Company Registration No. 01860772 (England and Wales)
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
COMPANY INFORMATION
Directors
C C Clements
S R Heatley
A M Moffatt
C Ramamurthy
(Appointed 19 June 2019)
N J Purveur
(Appointed 14 January 2020)
C Free
(Appointed 26 February 2020)
Secretary
Capita Group Secretary Limited
Company number
01860772
Registered office
65 Gresham Street
London
United Kingdom
EC2V 7NQ
Auditor
KPMG LLP
15 Canada Square
London
E14 5GL
Banker
Barclays Bank PLC
1 Churchill Place
London
E14 5HP
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
CONTENTS
Page
Strategic report
1 - 3
Directors' report
4 - 5
Independent auditor's report to the members of Capita Employee Benefits (Consulting) Limited
6 - 7
Income statement
8
Balance sheet
9 - 10
Statement of changes in equity
11
Notes to the financial statements
12 - 39
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
The Directors present the Strategic report and financial statements for the year ended 31 December 2019.
Review of the business
Capita Employee Benefits (Consulting) 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 Group's People Solutions division.
The principal activities of the Company during the 2019 year is the provision of employee benefits consultancy, communication and administrative services. There have not been any significant changes in the Company’s principal activities in the period under review. The business is currently considering a restructure of the entire Pensions business, with the aim to move all trade and assets of the continuing pensions consulting contracts within the Company to Capita Employee Benefits Limited (a sister company owned by Capita Plc). The completion and outcome of this restructure is subject to third party consents which are currently in the process of being obtained, but are yet to be certain.
In addition, on 1st December 2020 Capita Employee Benefits Consulting Ltd announced the sale of its Employee Benefits business to Benefex Financial Solutions as part of its strategic decision to simplify its portfolio. Included in the sale is Capita’s Health and Global consulting and brokerage business as well as its Flexible Benefits Consulting and Administration business. Capita colleagues employed previously by this business have transferred to Benefex, a provider of employee benefit solutions and employee benefit consulting services.
Subject to the transfer of the pensions consulting contracts to Capita Employee Benefits Limited, there will be no operational activity remaining in the Company.
The Company adopted IFRS 16 during the year which sets
out
the principles for the recognition, measurement, presentation and disclosure of leases. The
C
ompany has applied IFRS 16 using modified retrospective approach, the effect of which is explained in
n
ote no.
6, 10, 18
and
25
.
As shown in the Company's income statement on page 8, revenue has decreased from £35.6 million to £32.1 million due to client losses and the operating results have changed from an operating profit of £5.5 million in 2018 to an operating loss of £22.4 million in 2019.
During 2019, the Company took the decision to exit part of our business. The exit is in progress and expected to complete in 2020. As a result of this work and in accordance with our policy, the Company determined that the recoverability of £
1
.
8
m of contract fulfilment assets and £1
6.3
m of intangible assets was not supportable and these assets have been consequently impaired
to nil
in the reporting period
.
The balance sheet on page 9 and 10 of the financial statements shows the Company's financial position at the year end. Net assets have decreased from £24.2 million to £6.2 million in 2019. Amounts owed by/ to its parent company and fellow subsidiary undertakings are shown in note 13 and note 16 to the financial statements.
Key performance indicators used by Capita plc are operating margins, free cash flow, capital expenditure and return on capital employed. 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 level. The performance of the People Solutions division of Capita plc for 2019 is discussed in the Group's annual report which does not form part of this report. The Strategic report in the Annual Report of the Group provides further detail and is available to the public and may be obtained from Capita plc’s website on http://investors.capita.com.
- 1 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
Principal risks and uncertainties
The Company is subject to various risks and uncertainties during the ordinary course of its business many of which result from factors outside of its control. The Company's risk management framework provides reasonable (but cannot provide absolute) assurance that significant risks are identified and addressed. An active risk management process identifies, assesses, mitigates and reports on strategic, financial, operational and compliance risk.
The principal themes of risk for the Company are:
-
Operational
: including recruitment and retention of staff, maintenance of reputation and strong supplier and customer relationships, operational IT risk, and failures in information security controls.
To mitigate the effect of these risks and uncertainties, the Company adopts a number of systems and procedures, including:
Capita plc has also implemented appropriate controls and risk governance techniques across all of our businesses which are discussed in the Group's annual report which doesn't form part of this report.
Section 172 Statement
The Company forms part of the People Solutions division of the Group and 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 throughout the Group via divisional management teams and a common governance framework. The following disclosure describes how the Directors have had regard to the matters set out in section 172(1a) to (f) and forms the Directors’ statement required under section 414CZA of the Companies Act 2006.
Further details of the Group approach to each stakeholder are provided in Capita plc’s section 172 statement which can be found on page 39 of Capita plc’s Annual Report.
- 2 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
Secttion 172 (continued)
|
|
|
|
|
|
Workforce engagement; organisational culture; employee net promoter score
|
People surveys; regular all-employee communications
|
Established managers’ commitments; research into future of work
|
Application of standard Capita plc policies and procedures; refreshed purpose, values and behaviours
|
|
Net promoter score; quality and sustainability; additional value
|
Client survey; regular meetings with key clients and customers
|
Receipt of regular detailed feedback summaries; application of standard Capita plc policies and procedures which includes the establishment of Group contract review committee to ensure delivery against contractual obligations
|
Collaboration with clients and customers on key contracts
|
|
|
Capita plc holds regular meetings with Federation of Small Businesses; account management meetings with large suppliers
|
Application of Group payment policies including supplier charter; signatory to UK Prompt Payment Code (target 95% of supplier payments within 60 days)
|
|
|
|
Meetings, memberships and surveys of non-governmental organisations and charities
|
Group established responsible business strategy and responsible business committee; approval of third-party transaction guidelines; commitment to real living wage in 2020; enhanced family pay policies; Fair Tax Mark accreditation
|
Approval of new code of conduct
|
* Principal decisions are those that are material to the Group and/or significant to any of our key stakeholder groups.
