Company registration number 06002593 (England and Wales)
CAPITA IT SERVICES HOLDINGS LIMITED
ANNUAL REPORT AND UNAUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
CAPITA IT SERVICES HOLDINGS LIMITED
COMPANY INFORMATION
Directors
Capita Corporate Director Limited
G Shilston
Secretary
Capita Group Secretary Limited
Company number
06002593
Registered office
65 Gresham Street
London
England
EC2V 7NQ
Banker
Barclays Bank PLC
1 Churchill Place
London
United Kingdom
E14 5HP
CAPITA IT SERVICES HOLDINGS LIMITED
CONTENTS
Page
Strategic report
1 - 6
Directors' report
7 - 8
Income statement
9
Balance sheet
10 - 11
Statement of changes in equity
12
Notes to the financial statements
13 - 25
CAPITA IT SERVICES HOLDINGS LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 1 -
The Directors present their Strategic report and financial statements for the year ended 31 December 2023.
Principal activities
Capita IT Services Holdings Limited ('the Company') is a wholly owned subsidiary (indirectly held) of Capita plc. Capita plc along with its subsidiaries are hereafter referred to as 'the Group'.
The principal activity of the Company is that of a holding company. There have not been any significant changes in
the Company's principal activities in the year under review. The Directors are not aware, at the date of this report, of
any likely major changes in the Company's activities in the next year.
Review of the business
As shown in the Company’s income statement on page 9, the Company has profit before tax of £41,026,205 in 2023 as compared to loss before tax of £18,015,871 in 2022. Profit for the year ended December 2023 is driven by debt restructuring and return of capital from the subsidiaries in advance of its liquidations, with impairments recognised being offset against dividend income received from the subsidiaries. In addition, the Company recognised higher interest charge payable on intercompany loans due to rising interest rates.
The balance sheet on pages 10 to 11 of the financial statements shows the financial position at the year end. Net assets have increased from a net liability position of £68,177,244 in 2022 to a net asset position of £8,846,725 in 2023 on account of profit incurred by the Company and share premium recognised on shares issued during the year.
Details of the amounts owed by/to its parent company and fellow subsidiary companies are shown in notes 11 and 14 to the financial statements.
The Company has not identified any key performance indicators due to the nature of its operations as a holding company and as described in the business review above.
CAPITA IT SERVICES HOLDINGS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
Principal risks and uncertainties
The Company is exposed to a wide range of risks that, should they materialise, could have a detrimental impact on financial performance, reputation or operational resilience. The Company’s risk management framework provides a consistent approach to the identification, assessment, monitoring and reporting of risks and opportunities. The risk management process is based on risk registers and risk reporting at the established risk governance committees. Key risks are documented in the risk registers and have assigned risk owners who review them regularly, and report on them on at least a quarterly basis, as part of the risk reporting process. The strength of existing controls is evaluated to determine whether any further mitigating actions are needed to manage the risk level to within the risk appetite set by the Board.
As a holding company, the majority of the Company’s assets consists of investments in, and loans to subsidiary undertakings, accordingly the principal risks of the Company relate to its inability to recover the carrying value of its investments and loans due to adverse conditions in markets where its subsidiaries operate.
The principal themes of risks for the Company are:
Financial stability
Maintain financial stability and achieve financial targets.
Cyber security
Protect our systems, networks and programs from unauthorised use and access.
ESG
Comply with regulatory and contractual requirements to drive a purpose driven organisation with the right focus on governance.
Data governance and data privacy
Manage our data effectively as a strategic asset across the organisation.
As a subsidiary of Capita plc, the Company is subject to controls and risk governance techniques across all businesses. Details of the specific risk assessments and mitigating actions are outlined on pages 57-63 of the Group's 2023 Annual Report.
CAPITA IT SERVICES HOLDINGS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
Section 172 statement
Capita plc’s section 172 statement applies to its Divisions and the Company to the extent it relates to the Company’s activities. Common policies and practices are applied across the Group through divisional management teams and a common governance framework. The following disclosure describes how the Directors have regard to the matters set out in section 172(1)(a) to (f) and forms the Directors’ statement as required under section 414CZA of the Companies Act 2006.
Further details of the Group’s approach to each stakeholder are provided in Capita plc’s section 172 statement on pages 45, 46 and 47 of Capita plc’s 2023 Annual Report.
