Company registration number NI032979 (Northern Ireland)
CAPITA MANAGED IT SOLUTIONS LIMITED
ANNUAL REPORT AND UNAUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
CAPITA MANAGED IT SOLUTIONS LIMITED
COMPANY INFORMATION
Directors
Capita Corporate Director Limited
C J Gregory
(Appointed 14 August 2024)
Secretary
Capita Group Secretary Limited
Company number
NI032979
Registered office
Hillview House
61 Church Road
Newtownabbey
Co Antrim
BT36 7LQ
Banker
Barclays Bank PLC
1 Churchill Place
London
United Kingdom
E14 5HP
CAPITA MANAGED IT SOLUTIONS 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 - 43
CAPITA MANAGED IT SOLUTIONS LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023

The Directors present the Strategic report and financial statements for the year ended 31 December 2023.

Review of the business

Capita Managed IT Solutions 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 Company operates within the Capita Public Service division of the Group.

 

The principal activity of the Company is the provision of cloud based and infrastructure services to public and private specialist managed services in the education, commercial, government and utilities sectors. 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.

 

The financial statements of the Company as at 31 December 2022 were prepared on a breakup basis due to management’s intention to transfer the trade and assets of the Company into another Group company, and subsequently cease trading in the Company. However, after careful consideration and assessment this transfer is no longer expected to take place, and so the Company will continue operating in the foreseeable future and will not be liquidated. Accordingly, the Directors have prepared the financial statements for the current year on a going concern basis.

 

With effect from 1 December 2023, the Company’s immediate parent company, Capita IT Services Holdings Limited, transferred its 100% shareholding in the Company to Capita Business Services Ltd, a fellow Group subsidiary Company.

 

As shown in Company's income statement on page 9, revenue has increased from £76,129k in 2022 to £85,431k in 2023. The Company's Operating profit has increased from £5,238k in 2022 to £5,622k in 2023 mainly on account of improved margin on contracts and efficient cost recoveries across the Capita Group.

In addition, towards the end of 2022 the Group reorganised its technology software and solutions business and group support services business by transferring the underlying trade and assets from various Group companies in the UK into Capita Shared Services Limited (‘CSSL’). CSSL’s principal activity is the provision of certain head office and shared services, such as finance and HR support, payroll, IT and software services, to other companies within the Group. CSSL recovers the cost of providing these shared services by charging the Group companies that benefit from them, including the Company. Prior to the aforementioned reorganisation, the charges for the provision of these services were lower.

 

The balance sheet on pages 10 to 11 of the financial statements shows the financial position at the year end. Net assets decreased from £89,322k in 2022 to £18,385k in 2023 on account of distribution of dividends to its erstwhile parent Company, Capita IT Services holdings limited, which is offset by profits earned by the Company during the year.

 

Details of the amounts owed by/to its parent company and fellow subsidiary companies are shown in notes 12, 14 and 22 to the financial statements.

 

Key financial performance indicators used by the Group are adjusted revenue, adjusted profit before tax, adjusted basic/diluted earnings per share, free cash flow excluding business exits, and gearing ratios. Capita plc and its subsidiaries manage their operations on a divisional basis and as a consequence, some of these indicators are monitored only at a divisional, or Group level. The performance of the Capita Public Service division of the Group is discussed in the Group’s Annual Report which does not form part of this report.

- 1 -
CAPITA MANAGED IT SOLUTIONS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
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 at least quarterly, 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.

 

The principal risks for the Company are:

 

Profitable growth

Attract new clients and retain existing clients on appropriate commercial terms.

 

Contract performance

Deliver services to clients in line with contractual and legal obligations.

 

Innovation

Innovate and develop new customer value propositions with speed and agility.

 

People attraction and retention

Attract, develop, engage and retain the right talent.

 

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.

 

Safety and Health

Protect the safety, health and duty of care of all Capita’s employees, the people we work with and those affected by our acts and omissions.

 

Data governance and data privacy

Manage our data effectively (both clients and Capita) as a strategic asset across the organisation.

 

As a subsidiary of Capita plc, the Company is subject to controls and risk governance techniques applied across all the Group's businesses. Details of the specific risk assessments and mitigating actions are outlined on pages 57-63 of the Group's 2023 Annual Report.

Section 172 statement
Capita plc's section 172 statement applies to both the Division 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.
- 2 -
CAPITA MANAGED IT SOLUTIONS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

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

 

Topics of engagement

 

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.

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

 

Key metrics

Voluntary attrition, employee NPS, employee engagement Index and people survey completion level.

- 3 -
CAPITA MANAGED IT SOLUTIONS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

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

 

Topics of engagement

 

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

 

Key metrics

Customer NPS; specific feedback on client engagements.

- 4 -
CAPITA MANAGED IT SOLUTIONS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

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

 

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.

- 5 -
CAPITA MANAGED IT SOLUTIONS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

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

 

Topics of engagement

 

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.

On behalf of the Board

C J Gregory
Director
4 September 2024
- 6 -
CAPITA MANAGED IT SOLUTIONS LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023

The Directors present their Directors' report and financial statements for the year ended 31 December 2023.

Results and dividends

The result for the year is set out on page 9.

Dividend of £72,000k was paid 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
E H Brownell
(Resigned 31 March 2023)
G Bate-Williams
(Appointed 28 March 2023 and resigned 19 August 2024)
C J Gregory
(Appointed 14 August 2024)
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 party indemnity provision remains in force as at the date of approving the Directors' report.

Disabled persons

Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment within the Company continues and that the appropriate training is arranged. It is the policy of the Company that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.

Employee involvement

The Company's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.

 

Information of matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the Group's performance.

Post balance sheet date events

There are no significant events which have occurred after the reporting period.

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.

- 7 -
CAPITA MANAGED IT SOLUTIONS LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Statement of Directors' responsibilities

The Directors are responsible for preparing the Strategic Report, the Directors’ 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 they have elected to prepare the financial statements in accordance with UK accounting standards and applicable law (UK Generally Accepted Accounting Practice), including FRS 101 Reduced Disclosure Framework.