C C Clements
Director
17 December 2020
- 3 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
The Directors present their Director's report and financial statements for the year ended 31 December 2019.
Results and dividends
The results for the year are set out on page 8.
No dividend was proposed or paid during the year (2018: £nil).
Directors
The Directors who held office during the year and up to the date of signature of the financial statements were as follows:
S J S Mayall
(Resigned
14 August 2020
2020-08-14
)
C C Clements
S R Heatley
A M Moffatt
G Pickles
(Resigned 31 July 2019)
P M Telford
(Resigned 27 September 2019)
C Ramamurthy
(Appointed 19 June 2019)
N J Purveur
(Appointed 14 January 2020)
C Free
(Appointed 26 February 2020)
Political donations
The Company made no political donations and incurred no expenditure during the year (2018 : £nil).
Disabled persons
The Company's policy is to recruit disabled workers for those vacancies that they are able to fill. All necessary assistance with initial training courses is given. Once employed, a career plan is developed so as to ensure suitable opportunities for each disabled person. Arrangements are made, wherever possible, for retraining employees who become disabled, to enable them to perform work identified as appropriate to their aptitudes and abilities.
Employee involvement
The Company participates in the Group's policies and practices to keep employees informed on matters relevant to them as employees through regular meetings, newsletters, email notices and intranet communications. These communication initiatives enable employees to share information within and between business units and employees are encouraged, through an open-door policy, to discuss with management matters of interest to the employee and subjects affecting day to day operations of the Company. The Group's share incentive plan is designed to promote employee share ownership and to give employees the opportunity to participate in the future success of the Group.
Auditor
KPMG LLP, having indicated its willingness to continue in office, will be deemed to be reappointed as auditor under section 487(2) of the Companies Act 2006.
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CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
Statement of Directors' responsibilities in respect of Strategic report, Directors' report and financial statements
The Directors are responsible for preparing 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 the Directors 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 income statement of the Company for that period. In preparing these financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
- assess the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern;
-
use the going concern basis of accounting unless they either intend to liquidate the
C
ompany or to cease operations,or have no realistic alternative but to do so.
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
C
ompany and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
C
ompany’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions
.
Statement of disclosure to auditor
So far as each person who was a
D
irector at the date of approving this report is aware, there is no relevant audit information, being information needed by the auditor in connection with preparing its report, of which the company’s auditor is unaware. Having made enquiries of fellow
D
irectors and the company’s auditor, each
D
irector has taken all the steps that he might reasonably be expected to take as a director in order to make himself aware of any relevant audit information and to establish that the company’s auditor is aware of that information.
Qualifying third party indemnity provisions
The
C
ompany has granted an indemnity to the
D
irectors of the
C
ompany 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
D
irectors' report.
On behalf of the board
C C Clements
Director
65 Gresham Street, London, United Kingdom ,EC2V 7NQ
17 December 2020
2020-12-17
- 5 -
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
Opinion
We have audited the financial statements of Capita Employee Benefits (Consulting) Limited ("the company") for the year ended 31 December 2019 which comprise the Income Statement, Balance Sheet, Statement of Changes in Equity and related notes, including the accounting policies in note 1.
In our opinion the financial statements:
-
give a true and fair view of the state of the company's affairs as at 31 December 2019 and of its loss for the year then ended;
-
have been properly prepared in accordance with UK accounting standards, including FRS
; and
-
have been prepared in accordance with the requirements of the Companies Act 2006
.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company in accordance with, UK ethical requirements including the FRC Ethical Standard. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 1.1 to the financial statements which indicates that the company is reliant on its ultimate parent undertaking, Capita plc, in regard to its ability to continue as a going concern. Under a severe but plausible downside scenario Capita plc may require completion of its planned disposal programme, which requires shareholder approval and approval from the group’s lenders. These agreements with third parties constitute a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
Strategic report and directors' report
The directors are responsible for the strategic report and the directors’ report. Our opinion on the financial statements does not cover those reports and we do not express an audit opinion thereon.
Our responsibility is to read the strategic report and the directors’ report and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work:
-
we have not identified material misstatements in the strategic report and the directors’ report;
-
in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
-
in our opinion those reports have been prepared in accordance with the Companies Act 2006.
- 6 -
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
Matters on which we are required to report by exception
Under the Companies Act 2006 we are required to report to you if, in our opinion:
-
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
-
the financial statements are not in agreement with the accounting records and returns; or
-
certain disclosures of directors’ remuneration specified by law are not made; or
-
we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
Directors' responsibilities
As explained more fully in their statement set out on page 5, the directors are responsible for: the preparation of the financial statements and for being satisfied that they give a true and fair view; 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; assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so
.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC's website at: http://www.frc.org.uk/auditorsresponsibilities
.
The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
Ross Martin (Senior Statutory Auditor)
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
17 December 2020
2020-12-15
- 7 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2019
2019
2018
£m
£m
Notes
Revenue
3
32.1
35.6
Cost of sales
(28.3)
(28.4)
Gross profit
3.8
7.2
Administrative expenses
(8.1)
(1.7)
Operating (loss)/profit before impairment of intangibles and contract fulfilment assets
4
(4.3)
5.5
Impairment
(18.1)
-
Operating (loss)/profit
(22.4)
5.5
Other income
5
0.1
-
Net finance cost
-
-
(Loss)/profit before tax
(22.3)
5.5
Income tax credit/(charge)
7
4.3
(1.1)
Total comprehensive (loss)/ income for the year
(18.0)
4.4
The income statement has been prepared on the basis that all operations are continuing operations.
