2014
13.0
\u2014
0.3
At 31 December 1,684.1 1,684.1 34.8 34.8
Share premium
2022
\u00a3m
2021
\u00a3m
Ordinary shares of 2 1/15p each
At 1 January 1,145.5 1,143.3
VAT refund on rights issue issuance costs \u2014 2.2
At 31 December 1,145.5 1,145.5
In 2018 the Group offered a rights issue to existing shareholders, raising \u00a3700.7m less issuance costs of \u00a338.0m, which was capitalised to
share capital and share premium. The issuance costs included VAT that was, at the time, treated as irrecoverable. In 2021 it was agreed with
HMRC that \u00a32.2m of this VAT was recoverable and was refunded to the Group.
Treasury shares
2022
\u2116 m
2021
\u2116 m
2022
\u00a3m
2021
\u00a3m
Ordinary shares of 2 1/15p
At 1 January \u2014 2.3 \u2014 (0.1)
Issued on exercise of share options \u2014 (2.3) \u2014 0.1
At 31 December \u2014 \u2014 \u2014 \u2014
During the year, the Group did not purchase any treasury shares (2021: none) and did not allot nor issue any treasury shares (2021: 2,299,955
whose aggregate nominal value was \u00a347,532). The total consideration received in respect of the shares allotted during 2021 was \u00a3nil.
Employee benefit trust shares
2022
\u2116 m
2021
\u2116 m
2022
\u00a3m
2021
\u00a3m
Ordinary shares of 2 1/15p
At 1 January 18.1 12.6 (8.0) (11.1)
Shares purchased \u2014 13.0 \u2014 (0.3)
Issued on exercise of share options (8.8) (7.5) 3.8 3.4
At 31 December 9.3 18.1 (4.2) (8.0)
The Group will use shares held in the Employee Benefit Trust (EBT) shares to satisfy future requirements for shares under the Group\u2019s share
option and long-term incentive plans. On 19 April 2021, 13m ordinary 2 1/15p shares (2021: nil) were allotted to the EBT for an aggregate
nominal value of \u00a3268,667 to satisfy exercises under the Group\u2019s share plans. The total consideration received in respect of these shares was
\u00a3268,667. During the year, 8,770,217 (2021: 7,560,173) shares with a value of \u00a33.8m (2021: \u00a33.4m) were transferred out of the EBT to satisfy
exercises under the Group's share option and long-term incentive plans. The total consideration received in respect of these shares was \u00a3nil
(2021: \u00a3nil).
The Group has an unexpired authority to repurchase up to 10% of its issued share capital.
Section 4: Capital structure and financing costs continued
4.7 Group composition and non-controlling interests
The Group\u2019s subsidiaries are listed in notes 7.3.4 and 7.3.17 of the Parent Company financial statements on pages 219 and 224 to 227.
The Group holds a majority of the voting rights in all of its subsidiaries and the directors have determined that, other than the entity commented
on below, in each case the Group exercises de facto control.
On 23 September 2014, the Secretary of State for the Department for Energy and Climate Change granted Smart DCC Limited (DCC), a
wholly-owned subsidiary of the Group, a licence to establish and manage the smart metering communications infrastructure, governed by the
Smart Energy Code. Each year the Group reassess whether it has control over DCC as required under IFRS 10. The Group\u2019s ability to control
the relevant activities of DCC is restricted by DCC\u2019s operating licence. The power that the Group has over DCC\u2019s relevant activities by virtue of
owning it is limited (given the restrictions in the licence). That power is held by the board of DCC where the Group has minority representation
in compliance with the licence. Consequently, the Group has not consolidated DCC within its Group financial statements. The disclosure of
related party transactions with DCC is included in note 6.1.
Section 4: Capital structure and financing costs continued
4.7 Group composition and non-controlling interests
The Group\u2019s subsidiaries are listed in notes 7.3.4 and 7.3.17 of the Parent Company financial statements on pages 219 and 224 to 227.
The Group holds a majority of the voting rights in all of its subsidiaries and the directors have determined that, other than the entity commented
on below, in each case the Group exercises de facto control.
On 23 September 2014, the Secretary of State for the Department for Energy and Climate Change granted Smart DCC Limited (DCC), a
wholly-owned subsidiary of the Group, a licence to establish and manage the smart metering communications infrastructure, governed by the
Smart Energy Code. Each year the Group reassess whether it has control over DCC as required under IFRS 10. The Group\u2019s ability to control
the relevant activities of DCC is restricted by DCC\u2019s operating licence. The power that the Group has over DCC\u2019s relevant activities by virtue of
owning it is limited (given the restrictions in the licence). That power is held by the board of DCC where the Group has minority representation
in compliance with the licence. Consequently, the Group has not consolidated DCC within its Group financial statements. The disclosure of
related party transactions with DCC is included in note 6.1.
Section 5: Employee benefits
This section details employee related items that are not explained elsewhere in the financial statements.
In this section you will find disclosures about:
5.1 Share-based payment plans
5.2 Pensions
5.3 Employee benefit expense
Denotes accounting policies
Denotes significant accounting judgements, estimates and assumptions
Key highlights
Additional funding into
the defined benefit schemes Net defined benefit pension surplus
(2021: \u00a3155.5m) (2021: surplus \u00a35.8m)
Employee benefit expense
(2021: \u00a31,767.1m)
The net defined benefit pension position on an accounting basis moved from a small net asset at the start of the year to a larger net asset by
31 December 2022. As part of the deficit funding plan \u00a338.6m of additional funding was paid into the defined benefit schemes.
Net defined benefit pension asset
2022
\u00a3m
2021
\u00a3m
Movement
\u00a3m
Defined benefit obligation (1,136.1) (1,791.5) 655.4
Fair value of plan assets 1,175.7 1,797.3 (621.6)
Net defined pension asset after effect of asset ceiling limit 39.6 5.8 33.8
The main reason for the movement in the net defined benefit pension position was the deficit funding contributions (\u00a338.6m) paid into the
Capita Pension and Life Assurance Scheme (CPLAS) (plus a net \u00a30.2m deficit funding contribution in respect of other schemes). Both the
value attributed to the pension liabilities and the value of the assets fell materially over the year predominantly due to the material increase in
the yields available on both long-dated Government and corporate bonds. Due to the investment strategy adopted by the CPLAS Trustee
Board the impact of these changes has been broadly hedged so that the value of the assets has moved to a similar degree to the value of the
liabilities. The schemes are highly sensitive to the change in discount rates (with a 0.5% pa change resulting in a c.\u00a387.5m impact) and in
future inflation expectations (with a 0.5% pa change resulting in a c.\u00a348.8m impact).
The CPLAS is the Group\u2019s main defined benefit scheme. The valuation of liabilities for funding purposes (the actuarial valuation) differs to the
valuation for accounting purposes (which are shown in these financial statements) mainly due to different assumptions being used and different
market conditions at the different valuation dates (the effective date for the actuarial valuation is 31 March). The assumptions used for funding
purposes are scheme specific and allow for an appropriate amount of prudence, with the discount rate being based on the actual assets of the
CPLAS. While for accounting purposes the assumptions are determined on a best estimate basis in accordance with IAS 19, with the discount
rate being based on the yields available on high quality corporate bonds of appropriate currency and term. Management estimate that at
31 December 2022 the net asset of the CPLAS scheme was broadly the same on a funding basis (ie the funding assumption principles adopted
for the full actuarial valuation at 31 March 2020) as that on an accounting basis.
Section 5: Employee benefits continued
5.1 Share-based payment plans
The Group operates a number of executive and employee equity-settled share schemes.
Accounting policies
The fair value of the equity instrument granted is measured at grant date and is recognised as an expense over the vesting period, which ends
on the date on which the relevant employees become fully entitled to the award. Fair value is determined using an option pricing model, only
taking into account vesting conditions linked to the price of the shares of the Company (market conditions).
No expense is recognised for awards that do not ultimately vest as a result of not meeting performance or service conditions. Where all service
and performance vesting conditions have been met, the awards are treated as vesting, irrespective of whether or not the market condition is
satisfied, as market conditions have been reflected in the fair value of the equity instruments.
At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has
expired and management\u2019s best estimate of the achievement or otherwise of non-market conditions, the number of equity instruments that will
ultimately vest or, in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement in
cumulative expense since the previous balance sheet date is recognised in the consolidated income statement, with a corresponding
adjustment to equity.
Where the terms of an award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the
original award terms continues to be recognised over the original vesting period adjusted for the incremental fair value of any modification ie the
difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the
modification. No reduction is recognised if this difference is negative.
Where an award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the consolidated
income statement for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or
settlement date is deducted from equity, with any excess over the fair value being treated as an expense in the income statement.
The expense recognised for share-based payments (before tax) in respect of employee services received during the year to 31 December 2022
was \u00a35.4m (2021: \u00a31.2m), all of which arises from equity-settled share based payment transactions. Details of the schemes are as follows:
Deferred annual bonus plan
This scheme is applicable to executive directors. Under this scheme, awards are made annually consisting of only deferred shares, which are
linked to the payout under the annual bonus scheme (details of which are contained in the directors\u2019 remuneration report on pages 99 to 122).
The value of deferred shares is determined by the pay-out under the annual bonus scheme: half of the annual bonus is paid in cash and the
remainder is deferred into shares under the deferred annual bonus plan or the Capita executive plan. Directors have the option to defer up to
100% of their annual bonus into deferred shares or net bonus into a restricted share award. The deferred/restricted shares are held for a period
of three years from the date of award, during which they are not forfeitable, except in the case of dismissal for gross misconduct.
The weighted average share price of options at the date of exercise in 2022 was \u00a30.22 (2021: \u00a30.33). The weighted average share price during
the year was \u00a30.26 (2021: \u00a30.43).
The total cash value of the deferred shares awarded during the year was \u00a30.2m (2021: \u00a3nil).
Long-term incentive plans (LTIPs)
The structure of the Group\u2019s LTIP schemes was approved at the Company\u2019s AGM in 2017. From 2021, no new awards will be granted under
the LTIP although the 2020 awards are yet to vest.
For the 2019 award, 75% of the award was equally weighted between free cash flow, EBIT margin and organic revenue growth, with the
remaining 25% split equally between customer satisfaction and employee engagement, measured over a three-year period. Threshold vesting
(25%) for each measure is dependent upon: free cash flow reaching \u00a3190m; EBIT margin exceeding 9%; organic revenue growth to \u00a33,900m;
six point positive swing in NPS for both customer satisfaction and employee engagement. Target vesting (50%) for each measure is dependent
upon: free cash flow reaching \u00a3210m; EBIT margin exceeding 10%; organic revenue growth to \u00a33,950m; eight point positive swing in NPS for
both customer satisfaction and employee engagement. Maximum vesting (100%) for each measure is dependent upon: free cash flow reaching
\u00a3250m; EBIT margin of 12%; organic revenue growth to \u00a34,050m; 12 point positive swing in net promoter score (NPS) for both customer
satisfaction and employee engagement. Awards are also subject to an underpin based on an assessment of underlying financial and
operational performance.
The 2020 award is split into three equal tranches that vest on the first, second and third anniversary of the grant date. The first tranche in 2020
was subject to a retention element which will vest in full on each annual vesting date, with the remaining 50% subject to a performance
condition of net debt. Threshold vesting (25%) is dependent on net debt falling to \u00a3872m, target vesting (50%) is dependent on net debt falling
to \u00a3822m and maximum vesting (100%) is dependent on net debt being below \u00a3772m. Tranches 2 and 3 are subject to the retention element
only apart from the CEO\u2019s award which is subject to relative TSR and responsible business scorecard measures.
Details of the LTIP awards made to executive directors over the same period are set out in the directors\u2019 remuneration report, on page 115.
All of the above awards are subject to a performance underpin \u2013 assessment of the underlying financial and operational performance of Capita
over the performance period.
Section 5: Employee benefits continued
5.1 Share-based payment plans
The Group operates a number of executive and employee equity-settled share schemes.
Accounting policies
The fair value of the equity instrument granted is measured at grant date and is recognised as an expense over the vesting period, which ends
on the date on which the relevant employees become fully entitled to the award. Fair value is determined using an option pricing model, only
taking into account vesting conditions linked to the price of the shares of the Company (market conditions).
No expense is recognised for awards that do not ultimately vest as a result of not meeting performance or service conditions. Where all service
and performance vesting conditions have been met, the awards are treated as vesting, irrespective of whether or not the market condition is
satisfied, as market conditions have been reflected in the fair value of the equity instruments.
At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has
expired and management\u2019s best estimate of the achievement or otherwise of non-market conditions, the number of equity instruments that will
ultimately vest or, in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement in
cumulative expense since the previous balance sheet date is recognised in the consolidated income statement, with a corresponding
adjustment to equity.
Where the terms of an award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the
original award terms continues to be recognised over the original vesting period adjusted for the incremental fair value of any modification ie the
difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the
modification. No reduction is recognised if this difference is negative.
Where an award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the consolidated
income statement for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or
settlement date is deducted from equity, with any excess over the fair value being treated as an expense in the income statement.
The expense recognised for share-based payments (before tax) in respect of employee services received during the year to 31 December 2022
was \u00a35.4m (2021: \u00a31.2m), all of which arises from equity-settled share based payment transactions. Details of the schemes are as follows:
Deferred annual bonus plan
This scheme is applicable to executive directors. Under this scheme, awards are made annually consisting of only deferred shares, which are
linked to the payout under the annual bonus scheme (details of which are contained in the directors\u2019 remuneration report on pages 99 to 122).
The value of deferred shares is determined by the pay-out under the annual bonus scheme: half of the annual bonus is paid in cash and the
remainder is deferred into shares under the deferred annual bonus plan or the Capita executive plan. Directors have the option to defer up to
100% of their annual bonus into deferred shares or net bonus into a restricted share award. The deferred/restricted shares are held for a period
of three years from the date of award, during which they are not forfeitable, except in the case of dismissal for gross misconduct.
The weighted average share price of options at the date of exercise in 2022 was \u00a30.22 (2021: \u00a30.33). The weighted average share price during
the year was \u00a30.26 (2021: \u00a30.43).
The total cash value of the deferred shares awarded during the year was \u00a30.2m (2021: \u00a3nil).
Long-term incentive plans (LTIPs)
The structure of the Group\u2019s LTIP schemes was approved at the Company\u2019s AGM in 2017. From 2021, no new awards will be granted under
the LTIP although the 2020 awards are yet to vest.
For the 2019 award, 75% of the award was equally weighted between free cash flow, EBIT margin and organic revenue growth, with the
remaining 25% split equally between customer satisfaction and employee engagement, measured over a three-year period. Threshold vesting
(25%) for each measure is dependent upon: free cash flow reaching \u00a3190m; EBIT margin exceeding 9%; organic revenue growth to \u00a33,900m;
six point positive swing in NPS for both customer satisfaction and employee engagement. Target vesting (50%) for each measure is dependent
upon: free cash flow reaching \u00a3210m; EBIT margin exceeding 10%; organic revenue growth to \u00a33,950m; eight point positive swing in NPS for
both customer satisfaction and employee engagement. Maximum vesting (100%) for each measure is dependent upon: free cash flow reaching
\u00a3250m; EBIT margin of 12%; organic revenue growth to \u00a34,050m; 12 point positive swing in net promoter score (NPS) for both customer
satisfaction and employee engagement. Awards are also subject to an underpin based on an assessment of underlying financial and
operational performance.
The 2020 award is split into three equal tranches that vest on the first, second and third anniversary of the grant date. The first tranche in 2020
was subject to a retention element which will vest in full on each annual vesting date, with the remaining 50% subject to a performance
condition of net debt. Threshold vesting (25%) is dependent on net debt falling to \u00a3872m, target vesting (50%) is dependent on net debt falling
to \u00a3822m and maximum vesting (100%) is dependent on net debt being below \u00a3772m. Tranches 2 and 3 are subject to the retention element
only apart from the CEO\u2019s award which is subject to relative TSR and responsible business scorecard measures.
Details of the LTIP awards made to executive directors over the same period are set out in the directors\u2019 remuneration report, on page 115.
All of the above awards are subject to a performance underpin \u2013 assessment of the underlying financial and operational performance of Capita
over the performance period.
Section 5: Employee benefits continued
5.1 Share-based payment plans continued
Capita Executive Plan 2021
The Capita Executive Plan was approved by shareholders at the 2021 AGM. Under this plan, restricted share awards (RSAs) are granted to
executives.
With the exception of the executive directors, RSAs granted in 2021 and 2022 are split into three equal tranches that may vest on the first,
second and third anniversary of the grant date. The awards are not subject to a performance underpin.
Details of the Capita Executive Plan RSAs made to executive directors and the associated underpins are set out in the directors\u2019 remuneration
report, on page 116.
2022
\u2116 m
2021
\u2116 m
Outstanding at 1 January 46.4 48.5
Awarded during the year 28.5 15.8
Exercised (8.8) (9.8)
Forfeited (24.4) (8.1)
Outstanding at 31 December 41.7 46.4
Exercisable at 31 December \u2014 \u2014
The weighted average remaining contractual life of the above shares outstanding at 31 December 2022 was 1.3 years (2021: 1.0 years).
All schemes
The fair value of the options granted/awarded during the year was \u00a30.22 per share (2021: \u00a30.41 per share). None of the existing option
schemes have exercise prices.
The fair value for current share scheme issues is effectively the market price of a Capita share at the date of grant. Accordingly, no
assumptions have been disclosed.
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected
volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.
5.2 Pensions
Accounting policies
Defined contribution pension schemes
The Group maintains a number of defined contribution pension schemes and for these schemes the Group has no further payment obligations
once the contributions have been paid. The contributions are recognised as an employee benefit expense in the consolidated income
statement as the related service is provided and as they fall due.
Defined benefit pension schemes
In addition, the Group operates a defined benefit pension scheme and participates in a number of other defined benefit pension schemes, all of
which require contributions to be made to separate trustee-administered funds. The costs of providing benefits under these schemes are
determined separately for each scheme using the projected unit credit method, which attributes entitlement to benefits to the current period (to
determine current service cost) and to the current and prior periods (to determine the present value of the defined benefit obligation) and is
based on actuarial advice. Past service costs are recognised immediately in the consolidated income statement.
When a settlement (eliminating all obligations for benefits already accrued) or a curtailment (reducing future obligations as a result of a material
reduction in the scheme membership or a reduction in future entitlement) occurs, the obligation and related plan assets are remeasured using
current actuarial assumptions and the resultant gain/loss recognised in the consolidated income statement during the period in which the
settlement or curtailment occurs.
Remeasurements of the net defined benefit asset/liability, which comprise actuarial gains and losses, the return on plan assets (excluding
interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income and will not
be reclassified to the consolidated income statement. The Group generally determines the net interest expense/income on the net defined
benefit asset/liability for the year by applying the discount rate used to measure the defined benefit obligation at the beginning of the year to the
then net defined benefit asset/liability, taking into account any changes in the net defined benefit asset/liability during the year as a result of
contributions and benefit payments. However, due consideration is made to events which require the net interest expense/income on the net
defined benefit asset/liability to be remeasured over the course of the year.
Current and past service costs are charged to operating profit while the net interest cost is included within net finance costs.
The net asset/(liability) in the consolidated balance sheet with respect to the defined benefit pension schemes comprises the total for each
scheme, or group of schemes, of the present value of the defined benefit obligation (using a discount rate based on high quality corporate
bonds), less the fair value of plan assets out of which the obligations are to be settled directly. The policy to determine fair value of plan assets
is detailed in the note below. The value of a net pension benefit asset is restricted to the present value of any amount the Group expects to
recover by way of refunds from the plan or reductions in the future contributions.
Section 5: Employee benefits continued
5.2 Pensions continued
Significant accounting judgements, estimates and assumptions
The measurement of defined benefit obligations \u2013 the accounting cost of these benefits and the present value of pension liabilities involve
judgements about uncertain events including such factors as the life expectancy of members, the salary progression of current employees,
price inflation and the discount rate used to calculate the net present value of the future pension payments. The Group uses estimates for all of
these factors in determining the pension costs and liabilities incorporated in the consolidated financial statements. The assumptions reflect
historical experience and judgement regarding future expectations.
The Group continued to set RPI inflation in accordance with the market break-even expectations less an inflation risk premium. The inflation
risk premium has remained at 0.25% pa. For CPI, the Group retained the assumed difference between RPI and CPI at an average of 0.65%pa.
Short-term inflation expectations continued to rise due to the global economic recovery from the initial phase of Covid-19, combined with supply
constraints in certain sectors such as energy. Current inflation levels exceed 10% pa. This will have an impact on pension increases that are
linked to inflation and this impact, where applicable, has been reflected in the disclosures. It should be noted that a material proportion of
pension increases are capped (at different levels, but the main cap is 5% pa) with some caps applying annually and others applying over a
period of years.
The impact of Covid-19 on the effects of future life expectancy continues to be uncertain. The pandemic is likely to have an impact on the
setting of appropriate life expectancy assumptions and models for future improvements will need to consider whether the experiences in 2020
and 2021 are a short-term phenomenon, and if the pandemic will influence future mortality in other ways. For example, the pressure on health
services may mean that progress against other causes of death such as cancer is slower than previously expected, meaning an assumption of
a lower rate of mortality improvements might be appropriate. Alternatively, the surviving population may be in better health than those dying
from Covid-19, meaning that it might be expected that the remaining members live slightly longer. It is still too early to draw conclusions as to
what impact Covid-19 might have on future life expectancy; however, some allowance has been reflected for actual mortality experienced in
2020 and 2021 by making a refinement in an initial addition parameter used in the future mortality improvement assumptions from 0.5% to
0.25% (which makes an allowance for a decrease in initial rates of longevity improvement stemming from Covid-19) and which results in the life
expectancy reducing by around 0.1 years (around 0.4% of liabilities).
Pension expense included in the consolidated income statement
2022
\u00a3m
2021
\u00a3m
Defined contribution scheme 55.2 60.2
Defined benefit schemes
Current service cost 4.4 6.3
Administration costs 3.9 3.5
Past service cost 0.6 (0.2)
Effect of settlements 0.1 (0.7)
Interest cost (3.6) 1.5
Total defined benefit schemes 5.4 10.4
Total charged to profit before tax in the consolidated income statement 60.6 70.6
At 31 December 2022, retirement obligations were disclosed in relation to 9 (2021: 10) defined benefit pension schemes. The main defined
benefit scheme is the Capita Pension and Life Assurance Scheme.
The Capita Pension and Life Assurance Scheme (CPLAS)
CPLAS is the Group\u2019s main defined benefit scheme, which closed to future accrual for most members in 2017 (with around 200 members
continuing to accrue benefits \u2013 out of a total membership of around 16,600 members). Details of the CPLAS and other schemes net surplus/
(deficit) position are given at the bottom of the table below which shows the movements from the opening to the closing balance of the net
defined benefit asset/(liability). Events have occurred in the CPLAS that has led to its income statement being remeasured during the year.
Responsibility for the operation and governance of the CPLAS lies with a corporate Trustee which is independent of the Group. The Trustee
Board is required by law to act in the interest of the CPLAS\u2019s beneficiaries in accordance with the rules of the CPLAS and relevant legislation
(which includes the Pension Schemes Act 1993, the Pensions Act 1995 and the Pensions Act 2004). The nature of the relationship between
the Group and the Trustee Board is also governed by the rules of the CPLAS and relevant legislation. The Trustee Board is chaired by an
independent Trustee.
The assets of the CPLAS are held in a separate fund (administered by the Trustee Board) to meet long-term pension liabilities to beneficiaries.
The Trustee Board invest the assets in accordance with their Statement of Investment Principles, which is regularly reviewed. During 2021, the
Trustee Board delegated investment strategy decisions to a fiduciary manager, however, the Trustee Board maintained overall oversight of the
investment strategy.
A full actuarial valuation of the scheme is carried out every three years by an independent actuary for the Trustee Board, with the last full
actuarial valuation carried out at 31 March 2020. The purpose of that valuation is to design a funding plan to ensure that the CPLAS has
sufficient assets available to meet future benefit payments, based on assumptions agreed between the Trustee Board and the Group. The
31 March 2020 actuarial valuation showed a funding deficit of \u00a3182.2m (31 March 2017: \u00a3185.0m). This equates to a funding level of 89.0%
(31 March 2017: 86%).
Section 5: Employee benefits continued
5.2 Pensions continued
Significant accounting judgements, estimates and assumptions
The measurement of defined benefit obligations \u2013 the accounting cost of these benefits and the present value of pension liabilities involve
judgements about uncertain events including such factors as the life expectancy of members, the salary progression of current employees,
price inflation and the discount rate used to calculate the net present value of the future pension payments. The Group uses estimates for all of
these factors in determining the pension costs and liabilities incorporated in the consolidated financial statements. The assumptions reflect
historical experience and judgement regarding future expectations.
The Group continued to set RPI inflation in accordance with the market break-even expectations less an inflation risk premium. The inflation
risk premium has remained at 0.25% pa. For CPI, the Group retained the assumed difference between RPI and CPI at an average of 0.65%pa.
Short-term inflation expectations continued to rise due to the global economic recovery from the initial phase of Covid-19, combined with supply
constraints in certain sectors such as energy. Current inflation levels exceed 10% pa. This will have an impact on pension increases that are
linked to inflation and this impact, where applicable, has been reflected in the disclosures. It should be noted that a material proportion of
pension increases are capped (at different levels, but the main cap is 5% pa) with some caps applying annually and others applying over a
period of years.
The impact of Covid-19 on the effects of future life expectancy continues to be uncertain. The pandemic is likely to have an impact on the
setting of appropriate life expectancy assumptions and models for future improvements will need to consider whether the experiences in 2020
and 2021 are a short-term phenomenon, and if the pandemic will influence future mortality in other ways. For example, the pressure on health
services may mean that progress against other causes of death such as cancer is slower than previously expected, meaning an assumption of
a lower rate of mortality improvements might be appropriate. Alternatively, the surviving population may be in better health than those dying
from Covid-19, meaning that it might be expected that the remaining members live slightly longer. It is still too early to draw conclusions as to
what impact Covid-19 might have on future life expectancy; however, some allowance has been reflected for actual mortality experienced in
2020 and 2021 by making a refinement in an initial addition parameter used in the future mortality improvement assumptions from 0.5% to
0.25% (which makes an allowance for a decrease in initial rates of longevity improvement stemming from Covid-19) and which results in the life
expectancy reducing by around 0.1 years (around 0.4% of liabilities).
Pension expense included in the consolidated income statement
2022
\u00a3m
2021
\u00a3m
Defined contribution scheme 55.2 60.2
Defined benefit schemes
Current service cost 4.4 6.3
Administration costs 3.9 3.5
Past service cost 0.6 (0.2)
Effect of settlements 0.1 (0.7)
Interest cost (3.6) 1.5
Total defined benefit schemes 5.4 10.4
Total charged to profit before tax in the consolidated income statement 60.6 70.6
At 31 December 2022, retirement obligations were disclosed in relation to 9 (2021: 10) defined benefit pension schemes. The main defined
benefit scheme is the Capita Pension and Life Assurance Scheme.
The Capita Pension and Life Assurance Scheme (CPLAS)
CPLAS is the Group\u2019s main defined benefit scheme, which closed to future accrual for most members in 2017 (with around 200 members
continuing to accrue benefits \u2013 out of a total membership of around 16,600 members). Details of the CPLAS and other schemes net surplus/
(deficit) position are given at the bottom of the table below which shows the movements from the opening to the closing balance of the net
defined benefit asset/(liability). Events have occurred in the CPLAS that has led to its income statement being remeasured during the year.
Responsibility for the operation and governance of the CPLAS lies with a corporate Trustee which is independent of the Group. The Trustee
Board is required by law to act in the interest of the CPLAS\u2019s beneficiaries in accordance with the rules of the CPLAS and relevant legislation
(which includes the Pension Schemes Act 1993, the Pensions Act 1995 and the Pensions Act 2004). The nature of the relationship between
the Group and the Trustee Board is also governed by the rules of the CPLAS and relevant legislation. The Trustee Board is chaired by an
independent Trustee.
The assets of the CPLAS are held in a separate fund (administered by the Trustee Board) to meet long-term pension liabilities to beneficiaries.
The Trustee Board invest the assets in accordance with their Statement of Investment Principles, which is regularly reviewed. During 2021, the
Trustee Board delegated investment strategy decisions to a fiduciary manager, however, the Trustee Board maintained overall oversight of the
investment strategy.
A full actuarial valuation of the scheme is carried out every three years by an independent actuary for the Trustee Board, with the last full
actuarial valuation carried out at 31 March 2020. The purpose of that valuation is to design a funding plan to ensure that the CPLAS has
sufficient assets available to meet future benefit payments, based on assumptions agreed between the Trustee Board and the Group. The
31 March 2020 actuarial valuation showed a funding deficit of \u00a3182.2m (31 March 2017: \u00a3185.0m). This equates to a funding level of 89.0%
(31 March 2017: 86%).
Section 5: Employee benefits continued
5.2 Pensions continued
As a result of the funding valuation, the Group and the Trustee Board agreed the following plan to eliminate the deficit, effective from 1 July
2021:
2021 2022 2023
2
Deficit contribution
1
\u00a359.0m \u00a330.0m \u00a330.0m
1. The agreed contributions make allowance for additional contributions, totalling c\u00a3113.6m, paid by the Group between 1 April 2020 and 30 June 2021 to meet its obligations under the
previous agreement dated 23 November 2018, to unwind CPLAS\u2019s interest in the Capita Scotland (Pension) Limited Partnership, and in respect of a section 75 debt. The Trustee Board
has agreed with the Group to accelerate the payment of some of the deficit contributions on a pound for pound basis in the event of disposal proceeds being used to fund mandatory
prepayments of debt.
2. In addition, in 2023, the \u00a35.0m held in escrow at 31 December 2022 is expected to be released to CPLAS.
In addition to the above, the Group has agreed to make additional, non-statutory, contributions of \u00a315m each year in 2024, 2025 and 2026 to
meet a secondary funding target. The aim of which is to target, by 2026, the position of having sufficient assets to invest in a portfolio of low risk
assets with a low dependency covenant that will generate income to pay members\u2019 benefits as they fall due.
The next full actuarial valuation is due to be carried out with an effective date of 31 March 2023 and as part of that valuation the contribution
requirements will be reviewed, and if necessary, amended. For the purpose of these accounts, an independent qualified actuary projected the
results of the 31 March 2020 actuarial valuation to 31 December 2022 taking account of the relevant accounting requirements.
Approximate funding updates are produced at each scheme anniversary when a full actuarial valuation is not being undertaken. The most
recent of these, at 31 March 2022, showed a funding level of 104% on a Technical Provisions basis.
The Group expects to contribute around \u00a352m to the CPLAS during 2023. This includes the acceleration of agreed deficit contributions on a
pound for pound basis as noted above.
Other defined benefit schemes
The total employer contributions to the \u2018Other\u2019 schemes during 2023 are estimated to be \u00a33m.
Admitted Body arrangement
For the Admitted Body scheme, under which benefits continued to accrue until the contract ceased on 16 January 2020, the Group was
required to pay regular contributions as decided by the Scheme Actuary and as detailed in the scheme\u2019s Schedule of Contributions. On
2 February 2022 the scheme confirmed that, in accordance with their funding strategy statement, a cessation valuation at 16 January 2020 had
been carried out and an exit credit payment of \u00a3192,587 was due from the scheme to the Group. The payment was received by the Group on
17 March 2022 and no further amounts are due to the Group with the scheme\u2019s assessed liability to the Group now settled.
Other UK schemes
\u2022 Three segregated sections in an industry-wide scheme under which defined benefits are not continuing to accrue. The latest full actuarial
valuations (at 31 December 2018) showed that two of these sections were in surplus and therefore no deficit contributions were required. The
third section showed a small deficit but the Trustees agreed that no deficit contributions would be required. The actuarial valuations as at 31
December 2021 are currently in progress and as part of those valuations the contribution requirements will be reviewed, and if necessary,
amended. There is no cross subsidy with other employer sections.
\u2022 Participation in a non-associated multi-employer scheme under which defined benefits are not continuing to accrue. The latest full actuarial
valuation (at 30 September 2020) resulted in the Group requiring to pay deficit contributions of initially \u00a30.4m pa (which increase each year by
5.5% pa) until 2028. If the Group were to cease to be a participating employer in this scheme there would be an exit debt payable. At
30 September 2021, this was estimated at \u00a38.9m.
Overseas defined benefit schemes
The Group is responsible for an Irish defined benefit scheme which is classed as a cross-border scheme
where the beneficiaries of the scheme
have their liabilities, and the trustees hold assets, denominated in euro. The scheme is governed under UK regulations and subject to further
requirements applying to cross-border schemes. There are two segregated sections in the scheme. The latest full actuarial valuation (at
31 March 2022) showed a funding surplus for both the main section and the other section, and consequently, no deficit contributions are
required for either section. There are no members left accruing benefits.
The Group is also responsible for two Swiss schemes that provide defined contribution benefits but with certain guarantees (and are therefore
reported as defined benefit schemes under IAS 19). They are administered and governed through collective foundations which are separate
legal entities. Benefits are continuing to accrue in these schemes.
Additional defined benefit schemes
There are a further 46 (2021: 48) defined benefit pension arrangements in which various Capita businesses participated during 2022. Of these
arrangements, 41 (2021: 41) relate to participation in funded and unfunded public sector schemes (referred to as Admitted Body Arrangements
as described above), however, contractual protections are in place allowing actuarial and investment risk to be passed to the end customer via
recoveries for contributions paid. The nature of these arrangements vary from contract to contract but typically allow for the majority of
contributions payable to the schemes in excess of an initial rate agreed at the inception to be recovered from the end customer, as well as exit
payments (for funded schemes) payable to the schemes at the cessation of the contract, such that the Group\u2019s net exposure to actuarial and
investment risk is immaterial.
It is estimated that around \u00a312m of employer contributions were paid to these 46 schemes during 2022.
Section 5: Employee benefits continued
5.2 Pensions continued
Risks associated with the Group\u2019s pension schemes
The defined benefit pension schemes expose the Group to various risks, with the key risks set out below:
Investment risk: the schemes invest in a wide range of assets with a view to provide long-term investment returns at particular levels. There is
a risk that investment returns are lower than expected which, in isolation, could result in a worsening of the funding position of the schemes.
Interest rate risk: the IAS 19 discount rate is derived based on the yields available on good quality corporate bonds of suitable duration. If
these yields decrease then, in isolation, this would increase the value placed on the IAS 19 obligation and result in a worsening of the funding
position of the schemes.
Inflation risk: the liabilities of the schemes are linked to future levels of inflation. If future inflation is higher than expected then this would result
in the cost of providing the benefits increasing and thereby worsening the funding position of the schemes.
Longevity risk: if members live longer than expected, then pensions will be paid for a longer time which will increase the value placed on the
liabilities and therefore worsen the funding position of the schemes.
Environmental Social and Governance (ESG) risk: ESG risk relates to these issues having a detrimental impact on financial returns. The
fiduciary manager has policies in place to reduce this risk, although there is a higher risk in older externally held assets.
To manage these risks, the Group and the trustees carry out regular assessments of them. For CPLAS, the main defined benefit scheme, the
following actions have been taken:
\u2022 The CPLAS Trustee Board has entered into two bulk annuity contracts with an insurer in respect of a small number of high individual liability
pensioner members (one in 2015 and the second in late 2017) with total value included in the assets at 31 December 2022 of \u00a350.1m
(2021: \u00a367.8m).
\u2022 The CPLAS Trustee Board has entered into a Liability Driven Investment programme. The level of risk that is managed by this programme is
set by various market-related and funding trigger points.
Together, these actions have led to the Trustee Board hedging (interest rate and inflation) a high proportion of the CPLAS\u2019s liabilities. At
31 December 2022 around 95% of CPLAS\u2019s liabilities measured on the Trustee Board\u2019s long-term funding basis was hedged. As the funding
level improves it is planned to further increase the level of hedging. Despite the market volatility during the last quarter of 2022, the CPLAS held
sufficient liquid assets to meet its collateral calls and maintain its hedged positions throughout the year, as well as holding a sufficient buffer
against future adverse movements. The fiduciary manager has confirmed that the investment strategy held up well despite the market volatility
and that they continue as planned with the current strategy (which involved the selling down of more illiquid holdings in any event).
The hedging aims to match the value of the assets to the movement in liabilities (on a funding basis) arising from changes in market
expectations of future inflation rates and future gilt yields. This is to help protect and reduce volatility in funding valuations which are used to
determine the cash contribution requirements to the scheme. As these accounting disclosures use the yields available on corporate bonds to
determine the accounting liabilities, the hedging may not have the same impact against changes as they do on a funding valuation. Although
credit spreads (difference between the yields available on long-dated corporate bonds and long-dated government bonds) have been volatile
over the year, they have fallen back down towards levels seen at the start of the year. This means that the hedge has broadly had the same
impact on the funding position of the scheme and the accounting disclosures at the year-ends.
To illustrate how sensitive the value of the defined benefit obligations is to different market conditions, the table below shows what the resulting
defined benefit obligation would be if the assumptions were changed as shown (assuming all other assumptions remain constant):
Change in assumptions compared with 31 December 2022 actuarial assumptions
Group Total
\u00a3m
Base defined benefit obligation 1,136.1
0.5% pa decrease in discount rate 1,223.6
0.5% pa increase in salary increases 1,137.4
0.5% pa increase in inflation (and related assumption, eg salary and pension increases) 1,184.9
1 year increase in life expectancy 1,169.7
Due to the higher interest rate environment and recent market volatility, please note the change in method used to prepare the sensitivity
analysis (analysis from 0.1% pa to 0.5% pa).
Section 5: Employee benefits continued
5.2 Pensions continued
Risks associated with the Group\u2019s pension schemes
The defined benefit pension schemes expose the Group to various risks, with the key risks set out below:
Investment risk: the schemes invest in a wide range of assets with a view to provide long-term investment returns at particular levels. There is
a risk that investment returns are lower than expected which, in isolation, could result in a worsening of the funding position of the schemes.
Interest rate risk: the IAS 19 discount rate is derived based on the yields available on good quality corporate bonds of suitable duration. If
these yields decrease then, in isolation, this would increase the value placed on the IAS 19 obligation and result in a worsening of the funding
position of the schemes.
Inflation risk: the liabilities of the schemes are linked to future levels of inflation. If future inflation is higher than expected then this would result
in the cost of providing the benefits increasing and thereby worsening the funding position of the schemes.
Longevity risk: if members live longer than expected, then pensions will be paid for a longer time which will increase the value placed on the
liabilities and therefore worsen the funding position of the schemes.
Environmental Social and Governance (ESG) risk: ESG risk relates to these issues having a detrimental impact on financial returns. The
fiduciary manager has policies in place to reduce this risk, although there is a higher risk in older externally held assets.
To manage these risks, the Group and the trustees carry out regular assessments of them. For CPLAS, the main defined benefit scheme, the
following actions have been taken:
\u2022 The CPLAS Trustee Board has entered into two bulk annuity contracts with an insurer in respect of a small number of high individual liability
pensioner members (one in 2015 and the second in late 2017) with total value included in the assets at 31 December 2022 of \u00a350.1m
(2021: \u00a367.8m).
\u2022 The CPLAS Trustee Board has entered into a Liability Driven Investment programme. The level of risk that is managed by this programme is
set by various market-related and funding trigger points.
Together, these actions have led to the Trustee Board hedging (interest rate and inflation) a high proportion of the CPLAS\u2019s liabilities. At
31 December 2022 around 95% of CPLAS\u2019s liabilities measured on the Trustee Board\u2019s long-term funding basis was hedged. As the funding
level improves it is planned to further increase the level of hedging. Despite the market volatility during the last quarter of 2022, the CPLAS held
sufficient liquid assets to meet its collateral calls and maintain its hedged positions throughout the year, as well as holding a sufficient buffer
against future adverse movements. The fiduciary manager has confirmed that the investment strategy held up well despite the market volatility
and that they continue as planned with the current strategy (which involved the selling down of more illiquid holdings in any event).
The hedging aims to match the value of the assets to the movement in liabilities (on a funding basis) arising from changes in market
expectations of future inflation rates and future gilt yields. This is to help protect and reduce volatility in funding valuations which are used to
determine the cash contribution requirements to the scheme. As these accounting disclosures use the yields available on corporate bonds to
determine the accounting liabilities, the hedging may not have the same impact against changes as they do on a funding valuation. Although
credit spreads (difference between the yields available on long-dated corporate bonds and long-dated government bonds) have been volatile
over the year, they have fallen back down towards levels seen at the start of the year. This means that the hedge has broadly had the same
impact on the funding position of the scheme and the accounting disclosures at the year-ends.
To illustrate how sensitive the value of the defined benefit obligations is to different market conditions, the table below shows what the resulting
defined benefit obligation would be if the assumptions were changed as shown (assuming all other assumptions remain constant):
Change in assumptions compared with 31 December 2022 actuarial assumptions
Group Total
\u00a3m
Base defined benefit obligation 1,136.1
0.5% pa decrease in discount rate 1,223.6
0.5% pa increase in salary increases 1,137.4
0.5% pa increase in inflation (and related assumption, eg salary and pension increases) 1,184.9
1 year increase in life expectancy 1,169.7
Due to the higher interest rate environment and recent market volatility, please note the change in method used to prepare the sensitivity
analysis (analysis from 0.1% pa to 0.5% pa).
Section 5: Employee benefits continued
5.2 Pensions continued
Assets and liabilities
Under IAS 19, plan assets must be valued at their fair value on the balance sheet date. The plan assets are made up of quoted and unquoted
investments, and asset valuations have been sourced from the respective scheme\u2019s investment managers and custodians, based on their
pricing sources and methodologies. Unquoted investments require more judgement because their values are not directly observable. The
assumptions used in valuing unquoted investments are affected by current market conditions which could result in changes in fair value after
the measurement date.
For the main asset categories:
\u2022 Equities listed on recognised stock exchanges are valued at closing bid prices.
\u2022 Bonds are measured using a combination of broker quotes and pricing models making assumptions for credit and market risks and market
yield curves.
\u2022 Properties are valued on the basis of an open market value or are valued using models based on discounted cash flow techniques.
\u2022 Assets in investment funds are valued at fair value which is typically the net asset value provided by the investment manager.
\u2022 Certain unlisted investments are valued using a model based valuation such as discounted cash flow.
\u2022 The value of bulk annuity contracts has been assessed by discounting the projected cash flows payable under the contracts (projected by an
actuary, consistent with the terms of the contract) and is equal to the corresponding liability calculated by reference to the IAS 19
assumptions.
The assets and liabilities of all of the defined benefit pension schemes (excluding additional voluntary contributions) at 31 December are:
Group total
2022 2021
Quoted
\u00a3m
Unquoted
\u00a3m
Total
\u00a3m
Quoted
\u00a3m
Unquoted
\u00a3m
Total
\u00a3m
Scheme assets at fair value:
Equities:
\u2013 UK 0.2 2.5 2.7 1.0 3.1 4.1
\u2013 Overseas 2.0 24.8 26.8 7.0 76.5 83.5
\u2013 Private 0.2 \u2014 0.2 0.5 \u2014 0.5
2.4 27.3 29.7 8.5 79.6 88.1
Debt securities:
\u2013 UK Government 482.0 \u2014 482.0 789.1 0.2 789.3
\u2013 UK Corporate 0.4 11.6 12.0 1.1 7.6 8.7
\u2013 Overseas Government 10.1 11.4 21.5 2.6 53.4 56.0
\u2013 Overseas Corporate 0.9 101.0 101.9 1.2 67.8 69.0
\u2013 Emerging Markets 0.5 27.3 27.8 1.4 \u2014 1.4
\u2013 Private Debt \u2014 134.5 134.5 \u2014 129.5 129.5
\u2013 Secured Loans \u2014 39.8 39.8 0.1 \u2014 0.1
493.9 325.6 819.5 795.5 258.5 1,054.0
Property 2.6 88.2 90.8 2.8 97.5 100.3
Infrastructure 1.5 \u2014 1.5 1.5 \u2014 1.5
Credit Funds 2.7 \u2014 2.7 3.2 160.1 163.3
Hedge Funds \u2014 2.1 2.1 \u2014 54.1 54.1
Absolute Return Funds 0.1 \u2014 0.1 0.8 \u2014 0.8
Diversified Growth Funds \u2014 \u2014 \u2014 \u2014 79.5 79.5
Insurance Contracts \u2014 71.4 71.4 \u2014 86.8 86.8
Cash 34.3 133.2 167.5 148.1 11.2 159.3
Other (8.5) (1.1) (9.6) 1.2 8.4 9.6
32.7 293.8 326.5 157.6 497.6 655.2
Total 529.0 646.7 1,175.7
961.6 835.7
1,797.3
Present value of scheme liabilities
(before effect of asset ceiling limit) (1,136.0) (1,789.2)
Net surplus
(before effect of asset ceiling limit) 39.7 8.1
Effect of asset ceiling limit (0.1) (2.3)
Present value of scheme liabilities
(after effect of asset ceiling limit) (1,136.1) (1,791.5)
Net surplus
(after effect of asset ceiling limit) 39.6 5.8
* Some investments are in funds which are in themselves not traded in active markets. Please also note a change in asset classification for CPLAS\u2019s Credit Funds (\u00a393.0m) and Diversified
Growth Funds (\u00a356.8m) as at 31 December 2022 which are now classified on a \u2018look-through\u2019 basis.
Section 5: Employee benefits continued
5.2 Pensions continued
The CPLAS Trustee Board invests in Liability Driven Investments (LDIs) as part of a risk hedging strategy. The aim of the strategy is to match
the value of the assets to the movement in liabilities (on a funding basis) arising from changes in market expectations of future inflation rates
and future gilt yields. In order to achieve this, LDIs invest in a variety of instruments including gilts, synthetic gilts (combination of repurchase
agreement, reverse repurchase agreements and total return swaps) and cash. In the table above, the LDI as at 31 December 2022
(approximately \u00a3484.3m) has been mapped as 97.0% Quoted UK Government Bonds, 1.7% Quoted Overseas Government Bonds, 3.1%
Quoted Cash and -1.8% Quoted Other.
The assets do not include any directly owned financial instruments issued by the Group.
Within the Private Debt allocation, approximately \u00a397.3m relates to lagged valuations as at 30 September 2022. Allowance has been made for
broad market movements and distributions over the period to 31 December 2022.
In accordance with the CPLAS Trustee Board\u2019s focus on financially material considerations, it is acknowledged that Environment, Social and
Governance (ESG) factors can impact security prices. The CPLAS Trustee Board has discussed their views on ESG factors, and considered
the Group\u2019s perspective, and developed responsible investment beliefs. These can be found in the CPLAS\u2019s Statement of Investment
Principles (which can be found at https://www.cplas-pension.co.uk/library).
IFRIC 14
The Group has considered the impact of IFRIC 14 on the various schemes (in relation to either recognising a surplus or allowing for the impact
of any funding commitments made) and has concluded, based on the interpretation of the rules for each of the schemes, that IFRIC 14 would
marginally increase the deficits shown at this balance sheet date for only one scheme, which is reflected in the balance sheet position. For the
CPLAS, the Group\u2019s main defined benefit scheme, IFRIC 14 would not limit the surplus or increase the deficits shown at the balance sheet date
because the Group has an unconditional right to a refund at some point during the life of the scheme.
Reconciliation of retirement benefits
Explanation of constituents of the consolidated income statement.
The cost of providing the pension scheme during the year is broken down as follows, with due consideration being made for events which
require the income statement to be re-measured over the course of the year:
\u2022 Service cost is the cost to the Group of future benefits earned by contributing members over the current financial period.
\u2022 Past service cost represents the change in the present value of scheme liabilities in the current period in relation to prior years\u2019 service.
\u2022 Administration costs are those entailed by the pension schemes over the current period.
\u2022 Interest expense/(income) is made up of the interest on pension liabilities and assets over the current period generally based on the discount
rate adopted at the start of the period. An allowance for interest on the asset ceiling is recognised where applicable: approximately \u00a30.1m as
at 31 December 2022 (\u00a3nil as at 31 December 2021).
Section 5: Employee benefits continued
5.2 Pensions continued
The CPLAS Trustee Board invests in Liability Driven Investments (LDIs) as part of a risk hedging strategy. The aim of the strategy is to match
the value of the assets to the movement in liabilities (on a funding basis) arising from changes in market expectations of future inflation rates
and future gilt yields. In order to achieve this, LDIs invest in a variety of instruments including gilts, synthetic gilts (combination of repurchase
agreement, reverse repurchase agreements and total return swaps) and cash. In the table above, the LDI as at 31 December 2022
(approximately \u00a3484.3m) has been mapped as 97.0% Quoted UK Government Bonds, 1.7% Quoted Overseas Government Bonds, 3.1%
Quoted Cash and -1.8% Quoted Other.
The assets do not include any directly owned financial instruments issued by the Group.
Within the Private Debt allocation, approximately \u00a397.3m relates to lagged valuations as at 30 September 2022. Allowance has been made for
broad market movements and distributions over the period to 31 December 2022.
In accordance with the CPLAS Trustee Board\u2019s focus on financially material considerations, it is acknowledged that Environment, Social and
Governance (ESG) factors can impact security prices. The CPLAS Trustee Board has discussed their views on ESG factors, and considered
the Group\u2019s perspective, and developed responsible investment beliefs. These can be found in the CPLAS\u2019s Statement of Investment
Principles (which can be found at https://www.cplas-pension.co.uk/library).
IFRIC 14
The Group has considered the impact of IFRIC 14 on the various schemes (in relation to either recognising a surplus or allowing for the impact
of any funding commitments made) and has concluded, based on the interpretation of the rules for each of the schemes, that IFRIC 14 would
marginally increase the deficits shown at this balance sheet date for only one scheme, which is reflected in the balance sheet position. For the
CPLAS, the Group\u2019s main defined benefit scheme, IFRIC 14 would not limit the surplus or increase the deficits shown at the balance sheet date
because the Group has an unconditional right to a refund at some point during the life of the scheme.
Reconciliation of retirement benefits
Explanation of constituents of the consolidated income statement.
The cost of providing the pension scheme during the year is broken down as follows, with due consideration being made for events which
require the income statement to be re-measured over the course of the year:
\u2022 Service cost is the cost to the Group of future benefits earned by contributing members over the current financial period.
\u2022 Past service cost represents the change in the present value of scheme liabilities in the current period in relation to prior years\u2019 service.
\u2022 Administration costs are those entailed by the pension schemes over the current period.
\u2022 Interest expense/(income) is made up of the interest on pension liabilities and assets over the current period generally based on the discount
rate adopted at the start of the period. An allowance for interest on the asset ceiling is recognised where applicable: approximately \u00a30.1m as
at 31 December 2022 (\u00a3nil as at 31 December 2021).
Section 5: Employee benefits continued
5.2 Pensions continued
All schemes are partly or wholly funded, and the following table shows the components of the movements from the opening to the closing
balances for the net defined benefit obligation:
Group total
Defined benefit obligation Fair value of plan assets Net defined obligation
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
At 1 January (1,791.5) (1,882.3) 1,797.3 1,630.2 5.8 (252.1)
Included in the consolidated income statement:
Current service cost (4.4) (6.3) \u2014 \u2014 (4.4) (6.3)
Administration costs (3.9) (3.5) \u2014 \u2014 (3.9) (3.5)
Past service cost (0.6) 0.2 \u2014 \u2014 (0.6) 0.2
Effect of settlements 0.1 5.5 (0.2) (4.8) (0.1) 0.7
Interest income/(expense)* (44.0) (27.5) 47.6 26.0 3.6 (1.5)
Sub-total in consolidated income statement (52.8) (31.6) 47.4 21.2 (5.4) (10.4)
Included in other comprehensive income:
Actuarial gain/(loss) arising from:
\u2013 demographic assumptions 6.8 (10.7) \u2014 \u2014 6.8 (10.7)
\u2013 financial assumptions 706.1 129.2 \u2014 \u2014 706.1 129.2
\u2013 experience adjustments (50.4) (41.6) \u2014 \u2014 (50.4) (41.6)
\u2013 changes in asset ceiling/minimum liability 2.3 (2.3) \u2014 \u2014 2.3 (2.3)
Return on plan assets excluding interest \u2014 \u2014 (673.7) 34.8 (673.7) 34.8
Sub-total in other comprehensive income 664.8 74.6 (673.7) 34.8 (8.9) 109.4
Employer contributions (0.2) \u2014 48.7 158.9 48.5 158.9
Contributions by employees (1.7) (1.6) 1.7 1.6 \u2014 \u2014
Benefits paid 47.8 48.8 (47.8) (48.8) \u2014 \u2014
Exchange movement - recognised in other comprehensive income (2.5) 0.6 2.1 (0.6) (0.4) \u2014
At 31 December (1,136.1) (1,791.5) 1,175.7 1,797.3 39.6 5.8
Schemes in a net surplus
CPLAS (1,087.0) (1,725.3) 1,126.3 1,732.5 39.3 7.2
Other schemes (15.2) (23.8) 18.6 29.9 3.4 6.1
(1,102.2) (1,749.1) 1,144.9 1,762.4 42.7 13.3
Schemes in a net deficit
Other schemes (33.9) (42.4) 30.8 34.9 (3.1) (7.5)
(33.9) (42.4) 30.8 34.9 (3.1) (7.5)
At 31 December (1,136.1) (1,791.5) 1,175.7 1,797.3 39.6 5.8
*includes impact of asset ceiling on net interest of \u00a30.1m in 2022 (2021: \u00a3nil).
Of the total pension cost of \u00a35.4m (2021: \u00a310.4m), \u00a35.1m (2021: \u00a35.4m) was included in cost of sales, \u00a33.9m (2021: \u00a33.5m) was included in
administrative expenses, and, in net finance costs: \u00a33.6m of net interest income (2021: \u00a31.5m of net interest expense).
Breakdown of liabilities for the CPLAS
Information about the defined benefit obligation for the CPLAS:
Proportion
of overall
liability
%
Duration
(years)
Proportion
of overall
liability
%
Duration
(years)
2022 2022 2021 2021
Active members 6 16.9 5 21.4
Deferred members 59 18.0 63 22.8
Pensioners 35 10.6 32 13.0
Total percentage / average duration 100 15.5 100 19.6
Duration is a weighted average of when benefits are expected to be paid from a pension scheme. It is sensitive to the interest rate used to
calculate it. The increase in yields has acted to reduce the duration of the CPLAS (as less weight is placed of the pension cash flows stretching
far out into the future).
Section 5: Employee benefits continued
5.2 Pensions continued
Financial and demographic assumptions
All schemes
Main assumptions
1
:
2022
%
2021
%
Rate of price inflation \u2013 RPI 3.15 3.30
Rate of price inflation \u2013 CPI 2.50 2.65
Rate of salary increase 3.15 3.30
Rate of increase of pensions in payment
2
:
\u2013 RPI inflation capped at 5% per annum 3.05 3.20
\u2013 RPI inflation capped at 2.5% per annum 2.15 2.20
\u2013 CPI inflation capped at 5% per annum 2.50 2.65
Discount rate 4.75 1.90
Expected take up maximum available tax free cash 85.00 85.00
1. Only the discount rate is relevant to the Admitted Body Scheme. Different assumptions apply to non-UK schemes, for example: the discount rate for the Irish Schemes are 3.8% per annum
and for the Swiss schemes it is 2.2% per annum in 2022.
2. There are other levels of pension increase which apply to particular periods of membership.
The average future life expectancy from age 65 (in years) for mortality tables used to determine scheme liabilities for the various different
schemes at 31 December 2022 and 31 December 2021 are as follows:
Member currently aged 65 (current life expectancy) Member currently aged 45 (life expectancy at 65)
Male Female Male Female
2022 2021 2022 2021 2022 2021 2022 2021
Capita Scheme
1
22.4 22.5 24.3 24.4 22.3 22.4 25.2 25.3
Other Schemes
2
21.1 to 22.7 21.6 to 22.6 23.7 to 24.5 23.5 to 24.4 22.3 to 25.0 22.4 to 24.9 25.2 to 26.5 25.1 to 26.4
1. The assumptions used for the Capita scheme are tailored for each member. The assumptions adopted make allowance for an increase in the longevity in the future (CMI 2021 core model
Sk=7.0) with a long-term rate of improvement of 1.25% p.a., an \u2018A\u2019 parameter of 0.25% for both males and females and no weighting applied to 2020 and 2021 data). The rate for members
currently aged 65 is derived from the pensioner membership and the rate for members reaching age 65 in 20 years' time is derived from non-pensioner membership.
2. This does not apply to the Admitted Body Scheme.
5.3 Employee benefit expense
Accounting policies
Government grants
Government grants are not recognised until there is a reasonable assurance that they Group will comply with the conditions attaching to them
and that the grants will be received. Government grants are recognised in the consolidated income statement on a systematic basis over the
periods in which the Group recognises, as expenses, the related costs for which the grants are intended to compensate. Government grants
that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the
Group with no future related costs are recognised in the consolidated income statement in the period in which they become receivable.
Notes
2022
\u00a3m
2021
\u00a3m
(Re-
presented)
1
Wages and salaries
1
1,536.1 1,540.9
Social security costs 152.4 155.9
Pension costs 64.2 69.1
Share-based payments 5.1 5.4 1.2
1,758.1 1,767.1
1. The 2021 comparative figures have been re-presented to reflect the reclassification of employee contributions from pension costs to wages and salaries.
During 2021, the Group furloughed employees unable to work as a result of the Covid-19 pandemic, and applied to the Coronavirus Job
Retention Scheme (CJRS) operated by the UK Government. Amounts received under CJRS were treated as a government grant and deducted
from the relevant cost in the consolidated income statement. During 2021, the Group claimed \u00a34.9m under CJRS. These amounts are included
within the relevant cost headings in the table above. In May 2022, we announced the Group's intention to repay the amounts received in 2021
under CJRS at the end of the Group's publicly stated disposal programme and no later than the end of June 2023. An accrual has been
recognised for this repayment in the year ended 31 December 2022.
Section 5: Employee benefits continued
5.2 Pensions continued
Financial and demographic assumptions
All schemes
Main assumptions
1
:
2022
%
2021
%
Rate of price inflation \u2013 RPI 3.15 3.30
Rate of price inflation \u2013 CPI 2.50 2.65
Rate of salary increase 3.15 3.30
Rate of increase of pensions in payment
2
:
\u2013 RPI inflation capped at 5% per annum 3.05 3.20
\u2013 RPI inflation capped at 2.5% per annum 2.15 2.20
\u2013 CPI inflation capped at 5% per annum 2.50 2.65
Discount rate 4.75 1.90
Expected take up maximum available tax free cash 85.00 85.00
1. Only the discount rate is relevant to the Admitted Body Scheme. Different assumptions apply to non-UK schemes, for example: the discount rate for the Irish Schemes are 3.8% per annum
and for the Swiss schemes it is 2.2% per annum in 2022.