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:

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 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.

 

Strategic report

In accordance with s414c(11) of the Companies Act 2006, the Company has set out certain information in its Strategic report that is otherwise required to be disclosed in the Directors' report. This includes information regarding results and activities and a description of the principle risks and uncertainties facing the Company.

On behalf of the board
C J Gregory
Director
4 September 2024
- 8 -
CAPITA MANAGED IT SOLUTIONS LIMITED
INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
2023
2022
Notes
£'000
£'000
Revenue
3
85,431
76,129
Cost of sales
(71,485)
(66,775)
Gross profit
13,946
9,354
Administrative expenses
(8,324)
(4,116)
Operating profit
4
5,622
5,238
Impairments
5
(5,864)
-
0
Net finance income
6
3,814
984
Profit before tax
3,572
6,222
Income tax charge
7
(2,509)
(1,207)
Profit and total comprehensive income for the year
1,063
5,015

 

The income statement has been prepared on the basis that all operations are continuing operations.

The notes and information on pages 13 to 43 form an integral part of these financial statements.

- 9 -
CAPITA MANAGED IT SOLUTIONS LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2023
31 December 2023
2023
2022
Notes
£'000
£'000
Non-current assets
Property, plant and equipment
8
793
-
Right-of-use assets
8
2,833
-
Contract fulfilment assets
10
1,116
-
Financial assets
11
106
-
0
Trade and other receivables
12
962
-
0
Deferred tax assets
7
6,461
-
0
12,271
-
Current assets
Property, plant and equipment
8
-
1,017
Intangible assets
9
-
0
5,879
Right-of-use assets
8
-
3,417
Contract fulfilment assets
10
-
2,635
Financial assets
11
54
179
Trade and other receivables
12
44,616
94,816
Cash and cash equivalents
13
474
4,197
Deferred tax assets
7
-
0
6,681
45,144
118,821
Total assets
57,415
118,821
Current liabilities
Trade and other payables
14
14,611
11,071
Deferred income
15
15,800
10,829
Lease liabilities
16
791
4,178
Provisions
17
646
985
Income tax payable
3,528
2,436
35,376
29,499
Non-current liabilities
Lease liabilities
16
3,226
-
0
Provisions
17
428
-
3,654
-
Total liabilities
39,030
29,499
Net assets
18,385
89,322
- 10 -
CAPITA MANAGED IT SOLUTIONS LIMITED
BALANCE SHEET (CONTINUED)
AS AT
31 DECEMBER 2023
31 December 2023
2023
2022
Notes
£'000
£'000
Capital and reserves
Issued share capital
18
0*
1,210
Share premium
-
0
39,487
Other reserves
1,315
1,315
Retained earnings
17,070
47,310
Total equity
18,385
89,322

*less than £1000

The notes and information on pages 13 to 43 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 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.

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.

These financial statements were approved by the board of directors and authorised for issue on
4 September 2024
04 September 2024
and are signed on its behalf by:
C J Gregory
Director
Company registration number NI032979 (Northern Ireland)
- 11 -
CAPITA MANAGED IT SOLUTIONS LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
Share capital
Share premium
Other reserves
Retained earnings
Total equity
£'000
£'000
£'000
£'000
£'000
At 1 January 2022
1,210
39,487
1,315
42,295
84,307
Profit for the year
-
-
-
5,015
5,015
Transactions with owners:
Contribution in respect of share based payment charge
-
-
-
17
17
Settlement of share based payment charged by intercompany
-
-
-
(17)
(17)
At 31 December 2022
1,210
39,487
1,315
47,310
89,322
Profit for the year
-
-
-
1,063
1,063
Transactions with owners:
Contribution in respect of share based payment charge
-
-
-
44
44
Settlement of share based payment charged by intercompany
-
-
-
(44)
(44)
Reduction in shares and share premium
(1,210)
(39,487)
-
40,697
-
0
Dividends paid
-
-
-
(72,000)
(72,000)
At 31 December 2023
0*
-
0
1,315
17,070
18,385
*less than £1000
Share capital

The balance classified as share capital is the nominal proceeds on issue of the Company's equity share capital, comprising 1 ordinary share of £1.

 

On 1 November 2023, the Company reduced its ordinary share capital to 1 ordinary share of £1 nominal value through the cancellation of 1,210,412 ordinary shares of £1 each.

Share premium

The amount paid to the Company by the shareholders, in cash or other consideration, over and above the nominal value of the shares issued to them.

 

On 1 November 2023, the Company reduced its entire share premium of £39,487k by transferring that to retained earnings.

 

Other reserves

This consists of Capital contribution reserve. It represents the Share-based payments made against the Employee stock option plan (ESOP) issued by the parent company issued to the employees of the Company.

Retained earnings

Net profits kept to accumulate in the Company after dividends are paid and retained in the business as working capital.

The notes and information on pages 13 to 43 form an integral part of these financial statements.

- 12 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
1.1
Basis of preparation

Capita Managed IT Solutions Limited is a private company limited by shares incorporated in the UK.

The financial statements are prepared under the historical cost basis except where stated otherwise and in accordance 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 31 December 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:

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 condensed consolidated financial statements, being for the six month period ended 30 June 2024.

- 13 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)

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 condensed consolidated financial statements for the period ended 30 June 2024. These condensed consolidated financial statements were approved by the Board on 1 August 2024 and are available on the Group’s website (www.capita.com/investors). Below is a summary of the position at 1 August 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 condensed 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 condensed consolidated financial statements to 31 December 2025, which aligns with a period end and covenant test date for the Group.

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 June 2024.

The going concern assessment considers the Group’s sources and uses of liquidity and covenant compliance throughout the period under review.

Board Assessment

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. When combined with available committed facilities, this allows the Group to manage scheduled debt repayments. The most material sensitivities to the base case are the risk of not delivering the planned revenue growth and efficiency savings from the Group's previously announced restructuring programme.