There are no recognised gains and losses other than those passing through the income statement.
The notes on page 12 to 39 form an integral part of financial statements.
- 8 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
BALANCE SHEET
AS AT 31 DECEMBER 2019
31 December 2019
2019
2018
Notes
£m
£m
Non-current assets
Property, plant and equipment
8
2.0
2.4
Intangible assets
9
0.5
18.6
Right-of-use assets
10
0.1
-
Contract fulfilment assets
12
-
2.2
Trade and other receivables
13
0.1
-
Deferred tax
7
0.1
-
2.8
23.2
Current assets
Financial assets
11
0.9
-
Trade and other receivables
13
6.7
8.9
Income tax receivable
3.1
-
Cash
15
8.8
12.5
19.5
21.4
Total assets
22.3
44.6
Current liabilities
Trade and other payables
16
13.2
13.9
Deferred income
17
1.2
1.4
Financial liabilities
14
0.9
-
Provisions
19
0.8
0.3
Income tax payable
-
2.7
16.1
18.3
Non-current liabilities
Trade and other payables
16
-
2.1
-
2.1
Total liabilities
16.1
20.4
Net assets
6.2
24.2
- 9 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
BALANCE SHEET (CONTINUED)
AS AT 31 DECEMBER 2019
31 December 2019
2019
2018
£m
£m
Capital and reserves
Issued share capital
22
1.8
1.8
Retained earnings
4.4
22.4
Total equity
6.2
24.2
The notes on pages 12 to 39 form an integral part of financial statements.
Approved by Board and authorised for issue on 17 December 2020.
C C Clements
Director
Company Registration No. 01860772
- 10 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Share capital
Retained earnings
Total equity
£m
£m
£m
At 1 January 2018
1.8
18.0
19.8
Total comprehensive income for the year
-
4.4
4.4
At 31 December 2018
1.8
22.4
24.2
Total comprehensive expense for the year
-
(18.0)
(18.0)
At 31 December 2019
1.8
4.4
6.2
Share capital
- The balance classified as share capital are the nominal proceeds on issue of the Company's equity share capital, comprising 1,751,000 ordinary shares.
Retained earnings
- Net profits kept to accumulate in the Company after dividends are paid and retained in the business as working capital.
The notes on pages 12 to 39 form an integral part of the financial statements.
- 11 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
1.1
Basis of preparation
Capita Employee Benefits (Consulting) Limited is a Company incorporated and domiciled in the United Kingdom.
The Company is a wholly owned (indirectly held) subsidiary of Capita plc and operates within the Group's People Solutions division.
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 2019, the Directors are required to consider whether the operations will continue. As described in note 26, the business is currently considering a restructure of the entire Pensions business, with the aim to move all trade and assets of the continuing pensions consulting contracts within the Company to Capita Employee Benefits Limited (a sister company owned by Capita Plc). The completion and outcome of this restructure is subject to third party consents which are currently in the process of being obtained, but are yet to be certain. Subject to completion of this described business transfer, there will be no operational activity remaining in the Company. However, given the uncertainties surrounding the third party consents required, the Directors have not made a final decision to complete the restructure. Therefore they have determined that the going concern basis of preparation should be continue to be applied where it is appropriate.
In addition, the Directors are required to consider whether the Company will be able to operate within the level of available facilities and cash for the foreseeable future, being a period of at least 12 months following the approval of these accounts. 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 and sensitivities, including the potential impact of COVID-19 as set out below.
Since late March 2020, the Group and the Company have faced challenges and uncertainties due to the COVID-19 pandemic.
The Directors expect revenue over the rest of the year to remain resilient, given the client base and the long-term nature of our contracts. Nevertheless, to enable a robust assessment of the medium term forecast financial performance the Directors commissioned an exercise in June 2020 to revisit the outlook to the end of 2021 ahead of the normal business plan process. The high level of uncertainty as to how the COVID-19 pandemic might evolve over the remainder of 2020 and into 2021, including whether or not there will be a second wave and what impact this may have on the operation of the business, makes precise forecasting challenging. There is a higher degree of uncertainty than would usually be the case in making the key judgements and assumptions that underpin the Company’s financial forecasts.
The bottom-up forecasts have been subject to review and challenge by management and the Directors. The forecasts include overlays for additional financial benefits that are expected to be driven by the Group transformation programme. These include sales growth together with margin improvements and further cost out targets. The Directors have approved the 2021 outlook which, on the assumption that the overlays are successfully delivered, supports the base case and time period assessed as part of the going concern review for these financial statements.
In addition to the base case, the Directors considered severe but plausible downside scenarios, recognising there is execution risk associated with a transformation programme of such magnitude that has been impacted by the broader political and economic uncertainty introduced by COVID-19. Offsetting these risks the Directors have considered available mitigations within the direct control of the Company, including (restructuring and limiting variable rewards). Finally, the assessment has considered the extent to which the Company is reliant on the Group.
The Company is reliant on the Group in respect of the following:
- 12 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
1.1
Basis of preparation (Continued)
-
participation in the Group’s notional cash pooling arrangements, of which £9.1m was advanced by the Company at 30 November 2020. In the event of a default by the Group, the Company may not be able to access this facility; and
-
recovery of receivables of £1.9m from fellow Group undertakings as of 30 November 2020.
Given the reliance the Company has on the Group, the Directors have considered the financial position of the ultimate parent undertaking as disclosed in its most recent financial statements, being for the six months ended 30 June 2020.
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 and sensitivities, including the potential impact of COVID-19, when preparing the Group’s consolidated financial statements for the six months to 30 June 2020. These financial statements were approved by the Board on 17 August 2020 and are available on the Group’s website (
www.capita.com/investors).
