Capita plc

Annual Report 2022

This Annual Report, other

corporate publications,

ourlatest news and

announcements, and more

information about us is

available onour website,

www.capita.com

Welcome to the Capita plc

Annual Report 2022

Capita plc

Annual Report 2022

Cautionary statement

The directors present the Annual Report for

the year ended 31December 2022, which

includes the strategic report, corporate

governance, and audited accounts for this

year. Pages 1 to 122 of thisAnnual Report

comprise a report of the directors which has

been drawn up and presented in accordance

with English company law, and the liabilities

of the directors in connection with that report

shall be subject to the limitations and

restrictions provided by such law. Where

thedirectors’ report refers to other reports

ormaterial, such asa website address, this

has been done to direct the reader to other

sources of Capita plc information which may

be of interest. Such additional materials do

not form part of this report.

Our purpose

Capita is a purpose-led

organisation which exists

to ‘create better outcomes’

for all its stakeholders.

Read more about our people

on pages33 to 36.

Strategic

report

Capita plc

Annual Report 2022

2022

highlights

Non-financial highlights and KPIs

Points swing in

employee net

promoter score

+15pts

(2021: -22pts)

Points swing in

customer net

promoter score

+6pts

(2021: -3pts)

Suppliers paid

within 60 days

99%

(2021: 98%)

Total shareholder

return (TSR)

(33.5)%

(2021: (6.9)%)

Employee

engagement

index

65%

(2021: 56%)

Diversity: gender

M/F

51/49%

(2021: 51/49%)

Reduction in

carbon footprint

(location-based)

57%

(2021: 52%)

emissions

(location-based)

Scope1,2 and 3

39.0m

gross tonnes

(2021: 43.6m gross tonnes)

Voluntary

employeeturnover

30%

(2021: 30%)

Diversity:

ethnicity

37/24%

(2021: 56/19%)

Reduction in carbon

footprint

(market-based)

71%

(2021: 61%)

4. Data includes invoices paid through Capita UK companies.

5. White/Black, Asian and minority ethnic. 39% of people chose not to respond or not to specify.

6. Reduction in carbon footprint based on emissions per headcount from 2019 baseline. See pages 42 and 43 for more information.

7. Scope 3 for business travel only. See pages 42 and 43 for more information.

Financial highlights and KPIs

Reported revenue

£3,014.6m

(2021: £3,182.5m)

Reported profit

before tax

£61.4m

(2021: £285.6m)

Reported free

cash flow

£24.5m

(2021: £(264.3)m)

Adjusted revenue

£2,845.8m

(2021: £2,777.8m)

Adjusted profit/(loss)

before tax

£73.8m

(2021: £(122.8)m)

Free cash flow before the

impact of business exits

£29.0m

(2021: £(218.6)m)

Reported earnings per

share (continuing ops)

4.47p

(2021: 13.33p)

Adjusted earnings/loss

pershare

6.20p

(2021: (7.74)p)

Read more in the Chief Financial Officer’s review on pages 26 to 32.

1. Capita reports results on an adjusted basis to aid understanding of business performance.

Refer to alternative performance measures (APMs) on pages 229 to 231.

2. Refer to note 2.7 to the consolidated financial statements.

3. Refer to note 2.10 to the consolidated financial statements.

Our performance

In 2022, we delivered a turnaround in financial performance with

accelerated adjusted revenue growth, a step change in profitability

andpositive free cash flow. Capita is now a business focused on two

coredivisions with strong positions in attractive and growing markets,

underpinned by a strengthened balance sheet. Our priority continues

tobeonimproving performance for all our stakeholders.

Capita

Capita is a leading provider

of business process services,

driven by data, technology

and people

Consult

We work collaboratively

withclients as partners,

drawing on our practical

experience and deep

sectorknowledge

Transform

We create innovative,

digitally enabled solutions

to transform businesses

and services

Deliver

We provide business

process services and

operations, and software

and networks, often under

multi-year contracts

Strategic

report

Capita plc

Annual Report 2022

At a glance

About us

Capita is a leading

provider of business

process services, driven

by data, technology

andpeople.

Everything we do is underpinned by our

purpose: to ‘create better outcomes’ –

forour employees, clients and their

customers, suppliers and partners,

investors, andsociety.

Every day we help millions of people by

delivering innovative, digitally enabled

solutions to transform and simplify the

connections between governments and

citizens, businesses and customers.

We partner with clients and provide them

with the insight and technologies that allow

them to focus on what they do best and

make peoples’ lives easier and simpler.

We operate across two core divisions –

Public Service and Experience – in the

UK,Europe, India and South Africa; a

thirddivision, Portfolio, comprises our

remaining non-core businesses being

prepared for disposal.

The Turing Scheme, which provides global

opportunities in education and training for

students, will see a record 38,000 students

participate over the 2022–23 academic year.

We have secured a five-year

agreement with ScottishPower to

deliver customer support services.

We deliver training to the Royal Navy toprovide

motivated and experienced personnel to deal

withchallenges in the future.

What we do as a business

Strategic

report

Capita plc

Annual Report 2022

At a glance

continued

Capita’s structure in 2022

Two divisions focused on distinct market and client needs;

a third division of non-core businesses.

Capita Public Service Capita Experience Capita Portfolio

The number one

strategic supplier of

business process services (BPS) and

technology services to the UK Government.

Experience is one of western Europe’s

leading customer experience businesses.

Itis the market leader in the UK

and ranks

fifth in Germany

and Europe

Remaining portfolio of valuable but non-core

businesses, targeting sale by half year 2023,

depending on market conditions.

Main verticals: Education & Learning;

Local Public Services; Health & Welfare;

Defence, Fire & Security; and Justice,

Central Government & Transport

See page 16 for further information.

Main verticals: Telecoms, Media

&Technology; Multi-industry; and

FinancialServices

See page 20 for further information.

Pillars: People; Software; Business

Solutions; Travel; and Fera

Sold during 2022: Technology, Property

See page 24 for further information.

Adjusted revenue

contribution

51%

(2021: 51%)

Adjusted divisional

operating profit

contribution

63%

(2021: 91%)

Adjusted revenue

contribution

40%

(2021: 41%)

Adjusted divisional

operating profit

contribution

26%

(2021: 9%)

Adjusted revenue

contribution

(2021: 8%)

Adjusted divisional

operating profit

contribution

11%

(2021: 0%)

Divisional financial performance: (see also pages 19,

23 and 25) is presented on an adjusted basis. Reported

is not included, as the Board assesses divisional

performance on adjusted results. The calculation of

adjusted figures and our key performance indicators

(KPIs) are contained in the APMs on pages 229 to 231.

Divisional details and performance can be found on

pages 16 to 25.

1. Refer to APMs on pages 229 to 231.

2. TechMarketView.

3. NelsonHall.

Strategic

report

Capita plc

Annual Report 2022

Our purpose

and strategy

Our purpose

We are driven by our purpose:

to ‘create better outcomes’–

for our employees, clients

and customers, suppliers

andpartners, investors,

andsociety.

We are committed to being

aresponsible business –

inhow we operate, serve

society, respect our people

and the environment, and

deliver improving returns

toourinvestors.

Everyone at Capita strives to create better

outcomes for all our stakeholders by living

ourvalues of being:

Open Collaborative

Ingenious Effective

We bring these values to life through our day-to-

day behaviours and by putting our purpose at the

centre of everything we do.

Capita ‘creates better outcomes’ for all

itsstakeholders:

Our people by providing an

environment in which they

canthrive and develop

Number of people

in2022

50,000

Clients and customers by

delivering solutions, transforming

businesses and services, and

bydelighting them

Customer net

promoter score

(cNPS) in 2022

+35pts

Suppliers and partners by

treating them fairly and

encouraging them to deliver

Supplier payment

compliance in 2022

99%

Investors by delivering

improving free cash flow

andreturns

Share price

movement in 2022

(12.2)p

Society by acting as a

responsible business for

thecommunities we serve

Reduction in carbon

footprint in 2022

4.6m

gross tonnes

Strategic

report

Capita plc

Annual Report 2022

Our purpose

and strategy

continued

Our strategy

To create a simpler, stronger and more successful business that

will drive organic revenue growth and sustainable free cash flow.

Simplify

• A focused business with strong positions and

growth potential

• Using common, scalable capabilities

• Empowering our people to deliver

• Streamlining our cost base

Strengthen

• Winning more of the right work

• A stronger balance sheet through improving

cashgeneration and disposal proceeds

• Addressed the pension deficit

• Investment in technology and people

Succeed

• Purpose-led, responsible business

• Innovative and creative

• Accelerating revenue growth

• Delivered positive free cash flow

in2022

1. Free cash flow = reported free cash flow excluding the impact ofdisposals.

Measured through our KPIs:

Financial Non-financial

Adjusted revenue

£2,845.8m

(2021: £2,777.8m)

Employee NPS points swing

+15pts

(2021: -22pts)

Free cash flow before the

impact of business exits

£29.0m

(2021: £(218.6)m)

Customer NPS points swing

+6pts

(2021: -3pts)

Adjusted earnings/(loss) per

6.20p

(2021: (7.74)p)

Suppliers paid within 60 days

99%

(2021: 98%)

Net financial debt (pre-IFRS 16):

adjusted EBITDA

0.5x

(2021: 3.7x)

2. Refer to APMs on pages 229 to 231.

Aligning with our

performance-based

remuneration:

Annual bonus for the

executive directors

determined by:

Free cash flow

Revenue

Profit before tax

Strategic/personal objectives

Read more in the directors’ remuneration report

onpages 99 to 122.

Strategic

report

Capita plc

Annual Report 2022

Our business

model

Market expertise

We have deep understanding of our clients

and their markets; we are organised in market

verticals that reflect our client expertise.

Technological resources

We offer technology-led, digitally enabled

services and solutions. We are investing in

digital and software development. We partner

with global technology leaders.

Client relationships

We form longstanding partnerships with

awide range of clients, from blue-chip

businesses to the public sector, to transform

their activities by delivering insight and

innovative solutions.

Our people

We are a people-focused business, built

around 50,000 skilled and committed

employees who have deep understanding

ofour clients’ markets and needs.

International infrastructure

We have an international delivery platform,

with more than 18,000 people providing

technology solutions and customer

engagement services such as call centres

and customer support, principally in Europe,

India and South Africa.

Capita is a leading provider of

business process services, driven

bydata, technology and people.

We are focused on creating better

outcomes and value by working

collaboratively with our clients

aspartners.

We provide consulting, transformation

and professional delivery services,

drawing on our practical experience;

and provide digitally enabled

servicesand solutions, often under

multi-year contracts.

We consult, transform and deliver.

Consult

We work collaboratively with clients as

partners, drawing on our experience

and deep sector knowledge.

Transform

We create innovative solutions to

transform businesses and services.

Deliver

We provide digitally enabled

servicesand operations, often

undermulti-year contracts.

Our consultants:

• Work collaboratively with clients as

trusted, long-term partners.

• Proactively identify opportunities to

improve our clients’ businesses.

• Generate forward-looking insights

by analysing, researching and

debating trends and data.

• Support the design and

implementation of better solutions

for clients.

• Maximise opportunities across

Capita, driving pipeline and creating

pull-through revenue.

Our transformation services:

• Improve process quality, reliability

and efficiency.

• Help reduce risk and cost.

• Create new opportunities for clients.

• Allow clients to focus on what they

do best.

Our digitally enabled services:

• Help simplify clients’ services.

• Assist better decision making.

• Contribute to process acceleration.

• Improve end-customer experiences.

How we

createvalue

At Capita, we provide business process services,

drivenbydata, technology and people.

Our markets

We operate in large and growing markets, at scale and

often with significant market share.

Public Service

BPS spending growing at c.5% per annum

Government spending in the UK with private organisations

is around £176bn and spending on BPS is growing at

around 5% per annum. As Capita has won and delivered

more digital transformation and IT contracts across the

public sector, the UK Government now regards us as a

digital service provider alongside delivering traditional

outsourcing scopes of work.

(Source: TechMarketView)

Experience

Outsourced market growth of c.5% per annum

The global customer experience market is valued at around

£277bn and the outsourced element is expected to grow at

around 5% per annum. The drive to digital includes

acustomer desire to shift to self-service, where

convenience matters, and high-quality human interactions,

supported by technology when needed.

(Source: Everest)

Our expertise and resource

What we do as a business

Strategic

report

Capita plc

Annual Report 2022

Our business

model continued

We generate revenue, profit and cash flow

by providing valuable services to our

clients,consistently and efficiently over

thelong term.

Transformational services

Clients procure our digitally enabled services

and network solutions through contracts,

often long term, to effect significant change

in their businesses. In 2022, approximately

76% (2021: 77%) of Group adjusted revenue

was underpinned by long-term contracts,

with around 15% (2021: 15%) from short-term

contracts. Ourorder book at 31 December

2022 was £5.8bn.

Transactional services

Approximately 9% (2021: 8%) of adjusted

revenue

comes from our transactional

businesses where we sell products and

professional services to our clients across

awide range of functions. In 2022, this

represented £244.8m of adjusted revenue

Efficient operations

Running our business as efficiently as we

can allows us to pass savings through to

ourclients and customers over the long

term,aswell as generating value for our

shareholders. During 2022, our operating

profit margin improved from a negative 2.8%

to positive 3.6% through efficiencies from the

business structure we implemented in 2021,

reducing the cost of poor quality and

adopting efficiency-generating technologies

such as automation.

Generating cash flow

We aim to generate sustainable free cash

flow from revenue growth, increasing profit

margins through greater efficiency and

eliminating the cash cost of poor-quality

operations. During 2022, we delivered

positive free cash flow before the impact of

business exits

of £29.0m compared with

negative free cash flow before the impact of

business exits

of £218.6m in the prior year,

reflecting the non-repeat of one-off cash

payments made in 2021, including pensions

and VAT, and cessation of our significant

restructuring programme.

Generating financial value

Better outcomes for stakeholders

Our people by providing an environment

in which they can thrive and develop.

Clients and customers by delivering

solutions, transforming businesses

andservices, and by delighting them.

Suppliers and partners by treating

them fairly and encouraging them

todeliver.

Investors by delivering improving free

cash flow and returns.

Society by acting as a responsible

business for the communities we serve.

1. Refer to APMs on pages 229 to 231.

We delivered on our commitment of improving

financial performance and moved towards the

completion of the disposal processes in our

Portfolio division.”

David Lowden, Chairman

Strategic

report

Capita plc

Annual Report 2022

Chairman’s

introduction

Making good progress,

driven by our purpose

The patience and ongoing support of our

shareholders is very much appreciated and,

looking forward, we remain committed to

improving long-term value creation for them

andall ourstakeholders.

Strategy and performance

While 2021 marked the completion of Capita’s

transformation, 2022 saw us embedding

thenew corporate structure, stabilising the

business, and building on the platform

for growth.

We are now fully oriented towards our clients

and their own organisational and commercial

requirements, rather than approaching business

from our previous, product-focused perspective.

We are committed to providing a consistently

high quality of service delivery in order to

delight our clients and customers – and,

through this, will create more opportunities,

andaccelerate andincrease growth.

This has been reflected in our contract

renewalrate which has remained very high,

andour continuingly positive customer net

promoter scores.

In 2022, we increased our adjusted revenue–

with growth higher than it has been for seven

years – and produced adjusted profit and

positive free cash flow.

The progress and growth have been

mostvisible in our Public Service division,

withExperience still somewhat behind in

itsevolution.

In 2022, Capita made further progress as a

simplified and more focused organisation, built

around two core divisions with strong positions

in attractive and growing markets, and driven by

its purpose.

The macroeconomic backdrop for all

businesses including Capita, and our

employees, remained challenging – despite

thewaning threat of the Covid pandemic – amid

political uncertainty and inflationary pressures.

Despite the difficult external environment, we

delivered on our commitment of improving

financial performance and moved towards the

completion of the disposal processes in our

Portfolio division.

Aligned to our purpose, the welfare and

wellbeing of our tens of thousands of people

remained a top priority.

It was very important, especially amid the

cost-of-living crisis, to continue to support

andcare for our employees, particularly the

lowest paid.

I would like to thank all our colleagues for their

hard work, professionalism and commitment

over the last year.

With our structural transformation done, the

senior leadership team and the business are

now veryfocused on the needs of our clients

andcustomers.

At the same time, we recognise that our

investors have yet to see the financial benefits

of the company’s improved performance.

Focused investment on

digital is the way forward and,

backed by clear strategic

plans, will be the main driver

of growth for us.”

Strategic

report

Capita plc

Annual Report 2022

Chairman’s

introduction

continued

As a responsible business, we continued

tomake progress on delivering on our

environmental, social and governance (ESG)

objectives – and driving towards our target to

befully net zero on carbon emissions by 2035.

To enhance how we serve and respect our

stakeholders, including society and the

environment, we have also introduced

anESGcommittee to the Board.

Looking forward

We live and work in uncertain times, which

willcontinue to present challenges, but which

will also provide opportunities – and we need

toconsider how we respond to those as

abusiness.

We are committed to continuing to improve

performance on behalf of all our stakeholders.

We have to drive, not just towards increased

revenue growth, but to profitable growth with

improved, cash-backed margins. Increased

digitalisation and greater transformation

capabilities should enable that tohappen.

There is still more to be done at Capita and

challenges remain. But I am confident of

further progress towards long-term revenue

growth – and of securing a sustainable future

as a profitable business, delivering positive

free cash flow.

David Lowden

Chairman

We were delighted to welcome Janine

Goodchild, a clinical trainer in our healthcare

team, as our new employee director.

I would like to thank all members of the Board

for their commitment, continued support and

hard work.

Culture and sustainability

At Capita, we remain committed to our

purposeof creating better outcomes for

allstakeholders – our people, clients and

customers, suppliers and partners, investors,

and society.

As part of that, for the past three years, we have

been proud to support thousands of our lowest

paid people as an accredited payer of the real

living wage – and have recently invested to

continue that important commitment.

We have also embedded our virtual first

hybridworking model, introduced an employee

leadership council, and continued to work on

increasing diversity and inclusivity across the

organisation, and addressing our pay gaps.

But to be able to delight stakeholders, including

clients and customers, also requires an

engaged workforce, who like and want to

continue working for the organisation.

So, while we are pleased to have seen a rise

inboth our employee net promoter score and

engagement index, we must continue to focus

on the welfare and needs of our colleagues.

He successfully steered the organisation

through challenging times, overseeing the

structural transformation and the return to

adjusted revenue growth.

Matthew Lester, non-executive director, also left

the Board in 2022 and I would like to thank him

for his five years of service.

As Chair of the Audit and Risk Committee, he

enhanced our focus on financial controls and

helped identify and manage the material risk

factors that Capita continues to face.

Another non-executive director, John Cresswell,

has recently announced his intention to step

down from the Board at the end of March 2023;

and I would also like to thank him for his

professionalism, commitment and valuable

contribution during his seven-year tenure.

In June, we welcomed Brian McArthur-Muscroft,

a highly experienced chief financial officer and

board director, as a non-executive director.

Brian has taken over Matthew’s role as head of

the Audit and Risk Committee, and will continue

to focus on the increased discipline that has

been brought to bear across the organisation.

On the Board, we are committed to making

sure we have the necessary skills, expertise

and diversity to help support the delivery of

Capita’s strategy.

Our first ever employee directors, Lyndsay

Browne and Joseph Murphy, stepped down

inJune at the end of their three-year tenures.

I would like to thank them both for the significant

contribution they made to the Board, providing

fresh insight and a vital new perspective.

But that division has stabilised its revenues,

andwe are confident of seeing growth come

through successfully.

In 2022, we started to concentrate even more

on our digital transformation capabilities;

processes, standardisation and automation

areall being improved.

Focused investment on digital is the way

forward and, backed by clear strategic plans,

will be the main driver of growth for us.

We have now also sold a significant proportion

of our non-core Portfolio businesses, which

hashelped strengthen the balance sheet

andmaterially reduce our debt, and enabled

ustoaddress other responsibilities such as

additional contributions to the pension fund.

The Board and governance

It was my privilege to step up to become

Chairman of Capita in 2022.

On behalf of the Board, I would like to thank my

predecessor Sir Ian Powell for his outstanding

leadership over the previous six years.

Our strategy is delivering and we achieved a

turnaround in our financial performance in 2022.”

Jon Lewis, Chief Executive Officer

Strategic

report

Capita plc

Annual Report 2022

Chief Executive

Officer’s review

An important year

of stabilisation

and acceleration

further disposals of non-core businesses,

achieving gross disposal proceeds of c.£485m,

which has substantially reduced our net debt.

Market conditions and dynamics have

changedsignificantly over the past year, for

both businesses and consumers. But we

believe Capita remains a resilient business,

notwithstanding the challenging macroeconomic

environment, as we use our know-how, digital

tools and process expertise to deliver cost-

effective solutions to clients and customers.

I would like to thank our colleagues throughout

the organisation for their continued hard work,

commitment and professionalism.

The foundation that Capita now has in place,

following our transformation and stabilisation

phases, will allow us to accelerate our growth

further in 2023 and beyond.

Living our purpose

Creating better outcomes for all key

stakeholders is Capita’s purpose and is our

licence to operate. It underpins everything we

do as a business.

We align ourselves to the five principles of a

purpose-driven business within the Blueprint for

Better Business. These include being honest

and fair with clients and suppliers, being a good

citizen, being a responsible and responsive

employer, being a guardian for future

generations, and having a purpose which

delivers long-term sustainable performance.

Globally, we have introduced purpose-related

remuneration metrics and objectives, to embed

further our purpose-driven behaviours across

Summary

Following the completion in 2021 of the Group’s

transformation, 2022 was an important year of

stabilisation for Capita and we are pleased to

report that the Group delivered an acceleration

inadjusted revenue growth, an improvement

from last year’s adjusted loss before tax to

aprofit of £74m following cessation of

restructuring spend, and positive free cash

flowin line with expectations.

At the start of 2022, we set out our six corporate

priorities: to live our purpose; invest in our

colleagues; grow the business; deliver for our

clients; deliver sustainable free cash flow; and

reduce net debt. We made progress against

each of these priorities which has provided

afirm foundation for the success of the

business moving forwards. Our strategy is

delivering and we achieved a turnaround in

ourfinancial performance in 2022.

The Group’s organisational structure now

prioritises client needs alongside operational

delivery, and we were pleased to have seen

asix-point increase in customer net promoter

score (cNPS) over the year to +35 points.

We are also creating a more compelling

working environment for our colleagues, with an

increase of 15 points in our employee net

promoter score (eNPS). But there is still more to

do in this area, and we have a comprehensive

plan to deliver further progress in 2023.

We are on a path to sustainable free cash flow

generation, having delivered positive free cash

flow in 2022 and having continued to strengthen

the balance sheet following the completion of

We are committed to helping

our employees navigate the

cost-of-living crisis.”

Strategic

report

Capita plc

Annual Report 2022

Chief Executive

Officer’s review

continued

career opportunities for the economically

inactive and supporting the UK Government’s

Levelling Up agenda. In 2022, 85% of

employees gave our hybrid working model

asareason to stay with Capita, and we have

seena positive effect on both productivity

andabsenteeism.

However, similar to our competitors in the

outsourcing market, colleague attrition remains

a key challenge for the Group. We are working

to identify the drivers of attrition and take

meaningful action to reduce it to a sustainable

level. This year we introduced the career path

framework to both help employees’

development and shape their future progress,

creating long and fulfilling careers at Capita.

The rollout of the career path framework across

the Group will be completed in 2023.

Attrition rates have improved in a number

ofareas such as within our Technology

andSoftware Solutions (TSS) function and

PublicService, but there are still some parts

ofExperience where they remain high.

Addressing and reducing attrition across

theGroup represents a significant future

cost-saving opportunity.

We are committed to helping our employees

navigate the cost-of-living crisis, particularly our

lower-earning colleagues. We have confirmed

our commitment and retained our status as a

real living wage accredited employer in the UK;

and, through our 2023 annual salary review

process, pay rises will be heavily weighted

towards the lower earners in the organisation,

with the highest earners being asked to forgo

a basic pay increase.

the Group; these are set by the new ESG

Committee of the Board and approved by

theRemuneration Committee prior to final

Board approval.

Diversity was a key focus during 2022 and, as

a Group, we have set multi-year targets for

gender and ethnic equality, diversity and

inclusion in senior leadership. The Group is

ahead of these targets with 42% female senior

leadership (globally) and 14% ethnic diversity

in UK senior leadership, including 3% Black

representation at the end of 2022.

In addition, our Board and Executive

Committee are both currently 44% female and

22% ethnically diverse, well above the diversity

levels of most UK boards and executive teams.

Employee engagement and investing in our

colleagues was a corporate priority in 2022. We

paid specific attention to better communication,

investment in training, and development of the

career path framework. We have a compelling

employee value proposition and we saw a +15

point improvement in eNPS in 2022.

We are committed to remaining a virtual-first

organisation. Our hybrid working model allows

a large proportion of our colleagues to work

remotely all or part of the time. This has helped

improve employee recruitment, while unlocking

Capita has launched the business’s firstemployee leadership

council. This comprises 11 individuals, drawn from different

parts of the company, who have been identified as potential

future leaders within the organisation

cNPS remains high

+35pts

(2021: +29pts)

Strategic

report

Capita plc

Annual Report 2022

Chief Executive

Officer’s review

continued

divisions, led by our dedicated client partners,

are also generating a better-quality pipeline,

enabling us to accelerate revenue growth.