2. There are other levels of pension increase which apply to particular periods of membership.
The average future life expectancy from age 65 (in years) for mortality tables used to determine scheme liabilities for the various different
schemes at 31 December 2022 and 31 December 2021 are as follows:
Member currently aged 65 (current life expectancy) Member currently aged 45 (life expectancy at 65)
Male Female Male Female
2022 2021 2022 2021 2022 2021 2022 2021
Capita Scheme
1
22.4 22.5 24.3 24.4 22.3 22.4 25.2 25.3
Other Schemes
2
21.1 to 22.7 21.6 to 22.6 23.7 to 24.5 23.5 to 24.4 22.3 to 25.0 22.4 to 24.9 25.2 to 26.5 25.1 to 26.4
1. The assumptions used for the Capita scheme are tailored for each member. The assumptions adopted make allowance for an increase in the longevity in the future (CMI 2021 core model
Sk=7.0) with a long-term rate of improvement of 1.25% p.a., an \u2018A\u2019 parameter of 0.25% for both males and females and no weighting applied to 2020 and 2021 data). The rate for members
currently aged 65 is derived from the pensioner membership and the rate for members reaching age 65 in 20 years' time is derived from non-pensioner membership.
2. This does not apply to the Admitted Body Scheme.
5.3 Employee benefit expense
Accounting policies
Government grants
Government grants are not recognised until there is a reasonable assurance that they Group will comply with the conditions attaching to them
and that the grants will be received. Government grants are recognised in the consolidated income statement on a systematic basis over the
periods in which the Group recognises, as expenses, the related costs for which the grants are intended to compensate. Government grants
that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the
Group with no future related costs are recognised in the consolidated income statement in the period in which they become receivable.
Notes
2022
\u00a3m
2021
\u00a3m
(Re-
presented)
1
Wages and salaries
1
1,536.1 1,540.9
Social security costs 152.4 155.9
Pension costs 64.2 69.1
Share-based payments 5.1 5.4 1.2
1,758.1 1,767.1
1. The 2021 comparative figures have been re-presented to reflect the reclassification of employee contributions from pension costs to wages and salaries.
During 2021, the Group furloughed employees unable to work as a result of the Covid-19 pandemic, and applied to the Coronavirus Job
Retention Scheme (CJRS) operated by the UK Government. Amounts received under CJRS were treated as a government grant and deducted
from the relevant cost in the consolidated income statement. During 2021, the Group claimed \u00a34.9m under CJRS. These amounts are included
within the relevant cost headings in the table above. In May 2022, we announced the Group's intention to repay the amounts received in 2021
under CJRS at the end of the Group's publicly stated disposal programme and no later than the end of June 2023. An accrual has been
recognised for this repayment in the year ended 31 December 2022.
Section 5: Employee benefits continued
5.3 Employee benefit expense continued
The aggregate amount of directors\u2019 remuneration (salary, bonus and benefits) is shown on page 111 of the directors\u2019 remuneration report.
\u2022 The aggregate amount of gains made by directors on exercise of share options was \u00a3119,102 (2021: \u00a3nil) (refer to note 6.1).
\u2022 The remuneration of the highest paid director was \u00a31,767,972 (2021: \u00a31,185,415).
\u2022 Payments have been made to a defined contribution pension scheme on behalf of five directors (2021: four directors). For the
highest paid director, pension contributions of \u00a337,400 (2021: \u00a336,250) were made.
The average number of employees during the year was made up as follows:
2022
Number
2021
Number
Sales 598 766
Administration 3,093 3,259
Operations 47,509 49,305
51,200 53,330
Section 6: Other supporting notes
This section includes disclosures of those items that are not explained elsewhere in the financial statements.
In this section you will find disclosures about:
6.1 Related-party transactions
6.2 Contingent liabilities
6.3 Post balance sheet events
Denotes accounting policies
6.1 Related-party transactions
Compensation of key management personnel
2022
\u00a3m
2021
\u00a3m
Short-term employment benefits 7.6 12.7
Pension \u2014 \u2014
Share-based payments 2.2 0.3
9.8 13.0
Gains on share options exercised in the year by Capita plc executive directors were \u00a3119,102 (2021: \u00a3nil) and by key management personnel
\u00a3396,621 (2021: \u00a31,132,231), totalling \u00a3515,723 (2021: \u00a31,132,231).
During the year, the Group rendered administrative services to Smart DCC Limited (DCC), a wholly-owned subsidiary which is not consolidated
(refer to note 4.7). The Group received \u00a3112.0m (2021: \u00a390.1m) of revenue for these services. The services are procured by DCC on an arm\u2019s
length basis under the DCC licence. The services are subject to review by Ofgem to ensure that all costs are economically and efficiently
incurred by DCC.
Capita Pension and Life Assurance Scheme is a related party of the Group. Transactions with the Scheme are disclosed in note 5.2.
6.2 Contingent liabilities
Contingent liabilities represent potential future cash outflows which are either not probable or cannot be measured reliably.
The Group has provided, through the normal course of its business, performance bonds and bank guarantees of \u00a334.0m (2021: \u00a328.7m).
The Group is reviewing its position in respect of a number of its closed book Life & Pensions contracts. The outcomes and timing of this review,
which are uncertain, could result in the continuation of contracts with amended terms or the termination of contracts. If an operation is
terminated, the Group may incur associated costs, accelerate the recognition of deferred income or the impairment of contract assets.
The Group\u2019s entities are parties to legal actions and claims which arise in the normal course of business. The Group needs to apply judgement
in determining the merit of litigation against it and the chances of a claim successfully being made. It needs to determine the likelihood of an
outflow of economic benefits occurring and whether there is a need to disclose a contingent liability or whether a provision might be required
due to the probability assessment.
At any time there are a number of claims or notifications that need to be assessed across the Group. The disparate nature of the Group\u2019s
entities heightens the risk that not all potential claims are known at any point in time.
6.3 Post balance sheet events
The following events occurred after 31 December 2022, and before the approval of these consolidated financial statements, but have not
resulted in adjustment to the 2022 financial results:
Committed bridge facility
In February 2023, the Group entered into a committed bridge facility of \u00a350m with three of its relationship banks providing additional liquidity
from 1 January 2024. The committed bridge facility has an expiry date of 31 December 2024 and is subject to covenants, which are the same
as those in the Revolving Credit Facility (RCF). Both the RCF and the \u00a350m bridge facility incorporate provisions such that they will partially
reduce in quantum as a consequence of specified transactions including disposals, equity-raises or other refinancing.
",
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"fact-477": {
"value": "This section sets out the Group\u2019s accounting policies relating to these consolidated financial statements as a whole. Where an accounting policy is specific to one note, the policy is described in the note to which it relates. This section also includes details of new accounting standards, amendments and interpretations including their effective dates and explanation on the expected impact to the financial position and performance of the Group. For ease of reference, this symbol has been used to denote any accounting policies included within the notes: Denotes accounting policies These financial statements consolidate those of Capita plc (the Company or the Parent Company) and all of its subsidiaries (the Group). Capita plc is a public limited company incorporated in England and Wales whose shares are publicly traded. The principal activities of the Group are given in the strategic report on pages 16 to 25. These consolidated financial statements of Capita plc for the year ended 31 December 2022 were authorised for issue in accordance with a resolution of the directors on 2 March 2023. These consolidated financial statements are presented in British pounds sterling and all values are rounded to the nearest tenth of a million (\u00a3m) except where otherwise indicated. Statement of compliance These consolidated financial statements have been prepared in accordance with UK-adopted International Financial Reporting Standards (IFRSs) and the Disclosure and Transparency Rules of the UK's Financial Conduct Authority. Basis of consolidation These consolidated financial statements comprise the financial statements of the Group at 31 December each year. Subsidiaries are consolidated from the date on which control is transferred to the Group until control is transferred out of the Group. Where there is a loss of control of a subsidiary, these consolidated financial statements include the results for that part of the reporting year during which Capita plc had control and the profit or loss on disposal is calculated as the difference between the fair value of the consideration received and the carrying amount of the net assets (including goodwill) disposed of. Losses applicable to the non-controlling interests in subsidiaries are attributed to the non-controlling interests even if that results in the non-controlling interests having a deficit balance. Investments in associates are accounted for using the equity method. Under the equity method, the investment in the entity is stated as a one line item at cost plus the investor\u2019s share of retained post-acquisition profits or losses and other changes in net assets less any impairment. Going concern In determining the appropriate basis of preparation of the financial statements for the year ended 31 December 2022, the Board is required to consider whether the Group and Parent Company can continue in operational existence for the foreseeable future. The Board has concluded that it is appropriate to adopt the going concern basis, having undertaken a rigorous assessment of the financial forecasts, key uncertainties, sensitivities, and mitigations as set out below. Accounting standards require that \u2018the foreseeable future\u2019 for going concern assessment covers a period of at least twelve months from the date of approval of these financial statements, although those standards do not specify how far beyond twelve months a Board should consider. In its going concern assessment, the Board has considered the period from the date of approval of these financial statements to 31 August 2024 (\u2018the going concern period\u2019) and which aligns with the expiry of the revolving credit facility (RCF). The base case financial forecasts used in the going concern assessment are derived from the 2023-2024 business plans as approved by the Board in January 2023. The going concern assessment considers the Group\u2019s sources and uses of liquidity and covenant compliance throughout the period under review. The value of the Group\u2019s committed RCF was \u00a3288.4m at 31 December 2022 and it expires on 31 August 2024. In February 2023, the Group executed a committed bridge facility of \u00a350m with three of its relationship banks providing additional liquidity from 1 January 2024. The committed bridge facility has an expiry date of 31 December 2024 and is subject to covenants, which are the same as those in the RCF. Both the RCF and the \u00a350m bridge facility incorporate provisions such that they will partially reduce in quantum as a consequence of specified transactions, including disposals, equity raises or other refinancing. Given the track record of the Group extending the RCF in prior years, including in 2022, and the committed bridge facility executed in February 2023, the Board is confident that the RCF will be extended or refinanced and be of a sufficient quantum well ahead of its expiry in August 2024. Financial position at 31 December 2022 As detailed further in the Chief Financial Officer\u2019s review in the strategic report, as at 31 December 2022 the Group had net debt of \u00a3482.4m (2021: \u00a3879.8m), net financial debt (pre-IFRS 16) of \u00a384.9m (2021: \u00a3431.4m), liquidity of \u00a3405.2m (2021: \u00a3392.4m) and was in compliance with all debt covenants. Board assessment Base case scenario Under the base case scenario, completion of the Group\u2019s transformation programme has simplified and strengthened the business and facilitates further efficiency savings enabling sustainable growth in revenue, profit and cash flow over the medium term. This enables the generation of positive free cash flows, and, when combined with the proceeds from the Board approved disposal programme and available committed facilities allows the Group to manage scheduled debt repayments. The most material sensitivity to the base case is the risk of not delivering the planned revenue growth. As previously announced, the Board\u2019s plan is to establish an optimal capital structure to support the execution of the Group\u2019s strategy and to dispose of businesses that do not align with that strategy. The completion of the disposal programme requires agreement from third parties, and major disposals may be subject to shareholder and lender approval. Such agreements and approvals, are outside the direct control of the Company and as such, the inclusion of the effect of any potential future disposals in the Group\u2019s projections is inappropriate for going concern assessment purposes in accordance with IAS 1 Presentation of Financial Statements. Section 1: Basis of preparation continued The base case projections used for going concern assessment purposes reflect business disposals completed up to the date of approval of these financial statements but do not reflect the benefit of any further disposals that are in the pipeline. The liquidity headroom assessment in the base case projections reflects the Group\u2019s existing committed financing facilities and debt redemptions and does not reflect any potential future refinancing, other than in respect of the current RCF as noted above. The base case financial forecasts demonstrate liquidity headroom and compliance with all debt covenant measures throughout the going concern period to 31 August 2024. Severe but plausible downside scenario In considering severe but plausible downside scenarios, the Board has taken account of the potential adverse financial impacts resulting from the following risks: \u2022 revenue growth falling materially short of plan; \u2022 operating profit margin expansion not being achieved; \u2022 additional inflationary cost impacts which cannot be passed on to customers; \u2022 unforeseen operational issues leading to contract losses and cash outflows; \u2022 increased interest rates; \u2022 reduction in deferred cash consideration in respect of completed disposals; \u2022 non-availability of the Group\u2019s non-recourse receivables financing facility; and \u2022 unexpected financial costs and penalties linked to incidents such as data breaches and/or cyber-attacks. The likelihood of simultaneous crystallisation of the above risks is considered by the directors to be relatively low. Nevertheless in the event that simultaneous crystallisation were to occur, the Group would need to take action to mitigate the risk of insufficient liquidity and covenant headroom. In its assessment of going concern, the Board has considered the mitigations, under the direct control of the Group, that could be implemented including reductions in capital investment, substantially reducing (or removing in full) bonus and incentive payments and significantly reducing discretionary spend. Taking these mitigations into account, the Group\u2019s financial forecasts, in a severe but plausible downside scenario, demonstrate sufficient liquidity headroom and compliance with all debt covenant measures throughout the going concern period to 31 August 2024. Adoption of going concern basis Reflecting the Board\u2019s confidence in the benefits expected from the completion of the transformation programme and ability to obtain further RCF financing beyond its existing committed funding facilities coupled with its ability to implement appropriate mitigations should the severe but plausible downside materialise, the Group continues to adopt the going concern basis in preparing these financial statements. The Board has concluded that the Group and Parent Company will be able to continue in operation and meet their liabilities as they fall due over the period to 31 August 2024. Foreign currency translation The functional and presentation currency of Capita plc and its UK subsidiaries is the British pound sterling (\u00a3). Transactions in foreign currencies are initially recorded at the functional currency exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency exchange rate ruling at the balance sheet date. All differences are taken to the consolidated income statement with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign operation. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in the consolidated income statement. Tax charges and credits attributable to exchange differences on those borrowings are also taken directly to equity. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. The functional currencies of overseas operations include the euro, Indian rupee, South African rand, and the US dollar. At the reporting date, the assets and liabilities of the overseas operations are retranslated into the presentation currency of Capita plc at the exchange rate ruling on the balance sheet date and their income statements are translated using the weighted average exchange rate for the year. The exchange differences arising on the retranslation are taken directly to a separate component of equity. On disposal of a foreign operation, the deferred cumulative foreign currency translation difference recognised in equity relating to that particular foreign operation is recognised in the consolidated income statement. Current versus non-current classification The Group presents assets and liabilities in the balance sheet based on whether they are current or non-current. An asset is current when it is: \u2022 Expected to be realised or intended to be sold or consumed in the normal operating cycle; \u2022 Held primarily for the purpose of trading; \u2022 Expected to be realised within twelve months after the reporting period; or \u2022 Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is current when: \u2022 It is expected to be settled in the normal operating cycle; \u2022 It is held primarily for the purpose of trading; \u2022 It is due to be settled within twelve months after the reporting period; or \u2022 There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Group classifies all other liabilities as non-current. Section 1: Basis of preparation continued Recoverable amount of non-current assets At each reporting date, the Group assesses whether there is any indication that a non-current asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of the asset\u2019s recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The recoverable amount is the higher of an asset\u2019s, or cash-generating unit\u2019s, fair value less costs to sell and its value in use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Significant accounting judgements, estimates and assumptions The preparation of financial statements in accordance with generally accepted accounting principles requires the directors to make judgements and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported income and expense during the presented periods. Although these judgements and assumptions are based on the directors\u2019 best knowledge of the amount, events or actions, actual results may differ. As described in note 2.1, given the level of judgement and estimation involved in assessing the future profitability of contracts, it is reasonably possible that outcomes within the next financial year may be different from management\u2019s assumptions and could require a material adjustment to the carrying amounts of contract assets and, onerous contract provisions. The impact of climate change has been considered in the preparation of these financial statements across a number of areas, including our evaluation of the critical accounting estimates and judgements which are detailed below, consistent with the risks and opportunities set out in the strategic report on pages 49 to 53. None of these risks had a material effect on the critical accounting estimates or on the consolidated financial statements of the Group. The Group will continue developing its assessment of the impact that climate change may have on the assets and liabilities recognised and presented in its financial statements. The key sources of uncertainty that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year are summarised below and set out in more detail in the related note: \u2022 Contract accounting (note 2.1) \u2013 Impairment of contract fulfilment assets \u2013 Customer and onerous contract provisions \u2022 Deferred tax asset recognition (note 2.6) \u2022 Impairment of goodwill (note 3.4) \u2022 Measurement of defined benefit pension obligations (note 5.2) The key areas where significant accounting judgements have been made are summarised below and set out in more detail in the related note: \u2022 Capitalisation of contract fulfilment assets (note 3.1) \u2022 Measurement of goodwill (note 3.4) For ease of reference, this symbol has been used to denote significant accounting judgements and estimates where they occur within the note: Denotes significant accounting judgements, estimates and assumptions New standards and interpretations adopted The accounting policies adopted are consistent with those of the previous financial year. In addition, the Group has adopted the amendments to standards which are listed below. These amendments were either not applicable or not material to the Group, except for the impact of the Amendments to IAS 37 detailed further below. International Accounting Standards (IAS/IFRS) Effective date Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) 1 January 2022 Annual Improvements to IFRS Standards 2018 - 2020 1 January 2022 Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) 1 January 2022 Reference to the Conceptual Framework (Amendments to IFRS 3) 1 January 2022 Onerous contracts \u2013 cost of fulfilling a contract (amendments to IAS 37) An onerous contract is a contract under which the unavoidable costs (ie the costs that the Group cannot avoid because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The amendments specify that when assessing whether a contract is onerous or loss-making, an entity needs to include costs that relate directly to a contract to provide goods or services, which include both incremental costs (eg the costs of direct labour and materials) and an allocation of costs directly related to contract activities (eg depreciation of equipment used to fulfil the contract as well as costs of contract management and supervision). General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. The Group has adopted the amendment which resulted in a change in accounting policy for performing an onerous contract assessment. Previously, the Group included only incremental costs to fulfil a contract when determining whether that contract was onerous. The revised policy requires inclusion of both incremental costs and an allocation of other direct costs. In accordance with the transitional provisions, the Group applies the amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments (the date of initial application) and has not restated its comparative information. Section 1: Basis of preparation continued The adoption of the amended standard has resulted in a reduction in retained earnings at 1 January 2022 of \u00a321.7m, comprising an increase of \u00a318.8m in onerous contract provisions and an impairment of contract related assets of \u00a32.9m. The additional onerous contract provision recognised is tax deductible, however, no deferred tax asset has been recognised reflecting the probable level of future taxable profits that will be available against which the assets can be utilised at 1 January 2022. Impact of amendments to IAS 37 1 January 2022 \u00a3m Property, plant and equipment (0.5) Contract fulfilment assets (2.4) Total assets (2.9) Provisions (current) (10.6) Provisions (non-current) (8.2) Total liabilities (18.8) Retained earnings (21.7) Total equity (21.7) New standards and interpretations not yet adopted The International Accounting Standards Board (IASB) has issued the following standards, amendments and interpretations with an effective date after the date of these consolidated financial statements. These are effective for annual reporting periods beginning on or after the date indicated: International Accounting Standards (IAS/IFRS) Effective date IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts 1 January 2023 Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) 1 January 2023 Definition of Accounting Estimates (Amendments to IAS 8) 1 January 2023 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) 1 January 2023 Sale or contribution of assets between an investor and its associate or joint venture (Amendments to IFRS 10 and IAS 28) 1 January 2023 The Group is assessing the impact of these new standards and the Group\u2019s financial reporting will be presented in accordance with these standards from the effective date. IFRS 17 Insurance Contract and amendments to IFRS 17 Insurance Contracts IFRS 17 Insurance Contracts (IFRS 17) is a comprehensive new accounting standard for insurance contracts covering recognition, measurement, presentation and disclosure, and will replace IFRS 4 Insurance Contracts (IFRS 4). IFRS 17 applies to all types of insurance contracts (ie life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies, IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects. IFRS 17 is effective for reporting periods beginning on or after 1 January 2023 and must be applied retrospectively unless impracticable, in which case the Group has the option of using either the modified retrospective approach or the fair value approach. Based on initial analysis performed, it is not anticipated that this new accounting standard will have a material impact on the way the Group recognises its provisions in relation to insurance contracts. ",
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"fact-453": {
"value": "This section sets out the Group\u2019s accounting policies relating to these consolidated financial statements as a whole. Where an accounting policy is specific to one note, the policy is described in the note to which it relates. This section also includes details of new accounting standards, amendments and interpretations including their effective dates and explanation on the expected impact to the financial position and performance of the Group. For ease of reference, this symbol has been used to denote any accounting policies included within the notes: Denotes accounting policies These financial statements consolidate those of Capita plc (the Company or the Parent Company) and all of its subsidiaries (the Group). Capita plc is a public limited company incorporated in England and Wales whose shares are publicly traded. The principal activities of the Group are given in the strategic report on pages 16 to 25. These consolidated financial statements of Capita plc for the year ended 31 December 2022 were authorised for issue in accordance with a resolution of the directors on 2 March 2023. These consolidated financial statements are presented in British pounds sterling and all values are rounded to the nearest tenth of a million (\u00a3m) except where otherwise indicated. Statement of compliance These consolidated financial statements have been prepared in accordance with UK-adopted International Financial Reporting Standards (IFRSs) and the Disclosure and Transparency Rules of the UK's Financial Conduct Authority. Basis of consolidation These consolidated financial statements comprise the financial statements of the Group at 31 December each year. Subsidiaries are consolidated from the date on which control is transferred to the Group until control is transferred out of the Group. Where there is a loss of control of a subsidiary, these consolidated financial statements include the results for that part of the reporting year during which Capita plc had control and the profit or loss on disposal is calculated as the difference between the fair value of the consideration received and the carrying amount of the net assets (including goodwill) disposed of. Losses applicable to the non-controlling interests in subsidiaries are attributed to the non-controlling interests even if that results in the non-controlling interests having a deficit balance. Investments in associates are accounted for using the equity method. Under the equity method, the investment in the entity is stated as a one line item at cost plus the investor\u2019s share of retained post-acquisition profits or losses and other changes in net assets less any impairment. Going concern In determining the appropriate basis of preparation of the financial statements for the year ended 31 December 2022, the Board is required to consider whether the Group and Parent Company can continue in operational existence for the foreseeable future. The Board has concluded that it is appropriate to adopt the going concern basis, having undertaken a rigorous assessment of the financial forecasts, key uncertainties, sensitivities, and mitigations as set out below. Accounting standards require that \u2018the foreseeable future\u2019 for going concern assessment covers a period of at least twelve months from the date of approval of these financial statements, although those standards do not specify how far beyond twelve months a Board should consider. In its going concern assessment, the Board has considered the period from the date of approval of these financial statements to 31 August 2024 (\u2018the going concern period\u2019) and which aligns with the expiry of the revolving credit facility (RCF). The base case financial forecasts used in the going concern assessment are derived from the 2023-2024 business plans as approved by the Board in January 2023. The going concern assessment considers the Group\u2019s sources and uses of liquidity and covenant compliance throughout the period under review. The value of the Group\u2019s committed RCF was \u00a3288.4m at 31 December 2022 and it expires on 31 August 2024. In February 2023, the Group executed a committed bridge facility of \u00a350m with three of its relationship banks providing additional liquidity from 1 January 2024. The committed bridge facility has an expiry date of 31 December 2024 and is subject to covenants, which are the same as those in the RCF. Both the RCF and the \u00a350m bridge facility incorporate provisions such that they will partially reduce in quantum as a consequence of specified transactions, including disposals, equity raises or other refinancing. Given the track record of the Group extending the RCF in prior years, including in 2022, and the committed bridge facility executed in February 2023, the Board is confident that the RCF will be extended or refinanced and be of a sufficient quantum well ahead of its expiry in August 2024. Financial position at 31 December 2022 As detailed further in the Chief Financial Officer\u2019s review in the strategic report, as at 31 December 2022 the Group had net debt of \u00a3482.4m (2021: \u00a3879.8m), net financial debt (pre-IFRS 16) of \u00a384.9m (2021: \u00a3431.4m), liquidity of \u00a3405.2m (2021: \u00a3392.4m) and was in compliance with all debt covenants. Board assessment Base case scenario Under the base case scenario, completion of the Group\u2019s transformation programme has simplified and strengthened the business and facilitates further efficiency savings enabling sustainable growth in revenue, profit and cash flow over the medium term. This enables the generation of positive free cash flows, and, when combined with the proceeds from the Board approved disposal programme and available committed facilities allows the Group to manage scheduled debt repayments. The most material sensitivity to the base case is the risk of not delivering the planned revenue growth. As previously announced, the Board\u2019s plan is to establish an optimal capital structure to support the execution of the Group\u2019s strategy and to dispose of businesses that do not align with that strategy. The completion of the disposal programme requires agreement from third parties, and major disposals may be subject to shareholder and lender approval. Such agreements and approvals, are outside the direct control of the Company and as such, the inclusion of the effect of any potential future disposals in the Group\u2019s projections is inappropriate for going concern assessment purposes in accordance with IAS 1 Presentation of Financial Statements. Section 1: Basis of preparation continued The base case projections used for going concern assessment purposes reflect business disposals completed up to the date of approval of these financial statements but do not reflect the benefit of any further disposals that are in the pipeline. The liquidity headroom assessment in the base case projections reflects the Group\u2019s existing committed financing facilities and debt redemptions and does not reflect any potential future refinancing, other than in respect of the current RCF as noted above. The base case financial forecasts demonstrate liquidity headroom and compliance with all debt covenant measures throughout the going concern period to 31 August 2024. Severe but plausible downside scenario In considering severe but plausible downside scenarios, the Board has taken account of the potential adverse financial impacts resulting from the following risks: \u2022 revenue growth falling materially short of plan; \u2022 operating profit margin expansion not being achieved; \u2022 additional inflationary cost impacts which cannot be passed on to customers; \u2022 unforeseen operational issues leading to contract losses and cash outflows; \u2022 increased interest rates; \u2022 reduction in deferred cash consideration in respect of completed disposals; \u2022 non-availability of the Group\u2019s non-recourse receivables financing facility; and \u2022 unexpected financial costs and penalties linked to incidents such as data breaches and/or cyber-attacks. The likelihood of simultaneous crystallisation of the above risks is considered by the directors to be relatively low. Nevertheless in the event that simultaneous crystallisation were to occur, the Group would need to take action to mitigate the risk of insufficient liquidity and covenant headroom. In its assessment of going concern, the Board has considered the mitigations, under the direct control of the Group, that could be implemented including reductions in capital investment, substantially reducing (or removing in full) bonus and incentive payments and significantly reducing discretionary spend. Taking these mitigations into account, the Group\u2019s financial forecasts, in a severe but plausible downside scenario, demonstrate sufficient liquidity headroom and compliance with all debt covenant measures throughout the going concern period to 31 August 2024. Adoption of going concern basis Reflecting the Board\u2019s confidence in the benefits expected from the completion of the transformation programme and ability to obtain further RCF financing beyond its existing committed funding facilities coupled with its ability to implement appropriate mitigations should the severe but plausible downside materialise, the Group continues to adopt the going concern basis in preparing these financial statements. The Board has concluded that the Group and Parent Company will be able to continue in operation and meet their liabilities as they fall due over the period to 31 August 2024. Foreign currency translation The functional and presentation currency of Capita plc and its UK subsidiaries is the British pound sterling (\u00a3). Transactions in foreign currencies are initially recorded at the functional currency exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency exchange rate ruling at the balance sheet date. All differences are taken to the consolidated income statement with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign operation. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in the consolidated income statement. Tax charges and credits attributable to exchange differences on those borrowings are also taken directly to equity. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. The functional currencies of overseas operations include the euro, Indian rupee, South African rand, and the US dollar. At the reporting date, the assets and liabilities of the overseas operations are retranslated into the presentation currency of Capita plc at the exchange rate ruling on the balance sheet date and their income statements are translated using the weighted average exchange rate for the year. The exchange differences arising on the retranslation are taken directly to a separate component of equity. On disposal of a foreign operation, the deferred cumulative foreign currency translation difference recognised in equity relating to that particular foreign operation is recognised in the consolidated income statement. Current versus non-current classification The Group presents assets and liabilities in the balance sheet based on whether they are current or non-current. An asset is current when it is: \u2022 Expected to be realised or intended to be sold or consumed in the normal operating cycle; \u2022 Held primarily for the purpose of trading; \u2022 Expected to be realised within twelve months after the reporting period; or \u2022 Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is current when: \u2022 It is expected to be settled in the normal operating cycle; \u2022 It is held primarily for the purpose of trading; \u2022 It is due to be settled within twelve months after the reporting period; or \u2022 There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Group classifies all other liabilities as non-current. Section 1: Basis of preparation continued Recoverable amount of non-current assets At each reporting date, the Group assesses whether there is any indication that a non-current asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of the asset\u2019s recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The recoverable amount is the higher of an asset\u2019s, or cash-generating unit\u2019s, fair value less costs to sell and its value in use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Significant accounting judgements, estimates and assumptions The preparation of financial statements in accordance with generally accepted accounting principles requires the directors to make judgements and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported income and expense during the presented periods. Although these judgements and assumptions are based on the directors\u2019 best knowledge of the amount, events or actions, actual results may differ. As described in note 2.1, given the level of judgement and estimation involved in assessing the future profitability of contracts, it is reasonably possible that outcomes within the next financial year may be different from management\u2019s assumptions and could require a material adjustment to the carrying amounts of contract assets and, onerous contract provisions. The impact of climate change has been considered in the preparation of these financial statements across a number of areas, including our evaluation of the critical accounting estimates and judgements which are detailed below, consistent with the risks and opportunities set out in the strategic report on pages 49 to 53. None of these risks had a material effect on the critical accounting estimates or on the consolidated financial statements of the Group. The Group will continue developing its assessment of the impact that climate change may have on the assets and liabilities recognised and presented in its financial statements. The key sources of uncertainty that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year are summarised below and set out in more detail in the related note: \u2022 Contract accounting (note 2.1) \u2013 Impairment of contract fulfilment assets \u2013 Customer and onerous contract provisions \u2022 Deferred tax asset recognition (note 2.6) \u2022 Impairment of goodwill (note 3.4) \u2022 Measurement of defined benefit pension obligations (note 5.2) The key areas where significant accounting judgements have been made are summarised below and set out in more detail in the related note: \u2022 Capitalisation of contract fulfilment assets (note 3.1) \u2022 Measurement of goodwill (note 3.4) For ease of reference, this symbol has been used to denote significant accounting judgements and estimates where they occur within the note: Denotes significant accounting judgements, estimates and assumptions New standards and interpretations adopted The accounting policies adopted are consistent with those of the previous financial year. In addition, the Group has adopted the amendments to standards which are listed below. These amendments were either not applicable or not material to the Group, except for the impact of the Amendments to IAS 37 detailed further below. International Accounting Standards (IAS/IFRS) Effective date Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) 1 January 2022 Annual Improvements to IFRS Standards 2018 - 2020 1 January 2022 Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) 1 January 2022 Reference to the Conceptual Framework (Amendments to IFRS 3) 1 January 2022 Onerous contracts \u2013 cost of fulfilling a contract (amendments to IAS 37) An onerous contract is a contract under which the unavoidable costs (ie the costs that the Group cannot avoid because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The amendments specify that when assessing whether a contract is onerous or loss-making, an entity needs to include costs that relate directly to a contract to provide goods or services, which include both incremental costs (eg the costs of direct labour and materials) and an allocation of costs directly related to contract activities (eg depreciation of equipment used to fulfil the contract as well as costs of contract management and supervision). General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. The Group has adopted the amendment which resulted in a change in accounting policy for performing an onerous contract assessment. Previously, the Group included only incremental costs to fulfil a contract when determining whether that contract was onerous. The revised policy requires inclusion of both incremental costs and an allocation of other direct costs. In accordance with the transitional provisions, the Group applies the amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments (the date of initial application) and has not restated its comparative information. Section 1: Basis of preparation continued The adoption of the amended standard has resulted in a reduction in retained earnings at 1 January 2022 of \u00a321.7m, comprising an increase of \u00a318.8m in onerous contract provisions and an impairment of contract related assets of \u00a32.9m. The additional onerous contract provision recognised is tax deductible, however, no deferred tax asset has been recognised reflecting the probable level of future taxable profits that will be available against which the assets can be utilised at 1 January 2022. Impact of amendments to IAS 37 1 January 2022 \u00a3m Property, plant and equipment (0.5) Contract fulfilment assets (2.4) Total assets (2.9) Provisions (current) (10.6) Provisions (non-current) (8.2) Total liabilities (18.8) Retained earnings (21.7) Total equity (21.7) New standards and interpretations not yet adopted The International Accounting Standards Board (IASB) has issued the following standards, amendments and interpretations with an effective date after the date of these consolidated financial statements. These are effective for annual reporting periods beginning on or after the date indicated: International Accounting Standards (IAS/IFRS) Effective date IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts 1 January 2023 Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) 1 January 2023 Definition of Accounting Estimates (Amendments to IAS 8) 1 January 2023 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) 1 January 2023 Sale or contribution of assets between an investor and its associate or joint venture (Amendments to IFRS 10 and IAS 28) 1 January 2023 The Group is assessing the impact of these new standards and the Group\u2019s financial reporting will be presented in accordance with these standards from the effective date. IFRS 17 Insurance Contract and amendments to IFRS 17 Insurance Contracts IFRS 17 Insurance Contracts (IFRS 17) is a comprehensive new accounting standard for insurance contracts covering recognition, measurement, presentation and disclosure, and will replace IFRS 4 Insurance Contracts (IFRS 4). IFRS 17 applies to all types of insurance contracts (ie life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies, IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects. IFRS 17 is effective for reporting periods beginning on or after 1 January 2023 and must be applied retrospectively unless impracticable, in which case the Group has the option of using either the modified retrospective approach or the fair value approach. Based on initial analysis performed, it is not anticipated that this new accounting standard will have a material impact on the way the Group recognises its provisions in relation to insurance contracts. Accounting policies Revenue The Group generates revenue largely in the UK and Europe. The Group operates a diverse range of businesses and accordingly applies a variety of methods for revenue recognition, based on the principles set out in IFRS 15. The revenue and profits recognised in any period are based on the delivery of performance obligations and an assessment of when control is transferred to the customer. Revenue is recognised either when the performance obligation in the contract has been performed (\u2018point-in-time\u2019 recognition) or \u2018over time\u2019 as control of the performance obligation is transferred to the customer. For all contracts, the Group determines if the arrangement with a customer creates enforceable rights and obligations. This assessment results in certain Master Service Agreements (MSA) or Frameworks not meeting the definition of a contract under IFRS 15 and as such the individual call-off agreements, linked to the MSA, are treated as individual contracts. The Group enters into contracts which contain extension periods, where either the customer or both parties can choose to extend the contract or there is an automatic annual renewal, and/or termination clauses that could impact the actual duration of the contract. Judgement is applied to assess the impact that these clauses have when determining the appropriate contract term. The term of the contract impacts both the period over which revenue from performance obligations may be recognised and the period over which contract fulfilment assets and capitalised costs to obtain a contract are expensed. For contracts with multiple components to be delivered such as transformation, transitions and the delivery of outsourced services, management applies judgement to consider whether those promised goods and services are: (i) distinct \u2013 to be accounted for as separate performance obligations; (ii) not distinct \u2013 to be combined with other promised goods or services until a bundle is identified that is distinct; or, (iii) part of a series of distinct goods and services that are substantially the same and have the same pattern of transfer to the customer. At a contract\u2019s inception the total transaction price is estimated, being the amount to which the Group expects to be entitled and has rights to under the contract. This includes an assessment of any variable consideration where the Group\u2019s performance may result in additional revenues based on the achievement of agreed KPIs. Such amounts are only included based on the expected value, or the most likely outcome method, and only to the extent that it is highly probable that no revenue reversal will occur. The transaction price does not include estimates of consideration resulting from change orders for additional goods and services unless these are already agreed. Once the total transaction price is determined, the Group allocates this to the identified performance obligations in proportion to their relative standalone selling prices and recognises revenue when (or while) those performance obligations are satisfied. The Group infrequently sells standard products with observable standalone prices due to the specialised services required by customers, consequently the Group applies judgement to determine an appropriate standalone selling price. More frequently, the Group sells customers bespoke solutions, and in these cases the Group typically uses the expected cost-plus margin or a contractually stated price approach to estimate the standalone selling price of each performance obligation. The Group may offer price step downs during the life of a contract, but with no change to the underlying scope of services to be delivered. In general, any such variable consideration, price step down or discount is included in the total transaction price to be allocated across all performance obligations unless it relates to only one performance obligation in a contract. For each performance obligation to be recognised over time, the Group applies a revenue recognition method that faithfully depicts the Group\u2019s performance in transferring control of the goods or services to the customer. This decision requires assessment of the real nature of the goods or services that the Group has promised to transfer to the customer. The Group applies the relevant output or input method consistently to similar performance obligations in other contracts. When using the output method, the Group recognises revenue on the basis of direct measurements of the value to the customer of the goods and services transferred to date relative to the remaining goods and services under the contract. This is a faithful depiction of the transfer of services since the service delivered to the customer is unchanged. Where the output method is used, in particular for long-term service contracts where the series guidance is applied, the Group often uses a method of time elapsed which requires minimal estimation. Certain long-term contracts use output methods based upon estimations of: user numbers; service activity levels; or fees collected. When transfer of control is most closely aligned to Group efforts in delivering the service, the input method is used to measure progress and revenue is recognised in direct proportion to costs incurred. This is a faithful depiction of the transfer of services because costs (or other inputs) most accurately reflect the incremental benefits received by the customer from efforts to date. If performance obligations in a contract do not meet the over time criteria, the Group recognises revenue at a point-in-time when the service or good is delivered. Contract modifications The Group\u2019s contracts are often amended for changes in contract specifications and requirements. Contract modifications exist when the amendment either creates new, or changes existing, enforceable rights and obligations. The effect of a contract modification on the transaction price and the Group\u2019s measure of progress for the performance obligation to which it relates, is recognised as an adjustment to revenue in one of the following ways: a) prospectively as an additional separate contract; b) prospectively as a termination of the existing contract and creation of a new contract; c) as part of the original contract using a cumulative catch up; or, d) as a combination of (b) and (c). In respect of contracts for which the Group has decided there is a series of distinct goods and services that are substantially the same and have the same pattern of transfer where revenue is recognised over time, the modification will always be treated under either (a) or (b); (d) may arise when a contract has a part-termination and a modification of the remaining performance obligations. The facts and circumstances of any contract modification are considered individually because the types of modifications will vary contract by contract and may result in different accounting outcomes. lied in relation to the accounting for such modifications where the final terms or legal contracts have not been agreed prior to the period end because management needs to determine if a modification has been approved and if it either creates new, or changes existing, enforceable rights and obligations of the parties. Depending upon the outcome of such negotiations, the timing and amount of revenue recognised may be different in the relevant accounting periods. Modification and amendments to contracts are undertaken through an agreed formal process. For example, if a change in scope has been approved but the corresponding change in price is still being negotiated, management uses judgement to estimate the change in total transaction price. Importantly, any variable consideration is only recognised to the extent that it is highly probable that no revenue reversal will occur. For example, if pricing is subject to indexation based on an external metric (such as CPI or RPI) then the revenue related to the indexation will only be recognised once the relevant indexation is confirmed. Future indexation will not be recognised because it is not highly probable that a significant reversal of an indexation adjustment will not occur. Principal versus agent The Group has arrangements with some of its customers whereby it needs to determine if it acts as a principal or an agent because more than one party is involved in providing the goods and services to the customer. The Group is a principal if it controls a promised good or service before transferring that good or service to the customer. The Group is an agent if its role is to arrange for another entity to provide the goods or services. Factors considered in making this assessment are most notably: the discretion the Group has in establishing the price for the specified good or service; whether the Group has inventory risk; and whether or not the Group is primarily responsible for fulfilling the promise to deliver the service or good. This assessment of control requires judgement particularly in relation to certain service contracts. An example is the provision of certain recruitment and learning services where the Group may be assessed to be agent or principal dependent upon the facts and circumstances of the arrangement and the nature of the services being delivered. Where the Group is acting as a principal, revenue is recorded on a gross basis. Where the Group is acting as an agent, revenue is recorded on a net basis, recognising only the commission or fee earned as revenue. Licences Software licences delivered by the Group can either be right to access (active) or right to use (passive) licences, which determines the timing of revenue recognition. The assessment of whether a licence is active or passive involves judgement. The key determinant of an active licence is whether or not the Group is required to undertake continuing activities that significantly affect the licensed intellectual property (or the customer has a reasonable expectation that it will do so) and the customer is, therefore, exposed to positive (or negative) impacts resulting from those changes. Where the Group is responsible for any maintenance, continuing support, updates and upgrades, and accordingly the sale of the initial software is not distinct. All other licences which have significant standalone functionality are treated as passive licences. When software upgrades are sold as part of the software licence agreement (ie software upgrades are promised to the customer), the Group applies judgement to assess whether the software upgrades are distinct from the licence (ie a separate performance obligation). If the upgrades are considered fundamental to the ongoing use of the software by the customer, the upgrades are not considered distinct and not accounted for as a separate performance obligation. For each contract that includes a separate licence performance obligation, the Group considers all the facts and circumstances in determining whether the licence revenue is recognised over time (active) or at a point-in-time (passive) from the go-live date of the licence. Deferred and accrued income The Group\u2019s customer contracts include a diverse range of payment schedules dependent upon the nature and type of goods and/or services being provided. This can include performance-based payments or progress payments as well as regular monthly or quarterly payments for ongoing service delivery. Payments for transactional goods and services may be at delivery date, in arrears or part payment in advance. The long-term service contracts tend to have higher cash flows early in the contract to cover transformational activities. Where payments received are greater than the revenue recognised up to the reporting date, the Group recognises a deferred income contract liability for this difference. Where payments received less than the revenue recognised up to the reporting date, the Group recognises an accrued contract income asset for this difference. At each reporting date, the Group assesses whether there is any indication that accrued contract income assets may be impaired by considering whether or not any revenue reversal could occur. Where an indicator of impairment exists, the Group makes a formal estimate of the asset\u2019s recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Contract types The Group disaggregates revenue from contracts with customers by contract type, because management believe this best depicts how the nature, amount, timing, and uncertainty of the Group\u2019s revenue and cash flows are affected by economic factors. Categories are: long-term contractual \u2013 greater than two years; short-term contractual \u2013 less than two years; and transactional. The years being measured from the service commencement date. Long-term contractual \u2013 greater than two years The Group provides a range of services in the majority of its reportable segments under contracts with a duration of more than two years. The nature of contracts or performance obligations within this revenue type includes: (i) long-term outsourced service arrangements in the public and private sectors; and (ii) active software licence arrangements. The majority of long-term contractual agreements form part of a series of distinct goods and services because they are substantially the same service; and have the same pattern of transfer, since the series constitutes services provided in distinct time increments (eg daily, monthly, quarterly or annually), and therefore treats the series as one performance obligation. Short-term contractual \u2013 less than two years The nature of contracts or performance obligations within this revenue type includes: (i) short-term outsourced service arrangements in the public and private sectors; and (ii) software maintenance contracts. 2.2 Revenue including segmental revenue continued The Group has assessed that maintenance and support (ie on-call support, remote support) for software licences is a performance obligation that can be considered capable of being distinct and separately identifiable in a contract if the customer has a passive licence. These recurring services are substantially the same because the nature of the promise is for the Group to \u2018stand ready\u2019 to perform maintenance and support when required by the customer. Each day of \u2018standing ready\u2019 is distinct from each subsequent day and is transferred in the same pattern to the customer. Transactional (point-in-time) contracts The Group delivers a range of goods or services in all reportable segments that are transactional services for which revenue is recognised at the point-in-time when control of the goods or services has transferred to the customer. This may be at the point of physical delivery of goods or services and acceptance by the customer or when the customer obtains control of an asset or service in a contract with customer-specified acceptance criteria. The nature of contracts or performance obligations within this revenue type includes: (i) provision of IT hardware goods; (ii) passive software licence agreements; (iii) commission received as agent from the sale of third-party software; and (iv) fees received in relation to the delivery of professional services. Accounting policies IAS 1 permits an entity to present additional information for specific items to enable users to better assess the entity\u2019s financial performance. The Board has adopted a policy to disclose separately those items that it considers are outside the underlying operating results for the particular year under review and against which the Group\u2019s performance is assessed internally. In the Board\u2019s judgement, these need to be disclosed separately by virtue of their nature, size and/or incidence, for users of the consolidated financial statements to obtain an understanding of the financial information and the underlying in-year performance of the Group. Accordingly, these items are also excluded from the discussion of divisional performance in the strategic report. This policy is kept under review by the Board and the Audit and Risk Committee and is discussed in the committee\u2019s report on pages 90 to 98. The Board considers alternative performance measures (APMs) to be helpful to the reader, but notes that APMs have certain limitations, including the exclusion of significant recurring items, and may not be directly comparable with similarly titled measures presented by other companies. From 1 January 2022, the Board has limited the items excluded from the adjusted results to: business exits; amortisation and impairment of acquired intangibles; impairment of goodwill; and, certain mark-to-market valuation changes that impact net finance expense/income; because the adjusted metrics provide a more representative measure of the underlying performance of the business post completion of the Group-wide transformation. In prior years, the Board excluded other items from the adjusted results because they were material and required separate disclosure for users of the financial statements to obtain a proper understanding of the financial information and the underlying performance of the business. These items included: significant restructuring; contract-related provisions and impairments; and, certain litigation and claims. The comparatives have been re-presented on the same basis, with significant restructuring (\u00a3147.5m), certain litigation and claims (credit \u00a32.3m) and contract related provisions and impairments (\u00a343.1m) now included within adjusted results for the year ended 31 December 2021. The items below are excluded from the adjusted results: Operating profit/(loss) Profit/(loss) before tax Notes 2022 \u00a3m 2021 \u00a3m (Re-presented 4 ) 2022 \u00a3m 2021 \u00a3m (Re-presented4 ) Reported (79.6) (86.6) 61.4 285.6 Amortisation and impairment of acquired intangibles 3.3 5.1 7.7 5.1 7.7 Impairment of goodwill 3.4 169.0 11.5 169.0 11.5 Net finance (income)/costs 4.3 \u2014 \u2014 (3.4) 1.4 Business exits 2.8 8.4 (10.3) (158.3) (429.0) Adjusted 102.9 (77.7) 73.8 (122.8) 1. Adjusted operating profit increased by 232.4% (2021: increased 26.6%) and adjusted profit before tax increased by 160.1% (2021: increased 15.1%). Adjusted operating profit of \u00a3102.9m (2021: loss \u00a377.7m) was generated on adjusted revenue of \u00a32,845.8m (2021: \u00a32,777.8m) resulting in an adjusted operating margin of 3.6% (2021: (2.8)%). 2. The tax credit on adjusted profit before tax is \u00a331.8m (2021: \u00a34.0m charge) resulting in adjusted profit after tax of \u00a3105.6m (2021: \u00a3126.8m loss). 3. The adjusted operating loss and adjusted loss before tax for 2021 have been re-presented for the impact of business exits during 2022 and the change in adjusting items. This has resulted in adjusted operating profit decreasing from \u00a3139.1m to a loss of \u00a377.7m and adjusted profit before tax decreasing from \u00a393.5m to a loss of \u00a3122.8m. 4. 2021 adjusted results have been re-presented - please refer to further detail above. Amortisation and impairment of acquired intangible assets: the Group recognised acquired intangible amortisation of \u00a35.1m (2021: \u00a37.7m) and impairment of \u00a3nil (2021: \u00a3nil). These charges are excluded from the adjusted results of the Group because they are non-cash items generated from historical acquisition related activity. Impairment of goodwill: the Group carries on its balance sheet significant balances related to goodwill. Goodwill is subject to annual impairment testing and any impairment charges are reported separately because they are non-cash items generated from historical acquisition related activity. Net finance costs: net finance costs excluded from adjusted profits relate to movements in the mark-to-market value of forward foreign exchange contracts to cover anticipated future costs and therefore have no equivalent offsetting transaction in the accounting records, also refer to note 4.2.2. Business exits: the trading result of businesses exited, or in the process of being exited, and the gain or loss on disposals are excluded from the Group's adjusted results to enable comparability of the Group\u2019s adjusted results. Individual businesses within the Portfolio Division will be treated as held-for-sale (and therefore a business exit) when the disposal is highly probable and expected to complete within twelve months of the balance sheet date. Accounting policies Tax on the profit or loss for year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences except: \u2022 where the deferred tax liability arises from the initial recognition of goodwill; \u2022 where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and \u2022 in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Accounting policies Basic earnings/(loss) per share are calculated by dividing net profit for the period attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings/(loss) per share are calculated by dividing the net profit for the period attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. Accounting policies Business exits Business exits are businesses that have been sold, exited during the period, or are in the process of being sold or exited in accordance with the Group's strategy. None of these business exits meet the definition of \u2018discontinued operations\u2019 as stipulated by IFRS 5, which requires comparative financial information to be restated where the relative size of a disposal or business closure is significant, which is normally understood to mean a reported segment. However, the trading result of these businesses, non-trading expenses, and any gain/loss on disposal, have been excluded from adjusted results. To enable a like-for-like comparison of adjusted results, the 2021 comparatives have been re-presented to exclude the businesses classified as business exits during 2022. Assets held-for-sale The Group classifies a non-current asset (or disposal group) as held-for-sale if its carrying amount will be recovered principally through a sale transaction rather than continued use. For this to be the case, the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be highly probable. For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset (or disposal group), and an active programme to locate a buyer and complete the plan must have been initiated. Further, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value, and, the sale should be expected to be completed within one year from the date of classification. Based on the above requirements, individual businesses within the Portfolio Division will only reach the criteria to be treated as held-for-sale when their disposal is seen to be highly probable, and expected to complete within the following twelve months. At 31 December 2022 no disposals were deemed to have met this threshold. At 31 December 2021, the disposals of three businesses (AMT Sybex software, Secure Solutions and Services (SSS), and Speciality Insurance) were deemed to have met this threshold. 2022 business exits Business exits at 31 December 2022 primarily comprised: Business Disposal completed on AMT Sybex 1 January 2022 Secure Solutions and Services 3 January 2022 Trustmarque 31 March 2022 Speciality Insurance 29 April 2022 Real estate and infrastructure consultancy 22 September 2022 Optima Legal Services 30 November 2022 Pay360 1 December 2022 Capita Translation and Interpreting 29 December 2022 Further disposals are planned as part of the simplification agenda. Since these disposals did not meet the definition of business exits or assets held-for-sale at 31 December 2022, their trading results were included within adjusted results. However, exit costs related to those disposals, which include professional fees, salary costs and separation planning costs, are included within business exit non-trading administrative expenses. 2022 2021 Income statement impact Trading \u00a3m Non-trading \u00a3m Total \u00a3m Trading \u00a3m Non-trading \u00a3m Total \u00a3m Revenue 168.8 \u2014 168.8 404.7 \u2014 404.7 Cost of sales (135.3) \u2014 (135.3) (269.0) \u2014 (269.0) Gross profit 33.5 \u2014 33.5 135.7 \u2014 135.7 Administrative expenses (18.8) (23.1) (41.9) (56.4) (69.0) (125.4) Operating profit/(loss) 14.7 (23.1) (8.4) 79.3 (69.0) 10.3 Net finance costs (0.2) \u2014 (0.2) (0.7) (0.3) (1.0) Gain on business disposal \u2014 166.9 166.9 \u2014 419.7 419.7 Profit before tax 14.5 143.8 158.3 78.6 350.4 429.0 Taxation (2.8) (14.7) (17.5) (16.1) (43.0) (59.1) Profit after tax 11.7 129.1 140.8 62.5 307.4 369.9 Trading revenue and costs represent the current period trading performance of the above businesses up to the point of being disposed or exited, and in the comparative those businesses disposed of during 2021 (ESS, Life Insurance and Pensions Servicing business in Ireland, and the AXELOS joint venture with the UK Government). Trading expenses primarily comprise payroll costs of \u00a396.9m (2021: \u00a3217.6m) and information technology costs of \u00a323.2m (2021: \u00a365.2m). Included within non-trading administrative expenses is \u00a3nil (2021: \u00a39.3m) of amortisation of acquired intangibles which, in accordance with the Group\u2019s policy, were excluded from the Group\u2019s adjusted results and have been reclassified to business exits because they relate to businesses sold or being exited. Other non-trading administrative expenses include: asset impairments of \u00a3nil (2021: \u00a353.1m); disposal project costs of \u00a314.4m (2021: \u00a38.9m); other costs including staff and redundancy costs of \u00a38.7m (2021: \u00a34.7m); and, other income of \u00a3nil (2021: \u00a37.0m). Accounting policies Cash and short-term deposits in the balance sheet comprise cash at bank and in-hand and short-term deposits with an original maturity of three months or less. In the consolidated cash flow statement, cash and cash equivalents consist of cash and short-term deposits net of outstanding bank overdrafts and include cash and overdrafts within disposal group assets and liabilities held-for-sale. Cash at bank earns interest at fixed and floating rates based on prevailing bank deposit rates. Accounting policies Trade receivables: Trade receivables are initially recognised at cost (being the same as fair value) and subsequently at amortised cost less any provision for impairment, to ensure the amounts recognised represent their recoverable amount. Impairment: For trade receivables, the Group applies the simplified approach permitted by IFRS 9, resulting in trade receivables recognised and carried at original invoice amount less an allowance for any uncollectible amounts based on expected credit losses. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The Group monitors the level of trade receivables on a monthly basis, continually assessing the risk of default by any counterparty. Each customer has an external credit score which determines the level of credit provided. Derecognition: A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised (ie removed from the Group\u2019s consolidated balance sheet) when (i) the rights to receive the cash flows from the asset have expired; or, (ii) the Group has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a \u2018pass-through\u2019 arrangement; and either (a) the Group has transferred substantially all the risk and rewards of the asset; or, (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Trade receivables that are sold without recourse are derecognised at the point of sale when the risks and rewards of the receivables have been fully transferred. Accrued income: Accrued income in relation to contract assets is recognised when payments received from customers are less than the revenue recognised by the reporting date. Accounting policies The Group regularly incurs costs to deliver its outsourcing services in a more efficient way (often referred to as \u2018transformation\u2019 costs). These costs may include process mapping and design, system development, project management, hardware (generally within the scope of the Group\u2019s accounting policy for property, plant and equipment), software licence costs (generally within the scope of the Group\u2019s accounting policy for intangible assets), recruitment costs and training. Contract fulfilment costs are divided into: (i) costs that give rise to an asset; and (ii) costs that are expensed as incurred. When determining the appropriate accounting treatment for such costs, the Group firstly considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognised under IFRS 15. If other standards are not applicable to contract fulfilment costs, the Group applies the following criteria which, if met, result in capitalisation of costs that: (i) directly relate to a contract or to a specifically identifiable anticipated contract; (ii) generate or enhance resources that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and (iii) are expected to be recovered. The Group has determined that, where the relevant specific criteria are met, the costs for (i) process mapping and design; (ii) system development; and (iii) project management; are likely to qualify to be capitalised as contract fulfilment assets. The incremental costs of obtaining a contract with a customer are recognised as a contract fulfilment asset if the Group expects to recover them. The Group incurs costs such as bid costs, legal fees to draft a contract and sales commissions when it enters into a new contract. The Group has determined that the following costs may be capitalised as contract fulfilment assets: (i) legal fees to draft a contract after the Group has been selected as preferred supplier; and (ii) sales commissions directly related to winning a specific contract. Costs incurred prior to selection as preferred supplier are not capitalised but expensed as incurred. Utilisation: The utilisation charge is included within cost of sales. The Group utilises contract fulfilment assets over the expected contract period on a systematic basis that mirrors the pattern in which the Group transfers control of the service to the customer. Derecognition: A contract fulfilment asset is derecognised either when it is disposed of or when no further economic benefits are expected to flow from its use or disposal. Impairment: At each reporting date, the Group determines whether or not the contract fulfilment assets are impaired by comparing the carrying amount of the asset with the remaining amount of consideration that the Group expects to receive less the costs that relate to providing services under the relevant contract. In determining the estimated amount of consideration, the Group uses the same principles as it does to determine the contract transaction price, except that any constraints used to reduce the transaction price are removed for the impairment test. Accounting policies Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation: Depreciation is disclosed as an administrative expense in the consolidated income statement, and is calculated on a straight-line basis over the estimated useful life of the asset, as follows: \u2022 Freehold buildings and long leasehold property \u2013 up to 50 years. \u2022 Leasehold improvements \u2013 period of the lease. \u2022 Plant and machinery \u2013 3 to 10 years. Impairment: The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount. The recoverable amount of property, plant and equipment is the greater of net selling price and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are disclosed as administrative expenses in the consolidated income statement. Derecognition: An item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected to arise from the continued use of the asset (retired). Any gain or loss arising on derecognition of the asset, calculated as the difference between the net disposal proceeds and the carrying value of the asset, is included in the consolidated income statement when the asset is derecognised. Accounting policies Intangible assets acquired separately are capitalised at cost and those identified in a business acquisition are capitalised at fair value at the date of acquisition. In the case of capitalised software development costs, research expenditure is written off to the consolidated income statement in the period in which it is incurred. Development expenditure is similarly written off until the Group is satisfied as to the technical, commercial and financial viability of individual projects. Where this condition is satisfied, the development expenditure is capitalised and amortised over the period during which the Group is expected to benefit. Following initial recognition, the carrying amount of an intangible asset is its cost less accumulated amortisation and impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. There were no indefinite-lived assets in 2022 or 2021. Amortisation: Amortisation is charged on assets with finite lives and is disclosed as an administrative expense in the consolidated income statement. The amortisation method used reflects the expected pattern of consumption of future economic benefits and generally amortised on a straight-line basis, the amortisation periods used are as follows: \u2022 Intangible assets acquired in business combinations \u2013 1.5 to 20 years. \u2022 Intangible assets purchased or internally capitalised \u2013 3 to 20 years. Impairment: Intangible assets with finite lives are only tested for impairment, either individually or at the cash-generating unit level, where there is an indicator of impairment. Derecognition: Intangible assets are derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset (retired). Any gain or loss arising on derecognition of the asset, calculated as the difference between the net disposal proceeds and the carrying value of the asset, is included in the consolidated income statement when the asset is derecognised. The measurement of intangible assets other than goodwill in a business combination: on the acquisition of a business, the identifiable intangible assets may include licences, customer lists and brands. The fair value of these assets is determined by discounting estimated future net cash flows generated by the asset because in most cases no active market for the assets exists and therefore no observable value exists. The use of different assumptions for the expectations of future cash flows and the discount rate would change the valuation of the intangible assets. The assessment of costs capitalised as intangible assets to generate future economic benefits: judgement is applied in assessing whether costs incurred, both internal and external, will generate future economic benefits. Judgements and estimates are applied in determining the carrying value of the assets, including assumptions made in respect of the status of the programme each asset relates to. Given the level of judgement and estimation involved in assessing future cash flows, it is reasonably possible that outcomes within the next financial year may be different from management\u2019s assumptions and require an adjustment to the carrying value of intangible assets. Accounting policies Following initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Goodwill arising on acquisitions prior to 31 December 1997 remains set off directly against reserves and does not get recycled through the consolidated income statement. At the acquisition date, any goodwill acquired is allocated to the cash-generating units (CGU) which are expected to benefit from the combination\u2019s synergies. Impairment is determined by assessing the recoverable amount of the CGU to which the goodwill relates. Where the recoverable amount of the CGU is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in these circumstances is measured on the basis of the relative values of the operation disposed of and the portion of the CGU retained. Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Any difference between the price paid or received and the amount by which non-controlling interests are adjusted is recognised directly in equity and attributed to the owners of the Parent company. Prior to the adoption of IAS 27 (Amended), goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of the transaction. Accounting policies At the inception of the lease, the Group recognises a right-of-use asset at cost, which comprises the present value of minimum future lease payments determined at the inception of the lease. Right-of-use assets are depreciated using the straight-line method over the shorter of estimated life or the lease term. Depreciation is included within administrative expenses in the consolidated income statement. Amendment to lease terms resulting in a change in payments or the length of the lease results in an adjustment to the right-of-use asset and corresponding lease liability. Right-of-use assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be fully recoverable. Right-of-use assets exclude leases with low values and terms of twelve months or less. These leases are expensed to the consolidated income statement as incurred. Accounting policies Provisions are recognised when the Group has a present legal or constructive obligation arising from past events, it is probable that cash will be paid to settle it, and the amount can be estimated reliably. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows by a rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a financing cost in the consolidated income statement. The value of the provision is determined based on assumptions and estimates in relation to the amount, timing and likelihood of actual cash flows, which are dependent on future events. Where no reliable basis of estimation can be made, no provision is recorded. However, contingent liabilities disclosures are given when there is a greater than remote probability of outflow of economic benefits. See note 6.2. On an ongoing basis, management monitor provisions and their accurate estimation when compared to final outcomes. Accounting policies The Group leases various assets, comprising land and buildings, equipment and motor vehicles. The determination whether an arrangement is, or contains, a lease is based on whether the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. The following sets out the Group\u2019s lease accounting policy for all leases with the exception of leases with low value and term of twelve months or less which are expensed to the consolidated income statement. The Group as a lessee \u2013 Right-of-use assets and lease liabilities The accounting policy for right-of-use assets is included in note 3.5. The Group recognises lease liabilities where a lease contract exists and right-of-use assets representing the right to use the underlying leased assets. At the commencement of a lease, the Group recognises the lease liability measured at the present value of the lease payments to be made over the lease term. In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of the lease liability is increased to reflect the accretion of interest and reduced for the lease payments made. The incremental borrowing rate is the rate of interest that the Group would have to pay to borrow, over a similar term and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. Incremental borrowing rates are determined monthly and depend on the term, country, currency and commencement date of the lease. The incremental borrowing rate is determined based on a series of inputs including: the risk- free rate based on swap market data; a country-specific risk adjustment; a credit risk adjustment; and an entity-specific adjustment where the entity risk profile is different to that of the Group. The lease liability is subsequently remeasured (with a corresponding adjustment to the related right-of-use asset) when there is a change in future lease payments due to a renegotiation or market rent review, a change of an index or rate or a reassessment of the lease term. Lease payments are apportioned between a finance charge and a reduction of the lease liability based on the constant interest rate applied to the remaining balance of the liability. Interest expense is included within net finance costs in the consolidated income statement. Lease payments comprise fixed payments, including in-substance fixed payments such as service charges and variable lease payments that depend on an index or a rate, initially measured using the minimum index or rate at inception date. The payments also include any lease incentives and any penalty payments for terminating the lease, if the lease term reflects the lessee exercising that option. The lease term determined comprises the non-cancellable period of the lease contract. Periods covered by an option to extend the lease are included if the Group has reasonable certainty that the option will be exercised, and periods covered by an option to terminate are included if it is reasonably certain that this will not be exercised. The Group has elected to apply the practical expedient in IFRS 16 paragraph 15 not to separate non-lease components such as service charges from lease rental charges. The Group as a lessor When the Group acts as a lessor, it determines at lease commencement whether the lease is a finance lease or an operating lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers to the lessee all of the risks and rewards of ownership in relation to the underlying asset. If this is the case, then the lease is a finance lease. If not, then it is an operating lease. The Group acts as an intermediate lessor of property assets and equipment. When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses whether the sub-lease is a finance or operating lease in the context of the right-of-use asset arising from the head lease. In instances where the Group is the intermediate lessor and the sub-lease is classified as a finance lease, the Group recognises a net investment in sub-leases for amounts recoverable from the sub-lessees while derecognising the respective portion of the right-of-use asset. The lease liability is retained on the balance sheet. The net investment in sub-leases is classified as current or non-current finance assets in the consolidated balance sheet according to whether or not the amounts will be recovered within twelve months of the balance sheet date. Finance income recognised in respect of net investment in sub-leases is presented within net finance costs in the consolidated income statement and the capital element of lease rental received is presented within investing activities in the consolidated cash flow statement. The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term. The Group accounts for finance leases as finance lease receivables, using an incremental borrowing rate where the interest rate implicit in sub-lease is not easily determinable. Accounting policies Financial instruments \u2013 classification of financial instruments The Group classifies its financial instruments in the following measurement categories: \u2022 those to be measured subsequently at fair value, either through other comprehensive income (FVOCI) or through profit or loss (FVPL); and \u2022 those to be measured at amortised cost. The classification depends on the Group\u2019s business model for managing the financial assets and the contractual terms of the cash flows. Financial instruments \u2013 initial recognition At initial recognition, the Group measures a financial instrument at its fair value plus, in the case of a financial instrument not at FVPL, transaction costs that are directly attributable to the acquisition of the financial instrument. Transaction costs of financial instruments carried at FVPL are expensed in the consolidated income statement. Financial instruments with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. Purchases and sales of financial instruments are recognised on their trade date (ie the date the Group commits to purchase or sell the instrument). Financial instruments are derecognised when the rights to receive/pay cash flows from the financial instrument have expired or have been transferred such that the Group has transferred substantially all risks and rewards of ownership. Debt instruments Debt instruments are initially recognised at fair value less directly attributable transaction costs and are subsequently remeasured depending on the Group\u2019s business model for managing the liability and the cash flow characteristics of the liability. There are three measurement categories into which the Group classifies its debt instruments: \u2022 Amortised cost: instruments that are held for collection/payment of contractual cash flows are measured at amortised cost where those cash flows represent solely payments of principal and interest. Interest income/expense from these financial instruments is included in net finance costs using the effective interest rate method. \u2022 FVOCI: instruments that are held for collection/payment of contractual cash flows and for selling the financial instrument are measured at FVOCI where the instrument\u2019s cash flows represent solely payments of principal and interest. Movements in the carrying amount are taken through consolidated Other Comprehensive Income (OCI), except for the recognition of impairment gains or losses, interest income and foreign exchange gains/losses, which are recognised in the consolidated income statement. When the financial instrument is derecognised, the cumulative gain/loss previously recognised in OCI is reclassified to the consolidated income statement and recognised in other gains/ (losses). \u2022 FVPL: instruments that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain/loss on a debt instrument that is measured at FVPL is recognised in the consolidated income statement and presented within net finance costs. The Group reclassifies debt instruments when, and only when, its business model for managing those instruments changes. Equity instruments Investments in equity instruments are initially recognised at fair value and are subsequently remeasured at fair value with the movement recognised through the consolidated income statement, except where an election has been made for the movement to be recognised through OCI. An election can be made on initial recognition of equity instruments that are neither held-for-trading or instruments acquired as part of a business combination. Once an election has been made all movements in fair value, with the exception of dividends, are presented through OCI and there is no subsequent reclassification of fair value gains/losses to the consolidated income statement following the derecognition of the investment. Dividends from such investments continue to be recognised in the consolidated income statement as other income when the Group\u2019s right to receive payments is established. Impairment The Group assesses, on a forward looking basis, the expected credit losses associated with its financial instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Derivatives Derivative financial instruments are initially recognised at fair value and are subsequently remeasured at fair value at the end of each reporting period with the movement recognised through the consolidated income statement, except where derivatives qualify for cash flow hedge accounting. The effective proportion of cash flow hedges is recognised in OCI and presented in the hedging reserve within equity. The cumulative gain/loss is subsequently reclassified to the consolidated income statement in the same period that the relevant hedged transaction is realised. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs incurred in connection with the borrowing of funds. Accounting policies The fair value of the equity instrument granted is measured at grant date and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined using an option pricing model, only taking into account vesting conditions linked to the price of the shares of the Company (market conditions). No expense is recognised for awards that do not ultimately vest as a result of not meeting performance or service conditions. Where all service and performance vesting conditions have been met, the awards are treated as vesting, irrespective of whether or not the market condition is satisfied, as market conditions have been reflected in the fair value of the equity instruments. At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management\u2019s best estimate of the achievement or otherwise of non-market conditions, the number of equity instruments that will ultimately vest or, in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement in cumulative expense since the previous balance sheet date is recognised in the consolidated income statement, with a corresponding adjustment to equity. Where the terms of an award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period adjusted for the incremental fair value of any modification ie the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative. Where an award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the consolidated income statement for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over the fair value being treated as an expense in the income statement. The expense recognised for share-based payments (before tax) in respect of employee services received during the year to 31 December 2022 was \u00a35.4m (2021: \u00a31.2m), all of which arises from equity-settled share based payment transactions. Details of the schemes are as follows: Deferred annual bonus plan This scheme is applicable to executive directors. Under this scheme, awards are made annually consisting of only deferred shares, which are linked to the payout under the annual bonus scheme (details of which are contained in the directors\u2019 remuneration report on pages 99 to 122). The value of deferred shares is determined by the pay-out under the annual bonus scheme: half of the annual bonus is paid in cash and the remainder is deferred into shares under the deferred annual bonus plan or the Capita executive plan. Directors have the option to defer up to 100% of their annual bonus into deferred shares or net bonus into a restricted share award. The deferred/restricted shares are held for a period of three years from the date of award, during which they are not forfeitable, except in the case of dismissal for gross misconduct. The weighted average share price of options at the date of exercise in 2022 was \u00a30.22 (2021: \u00a30.33). The weighted average share price during the year was \u00a30.26 (2021: \u00a30.43). The total cash value of the deferred shares awarded during the year was \u00a30.2m (2021: \u00a3nil). Long-term incentive plans (LTIPs) The structure of the Group\u2019s LTIP schemes was approved at the Company\u2019s AGM in 2017. From 2021, no new awards will be granted under the LTIP although the 2020 awards are yet to vest. For the 2019 award, 75% of the award was equally weighted between free cash flow, EBIT margin and organic revenue growth, with the remaining 25% split equally between customer satisfaction and employee engagement, measured over a three-year period. Threshold vesting (25%) for each measure is dependent upon: free cash flow reaching \u00a3190m; EBIT margin exceeding 9%; organic revenue growth to \u00a33,900m; six point positive swing in NPS for both customer satisfaction and employee engagement. Target vesting (50%) for each measure is dependent upon: free cash flow reaching \u00a3210m; EBIT margin exceeding 10%; organic revenue growth to \u00a33,950m; eight point positive swing in NPS for both customer satisfaction and employee engagement. Maximum vesting (100%) for each measure is dependent upon: free cash flow reaching \u00a3250m; EBIT margin of 12%; organic revenue growth to \u00a34,050m; 12 point positive swing in net promoter score (NPS) for both customer satisfaction and employee engagement. Awards are also subject to an underpin based on an assessment of underlying financial and operational performance. The 2020 award is split into three equal tranches that vest on the first, second and third anniversary of the grant date. The first tranche in 2020 was subject to a retention element which will vest in full on each annual vesting date, with the remaining 50% subject to a performance condition of net debt. Threshold vesting (25%) is dependent on net debt falling to \u00a3872m, target vesting (50%) is dependent on net debt falling to \u00a3822m and maximum vesting (100%) is dependent on net debt being below \u00a3772m. Tranches 2 and 3 are subject to the retention element only apart from the CEO\u2019s award which is subject to relative TSR and responsible business scorecard measures. Details of the LTIP awards made to executive directors over the same period are set out in the directors\u2019 remuneration report, on page 115. All of the above awards are subject to a performance underpin \u2013 assessment of the underlying financial and operational performance of Capita over the performance period. Accounting policies Defined contribution pension schemes The Group maintains a number of defined contribution pension schemes and for these schemes the Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense in the consolidated income statement as the related service is provided and as they fall due. Defined benefit pension schemes In addition, the Group operates a defined benefit pension scheme and participates in a number of other defined benefit pension schemes, all of which require contributions to be made to separate trustee-administered funds. The costs of providing benefits under these schemes are determined separately for each scheme using the projected unit credit method, which attributes entitlement to benefits to the current period (to determine current service cost) and to the current and prior periods (to determine the present value of the defined benefit obligation) and is based on actuarial advice. Past service costs are recognised immediately in the consolidated income statement. When a settlement (eliminating all obligations for benefits already accrued) or a curtailment (reducing future obligations as a result of a material reduction in the scheme membership or a reduction in future entitlement) occurs, the obligation and related plan assets are remeasured using current actuarial assumptions and the resultant gain/loss recognised in the consolidated income statement during the period in which the settlement or curtailment occurs. Remeasurements of the net defined benefit asset/liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income and will not be reclassified to the consolidated income statement. The Group generally determines the net interest expense/income on the net defined benefit asset/liability for the year by applying the discount rate used to measure the defined benefit obligation at the beginning of the year to the then net defined benefit asset/liability, taking into account any changes in the net defined benefit asset/liability during the year as a result of contributions and benefit payments. However, due consideration is made to events which require the net interest expense/income on the net defined benefit asset/liability to be remeasured over the course of the year. Current and past service costs are charged to operating profit while the net interest cost is included within net finance costs. The net asset/(liability) in the consolidated balance sheet with respect to the defined benefit pension schemes comprises the total for each scheme, or group of schemes, of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. The policy to determine fair value of plan assets is detailed in the note below. The value of a net pension benefit asset is restricted to the present value of any amount the Group expects to recover by way of refunds from the plan or reductions in the future contributions. Accounting policies Government grants Government grants are not recognised until there is a reasonable assurance that they Group will comply with the conditions attaching to them and that the grants will be received. Government grants are recognised in the consolidated income statement on a systematic basis over the periods in which the Group recognises, as expenses, the related costs for which the grants are intended to compensate. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in the consolidated income statement in the period in which they become receivable. ",
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"value": "These financial statements consolidate those of Capita plc (the Company or the Parent Company) and all of its subsidiaries (the Group). ",
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"value": "These financial statements consolidate those of Capita plc (the Company or the Parent Company) and all of its subsidiaries (the Group). Capita plc is a public limited company incorporated in England and Wales whose shares are publicly traded. The principal activities of the Group are given in the strategic report on pages 16 to 25. These consolidated financial statements of Capita plc for the year ended 31 December 2022 were authorised for issue in accordance with a resolution of the directors on 2 March 2023. These consolidated financial statements are presented in British pounds sterling and all values are rounded to the nearest tenth of a million (\u00a3m) except where otherwise indicated. ",
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"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-533": {
"value": "These consolidated financial statements are presented in British pounds sterling and all values are rounded to the nearest tenth of a million (\u00a3m) except where otherwise indicated. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-505": {
"value": "Statement of compliance These consolidated financial statements have been prepared in accordance with UK-adopted International Financial Reporting Standards (IFRSs) and the Disclosure and Transparency Rules of the UK's Financial Conduct Authority. ",
"dimensions": {
"concept": "ifrs-full:StatementOfIFRSCompliance",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-504": {
"value": "Basis of consolidation These consolidated financial statements comprise the financial statements of the Group at 31 December each year. Subsidiaries are consolidated from the date on which control is transferred to the Group until control is transferred out of the Group. Where there is a loss of control of a subsidiary, these consolidated financial statements include the results for that part of the reporting year during which Capita plc had control and the profit or loss on disposal is calculated as the difference between the fair value of the consideration received and the carrying amount of the net assets (including goodwill) disposed of. Losses applicable to the non-controlling interests in subsidiaries are attributed to the non-controlling interests even if that results in the non-controlling interests having a deficit balance. Investments in associates are accounted for using the equity method. Under the equity method, the investment in the entity is stated as a one line item at cost plus the investor\u2019s share of retained post-acquisition profits or losses and other changes in net assets less any impairment. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-503": {
"value": "Going concern In determining the appropriate basis of preparation of the financial statements for the year ended 31 December 2022, the Board is required to consider whether the Group and Parent Company can continue in operational existence for the foreseeable future. The Board has concluded that it is appropriate to adopt the going concern basis, having undertaken a rigorous assessment of the financial forecasts, key uncertainties, sensitivities, and mitigations as set out below. Accounting standards require that \u2018the foreseeable future\u2019 for going concern assessment covers a period of at least twelve months from the date of approval of these financial statements, although those standards do not specify how far beyond twelve months a Board should consider. In its going concern assessment, the Board has considered the period from the date of approval of these financial statements to 31 August 2024 (\u2018the going concern period\u2019) and which aligns with the expiry of the revolving credit facility (RCF). The base case financial forecasts used in the going concern assessment are derived from the 2023-2024 business plans as approved by the Board in January 2023. The going concern assessment considers the Group\u2019s sources and uses of liquidity and covenant compliance throughout the period under review. The value of the Group\u2019s committed RCF was \u00a3288.4m at 31 December 2022 and it expires on 31 August 2024. In February 2023, the Group executed a committed bridge facility of \u00a350m with three of its relationship banks providing additional liquidity from 1 January 2024. The committed bridge facility has an expiry date of 31 December 2024 and is subject to covenants, which are the same as those in the RCF. Both the RCF and the \u00a350m bridge facility incorporate provisions such that they will partially reduce in quantum as a consequence of specified transactions, including disposals, equity raises or other refinancing. Given the track record of the Group extending the RCF in prior years, including in 2022, and the committed bridge facility executed in February 2023, the Board is confident that the RCF will be extended or refinanced and be of a sufficient quantum well ahead of its expiry in August 2024. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGoingConcernExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-507": {
"value": "Foreign currency translation The functional and presentation currency of Capita plc and its UK subsidiaries is the British pound sterling (\u00a3). Transactions in foreign currencies are initially recorded at the functional currency exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency exchange rate ruling at the balance sheet date. All differences are taken to the consolidated income statement with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign operation. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in the consolidated income statement. Tax charges and credits attributable to exchange differences on those borrowings are also taken directly to equity. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. The functional currencies of overseas operations include the euro, Indian rupee, South African rand, and the US dollar. At the reporting date, the assets and liabilities of the overseas operations are retranslated into the presentation currency of Capita plc at the exchange rate ruling on the balance sheet date and their income statements are translated using the weighted average exchange rate for the year. The exchange differences arising on the retranslation are taken directly to a separate component of equity. On disposal of a foreign operation, the deferred cumulative foreign currency translation difference recognised in equity relating to that particular foreign operation is recognised in the consolidated income statement. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-538": {
"value": "Significant accounting judgements, estimates and assumptions The preparation of financial statements in accordance with generally accepted accounting principles requires the directors to make judgements and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported income and expense during the presented periods. Although these judgements and assumptions are based on the directors\u2019 best knowledge of the amount, events or actions, actual results may differ. As described in note 2.1, given the level of judgement and estimation involved in assessing the future profitability of contracts, it is reasonably possible that outcomes within the next financial year may be different from management\u2019s assumptions and could require a material adjustment to the carrying amounts of contract assets and, onerous contract provisions. The impact of climate change has been considered in the preparation of these financial statements across a number of areas, including our evaluation of the critical accounting estimates and judgements which are detailed below, consistent with the risks and opportunities set out in the strategic report on pages 49 to 53. None of these risks had a material effect on the critical accounting estimates or on the consolidated financial statements of the Group. The Group will continue developing its assessment of the impact that climate change may have on the assets and liabilities recognised and presented in its financial statements. The key sources of uncertainty that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year are summarised below and set out in more detail in the related note: \u2022 Contract accounting (note 2.1) \u2013 Impairment of contract fulfilment assets \u2013 Customer and onerous contract provisions \u2022 Deferred tax asset recognition (note 2.6) \u2022 Impairment of goodwill (note 3.4) \u2022 Measurement of defined benefit pension obligations (note 5.2) The key areas where significant accounting judgements have been made are summarised below and set out in more detail in the related note: \u2022 Capitalisation of contract fulfilment assets (note 3.1) \u2022 Measurement of goodwill (note 3.4) For ease of reference, this symbol has been used to denote significant accounting judgements and estimates where they occur within the note: Significant accounting judgements, estimates and assumptions Due to the size and complexity of some of the Group\u2019s contracts, there are significant judgements to be applied, specifically in assessing: (i) the recoverability of contract fulfilment assets; and (ii) the completeness of the customer and onerous contract provisions. These judgements are dependent on assessing the contract\u2019s future profitability and give rise to a key source of estimation uncertainty. It is possible that outcomes within the next financial year may be different from management\u2019s assumptions and could require a material adjustment to the carrying amounts of contract assets and onerous contract provisions. It should be noted that while management must make judgements in relation to applying the revenue recognition policy and recognition of related balance sheet items (trade receivables; deferred income; and accrued income), these are not considered significant judgements (refer to note 2.2 for the Group\u2019s policies). Assessing contract profitability In assessing a contract\u2019s future lifetime profitability, management must estimate forecast revenue and costs to both transform and run the service over the remaining contract term. The ability to accurately forecast the outcomes involves estimates in respect of: costs to be incurred; cost savings to be achieved; impact of inflation; future performance against any contract-specific key performance indicators (KPIs) that could trigger variable consideration or service credits; and the outcome of any commercial negotiations. The level of uncertainty in the estimated future profitability of a contract is directly related to the stage of the life-cycle of the contract and the complexity of the performance obligations. Contracts in the transformation stage and pre-inflection stages are considered to have a higher level of uncertainty because of: \u2022 the ability to accurately estimate the costs to deliver the transformed process; \u2022 the dependency on the customer to agree to the specifics of the transformation: for example, where they are involved in certifying that the new process or the new technical solution designed by Capita meets their specific requirements; and \u2022 the assumptions made to forecast expected savings in the target operating model. Those contracts which are post-inflection and in BAU stage tend to have a much lower level of uncertainty in estimating future profitability. Recoverability of contract fulfilment assets and completeness of onerous contract provisions Management first assesses whether the contract assets are impaired and then further considers whether an onerous contract exists. For half and full year reporting, the Audit and Risk Committee specifically reviews the material judgements and estimates, and the overall approach in respect of the Group\u2019s major contracts, including comparison against previous forecasts. Major contracts include those that are material in size or risk to the Group\u2019s results. An assessment of which contracts are major contracts is performed twice a year, and to enable comparability the prior period balances below are re-presented to reflect the same scope as the current period. Other contracts are reported to the Audit and Risk Committee as deemed appropriate. These contracts are collectively referred to as \u2018major contracts\u2019 in the remainder of this note. The major contracts contributed \u00a31.4 billion (2021: \u00a31.3 billion) or 49% (2021: 47%) of Group adjusted revenue. Non-current contract fulfilment assets at 31 December 2022 were \u00a3263.0m, of which \u00a3106.3m (2021: \u00a3118.6m) relates to major contracts with ongoing transformational activities. The remainder relates to contracts post transformation and includes non-major contracts. The major contracts, both pre- and post-transformation, are rated according to their financial risk profile, which is linked to the level of uncertainty over future assumptions. For those that are in the high and medium rated risk categories the associated non-current contract fulfilment assets were, in aggregate, \u00a340.4m at 31 December 2022 (2021: \u00a341.9m). The recoverability of these assets is dependent on no significant adverse change in the key contract assumptions arising during the next financial year. The balance of deferred income associated with these contracts was \u00a3116.5m at 31 December 2022 (2021: \u00a3126.6m) and is forecast to be recognised as performance obligations continue to be delivered over the life of the respective contracts. Onerous contract provisions associated with these contracts were \u00a342.5m at 31 December 2022 (2021: \u00a339.5m). Following these reviews, and reviews of smaller contracts across the business, as outlined in note 3.1.3, contract fulfilment asset impairments of \u00a33.8m (2021: \u00a37.3m) were identified and recognised within cost of sales, of which \u00a30.5m (2021: \u00a3nil) relates to contract fulfilment assets added during the period, and net onerous contract provisions of \u00a31.7m (2021: \u00a332.0m) were identified and recognised in cost of sales. As discussed in note 1, the adoption of the amendment to IAS 37 resulted in additional onerous contract provisions being required, as well as contract asset impairments. On adoption of the amended standard the cumulative effect was recognised as an opening balance adjustment to retained earnings. Given the quantum of the relevant contract assets and liabilities, and the nature of the estimates noted above, management has concluded that it is reasonably possible, that outcomes within the next financial year may be different from management\u2019s current assumptions and could require a material adjustment to the carrying amounts of contract assets and onerous contract provisions. However, as noted above, \u00a3106.3m of non-current contract fulfilment assets relates to major contracts with ongoing transformational activities; and, \u00a340.4m of non-contract fulfilment assets and \u00a342.5m of onerous contract provisions relate to the highest and medium rated risk category. Due to the level of uncertainty, combination of variables and timing across numerous contracts, it is not practical to provide a quantitative analysis of the aggregated judgements that are applied, and management do not believe that disclosing a potential range of outcomes on a consolidated basis would provide meaningful information to a user of the financial statements. Due to commercial sensitivities, the Group does not specifically disclose the amounts involved in any individual contract. Certain major transformation contracts have key milestones during the next twelve months and an inability to meet these key milestones could lead to reduced profitability and a risk of impairment of the associated contract assets. These contracts include Royal Navy training and TfL Road User Charging. Additional information, which does not form part of these consolidated financial statements, on the results and performance of the underlying divisions including the outlook on certain contracts is set out in the divisional performance review. Significant accounting judgements, estimates and assumptions Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax assets and unused tax losses can be utilised, except where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. This involves an assessment of when those assets are likely to reverse, and a judgement as to whether or not there will be sufficient taxable profits available to offset the assets when they do reverse. This requires assumptions regarding future profitability and is therefore inherently uncertain. To the extent assumptions regarding future profitability change, there may be an increase or decrease in the amounts recognised in respect of deferred tax assets as well as in the amounts recognised during the year in which the change occurs. Sensitivities and additional information relating to deferred tax assets/liabilities are provided in note 2.6.2. The assessment of costs capitalised as intangible assets to generate future economic benefits: judgement is applied in assessing whether costs incurred, both internal and external, will generate future economic benefits. Judgements and estimates are applied in determining the carrying value of the assets, including assumptions made in respect of the status of the programme each asset relates to. Given the level of judgement and estimation involved in assessing future cash flows, it is reasonably possible that outcomes within the next financial year may be different from management\u2019s assumptions and require an adjustment to the carrying value of intangible assets. Significant accounting judgements, estimates and assumptions Measurement and impairment of goodwill: the amount of goodwill initially recognised as a result of a business combination is dependent on the allocation of the purchase price to the fair value of the identifiable assets acquired and the liabilities assumed. The determination of the fair value of the assets and liabilities is based, to a considerable extent, on management\u2019s judgement. Allocation of the purchase price affects the results of the Group because finite lived intangible assets are amortised. The Group determines whether goodwill is impaired on an annual basis, or more frequently if required, and this requires an estimation of the recoverable amount of the CGUs to which the intangible assets are allocated utilising an estimation of future cash flows and choosing a suitable discount rate. Significant accounting judgements, estimates and assumptions As detailed in note 2.1, in respect of onerous customer contract provisions, due to the level of uncertainty, combination of variables and timing across numerous contracts, it is not practical to provide a quantitative analysis of the aggregated judgements that are applied, and management do not believe that disclosing a potential range of outcomes on a consolidated basis would provide meaningful information to a user of the financial statements. Due to commercial sensitivities, the Group does not specifically disclose the amounts involved in any individual contract. Significant accounting judgements, estimates and assumptions The measurement of defined benefit obligations \u2013 the accounting cost of these benefits and the present value of pension liabilities involve judgements about uncertain events including such factors as the life expectancy of members, the salary progression of current employees, price inflation and the discount rate used to calculate the net present value of the future pension payments. The Group uses estimates for all of these factors in determining the pension costs and liabilities incorporated in the consolidated financial statements. The assumptions reflect historical experience and judgement regarding future expectations. The Group continued to set RPI inflation in accordance with the market break-even expectations less an inflation risk premium. The inflation risk premium has remained at 0.25% pa. For CPI, the Group retained the assumed difference between RPI and CPI at an average of 0.65%pa. Short-term inflation expectations continued to rise due to the global economic recovery from the initial phase of Covid-19, combined with supply constraints in certain sectors such as energy. Current inflation levels exceed 10% pa. This will have an impact on pension increases that are linked to inflation and this impact, where applicable, has been reflected in the disclosures. It should be noted that a material proportion of pension increases are capped (at different levels, but the main cap is 5% pa) with some caps applying annually and others applying over a period of years. The impact of Covid-19 on the effects of future life expectancy continues to be uncertain. The pandemic is likely to have an impact on the setting of appropriate life expectancy assumptions and models for future improvements will need to consider whether the experiences in 2020 and 2021 are a short-term phenomenon, and if the pandemic will influence future mortality in other ways. For example, the pressure on health services may mean that progress against other causes of death such as cancer is slower than previously expected, meaning an assumption of a lower rate of mortality improvements might be appropriate. Alternatively, the surviving population may be in better health than those dying from Covid-19, meaning that it might be expected that the remaining members live slightly longer. It is still too early to draw conclusions as to what impact Covid-19 might have on future life expectancy; however, some allowance has been reflected for actual mortality experienced in 2020 and 2021 by making a refinement in an initial addition parameter used in the future mortality improvement assumptions from 0.5% to 0.25% (which makes an allowance for a decrease in initial rates of longevity improvement stemming from Covid-19) and which results in the life expectancy reducing by around 0.1 years (around 0.4% of liabilities). Significant accounting judgements, estimates and assumptions Judgement is applied by the Group when determining what costs qualify to be capitalised in particular when considering whether these costs are incremental and when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable. For example, the Group considers which type of sales commissions are incremental to the cost of obtaining specific contracts and the point in time when the costs will be capitalised. See note 2.1 for further information. Movements in non-current contract fulfilment assets were as follows1: 2022 \u00a3m 2021 \u00a3m At 1 January 286.7 294.8 Impact of change in accounting standards \u2013 amendments to IAS 372 (2.4) \u2014 At 1 January 2022 on adoption of IAS 37 284.3 294.8 Additions 67.1 132.2 Transfer to assets held-for-sale \u2014 (32.6) Disposal of business (2.8) (0.1) Impairment (3.8) (7.3) Derecognition (0.4) (16.6) Utilised during the year (81.5) (83.9) Exchange movement 0.1 0.2 At 31 December 263.0 286.7 1. Refer to note 3.1.1 for current contract fulfilment assets. 2. The Group initially applied the amendments to IAS 37 at 1 January 2022 and the cumulative effect of applying the amendments was recognised as an opening balance adjustment to retained earnings. Refer to note 1 for further details. Impairment: In 2022, the Group recognised an impairment of \u00a33.8m (2021: \u00a37.3m) in cost of sales, of which, \u00a30.5m (2021: \u00a3nil) relates to contract fulfilment assets added during the year. Derecognition: In 2022, \u00a30.4m (2021: \u00a316.6m) was derecognised in relation to a contract in Capita Experience where the scope of our services changed due to termination of contracts and the Group had no further use for the assets. In 2021 the derecognition primarily related to a contract in Capita Public Service due to agreed reduction in scope of the contract and also contracts in Capita Experience where the scope of our services changed due to termination of contracts and the Group had no further use for the assets ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory",
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"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-534": {
"value": "New standards and interpretations adopted The accounting policies adopted are consistent with those of the previous financial year. In addition, the Group has adopted the amendments to standards which are listed below. These amendments were either not applicable or not material to the Group, except for the impact of the Amendments to IAS 37 detailed further below. International Accounting Standards (IAS/IFRS) Effective date Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) 1 January 2022 Annual Improvements to IFRS Standards 2018 - 2020 1 January 2022 Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) 1 January 2022 Reference to the Conceptual Framework (Amendments to IFRS 3) 1 January 2022 Onerous contracts \u2013 cost of fulfilling a contract (amendments to IAS 37) An onerous contract is a contract under which the unavoidable costs (ie the costs that the Group cannot avoid because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The amendments specify that when assessing whether a contract is onerous or loss-making, an entity needs to include costs that relate directly to a contract to provide goods or services, which include both incremental costs (eg the costs of direct labour and materials) and an allocation of costs directly related to contract activities (eg depreciation of equipment used to fulfil the contract as well as costs of contract management and supervision). General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. The Group has adopted the amendment which resulted in a change in accounting policy for performing an onerous contract assessment. Previously, the Group included only incremental costs to fulfil a contract when determining whether that contract was onerous. The revised policy requires inclusion of both incremental costs and an allocation of other direct costs. In accordance with the transitional provisions, the Group applies the amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments (the date of initial application) and has not restated its comparative information. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfExpectedImpactOfInitialApplicationOfNewStandardsOrInterpretations",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-508": {
"value": "New standards and interpretations adopted The accounting policies adopted are consistent with those of the previous financial year. In addition, the Group has adopted the amendments to standards which are listed below. These amendments were either not applicable or not material to the Group, except for the impact of the Amendments to IAS 37 detailed further below. International Accounting Standards (IAS/IFRS) Effective date Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) 1 January 2022 Annual Improvements to IFRS Standards 2018 - 2020 1 January 2022 Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) 1 January 2022 Reference to the Conceptual Framework (Amendments to IFRS 3) 1 January 2022 Onerous contracts \u2013 cost of fulfilling a contract (amendments to IAS 37) An onerous contract is a contract under which the unavoidable costs (ie the costs that the Group cannot avoid because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The amendments specify that when assessing whether a contract is onerous or loss-making, an entity needs to include costs that relate directly to a contract to provide goods or services, which include both incremental costs (eg the costs of direct labour and materials) and an allocation of costs directly related to contract activities (eg depreciation of equipment used to fulfil the contract as well as costs of contract management and supervision). General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. The Group has adopted the amendment which resulted in a change in accounting policy for performing an onerous contract assessment. Previously, the Group included only incremental costs to fulfil a contract when determining whether that contract was onerous. The revised policy requires inclusion of both incremental costs and an allocation of other direct costs. In accordance with the transitional provisions, the Group applies the amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments (the date of initial application) and has not restated its comparative information. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-478": {
"value": "2.1 Contract accounting At 31 December 2022, the Group had the following results and balance sheet items related to long-term contracts: Notes 2022 \u00a3m 2021 \u00a3m Long-term contractual revenue 1 2.2 2,236.2 2,325.2 Non-current and current deferred income 640.7 794.7 Non-current contract fulfilment assets 3.1.3 263.0 286.7 Non-current and current onerous contract provision 52.8 45.8 1. The 2021 comparative has been re-presented to reflect the recategorisation of certain contracts between contract types (long-term contractual, short-term contractual and transactional (point-in-time)) following a review in 2022. Background The Group operates diverse businesses. The majority of the Group\u2019s revenue is from contracts greater than two years in duration (long-term contractual), representing 74% of Group revenue in 2022 (2021: 73%). These long-term contracts can be complex in nature given the breadth of solutions the Group offers and the transformational activities involved. Typically, Capita takes a customer\u2019s process and transforms it into a more efficient and effective solution which is then operated for the customer. The outcome is a high quality solution that addresses a customer\u2019s needs and is delivered consistently over the life of the contract. The Group recognises revenue on long-term contracts as the value is delivered to the customer, which is generally evenly over the contract term, regardless of any restructuring and transformation activity. Capita will often incur greater costs during the transformation phase with costs diminishing over time as the target operating model is implemented and efficiencies realised. This results in lower profits or losses in the early years of contracts and potentially higher profits in later years as the transformation activities are successfully completed and the target operating model fully implemented (the business as usual (BAU) phase). The inflection point is when the contract becomes profitable. Contract fulfilment assets are recognised for those costs qualifying for capitalisation. The utilisation of these assets is recognised over the contract term. The timing of cash receipts from customers typically matches when the costs are incurred to transform, restructure and run the service. This results in income being deferred and released as the Group continues to deliver against its obligation to provide services and solutions to its customers. An example, showing the revenue, cost, profit and cash profit of a typical long-term contract lifecycle is as follows: Significant accounting judgements, estimates and assumptions Due to the size and complexity of some of the Group\u2019s contracts, there are significant judgements to be applied, specifically in assessing: (i) the recoverability of contract fulfilment assets; and (ii) the completeness of the customer and onerous contract provisions. These judgements are dependent on assessing the contract\u2019s future profitability and give rise to a key source of estimation uncertainty. It is possible that outcomes within the next financial year may be different from management\u2019s assumptions and could require a material adjustment to the carrying amounts of contract assets and onerous contract provisions. It should be noted that while management must make judgements in relation to applying the revenue recognition policy and recognition of related balance sheet items (trade receivables; deferred income; and accrued income), these are not considered significant judgements (refer to note 2.2 for the Group\u2019s policies). J Contract lifetime profit IFRS 15 revenue Cash received V alue Operating model at service commencement pa Target operating model Deferred income Restructuring Transformation phase BAU phase Inflection point Initial loss Time Higher level of uncertainty in lifetime profitability Reduced level of uncertainty in lifetime profitability Operating costs Fixed asset depreciation and contract fulfilment asset utilisation 2.1 Contract accounting continued Assessing contract profitability In assessing a contract\u2019s future lifetime profitability, management must estimate forecast revenue and costs to both transform and run the service over the remaining contract term. The ability to accurately forecast the outcomes involves estimates in respect of: costs to be incurred; cost savings to be achieved; impact of inflation; future performance against any contract-specific key performance indicators (KPIs) that could trigger variable consideration or service credits; and the outcome of any commercial negotiations. The level of uncertainty in the estimated future profitability of a contract is directly related to the stage of the life-cycle of the contract and the complexity of the performance obligations. Contracts in the transformation stage and pre-inflection stages are considered to have a higher level of uncertainty because of: \u2022 the ability to accurately estimate the costs to deliver the transformed process; \u2022 the dependency on the customer to agree to the specifics of the transformation: for example, where they are involved in certifying that the new process or the new technical solution designed by Capita meets their specific requirements; and \u2022 the assumptions made to forecast expected savings in the target operating model. Those contracts which are post-inflection and in BAU stage tend to have a much lower level of uncertainty in estimating future profitability. Recoverability of contract fulfilment assets and completeness of onerous contract provisions Management first assesses whether the contract assets are impaired and then further considers whether an onerous contract exists. For half and full year reporting, the Audit and Risk Committee specifically reviews the material judgements and estimates, and the overall approach in respect of the Group\u2019s major contracts, including comparison against previous forecasts. Major contracts include those that are material in size or risk to the Group\u2019s results. An assessment of which contracts are major contracts is performed twice a year, and to enable comparability the prior period balances below are re-presented to reflect the same scope as the current period. Other contracts are reported to the Audit and Risk Committee as deemed appropriate. These contracts are collectively referred to as \u2018major contracts\u2019 in the remainder of this note. The major contracts contributed \u00a31.4 billion (2021: \u00a31.3 billion) or 49% (2021: 47%) of Group adjusted revenue. Non-current contract fulfilment assets at 31 December 2022 were \u00a3263.0m, of which \u00a3106.3m (2021: \u00a3118.6m) relates to major contracts with ongoing transformational activities. The remainder relates to contracts post transformation and includes non-major contracts. The major contracts, both pre- and post-transformation, are rated according to their financial risk profile, which is linked to the level of uncertainty over future assumptions. For those that are in the high and medium rated risk categories the associated non-current contract fulfilment assets were, in aggregate, \u00a340.4m at 31 December 2022 (2021: \u00a341.9m). The recoverability of these assets is dependent on no significant adverse change in the key contract assumptions arising during the next financial year. The balance of deferred income associated with these contracts was \u00a3116.5m at 31 December 2022 (2021: \u00a3126.6m) and is forecast to be recognised as performance obligations continue to be delivered over the life of the respective contracts. Onerous contract provisions associated with these contracts were \u00a342.5m at 31 December 2022 (2021: \u00a339.5m). Following these reviews, and reviews of smaller contracts across the business, as outlined in note 3.1.3, contract fulfilment asset impairments of \u00a33.8m (2021: \u00a37.3m) were identified and recognised within cost of sales, of which \u00a30.5m (2021: \u00a3nil) relates to contract fulfilment assets added during the period, and net onerous contract provisions of \u00a31.7m (2021: \u00a332.0m) were identified and recognised in cost of sales. As discussed in note 1, the adoption of the amendment to IAS 37 resulted in additional onerous contract provisions being required, as well as contract asset impairments. On adoption of the amended standard the cumulative effect was recognised as an opening balance adjustment to retained earnings. Given the quantum of the relevant contract assets and liabilities, and the nature of the estimates noted above, management has concluded that it is reasonably possible, that outcomes within the next financial year may be different from management\u2019s current assumptions and could require a material adjustment to the carrying amounts of contract assets and onerous contract provisions. However, as noted above, \u00a3106.3m of non-current contract fulfilment assets relates to major contracts with ongoing transformational activities; and, \u00a340.4m of non-contract fulfilment assets and \u00a342.5m of onerous contract provisions relate to the highest and medium rated risk category. Due to the level of uncertainty, combination of variables and timing across numerous contracts, it is not practical to provide a quantitative analysis of the aggregated judgements that are applied, and management do not believe that disclosing a potential range of outcomes on a consolidated basis would provide meaningful information to a user of the financial statements. Due to commercial sensitivities, the Group does not specifically disclose the amounts involved in any individual contract. Certain major transformation contracts have key milestones during the next twelve months and an inability to meet these key milestones could lead to reduced profitability and a risk of impairment of the associated contract assets. These contracts include Royal Navy training and TfL Road User Charging. Additional information, which does not form part of these consolidated financial statements, on the results and performance of the underlying divisions including the outlook on certain contracts is set out in the divisional performance review. ",