To address the medium-term resilience of the Group, the Board have announced the planned disposal of the Education Software Services business (‘ESS’). It is the Board’s expectation that these funds will provide the necessary liquidity headroom to address any potential shortfalls arising in the downside scenarios evaluated, albeit with potentially limited covenant headroom as at 30 June 2021. It is also the Board's expectation that these funds will provide for compliance with all covenants although in certain circumstances this headroom is potentially limited at June 2021. The Board has confidence in the robustness of its primary mitigation (the ESS disposal) against the downside scenarios considered. The Board has several other options which are being actively pursued to provide further resilience in the event of a downside scenario. These include additional disposals and a refinancing of short- term maturities.
Material uncertainty
The disposal of ESS is subject to shareholder and lender approval, both of which are outside the control of the Company. Accordingly, this gives rise to material uncertainty, as defined in auditing and accounting standards, relating to events and circumstances which may cast significant doubt about the Group’s ability to continue as a going concern.
The Board is confident that the ESS disposal will be approved by shareholders and lenders, and based on this expectation believes that, even in a plausible but severe downside scenario, the Group will continue to have adequate financial resources to realise its assets and discharge their liabilities as they fall due over the period to 31 December 2021.
Conclusion
Although the Company has a reliance on the Group 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 realise its assets and discharge its liabilities as they fall due over the period to 31 December 2021. Consequently, the annual report and financial statements have been prepared on the going concern basis and do not include any adjustments which would be required if the going concern basis of preparation were to be deemed inappropriate.
However, as the Group’s disposal of ESS is subject to shareholder and lender approval, both of which are outside the control of the Group, this gives rise to a material uncertainty relating to events and circumstances which may cast significant doubt about the Group and therefore also the Company’s ability to continue as a going concern
.
- 13 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
1.2
Compliance with accounting standards
The Company has prepared and presented these financial statements by applying the recognition, measurement and disclosure requirements of International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs"), but made amendments, where necessary, in order to comply with the Companies Act 2006. The Company has applied FRS 101 - Reduced Disclosure Framework in the preparation of its financial statements and these are contained on pages 8 to 39.
The Company's ultimate parent undertaking, Capita plc, includes the Company in its consolidated statements. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU (EU-IFRS) and are available to the public and may be obtained from company's website on http://investors.capita.com.
In these financial statements, the Company has applied the disclosure exemptions available under FRS 101 in respect of the following disclosures:
-
A cash flow statement and related notes;
-
Comparative period reconciliations for share capital, tangible fixed assets and intangible assets;
-
Disclosures in respect of transactions with wholly owned subsidiaries;
-
Disclosures in respect of capital management;
-
The effects of new but not yet effective IFRSs;
-
Certain disclosures as required by IFRS 15
: Revenue from Contracts with Customers
;
-
Disclosures in respect of the compensation of key management personnel
,
and
-
Certain disclosures under IFRS 16 : Leases.
As the consolidated financial statements of Capita plc include equivalent disclosures, the Company has also taken the disclosure exemptions under FRS 101 available in respect of the following disclosure:
-
Certain disclosures required by IFRS 2
:
Share Based Payments in respect of Group settled share based payments;
-
Certain disclosures required by IAS 36
:
Impairments of assets in respect of the impairment of goodwill and indefinite life intangible assets;
-
Certain disclosures required by IFRS 3
:
Business Combinations in respect of business combinations undertaken by the Company, in the current and prior periods including the comparative period reconciliation for goodwill;
-
Certain disclosures under IFRs 13 Fair Value Measurement ;
and
-
Disclosures required by IFRS 7 Financial Instrument Disclosures.
- 14 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
1.3
Change in accounting Policy
The accounting policies adopted are consistent with those of the previous financial year except for the adoption of IFRS
16 Leases. In addition, the Company has adopted a new IFRIC as detailed below.
Initial adoption of IFRS 16 Leases
IFRS 16 (effective 1 January 2019) replaces IAS 17 and sets out the principles for the recognition, measurement, presentation and disclosure of leases. The Company applied IFRS 16 using the modified retrospective approach, under which the Company has measured the right-of-use assets at the value of lease liability (adjusted for prepaid lease payments). Accordingly, the comparative information presented for 2018 has not been restated – i.e. it is presented, as previously reported under IAS 17 and related interpretations.
The accounting policy under IFRS 16 is set out in 1
.8.
On adoption of IFRS 16, the Company immediately recognised right of use asset representing its right to use the underlying assets and lease liabilities representing its obligation to make lease payments.
IFRIC 23 Uncertainty over Income Tax Treatments
IFRIC 23 (effective 1 January 2019) addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 Income Taxes. The Company has initially applied IFRIC 23 Uncertainty over Income Tax Treatments at 1 January 2019. The Company applies judgement in quantifying uncertainties over income tax treatments and has considered whether it should adjust its uncertain tax provisions in line with this new criteria. There is no impact on the Company's financial statements due to application of IFRIC 23 (2018: £nil).
In addition, 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 interpretation
|
|
Prepayment features with negative compensation (Amendments to IFRS 9)
|
|
Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28)
|
|
Plan amendment, curtailment or settlement (Amendments to IAS 19)
|
|
Annual improvements to IFRS Standards 2015-2017 cycle (Amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23)
|
|
- 15 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
1.4
Revenue recognition
Revenue is earned within the United Kingdom.
The
C
ompany 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
C
ompany 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.
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
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.
- 16 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
1.4 Revenue recognition (continued)
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 overtime 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.
- 17 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
1.4 Revenue recognition (continued)
Long term contractual - greater 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.
Short term contractual - less than 2 years
The nature of contracts or performance obligations categorised within this revenue type is diverse and include
s
short term outsourced service arrangements in the public and private sectors
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 fees received in relation to delivery of professional services.