We are taking a proactive approach to

mitigating the pressures of rising inflation and,

in 2022, we believe this resulted in no material

profit impact from inflation on the Group. To

provide future protection, we have focused

efforts on ensuring we have robust contractual

protection in place against inflation. Where

protection does not currently exist, we have

seen success from commercial dialogue with

clients to ensure we are being fairly

remunerated in changing market conditions.

We also have embedded cost-reduction

programmes across the Group to help offset

inflationary pressures.

Digital transformation

There is a major market opportunity across

both core divisions to be more cost effective

and win more business, as we improve our

digital capabilities.

Both core divisions are highly ranked by

TechMarketView and Information Services

Group for their client delivery. We remain on

ajourney in which we are transitioning from

providing traditional business process

outsourcing (BPO) to BPS, where services and

process delivery are digitally enabled.

In 2022, the UK Government published its

roadmap for digital and data, outlining its

intention to spend up to an additional £8bn

by2025 on digital, data and technology

transformation. As our mix of work shifts

fromtraditional BPO to digital BPS, we see

incremental margin opportunity from processes

Sustainalytics, a leading independent ESG

andcorporate governance research, ratings

and analytics firm. Our newly created ESG

Committee provides additional strategic

oversight, accountability and guidance to

ensure we maintain our high standards.

Our performance on supplier metrics has been

maintained; for example, 99% of all suppliers

were paid within UK Government guidelines of

60 days, a one percentage point increase from

2021. We were also slightly ahead of our 33%

target spend with SME suppliers.

Markets and clients

We are a leading provider of business process

services (BPS), driven by data, technology and

people. Both our Public Service and

Experience divisions have strong positions in

their markets – as the UK Government’s largest

IT outsourcing supplier

and as the UK’s

leading customer services provider

Both markets are growing at around 5%

2,3

per

annum. Some sub-sectors within the markets

are growing at much higher rates, as both the

public and private sectors invest in digital

transformation to drive efficiency, amid

economic uncertainty and fiscal strain, and

deliver better citizen and customer service. Our

overall value proposition remains strong in the

current macroeconomic climate where we can

drive efficiency and productivity for the benefit

of customers and citizens.

Our deep sector process knowledge and

market vertical divisional structure, combined

with the breadth and depth of the Group’s client

base, provide stability and resilience. The

Elsewhere within the Group, we launched

Project Compass to provide ex-offenders with

meaningful employment upon leaving prison.

We also joined forces with a social impact firm

to assist military veterans with finding jobs to

help fill the UK’s digital skills gaps on their

return to civilian life. We were pleased to retain

our status as a gold award employer under the

Armed Forces Covenant.

Outside the UK, we made a donation at the

start of the Ukraine war to the Red Cross,

whileour colleagues in Poland have supported

refugees with donations and hosted refugee

families. In South Africa we funded a learners

programme to help underprivileged groups to

tackle digital exclusion.

More widely, across our contract bids, we have

seen our clients placing a greater emphasis on

ESG in their tender appraisal processes. This is

an area where we typically score well, reflecting

our success in transforming Capita into a truly

purpose-driven, responsible business.

We previously outlined our plans to take our

carbon footprint to net zero by 2035, ahead of

the UK Government’s target of 2050. Our

three-phased approach aims to see us reach

Scope 1 net zero by 2025 and Scope 2 and 3

net zero by 2030. During the year, the Science

Based Targets initiative verified the Group’s

2035 net zero target as compliant with the

highest standards of target-setting methodology

and Capita was awarded a climate change A list

award by the Carbon Disclosure Project (CDP).

We reduced our Scope 1 and 2 emissions by

45% compared with our 2019 base line. We are

pleased to be certified as ESG low risk by

For colleagues based outside the UK, we have

a similar and fair approach, paying colleagues

in line with our global pay principles. In order to

support our colleagues further, we have also

launched a number of financial wellbeing

initiatives including direct financial support,

such as salary advances, and the Level app

which provides support for financial budgeting.

During 2022, we continued to develop and

embed our health, safety and wellbeing policies

and standards for all our colleagues within the

divisions and business units. We are driving

assurance programmes around our

requirements, growing the wellbeing and

healthcomponents of our new occupational

health services, and increasing the digital

transformation of the tools we use to care for

our employees. In 2022 our annual employee

wellbeing index improved by 4%, we also

introduced SafetyNet, providing guidance

andsupport to teams dealing with complex

issues related to wellbeing, safeguarding

orvulnerability.

2. TechMarketView.

3. NelsonHall.

Strategic

report

Capita plc

Annual Report 2022

Chief Executive

Officer’s review

continued

anumber of years. New contract wins included

broad customer experience support provision

for ScottishPower for five years, which uses AI

conversational technology and data analytics

todeliver better outcomes and efficiencies.

Renewed contracts included a five-year

renewal with the BBC (providing TV licensing

collection, management and administration),

aseven-year contract extension with freenet

AG (providing customer services support for

the German telecommunications and digital

services company), and multiple contracts

within the financial services industry, reflecting

our strength in that area. The renewal rate in

Service, our digital technology stack will be an

area of continued investment in 2023 and

beyond, positioning us for improved

opportunities going forwards.

To underpin the Group’s increase in digital BPS;

in 2023 we will be investing in a number of

areas, including consolidation of our networks,

improving our automation tools, and growing

our cloud and hosting capabilities, data

analytics and software engineering. This will

enable us to meet the demands of clients, help

deliver user-centric solutions and accelerate

benefit delivery.

The Group continues to strengthen digital

capability within our client offerings, as we

invest in our technology stack and capabilities.

We have partnered with world-leading

technology providers such as Amazon Web

Services (AWS), Salesforce and Microsoft

tosupport the build of standardised scalable

platforms, improving our ability to deploy

automation, AI and analytics, and, in turn,

delivering better customer service outcomes.

Growing our business

In 2022, the Group won contracts with a total

contract value (TCV) of £2,853m (2021:£3,420m)

the reduction reflecting the scale andlumpy

nature of timing of contract award phasing in

Public Service, partially offset by astrong

performance in Experience.

Experience had a particularly strong year, with

a 71% increase in TCV sold, reflecting very high

levels of contract retention and growth with

existing clients. The book to bill ratio for the

division was 1.2x, the highest it has been for

becoming standardised and repeatable,

withgreater contract stickiness. Previous

investments are starting to yield benefits,

withthe UK Government, for the first time,

regarding us as a digital service provider

alongside delivering complex outsourcing

scopes of work.

To support our digital offerings, we continue

toembed our TSS capability. With 4,200

employees, TSS brings a single resource

poolto deliver secure, resilient and predictable

digital solutions for Capita’s businesses

andclients. We view this as the digital heart

ofCapita.

We have aligned TSS partners with divisional

Service Delivery Managers to ensure greater

insight into our clients’ requirements, while

ensuring we have a pan-Capita digital roadmap

with broader capabilities across the Group.

OurTSS capabilities contributed to client

satisfaction improvements across Capita Public

Service and Experience in 2022. The new

shared-service structure has also seen a strong

improvement in TSS employee engagement in

2022, with attrition rates halving.

Operationally, the creation of a shared service

technology delivery function facilitated a

significant step-up in new daily software

releases, delivering 33% more releases

compared with 2021, and helped reduce the cost

of service-credits across the contract portfolio.

Our strengthened balance sheet underpins our

ability to increase investment in digital solutions.

This year we invested in a new pensions

platform in our Financial Services vertical to

facilitate wider user self service. Within Public

In August 2022, Capita joined

forces with a social impact

firm to help military veterans

fill the UK’s chronic digital

skills gap

the division remains extremely high at 99%

ofall renewals bid for.

Public Service saw a 50% reduction in TCV

sold, compared with the prior year, following the

£925m win of the Royal Navy training contract

in 2021. Our client renewal rate remains very

high at 91% across renewals bid for. There was

Developing a more agile

workforce has enabled us

to increase our ability to

meet resource demands.”

Strategic

report

Capita plc

Annual Report 2022

Chief Executive

Officer’s review

continued

We had a strong and predictable operational

performance in 2022, hitting customer KPIs

consistently across the year. There were

anumber of notable achievements across

thecontract portfolio, including:

• Maintaining our 100% success delivery

record for both time and cost on the Royal

Navy training contract. The strength of this

partnership has allowed us to bid for

additional scopes of work such as the

Submarine Training Centre.

• A smooth start to our work on the new

ScottishPower contract in June, transferring

400 people to Capita from the previous

service provider with no impact on

operationalperformance.

• Flexible scaling of service delivery teams in our

Experience division around client peak

demand periods for retail sales across the year.

The challenging market conditions, and higher

levels of employee attrition in some areas,

increased cost pressure for the Group over the

year, but developing a more agile workforce

hasenabled us to increase our ability to meet

resource demands, and we have seen an

improvement in our eNPS.

We are experiencing one of the tightest

labourmarkets of all time, but managed to

recruit a significant number of people in 2022

tomeet market demand. We now have the

appropriate resources to grow and maximise

revenue opportunities.

At 31 December 2022, the Group’s order book

stood at £5,805m, reducing £310m from 31

December 2021 with £2,110m order book

additions, indexation and scope changes,

£2,132m revenue recognised and £288m from

business disposals and contract terminations.

Delivery for our clients and

costefficiency

Consistently delivering for our clients is

thecornerstone of our success. Effective,

efficient client delivery and getting it right first

time, reduces excess cost and allows us to

growrevenue.

Our cNPS improved in 2022 by six points,

withthe overall score now at +35 points. We

saw improvements in all divisions, reflecting

ourefforts to deliver for our clients and their

customers throughout the business. In a few

cases where KPI performance was not met

consistently we actively engaged in remediation

actions. This has helped improve our overall

external stakeholder reputational scores, where

we saw the highest annual scorethe Group has

achieved since tracking began three years ago.

To allow more consistent delivery across both

core divisions, we have established a flexible

and agile workforce, which can be scaled up

and down. We have created a single delivery

organisation in each division, with common

technology stacks and processes with a high

level of agility. We are applying the same

digitaltechnology to our clients and ourselves

to drive cost reduction and consistency of

service delivery.

success in the year in each vertical, including

renewals with NHS England, Barnet Council

and with the Department for Work and

Pensions. We also secured growth with existing

clients, including TfL Road User Charging and

the Royal Navy on the Submarine Training

Centre. The book to bill for the division for the

year was 0.8x.

Wider market conditions across 2022, including

changes within the UK Government, resulted in a

number of significant contract tender processes

seeing timeline slippage, particularly in areas of

new business. Across the year, more than £3bn

of TCV opportunities saw their closing date move

from 2022 to 2023. Our 2023 unweighted

pipeline is £7.5bn, with 70% of this reflecting new

clients and new business. The weighted pipeline

for 2023 is £2.2bn, split broadly 50:50 between

Experience and Public Service.

The remaining businesses within Portfolio

contributed £264m of TCV, which was a slight

increase from that signed in 2021 on a like-for-

like basis. The book to bill for the division

remains above 1.0x.

More broadly, we see margin opportunity in

improving commercial terms on our existing

contracts and from solutions that have a higher

digital underpin and are more scalable.

Our property portfolio and usage are a

continued area of focus for management as we

maintain our virtual first working model. In 2022,

we permanently closed 19 properties and

consolidated an additional 19, resulting in

a23% reduction in our total square footage

over the past two years, reducing our annual

lease payments by £22m.

Financial results – revenue and profit

Adjusted revenue

growth accelerated in 2022

to 2.4% across the whole year with 4% growth

in the second half as we delivered adjusted

revenue

of £2,845.8m (2021: £2,777.8m). New

contract wins included the Northern Ireland

teachers IT device refresh contract and the

Turing Scheme, as well as the annualised

benefit of the Royal Navy training contract and

price increases/indexation. The impact of these

new awards was partially offset by prior-year

losses, and reductions in contract scope and

volume, mainly in the Financial Services vertical

in Experience. Portfolio performed well, as

businesses recovered from the Covid-19 related

activity restraints of 2021.

Reported revenue declined by 5% to £3,014.6m

as the core business growth was more than

offset by the disposal of non-core businesses.

Adjusted profit before tax

increased to £73.8m

(2021 loss: £122.8m). The improvement in profit

reflected the cessation of major restructuring

spend in 2021 (£147.5m), the non-repetition of

1. Refer to APMs on pages 229 to 231.

Strategic

report

Capita plc

Annual Report 2022

Chief Executive

Officer’s review

continued

area. The division now has £249.8m revenue

and £26.9m of profit, before the allocation of

Group overheads in 2022.

The closed book Life & Pensions business

unit,which sits in Experience, continues to

negatively affect the Group’s cash performance,

as the costs of servicing a small number of

legacy contracts significantly outweigh client

cash receipts. The cash outflow from this

business unit is forecast to remain broadly

unchanged. However, we continue to deliver

operationally well for these clients and, while

wesupport those that remain core to our

Financial Services vertical, these contracts are

an area of continued focus from management,

as we look to reduce the adverse cash flow

impact on the Group.

Outlook

While the current economic and broader

political environments create some uncertainty,

we believe that the transformation of Capita

thatwe completed in 2021, and the financial

turnaround of the business we delivered in

2022, places the business in a strong position

todeliver successfully, moving forwards.

We expect that our market positioning,

transformed business model and focus on

opportunities in the digitally enabled BPS

spacewill enable us to continue to accelerate

revenue growth into 2023 and to deliver profit

growth and positive free cash flow over the

medium term.

Jon Lewis

Chief Executive Officer

Financial results – free cash flow

andnet debt

We delivered positive free cash flow before the

impact of business exits

of £29.0m (2021

outflow: £218.6m) and free cash flow was

positive at £24.5m (2021 outflow: £264.3m).

The swing to positive free cash flow generation

reflected a reduction in pension deficit

payments from £155.5m to £38.6m and

deferred VAT repayments from £104.1m to

£14.9m, together with an underlying

improvement in operating cash flow conversion.

Net debt reduced further to £482.4m in 2022

(2021: £879.8m), as we continued to strengthen

the balance sheet. Pre-IFRS 16 net financial

debt reduced to £84.9m (2021: £431.4m). The

reduction was achieved through our successful

disposals programme, with c.£485m of gross

proceeds received in 2022 from the sales of

Pay360, the Technology and Property pillars,

and Capita Translation and Interpreting, as well

as those announced in 2021.

Our disposals programme has enabled us to

meet £440m of debt maturities in 2021 and

2022. We continue to reduce other financial

obligations, including in respect of our pension

deficit through additional contributions, and our

property footprint which yielded a further

reduction in lease liabilities of £40m.

While market conditions have been challenging

in some areas, we continued to see good

interest in the businesses remaining to be sold

within Portfolio. Operationally, we have

maintained our strong delivery for clients in this

the closed book Life & Pensions provisions

booked in 2021 (£43.1m) and the benefit from

revenue growth and cost efficiencies over the

year. This was partially offset by the Group’s

commitment to repay £4.9m of furlough income

received in 2021.

Reported profit before tax decreased,

principally reflecting the reduction in disposal

gains, following the ESS and Axelos sales

completed in 2021 (2021 gain: £285.6m). In

2022, we made a disposal gain of £166.9m,

primarily from the sale of Pay360. We

recognised a £169.0m (2021: £11.5m) non-cash

goodwill impairment in respect of businesses

within the Portfolio division.

Capita’s Fire Service

College has launched its

new Aviation Firefighter

Programme – with London

Oxford Airport confirmed

asits first customer – in a

significant investment in

thecollege’s civilaviation

training offering

1. Refer to APMs on pages 229 to 231.

Public Service is well positioned,

benefiting from its breadth of

coverage, domain understanding

and scale.”

Alistair Murray

CEO, Capita Public Service

Adjusted revenue

£1,445.3m

(2021: £1,410.4m) 2.5%

Adjusted operating profit

£91.5m

(2021: £93.2m) (1.8)%

Adjusted revenue by type (%)

1 80% Long-term contractual

2 16% Short-term contractual

3 4% Transactional

Revenue by market (%)

1 16% Education & Learning

2 18% Local Public Services

3 17% Health & Welfare

4 20% Defence, Fire & Security

5 29%

Justice, Central Government

& Transport

Strategic

report

Chief Executive

Officer’s review

continued

Capita plc

Annual Report 2022

Public

Service

Business units

• Education & Learning

• Local Public Services

• Health & Welfare

• Defence, Fire & Security

• Justice, Central Government & Transport

Employees

• 11,70 0

Client distribution

• UK

Major contract wins and renewals

• A three-year extension to our Primary Care

Support England contract, worth £94m

• £85m additional growth and scope, including

the Submarine Training Centre on the Royal

Navy training contract

• An extension to the current 10-year Barnet

contract, worth up to £57m over three years

• Appointment as an HMRC automation

partner, which over four years could be worth

up to £20m

Competitors

• Fujitsu

• Atos

• Sopra Steria

• CGI

• TCS

• Cognizant

• Accenture

• DXC Technology

• BJSS

• Cap Gemini

• Kainos

• Serco

• Maximus

Financial performance

Divisional financial summary 2022 2021 Change %

Adjusted revenue

(£m) 1,445.3 1,410.4 2.5

Adjusted operating profit

(£m) 91.5 93.2 (1.8)

Adjusted operating margin

(%) 6.3 6.6

Adjusted EBITDA

(£m) 130.0 138.7 (6.3)

Cash generated from operations before business exits

(£m) 95.4 66.5 43.5

Order book (£m) 2,985.0 3,286.3 (9.2)

Capita Public Service

Capita Public Service is the number

one

strategic supplier of Software

andIT Services (SITS) and business

process services (BPS) to the

UKGovernment.

1. Refer to APMs on pages 229 to 231.

2. TechMarketView.

Capita Public Service is

structured across five

market verticals: Education

& Learning; Local Public

Services; Health & Welfare;

Defence, Fire &Security;

and Justice, Central

Government & Transport;

as well as the non-

consolidated Smart

DCCsubsidiary.

In 2022, we reinforced our

position as an important

strategic supplier to the

UKGovernment

Strategic

report

Chief Executive

Officer’s review

continued

Capita plc

Annual Report 2022

Public

Service

continued

In 2022, we reinforced our position as an

important strategic supplier to the UK

Government, reflecting continuous

improvements in our delivery and strengthened

balance sheet. As Capita has won and

delivered more digital transformation and

ITcontracts across the public sector, the

Government now regards us as a digital

serviceprovider alongside delivering traditional,

complex outsourcing scopes of work.

Our strength is in understanding our clients’

needs and problems with our deep sector

knowledge and client partners in our chosen

verticals working with relevant Government

departments. We have invested in our coverage

on Government frameworks, through which

companies are able to bid for Government

contracts, and we are now included on

frameworks representing market access

ofupto £9.5bn.

We are working with the Government to

understand how it expects the transition

todigital delivery to be completed, with

opportunities in our Health & Welfare,

andDefence, Fire & Security, and Justice,

Central Government & Transport verticals.

We saw success in this journey across

avarietyof contracts in 2022. In May, we were

appointed as HMRC’s new automation and

innovation partner to develop, deploy and

support robotic software and other automation

tools in order tosimplify processes and drive

operational efficiency.

Our placement on digital frameworks and the

shift in the BPS market to become more digital

and data-enabled provides an opportunity as

the Government seeks more cost-efficient and

effective services, while improving overall

citizen experience.

Across the variety of services that Public

Service provides, we compete with a number

ofother providers within this fragmented market

including but not limited to Fujitsu, Atos, Sopra

Steria, CGI, TCS, Cognizant, Accenture, DXC

Technology, BJSS, Cap Gemini, Kainos, Serco

and Maximus.

Our strategy

Our strategy is to create better outcomes, using

our consult-transform-deliver approach.

Public Service is executing on a digital strategy

transformation programme, materially investing

in our digital capabilities to create a preferred

technology stack and IT ecosystem, alongside

our traditional BPO business. This investment

will underpin our ambition to transform the way

we work, in line with the UK Government’s

evolving demand for digital solutions.

We look to leverage our vast experience of

delivering and integrating end-to-end processes

by deploying our digital capability in partnership

with our UK Government clients to help them

increase their operational efficiency and

improve the outcomes for UK citizens.

Our markets and growth drivers

Government spending in the UK with private

sector organisations is c.£176bn

. Our current

core addressable market is c.£13.9bn

growing

at c.5%

per annum. Digital BPS is a fast-

growing area, while BPO is currently shrinking,

reflecting the Government’s focus on digitally-

enabled transformation.

While broader market dynamics and

macroeconomics are expected to continue to

be challenging during 2023, Public Service is

well positioned, benefiting from its breadth of

coverage, domain understanding and scale,

together with sales and delivery capabilities in

each vertical, offering efficient solutions and

cost savings during times of fiscal strain.

In 2022, the UK Government published the

Roadmap for Digital and Data outlining its

intention to spend up to an additional £8bn by

2025 to accelerate digital, data and technology

transformation in order to better respond to

future macroeconomic challenges.

2. TechMarketView.

Our operational delivery

remained consistently

strong across the contract

portfolio

Strategic

report

Chief Executive

Officer’s review

continued

Capita plc

Annual Report 2022

Public

Service

continued

Cost and operational excellence

Across the year, we focused on further

embedding the operating model introduced in

2021 to ensure it met our clients’ needs across

a broad range of services with improved

cross-sell opportunities. There have been

natural efficiencies from the division’s matrix

operating model and we are now looking at the

digital tools and investments to reduce future

costs, as we enhance the scalability of solutions.

The division’s standalone cNPS improved by

nine points from 2021 to an overall score of

+33, including many of our key clients,

reflecting the commitment to client delivery and

consistent outcomes achieved during the year.

In 2022 our operational delivery remained

consistently strong across the contract portfolio,

with strong performance against all contract

KPIs; for example, we delivered on all the key

milestones on the Royal Navy training contract

and have now started running the Royal Navy’s

maritime composition training system. In

addition, we launched the Aviation Fire

Programme at the Fire Service College, while

the Job Entry Targeted Support contract

delivered in 18 months more than 1.5x the

target number of job starts. Within our Smart

DCC subsidiary there are now 10 million first

generation meters connected to the DCC

secure nationwide network.

Growth

Across the year, we intensified our customer

focus through client partnering, with a

professionalised sales force, to deliver high

growth alongside strong operational outcomes.

Public Service won contracts with £1,218m

(2021: £2,422m) TCV. The total TCV won

decreased from the prior year reflecting the

somewhat lumpy nature of the Government

large contract sales pipeline and, in particular,

the benefit in 2021 from the £925m Royal Navy

training contract award. We saw certain

material bid timelines pushed into 2023,

particularly in the second half of the year,

following a number of changes within the UK

Government. As a result, the division’s weighted

pipeline has increased by £419m to £1,652m,

and the 2022 book to bill ratio was 0.8x.

At 31 December 2022, the total unweighted

pipeline was £7,858m, a decrease of £291m

from December 2021, reflecting the TCV won

inthe year and the number of additions to the

pipeline across the year.

We continue to see strong performance on

contract renewals with a 91% win rate across

renewals bid for, with extensions with NHS

England, Barnet Council, the Department for

Work and Pensions, and the Northern Ireland

Education Authority. On all opportunities bid for,

we saw a success rate of 67%.

The order book at 31 December was £2,985m,

a decrease of £301m since 31 December 2021,

as revenue recognised was not offset by order

book additions in the year.

Utilising our internally developed GrantIS

platform, we successfully accelerated funding

applications with the Department for Education

for the 38,000 applications on the Turing

Scheme and the product remains in use on a

contract with the Department for International

Trade. We believe there are a number of further

applications for GrantIS within the grant

management and wider distribution market.

During the year, we set up a client advisory

board to improve our understanding of

Government bid processes and requirements to

help us become an even more effective service

provider. In the long term, we expect this to

improve win rates, our origination of bids,

andour cNPS, as we see further alignment

inour offerings.

In April 2022, Capita

secured a two-year contract

extension with Northern

Ireland’s Education

Authority to continue to

deliver the managed IT

service for allofNorthern

Ireland’s 1,100schools

Strategic

report

Chief Executive

Officer’s review

continued

Capita plc

Annual Report 2022

Public

Service

continued

restructuring spend in 2021 (£5m) and margin

from contract wins and increases in volumes.

The division also benefited from the mutual

conclusion ofthe Electronic Monitoring Service

transformation programme in 2021, which

resulted in £9m of costs being incurred in

theprior year.

Cash generated from operations before

business exits

increased by 43.5% to £95.4m,

reflecting the working capital benefit from

contracts moving into the operational phase,

offset by utilisation of customer contract

provisions in 2022. The 2021 cash flow was

impacted by the repayment ofdeferred VAT

from 2020.

Outlook

In 2023, we expect accelerated revenue

growth, particularly in our Education &

Learning, and Defence, Fire & Security

verticals, as volumes on existing contracts and

transactional revenueincrease.

Improvements in the division’s operating margin

are expected to be achieved, as we continue to

win work at appropriate rates of return and

efficiencies are realised from our simplified

organisation and technology investment.

This consistent performance has reduced the

financial burden on the division, with the major

contracts now delivering improving profit and

cash flow, alongside growth opportunities such

as the Submarine Training Centre and with our

TfL Road User Charging contract.

We have now commenced investment to

underpin efficient operations in future years,

automating common operational activities, with

financial payback expected from 2023. We are

increasingly using shared service centres to

provide resourcing flexibility and to ensure we

service our contracts consistently.