The base case projections used for going concern assessment purposes reflect business disposals completed up to the date of approval of these condensed financial statements and the agreed sale of the Capita One business because the completion of the disposal has been assessed to be highly probable. 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 31 December 2025.

In considering severe but plausible downside scenarios, the Board has taken account of the potential adverse financial impacts resulting from the following risks:

- 14 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)

Basis of preparation (continued)

 

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. The Board considered the impact of the above risks and mitigations on the Group both in the scenario where the Capita One disposal does occur, and if it were not to occur. In the event of the simultaneous crystallisation of risks and the Capita One disposal does not complete, the Board also considered the ability of the Group to refinance a portion of the 2025 maturing debt. 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 31 December 2025.

 

Adoption of going concern basis by the Group:

Reflecting the levels of liquidity and covenant headroom in the base case and severe but plausible downside scenario, the Group continues to adopt the going concern basis in preparing these condensed 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 31 December 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 31 December 2025 (the ‘going concern period’). Consequently, the annual report and financial statements have been prepared on the going concern basis.

- 15 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
1.2
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 the Transparency Rules of the UK's Financial Conduct Authority. They 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:

 

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:

 

1.3
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

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

International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12)

1 January 2023

- 16 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
1.4
Revenue

Revenue is earned within the United Kingdom.

 

The Company operates a number of diverse businesses and therefore it uses a variety of methods for revenue recognition based on the principles set out in IFRS 15. Many of the contracts entered are long term and complex in nature given the breadth of solutions the Company offers.

 

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.

 

In determining the amount of revenue and profits to record, and related balance sheet items (such as contract fulfilment assets, capitalisation of costs to obtain a contract, trade receivables, accrued income and deferred income) to recognise in the period, management is required to form a number of key judgements and assumptions. This includes an assessment of the costs the Company incurs to deliver the contractual commitments and whether such costs should be expensed as incurred or capitalised. These judgements are inherently subjective and may cover future events such as the achievement of contractual milestones, performance KPIs and planned cost savings. In addition, for certain contracts, key assumptions are made concerning contract extensions and amendments, as well as opportunities to use the contract developed systems and technologies on other similar projects.

 

Revenue is recognised either when the performance obligation in the contract has been performed (so 'point in time' recognition) or 'over time' as control of the performance obligation is transferred to the customer.

 

For all contracts, the Company determines if the arrangement with a customer creates enforceable rights and obligations. This assessment results in certain Master Service Agreements (‘MSA’s’) 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 Company 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.

- 17 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
Revenue (continued)

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 - to be accounted for as separate two performance obligations; (ii) not distinct - 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 contract inception the total transaction price is estimated, being the amount to which the Company expects to be entitled and has rights to under the present contract. This includes an assessment of any variable consideration where the Company's 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 agreed.

 

Once the total transaction price is determined, the Company allocates this to the identified performance obligations in proportion to their relative stand-alone selling prices and recognises revenue when (or as) those performance obligations are satisfied. The Company infrequently sells standard products with observable standalone prices due to the specialised services required by customers and therefore the Company applies judgement to determine an appropriate standalone selling price. More frequently, the Company sells a customer bespoke solution, and in these cases the Company typically uses the expected cost-plus margin or a contractually stated price approach to estimate the standalone selling price of each performance obligation.

 

The Company 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 the contract.

 

For each performance obligation, the Company determines if revenue will be recognised over time or at a point in time. Where the Company recognises revenue over time for long term contracts, this is in general due to the Company performing and the customer simultaneously receiving and consuming the benefits provided over the life of the contract.

 

For each performance obligation to be recognised over time, the Company applies a revenue recognition method that faithfully depicts the Company’s 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 Company has promised to transfer to the customer. The Company applies the relevant output or input method consistently to similar performance obligations in other contracts.

 

When using the output method, the Company 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.

 

Where the output method is used, for long term service contracts where the series guidance is applied (see below for further details), the Company often uses a method of time elapsed which requires minimal estimation. Certain long-term contracts use output methods based upon estimation of number of users, level of service activity or fees collected.

 

If performance obligations in a contract do not meet the over time criteria, the Company recognises revenue at a point in time (see below for further details).

 

The Company disaggregates revenue from contracts with customers by contract type, as management believe this best depicts how the nature, amount, timing and uncertainty of the Company’s revenue and cash flows are affected by economic factors. Categories are: ‘long-term contractual – greater than two years’; and ‘short-term contractual – less than two years’. Years based from service commencement date.

- 18 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
Revenue (continued)

Contract term longer than 2 years

 

The Company provides a range of services in various segments under customer contracts with a duration of more than two years.

 

The nature of contracts or performance obligations categorised within this revenue type is diverse and includes (i) long term outsourced service arrangements in the public and private sectors; and (ii) active software licence arrangements (see definition below).

 

The Company considers that the services provided meet the definition of a series of distinct goods and services as they are (i) substantially the same and (ii) have the same pattern of transfer (as the series constitutes services provided in distinct time increments (e.g., daily, monthly, quarterly or annual services)) and therefore treats the series as one performance obligation. Even if the underlying activities performed by the Company to satisfy a promise vary significantly throughout the day and from day to day, that fact, by itself, does not mean the distinct goods or services are not substantially the same. For the majority of long service contracts with customers in this category, the Company recognises revenue using the output method as it best reflects the nature in which the Company is transferring control of the goods or services to the customer.

 

Active software licences are those where the Company has a continuing involvement after the sale or transfer of control to the customer, which significantly affects the intellectual property to which the customer has rights. The Company is in a majority of cases responsible for any maintenance, continuing support, updates and upgrades and accordingly the sale of the initial software is not distinct. The Company’s accounting policy for licences is discussed in more detail below.

 

Over time service with contract length less than 2 years

 

The nature of contracts or performance obligations categorised within this revenue type is diverse and includes (i) short term outsourced service arrangements in the public and private sectors; and (ii) software maintenance contracts.

