The Directors present the Strategic report and financial statements for the year ended 31 December 2020.
Capita Life and Pensions International Limited (“the Company”), is a wholly owned subsidiary of Capita plc. Capita plc along with its subsidiaries are hereafter referred to as “the Group”. The company operates within the Group’s support s ervices division.
The principal activity of the Company is that of carrying on the business of a holding and investment Company. There have not been any significant changes in the Company's principal activities in the year under review. The Directors are not aware, at the date of this report, of any likely major changes in the Company's activities in the next year .
As shown in the Company’s income statement on page 10, the Company has made an operating profit of £6,597,227 and £21,283,300 in 2020 and 2019 respectively. The profit is mainly driven by the receipt of dividend of £7,105,022 from Capita (Dubai FZ) Limited in 2020 and £21,673,817 in 2019 from Capita Life and Pensions Services (Isle of Man) Limited and Capita Services (Isle of Man) Limited.
The balance sheet on page 11 of the financial statements shows the Company's financial position at the year end. Net assets have increased from £479,569 to £7,167,433 as a result of profits generated during the year. Details of amounts owed by its parent Company and fellow subsidiary undertakings are shown in note 9 to the financial statements.
The Company has not identified any key performance indicators due to the nature of its operations as a holding company and as described in the business review above.
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 financial and compliance risk.
As a holding company, majority of Company’s assets consist of investments in, and loans to, subsidiary undertakings, accordingly principal risks of the Company relate to its inability to recover the carrying value of its investments and loans due to adverse conditions in markets where its subsidiaries operate.
The principal themes of risk for the Company are:
Financial: significant failures in internal systems of control and lack of corporate stability.
Compliance: non-compliance with laws and regulations. The Company must comply with an extensive range of requirements that govern and regulate its business.
To mitigate the effect of these risks and uncertainties, the Company adopts a number of systems and procedures, including:
Applying procedures and controls to manage compliance and financial risks, including adhering to an internal control framework.
Capita plc, has also implemented appropriate controls and risk governance techniques across all of its businesses which are discussed in the Group’s annual report which does not form part of this report.
Section 172 statement
Capita plc’s section 172 statement applies to both the Support Services 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 pages 38 and 39 of Capita plc’s Annual Report.
Stakeholders
Our People What matters to them?
How we engaged? Topics of Engagement
Outcomes and actions
Key Metrics |
Flexible working, learning and development opportunities leading to career progression, fair pay and benefits as a reward for performance, two-way communication and feedback. People surveys, regular all-employee communications. Protection of employees during Covid-19, human resource policies during Covid-19, future ways of working as a result of Covid-19, creating an inclusive workplace. Issue of Capita-specific Covid-19 guidance and regular updates, new and temporary human resource policies (e.g. furlough and flexible working). Employee net promoter score, people survey completion level. |
Clients & Customers What matters to them? How we engaged? Topics of Engagement
Outcomes and actions
Key Metrics |
High-quality service delivery, sustainability, and rapid response to support pandemic planning. Client meetings and surveys, regular meetings with key clients and customers. Remote working on client services as a result of Covid-19, current service delivery, possible future services, co-creation of client value propositions. 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. Customer net promoter score, specific feedback on client engagements. |
Supplier & Partners What matters to them?
How we engaged?
Topics of Engagement Outcomes and actions
Key Metrics |
Payments made within agreed payment terms, clear and fair procurement process, building lasting commercial relationships and working inclusively with all types of business. Supplier meetings throughout source to procure process, regular reviews with suppliers and supplier questionnaires. Supplier payments, sourcing requirements, supplier performance and supplier Charter. Alignment of payments with agreed terms, Supplier feedback on improvements to procurement process, improvement plans and innovation opportunities and improved adherence to Supplier Charter. Percentage of supplier payments within agreed terms, supplier relationship management feedback score, and supplier diversity profile. |
Society What matters to them?
How we engaged? Topics of Engagement
Outcomes and actions
Key Metrics |
Social mobility, youth skills and jobs, digital inclusion, diversity and inclusion, climate change and business ethics. Memberships of non-governmental organisations and charitable and community partnerships. Youth employment, tackling digital exclusion, workplace inequalities and carbon reduction targets. Implementation of real living wage, youth and employability programme and commitments to tackle racism and enhance ethnic diversity. Percentage reduction in carbon footprint, amount of community investment, and responsible business report 2020: capita.com/responsible business. |
On behalf of the board
The Directors present their Directors' r eport and financial statements for the year ended 31 December 20 20 .
The results for the year are set out on page 10.
No dividend was paid or proposed during the year (2019: £21,281,000)
The Directors , who held office during the year and up to the date of signature of the financial statements were as follows:
We have audited the financial statements of Capita Life and Pensions International Limited (“the company”) for the year ended 31 December 2020 which comprise the Income Statement, Balance Sheet, Statement of Changes in Equity and related notes, including the accounting policies in note 1.