Financial performance

Adjusted revenue

increased by 2.5% to

£1,445.3m, reflecting the annualisation of the

Royal Navy training contract and additional

growth opportunities within the contract and

wins such as the Northern Ireland teachers

ITrefresh contract. Revenue also benefited

from additional volumes in the Justice, Central

Government & Transport vertical and the

running of the first full test cycle of primary

school curriculum assessments in England

forthe Standards and Testing Agency (STA),

following cancellation of the previous year’s

testcycle due to Covid restrictions. There were

contract handbacks in the year within our Local

Public Services vertical, as well as the cessation

of our contract with The Pensions Regulator.

Adjusted operating profit

decreased by 1.8%

to£91.5m, reflecting the mix of work and

reduced margin on the British Army Recruiting

Partnering Project (RPP) contract as it moved

into the next phase of service delivery. This

wasoffset by the non-recurrence of significant

In 2022, we delivered on all the key milestones of

our Royal Navy training contracts, and have now

started running the Navy’s maritime composition

training system

1. Refer to APMs on pages 229 to 231.

Our service-delivery options

across different geographies

offer our clients flexibility and

provide a growth opportunity

going forward.”

Corinne Ripoche

CEO, Capita Experience

Adjusted revenue

£1,150.7m

(2021: £1,140.9m) 0.9%

Adjusted operating profit

£38.5m

(2021: £8.9m) 332.6%

Strategic

report

Chief Executive

Officer’s review

continued

Capita plc

Annual Report 2022

Experience

Capita Experience

Capita Experience is one of western

Europe’s leading customer experience

businesses. It is the market leader

inthe UK

and ranks fifth in Germany

andEurope

Business units (new split from 2023)

• Telecoms, Media & Technology

• Financial Services

• Energy & Utilities

• Retail

Employees

• 31,000

Client distribution

• UK, Ireland, Germany and Switzerland

Delivery centres

• UK, South Africa, India and Poland

Major contract wins and renewals

• A five-year contract extension worth £456m

toadminister the TV licence fee on behalf

ofthe BBC

• Extensions worth up to £40m across our

Plusnet and Samsung contracts

• A new logo win with ScottishPower worth

upto £63m over five years

Competitors

• Atento

• Teleperformance

• Webhelp

• Accenture

• Concentrix

• T-Tech

• Sykes Enterprises

• Firstsource

• Majorel

• In-sourcing trend

Financial performance

Divisional financial summary 2022 2021 Change %

Adjusted revenue

(£m) 1,150.7 1,140.9 0.9

Adjusted operating profit

(£m) 38.5 8.9 332.6

Adjusted operating margin

(%) 3.3 0.8

Adjusted EBITDA

(£m) 113.4 93.2 21.7

Cash generated from/(used by) operations before business exits

(£m) 30.7 (4.8) n/a

Order book (£m) 2,526.7 2,271.8 11. 2

Adjusted revenue by type (%)

1 86% Long-term contractual

2 13% Short-term contractual

3 1% Transactional

Revenue by market (%)

1 39% Telecoms, Media

& Technology

2 21% Multi-industry

3 40% Financial Services

1. Refer to APMs on pages 229 to 231.

4. NelsonHall.

Experience is now

structured around four

core industries: Financial

Services; Technology

Media& Telco (TMT); and,

following the separation

ofour Multi-industry

vertical, Energy & Utilities

andRetail.

Renewal rates continue to

remain high for the division,

with 99% of bids successful

Strategic

report

Chief Executive

Officer’s review

continued

Capita plc

Annual Report 2022

Experience

continued

In 2022 we introduced a single divisional

operating model, with more consistent

leadership and improved rigour across the

service delivery process. Using our matrix

operating model, we are able to meet

resourcing needs with an agile and flexible

workforce available to serve across various

contracts as demand requires, such as for peak

sale periods. Our operating model helps us stay

competitive within the market and allows us to

manage resources around client demands with

an end-to-end delivery model.

Our strategy

The long-term strategy of the core business is

to be a leading customer experience service

provider delivering better outcomes for our

clients through a consultative approach

underpinned by data and technology.

Experience has an extensive blue-chip

customer list and we have increasingly seen

our customer base diversify, with wins this year

in the FinTech sector.

Our markets and growth drivers

The global customer experience market is

worth £277bn

a year and the outsourced

element is expected to grow at c.5%

perannum. Around 28%

of the market

iscurrently outsourced.

We are the largest provider of customer

experience services in the UK and Ireland,

witha market share of around 12%

. Our

competitors within the customer experience

segment are mostly global and include peers

such as Teleperformance, Webhelp, Concentrix

and Majorel.

The market continues to trend towards self-

service and automation, with clients looking

toutilise omni-channel offerings, with increased

multilingual capabilities and capacity, and

agents working remotely both on and offshore.

The changing economic landscape poses an

opportunity for Experience, particularly within

our Financial Services and Energy & Utilities

industry verticals, as institutions in these

sectors have a key role to play in helping

vulnerable customers through periods of

uncertainty, and empathetic human intervention

is required for those who need it most.

4. NelsonHall.

5. Everest.

Capita Experience digital ecosystem

Data

insight

and

analytics

Digital

and AI

Agent

assist

Agent

hubs

Cloud

shoring

Managed

service

Experience

capabilities

Working from

home (WFH)

and workforce

management

Cloud

omni-channel

AWS connect

Assisted

customer

conversation

Workflow

management

Robotic

processing

automation

(RPA)/

automation

Conversational

Dynamic

data

Voice customer

services

Web andemail

services

Strategic

report

Chief Executive

Officer’s review

continued

Capita plc

Annual Report 2022

Experience

continued

Cost and operational excellence

Throughout 2022, our matrix structure delivered

operational excellence while delighting clients,

as evidenced by our consistent KPI performance

and +10 point improvement in cNPS, to an

overall score of +19.

As with many competitors in our markets,

employee attrition remained high, and we

adapted our business model across the year,

while taking action to address the higher level

ofattrition. We moved to using a demand-led

resource model, allowing us to resource all

full-time employee requirements on our

contracts. Attrition will remain a key area of

focus in 2023, as well as being an area of

further cost-reduction opportunity, as we reduce

attrition levels and improve employee retention.

We delivered well for our clients during the year;

for example, after winning the ScottishPower

contract in June, we transferred 400 people

from the previous service provider to Capita

Experience with no impact on functionality or

service delivered to customers. Working with

another client in the energy sector, we more

than doubled the existing team to improve

customer service, responding to the additional

volume requirements during the ongoing

energy crisis, reducing response times by 30%

and improving quality scores by 10%.

The weighted pipeline at 31 December 2022

stood at £1,114m (2021: £1,566m) reflecting the

TCV won during the year. The divisional book to

bill was 1.2x, an improvement from 0.7x in 2021,

an important milestone on the division’s

business-improvement journey.

Renewal rates continue to remain high for the

division, with 99% of bids successful as we

continue to deliver operationally for clients.

Renewals are important in order to maintain

aconsistent revenue base, but we are also

focused on revenue growth from new scopes

ofwork and growth on account where our

historical win rates have not been as strong.

Our win rate in the division was 52% across

allopportunities. Our 2023 pipeline is diverse,

with a mixture of new scopes of work and

growth on account.

Challenged end-markets meant that we saw

anumber of significant deal timelines slip into

2023; these included a number of new clients

inthe TMT vertical and renewals within our

Energy & Utilities and Retail industry verticals.

The order book at year end was £2,527m, an

increase of £255m since 31 December 2021,

reflecting the contract wins in the year which

more than offset revenue recognised in the year.

We are a trusted partner and adviser for clients,

with omni-channel delivery options allowing for

both self-service and human-contact options

based on the nature of the experience required.

The division has an advanced toolkit of services

including speech analysis and real-time

feedback to ensure customers get the best

outcomes seamlessly.

Our service-delivery options across different

geographies offer our clients flexibility and

provide a growth opportunity going forward.

In2022, alongside expanding our operations in

India and Durban, South Africa, we expanded

into additional cities in Poland to support

delivery of our services in 35 different

languages with 24/7 support. These sites

willbe important strategic hubs for our

futuregrowth and further expansion of our

multilingualcapabilities.

Growth

At 31 December 2022, the total unweighted

pipeline was £4,082m, a decrease of £1,388m

from 31 December 2021. The division won TCV

of £1,371m, an increase of 71% from 2021.

Significant wins in the year included renewals

with the BBC (providing TV licensing collection,

management and administration) and with

freenet AG (providing customer services

support for the German telecommunications

and digital services company) within our

international business in TMT. There were

multiple wins within the Financial Services

vertical, reflecting our strength in this area.

Capita has secured a five-

year agreement to deliver

frontline customer support

services for ScottishPower

customers across the UK

As revenue growth becomes

more established, operating

leverage is expected to drive

further margin improvement

Strategic

report

Chief Executive

Officer’s review

continued

Capita plc

Annual Report 2022

Experience

continued

Cash generated from operations before business

exits

increased by £35.5m to £30.7m, with an

improvement in working capital benefiting the

division’s operating cash conversion. The

division’s cash performance in 2021 was

impacted by the repayment of deferred VAT

from 2020 together with restructuring spend

and recognition of contract-related provisions.

Outlook

While improvements were made during 2022,

Experience continues to lag behind Public

Service in its business-improvement journey.

In 2023, we expect revenue to be broadly in line

with 2022, reflecting continued reductions from

contract losses and volume attrition within the

closed book Life & Pensions, offset by growth

from new wins and growth on account delivered

across our market verticals. As we have

simplified our go-to-market offering and

become more efficient and effective, we expect

to deliver mid single-digit growth over the

medium term.

As revenue growth becomes more established,

operating leverage is expected to drive further

margin improvement.

We have seen further volume attrition within our

closed book Life & Pensions business unit, in

line with our expectations. The business unit is

forecast to be loss-making with a consistent

cash outflow in future years, with a provision

held reflecting this. We continue to deliver

operationally well for these clients but remain

focused on resolving the structural challenge

inthis area to reduce ongoing cash losses.

Elsewhere in the regulated services business,

Pensions Administration continues to perform

well and activity levels improved further in 2022.

Within the Financial Services vertical, we

invested in our mortgage business to create a

customer-focused IT platform and ecosystem,

allowing an end-to-end service to clients, which

supports our growth ambitions in this area.

Financial performance

Adjusted revenue

increased by 0.9% to

£1,150.7m, reflecting price increases and wins

in the year including ScottishPower and

international wins in Germany and Switzerland

which offset the final-year impact of prior-year

losses. The division saw lower volumes with

continued attrition within the closed book Life

&Pensions contracts.

Adjusted operating profit

increased by 332.6%

to £38.5m. The result in 2021 was impacted by

the recognition of provisions and impairments in

our closed book Life & Pensions business

(£43m) and completion of the Group’s

significant restructuring where the division

incurred £12m of expense in 2021.

Capita has secured a five-year contract extension to

continue to administer the TV licence fee in the UK

In addition, we worked with Marks & Spencer

deploying conversational AI, outperforming the

previous incumbent with a 10% increase in

customers able to self serve. We also worked

with an existing customer on a consulting

basisto categorise all incoming calls across

their entire estate and use data analytics to

improve and add value to the overall customer

experience. This type of consulting engagement

is an important growth area for thedivision,

aswe boost our BPO and BPS services, while

improving the end-customer journey.

1. Refer to APMs on pages 229 to 231.

We have made significant

progress with the Portfolio

disposal programme, helping

ussimplify and focus the Group

for future growth.”

Chantal Free

CEO, Capita Portfolio

Adjusted revenue

£249.8m

(2021: £226.5m) 10.3%

Adjusted operating profit

£16.2m

(2021: £(0.1)m) n/a%

Strategic

report

Chief Executive

Officer’s review

continued

Capita plc

Annual Report 2022

Portfolio

Business units

• People

• Property (sold during 2022)

• Technology (sold during 2022)

• Software

• Business Solutions

• Travel

• Fera

Employees

• 3,000

Client distribution

• UK

Major contract wins and renewals

• A renewal with an energy company within the

Peoplepillar worth £5m

• There were a number of new clients and

renewals within the Retain business with

totalTCV won over £7m

Portfolio

Portfolio comprises the remaining

non-core businesses which the

Group is looking to exit.

Financial performance

Divisional financial summary 2022 2021 Change %

Adjusted revenue

(£m) 249.8 226.5 10.3

Adjusted operating profit

(£m) 16.2 (0.1) n/a

Adjusted operating margin

(%) 6.5 –

Adjusted EBITDA

(£m) 35.6 24.3 46.5

Cash generated from operations before business exits

(£m) 17.1 21.2 (19.3)

Order book (£m) 293.5 557. 3

(47.3)

2. Includes businesses subsequently disposed of in 2022

Adjusted revenue by type (%)

1 13% Long-term contractual

2 15% Short-term contractual

3 72% Transactional

1. Refer to APMs on pages 229 to 231.

Since the division was

formed in 2021 we have

made significant progress

with the Portfolio disposal

programme, helping us

simplify and focus the

Group for future growth.

This year thedivision

raised more than £330m

gross proceeds from

completed disposals.

Strategic

report

Chief Executive

Officer’s review

continued

Capita plc

Annual Report 2022

Portfolio

continued

We are working to ensure ongoing cost

efficiency in the division ahead of the

completion of the disposal programme,

throughsuccessful vacancy management

andredeployment of employees across the

wider Group.

Financial performance

Adjusted revenue

increased 10.3% to £249.8m

as pillars within Portfolio continued to recover

from subdued trading during the Covid-19

pandemic, particularly within our Agiito and

Enforcement businesses.

Adjusted operating profit

increased from break

even to £16.2m, reflecting revenue growth

andthe benefit from the non-repeat of £2.3m

significant restructuring costs incurred in 2021.

Thismore than offset the cost of operational

investment in some pillars.

Cash generated from operations before

business exits

decreased by 19.3% to £17.1m

driven by working capital requirements as the

division recovers from Covid-19, which more

than offset the improvement in EBITDA.

Outlook

We are targeting for the majority of the

remaining businesses within Portfolio to

bedisposed ofduring the first half of 2023,

depending ongeneral market conditions.

Our markets and growth drivers

Portfolio is made up of a range of businesses

which service public and private sector clients

across multiple, generally mature, markets

andsectors.

We enjoy strong positions in many of the

markets where we operate, with strong brands

andpositive client perception of our services.

Our strategy

The division is organised into pillars comprising

businesses of similar characteristics: People,

Software, Business Solutions, Travel, and the

Fera joint venture with the UK Government, to

allow for efficient management and to facilitate

smooth transaction processes.

During 2022, we successfully completed the

disposal of the Technology and Property pillars,

as well as Capita Translation and Interpreting

within the Business Solutions pillar, together

with those announced in 2021, achieving gross

proceeds of c.£330m from these disposals.

Cost and operational excellence

The pillars within Portfolio continue to deliver

astrong operational service for clients and

thedivision has seen its fourth consecutive

improvement in its annual cNPS score.

During the year, our travel business, Agiito,

wona number of awards, including being

recognised in the Top 50 Business Travel

Agencies. Within our Fera business, we opened

an expert insect bioconversion research and

development facility to support the needs of

global clients across the industry.

Fera Science launched a

£1mlaboratory forinsect

bioconversion in York

1. Refer to APMs on pages 229 to 231.

Accelerated revenue growth, a step change

in profitability and positive free cash flow.”

Tim Weller, Chief Financial Officer

Strategic

report

Capita plc

Annual Report 2022

Chief Financial

Officer’s review

A turnaround in

financial performance

revenue was impacted by significant prior year

contract losses, offset by new wins, including

those in International and with ScottishPower.

Growth in our transactional business was

mainly driven by Portfolio, including the

Traveland Enforcement businesses,

whichcontinued their recovery following

Covid-related constraints.

From 1January 2022, the Board has limited the

items excluded from the adjusted results to

business exits, amortisation and impairment of

acquired intangibles, impairment of goodwill

and certain fair value adjustments which impact

net finance income/expense. This presentation

Overview

Improved adjusted revenue

growth was in line

with our expectations, with an acceleration

across the year from 1% in the first half to 4%

inthe second half. This was driven by strong

growth in the Public Service and Portfolio

divisions and stabilisation of revenues in the

Experience division.

Public Service revenue growth was

underpinned by new wins such as the Northern

Ireland teachers IT refresh contract and

annualisation of the Royal Navy training

contract offset by revenue reductions in some

Local Public Service contracts. Experience

Summary of financial performance

Financial highlights

Reported results – continuing operations Adjusted

results – continuing operations

31 December

2022

31 December

2021

Reported

YOY change

31 December

2022

31 December

2021

Adjusted

YOY change

Revenue £3,014.6m £3,182.5m (5.3)% £2,845.8m £2,777.8m 2.4%

Operating profit/(loss) £(79.6)m £(86.6)m 8% £102.9m £( 7 7.7) m n/a

EBITDA £235.7m £222.3m 6% £238.8m £143.0m 67%

Profit/(loss) before tax £61.4m £285.6m (79)% £73.8m £(122.8)m n/a

Earnings/(loss)

pershare

4.47p 13.33p (67)% 6.20p (7.74)p n/a

Cash generated from/

(used by)operations*

£117.8m £(148.5)m n/a £116.5m £(109.7)m n/a

Free cash flow* £24.5m £(264.3)m n/a £29.0m £(218.6)m n/a

Net debt £(482.4)m £(879.8)m £3 97.4m £(482.4)m £(879.8)m £3 9 7.4m

Net financial debt

(pre-IFRS 16)

£(84.9)m £(431.4)m £346.5m £(84.9)m £(431.4)m £346.5m

* Cash generated from operations adjusted results and free cash flow adjusted results are free cash flow before business exits and

cash generated from operations before business exits respectively (refer to note 2.10)

1. Refer to APMs on pages 229 to 231.

Strategic

report

Capita plc

Annual Report 2022

Chief Financial

Officer’s review

continued

of their nature, size and/or incidence for

usersof the financial statements to obtain

anunderstanding of the financial information

andthe underlying in-period performance

ofthebusiness.

In accordance with the above policy, the

tradingresults of business exits, along with

thenon-trading expenses and gain or loss on

disposals, have been excluded from adjusted

results. To enable a like-for-like comparison of

adjusted results, the 2021 comparatives have

been re-presented to exclude 2022 business

exits. As at 31 December 2022, the following

businesses met this threshold and were

classified as business exits and therefore

excluded from adjusted results in both 2022

and 2021: ESS, AXELOS, Life Insurance and

Pensions Servicing business in Ireland, AMT

Sybex, Secure Solutions and Services, the

Speciality Insurance business, Trustmarque,

Real Estate and Infrastructure Consultancy,

Optima Legal Services, Pay360 and Capita

Translation and Interpreting.

Reconciliations between adjusted and reported

operating profit, profit before tax and free

cashflow before business exits are provided

onthefollowing pages and in the notes to the

financial statements.

These disposals form part of the Board-

approved disposal programme. The sale

processes have been launched for the

remaining pillars in the Portfolio division. The

Group expects to use the proceeds from this

disposal programme to repay debt, to make

accelerated deficit reduction contributions to

theGroup’s defined benefit pension scheme

and to invest in driving growth in the remaining

core businesses. During the year, we repaid

£226.7m of private placement loan notes and

made pension deficit contributions of £38.6m

(£30.0m regular contributions and £8.6m

acceleration of agreed contributions triggered

by disposals).

Liquidity as at 31December 2022 was

£405.2m, made up of £288.4m of the undrawn

element of our committed revolving credit

facility (RCF) and £116.8m of unrestricted cash

and cash equivalents net of overdrafts. In July

2022, we extended the RCF to 31August 2024.

Adjusted results

Capita reports results on an adjusted basis to

aid understanding of business performance.

The Board has adopted a policy of disclosing

separately those items that it considers are

outside the underlying operating results for the

particular period under review and against

which the Group’s performance is assessed

internally. In the directors’ judgement, these

items need to be disclosed separately by virtue

performance measures that provide a more

representative measure of the sustainable cash

flow of the Group following completion of the

Group-wide transformation.

Cash generated from operations before

business exits

increased by £226.2m to

£116.5m benefiting from the improvement in

adjusted profit

explained above, a reduction

inrepayments in respect of the Government’s

VAT deferral scheme and a £43.6m reduction

inpension deficit contributions as the Group

reverts to the agreed deficit contributions set

aspart of the 2020 triennial funding agreement

with the pension scheme trustees.

Free cash flow before business exits

for the

year ended 31December 2022 was an inflow

of£29.0m (2021: £218.6m outflow). The

improvement primarily reflected the above

increase in cash generated from operations

before business exits

, and a reduction in net

interest paid in respect of leases and private

placement loan notes.

As part of our drive for simplification of the

business, and strengthening the balance sheet,

we continue to seek to dispose of a number

ofnon-core businesses. During the year we

completed the disposal of eight businesses,

realising total proceeds net of disposal costs of

£463.4m (including settlement of intercompany

balances on completion) with net cash proceeds

of £387.9m reflecting the cash held in the

disposed entities on completion.

provides a more representative measure of

theunderlying performance of the business

following completion of the Group-wide

transformation. The comparatives have been

re-presented on the same basis, with significant

restructuring (£147.5m), contract-related

provisions and impairments (£43.1m) and

certain litigation and claims (credit £2.3m) now

included within adjusted results for the year

ended 31December 2021.

The increase in adjusted profit before tax

reflects the above change in presentation,

andtherefore benefits from the reduction

inrestructuring costs and contract-related

provisions and impairments, as well as the

benefit of revenue growth. In 2021, the

Groupreceived £4.9m of funding under the

coronavirus job retention scheme made

available by the Government to help ease the

employment impact of Covid-19. In May 2022,

we announced the Group’s intention to repay

the 2021 furlough-related income at the end of

the Group’s publicly stated disposal programme

and no later than the end of June 2023. An

accrual has been recognised for this repayment

in the year ended 31December 2022.

The decrease in reported profit before tax

aroseas the increase in adjusted profit before

tax

was more than offset by an increase

inimpairments of goodwill, a reduction in

operating profit from business exits and a

lowergain on the sale of businesses.

From 1January 2022, the Board considers free

cash flow and cash generated from operations

before business exits each to be alternative

1. Refer to APMs on pages 229 to 231.

Strategic

report

Capita plc

Annual Report 2022

Chief Financial

Officer’s review

continued

Adjusted profit before tax

increased in 2022.

The adjusted profit before tax

was driven

bythe following:

• Public Service: benefits from the wins in

2022, the annualised benefit of the Royal

Navy training contract and the non-recurrence

of Electronic Monitoring programme costs

in2021; offset by a reduction on the British

Army recruitment contract (RPP) resulting

from transition to the next phase of

servicedelivery;

• Experience: flow through of prior year losses

including 3UK, William Hill and in the closed

book Life & Pensions business. 2021 was

impacted by provisions and impairments in

the closed book Life & Pensions business

and completion of significant restructuring;

• Portfolio: benefits from post Covid-19

recovery in transactional businesses and

thenon-repeat of 2021 restructuring costs;

offset by operational investment in certain

businesses; and

• Capita plc: benefits from the end of the

transformation programme (2021 included

£128.0m of significant restructuring) and

efficiencies realised; offset by the effect of

theannounced intention to repay the 2021

furlough-related income.

Cash generated from operations and

freecash flow

Adjusted EBITDA

increased by 67% reflecting

the improvement in adjusted profit

explained

above and the significant reduction in

Adjusted revenue

growth of 2.4% was in line

with expectations. The adjusted revenue

was

impacted by the following:

• Public Service (2.5% growth): growth from

contract wins, including a contract to supply

laptops to teachers in Northern Ireland as well

as the annualised benefit of the Royal Navy

training contract, increased growth in existing

contracts in Central Government, and

completion of a full test cycle on STA,

offsetting handbacks in Local Government;

• Experience (0.9% growth): stabilisation in

revenue, with the impact of significant prior

year contract losses offset by positive

revenue contributions in particular from

newclient wins in International and with

ScottishPower; and

• Portfolio (10.3% growth): growth in

transactional revenue mainly from Travel

andEnforcement following the turnaround

inthese Covid-19 impacted businesses.

Order book

The Group’s consolidated order book was

£5,805.2m at 31 December 2022 (2021:

£6,115.4m). Additions from contract wins, scope

changes and indexation in 2022 (£2,110.2m),

including the BBC and freenet AG extensions

within Experience, and Personal Independence

Payments and TfL Road User Charging within

Public Service, were offset by the reduction

from revenue recognised in the year

(£2,132.3m), contract terminations (£8.1m)

andbusiness disposals (£280.0m).

1. Refer to APMs on pages 229 to 231.

Adjusted revenue

bridge by division

Public

Service

£m

Experience

£m

Portfolio

£m

Total

£m

Year ended 31 December 2021 1,410.4 1,140.9 226.5 2,777.8

Net growth 34.9 9.8 23.3 68.0

Year ended 31 December 2022 1,445.3 1,150.7 249.8 2,845.8

Adjusted profit before tax

bridge by division

Public

Service

£m

Experience

£m

Portfolio

£m

Capita

plc

£m

Total

£m

Year ended 31 December 2021 93.2 8.9 (0.1) (224.8) (122.8)

Net growth/(reduction) (1.7) 29.6 16.3 152.4 196.6

Year ended 31 December 2022 91.5 38.5 16.2 (72.4) 73.8

depreciation, amortisation and impairment of

property, plant and equipment and intangible

assets, largely driven by the Group’s property

rationalisation programme.

Cash generated from operations before

business exits

benefited from the improvement

in adjusted EBITDA

, a lower working capital

outflow compared with 2021, materially lower

deferred VAT repayments and pension deficit

contributions; offset by a reduction in non-cash

and other adjustments.