 

The Company has assessed that maintenance and support (i.e. 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 as the nature of the promise is for the Company to 'stand ready' to perform maintenance and support when required by the customer. Each day of standing ready is then distinct from each following day and is transferred in the same pattern to the customer.

 

Transactional (Point in time) contracts

 

The Company 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 and acceptance by a 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 categorised within this revenue type is diverse and 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 delivery of professional services.

 

Passive software licences are licences which have significant stand-alone functionality and the contract does not require, and the customer does not reasonably expect, the Company to undertake activities that significantly affect the licence. Any ongoing maintenance or support services for passive licences are likely to be separate performance obligations. The Company’s accounting policy for licences is discussed in more detail below.

- 19 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
Revenue (continued)

Contract modifications

 

The Company’s contracts are often amended for changes in contract specifications and requirements. Contract modifications exist when the amendment either creates new or changes the existing enforceable rights and obligations. The effect of a contract modification on the transaction price and the Company’s 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).

 

For contracts for which the Company 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). Scenario (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 as 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 as management need 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 via 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 use their judgement to estimate the change to the total transaction price. Importantly any variable consideration is only recognised to the extent that it is highly probably that no revenue reversal will occur.

 

Principal versus agent

 

The Company has arrangements with some of its customers whereby it needs to determine if it acts as a principal or an agent as more than one party is involved in providing the goods and services to the customer. The Company acts as a principal if it controls a promised good or service before transferring that good or service to the customer. The Company 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 Company has in establishing the price for the specified good or service, whether the Company has inventory risk and whether the Company is primarily responsible for fulfilling the promise to deliver the service or good.

 

This assessment of control requires judgement in particular in relation to certain service contracts. An example, is the provision of certain recruitment and learning services where the Company 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 Company is acting as a principal, revenue is recorded on a gross basis. Where the Company is acting as an agent revenue is recorded at a net amount reflecting the margin earned.

 

The Company considers for each contract that includes a separate licence performance obligation all the facts and circumstances in determining whether the licence revenue is recognised over time or at a point in time from the go live date of the licence.

- 20 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
Revenue (continued)

Contract related assets and liabilities

 

As a result of the contracts which the Company enters into with its customers, a number of different assets and liabilities are recognised on the Company’s balance sheet. These include but are not limited to:

 

Contract fulfilment assets

 

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 Company 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 Company applies the following criteria which, if met, result in capitalisation:

 

(i) the costs directly relate to a contract or to a specifically identifiable anticipated contract; (ii) the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and (iii) the costs are expected to be recovered.

 

The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable. The Company regularly incurs costs to deliver its outsourcing services in a more efficient way (often referred to as ‘transformation’ costs).

 

These costs may include process mapping and design, system development, project management, hardware (generally in scope of the Company’s accounting policy for property, plant and equipment), software licence costs (generally in scope of the Company’s accounting policy for intangible assets), recruitment costs and training.

 

Capitalisation of costs to obtain a contract

 

The incremental costs of obtaining a contract with a customer are recognised as an asset if the Company expects to recover them. The Company incurs costs such as bid costs, legal fees to draft a contract and sales commissions when it enters into a new contract.

 

Judgement is applied by the Company when determining what costs qualify to be capitalised in particular when considering whether these costs are incremental and whether these are expected to be recoverable. For example, the Company 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.

 

The Company has determined that the following costs may be capitalised as contract assets (i) legal fees to draft a contract (once the Company has been selected as a preferred supplier for a bid); and (ii) sales commissions that are directly related to winning a specific contract. Costs incurred prior to selection as preferred supplier are not capitalised but are expensed as incurred.

- 21 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)

Revenue (continued)

 

Utilisation, derecognition and impairment of contract fulfilment assets and capitalised costs to obtain a contract

 

The Company utilises contract fulfilment assets and capitalised costs to obtain a contract to cost of sales over the expected contract period using a systematic basis that mirrors the pattern in which the Company transfers control of the service to the customer. The utilisation charge is included within cost of sales. Judgement is applied to determine this period, for example whether this expected period would be the contract term or a longer period such as the estimated life of the customer relationship for a particular contract if, say, renewals are expected.

 

A contract fulfilment asset or capitalised costs to obtain a contract is derecognised either when it is disposed of or when no further economic benefits are expected to flow from its use or disposal.

 

Management is required to determine the recoverability of contract related assets within property, plant and equipment, intangible assets as well as contract fulfilment assets, capitalised costs to obtain a contract, accrued income and trade receivables. At each reporting date, the Company determines whether or not the contract fulfilment assets and capitalised costs to obtain a contract are impaired by comparing the carrying amount of the asset to the remaining amount of consideration that the Company expects to receive less the costs that relate to providing services under the relevant contract. In determining the estimated amount of consideration, the Company uses the same principles as it does to determine the contract transaction price, except that any constraints used to reduce the transaction price will be removed for the impairment test.

 

Where the relevant contracts or specific performance obligations are demonstrating marginal profitability or other indicators of impairment, judgement is required in ascertaining whether or not the future economic benefits from these contracts are sufficient to recover these assets. In performing this impairment assessment, management is required to make an assessment of the costs to complete the contract. The ability to accurately forecast such costs involves estimates around cost savings to be achieved over time, anticipated profitability of the contract, as well as future performance against any contract-specific KPIs that could trigger variable consideration, or service credits. Where a contract is anticipated to make a loss, these judgements are also relevant in determining whether or not an onerous contract provision is required and how this is to be measured.

 

Deferred and accrued income

 

The Company’s customer contracts include a diverse range of payment schedules dependent upon the nature and type of goods and services being provided. The Company often agrees payment schedules at the inception of long term contracts under which it receives payments throughout the term of the contracts. These payment schedules may 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.

 

Where payments made are greater than the revenue recognised at the period end date, the Company recognises a deferred income contract liability for this difference. Where payments made are less than the revenue recognised at the period end date, the Company recognises an accrued income contract asset for this difference.