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. The most recent financial statements of Capita plc include material uncertainties that may cast significant doubt on its ability to continue as a going concern. The reliance of the Company on Capita plc accordingly means that these events and conditions constitute a material uncertainty that may cast significant doubt on the Group’s and in turn, the Company’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
The directors have prepared the financial statements on the going concern basis. As stated above, they have concluded that a material uncertainty related to going concern exists.
Based on our financial statements audit work, we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:
Enquiring of management and inspection of policy documentation as to the Capita plc’s policies and procedures to prevent and detect fraud that apply to this group company as well as enquiring whether the directors have knowledge of any actual, suspected or alleged fraud.
Reading Board minutes.
Using analytical procedures to identify any unusual or unexpected relationships.
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit.
As required by auditing standards, we perform procedures to address the risk of management override of controls, in particular the risk that management may be in a position to make inappropriate accounting entries. On this audit we do not believe there is a fraud risk related to revenue recognition because there are no revenue transactions.
We did not identify any additional fraud risks.
We also performed procedures including:
Identifying journal entries to test based on risk criteria and comparing the identified entries to supporting documentation. These included those posted by senior finance and those posted to unusual accounts.
Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience and through discussion with the directors (as required by auditing standards) and discussed with the directors the policies and procedures regarding compliance with laws and regulations.
The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation (including related companies legislation), distributable profits legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
This company, as a holding company, is not subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements.
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.
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.
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; or
We have nothing to report in these respects.
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.
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 www.frc.org.uk/auditorsresponsibilities .
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.
Capita Life and Pensions International Limited is a company incorporated and domiciled in the United Kingdom.
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 2020, the Company’s Directors (“the Directors”) are required to consider whether the Company can continue in operational existence for the foreseeable future, being a period of at least 12 months following the approval of these 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, as set out below :
Board assessment
Base case scenario
As a holding company, majority of the Company’s assets consists of investments in, and receivables from, subsidiary undertakings. Accordingly, principal risks of the Company relate to its inability to recover the carrying value of its investments and loans due to adverse conditions in markets where its subsidiaries operate.
The financial forecasts used for the going concern assessment are derived from the 2021-2023 business plans (‘BP’) for the Company which have been subject to review and challenged by management and the Directors. The Directors have approved the projections . COVID-19 has introduced unprecedented economic uncertainties and has led to increased judgement particularly in forecasting future financial performance. The forecast impact of COVID-19 has been incorporated within the base case forecasts, however the continuing uncertainty over how the COVID-19 pandemic might evolve, including the speed and timing of economic recovery, makes precise forecasting challenging.
Severe but plausible downside
In addition to the base case, the Directors considered severe but plausible downside scenarios, recognising the broader uncertainty arising from COVID-19. The downside scenarios include trading downside risks, which assumes increased attrition, and further impacts of COVID-19. In addition, the downside scenario includes potential adverse financial impacts that could arise from unforeseen operational issues leading to contract losses and cash outflows.
Offsetting these risks, the Directors have considered available mitigations within the direct control of the Company including limiting discretionary spend.
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:
provision of certain services, such as administrative services and should the Group be unable to deliver these services, the Company would have difficulty in continuing to trade;
recovery of receivables of £ 6,547,097 (AED 33,225,206) and £ 393,815 from fellow Group undertakings as at 3 0 June 2021. If these receivables are not able to be recovered when forecast by the Company, then the Company may have difficulty in continuing to trade; and
revenue earned by its subsidiaries from other group entities and key contracts that may be terminated in the event of a default by the Group .
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 year ended 31 December 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, when preparing the Group’s consolidated financial statements to 31 December 2020. These financial statements were approved by the Board on 16 March 2021 and are available on the Group’s website ( www.capita.com/investors ). Below is a summary of the position as at 16 March 2021:
Accounting standards require that the foreseeable future covers a period of at least 12 months from the date of approval of the financial statements, although they do not specify how far beyond 12 months a Board should consider. In the prior year, the Board considered an extended period out to 31 August 2022 (30 months) which aligned with the expiry of the revolving credit facility (RCF). The Board continued to consider the period out to 31 August 2022 for the purpose of the going concern assessment, which reflects a period of at least 18 months from the date of approval of the Group consolidated financial statements (the going concern period). While this is a shorter period, it does align with the expiry of the RCF which is a key consideration. The Board also considered any committed outflows beyond this period in forming their assessment.
To address the resilience of the Group to its severe but plausible downside scenarios, the Board has been exploring a refinancing of the debt maturities to reprofile the debt repayments to align with the completion of the transformation programme while also providing the financial support necessary to complete the required investments. While refinancing was not completed in 2020, the Board did successfully arrange backstop facilities in February and August 2020, is already in discussion with lenders, and is targeting completion of a refinancing in 2021.