The lower working capital outflow arises from

contracts moving into the operational phase

and increased utilisation of non-recourse trade

receivables financing in 2022.

The reduction in non-cash and other

adjustments reflects utilisation of customer

contract provisions in 2022 compared with

provision recognition in 2021, and the utilisation

of the remaining restructuring provision.

Free cash flow before business exits

for the

year ended 31December 2022 was an inflow

of£29.0m (2021: outflow £218.6m). The

improvement reflected the above increase

incash generated from operations before

business exits

, a reduction in capital

expenditure, and net interest paid in respect

ofleases and the Group’s private placement

loan notes.

Adjusted operating cash conversion

increased

to 68% (2021: 48%).

Strategic

report

Capita plc

Annual Report 2022

Chief Financial

Officer’s review

continued

Reported results

Adjusted to reported profit

As noted above, to aid understanding of our

underlying performance, adjusted operating

profit

and adjusted profit before tax

exclude

anumber of specific items, including the

amortisation and impairment of acquired

intangibles and goodwill, and the impact

ofbusiness exits.

Impairment of goodwill

In preparing the half-yearly condensed

consolidated financial statements at 30 June

2022, and these consolidated financial

statements at 31 December 2022, the Group

undertook detailed impairment reviews.

At 30 June 2022 a goodwill impairment of

£92.5m was recognised in respect of the

People and Property CGUs, and at 31

December 2022 a further goodwill impairment

of £76.5m was recognised in respect of the

People, Travel and Business Solutions

CGUs,in the Group’s Portfolio division. The

impairments reflected the difference between

the expected net proceeds at disposal and the

cash flows the Group had previously projected

it would generate if it held these businesses into

perpetuity. The difference has arisen due to the

potential for acquirers factoring in additional

investment and costs required to run the

businesses on a standalone basis, coupled

withgeneral macroeconomic conditions.

Refer to note 3.4 to the consolidated financial

statements for further details.

Business exits

Business exits include the effects of businesses

that have been disposed of or exited during the

period and the results of businesses held-for-

sale at the reporting date.

In addition, business exits include the exit costs,

including professional fees, salary costs and

separation planning costs, relating to further

planned disposals for which the held-for-sale

and business exit criteria were not met at

31December 2022.

In accordance with our policy, the trading

results of these businesses, along with the

non-trading expenses and gain on disposal,

were classified as business exits and therefore

excluded from adjusted results. To enable

alike-for-like comparison of adjusted results,

the 2021 comparatives have been re-presented

toexclude the 2022 business exits.

1. Refer to APMs on pages 229 to 231.

Adjusted operating profit to free cash flow before business exits

2022

£m

2021

£m

Adjusted operating profit/(loss)

102.9 (7 7.7)

Add: depreciation/amortisation and impairment of property, plant and

equipment and intangible assets 135.9 220.7

Adjusted EBITDA

238.8 143.0

Working capital (32.7) (113.6)

Non-cash and other adjustments (44.7) 38.6

Operating cash flow before business exits

161.4 68.0

Deferred VAT repayment (14.9) (104.1)

Pension deficit contributions (30.0) (73.6)

Cash generated from/(used by) operations before business exits

116.5 (109.7)

Net capital expenditure (43.6) (51.2)

Interest/tax paid (43.9) (57.7)

Free cash flow before business exits

29.0 (218.6)

Reported to adjusted

profit bridge

Operating profit/(loss) Profit/(loss) before tax

2022

£m

2021

£m

2022

£m

2021

£m

Reported (79.6) (86.6) 61.4 285.6

Amortisation and impairment of acquired

intangibles

5.1 7.7 5.1 7.7

Impairment of goodwill 169.0 11.5 169.0 11.5

Net finance costs — — (3.4) 1.4

Business exits 8.4 (10.3) (158.3) (429.0)

Adjusted 102.9 (7 7.7) 73.8 (122.8)

Strategic

report

Capita plc

Annual Report 2022

Chief Financial

Officer’s review

continued

Further businesses are planned for disposal

aspart of the Group’s simplification strategy.

However, given the status of the relevant

disposal processes, the businesses did not

meet the criteria to be classified as assets

held-for-sale at 31December 2022 and,

accordingly their trading results are included

within adjusted results.

Further detail of the specific items charged in

arriving at reported operating profit and profit

before tax for 2022 is provided in note 2.4 of

theconsolidated financial statements.

Taxation

The reported income tax credit for the year of

£14.6m (2021: charge £61.5m) and the adjusted

income tax credit for the year of £31.8m (2021:

charge of £4.0m) reflect the recognition of

additional deferred tax assets of £36.7m (net of

a £16.7m change in the deferred tax asset

estimate due to the reduction in future taxable

profits on disposal of taxable entities, reflected

At 31 December 2022 business exits primarily comprised:

Business Disposal completed on

AMT Sybex 1 January 2022

Secure Solutions and Services 3 January 2022

Trustmarque 31 March 2022

Speciality Insurance 29 April 2022

Real Estate and Infrastructure Consultancy 22 September 2022

Optima Legal Services 30 November 2022

Pay360 1 December 2022

Capita Translation andInterpreting 29 December 2022

Free cash flow to free cash flow before business exits

2022

£m

2021

£m

Free cash flow 24.5 (264.3)

Business exits (4.1) (36.2)

Pension deficit contributions triggered by disposals 8.6 81.9

Free cash flow before business exits

29.0 (218.6)

Net debt

2022

£m

2021

£m

Opening net debt (879.8) (1,07 7.1)

Cash movement in net debt 438.2 232.1

Non-cash movements (40.8) (34.8)

Closing net debt (482.4) (879.8)

Remove closing IFRS 16 impact 39 7.5 448.4

Net financial debt (pre-IFRS 16) (84.9) (431.4)

Cash and cash equivalents net of overdrafts 177. 2 101.5

Financial debt net of swaps (262.1) (532.9)

Net financial debt/adjusted EBITDA

(both pre-IFRS 16) 0.5x 3.7x

Net debt (post-IFRS 16)/adjusted EBITDA

2.0x 4.1x

1. Refer to APMs on pages 229 to 231.

in the tax arising on business exits). These

losses mainly arose due to the adoption of

IFRS 15, Covid-19 related downward pressures

on the profits and tax deductible restructuring

costs in previous years.

Free cash flow to free cash flow before

business exits

Free cash flow was lower than free cash flow

before business exits

principally reflecting

pension deficit contributions triggered by the

disposal of Trustmarque and AXELOS, offset

by free cash flows generated by business exits.

Movements in net debt

Net debt at 31December 2022 was £482.4m

(2021: £879.8m). The substantial reduction

innet debt reflects the benefit of the Group’s

positive freecash flow generation, the proceeds

fromdisposals, coupled with the impact of

theongoing programme of leased property

estate exits.

Strategic

report

Capita plc

Annual Report 2022

Chief Financial

Officer’s review

continued

£38.6m of deficit funding contributions paid into

the Scheme (plus a net £0.2m deficit funding

contribution in respect of other schemes). Both

the value attributed to the pension liabilities and

the value of the assets fell materially over the

year predominantly due to the material increase

in the yields available on both long-dated

Government and corporate bonds. Due to the

investment strategy adopted by the Trustee of

the Scheme the impact of these changes has

been broadly hedged so that the value of the

assets has moved to a similar degree to the

value of the liabilities. Despite the economic

events in Q3 2022 that led the Bank of England

to purchase Government bonds, the Scheme’s

Fiduciary Manager confirmed that the Scheme

had sufficient liquid assets to meet collateral

calls to maintain its hedged positions

throughout the year, as well as confirming

thatthere is sufficient buffer against future

adverse movements.

Viability assessment

The Board’s assessment of viability over the

Group’s three-year business planning time

horizon is summarised in the viability statement

on page 64.

Pensions

Contributions during the year to the Capita

Pension and Life Assurance Scheme (the

Scheme) have been in line with the contribution

schedule agreed with the Trustee of the Scheme

following the 31 March 2020 triennial valuation.

This includes the acceleration of deficit

reduction contributions (£8.6m) triggered due to

the disposal of Capita entities during the year.

The net defined benefit pension position for

accounting purposes moved from a small net

asset at the start of the year (£5.8m) to a larger

net asset by 31December 2022 (£39.6m). The

main reasons for this movement were the

favourable than drawing under the RCF as

prevailing interest rates have increased. As

such, the Group has increased its use of the

facility across the year with the value of invoices

sold under the facility at 31December 2022 of

£44.4m (2021: £16.4m).

At 31December 2022, the Group had £177.2m

of cash and cash equivalents net of overdrafts,

and £285.5m of private placement loan notes

and fixed-rate bearer notes. These debt

instruments mature over the period to 2027,

with repayment of £66.3m of maturities in 2023

which are expected to be funded through the

Group’s existing facilities, cash and cash

equivalents and from the proceeds of the

Group’s ongoing divestment programme

without the need to obtain new financing.

Assuch, a measured approach will be taken

toany potential refinancing with time taken to

implement a longer-term debt solution at the

appropriate moment.

Going concern

The Board closely monitors the Group’s

fundingposition throughout the year, including

compliance with covenants and available

facilities to ensure it has sufficient headroom

tofund operations. In addition, to support the

going concern assumption, the Board conducts

a robust assessment of the projections,

considering also the committed facilities

available to the Group.

The Group and Parent Company continue to

adopt the going concern basis in preparing

these consolidated financial statements as

setout in section 1 to the consolidated

financialstatements.

Net financial debt (pre-IFRS 16) reduced by

£346.5m to £84.9m at 31 December 2022,

resulting in a net financial debt to adjusted

EBITDA

(both pre-IFRS 16) ratio of 0.5x. Over

the medium term, following the completion of

our Portfolio divestment programme, we will

betargeting anet financial debt to adjusted

EBITDA

(both pre-IFRS 16) ratio for Capita

of≤1.0x.

The Group was compliant with all debt

covenants at 31 December 2022.

Capital and financial risk management

Liquidity remains a key area of focus for the

Group. Financial instruments used to fund

operations and to manage liquidity comprise

US private placement loan notes, euro fixed-

rate bearer notes, revolving credit facility (RCF),

leases and overdrafts.

In July 2022, the Group signed an extension

ofthe £300m forward start RCF with its

lendingbanks for a further twelve months to

August 2024. The new facility commenced on

31August 2022 upon the expiry of the previous

RCF and provides the Group with committed

liquidity for the cash fluctuations of the business

cycle and an allowance for contingencies, and

incorporates provisions such that it will partially

reduce in quantum as a consequence of

specified transactions. The RCF was not drawn

upon at 31 December 2022 and had a total

committed value of £288.4m.

In addition, the Group has in place a non-

recourse invoice discounting facility, utilisation

of which has become economically more

1. Refer to APMs on pages 229 to 231.

Liquidity

2022

£m

2021

£m

Revolving credit facility (RCF) 288.4 385.7

Less: drawing on committed facilities — (40.0)

Undrawn committed facilities 288.4 345.7

Net cash, cash equivalents net of overdrafts 177. 2 101.5

Less: restricted cash

(60.4) (54.8)

Liquidity 405.2 392.4

* Restricted cash includes cash required to be held under FCA regulations and cash held in foreign bank accounts.

Strategic

report

Capita plc

Annual Report 2022

Chief Financial

Officer’s review

continued

The valuation of the Scheme liabilities (and

assumptions used) for funding purposes

(theactuarial valuation) are specific to the

circumstances of the Scheme. It differs from the

valuation and assumptions used for accounting

purposes, which are set out in IAS 19 and

shown in these financial statements. The

maindifference is in assumption principles

being used based in the different regulatory

requirements of the valuations. Management

estimates that at 31December 2022 the net

asset of the Scheme on a funding basis (ie the

funding assumption principles adopted for the

full actuarial valuation at 31 March 2020

updated for market conditions at 31December

2022) was approximately £40.0m (2021: net

asset £40.0m) on a technical provisions basis.

The Trustee of the Scheme has also agreed

asecondary more prudent funding target to

enable it to reduce the reliance the Scheme

hason the covenant of the Group. On this

basis, at 31December 2022, the funding level

was around 96% (or a net liability of £50m).

Thedeficit of £50m is expected to be met by

amixture of the remaining deficit contributions

and asset outperformance.

The next triennial valuation of the Scheme is

due as at 31 March 2023, where the Trustee of

the Scheme and the Company will review the

contributions being paid to the Scheme. The

2023 triennial valuation is expected to be

completed in 2024.

Consolidated balance sheet

At 31December 2022 the consolidated net assets

were £352.7m (2021: net assets £296.5m).

The movement is predominantly driven by the

gain on the sale of businesses offset by the

goodwill impairment recognised during the year,

and the increase in the net pension asset

referred to above.

Parent company balance sheet

The company’s market capitalisation was

significantly less than the net assets of the

parent company at 31December 2022 and

theDirectors gave consideration as to why

thismight be the case and whether assets on

the parent company balance sheet may be

impaired. The factors considered included:

thediffering basis of valuations (point in time

nature of the market capitalisation and that third

parties value the services sector on income

statement multiples versus long-term view

using a discounted cash flow for the basis

ofimpairment testing under accounting

standards), sum-of-the-parts view and the

multiples achieved on recent disposals, and

that the sector may be trading at or below

bookvalue with the market making a general

assessment of the sector and all companies

within the sector which can ignore the liquidity

profile and specific risks of an entity.

Management’s estimate of the value in use of

the Group used in the testing of goodwill and

intangibles for impairment at 31December

2022 gave a value for the Group that exceeded

the market capitalisation at that date, and

supported the parent company net assets.

Animpairment test was performed at

31December 2022 in respect of the parent

company’s investments in subsidiaries and

amounts owedby subsidiary undertakings.

A£7.0m impairment was identified in respect

ofthe parent company’s investments in

subsidiaries, and an impairment of £30.1m

wasrecognised inrespect of amounts owed

bysubsidiaries.

The net defined benefit

pension position for

accounting purposes

moved from a small net

asset at the start of the

year(£5.8m) to a larger net

asset by 31December 2022

(£39.6m)

Workforce

50,000

people employed in 11 different countries

While we know we are still

on a journey to create

acompelling and fully

consistent experience for

every employee globally,

webelieve we are making

significant progress

Strategic

report

Capita plc

Annual Report 2022

Our people

Our commitment to consistency in 2022

underpinned many of our headline activities,

including the launch of our career path

framework, our focus on equitable opportunities

through diversity and inclusion, the expansion

of our central employee relations hub and the

significant increase in the use of digital training

modules. We also continued our support of

flexible, hybrid or remote working wherever

possible, and saw an extremely positive

response from employees.

However, we must acknowledge that, like many

of our peers, attrition and attraction remains

akey challenge, as does the macroeconomic

climate and the subsequent impact on our

employees – particularly those who are lowest

paid. We are continuing to work to support our

people however we can, including through our

commitment to the real living wage, and via

ongoing financial wellbeing support across

thebusiness.

We expect attrition to remain a key focus area

throughout 2023, and we will continue to adapt

and evolve our practices as required to ensure

we continue to meet the needs of our clients

and other stakeholders.

In 2022, despite all the challenges, our focus

remained on making Capita a place that people

want to join and where they want to stay – a

workplace that delivers on our four employee

value proposition (EVP) themes: be yourself;

make an impact; expand your horizons; and

shape our future. We were, therefore,

particularly pleased to see improvements in our

employee net promoter score (eNPS), our

engagement index, and our wellbeing and

inclusion indices. While we know we are still on

a journey to create a compelling and fully

consistent experience for every employee

globally, we believe we are making significant

progress towards this goal.

2022 saw the promotion of a new Chief People

Officer, Scott Hill, demonstrating the success

of our continuing focus on internal mobility and

succession planning. We also increased the

remit of our People function, moving both

theinternal and external communications

andresponsible business specialisms into

thefunction.

Creating a compelling

people experience

While 2022 presented many challenges for so many businesses and their people,

including a cost-of-living crisis and a very tight labour market, we remained

focused at Capita on delivering an increasingly positive and consistent employee

experience, which delivered improved engagement metrics.

Strategic

report

Capita plc

Annual Report 2022

Our people

continued

Our commitment to flexible,

remoteworking

In a market where many companies are now

expecting all employees to return to the office

post-Covid, we took a clear stance at Capita to

offer flexible and remote work wherever client

and business needs allow as part of a virtual-

first working approach.

We believe offering this flexibility will help us

attract and retain high-quality and increasingly

diverse talent. For the first time, we asked about

working arrangements in our annual people

survey, and the data showed us that those who

work in a hybrid model, or from home, are on

average 11% more engaged than those who

work solely from an office or the field. 85% of

these individuals also say it is a key motivator

for them to remain working at Capita.

However, we do acknowledge that fully remote

working does not suit everyone, and we

encourage colleagues to book a desk in a local

office when needed, or to get together for team

events. We will continue to evaluate the impact

of this approach in 2023.

Building an engaged workforce

In order to live our purpose and delight our

customers, we know that we need a highly

engaged workforce. Therefore in 2022 we

introduced a pulse survey, on top of our annual

employee survey, to better understand how our

employees are feeling, and ensure we are

listening to, and acting on their feedback. We

were pleased to see that in our annual people

survey, completed in October by more than

30,000 employees globally, 82% of

respondents said their manager had both

shared and acted on survey results. We will

work to continue increasing this score in 2023.

In overall engagement, we saw positive

movement in 2022: our eNPS increased by

15 points, while our employee engagement

index increased by 9%.

In addition, 2022 was the fourth year in

which employees were able to rate their line

manager’s performance against our managers’

commitments. These commitments set out

the additional behaviours we expect from all

our leaders and managers and affirm our

commitment to be a values-driven organisation.

For the past year, across all 10 commitments,

more than 92% of respondents agreed that

their manager demonstrated our values and

behaviours. The feedback is fed into annual

development discussions and can inform

managers’ objectives.

Investment in apprenticeships at all levels continued

to grow and is providing ongoing opportunities to

build the skills required for our future business

success and for serving our clients successfully

insupport of growth

Strategic

report

Capita plc

Annual Report 2022

Our people

continued

We continued to support wellbeing initiatives

offering a suite of digital modules, which in

addition to specialist speakers, provided

practical tools and techniques for personal

wellbeing. We amended and enhanced the

communication on our Speak up whistleblower

policy, providing colleagues with a safe and

secure mechanism to report anonymously

anyactivity that does not meet the values that

we strive to achieve at Capita every day. We

also introduced our Code of Conduct digital

learning, which has been completed by 97%

ofapplicable employees.

In 2022, our global learning teams collaborated

to remove duplication and continuously improve

our learning offering. This has been recognised in

Capita India where our Learning & Development

team won two awards, the L&D Excellence

Award & The Innovation in Learning Award at

Future of L&D Summit and Awards 2022.

Looking forward, we will continue to focus on

simplification, organising our resources and

providing easy access for all colleagues so

theycan self-serve and self-develop. We will

continue to build our learning suite and

provideclear alignment to our career pathway

framework, supporting attraction, diversity

andinclusion, competency development,

andretention of our talent globally.

Professional development

We offer 64 different professional development

programmes across England funded by our

apprenticeship levy. We have more than 600

learners on the apprenticeship programmes

and 186 learners who successfully completed

their professional development programme this

Performance and development

During 2022, our focus was on the development

of our career path framework (CPF). This is

aCapita-wide tool designed to enable our

colleagues to plan and develop their career.

Itprovides a map of the whole organisation

enabling colleagues to view the role they

arein,behavioural, leadership and technical

competencies for each job across the

organisation and identify what they need to

doto progress and move to another role in

theorganisation. This framework forms the

foundation of many of our development and

people processes.

Aligned to our CPF, we provide a global

academy approach to learning that gives

individuals access to self-directed development

that enables growth in them and for the business.

Capita Academy

For the Academy, 2022 was a year of engaging

with colleagues and highlighting our resources

across Capita. We continued to build a solid

resource bank within the Academy through

theintroduction of the Capita e-library, which

provides colleagues with a suite of accessible

learning to support their ongoing development.

We introduced a self-assessment tool

‘MyCompass’ for colleagues to assess their

current knowledge and skills level against

theiraspirational level with suggested learning

to support in-role development. Our focus

continued to be on management development

through our newly launched managers

passportprogramme and on growth through

our Sales Academy.

year. At the same time, the development of

ourmanagers remains a significant priority,

andlast year we aligned our Accelerate,

Advance and Ascent programmes to our

managers passport to upskill our line

managers. We currently have 173 managers

onone of these development pathways.

Investment in apprenticeships at all levels

continued, and is providing ongoing

opportunities to build the skills required for our

future business success and for serving our

clients successfully in support of growth. As an

extension of our apprenticeship offering and in

alignment with our social value and responsible

business activity, we pledged to gift more than

£1.4m in 2022–23 to help charities and SMEs

invest in skills development.

Supporting future leaders

In 2022, we enhanced our approach to internal

mobility through succession and progression.

Succession planning is an integral process

helping us to identify potential in individuals and

develop future talent to support organisational

effectiveness and success. We conducted a

comprehensive succession process for our

Executive Committee and top 100 leadership

roles, challenging ourselves on the diversity

and inclusion of our talent pipelines. 42% of this

population who were identified as high potential

and suitable for succession are female.

To improve diversity at senior levels, we also

continue to support high-potential women

andindividuals from underrepresented

groupsthrough cross-company mentoring

opportunities. In 2022, 80 colleagues were

enrolled in these programmes. We are

We continued to see positive levels

ofengagement with our learning

resources over the past year, eg:

c.569,000

digital learning modules completed – an

increase of more than 492,000 on 2021

c.356,000

mandatory training modules completed

c.10,360

managers passport digital modules

completed – an increase of more than 3,060

on 2021

606

colleagues attended live development

workshops delivered by the Capita Academy

c.44,000

of applicable colleagues completed our

newly introduced Code of Conduct training

(since its launch in April 2022)

c.45,500

resources have been accessed as part of

Capita’s e-library, including e-books, audio

learning and virtual classrooms

Strategic

report

Capita plc

Annual Report 2022

Our people

continued

onboarding team to deliver excellence in our

new joiner experience; evolved our reward

hubto improve consistency in the application

ofglobal compensation and benefits; and

introduced a global mobility team to support

complex international movement when

required. We also centralised the majority of our

employee relations activity, delivering improved

efficiency, consistency and reporting which will

allow us to be more proactive in employee

relations management going forward.

Our People Hub, which provides direct support

to all employees, continued to deliver excellent

results, with 99% of calls being answered

within10 seconds. Our internal chatbot, Herbot,

can now manage high volume multi-functional

transactional queries from employees, on

demand and across time zones. Across our

People Hub channels, we successfully

managed more than 500,000 enquiries,

incidents, and data transactions throughout

theyear. As a reflection of our progress, we

were awarded best Shared Services Team

ofthe year 2022 by UBS forum.

Reward

Our fair pay agenda continues to underpin

allour remuneration decisions. That means

ensuring that we are recognising the

contributions of all our colleagues, junior and

senior, supporting and paying all colleagues

fairly for the work they do. You can read

moreinour annual fair pay report, published

alongside our Annual Report. We also

published our UK pay gap figures and

anarrative explaining them. We continued

tosupport our lowest paid employees by

beingareal living wage employer.

delighted to win the Moving Ahead Mentor

ofthe year for 2022 and Moving Ahead

MostDedicated Programme Partner of the

yearawards.

Talent acquisition and turnover

Despite an extremely tight global talent market,

Capita continued in 2022 to attract large

volumes of applicants, with more than 27,000

new starters in the year. International headcount

also increased, notably in South Africa where

itgrew by 139% to more than 4,900.

Given the challenging external economic

backdrop, our focus in 2022 was on employee

retention initiatives, ensuring the best talent was

nurtured and developed. Our strengthened

‘Capita first’ policy saw more than 3,200 roles

filled internally, 11% of total recruitment.

Voluntary turnover remained high and

continues to be a challenge due to external

market conditions. In 2023 we will continue to

build on our internal mobility strategy, and focus

on retention activities.

Over the course of 2022 the resourcing function

implemented a new target operating model and

held a series of levelling-up roadshows to

embed our candidate-focused approach. We

also continued to work on the refresh of our

employer brand, developing new campaign

material and capitalising on our EVP to attract

and retain talent.

HR operations

In 2022, we continued to focus on simplifying

and centralising key human resource functions,

delivered through improved technology and

processes. To do this we launched a dedicated

Responsible business at a glance

We are committed to being a responsible business – in how we operate, serve society, respect

our people and the environment, and deliver improving returns to our investors.

Our people – see pages 33 to 36 for more information. Also read our fair pay report and UK pay

gap reporting online.

We want to make Capita a place that people want to join and where they want to stay – a workplace

that delivers on our four employee value proposition themes: be yourself; make an impact; expand your

horizons; and shape our future. We launched our inaugural Capita employee leadership council in

2022 with 11 colleagues from across the Group. We recognise the contributions of all colleagues, junior

and senior, supporting and paying them fairly for the work they do. We are a real living wage employer.

Key metrics 2022 2021

eNPS (points) -9 -24

Voluntary turnover (%) 30 30

Employee engagement index (%) 65 56

People survey response rate (%) 72 68

Our customers and clients – see pages 44 and 47 for more information. Also read our supplier

charter and human rights policy online.

Our reputation depends on delighting our customers and clients. We are committed to working with our

supply-base to ensure that together we can achieve wider social, economic and environmental benefits.

Key metrics 2022 2021

cNPS (points) +35 +29

Supplier payment within 60 days (%) 99 98

The environment – see pages 42 to 44 and the TCFD section for more information. Also read

our achieving net zero report online.