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"value": "2.2 Revenue including segmental revenue Accounting policies Revenue The Group generates revenue largely in the UK and Europe. The Group operates a diverse range of businesses and accordingly applies a variety of methods for revenue recognition, based on the principles set out in IFRS 15. The revenue and profits recognised in any period are based on the delivery of performance obligations and an assessment of when control is transferred to the customer. Revenue is recognised either when the performance obligation in the contract has been performed (\u2018point-in-time\u2019 recognition) or \u2018over time\u2019 as control of the performance obligation is transferred to the customer. For all contracts, the Group determines if the arrangement with a customer creates enforceable rights and obligations. This assessment results in certain Master Service Agreements (MSA) or Frameworks not meeting the definition of a contract under IFRS 15 and as such the individual call-off agreements, linked to the MSA, are treated as individual contracts. The Group enters into contracts which contain extension periods, where either the customer or both parties can choose to extend the contract or there is an automatic annual renewal, and/or termination clauses that could impact the actual duration of the contract. Judgement is applied to assess the impact that these clauses have when determining the appropriate contract term. The term of the contract impacts both the period over which revenue from performance obligations may be recognised and the period over which contract fulfilment assets and capitalised costs to obtain a contract are expensed. For contracts with multiple components to be delivered such as transformation, transitions and the delivery of outsourced services, management applies judgement to consider whether those promised goods and services are: (i) distinct \u2013 to be accounted for as separate performance obligations; (ii) not distinct \u2013 to be combined with other promised goods or services until a bundle is identified that is distinct; or, (iii) part of a series of distinct goods and services that are substantially the same and have the same pattern of transfer to the customer. At a contract\u2019s inception the total transaction price is estimated, being the amount to which the Group expects to be entitled and has rights to under the contract. This includes an assessment of any variable consideration where the Group\u2019s performance may result in additional revenues based on the achievement of agreed KPIs. Such amounts are only included based on the expected value, or the most likely outcome method, and only to the extent that it is highly probable that no revenue reversal will occur. The transaction price does not include estimates of consideration resulting from change orders for additional goods and services unless these are already agreed. Once the total transaction price is determined, the Group allocates this to the identified performance obligations in proportion to their relative standalone selling prices and recognises revenue when (or while) those performance obligations are satisfied. The Group infrequently sells standard products with observable standalone prices due to the specialised services required by customers, consequently the Group applies judgement to determine an appropriate standalone selling price. More frequently, the Group sells customers bespoke solutions, and in these cases the Group typically uses the expected cost-plus margin or a contractually stated price approach to estimate the standalone selling price of each performance obligation. The Group may offer price step downs during the life of a contract, but with no change to the underlying scope of services to be delivered. In general, any such variable consideration, price step down or discount is included in the total transaction price to be allocated across all performance obligations unless it relates to only one performance obligation in a contract. For each performance obligation to be recognised over time, the Group applies a revenue recognition method that faithfully depicts the Group\u2019s performance in transferring control of the goods or services to the customer. This decision requires assessment of the real nature of the goods or services that the Group has promised to transfer to the customer. The Group applies the relevant output or input method consistently to similar performance obligations in other contracts. When using the output method, the Group recognises revenue on the basis of direct measurements of the value to the customer of the goods and services transferred to date relative to the remaining goods and services under the contract. This is a faithful depiction of the transfer of services since the service delivered to the customer is unchanged. Where the output method is used, in particular for long-term service contracts where the series guidance is applied, the Group often uses a method of time elapsed which requires minimal estimation. Certain long-term contracts use output methods based upon estimations of: user numbers; service activity levels; or fees collected. When transfer of control is most closely aligned to Group efforts in delivering the service, the input method is used to measure progress and revenue is recognised in direct proportion to costs incurred. This is a faithful depiction of the transfer of services because costs (or other inputs) most accurately reflect the incremental benefits received by the customer from efforts to date. If performance obligations in a contract do not meet the over time criteria, the Group recognises revenue at a point-in-time when the service or good is delivered. Contract modifications The Group\u2019s contracts are often amended for changes in contract specifications and requirements. Contract modifications exist when the amendment either creates new, or changes existing, enforceable rights and obligations. The effect of a contract modification on the transaction price and the Group\u2019s measure of progress for the performance obligation to which it relates, is recognised as an adjustment to revenue in one of the following ways: a) prospectively as an additional separate contract; b) prospectively as a termination of the existing contract and creation of a new contract; c) as part of the original contract using a cumulative catch up; or, d) as a combination of (b) and (c). In respect of contracts for which the Group has decided there is a series of distinct goods and services that are substantially the same and have the same pattern of transfer where revenue is recognised over time, the modification will always be treated under either (a) or (b); (d) may arise when a contract has a part-termination and a modification of the remaining performance obligations. The facts and circumstances of any contract modification are considered individually because the types of modifications will vary contract by contract and may result in different accounting outcomes. 2.2 Revenue including segmental revenue continued Judgement is applied in relation to the accounting for such modifications where the final terms or legal contracts have not been agreed prior to the period end because management needs to determine if a modification has been approved and if it either creates new, or changes existing, enforceable rights and obligations of the parties. Depending upon the outcome of such negotiations, the timing and amount of revenue recognised may be different in the relevant accounting periods. Modification and amendments to contracts are undertaken through an agreed formal process. For example, if a change in scope has been approved but the corresponding change in price is still being negotiated, management uses judgement to estimate the change in total transaction price. Importantly, any variable consideration is only recognised to the extent that it is highly probable that no revenue reversal will occur. For example, if pricing is subject to indexation based on an external metric (such as CPI or RPI) then the revenue related to the indexation will only be recognised once the relevant indexation is confirmed. Future indexation will not be recognised because it is not highly probable that a significant reversal of an indexation adjustment will not occur. Principal versus agent The Group has arrangements with some of its customers whereby it needs to determine if it acts as a principal or an agent because more than one party is involved in providing the goods and services to the customer. The Group is a principal if it controls a promised good or service before transferring that good or service to the customer. The Group is an agent if its role is to arrange for another entity to provide the goods or services. Factors considered in making this assessment are most notably: the discretion the Group has in establishing the price for the specified good or service; whether the Group has inventory risk; and whether or not the Group is primarily responsible for fulfilling the promise to deliver the service or good. This assessment of control requires judgement particularly in relation to certain service contracts. An example is the provision of certain recruitment and learning services where the Group may be assessed to be agent or principal dependent upon the facts and circumstances of the arrangement and the nature of the services being delivered. Where the Group is acting as a principal, revenue is recorded on a gross basis. Where the Group is acting as an agent, revenue is recorded on a net basis, recognising only the commission or fee earned as revenue. Licences Software licences delivered by the Group can either be right to access (active) or right to use (passive) licences, which determines the timing of revenue recognition. The assessment of whether a licence is active or passive involves judgement. The key determinant of an active licence is whether or not the Group is required to undertake continuing activities that significantly affect the licensed intellectual property (or the customer has a reasonable expectation that it will do so) and the customer is, therefore, exposed to positive (or negative) impacts resulting from those changes. Where the Group is responsible for any maintenance, continuing support, updates and upgrades, and accordingly the sale of the initial software is not distinct. All other licences which have significant standalone functionality are treated as passive licences. When software upgrades are sold as part of the software licence agreement (ie software upgrades are promised to the customer), the Group applies judgement to assess whether the software upgrades are distinct from the licence (ie a separate performance obligation). If the upgrades are considered fundamental to the ongoing use of the software by the customer, the upgrades are not considered distinct and not accounted for as a separate performance obligation. For each contract that includes a separate licence performance obligation, the Group considers all the facts and circumstances in determining whether the licence revenue is recognised over time (active) or at a point-in-time (passive) from the go-live date of the licence. Deferred and accrued income The Group\u2019s customer contracts include a diverse range of payment schedules dependent upon the nature and type of goods and/or services being provided. This can include performance-based payments or progress payments as well as regular monthly or quarterly payments for ongoing service delivery. Payments for transactional goods and services may be at delivery date, in arrears or part payment in advance. The long-term service contracts tend to have higher cash flows early in the contract to cover transformational activities. Where payments received are greater than the revenue recognised up to the reporting date, the Group recognises a deferred income contract liability for this difference. Where payments received less than the revenue recognised up to the reporting date, the Group recognises an accrued contract income asset for this difference. At each reporting date, the Group assesses whether there is any indication that accrued contract income assets may be impaired by considering whether or not any revenue reversal could occur. Where an indicator of impairment exists, the Group makes a formal estimate of the asset\u2019s recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Contract types The Group disaggregates revenue from contracts with customers by contract type, because management believe this best depicts how the nature, amount, timing, and uncertainty of the Group\u2019s revenue and cash flows are affected by economic factors. Categories are: long-term contractual \u2013 greater than two years; short-term contractual \u2013 less than two years; and transactional. The years being measured from the service commencement date. Long-term contractual \u2013 greater than two years The Group provides a range of services in the majority of its reportable segments under contracts with a duration of more than two years. The nature of contracts or performance obligations within this revenue type includes: (i) long-term outsourced service arrangements in the public and private sectors; and (ii) active software licence arrangements. The majority of long-term contractual agreements form part of a series of distinct goods and services because they are substantially the same service; and have the same pattern of transfer, since the series constitutes services provided in distinct time increments (eg daily, monthly, quarterly or annually), and therefore treats the series as one performance obligation. Short-term contractual \u2013 less than two years The nature of contracts or performance obligations within this revenue type includes: (i) short-term outsourced service arrangements in the public and private sectors; and (ii) software maintenance contracts. 2.2 Revenue including segmental revenue continued The Group has assessed that maintenance and support (ie on-call support, remote support) for software licences is a performance obligation that can be considered capable of being distinct and separately identifiable in a contract if the customer has a passive licence. These recurring services are substantially the same because the nature of the promise is for the Group to \u2018stand ready\u2019 to perform maintenance and support when required by the customer. Each day of \u2018standing ready\u2019 is distinct from each subsequent day and is transferred in the same pattern to the customer. Transactional (point-in-time) contracts The Group delivers a range of goods or services in all reportable segments that are transactional services for which revenue is recognised at the point-in-time when control of the goods or services has transferred to the customer. This may be at the point of physical delivery of goods or services and acceptance by the customer or when the customer obtains control of an asset or service in a contract with customer-specified acceptance criteria. The nature of contracts or performance obligations within this revenue type includes: (i) provision of IT hardware goods; (ii) passive software licence agreements; (iii) commission received as agent from the sale of third-party software; and (iv) fees received in relation to the delivery of professional services. 2.2 Revenue including segmental revenue continued 2.2.1 Segmental revenue The Group\u2019s operations are managed separately according to the nature of the services provided, with each segment representing a strategic business division offering a different package of client outcomes across the markets the Group serves. Capita plc is a reconciling item and not an operating segment. A description of the service provision for each segment can be found in the strategic report on pages 16 to 25. The tables below present revenue for the Group\u2019s business segments as reported to the Chief Operating Decision Maker. The Group comprises two core trading divisions - Capita Public Service and Capita Experience - and a third division - Capita Portfolio - which comprises non-core businesses that the Group intends to exit in due course. Comparative information has been re-presented to reflect businesses exited during 2022. Adjusted revenue, excluding results from businesses exited in both years (adjusting items), was \u00a32,845.8m (2021: \u00a32,777.8m), an increase of 2.4% (2021: increase 0.1%). Year ended 31 December 2022 Notes Capita Public Service \u00a3m Capita Experience \u00a3m Capita Portfolio \u00a3m Capita plc \u00a3m Total adjusted \u00a3m Adjusting items \u00a3m Total reported \u00a3m Continuing operations Long-term contractual 1,157.3 986.2 33.1 \u2014 2,176.6 59.6 2,236.2 Short-term contractual 236.7 150.0 37.7 \u2014 424.4 70.4 494.8 Transactional (point-in-time) 51.3 14.5 179.0 \u2014 244.8 38.8 283.6 Total segment revenue 1,445.3 1,150.7 249.8 \u2014 2,845.8 168.8 3,014.6 Trading revenue 1,487.5 1,190.9 334.2 \u2014 3,012.6 \u2014 3,012.6 Inter-segment revenue (42.2) (40.2) (84.4) \u2014 (166.8) \u2014 (166.8) Total adjusted segment revenue 1,445.3 1,150.7 249.8 \u2014 2,845.8 \u2014 2,845.8 Business exits \u2013 trading 2.8 \u2014 33.3 135.5 \u2014 \u2014 168.8 168.8 Total segment revenue 1,445.3 1,184.0 385.3 \u2014 2,845.8 168.8 3,014.6 Year ended 31 December 2021 (Re-presented)1 Continuing operations Long-term contractual 1,115.3 982.2 38.5 \u2014 2,136.0 189.2 2,325.2 Short-term contractual 211.1 152.7 42.9 \u2014 406.7 127.7 534.4 Transactional (point-in-time) 84.0 6.0 145.1 \u2014 235.1 87.8 322.9 Total segment revenue 1,410.4 1,140.9 226.5 \u2014 2,777.8 404.7 3,182.5 Trading revenue 1,443.5 1,226.9 265.4 \u2014 2,935.8 \u2014 2,935.8 Inter-segment revenue (33.1) (86.0) (38.9) \u2014 (158.0) \u2014 (158.0) Total adjusted segment revenue 1,410.4 1,140.9 226.5 \u2014 2,777.8 \u2014 2,777.8 Business exits \u2013 trading 2.8 \u2014 43.9 360.8 \u2014 \u2014 404.7 404.7 Total segment revenue 1,410.4 1,184.8 587.3 \u2014 2,777.8 404.7 3,182.5 1. The 2021 comparative figures have been re-presented to reflect the recategorisation of certain contracts between contract types (long-term contractual, short-term contractual and transactional (point-in-time)) following a review in 2022. Geographical location The table below presents revenue by geographical location. 2022 2021 United Kingdom \u00a3m Other \u00a3m Total \u00a3m United Kingdom \u00a3m Other \u00a3m Total \u00a3m Revenue 2,718.6 296.0 3,014.6 2,882.4 300.1 3,182.5 2.2 Revenue including segmental revenue continued 2.2.2 Order book The tables below show the order book for each division, categorised into long-term contractual (contracts with length greater than two years) and short-term contractual (contracts with length less than two years). The length of the contract is calculated from the start of the service commencement date. The figures represent the aggregate amount of currently contracted transaction price allocated to the performance obligations that are unsatisfied or partially unsatisfied. Revenue expected to be recognised upon satisfaction of these performance obligations is as follows: Order book 31 December 2022 Capita Public Service \u00a3m Capita Experience \u00a3m Capita Portfolio \u00a3m Capita plc \u00a3m Total \u00a3m Long-term contractual 2,916.7 2,465.3 201.9 \u2014 5,583.9 Short-term contractual 68.3 61.4 91.6 \u2014 221.3 Total 2,985.0 2,526.7 293.5 \u2014 5,805.2 Order book 31 December 2021 Capita Public Service \u00a3m Capita Experience \u00a3m Capita Portfolio \u00a3m Capita plc \u00a3m Total \u00a3m Long-term contractual 3,172.8 2,170.0 417.1 \u2014 5,759.9 Short-term contractual 113.5 101.8 140.2 \u2014 355.5 Total 3,286.3 2,271.8 557.3 \u2014 6,115.4 The table below shows the expected timing of revenue to be recognised on long-term contractual orders at 31 December 2022: Time bands of expected revenue recognition from long-term contractual orders Capita Public Service \u00a3m Capita Experience \u00a3m Capita Portfolio \u00a3m Capita plc \u00a3m Total \u00a3m < 1 year 843.3 708.3 25.2 \u2014 1,576.8 1\u20135 years 1,417.0 1,489.8 62.6 \u2014 2,969.4 > 5 years 656.4 267.2 114.1 \u2014 1,037.7 Total 2,916.7 2,465.3 201.9 \u2014 5,583.9 Prior year comparative information is not presented for the expected timing of revenue recognition because it is a forward looking disclosure and therefore management does not believe that such disclosure provides meaningful information to a user of the consolidated financial statements. The order book represents the consideration that the Group will be entitled to receive from customers when the Group satisfies its remaining performance obligations under the contracts. However, the total revenue that will be earned by the Group will also include non-contracted volumetric revenue, future indexation linked to an external metric, new wins, scope changes, and anticipated contract extensions. These elements have been excluded from the above tables because they are not contracted. Additionally, revenue from contract extensions is excluded from the order book unless they are pre-priced extensions whereby the Group has a legally binding obligation to deliver the performance obligations during the extension period. The total revenue related to pre-priced extensions included in the tables above amounted to \u00a3577.0m (2021: \u00a3668.0m). The amounts presented do not include orders for which neither party has performed, and each party has the unilateral right to terminate a wholly unperformed contract without compensating the other party. Of the \u00a35.6 billion (2021: \u00a35.8 billion) revenue to be earned on long-term contracts, \u00a34.2 billion (2021: \u00a34.3 billion) relates to major contracts. This amount excludes revenue that will be derived from frameworks (transactional \u2018point-in-time\u2019 contracts), non-contracted volumetric revenue, non-contracted scope changes and future unforeseen volume changes from these major contracts, which together are anticipated to contribute an additional \u00a30.7 billion (2021: \u00a32.3 billion) of revenue to the Group over the life of these contracts. The Group performs various services for a number of UK Government ministerial departments and considers these individual ministerial departments to be separate customers due to the limited economic integration between each ministerial department. No single customer makes up more than 10% of the Group\u2019s revenues. 2.2.3 Deferred income The Group\u2019s deferred income balances solely relate to revenue from contracts with customers. Revenue recognised in the reporting period that was included in the deferred income balance at the beginning of the period was \u00a3831.4m (2021: \u00a3941.1m). Movements in the deferred income balances were driven by transactions entered into by the Group within the normal course of business during the year (2021: other than the accelerated revenue recognised of \u00a323.1m on early termination of contracts in Capita Experience and agreed reduction in scope on a contract in Capita Public Service). ",
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"value": "Revenue The Group generates revenue largely in the UK and Europe. The Group operates a diverse range of businesses and accordingly applies a variety of methods for revenue recognition, based on the principles set out in IFRS 15. The revenue and profits recognised in any period are based on the delivery of performance obligations and an assessment of when control is transferred to the customer. Revenue is recognised either when the performance obligation in the contract has been performed (\u2018point-in-time\u2019 recognition) or \u2018over time\u2019 as control of the performance obligation is transferred to the customer. For all contracts, the Group determines if the arrangement with a customer creates enforceable rights and obligations. This assessment results in certain Master Service Agreements (MSA) or Frameworks not meeting the definition of a contract under IFRS 15 and as such the individual call-off agreements, linked to the MSA, are treated as individual contracts. The Group enters into contracts which contain extension periods, where either the customer or both parties can choose to extend the contract or there is an automatic annual renewal, and/or termination clauses that could impact the actual duration of the contract. Judgement is applied to assess the impact that these clauses have when determining the appropriate contract term. The term of the contract impacts both the period over which revenue from performance obligations may be recognised and the period over which contract fulfilment assets and capitalised costs to obtain a contract are expensed. For contracts with multiple components to be delivered such as transformation, transitions and the delivery of outsourced services, management applies judgement to consider whether those promised goods and services are: (i) distinct \u2013 to be accounted for as separate performance obligations; (ii) not distinct \u2013 to be combined with other promised goods or services until a bundle is identified that is distinct; or, (iii) part of a series of distinct goods and services that are substantially the same and have the same pattern of transfer to the customer. At a contract\u2019s inception the total transaction price is estimated, being the amount to which the Group expects to be entitled and has rights to under the contract. This includes an assessment of any variable consideration where the Group\u2019s performance may result in additional revenues based on the achievement of agreed KPIs. Such amounts are only included based on the expected value, or the most likely outcome method, and only to the extent that it is highly probable that no revenue reversal will occur. The transaction price does not include estimates of consideration resulting from change orders for additional goods and services unless these are already agreed. Once the total transaction price is determined, the Group allocates this to the identified performance obligations in proportion to their relative standalone selling prices and recognises revenue when (or while) those performance obligations are satisfied. The Group infrequently sells standard products with observable standalone prices due to the specialised services required by customers, consequently the Group applies judgement to determine an appropriate standalone selling price. More frequently, the Group sells customers bespoke solutions, and in these cases the Group typically uses the expected cost-plus margin or a contractually stated price approach to estimate the standalone selling price of each performance obligation. The Group may offer price step downs during the life of a contract, but with no change to the underlying scope of services to be delivered. In general, any such variable consideration, price step down or discount is included in the total transaction price to be allocated across all performance obligations unless it relates to only one performance obligation in a contract. For each performance obligation to be recognised over time, the Group applies a revenue recognition method that faithfully depicts the Group\u2019s performance in transferring control of the goods or services to the customer. This decision requires assessment of the real nature of the goods or services that the Group has promised to transfer to the customer. The Group applies the relevant output or input method consistently to similar performance obligations in other contracts. When using the output method, the Group recognises revenue on the basis of direct measurements of the value to the customer of the goods and services transferred to date relative to the remaining goods and services under the contract. This is a faithful depiction of the transfer of services since the service delivered to the customer is unchanged. Where the output method is used, in particular for long-term service contracts where the series guidance is applied, the Group often uses a method of time elapsed which requires minimal estimation. Certain long-term contracts use output methods based upon estimations of: user numbers; service activity levels; or fees collected. When transfer of control is most closely aligned to Group efforts in delivering the service, the input method is used to measure progress and revenue is recognised in direct proportion to costs incurred. This is a faithful depiction of the transfer of services because costs (or other inputs) most accurately reflect the incremental benefits received by the customer from efforts to date. If performance obligations in a contract do not meet the over time criteria, the Group recognises revenue at a point-in-time when the service or good is delivered. Contract modifications The Group\u2019s contracts are often amended for changes in contract specifications and requirements. Contract modifications exist when the amendment either creates new, or changes existing, enforceable rights and obligations. The effect of a contract modification on the transaction price and the Group\u2019s measure of progress for the performance obligation to which it relates, is recognised as an adjustment to revenue in one of the following ways: a) prospectively as an additional separate contract; b) prospectively as a termination of the existing contract and creation of a new contract; c) as part of the original contract using a cumulative catch up; or, d) as a combination of (b) and (c). In respect of contracts for which the Group has decided there is a series of distinct goods and services that are substantially the same and have the same pattern of transfer where revenue is recognised over time, the modification will always be treated under either (a) or (b); (d) may arise when a contract has a part-termination and a modification of the remaining performance obligations. The facts and circumstances of any contract modification are considered individually because the types of modifications will vary contract by contract and may result in different accounting outcomes. 2.2 Revenue including segmental revenue continued Judgement is applied in relation to the accounting for such modifications where the final terms or legal contracts have not been agreed prior to the period end because management needs to determine if a modification has been approved and if it either creates new, or changes existing, enforceable rights and obligations of the parties. Depending upon the outcome of such negotiations, the timing and amount of revenue recognised may be different in the relevant accounting periods. Modification and amendments to contracts are undertaken through an agreed formal process. For example, if a change in scope has been approved but the corresponding change in price is still being negotiated, management uses judgement to estimate the change in total transaction price. Importantly, any variable consideration is only recognised to the extent that it is highly probable that no revenue reversal will occur. For example, if pricing is subject to indexation based on an external metric (such as CPI or RPI) then the revenue related to the indexation will only be recognised once the relevant indexation is confirmed. Future indexation will not be recognised because it is not highly probable that a significant reversal of an indexation adjustment will not occur. Principal versus agent The Group has arrangements with some of its customers whereby it needs to determine if it acts as a principal or an agent because more than one party is involved in providing the goods and services to the customer. The Group is a principal if it controls a promised good or service before transferring that good or service to the customer. The Group is an agent if its role is to arrange for another entity to provide the goods or services. Factors considered in making this assessment are most notably: the discretion the Group has in establishing the price for the specified good or service; whether the Group has inventory risk; and whether or not the Group is primarily responsible for fulfilling the promise to deliver the service or good. This assessment of control requires judgement particularly in relation to certain service contracts. An example is the provision of certain recruitment and learning services where the Group may be assessed to be agent or principal dependent upon the facts and circumstances of the arrangement and the nature of the services being delivered. Where the Group is acting as a principal, revenue is recorded on a gross basis. Where the Group is acting as an agent, revenue is recorded on a net basis, recognising only the commission or fee earned as revenue. Licences Software licences delivered by the Group can either be right to access (active) or right to use (passive) licences, which determines the timing of revenue recognition. The assessment of whether a licence is active or passive involves judgement. The key determinant of an active licence is whether or not the Group is required to undertake continuing activities that significantly affect the licensed intellectual property (or the customer has a reasonable expectation that it will do so) and the customer is, therefore, exposed to positive (or negative) impacts resulting from those changes. Where the Group is responsible for any maintenance, continuing support, updates and upgrades, and accordingly the sale of the initial software is not distinct. All other licences which have significant standalone functionality are treated as passive licences. When software upgrades are sold as part of the software licence agreement (ie software upgrades are promised to the customer), the Group applies judgement to assess whether the software upgrades are distinct from the licence (ie a separate performance obligation). If the upgrades are considered fundamental to the ongoing use of the software by the customer, the upgrades are not considered distinct and not accounted for as a separate performance obligation. For each contract that includes a separate licence performance obligation, the Group considers all the facts and circumstances in determining whether the licence revenue is recognised over time (active) or at a point-in-time (passive) from the go-live date of the licence. Deferred and accrued income The Group\u2019s customer contracts include a diverse range of payment schedules dependent upon the nature and type of goods and/or services being provided. This can include performance-based payments or progress payments as well as regular monthly or quarterly payments for ongoing service delivery. Payments for transactional goods and services may be at delivery date, in arrears or part payment in advance. The long-term service contracts tend to have higher cash flows early in the contract to cover transformational activities. Where payments received are greater than the revenue recognised up to the reporting date, the Group recognises a deferred income contract liability for this difference. Where payments received less than the revenue recognised up to the reporting date, the Group recognises an accrued contract income asset for this difference. At each reporting date, the Group assesses whether there is any indication that accrued contract income assets may be impaired by considering whether or not any revenue reversal could occur. Where an indicator of impairment exists, the Group makes a formal estimate of the asset\u2019s recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Contract types The Group disaggregates revenue from contracts with customers by contract type, because management believe this best depicts how the nature, amount, timing, and uncertainty of the Group\u2019s revenue and cash flows are affected by economic factors. Categories are: long-term contractual \u2013 greater than two years; short-term contractual \u2013 less than two years; and transactional. The years being measured from the service commencement date. Long-term contractual \u2013 greater than two years The Group provides a range of services in the majority of its reportable segments under contracts with a duration of more than two years. The nature of contracts or performance obligations within this revenue type includes: (i) long-term outsourced service arrangements in the public and private sectors; and (ii) active software licence arrangements. The majority of long-term contractual agreements form part of a series of distinct goods and services because they are substantially the same service; and have the same pattern of transfer, since the series constitutes services provided in distinct time increments (eg daily, monthly, quarterly or annually), and therefore treats the series as one performance obligation. Short-term contractual \u2013 less than two years The nature of contracts or performance obligations within this revenue type includes: (i) short-term outsourced service arrangements in the public and private sectors; and (ii) software maintenance contracts. 2.2 Revenue including segmental revenue continued The Group has assessed that maintenance and support (ie on-call support, remote support) for software licences is a performance obligation that can be considered capable of being distinct and separately identifiable in a contract if the customer has a passive licence. These recurring services are substantially the same because the nature of the promise is for the Group to \u2018stand ready\u2019 to perform maintenance and support when required by the customer. Each day of \u2018standing ready\u2019 is distinct from each subsequent day and is transferred in the same pattern to the customer. Transactional (point-in-time) contracts The Group delivers a range of goods or services in all reportable segments that are transactional services for which revenue is recognised at the point-in-time when control of the goods or services has transferred to the customer. This may be at the point of physical delivery of goods or services and acceptance by the customer or when the customer obtains control of an asset or service in a contract with customer-specified acceptance criteria. The nature of contracts or performance obligations within this revenue type includes: (i) provision of IT hardware goods; (ii) passive software licence agreements; (iii) commission received as agent from the sale of third-party software; and (iv) fees received in relation to the delivery of professional services. ",
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"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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},
"fact-509": {
"value": "2.2.3 Deferred income The Group\u2019s deferred income balances solely relate to revenue from contracts with customers. Revenue recognised in the reporting period that was included in the deferred income balance at the beginning of the period was \u00a3831.4m (2021: \u00a3941.1m). Movements in the deferred income balances were driven by transactions entered into by the Group within the normal course of business during the year (2021: other than the accelerated revenue recognised of \u00a323.1m on early termination of contracts in Capita Experience and agreed reduction in scope on a contract in Capita Public Service). ",
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"fact-539": {
"value": "2.3 Operating profit 2.3.1 Items charged/(credited) to reported operating profit Notes 2022 \u00a3m 2021 \u00a3m Depreciation of property, plant and equipment 3.2 40.9 48.6 Depreciation of right-of-use assets 3.5 56.0 68.2 Impairment of property, plant and equipment 3.2 4.7 1.9 (Reversal of impairment)/impairment of right-of-use assets 3.5 (2.7) 13.3 Amortisation of intangible assets 3.3 41.5 57.7 Impairment of intangible assets 3.3 5.9 58.7 Impairment of goodwill 3.4 169.0 16.1 Impairment of disposal group assets held-for-sale 2.8 \u2014 44.1 Loss on sale of property, plant and equipment and intangibles 2.10.1 3.5 0.7 Foreign exchange differences 6.9 (0.2) Contract fulfilment asset utilisation, impairment and derecognition 3.1.3 85.7 107.8 Contract termination gains \u2014 (4.7) The net of: accelerated deferred income unwind, and contract fulfilment asset utilisation \u2014 (7.5) Onerous contract provisions (net of additions and releases) 1.7 32.0 Contract fulfilment asset utilisation, impairment and derecognition: the Group continually monitors and reviews its major contracts to identify any indicators of impairment of contract fulfilment assets. During the year, management has recognised an impairment against costs capitalised as contract fulfilment assets totalling \u00a33.8m (2021: \u00a37.3m) in cost of sales. Contract termination gains: customer contracts usually contain provisions to compensate the Group for exit costs and future profits in the event of early termination. There were no in-year customer contract terminations for customer convenience that led to associated exit fees being earned by Capita (2021: \u00a34.7m in Capita Experience) and recorded as income during the year. The net of: accelerated deferred income unwind and contract fulfilment asset utilisation: during 2022 the Group recognised no gains or losses (2021: gain \u00a37.5m) related to the net of accelerated deferred income unwinds and contract fulfilment asset utilisation. In 2021 the gains primarily related to a contract in Capita Experience where a contract was terminated earlier than planned and the agreed reduction in scope of a contract in Capita Public Service. Onerous contract provisions: during 2022 the Group recognised a net loss of \u00a31.7m related to onerous contract provisions (refer to note 3.6) in Capita Experience (2021: \u00a332.0m loss related to contracts in Capita Experience). 2.3.2 Fees payable to auditors The amounts included in the table below relate to fees payable to KPMG LLP and its associates: 2022 \u00a3m 2021 \u00a3m Audit and audit-related services The audit of the Parent Company and the Group\u2019s consolidated financial statements 5.1 5.1 The audit of the financial statements of the Group\u2019s subsidiary companies 1.0 1.9 Total audit and audit-related services 6.1 7.0 Non-audit services Other assurance services 1.6 1.5 Total non-audit services 1.6 1.5 Total audit and non-audit services 7.7 8.5 The non-audit fees in respect of 2022 related to the review of interim results, and services as reporting accountant for the disposal of Pay360 Limited. In respect of 2021, the non-audit fees related to the review of interim results, and services as reporting accountant for the disposal of AXELOS Limited. 2.4 Adjusted operating profit and adjusted profit before tax Accounting policies IAS 1 permits an entity to present additional information for specific items to enable users to better assess the entity\u2019s financial performance. The Board has adopted a policy to disclose separately those items that it considers are outside the underlying operating results for the particular year under review and against which the Group\u2019s performance is assessed internally. In the Board\u2019s judgement, these need to be disclosed separately by virtue of their nature, size and/or incidence, for users of the consolidated financial statements to obtain an understanding of the financial information and the underlying in-year performance of the Group. Accordingly, these items are also excluded from the discussion of divisional performance in the strategic report. This policy is kept under review by the Board and the Audit and Risk Committee and is discussed in the committee\u2019s report on pages 90 to 98. The Board considers alternative performance measures (APMs) to be helpful to the reader, but notes that APMs have certain limitations, including the exclusion of significant recurring items, and may not be directly comparable with similarly titled measures presented by other companies. From 1 January 2022, the Board has limited the items excluded from the adjusted results to: business exits; amortisation and impairment of acquired intangibles; impairment of goodwill; and, certain mark-to-market valuation changes that impact net finance expense/income; because the adjusted metrics provide a more representative measure of the underlying performance of the business post completion of the Group-wide transformation. In prior years, the Board excluded other items from the adjusted results because they were material and required separate disclosure for users of the financial statements to obtain a proper understanding of the financial information and the underlying performance of the business. These items included: significant restructuring; contract-related provisions and impairments; and, certain litigation and claims. The comparatives have been re-presented on the same basis, with significant restructuring (\u00a3147.5m), certain litigation and claims (credit \u00a32.3m) and contract related provisions and impairments (\u00a343.1m) now included within adjusted results for the year ended 31 December 2021. The items below are excluded from the adjusted results: Operating profit/(loss) Profit/(loss) before tax Notes 2022 \u00a3m 2021 \u00a3m (Re-presented 4 ) 2022 \u00a3m 2021 \u00a3m (Re-presented4 ) Reported (79.6) (86.6) 61.4 285.6 Amortisation and impairment of acquired intangibles 3.3 5.1 7.7 5.1 7.7 Impairment of goodwill 3.4 169.0 11.5 169.0 11.5 Net finance (income)/costs 4.3 \u2014 \u2014 (3.4) 1.4 Business exits 2.8 8.4 (10.3) (158.3) (429.0) Adjusted 102.9 (77.7) 73.8 (122.8) 1. Adjusted operating profit increased by 232.4% (2021: increased 26.6%) and adjusted profit before tax increased by 160.1% (2021: increased 15.1%). Adjusted operating profit of \u00a3102.9m (2021: loss \u00a377.7m) was generated on adjusted revenue of \u00a32,845.8m (2021: \u00a32,777.8m) resulting in an adjusted operating margin of 3.6% (2021: (2.8)%). 2. The tax credit on adjusted profit before tax is \u00a331.8m (2021: \u00a34.0m charge) resulting in adjusted profit after tax of \u00a3105.6m (2021: \u00a3126.8m loss). 3. The adjusted operating loss and adjusted loss before tax for 2021 have been re-presented for the impact of business exits during 2022 and the change in adjusting items. This has resulted in adjusted operating profit decreasing from \u00a3139.1m to a loss of \u00a377.7m and adjusted profit before tax decreasing from \u00a393.5m to a loss of \u00a3122.8m. 4. 2021 adjusted results have been re-presented - please refer to further detail above. Amortisation and impairment of acquired intangible assets: the Group recognised acquired intangible amortisation of \u00a35.1m (2021: \u00a37.7m) and impairment of \u00a3nil (2021: \u00a3nil). These charges are excluded from the adjusted results of the Group because they are non-cash items generated from historical acquisition related activity. Impairment of goodwill: the Group carries on its balance sheet significant balances related to goodwill. Goodwill is subject to annual impairment testing and any impairment charges are reported separately because they are non-cash items generated from historical acquisition related activity. Net finance costs: net finance costs excluded from adjusted profits relate to movements in the mark-to-market value of forward foreign exchange contracts to cover anticipated future costs and therefore have no equivalent offsetting transaction in the accounting records, also refer to note 4.2.2. Business exits: the trading result of businesses exited, or in the process of being exited, and the gain or loss on disposals are excluded from the Group's adjusted results to enable comparability of the Group\u2019s adjusted results. Individual businesses within the Portfolio Division will be treated as held-for-sale (and therefore a business exit) when the disposal is highly probable and expected to complete within twelve months of the balance sheet date. ",
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"fact-510": {
"value": "2.3 Operating profit 2.3.1 Items charged/(credited) to reported operating profit Notes 2022 \u00a3m 2021 \u00a3m Depreciation of property, plant and equipment 3.2 40.9 48.6 Depreciation of right-of-use assets 3.5 56.0 68.2 Impairment of property, plant and equipment 3.2 4.7 1.9 (Reversal of impairment)/impairment of right-of-use assets 3.5 (2.7) 13.3 Amortisation of intangible assets 3.3 41.5 57.7 Impairment of intangible assets 3.3 5.9 58.7 Impairment of goodwill 3.4 169.0 16.1 Impairment of disposal group assets held-for-sale 2.8 \u2014 44.1 Loss on sale of property, plant and equipment and intangibles 2.10.1 3.5 0.7 Foreign exchange differences 6.9 (0.2) Contract fulfilment asset utilisation, impairment and derecognition 3.1.3 85.7 107.8 Contract termination gains \u2014 (4.7) The net of: accelerated deferred income unwind, and contract fulfilment asset utilisation \u2014 (7.5) Onerous contract provisions (net of additions and releases) 1.7 32.0 Contract fulfilment asset utilisation, impairment and derecognition: the Group continually monitors and reviews its major contracts to identify any indicators of impairment of contract fulfilment assets. During the year, management has recognised an impairment against costs capitalised as contract fulfilment assets totalling \u00a33.8m (2021: \u00a37.3m) in cost of sales. Contract termination gains: customer contracts usually contain provisions to compensate the Group for exit costs and future profits in the event of early termination. There were no in-year customer contract terminations for customer convenience that led to associated exit fees being earned by Capita (2021: \u00a34.7m in Capita Experience) and recorded as income during the year. The net of: accelerated deferred income unwind and contract fulfilment asset utilisation: during 2022 the Group recognised no gains or losses (2021: gain \u00a37.5m) related to the net of accelerated deferred income unwinds and contract fulfilment asset utilisation. In 2021 the gains primarily related to a contract in Capita Experience where a contract was terminated earlier than planned and the agreed reduction in scope of a contract in Capita Public Service. Onerous contract provisions: during 2022 the Group recognised a net loss of \u00a31.7m related to onerous contract provisions (refer to note 3.6) in Capita Experience (2021: \u00a332.0m loss related to contracts in Capita Experience). 2.3.2 Fees payable to auditors The amounts included in the table below relate to fees payable to KPMG LLP and its associates: 2022 \u00a3m 2021 \u00a3m Audit and audit-related services The audit of the Parent Company and the Group\u2019s consolidated financial statements 5.1 5.1 The audit of the financial statements of the Group\u2019s subsidiary companies 1.0 1.9 Total audit and audit-related services 6.1 7.0 Non-audit services Other assurance services 1.6 1.5 Total non-audit services 1.6 1.5 Total audit and non-audit services 7.7 8.5 The non-audit fees in respect of 2022 related to the review of interim results, and services as reporting accountant for the disposal of Pay360 Limited. In respect of 2021, the non-audit fees related to the review of interim results, and services as reporting accountant for the disposal of AXELOS Limited. 2.4 Adjusted operating profit and adjusted profit before tax Accounting policies IAS 1 permits an entity to present additional information for specific items to enable users to better assess the entity\u2019s financial performance. The Board has adopted a policy to disclose separately those items that it considers are outside the underlying operating results for the particular year under review and against which the Group\u2019s performance is assessed internally. In the Board\u2019s judgement, these need to be disclosed separately by virtue of their nature, size and/or incidence, for users of the consolidated financial statements to obtain an understanding of the financial information and the underlying in-year performance of the Group. Accordingly, these items are also excluded from the discussion of divisional performance in the strategic report. This policy is kept under review by the Board and the Audit and Risk Committee and is discussed in the committee\u2019s report on pages 90 to 98. The Board considers alternative performance measures (APMs) to be helpful to the reader, but notes that APMs have certain limitations, including the exclusion of significant recurring items, and may not be directly comparable with similarly titled measures presented by other companies. From 1 January 2022, the Board has limited the items excluded from the adjusted results to: business exits; amortisation and impairment of acquired intangibles; impairment of goodwill; and, certain mark-to-market valuation changes that impact net finance expense/income; because the adjusted metrics provide a more representative measure of the underlying performance of the business post completion of the Group-wide transformation. In prior years, the Board excluded other items from the adjusted results because they were material and required separate disclosure for users of the financial statements to obtain a proper understanding of the financial information and the underlying performance of the business. These items included: significant restructuring; contract-related provisions and impairments; and, certain litigation and claims. The comparatives have been re-presented on the same basis, with significant restructuring (\u00a3147.5m), certain litigation and claims (credit \u00a32.3m) and contract related provisions and impairments (\u00a343.1m) now included within adjusted results for the year ended 31 December 2021. The items below are excluded from the adjusted results: Operating profit/(loss) Profit/(loss) before tax Notes 2022 \u00a3m 2021 \u00a3m (Re-presented 4 ) 2022 \u00a3m 2021 \u00a3m (Re-presented4 ) Reported (79.6) (86.6) 61.4 285.6 Amortisation and impairment of acquired intangibles 3.3 5.1 7.7 5.1 7.7 Impairment of goodwill 3.4 169.0 11.5 169.0 11.5 Net finance (income)/costs 4.3 \u2014 \u2014 (3.4) 1.4 Business exits 2.8 8.4 (10.3) (158.3) (429.0) Adjusted 102.9 (77.7) 73.8 (122.8) 1. Adjusted operating profit increased by 232.4% (2021: increased 26.6%) and adjusted profit before tax increased by 160.1% (2021: increased 15.1%). Adjusted operating profit of \u00a3102.9m (2021: loss \u00a377.7m) was generated on adjusted revenue of \u00a32,845.8m (2021: \u00a32,777.8m) resulting in an adjusted operating margin of 3.6% (2021: (2.8)%). 2. The tax credit on adjusted profit before tax is \u00a331.8m (2021: \u00a34.0m charge) resulting in adjusted profit after tax of \u00a3105.6m (2021: \u00a3126.8m loss). 3. The adjusted operating loss and adjusted loss before tax for 2021 have been re-presented for the impact of business exits during 2022 and the change in adjusting items. This has resulted in adjusted operating profit decreasing from \u00a3139.1m to a loss of \u00a377.7m and adjusted profit before tax decreasing from \u00a393.5m to a loss of \u00a3122.8m. 4. 2021 adjusted results have been re-presented - please refer to further detail above. Amortisation and impairment of acquired intangible assets: the Group recognised acquired intangible amortisation of \u00a35.1m (2021: \u00a37.7m) and impairment of \u00a3nil (2021: \u00a3nil). These charges are excluded from the adjusted results of the Group because they are non-cash items generated from historical acquisition related activity. Impairment of goodwill: the Group carries on its balance sheet significant balances related to goodwill. Goodwill is subject to annual impairment testing and any impairment charges are reported separately because they are non-cash items generated from historical acquisition related activity. Net finance costs: net finance costs excluded from adjusted profits relate to movements in the mark-to-market value of forward foreign exchange contracts to cover anticipated future costs and therefore have no equivalent offsetting transaction in the accounting records, also refer to note 4.2.2. Business exits: the trading result of businesses exited, or in the process of being exited, and the gain or loss on disposals are excluded from the Group's adjusted results to enable comparability of the Group\u2019s adjusted results. Individual businesses within the Portfolio Division will be treated as held-for-sale (and therefore a business exit) when the disposal is highly probable and expected to complete within twelve months of the balance sheet date. ",
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"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"fact-480": {
"value": "2.3 Operating profit 2.3.1 Items charged/(credited) to reported operating profit Notes 2022 \u00a3m 2021 \u00a3m Depreciation of property, plant and equipment 3.2 40.9 48.6 Depreciation of right-of-use assets 3.5 56.0 68.2 Impairment of property, plant and equipment 3.2 4.7 1.9 (Reversal of impairment)/impairment of right-of-use assets 3.5 (2.7) 13.3 Amortisation of intangible assets 3.3 41.5 57.7 Impairment of intangible assets 3.3 5.9 58.7 Impairment of goodwill 3.4 169.0 16.1 Impairment of disposal group assets held-for-sale 2.8 \u2014 44.1 Loss on sale of property, plant and equipment and intangibles 2.10.1 3.5 0.7 Foreign exchange differences 6.9 (0.2) Contract fulfilment asset utilisation, impairment and derecognition 3.1.3 85.7 107.8 Contract termination gains \u2014 (4.7) The net of: accelerated deferred income unwind, and contract fulfilment asset utilisation \u2014 (7.5) Onerous contract provisions (net of additions and releases) 1.7 32.0 Contract fulfilment asset utilisation, impairment and derecognition: the Group continually monitors and reviews its major contracts to identify any indicators of impairment of contract fulfilment assets. During the year, management has recognised an impairment against costs capitalised as contract fulfilment assets totalling \u00a33.8m (2021: \u00a37.3m) in cost of sales. Contract termination gains: customer contracts usually contain provisions to compensate the Group for exit costs and future profits in the event of early termination. There were no in-year customer contract terminations for customer convenience that led to associated exit fees being earned by Capita (2021: \u00a34.7m in Capita Experience) and recorded as income during the year. The net of: accelerated deferred income unwind and contract fulfilment asset utilisation: during 2022 the Group recognised no gains or losses (2021: gain \u00a37.5m) related to the net of accelerated deferred income unwinds and contract fulfilment asset utilisation. In 2021 the gains primarily related to a contract in Capita Experience where a contract was terminated earlier than planned and the agreed reduction in scope of a contract in Capita Public Service. Onerous contract provisions: during 2022 the Group recognised a net loss of \u00a31.7m related to onerous contract provisions (refer to note 3.6) in Capita Experience (2021: \u00a332.0m loss related to contracts in Capita Experience). 2.3.2 Fees payable to auditors The amounts included in the table below relate to fees payable to KPMG LLP and its associates: 2022 \u00a3m 2021 \u00a3m Audit and audit-related services The audit of the Parent Company and the Group\u2019s consolidated financial statements 5.1 5.1 The audit of the financial statements of the Group\u2019s subsidiary companies 1.0 1.9 Total audit and audit-related services 6.1 7.0 Non-audit services Other assurance services 1.6 1.5 Total non-audit services 1.6 1.5 Total audit and non-audit services 7.7 8.5 The non-audit fees in respect of 2022 related to the review of interim results, and services as reporting accountant for the disposal of Pay360 Limited. In respect of 2021, the non-audit fees related to the review of interim results, and services as reporting accountant for the disposal of AXELOS Limited. 2.4 Adjusted operating profit and adjusted profit before tax Accounting policies IAS 1 permits an entity to present additional information for specific items to enable users to better assess the entity\u2019s financial performance. The Board has adopted a policy to disclose separately those items that it considers are outside the underlying operating results for the particular year under review and against which the Group\u2019s performance is assessed internally. In the Board\u2019s judgement, these need to be disclosed separately by virtue of their nature, size and/or incidence, for users of the consolidated financial statements to obtain an understanding of the financial information and the underlying in-year performance of the Group. Accordingly, these items are also excluded from the discussion of divisional performance in the strategic report. This policy is kept under review by the Board and the Audit and Risk Committee and is discussed in the committee\u2019s report on pages 90 to 98. The Board considers alternative performance measures (APMs) to be helpful to the reader, but notes that APMs have certain limitations, including the exclusion of significant recurring items, and may not be directly comparable with similarly titled measures presented by other companies. From 1 January 2022, the Board has limited the items excluded from the adjusted results to: business exits; amortisation and impairment of acquired intangibles; impairment of goodwill; and, certain mark-to-market valuation changes that impact net finance expense/income; because the adjusted metrics provide a more representative measure of the underlying performance of the business post completion of the Group-wide transformation. In prior years, the Board excluded other items from the adjusted results because they were material and required separate disclosure for users of the financial statements to obtain a proper understanding of the financial information and the underlying performance of the business. These items included: significant restructuring; contract-related provisions and impairments; and, certain litigation and claims. The comparatives have been re-presented on the same basis, with significant restructuring (\u00a3147.5m), certain litigation and claims (credit \u00a32.3m) and contract related provisions and impairments (\u00a343.1m) now included within adjusted results for the year ended 31 December 2021. The items below are excluded from the adjusted results: Operating profit/(loss) Profit/(loss) before tax Notes 2022 \u00a3m 2021 \u00a3m (Re-presented 4 ) 2022 \u00a3m 2021 \u00a3m (Re-presented4 ) Reported (79.6) (86.6) 61.4 285.6 Amortisation and impairment of acquired intangibles 3.3 5.1 7.7 5.1 7.7 Impairment of goodwill 3.4 169.0 11.5 169.0 11.5 Net finance (income)/costs 4.3 \u2014 \u2014 (3.4) 1.4 Business exits 2.8 8.4 (10.3) (158.3) (429.0) Adjusted 102.9 (77.7) 73.8 (122.8) 1. Adjusted operating profit increased by 232.4% (2021: increased 26.6%) and adjusted profit before tax increased by 160.1% (2021: increased 15.1%). Adjusted operating profit of \u00a3102.9m (2021: loss \u00a377.7m) was generated on adjusted revenue of \u00a32,845.8m (2021: \u00a32,777.8m) resulting in an adjusted operating margin of 3.6% (2021: (2.8)%). 2. The tax credit on adjusted profit before tax is \u00a331.8m (2021: \u00a34.0m charge) resulting in adjusted profit after tax of \u00a3105.6m (2021: \u00a3126.8m loss). 3. The adjusted operating loss and adjusted loss before tax for 2021 have been re-presented for the impact of business exits during 2022 and the change in adjusting items. This has resulted in adjusted operating profit decreasing from \u00a3139.1m to a loss of \u00a377.7m and adjusted profit before tax decreasing from \u00a393.5m to a loss of \u00a3122.8m. 4. 2021 adjusted results have been re-presented - please refer to further detail above. Amortisation and impairment of acquired intangible assets: the Group recognised acquired intangible amortisation of \u00a35.1m (2021: \u00a37.7m) and impairment of \u00a3nil (2021: \u00a3nil). These charges are excluded from the adjusted results of the Group because they are non-cash items generated from historical acquisition related activity. Impairment of goodwill: the Group carries on its balance sheet significant balances related to goodwill. Goodwill is subject to annual impairment testing and any impairment charges are reported separately because they are non-cash items generated from historical acquisition related activity. Net finance costs: net finance costs excluded from adjusted profits relate to movements in the mark-to-market value of forward foreign exchange contracts to cover anticipated future costs and therefore have no equivalent offsetting transaction in the accounting records, also refer to note 4.2.2. Business exits: the trading result of businesses exited, or in the process of being exited, and the gain or loss on disposals are excluded from the Group's adjusted results to enable comparability of the Group\u2019s adjusted results. Individual businesses within the Portfolio Division will be treated as held-for-sale (and therefore a business exit) when the disposal is highly probable and expected to complete within twelve months of the balance sheet date. ",
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"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"fact-535": {
"value": "2.3.2 Fees payable to auditors The amounts included in the table below relate to fees payable to KPMG LLP and its associates: 2022 \u00a3m 2021 \u00a3m Audit and audit-related services The audit of the Parent Company and the Group\u2019s consolidated financial statements 5.1 5.1 The audit of the financial statements of the Group\u2019s subsidiary companies 1.0 1.9 Total audit and audit-related services 6.1 7.0 Non-audit services Other assurance services 1.6 1.5 Total non-audit services 1.6 1.5 Total audit and non-audit services 7.7 8.5 The non-audit fees in respect of 2022 related to the review of interim results, and services as reporting accountant for the disposal of Pay360 Limited. In respect of 2021, the non-audit fees related to the review of interim results, and services as reporting accountant for the disposal of AXELOS Limited. ",
"dimensions": {
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"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"fact-455": {
"value": "Net finance costs: net finance costs excluded from adjusted profits relate to movements in the mark-to-market value of forward foreign exchange contracts to cover anticipated future costs and therefore have no equivalent offsetting transaction in the accounting records, also refer to note 4.2.2. ",
"dimensions": {
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"fact-466": {
"value": "Net finance costs: net finance costs excluded from adjusted profits relate to movements in the mark-to-market value of forward foreign exchange contracts to cover anticipated future costs and therefore have no equivalent offsetting transaction in the accounting records, also refer to note 4.2.2. ",
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"language": "en",
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"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"fact-481": {
"value": "2.5 Segmental information The Group\u2019s operations are managed separately according to the nature of the services provided, with each segment representing a strategic business division offering a different package of client outcomes across the markets the Group serves. Capita plc is a reconciling item and not an operating segment. A description of the services provided by each segment can be found in the strategic report on pages16 to 25. The tables below present profit for the Group\u2019s business segments. For segmental reporting, the costs of the central functions have been allocated to the segments using appropriate drivers such as adjusted revenue, adjusted profit or headcount. Comparative information has been re-presented to reflect businesses exited during 2022 and the change in definition of what the Board excludes from adjusted results (refer to note 2.4). Information on segmental revenue can be found in note 2.2. Year ended 31 December 2022 Notes Capita Public Service \u00a3m Capita Experience \u00a3m Capita Portfolio \u00a3m Capita plc \u00a3m Total adjusted \u00a3m Adjusting items \u00a3m Total reported \u00a3m Adjusted operating profit 2.4 91.5 38.5 16.2 (43.3) 102.9 \u2014 102.9 Business exits \u2013 trading 2.8 \u2014 4.3 10.4 \u2014 \u2014 14.7 14.7 Total trading result 91.5 42.8 26.6 (43.3) 102.9 14.7 117.6 Non-trading items: Business exits \u2013 non-trading 2.8 \u2014 (23.1) (23.1) Other adjusting items 2.4 \u2014 (174.1) (174.1) Operating profit/(loss) 102.9 (182.5) (79.6) Interest income 8.9 Interest expense (40.6) Share of results in associates and investment gains 5.8 Gain on business disposal 166.9 Profit before tax 61.4 Supplementary Information Depreciation and amortisation 3.2 3.3 3.5 38.5 67.2 19.4 3.3 128.4 10.0 138.4 Impairment of property, plant and equipment, intangible assets and right-of-use assets \u2014 7.7 \u2014 (0.2) 7.5 0.4 7.9 Contract fulfilment assets utilisation, impairment and derecognition 3.1.3 67.2 16.3 0.8 \u2014 84.3 1.4 85.7 Onerous contract provisions 2.3 \u2014 1.7 \u2014 \u2014 1.7 \u2014 1.7 2.5 Segmental information continued Year ended 31 December 2021 Notes Capita Public Service \u00a3m Capita Experience \u00a3m Capita Portfolio \u00a3m Capita plc \u00a3m Total adjusted \u00a3m Adjusting items \u00a3m Total reported \u00a3m Re-presented 1 Adjusted operating profit 2.4 93.2 8.9 (0.1) (179.7) (77.7) \u2014 (77.7) Business exits \u2013 trading 2.8 \u2014 6.9 72.4 \u2014 \u2014 79.3 79.3 Total trading result 93.2 15.8 72.3 (179.7) (77.7) 79.3 1.6 Non-trading items: Business exits \u2013 non-trading 2.8 \u2014 (69.0) (69.0) Other adjusting items 2.4 \u2014 (19.2) (19.2) Operating loss (77.7) (8.9) (86.6) Interest income 4.7 Interest expense (51.6) Share of results in associates and investment gains (0.6) Gain on business disposal 419.7 Profit before tax 285.6 Supplementary Information Depreciation and amortisation 3.2 3.3 3.5 42.2 78.8 21.8 6.6 149.4 25.1 174.5 Impairment of property, plant and equipment, intangible assets and right-of-use assets 3.3 5.5 2.6 59.9 71.3 2.6 73.9 Contract fulfilment assets utilisation, impairment and derecognition 3.1.3 64.5 21.8 2.0 \u2014 88.3 19.5 107.8 Onerous contract provisions 2.3 \u2014 32.0 \u2014 \u2014 32.0 \u2014 32.0 1. 2021 adjusted results have been re-presented - please refer to note 2.4 for further details. Geographical location The table below presents the carrying amount of non-current assets (excluding deferred tax, financial assets and employee benefits) by the geographical location of those assets. 2022 2021 United Kingdom \u00a3m Other \u00a3m Total \u00a3m United Kingdom \u00a3m Other \u00a3m Total \u00a3m Non-current assets 1,320.9 20.6 1,341.5 1,791.3 27.7 1,819.0 ",
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"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"fact-482": {