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). d) may arise when a contract has a part termination and a modification of the remaining performance obligations.
- 18 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
1.4 Revenue recognition (continued)
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.
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:
• Property, plant and equipment
• Intangible assets
• Contract fulfilment assets
• Contract assets derived from costs to obtain a contract
• Trade receivable
s
• Accrued income
• Deferred income
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.
- 19 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
1.4 Revenue recognition (continued)
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.
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.
- 20 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
1.4 Revenue recognition (continued)
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.
At each reporting date, the Company assesses whether there is any indication that accrued income assets may be impaired by considering whether the revenue remains highly probable that no revenue reversal will occur. 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.
1.5
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. It is not amortised but is tested annually for impairment. This is not in accordance with The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 which requires that all goodwill be amortised. The directors consider that this would fail to give a true and fair view of the profit for the year and that the economic measure of performance in any period is properly made by reference only to any impairment that may have arisen. It is not practicable to quantify the effect on the financial statements of this departure.
On adoption of FRS 101, the company restated business combinations that took place between 1 January 2004 and 31 December 2010. Certain items were recognised as other intangible assets from goodwill and amortised over their expected useful life and goodwill amortisation was restated to reverse the impact of amortisation over that period. The company, therefore, restated its opening balance in 2012 to reflect the position had IFRS 3 'Business Combinations' been in effect since 1 January 2004. This is in accordance with the position recorded in the ultimate parent company's consolidated accounts, which the directors believe is the most appropriate and consistent approach to take on business combinations since the adoption of IFRS in the comparative period for the year ending 31 December 2005. Prior to 1 January 2004 business combinations were accounted for under UK GAAP
.
- 21 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
1.6
Plant, Property and Equipment
Property, plant and equipment are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows:
Land and buildings leasehold
Over the period of the lease
Fixtures, fittings & equipment
3-5 years
Computer equipment
Over life of contract
1.7
Intangible assets
Other intangibles 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
- 10
years. In the case of capitalised software development costs, research expenditure is written off to the statement of profit and loss in the period in which it is incurred.
- 22 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
1.8
Leasing
The Company leases various assets, comprising land and buildings.
The determination whether an arrangement is, or contains, a lease is based on whether the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. The following sets out the Company’s lease accounting policy for all leases with the exception of leases with low value and term of 12 months or less which we have taken the exemption in the standard. These are expensed to the income statement.
At the inception of the lease, the Company recognises a right-of-use asset and a lease liability. A lease liability is recognised in the balance sheet at the present value of minimum lease payments determined at the inception of the lease. A right-of-use asset of equivalent value is also recognised. 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 the line item administrative expenses in the income statement.
The Company as a lessee - Right-of-use assets and lease liabilities
Right-of-use assets are measured at cost, which comprised the initial amount of the lease liability adjusted for any lease payments made at or before the adoption date, less any lease incentives received at or before the adoption date. Depreciation is included within administrative expenses in the income statement. 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-uses assets exclude leases with a low value and term of 12 months or less. These leases are expensed to the income statement as incurred.
Lease liabilities are measured at amortised cost using the effective interest rate method. 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 the line item net finance costs in the consolidated income statement.
The lease payments comprise fixed payments, including in-substance fixed payments such as service charges and variable lease payments that depend on an index or a rate, initially measured using the minimum index or rate at inception date. The payments also include any lease incentives and any penalty payments for terminating the lease, if the lease term reflects the lessee exercising that option. Lease liability is adjusted for any prepayment
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 the option to terminate are included if it is reasonably certain that this will not be exercised.
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. Payments associated with leases that have a term of less than 12 months or are of low value are recognised as an expense in the income statement as incurred.
- 23 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
1.9
Pensions
The Company participates in a number of defined contribution schemes and contributions are charged to the income statement account in the year in which they are due. These schemes are funded and the payment of contributions is made to separately administered trust funds. The assets of these schemes are held separately from the Company. The Company remits monthly pension contributions to Capita Business Services Limited, a fellow subsidiary undertaking, which pays the Group liability centrally. Any unpaid contributions at the year-end have been accrued in the accounts of that
C
ompany.
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 liabilities are recognised for all taxable temporary differences:
-
except where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
-
in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
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 income 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 income 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 EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
1.11
Share Based Payments
The Company participates in various share option and share save schemes operated by Capita plc, the ultimate parent undertaking. Details of these schemes are contained in the Group's annual report.
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted 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. In valuing equity settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the company (market conditions).
No expense is recognised for awards that do not ultimately vest as a result of not meeting performance or service conditions. Where all service and performance vesting conditions have been met, the awards are treated as vesting, irrespective of whether or not the market condition is satisfied, as market conditions have been reflected in the fair value of the equity instruments.
At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management'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, attributable to the company, since the previous balance sheet date is recognised in the profit and loss account and settled with Capita pie, the ultimate parent undertaking.
In accordance with IFRS 2, share option awards of the ultimate parent company's equity instruments in respect of settling grants to employees of the Company are disclosed as a charge to the profit and loss account and a credit to equity. The Company's policy is to reimburse its ultimate parent company through the intercompany account for charges that are made to it. Hence the debit to equity has been eliminated, rather reflecting a debit to inter-company which better describes the underlying nature of the transaction.
- 25 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
1.12
Financial Instruments
Investments and other financial assets
(i) Classification
T
he
Company
classifies its financial assets in the following measurement categories:
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.
For investments in equity instruments that are not held for trading, this will depend on whether the
Company
has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).
The
Company
reclassifies debt investments when and only when its business model for managing those assets changes
.
(ii) Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade date (that is, the date on which the group commits to purchase or sell the asset). Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the
Company
has transferred substantially all the risks and rewards of ownership.