Our People
Why they are important
They deliver our business strategy; they support the organisation to build a values-based culture; and they deliver our products and services ensuring client satisfaction.
What matters to them
Flexible working; learning and development opportunities leading to career progression; fair pay and benefits as a reward for performance; and two-way communication and feedback.
How we engaged
People surveys
Regular all-employee communications
Employee director on the Capita plc Board
Employee focus groups and network groups
Workforce engagement on remuneration
Regular ‘breakfast’ sessions with the Executive Committee for our colleagues
Topics of engagement
Creating an inclusive workplace
Health and wellbeing
Speak Up policy
Directors’ remuneration
Acting on survey feedback
The career path framework
The redundancy consultation programme announced in November 2023
Outcomes and actions
The 2023 employee survey showed key indices had either improved or remained steady with a five-point increase in the eNPS compared with 2022. 63% of colleagues who responded felt proud to work at Capita. We are developing and delivering a range of action plans, including ensuring our leaders feel confidence in, and ownership of Capita’s strategy, plans and successes, developing inclusive opportunities for internal career mobility.
In December 2023, the Board agreed that while the appointment of employee directors had been successful, it was appropriate for the Board to consider a wider level of engagement with colleagues, including site visits arranged for individual directors to meet with local management and colleagues at Capita’s businesses. In addition, the Board has appointed Nneka Abulokwe as the designated non-executive director to engage with colleagues. Adolfo Hernandez, our new CEO, has also commenced a series of breakfast sessions to meet with colleagues of differing seniority and at different locations throughout the Group. Janine Goodchild stepped down from the Board as an employee director on 31 December 2023.
The UK real living wage increase was applied from 1 April 2023. At the end of 2023, we took the difficult decision to withdraw from the UK’s real living wage. Since 2020, the Group has increased the salaries of our lowest earners by 22% and the 2024 real living wage increase of 10.1% was not something we could commit to given the need for Capita to remain cost competitive and reflecting the fact that this is not a cost we are able to pass on to clients.
The global career path framework which defines career levels, career job content, and reward framework within Capita was launched during the year.
CAPITA IT SERVICES HOLDINGS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -
In October 2023, Capita was recognised by Forbes, as being one of the top companies for women, ranking at number 18 out of 400 global companies on their list.
We continued to promote our Speak Up policy throughout the organisation.
Risks to stakeholder relationship
Our ability to recruit due to the national and global labour market demand for resources
Our ability to retain and develop people, impacting our quality of service and our financial performance
Our ability to evolve our culture and practices in line with our responsible business agenda
Key metrics
Voluntary attrition, employee NPS, employee engagement Index and people survey completion level.
Clients and customers
Why they are important
They are recipients of Capita’s services; and Capita’s reputation depends on consistent and timely delivery of the services they need from us.
What matters to them
High-quality service delivery; delivery of transformation projects within agreed timeframes; and responsible and sustainable business credentials.
How we engaged
Client meetings and surveys
Regular meetings with government stakeholders and annual review with the Cabinet Office
Through our customer advisory boards
Through our senior client partner programme giving an experienced single point of contact for key clients and customers
Introductory meetings and correspondence with the new CEO and new interim CEO, Capita Public Service
Topics of engagement
Current service delivery
Transition and mobilisation of services
Capita’s digital transformation capabilities
Possible future services
Co-creation of client value propositions
The cyber incident
Ongoing benefits of hybrid working on client services
Outcomes and actions
Feedback provided to business units to address any issues raised; client value proposition teams supporting divisions with co-creation ideas; direct customer and sector feedback; and senior client partner programme undertaking client-focused growth sprints to build understanding of client issues and ideas to help address them.
Risks to stakeholder relationship
Loss of business by not providing the services that our clients and customers want
Damage to reputation by not delivering to the requirements of our clients and customers
Loss of customers for our clients
Key metrics
Customer NPS; specific feedback on client engagements.
CAPITA IT SERVICES HOLDINGS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 5 -
Suppliers and Partners
Why they are important
They share our values and help us deliver our purpose; maintain high standards in our supply chain; and achieve social, economic and environmental benefits aligned to the Social Value Act. Our suppliers and partners provide additional expertise, skill and technology, elevating our offering.
What matters to them
Payments made within agreed payment terms; clear and fair procurement process; building lasting commercial relationships; and working inclusively with all types of business.