"value": "2.6 Taxation Accounting policies Tax on the profit or loss for year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences except: \u2022 where the deferred tax liability arises from the initial recognition of goodwill; \u2022 where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and \u2022 in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Significant accounting judgements, estimates and assumptions Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax assets and unused tax losses can be utilised, except where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. This involves an assessment of when those assets are likely to reverse, and a judgement as to whether or not there will be sufficient taxable profits available to offset the assets when they do reverse. This requires assumptions regarding future profitability and is therefore inherently uncertain. To the extent assumptions regarding future profitability change, there may be an increase or decrease in the amounts recognised in respect of deferred tax assets as well as in the amounts recognised during the year in which the change occurs. Sensitivities and additional information relating to deferred tax assets/liabilities are provided in note 2.6.2. 2.6.1 Income tax credit There is a reported income tax credit for the period of \u00a314.6m on reported profit before tax of \u00a361.4m (2021: reported income tax charge of \u00a361.5m on reported profit of \u00a3285.6m), and an adjusted income tax credit for the period of \u00a331.8m on adjusted profit before tax of \u00a373.8m (2021: adjusted tax charge of \u00a34.0m on adjusted loss of \u00a3122.8m). The most significant reconciling items, explaining the difference from the standard UK rate of 19%, are changes in the accounting estimate of recognised deferred tax assets, non-taxable profit on disposals and non- deductible goodwill impairment. The forecast future adjusted effective tax rate, before and assuming no material changes to tax laws in the jurisdictions in which Capita operates, is expected to be broadly in line with the UK corporation tax rate, with an increase for taxable profits in higher tax rate jurisdictions. However, management anticipates that in the short term, the continued divestment programme may impact the future effective tax rate because the profits of divested businesses fall outside of the assessment of future taxable profits, impacting the recognisable deferred tax asset assessment. The major components of income tax charge/(credit) are set out below: 2022 2021 Consolidated income statement Total reported \u00a3m Included in adjusted profit \u00a3m Not included in adjusted profit \u00a3m Total reported \u00a3m Included in adjusted profit \u00a3m Not included in adjusted profit \u00a3m Current income tax Current income tax charge 14.0 12.6 1.4 27.2 (14.5) 41.7 Adjustment in respect of prior years (1.2) (1.2) \u2014 3.8 3.8 \u2014 Deferred tax On origination and reversal of temporary differences (36.7) (52.5) 15.8 76.1 60.3 15.8 Effect of changes in tax rate on deferred tax balances 3.0 3.0 \u2014 (39.0) (39.0) \u2014 Adjustment in respect of prior years 6.3 6.3 \u2014 (6.6) (6.6) \u2014 Total (14.6) (31.8) 17.2 61.5 4.0 57.5 2.6 Taxation continued Consolidated statement of comprehensive income and consolidated statement of changes in equity 2022 \u00a3m 2021 \u00a3m Current income tax movement on cash flow hedges \u2014 (2.0) Deferred tax movement on cash flow hedges 1.6 (0.2) Deferred tax movement in relation to actuarial changes on defined benefit pension schemes 5.2 32.2 Current income tax movement on defined benefit pension scheme contributions (7.2) (11.5) Effect of rate change on deferred tax on defined benefit pension schemes \u2014 (2.6) Current income tax deduction on the exercise of share options \u2014 (0.4) (0.4) 15.5 The reconciliation between the total tax charge/(credit) and the accounting profit multiplied by the UK corporation tax rate is as follows: Total tax Current tax 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Profit before tax from continuing operations 61.4 285.6 61.4 285.6 Notional charge at UK corporation tax rate of 19% 11.7 54.3 11.7 54.3 Adjustments in respect of current income tax of prior years a (1.2) 3.8 (1.2) 3.8 Adjustments in respect of deferred tax of prior years b 6.3 (6.6) \u2014 \u2014 Non-deductible expense/(non-taxable income) \u2013 adjusted c (2.3) 3.7 (2.3) 3.7 Non-deductible expenses \u2013 business exit d* 2.3 1.5 2.3 1.5 Non-taxable income \u2013 specific items \u2014 (1.1) \u2014 (1.1) Profit on disposal of business e* (31.6) (51.7) (31.6) (51.7) Non-deductible goodwill impairment f* 32.0 11.4 32.0 11.4 Difference in rate recognition of temporary differences 3.1 (39.0) \u2014 \u2014 Tax provided on unremitted earnings g 1.3 1.1 \u2014 3.2 Attributable to different tax rates in overseas jurisdictions h 0.5 (0.1) 0.5 (0.1) Movement in deferred tax unrecognised note 2.6.2 (36.7) 84.2 \u2014 \u2014 Fixed asset timing differences \u2014 \u2014 6.8 (2.0) Current tax impact on other timing differences \u2014 \u2014 (6.4) 0.2 Carry forward/(utilisation) of losses in current period i \u2014 \u2014 1.0 7.8 At the effective total tax rate of (23.8)% (2021: 21.5%) and the effective current tax rate of 20.8% (2021: 10.9%) j (14.6) 61.5 12.8 31.0 Tax (credit)/charge reported in the income statement (14.6) 61.5 12.8 31.0 * These \u00a32.7m (2021: \u00a3(39.9)m) of reconciling items relate to reported tax charge only, with no impact on the adjusted tax charge. Further details are given (*) below. a The \u00a31.2m prior year credit adjustment includes: (i) a \u00a31.2m release of uncertain tax positions due to the relevant entity being put into liquidation; (ii) a \u00a36.3m credits which have a corresponding impact within deferred tax of prior years; and (iii) a \u00a36.0m credit to adjust for finalisation of submitted tax returns. b Adjustments in respect of deferred tax of prior years mainly relate to \u00a36.3m of charges which have a corresponding impact within current income tax of prior years. c Relates mainly to a one-off tax deduction triggered due to the adoption of IAS 37. Refer to section 1 for further details. d* Business exit: relates to non-deductible closure costs associated with the sale of entities. Refer to note 2.8 for further details. e* Relates to the application of the tax exemption on accounting profits from the sale of entities. Refer to note 2.8.1 for further details. f* Relates to the intangible asset impairments as detailed further in note 3.4. g Movement in the deferred tax liability recognised on the unremitted earnings of those subsidiaries affected by withholding taxes. h Relates to the difference between tax payable at higher rates in India and South Africa, and tax payable at lower rates in other trading jurisdictions (Poland, Isle of Man and UAE). i Relates to the (utilisation)/carry forward of tax losses during the current period. j The current tax charge of \u00a312.8m (2021: \u00a331.0m) results in an effective current tax rate of 20.8%, which is different from the UK statutory rate of tax of 19% predominantly due to: tax impact of non-taxable profits from disposals of businesses; non-deductible goodwill impairment; and losses carried forward. The impact of differing overseas tax rates is minimal and covered in footnote (h). 2.6 Taxation continued 2.6.2 Deferred tax A change to the main UK corporation tax rate was substantively enacted on 24 May 2021. The rate applicable from 1 April 2023 increases from 19% to 25%. The net UK deferred tax assets for the period to 31 December 2022, and the prior period, have been calculated based on this rate. Deferred tax relates to the following: Credited/(charged) to At 1 January \u00a3m Income statement \u00a3m OCI and changes in equity \u00a3m Other movements2 \u00a3m At 31 December \u00a3m Deferred tax assets Fixed assets which qualify for tax relief 77.3 12.2 \u2014 1.3 90.8 Deferred income (0.1) 1.2 \u2014 (1.1) \u2014 Provisions and other timing differences 14.7 (3.7) (1.6) 1.1 10.5 Pension schemes 19.8 (8.7) (5.2) \u2014 5.9 Share-based payments 3.8 (0.4) \u2014 (2.1) 1.3 Tax losses1 63.3 27.2 \u2014 (9.1) 81.4 178.8 27.8 (6.8) (9.9) 189.9 Jurisdictional netting (2.8) (0.4) Net deferred tax assets 176.0 27.8 (6.8) (9.9) 189.5 Deferred tax liabilities Acquired intangibles (0.7) 0.5 \u2014 \u2014 (0.2) Contract fulfilment assets (4.4) 0.4 \u2014 1.8 (2.2) Unremitted earnings (3.6) (1.3) \u2014 \u2014 (4.9) (8.7) (0.4) \u2014 1.8 (7.3) Jurisdictional netting 2.8 0.4 Net deferred tax liabilities (5.9) (0.4) \u2014 1.8 (6.9) Net deferred tax 170.1 27.4 (6.8) (8.1) 182.6 1. Mainly trading losses available to shelter future profits and deferred interest. 2. Other movements includes business disposals. The main movements in the net deferred tax asset are due to the income statement tax credit arising on the change in the accounting estimate of deferred tax, the deferred tax charge to other comprehensive income (OCI) and income statement on the defined benefit pension scheme surplus recognised for accounting purposes, and the deferred tax assets disposed of on the sale of subsidiaries. For the purpose of recognising deferred tax on the pension scheme surplus, withholding tax at 35% would apply for any surplus being refunded to the Group at the end of the life of the scheme. Corporation tax at 25% would apply for any surplus expected to unwind over the life of the scheme. Management have concluded that the corporation tax rate should apply to the recognition of deferred tax on the pension scheme surplus, reflecting the Group\u2019s intention regarding the manner of recovery of the asset. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. The recoverability of deferred tax assets is supported by the deferred tax liabilities against which the reversal can be offset and the expected level of future profits in the countries concerned. The recognition of deferred tax assets for 2022 has been based on the forecast accounting profits in the 2023-2025 business plans (BP) approved by the Board. This is the same plan used to derive forecast cash flows for the goodwill impairment test, per note 3.4. A long-term growth rate of 2.2%, as used for impairment test purposes, has been applied to years beyond 2025. A reducing probability factor has also been applied to future profits for the potential decrease in reliability of forecasts extrapolated for later years, such that profits beyond seven years of the balance sheet date have not been considered probable for the purpose of assessing deferred tax asset recognition. Historic tax losses make up the majority of the deferred tax asset. These losses mainly arose due to the adoption of IFRS 15, Covid-19 related downward pressures on the profits and tax deductible restructuring costs in previous years. Based on the above adjusted forecasts, management have concluded that an additional deferred tax asset should be recognised this year. The impact of this is an adjustment to recognise additional deferred tax assets of \u00a336.7m. This is net of \u00a316.7m change in the deferred tax asset estimate due to the reduction in future taxable profits on disposal of taxable subsidiaries, reflected in the tax arising on business exits (see note 2.8). Deferred tax asset recognition is reliant on the accuracy of management\u2019s forecasts and the assumptions that underlie them. Management have considered the severe but plausible downsides, applied to the base-case projections, to gauge sensitivity and identify a reasonable possible alternative result. This scenario identified a further potential reduction in recognised deferred tax assets of approximately \u00a317m. Further disposals, planned as part of the simplification agenda, could also reduce the recognised deferred tax asset in future periods, which management currently estimate at approximately \u00a341m. The Group has unrecognised tax losses and other temporary differences that are available for offset against future taxable profits of the companies in which the losses or other temporary differences arose, but have not been recognised because their recoverability is uncertain. The table below shows the amounts split between UK and non-UK jurisdictions. 2.6 Taxation continued 2022 \u00a3m Gross Amount 2021 \u00a3m Gross Amount At 31 December UK: Tax losses 332.7 498.0 Other temporary timing differences 113.9 99.7 446.6 597.7 Non-UK: Tax losses 60.8 44.9 Other temporary timing differences 11.6 14.8 72.4 59.7 Total 519.0 657.4 Assets have no time expiry, but some losses are subject to specific loss restriction rules. \u00a339.9m (2021: \u00a350.7m) of the losses were incurred by companies acquired by the Group and are not a result of the Group\u2019s trading performance. Dividends received from subsidiaries are largely exempt from UK tax but may be subject to dividend withholding taxes levied by the overseas tax jurisdictions in which the subsidiaries operate. The gross temporary differences of those subsidiaries affected by such potential taxes is \u00a358.4m (2021: \u00a342.8m). A deferred income tax liability of \u00a34.9m (2021: \u00a33.6m) has been recognised on the unremitted earnings of those subsidiaries affected by such potential taxes because the Group is able to control the timing of reversal and it is anticipating dividends to be distributed. The earnings remitted during the year have resulted in a reduction in the closing deferred tax liability. 2.6.3 Uncertain tax positions The Group files income tax returns in several jurisdictions and some of those returns are open to, or subject to, tax authority audits or examinations. Tax returns contain matters that could be subject to differing interpretations of applicable tax laws and regulations and the resolution of tax positions, through negotiations with relevant tax authorities or through litigation, can take several years. Tax uncertainties are assessed throughout the year and specifically at the year-end with any associated provisions recognised considering the specific circumstances of each risk, including the merits of technical aspects, previous experience with tax authorities, recent tax law and if relevant, external specialist advice. The Group applies judgement in quantifying uncertainties over income tax treatments in accordance with this criteria. Income tax receivable of \u00a39.9m at 31 December 2022 is net of a \u00a32.9m (2021: \u00a34.1m) liability in relation to uncertain tax positions. The Group released \u00a31.2m (2021: \u00a31.7m ) of uncertain tax positions during 2022 relating to tax risks which are no longer considered likely to arise, due to the relevant entity being put into liquidation. The release is disclosed as a current income tax prior year adjustment. Expiry of statute of limitations, or conclusion of tax audits could result in a further release of the provision in the next financial year. While it is difficult to predict the ultimate outcome in some cases, and there are a range of different outcomes, the Group does not currently anticipate that there will be any material impact on the Group\u2019s financial position or results of operations during the next financial year. 2.6.4 Global minimum tax In December 2021, the OECD released the Pillar II global minimum tax draft legislative framework which ultimately seeks to introduce a global minimum corporation tax rate of 15%. Following consultation the UK Government has proposed that Pillar II will first apply to accounting periods beginning on or after 31 December 2023, but at the time of signing these financial statements no tax jurisdiction Capita operates in had enacted or substantively enacted laws to implement the Pillar II framework. As disclosed in our Responsible Taxation report, which can be found in the Responsible Business area of the Capita website, Capita has minimal profits arising in jurisdictions with a low tax rate. A high level impact assessment of a potential top-up tax, chargeable in respect of profits in jurisdictions which have an effective tax rate lower than 15%, suggests that Capita may be subject to some top-up tax due to a trading legal entity in the Isle of Man which has a statutory corporate tax rate lower than 15%. There has been a lack of Pillar II legislative progress globally, with the UK only having draft legislation currently available. As such, Capita is unable to determine the impact of the framework with any degree of certainty. Capita is committed to paying its fair share of tax in all jurisdictions. As a conscientious taxpayer, Capita will continue to monitor the legislative progress in all the jurisdictions it operates in. 2.6.5 Capita\u2019s responsible approach to taxation Capita has an open and positive working relationship with HMRC, has a designated customer compliance manager, and is committed to prompt disclosure and transparency in all dealings with HMRC and overseas tax authorities. The Group does not have a complex tax structure, nor does it pursue aggressive tax avoidance activities. The Group has a low-risk rating from HMRC, re-assessed in 2021, and has been awarded the Fair Tax Mark for its tax disclosures from 2018 to 2021. The Group has operations in a number of countries outside the UK. All Capita operations outside the UK are trading operations and pay the appropriate local taxes on these activities. Further detail, regarding Capita's tax strategy can be found on the Policies & Principles area of the Capita website (https://www.capita.com/our-company/about-capita/ policies-and-principles). Capita contributed \u00a3153.2m (2021: \u00a3162.3m ) in taxes from its UK operations during 2022. This consisted of a net repayment of \u00a32.6m (2021: net repayment of \u00a30.5m) of UK corporation tax; \u00a315.0m (2021: \u00a318.1m) incurred in irrecoverable VAT; \u00a3124.8m (2021: \u00a3125.5m) in employer national insurance contributions (NIC); and \u00a316.0m (2021: \u00a319.3m) in other levies including business rates, import duties, the apprenticeship levy and environmental taxes. Additionally, the Group\u2019s 2022 UK VAT payments were \u00a3315.1m (2021: \u00a3318.7m). A further \u00a314.9m VAT was remitted in 2022, which was VAT deferred from 2020 under HMRC\u2019s Covid-19 deferral scheme: The Group also collected \u00a3272.8m (2021: \u00a3287.8m) of Capita UK employee payroll taxes (PAYE and NIC). Capita entities in overseas jurisdictions paid \u00a38.5m (2021: \u00a315.0m) corporation tax, which mainly covers corporate income tax on local profits. ",
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"fact-467": {
"value": "Tax on the profit or loss for year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences except: \u2022 where the deferred tax liability arises from the initial recognition of goodwill; \u2022 where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and \u2022 in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. ",
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"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"fact-456": {
"value": "Tax on the profit or loss for year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences except: \u2022 where the deferred tax liability arises from the initial recognition of goodwill; \u2022 where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and \u2022 in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. ",
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},
"fact-511": {
"value": "2.6.2 Deferred tax A change to the main UK corporation tax rate was substantively enacted on 24 May 2021. The rate applicable from 1 April 2023 increases from 19% to 25%. The net UK deferred tax assets for the period to 31 December 2022, and the prior period, have been calculated based on this rate. Deferred tax relates to the following: Credited/(charged) to At 1 January \u00a3m Income statement \u00a3m OCI and changes in equity \u00a3m Other movements2 \u00a3m At 31 December \u00a3m Deferred tax assets Fixed assets which qualify for tax relief 77.3 12.2 \u2014 1.3 90.8 Deferred income (0.1) 1.2 \u2014 (1.1) \u2014 Provisions and other timing differences 14.7 (3.7) (1.6) 1.1 10.5 Pension schemes 19.8 (8.7) (5.2) \u2014 5.9 Share-based payments 3.8 (0.4) \u2014 (2.1) 1.3 Tax losses1 63.3 27.2 \u2014 (9.1) 81.4 178.8 27.8 (6.8) (9.9) 189.9 Jurisdictional netting (2.8) (0.4) Net deferred tax assets 176.0 27.8 (6.8) (9.9) 189.5 Deferred tax liabilities Acquired intangibles (0.7) 0.5 \u2014 \u2014 (0.2) Contract fulfilment assets (4.4) 0.4 \u2014 1.8 (2.2) Unremitted earnings (3.6) (1.3) \u2014 \u2014 (4.9) (8.7) (0.4) \u2014 1.8 (7.3) Jurisdictional netting 2.8 0.4 Net deferred tax liabilities (5.9) (0.4) \u2014 1.8 (6.9) Net deferred tax 170.1 27.4 (6.8) (8.1) 182.6 1. Mainly trading losses available to shelter future profits and deferred interest. 2. Other movements includes business disposals. The main movements in the net deferred tax asset are due to the income statement tax credit arising on the change in the accounting estimate of deferred tax, the deferred tax charge to other comprehensive income (OCI) and income statement on the defined benefit pension scheme surplus recognised for accounting purposes, and the deferred tax assets disposed of on the sale of subsidiaries. For the purpose of recognising deferred tax on the pension scheme surplus, withholding tax at 35% would apply for any surplus being refunded to the Group at the end of the life of the scheme. Corporation tax at 25% would apply for any surplus expected to unwind over the life of the scheme. Management have concluded that the corporation tax rate should apply to the recognition of deferred tax on the pension scheme surplus, reflecting the Group\u2019s intention regarding the manner of recovery of the asset. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. The recoverability of deferred tax assets is supported by the deferred tax liabilities against which the reversal can be offset and the expected level of future profits in the countries concerned. The recognition of deferred tax assets for 2022 has been based on the forecast accounting profits in the 2023-2025 business plans (BP) approved by the Board. This is the same plan used to derive forecast cash flows for the goodwill impairment test, per note 3.4. A long-term growth rate of 2.2%, as used for impairment test purposes, has been applied to years beyond 2025. A reducing probability factor has also been applied to future profits for the potential decrease in reliability of forecasts extrapolated for later years, such that profits beyond seven years of the balance sheet date have not been considered probable for the purpose of assessing deferred tax asset recognition. Historic tax losses make up the majority of the deferred tax asset. These losses mainly arose due to the adoption of IFRS 15, Covid-19 related downward pressures on the profits and tax deductible restructuring costs in previous years. Based on the above adjusted forecasts, management have concluded that an additional deferred tax asset should be recognised this year. The impact of this is an adjustment to recognise additional deferred tax assets of \u00a336.7m. This is net of \u00a316.7m change in the deferred tax asset estimate due to the reduction in future taxable profits on disposal of taxable subsidiaries, reflected in the tax arising on business exits (see note 2.8). Deferred tax asset recognition is reliant on the accuracy of management\u2019s forecasts and the assumptions that underlie them. Management have considered the severe but plausible downsides, applied to the base-case projections, to gauge sensitivity and identify a reasonable possible alternative result. This scenario identified a further potential reduction in recognised deferred tax assets of approximately \u00a317m. Further disposals, planned as part of the simplification agenda, could also reduce the recognised deferred tax asset in future periods, which management currently estimate at approximately \u00a341m. The Group has unrecognised tax losses and other temporary differences that are available for offset against future taxable profits of the companies in which the losses or other temporary differences arose, but have not been recognised because their recoverability is uncertain. The table below shows the amounts split between UK and non-UK jurisdictions. 2.6 Taxation continued 2022 \u00a3m Gross Amount 2021 \u00a3m Gross Amount At 31 December UK: Tax losses 332.7 498.0 Other temporary timing differences 113.9 99.7 446.6 597.7 Non-UK: Tax losses 60.8 44.9 Other temporary timing differences 11.6 14.8 72.4 59.7 Total 519.0 657.4 Assets have no time expiry, but some losses are subject to specific loss restriction rules. \u00a339.9m (2021: \u00a350.7m) of the losses were incurred by companies acquired by the Group and are not a result of the Group\u2019s trading performance. Dividends received from subsidiaries are largely exempt from UK tax but may be subject to dividend withholding taxes levied by the overseas tax jurisdictions in which the subsidiaries operate. The gross temporary differences of those subsidiaries affected by such potential taxes is \u00a358.4m (2021: \u00a342.8m). A deferred income tax liability of \u00a34.9m (2021: \u00a33.6m) has been recognised on the unremitted earnings of those subsidiaries affected by such potential taxes because the Group is able to control the timing of reversal and it is anticipating dividends to be distributed. The earnings remitted during the year have resulted in a reduction in the closing deferred tax liability. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-483": {
"value": "2.7 Earnings/(loss) per share Accounting policies Basic earnings/(loss) per share are calculated by dividing net profit for the period attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings/(loss) per share are calculated by dividing the net profit for the period attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. 2022 2021 Continuing operations p Total operations p Continuing operations p Total operations p Basic earnings/(loss) per share \u2013 reported 4.47 4.47 13.33 13.52 \u2013 adjusted 1 6.20 6.20 (7.74) (7.74) Diluted earnings/(loss) per share \u2013 reported 4.40 4.40 13.15 13.33 \u2013 adjusted 1 6.09 6.09 (7.74) (7.74) 1. 2021 adjusted results have been re-presented. Please refer to note 2.4 for further details. The following tables show the earnings and share data used in the basic and diluted earnings/(loss) per share calculations: 2022 2021 Continuing operations \u00a3m Total operations \u00a3m Continuing operations \u00a3m Total operations \u00a3m Reported profit before tax for the period 61.4 61.4 285.6 288.7 Income tax credit/(charge) 2.6 14.6 14.6 (61.5) (61.5) Reported profit for the period 76.0 76.0 224.1 227.2 Less: Non-controlling interest (1.2) (1.2) (2.5) (2.5) Total profit attributable to shareholders 74.8 74.8 221.6 224.7 Adjusted profit/(loss) before tax for the period 1 2.4 73.8 73.8 (122.8) (122.8) Income tax credit/(charge) 2.6.1 31.8 31.8 (4.0) (4.0) Adjusted profit/(loss) for the period 1 105.6 105.6 (126.8) (126.8) Less: Non-controlling interest (2.0) (2.0) (1.9) (1.9) Adjusted profit/(loss) attributable to shareholders 1 103.6 103.6 (128.7) (128.7) 1. 2021 adjusted results have been re-presented. Please refer to note 2.4 for further details. 2022 m 2021 m Weighted average number of ordinary shares (excluding trust and treasury shares) for basic earnings per share 1,671.7 1,661.9 Dilutive potential ordinary shares: Employee share options 30.0 23.9 Weighted average number of ordinary shares (excluding trust and treasury shares) adjusted for the effect of dilution 1,701.7 1,685.8 The earnings per share figures are calculated based on earnings attributable to ordinary equity holders of the Parent Company, and therefore exclude non-controlling interest. The earnings per share is calculated on a total reported and an adjusted basis. The earnings per share for business exits and specific items are reconciling items between total reported and adjusted earnings per share. There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date on which these consolidated financial statements were authorised for issue. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-457": {
"value": "Basic earnings/(loss) per share are calculated by dividing net profit for the period attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings/(loss) per share are calculated by dividing the net profit for the period attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForEarningsPerShareExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-512": {
"value": "2.8 Business exits and assets held-for-sale Accounting policies Business exits Business exits are businesses that have been sold, exited during the period, or are in the process of being sold or exited in accordance with the Group's strategy. None of these business exits meet the definition of \u2018discontinued operations\u2019 as stipulated by IFRS 5, which requires comparative financial information to be restated where the relative size of a disposal or business closure is significant, which is normally understood to mean a reported segment. However, the trading result of these businesses, non-trading expenses, and any gain/loss on disposal, have been excluded from adjusted results. To enable a like-for-like comparison of adjusted results, the 2021 comparatives have been re-presented to exclude the businesses classified as business exits during 2022. Assets held-for-sale The Group classifies a non-current asset (or disposal group) as held-for-sale if its carrying amount will be recovered principally through a sale transaction rather than continued use. For this to be the case, the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be highly probable. For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset (or disposal group), and an active programme to locate a buyer and complete the plan must have been initiated. Further, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value, and, the sale should be expected to be completed within one year from the date of classification. Based on the above requirements, individual businesses within the Portfolio Division will only reach the criteria to be treated as held-for-sale when their disposal is seen to be highly probable, and expected to complete within the following twelve months. At 31 December 2022 no disposals were deemed to have met this threshold. At 31 December 2021, the disposals of three businesses (AMT Sybex software, Secure Solutions and Services (SSS), and Speciality Insurance) were deemed to have met this threshold. 2022 business exits Business exits at 31 December 2022 primarily comprised: Business Disposal completed on AMT Sybex 1 January 2022 Secure Solutions and Services 3 January 2022 Trustmarque 31 March 2022 Speciality Insurance 29 April 2022 Real estate and infrastructure consultancy 22 September 2022 Optima Legal Services 30 November 2022 Pay360 1 December 2022 Capita Translation and Interpreting 29 December 2022 Further disposals are planned as part of the simplification agenda. Since these disposals did not meet the definition of business exits or assets held-for-sale at 31 December 2022, their trading results were included within adjusted results. However, exit costs related to those disposals, which include professional fees, salary costs and separation planning costs, are included within business exit non-trading administrative expenses. 2022 2021 Income statement impact Trading \u00a3m Non-trading \u00a3m Total \u00a3m Trading \u00a3m Non-trading \u00a3m Total \u00a3m Revenue 168.8 \u2014 168.8 404.7 \u2014 404.7 Cost of sales (135.3) \u2014 (135.3) (269.0) \u2014 (269.0) Gross profit 33.5 \u2014 33.5 135.7 \u2014 135.7 Administrative expenses (18.8) (23.1) (41.9) (56.4) (69.0) (125.4) Operating profit/(loss) 14.7 (23.1) (8.4) 79.3 (69.0) 10.3 Net finance costs (0.2) \u2014 (0.2) (0.7) (0.3) (1.0) Gain on business disposal \u2014 166.9 166.9 \u2014 419.7 419.7 Profit before tax 14.5 143.8 158.3 78.6 350.4 429.0 Taxation (2.8) (14.7) (17.5) (16.1) (43.0) (59.1) Profit after tax 11.7 129.1 140.8 62.5 307.4 369.9 Trading revenue and costs represent the current period trading performance of the above businesses up to the point of being disposed or exited, and in the comparative those businesses disposed of during 2021 (ESS, Life Insurance and Pensions Servicing business in Ireland, and the AXELOS joint venture with the UK Government). Trading expenses primarily comprise payroll costs of \u00a396.9m (2021: \u00a3217.6m) and information technology costs of \u00a323.2m (2021: \u00a365.2m). Included within non-trading administrative expenses is \u00a3nil (2021: \u00a39.3m) of amortisation of acquired intangibles which, in accordance with the Group\u2019s policy, were excluded from the Group\u2019s adjusted results and have been reclassified to business exits because they relate to businesses sold or being exited. Other non-trading administrative expenses include: asset impairments of \u00a3nil (2021: \u00a353.1m); disposal project costs of \u00a314.4m (2021: \u00a38.9m); other costs including staff and redundancy costs of \u00a38.7m (2021: \u00a34.7m); and, other income of \u00a3nil (2021: \u00a37.0m). 2.8 Business exits and assets held for sale continued 2.8.1 Disposals During 2022 the Group disposed of eight businesses: AMT Sybex, Secure Solutions and Services, Trustmarque, Speciality Insurance, Real estate and infrastructure consultancy, Optima Legal Services, Pay360 and Capita Translation and Interpreting. During 2021 the Group disposed of three businesses: ESS, Life Insurance and Pensions Servicing business in Ireland and AXELOS. . The assets and liabilities disposed of and the related gain on disposal are as follows: 2022 \u00a3m 2021 \u00a3m Property, plant and equipment 0.2 0.2 Intangible assets 20.4 20.0 Goodwill 178.3 65.7 Right-of-use assets 0.2 \u2014 Income tax recoverable and deferred tax assets 7.6 \u2014 Contract fulfilment assets 2.8 0.1 Trade and other receivables 136.6 2.6 Cash and cash equivalents 55.9 8.2 Disposal group assets held-for-sale 143.0 120.2 Trade and other payables (127.0) (6.7) Deferred income (38.6) (2.9) Lease liabilities (0.3) \u2014 Deferred consideration payable \u2014 (22.8) Loans payable 1 \u2014 (26.0) Capita group loan balances (102.3) (27.2) Income tax payable and deferred tax liabilities (0.7) (4.3) Provisions (0.4) \u2014 Disposal group liabilities held-for-sale (135.4) (57.5) Net identifiable assets sold 140.3 69.6 Non-controlling interests (0.3) (3.4) 140.0 66.2 Sales price: received in cash 330.0 508.6 deferred receivable 10.5 \u2014 Less: disposal costs (33.3) (25.5) Net sales price 307.2 483.1 Realisation of cumulative currency translation difference (0.3) 2.8 Gain on business disposals 166.9 419.7 Net cash inflow Proceeds received 330.0 508.6 Less disposal costs: income statement charge (33.3) (25.5) change in accrued disposal costs during the year 9.9 \u2014 Settlement of receivables due from disposed subsidiaries: disposal of subsidiaries in the period 102.3 27.2 disposal of subsidiaries classified as held-for-sale 54.5 \u2014 Total proceeds received net of disposal costs paid 463.4 510.3 Total cash held by subsidiaries when sold Cash held by subsidiaries when sold (55.9) (8.2) Cash held by subsidiaries classified as held-for-sale (19.6) (17.7) Total cash held by subsidiaries when sold (75.5) (25.9) Net cash inflow 387.9 484.4 1. The loan payable represents an interest bearing loan payable by AXELOS Limited to HM Government in connection with a dividend payable by this company. The loan is subject to interest at 6%pa and was settled on completion of the disposal on 29 July 2021. Disposal costs of \u00a37.1m, relating to businesses disposed of in the year, were recognised in prior years and are excluded from the above gain on business disposals. 2.8 Business exits and assets held for sale continued As part of the disposal of Trustmarque to One Equity Partners in March 2022, Capita entered into a five year agreement committing to procure a sufficient amount of the Group's IT and technology requirements through Trustmarque as a reseller of such services to enable Trustmarque to realise a specified level of gross profits over the period of that agreement. The price paid for these purchases will be equivalent to that paid by other customers of Trustmarque, and the Group expects to have sufficient demand to meet the commitment. It is currently estimated that the total expenditure with Trustmarque under this agreement over the five year period will be approximately \u00a3300m of which less than 25% is expected to be capital in nature. During 2022, management identified that the net assets of a business held-for-sale at 31 December 2021 and used to assess for impairment were incorrectly determined when comparing to the expected net disposal proceeds. This resulted in an overstatement of a goodwill impairment charge recognised within business exits (\u00a319.0m) and consequently, an understatement of assets held-for-sale at 31 December 2021. This error did not impact the adjusted results of the Group. Management has considered IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and concluded that the impact of this error is not deemed material since it would not influence the economic decisions of primary users of the consolidated financial statements, not least because the business has been disposed of in the current period, and therefore, the correction of the impairment has been recognised in the current period within the gain on business disposal. 2.8.2 Disposal group assets and liabilities held-for-sale Disposal group assets and liabilities held-for-sale at 31 December 2021 comprised the AMT Sybex, Secure Solutions and Services and Speciality Insurance businesses, whose disposals were completed during the first half of 2022. At 31 December 2022, no disposals were deemed to have met the threshold to be treated as held-for-sale. 2022 \u00a3m 2021 \u00a3m Property, plant and equipment \u2014 0.4 Intangible assets \u2014 14.4 Goodwill \u2014 44.2 Contract fulfilment assets \u2014 32.6 Trade and other receivables \u2014 10.7 Accrued income \u2014 5.1 Prepayments \u2014 5.2 Cash and cash equivalents \u2014 15.8 Income tax receivable and deferred tax assets \u2014 10.4 Disposal group assets held-for-sale \u2014 138.8 Trade and other payables \u2014 1.6 Other taxes and social security \u2014 1.6 Accruals \u2014 3.4 Deferred income \u2014 69.8 Income tax payable and deferred tax liabilities \u2014 2.3 Provisions \u2014 2.4 Disposal group liabilities held-for-sale \u2014 81.1 Business exit cash flows Businesses exited and being exited had a cash generated from operations inflow of \u00a39.9m (2021: cash inflow of \u00a343.1m). ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-468": {
"value": "Business exits Business exits are businesses that have been sold, exited during the period, or are in the process of being sold or exited in accordance with the Group's strategy. None of these business exits meet the definition of \u2018discontinued operations\u2019 as stipulated by IFRS 5, which requires comparative financial information to be restated where the relative size of a disposal or business closure is significant, which is normally understood to mean a reported segment. However, the trading result of these businesses, non-trading expenses, and any gain/loss on disposal, have been excluded from adjusted results. To enable a like-for-like comparison of adjusted results, the 2021 comparatives have been re-presented to exclude the businesses classified as business exits during 2022. Assets held-for-sale The Group classifies a non-current asset (or disposal group) as held-for-sale if its carrying amount will be recovered principally through a sale transaction rather than continued use. For this to be the case, the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be highly probable. For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset (or disposal group), and an active programme to locate a buyer and complete the plan must have been initiated. Further, the asset (or disposal group) must be actively marketed for sale at a price that is reasonable in relation to its current fair value, and, the sale should be expected to be completed within one year from the date of classification. Based on the above requirements, individual businesses within the Portfolio Division will only reach the criteria to be treated as held-for-sale when their disposal is seen to be highly probable, and expected to complete within the following twelve months. At 31 December 2022 no disposals were deemed to have met this threshold. At 31 December 2021, the disposals of three businesses (AMT Sybex software, Secure Solutions and Services (SSS), and Speciality Insurance) were deemed to have met this threshold. 2022 business exits Business exits at 31 December 2022 primarily comprised: Business Disposal completed on AMT Sybex 1 January 2022 Secure Solutions and Services 3 January 2022 Trustmarque 31 March 2022 Speciality Insurance 29 April 2022 Real estate and infrastructure consultancy 22 September 2022 Optima Legal Services 30 November 2022 Pay360 1 December 2022 Capita Translation and Interpreting 29 December 2022 Further disposals are planned as part of the simplification agenda. Since these disposals did not meet the definition of business exits or assets held-for-sale at 31 December 2022, their trading results were included within adjusted results. However, exit costs related to those disposals, which include professional fees, salary costs and separation planning costs, are included within business exit non-trading administrative expenses. 2022 2021 Income statement impact Trading \u00a3m Non-trading \u00a3m Total \u00a3m Trading \u00a3m Non-trading \u00a3m Total \u00a3m Revenue 168.8 \u2014 168.8 404.7 \u2014 404.7 Cost of sales (135.3) \u2014 (135.3) (269.0) \u2014 (269.0) Gross profit 33.5 \u2014 33.5 135.7 \u2014 135.7 Administrative expenses (18.8) (23.1) (41.9) (56.4) (69.0) (125.4) Operating profit/(loss) 14.7 (23.1) (8.4) 79.3 (69.0) 10.3 Net finance costs (0.2) \u2014 (0.2) (0.7) (0.3) (1.0) Gain on business disposal \u2014 166.9 166.9 \u2014 419.7 419.7 Profit before tax 14.5 143.8 158.3 78.6 350.4 429.0 Taxation (2.8) (14.7) (17.5) (16.1) (43.0) (59.1) Profit after tax 11.7 129.1 140.8 62.5 307.4 369.9 Trading revenue and costs represent the current period trading performance of the above businesses up to the point of being disposed or exited, and in the comparative those businesses disposed of during 2021 (ESS, Life Insurance and Pensions Servicing business in Ireland, and the AXELOS joint venture with the UK Government). Trading expenses primarily comprise payroll costs of \u00a396.9m (2021: \u00a3217.6m) and information technology costs of \u00a323.2m (2021: \u00a365.2m). Included within non-trading administrative expenses is \u00a3nil (2021: \u00a39.3m) of amortisation of acquired intangibles which, in accordance with the Group\u2019s policy, were excluded from the Group\u2019s adjusted results and have been reclassified to business exits because they relate to businesses sold or being exited. Other non-trading administrative expenses include: asset impairments of \u00a3nil (2021: \u00a353.1m); disposal project costs of \u00a314.4m (2021: \u00a38.9m); other costs including staff and redundancy costs of \u00a38.7m (2021: \u00a34.7m); and, other income of \u00a3nil (2021: \u00a37.0m). ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-513": {
"value": "2.9 Discontinued operations Capita completed the disposal of its Asset Services businesses, including Capita Financial Managers Limited (CFM), to the Link Group on 3 November 2017. The disposal met the definition of a discontinued operation as stipulated by IFRS 5. In 2021 the income of \u00a33.1m related to a reduction in provisions following reassessments of the likely future costs to be incurred by the Group. No further material movements in provisions related to the disposal of the Asset Services business are anticipated. The earnings per share impact from discontinued operations is nil p (2021: 0.19p) on basic earnings per share and nil p (2021: 0.18p) on diluted earnings per share. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDiscontinuedOperationsExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-514": {
"value": "2.10 Cash flow information Accounting policies Cash and short-term deposits in the balance sheet comprise cash at bank and in-hand and short-term deposits with an original maturity of three months or less. In the consolidated cash flow statement, cash and cash equivalents consist of cash and short-term deposits net of outstanding bank overdrafts and include cash and overdrafts within disposal group assets and liabilities held-for-sale. Cash at bank earns interest at fixed and floating rates based on prevailing bank deposit rates. 2.10.1 Additional cash flow information 2022 2022 2021 2021 Restated 2 Restated2 Notes Reported \u00a3m Before business exits \u00a3m Reported \u00a3m Before business exits \u00a3m Cash flows from operating activities: Reported operating loss 2.4 (79.6) (79.6) (86.6) (86.6) Less: business exit operating loss/(profit) 2.8 \u2014 8.4 \u2014 (10.3) Total operating loss (79.6) (71.2) (86.6) (96.9) Adjustments for non-cash items: Depreciation 3.2, 3.5 96.9 96.7 117.1 115.7 Amortisation of intangible assets 3.3 41.5 36.8 57.7 41.4 Share-based payment expense 5.1 5.4 5.4 1.2 1.2 Employee benefits 5.2 9.0 9.0 8.9 8.9 Loss on sale of property, plant and equipment and intangible assets 2.3 3.5 3.5 0.7 0.7 Amendments and early terminations of leases (4.7) (4.7) \u2014 \u2014 Impairment of disposal group assets \u2014 \u2014 44.1 \u2014 Impairment of non-current assets 176.9 176.5 90.0 82.8 Other adjustments: Movement in provisions (42.1) (47.9) 21.9 36.2 Pension deficit contributions (38.6) (30.0) (155.5) (73.6) Other contributions into pension schemes (10.0) (10.0) (8.4) (8.4) Movements in working capital: Trade and other receivables (41.0) 18.6 (5.2) (10.0) Non-recourse trade receivables financing 28.0 28.0 (5.7) (5.7) Trade and other payables 84.8 25.9 17.0 20.6 VAT deferral (14.9) (14.9) (104.1) (104.1) Deferred income (116.0) (124.2) (116.9) (62.9) Contract fulfilment assets (non-current) 18.7 19.0 (24.7) (55.6) Cash generated from/(used by) operations 117.8 116.5 (148.5) (109.7) Adjustments for free cash flows: Income tax paid (7.9) (6.5) (17.7) (17.7) Net interest paid (38.0) (37.4) (40.1) (40.0) Net cash inflows/(outflow) from operating activities 71.9 72.6 (206.3) (167.4) Purchase of property, plant and equipment 3.2 (20.6) (16.8) (25.6) (18.7) Purchase of intangible assets 3.3 (27.3) (27.3) (32.5) (32.5) Proceeds from sale of property, plant and equipment and intangible assets 0.5 0.5 0.1 \u2014 Free cash flow1 24.5 29.0 (264.3) (218.6) 1. Definitions of the alternative performance measures and related KPIs can be found in section 8.2. 2. The 2021 cash flow has been restated to include \u00a327.2m of cash, received from the purchasers of subsidiaries when sold to settle inter-company balances, within investing activities, which were previously included within the operating activities. This results in an increase in net cash flow from investing activities by \u00a327.2m and decrease in net cash flows from operating activities, cash generated from operations, and free cash flow by the same amount. There is no impact on the reported net movement in cash and cash equivalents. 2.10 Cash flow information continued 2.10.2 Free cash flow and cash generated from operations (alternative performance measures - refer to section 8.2) From 1 January 2022, the Board considers free cash flow, and cash generated from operations before business exits, to be alternative performance measures because these metrics provide a more representative measure of the sustainable cash flow of the Group. These measures are analysed below: Free cash flow Cash generated/(used) by operations 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Reported 24.5 (264.3) 117.8 (148.5) Business exits (4.1) (36.2) (9.9) (43.1) Pension deficit contributions triggered by disposals 8.6 81.9 8.6 81.9 Before business exits 29.0 (218.6) 116.5 (109.7) A reconciliation of net cash flow to movement in net debt is included in note 2.10.3. Business exits: the cash flows of businesses exited, or in the process of being exited, and the proceeds from disposals, are disclosed outside the adjusted results. The 31 December 2021 results have been re-presented for those businesses exited, or in the process of being exited, during the period from 1 January 2022 to 31 December 2022 to enable comparability of the adjusted results. Pension deficit contributions triggered by disposals: the Trustee of the Capita Pension and Life Assurance Scheme (the Scheme) has agreed with the Group to accelerate the payment of future agreed deficit contributions on a pound for pound basis in the event of disposal proceeds being used to fund mandatory prepayments of debt. During the year, the disposal of the Trustmarque business led to accelerated deficit contributions of \u00a35.9m being paid into the Scheme (plus up to a further \u00a314.5m in accelerated contributions will be required to be paid by 31 March 2024). In addition, an accelerated deficit contribution of \u00a32.7m was paid into the Scheme during the year as a result of the disposal of the Axelos business in 2021 (2021: Pension deficit contributions of \u00a381.9m triggered by: the disposal of the ESS business which led to accelerated deficit contributions of \u00a350.2m; and the disposal of the Parking Eye business in 2018, where actual settlement of accelerated deficit contributions of \u00a331.7m was deferred until 2021). 2.10.3 Reconciliation of net cash flow to movement in net debt Overdrafts comprise the aggregate value of overdrawn bank account balances within the Group\u2019s notional interest pooling arrangements. These aggregate overdrawn amounts are fully offset by surplus balances within the same arrangements. At 31 December 2022, the Group\u2019s \u00a3288.4m committed revolving credit facility was undrawn (31 December 2021: \u00a340.0m drawn). Year ended 31 December 2022 Note Net debt at 1 January \u00a3m Cash flow movements \u00a3m Non-cash movement2 \u00a3m Net debt at 31 December \u00a3m Cash, cash equivalents and overdrafts 4.5.4 101.5 75.3 0.4 177.2 Other loan notes 4.5 (1.3) 0.6 \u2014 (0.7) Credit facilities (46.0) 46.0 \u2014 \u2014 Private placement loan notes1 4.5 (512.9) 242.0 (14.6) (285.5) Cross-currency interest rate swaps1 4.5 28.0 (10.1) 6.9 24.8 Lease liabilities 4.4 (448.4) 84.4 (33.5) (397.5) Total net liabilities from financing activities (980.6) 362.9 (41.2) (658.9) Deferred consideration 4.5 (0.7) \u2014 \u2014 (0.7) Net debt 4.1.1 (879.8) 438.2 (40.8) (482.4) 1. The sum of these items equates to the fair value of the Group\u2019s private placement loan note\u2019s debt of \u00a3260.7m (2021: \u00a3484.9m). Cash flow movement in private placement loan notes includes both repayment of private placement loan notes of \u00a3236.8m (2021: \u00a3232.3m) and finance arrangement costs of \u00a35.2m (2021: \u00a31.9m). 2. Non-cash movement relates to: the effect of changes in foreign exchange on cash; fair value changes on the swaps; amortisation of loan notes issue costs; amortisation of the discount on the euro debt; and additions and terminations and foreign exchange rate effects on the Group\u2019s leases. Year ended 31 December 2021 Note Net debt at 1 January \u00a3m Cash flow movements \u00a3m Non-cash movement 2 \u00a3m Net debt at 31 December \u00a3m Cash, cash equivalents and overdrafts 4.5.4 141.1 (43.6) 4.0 101.5 Other loan notes 4.5 (2.3) 1.0 \u2014 (1.3) Credit facilities \u2014 (46.0) \u2014 (46.0) Private placement loan notes 4.5 (765.1) 234.2 18.0 (512.9) Cross-currency interest rate swaps 4.5 57.5 (19.7) (9.8) 28.0 Interest rate swaps 4.5 0.5 \u2014 (0.5) \u2014 Lease liabilities3 4.4 (508.1) 106.2 (46.5) (448.4) Total net liabilities from financing activities (1,217.5) 275.7 (38.8) (980.6) Deferred consideration 4.5 (0.7) \u2014 \u2014 (0.7) Net debt 4.1.1 (1,077.1) 232.1 (34.8) (879.8) 3. Cash flow movements in respect of lease liabilities have been re-presented to include net interest paid on finance leases (\u00a323.6m) previously included within non-cash movement. ",
"dimensions": {
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"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
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},
"fact-484": {
"value": "2.10 Cash flow information Accounting policies Cash and short-term deposits in the balance sheet comprise cash at bank and in-hand and short-term deposits with an original maturity of three months or less. In the consolidated cash flow statement, cash and cash equivalents consist of cash and short-term deposits net of outstanding bank overdrafts and include cash and overdrafts within disposal group assets and liabilities held-for-sale. Cash at bank earns interest at fixed and floating rates based on prevailing bank deposit rates. 2.10.1 Additional cash flow information 2022 2022 2021 2021 Restated 2 Restated2 Notes Reported \u00a3m Before business exits \u00a3m Reported \u00a3m Before business exits \u00a3m Cash flows from operating activities: Reported operating loss 2.4 (79.6) (79.6) (86.6) (86.6) Less: business exit operating loss/(profit) 2.8 \u2014 8.4 \u2014 (10.3) Total operating loss (79.6) (71.2) (86.6) (96.9) Adjustments for non-cash items: Depreciation 3.2, 3.5 96.9 96.7 117.1 115.7 Amortisation of intangible assets 3.3 41.5 36.8 57.7 41.4 Share-based payment expense 5.1 5.4 5.4 1.2 1.2 Employee benefits 5.2 9.0 9.0 8.9 8.9 Loss on sale of property, plant and equipment and intangible assets 2.3 3.5 3.5 0.7 0.7 Amendments and early terminations of leases (4.7) (4.7) \u2014 \u2014 Impairment of disposal group assets \u2014 \u2014 44.1 \u2014 Impairment of non-current assets 176.9 176.5 90.0 82.8 Other adjustments: Movement in provisions (42.1) (47.9) 21.9 36.2 Pension deficit contributions (38.6) (30.0) (155.5) (73.6) Other contributions into pension schemes (10.0) (10.0) (8.4) (8.4) Movements in working capital: Trade and other receivables (41.0) 18.6 (5.2) (10.0) Non-recourse trade receivables financing 28.0 28.0 (5.7) (5.7) Trade and other payables 84.8 25.9 17.0 20.6 VAT deferral (14.9) (14.9) (104.1) (104.1) Deferred income (116.0) (124.2) (116.9) (62.9) Contract fulfilment assets (non-current) 18.7 19.0 (24.7) (55.6) Cash generated from/(used by) operations 117.8 116.5 (148.5) (109.7) Adjustments for free cash flows: Income tax paid (7.9) (6.5) (17.7) (17.7) Net interest paid (38.0) (37.4) (40.1) (40.0) Net cash inflows/(outflow) from operating activities 71.9 72.6 (206.3) (167.4) Purchase of property, plant and equipment 3.2 (20.6) (16.8) (25.6) (18.7) Purchase of intangible assets 3.3 (27.3) (27.3) (32.5) (32.5) Proceeds from sale of property, plant and equipment and intangible assets 0.5 0.5 0.1 \u2014 Free cash flow1 24.5 29.0 (264.3) (218.6) 1. Definitions of the alternative performance measures and related KPIs can be found in section 8.2. 2. The 2021 cash flow has been restated to include \u00a327.2m of cash, received from the purchasers of subsidiaries when sold to settle inter-company balances, within investing activities, which were previously included within the operating activities. This results in an increase in net cash flow from investing activities by \u00a327.2m and decrease in net cash flows from operating activities, cash generated from operations, and free cash flow by the same amount. There is no impact on the reported net movement in cash and cash equivalents. 2.10 Cash flow information continued 2.10.2 Free cash flow and cash generated from operations (alternative performance measures - refer to section 8.2) From 1 January 2022, the Board considers free cash flow, and cash generated from operations before business exits, to be alternative performance measures because these metrics provide a more representative measure of the sustainable cash flow of the Group. These measures are analysed below: Free cash flow Cash generated/(used) by operations 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Reported 24.5 (264.3) 117.8 (148.5) Business exits (4.1) (36.2) (9.9) (43.1) Pension deficit contributions triggered by disposals 8.6 81.9 8.6 81.9 Before business exits 29.0 (218.6) 116.5 (109.7) A reconciliation of net cash flow to movement in net debt is included in note 2.10.3. Business exits: the cash flows of businesses exited, or in the process of being exited, and the proceeds from disposals, are disclosed outside the adjusted results. The 31 December 2021 results have been re-presented for those businesses exited, or in the process of being exited, during the period from 1 January 2022 to 31 December 2022 to enable comparability of the adjusted results. Pension deficit contributions triggered by disposals: the Trustee of the Capita Pension and Life Assurance Scheme (the Scheme) has agreed with the Group to accelerate the payment of future agreed deficit contributions on a pound for pound basis in the event of disposal proceeds being used to fund mandatory prepayments of debt. During the year, the disposal of the Trustmarque business led to accelerated deficit contributions of \u00a35.9m being paid into the Scheme (plus up to a further \u00a314.5m in accelerated contributions will be required to be paid by 31 March 2024). In addition, an accelerated deficit contribution of \u00a32.7m was paid into the Scheme during the year as a result of the disposal of the Axelos business in 2021 (2021: Pension deficit contributions of \u00a381.9m triggered by: the disposal of the ESS business which led to accelerated deficit contributions of \u00a350.2m; and the disposal of the Parking Eye business in 2018, where actual settlement of accelerated deficit contributions of \u00a331.7m was deferred until 2021). 2.10.3 Reconciliation of net cash flow to movement in net debt Overdrafts comprise the aggregate value of overdrawn bank account balances within the Group\u2019s notional interest pooling arrangements. These aggregate overdrawn amounts are fully offset by surplus balances within the same arrangements. At 31 December 2022, the Group\u2019s \u00a3288.4m committed revolving credit facility was undrawn (31 December 2021: \u00a340.0m drawn). Year ended 31 December 2022 Note Net debt at 1 January \u00a3m Cash flow movements \u00a3m Non-cash movement2 \u00a3m Net debt at 31 December \u00a3m Cash, cash equivalents and overdrafts 4.5.4 101.5 75.3 0.4 177.2 Other loan notes 4.5 (1.3) 0.6 \u2014 (0.7) Credit facilities (46.0) 46.0 \u2014 \u2014 Private placement loan notes1 4.5 (512.9) 242.0 (14.6) (285.5) Cross-currency interest rate swaps1 4.5 28.0 (10.1) 6.9 24.8 Lease liabilities 4.4 (448.4) 84.4 (33.5) (397.5) Total net liabilities from financing activities (980.6) 362.9 (41.2) (658.9) Deferred consideration 4.5 (0.7) \u2014 \u2014 (0.7) Net debt 4.1.1 (879.8) 438.2 (40.8) (482.4) 1. The sum of these items equates to the fair value of the Group\u2019s private placement loan note\u2019s debt of \u00a3260.7m (2021: \u00a3484.9m). Cash flow movement in private placement loan notes includes both repayment of private placement loan notes of \u00a3236.8m (2021: \u00a3232.3m) and finance arrangement costs of \u00a35.2m (2021: \u00a31.9m). 2. Non-cash movement relates to: the effect of changes in foreign exchange on cash; fair value changes on the swaps; amortisation of loan notes issue costs; amortisation of the discount on the euro debt; and additions and terminations and foreign exchange rate effects on the Group\u2019s leases. Year ended 31 December 2021 Note Net debt at 1 January \u00a3m Cash flow movements \u00a3m Non-cash movement 2 \u00a3m Net debt at 31 December \u00a3m Cash, cash equivalents and overdrafts 4.5.4 141.1 (43.6) 4.0 101.5 Other loan notes 4.5 (2.3) 1.0 \u2014 (1.3) Credit facilities \u2014 (46.0) \u2014 (46.0) Private placement loan notes 4.5 (765.1) 234.2 18.0 (512.9) Cross-currency interest rate swaps 4.5 57.5 (19.7) (9.8) 28.0 Interest rate swaps 4.5 0.5 \u2014 (0.5) \u2014 Lease liabilities3 4.4 (508.1) 106.2 (46.5) (448.4) Total net liabilities from financing activities (1,217.5) 275.7 (38.8) (980.6) Deferred consideration 4.5 (0.7) \u2014 \u2014 (0.7) Net debt 4.1.1 (1,077.1) 232.1 (34.8) (879.8) 3. Cash flow movements in respect of lease liabilities have been re-presented to include net interest paid on finance leases (\u00a323.6m) previously included within non-cash movement. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCashFlowStatementExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-458": {
"value": "Cash and short-term deposits in the balance sheet comprise cash at bank and in-hand and short-term deposits with an original maturity of three months or less. In the consolidated cash flow statement, cash and cash equivalents consist of cash and short-term deposits net of outstanding bank overdrafts and include cash and overdrafts within disposal group assets and liabilities held-for-sale. Cash at bank earns interest at fixed and floating rates based on prevailing bank deposit rates. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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},
"fact-515": {
"value": "3.1 Working capital 3.1.1 Trade and other receivables Accounting policies Trade receivables: Trade receivables are initially recognised at cost (being the same as fair value) and subsequently at amortised cost less any provision for impairment, to ensure the amounts recognised represent their recoverable amount. Impairment: For trade receivables, the Group applies the simplified approach permitted by IFRS 9, resulting in trade receivables recognised and carried at original invoice amount less an allowance for any uncollectible amounts based on expected credit losses. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The Group monitors the level of trade receivables on a monthly basis, continually assessing the risk of default by any counterparty. Each customer has an external credit score which determines the level of credit provided. Derecognition: A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised (ie removed from the Group\u2019s consolidated balance sheet) when (i) the rights to receive the cash flows from the asset have expired; or, (ii) the Group has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a \u2018pass-through\u2019 arrangement; and either (a) the Group has transferred substantially all the risk and rewards of the asset; or, (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Trade receivables that are sold without recourse are derecognised at the point of sale when the risks and rewards of the receivables have been fully transferred. Accrued income: Accrued income in relation to contract assets is recognised when payments received from customers are less than the revenue recognised by the reporting date. Current Non-current 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Trade receivables 149.9 232.0 \u2014 \u2014 Other receivables1 32.6 43.4 5.8 4.0 Current contract fulfilment assets2 10.7 23.7 \u2014 \u2014 Accrued income 179.1 169.5 \u2014 2.7 Prepayments 58.1 78.5 10.0 9.0 430.4 547.1 15.8 15.7 1. Other receivables includes \u00a30.4m (2021: \u00a31.6m) of accrued interest on cross-currency interest rate swaps. 2. Refer to note 3.1.3 for non-current contract fulfilment assets. Trade receivables are non-interest bearing and are generally on 30-day terms. The Group\u2019s accrued income balances solely relate to revenue from contracts with customers. Movements in the accrued income balances were driven by transactions entered into by the Group in the normal course of business during the year. Movements in the loss allowance made against receivables were as follows: 2022 \u00a3m 2021 \u00a3m At 1 January 19.4 11.3 Utilised (4.0) (6.7) Provided in the year 15.3 15.2 Business disposal (1.0) \u2014 Transfer to disposal group assets held-for-sale \u2014 (0.4) At 31 December 29.7 19.4 3.1 Working capital continued There are no customers who represent more than 10% of the total balance of trade receivables. Ageing of trade receivables 2022 \u00a3m 2021 \u00a3m Not due 118.5 203.3 Overdue by less than three months 26.9 29.8 Overdue between three and six months 6.3 6.6 Overdue between six and twelve months 9.9 11.4 Overdue more than twelve months 18.0 0.3 Allowance for doubtful debts (29.7) (19.4) 149.9 232.0 Non-recourse trade receivables facilities The value of the outstanding invoices sold under non-recourse trade receivable facilities was \u00a344.4m at 31 December 2022 (2021: \u00a316.4m). The cost of selling such invoices totalling \u00a30.8m (2021: \u00a30.6m) was included in administrative expenses in the consolidated income statement. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-485": {
"value": "3.1 Working capital 3.1.1 Trade and other receivables Accounting policies Trade receivables: Trade receivables are initially recognised at cost (being the same as fair value) and subsequently at amortised cost less any provision for impairment, to ensure the amounts recognised represent their recoverable amount. Impairment: For trade receivables, the Group applies the simplified approach permitted by IFRS 9, resulting in trade receivables recognised and carried at original invoice amount less an allowance for any uncollectible amounts based on expected credit losses. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The Group monitors the level of trade receivables on a monthly basis, continually assessing the risk of default by any counterparty. Each customer has an external credit score which determines the level of credit provided. Derecognition: A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised (ie removed from the Group\u2019s consolidated balance sheet) when (i) the rights to receive the cash flows from the asset have expired; or, (ii) the Group has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a \u2018pass-through\u2019 arrangement; and either (a) the Group has transferred substantially all the risk and rewards of the asset; or, (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Trade receivables that are sold without recourse are derecognised at the point of sale when the risks and rewards of the receivables have been fully transferred. Accrued income: Accrued income in relation to contract assets is recognised when payments received from customers are less than the revenue recognised by the reporting date. Current Non-current 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Trade receivables 149.9 232.0 \u2014 \u2014 Other receivables1 32.6 43.4 5.8 4.0 Current contract fulfilment assets2 10.7 23.7 \u2014 \u2014 Accrued income 179.1 169.5 \u2014 2.7 Prepayments 58.1 78.5 10.0 9.0 430.4 547.1 15.8 15.7 1. Other receivables includes \u00a30.4m (2021: \u00a31.6m) of accrued interest on cross-currency interest rate swaps. 2. Refer to note 3.1.3 for non-current contract fulfilment assets. Trade receivables are non-interest bearing and are generally on 30-day terms. The Group\u2019s accrued income balances solely relate to revenue from contracts with customers. Movements in the accrued income balances were driven by transactions entered into by the Group in the normal course of business during the year. Movements in the loss allowance made against receivables were as follows: 2022 \u00a3m 2021 \u00a3m At 1 January 19.4 11.3 Utilised (4.0) (6.7) Provided in the year 15.3 15.2 Business disposal (1.0) \u2014 Transfer to disposal group assets held-for-sale \u2014 (0.4) At 31 December 29.7 19.4 3.1 Working capital continued There are no customers who represent more than 10% of the total balance of trade receivables. Ageing of trade receivables 2022 \u00a3m 2021 \u00a3m Not due 118.5 203.3 Overdue by less than three months 26.9 29.8 Overdue between three and six months 6.3 6.6 Overdue between six and twelve months 9.9 11.4 Overdue more than twelve months 18.0 0.3 Allowance for doubtful debts (29.7) (19.4) 149.9 232.0 Non-recourse trade receivables facilities The value of the outstanding invoices sold under non-recourse trade receivable facilities was \u00a344.4m at 31 December 2022 (2021: \u00a316.4m). The cost of selling such invoices totalling \u00a30.8m (2021: \u00a30.6m) was included in administrative expenses in the consolidated income statement. 3.1.2 Trade and other payables Current Non-current 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Trade payables 134.9 153.7 0.1 \u2014 Other payables 32.8 26.7 6.5 6.3 Other taxes and social security 85.6 122.9 6.0 5.0 Accruals 239.2 238.9 2.5 4.1 492.5 542.2 15.1 15.4 Trade payables are non-interest bearing and are settled on terms agreed with the suppliers. The Group aims to pay its suppliers on time in accordance with agreed terms. 3.1 Working capital continued 3.1.3 Contract fulfilment assets Accounting policies The Group regularly incurs costs to deliver its outsourcing services in a more efficient way (often referred to as \u2018transformation\u2019 costs). These costs may include process mapping and design, system development, project management, hardware (generally within the scope of the Group\u2019s accounting policy for property, plant and equipment), software licence costs (generally within the scope of the Group\u2019s accounting policy for intangible assets), recruitment costs and training. Contract fulfilment costs are divided into: (i) costs that give rise to an asset; and (ii) costs that are expensed as incurred. When determining the appropriate accounting treatment for such costs, the Group firstly considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognised under IFRS 15. If other standards are not applicable to contract fulfilment costs, the Group applies the following criteria which, if met, result in capitalisation of costs that: (i) directly relate to a contract or to a specifically identifiable anticipated contract; (ii) generate or enhance resources that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and (iii) are expected to be recovered. The Group has determined that, where the relevant specific criteria are met, the costs for (i) process mapping and design; (ii) system development; and (iii) project management; are likely to qualify to be capitalised as contract fulfilment assets. The incremental costs of obtaining a contract with a customer are recognised as a contract fulfilment asset if the Group expects to recover them. The Group incurs costs such as bid costs, legal fees to draft a contract and sales commissions when it enters into a new contract. The Group has determined that the following costs may be capitalised as contract fulfilment assets: (i) legal fees to draft a contract after the Group has been selected as preferred supplier; and (ii) sales commissions directly related to winning a specific contract. Costs incurred prior to selection as preferred supplier are not capitalised but expensed as incurred. Utilisation: The utilisation charge is included within cost of sales. The Group utilises contract fulfilment assets over the expected contract period on a systematic basis that mirrors the pattern in which the Group transfers control of the service to the customer. Derecognition: A contract fulfilment asset is derecognised either when it is disposed of or when no further economic benefits are expected to flow from its use or disposal. Impairment: At each reporting date, the Group determines whether or not the contract fulfilment assets are impaired by comparing the carrying amount of the asset with the remaining amount of consideration that the Group expects to receive less the costs that relate to providing services under the relevant contract. In determining the estimated amount of consideration, the Group uses the same principles as it does to determine the contract transaction price, except that any constraints used to reduce the transaction price are removed for the impairment test. Significant accounting judgements, estimates and assumptions Judgement is applied by the Group when determining what costs qualify to be capitalised in particular when considering whether these costs are incremental and when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable. For example, the Group considers which type of sales commissions are incremental to the cost of obtaining specific contracts and the point in time when the costs will be capitalised. See note 2.1 for further information. Movements in non-current contract fulfilment assets were as follows1: 2022 \u00a3m 2021 \u00a3m At 1 January 286.7 294.8 Impact of change in accounting standards \u2013 amendments to IAS 372 (2.4) \u2014 At 1 January 2022 on adoption of IAS 37 284.3 294.8 Additions 67.1 132.2 Transfer to assets held-for-sale \u2014 (32.6) Disposal of business (2.8) (0.1) Impairment (3.8) (7.3) Derecognition (0.4) (16.6) Utilised during the year (81.5) (83.9) Exchange movement 0.1 0.2 At 31 December 263.0 286.7 1. Refer to note 3.1.1 for current contract fulfilment assets. 2. The Group initially applied the amendments to IAS 37 at 1 January 2022 and the cumulative effect of applying the amendments was recognised as an opening balance adjustment to retained earnings. Refer to note 1 for further details. Impairment: In 2022, the Group recognised an impairment of \u00a33.8m (2021: \u00a37.3m) in cost of sales, of which, \u00a30.5m (2021: \u00a3nil) relates to contract fulfilment assets added during the year. Derecognition: In 2022, \u00a30.4m (2021: \u00a316.6m) was derecognised in relation to a contract in Capita Experience where the scope of our services changed due to termination of contracts and the Group had no further use for the assets. In 2021 the derecognition primarily related to a contract in Capita Public Service due to agreed reduction in scope of the contract and also contracts in Capita Experience where the scope of our services changed due to termination of contracts and the Group had no further use for the assets . ",
"dimensions": {
"concept": "capitaplc:DisclosureOfWorkingCapital",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-459": {