(iii) Measurement
At initial recognition, the
Company
measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
(iv) Impairment
T
he
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.
For trade receivables, the
Company
applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables
.
- 26 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
1.12
Financial Instruments( continued)
Available-for-sale financial assets are measured at their fair value with unrealised gains or losses being recognised directly in equity. When the investment is disposed of, the cumulative gain or loss previously recorded in equity is recognised in the income statement.
Financial assets at fair value through the income statement (disclosed in investment income) include financial assets designated upon initial recognition as at fair value through the income statement.
Trade and other receivables
The Company assesses on a forward-looking basis the expected credit losses associated with its receivables carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Company applies the simplified approach permitted by IFRS 9, resulting in trade receivables recognised and carried at original invoice amount less an allowance for any uncollectible amounts based on expected credit losses
.
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 an original maturity of 3 months or less. Bank overdrafts are shown within current financial liabilities.
Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at their fair value less any directly attributable transaction costs.
After initial recognition, loans and borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method.
Gains and losses are recognised in the income statement when the liabilities are derecognised, as well as through the amortisation process.
1.13
Impairment of non-financial assets
At each reporting 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 liability.
1.14
Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the account of the obligation. Where the Company expects some or all a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when recovery is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. The Company provides, on a discounted basis, for the future rent expense and related cost of leasehold property (net of estimated sub-lease income) where the space is vacant or currently not planned to be used for ongoing operations.
- 27 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
2
Significant accounting judgements, estimates and assumptions
The preparation of financial statements in conformity with generally accepted accounting policies requires the Directors to make judgments and assumptions that affect the reported amounts of assets and liabilities disclosure of contingencies at the date of the financial statements and the reported income and expense during the reported periods. Although these judgements and assumptions are based on the Directors best knowledge of the amount, events or actions, actual results may differ from the estimates.
The measurement of revenue and resulting profit recognition requires judgements to be applied, including the measurement and timing of revenue recognition , estimation of the recoverable value of fees and the recognition of assets and liabilities, that result from the performance of the contract.
3
Revenue
The total
revenue
of the
C
ompany for the year has been derived from its principal activity wholly undertaken in the United Kingdom.
4
Operating profit
2019
2018
£m
£m
(Loss)/profit for the year is stated after charging:
Depreciation of property, plant and equipment
0.4
0.4
Depreciation of right-of-use asset
0.1
-
Amortisation of intangible assets
2.4
1.5
Impairment of intangible assets
16.3
-
Impairment of contract fulfilment assets
1.8
-
Operating lease rentals - other assets
-
4.7
During 2019, the Company took the decision to exit part of our business. The exit is in progress and expected to complete in 2020. As a result of this work and in accordance with our policy, the Company determined that the recoverability of £1.8m of contract fulfilment assets and £16.3m of intangible assets was not supportable and these assets have been consequently impaired to nil in the reporting period .
Audit fees are borne by the ultimate parent undertaking, Capita plc. The audit fee for the current period was £30,437 (2018: £29,550). The Company has taken advantage of the exemption provided by regulations 6(2)(b) of The Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) Regulations 2008 not to provide information in respect of fees for other (non-audit) services as this information is required to be given in the company accounts of the ultimate parent undertaking, which it is required to prepare in accordance with the Companies Act 2006.
5
Other income
2019
2018
£
£
Rental income
0.1
-
0.1
-
6
Leases under IFRS 16
2019
£m
Depreciation of right-of-use assets
(0.1)
- 28 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
7
Income tax
The major components of income tax expense for the years ended 31 December 2019 and 2018 are:
2019
2018
£m
£m
Current income tax
UK corporation tax
(4.1)
1.0
Adjustments in respect of prior periods
(0.1)
-
(4.2)
1.0
Deferred income tax
Origination and reversal of temporary differences
(0.1)
0.1
Adjustment in respect of prior periods
-
-
(0.1)
0.1
Total tax (credit)/expense reported in the income statement
(4.3)
1.1
The reconciliation between tax charge and the accounting profit multiplied by the UK corporation tax rate for the years ended 31 December 2019 and 2018 is as follows:
2019
2018
£m
£m
(Loss)/profit before tax
(22.3)
5.5
(Loss)/profit before taxation multiplied by standard rate of corporation tax in the UK of 19.00% (2018: 19.00%)
(4.2)
1.0
Expenses not deductible for tax purposes
-
0.1
Adjustments in respect of current income tax of prior periods
(0.1)
-
Total tax (credit)/expense reported in the income statement
(4.3)
1.1
- 29 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
7
Income tax
(Continued)
Balance sheet
Income Statement
2019
2018
2019
2018
£m
£m
£m
£m
Deferred Tax (Asset)/Liability
Decelerated capital allowances
(0.1)
-
(0.1)
-
Deferred income liability
-
-
-
0.1
Net deferred tax asset
(0.1)
-
-
Deferred income tax (credit)/expense
(0.1)
0.1
A reduction in the UK corporation tax rate from 19% to 17% (effective from 1 April 2020) was substantively enacted on 6 September 2016, and the UK deferred tax asset/(liability) as at 31 December 2019 has been calculated based on this rate. On the 11 March 2020 Budget it was announced that the UK tax rate will remain at the current 19% and not reduce to 17% from 1 April 2020.
This will have a consequential effect on the company’s future tax charge. If this rate change had been substantively enacted at the current balance sheet date the deferred tax asset would have increased by £13,487.
