REG-Capita PLC: Annual Financial Report
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3 April 2013 Capita plc (the "Company") Annual Financial Report Capita plc will hold its Annual General Meeting at 11.00am on Tuesday 14 May 2013 at Deutsche Bank, 1 Great Winchester Street, London EC2N 2DB. Pursuant to Listing Rule 9.6.1, copies of the following documents have been submitted to the National Storage Mechanism and will shortly be available for inspection at http://www.hemscott.com/nsm.do: - Annual Report and Accounts for the year ended 31 December 2012 * Notice of Meeting for the 2013 Annual General Meeting * Form of Proxy These documents are available on the Company's website: www.capita.co.uk. Contact: Francesca Todd, Deputy Group Company Secretary, 020 7202 0641 A condensed set of the Company's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements, were included in the preliminary results announcement released on 28 February 2013. That information, together with the information set out below, which is extracted from the Annual Report and Accounts 2012, is provided in accordance with the Disclosure and Transparency Rule 6.3.5. This information should be read in conjunction with the Company's preliminary results announcement. This announcement is not a substitute for reading the full Annual Report and Accounts 2012. Principal risks and uncertainties Managing our risks Effective risk management not only acts to protect and maximise the financial performance of the business, it also offers the opportunity to safely undertake more complex, operationally challenging projects and attract the higher reward that comes with the ability to effectively manage risk. The Group Board is responsible for ensuring that an appropriate risk management framework is in place, with relevant systems and controls to identify, assess and mitigate major business risks that could impact the delivery of our growth strategy. The Capita Risk Appetite Statement, is subject to regular review as the Group's plans, controls and level of risk maturity develop over time. It provides a consistent reference point for the alignment of risk taking and risk management throughout the organisation and is reviewed and adopted at divisional and business unit level as applicable. Implementation of risk management is aligned with Capita's decentralised business model. Each Divisional Director and/or senior management of the underlying business unit, is responsible for establishing processes and procedures to capture, manage, and report on the risks for which they are accountable in accordance with the agreed Group framework. Capita operates the `three lines of defence' model, with line management responsible for the first line, Risk and Compliance for the second line, and Group Internal Audit for the third line. Key risk Potential impacts Mitigating activities include categories Financial - Adverse effect on - Financial performance of each business financial performance unit is monitored monthly and brand reputation. - Capital expenditure is subject to rigorous monitoring and budgetary controls. Delegates and - Reputation risk and - Rigorous risk-based due diligence counterparty financial loss e.g. processes for the selection of key failure disruption to supply delegates and wider counterparties chain; service monitoring interruption. Operational - Failure to meet - Operating frameworks and business risks contractual service resilience arrangements in place level agreements - Operating performance indicators - Financial penalties reviewed by line management - Potential loss of - Risk committees and Group Board contracts escalation as appropriate - Brand reputation - Risk based independent assurance impacted. - Business resilience arrangements in place - Centralised proactive and reactive PR team provides full issues management communications support Acquisitions - Planned synergies - Rigorous risk-based due diligence and organic not achieved growth - `Black Hat' process: - Adverse impact on financial growth and - Fit with strategy and pricing is performance subject to review and approval by the Group Board - Financial penalties. - Appropriate contractual terms to ensure fair risk/reward profile - Robust integration and transition process. Economic - Weaker economic - Focus on 10 diverse public and private landscape conditions are a key sector markets driver for outsourcing, however, - Focus on widening scope of existing extreme economic contracts to help clients save money uncertainty can result in a delay in buying - Supply of services that support decisions and lower essential client functions rather than discretionary spend discretionary activities across some market segments. - Initiatives to increase the efficiency of Group operations. Attract and - Lack of appropriate - Training and development retain resources may lead to employees inability to develop - Continual development through objective and execute business setting and appraisals plans - Competitive incentive and bonus plans - Poor employee morale - Succession planning - Competitive disadvantage. - Comprehensive vetting process in line with roles. Loss of - Contractual and - Appropriate policies and procedures sensitive or regulatory penalties confidential - Robust information security framework, data - Adverse media including policies and processes comment and reputation impact on brand. - Escalation to risk committees and subsidiary boards - Training and monitoring programme across businesses - Swift adoption of Group policies and protocols by newly acquired businesses - Sharing of best practice and issues through cross-Group forums - Regular monitoring through risk-based audits and follow-up of actions - Centralised proactive and reactive PR team. IT risks - Failure to support - Adoption, implementation and audit of core services and industry recognised controls business needs - Regular and documented disaster - Inability to provide recovery tests adequate disaster recovery services - Regular audit of services and systems to validate adequacy of protective - Failure to protect controls and processes client and Capita data. Fraud, bribery - Potential for civil - Appropriate policies and procedures in and corruption and criminal penalties place including a `speak up' policy for business and/or senior officers - Anti corruption culture and a zero tolerance approach with a robust - Potential disciplinary process prohibition from bidding for public - Risk assessments of vulnerabilities sector contracts in EU - Monitoring and audit - Media comment and reputation impact. - Centralised proactive and reactive PR team. Regulatory - Non-compliance with - Appropriate policies and procedures landscape the requirements of our regulatory bodies - Monitoring by Risk, Internal Audit and in the UK or overseas Regulatory Compliance teams (including the Financial Services - Escalation of risks to risk committees Authority in respect and subsidiary boards of regulated UK financial services - Risk-based assurance and actions for business) improvement - Regulatory, - Independent reporting to Group Audit financial and Committee and Group Financial Services contractual penalties Risk & Governance Forum. - Adverse impact on reputation. Health and - Non-compliance with - Rigorously applied health and safety safety health and safety policy and processes regulations - Health and safety training - Adverse impact on wellbeing of our - Comprehensive Group wide health and employees. safety audits undertaken twice a year. Environmental - As a low impact - Raising awareness of environmental company our key issues and Group sustainability environmental impacts initiatives are energy use, business travel, - Continue to measure and manage our resource use and waste carbon footprint and achieve energy management which we reductions. manage proactively. - Environmental management system in place - Environmental site audits carried out twice a year - Reduction of paper use and increase in recycling. Related party transactions Compensation of key management personnel 2012 2011 £m £m Short term employment 7.6 5.5 benefits Pension 0.1 0.2 Share based payments 3.6 3.6 Total 11.3 9.3 Gains on share options exercised in the year by key management personnel totalled £4.6m (2011: £5.8m). Nigel Wilson, who was Senior Independent Director until his resignation from the Board on 31 December 2012, was Group Chief Financial Officer of Legal & General Group Plc until June 2012 when he was appointed as Chief Executive Officer of that group. The Legal & General Group Plc had an interest in 23,279,554 shares in Capita plc as at 20 February 2013 and has a contractual relationship with the Group. Nigel Wilson did not participate in any Legal & General board discussions or decisions in respect of that company's dealings with Capita plc which are conducted on an arm's length basis. Pursuant to the Company's share placing which completed on 24 April 2012, funds managed by Invesco Limited, a substantial shareholder in the Company and therefore a related party of the Company (in each case, for the purposes of the Listing Rules of the UK Listing Authority), subscribed, pro rata to their previously existing holdings, for an additional 8,000,000 shares in the Company at the placing price of 685p representing an aggregate further investment of £ 54.8m. In addition, Invesco acquired a further 16,459,384 shares during the year at market value. Statement of Directors' responsibility The Directors confirm that, to the best of their knowledge: a) the consolidated financial statements in this report, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS, give a true and fair view of the assets, liabilities, financial position and profit of the Group taken as a whole; b) the parent company financial statements in this report, which have been prepared in accordance with United Kingdom Accounting Standards (UK GAAP) and applicable law, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and c) the management report contained in this report includes a fair review of the development and performance of the business and position of the Company and the Group taken as a whole, together with a description of the principal risks and uncertainties that they face. By order of the Board P R M Pindar G M Hurst Chief Executive Group Finance Director 27 February 2013 END