"value": "3.1.1 Trade and other receivables Accounting policies Trade receivables: Trade receivables are initially recognised at cost (being the same as fair value) and subsequently at amortised cost less any provision for impairment, to ensure the amounts recognised represent their recoverable amount. Impairment: For trade receivables, the Group applies the simplified approach permitted by IFRS 9, resulting in trade receivables recognised and carried at original invoice amount less an allowance for any uncollectible amounts based on expected credit losses. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The Group monitors the level of trade receivables on a monthly basis, continually assessing the risk of default by any counterparty. Each customer has an external credit score which determines the level of credit provided. Derecognition: A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised (ie removed from the Group\u2019s consolidated balance sheet) when (i) the rights to receive the cash flows from the asset have expired; or, (ii) the Group has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a \u2018pass-through\u2019 arrangement; and either (a) the Group has transferred substantially all the risk and rewards of the asset; or, (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Trade receivables that are sold without recourse are derecognised at the point of sale when the risks and rewards of the receivables have been fully transferred. Accrued income: Accrued income in relation to contract assets is recognised when payments received from customers are less than the revenue recognised by the reporting date. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherReceivablesExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-516": {
"value": "3.1.2 Trade and other payables Current Non-current 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Trade payables 134.9 153.7 0.1 \u2014 Other payables 32.8 26.7 6.5 6.3 Other taxes and social security 85.6 122.9 6.0 5.0 Accruals 239.2 238.9 2.5 4.1 492.5 542.2 15.1 15.4 Trade payables are non-interest bearing and are settled on terms agreed with the suppliers. The Group aims to pay its suppliers on time in accordance with agreed terms. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-460": {
"value": "3.2 Property, plant and equipment Accounting policies Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation: Depreciation is disclosed as an administrative expense in the consolidated income statement, and is calculated on a straight-line basis over the estimated useful life of the asset, as follows: \u2022 Freehold buildings and long leasehold property \u2013 up to 50 years. \u2022 Leasehold improvements \u2013 period of the lease. \u2022 Plant and machinery \u2013 3 to 10 years. Impairment: The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount. The recoverable amount of property, plant and equipment is the greater of net selling price and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are disclosed as administrative expenses in the consolidated income statement. Derecognition: An item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected to arise from the continued use of the asset (retired). Any gain or loss arising on derecognition of the asset, calculated as the difference between the net disposal proceeds and the carrying value of the asset, is included in the consolidated income statement when the asset is derecognised. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-486": {
"value": "3.2 Property, plant and equipment Accounting policies Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation: Depreciation is disclosed as an administrative expense in the consolidated income statement, and is calculated on a straight-line basis over the estimated useful life of the asset, as follows: \u2022 Freehold buildings and long leasehold property \u2013 up to 50 years. \u2022 Leasehold improvements \u2013 period of the lease. \u2022 Plant and machinery \u2013 3 to 10 years. Impairment: The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount. The recoverable amount of property, plant and equipment is the greater of net selling price and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are disclosed as administrative expenses in the consolidated income statement. Derecognition: An item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected to arise from the continued use of the asset (retired). Any gain or loss arising on derecognition of the asset, calculated as the difference between the net disposal proceeds and the carrying value of the asset, is included in the consolidated income statement when the asset is derecognised. 2022 2021 Leasehold improvements, land and buildings \u00a3m Plant and machinery \u00a3m Total \u00a3m Leasehold improvements, land and buildings \u00a3m Plant and machinery \u00a3m Total \u00a3m Cost At 1 January 99.6 169.1 268.7 103.3 193.2 296.5 Additions 7.7 12.9 20.6 8.1 17.5 25.6 Disposal of business \u2014 (0.4) (0.4) \u2014 (0.8) (0.8) Disposals \u2013 included in adjusted profit (9.1) (7.4) (16.5) (2.3) (10.0) (12.3) Disposals \u2013 included in business exits \u2014 \u2014 \u2014 (0.1) (0.4) (0.5) Transfer to assets held-for-sale \u2014 \u2014 \u2014 (0.1) (0.6) (0.7) Reclassifications 1.3 (1.8) (0.5) \u2014 (1.9) (1.9) Asset retirements (3.7) (27.9) (31.6) (8.9) (25.8) (34.7) Exchange movement 0.2 2.0 2.2 (0.4) (2.1) (2.5) At 31 December 96.0 146.5 242.5 99.6 169.1 268.7 Depreciation and impairment At 1 January 40.5 99.2 139.7 41.6 97.7 139.3 Impact of change in accounting standards \u2013 amendments to IAS 371 \u2014 0.5 0.5 \u2014 \u2014 \u2014 At 1 January 2022 on adoption of IAS 37 40.5 99.7 140.2 41.6 97.7 139.3 Depreciation charged in the year - included in adjusted profit 10.1 30.6 40.7 9.3 38.2 47.5 Depreciation charged in the year - included in business exits \u2014 0.2 0.2 0.1 1.0 1.1 Disposal of business \u2014 (0.2) (0.2) \u2014 (0.6) (0.6) Disposals \u2013 included in adjusted profit (7.3) (6.9) (14.2) (2.0) (9.7) (11.7) Disposals \u2013 included in business exits \u2014 \u2014 \u2014 (0.1) (0.5) (0.6) Impairment \u2013 included in adjusted profit 2.0 2.7 4.7 0.6 1.3 1.9 Transfer to assets held-for-sale \u2014 \u2014 \u2014 (0.1) (0.2) (0.3) Reclassifications 0.8 (0.8) \u2014 \u2014 (0.4) (0.4) Asset retirements (3.7) (27.9) (31.6) (8.9) (25.8) (34.7) Exchange movement 0.1 1.5 1.6 \u2014 (1.8) (1.8) At 31 December 42.5 98.9 141.4 40.5 99.2 139.7 Net book value At 1 January 59.1 69.9 129.0 61.7 95.5 157.2 At 31 December 53.5 47.6 101.1 59.1 69.9 129.0 1. The Group initially applied the amendments to IAS 37 at 1 January 2022 and the cumulative effect of applying the amendments was recognised as an opening balance adjustment to retained earnings. Refer to note 1 for further details. 3.2 Property, plant and equipment continued At 31 December 2022, amounts contracted for but not provided in the financial statements for the acquisition of property, plant and equipment amounted to \u00a32.7m (2021: \u00a33.6m), relating to building improvements on leased property. During the prior year the Group exited a number of properties and their related leasehold improvement assets were disposed of for no consideration. Since these exits were part of the Group wide transformation, the related charge was excluded from adjusted profit. Following the change in presentation of adjusted results (refer to note 2.4) the related charge has been re-presented and included within adjusted profit. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-469": {
"value": "Depreciation: Depreciation is disclosed as an administrative expense in the consolidated income statement, and is calculated on a straight-line basis over the estimated useful life of the asset, as follows: \u2022 Freehold buildings and long leasehold property \u2013 up to 50 years. \u2022 Leasehold improvements \u2013 period of the lease. \u2022 Plant and machinery \u2013 3 to 10 years. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDepreciationExpenseExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-470": {
"value": "3.3 Intangible assets Accounting policies Intangible assets acquired separately are capitalised at cost and those identified in a business acquisition are capitalised at fair value at the date of acquisition. In the case of capitalised software development costs, research expenditure is written off to the consolidated income statement in the period in which it is incurred. Development expenditure is similarly written off until the Group is satisfied as to the technical, commercial and financial viability of individual projects. Where this condition is satisfied, the development expenditure is capitalised and amortised over the period during which the Group is expected to benefit. Following initial recognition, the carrying amount of an intangible asset is its cost less accumulated amortisation and impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. There were no indefinite-lived assets in 2022 or 2021. Amortisation: Amortisation is charged on assets with finite lives and is disclosed as an administrative expense in the consolidated income statement. The amortisation method used reflects the expected pattern of consumption of future economic benefits and generally amortised on a straight-line basis, the amortisation periods used are as follows: \u2022 Intangible assets acquired in business combinations \u2013 1.5 to 20 years. \u2022 Intangible assets purchased or internally capitalised \u2013 3 to 20 years. Impairment: Intangible assets with finite lives are only tested for impairment, either individually or at the cash-generating unit level, where there is an indicator of impairment. Derecognition: Intangible assets are derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset (retired). Any gain or loss arising on derecognition of the asset, calculated as the difference between the net disposal proceeds and the carrying value of the asset, is included in the consolidated income statement when the asset is derecognised. The measurement of intangible assets other than goodwill in a business combination: on the acquisition of a business, the identifiable intangible assets may include licences, customer lists and brands. The fair value of these assets is determined by discounting estimated future net cash flows generated by the asset because in most cases no active market for the assets exists and therefore no observable value exists. The use of different assumptions for the expectations of future cash flows and the discount rate would change the valuation of the intangible assets. The assessment of costs capitalised as intangible assets to generate future economic benefits: judgement is applied in assessing whether costs incurred, both internal and external, will generate future economic benefits. Judgements and estimates are applied in determining the carrying value of the assets, including assumptions made in respect of the status of the programme each asset relates to. Given the level of judgement and estimation involved in assessing future cash flows, it is reasonably possible that outcomes within the next financial year may be different from management\u2019s assumptions and require an adjustment to the carrying value of intangible assets. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-461": {
"value": "3.3 Intangible assets Accounting policies Intangible assets acquired separately are capitalised at cost and those identified in a business acquisition are capitalised at fair value at the date of acquisition. In the case of capitalised software development costs, research expenditure is written off to the consolidated income statement in the period in which it is incurred. Development expenditure is similarly written off until the Group is satisfied as to the technical, commercial and financial viability of individual projects. Where this condition is satisfied, the development expenditure is capitalised and amortised over the period during which the Group is expected to benefit. Following initial recognition, the carrying amount of an intangible asset is its cost less accumulated amortisation and impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. There were no indefinite-lived assets in 2022 or 2021. Amortisation: Amortisation is charged on assets with finite lives and is disclosed as an administrative expense in the consolidated income statement. The amortisation method used reflects the expected pattern of consumption of future economic benefits and generally amortised on a straight-line basis, the amortisation periods used are as follows: \u2022 Intangible assets acquired in business combinations \u2013 1.5 to 20 years. \u2022 Intangible assets purchased or internally capitalised \u2013 3 to 20 years. Impairment: Intangible assets with finite lives are only tested for impairment, either individually or at the cash-generating unit level, where there is an indicator of impairment. Derecognition: Intangible assets are derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset (retired). Any gain or loss arising on derecognition of the asset, calculated as the difference between the net disposal proceeds and the carrying value of the asset, is included in the consolidated income statement when the asset is derecognised. The measurement of intangible assets other than goodwill in a business combination: on the acquisition of a business, the identifiable intangible assets may include licences, customer lists and brands. The fair value of these assets is determined by discounting estimated future net cash flows generated by the asset because in most cases no active market for the assets exists and therefore no observable value exists. The use of different assumptions for the expectations of future cash flows and the discount rate would change the valuation of the intangible assets. The assessment of costs capitalised as intangible assets to generate future economic benefits: judgement is applied in assessing whether costs incurred, both internal and external, will generate future economic benefits. Judgements and estimates are applied in determining the carrying value of the assets, including assumptions made in respect of the status of the programme each asset relates to. Given the level of judgement and estimation involved in assessing future cash flows, it is reasonably possible that outcomes within the next financial year may be different from management\u2019s assumptions and require an adjustment to the carrying value of intangible assets. 3.4 Goodwill Accounting policies Following initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Goodwill arising on acquisitions prior to 31 December 1997 remains set off directly against reserves and does not get recycled through the consolidated income statement. At the acquisition date, any goodwill acquired is allocated to the cash-generating units (CGU) which are expected to benefit from the combination\u2019s synergies. Impairment is determined by assessing the recoverable amount of the CGU to which the goodwill relates. Where the recoverable amount of the CGU is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in these circumstances is measured on the basis of the relative values of the operation disposed of and the portion of the CGU retained. Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Any difference between the price paid or received and the amount by which non-controlling interests are adjusted is recognised directly in equity and attributed to the owners of the Parent company. Prior to the adoption of IAS 27 (Amended), goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of the transaction. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-517": {
"value": "3.3 Intangible assets Accounting policies Intangible assets acquired separately are capitalised at cost and those identified in a business acquisition are capitalised at fair value at the date of acquisition. In the case of capitalised software development costs, research expenditure is written off to the consolidated income statement in the period in which it is incurred. Development expenditure is similarly written off until the Group is satisfied as to the technical, commercial and financial viability of individual projects. Where this condition is satisfied, the development expenditure is capitalised and amortised over the period during which the Group is expected to benefit. Following initial recognition, the carrying amount of an intangible asset is its cost less accumulated amortisation and impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. There were no indefinite-lived assets in 2022 or 2021. Amortisation: Amortisation is charged on assets with finite lives and is disclosed as an administrative expense in the consolidated income statement. The amortisation method used reflects the expected pattern of consumption of future economic benefits and generally amortised on a straight-line basis, the amortisation periods used are as follows: \u2022 Intangible assets acquired in business combinations \u2013 1.5 to 20 years. \u2022 Intangible assets purchased or internally capitalised \u2013 3 to 20 years. Impairment: Intangible assets with finite lives are only tested for impairment, either individually or at the cash-generating unit level, where there is an indicator of impairment. Derecognition: Intangible assets are derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset (retired). Any gain or loss arising on derecognition of the asset, calculated as the difference between the net disposal proceeds and the carrying value of the asset, is included in the consolidated income statement when the asset is derecognised. The measurement of intangible assets other than goodwill in a business combination: on the acquisition of a business, the identifiable intangible assets may include licences, customer lists and brands. The fair value of these assets is determined by discounting estimated future net cash flows generated by the asset because in most cases no active market for the assets exists and therefore no observable value exists. The use of different assumptions for the expectations of future cash flows and the discount rate would change the valuation of the intangible assets. The assessment of costs capitalised as intangible assets to generate future economic benefits: judgement is applied in assessing whether costs incurred, both internal and external, will generate future economic benefits. Judgements and estimates are applied in determining the carrying value of the assets, including assumptions made in respect of the status of the programme each asset relates to. Given the level of judgement and estimation involved in assessing future cash flows, it is reasonably possible that outcomes within the next financial year may be different from management\u2019s assumptions and require an adjustment to the carrying value of intangible assets. 3.3 Intangible assets continued 2022 2021 Intangible assets acquired in business combinations \u00a3m Capitalised/ purchased software \u00a3m Total \u00a3m Intangible assets acquired in business combinations \u00a3m Capitalised/ purchased software \u00a3m Total \u00a3m Cost At 1 January 55.4 222.7 278.1 174.3 314.2 488.5 Disposal of business \u2014 (33.0) (33.0) (61.3) (7.6) (68.9) Additions \u2014 27.3 27.3 \u2014 32.5 32.5 Disposals \u2013 included in adjusted profit \u2014 (12.2) (12.2) \u2014 (3.0) (3.0) Disposals \u2013 included in business exits \u2014 \u2014 \u2014 \u2014 (3.4) (3.4) Transfer to assets held-for-sale \u2014 \u2014 \u2014 (6.8) (16.4) (23.2) Reclassifications \u2014 0.5 0.5 \u2014 1.9 1.9 Asset retirement (53.1) (11.2) (64.3) (50.3) (94.8) (145.1) Exchange movement 0.7 0.5 1.2 (0.5) (0.7) (1.2) At 31 December 3.0 194.6 197.6 55.4 222.7 278.1 Amortisation and impairment At 1 January 49.6 81.2 130.8 135.4 88.1 223.5 Amortisation charged in the year - included in adjusted profit \u2014 31.7 31.7 \u2014 33.7 33.7 Amortisation charged in the year - excluded from adjusted profit 5.1 \u2014 5.1 7.7 \u2014 7.7 Amortisation charged in the year - included in business exits \u2014 4.7 4.7 9.2 7.1 16.3 Impairment \u2013 included in adjusted profit \u2014 5.5 5.5 \u2014 56.1 56.1 Impairment \u2013 included in business exits \u2014 0.4 0.4 \u2014 2.6 2.6 Disposal of business \u2014 (12.6) (12.6) (46.5) (2.4) (48.9) Disposals \u2013 included in adjusted profit \u2014 (10.5) (10.5) \u2014 (2.7) (2.7) Disposals \u2013 included in business exits \u2014 \u2014 \u2014 \u2014 (3.4) (3.4) Transfer to assets held-for-sale \u2014 \u2014 \u2014 (5.7) (3.1) (8.8) Reclassifications \u2014 \u2014 \u2014 \u2014 0.4 0.4 Asset retirement (53.1) (11.2) (64.3) (50.3) (94.8) (145.1) Exchange movement 0.7 0.1 0.8 (0.2) (0.4) (0.6) At 31 December 2.3 89.3 91.6 49.6 81.2 130.8 Net book value At 1 January 5.8 141.5 147.3 38.9 226.1 265.0 At 31 December 0.7 105.3 106.0 5.8 141.5 147.3 Intangible assets acquired in business combinations include: committed sales (net book value 2022: \u00a30.7m, 2021: \u00a33.3m); and client lists and relationships (net book value 2022: \u00a3nil, 2021: \u00a32.5m). Intangible assets capitalised or purchased include capitalised software development (net book value 2022: \u00a390.9m, 2021: \u00a3120.7m) and purchased software (net book value 2022: \u00a314.4m, 2021: \u00a320.8m). Impairment included in adjusted profit in 2021 includes \u00a353.5m in respect of areas of a new financial reporting system invested in as part of the finance transformation that are no longer expected to be used. This charge was previously excluded from adjusted profit, however following the change in presentation of adjusted results (refer to note 2.4) the related charge has been re-presented and included within adjusted profit. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-487": {
"value": "3.3 Intangible assets Accounting policies Intangible assets acquired separately are capitalised at cost and those identified in a business acquisition are capitalised at fair value at the date of acquisition. In the case of capitalised software development costs, research expenditure is written off to the consolidated income statement in the period in which it is incurred. Development expenditure is similarly written off until the Group is satisfied as to the technical, commercial and financial viability of individual projects. Where this condition is satisfied, the development expenditure is capitalised and amortised over the period during which the Group is expected to benefit. Following initial recognition, the carrying amount of an intangible asset is its cost less accumulated amortisation and impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. There were no indefinite-lived assets in 2022 or 2021. Amortisation: Amortisation is charged on assets with finite lives and is disclosed as an administrative expense in the consolidated income statement. The amortisation method used reflects the expected pattern of consumption of future economic benefits and generally amortised on a straight-line basis, the amortisation periods used are as follows: \u2022 Intangible assets acquired in business combinations \u2013 1.5 to 20 years. \u2022 Intangible assets purchased or internally capitalised \u2013 3 to 20 years. Impairment: Intangible assets with finite lives are only tested for impairment, either individually or at the cash-generating unit level, where there is an indicator of impairment. Derecognition: Intangible assets are derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset (retired). Any gain or loss arising on derecognition of the asset, calculated as the difference between the net disposal proceeds and the carrying value of the asset, is included in the consolidated income statement when the asset is derecognised. The measurement of intangible assets other than goodwill in a business combination: on the acquisition of a business, the identifiable intangible assets may include licences, customer lists and brands. The fair value of these assets is determined by discounting estimated future net cash flows generated by the asset because in most cases no active market for the assets exists and therefore no observable value exists. The use of different assumptions for the expectations of future cash flows and the discount rate would change the valuation of the intangible assets. The assessment of costs capitalised as intangible assets to generate future economic benefits: judgement is applied in assessing whether costs incurred, both internal and external, will generate future economic benefits. Judgements and estimates are applied in determining the carrying value of the assets, including assumptions made in respect of the status of the programme each asset relates to. Given the level of judgement and estimation involved in assessing future cash flows, it is reasonably possible that outcomes within the next financial year may be different from management\u2019s assumptions and require an adjustment to the carrying value of intangible assets. 3.3 Intangible assets continued 2022 2021 Intangible assets acquired in business combinations \u00a3m Capitalised/ purchased software \u00a3m Total \u00a3m Intangible assets acquired in business combinations \u00a3m Capitalised/ purchased software \u00a3m Total \u00a3m Cost At 1 January 55.4 222.7 278.1 174.3 314.2 488.5 Disposal of business \u2014 (33.0) (33.0) (61.3) (7.6) (68.9) Additions \u2014 27.3 27.3 \u2014 32.5 32.5 Disposals \u2013 included in adjusted profit \u2014 (12.2) (12.2) \u2014 (3.0) (3.0) Disposals \u2013 included in business exits \u2014 \u2014 \u2014 \u2014 (3.4) (3.4) Transfer to assets held-for-sale \u2014 \u2014 \u2014 (6.8) (16.4) (23.2) Reclassifications \u2014 0.5 0.5 \u2014 1.9 1.9 Asset retirement (53.1) (11.2) (64.3) (50.3) (94.8) (145.1) Exchange movement 0.7 0.5 1.2 (0.5) (0.7) (1.2) At 31 December 3.0 194.6 197.6 55.4 222.7 278.1 Amortisation and impairment At 1 January 49.6 81.2 130.8 135.4 88.1 223.5 Amortisation charged in the year - included in adjusted profit \u2014 31.7 31.7 \u2014 33.7 33.7 Amortisation charged in the year - excluded from adjusted profit 5.1 \u2014 5.1 7.7 \u2014 7.7 Amortisation charged in the year - included in business exits \u2014 4.7 4.7 9.2 7.1 16.3 Impairment \u2013 included in adjusted profit \u2014 5.5 5.5 \u2014 56.1 56.1 Impairment \u2013 included in business exits \u2014 0.4 0.4 \u2014 2.6 2.6 Disposal of business \u2014 (12.6) (12.6) (46.5) (2.4) (48.9) Disposals \u2013 included in adjusted profit \u2014 (10.5) (10.5) \u2014 (2.7) (2.7) Disposals \u2013 included in business exits \u2014 \u2014 \u2014 \u2014 (3.4) (3.4) Transfer to assets held-for-sale \u2014 \u2014 \u2014 (5.7) (3.1) (8.8) Reclassifications \u2014 \u2014 \u2014 \u2014 0.4 0.4 Asset retirement (53.1) (11.2) (64.3) (50.3) (94.8) (145.1) Exchange movement 0.7 0.1 0.8 (0.2) (0.4) (0.6) At 31 December 2.3 89.3 91.6 49.6 81.2 130.8 Net book value At 1 January 5.8 141.5 147.3 38.9 226.1 265.0 At 31 December 0.7 105.3 106.0 5.8 141.5 147.3 Intangible assets acquired in business combinations include: committed sales (net book value 2022: \u00a30.7m, 2021: \u00a33.3m); and client lists and relationships (net book value 2022: \u00a3nil, 2021: \u00a32.5m). Intangible assets capitalised or purchased include capitalised software development (net book value 2022: \u00a390.9m, 2021: \u00a3120.7m) and purchased software (net book value 2022: \u00a314.4m, 2021: \u00a320.8m). Impairment included in adjusted profit in 2021 includes \u00a353.5m in respect of areas of a new financial reporting system invested in as part of the finance transformation that are no longer expected to be used. This charge was previously excluded from adjusted profit, however following the change in presentation of adjusted results (refer to note 2.4) the related charge has been re-presented and included within adjusted profit. 3.4 Goodwill Accounting policies Following initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Goodwill arising on acquisitions prior to 31 December 1997 remains set off directly against reserves and does not get recycled through the consolidated income statement. At the acquisition date, any goodwill acquired is allocated to the cash-generating units (CGU) which are expected to benefit from the combination\u2019s synergies. Impairment is determined by assessing the recoverable amount of the CGU to which the goodwill relates. Where the recoverable amount of the CGU is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in these circumstances is measured on the basis of the relative values of the operation disposed of and the portion of the CGU retained. Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Any difference between the price paid or received and the amount by which non-controlling interests are adjusted is recognised directly in equity and attributed to the owners of the Parent company. Prior to the adoption of IAS 27 (Amended), goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of the transaction. Significant accounting judgements, estimates and assumptions Measurement and impairment of goodwill: the amount of goodwill initially recognised as a result of a business combination is dependent on the allocation of the purchase price to the fair value of the identifiable assets acquired and the liabilities assumed. The determination of the fair value of the assets and liabilities is based, to a considerable extent, on management\u2019s judgement. Allocation of the purchase price affects the results of the Group because finite lived intangible assets are amortised. The Group determines whether goodwill is impaired on an annual basis, or more frequently if required, and this requires an estimation of the recoverable amount of the CGUs to which the intangible assets are allocated utilising an estimation of future cash flows and choosing a suitable discount rate. 2022 \u00a3m 2021 \u00a3m Cost At 1 January 1,676.8 1,918.5 Disposal of businesses (255.0) (65.7) Transfer to disposal group assets held-for-sale \u2014 (177.3) Exchange movement 1.5 1.3 At 31 December 1,423.3 1,676.8 Accumulated impairment At 1 January 725.1 798.0 Disposal of businesses (76.7) \u2014 Transfer to disposal group assets held-for-sale \u2014 (89.0) Impairment \u2013 excluded from adjusted profit 169.0 11.5 Impairment \u2013 included in business exits \u2014 4.6 At 31 December 817.4 725.1 Net book value At 1 January 951.7 1,120.5 At 31 December 605.9 951.7 3.4 Goodwill continued Cash-generating units Reflecting the way management exercises oversight and monitors the Group\u2019s performance, the lowest level at which goodwill is monitored is at the divisional level for Capita Public Service and Capita Experience, and at a sub-divisional level for Capita Portfolio. At 31 December 2022 the Group has seven CGUs or groups of CGUs for the purpose of impairment testing of goodwill. In light of the ongoing disposal processes within the Capita Portfolio division, the CGUs and groups of CGUs relating to the Capita Portfolio division have been presented in aggregate in the table below, and where relevant in this note. An aggregated disclosure of the carrying value of goodwill for the Capita Portfolio division with recoverable amount sensitivity disclosed, including the impact on the aggregate impairment charge recognised, is considered by management to provide meaningful information to the primary users of these consolidated financial statements. Carrying amount of goodwill allocated to groups of CGUs: CGU Capita Public Service \u00a3m Capita Experience \u00a3m Capita Portfolio \u00a3m Total \u00a3m At 1 January 284.6 220.2 446.9 951.7 Business disposals \u2014 (11.9) (166.4) (178.3) Impairment \u2013 excluded from adjusted profit \u2014 \u2014 (169.0) (169.0) Exchange movement \u2014 1.5 \u2014 1.5 At 31 December 284.6 209.8 111.5 605.9 Business exits As set out in note 2.8, eight businesses were fully disposed of during the year. Goodwill relating to three of these businesses had been reclassified to disposal group assets held-for-sale at 31 December 2021. Goodwill relating to the other disposals is included within the Group\u2019s brought forward goodwill balances as at 1 January 2022, and has either been impaired during the course of the year, or derecognised as part of business disposals. No businesses that the Group intends to dispose of in 2023 met the criteria to be treated as held-for-sale at 31 December 2022. The impairment test In undertaking the annual impairment review, the directors considered both internal and external sources of information, and any observable indications that may suggest that the carrying value of goodwill may be impaired. This included a comparison with the Group\u2019s share price and market capitalisation. The Group\u2019s impairment test compares the carrying value of each CGU with its recoverable amount. The recoverable amount of a CGU is the higher of fair value less cost of disposal, and its value in use, where value in use would typically be the expected cash flows to be generated from operating the businesses into perpetuity. At 31 December 2022, no planned disposals met the threshold to be classified as held-for-sale (refer to note 2.8). However, the disposal of businesses aligned to the People, Business Solutions (excluding one smaller business where the disposal process is less advanced), Travel and Fera CGUs or groups of CGUs in the Capita Portfolio division were sufficiently advanced that the Board\u2019s judgement was that for impairment testing purposes the value-in-use of these CGUs or groups of CGUs should be determined based on the future cash flows of the CGUs or groups of CGUs from continuing use, up to the estimated date of disposal, plus an estimate of the sale proceeds less cost of disposal. At 30 June 2022, a goodwill impairment of \u00a392.5m was recognised in respect of the People and Property groups of CGUs, and at 31 December 2022, a further goodwill impairment of \u00a376.5m was recognised in respect of the People, Travel and Business Solutions groups of CGUs. The impairments arose primarily due to the expectation of acquirers factoring in additional investment and costs required to run the businesses outside of the Group, and general macroeconomic conditions. The Property group of CGUs was disposed of in the second half of 2022. As at 31 December 2022, the estimated recoverable amount of each remaining Group of CGUs exceeded its respective carrying value. The key inputs to the calculations are described below, including changes in market conditions. Forecast cash flows The cash flow projections prepared for the impairment test are derived from the 2023-2025 business plans (BP) approved by the Board. Global economic uncertainties continue to lead to increased judgement being applied, particularly in forecasting future financial performance. Other than for movements in deferred income and contract fulfilment assets, cash flows are adjusted to exclude working capital movements since the corresponding balances are not included in the CGU carrying amount. For ongoing disposals that are seen to be sufficiently advanced, forecast cash flows cover both operational cash flows up to the expected date of disposal, as well as the Board\u2019s best estimate of expected net proceeds at disposal. These have been derived from management\u2019s latest financial projections and reflect an assessment of the range of bids currently being considered by the Board, the status of these sale processes and the time horizon over which these transactions are expected to complete. Allocation of central function costs The Board has considered an appropriate methodology to apply when allocating central function costs. The methodology applied for the 2022 impairment test was aligned to that applied in reporting segmental performance (refer to note 2.5). The costs of Capita plc, which have not been allocated as part of segmental reporting, are allocated based on 2023 forecast EBITDA. Long-term growth rate The long-term growth rate is based on economic growth forecasts by recognised bodies and this has been applied to forecast cash flows for years four and five (2026 and 2027) and for the terminal period. The 2022 long-term growth rate is 2.2% (2021: 1.7%). 3.4 Goodwill continued Discount rates Management estimates discount rates using pre-tax rates of comparator companies for each CGU or group of CGUs, which reflect the latest market assumptions for the risk-free rate, the equity risk premium and the net cost of debt, and which are all based on publicly available external sources. The table below represents the pre-tax discount rates applied to the cash flows for 2022 and 2021. Capita Public Service Capita Experience Capita Portfolio People Software Business Solutions Travel Fera 2022 11.8 % 10.4 % 14.3 % 12.1 % 12.1 % 13.0 % 11.2 % 2021 13.0 % 11.6 % 12.4 % 12.8 % 13.3 % 15.7 % 11.9 % Sensitivity analysis The impairment testing as described is reliant on the accuracy of management\u2019s forecasts and the assumptions that underlie them; and on the selection of the discount and growth rates to be applied. To gauge the sensitivity of the result to a change in any one, or combination of the assumptions that underlie the model, a number of scenarios were developed to identify the range of reasonably possible alternatives and measure which CGUs are the most susceptible to an impairment should the assumptions used be varied. Sensitivity scenarios applied estimate the additional impairment required (with all other variables being equal) by: an increase in discount rate of 1%, or a decrease of 1% in the long-term growth rate (for the terminal period) for the Group in total and each of the CGUs; or, by the severe but plausible downsides applied to the base-case projections for assessing going concern and viability, without mitigations, for 2023 to 2025, and the long-term growth rate (2.2%) applied to projected cash flows for 2026, 2027, and the terminal period. We have also considered the impact of all of the scenarios together, which is also a reasonable possible alternative. This sensitivity analysis covers CGUs where the associated business\u2019 value-in-use has been calculated based on operating the business into perpetuity (covering Capita Public Service, Capita Experience, the Portfolio Software pillar, and one smaller business within the Portfolio Business Solutions pillar where the disposal process is less far advanced). No additional impairments have been identified under any of these sensitivity scenarios, including the combination sensitivity scenario. However, for the Portfolio Software group of CGUs it is noted that the key assumption impacting the impairment test is the forecast EBITDA growth included in the BP (compound annual growth rate over the BP period in excess of 60%). The forecast EBITDA in 2025 would need to reduce by more than 45% before the group of CGUs recoverable amount would be equal to its carrying amount. For the businesses in the Capita Portfolio division where for impairment testing purposes the value-in-use has been determined based on the future cash flows of the CGUs from continuing use up to the estimated date of disposal, plus an estimate of the net sale proceeds (being businesses aligned to the People, Business Solutions, Travel and Fera CGUs or groups of CGUs), assumptions around the expected sale proceeds are seen to be the only key assumption impacting the impairment test. While it is the Board\u2019s intention to complete these disposals in the short-term, where there are presently no signed agreements in place with any counterparty, there are a range of possible outcomes that could occur, and the actual net proceeds received could be materially higher or lower than those assumed in the impairment assessment. Given the dependence on commercial negotiations it is not possible to quantify a reasonably possible change in this key assumption, however a change of 10% in the aggregate net proceeds would have materially altered the impairment charge recognised. The expected sales proceeds are based on the Board\u2019s best estimate, based on the knowledge existing at the time of estimation. ",
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"fact-518": {
"value": "3.4 Goodwill Accounting policies Following initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Goodwill arising on acquisitions prior to 31 December 1997 remains set off directly against reserves and does not get recycled through the consolidated income statement. At the acquisition date, any goodwill acquired is allocated to the cash-generating units (CGU) which are expected to benefit from the combination\u2019s synergies. Impairment is determined by assessing the recoverable amount of the CGU to which the goodwill relates. Where the recoverable amount of the CGU is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in these circumstances is measured on the basis of the relative values of the operation disposed of and the portion of the CGU retained. Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Any difference between the price paid or received and the amount by which non-controlling interests are adjusted is recognised directly in equity and attributed to the owners of the Parent company. Prior to the adoption of IAS 27 (Amended), goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of the transaction. Significant accounting judgements, estimates and assumptions Measurement and impairment of goodwill: the amount of goodwill initially recognised as a result of a business combination is dependent on the allocation of the purchase price to the fair value of the identifiable assets acquired and the liabilities assumed. The determination of the fair value of the assets and liabilities is based, to a considerable extent, on management\u2019s judgement. Allocation of the purchase price affects the results of the Group because finite lived intangible assets are amortised. The Group determines whether goodwill is impaired on an annual basis, or more frequently if required, and this requires an estimation of the recoverable amount of the CGUs to which the intangible assets are allocated utilising an estimation of future cash flows and choosing a suitable discount rate. 2022 \u00a3m 2021 \u00a3m Cost At 1 January 1,676.8 1,918.5 Disposal of businesses (255.0) (65.7) Transfer to disposal group assets held-for-sale \u2014 (177.3) Exchange movement 1.5 1.3 At 31 December 1,423.3 1,676.8 Accumulated impairment At 1 January 725.1 798.0 Disposal of businesses (76.7) \u2014 Transfer to disposal group assets held-for-sale \u2014 (89.0) Impairment \u2013 excluded from adjusted profit 169.0 11.5 Impairment \u2013 included in business exits \u2014 4.6 At 31 December 817.4 725.1 Net book value At 1 January 951.7 1,120.5 At 31 December 605.9 951.7 3.4 Goodwill continued Cash-generating units Reflecting the way management exercises oversight and monitors the Group\u2019s performance, the lowest level at which goodwill is monitored is at the divisional level for Capita Public Service and Capita Experience, and at a sub-divisional level for Capita Portfolio. At 31 December 2022 the Group has seven CGUs or groups of CGUs for the purpose of impairment testing of goodwill. In light of the ongoing disposal processes within the Capita Portfolio division, the CGUs and groups of CGUs relating to the Capita Portfolio division have been presented in aggregate in the table below, and where relevant in this note. An aggregated disclosure of the carrying value of goodwill for the Capita Portfolio division with recoverable amount sensitivity disclosed, including the impact on the aggregate impairment charge recognised, is considered by management to provide meaningful information to the primary users of these consolidated financial statements. Carrying amount of goodwill allocated to groups of CGUs: CGU Capita Public Service \u00a3m Capita Experience \u00a3m Capita Portfolio \u00a3m Total \u00a3m At 1 January 284.6 220.2 446.9 951.7 Business disposals \u2014 (11.9) (166.4) (178.3) Impairment \u2013 excluded from adjusted profit \u2014 \u2014 (169.0) (169.0) Exchange movement \u2014 1.5 \u2014 1.5 At 31 December 284.6 209.8 111.5 605.9 Business exits As set out in note 2.8, eight businesses were fully disposed of during the year. Goodwill relating to three of these businesses had been reclassified to disposal group assets held-for-sale at 31 December 2021. Goodwill relating to the other disposals is included within the Group\u2019s brought forward goodwill balances as at 1 January 2022, and has either been impaired during the course of the year, or derecognised as part of business disposals. No businesses that the Group intends to dispose of in 2023 met the criteria to be treated as held-for-sale at 31 December 2022. The impairment test In undertaking the annual impairment review, the directors considered both internal and external sources of information, and any observable indications that may suggest that the carrying value of goodwill may be impaired. This included a comparison with the Group\u2019s share price and market capitalisation. The Group\u2019s impairment test compares the carrying value of each CGU with its recoverable amount. The recoverable amount of a CGU is the higher of fair value less cost of disposal, and its value in use, where value in use would typically be the expected cash flows to be generated from operating the businesses into perpetuity. At 31 December 2022, no planned disposals met the threshold to be classified as held-for-sale (refer to note 2.8). However, the disposal of businesses aligned to the People, Business Solutions (excluding one smaller business where the disposal process is less advanced), Travel and Fera CGUs or groups of CGUs in the Capita Portfolio division were sufficiently advanced that the Board\u2019s judgement was that for impairment testing purposes the value-in-use of these CGUs or groups of CGUs should be determined based on the future cash flows of the CGUs or groups of CGUs from continuing use, up to the estimated date of disposal, plus an estimate of the sale proceeds less cost of disposal. At 30 June 2022, a goodwill impairment of \u00a392.5m was recognised in respect of the People and Property groups of CGUs, and at 31 December 2022, a further goodwill impairment of \u00a376.5m was recognised in respect of the People, Travel and Business Solutions groups of CGUs. The impairments arose primarily due to the expectation of acquirers factoring in additional investment and costs required to run the businesses outside of the Group, and general macroeconomic conditions. The Property group of CGUs was disposed of in the second half of 2022. As at 31 December 2022, the estimated recoverable amount of each remaining Group of CGUs exceeded its respective carrying value. The key inputs to the calculations are described below, including changes in market conditions. Forecast cash flows The cash flow projections prepared for the impairment test are derived from the 2023-2025 business plans (BP) approved by the Board. Global economic uncertainties continue to lead to increased judgement being applied, particularly in forecasting future financial performance. Other than for movements in deferred income and contract fulfilment assets, cash flows are adjusted to exclude working capital movements since the corresponding balances are not included in the CGU carrying amount. For ongoing disposals that are seen to be sufficiently advanced, forecast cash flows cover both operational cash flows up to the expected date of disposal, as well as the Board\u2019s best estimate of expected net proceeds at disposal. These have been derived from management\u2019s latest financial projections and reflect an assessment of the range of bids currently being considered by the Board, the status of these sale processes and the time horizon over which these transactions are expected to complete. Allocation of central function costs The Board has considered an appropriate methodology to apply when allocating central function costs. The methodology applied for the 2022 impairment test was aligned to that applied in reporting segmental performance (refer to note 2.5). The costs of Capita plc, which have not been allocated as part of segmental reporting, are allocated based on 2023 forecast EBITDA. Long-term growth rate The long-term growth rate is based on economic growth forecasts by recognised bodies and this has been applied to forecast cash flows for years four and five (2026 and 2027) and for the terminal period. The 2022 long-term growth rate is 2.2% (2021: 1.7%). 3.4 Goodwill continued Discount rates Management estimates discount rates using pre-tax rates of comparator companies for each CGU or group of CGUs, which reflect the latest market assumptions for the risk-free rate, the equity risk premium and the net cost of debt, and which are all based on publicly available external sources. The table below represents the pre-tax discount rates applied to the cash flows for 2022 and 2021. Capita Public Service Capita Experience Capita Portfolio People Software Business Solutions Travel Fera 2022 11.8 % 10.4 % 14.3 % 12.1 % 12.1 % 13.0 % 11.2 % 2021 13.0 % 11.6 % 12.4 % 12.8 % 13.3 % 15.7 % 11.9 % Sensitivity analysis The impairment testing as described is reliant on the accuracy of management\u2019s forecasts and the assumptions that underlie them; and on the selection of the discount and growth rates to be applied. To gauge the sensitivity of the result to a change in any one, or combination of the assumptions that underlie the model, a number of scenarios were developed to identify the range of reasonably possible alternatives and measure which CGUs are the most susceptible to an impairment should the assumptions used be varied. Sensitivity scenarios applied estimate the additional impairment required (with all other variables being equal) by: an increase in discount rate of 1%, or a decrease of 1% in the long-term growth rate (for the terminal period) for the Group in total and each of the CGUs; or, by the severe but plausible downsides applied to the base-case projections for assessing going concern and viability, without mitigations, for 2023 to 2025, and the long-term growth rate (2.2%) applied to projected cash flows for 2026, 2027, and the terminal period. We have also considered the impact of all of the scenarios together, which is also a reasonable possible alternative. This sensitivity analysis covers CGUs where the associated business\u2019 value-in-use has been calculated based on operating the business into perpetuity (covering Capita Public Service, Capita Experience, the Portfolio Software pillar, and one smaller business within the Portfolio Business Solutions pillar where the disposal process is less far advanced). No additional impairments have been identified under any of these sensitivity scenarios, including the combination sensitivity scenario. However, for the Portfolio Software group of CGUs it is noted that the key assumption impacting the impairment test is the forecast EBITDA growth included in the BP (compound annual growth rate over the BP period in excess of 60%). The forecast EBITDA in 2025 would need to reduce by more than 45% before the group of CGUs recoverable amount would be equal to its carrying amount. For the businesses in the Capita Portfolio division where for impairment testing purposes the value-in-use has been determined based on the future cash flows of the CGUs from continuing use up to the estimated date of disposal, plus an estimate of the net sale proceeds (being businesses aligned to the People, Business Solutions, Travel and Fera CGUs or groups of CGUs), assumptions around the expected sale proceeds are seen to be the only key assumption impacting the impairment test. While it is the Board\u2019s intention to complete these disposals in the short-term, where there are presently no signed agreements in place with any counterparty, there are a range of possible outcomes that could occur, and the actual net proceeds received could be materially higher or lower than those assumed in the impairment assessment. Given the dependence on commercial negotiations it is not possible to quantify a reasonably possible change in this key assumption, however a change of 10% in the aggregate net proceeds would have materially altered the impairment charge recognised. The expected sales proceeds are based on the Board\u2019s best estimate, based on the knowledge existing at the time of estimation. ",
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"fact-471": {
"value": "3.4 Goodwill Accounting policies Following initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Goodwill arising on acquisitions prior to 31 December 1997 remains set off directly against reserves and does not get recycled through the consolidated income statement. At the acquisition date, any goodwill acquired is allocated to the cash-generating units (CGU) which are expected to benefit from the combination\u2019s synergies. Impairment is determined by assessing the recoverable amount of the CGU to which the goodwill relates. Where the recoverable amount of the CGU is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in these circumstances is measured on the basis of the relative values of the operation disposed of and the portion of the CGU retained. Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Any difference between the price paid or received and the amount by which non-controlling interests are adjusted is recognised directly in equity and attributed to the owners of the Parent company. Prior to the adoption of IAS 27 (Amended), goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of the transaction. ",
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},
"fact-488": {
"value": "3.5 Right-of-use assets Accounting policies At the inception of the lease, the Group recognises a right-of-use asset at cost, which comprises the present value of minimum future lease payments determined at the inception of the lease. Right-of-use assets are depreciated using the straight-line method over the shorter of estimated life or the lease term. Depreciation is included within administrative expenses in the consolidated income statement. Amendment to lease terms resulting in a change in payments or the length of the lease results in an adjustment to the right-of-use asset and corresponding lease liability. Right-of-use assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be fully recoverable. Right-of-use assets exclude leases with low values and terms of twelve months or less. These leases are expensed to the consolidated income statement as incurred. Net Book Value Property \u00a3m Motor vehicles \u00a3m Equipment \u00a3m Total \u00a3m At 1 January 2021 310.0 16.9 15.2 342.1 Addition of new leases 18.2 4.2 \u2014 22.4 Depreciation charged during the year - included in adjusted profit (55.1) (6.5) (6.6) (68.2) Impairment - included in adjusted profit (13.0) \u2014 (0.3) (13.3) Disposal (2.2) \u2014 (1.0) (3.2) Exchange movement (1.7) 0.4 \u2014 (1.3) Other movements 9.4 0.4 (0.4) 9.4 At 31 December 2021 265.6 15.4 6.9 287.9 Addition of new leases 12.9 2.4 \u2014 15.3 Depreciation charged during the year - included in adjusted profit (45.8) (6.0) (4.2) (56.0) Reversal of Impairment - included in adjusted profit 2.4 \u2014 0.3 2.7 Disposal of business (0.2) \u2014 \u2014 (0.2) Disposal (6.3) (1.6) (0.5) (8.4) Exchange movement 1.4 \u2014 \u2014 1.4 Other movements 7.0 0.4 (0.6) 6.8 At 31 December 2022 237.0 10.6 1.9 249.5 Other movements include amendments to existing leases. ",
"dimensions": {
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"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-489": {
"value": "3.6 Provisions Accounting policies Provisions are recognised when the Group has a present legal or constructive obligation arising from past events, it is probable that cash will be paid to settle it, and the amount can be estimated reliably. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows by a rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a financing cost in the consolidated income statement. The value of the provision is determined based on assumptions and estimates in relation to the amount, timing and likelihood of actual cash flows, which are dependent on future events. Where no reliable basis of estimation can be made, no provision is recorded. However, contingent liabilities disclosures are given when there is a greater than remote probability of outflow of economic benefits. See note 6.2. On an ongoing basis, management monitor provisions and their accurate estimation when compared to final outcomes. Significant accounting judgements, estimates and assumptions As detailed in note 2.1, in respect of onerous customer contract provisions, due to the level of uncertainty, combination of variables and timing across numerous contracts, it is not practical to provide a quantitative analysis of the aggregated judgements that are applied, and management do not believe that disclosing a potential range of outcomes on a consolidated basis would provide meaningful information to a user of the financial statements. Due to commercial sensitivities, the Group does not specifically disclose the amounts involved in any individual contract. Provisions The movements in provisions during the year are as follows: Restructuring provision \u00a3m Business exit provision \u00a3m Claims and litigation provision \u00a3m Property provision \u00a3m Customer contract provision \u00a3m Other provisions \u00a3m Total \u00a3m At 1 January 25.6 1.5 13.2 9.7 84.7 5.9 140.6 Impact of change in accounting standards \u2013 amendments to IAS 371 \u2014 \u2014 \u2014 \u2014 18.8 \u2014 18.8 At 1 January 2022 on adoption of IAS 37 25.6 1.5 13.2 9.7 103.5 5.9 159.4 Reclassification2 (25.6) \u2014 \u2014 21.8 (0.5) 4.3 \u2014 Provisions in the year \u2014 25.0 7.6 7.0 20.6 6.0 66.2 Releases in the year \u2014 (1.2) (1.4) (7.8) (17.1) (3.7) (31.2) Utilisation \u2014 (14.6) (2.4) (11.7) (33.0) (5.0) (66.7) Disposal of subsidiaries \u2014 \u2014 \u2014 (0.3) \u2014 (0.1) (0.4) At 31 December \u2014 10.7 17.0 18.7 73.5 7.4 127.3 31 December 2022 \u00a3m 31 December 2021 \u00a3m Current 75.7 126.6 Non-current 51.6 14.0 127.3 140.6 1. The Group initially applied the amendments to IAS 37 at 1 January 2022 and the cumulative effect of applying the amendments was recognised as an opening balance adjustment to retained earnings. Refer to note 1 for further details. 2. Following the end of the Group-wide transformation programme, restructuring provision relating to severance and property costs (including unavoidable running costs, such as insurance, security, and dilapidation costs) where properties have been exited as a result of the transformation programme, have been reclassified to others and property provision respectively as at 1 January 2022. 3.6 Provisions continued Business exit provision: The provision relates to the cost of exiting businesses through disposal or closure including professional fees related to business exits and the costs of separating the businesses being disposed. These are likely to unwind over a period of one to four years. Claims and litigation provision: The Group is exposed to claims and litigation proceedings arising in the ordinary course of business. These matters are reassessed regularly and where obligations are probable and estimable, provisions are made representing the Group\u2019s best estimate of the expenditure to be incurred. Due to the nature of these claims, the Group cannot give an estimate of the period over which this provision will unwind. Property provision: The provision relates to unavoidable running costs, such as insurance and security, of leasehold property where the space is vacant or currently not planned to be used for ongoing operations, and for dilapidation costs. The expectation is that this expenditure will be incurred over the remaining periods of the leases which vary up to 25 years. Customer contract provision: The provision includes onerous contract provisions in respect of customer contracts where the costs of fulfilling a contract (both incremental and costs directly related to contract activities) exceeds the economic benefits expected to be received under the contract, claims/obligations associated with missed milestones in contractual obligations, and other potential exposures related to contracts with customers. These provisions are forecast to unwind over periods of up to six years. The customer contract provision includes \u00a359.7m (2021: \u00a354.5m) in respect of contracts in Capita Experience. The Group has highlighted in prior reporting the structural challenges associated with the closed book Life & Pensions contracts. These provided for upfront cash inflows to support initial transformation activities with a much lower level of cash inflow after the transformation phase was completed. Under the Group\u2019s long-term contract accounting policy, the cash flow profile of these contracts has resulted in deferral of profit into future years which is not backed by net cash flows (because the relevant cash receipts arose in the early years of contract execution). Additionally, some of the contracts contain evergreen clauses potentially allowing the customers to extend the contracts indefinitely until the run-off of the underlying life and pension books is complete. The closed book Life & Pensions business has remained in structural decline because some customers, with legacy IT systems, have switched to suppliers who can provide a single digital platform for all their books. The Group has sought to drive efficiencies to mitigate this fall off in volumes, while supporting customers who have selected new outsource providers or taken the activities back in-house. The closed books contractual dynamics have led to onerous conditions to service certain of these contracts. Management has been required to assess the likely length of the remaining contracts, given the pattern and experience of contract terminations while also recognising the evergreen clauses. Accordingly, the Group has, in prior years, provided for the onerous contract conditions based on the best estimate of the remaining contract terms. The Group has continued to support a major customer on the transfer of services to another supplier. This is taking significantly longer than initially expected. In 2021, management reassessed the lifetime estimate to include not only the onerous contract terms but also the period and likely costs to support the final handover of services. This assessment was extended across all contracts that contain evergreen clauses, including those where there are ongoing discussions regarding either termination or transfer of services. This reassessment, reflecting the developments in the latter half of 2021, provided cover for contracts to extend out to 2026. This resulted in an increase to the contract provision of \u00a339.5m at 31 December 2021. At 31 December 2022, the provision was increased to provide cover for contracts to extend out to December 2027 (ie a five-year rolling period). Other provisions: Relates to provisions in respect of other potential exposures arising as a result of the nature of some of the operations that the Group provides. These are likely to unwind over periods of up to five years. ",
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"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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},
"fact-490": {
"value": "4.1 Net debt, capital and capital management 4.1.1 Net debt and capital The components of the Group\u2019s net debt and undrawn available liquidity are summarised below. Notes 2022 \u00a3m 2021 \u00a3m Year on Year movement Cash and cash equivalents 4.5.4 (396.8) (333.4) (63.4) Overdraft 4.5.4 219.6 231.9 (12.3) Lease liabilities 4.4.1 397.5 448.4 (50.9) Private placement loan notes1 4.5.2 285.5 512.9 (227.4) Credit facilities2 \u2014 46.0 (46.0) Other loan notes 4.5.2 0.7 1.3 (0.6) Currency and interest rate swaps 4.5.2 (24.8) (28.0) 3.2 Deferred consideration 4.5.2 0.7 0.7 \u2014 Net debt 482.4 879.8 (397.4) Undrawn available financing facilities 4.5.2b 288.4 345.7 (57.3) Capital 770.8 1,225.5 (454.7) 1. Private placement loan notes include US dollar and British pound sterling private placement loan notes, and euro fixed rate bearer notes. 2. 2021: credit facilities includes \u00a340.0m drawing on the RCF. A reconciliation of net debt shown above to cash flow can be found in note 2.10.3. The overdrafts are part of a cash pooling arrangement, and the underlying balances can be fully offset by cash balances in the same arrangement. During the year, USD and GBP private placement loan notes of \u00a340.5m and \u00a336.7m were repaid at maturity on 22 January 2022 and 22 April 2022 respectively. The associated currency and interest rate swaps also expired on these dates, such that the combined net cash outflow for these repayments was \u00a367.2m. Additionally, \u00a320.7m of the outstanding EUR fixed rate notes were prepaid during June and July 2022 as a result of the disposal of Trustmarque with a further repayment at maturity on 10 November 2022 of \u00a3138.8m . 4.1.2 Capital management Focus on capital management forms an important component of Board meetings, including review of forecast gearing and key covenant tests, and the mix of funding sources, thereby ensuring sustainability and flexibility. Shareholder returns will be reviewed over time in accordance with the Group\u2019s generation of sustainable free cash flow. The Group\u2019s capital management process ensures that it meets the financial covenants of its borrowing arrangements. There are two separate sets of covenant tests underlying the Group\u2019s financial instruments with the key difference being the treatment of IFRS 16. There have been no breaches in the financial covenants of any loans or borrowings during the reporting period. The committed RCF provides the liquidity needed to cover the cash fluctuations of the business cycle, allowing a buffer for contingencies. Capita plc supports the obligations of its various regulated financial services businesses. The board of each regulated firm is responsible for ensuring it has embedded capital management frameworks that ensure the availability of adequate financial resources at all times, and all of them complied with all externally imposed financial services regulatory capital requirements applicable to them. To provide working capital funding at an economically favourable rate versus the RCF, in the UK, the Group uses a non-recourse invoice discounting facility, and the value of invoices sold under this arrangement at 31 December 2022 was \u00a336.9m (2021: \u00a33.9m) . Additionally, the Group's German business uses a non-recourse invoice discounting arrangement for a specific customer contract, and the value of invoices sold under that arrangement at 31 December 2022 was \u00a37.5m (2021: \u00a312.5m). ",
"dimensions": {
"concept": "capitaplc:DisclosureOfNetDebtCapitalAndCapitalManagement",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-519": {
"value": "4.1.1 Net debt and capital The components of the Group\u2019s net debt and undrawn available liquidity are summarised below. Notes 2022 \u00a3m 2021 \u00a3m Year on Year movement Cash and cash equivalents 4.5.4 (396.8) (333.4) (63.4) Overdraft 4.5.4 219.6 231.9 (12.3) Lease liabilities 4.4.1 397.5 448.4 (50.9) Private placement loan notes1 4.5.2 285.5 512.9 (227.4) Credit facilities2 \u2014 46.0 (46.0) Other loan notes 4.5.2 0.7 1.3 (0.6) Currency and interest rate swaps 4.5.2 (24.8) (28.0) 3.2 Deferred consideration 4.5.2 0.7 0.7 \u2014 Net debt 482.4 879.8 (397.4) Undrawn available financing facilities 4.5.2b 288.4 345.7 (57.3) Capital 770.8 1,225.5 (454.7) 1. Private placement loan notes include US dollar and British pound sterling private placement loan notes, and euro fixed rate bearer notes. 2. 2021: credit facilities includes \u00a340.0m drawing on the RCF. A reconciliation of net debt shown above to cash flow can be found in note 2.10.3. The overdrafts are part of a cash pooling arrangement, and the underlying balances can be fully offset by cash balances in the same arrangement. During the year, USD and GBP private placement loan notes of \u00a340.5m and \u00a336.7m were repaid at maturity on 22 January 2022 and 22 April 2022 respectively. The associated currency and interest rate swaps also expired on these dates, such that the combined net cash outflow for these repayments was \u00a367.2m. Additionally, \u00a320.7m of the outstanding EUR fixed rate notes were prepaid during June and July 2022 as a result of the disposal of Trustmarque with a further repayment at maturity on 10 November 2022 of \u00a3138.8m 4.5.3 Borrowings Details of the Group\u2019s current RCF facility are shown in the above liquidity section (see note 4.5.2b). Borrowing costs of \u00a32.4m were capitalised in the year (2021: \u00a31.9m). At 31 December 2022, the Group\u2019s private placement loan note series had a GBP equivalent underlying carrying value of \u00a3260.5m (2021: \u00a3484.8m) (see note 4.5.2a) analysed as follows: Maturity Denomination Interest rate % Nominal value Ccy\u2019m 27 October 2023 GBP 2.520 27.5 22 January 2025 GBP 3.540 7.4 22 April 2025 GBP 3.670 22.3 27 October 2026 GBP 2.770 18.6 22 January 2027 GBP 3.580 23.8 Total GBP denominated GBP 99.6 22 January 2023 USD 3.450 39.4 27 October 2023 USD 3.370 17.8 22 January 2025 USD 3.650 74.3 27 October 2026 USD 3.590 19.3 22 January 2027 USD 3.800 27.5 Total USD denominated 1 USD 178.3 10 November 2027 EUR 3.625 53.4 Total euro denominated2 EUR 53.4 1. USD denominated loan notes have a GBP equivalent underlying carrying value of \u00a3117.2m. The Group has entered into cross-currency interest rate swaps for the USD issues to achieve a floating rate of interest based on SONIA. Further disclosure on the Group\u2019s use of hedges is included in note 4.2. 2. Euro denominated loan notes have a GBP equivalent underlying carrying value of \u00a345.8m. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBorrowingsExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-520": {