8
Property, plant and equipment
Land and buildings leasehold
Fixtures, fittings & equipment
Computer equipment
Total
£m
£m
£m
£m
Cost
At 1 January 2019
2.3
1.6
0.2
4.1
Additions
-
-
0.1
0.1
Disposals
-
-
(0.1)
(0.1)
Asset retirement
(0.1)
-
(0.1)
(0.2)
At 31 December 2019
2.2
1.6
0.1
3.9
Depreciation and impairment
At 1 January 2019
1.0
0.6
0.1
1.7
Depreciation
0.2
0.1
0.1
0.4
Asset retirement
(0.1)
-
(0.1)
(0.2)
At 31 December 2019
1.1
0.7
0.1
1.9
Net book value
At 31 December 2019
1.1
0.9
-
2.0
At 31 December 2018
1.3
1.0
0.1
2.4
- 30 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
9
Intangible assets
Purchased software
Capitalised software Development
Other Intangibles
Total
£m
£m
£m
£m
Cost
At 1 January 2019
0.2
24.3
0.2
24.7
Additions
-
0.6
-
0.6
Reclass
-
0.2
(0.2)
-
31 December 2019
0.2
25.1
-
25.3
Amortisation and impairment
At 1 January 2019
-
6.0
0.1
6.1
Charge for the year
0.2
2.2
-
2.4
Impairment*
-
16.3
-
16.3
Reclass
-
0.1
(0.1)
-
At 31 December 2019
0.2
24.6
-
24.8
Net book value
At 31 December 2019
-
0.5
-
0.5
At 31 December 2018
0.2
18.3
0.1
18.6
*During 2019, the Company took the decision to exit part of our business. The exit is in progress and expected to complete in 2020. As a result of this work and in accordance with our policy, the Company determined that the recoverability of £16.3m of intangible assets was not supportable and these assets have been consequently impaired in the reporting period.
10
Right-of-use assets
Land and buildings
£m
Balance at 1 January 2019
-
Adjustment on transition to IFRS 16 (refer note 25)
0.2
Depreciation charge for the year
(0.1)
Balance at 31 December 2019
0.1
Balance at 31 December 2018
-
- 31 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
11
Financial assets
2019
2018
£
£
Other financial assets
0.9
-
0.9
-
Other financial assets represents the amounts that is due from Atlas Master Trust Trustee Limited in event of the Company requiring it for liquidity purposes
.
12
Contract fulfilment assets
£m
As at 1 January 2018
0.2
Additions
2.1
Utilisation
(0.1)
As at 31 December 2018
2.2
Additions
0.8
Utilisation
(1.2)
Impairment
(1.8)
As at 31 December 2019
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 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 key performance indicators that could trigger variable consideration, or service credits.
During 2019, the Company took the decision to exit part of our business. The exit is in progress and expected to complete in 2020. As a result of this work and in accordance with our policy, the Company determined that the recoverability of £
1
.
8
m of contract fulfilment assets was not supportable and these assets have been consequently impaired
to nil
in the reporting period
.
- 32 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
13
Trade and other receivables
Current
2019
2018
£m
£m
Trade receivables
3.9
3.7
Other receivables
-
0.7
Accrued income
1.5
1.8
Prepayments
0.3
1.5
Amounts due from parent & fellow subsidiary undertaking
1.0
1.2
6.7
8.9
Non-current
2019
2018
£
£
Prepayments
0.1
-
0.1
-
14
Financial liabilities
2019
2018
£
£
Current
Other loans
(0.9)
-
0.9
-
Other loans represents the amounts that is due to Capita Employee Benefits Limited. Capita Employee Benefits Limited has provided this loan to Capita Employee Benefits (Consulting) Limited to meet the expenses in the event of the Company requiring it for liquidity purposes.
15
Cash
2019
2018
£m
£m
Cash at bank and in hand
8.8
12.5
8.8
12.5
- 33 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
16
Trade and other payables
Current
2019
2018
£m
£m
Trade payables
1.0
0.9
Other taxes and social security
1.1
1.3
Accruals
0.9
2.0
Amounts due to parent and fellow subsidiary undertaking
10.2
9.7
13.2
13.9
Non-current
2019
2018
£m
£m
Accruals
-
2.1
17
Deferred income
2019
2018
£m
£m
Current
Deferred income
1.2
1.4
The deferred income balances solely relates to revenue from contracts with customers. Movements in the deferred income balances were driven by transactions entered into by the Company within the normal course of business in the year.
- 34 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
18
Lease liabilities
2019
2018
£m
£m
Current
Lease liabilities
-
-
Non-current
Lease liabilities
-
-
In calculating the lease liability to be recognised on adoption, the Company used a weighted average incremental borrowing rate at 1 January 2019 ranging from 3.31% to 3.94%.
2019
Lease liabilities
£m
Operating lease commitments at 31 December 2018 disclosed under IAS 17
0.1
Operating lease commitment restated for 31 December 2018
0.1
Discounted using the incremental borrowing rate at 1 January 2019
-
Lease liabilities recognised as at 1 January 2019
0.2
out of which
Current
0.1
Non Current
0.1
2019
£m
Maturity analysis - Contractual undiscounted cash flows
Less than one year
-
Two to 5 years
-
Total undiscounted lease liabilities at 31 December
-
- 35 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
19
Provisions
Current
Claims
Dilapidations
Total
£m
£m
£m
As at 1 January 2019
0.3
-
0.3
Reclassed from non current to current
-
-
-
Provided during the year
0.6
0.1
0.7
Utilisation
(0.1)
(0.1)
(0.2)
As at 31 December 2019
0.8
-
0.8
The Company is subject to claims and litigation arising out of the ordinary course of business, resulting principally from alleged errors and omissions in connection with the Company's pension administration and consulting business. Provision is made where appropriate for potential liabilities that may arise in respect of claims and litigations attributable to events which have been notified to or are anticipated by the Company at the balance sheet date.