Our three-phased approach aims to reach operational net zero by 2025; operational and business

travel net zero by 2030; and full net zero by 2035.

Key metrics 2022 2021

Reduction in carbon footprint (gross tonnes) 4.6m 11.6m

Our investors – see page 48 for more information

Input and feedback from our investors forms an important element of our decision making.

Key metrics 2022 2021

TSR (%) (33.5) (6.9)

Share price movement (pence) (12.2) (2.7)

Strategic

report

Capita plc

Annual Report 2022

Responsible

business

UK, our science-based climate targets (we

intend to be net zero by 2035), the significant

progress towards our diversity goals, the launch

of our Capita Leadership Council, our continued

commitment to having an employee director

onthe Board, and our socially responsible

resourcing programmes, including one that

provides paid internships to ex-offenders.

However, we also now need to respond to

arapidly changing external environment

thatincludes an increasing understanding

ofthe impact of climate change, a difficult

economic situation and a cost-of-living crisis

forour employees.

We are, therefore, in the process of refreshing

our responsible business strategy to ensure

itfocuses on the areas of greatest concern

andeffect.

We will publish our updated strategy and

responsible business report later in 2023

(www.capita.com/responsible-business). We

know that to ‘create better’ we must constantly

adapt, evolve and respond, and, through our

current and future activities, we arecommitted

to this ongoing challenge.

The commitment to being a purpose-led,

values-driven and responsible organisation

isnow part of Capita’s DNA. This means a

constant, Group-wide focus on how we can

deliver better for all our stakeholders –

employees, shareholders, clients, end-users

and communities.

In 2022, we further demonstrated this

commitment through the creation of a new

ESG(environmental, social and governance)

Committee of the Board, focusing on

responsible business issues, and providing

additional strategic oversight, accountability

and guidance.

Our responsible business strategy, which was

originally developed in 2019, has ensured that

we remained focused on supporting the United

Nations’ Sustainable Development Goals

(UNSDGs) as well as addressing the issues

where we can have the biggest impact –

through our own operations, and the products

and services we provide to our clients.

In 2022, our activities focused significantly on:

building a more inclusive organisation and

supporting our colleagues’ wellbeing; tackling

economic inequality and increasing digital

inclusion; reducing our environmental impact

and operating responsibly. Among the

significant range of activities delivered, we are

most proud of our continuing commitment to be

a real living wage accredited employer in the

Creating better for all

our stakeholders

The commitment to being a purpose-led, values-driven and

responsibleorganisation is now part of Capita’s DNA.

Strategic

report

Capita plc

Annual Report 2022

Responsible

business

continued

We are addressing the

globalchallenges of

importance to our

business and society.

People Community Planet Operating responsibly

Delivering ourstrategy themes

Building a more inclusive

organisation

Driving greater

social mobility

Reducing our

environmentalimpact

Operating responsibly for

ourstakeholders

Enabling better

digital access

Goals

• Ensuring our workforce reflects

thediversity of the communities

weserve and is inclusive

• Empowering 100,000 young people

inthe communities we serve to

progress into the world of work by

theend of 2023

• Equipping 10,000 people in

ourcommunities with the digital

skillsrequired for today’s world by

theend of 2023

• Seeking to reduce our carbon

footprint and supporting our clients

todo the same

• Seeking to integrate environmental,

social, ethicaland governance

considerations across our

businessoperations

Areas of focus

• Prioritising our colleagues’ wellbeing

• Engaging with our colleagues

• Reimagining our workplaces

• Building an inclusive organisation

• Tackling youth unemployment

• Promoting digital skills

for all

• Tackling environmental challenges

withclients

• Improving our environmental

performance

• Adapting to climate change

• Client relations

• Supplier engagement

• Ethical business

Supporting the UNSDGs

Strategic

report

Capita plc

Annual Report 2022

Responsible

business

continued

• Developing a number of programmes

tosupport the career progression of

underrepresented groups.

• Our RISE (reduce inequality strive for

equality) and RISE for Women programmes

are specifically designed for Black, Asian &

minority ethnic and female colleagues to help

start them on atransformational journey that

will give them the practical mechanisms to

drive their careers forward.

We were extremely pleased that two Capita

leaders – Kathy Quashie, Chief Growth Officer

and Eileen Lewis, Social Responsible

Resourcing Lead – were named in the global

2022 Empower Ethnic Minority Role Model Lists.

We were highly commended by the Employers

Network for Equality & Inclusion for our approach

to intersectionality, and recognised as a ‘Leading

Light’ by the UK Social Mobility awards.

We also secured a place in the 100 Best

Companies for Women in India, as well as

being one of the 2022 Exemplars in Most

Inclusive Companies Index in India, which

istestimony to our diversity and inclusion

commitments andpractices.

In 2022 we continued with our three diversity

focus areas: women in senior leadership; ethnic

diversity in middle and senior leadership; and

supporting colleagues with a disability. We are

pleased to say that:

• We exceeded our 2022 targets for women

insenior roles. Our workforce is 51% female,

and in our senior leadership roles 42% are

female. In addition, both our Board and

Executive Committee are 44% female.

• Expanding the use of personal pronouns on

Workday, Outlook and Teams to ensure our

colleagues are represented and supported

inthe way they wish to be recognised.

• Launching a new ‘life leave’ policy, to support

employees with paid time off for fertility

treatment, early pregnancy loss and more.

• Running an ongoing lunch and learn series

tobuild awareness and understanding of

oursimilarities and differences. In 2022 this

included topics such as: menopause; faith

and wellbeing; debunking the myths behind

ADHD; baby loss awareness; and more.

• This was in addition to our ongoing

celebration of awareness events, including

(but not limited to) Pride, International

Women’s Day, International Men’s Day, Racial

Equality Week, Black History Month, Mental

Health Awareness week, and International

Day of People with Disabilities.

• Celebrating our Black colleagues with our

second annual Black Employees Awards,

held during Black History Month.

• Continuing to review employee survey results

by protected characteristic and working with

each of our employee network groups on

results relevant to their area of focus.

Building a more inclusive organisation

At Capita, we are committed to creating an

environment where diversity is valued,

respected and included in everything we do,

and where we benefit from all colleagues

sharing their different perspectives and bringing

their whole selves to work. In this way, each

person can do their part to create better

outcomes. We are committed to this goal not

just because it helps us deliver better for our

clients and end-users, but because we believe

it’s the right thing to do.

During 2022, we continued to build on our

previous work to create a more inclusive

workplace for all our people. This included:

• Growing and supporting our eight global

employee network groups. We currently have

more than 15,000 network members.

• Continuing in our commitment to be a real

living wage employer in the UK.

People

We secured a place in the

100 Best Companies for

Women in India, as well

asbeing oneof the 2022

Exemplars in Most Inclusive

Companies Index in India

Addressing our

global challenges

Strategic

report

Capita plc

Annual Report 2022

Responsible

business

continued

We also completed the transition to our new

provider, Health Partners, and launched

aseries of proactive occupational health

interventions in the UK, building on the

activitiesalready in place in some of our

international locations.

Reimagining our workplaces

We continued to transform and simplify our

property footprint with further consolidation

during 2022 with 19 locations closed globally.

We continue to look to invest, as we create

more flexible and better equipped space,

providing our colleagues with improved

technology to complement our ways of working.

This allows us to come together, both face-to-

face and virtually, to collaborate and to meet

with clients and stakeholders.

We also internally recycle as much quality

furniture and equipment as possible from

thesites we closed, with 36 locations benefiting

from more than 5,200 items. As part of our

responsible business commitment, wealso

donated more than 2,300 items of furniture to

12 schools, three NHS Trusts and six charities.

Supporting our colleagues’ wellbeing

Focusing on the wellbeing, safety and health

ofall Capita employees continues to be a top

priority. In 2022, we particularly focused on

mental health and financial wellbeing, as the

cost-of-living crisis intensified.

We are not afraid to tackle difficult subjects

andalso launched suicide awareness initiatives

andnew guidance relating to domestic abuse.

Wealso launched our Group menopause

procedure, supported with our first ever virtual

Menopause Café.

Through the advancement of our wellbeing,

safety, and health focus, our colleagues

reported improved feelings of healthand

wellbeing, with a Wellbeing Index rating of 71%

in our annual people survey (up4% from 2021).

We introduced new mandatory safeguarding

training with 98% completion for level 1 and

99% for level 2, which exceeds our internal

compliance targets of 95%.

We also enhanced and expanded our

SafetyNet initiative, which provides guidance

and support to human resources representatives

and business managers dealing with

employees with complex issuesrelated

towellbeing, safeguarding or vulnerability.

Asamultidisciplinary group, SafetyNet

providesanindependent view and advice,

recommends additional interventions, and

supports managers and colleagues through

extremely difficult situations. In 2022,

SafetyNethas supported 219 colleagues

sinceit started in 2021.

• We exceeded our 2022 targets for ethnic

diversity in leadership roles. Our workforce

is21% ethnically diverse, including 7% Black,

and our senior leaders are now 14% ethnically

diverse (in the UK) and 3% Black. In 2023

wewill be working on targets for additional

geographies. In addition, both our Board

andExecutive Committee are each 22%

ethnically diverse.

• In 2022 we were recognised as Disability

Confident Employer (level 2) status across the

Group and we are working to achieve level 3

status in 2023. We are particularly proud of

the work we did with the Capita ability network

to support our colleagues with adisability,

such as the launch of our adjustments

passport to ensure that reasonable adjustments

follow our employees throughout their career

in Capita. We also increased our disability

declaration level by8%.

We will continue to build on these figures in

2023, while also introducing an additional focus

on how we measure and track social mobility

within the organisation.

* Senior management includes directors of subsidiary legal

entities as per requirements ofthe Companies Act section

414C(8)(c)(ii) and414C(10)(b).

Board

1 5 (56%) Male

2 4 (44%)

Female

Executive Committee

1 5 (56%) Male

2 4 (44%)

Female

Senior management*

1 73 (74%) Male

2 25 (26%)

Female

All employees

1 24,240 (49%) Male

2 25,350 (51%)

Female

2 1

Strategic

report

Capita plc

Annual Report 2022

Responsible

business

continued

We also continued to work with Good Things

Foundation, the digital inclusion charity, to

inspire senior leaders in England to set

ambitious strategies to tackle digital inequality.

The aim of this work is to ensure people from

allbackgrounds, including the disadvantaged,

have access to devices and the skills necessary

to use them. Our partnership engaged several

combined authorities in England to help them

develop their approaches to digital inclusion

and led to the creation of aroadmap providing

practical ideas for digital inclusion strategies

aimed at tackling digital inequality.

Capita colleagues also volunteered their time

during the year to take part in Business in the

Community’s ClickSilver Connections scheme,

providing mentors to help older and vulnerable

people to connect with friends and family,

source essential items, find information and

gain digital confidence.

At the start of the Ukraine war, our colleagues

inKrakow collected clothes, food and money

tosupport the refugees and some of our

colleagues hosted refugee families. We have

since raised further resources and bought a

generator to provide power to a water plant

which pumps to local hospitals in Ukraine.

All our employees globally are granted one

dayper year for volunteering activities, more

than 7,800 hours of volunteering were

requested in 2022.

We also continued our sponsorship of the UK

Social Mobility Awards and were delighted to

beawarded a ‘Leading Light’ award.

We were also particularly pleased to see the

progress of our Compass programme,

delivered in partnership with Project Remake,

supporting ex-offenders into meaningful work.

You can watch interviews with some of our

Compass interns at www.capita.com/our-

thinking/creating-better-outcomes-internships-

prison-leavers. We hope to grow this

programme further in 2023.

Digital inclusion

In 2022, Capita invested in WithYouWithMe, a

workforce technology platform that finds

employment for military veterans and other

overlooked groups through delivering innovative

aptitude testing and digital skills training. With

them, we launched ‘15,000 Futures’, an initiative

to support former members of the UK armed

forces and their partners to find employment in

the technology and digital sectors after leaving

the military, encouraging organisations to fill 5%

of available digital roles with reskilled veterans.

Tackling economic inequalities

Helping to support and grow strong

communities in the current economic climate

isa key priority for Capita, and, we believe, an

obligation for all businesses globally. We are

therefore proud that we not only renewed our

commitment to be a real living wage employer

in 2023, but we also joined Business in the

Community’s cross-industry cost of living

taskforce, which launched in December 2022.

Capita was one of the first organisations to sign

up to the UK Government’s Kickstart Scheme.

From the start of 2021 to end of 2022, we

offered 59 Kickstart placements, with the

majority being delivered virtually. 95% of our

Kickstarters successfully completed the

programme with 53% securing roles in Capita

afterwards. 17% gained roles externally and 8%

returned to full time education. Of the 53% that

were retained after the programme, 90%

remain within Capita.

In 2022 we pledged to gift more than £1.4m of

our apprenticeship levy to support charities and

SMEs to invest in skills development. We

continued to support our employees to

fundraise more than £60,000 and were pleased

to donate more than £16,000 in matched charity

funding. We also raised more than £180,000

through payroll giving.

Community

Helping to support and

grow strong communities

inthe current economic

climate is a key priority for

Capita; and, we believe,

anobligation for all

businesses globally

Community investment

c.£1m

(2021: c.£0.9m)

Strategic

report

Capita plc

Annual Report 2022

Responsible

business

continued

We have already achieved our 2025 and 2030

near-term science-based targets apart from

those relating to Scope 1 which we expect to

achieve by 2024.

Work to improve the accuracy of our monitoring

of Scope 3 emissions will accelerate in 2023.

Across the Group we will develop our low

carbon transition plan to ensure transparency

tostakeholders across all areas of our carbon

reduction planning, responding to climate-

related risks and opportunities, and our

contribution to economy wide transition.

With more than 50,000 colleagues across

theglobe, we are all too aware of our own

internal responsibilities. We therefore launched

a newenvironmental standard, setting out

Capita’s environmental commitments and

responsibilities and incorporating an

environmental training module for all employees

to support the environmental standard and net

zero commitment.

In 2022 we published our third disclosure

statement against the recommendations of

theFinancial Stability Board’s Task Force on

Climate-related Financial Disclosure (TCFD),

see page 49.

Our three-phased approach aims to reach

operational net zero by 2025; operational and

business travel net zero by 2030; and full net

zero by 2035.

In 2022, as part of our business planning

process, each division and function submitted

its own net zero targets for 2023 and issued

plans to achieve longer-term net zero

milestones. Successful submission of these

plans and reduction targets, together with

demonstrable reduction in carbon emissions,

forms part of 2022 management bonus plan

criteria. 2023 incentives will focus on

achievement of target, and reporting of

performance against target will form part of the

company-wide management reporting cycle.

Following our commitment to be net zero by

2035, the challenges we believe will be most

difficult to address are: the decarbonisation of

our heating systems; and collecting, monitoring

and managing the reduction of emissions from

more than 19,000 suppliers.

Driving down GHG emissions

Following the onset of the Covid pandemic,

wesignificantly reduced business travel. While

there was an increase over lockdown levels,

travel bounceback in 2022 has been mitigated

by our virtual first meeting strategy and remains

less than 25% of pre-pandemic levels. Our

electricity emissions also reduced, through

efficiency, sourcing more renewable power

andreducing the property portfolio.

Fighting climate change

The Science Based Target initiative (SBTi) has

verified Capita’s 2035 net zero science-based

target as follows:

Near-term targets

Capita has committed to reduce absolute

Scope 1 and 2 greenhouse gases (GHG)

emissions and absolute Scope 3 GHG

emissions covering business travel by 46% by

2030 from a 2019 base year. Capita has also

committed to 50% of its suppliers by spend –

covering purchased goods & services and

capital goods – having science-based targets

by 2025.

Long-term targets

Capita has committed to reducing absolute

Scope 1 and 2 GHG emissions, and absolute

Scope 3 GHG emissions (covering purchased

goods & services, capital goods, business-

travel and employee commuting) by 90% by

2035 from a 2019 base year.

We set out our ambitious and far-reaching

roadmap to take us to net zero in 2021. We

arecommitted to these challenging targets

atevery level of our organisation, setting

decarbonisation as our overarching objective.

Our goal is for all residual emissions to be

neutralised in line with SBTi criteria to reach

netzero emissions.

We are working to reach

operational net zero by

2025; operational and

business travel net zero

by2030; and full net zero

by2035, including our

supply chain

Planet

Strategic

report

Capita plc

Annual Report 2022

Responsible

business

continued

Our disclosures cover sources of our GHG

emissions from our operations in the UK,

Ireland, Central Europe (Poland, Germany,

Switzerland and Bulgaria), India and South

Africa. Capita converts the consumption data

into a carbon footprint with consideration for

theWorld Business Council for Sustainable

Development and World Resources Institute’s

Greenhouse Gas Protocol, together with the

latest emissionsfactors from the UK

Department forEnvironment, Food and

RuralAffairs, Association of Issuing Bodies

andInternational Energy Agency.

Methodology

We measure our environmental performance

by reporting our global carbon footprint annually

in terms of tonnes CO

equivalent (tCO

e), an

absolute measure, and tonnes CO

equivalent

per £1m revenue and per person (intensity

measures). The data relates to Capita’s owned

and leased facilities and business travel under

its operational control across all geographies.

We report separately on our direct emissions

from Capita-controlled and owned sources

(Scope 1), indirect emissions from consumption

of electricity, heat or steam (Scope 2), and

emissions from third parties (Scope 3). This

ensures our compliance with Part 7 of The

Companies Act 2006 (Strategic Report and

Director’s Report) Regulations 2013 which

requires certain disclosures in respect of GHG

emissions (the Strategic Report GHG Emission

disclosures). We engaged an external agency,

Corporate Citizenship, to provide independent

limited assurance over the selected GHG

emissions data (highlighted in the table

opposite with an *) using the assurance

standards ISAE 3000 and 3410. Corporate

Citizenship has issued an unqualified opinion

over the selected data; its full assurance

statement is available at www.capita.com/

responsible-business/resources-and-reports.

Annual GHG emissions

2022 2021 2020

Scope 1 (tCO

e) 12,049* 15,021* 18,980*

Scope 2 (tCO

e) (location-based) 21,137* 24,088* 28,359*

Scope 2 (tCO

e) (market-based) 4,083* 10,328* 23,526*

Scope 3 (tCO

e) (business travel and waste) 6,101* 4,500* 7,8 81*

Total gross tonnes of CO

e (location-based) 39,287 43,609 55,219

Total gross tonnes of CO

e (market-based) 22,233 29,848 50,386

Total gross tonnes of CO

e/£1m revenue

(location-based) 13.03 13.70 16.60

Total gross tonnes of CO

e/headcount

(location-based) 0.79 0.73 0.85

Table of progress against targets

Progress against SBTi verified short-term targets

2022

actual

2022

target

2030

target

Scope 1 (tCO

e) 12,049 14,506 10,201

Scope 2 (tCO

e) (market-based) 4,083 24,167 14,876

Scope 3 (business travel and waste) 6,101 26,869 16,540

Progress against SBTi verified short-term engagement target

2022

actual

2022

target

2025

target

Scope 3 supply chain spend covered by science-

based targets % 50% 32% 50%

Other metrics 2022 2021 2020

100% renewable power progress (as % of total power) 85% 80% 68%

Transition from internal combustion to low emission

vehicles:

Diesel 47% 62% 77%

Hybrid electric 48% 32% 19%

Pure electric 4% 5% 4%

Average CO

e 96g/km 96g/km 98g/km%

Fleet vehicle energy source

Notes:

Total gross tonnes of CO

e/£1m revenue (location-based) in 2022, 2021 and 2020 has been calculated using statutory revenue.

Scope 1: Emissions from Capita sources that are controlled by us, including the combustion of fuel, company-owned vehicles and the

operation of our facilities.

Scope 2: Emissions from the consumption of purchased electricity, heat or steam.

Scope 3: Emissions from non-owned sources related to Capita’s activities, including business travel and waste.

Milestone 1:

Operational net zero

Milestone 2:

Operational + travel net zero

Milestone 3:

Full net zero

2025

Operational (Scope 1 & 2)

2030

Operational (Scope 1 & 2)

+ business travel emissions

2035

Operational (Scope 1 & 2)

+ business travel

+ supply chain emissions

Strategic

report

Capita plc

Annual Report 2022

Responsible

business

continued

Our supplier charter, which is available on our

website, remains at the core of strengthening

our commitments to support more SMEs,

increasing the diversity of our supply chain,

promoting supply chain resilience and

encouraging ambitious carbon reduction

targets. All new and renewing suppliers are

expected to comply with this charter.

Business aligned objectives are in place for

2023 which are fully supported by the Board,

inorder for us to progress to meet our net zero

goals for Scope 3 emissions. Our 2025 goals

are that 55% of our suppliers by spend will have

committed to having science-based targets

(SBTs) in place and, by 2030, 85% of our

suppliers by spend will have committed to

having SBTs in place.

As signatories to the Prompt Payment Code, we

report our payment practices and performance

to the UK Government every six months; 99%

of our suppliers were paid within 60 days.

Our two core divisions (Public Service and

Experience) received feedback from 403

individuals across 250 clients providing a 52%

response rate. The results give the two core

divisions a combined cNPS score of +24, an

increase of +8 on 2021.

Supplier engagement

Around 92% of our total supply chain are

smalland medium-sized enterprises (SMEs),

including sole traders and micro-businesses.

We continued to recognise the effect that the

current economic situation is having on many

ofthese suppliers, with varying demand for

products and services often severely affecting

their cash flow. Consequently, we strive as

abusiness to prioritise and ensure payment

toterms with our vendors at all times

wherepossible.

We spent more than £1.98bn in 2022 with more

than 19,000 direct suppliers in 69 countries.

Wevalue the business relationships we have

with our suppliers and seek to build lasting

relationships, treating our suppliers and

partners fairly and paying promptly. We want

towork with suppliers who share our values

and support us in delivering our purpose.

Our aim is to encourage and work with

suppliers in order to achieve the highest

standards within our supply chain. We are

committed to working with our supply base

toensure that together we can achieve wider

social, economic and environmental benefits.

Operating responsibly means ensuring we keep

our purpose – to create better outcomes for all

stakeholders – at the core of everything we do.

In 2022, we maintained our focus by: continuing

to support clients and communities in recovery

from the Covid pandemic; engaging and

working closely with our suppliers;

understanding our colleagues needs; and

dealing with wider societal challenges, such

asthe cost-of-living crisis.

Client relations

We actively seek the views of our clients

through an annual customer net promoter

score(cNPS) survey. In the survey we ask for

feedback on our current performance and

advice on areas that they would like us to focus

on in future. We feed this information back to

our teams who then take the time to understand

any root causes of issues raised and set

actions which are monitored via our customer

relationship management platform, Salesforce.

In 2022, we received feedback from 585

individuals across 392 clients. This enabled us

to achieve a 49% response rate and the results

give Capita a cNPS score of +35 for 2022

which is an increase of +6 on 2021.

Operating responsibly

cNPS score for 2022

+35

Spend with direct suppliers in 2022

£1.98bn

countries

Strategic

report

Capita plc

Annual Report 2022

Responsible

business

continued

Targeting bribery and corruption

We do not tolerate bribery or corruption in any

form. Our anti-bribery and corruption policy

applies to all Capita businesses, employees

and suppliers. The Risk & Compliance team

monitors compliance, with a view to ensuring

allparts of the business are aware of their

responsibilities in terms of charitable donations,

sponsorships, facilitation payments, gifts and

hospitality. All employees must complete

financial crime training annually.

Upholding human rights

We are committed to playing our role in

globalsociety by ensuring that through our

management and operations we have the

systems, policies and processes in place to

identify any potential instances of exploitation

and, if found, eradicate modern slavery in all

itsforms from our business and supply chain.

Our updated human rights policy details our

commitments to upholding the principles of

human rights, as set out in the UN Declaration

of Human Rights and the International Labour

Organization core labour principles. We comply

with all relevant legislation, including the UK

Modern Slavery Act and our compliance

statement can be found on our website. We

outline expectations and compliance to the

standards we set out for suppliers, working with

them to ensure they operate in accordance with

this policy, and upholding the principles of

human rights in their operations and supply

chains. We are taking appropriate steps to

ensure that everyone who works for Capita

benefits from a working environment in which

their fundamental human rights are respected

Valuing the employee voice

As a people-centric business, we believe

listening to, and involving, our colleagues in the

highest levels of our strategic decision making

is critical to our success. Our first two employee

non-executive directors completed their terms

in the summer of 2022, and we recruited a

newemployee director, Janine Goodchild,

whojoined the Board on 1 July 2022. We are

proud of the exceptional contribution and fresh

perspective that our employee directors make

to Board-level governance in the organisation,

and we would encourage other organisations

toconsider doing the same.

Building on this employee-oriented success,

welaunched our inaugural Capita Employee

Leadership Council in 2022. The council

comprises 11 individuals, drawn from different

parts of Capita, who were identified as potential

future leaders within the organisation. The

council acts as an advisory group, representing

the perspective of employees directly to the

Executive Committee, the business’ senior

leadership team. It has also contributed to

strategic projects.

Each council member’s tenure is two years,

during which they will benefit from learning

anddevelopment opportunities designed to

enhance their leadership skills. This will occur

through projects the council is asked to deliver

and a rotating programme of mentorships which

will be provided by members of the executive,

including our CEO, Jon Lewis.

Members of our tech solution delivery team

competed in a charity plane pull to raise funds

for Action for Children

Strategic

report

Capita plc

Annual Report 2022

Responsible

business

continued

and anyone that we do business with also

upholds these principles. If any client,

employee, supplier or other stakeholder

becomes aware of any potential breach of

human rights (or any other ethical concern) they

may report this confidentially to our Speak Up

hotline. This hotline is externally managed for

independence and confidentiality.