"value": "4.1.2 Capital management Focus on capital management forms an important component of Board meetings, including review of forecast gearing and key covenant tests, and the mix of funding sources, thereby ensuring sustainability and flexibility. Shareholder returns will be reviewed over time in accordance with the Group\u2019s generation of sustainable free cash flow. The Group\u2019s capital management process ensures that it meets the financial covenants of its borrowing arrangements. There are two separate sets of covenant tests underlying the Group\u2019s financial instruments with the key difference being the treatment of IFRS 16. There have been no breaches in the financial covenants of any loans or borrowings during the reporting period. The committed RCF provides the liquidity needed to cover the cash fluctuations of the business cycle, allowing a buffer for contingencies. Capita plc supports the obligations of its various regulated financial services businesses. The board of each regulated firm is responsible for ensuring it has embedded capital management frameworks that ensure the availability of adequate financial resources at all times, and all of them complied with all externally imposed financial services regulatory capital requirements applicable to them. To provide working capital funding at an economically favourable rate versus the RCF, in the UK, the Group uses a non-recourse invoice discounting facility, and the value of invoices sold under this arrangement at 31 December 2022 was \u00a336.9m (2021: \u00a33.9m) . Additionally, the Group's German business uses a non-recourse invoice discounting arrangement for a specific customer contract, and the value of invoices sold under that arrangement at 31 December 2022 was \u00a37.5m (2021: \u00a312.5m). Financial risk management objectives and policies The Group\u2019s Board of directors has overall responsibility for the establishment and oversight of the Group\u2019s risk management framework, which is outlined on pages 54 to 63 of the strategic report. The Group\u2019s principal financial instruments comprise cash, bank loans, private placement loan notes, lease assets and liabilities, and derivatives. The purpose of these is to fund and provide liquidity for the Group\u2019s operations and to manage its financial risks. The Group has various other financial instruments including trade receivables and trade payables arising from its operations. Derivatives comprise cross-currency interest rate swaps, and forward foreign currency contracts executed with its relationship banks, all of which have investment grade credit ratings. The derivatives\u2019 purpose is to manage interest rate and currency risks arising from the Group\u2019s operations and its sources of finance. It is the Group\u2019s policy that no speculative trading in financial instruments is undertaken. The main risks arising from the Group\u2019s financial instruments are liquidity risk, foreign currency risk, interest rate risk, and credit risk. The Board periodically reviews and agrees policies for managing these risks, which are summarised below. ",
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"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-491": {
"value": "4.2 Financial risk Financial risk management objectives and policies The Group\u2019s Board of directors has overall responsibility for the establishment and oversight of the Group\u2019s risk management framework, which is outlined on pages 54 to 63 of the strategic report. The Group\u2019s principal financial instruments comprise cash, bank loans, private placement loan notes, lease assets and liabilities, and derivatives. The purpose of these is to fund and provide liquidity for the Group\u2019s operations and to manage its financial risks. The Group has various other financial instruments including trade receivables and trade payables arising from its operations. Derivatives comprise cross-currency interest rate swaps, and forward foreign currency contracts executed with its relationship banks, all of which have investment grade credit ratings. The derivatives\u2019 purpose is to manage interest rate and currency risks arising from the Group\u2019s operations and its sources of finance. It is the Group\u2019s policy that no speculative trading in financial instruments is undertaken. The main risks arising from the Group\u2019s financial instruments are liquidity risk, foreign currency risk, interest rate risk, and credit risk. The Board periodically reviews and agrees policies for managing these risks, which are summarised below. 4.2.1 Liquidity risk The Group monitors the risk of a liquidity shortage through its business plan and liquidity cycle forecasts and analysis, taking into consideration the maturity of the Group\u2019s financial instruments, projected cash flows from operations and an allowance for contingencies. The Group\u2019s policy is to hold cash and undrawn committed facilities at a level sufficient to fund the Group\u2019s operations and its medium-term plans. Multiple sources of funding are used to maintain a balance between continuity of funding and flexibility without placing reliance on sources that are not contractually committed. The Group\u2019s committed bank facilities provide liquidity for the cash fluctuations of the business cycle and an allowance for contingencies. At 31 December 2022 the RCF commitment was \u00a3288.4m (31 December 2021: \u00a3385.7m) and was subsequently reduced to \u00a3284.7m on 4 January 2023 following receipt of proceeds from disposals. The RCF expires on 31 August 2024 and was not drawn upon at 31 December 2022 (31 December 2021: \u00a340.0m drawn). The size of the available commitment will be right-sized each time the Group either refinances, raises funds through disposals, or raises equity with the RCF including mandatory cancellation mechanisms that determine the amount of the cancellation in each case. The commitments are subject to a minimum value of \u00a3180m regardless of the quantum of receipts. The Group\u2019s core funding is provided by US private placement loan notes and euro fixed-rate bearer notes (\u2018private placement loan notes\u2019), and to mitigate the risk of needing to refinance in challenging conditions, these have been arranged with a spread of maturities to November 2027. The bank facilities and private placement loan notes all include provisions that would require repayment in the event of a change of control, which are typical of these arrangements. In March 2022 the Group executed a committed backstop bridge facility with one of its relationship banks which provided \u00a370m of additional liquidity and incorporated provisions such that it would be cancelled or partially reduced in quantum as a consequence of specified transactions, including on the completion of the announced disposal of Trustmarque. The facility was cancelled on 10 March 2022 following receipt of the Trustmarque disposal proceeds. In February 2023, the Group entered into a committed bridge facility of \u00a350m with three of its relationship banks providing additional liquidity from 1 January 2024. It incorporates provisions such that it will partially reduce in quantum as a consequence of specified transactions. The committed facility has an expiry date of 31 December 2024 and is subject to covenants, which are the same as those in the RCF. The tables below summarise the maturity profile of the Group\u2019s financial liabilities based on contractual undiscounted cash flows. All balances are stated based on the prevailing foreign exchange rates and the contractual interest rates at the end of the reporting period. At 31 December 2022 Within 1 year \u00a3m Between 1\u20132 years \u00a3m Between 2\u20133 years \u00a3m Between 3\u20134 years \u00a3m Between 4\u20135 years \u00a3m More than 5 years \u00a3m Total \u00a3m Overdraft* 219.6 \u2014 \u2014 \u2014 \u2014 \u2014 219.6 Private placement loan notes 75.0 \u2014 91.4 34.7 94.0 \u2014 295.1 Interest on loan notes 9.6 7.9 6.2 4.5 2.6 \u2014 30.8 Lease liabilities 76.1 64.9 49.0 39.7 33.6 296.7 560.0 Deferred consideration \u2014 \u2014 \u2014 \u2014 0.7 \u2014 0.7 Put options of non-controlling interests 9.2 \u2014 \u2014 \u2014 \u2014 \u2014 9.2 Cross-currency interest rate swaps 0.8 0.8 0.8 0.8 \u2014 \u2014 3.2 Other financial instruments 0.7 \u2014 \u2014 \u2014 \u2014 \u2014 0.7 391.0 73.6 147.4 79.7 130.9 296.7 1,119.3 * The Group has a notional cash pool under which the bank may net cash balances with overdrafts held by other Group companies in the arrangements. The overdraft balances shown above are fully offset by credit balances in the same arrangement. 4.2 Financial risk continued At 31 December 2021 Within 1 year \u00a3m Between 1\u20132 years \u00a3m Between 2\u20133 years \u00a3m Between 3\u20134 years \u00a3m Between 4\u20135 years \u00a3m More than 5 years \u00a3m Total \u00a3m Overdraft 231.9 \u2014 \u2014 \u2014 \u2014 \u2014 231.9 Credit facilities 46.0 \u2014 \u2014 \u2014 \u2014 \u2014 46.0 Private placement loan notes 226.9 69.8 \u2014 84.6 32.9 94.6 508.8 Interest on loan notes 15.3 9.2 7.6 6.0 4.5 2.6 45.2 Lease liabilities 82.8 73.0 61.8 46.6 38.1 322.2 624.5 Deferred consideration \u2014 \u2014 \u2014 \u2014 \u2014 0.7 0.7 Put options of non-controlling interests 8.6 \u2014 \u2014 \u2014 \u2014 \u2014 8.6 Cross-currency interest rate swaps 0.6 0.7 0.4 0.4 0.4 \u2014 2.5 Cash flow hedges 0.6 0.6 0.1 \u2014 \u2014 \u2014 1.3 Other financial instruments 1.3 4.3 \u2014 \u2014 \u2014 \u2014 5.6 614.0 157.6 69.9 137.6 75.9 420.1 1,475.1 4.2.2 Foreign currency risk The Group is not generally exposed to significant foreign currency transaction risk with two exceptions. Firstly, services are provided by the Group\u2019s operations in India and South Africa and incurred in Indian rupee (INR) and South African rand (ZAR). The Group seeks to mitigate the short term effect of this exposure by entering into forward foreign exchange contracts to fix the British pounds sterling (GBP) cost of highly probable transactions over a rolling 24 month period. At 31 December 2022, the Group held forward foreign exchange contracts against forecast internal monthly INR and ZAR costs expected in the years up to and including December 2024. These forecast costs have been determined on the basis of the underlying cash flows associated with the delivery of services under executed customer contracts. Secondly, the Group holds foreign exchange forwards against committed costs relating to the purchase of cloud software services in US dollars (USD) in the years up to and including August 2024. To maximise hedge effectiveness, forward foreign exchange contracts are executed with terms matching the underlying cash flows. The following table demonstrates the sensitivity of the Group\u2019s profit before tax and equity to a 5% strengthening/(weakening) in INR, ZAR and USD exchange rates, assuming all other variables are unchanged, that would arise from the resulting changes in the fair value of the Group\u2019s forward exchange contracts. USD INR ZAR Effect on profit before tax \u00a3m Effect on equity \u00a3m Effect on profit before tax \u00a3m Effect on equity \u00a3m Effect on profit before tax \u00a3m Effect on equity \u00a3m 2022 \u2014 0.8 \u2014 0.3 1.8 \u2014 2021 \u2014 (3.3) \u2014 (5.3) (3.1) \u2014 4.2.3 Interest rate risk The Group manages its interest rate exposure, which arises from the Group\u2019s private placement loan notes, cash, deposits and RCF drawings at variable interest rates through cross-currency interest rate swaps. The swaps are designated fair value hedges against the fair value changes of the private placement loan notes. 4.2 Financial risk continued The net level of floating rate interest exposure is managed, to arrive at an acceptable overall interest rate risk profile. The interest rate profile of the Group\u2019s interest-bearing financial instruments was as follows: Nominal amounts At 31 December 2022 Within 1 year \u00a3m Between 1\u20132 years \u00a3m Between 2\u20133 years \u00a3m Between 3\u20134 years \u00a3m Between 4\u20135 years \u00a3m More than 5 years \u00a3m Total \u00a3m Fixed rate Private placement loan notes 27.5 \u2014 29.7 18.6 71.2 \u2014 147.0 Floating rate Cash in hand (396.8) \u2014 \u2014 \u2014 \u2014 \u2014 (396.8) Overdraft 219.6 \u2014 \u2014 \u2014 \u2014 \u2014 219.6 Private placement loan notes 38.8 \u2014 46.2 15.5 17.1 \u2014 117.6 Nominal amounts At 31 December 2021 Within 1 year \u00a3m Between 1\u20132 years \u00a3m Between 2\u20133 years \u00a3m Between 3\u20134 years \u00a3m Between 4\u20135 years \u00a3m More than 5 years \u00a3m Total \u00a3m Fixed rate Private placement loan notes 169.2 27.5 \u2014 29.7 18.6 74.2 319.2 Floating rate Cash in hand (333.4) \u2014 \u2014 \u2014 \u2014 \u2014 (333.4) Overdraft 231.9 \u2014 \u2014 \u2014 \u2014 \u2014 231.9 Private placement loan notes 48.5 38.8 \u2014 46.2 15.5 17.1 166.1 Credit facilities 46.0 \u2014 \u2014 \u2014 \u2014 \u2014 46.0 A sensitivity analysis to changes in interest rates shows that a 0.5% increase or decrease in interest rates, assuming all other variables are held constant, results in an \u00a30.6m (2021: \u00a31.1m) increase or decrease to profit before tax, and no impact on the Group\u2019s equity. 4.2.4 Hedges Fair value hedges The Group\u2019s fixed rate USD and GBP private placement loan notes are hedged through a combination of cross-currency interest rate swaps. The cross-currency interest rate swaps hedge the exposure to changes in the fair value of US dollar denominated loan notes. The loan notes and their corresponding swaps have the same critical terms including nominal values and maturity dates. The total loss in the year on the fair value hedges of \u00a33.2m (2021: \u00a330.0m loss) was equal to the loss/gain on the hedged items resulting in no net gain or loss in the income statement apart from hedge ineffectiveness from credit risk and currency basis risk. This effect of hedge ineffectiveness resulted in a \u00a30.2m debit (2021: \u00a30.1m credit) to the consolidated income statement, shown in net finance costs, note 4.3. The impact of the hedged item and the related financial derivatives on the consolidated balance sheet at 31 December 2022 is as follows: Notional amount \u00a3m Carrying amount \u00a3m Line item in the balance sheet Change in FV used for measuring ineffectiveness \u00a3m Cross-currency interest rate swaps \u2013 assets 102.1 25.8 Financial assets (4.4) Cross-currency interest rate swaps \u2013 liabilities 15.5 (1.0) Financial liabilities 1.2 24.8 (3.2) Carrying amount \u00a3m Accumulated FV adjustment \u00a3m Line item in the balance sheet Change in FV used for measuring ineffectiveness \u00a3m Private placement loan notes 285.5 24.8 Financial Liabilities 3.2 4.2 Financial risk continued Cash flow hedges The Group holds a series of non-deliverable forward foreign exchange contracts (NDFs), that are designated as hedges of the highly probable transactions in INR of the Group\u2019s Indian operations. The terms of the NDFs match the terms of these commitments. Secondly, the Group holds foreign exchange forward contracts against committed costs relating to the purchase of cloud software services in US dollars in years up to and including August 2024. The fair value of cash flow hedging instruments held at 31 December 2022 is shown in note 4.5.2. The cash flow hedges have been assessed to be highly effective. The cash flow hedging reserve comprises the effective portion of the cumulative net change in the fair value of the hedging instruments. The following table provides an analysis of components of equity resulting from cash flow hedge accounting: 2022 \u00a3m 2021 \u00a3m At 1 January (0.7) (4.8) Change in fair value recognised in the consolidated statement of other comprehensive income 11.5 1.3 Reclassified to the consolidated income statement: recognised in administrative expenses (5.1) \u2014 recognised in net finance cost \u2014 0.6 Change in tax (1.6) 2.2 At 31 December 4.1 (0.7) 4.2.5 Credit risk The Group trades only with third parties that are expected to be creditworthy. It is the Group\u2019s policy that all clients who wish to trade on credit terms are subject to credit verification procedures. The Group manages its operations to avoid any excessive concentration of counterparty risk and the Group takes all reasonable steps to seek assurance from the counterparties that they can fulfil their obligations. In addition, receivable balances are monitored on an ongoing basis with the result that the Group\u2019s exposure to credit loss remains low - also refer note 3.1.1. The carrying values of the Group\u2019s financial assets and contract assets represent its maximum credit exposure. The mark-to-market movement on derivatives includes the extent to which the fair value of these instruments has been affected by the perceived change in the creditworthiness of the counterparties (ie the expected credit losses) to those instruments and that of the Group itself (own credit risk). The Group is comfortable that the risk attached to those counterparties is not significant and believes that the swaps continue to act as an effective hedge against the movements in the fair value of the Group\u2019s private placement loan notes. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-521": {
"value": "4.2.1 Liquidity risk The Group monitors the risk of a liquidity shortage through its business plan and liquidity cycle forecasts and analysis, taking into consideration the maturity of the Group\u2019s financial instruments, projected cash flows from operations and an allowance for contingencies. The Group\u2019s policy is to hold cash and undrawn committed facilities at a level sufficient to fund the Group\u2019s operations and its medium-term plans. Multiple sources of funding are used to maintain a balance between continuity of funding and flexibility without placing reliance on sources that are not contractually committed. The Group\u2019s committed bank facilities provide liquidity for the cash fluctuations of the business cycle and an allowance for contingencies. At 31 December 2022 the RCF commitment was \u00a3288.4m (31 December 2021: \u00a3385.7m) and was subsequently reduced to \u00a3284.7m on 4 January 2023 following receipt of proceeds from disposals. The RCF expires on 31 August 2024 and was not drawn upon at 31 December 2022 (31 December 2021: \u00a340.0m drawn). The size of the available commitment will be right-sized each time the Group either refinances, raises funds through disposals, or raises equity with the RCF including mandatory cancellation mechanisms that determine the amount of the cancellation in each case. The commitments are subject to a minimum value of \u00a3180m regardless of the quantum of receipts. The Group\u2019s core funding is provided by US private placement loan notes and euro fixed-rate bearer notes (\u2018private placement loan notes\u2019), and to mitigate the risk of needing to refinance in challenging conditions, these have been arranged with a spread of maturities to November 2027. The bank facilities and private placement loan notes all include provisions that would require repayment in the event of a change of control, which are typical of these arrangements. In March 2022 the Group executed a committed backstop bridge facility with one of its relationship banks which provided \u00a370m of additional liquidity and incorporated provisions such that it would be cancelled or partially reduced in quantum as a consequence of specified transactions, including on the completion of the announced disposal of Trustmarque. The facility was cancelled on 10 March 2022 following receipt of the Trustmarque disposal proceeds. In February 2023, the Group entered into a committed bridge facility of \u00a350m with three of its relationship banks providing additional liquidity from 1 January 2024. It incorporates provisions such that it will partially reduce in quantum as a consequence of specified transactions. The committed facility has an expiry date of 31 December 2024 and is subject to covenants, which are the same as those in the RCF. The tables below summarise the maturity profile of the Group\u2019s financial liabilities based on contractual undiscounted cash flows. All balances are stated based on the prevailing foreign exchange rates and the contractual interest rates at the end of the reporting period. At 31 December 2022 Within 1 year \u00a3m Between 1\u20132 years \u00a3m Between 2\u20133 years \u00a3m Between 3\u20134 years \u00a3m Between 4\u20135 years \u00a3m More than 5 years \u00a3m Total \u00a3m Overdraft* 219.6 \u2014 \u2014 \u2014 \u2014 \u2014 219.6 Private placement loan notes 75.0 \u2014 91.4 34.7 94.0 \u2014 295.1 Interest on loan notes 9.6 7.9 6.2 4.5 2.6 \u2014 30.8 Lease liabilities 76.1 64.9 49.0 39.7 33.6 296.7 560.0 Deferred consideration \u2014 \u2014 \u2014 \u2014 0.7 \u2014 0.7 Put options of non-controlling interests 9.2 \u2014 \u2014 \u2014 \u2014 \u2014 9.2 Cross-currency interest rate swaps 0.8 0.8 0.8 0.8 \u2014 \u2014 3.2 Other financial instruments 0.7 \u2014 \u2014 \u2014 \u2014 \u2014 0.7 391.0 73.6 147.4 79.7 130.9 296.7 1,119.3 * The Group has a notional cash pool under which the bank may net cash balances with overdrafts held by other Group companies in the arrangements. The overdraft balances shown above are fully offset by credit balances in the same arrangement. At 31 December 2021 Within 1 year \u00a3m Between 1\u20132 years \u00a3m Between 2\u20133 years \u00a3m Between 3\u20134 years \u00a3m Between 4\u20135 years \u00a3m More than 5 years \u00a3m Total \u00a3m Overdraft 231.9 \u2014 \u2014 \u2014 \u2014 \u2014 231.9 Credit facilities 46.0 \u2014 \u2014 \u2014 \u2014 \u2014 46.0 Private placement loan notes 226.9 69.8 \u2014 84.6 32.9 94.6 508.8 Interest on loan notes 15.3 9.2 7.6 6.0 4.5 2.6 45.2 Lease liabilities 82.8 73.0 61.8 46.6 38.1 322.2 624.5 Deferred consideration \u2014 \u2014 \u2014 \u2014 \u2014 0.7 0.7 Put options of non-controlling interests 8.6 \u2014 \u2014 \u2014 \u2014 \u2014 8.6 Cross-currency interest rate swaps 0.6 0.7 0.4 0.4 0.4 \u2014 2.5 Cash flow hedges 0.6 0.6 0.1 \u2014 \u2014 \u2014 1.3 Other financial instruments 1.3 4.3 \u2014 \u2014 \u2014 \u2014 5.6 614.0 157.6 69.9 137.6 75.9 420.1 1,475.1 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-522": {
"value": "4.2.2 Foreign currency risk The Group is not generally exposed to significant foreign currency transaction risk with two exceptions. Firstly, services are provided by the Group\u2019s operations in India and South Africa and incurred in Indian rupee (INR) and South African rand (ZAR). The Group seeks to mitigate the short term effect of this exposure by entering into forward foreign exchange contracts to fix the British pounds sterling (GBP) cost of highly probable transactions over a rolling 24 month period. At 31 December 2022, the Group held forward foreign exchange contracts against forecast internal monthly INR and ZAR costs expected in the years up to and including December 2024. These forecast costs have been determined on the basis of the underlying cash flows associated with the delivery of services under executed customer contracts. Secondly, the Group holds foreign exchange forwards against committed costs relating to the purchase of cloud software services in US dollars (USD) in the years up to and including August 2024. To maximise hedge effectiveness, forward foreign exchange contracts are executed with terms matching the underlying cash flows. The following table demonstrates the sensitivity of the Group\u2019s profit before tax and equity to a 5% strengthening/(weakening) in INR, ZAR and USD exchange rates, assuming all other variables are unchanged, that would arise from the resulting changes in the fair value of the Group\u2019s forward exchange contracts. USD INR ZAR Effect on profit before tax \u00a3m Effect on equity \u00a3m Effect on profit before tax \u00a3m Effect on equity \u00a3m Effect on profit before tax \u00a3m Effect on equity \u00a3m 2022 \u2014 0.8 \u2014 0.3 1.8 \u2014 2021 \u2014 (3.3) \u2014 (5.3) (3.1) \u2014 4.2.3 Interest rate risk The Group manages its interest rate exposure, which arises from the Group\u2019s private placement loan notes, cash, deposits and RCF drawings at variable interest rates through cross-currency interest rate swaps. The swaps are designated fair value hedges against the fair value changes of the private placement loan notes. The net level of floating rate interest exposure is managed, to arrive at an acceptable overall interest rate risk profile. The interest rate profile of the Group\u2019s interest-bearing financial instruments was as follows: Nominal amounts At 31 December 2022 Within 1 year \u00a3m Between 1\u20132 years \u00a3m Between 2\u20133 years \u00a3m Between 3\u20134 years \u00a3m Between 4\u20135 years \u00a3m More than 5 years \u00a3m Total \u00a3m Fixed rate Private placement loan notes 27.5 \u2014 29.7 18.6 71.2 \u2014 147.0 Floating rate Cash in hand (396.8) \u2014 \u2014 \u2014 \u2014 \u2014 (396.8) Overdraft 219.6 \u2014 \u2014 \u2014 \u2014 \u2014 219.6 Private placement loan notes 38.8 \u2014 46.2 15.5 17.1 \u2014 117.6 Nominal amounts At 31 December 2021 Within 1 year \u00a3m Between 1\u20132 years \u00a3m Between 2\u20133 years \u00a3m Between 3\u20134 years \u00a3m Between 4\u20135 years \u00a3m More than 5 years \u00a3m Total \u00a3m Fixed rate Private placement loan notes 169.2 27.5 \u2014 29.7 18.6 74.2 319.2 Floating rate Cash in hand (333.4) \u2014 \u2014 \u2014 \u2014 \u2014 (333.4) Overdraft 231.9 \u2014 \u2014 \u2014 \u2014 \u2014 231.9 Private placement loan notes 48.5 38.8 \u2014 46.2 15.5 17.1 166.1 Credit facilities 46.0 \u2014 \u2014 \u2014 \u2014 \u2014 46.0 A sensitivity analysis to changes in interest rates shows that a 0.5% increase or decrease in interest rates, assuming all other variables are held constant, results in an \u00a30.6m (2021: \u00a31.1m) increase or decrease to profit before tax, and no impact on the Group\u2019s equity. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfMarketRiskExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-523": {
"value": "4.2.4 Hedges Fair value hedges The Group\u2019s fixed rate USD and GBP private placement loan notes are hedged through a combination of cross-currency interest rate swaps. The cross-currency interest rate swaps hedge the exposure to changes in the fair value of US dollar denominated loan notes. The loan notes and their corresponding swaps have the same critical terms including nominal values and maturity dates. The total loss in the year on the fair value hedges of \u00a33.2m (2021: \u00a330.0m loss) was equal to the loss/gain on the hedged items resulting in no net gain or loss in the income statement apart from hedge ineffectiveness from credit risk and currency basis risk. This effect of hedge ineffectiveness resulted in a \u00a30.2m debit (2021: \u00a30.1m credit) to the consolidated income statement, shown in net finance costs, note 4.3. The impact of the hedged item and the related financial derivatives on the consolidated balance sheet at 31 December 2022 is as follows: Notional amount \u00a3m Carrying amount \u00a3m Line item in the balance sheet Change in FV used for measuring ineffectiveness \u00a3m Cross-currency interest rate swaps \u2013 assets 102.1 25.8 Financial assets (4.4) Cross-currency interest rate swaps \u2013 liabilities 15.5 (1.0) Financial liabilities 1.2 24.8 (3.2) Carrying amount \u00a3m Accumulated FV adjustment \u00a3m Line item in the balance sheet Change in FV used for measuring ineffectiveness \u00a3m Private placement loan notes 285.5 24.8 Financial Liabilities 3.2 Cash flow hedges The Group holds a series of non-deliverable forward foreign exchange contracts (NDFs), that are designated as hedges of the highly probable transactions in INR of the Group\u2019s Indian operations. The terms of the NDFs match the terms of these commitments. Secondly, the Group holds foreign exchange forward contracts against committed costs relating to the purchase of cloud software services in US dollars in years up to and including August 2024. The fair value of cash flow hedging instruments held at 31 December 2022 is shown in note 4.5.2. The cash flow hedges have been assessed to be highly effective. The cash flow hedging reserve comprises the effective portion of the cumulative net change in the fair value of the hedging instruments. The following table provides an analysis of components of equity resulting from cash flow hedge accounting: 2022 \u00a3m 2021 \u00a3m At 1 January (0.7) (4.8) Change in fair value recognised in the consolidated statement of other comprehensive income 11.5 1.3 Reclassified to the consolidated income statement: recognised in administrative expenses (5.1) \u2014 recognised in net finance cost \u2014 0.6 Change in tax (1.6) 2.2 At 31 December 4.1 (0.7) ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGeneralHedgeAccountingExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-524": {
"value": "4.2.5 Credit risk The Group trades only with third parties that are expected to be creditworthy. It is the Group\u2019s policy that all clients who wish to trade on credit terms are subject to credit verification procedures. The Group manages its operations to avoid any excessive concentration of counterparty risk and the Group takes all reasonable steps to seek assurance from the counterparties that they can fulfil their obligations. In addition, receivable balances are monitored on an ongoing basis with the result that the Group\u2019s exposure to credit loss remains low - also refer note 3.1.1. The carrying values of the Group\u2019s financial assets and contract assets represent its maximum credit exposure. The mark-to-market movement on derivatives includes the extent to which the fair value of these instruments has been affected by the perceived change in the creditworthiness of the counterparties (ie the expected credit losses) to those instruments and that of the Group itself (own credit risk). The Group is comfortable that the risk attached to those counterparties is not significant and believes that the swaps continue to act as an effective hedge against the movements in the fair value of the Group\u2019s private placement loan notes. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCreditRiskExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-536": {
"value": "4.3 Net finance costs The table below shows the composition of net finance costs, including those excluded from adjusted profit: Notes 2022 \u00a3m 2021 \u00a3m Interest income Interest on cash (1.1) (0.4) Interest on finance lease assets (4.2) (4.3) Net interest income on defined benefit pension schemes 5.2 (3.6) \u2014 Total interest income (8.9) (4.7) Interest expense Private placement loan notes1 12.0 17.9 Cash flow hedges recycled to the income statement \u2014 0.6 Bank loans and overdrafts 9.2 5.4 Interest on finance lease liabilities 22.6 23.8 Net interest expense on defined benefit pension schemes 5.2 \u2014 1.5 Total interest expense 43.8 49.2 Net finance expense included in adjusted profit 34.9 44.5 Included within business exits Bank loans and overdrafts 0.2 0.7 Discount unwind on public sector subsidiary partnership payment 4.5.2 \u2014 0.4 Other financial (income)/expense \u2014 (0.1) Other items excluded from adjusted profits Non-designated foreign exchange forward contracts \u2013 mark-to-market (3.6) 1.5 Fair value hedge ineffectiveness2 4.2.4 0.2 (0.1) Net finance (income)/expenses excluded from adjusted profit (3.2) 2.4 Total net finance expense 31.7 46.9 1. Private placement loan notes comprise US private placement loan notes and euro fixed rate bearer notes. 2. Fair value hedge ineffectiveness arises from changes in currency basis, and the movement in a provision for counterparty risk associated with the swaps. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceCostExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-525": {
"value": "4.3 Net finance costs The table below shows the composition of net finance costs, including those excluded from adjusted profit: Notes 2022 \u00a3m 2021 \u00a3m Interest income Interest on cash (1.1) (0.4) Interest on finance lease assets (4.2) (4.3) Net interest income on defined benefit pension schemes 5.2 (3.6) \u2014 Total interest income (8.9) (4.7) Interest expense Private placement loan notes1 12.0 17.9 Cash flow hedges recycled to the income statement \u2014 0.6 Bank loans and overdrafts 9.2 5.4 Interest on finance lease liabilities 22.6 23.8 Net interest expense on defined benefit pension schemes 5.2 \u2014 1.5 Total interest expense 43.8 49.2 Net finance expense included in adjusted profit 34.9 44.5 Included within business exits Bank loans and overdrafts 0.2 0.7 Discount unwind on public sector subsidiary partnership payment 4.5.2 \u2014 0.4 Other financial (income)/expense \u2014 (0.1) Other items excluded from adjusted profits Non-designated foreign exchange forward contracts \u2013 mark-to-market (3.6) 1.5 Fair value hedge ineffectiveness2 4.2.4 0.2 (0.1) Net finance (income)/expenses excluded from adjusted profit (3.2) 2.4 Total net finance expense 31.7 46.9 1. Private placement loan notes comprise US private placement loan notes and euro fixed rate bearer notes. 2. Fair value hedge ineffectiveness arises from changes in currency basis, and the movement in a provision for counterparty risk associated with the swaps. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceIncomeExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-492": {
"value": "4.3 Net finance costs The table below shows the composition of net finance costs, including those excluded from adjusted profit: Notes 2022 \u00a3m 2021 \u00a3m Interest income Interest on cash (1.1) (0.4) Interest on finance lease assets (4.2) (4.3) Net interest income on defined benefit pension schemes 5.2 (3.6) \u2014 Total interest income (8.9) (4.7) Interest expense Private placement loan notes1 12.0 17.9 Cash flow hedges recycled to the income statement \u2014 0.6 Bank loans and overdrafts 9.2 5.4 Interest on finance lease liabilities 22.6 23.8 Net interest expense on defined benefit pension schemes 5.2 \u2014 1.5 Total interest expense 43.8 49.2 Net finance expense included in adjusted profit 34.9 44.5 Included within business exits Bank loans and overdrafts 0.2 0.7 Discount unwind on public sector subsidiary partnership payment 4.5.2 \u2014 0.4 Other financial (income)/expense \u2014 (0.1) Other items excluded from adjusted profits Non-designated foreign exchange forward contracts \u2013 mark-to-market (3.6) 1.5 Fair value hedge ineffectiveness2 4.2.4 0.2 (0.1) Net finance (income)/expenses excluded from adjusted profit (3.2) 2.4 Total net finance expense 31.7 46.9 1. Private placement loan notes comprise US private placement loan notes and euro fixed rate bearer notes. 2. Fair value hedge ineffectiveness arises from changes in currency basis, and the movement in a provision for counterparty risk associated with the swaps. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceIncomeExpenseExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-462": {
"value": "4.4 Leases Accounting policies The Group leases various assets, comprising land and buildings, equipment and motor vehicles. The determination whether an arrangement is, or contains, a lease is based on whether the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. The following sets out the Group\u2019s lease accounting policy for all leases with the exception of leases with low value and term of twelve months or less which are expensed to the consolidated income statement. The Group as a lessee \u2013 Right-of-use assets and lease liabilities The accounting policy for right-of-use assets is included in note 3.5. The Group recognises lease liabilities where a lease contract exists and right-of-use assets representing the right to use the underlying leased assets. At the commencement of a lease, the Group recognises the lease liability measured at the present value of the lease payments to be made over the lease term. In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of the lease liability is increased to reflect the accretion of interest and reduced for the lease payments made. The incremental borrowing rate is the rate of interest that the Group would have to pay to borrow, over a similar term and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. Incremental borrowing rates are determined monthly and depend on the term, country, currency and commencement date of the lease. The incremental borrowing rate is determined based on a series of inputs including: the risk- free rate based on swap market data; a country-specific risk adjustment; a credit risk adjustment; and an entity-specific adjustment where the entity risk profile is different to that of the Group. The lease liability is subsequently remeasured (with a corresponding adjustment to the related right-of-use asset) when there is a change in future lease payments due to a renegotiation or market rent review, a change of an index or rate or a reassessment of the lease term. Lease payments are apportioned between a finance charge and a reduction of the lease liability based on the constant interest rate applied to the remaining balance of the liability. Interest expense is included within net finance costs in the consolidated income statement. Lease payments comprise fixed payments, including in-substance fixed payments such as service charges and variable lease payments that depend on an index or a rate, initially measured using the minimum index or rate at inception date. The payments also include any lease incentives and any penalty payments for terminating the lease, if the lease term reflects the lessee exercising that option. The lease term determined comprises the non-cancellable period of the lease contract. Periods covered by an option to extend the lease are included if the Group has reasonable certainty that the option will be exercised, and periods covered by an option to terminate are included if it is reasonably certain that this will not be exercised. The Group has elected to apply the practical expedient in IFRS 16 paragraph 15 not to separate non-lease components such as service charges from lease rental charges. The Group as a lessor When the Group acts as a lessor, it determines at lease commencement whether the lease is a finance lease or an operating lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers to the lessee all of the risks and rewards of ownership in relation to the underlying asset. If this is the case, then the lease is a finance lease. If not, then it is an operating lease. The Group acts as an intermediate lessor of property assets and equipment. When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses whether the sub-lease is a finance or operating lease in the context of the right-of-use asset arising from the head lease. In instances where the Group is the intermediate lessor and the sub-lease is classified as a finance lease, the Group recognises a net investment in sub-leases for amounts recoverable from the sub-lessees while derecognising the respective portion of the right-of-use asset. The lease liability is retained on the balance sheet. The net investment in sub-leases is classified as current or non-current finance assets in the consolidated balance sheet according to whether or not the amounts will be recovered within twelve months of the balance sheet date. Finance income recognised in respect of net investment in sub-leases is presented within net finance costs in the consolidated income statement and the capital element of lease rental received is presented within investing activities in the consolidated cash flow statement. The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term. The Group accounts for finance leases as finance lease receivables, using an incremental borrowing rate where the interest rate implicit in sub-lease is not easily determinable. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-493": {
"value": "4.4 Leases Accounting policies The Group leases various assets, comprising land and buildings, equipment and motor vehicles. The determination whether an arrangement is, or contains, a lease is based on whether the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. The following sets out the Group\u2019s lease accounting policy for all leases with the exception of leases with low value and term of twelve months or less which are expensed to the consolidated income statement. The Group as a lessee \u2013 Right-of-use assets and lease liabilities The accounting policy for right-of-use assets is included in note 3.5. The Group recognises lease liabilities where a lease contract exists and right-of-use assets representing the right to use the underlying leased assets. At the commencement of a lease, the Group recognises the lease liability measured at the present value of the lease payments to be made over the lease term. In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of the lease liability is increased to reflect the accretion of interest and reduced for the lease payments made. The incremental borrowing rate is the rate of interest that the Group would have to pay to borrow, over a similar term and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. Incremental borrowing rates are determined monthly and depend on the term, country, currency and commencement date of the lease. The incremental borrowing rate is determined based on a series of inputs including: the risk- free rate based on swap market data; a country-specific risk adjustment; a credit risk adjustment; and an entity-specific adjustment where the entity risk profile is different to that of the Group. The lease liability is subsequently remeasured (with a corresponding adjustment to the related right-of-use asset) when there is a change in future lease payments due to a renegotiation or market rent review, a change of an index or rate or a reassessment of the lease term. Lease payments are apportioned between a finance charge and a reduction of the lease liability based on the constant interest rate applied to the remaining balance of the liability. Interest expense is included within net finance costs in the consolidated income statement. Lease payments comprise fixed payments, including in-substance fixed payments such as service charges and variable lease payments that depend on an index or a rate, initially measured using the minimum index or rate at inception date. The payments also include any lease incentives and any penalty payments for terminating the lease, if the lease term reflects the lessee exercising that option. The lease term determined comprises the non-cancellable period of the lease contract. Periods covered by an option to extend the lease are included if the Group has reasonable certainty that the option will be exercised, and periods covered by an option to terminate are included if it is reasonably certain that this will not be exercised. The Group has elected to apply the practical expedient in IFRS 16 paragraph 15 not to separate non-lease components such as service charges from lease rental charges. The Group as a lessor When the Group acts as a lessor, it determines at lease commencement whether the lease is a finance lease or an operating lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers to the lessee all of the risks and rewards of ownership in relation to the underlying asset. If this is the case, then the lease is a finance lease. If not, then it is an operating lease. The Group acts as an intermediate lessor of property assets and equipment. When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses whether the sub-lease is a finance or operating lease in the context of the right-of-use asset arising from the head lease. In instances where the Group is the intermediate lessor and the sub-lease is classified as a finance lease, the Group recognises a net investment in sub-leases for amounts recoverable from the sub-lessees while derecognising the respective portion of the right-of-use asset. The lease liability is retained on the balance sheet. The net investment in sub-leases is classified as current or non-current finance assets in the consolidated balance sheet according to whether or not the amounts will be recovered within twelve months of the balance sheet date. Finance income recognised in respect of net investment in sub-leases is presented within net finance costs in the consolidated income statement and the capital element of lease rental received is presented within investing activities in the consolidated cash flow statement. The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term. The Group accounts for finance leases as finance lease receivables, using an incremental borrowing rate where the interest rate implicit in sub-lease is not easily determinable. 4.4 Leases continued 4.4.1 The Group as a lessee Amounts recognised on the balance sheet Note 2022 \u00a3m 2021 \u00a3m Type of financial instrument Lease liabilities 397.5 448.4 Financial liabilities The lease liability includes \u00a35.0m (2021: \u00a318.8m) of future lease payments (undiscounted) for leases with termination options that could be exercised but are recognised at full term. The potential future cash outflows of \u00a313.2m (2021: \u00a323.1m) (undiscounted) have not been included in the lease liability because the Group is reasonably certain that the leases will not be extended. The total cash outflow for leases was \u00a384.4m (2021: \u00a3106.2m) consisting of interest paid of \u00a322.6m (2021: \u00a323.6m) and capital element of \u00a361.8m (2021: \u00a382.6m). Right-of-use assets are discussed in note 3.5, the maturity analysis of lease liabilities is included in note 4.2 and interest expense in note 4.3. 4.4.2 The Group as a lessor Amounts recognised on the balance sheet 2022 \u00a3m 2021 \u00a3m Type of financial instrument Lease receivables 76.3 82.1 Financial assets The maturity analysis of lease receivables, including the undiscounted lease payments to be received, is as follows: 2022 \u00a3m 2021 \u00a3m Within 1 year 9.8 10.8 Between 1-2 years 9.7 9.6 Between 2-3 years 8.2 9.6 Between 3-4 years 7.7 8.2 Between 4-5 years 4.0 7.7 More than 5 years 70.2 73.0 Total undiscounted lease payments receivable 109.6 118.9 Unearned finance income (33.3) (36.8) Net investment in lease receivables 76.3 82.1 The expenses related to short-term leases, leases of low-value assets and income from sub-leases are immaterial and therefore there is no separate disclosure. During 2020, the Group sublet a leased property. The sub-lease includes an option for the lessee to terminate the lease earlier than the Group\u2019s lease with its landlord. Management assessed it was reasonably certain that the break clause will not be exercised and, accordingly, determined that the sub-lease is a finance lease. This resulted in the recognition of a finance lease receivable of \u00a370.5m as of 31 December 2022. This judgement was based on a number of factors as prescribed within IFRS 16 \u2018Leases\u2019 such as incentive to lessee, importance of the location to the lessee\u2019s operations, shorter non-cancellable period of lease and the lessee\u2019s planned modifications to, and customisation of, the property. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfLeasesExplanatory",
"language": "en",
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"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-474": {
"value": "4.5 Financial instruments and the fair value hierarchy Accounting policies Financial instruments \u2013 classification of financial instruments The Group classifies its financial instruments in the following measurement categories: \u2022 those to be measured subsequently at fair value, either through other comprehensive income (FVOCI) or through profit or loss (FVPL); and \u2022 those to be measured at amortised cost. The classification depends on the Group\u2019s business model for managing the financial assets and the contractual terms of the cash flows. Financial instruments \u2013 initial recognition At initial recognition, the Group measures a financial instrument at its fair value plus, in the case of a financial instrument not at FVPL, transaction costs that are directly attributable to the acquisition of the financial instrument. Transaction costs of financial instruments carried at FVPL are expensed in the consolidated income statement. Financial instruments with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. Purchases and sales of financial instruments are recognised on their trade date (ie the date the Group commits to purchase or sell the instrument). Financial instruments are derecognised when the rights to receive/pay cash flows from the financial instrument have expired or have been transferred such that the Group has transferred substantially all risks and rewards of ownership. Debt instruments Debt instruments are initially recognised at fair value less directly attributable transaction costs and are subsequently remeasured depending on the Group\u2019s business model for managing the liability and the cash flow characteristics of the liability. There are three measurement categories into which the Group classifies its debt instruments: \u2022 Amortised cost: instruments that are held for collection/payment of contractual cash flows are measured at amortised cost where those cash flows represent solely payments of principal and interest. Interest income/expense from these financial instruments is included in net finance costs using the effective interest rate method. \u2022 FVOCI: instruments that are held for collection/payment of contractual cash flows and for selling the financial instrument are measured at FVOCI where the instrument\u2019s cash flows represent solely payments of principal and interest. Movements in the carrying amount are taken through consolidated Other Comprehensive Income (OCI), except for the recognition of impairment gains or losses, interest income and foreign exchange gains/losses, which are recognised in the consolidated income statement. When the financial instrument is derecognised, the cumulative gain/loss previously recognised in OCI is reclassified to the consolidated income statement and recognised in other gains/ (losses). \u2022 FVPL: instruments that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain/loss on a debt instrument that is measured at FVPL is recognised in the consolidated income statement and presented within net finance costs. The Group reclassifies debt instruments when, and only when, its business model for managing those instruments changes. Equity instruments Investments in equity instruments are initially recognised at fair value and are subsequently remeasured at fair value with the movement recognised through the consolidated income statement, except where an election has been made for the movement to be recognised through OCI. An election can be made on initial recognition of equity instruments that are neither held-for-trading or instruments acquired as part of a business combination. Once an election has been made all movements in fair value, with the exception of dividends, are presented through OCI and there is no subsequent reclassification of fair value gains/losses to the consolidated income statement following the derecognition of the investment. Dividends from such investments continue to be recognised in the consolidated income statement as other income when the Group\u2019s right to receive payments is established. Impairment The Group assesses, on a forward looking basis, the expected credit losses associated with its financial instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-472": {
"value": "4.5 Financial instruments and the fair value hierarchy Accounting policies Financial instruments \u2013 classification of financial instruments The Group classifies its financial instruments in the following measurement categories: \u2022 those to be measured subsequently at fair value, either through other comprehensive income (FVOCI) or through profit or loss (FVPL); and \u2022 those to be measured at amortised cost. The classification depends on the Group\u2019s business model for managing the financial assets and the contractual terms of the cash flows. Financial instruments \u2013 initial recognition At initial recognition, the Group measures a financial instrument at its fair value plus, in the case of a financial instrument not at FVPL, transaction costs that are directly attributable to the acquisition of the financial instrument. Transaction costs of financial instruments carried at FVPL are expensed in the consolidated income statement. Financial instruments with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. Purchases and sales of financial instruments are recognised on their trade date (ie the date the Group commits to purchase or sell the instrument). Financial instruments are derecognised when the rights to receive/pay cash flows from the financial instrument have expired or have been transferred such that the Group has transferred substantially all risks and rewards of ownership. Debt instruments Debt instruments are initially recognised at fair value less directly attributable transaction costs and are subsequently remeasured depending on the Group\u2019s business model for managing the liability and the cash flow characteristics of the liability. There are three measurement categories into which the Group classifies its debt instruments: \u2022 Amortised cost: instruments that are held for collection/payment of contractual cash flows are measured at amortised cost where those cash flows represent solely payments of principal and interest. Interest income/expense from these financial instruments is included in net finance costs using the effective interest rate method. \u2022 FVOCI: instruments that are held for collection/payment of contractual cash flows and for selling the financial instrument are measured at FVOCI where the instrument\u2019s cash flows represent solely payments of principal and interest. Movements in the carrying amount are taken through consolidated Other Comprehensive Income (OCI), except for the recognition of impairment gains or losses, interest income and foreign exchange gains/losses, which are recognised in the consolidated income statement. When the financial instrument is derecognised, the cumulative gain/loss previously recognised in OCI is reclassified to the consolidated income statement and recognised in other gains/ (losses). \u2022 FVPL: instruments that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain/loss on a debt instrument that is measured at FVPL is recognised in the consolidated income statement and presented within net finance costs. The Group reclassifies debt instruments when, and only when, its business model for managing those instruments changes. Equity instruments Investments in equity instruments are initially recognised at fair value and are subsequently remeasured at fair value with the movement recognised through the consolidated income statement, except where an election has been made for the movement to be recognised through OCI. An election can be made on initial recognition of equity instruments that are neither held-for-trading or instruments acquired as part of a business combination. Once an election has been made all movements in fair value, with the exception of dividends, are presented through OCI and there is no subsequent reclassification of fair value gains/losses to the consolidated income statement following the derecognition of the investment. Dividends from such investments continue to be recognised in the consolidated income statement as other income when the Group\u2019s right to receive payments is established. Impairment The Group assesses, on a forward looking basis, the expected credit losses associated with its financial instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-463": {
"value": "4.5 Financial instruments and the fair value hierarchy Accounting policies Financial instruments \u2013 classification of financial instruments The Group classifies its financial instruments in the following measurement categories: \u2022 those to be measured subsequently at fair value, either through other comprehensive income (FVOCI) or through profit or loss (FVPL); and \u2022 those to be measured at amortised cost. The classification depends on the Group\u2019s business model for managing the financial assets and the contractual terms of the cash flows. Financial instruments \u2013 initial recognition At initial recognition, the Group measures a financial instrument at its fair value plus, in the case of a financial instrument not at FVPL, transaction costs that are directly attributable to the acquisition of the financial instrument. Transaction costs of financial instruments carried at FVPL are expensed in the consolidated income statement. Financial instruments with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. Purchases and sales of financial instruments are recognised on their trade date (ie the date the Group commits to purchase or sell the instrument). Financial instruments are derecognised when the rights to receive/pay cash flows from the financial instrument have expired or have been transferred such that the Group has transferred substantially all risks and rewards of ownership. Debt instruments Debt instruments are initially recognised at fair value less directly attributable transaction costs and are subsequently remeasured depending on the Group\u2019s business model for managing the liability and the cash flow characteristics of the liability. There are three measurement categories into which the Group classifies its debt instruments: \u2022 Amortised cost: instruments that are held for collection/payment of contractual cash flows are measured at amortised cost where those cash flows represent solely payments of principal and interest. Interest income/expense from these financial instruments is included in net finance costs using the effective interest rate method. \u2022 FVOCI: instruments that are held for collection/payment of contractual cash flows and for selling the financial instrument are measured at FVOCI where the instrument\u2019s cash flows represent solely payments of principal and interest. Movements in the carrying amount are taken through consolidated Other Comprehensive Income (OCI), except for the recognition of impairment gains or losses, interest income and foreign exchange gains/losses, which are recognised in the consolidated income statement. When the financial instrument is derecognised, the cumulative gain/loss previously recognised in OCI is reclassified to the consolidated income statement and recognised in other gains/ (losses). \u2022 FVPL: instruments that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain/loss on a debt instrument that is measured at FVPL is recognised in the consolidated income statement and presented within net finance costs. The Group reclassifies debt instruments when, and only when, its business model for managing those instruments changes. Equity instruments Investments in equity instruments are initially recognised at fair value and are subsequently remeasured at fair value with the movement recognised through the consolidated income statement, except where an election has been made for the movement to be recognised through OCI. An election can be made on initial recognition of equity instruments that are neither held-for-trading or instruments acquired as part of a business combination. Once an election has been made all movements in fair value, with the exception of dividends, are presented through OCI and there is no subsequent reclassification of fair value gains/losses to the consolidated income statement following the derecognition of the investment. Dividends from such investments continue to be recognised in the consolidated income statement as other income when the Group\u2019s right to receive payments is established. Impairment The Group assesses, on a forward looking basis, the expected credit losses associated with its financial instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Derivatives Derivative financial instruments are initially recognised at fair value and are subsequently remeasured at fair value at the end of each reporting period with the movement recognised through the consolidated income statement, except where derivatives qualify for cash flow hedge accounting. The effective proportion of cash flow hedges is recognised in OCI and presented in the hedging reserve within equity. The cumulative gain/loss is subsequently reclassified to the consolidated income statement in the same period that the relevant hedged transaction is realised. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs incurred in connection with the borrowing of funds. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-494": {
"value": "4.5 Financial instruments and the fair value hierarchy Accounting policies Financial instruments \u2013 classification of financial instruments The Group classifies its financial instruments in the following measurement categories: \u2022 those to be measured subsequently at fair value, either through other comprehensive income (FVOCI) or through profit or loss (FVPL); and \u2022 those to be measured at amortised cost. The classification depends on the Group\u2019s business model for managing the financial assets and the contractual terms of the cash flows. Financial instruments \u2013 initial recognition At initial recognition, the Group measures a financial instrument at its fair value plus, in the case of a financial instrument not at FVPL, transaction costs that are directly attributable to the acquisition of the financial instrument. Transaction costs of financial instruments carried at FVPL are expensed in the consolidated income statement. Financial instruments with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. Purchases and sales of financial instruments are recognised on their trade date (ie the date the Group commits to purchase or sell the instrument). Financial instruments are derecognised when the rights to receive/pay cash flows from the financial instrument have expired or have been transferred such that the Group has transferred substantially all risks and rewards of ownership. Debt instruments Debt instruments are initially recognised at fair value less directly attributable transaction costs and are subsequently remeasured depending on the Group\u2019s business model for managing the liability and the cash flow characteristics of the liability. There are three measurement categories into which the Group classifies its debt instruments: \u2022 Amortised cost: instruments that are held for collection/payment of contractual cash flows are measured at amortised cost where those cash flows represent solely payments of principal and interest. Interest income/expense from these financial instruments is included in net finance costs using the effective interest rate method. \u2022 FVOCI: instruments that are held for collection/payment of contractual cash flows and for selling the financial instrument are measured at FVOCI where the instrument\u2019s cash flows represent solely payments of principal and interest. Movements in the carrying amount are taken through consolidated Other Comprehensive Income (OCI), except for the recognition of impairment gains or losses, interest income and foreign exchange gains/losses, which are recognised in the consolidated income statement. When the financial instrument is derecognised, the cumulative gain/loss previously recognised in OCI is reclassified to the consolidated income statement and recognised in other gains/ (losses). \u2022 FVPL: instruments that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain/loss on a debt instrument that is measured at FVPL is recognised in the consolidated income statement and presented within net finance costs. The Group reclassifies debt instruments when, and only when, its business model for managing those instruments changes. Equity instruments Investments in equity instruments are initially recognised at fair value and are subsequently remeasured at fair value with the movement recognised through the consolidated income statement, except where an election has been made for the movement to be recognised through OCI. An election can be made on initial recognition of equity instruments that are neither held-for-trading or instruments acquired as part of a business combination. Once an election has been made all movements in fair value, with the exception of dividends, are presented through OCI and there is no subsequent reclassification of fair value gains/losses to the consolidated income statement following the derecognition of the investment. Dividends from such investments continue to be recognised in the consolidated income statement as other income when the Group\u2019s right to receive payments is established. Impairment The Group assesses, on a forward looking basis, the expected credit losses associated with its financial instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Derivatives Derivative financial instruments are initially recognised at fair value and are subsequently remeasured at fair value at the end of each reporting period with the movement recognised through the consolidated income statement, except where derivatives qualify for cash flow hedge accounting. The effective proportion of cash flow hedges is recognised in OCI and presented in the hedging reserve within equity. The cumulative gain/loss is subsequently reclassified to the consolidated income statement in the same period that the relevant hedged transaction is realised. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs incurred in connection with the borrowing of funds. 4.5 Financial instruments and the fair value hierarchy continued
4.5.1 Fair value hierarchy
The Group\u2019s financial assets and liabilities are classified based on the following fair value hierarchy:
\u2022 Level-1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
\u2022 Level-2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or
indirectly. With the exception of current financial instruments (which have a short maturity), the fair value of the Group\u2019s level-2 financial
instruments were calculated by discounting the expected future cash flows at prevailing interest rates. The valuation models incorporate
various inputs including foreign exchange spot and forward rates and interest rate curves. In the case of floating rate borrowings the
nominal value approximates to fair value because interest is set at floating rates where payments are reset to market values at intervals of
less than one year.
\u2022 Level-3: techniques using inputs that have a significant effect on the recorded fair value which are not based on observable market data.
Other financial instruments, where observable market data is not available, are carried at either amortised cost or cost (undiscounted cash
flows) as a reasonable approximation of fair value.
During the year ended 31 December 2022, there were no transfers between fair value levels.
4.5.2 Financial instruments and their fair value hierarchy classification
The following table analyses, by classification and category, the carrying value of the Group\u2019s financial instruments and identifies the level of
the fair value hierarchy for the instruments carried at fair value:
At 31 December 2022 Note
Fair value
hierarchy
FVPL
\u00a3m
FVOCI
\u00a3m
Derivatives
used for
hedging
\u00a3m
Amortised
cost
\u00a3m
Total
\u00a3m
Current
\u00a3m
Non-
current
\u00a3m
Financial assets
Lease receivables 4.4.2 n/a \u2014 \u2014 \u2014 76.3 76.3 5.9 70.4
Cash flow hedges 4.2.4 Level-2 \u2014 \u2014 5.4 \u2014 5.4 3.0 2.4
Non-designated foreign exchange forwards and
swaps Level-2 5.3 \u2014 \u2014 \u2014 5.3 4.4 0.9
Cross-currency interest rate swaps a Level-2 \u2014 \u2014 25.8 \u2014 25.8 8.3 17.5
Originated loans receivable n/a \u2014 \u2014 \u2014 0.5 0.5 \u2014 0.5
Financial assets at fair value through P&L Level-3 17.2 \u2014 \u2014 \u2014 17.2 \u2014 17.2
Financial assets at fair value through OCI Level-3 \u2014 0.8 \u2014 \u2014 0.8 \u2014 0.8
Deferred consideration receivable n/a \u2014 \u2014 \u2014 10.5 10.5 2.0 8.5
22.5 0.8 31.2 87.3 141.8 23.6 118.2
Other financial assets
Cash
4.5.4
n/a \u2014 \u2014 \u2014 396.8 396.8 396.8 \u2014
Total financial assets 22.5 0.8 31.2 484.1 538.6 420.4 118.2
Financial liabilities
Private placement loan notes a n/a \u2014 \u2014 \u2014 285.5 285.5 74.6 210.9
Other loan notes n/a \u2014 \u2014 \u2014 0.7 0.7 0.7 \u2014
Non-designated foreign exchange forwards and
swaps Level-2 0.1 \u2014 \u2014 \u2014 0.1 0.1 \u2014
Cross-currency interest rate swaps a Level-2 \u2014 \u2014 1.0 \u2014 1.0 \u2014 1.0
Deferred consideration payable n/a \u2014 \u2014 \u2014 0.7 0.7 \u2014 0.7
Put options of non-controlling interests d Level-3 \u2014 9.2 \u2014 \u2014 9.2 9.2 \u2014
0.1 9.2 1.0 286.9 297.2 84.6 212.6
Other financial liabilities
Overdrafts 4.5.4 n/a \u2014 \u2014 \u2014 219.6 219.6 219.6 \u2014
Lease liabilities 4.4.1 n/a \u2014 \u2014 \u2014 397.5 397.5 55.6 341.9
Total financial liabilities 0.1 9.2 1.0 904.0 914.3 359.8 554.5
4.5 Financial instruments and the fair value hierarchy continued
Financial assets measured at amortised cost consist of cash, lease receivables, originated loans and deferred consideration receivable. The
carrying value of cash is a reasonable approximation of its fair value due to the short-term nature of the instruments. Lease receivables,
originated loans and deferred consideration receivable are measured at amortised cost using the effective interest rate method. Included in
other investments are \u00a30.8m (31 December 2021: \u00a30.8m) of strategic investments in unlisted equity securities which are not held-for-trading
and the Group elected to recognise at Fair Value through Other Comprehensive Income (FVOCI). During the period no dividends were
received from, and no disposals were made of, strategic investments.
The financial assets at Fair Value through P&L (FVPL) relate to the Group\u2019s minority shareholding in companies as part of Capita Scaling
Partners. The assets are revalued when reliable information on fair value becomes available, which is normally at each funding round.
Financial liabilities measured at amortised cost consist of loan notes, overdrafts, lease liabilities, credit facilities and deferred consideration
payable. With the exception of certain series within the fixed rate private placement loan notes, the carrying value of financial liabilities are a
reasonable approximation of their fair value. This is because either the interest payable is close to market rates or the liability is short-term in
nature. The private placement loan note series that remain subject to a fixed rate of interest have an underlying carrying value of \u00a3144.9m
(2021: \u00a3320.7m) and a fair value of \u00a3130.2m (2021: \u00a3278.2m). The carrying value of overdrafts is a reasonable approximation of fair value
reflecting the short-term nature of the instruments. Lease liabilities and deferred consideration payable are measured at amortised cost using
the effective interest rate method.
The Group\u2019s key financial liabilities are set out below:
a. Private placement loan notes
The private placement loan notes were issued in US dollars, pounds sterling, and euros at fixed interest rates. The Group manages its
exposure to foreign exchange and interest rate movements through cross-currency interest rate swaps, interest rate swaps, and forward foreign
exchange contracts.
b. Bank facilities
Details of the Group\u2019s bank facilities are provided in the Liquidity section above. At 31 December 2022, the total value of committed facilities
was \u00a3288.4m, of which none was drawn (2021: total facilities of \u00a3385.7m of which \u00a340.0m was drawn).
c. Public sector subsidiary partnership payment
The public sector subsidiary partnership payment liability represented the annual deferred payments to be made by AXELOS Limited. This
liability was derecognised when AXELOS Limited was sold on 26 July 2021.
d. Put options of non-controlling interests
The liability at 31 December 2022 represents the present value of the cost to acquire the non-controlling interest in Fera Science Limited (see
note 4.7). The option held by the non-controlling shareholder of Fera Science Limited has been exercisable since April 2021. A sensitivity
analysis assuming a 10% increase/decrease in the earnings potential of the business results in a \u00a30.9m increase/decrease in the valuation.
The option to acquire the non-controlling interest in AXELOS Limited expired without being exercised on 28 February 2021, and the related
liability was de-recognised. Upon inception of the option agreements, management determined that changes in the carrying amount would be
recognised within equity. This has been applied consistently for all options entered into.