How we engaged
Supplier meetings throughout source to procure process
Regular reviews with suppliers
Supplier questionnaires and risk assessments
Topics of engagement
Outcomes and actions
Our supplier charter, which is available on our website, remains at the core of strengthening our commitments and sets out how we conduct business in an open, honest and transparent manner, and what we expect of our suppliers. This year, it was refreshed and relaunched.
To understand Capita’s Scope 3 carbon footprint, a supplier engagement programme was also undertaken with suppliers accounting for £1bn annual spend (over 50% of the supply chain by spend) to ask them to disclose their carbon emissions to CDP.
During 2023, 99% of our suppliers were paid within 60 days.
Risks to stakeholder relationship
Key metrics
99% of supplier payments within agreed terms; SME spend allocation; and supplier diversity profile.
CAPITA IT SERVICES HOLDINGS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 6 -
Society
Why they are important
Capita is a provider of key services to government impacting a large proportion of the population.
What matters to them
Social mobility; youth skills and jobs; digital inclusion; diversity and inclusion; climate change; business ethics; accreditations and benchmarking; and cost of living crisis.
How we engaged
Membership of non-governmental organisations
Charitable and community partnerships
External accreditations and benchmarking
Working with clients, suppliers and the Cabinet Office
Topics of engagement
Youth employment
Workplace inequalities
Diversity & inclusion
Climate change
Outcomes and actions
Youth and employability programme such as Social Shifters; ranked 18 on the Forbes Global list of top employers for women; a 5% reduction in our gender pay gap (compared with 2022); awarded Employer’s Network for Equality and Inclusion; achieved a silver Tidemark and an A CDP (Carbon Disclosure Project) score as well as a silver medal in EcoVadis for Capita plc.
Risks to stakeholder relationship
Key metrics
Community investment, workforce diversity and ethnicity data, including pay gaps.
G Shilston
Director
14 May 2024
CAPITA IT SERVICES HOLDINGS LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 7 -
The Directors present their Directors' Report and Financial statements for the year ended 31 December 2023.
Results and dividends
The results for the year are set out on page 9.
The Company has not paid or proposed any dividends during the year (2022 : £nil).
Directors
The Directors, who held office during the year and up to the date of signature of the financial statements were as follows:
Capita Corporate Director Limited
G Shilston
Political donations
The Company made no political donations and incurred no political expenditure during the year (2022: £nil).
Environment
The Company recognises the importance of its environmental responsibilities, monitors its impact on the environment, and designs and implements policies to reduce any damage that might be caused by the it’s activities. The Company operates in accordance with Group policies, which are described in the Group’s 2023 annual report that does not form part of this report. Initiatives designed to minimise the Company’s impact on the environment include safe disposal of waste, recycling and reducing energy consumption.
Statement of Directors' responsibilities
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
CAPITA IT SERVICES HOLDINGS LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 8 -
Qualifying third party indemnity provisions
The Company has granted an indemnity to the directors of the Company against liability in respect of proceedings brought by third parties, subject to the conditions set out in the Companies Act 2006. Such qualifying third-part indemnity provisions remains in force as at the date of approving the directors' report.
On behalf of the board
G Shilston
Director
14 May 2024
CAPITA IT SERVICES HOLDINGS LIMITED
INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 9 -
2023
2022
Notes
£
£
Administrative expenses
(31)
(33)
Investment income
4
181,473,122
704,143
Other income
5
48,605,218
Impairments
6
(172,040,372)
(6,585,976)
Net finance cost
7
(17,011,732)
(12,134,005)
Profit/(loss) before tax
41,026,205
(18,015,871)
Income tax credit
8
3,997,764
2,305,467
Profit/(loss) and total comprehensive income/(expense) for the year
45,023,969
(15,710,404)
The income statement has been prepared on the basis that all operations are continuing operations.
The notes and information on pages 13 to 25 form an integral part of these financial statements.