During 2019 business undertook a review of its claims provisions. Following this review the value of various claims were adjusted to appropriate values. These revised values reflect the best estimate of both the quantum and likelihood of the claim being crystalized and resulting in settlement.
The Company is required to perform repairs on leased properties prior to the properties being vacated at the end of the lease term. Dilapidation provisions for such costs are made where a legal obligation is identified and the liability can be reasonably quantified.
20
Employees
The average monthly number of
employees
(including
non-executive D
irectors) year w
ere
:
2019
2018
Number
Number
330
Operation
335
Sales and administration
43
44
373
379
- 36 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
20
Employees
(Continued)
Their aggregate remuneration comprised:
2019
2018
Employee costs
£m
£m
Wages and salaries
20.0
20.4
Social security costs
2.2
2.3
Pension costs
1.1
1.9
23.3
24.6
21
Directors' remuneration
2019
2018
£000
£000
Remuneration for qualifying services
390.7
85.6
Company pension contributions to defined contribution schemes
12.6
2.9
403.3
88.5
Two
D
irectors were paid by the Company (2018 : 1). The other Directors have not provided qualifying services to the Company and are paid by other companies within the Capita Group. Such remuneration has not been allocated to the Company. The Directors of the Company were reimbursed for the expenses incurred by them whilst performing business responsibilities.
The number of
D
irectors for whom retirement benefits are accruing under defined contribution schemes amounted to
2
(2018 -
1
).
Remuneration disclosed above include the following amounts paid to the highest paid Director:
2019
2018
£000
£000
Remuneration for qualifying services
228.4
85.6
Company pension contributions to defined contribution schemes
4.4
2.9
232.8
88.5
22
Issued share capital
2019
2018
2019
2018
Numbers
Numbers
£m
£m
Allotted, called up and fully paid
Ordinary shares of £1 each
At 1 January
1,751,000
1,751,000
1.8
1.8
At 31 December
1,751,000
1,751,000
1.8
1.8
- 37 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
23
Employee benefits
The pension charge for the defined contribution pension schemes for the year is £
1.1
m (20
18
: £1.9m)
24
Controlling party
The Company's immediate parent undertaking is Capita Employee Benefits Holdings Limited, a company incorporated in England and Wales.
The Company's ultimate parent undertaking is Capita plc. a company incorporated in England and Wales. The accounts of Capita plc are available from the registered office at 65 Gresham Street, London, United Kingdom EC2V 7NQ.
25
Reconciliation of opening balance as at 1 January 2019
Carrying amount -
31 December 2018
Remeasured carrying
amount as at 1
January 2019
Impact on
Adoption of IFRS 16
Assets
Right-of-use assets (a)
-
0.2
0.2
Liabilities
Lease liabilities
Current (b)
-
(0.1)
(0.1)
Non- current (b)
-
(0.1)
(0.1)
-
Right-of-use assets: N
on-current assets have been impacted due to recognition of right-of-use assets on 1 January 2019. The right-of-use assets are initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the adoption date less any lease incentives received at or before the adoption date (reclassified on the opening balance sheet).
-
Lease liabilities:
Financial liabilities have been impacted due to the recognition of lease liabilities. This liability is initially measured at the present value of the lease payments that are not paid at the adoption date, discounted using the Group’s incremental borrowing rate. The 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 commencement date. The lease liabilities have been classified between current and non-current.
- 38 -
CAPITA EMPLOYEE BENEFITS (CONSULTING) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
26
Post balance sheet event
Following a strategic review, on 1st December 2020 Capita Employee Benefits
(
Consulting
)
L
imited
announced the sale of its Employee Benefits business to Benefex Financial Solutions as part of its strategic decision to simplify its portfolio, receiving sale consideration of £3.8m in December. No assets were disposed of as part of the sale, and the cost of disposal is estimated to be around £5.4m.
As a result we expect to record a loss on disposal of circa £1.6m.
Included in the sale is Capita’s Health and Global consulting and brokerage business as well as its Flexible Benefits Consulting and Administration business. Capita colleagues employed previously by this business have transferred to Benefex, a provider of employee benefit solutions and employee benefit consulting services.
The business is currently considering a restructure of the entire Pensions business, with the aim to move all trade and assets of the continuing pensions consulting contracts within the Company to Capita Employee Benefits Limited (a sister company owned by Capita Plc). The completion and outcome of this restructure is subject to third party consents which are currently in the process of being obtained, but are yet to be certain.
On 11 March 2020, the World Health Organization declared the Coronavirus (COVID-19) outbreak to be a pandemic in recognition of its rapid spread across the globe, with over 150 countries now affected. Many governments are taking increasingly stringent steps to help contain or delay the spread of the virus. Currently, there is a significant increase in economic uncertainty which the Directors have assessed in considering the going concern assumption.
For the Company’s 31 December 2019 financial statements, the Coronavirus outbreak and the related impacts are considered non-adjusting events. The Directors have assessed that there is no material impact on the recognition and measurement of assets and liabilities as a result of this subsequent event.
- 39 -
2019-12-31
2019-01-01
S J S Mayall
S J S Mayall
S R Heatley
A M Moffatt
G Pickles
P M Telford
C Ramamurthy
C C Clements
S R Heatley
Capita Group Secretary Limited
false
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core:Right-of-useAssets
2019-12-31
01860772
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core:IncreaseDecreaseDueToTransitionFromPreviousStandard
2018-12-31
01860772
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core:IncreaseDecreaseDueToTransitionFromPreviousStandard
2018-12-31
01860772
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2019-01-01
2019-12-31
01860772
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2019-01-01
2019-12-31
01860772
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2019-01-01
2019-12-31
01860772
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2019-01-01
2019-12-31
01860772
bus:FullAccounts
2019-01-01
2019-12-31
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iso4217:GBP