4.5 Financial instruments and the fair value hierarchy continued At 31 December 2021 Note Fair value hierarchy FVPL \u00a3m FVOCI \u00a3m Derivatives used for hedging \u00a3m Amortised cost \u00a3m Total \u00a3m Current \u00a3m Non- current \u00a3m Financial assets Lease receivables 4.4.2 n/a \u2014 \u2014 \u2014 82.1 82.1 6.6 75.5 Cash flow hedges 4.2.4 Level-2 \u2014 \u2014 0.9 \u2014 0.9 0.7 0.2 Non-designated foreign exchange forwards and swaps Level-2 1.8 \u2014 \u2014 \u2014 1.8 0.8 1.0 Cross-currency interest rate swaps a Level-2 \u2014 \u2014 30.2 \u2014 30.2 9.4 20.8 Originated loans receivable n/a \u2014 \u2014 \u2014 0.5 0.5 \u2014 0.5 Financial assets at fair value through P&L Level-3 8.4 \u2014 \u2014 \u2014 8.4 \u2014 8.4 Financial assets at fair value through OCI Level-3 \u2014 0.8 \u2014 \u2014 0.8 \u2014 0.8 10.2 0.8 31.1 82.6 124.7 17.5 107.2 Other financial assets Cash . 4 n/a \u2014 \u2014 \u2014 317.6 317.6 317.6 \u2014 Cash included within disposal group assets held- for-sale 2.8 n/a \u2014 \u2014 \u2014 15.8 15.8 15.8 \u2014 Total financial assets 10.2 0.8 31.1 416.0 458.1 350.9 107.2 Financial liabilities Private placement loan note a n/a \u2014 \u2014 \u2014 512.9 512.9 226.3 286.6 Other loan notes n/a \u2014 \u2014 \u2014 1.3 1.3 0.3 1.0 Credit facilities b Level-2 \u2014 \u2014 \u2014 46.0 46.0 46.0 \u2014 Cash flow hedges 4.2.4 Level-2 \u2014 \u2014 1.8 \u2014 1.8 0.8 1.0 Non-designated foreign exchange forwards and swaps Level-2 4.7 \u2014 \u2014 \u2014 4.7 4.3 0.4 Cross-currency interest rate swaps a Level-2 \u2014 \u2014 2.2 \u2014 2.2 \u2014 2.2 Deferred consideration payable n/a \u2014 \u2014 \u2014 0.7 0.7 \u2014 0.7 Put options of non-controlling interests d Level-3 \u2014 8.6 \u2014 \u2014 8.6 8.6 \u2014 4.7 8.6 4.0 560.9 578.2 286.3 291.9 Other financial liabilities Overdrafts 4.5.4 n/a \u2014 \u2014 \u2014 231.9 231.9 231.9 \u2014 Lease liabilities 4.4.1 n/a \u2014 \u2014 \u2014 448.4 448.4 61.6 386.8 Total financial liabilities 4.7 8.6 4.0 1,241.2 1,258.5 579.8 678.7 4.5 Financial instruments and the fair value hierarchy continued The following table shows the reconciliation from the opening balances to the closing balances for Level-3 fair values. Subsidiary partnership payment \u00a3m Put options of non- controlling interests \u00a3m Investments FVPL and FVOCI \u00a3m At 1 January 2021 27.1 99.7 2.3 Payments made (4.7) \u2014 \u2014 Change in put-options recognised in other comprehensive income 1 \u2014 (91.1) \u2014 Additions \u2014 \u2014 0.3 Reclassification from other investment categories \u2014 \u2014 4.3 Gain in fair value recognised in income statement \u2014 \u2014 2.2 Gain in fair value recognised in other comprehensive income \u2014 \u2014 0.1 Discount unwind recognised in the income statement 0.4 \u2014 \u2014 Business disposal (22.8) \u2014 \u2014 At 31 December 2021 \u2014 8.6 9.2 Change in put-options recognised in other comprehensive income \u2014 0.6 \u2014 Additions \u2014 \u2014 2.3 Reclassification from other investment categories \u2014 \u2014 0.4 Gain in fair value recognised in income statement \u2014 \u2014 5.9 Gain in fair value recognised in other comprehensive income \u2014 \u2014 0.2 At 31 December 2022 \u2014 9.2 18.0 1. The option to acquire the non-controlling interest in AXELOS Limited expired without being exercised on 28 February 2021, and the related liability was de-recognised 4.5.3 Borrowings Details of the Group\u2019s current RCF facility are shown in the above liquidity section (see note 4.5.2b). Borrowing costs of \u00a32.4m were capitalised in the year (2021: \u00a31.9m). At 31 December 2022, the Group\u2019s private placement loan note series had a GBP equivalent underlying carrying value of \u00a3260.5m (2021: \u00a3484.8m) (see note 4.5.2a) analysed as follows: Maturity Denomination Interest rate % Nominal value Ccy\u2019m 27 October 2023 GBP 2.520 27.5 22 January 2025 GBP 3.540 7.4 22 April 2025 GBP 3.670 22.3 27 October 2026 GBP 2.770 18.6 22 January 2027 GBP 3.580 23.8 Total GBP denominated GBP 99.6 22 January 2023 USD 3.450 39.4 27 October 2023 USD 3.370 17.8 22 January 2025 USD 3.650 74.3 27 October 2026 USD 3.590 19.3 22 January 2027 USD 3.800 27.5 Total USD denominated 1 USD 178.3 10 November 2027 EUR 3.625 53.4 Total euro denominated2 EUR 53.4 1. USD denominated loan notes have a GBP equivalent underlying carrying value of \u00a3117.2m. The Group has entered into cross-currency interest rate swaps for the USD issues to achieve a floating rate of interest based on SONIA. Further disclosure on the Group\u2019s use of hedges is included in note 4.2. 2. Euro denominated loan notes have a GBP equivalent underlying carrying value of \u00a345.8m. 4.5 Financial instruments and the fair value hierarchy continued 4.5.4 Cash, cash equivalents and overdrafts The Group has a notional cash pool under which the bank may net cash balances with overdrafts held by other Group companies in the arrangements. The overdraft balances shown below are fully offset by credit balances in the same arrangement. The Group\u2019s gross cash position is shown in the table below: 2022 \u00a3m 2021 \u00a3m Cash and cash equivalents 396.8 317.6 Overdrafts (219.6) (231.9) Cash, net of overdrafts, included in disposal group assets and liabilities held for sale \u2014 15.8 Cash, cash equivalents and overdrafts 177.2 101.5",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-475": {
"value": "Derivatives Derivative financial instruments are initially recognised at fair value and are subsequently remeasured at fair value at the end of each reporting period with the movement recognised through the consolidated income statement, except where derivatives qualify for cash flow hedge accounting. The effective proportion of cash flow hedges is recognised in OCI and presented in the hedging reserve within equity. The cumulative gain/loss is subsequently reclassified to the consolidated income statement in the same period that the relevant hedged transaction is realised. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-473": {
"value": "Derivatives Derivative financial instruments are initially recognised at fair value and are subsequently remeasured at fair value at the end of each reporting period with the movement recognised through the consolidated income statement, except where derivatives qualify for cash flow hedge accounting. The effective proportion of cash flow hedges is recognised in OCI and presented in the hedging reserve within equity. The cumulative gain/loss is subsequently reclassified to the consolidated income statement in the same period that the relevant hedged transaction is realised. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-476": {
"value": "Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs incurred in connection with the borrowing of funds. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingCostsExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-526": {
"value": "4.5.1 Fair value hierarchy The Group\u2019s financial assets and liabilities are classified based on the following fair value hierarchy: \u2022 Level-1: quoted (unadjusted) prices in active markets for identical assets or liabilities. \u2022 Level-2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly. With the exception of current financial instruments (which have a short maturity), the fair value of the Group\u2019s level-2 financial instruments were calculated by discounting the expected future cash flows at prevailing interest rates. The valuation models incorporate various inputs including foreign exchange spot and forward rates and interest rate curves. In the case of floating rate borrowings the nominal value approximates to fair value because interest is set at floating rates where payments are reset to market values at intervals of less than one year. \u2022 Level-3: techniques using inputs that have a significant effect on the recorded fair value which are not based on observable market data. Other financial instruments, where observable market data is not available, are carried at either amortised cost or cost (undiscounted cash flows) as a reasonable approximation of fair value. During the year ended 31 December 2022, there were no transfers between fair value levels. 4.5.2 Financial instruments and their fair value hierarchy classification The following table analyses, by classification and category, the carrying value of the Group\u2019s financial instruments and identifies the level of the fair value hierarchy for the instruments carried at fair value: At 31 December 2022 Note Fair value hierarchy FVPL \u00a3m FVOCI \u00a3m Derivatives used for hedging \u00a3m Amortised cost \u00a3m Total \u00a3m Current \u00a3m Non- current \u00a3m Financial assets Lease receivables 4.4.2 n/a \u2014 \u2014 \u2014 76.3 76.3 5.9 70.4 Cash flow hedges 4.2.4 Level-2 \u2014 \u2014 5.4 \u2014 5.4 3.0 2.4 Non-designated foreign exchange forwards and swaps Level-2 5.3 \u2014 \u2014 \u2014 5.3 4.4 0.9 Cross-currency interest rate swaps a Level-2 \u2014 \u2014 25.8 \u2014 25.8 8.3 17.5 Originated loans receivable n/a \u2014 \u2014 \u2014 0.5 0.5 \u2014 0.5 Financial assets at fair value through P&L Level-3 17.2 \u2014 \u2014 \u2014 17.2 \u2014 17.2 Financial assets at fair value through OCI Level-3 \u2014 0.8 \u2014 \u2014 0.8 \u2014 0.8 Deferred consideration receivable n/a \u2014 \u2014 \u2014 10.5 10.5 2.0 8.5 22.5 0.8 31.2 87.3 141.8 23.6 118.2 Other financial assets Cash 4.5.4 n/a \u2014 \u2014 \u2014 396.8 396.8 396.8 \u2014 Total financial assets 22.5 0.8 31.2 484.1 538.6 420.4 118.2 Financial liabilities Private placement loan notes a n/a \u2014 \u2014 \u2014 285.5 285.5 74.6 210.9 Other loan notes n/a \u2014 \u2014 \u2014 0.7 0.7 0.7 \u2014 Non-designated foreign exchange forwards and swaps Level-2 0.1 \u2014 \u2014 \u2014 0.1 0.1 \u2014 Cross-currency interest rate swaps a Level-2 \u2014 \u2014 1.0 \u2014 1.0 \u2014 1.0 Deferred consideration payable n/a \u2014 \u2014 \u2014 0.7 0.7 \u2014 0.7 Put options of non-controlling interests d Level-3 \u2014 9.2 \u2014 \u2014 9.2 9.2 \u2014 0.1 9.2 1.0 286.9 297.2 84.6 212.6 Other financial liabilities Overdrafts 4.5.4 n/a \u2014 \u2014 \u2014 219.6 219.6 219.6 \u2014 Lease liabilities 4.4.1 n/a \u2014 \u2014 \u2014 397.5 397.5 55.6 341.9 Total financial liabilities 0.1 9.2 1.0 904.0 914.3 359.8 554.5 Financial assets measured at amortised cost consist of cash, lease receivables, originated loans and deferred consideration receivable. The carrying value of cash is a reasonable approximation of its fair value due to the short-term nature of the instruments. Lease receivables, originated loans and deferred consideration receivable are measured at amortised cost using the effective interest rate method. Included in other investments are \u00a30.8m (31 December 2021: \u00a30.8m) of strategic investments in unlisted equity securities which are not held-for-trading and the Group elected to recognise at Fair Value through Other Comprehensive Income (FVOCI). During the period no dividends were received from, and no disposals were made of, strategic investments. The financial assets at Fair Value through P&L (FVPL) relate to the Group\u2019s minority shareholding in companies as part of Capita Scaling Partners. The assets are revalued when reliable information on fair value becomes available, which is normally at each funding round. Financial liabilities measured at amortised cost consist of loan notes, overdrafts, lease liabilities, credit facilities and deferred consideration payable. With the exception of certain series within the fixed rate private placement loan notes, the carrying value of financial liabilities are a reasonable approximation of their fair value. This is because either the interest payable is close to market rates or the liability is short-term in nature. The private placement loan note series that remain subject to a fixed rate of interest have an underlying carrying value of \u00a3144.9m (2021: \u00a3320.7m) and a fair value of \u00a3130.2m (2021: \u00a3278.2m). The carrying value of overdrafts is a reasonable approximation of fair value reflecting the short-term nature of the instruments. Lease liabilities and deferred consideration payable are measured at amortised cost using the effective interest rate method. The Group\u2019s key financial liabilities are set out below: a. Private placement loan notes The private placement loan notes were issued in US dollars, pounds sterling, and euros at fixed interest rates. The Group manages its exposure to foreign exchange and interest rate movements through cross-currency interest rate swaps, interest rate swaps, and forward foreign exchange contracts. b. Bank facilities Details of the Group\u2019s bank facilities are provided in the Liquidity section above. At 31 December 2022, the total value of committed facilities was \u00a3288.4m, of which none was drawn (2021: total facilities of \u00a3385.7m of which \u00a340.0m was drawn). c. Public sector subsidiary partnership payment The public sector subsidiary partnership payment liability represented the annual deferred payments to be made by AXELOS Limited. This liability was derecognised when AXELOS Limited was sold on 26 July 2021. d. Put options of non-controlling interests The liability at 31 December 2022 represents the present value of the cost to acquire the non-controlling interest in Fera Science Limited (see note 4.7). The option held by the non-controlling shareholder of Fera Science Limited has been exercisable since April 2021. A sensitivity analysis assuming a 10% increase/decrease in the earnings potential of the business results in a \u00a30.9m increase/decrease in the valuation. The option to acquire the non-controlling interest in AXELOS Limited expired without being exercised on 28 February 2021, and the related liability was de-recognised. Upon inception of the option agreements, management determined that changes in the carrying amount would be recognised within equity. This has been applied consistently for all options entered into. At 31 December 2021 Note Fair value hierarchy FVPL \u00a3m FVOCI \u00a3m Derivatives used for hedging \u00a3m Amortised cost \u00a3m Total \u00a3m Current \u00a3m Non- current \u00a3m Financial assets Lease receivables 4.4.2 n/a \u2014 \u2014 \u2014 82.1 82.1 6.6 75.5 Cash flow hedges 4.2.4 Level-2 \u2014 \u2014 0.9 \u2014 0.9 0.7 0.2 Non-designated foreign exchange forwards and swaps Level-2 1.8 \u2014 \u2014 \u2014 1.8 0.8 1.0 Cross-currency interest rate swaps a Level-2 \u2014 \u2014 30.2 \u2014 30.2 9.4 20.8 Originated loans receivable n/a \u2014 \u2014 \u2014 0.5 0.5 \u2014 0.5 Financial assets at fair value through P&L Level-3 8.4 \u2014 \u2014 \u2014 8.4 \u2014 8.4 Financial assets at fair value through OCI Level-3 \u2014 0.8 \u2014 \u2014 0.8 \u2014 0.8 10.2 0.8 31.1 82.6 124.7 17.5 107.2 Other financial assets Cash . 4 n/a \u2014 \u2014 \u2014 317.6 317.6 317.6 \u2014 Cash included within disposal group assets held- for-sale 2.8 n/a \u2014 \u2014 \u2014 15.8 15.8 15.8 \u2014 Total financial assets 10.2 0.8 31.1 416.0 458.1 350.9 107.2 Financial liabilities Private placement loan note a n/a \u2014 \u2014 \u2014 512.9 512.9 226.3 286.6 Other loan notes n/a \u2014 \u2014 \u2014 1.3 1.3 0.3 1.0 Credit facilities b Level-2 \u2014 \u2014 \u2014 46.0 46.0 46.0 \u2014 Cash flow hedges 4.2.4 Level-2 \u2014 \u2014 1.8 \u2014 1.8 0.8 1.0 Non-designated foreign exchange forwards and swaps Level-2 4.7 \u2014 \u2014 \u2014 4.7 4.3 0.4 Cross-currency interest rate swaps a Level-2 \u2014 \u2014 2.2 \u2014 2.2 \u2014 2.2 Deferred consideration payable n/a \u2014 \u2014 \u2014 0.7 0.7 \u2014 0.7 Put options of non-controlling interests d Level-3 \u2014 8.6 \u2014 \u2014 8.6 8.6 \u2014 4.7 8.6 4.0 560.9 578.2 286.3 291.9 Other financial liabilities Overdrafts 4.5.4 n/a \u2014 \u2014 \u2014 231.9 231.9 231.9 \u2014 Lease liabilities 4.4.1 n/a \u2014 \u2014 \u2014 448.4 448.4 61.6 386.8 Total financial liabilities 4.7 8.6 4.0 1,241.2 1,258.5 579.8 678.7 The following table shows the reconciliation from the opening balances to the closing balances for Level-3 fair values. Subsidiary partnership payment \u00a3m Put options of non- controlling interests \u00a3m Investments FVPL and FVOCI \u00a3m At 1 January 2021 27.1 99.7 2.3 Payments made (4.7) \u2014 \u2014 Change in put-options recognised in other comprehensive income 1 \u2014 (91.1) \u2014 Additions \u2014 \u2014 0.3 Reclassification from other investment categories \u2014 \u2014 4.3 Gain in fair value recognised in income statement \u2014 \u2014 2.2 Gain in fair value recognised in other comprehensive income \u2014 \u2014 0.1 Discount unwind recognised in the income statement 0.4 \u2014 \u2014 Business disposal (22.8) \u2014 \u2014 At 31 December 2021 \u2014 8.6 9.2 Change in put-options recognised in other comprehensive income \u2014 0.6 \u2014 Additions \u2014 \u2014 2.3 Reclassification from other investment categories \u2014 \u2014 0.4 Gain in fair value recognised in income statement \u2014 \u2014 5.9 Gain in fair value recognised in other comprehensive income \u2014 \u2014 0.2 At 31 December 2022 \u2014 9.2 18.0 1. The option to acquire the non-controlling interest in AXELOS Limited expired without being exercised on 28 February 2021, and the related liability was de-recognised ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-527": {
"value": "4.6 Issued share capital Allotted, called up and fully paid 2022 \u2116 m 2021 \u2116 m 2022 \u00a3m 2021 \u00a3m Ordinary shares of 2 1/15p each At 1 January 1,684.1 1,671.1 34.8 34.5 Issue of share capital \u2014 13.0 \u2014 0.3 At 31 December 1,684.1 1,684.1 34.8 34.8 Share premium 2022 \u00a3m 2021 \u00a3m Ordinary shares of 2 1/15p each At 1 January 1,145.5 1,143.3 VAT refund on rights issue issuance costs \u2014 2.2 At 31 December 1,145.5 1,145.5 In 2018 the Group offered a rights issue to existing shareholders, raising \u00a3700.7m less issuance costs of \u00a338.0m, which was capitalised to share capital and share premium. The issuance costs included VAT that was, at the time, treated as irrecoverable. In 2021 it was agreed with HMRC that \u00a32.2m of this VAT was recoverable and was refunded to the Group. Treasury shares 2022 \u2116 m 2021 \u2116 m 2022 \u00a3m 2021 \u00a3m Ordinary shares of 2 1/15p At 1 January \u2014 2.3 \u2014 (0.1) Issued on exercise of share options \u2014 (2.3) \u2014 0.1 At 31 December \u2014 \u2014 \u2014 \u2014 During the year, the Group did not purchase any treasury shares (2021: none) and did not allot nor issue any treasury shares (2021: 2,299,955 whose aggregate nominal value was \u00a347,532). The total consideration received in respect of the shares allotted during 2021 was \u00a3nil. Employee benefit trust shares 2022 \u2116 m 2021 \u2116 m 2022 \u00a3m 2021 \u00a3m Ordinary shares of 2 1/15p At 1 January 18.1 12.6 (8.0) (11.1) Shares purchased \u2014 13.0 \u2014 (0.3) Issued on exercise of share options (8.8) (7.5) 3.8 3.4 At 31 December 9.3 18.1 (4.2) (8.0) The Group will use shares held in the Employee Benefit Trust (EBT) shares to satisfy future requirements for shares under the Group\u2019s share option and long-term incentive plans. On 19 April 2021, 13m ordinary 2 1/15p shares (2021: nil) were allotted to the EBT for an aggregate nominal value of \u00a3268,667 to satisfy exercises under the Group\u2019s share plans. The total consideration received in respect of these shares was \u00a3268,667. During the year, 8,770,217 (2021: 7,560,173) shares with a value of \u00a33.8m (2021: \u00a33.4m) were transferred out of the EBT to satisfy exercises under the Group's share option and long-term incentive plans. The total consideration received in respect of these shares was \u00a3nil (2021: \u00a3nil). The Group has an unexpired authority to repurchase up to 10% of its issued share capital. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-495": {
"value": "4.6 Issued share capital Allotted, called up and fully paid 2022 \u2116 m 2021 \u2116 m 2022 \u00a3m 2021 \u00a3m Ordinary shares of 2 1/15p each At 1 January 1,684.1 1,671.1 34.8 34.5 Issue of share capital \u2014 13.0 \u2014 0.3 At 31 December 1,684.1 1,684.1 34.8 34.8 Share premium 2022 \u00a3m 2021 \u00a3m Ordinary shares of 2 1/15p each At 1 January 1,145.5 1,143.3 VAT refund on rights issue issuance costs \u2014 2.2 At 31 December 1,145.5 1,145.5 In 2018 the Group offered a rights issue to existing shareholders, raising \u00a3700.7m less issuance costs of \u00a338.0m, which was capitalised to share capital and share premium. The issuance costs included VAT that was, at the time, treated as irrecoverable. In 2021 it was agreed with HMRC that \u00a32.2m of this VAT was recoverable and was refunded to the Group. Treasury shares 2022 \u2116 m 2021 \u2116 m 2022 \u00a3m 2021 \u00a3m Ordinary shares of 2 1/15p At 1 January \u2014 2.3 \u2014 (0.1) Issued on exercise of share options \u2014 (2.3) \u2014 0.1 At 31 December \u2014 \u2014 \u2014 \u2014 During the year, the Group did not purchase any treasury shares (2021: none) and did not allot nor issue any treasury shares (2021: 2,299,955 whose aggregate nominal value was \u00a347,532). The total consideration received in respect of the shares allotted during 2021 was \u00a3nil. Employee benefit trust shares 2022 \u2116 m 2021 \u2116 m 2022 \u00a3m 2021 \u00a3m Ordinary shares of 2 1/15p At 1 January 18.1 12.6 (8.0) (11.1) Shares purchased \u2014 13.0 \u2014 (0.3) Issued on exercise of share options (8.8) (7.5) 3.8 3.4 At 31 December 9.3 18.1 (4.2) (8.0) The Group will use shares held in the Employee Benefit Trust (EBT) shares to satisfy future requirements for shares under the Group\u2019s share option and long-term incentive plans. On 19 April 2021, 13m ordinary 2 1/15p shares (2021: nil) were allotted to the EBT for an aggregate nominal value of \u00a3268,667 to satisfy exercises under the Group\u2019s share plans. The total consideration received in respect of these shares was \u00a3268,667. During the year, 8,770,217 (2021: 7,560,173) shares with a value of \u00a33.8m (2021: \u00a33.4m) were transferred out of the EBT to satisfy exercises under the Group's share option and long-term incentive plans. The total consideration received in respect of these shares was \u00a3nil (2021: \u00a3nil). The Group has an unexpired authority to repurchase up to 10% of its issued share capital. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-528": {
"value": "4.7 Group composition and non-controlling interests The Group\u2019s subsidiaries are listed in notes 7.3.4 and 7.3.17 of the Parent Company financial statements on pages 219 and 224 to 227. The Group holds a majority of the voting rights in all of its subsidiaries and the directors have determined that, other than the entity commented on below, in each case the Group exercises de facto control. On 23 September 2014, the Secretary of State for the Department for Energy and Climate Change granted Smart DCC Limited (DCC), a wholly-owned subsidiary of the Group, a licence to establish and manage the smart metering communications infrastructure, governed by the Smart Energy Code. Each year the Group reassess whether it has control over DCC as required under IFRS 10. The Group\u2019s ability to control the relevant activities of DCC is restricted by DCC\u2019s operating licence. The power that the Group has over DCC\u2019s relevant activities by virtue of owning it is limited (given the restrictions in the licence). That power is held by the board of DCC where the Group has minority representation in compliance with the licence. Consequently, the Group has not consolidated DCC within its Group financial statements. The disclosure of related party transactions with DCC is included in note 6.1. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfNoncontrollingInterestsExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-496": {
"value": "4.7 Group composition and non-controlling interests The Group\u2019s subsidiaries are listed in notes 7.3.4 and 7.3.17 of the Parent Company financial statements on pages 219 and 224 to 227. The Group holds a majority of the voting rights in all of its subsidiaries and the directors have determined that, other than the entity commented on below, in each case the Group exercises de facto control. On 23 September 2014, the Secretary of State for the Department for Energy and Climate Change granted Smart DCC Limited (DCC), a wholly-owned subsidiary of the Group, a licence to establish and manage the smart metering communications infrastructure, governed by the Smart Energy Code. Each year the Group reassess whether it has control over DCC as required under IFRS 10. The Group\u2019s ability to control the relevant activities of DCC is restricted by DCC\u2019s operating licence. The power that the Group has over DCC\u2019s relevant activities by virtue of owning it is limited (given the restrictions in the licence). That power is held by the board of DCC where the Group has minority representation in compliance with the licence. Consequently, the Group has not consolidated DCC within its Group financial statements. The disclosure of related party transactions with DCC is included in note 6.1. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCompositionOfGroupExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-497": {
"value": "5.1 Share-based payment plans The Group operates a number of executive and employee equity-settled share schemes. Accounting policies The fair value of the equity instrument granted is measured at grant date and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined using an option pricing model, only taking into account vesting conditions linked to the price of the shares of the Company (market conditions). No expense is recognised for awards that do not ultimately vest as a result of not meeting performance or service conditions. Where all service and performance vesting conditions have been met, the awards are treated as vesting, irrespective of whether or not the market condition is satisfied, as market conditions have been reflected in the fair value of the equity instruments. At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management\u2019s best estimate of the achievement or otherwise of non-market conditions, the number of equity instruments that will ultimately vest or, in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement in cumulative expense since the previous balance sheet date is recognised in the consolidated income statement, with a corresponding adjustment to equity. Where the terms of an award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period adjusted for the incremental fair value of any modification ie the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative. Where an award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the consolidated income statement for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over the fair value being treated as an expense in the income statement. The expense recognised for share-based payments (before tax) in respect of employee services received during the year to 31 December 2022 was \u00a35.4m (2021: \u00a31.2m), all of which arises from equity-settled share based payment transactions. Details of the schemes are as follows: Deferred annual bonus plan This scheme is applicable to executive directors. Under this scheme, awards are made annually consisting of only deferred shares, which are linked to the payout under the annual bonus scheme (details of which are contained in the directors\u2019 remuneration report on pages 99 to 122). The value of deferred shares is determined by the pay-out under the annual bonus scheme: half of the annual bonus is paid in cash and the remainder is deferred into shares under the deferred annual bonus plan or the Capita executive plan. Directors have the option to defer up to 100% of their annual bonus into deferred shares or net bonus into a restricted share award. The deferred/restricted shares are held for a period of three years from the date of award, during which they are not forfeitable, except in the case of dismissal for gross misconduct. The weighted average share price of options at the date of exercise in 2022 was \u00a30.22 (2021: \u00a30.33). The weighted average share price during the year was \u00a30.26 (2021: \u00a30.43). The total cash value of the deferred shares awarded during the year was \u00a30.2m (2021: \u00a3nil). Long-term incentive plans (LTIPs) The structure of the Group\u2019s LTIP schemes was approved at the Company\u2019s AGM in 2017. From 2021, no new awards will be granted under the LTIP although the 2020 awards are yet to vest. For the 2019 award, 75% of the award was equally weighted between free cash flow, EBIT margin and organic revenue growth, with the remaining 25% split equally between customer satisfaction and employee engagement, measured over a three-year period. Threshold vesting (25%) for each measure is dependent upon: free cash flow reaching \u00a3190m; EBIT margin exceeding 9%; organic revenue growth to \u00a33,900m; six point positive swing in NPS for both customer satisfaction and employee engagement. Target vesting (50%) for each measure is dependent upon: free cash flow reaching \u00a3210m; EBIT margin exceeding 10%; organic revenue growth to \u00a33,950m; eight point positive swing in NPS for both customer satisfaction and employee engagement. Maximum vesting (100%) for each measure is dependent upon: free cash flow reaching \u00a3250m; EBIT margin of 12%; organic revenue growth to \u00a34,050m; 12 point positive swing in net promoter score (NPS) for both customer satisfaction and employee engagement. Awards are also subject to an underpin based on an assessment of underlying financial and operational performance. The 2020 award is split into three equal tranches that vest on the first, second and third anniversary of the grant date. The first tranche in 2020 was subject to a retention element which will vest in full on each annual vesting date, with the remaining 50% subject to a performance condition of net debt. Threshold vesting (25%) is dependent on net debt falling to \u00a3872m, target vesting (50%) is dependent on net debt falling to \u00a3822m and maximum vesting (100%) is dependent on net debt being below \u00a3772m. Tranches 2 and 3 are subject to the retention element only apart from the CEO\u2019s award which is subject to relative TSR and responsible business scorecard measures. Details of the LTIP awards made to executive directors over the same period are set out in the directors\u2019 remuneration report, on page 115. All of the above awards are subject to a performance underpin \u2013 assessment of the underlying financial and operational performance of Capita over the performance period. 5.1 Share-based payment plans continued Capita Executive Plan 2021 The Capita Executive Plan was approved by shareholders at the 2021 AGM. Under this plan, restricted share awards (RSAs) are granted to executives. With the exception of the executive directors, RSAs granted in 2021 and 2022 are split into three equal tranches that may vest on the first, second and third anniversary of the grant date. The awards are not subject to a performance underpin. Details of the Capita Executive Plan RSAs made to executive directors and the associated underpins are set out in the directors\u2019 remuneration report, on page 116. 2022 \u2116 m 2021 \u2116 m Outstanding at 1 January 46.4 48.5 Awarded during the year 28.5 15.8 Exercised (8.8) (9.8) Forfeited (24.4) (8.1) Outstanding at 31 December 41.7 46.4 Exercisable at 31 December \u2014 \u2014 The weighted average remaining contractual life of the above shares outstanding at 31 December 2022 was 1.3 years (2021: 1.0 years). All schemes The fair value of the options granted/awarded during the year was \u00a30.22 per share (2021: \u00a30.41 per share). None of the existing option schemes have exercise prices. The fair value for current share scheme issues is effectively the market price of a Capita share at the date of grant. Accordingly, no assumptions have been disclosed. The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-529": {
"value": "The fair value of the equity instrument granted is measured at grant date and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined using an option pricing model, only taking into account vesting conditions linked to the price of the shares of the Company (market conditions). No expense is recognised for awards that do not ultimately vest as a result of not meeting performance or service conditions. Where all service and performance vesting conditions have been met, the awards are treated as vesting, irrespective of whether or not the market condition is satisfied, as market conditions have been reflected in the fair value of the equity instruments. At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management\u2019s best estimate of the achievement or otherwise of non-market conditions, the number of equity instruments that will ultimately vest or, in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement in cumulative expense since the previous balance sheet date is recognised in the consolidated income statement, with a corresponding adjustment to equity. Where the terms of an award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period adjusted for the incremental fair value of any modification ie the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative. Where an award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the consolidated income statement for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over the fair value being treated as an expense in the income statement. The expense recognised for share-based payments (before tax) in respect of employee services received during the year to 31 December 2022 was \u00a35.4m (2021: \u00a31.2m), all of which arises from equity-settled share based payment transactions. Details of the schemes are as follows: Deferred annual bonus plan This scheme is applicable to executive directors. Under this scheme, awards are made annually consisting of only deferred shares, which are linked to the payout under the annual bonus scheme (details of which are contained in the directors\u2019 remuneration report on pages 99 to 122). The value of deferred shares is determined by the pay-out under the annual bonus scheme: half of the annual bonus is paid in cash and the remainder is deferred into shares under the deferred annual bonus plan or the Capita executive plan. Directors have the option to defer up to 100% of their annual bonus into deferred shares or net bonus into a restricted share award. The deferred/restricted shares are held for a period of three years from the date of award, during which they are not forfeitable, except in the case of dismissal for gross misconduct. The weighted average share price of options at the date of exercise in 2022 was \u00a30.22 (2021: \u00a30.33). The weighted average share price during the year was \u00a30.26 (2021: \u00a30.43). The total cash value of the deferred shares awarded during the year was \u00a30.2m (2021: \u00a3nil). Long-term incentive plans (LTIPs) The structure of the Group\u2019s LTIP schemes was approved at the Company\u2019s AGM in 2017. From 2021, no new awards will be granted under the LTIP although the 2020 awards are yet to vest. For the 2019 award, 75% of the award was equally weighted between free cash flow, EBIT margin and organic revenue growth, with the remaining 25% split equally between customer satisfaction and employee engagement, measured over a three-year period. Threshold vesting (25%) for each measure is dependent upon: free cash flow reaching \u00a3190m; EBIT margin exceeding 9%; organic revenue growth to \u00a33,900m; six point positive swing in NPS for both customer satisfaction and employee engagement. Target vesting (50%) for each measure is dependent upon: free cash flow reaching \u00a3210m; EBIT margin exceeding 10%; organic revenue growth to \u00a33,950m; eight point positive swing in NPS for both customer satisfaction and employee engagement. Maximum vesting (100%) for each measure is dependent upon: free cash flow reaching \u00a3250m; EBIT margin of 12%; organic revenue growth to \u00a34,050m; 12 point positive swing in net promoter score (NPS) for both customer satisfaction and employee engagement. Awards are also subject to an underpin based on an assessment of underlying financial and operational performance. The 2020 award is split into three equal tranches that vest on the first, second and third anniversary of the grant date. The first tranche in 2020 was subject to a retention element which will vest in full on each annual vesting date, with the remaining 50% subject to a performance condition of net debt. Threshold vesting (25%) is dependent on net debt falling to \u00a3872m, target vesting (50%) is dependent on net debt falling to \u00a3822m and maximum vesting (100%) is dependent on net debt being below \u00a3772m. Tranches 2 and 3 are subject to the retention element only apart from the CEO\u2019s award which is subject to relative TSR and responsible business scorecard measures. Details of the LTIP awards made to executive directors over the same period are set out in the directors\u2019 remuneration report, on page 115. All of the above awards are subject to a performance underpin \u2013 assessment of the underlying financial and operational performance of Capita over the performance period",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-464": {
"value": "5.2 Pensions Accounting policies Defined contribution pension schemes The Group maintains a number of defined contribution pension schemes and for these schemes the Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense in the consolidated income statement as the related service is provided and as they fall due. Defined benefit pension schemes In addition, the Group operates a defined benefit pension scheme and participates in a number of other defined benefit pension schemes, all of which require contributions to be made to separate trustee-administered funds. The costs of providing benefits under these schemes are determined separately for each scheme using the projected unit credit method, which attributes entitlement to benefits to the current period (to determine current service cost) and to the current and prior periods (to determine the present value of the defined benefit obligation) and is based on actuarial advice. Past service costs are recognised immediately in the consolidated income statement. When a settlement (eliminating all obligations for benefits already accrued) or a curtailment (reducing future obligations as a result of a material reduction in the scheme membership or a reduction in future entitlement) occurs, the obligation and related plan assets are remeasured using current actuarial assumptions and the resultant gain/loss recognised in the consolidated income statement during the period in which the settlement or curtailment occurs. Remeasurements of the net defined benefit asset/liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income and will not be reclassified to the consolidated income statement. The Group generally determines the net interest expense/income on the net defined benefit asset/liability for the year by applying the discount rate used to measure the defined benefit obligation at the beginning of the year to the then net defined benefit asset/liability, taking into account any changes in the net defined benefit asset/liability during the year as a result of contributions and benefit payments. However, due consideration is made to events which require the net interest expense/income on the net defined benefit asset/liability to be remeasured over the course of the year. Current and past service costs are charged to operating profit while the net interest cost is included within net finance costs. The net asset/(liability) in the consolidated balance sheet with respect to the defined benefit pension schemes comprises the total for each scheme, or group of schemes, of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. The policy to determine fair value of plan assets is detailed in the note below. The value of a net pension benefit asset is restricted to the present value of any amount the Group expects to recover by way of refunds from the plan or reductions in the future contributions. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-498": {
"value": "5.2 Pensions Accounting policies Defined contribution pension schemes The Group maintains a number of defined contribution pension schemes and for these schemes the Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense in the consolidated income statement as the related service is provided and as they fall due. Defined benefit pension schemes In addition, the Group operates a defined benefit pension scheme and participates in a number of other defined benefit pension schemes, all of which require contributions to be made to separate trustee-administered funds. The costs of providing benefits under these schemes are determined separately for each scheme using the projected unit credit method, which attributes entitlement to benefits to the current period (to determine current service cost) and to the current and prior periods (to determine the present value of the defined benefit obligation) and is based on actuarial advice. Past service costs are recognised immediately in the consolidated income statement. When a settlement (eliminating all obligations for benefits already accrued) or a curtailment (reducing future obligations as a result of a material reduction in the scheme membership or a reduction in future entitlement) occurs, the obligation and related plan assets are remeasured using current actuarial assumptions and the resultant gain/loss recognised in the consolidated income statement during the period in which the settlement or curtailment occurs. Remeasurements of the net defined benefit asset/liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income and will not be reclassified to the consolidated income statement. The Group generally determines the net interest expense/income on the net defined benefit asset/liability for the year by applying the discount rate used to measure the defined benefit obligation at the beginning of the year to the then net defined benefit asset/liability, taking into account any changes in the net defined benefit asset/liability during the year as a result of contributions and benefit payments. However, due consideration is made to events which require the net interest expense/income on the net defined benefit asset/liability to be remeasured over the course of the year. Current and past service costs are charged to operating profit while the net interest cost is included within net finance costs. The net asset/(liability) in the consolidated balance sheet with respect to the defined benefit pension schemes comprises the total for each scheme, or group of schemes, of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. The policy to determine fair value of plan assets is detailed in the note below. The value of a net pension benefit asset is restricted to the present value of any amount the Group expects to recover by way of refunds from the plan or reductions in the future contributions. 5.2 Pensions continued Significant accounting judgements, estimates and assumptions The measurement of defined benefit obligations \u2013 the accounting cost of these benefits and the present value of pension liabilities involve judgements about uncertain events including such factors as the life expectancy of members, the salary progression of current employees, price inflation and the discount rate used to calculate the net present value of the future pension payments. The Group uses estimates for all of these factors in determining the pension costs and liabilities incorporated in the consolidated financial statements. The assumptions reflect historical experience and judgement regarding future expectations. The Group continued to set RPI inflation in accordance with the market break-even expectations less an inflation risk premium. The inflation risk premium has remained at 0.25% pa. For CPI, the Group retained the assumed difference between RPI and CPI at an average of 0.65%pa. Short-term inflation expectations continued to rise due to the global economic recovery from the initial phase of Covid-19, combined with supply constraints in certain sectors such as energy. Current inflation levels exceed 10% pa. This will have an impact on pension increases that are linked to inflation and this impact, where applicable, has been reflected in the disclosures. It should be noted that a material proportion of pension increases are capped (at different levels, but the main cap is 5% pa) with some caps applying annually and others applying over a period of years. The impact of Covid-19 on the effects of future life expectancy continues to be uncertain. The pandemic is likely to have an impact on the setting of appropriate life expectancy assumptions and models for future improvements will need to consider whether the experiences in 2020 and 2021 are a short-term phenomenon, and if the pandemic will influence future mortality in other ways. For example, the pressure on health services may mean that progress against other causes of death such as cancer is slower than previously expected, meaning an assumption of a lower rate of mortality improvements might be appropriate. Alternatively, the surviving population may be in better health than those dying from Covid-19, meaning that it might be expected that the remaining members live slightly longer. It is still too early to draw conclusions as to what impact Covid-19 might have on future life expectancy; however, some allowance has been reflected for actual mortality experienced in 2020 and 2021 by making a refinement in an initial addition parameter used in the future mortality improvement assumptions from 0.5% to 0.25% (which makes an allowance for a decrease in initial rates of longevity improvement stemming from Covid-19) and which results in the life expectancy reducing by around 0.1 years (around 0.4% of liabilities). Pension expense included in the consolidated income statement 2022 \u00a3m 2021 \u00a3m Defined contribution scheme 55.2 60.2 Defined benefit schemes Current service cost 4.4 6.3 Administration costs 3.9 3.5 Past service cost 0.6 (0.2) Effect of settlements 0.1 (0.7) Interest cost (3.6) 1.5 Total defined benefit schemes 5.4 10.4 Total charged to profit before tax in the consolidated income statement 60.6 70.6 At 31 December 2022, retirement obligations were disclosed in relation to 9 (2021: 10) defined benefit pension schemes. The main defined benefit scheme is the Capita Pension and Life Assurance Scheme. The Capita Pension and Life Assurance Scheme (CPLAS) CPLAS is the Group\u2019s main defined benefit scheme, which closed to future accrual for most members in 2017 (with around 200 members continuing to accrue benefits \u2013 out of a total membership of around 16,600 members). Details of the CPLAS and other schemes net surplus/ (deficit) position are given at the bottom of the table below which shows the movements from the opening to the closing balance of the net defined benefit asset/(liability). Events have occurred in the CPLAS that has led to its income statement being remeasured during the year. Responsibility for the operation and governance of the CPLAS lies with a corporate Trustee which is independent of the Group. The Trustee Board is required by law to act in the interest of the CPLAS\u2019s beneficiaries in accordance with the rules of the CPLAS and relevant legislation (which includes the Pension Schemes Act 1993, the Pensions Act 1995 and the Pensions Act 2004). The nature of the relationship between the Group and the Trustee Board is also governed by the rules of the CPLAS and relevant legislation. The Trustee Board is chaired by an independent Trustee. The assets of the CPLAS are held in a separate fund (administered by the Trustee Board) to meet long-term pension liabilities to beneficiaries. The Trustee Board invest the assets in accordance with their Statement of Investment Principles, which is regularly reviewed. During 2021, the Trustee Board delegated investment strategy decisions to a fiduciary manager, however, the Trustee Board maintained overall oversight of the investment strategy. A full actuarial valuation of the scheme is carried out every three years by an independent actuary for the Trustee Board, with the last full actuarial valuation carried out at 31 March 2020. The purpose of that valuation is to design a funding plan to ensure that the CPLAS has sufficient assets available to meet future benefit payments, based on assumptions agreed between the Trustee Board and the Group. The 31 March 2020 actuarial valuation showed a funding deficit of \u00a3182.2m (31 March 2017: \u00a3185.0m). This equates to a funding level of 89.0% (31 March 2017: 86%). 5.2 Pensions continued As a result of the funding valuation, the Group and the Trustee Board agreed the following plan to eliminate the deficit, effective from 1 July 2021: 2021 2022 2023 2 Deficit contribution 1 \u00a359.0m \u00a330.0m \u00a330.0m 1. The agreed contributions make allowance for additional contributions, totalling c\u00a3113.6m, paid by the Group between 1 April 2020 and 30 June 2021 to meet its obligations under the previous agreement dated 23 November 2018, to unwind CPLAS\u2019s interest in the Capita Scotland (Pension) Limited Partnership, and in respect of a section 75 debt. The Trustee Board has agreed with the Group to accelerate the payment of some of the deficit contributions on a pound for pound basis in the event of disposal proceeds being used to fund mandatory prepayments of debt. 2. In addition, in 2023, the \u00a35.0m held in escrow at 31 December 2022 is expected to be released to CPLAS. In addition to the above, the Group has agreed to make additional, non-statutory, contributions of \u00a315m each year in 2024, 2025 and 2026 to meet a secondary funding target. The aim of which is to target, by 2026, the position of having sufficient assets to invest in a portfolio of low risk assets with a low dependency covenant that will generate income to pay members\u2019 benefits as they fall due. The next full actuarial valuation is due to be carried out with an effective date of 31 March 2023 and as part of that valuation the contribution requirements will be reviewed, and if necessary, amended. For the purpose of these accounts, an independent qualified actuary projected the results of the 31 March 2020 actuarial valuation to 31 December 2022 taking account of the relevant accounting requirements. Approximate funding updates are produced at each scheme anniversary when a full actuarial valuation is not being undertaken. The most recent of these, at 31 March 2022, showed a funding level of 104% on a Technical Provisions basis. The Group expects to contribute around \u00a352m to the CPLAS during 2023. This includes the acceleration of agreed deficit contributions on a pound for pound basis as noted above. Other defined benefit schemes The total employer contributions to the \u2018Other\u2019 schemes during 2023 are estimated to be \u00a33m. Admitted Body arrangement For the Admitted Body scheme, under which benefits continued to accrue until the contract ceased on 16 January 2020, the Group was required to pay regular contributions as decided by the Scheme Actuary and as detailed in the scheme\u2019s Schedule of Contributions. On 2 February 2022 the scheme confirmed that, in accordance with their funding strategy statement, a cessation valuation at 16 January 2020 had been carried out and an exit credit payment of \u00a3192,587 was due from the scheme to the Group. The payment was received by the Group on 17 March 2022 and no further amounts are due to the Group with the scheme\u2019s assessed liability to the Group now settled. Other UK schemes \u2022 Three segregated sections in an industry-wide scheme under which defined benefits are not continuing to accrue. The latest full actuarial valuations (at 31 December 2018) showed that two of these sections were in surplus and therefore no deficit contributions were required. The third section showed a small deficit but the Trustees agreed that no deficit contributions would be required. The actuarial valuations as at 31 December 2021 are currently in progress and as part of those valuations the contribution requirements will be reviewed, and if necessary, amended. There is no cross subsidy with other employer sections. \u2022 Participation in a non-associated multi-employer scheme under which defined benefits are not continuing to accrue. The latest full actuarial valuation (at 30 September 2020) resulted in the Group requiring to pay deficit contributions of initially \u00a30.4m pa (which increase each year by 5.5% pa) until 2028. If the Group were to cease to be a participating employer in this scheme there would be an exit debt payable. At 30 September 2021, this was estimated at \u00a38.9m. Overseas defined benefit schemes The Group is responsible for an Irish defined benefit scheme which is classed as a cross-border scheme where the beneficiaries of the scheme have their liabilities, and the trustees hold assets, denominated in euro. The scheme is governed under UK regulations and subject to further requirements applying to cross-border schemes. There are two segregated sections in the scheme. The latest full actuarial valuation (at 31 March 2022) showed a funding surplus for both the main section and the other section, and consequently, no deficit contributions are required for either section. There are no members left accruing benefits. The Group is also responsible for two Swiss schemes that provide defined contribution benefits but with certain guarantees (and are therefore reported as defined benefit schemes under IAS 19). They are administered and governed through collective foundations which are separate legal entities. Benefits are continuing to accrue in these schemes. Additional defined benefit schemes There are a further 46 (2021: 48) defined benefit pension arrangements in which various Capita businesses participated during 2022. Of these arrangements, 41 (2021: 41) relate to participation in funded and unfunded public sector schemes (referred to as Admitted Body Arrangements as described above), however, contractual protections are in place allowing actuarial and investment risk to be passed to the end customer via recoveries for contributions paid. The nature of these arrangements vary from contract to contract but typically allow for the majority of contributions payable to the schemes in excess of an initial rate agreed at the inception to be recovered from the end customer, as well as exit payments (for funded schemes) payable to the schemes at the cessation of the contract, such that the Group\u2019s net exposure to actuarial and investment risk is immaterial. It is estimated that around \u00a312m of employer contributions were paid to these 46 schemes during 2022. 5.2 Pensions continued Risks associated with the Group\u2019s pension schemes The defined benefit pension schemes expose the Group to various risks, with the key risks set out below: Investment risk: the schemes invest in a wide range of assets with a view to provide long-term investment returns at particular levels. There is a risk that investment returns are lower than expected which, in isolation, could result in a worsening of the funding position of the schemes. Interest rate risk: the IAS 19 discount rate is derived based on the yields available on good quality corporate bonds of suitable duration. If these yields decrease then, in isolation, this would increase the value placed on the IAS 19 obligation and result in a worsening of the funding position of the schemes. Inflation risk: the liabilities of the schemes are linked to future levels of inflation. If future inflation is higher than expected then this would result in the cost of providing the benefits increasing and thereby worsening the funding position of the schemes. Longevity risk: if members live longer than expected, then pensions will be paid for a longer time which will increase the value placed on the liabilities and therefore worsen the funding position of the schemes. Environmental Social and Governance (ESG) risk: ESG risk relates to these issues having a detrimental impact on financial returns. The fiduciary manager has policies in place to reduce this risk, although there is a higher risk in older externally held assets. To manage these risks, the Group and the trustees carry out regular assessments of them. For CPLAS, the main defined benefit scheme, the following actions have been taken: \u2022 The CPLAS Trustee Board has entered into two bulk annuity contracts with an insurer in respect of a small number of high individual liability pensioner members (one in 2015 and the second in late 2017) with total value included in the assets at 31 December 2022 of \u00a350.1m (2021: \u00a367.8m). \u2022 The CPLAS Trustee Board has entered into a Liability Driven Investment programme. The level of risk that is managed by this programme is set by various market-related and funding trigger points. Together, these actions have led to the Trustee Board hedging (interest rate and inflation) a high proportion of the CPLAS\u2019s liabilities. At 31 December 2022 around 95% of CPLAS\u2019s liabilities measured on the Trustee Board\u2019s long-term funding basis was hedged. As the funding level improves it is planned to further increase the level of hedging. Despite the market volatility during the last quarter of 2022, the CPLAS held sufficient liquid assets to meet its collateral calls and maintain its hedged positions throughout the year, as well as holding a sufficient buffer against future adverse movements. The fiduciary manager has confirmed that the investment strategy held up well despite the market volatility and that they continue as planned with the current strategy (which involved the selling down of more illiquid holdings in any event). The hedging aims to match the value of the assets to the movement in liabilities (on a funding basis) arising from changes in market expectations of future inflation rates and future gilt yields. This is to help protect and reduce volatility in funding valuations which are used to determine the cash contribution requirements to the scheme. As these accounting disclosures use the yields available on corporate bonds to determine the accounting liabilities, the hedging may not have the same impact against changes as they do on a funding valuation. Although credit spreads (difference between the yields available on long-dated corporate bonds and long-dated government bonds) have been volatile over the year, they have fallen back down towards levels seen at the start of the year. This means that the hedge has broadly had the same impact on the funding position of the scheme and the accounting disclosures at the year-ends. To illustrate how sensitive the value of the defined benefit obligations is to different market conditions, the table below shows what the resulting defined benefit obligation would be if the assumptions were changed as shown (assuming all other assumptions remain constant): Change in assumptions compared with 31 December 2022 actuarial assumptions Group Total \u00a3m Base defined benefit obligation 1,136.1 0.5% pa decrease in discount rate 1,223.6 0.5% pa increase in salary increases 1,137.4 0.5% pa increase in inflation (and related assumption, eg salary and pension increases) 1,184.9 1 year increase in life expectancy 1,169.7 Due to the higher interest rate environment and recent market volatility, please note the change in method used to prepare the sensitivity analysis (analysis from 0.1% pa to 0.5% pa). 5.2 Pensions continued Assets and liabilities Under IAS 19, plan assets must be valued at their fair value on the balance sheet date. The plan assets are made up of quoted and unquoted investments, and asset valuations have been sourced from the respective scheme\u2019s investment managers and custodians, based on their pricing sources and methodologies. Unquoted investments require more judgement because their values are not directly observable. The assumptions used in valuing unquoted investments are affected by current market conditions which could result in changes in fair value after the measurement date. For the main asset categories: \u2022 Equities listed on recognised stock exchanges are valued at closing bid prices. \u2022 Bonds are measured using a combination of broker quotes and pricing models making assumptions for credit and market risks and market yield curves. \u2022 Properties are valued on the basis of an open market value or are valued using models based on discounted cash flow techniques. \u2022 Assets in investment funds are valued at fair value which is typically the net asset value provided by the investment manager. \u2022 Certain unlisted investments are valued using a model based valuation such as discounted cash flow. \u2022 The value of bulk annuity contracts has been assessed by discounting the projected cash flows payable under the contracts (projected by an actuary, consistent with the terms of the contract) and is equal to the corresponding liability calculated by reference to the IAS 19 assumptions. The assets and liabilities of all of the defined benefit pension schemes (excluding additional voluntary contributions) at 31 December are: Group total 2022 2021 Quoted \u00a3m Unquoted \u00a3m Total \u00a3m Quoted \u00a3m Unquoted \u00a3m Total \u00a3m Scheme assets at fair value: Equities: \u2013 UK 0.2 2.5 2.7 1.0 3.1 4.1 \u2013 Overseas 2.0 24.8 26.8 7.0 76.5 83.5 \u2013 Private 0.2 \u2014 0.2 0.5 \u2014 0.5 2.4 27.3 29.7 8.5 79.6 88.1 Debt securities: \u2013 UK Government 482.0 \u2014 482.0 789.1 0.2 789.3 \u2013 UK Corporate 0.4 11.6 12.0 1.1 7.6 8.7 \u2013 Overseas Government 10.1 11.4 21.5 2.6 53.4 56.0 \u2013 Overseas Corporate 0.9 101.0 101.9 1.2 67.8 69.0 \u2013 Emerging Markets 0.5 27.3 27.8 1.4 \u2014 1.4 \u2013 Private Debt \u2014 134.5 134.5 \u2014 129.5 129.5 \u2013 Secured Loans \u2014 39.8 39.8 0.1 \u2014 0.1 493.9 325.6 819.5 795.5 258.5 1,054.0 Property 2.6 88.2 90.8 2.8 97.5 100.3 Infrastructure 1.5 \u2014 1.5 1.5 \u2014 1.5 Credit Funds 2.7 \u2014 2.7 3.2 160.1 163.3 Hedge Funds \u2014 2.1 2.1 \u2014 54.1 54.1 Absolute Return Funds 0.1 \u2014 0.1 0.8 \u2014 0.8 Diversified Growth Funds \u2014 \u2014 \u2014 \u2014 79.5 79.5 Insurance Contracts \u2014 71.4 71.4 \u2014 86.8 86.8 Cash 34.3 133.2 167.5 148.1 11.2 159.3 Other (8.5) (1.1) (9.6) 1.2 8.4 9.6 32.7 293.8 326.5 157.6 497.6 655.2 Total 529.0 646.7 1,175.7 961.6 835.7 1,797.3 Present value of scheme liabilities (before effect of asset ceiling limit) (1,136.0) (1,789.2) Net surplus (before effect of asset ceiling limit) 39.7 8.1 Effect of asset ceiling limit (0.1) (2.3) Present value of scheme liabilities (after effect of asset ceiling limit) (1,136.1) (1,791.5) Net surplus (after effect of asset ceiling limit) 39.6 5.8 * Some investments are in funds which are in themselves not traded in active markets. Please also note a change in asset classification for CPLAS\u2019s Credit Funds (\u00a393.0m) and Diversified Growth Funds (\u00a356.8m) as at 31 December 2022 which are now classified on a \u2018look-through\u2019 basis. 5.2 Pensions continued The CPLAS Trustee Board invests in Liability Driven Investments (LDIs) as part of a risk hedging strategy. The aim of the strategy is to match the value of the assets to the movement in liabilities (on a funding basis) arising from changes in market expectations of future inflation rates and future gilt yields. In order to achieve this, LDIs invest in a variety of instruments including gilts, synthetic gilts (combination of repurchase agreement, reverse repurchase agreements and total return swaps) and cash. In the table above, the LDI as at 31 December 2022 (approximately \u00a3484.3m) has been mapped as 97.0% Quoted UK Government Bonds, 1.7% Quoted Overseas Government Bonds, 3.1% Quoted Cash and -1.8% Quoted Other. The assets do not include any directly owned financial instruments issued by the Group. Within the Private Debt allocation, approximately \u00a397.3m relates to lagged valuations as at 30 September 2022. Allowance has been made for broad market movements and distributions over the period to 31 December 2022. In accordance with the CPLAS Trustee Board\u2019s focus on financially material considerations, it is acknowledged that Environment, Social and Governance (ESG) factors can impact security prices. The CPLAS Trustee Board has discussed their views on ESG factors, and considered the Group\u2019s perspective, and developed responsible investment beliefs. These can be found in the CPLAS\u2019s Statement of Investment Principles (which can be found at https://www.cplas-pension.co.uk/library). IFRIC 14 The Group has considered the impact of IFRIC 14 on the various schemes (in relation to either recognising a surplus or allowing for the impact of any funding commitments made) and has concluded, based on the interpretation of the rules for each of the schemes, that IFRIC 14 would marginally increase the deficits shown at this balance sheet date for only one scheme, which is reflected in the balance sheet position. For the CPLAS, the Group\u2019s main defined benefit scheme, IFRIC 14 would not limit the surplus or increase the deficits shown at the balance sheet date because the Group has an unconditional right to a refund at some point during the life of the scheme. Reconciliation of retirement benefits Explanation of constituents of the consolidated income statement. The cost of providing the pension scheme during the year is broken down as follows, with due consideration being made for events which require the income statement to be re-measured over the course of the year: \u2022 Service cost is the cost to the Group of future benefits earned by contributing members over the current financial period. \u2022 Past service cost represents the change in the present value of scheme liabilities in the current period in relation to prior years\u2019 service. \u2022 Administration costs are those entailed by the pension schemes over the current period. \u2022 Interest expense/(income) is made up of the interest on pension liabilities and assets over the current period generally based on the discount rate adopted at the start of the period. An allowance for interest on the asset ceiling is recognised where applicable: approximately \u00a30.1m as at 31 December 2022 (\u00a3nil as at 31 December 2021). 5.2 Pensions continued All schemes are partly or wholly funded, and the following table shows the components of the movements from the opening to the closing balances for the net defined benefit obligation: Group total Defined benefit obligation Fair value of plan assets Net defined obligation 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m At 1 January (1,791.5) (1,882.3) 1,797.3 1,630.2 5.8 (252.1) Included in the consolidated income statement: Current service cost (4.4) (6.3) \u2014 \u2014 (4.4) (6.3) Administration costs (3.9) (3.5) \u2014 \u2014 (3.9) (3.5) Past service cost (0.6) 0.2 \u2014 \u2014 (0.6) 0.2 Effect of settlements 0.1 5.5 (0.2) (4.8) (0.1) 0.7 Interest income/(expense)* (44.0) (27.5) 47.6 26.0 3.6 (1.5) Sub-total in consolidated income statement (52.8) (31.6) 47.4 21.2 (5.4) (10.4) Included in other comprehensive income: Actuarial gain/(loss) arising from: \u2013 demographic assumptions 6.8 (10.7) \u2014 \u2014 6.8 (10.7) \u2013 financial assumptions 706.1 129.2 \u2014 \u2014 706.1 129.2 \u2013 experience adjustments (50.4) (41.6) \u2014 \u2014 (50.4) (41.6) \u2013 changes in asset ceiling/minimum liability 2.3 (2.3) \u2014 \u2014 2.3 (2.3) Return on plan assets excluding interest \u2014 \u2014 (673.7) 34.8 (673.7) 34.8 Sub-total in other comprehensive income 664.8 74.6 (673.7) 34.8 (8.9) 109.4 Employer contributions (0.2) \u2014 48.7 158.9 48.5 158.9 Contributions by employees (1.7) (1.6) 1.7 1.6 \u2014 \u2014 Benefits paid 47.8 48.8 (47.8) (48.8) \u2014 \u2014 Exchange movement - recognised in other comprehensive income (2.5) 0.6 2.1 (0.6) (0.4) \u2014 At 31 December (1,136.1) (1,791.5) 1,175.7 1,797.3 39.6 5.8 Schemes in a net surplus CPLAS (1,087.0) (1,725.3) 1,126.3 1,732.5 39.3 7.2 Other schemes (15.2) (23.8) 18.6 29.9 3.4 6.1 (1,102.2) (1,749.1) 1,144.9 1,762.4 42.7 13.3 Schemes in a net deficit Other schemes (33.9) (42.4) 30.8 34.9 (3.1) (7.5) (33.9) (42.4) 30.8 34.9 (3.1) (7.5) At 31 December (1,136.1) (1,791.5) 1,175.7 1,797.3 39.6 5.8 *includes impact of asset ceiling on net interest of \u00a30.1m in 2022 (2021: \u00a3nil). Of the total pension cost of \u00a35.4m (2021: \u00a310.4m), \u00a35.1m (2021: \u00a35.4m) was included in cost of sales, \u00a33.9m (2021: \u00a33.5m) was included in administrative expenses, and, in net finance costs: \u00a33.6m of net interest income (2021: \u00a31.5m of net interest expense). Breakdown of liabilities for the CPLAS Information about the defined benefit obligation for the CPLAS: Proportion of overall liability % Duration (years) Proportion of overall liability % Duration (years) 2022 2022 2021 2021 Active members 6 16.9 5 21.4 Deferred members 59 18.0 63 22.8 Pensioners 35 10.6 32 13.0 Total percentage / average duration 100 15.5 100 19.6 Duration is a weighted average of when benefits are expected to be paid from a pension scheme. It is sensitive to the interest rate used to calculate it. The increase in yields has acted to reduce the duration of the CPLAS (as less weight is placed of the pension cash flows stretching far out into the future). 5.2 Pensions continued Financial and demographic assumptions All schemes Main assumptions1: 2022 % 2021 % Rate of price inflation \u2013 RPI 3.15 3.30 Rate of price inflation \u2013 CPI 2.50 2.65 Rate of salary increase 3.15 3.30 Rate of increase of pensions in payment2 : \u2013 RPI inflation capped at 5% per annum 3.05 3.20 \u2013 RPI inflation capped at 2.5% per annum 2.15 2.20 \u2013 CPI inflation capped at 5% per annum 2.50 2.65 Discount rate 4.75 1.90 Expected take up maximum available tax free cash 85.00 85.00 1. Only the discount rate is relevant to the Admitted Body Scheme. Different assumptions apply to non-UK schemes, for example: the discount rate for the Irish Schemes are 3.8% per annum and for the Swiss schemes it is 2.2% per annum in 2022. 2. There are other levels of pension increase which apply to particular periods of membership. The average future life expectancy from age 65 (in years) for mortality tables used to determine scheme liabilities for the various different schemes at 31 December 2022 and 31 December 2021 are as follows: Member currently aged 65 (current life expectancy) Member currently aged 45 (life expectancy at 65) Male Female Male Female 2022 2021 2022 2021 2022 2021 2022 2021 Capita Scheme 1 22.4 22.5 24.3 24.4 22.3 22.4 25.2 25.3 Other Schemes2 21.1 to 22.7 21.6 to 22.6 23.7 to 24.5 23.5 to 24.4 22.3 to 25.0 22.4 to 24.9 25.2 to 26.5 25.1 to 26.4 1. The assumptions used for the Capita scheme are tailored for each member. The assumptions adopted make allowance for an increase in the longevity in the future (CMI 2021 core model Sk=7.0) with a long-term rate of improvement of 1.25% p.a., an \u2018A\u2019 parameter of 0.25% for both males and females and no weighting applied to 2020 and 2021 data). The rate for members currently aged 65 is derived from the pensioner membership and the rate for members reaching age 65 in 20 years' time is derived from non-pensioner membership. 2. This does not apply to the Admitted Body Scheme. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-499": {
"value": "5.3 Employee benefit expense Accounting policies Government grants Government grants are not recognised until there is a reasonable assurance that they Group will comply with the conditions attaching to them and that the grants will be received. Government grants are recognised in the consolidated income statement on a systematic basis over the periods in which the Group recognises, as expenses, the related costs for which the grants are intended to compensate. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in the consolidated income statement in the period in which they become receivable. Notes 2022 \u00a3m 2021 \u00a3m (Re- presented)1 Wages and salaries 1 1,536.1 1,540.9 Social security costs 152.4 155.9 Pension costs 64.2 69.1 Share-based payments 5.1 5.4 1.2 1,758.1 1,767.1 1. The 2021 comparative figures have been re-presented to reflect the reclassification of employee contributions from pension costs to wages and salaries. During 2021, the Group furloughed employees unable to work as a result of the Covid-19 pandemic, and applied to the Coronavirus Job Retention Scheme (CJRS) operated by the UK Government. Amounts received under CJRS were treated as a government grant and deducted from the relevant cost in the consolidated income statement. During 2021, the Group claimed \u00a34.9m under CJRS. These amounts are included within the relevant cost headings in the table above. In May 2022, we announced the Group's intention to repay the amounts received in 2021 under CJRS at the end of the Group's publicly stated disposal programme and no later than the end of June 2023. An accrual has been recognised for this repayment in the year ended 31 December 2022. 5.3 Employee benefit expense continued The aggregate amount of directors\u2019 remuneration (salary, bonus and benefits) is shown on page 111 of the directors\u2019 remuneration report. \u2022 The aggregate amount of gains made by directors on exercise of share options was \u00a3119,102 (2021: \u00a3nil) (refer to note 6.1). \u2022 The remuneration of the highest paid director was \u00a31,767,972 (2021: \u00a31,185,415). \u2022 Payments have been made to a defined contribution pension scheme on behalf of five directors (2021: four directors). For the highest paid director, pension contributions of \u00a337,400 (2021: \u00a336,250) were made. The average number of employees during the year was made up as follows: 2022 Number 2021 Number Sales 598 766 Administration 3,093 3,259 Operations 47,509 49,305 51,200 53,330 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-465": {
"value": "Government grants Government grants are not recognised until there is a reasonable assurance that they Group will comply with the conditions attaching to them and that the grants will be received. Government grants are recognised in the consolidated income statement on a systematic basis over the periods in which the Group recognises, as expenses, the related costs for which the grants are intended to compensate. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in the consolidated income statement in the period in which they become receivable. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForGovernmentGrants",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-530": {
"value": "6.1 Related-party transactions Compensation of key management personnel 2022 \u00a3m 2021 \u00a3m Short-term employment benefits 7.6 12.7 Pension \u2014 \u2014 Share-based payments 2.2 0.3 9.8 13.0 Gains on share options exercised in the year by Capita plc executive directors were \u00a3119,102 (2021: \u00a3nil) and by key management personnel \u00a3396,621 (2021: \u00a31,132,231), totalling \u00a3515,723 (2021: \u00a31,132,231). During the year, the Group rendered administrative services to Smart DCC Limited (DCC), a wholly-owned subsidiary which is not consolidated (refer to note 4.7). The Group received \u00a3112.0m (2021: \u00a390.1m) of revenue for these services. The services are procured by DCC on an arm\u2019s length basis under the DCC licence. The services are subject to review by Ofgem to ensure that all costs are economically and efficiently incurred by DCC. Capita Pension and Life Assurance Scheme is a related party of the Group. Transactions with the Scheme are disclosed in note 5.2. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTransactionsBetweenRelatedPartiesExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-500": {
"value": "6.1 Related-party transactions Compensation of key management personnel 2022 \u00a3m 2021 \u00a3m Short-term employment benefits 7.6 12.7 Pension \u2014 \u2014 Share-based payments 2.2 0.3 9.8 13.0 Gains on share options exercised in the year by Capita plc executive directors were \u00a3119,102 (2021: \u00a3nil) and by key management personnel \u00a3396,621 (2021: \u00a31,132,231), totalling \u00a3515,723 (2021: \u00a31,132,231). During the year, the Group rendered administrative services to Smart DCC Limited (DCC), a wholly-owned subsidiary which is not consolidated (refer to note 4.7). The Group received \u00a3112.0m (2021: \u00a390.1m) of revenue for these services. The services are procured by DCC on an arm\u2019s length basis under the DCC licence. The services are subject to review by Ofgem to ensure that all costs are economically and efficiently incurred by DCC. Capita Pension and Life Assurance Scheme is a related party of the Group. Transactions with the Scheme are disclosed in note 5.2. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-537": {
"value": "Compensation of key management personnel 2022 \u00a3m 2021 \u00a3m Short-term employment benefits 7.6 12.7 Pension \u2014 \u2014 Share-based payments 2.2 0.3 9.8 13.0 Gains on share options exercised in the year by Capita plc executive directors were \u00a3119,102 (2021: \u00a3nil) and by key management personnel \u00a3396,621 (2021: \u00a31,132,231), totalling \u00a3515,723 (2021: \u00a31,132,231). ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-531": {
"value": "6.2 Contingent liabilities Contingent liabilities represent potential future cash outflows which are either not probable or cannot be measured reliably. The Group has provided, through the normal course of its business, performance bonds and bank guarantees of \u00a334.0m (2021: \u00a328.7m). The Group is reviewing its position in respect of a number of its closed book Life & Pensions contracts. The outcomes and timing of this review, which are uncertain, could result in the continuation of contracts with amended terms or the termination of contracts. If an operation is terminated, the Group may incur associated costs, accelerate the recognition of deferred income or the impairment of contract assets. The Group\u2019s entities are parties to legal actions and claims which arise in the normal course of business. The Group needs to apply judgement in determining the merit of litigation against it and the chances of a claim successfully being made. It needs to determine the likelihood of an outflow of economic benefits occurring and whether there is a need to disclose a contingent liability or whether a provision might be required due to the probability assessment. At any time there are a number of claims or notifications that need to be assessed across the Group. The disparate nature of the Group\u2019s entities heightens the risk that not all potential claims are known at any point in time. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-501": {
"value": "6.2 Contingent liabilities Contingent liabilities represent potential future cash outflows which are either not probable or cannot be measured reliably. The Group has provided, through the normal course of its business, performance bonds and bank guarantees of \u00a334.0m (2021: \u00a328.7m). The Group is reviewing its position in respect of a number of its closed book Life & Pensions contracts. The outcomes and timing of this review, which are uncertain, could result in the continuation of contracts with amended terms or the termination of contracts. If an operation is terminated, the Group may incur associated costs, accelerate the recognition of deferred income or the impairment of contract assets. The Group\u2019s entities are parties to legal actions and claims which arise in the normal course of business. The Group needs to apply judgement in determining the merit of litigation against it and the chances of a claim successfully being made. It needs to determine the likelihood of an outflow of economic benefits occurring and whether there is a need to disclose a contingent liability or whether a provision might be required due to the probability assessment. At any time there are a number of claims or notifications that need to be assessed across the Group. The disparate nature of the Group\u2019s entities heightens the risk that not all potential claims are known at any point in time. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-502": {
"value": "6.3 Post balance sheet events The following events occurred after 31 December 2022, and before the approval of these consolidated financial statements, but have not resulted in adjustment to the 2022 financial results: Committed bridge facility In February 2023, the Group entered into a committed bridge facility of \u00a350m with three of its relationship banks providing additional liquidity from 1 January 2024. The committed bridge facility has an expiry date of 31 December 2024 and is subject to covenants, which are the same as those in the Revolving Credit Facility (RCF). Both the RCF and the \u00a350m bridge facility incorporate provisions such that they will partially reduce in quantum as a consequence of specified transactions including disposals, equity-raises or other refinancing.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-5": {
"value": "65 Gresham Street London EC2V 7NQ",
"dimensions": {
"concept": "ifrs-full:AddressOfRegisteredOfficeOfEntity",
"language": "en",
"entity": "scheme:CMIGEWPLHL4M7ZV0IZ88",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
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}
}