CAPITA IT SERVICES HOLDINGS LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2023
31 December 2023
- 10 -
2023
2022
Notes
£
£
Non-current assets
Investments in subsidiaries
9
10,528,066
185,514,203
10,528,066
185,514,203
Current assets
Trade and other receivables
11
2,803,316
Cash and cash equivalents
12
194,089
Income tax receivable
6,303,231
3,252,633
6,497,320
6,055,949
Total assets
17,025,386
191,570,152
Current liabilities
Trade and other payables
14
8,178,661
249,199,017
Financial liabilities
13
10,548,379
Total liabilities
8,178,661
259,747,396
Net assets/(liabilities)
8,846,725
(68,177,244)
CAPITA IT SERVICES HOLDINGS LIMITED
BALANCE SHEET (CONTINUED)
AS AT
31 DECEMBER 2023
31 December 2023
2023
2022
Notes
£
£
- 11 -
Capital and reserves
Issued share capital
15
58,730,845
58,730,844
Share premium
16
31,999,999
Retained deficit
(81,884,119)
(126,908,088)
Total deficit
8,846,725
(68,177,244)
The notes and information on pages 13 to 25 form an integral part of these financial statements.
For the financial year ended 31 December 2023 the company was entitled to exemption from audit under section 479A of the Companies Act 2006 relating to subsidiary companies.
The members have not required the company to obtain an audit of its financial statements for the year in question in accordance with section 476 of the Companies Act 2006.
The Directors acknowledge their responsibilities for complying with the requirements of the Companies Act 2006 with respect to accounting records and the preparation of financial statements.
These financial statements were approved by the board of directors and authorised for issue on 14 May 2024 and are signed on its behalf by:
G Shilston
Director
Company registration number 06002593 (England and Wales)
CAPITA IT SERVICES HOLDINGS LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 12 -
Share capital
Share premium
Retained deficit
Total equity
£
£
£
£
At 1 January 2022
58,730,844
(111,197,684)
(52,466,840)
Loss for the year
-
-
(15,710,404)
(15,710,404)
At 31 December 2022
58,730,844
(126,908,088)
(68,177,244)
Profit for the year
-
-
45,023,969
45,023,969
Transactions with owners:
Issue of share capital
1
31,999,999
-
32,000,000
At 31 December 2023
58,730,845
31,999,999
(81,884,119)
8,846,725
Share capital
The balance classified as share capital is the nominal proceeds on issue of the Company's equity share capital, comprising 58,730,845 ordinary shares of £1 each. On 12 December 2023, the Company has issued 1 ordinary share of £1 each at a share premium of £31,999,999.
Share premium
The amount paid to the Company by shareholders, in cash or other consideration, over and above the nominal value of the shares issued to them less issuance costs.
Retained deficit
The balance pertains to net losses accumulated in the Company.
The notes and information on pages 13 to 25 form an integral part of these financial statements.
CAPITA IT SERVICES HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 13 -
1
Accounting policies
1.1
Basis of preparation
Capita IT Services Holdings Limited is a private company limited by shares incorporated in England and Wales. The registered office is 65 Gresham Street, London, England, EC2V 7NQ. The company's principal activities and nature of its operations are disclosed in the Directors' report.
The financial statements have been prepared under the historical cost basis except where stated otherwise and in accordance with with applicable accounting standards.
In determining the appropriate basis of preparation for the annual report and financial statements for the year ended 31 December 2023, the Company’s Directors (‘the Directors’) are required to consider whether the Company can continue in operational existence for the foreseeable future, being a period of at least 12 months following the approval of these financial statements. The Directors have 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 ‘the foreseeable future’ 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 the Directors should consider. In its going concern assessment, the Directors have considered the period from the date of approval of these financial statements to 30 June 2025 (‘the going concern period’) and which aligns to the period considered by the Directors of the ultimate parent company, Capita plc.
Board assessment
The financial forecasts used for the going concern assessment are derived from financial projections for 2024-2025 for the Company which have been subject to review and challenge by management and the Directors. The Directors have approved the projections.
Inter-dependency with Capita plc ('the Group')
The Director’s assessment of going concern has considered the extent to which the Company’s ability to remain a going concern is inter-dependent with that of the Group. The Company has dependency with the Group in respect of the following:
provision of certain services, such as administrative support services and should the Group be unable to deliver these services, the Company would have difficulty in continuing to trade;
participation in the Group’s notional cash pooling arrangements, of which £204,695 was held at 30 April 2024. In the event of the cash being required elsewhere in the Group, the Company may not be able to access its cash balance within the pooling arrangement;
additional funding that may be required if the Company suffers potential future losses;
revenue earned by its subsidiaries from other Group entities and key contracts that may be terminated in the event of a default by the Group; and
the Company forms part of a group of subsidiary companies owned directly or indirectly by Capita plc each of which guarantee the obligations under certain funding arrangements of Capita plc and Capita Holdings Limited (refer to note 19).