 

Onerous contracts

 

The Company reviews its long-term contracts to ensure that the expected economic benefits to be received are in excess of the unavoidable costs of meeting the obligations under the contract. The unavoidable costs are the lower of the net costs of termination or the costs of fulfilment of the contractual obligations. The Company recognises the excess of the unavoidable costs over economic benefits due to be received as an onerous contract provision.

- 22 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
1.5
Goodwill

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.

At the acquisition date, any goodwill acquired is allocated to the cash-generating units (CGU) which are expected to benefit from the combination’s 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.

1.6
Intangible assets other than goodwill

Other intangibles includes Software which are valued at cost less accumulated amortisation. Amortisation is calculated to write off the cost in equal annual instalments over their estimated useful life, which is typically 5 years. In the case of capitalised software development costs, research expenditure is written off to the Income statement in the period in which it is incurred. Development expenditure is written off in the same way unless and until the Company is satisfied as to the technical, commercial and financial viability of individual projects. In these cases, the development expenditure is capitalised and amortised over the period during which the Company is expected to benefit.

1.7
Property, plant and equipment

Property, plant and equipment are stated at cost less depreciation. Freehold land is not depreciated.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Leasehold land and buildings
over the period of the lease
Fixtures, fittings & equipment
3 - 5 years
Computer equipment
3 - 5 years
1.8
Impairment of tangible and intangible assets

At each balance sheet date, the Company assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Company makes a formal estimate of the asset's 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's or cash-generating unit's fair value less costs to sell and its value in use is determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the asset.

- 23 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
1.9
Financial instruments

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.

 

Non-recourse trade receivable financing

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.

 

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.

 

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.

1.10
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.

 

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.

- 24 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
1.11
Provisions

Provisions are recognised when the Company 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 discounted using the yield on government bonds which have a similar timing and currency of cash flows to the provision being discounted. Where required adjustments are made to the yields to reflect the risks specific to the cash flows being discounted. The unwinding of the discount is recognised as a financing cost in the 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.

 

On an ongoing basis, management monitor provisions and their accurate estimation when compared to final outcomes.

- 25 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
1.12
Pensions

The Company participates in a defined contribution pension scheme where contributions are charged to the income statement in the year in which they are due. The scheme is funded and contributions are paid to a separately administered trust fund. The assets of the scheme are held separately from the Company. The Company remits monthly pension contributions to Capita Business Services Ltd, a fellow subsidiary undertaking, which pays the Group liability centrally. Any unpaid contributions at the year-end have been accrued in the accounts of Capita Business Services Ltd.

In addition, the Company participates in a number of defined benefit pension schemes which require contributions to be made to separate trustee-administered funds.

Where the Company participates in public sector defined benefit pension schemes, this is for a finite period and there are contractual protections in place to limit the financial risks to the Company of the membership of these schemes by its employees and as such the pension costs are reported on a defined contribution basis recognising a cost equal to its contribution payable during the period. (See note 21)

The Company also has employees who are members of the Group’s main defined benefit pension scheme (“HPS”) (formerly known as CPLAS). The Company has current employees who continue to accrue benefits in the HPS.

As there is no contractual agreement or stated Group policy for charging the net defined benefit cost of the HPS to participating entities, the net defined benefit cost of the HPS is recognised fully in the accounts of the Principal Employer (Capita Business Services Ltd). The Company then recognises a cost equal to its contribution payable for the period.

The contributions payable by the participating entities are determined on the following basis:

A full actuarial valuation of the HPS is carried out every three years by an independent qualified actuary for the Trustee of the HPS, with the last full valuation carried out as at 31 March 2023. The next full actuarial valuation is due to be carried out with an effective date of 31 March 2026.

- 26 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
1.13
Share-based payments

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 are met, the awards are treated as vesting, irrespective of whether or not the market condition is satisfied, since 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’s 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 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 i.e., 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 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.

1.14
Leases

The Company 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. At the inception of the lease, the Company recognises a right-of-use asset at cost, which comprises the present value of minimum 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 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 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.

 

The company has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in profit or loss on a straight-line basis over the lease term.

- 27 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)

Leases (continued)

 

The Company as a lessee - Right-of-use assets and lease liabilities

The Company recognises lease liabilities where a lease contract exists and right-of-use assets representing the right to use the underlying leased assets. At lease commencement date, the Company recognises lease liabilities 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 Company 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 lease liabilities 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 Company would have to pay to borrow, over a similar term and with a similar security, the funds necessary to acquire 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, currency and start 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 credit risk adjustment; and an entity-specific adjustment. 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 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 it is anticipated that the Company will exercise 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 Company 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 Company 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.

- 28 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)

Leases (continued)

 

The Company as a lessor

When the Company acts as a lessor, it determines at the lease commencement whether the lease is a finance lease or an operating lease.

 

To classify each lease, the Company 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 Company acts as an intermediate lessor of property assets and equipment. When the Company 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, not with reference to the underlying asset.

 

In instances where the Company is the intermediate lessor and the sub-lease is classified as a finance lease, the Company recognises a net investment in sub-leases for amounts recoverable from the sub-lessees while derecognising the respective portion of the gross right-of-use asset. The gross 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 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 income statement. The Company recognises lease payments received under operating leases as income on a straight-line basis over the lease term. The Company accounts for finance leases as a finance lease receivables, using incremental borrowing rate where the interest rate implicit in sub-lease is not easily determinable.

1.15
Foreign exchange

Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to Income statement account.

1.16
Current vs Non-current classification

The Company presents assets and liabilities in the balance sheet based on whether they are current or non-current.

 

An asset is current when it is:

 

All other assets are classified as non-current.

 

A liability is current when:

 

The Company classifies all other liabilities as non-current.

- 29 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
2
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’ best knowledge of the amount, events or actions, actual results may differ.