In addition to refinancing, the Board has approved a continuation of the previously announced disposal programme which covers businesses that do not align with the longer-term strategy for the Group. The Group has a strong track record of executing major planned disposals and the Board is confident that the disposal programme can be delivered given the strength of the underlying businesses and the value they deliver. The planned disposals will introduce considerable net cash proceeds to the Group, albeit with a corresponding removal of consolidated profits associated with these businesses.
Material uncertainties related to the group:
The Board recognises that any refinancing, should the severe downside play out, would require third party agreements from lenders. Furthermore, the disposal programme requires agreement from third parties, and major disposals may be subject to shareholder and lender approval. Such agreements and approvals are outside the direct control of the Group. Accordingly, these events give rise to material uncertainties, as defined in auditing and accounting standards, relating to events and circumstances which may cast significant doubt about the Group’s and Parent’s ability to continue as a going concern and, therefore, that the Group and Company may be unable to realise their assets and discharge their liabilities in the normal course of business.
Reflecting the Board’s confidence in the transformation programme, ability to refinance, and execution of the approved disposal programme, the Company continues to adopt the going concern basis in preparing the financial statements. The Board has concluded that the Group and Parent Company will continue to have adequate financial resources to realise their assets and discharge their liabilities as they fall due over the period to 31 August 2022. Consequently, these financial statements do not include any adjustments which would be required if the going concern basis of preparation is inappropriate.
The Company has applied FRS 101 - Reduced Disclosure Framework in the preparation of its financial statements. The Company has prepared and presented these financial statements by applying the recognition, measurement and disclosure requirements of international accounting standards in conformity with the requirements of the Companies Act 2006 .
The Company's ultimate parent undertaking, Capita plc, includes the Company in its consolidated statements. The consolidated financial statements are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and are available to the public and may be obtained from Capita plc's website on https://www.capita.com/investors.
In these financial statements, the Company has applied the disclosure exemptions available under FRS 101 in respect of the following disclosures:
A cash flow statement and related notes;
Comparative period reconciliations for share capital, property, plant and equipment 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 regarding IFRS 15 Revenue from Contracts with Customers; and
Disclosures in respect of the compensation of key management personnel.
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 disclosures:
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; and
Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosure required by IFRS 7 Financial Instrument Disclosures.
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 |
Effective date |
Amendments to references to the Conceptual Framework in IFRS Standards |
1 January 2020 |
Definition of Material (Amendments to IAS 1 and IAS 8) |
1 January 2020 |
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39, IFRS 7) |
1 January 2020 |
Definition of a Business (Amendments to IFRS 3) |
1 January 2020 |
COVID-19-Related Rent Concession (Amendments to IFRS 16) |
1 June 2020 |
All investments are initially recorded at their cost. Subsequently they are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.
Tax on the profit or loss for year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity or other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences:
- except where the deferred tax liability arises from the initial recognition of goodwill;
- 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.
The financial statements present information about the Company as an individual undertaking and not about its group. The Company has not prepared group accounts as it is exempt from the requirement to do so by section 400 of the Companies Act 2006 as it is a subsidiary undertaking of Capita plc, a company incorporated in England and Wales, and is included in the consolidated accounts of that company.
Investments and other financial assets
Classification
Company classifies its financial assets in the following measurement categories:
those to be measured subsequently at fair value (either through OCI or through profit or loss); and
those to be measured at amortised cost.
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).
Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade date (that is, the date on which the Company commits to purchase or sell the asset). Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Impairment
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.
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.
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.
The preparation of financial statements in conformity with generally accepted accounting principles requires the directors to make judgements and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported income and expense during the reported periods. Although these judgements and assumptions are based on the Directors' best knowledge of the amount, events
or actions, actual results may differ.
The reconciliation between tax c redit and the accounting profit multiplied by the UK corporation tax rate for the years ended 31 December 20 20 and 201 9 is as follows:
A change to the main UK corporation tax rate was substantively enacted on 17 March 2020. The rate applicable from 1 April 2020 now remains at 19 % , rather than the previously enacted reduction to 17 % . This has no material impact for the Company.
On 3 March 2021, it was announced in the Budget that the UK tax rate will increase from 19% to 25% from 1 April 2023 onwards. This will have a consequential effect on the company's future income tax charge from 2023.
There were no employees during the current year (201 9 : n il)
The Company's immediate parent undertaking is Capita Life & Pensions Services Limited, a company in incorporated in England and Wales.
The Company's ultimate parent undertaking is Capita plc, a company in 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.
There are no post balance sheet events that have an adjusting effect on the financial statements.