Given the inter-dependency the Company has with the Group, the Directors have considered the financial position of the ultimate parent undertaking as disclosed in its most recent consolidated financial statements, being for the year ended 31 December 2023.
CAPITA IT SERVICES HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 14 -
Basis of preparation (continued)
Ultimate parent undertaking – Capita plc
The Capita plc Board (‘the Board’) concluded that it was appropriate to adopt the going concern basis, having undertaken a rigorous assessment of the financial forecasts, key uncertainties, sensitivities, and mitigations when preparing the Group’s consolidated financial statements at 31 December 2023. These consolidated financial statements were approved by the Board on 5 March 2024 and are available on the Group’s website (www.capita.com/investors). Below is a summary of the position at 5 March 2024:
Accounting standards require that ‘the foreseeable future’ for going concern assessment covers a period of at least twelve months from the date of approval of these consolidated 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 consolidated financial statements to 30 June 2025, which aligns with a period end and covenant test date for the Group, and has also allowed the Board to assess the liquidity impact of the borrowings that mature in January 2025 and April 2025. There are no other debt maturities in the period to 30 June 2025.
The base case financial forecasts used in the going concern assessment are derived from financial projections for 2024-2025 as approved by the Board in December 2023.
Under the base case scenario, the Group’s transformation programme and completion of the Portfolio non-core business disposal programme in January 2024 has simplified and strengthened the business and facilitates further efficiency savings enabling sustainable growth in revenue, profit and cash flow over the medium term.
The base case projections used for going concern assessment purposes reflect business disposals completed up to the date of approval of these financial statements. The liquidity headroom assessment in the base case projections reflects the Group’s existing committed financing facilities and debt redemptions and does not reflect any potential future refinancing. The base case financial forecasts demonstrate liquidity headroom and compliance with all debt covenant measures throughout the going concern period to 30 June 2025.
In considering severe but plausible downside scenarios, the Board has taken account of the potential adverse financial impacts resulting from the following risks:
revenue growth falling materially short of plan;
operating profit margin expansion not being achieved;
targeted cost savings delayed or not delivered;
additional inflationary cost impacts which cannot be passed on to customers;
unforeseen operational issues leading to contract losses and cash outflows;
volatility in interest rates;
non-availability of the Group’s non-recourse receivables financing facility; and
unexpected financial costs 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 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 or delays in capital investment, substantially reducing (or removing in full) bonus and incentive payments. Taking these mitigations into account, the Group’s 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 30 June 2025.
CAPITA IT SERVICES HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 15 -
Basis of preparation (continued)
Adoption of going concern basis by the Group:
Reflecting the continued benefits from the transformation programme delivered over the last few years and the Portfolio non-core business disposal programme completed in January 2024, coupled with the Board’s ability to implement appropriate mitigations should the severe but plausible downside materialise, the Group continues to adopt the going concern basis in preparing these consolidated financial statements. The Board has concluded that the Group will be able to continue in operation and meet its liabilities as they fall due over the period to 30 June 2025.
Conclusion
Although the Company has a reliance on the Group as detailed above, even in a severe but plausible downside for both the Company and the Group, the Directors are confident the Company will continue to have adequate financial resources to continue in operation and discharge its liabilities as they fall due over the period to 30 June 2025 (the ‘going concern period’). Consequently, the annual report and financial statements have been prepared on the going concern basis.
1.2
Guarantor group
The Company forms part of a group of subsidiary companies owned directly or indirectly by Capita plc each of which guarantee the obligations under certain funding arrangements of Capita plc and Capita Holdings Limited. These funding arrangements are: Capita plc's principal bank credit facilities, and private placement loan notes issued by both Capita plc and Capita Holdings Limited. These arrangements are subject to ongoing compliance with covenants that include the Group’s maximum ratio of adjusted net debt to adjusted Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) and minimum interest cover. The covenant threshold tests are required to be carried out twice a year and the Group was in compliance with all debt covenants.
CAPITA IT SERVICES HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 16 -
1.3
Compliance with accounting standards
The Company has applied FRS101 – Reduced Disclosure Framework in the preparation of its financial statements.
The Company has prepared and presented these financial statements by applying the recognition, measurement and disclosure requirements of international accounting standards in conformity with the requirements of the Companies Act 2006 .