 

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year is the measurement and impairment of goodwill. The Company determines whether goodwill is impaired on an annual basis and thus requires an estimation of the value in use of the cash-generating units to which the intangible assets are allocated. This involves estimation of future cash flows and choosing a suitable discount rate. The Company has made judgements in determining contracts in scope for IFRS 16, determining the interest rate used for discounting of future cash flows, and the lease term.

3
Revenue

The total revenue of the Company for the year has been derived from its principal activity wholly undertaken in the United Kingdom.

4
Operating Profit
Notes
2023
2022
Operating Profit for the year is stated after (crediting)/charging:
£'000
£'000
(Income)/expense from foreign exchange differences
(6)
13
Depreciation of property, plant and equipment
8
271
290
Depreciation of right-of-use assets
8
654
557
Amortisation of intangible assets
9
15
25
Impairment of right-of-use assets
8
662
-
0
Contract fulfilment assets - utilisation
10
1,519
408
Short term lease rentals
375
199
5
Impairments

Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in the income statement:

2023
2022
£'000
£'000
Impairment of goodwill (refer to note 9)
5,864
-
0
Impairment of property, plant and equipment (refer to note 8)
662
-
0
6,526
-
- 30 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
6
Net finance income
2023
2022
£'000
£'000
Interest income
Interest income on bank balance
168
-
0
Interest receivable from Group companies
3,828
1,199
3,996
1,199
Interest expense
Interest expense on bank overdrafts and loans
-
0
(40)
Interest expense on lease liabilities
(182)
(175)
(182)
(215)
Total net finance income
3,814
984
7
Income tax
The major components of income tax charge are:
2023
2022
£'000
£'000
Current tax
UK corporation tax
2,298
1,237
Adjustments in respect of prior periods
(8)
1,185
2,290
2,422
Deferred tax
Origination and reversal of temporary differences
211
367
Adjustment in respect of prior periods
8
(1,582)
219
(1,215)
Total tax charge
2,509
1,207
- 31 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
7
Income tax
(Continued)

The charge for the year can be reconciled to the profit per the income statement as follows:

2023
2022
£'000
£'000
Profit before taxation
3,572
6,222
Expected tax charge based on the weighted average Corporation Tax rate of 23.52% (2022: 19.00%)
840
1,182
Expenses not deductible for tax purpose
19
11
Change in unrecognised deferred tax assets
259
425
Adjustment in respect of current income tax of prior periods
-
1,185
Impact of changes in statutory tax rates
12
(14)
Adjustment in respect of deferred tax of prior periods
-
0
(1,582)
Intagibles fixed assets write down
1,379
-
Total adjustments
1,669
25
Total tax charge reported in the income statement
2,509
1,207
Balance sheet
Income statement
2023
2022
2023
2022
£'000
£'000
£'000
£'000
Deferred tax assets
Decelerated capital allowances
6,453
6,671
211
(1,222)
Other short term timing differences
8
10
8
7
Deferred tax assets
6,461
6,681
Deferred tax charge/(credit) to income statement
219
(1,215)

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%. The deferred tax asset at 31 December 2023, and at the end of the prior period, has been calculated based on this rate.

 

As at 31 December 2023, the Company has gross fixed asset timing differences of £2,300k (2022: £8,100k) in respect of which no deferred tax assets have been recognised due to the uncertainty of future use.

- 32 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
8
Property, plant and equipment
Leasehold land and buildings
Fixtures, fittings & equipment
Computer equipment
Total
£'000
£'000
£'000
£'000
Cost
At 1 January 2023
1,340
12
968
2,320
Additions
47
-
0
-
0
47
Asset retirement
(24)
(12)
(125)
(161)
At 31 December 2023
1,363
-
0
843
2,206
Accumulated depreciation and impairment
At 1 January 2023
429
12
862
1,303
Charge for the year
172
-
0
99
271
Asset retirement
(24)
(12)
(125)
(161)
At 31 December 2023
577
-
0
836
1,413
Net book value
At 31 December 2023
786
-
0
7
793
At 31 December 2022
911
-
0
106
1,017
Right-of-use assets
Land and buildings
£'000
Net book value at 1 January 2023
3,417
Depreciation charge
(654)
Impairment
(662)
Other movements*
732
Net book value at 31 December 2023
2,833

*Other movements include amendments to existing leases and terminations.

 

During the year, to deliver the cost reduction programme announced by Group, the Company exited a number of leased properties and recognised an impairment charge of £662k in respect of its right-of-use assets.

- 33 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
9
Intangible assets
Goodwill
Software
Total
£'000
£'000
£'000
Cost or valuation
At 1 January 2023
9,372
126
9,498
Disposals
-
0
(126)
(126)
At 31 December 2023
9,372
-
0
9,372
Amortisation and impairment
At 1 January 2023
3,508
111
3,619
Charge for the year
-
0
15
15
Impairment
5,864
-
0
5,864
Asset retirement
-
0
(126)
(126)
At 31 December 2023
9,372
-
0
9,372
Net book value
At 31 December 2023
-
0
-
0
-
0
At 31 December 2022
5,864
15
5,879

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. The Company’s impairment test compares the carrying value of the cash generating unit ('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 business into perpetuity.

 

The valuation of the CGU under fair value less costs of disposal assumes that a third-party acquirer will undertake a similar plan to derive similar benefits in the business going forward. The enterprise value of the CGU is dependent on the successful implementation of the cost reduction programme. Fair value less costs of disposal for the CGU has been estimated using discounted cash flows. The fair value measurement was categorised as a Level-3 fair value based on the inputs in the valuation technique used. The costs of disposal have been estimated based on the Groups’ significant disposals in recent years.

 

The key inputs to the calculations are described below, including changes in market conditions.

 

The cash flow projections prepared for the impairment test are derived from the 2024-2026 business plans approved by the Board. Global economic uncertainties continue to lead to increased judgement being applied, particularly in forecasting future financial performance. 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 (2027 and 2028) and for the terminal period. The 2023 long-term growth rate is 1.7% (2022: 2.2%).

 

The average pre-tax discount rate used for the impairment test is 11.0% (2022: 11.8%). Management estimates discount rates using pre-tax rates of comparator companies, 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.