Protecting privacy

Our clients and our colleagues expect us to

keep their data safe and secure, and to respect

their privacy. We take this responsibility very

seriously, with a view to ensuring we only

process personal data in line with all applicable

laws, including how we collect, store, use,

retain, transfer and delete personal data.

Our privacy policy details how we expect

everyone to take responsibility for privacy,

including the protection of data, applying our

privacy standards, procedures and guidance in

their areas of the business. These requirements

include maintaining information asset registers,

following a comprehensive incident

management process, completing privacy by

design and default, and data protection impact

assessments. We continue to raise awareness

of the importance of privacy through our

mandatory training and ongoing communication

programmes.

Non-financial information statement

This section of the report constitutes Capita’s non-financial information statement, produced to comply with sections 414CA and

414CB of the Companies Act 2006. The table below, and information it refers to, is intended to help stakeholders understand our

position on key non-financial matters. This builds on reporting that we do under the following frameworks: CDP, Dow Jones

Sustainability Index and the EcoVadis Assessment.

Reporting requirement Policies and standards which govern ourapproach Where is this referenced in this report?

Environmental matters • Health, safety and environmental policy (E)

• Environmental standard (I)

• Responsible business: fighting climate change

pages 42 and 43

Employees • Code of conduct (E)

• Health, safety and environmental policy(E)

• Diversity and inclusion policy (E)

• Wellbeing policy (E)

• Employee handbook (I)

• Our people section pages 33 to 36

• Responsible business: building an inclusive

workplace pages 39 and 40

• Responsible business: diversity data page 40

Human rights • Human rights policy (E)

• Supplier charter (E)

• Modern slavery statement (E)

• Information and cyber security policy (E)

• Privacy policy (E)

• Employment screening policy (I)

• Procurement policy (E)

• Speak Up policy (E)

• Safeguarding policy (E)

• Responsible business: operating responsibly –

supplier engagement page44

• Responsible business: community – tackling

economic inequalities page41

• Responsible business: operating responsibly –

upholding human rights page 45 and 46

Social matters • Community and charity policy (E)

• Community and charity standard (I)

• Volunteering FAQ (I)

• Matched funding FAQ (I)

• Fundraising FAQ (I)

• Responsible business: digital inclusion page 41

• Responsible business: community – tackling

economic inequalities page 41

Anti-corruption

and anti-bribery

• Code of Conduct: Anti-bribery and

corruptionpolicy (E)

• Financial crime policy (E)

• Responsible business: targeting bribery and

corruption page 45

Due diligence

and outcome

• Risk management framework

• Annual internal audit plan

• Risk register

• Audit and Risk Committee report

• Risk management framework pages 55 and 56

• Audit and Risk Committee report pages 90 to 98

Business model • Business model pages 6 and

Non-financial KPIs • Non-financial KPIs page 1

• Responsible business pages 37 to 45

I – Group policies, guidance and standards published internally; E – Group policies, statement and reports published externally.

Section 172 statement

The following disclosures describe 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.

Create better

outcomes

Society

Investors

Our people

Clients

andcustomers

Suppliers and

partners

Strategic

report

Capita plc

Annual Report 2022

Engaging with

our stakeholders

Engaging with

our stakeholders

Clients and customers

Why they are important

They are recipients of Capita’s

services; and Capita’s reputation

depends on delighting them.

What matters to them

High-quality service delivery;

delivery of transformation projects

within agreed timeframes; and

responsible and sustainable

business credentials.

How we engaged

• Client meetings and surveys

• Regular meetings with

government stakeholders

andannual review with the

Cabinet Office

• Creation of Customer Advisory

Boards

• Created a senior client

partnerprogramme giving

anexperienced single point

ofcontact for key clients

andcustomers

Topics of engagement

• Current service delivery

• Capita’s digital transformation

capabilities

• Possible future services

• Co-creation of client value

propositions

• Ongoing benefits of hybrid

working on client services

Outcomes and actions

Feedback provided to business

units to address any issues raised;

client value proposition teams

supporting divisions with

co-creation ideas; direct customer

and sector feedback; and senior

client partner programme

undertaking client-focused growth

sprints to build understanding of

client issues and ideas to help

address them.

Risks to stakeholder

relationship

• Loss of business by not providing

the services that our clients and

customers want

• Damage to reputation by not

delivering to the requirements

ofour clients and customers

Key metrics

Customer NPS; specific feedback

on client engagements.

Further details

Chief Executive Officer’s review on

pages 10 to 15.

Our people

Why they are important

They deliver our business strategy;

they support the organisation to

build a values-based culture; and

they deliver our products and

services ensuring client satisfaction.

What matters to them

Flexible working; learning and

development opportunities leading

to career progression; fair pay

andbenefits as a reward for

performance; and two-way

communication and feedback.

How we engaged

• People surveys

• Regular all-employee

communications

• Employee director on the

Capitaplc Board

• Employee focus groups and

network groups

• Workforce engagement on

remuneration

• Leadership Council

• Regular ‘breakfast’ sessions

withthe Executive Committee

forour colleagues

Topics of engagement

• Creating an inclusive workplace

• Speak Up policy

• Health and wellbeing

• Directors’ remuneration

• Acting on survey feedback

Outcomes and actions

The 2022 employee survey showed

improvement across all metrics. We

are developing and delivering a

range of action plans, including

ensuring our leaders feel confidence

in, and ownership of Capita’s

strategy, plans and successes,

developing inclusive opportunities

for internal career mobility.

We developed a global career path

framework which defines career

levels, career job content, and

reward framework and introduced

mentoring schemes.

We introduced our first employee

leadership council, comprising

11individuals, drawn from different

parts of Capita.

We refreshed our Speak Up policy.

Risks to stakeholder

relationship

• Our ability to recruit due to the

national and global labour market

demand for resources

• Our ability to retain people,

impacting our quality of service

• Our ability to evolve our culture

and practices in line with our

responsible business agenda

Key metrics

Employee NPS, Employee

Engagement Index and people

survey completion level.

Further details

Our people section on pages 33 to

36. Responsible business section

on pages 37 to 45. Directors’

remuneration report on pages 99

to122.

See page 75 for more information.

Strategic

report

Capita plc

Annual Report 2022

Engaging with

our stakeholders

continued

Society

Why they are important

Capita is a provider of key services

to government impacting a large

proportion of the population.

What matters to them

Social mobility; youth skills and

jobs;digital inclusion; diversity

andinclusion; climate change;

businessethics; accreditations

andbenchmarking; and cost of

living crisis.

How we engaged

• Membership of non-governmental

organisations

• Charitable and community

partnerships

• External accreditations

andbenchmarking

• Working with clients, suppliers

and the Cabinet Office

Topics of engagement

• Youth employment

• Promoting digital inclusion

• Workplace inequalities

• Diversity & inclusion

• Climate change

Outcomes and actions

Publication of net zero plan and

verification during 2022 of Science

Based Targets; continued

commitment and accreditation as a

real living wage employer; youth and

employability programme; Capita’s

investment in WithYouWithMe,

aworkplace technology platform

that finds employment for military

veterans and other overlooked

groups through delivering innovative

aptitude testing and digital skills

training; highly commended by the

Employers Network for Equality

&Inclusion for our approach to

intersectionality; recognised as

a‘Leading Light’ by the UK Social

Mobility awards; and joined the

Cost-of-living Taskforce.

Risks to stakeholder

relationship

• Lack of understanding of the

issues important to them

• Insufficient communication or

involvement in shaping and

influencing strategies and plans

Key metrics

Net zero by 2035, community

investment, workforce diversity and

ethnicity data, including pay gaps.

Further details

Responsible business: Planet

section on pages 42 to 44.

Greenhouse gas emissions section

on pages 79 to 81.

Investors

Why they are important

They own the business and provide

essential capital; and their input

andfeedback is considered when

making decisions.

What matters to them

Reporting on strategic, operational

and ESG factors; financial

performance; directors’

remuneration, access to the Board

and senior management; and

regular communication.

How we engaged

• Financial and other reports and

trading updates

• Regular investor programme with

the Board, including meetings

with the Chairman and

Remuneration Committee chair

and feedback throughout the year

• Discussions around AGM on

resolutions and governance

topics

• Dedicated investor relations

contacts and email inbox

• Regular Board reports from

investor relations function and

external advisers

Topics of engagement

• Disposal programme

• Medium term targets and outlook

• Social: attrition and engagement

• Balance sheet and liquidity

• Governance: remuneration

• Environmental: net zero target

Outcomes and actions

Frequent market communication;

and active engagement with largest

shareholders including with the

Chairman and Remuneration

Committee chair.

Hybrid arrangements for the 2022

annual general meeting to allow

shareholders to attend both

physically in-person and remotely.

Risks to stakeholder

relationship

• Changes to outsourcing market,

eg government policy

• Delivery on strategic and

financialobjectives

• Key aspects of governance.

egremuneration

Key metrics

Revenue; profit; free cash flow; net

debt and gearing; valuation; and

AGM voting.

Further details

Shareholder engagement section

on page 44.

Principal decisions table on

page75.

Suppliers and partners

Why they are important

They share our values and help us

deliver our purpose; maintain high

standards in our supply chain; and

achieve social, economic and

environmental benefits aligned

tothe Social Value Act.

What matters to them

Payments made within agreed

payment terms; clear and fair

procurement process; building

lasting commercial relationships;

and working inclusively with all

types of business.

How we engaged

• Supplier meetings throughout

source to procure process

• Regular reviews with suppliers

• Supplier questionnaires and risk

assessments

Topics of engagement

• Supplier payments

• Sourcing requirements

• Supplier performance

• Responsible Business

• Science based targets (SBTs)

• Supplier Charter

Outcomes and actions

Alignment of payments with agreed

terms; supplier feedback on

improvements to procurement

process; improvement plans and

innovation opportunities; and

improved adherence to supplier

charter, suppliers committing

toSBTs.

Risks to stakeholder

relationship

• Environmental issues

• Commitment to tackling SBTs

• Supply chain resilience

Key metrics

99% of supplier payments within

agreed terms; SME spend

allocation; and supplier diversity

profile.

Further details

Supplier engagement section on

page 44.

Governance

Board responsibility for climate-related

risks and opportunities:

Capita’s Board is responsible for promoting

long-term sustainable success, generating

value for shareholders and contributing to

wider society. This includes its role in ensuring

climate-related issues are appropriately

considered when setting business strategy,

deploying capital, agreeing remuneration

metrics, and setting corporate policy.

To achieve these responsibilities, the Board is

assisted by three committees:

• The Audit and Risk Committee (ARC)

assists in managing risk systems, including

managing climate change as a principal risk.

• The Remuneration Committee is

responsible for setting policies for executive

pay and incentives and approving changes

to existing remuneration plans. In 2022,

executive remuneration is linked to the

achievement of Capita’s climate targets

during 2022.

• The newly formed ESG Committee has

senior level oversight of climate-related

issues and is chaired by the Chairman

oftheBoard.

Management’s responsibility for climate-

related risks and opportunities:

Climate-related responsibilities are assigned

to specific management-level positions that

coordinate activity across and within each

business division.

• Capita’s Chief Executive Officer: overall

responsibility for climate-related risks &

opportunities and for ensuring that climate

issues are appropriately considered at

Board level.

• Divisional Heads of Responsible Business:

deliver on Capita’s sustainability initiatives

and commitments, including those relating

toclimate change.

• Divisional Heads of Risk: adapt Group-wide

risk policies and identify climate-related risks

to align with their business divisions and

operating context, which feedback to

Grouplevel.

• Group Head of Environment: ownership

ofthe climate change principal risk and

managing development of Capita’s net zero

strategy. Work closely with the Group Risk

and Compliance functions, particularly

around the climate change principal risk.

Strategic

report

Capita plc

Annual Report 2022

Task Force on Climate-related

FinancialDisclosures

Task Force on Climate-related

Financial Disclosures (TCFD)

Strategy

To identify, assess and manage climate

risksand opportunities, Capita conducted

anin-depth climate scenario analysis (CSA)

in two phases.

Phase 1, a qualitative risks and opportunity

assessment, was completed in 2021, while

phase 2, the quantification of climate risks,

was completed in 2022.

This analytical work has allowed Capita to

understand the range of possible impacts

arising from different long-term climate

change scenarios to inform the overall

business strategy, build resilience and

mitigate climate risk impacts.

Climate risks and opportunities are

assessed across short-term (0–3 years),

medium-term (4–9 years), and long-term

(10+ years) time horizons to reflect the

longer-term impacts from climate change.

Strategic

report

Capita plc

Annual Report 2022

Task Force on Climate-related

FinancialDisclosures

continued

Physical risks

Exposure modelling

All of Capita’s sites were screened for exposure

to water stress in the baseline using publicly

available projections; 20 highly exposed or

strategic sites were taken forward for detailed

modelling. The modelling was used to provide

an exposure rating for each of Capita’s sites.

Scenarios used and timelines modelled are

outlined in the risk table.

Vulnerability workshop

To understand Capita’s vulnerability to water

stress, an internal cross-functional workshop

was conducted. The discussions and output

from this workshop provided an understanding

of site operations which was used to provide

each site with a vulnerability rating.

Overall risk rating

The exposure and vulnerability risk ratings were

multiplied together to understand the overall

risk of water stress to each of the modelled

sites. Results and mitigation measures are

outlined in the risk table.

Transition risks

Exposure modelling

Three transition risks (carbon pricing,

supply-chain pass through costs and energy

pricing) were modelled, using publicly available

projections in a low carbon <2°C scenario.

Carbon credit pricing was modelled using

a bespoke offset modelling system based on

offsetting project type and market fluctuations.

All scenarios and timelines are outlined in the

risk table.

Carbon pricing, supply chain pass-through

costs and energy pricing were all modelling

under two internal emissions/energy

consumption projections: business as usual

(BAU) and net zero.

BAU: assumes that Capita’s emissions or

energy consumption remains constant from

a2019 baseline.

Net zero: assumes that Capita’s emissions and

energy consumption decrease in line with the

SBTi verified near-term targets and 2035 net

zero target.

Vulnerability

To understand Capita’s vulnerability to the

modelled transitional risks, an internal cross-

functional workshop was conducted. The

discussions and output from this workshop

provided an understanding of Capita’s financial

planning, strategy and current mitigation

measures. The outputs of the workshop and the

exposure modelling were assessed to provide

an overall potential impact rating for each risk,

outlined in the risk table.

Phase 1 (completed in 2021): qualitative

risk & opportunity assessment

In 2021, Capita completed the first phase of

itsclimate scenario analysis by qualitatively

assessing climate risks and opportunities

overforward-looking scenarios.

The qualitative assessment consisted of:

• A gap analysis against TCFD

recommendations to identify actions to

achieve full disclosure, and a peer review

ofsector climate-related disclosures.

• Internal stakeholder engagement to examine

potential operational impacts from climate

change. Teams engaged included:

Procurement; Business Growth & Continuity;

Risk Management; Responsible Business;

and Financial Planning. Each team has

identified relevant climate-related risks and

opportunities for their function.

• Qualitative assessment of risks and

opportunities across relevant geographies,

time horizons and climate scenarios based

onscores for vulnerability, likelihood and

magnitude assessment criteria (results can

be found on Capita’s website). This enables

the prioritisation of climate impacts for further

analysis in phase 2.

Capita has used the climate scenarios

developed by Network for Greening the

Financial System (NGFS). These include

three scenario categories: orderly transition

(for early ambitious action), disorderly transition

(for when action is late and sudden), and

hothouse world (for limited action resulting

insignificant warming).

Phase 2 (completed in 2022):

quantitative modelling of five key

climate risks

As a result of the qualitative CSA, Capita

identified five risks likely to affect its operation

indifferent climate scenarios:

• water stress (physical risk);

• carbon pricing (transition risk);

• supply chain pass-through costs

(transition risk);

• energy pricing (transition risk); and

• carbon credit pricing (transition risk).

While Capita’s exposure to the risks was

modelled on a global level for the transition

risks, the water stress risk was modelled at

site level.

Strategic

report

Capita plc

Annual Report 2022

Task Force on Climate-related

FinancialDisclosures

continued

Risk description

Climate scenario

and time horizon Potential impact Mitigation actions

Supply chain pass-through cost

Costs from direct taxation

on suppliers’ emissions

passed through to Capita

and indirect costs from the

low carbon transition on

Capita’s supply chain.

Scenario: IEA net zero and

NGFS divergent net zero

(low carbon <2°C)

Time horizon: 2019–2050

(short, medium and long

term)

Potential minor impact on

Capita from an explicit carbon

tax but the implicit cost of

carbon could have a greater

impact if not considered in

financial planning.

Main impacts identified:

• Increased pass-through

costs from supply chain as

carbon intensive parts of

the supply chain are impact

by increasing carbon prices.

BAU projections show

significantly greater impact

than from emissions reducing

in line with net zero target.

Capita’s current strategy is

showing much greater

resilience to risk from carbon

pricing due to implemented

carbon-reduction strategies

and targets compared with

theBAU scenario.

• Focus on emissions

reductions, particularly for

Scope 3, and ensure that the

net zero and near-term

reduction targets are met

• Engage with supply chain

• Implement an internal price

of carbon

• Build costs into financial

planning and strategy

Risk table: we modelled five risks in terms of the scenarios and time horizons used, their potential

impact and the current/potential mitigation actions.

Risk description

Climate scenario

and time horizon Potential impact Mitigation actions

Water stress

Ratio of renewable water

supply to water demand.

Increased water stress

implies higher competition

among users and reduced

availability of, as well as

increased costs of, water.

Scenario: SSP3 RCP8.5

(high carbon)

Future time horizon: 2040

(long term)

Baseline: 1960-2014

Seven sites in two locations

were found to have potential

major impact from water

stress due to high exposure

and vulnerability to water

stress-related power issues.

The other modelled sites

were found to have no

potential impact to moderate

potential impact.

Main impacts identified:

• Power outages

• Water, sanitation and

hygiene facility maintenance

• Increased cost and volatility

ofwater supply

• Leasing agreements can

provide flexibility and

mitigation if water stress

isconsidered

• Include water stress risk into

longer-term contracts

• Integrate water stress risk

into site location

considerations

• Utilise flexible working

arrangements, including

work from home protocols

• Consider potential carbon

emissions from mitigation

techniques (eg diesel

generators)

Carbon pricing

Costs associated with tax

onCapita’s Scope 1 and 2

emissions and indirect costs

to operations from taxing of

emission sources.

Scenario: IEA net zero and

NGFS divergent net zero

(low carbon <2°C)

Time horizon: 2019–2050

(short, medium and

longterm)

Potential minor impact to

Capita from an explicit carbon

tax but the implicit cost of

carbon could have a greater

impact if not considered in

financial planning.

Main impacts identified:

• Increased costs of operations

and energy procurement

BAU projections show

significantly greater impact

than from emissions reducing

in line with net zero target.

Capita’s current strategy is

showing much greater

resilience to risk from carbon

pricing due to implemented

carbon-reduction strategies

and targets compared with the

BAU scenario.

• Focus on emissions

reductions across all scopes

and ensure that the net zero

and near-term reduction

targets are met

• Engage with supply chain

• Implement an internal price

of carbon

• Build costs into financial

planning and strategy

Strategic

report

Capita plc

Annual Report 2022

Task Force on Climate-related

FinancialDisclosures

continued

Climate transition plan

Capita is committed to achieving net zero by

2035, with near-term and long-term science-

based targets validated by the SBTi. Further

details on our targets and climate transition

plancan be found on our climate change hub

webpage. Key climate initiatives underway to

reduce our emissions footprint include:

• Streamlining Capita’s global property portfolio

to reduce building-related emissions.

• Maintaining our energy efficiency programme,

which identifies energy anomalies and

enables data-driven efficiency improvements

across Capita’s property portfolio.

• Procuring renewable electricity across all

Capita’s controlled UK sites, with intent to

extend coverage to 100% of tenanted

buildings occupied where possible.

• Transitioning vehicles to electric vehicles or

hybrid, with 33% of fleet transitioned to date.

• Promoting hybrid and virtual working to

reduce commuting and business travel

emissions.

• Increasing the proportion of supply chain

spend on suppliers with science-based GHG

reduction targets.

Planned actions in 2023:

• Integrate results of 2022 quantitative CSA

intoGroup-wide risk matrix and assess

requirements for mitigation.

• Establish which identified risks would be most

beneficial to assess quantitatively or assess

on a more granular level.

• More detailed analysis of potential

opportunities afforded to Capita by the

low-carbon transition.

• Develop climate transition plan to Gold

Standard in line with UK Taskforce on

Transition Plan recommendations.

Risk description

Climate scenario

and time horizon Potential impact Mitigation actions

Energy pricing

Projections of costs of

different energy sources

splitby country.

Scenario: Enerbase (high

carbon) and Energreen

(low carbon <2°C) from

Enerdata projection.

Time horizon: 2019-2050

(short, medium and

longterm)

Exposure to high energy

pricing is greater in a

low-carbon scenario than a

high-carbon scenario.

Main impacts identified:

• Increased energy price

volatility

• Increased energy costs

due tocarbon taxation

Capita is already closely

monitoring energy costs,

implementing energy

efficiency measures and

buying on a contract basis,

thereby mitigating against

potential price volatility and

making strategy more

resilient.

• Detailed analysis of energy

consumption

• On-site renewable

production

• Focus on energy efficiency

and usage reduction

• Ensure all programmes

areconsidered in

capexplanning

Carbon credit pricing

Cost of purchasing carbon

credits to offset Capita’s

residual emissions in line

with our net zero targets.

Scenario: N/A

Time horizon: 2019-2050

(short, medium and

longterm)

Potential moderate impact

due to high costs of spot

purchases after Capita’s net

zero target year of 2050.

Main impacts identified:

• Additional cost of offsetting

toreach net zero target

Risk could be higher if the net

zero target or near-term

targets are not met

• Introduce a carbon credit

purchase strategy

• Integrate carbon credit

purchases into longer-term

financial planning

• Invest early in offsetting

projects

• Continued focus on

emissions reduction

Strategic

report

Capita plc

Annual Report 2022

Task Force on Climate-related

FinancialDisclosures

continued

• Revenue from climate related opportunities:

in2023, Capita will initiate the categorisation

of services that directly/indirectly enable

GHGemission reductions through customer

implementation. Once defined, systems will be

adjusted to track low carbon-related revenues.

• Capital deployment on management of

climate risks and opportunities: Capita

hasestablished a climate transition plan to

achieve net zero, and the costs of achieving

this target in alignment with the SBTi are

being reviewed in 2023–2025.

• Internal carbon price: Capita is exploring how

a bespoke internal carbon price can be used

in the capital allocation process to support

thebusiness case for investment in low

carbon initiatives.

• Proportion of executive remuneration

assigned to climate considerations: Capita

incorporated performance against Capita’s

climate targets in remuneration policy

inFY2022.

Other climate-related indicators monitored:

• Number of suppliers who set their own

science based GHG reduction targets,

helping track supply chain emissions and

attainment of SBTs.

• Proportion of renewable power for electricity,

tracking our fossil fuels phase-out and

adoption of new energy sources.

• Emissions associated with business travel,

contributing to attainment of climate targets.

• Carbon intensity of business by turnover

andheadcount.

Climate-related targets:

• Capita has set a range of ambitious targets

toreduce the company’s impact on global

warming, and its exposure to climate-related

risks. The SBTi has verified Capita’s 2035

netzero science-based target.

Overall net zero target

Capita commits to reach net zero greenhouse

gas emissions across the value chain by 2035

from a 2019 base year.

Near-term targets

Capita commits to reduce absolute Scope 1

and 2 GHG emissions and absolute Scope 3

GHG emissions covering business travel 46%

by 2030 from a 2019 base year. Capita also

commits that 50% of its suppliers by spend

covering purchased goods & services and

capital goods will have science-based targets

by 2025.

Long-term targets

Capita commits to reduce absolute Scope 1

and 2 GHG emissions, and absolute Scope 3

GHG emissions covering purchased goods &

services, capital goods, business travel and

employee commuting 90% by 2035 from a

2019 base year.

This long-term SBT will require an ambitious

90% absolute reduction of Scope 1, 2 and 3

emissions from 2019, before counterbalancing

residual emissions to achieve net zero.

Risk management

Climate change is fully integrated into our risk

management system and, in early 2021, was

escalated to a Group-wide principal risk.

Asaprincipal risk, climate change is subject

tooversight by the ARC and Board, and

ownership is assigned to the Group Head

ofEnvironment. Risk identification and

assessment process: since establishing climate

change as a principal risk, Capita has held

several internal interviews to understand how

risks and opportunities manifest for different

divisions and functions. A longlist of risks and

opportunities was developed and cross-

referenced against both apeer review and

TCFD resources, and was qualitatively

analysed in 2021.

In 2022, five key climate risks were

quantitatively modelled and analysed. The

results will be integrated into Capita’s Group-

wide risk management framework.

Assessments into required mitigation actions

will be carried out in 2023 and integrated into

Capita’s investment planning and strategy. In

Capita’s Group-wide risk assessment process,

ongoing and emerging risks are continually

monitored across emerging legal, health, safety

and environmental regulations (such as the UK

Government’s PPN 06/21), using Watermans

(athird party legal register service provider) and

an online compliance tool. Identified risks are

added to Capita’s risk register and escalated

tothe Executive Committee if needed. Each

identified risk is evaluated against six impact

categories: finance, people, legal & regulatory,

technology, customer, and strategy. Whichever

impact has the highest score will determine the

risk’s overall risk score, which is then pitched

against four levels of likelihood.