The Company's ultimate parent company, Capita plc, includes the Company in its consolidated statements. The consolidated financial statements are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and with UK-adopted International Financial Reporting Standards ('IFRSs') and the Disclosure and Transparency Rules of the UK's Financial Conduct Authority. These are available to the public and may be obtained from Capita plc’s website on https://www.capita.com/investors .
In these financial statements, the Company has applied the disclosure exemptions available under FRS 101 in respect of the following disclosures:
A cash flow statement and related notes;
Comparative period reconciliations for share capital,
Disclosures in respect of transactions with wholly owned subsidiaries;
Disclosures in respect of capital management;
The effects of new but not yet effective IFRSs; and
Disclosures in respect of the compensation of key management personnel.
Since the consolidated financial statements of Capita plc include equivalent disclosures, the Company has also taken the disclosure exemptions under FRS 101 available in respect of the following disclosure:
Certain disclosures required by IAS 36 in respect of the impairment of investment in subsidiaries;
Certain disclosures required by IFRS 3 in respect of business combinations undertaken by the Company, including a comparative period reconciliation of goodwill; and
Certain disclosures required by IFRS 7 and certain disclosure exemptions as permitted by IFRS 13 Fair value measurement.
1.4
Change in accounting policies
The Company has adopted the new amendments to standards detailed below but they do not have a material effect on the Company's financial statements.
New amendments or interpretations | |
IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts | |
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) | |
Definition of Accounting Estimates (Amendments to IAS 8) | |
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) | |
International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12) | |
CAPITA IT SERVICES HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 17 -
1.5
Investments
All investments are initially recorded at their cost. Subsequently, they are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.
At each reporting period, the Company assesses whether there are indicators to reverse the previously recognised impairment loss. The reversals of impairment are only recognised where there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised.
1.6
Financial instruments
Investments and other financial assets
The Company classifies its financial assets in the following measurement categories:
The classification depends on the Company’s business model for managing the financial assets and the contractual terms of the cash flows.
For investments in equity instruments that are not held-for-trading, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income ('FVOCI').
Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on the trade date (i.e., the date on which the Company commits to purchase or sell the asset). Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss ('FVPL'), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed to the income statement.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Impairment
The Company assesses, on a forward-looking basis, the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
CAPITA IT SERVICES HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 18 -
Trade and other 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.
For trade receivables, the Company applies the simplified approach permitted by IFRS 9 Financial instruments, 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 Company 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 (i.e., removed from the Company’s balance sheet) when (i) the rights to receive the cash flows from the asset have expired; or, (ii) the Company 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 ‘pass-through’ arrangement; and either (a) the Company has transferred substantially all the risk and rewards of the asset; or, (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Trade and other payables
Trade and other payables are recognised initially at cost (being same as fair value). Subsequent to initial recognition they are measured at amortised cost using the effective interest method.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with original maturities of three months or less that are readily convertible in to known amounts of cash and which are subject to an insignificant risk of change in value. Bank overdrafts are shown within current financial liabilities.
1.7
Taxation
Tax on the profit or loss for the 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.
CAPITA IT SERVICES HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 19 -
Taxation (continued)
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 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.
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.
1.8
Group accounts
The financial statements present information about the Company as an individual company and not about its Group. The Company has not prepared Group accounts because it is fully exempt from the requirement to do so by section 400 of the Companies Act 2006 since it is a subsidiary company of Capita plc, a company incorporated in England and Wales, and is included in the consolidated financial statements of that company.
2
Significant accounting judgements, estimates and assumptions
The preparation of financial statements in conformity 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 reported periods. Although these judgements and assumptions are based on the Directors' best knowledge of the amount, events or actions, actual results may differ.
The key source of estimation uncertainty that has a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year is that the Company determines whether investments are impaired based on any impairment indicators. This involves estimation of the enterprise value of the investee which is determined based on the greater of discounted future cash flows at a suitable discount rate or through the recoverable value of investments held by the investee Company.