- 34 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
9
Intangible assets
(Continued)

The cashflow projections include certain head office and shared service costs, such as for finance and HR support, payroll, IT and software services. Judgement has been taken on the quantum of such costs that would be expected to arise for a market participant when calculating fair value.

 

As at 31 December 2023, the carrying value of the CGU exceeded its estimated recoverable amount, as a result of which, Goodwill was impaired by £5,864k (2022: £nil k).

10
Contract fulfilment assets
£'000
At 1 January 2022
1,372
Additions
1,671
Utilised during the year
(408)
At 31 December 2022
2,635
Utilised during the year
(1,519)
At 31 December 2023
1,116

In preparing these financial statements, the Company undertook a review to identify indicators of impairment of contract fulfilment assets. The Company determined whether or not the contract fulfilment assets were impaired by comparing the carrying amount of the asset to the remaining amount of consideration that the entity expects to receive less the costs that relate to providing services under the relevant contract. In determining the estimated amount of consideration, the Company used the same principles as it does to determine the contract transaction price, except that any constraints used to reduce the transaction price were removed for the impairment test.

 

In line with our accounting policy, as set out in note 1.4, if a contract or specific performance obligation exhibited marginal profitability or other indicators of impairment, judgement was applied to ascertain whether or not the future economic benefits from these contracts were sufficient to recover these assets. In performing impairment assessment, management is required to make an assessment of the costs to complete the contract. The ability to accurately forecast such costs involves estimates around cost savings to be achieved over time, anticipated profitability of the contract, as well as future performance against any contract-specific KPIs that could trigger variable consideration, or service credits.

 

- 35 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
11
Financial assets
Non-current
2023
2022
£'000
£'000
Finance lease receivable
106
-
0
106
-
Current
2023
2022
£'000
£'000
Finance lease receivable
54
179
54
179
2023
2022
£'000
£'000
Maturity analysis - Contractual undiscounted cash flows
Less than one year
60
60
One to two years
60
60
More than two years
50
77
Total undiscounted lease payments receivable
170
197
Unearned finance income
(10)
(18)
Net investment
160
179
- 36 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
12
Trade and other receivables
Current
2023
2022
£'000
£'000
Trade receivables
9,143
3,811
Contract fulfilment assets
3,912
1,780
Amounts due from Group companies
25,851
82,299
Accrued income
1,546
1,497
Prepayments
4,164
5,429
44,616
94,816
Non-current
2023
2022
£'000
£'000
Prepayments
962
-
0
962
-
0

Amounts due from group companies are repayable on demand and are not chargeable to interest, except for amount due to Capita plc of £25,674k as at 31 December 2023 (2022: £82,231k), on which interest is charged as per the prevailing Bank of England rates.

13
Cash and cash equivalents
2023
2022
£'000
£'000
Cash at bank and in hand
474
4,197
474
4,197
14
Trade and other payables
Current
2023
2022
£'000
£'000
Trade payables
8,991
3,667
Amount due to Group companies
896
2,596
Accruals
1,838
3,145
Other taxes and social security
2,870
1,646
Other payables
16
17
14,611
11,071

Amounts due to group companies are repayable on demand and are not chargeable to interest.

- 37 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
15
Deferred income
2023
2022
£'000
£'000
Current
Deferred income
15,800
10,829
15,800
10,829
16
Lease liabilities

Lease liabilities are classified based on the amounts that are expected to be settled within the next twelve months and after more than twelve months from the reporting date, as follows:

2023
2022
£'000
£'000
Current liabilities
791
4,178
Non-current liabilities
3,226
-
0
4,017
4,178
2023
2022
Amounts recognised in the income statement include the following:
£'000
£'000
Interest on lease liabilities
182
175

The total cash outflow for leases was £951k (2022: £863k) consisting of interest paid of £182k (2022: £175k) and capital element of £769k (2022: £688k).

2023
2022
Maturity analysis - contractual undiscounted cash flows
£'000
£'000
Less than one year
951
863
One to two years
857
863
More than two years
2,711
2,002
Total undiscounted liabilities at 31 December
4,519
3,728
- 38 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
17
Provisions
2023
2022
£'000
£'000
Current
646
985
Non-current
428
-
1,074
985
Property
Cost Reduction
Others
Total
£'000
£'000
£'000
£'000
At 1 January 2023
278
-
0
707
985
Additions made during the year
27
659
2,633
3,319
Released during the year
(8)
-
0
(1,216)
(1,224)
Utilised during the year
(111)
-
0
(1,895)
(2,006)
At 31 December 2023
186
659
229
1,074

The Company is required to perform repairs on leased properties prior to the properties being vacated at the end of their lease term. Dilapidations for such costs are made where legal obligation is identified and the liability can be reasonably quantified.

 

Cost reduction provision relates to unavoidable running costs of leasehold properties, such as insurance and security, and dilapidation provisions, where properties are exited as a result of the cost reduction programme.

 

Other provision relates to a gainshare clause in a contractual obligation.

18
Share capital
2023
2022
2023
2022
Number
Number
£
£
Allotted, called up and fully paid
Ordinary shares of £1 each
At 1 January 2023
1,210,413
1,210,413
1,210,413
1,210,413
Cancellation of share capital
(1,210,412)
-
(1,210,412)
-
At 31 December 2023
1
1,210,413
1
1,210,413

The balance classified as share capital is the nominal proceeds on issue of the Company's equity share capital, comprising 1 ordinary share of £1.

 

On 1 November 2023, the Company reduced its ordinary share capital to 1 ordinary share of £1 nominal value through the cancellation of 1,210,412 ordinary shares of £1 each.

- 39 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
19
Employees

The average monthly number of employees (including non-executive Directors) were:

2023
2022
Number
Number
Sales and operation
290
273
Administration
18
9
Total
308
282

Their aggregate remuneration comprised:

2023
2022
£'000
£'000
Wages and salaries
13,515
15,965
Social security costs
1,559
1,716
Pension costs
693
806
Share based payments
44
17
15,811
18,504

The above includes the recharges from other Group entities in respect of various services received by the Company throughout the year.