As with all Group-wide risks, the climate change

principal risk scoring process identifies key

controls and mitigating actions to reduce risk

from inherent to residual level. Further risk

reduction actions are taken to bring residual risk

down to the risk appetite level set by the Board.

Current climate risk controls include adopting

ascience-based emission reduction target;

monitoring supply chain emissions; climate

factors integrated into due diligence when

onboarding new suppliers; business continuity

planning to ensure climate resilience; a travel

policy to reduce business travel; and ongoing

monitoring of health, safety and environment

legislation. These controls and their

effectiveness are reviewed regularly.

Metrics and targets

Climate-related metrics:

The business is committed to developing

cross-industry, climate-related metrics in

accordance with the 2021 TCFD

implementation guidance update.

• Scopes 1–3 emissions: we measure and

disclose our operational (Scope 1 and 2) and

business travel (Scope 3) GHG emissions

annually, see page 43 and our full value

chainemissions via CDP’s climate

questionnaire, in accordance with the

GHGProtocol’s methodology.

• Exposure to climate related risks: the climate

scenario analysis conducted under strategy

informs the amount of potential financial

exposure to material climate impacts.

We manage risks proactively

At Capita, we recognise that effective risk management and internal control is fundamental

to helping us achieve our strategic objectives. Our ability to identify, assess and manage

risks successfully enables us to continue to protect shareholder value and allows us to

pursue potential opportunities for growth.

Strategic

report

Capita plc

Annual Report 2022

Risk management

and internal control

over the operation of key financial controls.

Itisintended that this process will continue

tooperate in 2023, in parallel with new and

existing control initiatives such as the finance

control framework project, which will focus on

strengthening key system access controls;

refining key finance policies and standards

andcontinuing to simplify and standardise key

financial controls.

Risk oversight and governance

A risk-focused culture and tone is expected

across all levels at Capita, reflecting the tone at

the top set by the Board. The Board is ultimately

accountable for providing strategic governance

and stewardship of the company. Throughout

2022, the principal and emerging risks facing

the company continued to be reviewed by the

Board, including those risks that could threaten

Capita’s business strategy delivery, future

performance, resilience or liquidity.

The Board is committed to the continuous

improvement of our governance mechanisms

and risk management processes, to ensure

thatrisks, including new and emerging risks,

continue to be identified and managed

effectively at all levels of the Group. As part

ofthis commitment, a regular review of the

principal risks was undertaken during the year

to ensure that they remain relevant and

appropriate. This included determining whether

any new or emerging risks should be added to

the principal risk profile. The ARC, which has

delegated responsibility from the Board for

reviewing and assessing the risk management

and internal control systems, is responsible for

overseeing the Group’s principal risk profile and

management’s risk mitigation strategy.

(the ARC) do not underestimate the work

needed to ensure that robust internal control and

risk assessment frameworks are embedded

fully. Work will continue to be undertaken

during2023 to enhance and improve the

standardisation and overall effectiveness

oftheGroup’s internal control framework.

Key control questionnaire

The key controls questionnaire (KCQ) is an

annual management attestation process where

business leaders testify to the effectiveness of

key controls and adherence with group polices

within their functions, divisions or business

units. The results from the KCQ process inform

the development of action plans for control

improvement during the subsequent year.

The KCQ reinforces accountability and

increases business leaders’ awareness of

theirresponsibilities in maintaining an effective

control environment. The status of KCQ

corrective actions arising from the exercise

arereported to the executive risk and ethics

committee (EREC) throughout the year.

Minimum control standards

The senior finance team undertake an annual

self-assessment of financial controls across the

Group against a specified set of Minimum

Control Standards focused on identifying areas

to strengthen controls of improve efficiency.

Any material issues are dealt with through

mitigating activities to ensure the effectiveness

of the existing controls over financial reporting.

During 2022, the Finance function continued to

enhance the self-assessment process across

the whole organisation to obtain assurance

Risk management

andinternal control

Impact of cost of energy, elevated

inflation, rising interest rates and global

economic weakness on Capita

In 2022, inflation rates in the UK and around the

world rose to their highest levels since the early

1980s. While there is no single reason for this

rapid rise in global prices, a series of events

worked together to increase inflation to such

high levels, including recovery from the

Covid-19 pandemic (as demand outpaced

supply) and Russia’s invasion of Ukraine with

resulting sanctions and supply chain disruption

that have led to price increases in oil, gas and

food across the world.

In November 2022, the Bank of England

warned that the UK was facing its longest

recession since records began, with the

economic downturn expected to extend well

into 2024 and unemployment likely to double

to6.5% during the country’s two-year slump.

Whilst the latest economic projections in the

Bank of England’s February 2023 Monetary

Policy Report anticipate a less severe

downturn, there remains considerable

uncertainty about the strength of the economy

and Capita will continue to monitor the impact

on our principal risks.

Internal control and risk management

We continuously seek opportunities to enhance

our risk management and internal control

environment and introduce greater rigour and

standardisation in our processes and controls.

The Board recognises that Capita’s control

effectiveness remains dependent on

management intervention and that

inconsistencies in control documentation can

lead to process variability across the Group.

The Board and the Audit and Risk Committee

Risk governance structure and assurance lines

Bottom

Top

down

Local risk committees

Divisional and business

unit management

Risk, compliance

and governance

Executive and risk

committees

Audit and Risk

Committee (ARC)

Board

Ownership and

management

of risk

Risk

oversight

Independent

assurance

Strategic

report

Capita plc

Annual Report 2022

Risk management

and internal control

continued

Risk management process

The risk management framework ensures that

ownership and responsibility for identification,

assessment and management of key risks and

opportunities are embedded throughout

Capita.The Board sets the context for risk

management through defining the strategic

direction and risk tolerances for the

organisation as a whole. The divisions,

functions and business unit teams then work

In 2022 the ARC reviewed, discussed and

briefed the Board on risks, controls and

assurance, including the annual assessment

ofthe system of risk management and internal

control, to monitor the effectiveness of the

procedures for internal control over financial

reporting, compliance and operational matters.

The EREC is responsible for identifying,

assessing, overseeing and challenging

principal risks across all Capita’s unregulated

businesses and provides regular updates to

themain Committee.

Capita recognises the importance to clients and

customers of the financial services businesses

it operates and the need for specific oversight,

to manage and mitigate regulatory risks

associated with those businesses, which is

provided by the financial regulated entities

oversight committee (FREOC). The FREOC

ischaired by an independent non-executive

director, supported by specialist risk and

compliance professionals and provides regular

updates to the ARC.

On a day-to-day basis, divisional and functional

leaders, senior leadership and business unit

teams identify, manage and monitor risks that

they are accountable for. Capita recognises

thatrisk cannot be fully eliminated and that

there are certain risks the Board and/or the

senior leadership will accept when pursuing

strategic business opportunities. However,

these risk acceptance decisions are made

atanappropriate authority level and reflect

theorganisation’s defined risk appetite.

Capita’srisk governance framework is

illustrated opposite.

Third line of defence

• Internal Audit reports directly to the Board and

ARC on the effectiveness of governance, internal

control andrisk management, through an

independent risk-based assurance programme

• Help safeguard the first two lines and

recommendimprovements as the risk

profileadapts and changes

Second line of defence

• Provide the policies, framework, tools,

techniques and support to empower risk and

internal control to be managed by the first line

• Establish monitoring controls, provide oversight

and regularly evaluate the effectiveness of the

firstline

• Promote consistency of the key objectives and

management of risk across the Group

First line of defence

• Includes senior leadership and employees who,

aspart of their core role, identify and manage

keyrisks

• Equipped with the necessary skills, knowledge

and tools to operate effectively and have the

relevant authority levels to embed the policies

and procedures across the internal controls and

risk management frameworks

incollaboration to undertake a ‘top down,

bottom up’ approach to identify, assess and

respond to risks faced by Capita.

The risk management process is based on risk

registers and risk reporting at the established

risk governance committees. Key risks in the

registers have assigned risk owners who review

them regularly, and report on them at least a

quarterly basis, as part of the risk reporting

process. The strength of existing controls is

The impact on our

riskprofile of the rapid

deterioration in the global

economy, potential

prolonged recession in

theUK and cost-of-living

challenges is being

closelymonitored

Strategic

report

Capita plc

Annual Report 2022

Risk management

and internal control

continued

Principal risks

Principal risks are defined as those risks that

are significant for the Group and are owned and

managed by a specified member of the

executive team who has accountability for

ensuring that the risk is managed within the risk

appetite levels set by the Board. Assigning risk

ownership at executive level also ensures that

an appropriate level of attention and focus is

applied in addressing the principal risks.

A regular cycle of reassessment and reporting

of the principal risks is undertaken within the

remit of the EREC and the ARC.

For more details on the challenges faced and

actions taken to address them, please refer

tothe Chief Executive Officer’s review on

page10.

Risk appetite

The Board sets the Group’s risk appetite, as

proposed by the EREC, to ensure that it reflects

current external factors and market conditions.

The risk appetite outlines: those risks Capita

should not take; those which should be

managed to an acceptable level; and those

which should be accepted to deliver our

business strategy.

As part of the risk management maturity

programme, risk owners, supported by Group

Risk, have been developing risk appetite

statements for their respective principal risks.

This will provide greater clarity to the

organisation and to the risk owners on the

acceptable level of risk set by the Board

andthesteps required to manage risk levels

towithin the agreed appetite.

Emerging risks

The identification of emerging risks is carried

out by both the divisions and business units,

using a bottom-up approach, and the executive,

from a top-down perspective. Regular reviews

of risks, including emerging risks and project/

programme risks, are included in risk and

assurance committees within Capita’s existing

governance structures. Capita did not identify

any emerging risks during 2022. However,

theimpact on our risk profile of the rapid

deterioration in the global economy, potential

prolonged recession in the UK and cost-of-

living challenges is being closely monitored.

evaluated to determine whether any additional

mitigation actions are needed to manage the

risk level to within the risk tolerances and

appetites set by the Board.

Risks are assessed at both an inherent

(pre-controls) and residual (post-controls)

level,against two scales addressing: (a) their

likelihood; and (b) their potential impact on

Capita. The assessment of impact includes

finance, customer & client, technology, people,

reputation, and legal & regulatory. These risk

assessments are designed to ensure a

thorough assessment of the risks, as well as

the associated causes, controls, mitigations

and future risk reduction actions. A risk and

assurance committee timetable enables

smooth flow of risk information between the

divisions, functions, the EREC and the ARC.

During 2022 standard terms of reference,

agenda and data points were developed at

each governance level to ensure risk

management is consistently reported and

understood across Capita.

Our risk management processes continued

tooperate effectively throughout 2022. The

progression of Capita’s disposal programme

and external influences such as: the potential

UK recession; rapidly increasing inflation and

interest rates; and the associated cost-of-living

challenges – were all reviewed and considered

for their impact on Capita’s principal risk profile

by the executive team.

During the year, the likelihood

ofprincipal risk 3, failure to

innovate and develop new value

propositions forclients and

customers, reduced when

compared with the previous year.

We now have a dedicated strategy

team working on effectively

managing existing propositions

and working in collaboration with

our sector, growth, consult and

transform teams to identify

opportunities to create new

propositions for our clients. We

have also developed stronger

strategic partnerships with our key

technology providers to enable us

to better leverage their products to

serve our clients.

The Board remains confident that our

existing governance mechanisms and

risk management processes will

ensure that risks, including emerging

risks, continue to be identified and

dealt with effectively. However, the

Board recognises that a number of

these risks are taking a number of

years to address and bring back to

anappropriate level. The Board also

recognises the improvement made,

which has resulted in Capita being

asimpler business with a stronger

operational platform to underpin its

future development. At Capita, the

principal risks are considered over the

same three-year period as the viability

statement. They are listed and

described opposite and, for each risk,

wedisclose key mitigations and future

actions to further manage the risk

andimprove internal control.

Strategic

report

Capita plc

Annual Report 2022

Risk management

and internal control

continued

Key: Level of risk

Critical The maximum level of risk Capita

can bear andremain effective at

delivering its strategy. Ofimmediate

critical concern.

Uncomfortable Risk level will cause problems that

would putuncomfortable pressure

on delivery.

Vulnerable Risk level likely to cause problems

that would putuncomfortable

pressure on delivery.

Acceptable A business-as-usual risk,

manageable with the rightpeople

andprocesses in place to respond

tothethreat. A tolerable level

ofrisk.

Risk movement since 2021

year end

The Capita principal risk profile as at

31December 2022, is illustrated below

Impact

Likelihood

312

ImminentRare

Minor Significant

No. Risk title Risk description

Living our

purpose

Failure to live our purpose and failure to

change stakeholder perception so we are

seento live ourpurpose

Strategy Failure to define, resource and execute the

right medium-termstrategy

Innovation Failure to innovate and develop new value

propositions forclients and customers

People

attraction

&retention

Failure to attract, develop, engage and retain

the right peoplefor current and future client

propositions

Culture Failure to change the culture and practices of

Capita inlinewith our purpose and strategy

Data

protection

Failure to protect data, information and

ITsystems

Contracts Failure to secure new/extend existing

contracts and services

Delighting

clients

Failure to delight clients and customers

anddeliver contractual obligations

Internal

control

Failure to maintain a risk-based system of

internalcontrol

Geopolitical

climate

Failure to plan for, influence and respond

topotential changes in the geopolitical climate

Financial

stability

Failure to maintain financial stability and

achieve financial targets

Wellbeing,

health &

safety

Failure of Capita to protect the wellbeing,

safety and health of all Capita’s employees,

the people we work with and our service users

Climate

change

Failure to adapt Capita and its services tothe

impacts of climate change

Strategic

report

Capita plc

Annual Report 2022

Risk management

and internal control

continued

Principal risk and risk level Potential impact How we manage the risk

Failure to

define,

resource and

execute the

right medium-

term strategy

Accountable

officer: CEO

• misalignment

between Group

and divisional

objectives

• inability to evolve

strategic

objectives

egadapt to a

changing market

environment/

client

expectations/

competitor

action/policy

• difficult to

articulate and

optimise

investment case

for investors

• ineffective

prioritisation of

capital

investment/

investment

decisions with

sub-optimal

returns versus

competitors

This risk is managed through regular review, challenge and update of

divisional strategies at least annually with Executive Committee and Board

approval, ensuring alignment to Capita’s corporate strategy.

Mitigation actions in 2022

• Embedded the operating changes and focused on growth in our areas

ofcore competencies

• Continued to dispose of portfolio businesses at the right price to reduce

debt and improve liquidity

• Reviewed the divisional medium-term strategies, including market and

competitor analysis, which were also presented to the Board and

Executive Committee

• Investment provided to develop and implement the first stage of Public

Service divisions’ digital strategy

• Operational optimisation plan prepared within the Experience division

fordelivery throughout 2023

• Strengthened its commercial model with more stringent pricing discipline,

given the macroeconomic backdrop

Future actions:

• Focus on growth in our areas of core competency

• Execute and deliver Public Service division’s digital strategy

investmentprogramme

• Embed Experience division’s operating model changes to drive more

effective operations and delivery

• Review and enhance Capita’s strategic partnerships ecosystem

Principal risk and risk level Potential impact How we manage the risk

Failure to live

our purpose

and failure

tochange

stakeholder

perception

sothat we are

seen to live

ourpurpose

Accountable

officer: CEO

• misalignment

between the

strategic

objectives and

the purpose of

the business

• brand and

reputation

adversely

impacted

• clients, suppliers,

and people don’t

want to work

with, or for,

Capita

• investors lose

confidence in the

Group’s ESG

credentials

Cost of living and inflation impacts may cause us to have more challenging

decision points in terms of being a purpose-led business. For example,

where the needs of different stakeholders’ conflict.

Mitigation actions in 2022

• Established a Board level ESG committee, to oversee our ESG initiatives

• Centralised ESG strategic oversight into the Group People function to

ensure a globally consistent approach

• Developed a refreshed approach to how we deliver social value, and how

this complements our core service offerings

Future actions

• Refresh our corporate responsibility business strategy to ensure

maximum impact and alignment with our evolving business

• Continue to build external visibility of activities related to our purpose,

values, behaviours and ESG credentials

• Further develop our approach to social value delivery in order to align

toour overall ESG principles

Strategic

report

Capita plc

Annual Report 2022

Risk management

and internal control

continued

Principal risk and risk level Potential impact How we manage the risk

Failure to

change the

culture and

practices of

Capita in line

with our

inlinewith our

purpose and

strategy

Accountable

officer: CEO

• potential for new

clients not to

want to contract

with Capita

• unable to attract

and retain talent

• negative

corporate

reputation

hampers our

ability to deliver

sustainable

growth

• lack of staff

engagement

anddemotivated

staff leading to

attrition hindering

ability to deliver

strategic

objectives

Cost of living and inflation impacts may cause engagement challenges in

specific parts of the business, particularly where our employees are in a

lower pay bracket, and therefore are significantly more affected by increases

in the cost of living. This could cause reduced engagement and cultural

impacts, specifically related to employee confidence in Capita as a

purpose-led business.

Mitigation actions in 2022

• Implemented a mid-year employee survey to improve employee

engagement to identify further improvements

• Continued to work with over 15,000 colleagues in our expanded employee

network groups to deliver a range of policy and procedural changes based

on employee feedback. We saw a resulting increase in our global inclusion

index

• Launched the Capita leadership council to provide more diverse employee

input into Group-wide strategic decision making, as well as demonstrating

our commitment to growing diverse, internal future leaders in line with our

commitments as a purpose-led employer

• Continued to work on the embedding of our employee value proposition

throughout the full employee lifecycle, therefore working to create a

consistent, purpose-led and values driven experience for every employee

from attraction to exit

Future actions:

• Deliver our employee listening programme, acting at all levels on the

feedback received via our surveys

• Work with our employee network groups to drive positive cultural

andpolicy changes

• Work with our leadership council, to bring constructive challenge

anddiverse thinking to our executive

Principal risk and risk level Potential impact How we manage the risk

Failure to

innovate and

develop new

value

propositions

for clients and

customers

Accountable

officers:

divisional CEOs

• inability to grow

and develop into

new markets

• failure to

compete with

others who are

innovative

• loss of new and

existing business

to competitors

• eroded corporate

position in the

market

Within the Strategy function, we have a dedicated team working on

effectively managing existing propositions and working in collaboration with

Sectors, Growth, Consult/Transform and the digital transformation programme

to identify prioritised opportunities to create new propositions forour clients.

Mitigation actions in 2022

• Horizon scanned new customer value propositions

• Developed stronger strategic partnerships with key technology providers

to enable us to better leverage their products to serve our clients

• Explored opportunities to invest in the innovation and product teams to

build future capability

• Rolled out the governance product lifecycle

Future actions:

• Improve definition of propositions, and related communications and

marketing material

• Match our integrated capabilities to client and market demand

• Standardise and integrate our digital capabilities to deliver more efficient

solutions for our clients

• Align innovation within the overall governance across the product lifecycle

to develop scalable, monetizable, global client value propositions

• Leverage market insight to identify opportunities to develop innovative &

client centric value propositions with unique selling points

• Align country led go to market strategies, as the north star to drive central

and in-country innovative solutions

Failure to

attract,

develop,

engage and

retain the right

people for

current and

future client

propositions

Accountable

officer: Chief

People Officer

• loss of key

personnel/lack

ofsuccession

• increased staff

attrition and

increase in costs

from buying in

short-term

contractors

• poor financial

performance

resulting in

inability to grow

• reputational

damage

The cost of living challenges and inflationary environment are having

asignificant impact on the UK labour market and our attrition levels.

Unprecedented recruitment activity is being driven by job seekers looking

foralternative employment, across sectors.

Mitigation actions in 2022

• Further developed our people proposition and attraction strategy

torespond to market labour challenges

• Continued focus on ensuring competitive pay and reward packages

• Introduced a demand planning methodology to enable

proactiverecruitment

• Improved the onboarding process to rationalise and reduce onboarding

time for candidates

• Developed a career path framework enabling employees to plan

anddevelop their careers

Future actions:

• Further develop our people proposition and attraction strategy to

respondto market labour challenges

• Continue to review pay and reward packages to ensure that they

remaincompetitive

• Roll out the career path framework to enable employees to plan

anddevelop their careers

• Implement technology to enhance candidate journey and reduce

time-to-offer

Strategic

report

Capita plc

Annual Report 2022

Risk management

and internal control

continued

Principal risk and risk level Potential impact How we manage the risk

Failure to

secure new

contracts/

extend existing

contracts and

services

Accountable

officers:

divisional CEOs

• loss of contracts

• inability to

acquire new

business

• contract terms

and service

commitments

arenot met or

understood

• exposure to

unexpected

costs/cost

overruns or

onerous terms

• brand and

reputation

damage

• financial claims/

penalties and

other disputes

with clients

• adverse impact

on contract

profitability

We continue to bid for and win new contracts that we are confident we

havethe resources and proven track record to deliver. Continued focus

onmaximising the benefit of our operating model will ensure our

competitiveness in our principal markets. Coupling this with our deep

sectoral understanding through the industry verticals in our core divisions

should enable us to maximise our market opportunities.

Mitigation actions in 2022

• Refreshed the contract review committee policy and deal reviewprocess

• ‘Solution briefcase’ relaunched in Public Service

• Public Service commercial playbook develop and embedded

• Delegation of authority matrices updated to reflect new ways of working

• Coordination between Pursuit, Programme and Performance

teamsimproved

• Go to market strategies to influence market trends and solutions approved

by the Board

• Focused on our technology and digital assets in collaboration with TSS

and our Products and Customer Value Proposition teams

Future actions:

• Investment in digital propositions to enhance attractiveness to the market

• Fortify the strategic deals team to support high value multi-year contract

opportunities

• Deploy clear focus on growth across geographies with specialisation

across go to market value propositions

• Leverage the new organisation and operating model to enhance market

penetration via land and expand opportunities

• Recalibrate pre-sales to delivery process, including governance across

quality of deals, with focus on margins and profitability

Principal risk and risk level Potential impact How we manage the risk

Failure to

protect data,

information

and IT systems

Accountable

officer: Chief

Technology

Officer (CTO)

• loss or theft of

confidential client

or customer data

due to cyber

attack

• disruption to

business

operations of

Capita and/or its

customers due

tocyber attack

• loss of one or

more of Capita’s

data centres

• reputational

damage leading

to loss of new

and existing

business

TSS was created in August 2021 as an IT and Software shared service

todeliver products and services to Capita’s colleagues and clients.

Thisconsolidation of resource and capability into TSS, enables Capita to

better manage and continually improve the IT and cyber resilience posture,

standardise toolsets and create repeatable and scalable products and

services, and to simplify how we operate as a business.

Mitigation actions in 2022

Established the technology strategy for TSS as a wider business to

introduce standardisation and harmonisation of Capita’s IT landscape.

Strategy created on the back of having completed industry, market led

andclient analyses of Capita’s technology domains.

• Consolidation of over 4,000 IT resources into a shared service to drive

efficiencies and improve service levels

• Improved stability of IT environments

• Migration from legacy hosting into a Tier 3 industry standard for improved

data centre performance, removal of end-of-life systems

Identified a clear road map for technology to ensure full foresight of any

upcoming technology obsolescence.

Future actions:

• Enhance our understanding and reassessment of the technology risk

profile by creating a centralised risk register

• Continue to evolve our cyber security posture

• Create a pan-Capita IT disaster recovery shared service to consolidate

and simplify the capability and enhance resilience

• Continue to invest in our capabilities and people

• Invest in enhancing digital capability in the identified priority tech domains

• IT Asset Management to enhance visibility of the estate

Strategic

report

Capita plc

Annual Report 2022

Risk management

and internal control

continued

Principal risk and risk level Potential impact How we manage the risk

Failure to

maintain a

risk-based

system of

internal control

Accountable

officer: CFO

• fraud,

misstatement

and inaccurate

financial

reporting

• greater

regulatory or

client scrutiny

• increased costs

associated with

risk remediation

activities

• breaches of law,

statutory and

legal reporting

leading to

regulatory fines

in financial

services sector

and loss of key

contracts

• reputational

damage and

adverse media

interest leading

Our internal controls effectiveness has historically been dependent on

management experience and intervention. A multi-year control improvement

programme is underway with progress being made in establishing and

communicating standards, automating system access controls, and

standardising control activities across the Group. The implementation of

efficient processes and controls is key in reducing effort, duplication and

costs to mitigate the impact of inflation on the Group.

Mitigation actions in 2022

• Established a programme to standardise finance processes and controls

• Further improved the coverage of financial policies and associated

standards

• Refreshed and updated the delegation of authority document following the

implementation of the new divisional structure

• Deployed software which has automated reviews of access to key

financesystems

Future actions:

• Continue to standardise finance processes and controls

• Review and refresh the framework that ensures consistency and quality

ofGroup wide policies and standards

• Further documentation of our key business processes to enable

additionalstandardisation and automation of our key business processes

and controls

Failure to plan

for, influence

and respond

topotential

changes in the

geopolitical

climate

Accountable

officer: CEO

• unable to

respond rapidly

and effectively

tonew political

priorities which

change the

regulatory

environment and

public sector

customer

priorities

We may encounter changes in government priorities as we approach

aperiod of political turbulence in the run-up to a UK general election.