3
Profit/(loss) for the year
2023
2022
Profit/(loss) for the year is stated after charging/(crediting):
£
£
Net finance cost
17,011,732
12,134,005
Investment income
(181,473,122)
(704,143)
Impairment
172,040,372
23,821,480
Impairment reversal
-
(17,235,504)
CAPITA IT SERVICES HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 20 -
4
Investment income
2023
2022
£
£
Dividend income from shares in subsidiary companies
181,473,122
704,143
181,473,122
704,143
During the year the Company has received dividend in specie from the below subsidiaries in advance of its disposal or liquidation settled via amounts due from Capita plc:
| | |
Capita IT Services Limited | | |
Capita Managed IT Solutions Limited | | |
Capita IT Services (BSF) Limited | | |
Updata Infrastructure (UK) Limited | | |
| | |
| | |
| | |
| | |
5
Other income
2023
2022
£
£
Intercompany loan payable written back
48,605,218
-
48,605,218
The company entered into a debt restructuring arrangement with its ultimate parent company, Capita plc, whereby Capita plc approved write back of an inter-company on demand loan totalling £48,605,218 as per the terms of the deed.
6
Impairments
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
2023
2022
£
£
Impairment of investments in subsidiaries (refer to note 9)
172,040,372
23,821,480
Reversal of impairment of investments in subsidiaries (refer to note 9)
(17,235,504)
172,040,372
6,585,976
CAPITA IT SERVICES HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 21 -
7
Net finance cost
2023
2022
£
£
Interest expense
Interest expense on bank overdrafts and loans
(304,668)
(65,159)
Interest payable to Group companies
(16,707,064)
(12,068,846)
Total finance cost
(17,011,732)
(12,134,005)
8
Income tax
The major components of income tax credit are:
2023
2022
£
£
Current tax
UK corporation tax
(3,997,764)
(2,305,467)
The reconciliation between tax credit and the accounting profit/(loss) multiplied by the UK corporation tax rate for the years ended 31 December 2023 and 2022 is as follows:
2023
2022
£
£
Profit/(loss) before taxation
41,026,205
(18,015,871)
Expected tax charge/(credit) based on the Corporation Tax rate of 23.50% (2022: 19.00%)
9,641,158
(3,423,015)
Expenses not deductible for tax purpose
29,007,262
1,251,335
Non-taxable income
(42,646,184)
(133,787)
Total adjustments
(13,638,922)
1,117,548
Total tax credit reported in the income statement
(3,997,764)
(2,305,467)
A change to the main UK corporation tax rate was substantively enacted on 24 May 2021. The rate applicable from 1 April 2023 increased from 19% to 25%.
CAPITA IT SERVICES HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 22 -
9
Investments
Subsidiaries
£
Cost
At 1 January 2023
403,433,540
Disposals (note a)
(2,945,765)
Derecognition
(65,159,735)
At 31 December 2023
335,328,040
Impairment
At 1 January 2023
217,919,337
Impairment charges (note b)
172,040,372
Derecognition
(65,159,735)
At 31 December 2023
324,799,974
Net book value
At 31 December 2023
10,528,066
At 31 December 2022
185,514,203
a. On 28th November 2023, the Company impaired its investment in Capita Managed IT Solutions Limited (CMITS) by £65,159,735 to a Net Book Value of £2,945,765. On 1st December 2023, CMITS was sold to Capita Business Services Limited, a fellow group company, for a consideration of £2,945,765 recognised as disposal and the balance £65,159,735 in gross cost and accumulated impairment was derecognised.
b. The Company considered whether there was an indicator of impairment in investments in subsidiaries at 31 December 2023. At 31 December 2023 the Company’s ultimate parent company, Capita plc, identified an indicator of impairment existed due to the market capitalisation of the Group being below the carrying value of Capita plc’s net assets. As a holding company for the Group, this indicator of impairment is also considered to be relevant for the Company, and so an impairment test was carried out for the Company at the balance sheet date, comparing the carrying value of each subsidiary investment held by the Company with its recoverable amount. The recoverable amount has been determined using fair value less costs of disposal. For non-trading subsidiaries this is based on the net asset value of the entity as at 31 December 2023, which is considered to not be materially different to the fair value derived by other means. For all other entities, recoverable amount is estimated on a discounted cash flow basis. Recoverable amounts will also factor in the recoverable amount of an entity’s direct and indirect subsidiaries. The trade and assets of subsidiaries of the Company have been transferred to other companies within the Group and therefore, these subsidiaries have been considered as non-trading subsidiaries for the purpose of deriving recoverable value.