20
Directors' remuneration

For the year ended 2023, 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.

- 40 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
21
Employee benefits

The Company participates in both defined benefit and defined contribution pension schemes.

 

The pension charge for the defined contribution pension schemes for the year is £574k (2022: £662k). The pension charge excludes pension contributions paid by the Company on behalf of employees via a salary sacrifice arrangement.

 

The Company has current and former employees who are members of public sector defined benefit pension schemes.

Where the Company participates in public sector defined benefit pension schemes, this is for a finite period and there are contractual protections in place allowing actuarial and investment risk to be passed on to the end customer via recoveries for contributions paid. The nature of these arrangements vary from contract to contract but typically allows 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 payable to the schemes at the cessation of the contract (where applicable), such that the Company’s net exposure to actuarial and investment risk is immaterial. Therefore the costs in relation to all of the above schemes are reported on a defined contribution basis recognising a cost equal to its contribution payable during the period. No amounts are recognised on the Company’s balance sheet.

The pension charge for these public sector defined benefit pension schemes is included in the above pension charge for the defined contribution pension schemes.

The Group's main defined benefit pension scheme

The Company has current and former employees who are members of the Group’s main defined benefit pension scheme (“HPS”) (formerly known as CPLAS). The Company has current employees who continue to accrue benefits in the HPS.

The pension charge for the Company in relation to the HPS for the year was £119k (2022: £144k).

A full actuarial valuation of the HPS is carried out every three years by an independent qualified actuary for the Trustee of the HPS, with the last full valuation carried out as at 31 March 2023. Amongst the main purposes of the valuation is to agree a contribution plan such that the pension scheme has sufficient assets available to meet future benefit payments, based on assumptions agreed between the Trustee of the HPS and the Principal Employer (Capita Business Services Ltd, a fellow subsidiary undertaking). The 31 March 2023 valuation showed a funding surplus of £51.4m (31 March 2020: funding deficit of £182.2m). This equates to a funding level of 105% (31 March 2020: 89%).

Given the funding position of the HPS, the Principal Employer and the Trustee of the HPS agreed that no further deficit recovery contributions from the Principal Employer are required other than those already committed* as part of the 31 March 2020 actuarial valuation. In accordance with the schedule of contributions put in place following the 31 March 2020 actuarial valuation, the Principal Employer has paid £30m of regular deficit contributions during 2023 and £16.3m of accelerated deficit funding contributions and other contributions triggered by the disposal of certain businesses in the second half of 2022 and 2023. The Principal Employer will pay a further £21m of contributions in 2024, with no further deficit contributions in 2025 and beyond.

*These include additional, non-statutory, contributions to meet a secondary funding target with the objective 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’ benefits as they fall due.

- 41 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
21
Employee benefits
(Continued)

Finally, the Principal Employer agreed an average employer contribution rate of 23.6% of pensionable salary towards the expected cost of benefits accruing.

The next full actuarial valuation is due to be carried out with an effective date of 31 March 2026.

For the purpose of the consolidated accounts of Capita plc, an independent qualified actuary projected the results of the 31 March 2023 full actuarial valuation to 31 December 2023 taking account of the relevant accounting requirements.

The principal assumptions for the accounting valuation as at 31 December 2023 were as follows: rate of increase in RPI/CPI price inflation - 3.05% pa/2.45% pa (2022: 3.15% pa/2.50% pa); rate of salary increase - 3.05% pa (2022: 3.15% pa); rate of increase for pensions in payment (where RPI inflation capped at 5% pa applies) - 3.0% pa (2022: 3.05% pa); discount rate - 4.55% pa (2022: 4.75% pa).

The HPS assets at fair value as at 31 December 2023 totalled £1,154.4m (2022: £1,126.3m). The actuarially assessed value of HPS as at 31 December 2023 was £1,125.0m (2022: £1,087.0m) indicating that the HPS had a net asset of £29.4m (2022: net asset of £39.3m). These figures are quoted gross of deferred tax. The full disclosure is available in the consolidated accounts of Capita plc.

For the purpose of these accounts, the Company’s interest in the HPS is reported on a defined contribution basis recognising a cost equal to its contributions payable during the period.

22
Related party transactions

During the year the Company entered into the following transactions with related parties:

Sale of goods
Purchase of goods
2023
2022
2023
2022
£'000
£'000
£'000
£'000
Entities with joint control or significant influence over the company -
Entrust Support Services Limited
18
17
-
64
RE (Regional Enterprise) Limited
-
0*
-
-
18
17
-
0
64

The following amounts were outstanding at the reporting end date:

2023
2022
Amounts due from related parties
£'000
£'000
Entities with joint control or significant influence over the company
Entrust Support Services Limited
8
0*
RE (Regional Enterprise) Limited
0*
-
8
0*

* less than £1000

- 42 -
CAPITA MANAGED IT SOLUTIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
23
Contingent liabilities

At 31 December 2023, indemnities provided through the normal course of its business, performance bonds and bank guarantees of £nil (2022: £15k).

24
Controlling party

The Company's immediate parent company is Capita Business Services Ltd, a company incorporated in England and Wales. The Company's ultimate parent company is Capita plc, a company incorporated in England and Wales. The financial statements of Capita plc are available from the registered office at 65 Gresham Street, London, England, EC2V 7NQ.

25
Post balance sheet date events

There are no significant events which have occurred after the reporting period.

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2023-12-312023-01-01Capita Corporate Director LimitedE H BrownellG Bate-WilliamsC J GregoryCapita Group Secretary LimitedfalseCCH SoftwareiXBRL Review & Tag 2022.2The members have not required the company to obtain an auditThe company is not entitled to exemption from audit under section 477 of the Companies Act 2006 relating to small companiesThe accounts have not been prepared in accordance with the provisions of the small companies 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