Using this approach, the Company has impaired its investments in Computerland UK Limited by £10,383,780 and Capita IT Services Limited by £88,157,060 based on its recoverable value, being net asset value, which was offset against dividend income received from the subsidiary. The Company has also impaired its investment in Updata Infrastructure (UK) Limited by £8,339,797, which was offset against dividend income received from the subsidiary, following the return of capital from the subsidiary in advance of its liquidation and fully impaired its investment in Capita IT Services (BSF) Limited in advance of its liquidation, which was offset against the final dividend income received from the subsidiary.
CAPITA IT SERVICES HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 23 -
10
List of Subsidiaries
Details of the company's subsidiaries at 31 December 2023 are as follows:
Name of company
Address
Class of
% Held
shares held
Direct
Indirect
Computerland UK Limited
1
Ordinary
100.00
-
Capita IT Services Limited
2
Ordinary
100.00
-
Capita IT Services (BSF) Limited
1
Ordinary
100.00
-
Updata Infrastructure (UK) Limited
1
Ordinary
100.00
-
Updata Infrastructure 2012 Limited
3
Ordinary
-
100.00
Electra-Net Group Limited
3
Ordinary
-
100.00
Electra-Net Holdings Limited - in
liquidation
3
Ordinary
100.00
-
Registered office addresses (all UK unless otherwise indicated):
1
65 Gresham Street, London, England, E2CV 7NQ
2
Pavilion Building Ellismuir Way, Tannochside Park, Uddingston, Glasgow, G71 5PW
3
1 More London Place, London, SE1 2AF
11
Trade and other receivables
Current
2023
2022
£
£
Amounts due from Group companies
2,803,316
2,803,316
12
Cash and cash equivalents
2023
2022
£
£
Cash at bank and in hand
194,089
194,089
13
Financial liabilities
Current
2023
2022
£
£
Bank overdrafts
10,548,379
10,548,379
CAPITA IT SERVICES HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 24 -
14
Trade and other payables
Current
2023
2022
£
£
Amount due to Group companies
8,178,661
249,199,017
8,178,661
249,199,017
Amounts due to group companies are repayable on demand. These amounts are due to Capita Plc, on which interest is charged as per the prevailing Bank of England rates.
15
Share capital
2023
2022
2023
2022
Number
Number
£
£
Allotted, called up and fully paid
Ordinary shares of £1 each
At 1 January 2023
58,730,844
58,730,844
58,730,844
58,730,844
Issue of fully paid shares
1
0
1
At 31 December 2023
58,730,845
58,730,844
58,730,845
58,730,844
16
Share premium
2023
2022
£
£
Ordinary shares of £1 each
At 1 January
Issue of new shares
31,999,999
At 31 December
31,999,999
17
Employees
There were no employees during the current year (2022: nil).
18
Directors' remuneration
All directors are paid by other companies within the Capita Group. The Company has not paid any fees or other remuneration to the Group based Directors related to the directorship role they provided to the Company as a part of their Group-wide executive management role. The Company has estimated that allocation of the qualifying services that these Group based Directors provided to the Company is inconsequential.
CAPITA IT SERVICES HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 25 -
19
Contingent liabilities
The Company forms part of a group of subsidiary companies to Capita plc which guarantee the obligations of the core funding arrangements of Capita group. These are: Capita plc’s principal bank facilities, issued by Capita plc, and US private placement loan notes issued by Capita Holdings Limited and Capita plc.
At 31 December 2023, the RCF commitment was £260.7m (31 December 2022: £288.4m). The RCF expires on 31 December 2026 and was not drawn upon at 31 December 2023 (31 December 2022: undrawn).
At 31 December 2023, the total exposure under these guarantees undertaken for the benefit of Capita plc and other subsidiary undertakings was £262.5m (2022: £285.5m).
The Company also forms part of a cross-guarantee in respect of the overdrafts of its fellow subsidiary companies under a notional cash-pool bank arrangement.
20
Controlling party
The company's immediate parent undertaking is Capita Holdings Limited, a company incorporated in England and Wales.
The company's ultimate parent undertaking is Capita plc, a company incorporated in England and Wales. The accounts of Capita plc are available from the registered office at 65 Gresham Street, London, England, EC2V 7NQ.
21
Post balance sheet date events
The Company received interim dividend in specie of £897,177 from Updata Infrastructure (UK) Limited on 8 January, 2024.
There were no other significant events which have occurred after the reporting period.
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