Wecontinue to monitor, engage and communicate with government

stakeholders to understand emerging policy and contribute to consultations

where appropriate. Our continued commitment to being a leading

responsible business, our reputation for reliable delivery and seeking

contracts that enhance social value will remain our key focus.

Mitigation actions in 2022

• Continued engagement with UK Government and others to promote

andprotect reputation

• Continued monitoring of policy developments including emerging plans

forgovernmental strategic objectives including levelling up

Future actions:

• Engage with Government and elected reps from all main UK political

parties, including the devolved parliaments and assemblies to

communicate Capita’s delivery performance and capability, and our

commitment as a responsible business

Principal risk and risk level Potential impact How we manage the risk

Failure to

delight clients

and customers

and deliver

contractual

obligations

Accountable

officers:

divisional CEOs

• loss of existing

contracts

• brand and

reputation

damage

• limited or no

newbusiness

• demotivated

staffleading to

attrition and loss

of capability/

capacity

• financial

penalties and/or

service credits

We deliver services that are vital to the success of our clients; Capita will

take all reasonable steps to ensure it meets contractual obligations and

deliverables. Performance against deliverables is regularly and rigorously

monitored through several governance forums.

Mitigation actions in 2022

• Continued development of the divisional operating environment to drive

simplification and strengthening of service delivery

• Increased automation of Development Operations

• Improvements undertaken to operational performance reporting, to

support earlier identification of potential performance concerns

• Risk reduction operational maturity assessments undertaken to identify

opportunities to deliver better outcomes for our clients

• Commonality identified in failures or issues across divisions, and

addressed through coordinated action

• Rolled out foresight demand planning tool to better predict and manage

recruitment pipeline and mitigate attrition risk across the business

• Introduced a new customer success framework

Future actions:

• Project Accelerate to review, transform and strengthen current capabilities

(incl. operational excellence plan 2023)

• Continue top lessons learned activity to maintain learning from experience

• Continued review/development of ’function’ through the future Capita

operating model work to drive consistency and standardisation

• Focus on data-led, technology-driven and people-enabled business

model, keeping our clients at the forefront of all our initiatives

• Leverage Lean 6 Sigma capabilities to drive operational excellence

acrossdelivery platforms globally

• Deploy continuous improvement insights and analytics to deliver

solutionsthat drive enhanced customer experiences for our clients

andtheir customers

Strategic

report

Capita plc

Annual Report 2022

Risk management

and internal control

continued

Principal risk and risk level Potential impact How we manage the risk

Failure of

Capita to

protect the

wellbeing,

safety, and

health of all

Capita’s

employees,

thepeople we

work with and

our service-

users

Accountable

officer: Chief

General Counsel

and Company

Secretary

• poor health,

injury and death

of colleagues

and service

users

• legislative

breaches/

prosecutions,

including

corporate

manslaughter

• costs associated

with

compensation

and litigation

• reputational

damage

• increased levels

of absenteeism

and recruitment/

retention

challenges

• increased

insurance

premiums

• loss of contracts

or inability to win

new contracts

• reduced

willingness of

contractors to

work with Capita

The cost-of-living crisis and rising inflation have increased financial and

social concerns for many Capita colleagues with significant potential

consequences for their day-to-day lives. These types of social, financial,

andpractical/day-to-day impacts are known to have potential negative

effects on wellbeing in general and mental health in particular.

Mitigation actions in 2022

• Developed and implemented a culture of ownership and accountability

forthe wellbeing, safety and health of our people by Group, Divisional,

andbusiness leadership

• Assessed and validated Capita’s legal and statutory wellbeing, safety

andhealth requirements

• Embedded CRC HSE & Safeguarding risk assessments for new contracts

• Updated the approach and process to wellbeing, safety and health

incident and near-miss reporting, management and analysis

Future actions:

• Complete detailed pan-Capita wellbeing assessment

• Develop a pan-Capita mental health plan including alignment

• Initiate new mandatory HSE training programme

• Expand proactive occupational health intervention programme in

CapitaUK

• Review and confirm health screening policies for all Capita business units

Principal risk and risk level Potential impact How we manage the risk

Failure to

maintain

financial

stability

andachieve

financial

targets

Accountable

officer: CFO

• poor cash flow

and high levels

ofdebt reduce

liquidity available

to invest in

business

development

andgrowth

• loss of

shareholder

value

• loss of investor

confidence

The impact of the challenging economic environment on the trading

performance of the Group is outlined in the Chief Financial Officer’s

review.The Group’s materially reduced level of net debt, pension deficit

reduction, prudent approach to balance sheet management and focus

ondelivering against our financial objectives all serve to mitigate the risk

offinancial instability.

Mitigation actions in 2022

• Completed the disposal of several key businesses including the

Trustmarque business, Pay360, and the real estate and infrastructure

consultancy businesses

• Agreed an extension to the Group’s RCF to August 2024

Future actions:

• Completion of remaining planned disposals of businesses

• Review the Group’s capital structure on completion of disposals

• Continued focus on resources in the two core divisions and reductions

inGroup overheads with the aim of delivering sustainable material free

cash flow

Strategic

report

Capita plc

Annual Report 2022

Risk management

and internal control

continued

Principal risk and risk level Potential impact How we manage the risk

Failure to

adapt Capita

and its

services to the

impacts of

climate change

Accountable

officer: Chief

General Counsel

and Company

Secretary

• unpredictable

shift in markets

tolow carbon

leading to

increased costs

and reduced

revenue

• increased cost

and uncertainty

of investment in

new technology

and substitution

of existing

products and

services

• reputational

threats from slow

adaptation to

climate change

• increased cost of

regulation and

decarbonisation

resulting from

transition to a

lower carbon

economy

• impact on

infrastructure,

service delivery

and supply chain

from extreme

weather events

• impacts of global

warming in

different

territories on

business

continuity and

staff welfare

The global economic downturn has contributed to lower-than-expected

delivery against commitments made at COP26, which may lead to an

increasingly disorderly low carbon transition. Scenario analysis of climate

risks and opportunities point to a greater threat of disruption from disorderly

transition, requiring immediate action to minimise the impact to Capita, its

stakeholders and wider society.

Mitigation actions in 2022

• Linked objectives and management bonus to net zero initiatives

• Reviewed the HSE policy to include specific environmental factors and

creation of a new environmental standard

• Engaged with suppliers and customers to ensure resilience to transitional

and physical climate risk, developing low carbon business solutions

supporting net zero commitments

• Introduced further efficiency, renewable energy, and travel reduction

programmes

Future actions:

• Integrate climate culture and practice into Capita business as usual

• Progress against targets reported in divisional performance reporting

from2023

• Continue to improve understanding and management of Scope 3 emissions

• Increase accuracy and maturity of supply chain emissions reporting

andextend scope of supply chain engagement

• Develop and implement net zero plans and low carbon transition plan

• Further develop our emissions database, analysis, insights, and

associated actions to minimise climate risk

Strategic

report

Capita plc

Annual Report 2022

Viability statement

than not’ test. These wide-ranging risks are

unlikely to crystallise simultaneously and

thereare mitigations under the direct control

ofthe Group, including reductions in capital

investment, substantially reducing and (or

removing in full) bonus and incentive payments

and significantly reducing discretionary spend,

that can be actioned to address a combination

of risk crystallisations that may occur under

asevere but plausible downside. These

havebeen considered in the Board’s

viabilityassessment.

Based on this assessment and reflecting the

Board’s confidence in the platform for improving

financial performance resulting from completion

of the transformation plan, and the Group’s

ability to refinance, the Board has a reasonable

expectation that the Group and Parent

Company will be able to continue in operation

and meet their liabilities as they fall due over

theperiod of the viability assessment.

The strategic report was approved by the

Board and signed on behalf of the Board:

Claire Denton

Chief General Counsel and Company Secretary

2 March 2023

Capita plc

Registered in England and Wales No.2081330

• Operating profit margin expansion over the

business plan period reflecting the benefit of

operating leverage coupled with ongoing

efficiency delivery.

• Completion of the portfolio disposal

programme during 2023.

• The refinancing of the Group’s RCF prior to

itsmaturity in August 2024.

The most material assumptions from a

viabilityassessment perspective, relate to

thecontinuation of adjusted revenue growth,

operating profit margin expansion, and the

refinancing of the RCF. Capita has been

successful in obtaining new and extended

financing facilities over the last few years.

Assuch, in concluding on viability the Board

believes that it is reasonable to assume that the

Group will be successful in refinancing the RCF

in line with the assumptions underpinning the

base case financial projections.

The three-year base case financial projections

were used to assess covenant compliance and

liquidity headroom under different scenarios.

This analysis included assessing the sensitivity

of the financial performance of the Group

tochanges in trading conditions in line with

thoseconsidered in the severe but plausible

downside case for the going concern

assessment and from the crystallisation of

specific risks including those set out in the

principal risks section of the 2022 Annual

Report and Accounts (refer to section 1 of

theconsolidated financial statements).

The risks applied have not been probability

weighted but rather consider the impact should

each risk materialise by applying a ‘more likely

• The ongoing successful execution of the

non-core business disposal programme

which has realised net cash proceeds

totalling c.£1.3bn since 1 January 2018,

usedto repay maturing debt, to make further

deficit reduction contributions to the Group’s

main defined benefit pension scheme and

toinvest in driving growth in the remaining

core businesses.

• The repayment of £1.7bn of debt, including

lease liabilities, since 1 January 2018.

• The extension during 2022 of the Group’s

revolving credit facility (RCF) to 31August

2024 and in February 2023, the Group

entering into a committed bridge facility

of£50m with three of its relationship

banksproviding additional liquidity from

1January 2024.

• The payment of c.£350m of deficit reduction

contributions to the Group’s main defined

benefit pension scheme since 1 January

2018, and the commitment to a further

c.£70m of deficit reduction contributions

across 2023–2024, which should enable the

scheme to reduce its reliance on the covenant

of the Group.

The foregoing elements provide the backdrop

to the three-year business plan approved by the

Board in January 2023 and are key factors in

the Directors’ viability assessment. The main

assumptions underpinning the base case

financial projections in the Group’s business

plan are set out below:

• Further adjusted revenue growth broadly

inline with market trends in each of the two

core divisions.

In accordance with provision 31 of the UK

Corporate Governance Code 2018, the Board

has assessed the viability of the Group and

Parent Company over the three-year period to

31 December 2025, aligned with the period of

the Group’s bottom-up business planning

process. The Board believes that a three-year

period provides sufficient clarity to consider the

Group and Parent Company’s prospects and

facilitates the development of a robust base

case set of financial projections against which

severe but plausible downside scenario stress

testing can be conducted.

The completion of the Group’s multi-year

transformation programme during 2021 created

the platform for sustainable improving financial

performance which underpins the viability of

theGroup and Parent Company. The Board

particularly notes the following:

• The simplification and strengthening of the

Group’s organisation design establishing two

core divisions focused on public and private

sector markets providing a platform for

continued revenue growth and delivery

ofefficiency savings.

• Adjusted revenue growth in 2022 of 2.4%.

• A significant reduction in the Group’s cost

base, with cumulative savings during the

transformation programme of £428m.

Viability

statement

Corporate

governance

Capita plc

Annual Report 2022

Corporate

governance

Capita is committed to creating an environment

where diversity and inclusion are valued and

respected, and where we benefit from all

colleagues sharing their different perspectives.”

David Lowden, Chairman

Corporate

governance

Capita plc

Annual Report 2022

Chairman’s

report

Chairman’s report

On behalf of the Board, I am pleased to introduce the Company’s

corporate governance report for the year ended 31 December 2022,

which is my first report as your Chairman.

Corporate governance

The corporate governance report sets out how the Company has complied with the 2018 UK

Corporate Governance Code. It also aims to explain the work and activities of the Board, and the

work of its committees, and details the annual evaluation process for the year under review.

Capita is a purpose-led business, and we are committed to being a responsible business – in how

we operate, serve society, respect our people and the environment, and deliver improving returns

toour investors. The Board is committed to ensuring Capita’s governance structure aligns with this

and operates to the highest standard – this is one of my principal objectives as your Chairman.

In June 2022, the Board established an ESG (environmental, social and governance) Committee,

aforum not affected by the time pressures of the wider Board agenda. This enables ESG matters

tobe properly considered and helps support the work being undertaken by the business to tackle

them, including our commitment to achieve net zero across our value chain by 2035. I am proud

that in 2022 Capita was, for the first time, included in the Carbon Disclosure Project ‘A’ list, a

universal global measure that scores companies and cities based on their journey through

disclosure and towards environmental leadership.

As a Board, we were also kept fully informed of the Company’s refreshed mandatory Code of

Conduct training and the relaunched Speak Up policy, which is overseen by the Audit and Risk

Committee. Both initiatives are pivotal to our commitment to ensuring we remain true to our values

and, by complying with the Code of Conduct we demonstrate our commitment to creating better

outcomes across Capita.

The Group’s Board and committee structure, including the new ESG Committee, is outlined below.

Further information on the ESG Committee and its remit is provided on pages 88 and 89, with

further information on Capita’s responsible business focus provided on pages 34 to 45.

Board composition

There were several changes to the Board during 2022.

Matthew Lester stepped down on 30 June 2022, having served as a director for five years. On

behalf of the Board, I would like to thank Matthew for his hard work, commitment and wise counsel,

and especially for his leadership as Chair of the Audit and Risk Committee.

Lyndsay Browne and Joseph Murphy, our first employee directors, resigned on 30 June 2022,

having served their three-year terms. I would also like to thank them for their commitment and

professionalism. Their contribution to the Board was significant and provided fresh insight and

avital new perspective.

Board time allocation (%)

1 50%

Strategy, transformation

and growth

2 30% Executive reports

3 5% Governance

(incl. Board evaluation)

4 5% IR / brand / reputation

5 10% Full and half-year results

David Lowden (Chairman)

2 years

Jon Lewis (CEO)

Tim Weller (CFO)

Georgina Harvey

John Cresswell

Neelam Dhawan

Nneka Abulokwe

Janine Goodchild

Brian McArthur-Muscroft

5 years

2 years

3 years

8 months

7 years

2 years

1 year

9 months

Board directors: length of tenure

2015 2018

2022

1. Joined the Board on 1 January 2021, appointed as Senior Independent Director (SID) on

1 March 2021 and as Chairman on 10 May 2022 when he ceased to be SID

2. Joined the Board on 1 October 2019 and as SID on 1 July 2022

3. Joined the Board on 1 February 2022

4. Joined the Board on 1 July 2022

5. Joined the Board on 1 June 2022

Corporate

governance

Capita plc

Annual Report 2022

Chairman’s

report

continued

31 December 2022

Female representation

44.4%

We welcomed Nneka Abulokwe and Brian McArthur-Muscroft to the Board as independent

Non-Executive Directors on 1 February and 1 June 2022 respectively. Nneka has a wealth of

experience gained within both entrepreneurial and corporate environments. Her expertise has

already been of great benefit to the Board, as Capita continues to develop digital innovation to help

execute our growth strategy.

Brian, who also took over the responsibilities of Audit and Risk Committee Chair on 1 July 2022, is

a highly experienced chief financial officer and board director. Janine Goodchild joined the Board on

1 July 2022, as our new Employee Non-Executive Director and has already provided great insight.

I joined the Board as a Director on 1 January 2021 and was appointed as Senior Independent Director

on 1 March 2021. Sir Ian Powell stepped down as Chairman at the conclusion of the Company’s

AGM on 10 May 2022, and I was pleased to accept the Chairman appointment, having been

appointed as Chairman designate on 22 March 2022 as part of the Board’s succession planning.

Sir Ian had, since his appointment as Chairman in 2017, provided outstanding leadership and

strategic guidance to the Board during a period of significant change for the business.

On 3 February 2023, we announced that John Cresswell, independent Non-Executive Director had

decided to step down from the Board with effect from 31 March 2023. I would like to thank John for

his commitment and valuable contribution to the Board during his seven year tenure as a director.

Capita is committed to creating an environment where diversity and inclusion are valued and

respected, and where we benefit from all colleagues sharing their different perspectives. The Board

will continue to lead by example through its own approach to inclusion and diversity across its

composition. As at the date of this Annual Report, 44% of the Board is female, exceeding the FCA’s

target of 40%, including our Senior Independent Director. Our ethnic diversity continued to improve

with the appointment of Nneka Abulokwe. Further details of Board appointments during 2022 can

be found in the Nomination Committee report on pages 86 and 87.

Company purpose and culture

The Board recognises that it has ultimate responsibility for ensuring an appropriate culture is in

place across Capita to underpin how the business behaves towards all its stakeholders. Our culture

provides the foundation to drive our purpose and delivery of our strategy.

As a Board, we spend time focused on ensuring our culture enables us to build the organisational

capability required to deliver on our commitments to our people, clients and customers, suppliers

and partners, society and our investors. The Board receives regular reports on activities that

enableit to monitor developments in the Group’s culture and provides supportive challenge to

management. The dashboard below is an aggregation of key measures informing the Board’s

The time allocation chart

isprovided for guidance

only and other matters

werealso considered by

theBoard.

Corporate

governance

Capita plc

Annual Report 2022

Chairman’s

report

continued

Finding from 2021 evaluation Action in 2022

Strategy – the Board has rightly focused on managing the

pandemic amid a more complex and lengthy turnaround than

originally envisaged. Additional focus on long-term strategy

for the two core divisions would be beneficial.

Regular presentations from the CEOs of Experience and

Public Service are scheduled into the Board’s annual calendar,

together with presentations on the Group’s growth strategy,

which include both divisions. In September 2022, the Board

held a strategy day where these matters were discussed in

detail.

The 2022 Board evaluation, and the evaluation of the committees, was undertaken by the

completion of a questionnaire by each director, followed by a one-to-one meeting with the

Chairman. The Board received a report from the Chairman on the outcome of the evaluation,

including formal recommendations which were discussed and approved by the Board. Committee

feedback was presented to the relevant committee chair. The Chairman was assisted in this

process by Claire Denton, Chief General Counsel and Company Secretary.

The evaluation concluded that the performance of the Board was viewed positively. A particular

strength of the Board was found to be a culture with honest and open debate. The evaluation also

identified certain aspects of the Board’s work that could be improved and these areas, set out in the

following table, were highlighted and discussed by the Board.

Finding from 2022 evaluation Proposed actions in 2023

Strategy – although noting the regular presentations from the

CEOs of Experience and Public Service, additional focus

was sought from the Board on the divisions’ strategic focus

on digital solutions and margin improvements.

Additional presentations have been included in the Board’s

annual calendar, these include a strategic focus on digital

solutions to meet client requirements and margin improvement

from Experience and Public Service.

Stakeholders – the Board noted that further interaction with

both clients and senior management would be beneficial.

Visits to clients will be organised for the Board. In addition

more members of the senior management team below the

Executive Committee will be asked to present and meet with

the Board in both a formal and more informal setting.

Corporate governance and committee reports

The following pages in this section consist of our corporate governance and committee reports.

Ihope that you will find these and the entire Annual Report informative. The Board will be happy

toreceive any feedback you may have.

David Lowden

Chairman

2 March 2023

assessment of culture, and further information on each of these, and the Group’s approach to

investing in and rewarding its workforce is set out in the people and responsible business sections

of the strategic report on pages 33 to 36 and 37 to 45, respectively.

Metric 2022 2021

Movement in employee net promoter score (ameasure of employee satisfaction)

+15 points -22 points

Employee engagement index (a measure of employee engagement)

65% 56%

People survey response rate (a measure ofemployee engagement)

72% 68%

Employee rating of manager commitments (ameasure of how managers live our values and

demonstrate our behaviours)

90% 87%

Voluntary turnover (a measure of employee commitment)

30% 30%

The Board was pleased to note that, in 2022 scores increased in almost all areas of the people

survey at a Group level and there is a general trend towards positivity. However, the Board

recognises that we are still behind the benchmark in certain areas. A plan is being developed to

deliver a range of action plans from Group level down to team level and this remains a key focus

forour CEO, Jon Lewis, and the senior management team. The Board, through its ESG Committee,

will continue to receive regular updates from management on the progress made against these

action plans.

Board evaluation

The Board carries out effectiveness reviews annually. Due to the changes in Board membership,

and an external evaluation being undertaken in 2021, the 2022 evaluation was undertaken internally.

Key findings of the evaluation performed in 2022 are set out below, together with actions taken during

the year in response to the 2021 external evaluation performed by Independent Board Evaluation.

Finding from 2021 evaluation Action in 2022

Succession planning – further in-depth focus needed to

ensure Board composition is appropriate for the Group as it

shifts focus from transformation to growth.

The Nomination Committee reviewed the skill set of the Board,

and agreed a skills matrix aligned to the Group’s redefined

strategy. During the year, Nneka Abulokwe was appointed asa

non-executive director. Her skillset will assist with the Board’s

strategy to develop digital innovation as part of the Group’s

growth strategy. David Lowden was appointed as

chairdesignate on 22 March 2022 as part of the Board’s

succession planning, being appointed as Chairman on

10May2022. Brian McArthur-Muscroft was appointed as a

non-executive director on 1 June 2022, he brings additional

and current financial expertise to the Board given his role

aschief financial officer of Qontigo, a financial management

and investment management business.

Chairman Executive Directors Independent Non-Executive Directors

Corporate

governance

Capita plc

Annual Report 2022

Board members

Key to committees

Audit and Risk

Nomination

Remuneration Committee chair

Environmental, Social and Governance (ESG)

David Lowden

Chairman

Appointed: January 2021 (independent

Non-Executive Director); March 2021

(Senior Independent Director); May 2022

(Chairman)

Independent at appointment: Yes

Key skills and experience: David is

ahighly experienced non-executive

director, senior independent director and

chair of UK listed companies. He was

formerly Chair of PageGroup plc and

Huntsworth plc, Senior Independent

Director at Berendsen, Chair of the

Auditand Risk Committee at William Hill,

Chair of the Audit Committee at Cable &

Wireless Worldwide plc andChief

Executive ofTaylor Nelson Sofresplc.

Other current appointments: Chairman

of Diploma plc; and SeniorIndependent

Director of MorganSindall plc.

Tim Weller

Chief Financial Officer

Appointed: May 2021

Key skills and experience: before

joining Capita, Tim was at G4S for five

years as its CFO and for three years

before that as a Non-Executive Director.

He has many years’ experience as a

CFO with Innogy, RWE Thames Water,

United Utilities, Cable & Wireless

Worldwide plc and Petrofac. He spent his

early career at KPMG, where he trained

to become aChartered Accountant,

becoming apartner in 1997.

Board responsibilities: overall control

and responsibility for all financial aspects

of the business’s strategy.

External appointments: Non-Executive

Director of TheCarbon Trust.

Georgina Harvey

Senior Independent Director

Appointed: October 2019 (Non-

Executive Director); July 2022 (Senior

Independent Director)

Key skills and experience: Georgina

has significant experience across highly

competitive consumer-facing markets

and of delivering successful

transformational change. Prior to her

current roles, Georgina was Managing

Director ofRegionals and a member of

the Executive Committee of Trinity Mirror

plc from 2005 to2012.

Other current appointments: Non-

Executive Director of Superdryplc and

McColl’s Retail Group plc.

Jon Lewis

Chief Executive Officer

Appointed: December 2017

Key skills and experience: before

joining Capita, Jon was Chief Executive

Officer of Amec Foster Wheeler. Prior

tothat, he had a 20-year career at

Halliburton Company Inc, where he

helda number of senior roles, including

Senior Vice President and member of

theHalliburton Executive Committee.

Board responsibilities: managing and

developing Capita’s business to achieve

the Company’s strategic objectives.

External appointments: board member

of EquinorASA.

Brian

McArthur-Muscroft

Appointed: June 2022

Key skills and experience: Brian was

formerly the Group Chief Financial

Officer at Micro Focus International plc,

aFTSE 100 global infrastructure

software company. Prior roles include

CFO at Paysafe Group plc leading the

business to a FTSE 250 listing on the

LSE Main Market in 2016 and Group FD

at Telecity Group plc. Also a restructuring

specialist, he was interim CFO on the

successful turnaround of MCI Worldcom

EMEA. Prior to joining Capita he was a

Non-Executive Director at Robert Walters

plc. Brian holds a law degree and

qualified as a chartered accountant with

PricewaterhouseCoopers in London.

Other current appointments:

ChiefFinancial Officer of Qontigo,

afinancial intelligence and investment

management business.

Independent Non-Executive Directors Employee Non-Executive Director

Corporate

governance

Capita plc

Annual Report 2022

Board members

continued

Nneka Abulokwe OBE

Appointed: February 2022

Key skills and experience: Nnekahas

significant experience of delivering

large-scale, high-profile technology

projects for governments and private

institutions globally. She held senior

andexecutive positions withLogica

(nowCGI), Atos andSopra Steria, in

acorporate careerspanning more than

25years, before founding MicroMax

Consulting, where she is currently CEO.

Nneka was awarded Officer of the Order

of the British Empire (OBE) in2019 for

services to business.

Other current appointments: Non-

Executive Director, Davies Group;

Director of MicroMax Consulting Limited;

external member of the Audit & Risk

Committee, University ofCambridge;

adviser to Cranfield School of

Management Advisory Board and

DoGood Africa.

Neelam Dhawan

Appointed: March 2021

Key skills and experience: Neelam has

c.40 years’ leadership experience in the

IT industry, where she held senior

positions in Hewlett-Packard, Microsoft,

Compaq and IBM with responsibility for

awide range ofareas including strategy,

corporate development, software

engineering and offshoring. She now

advises multinationals on business and

technology transformation and, until

recently, was an advisor to IBM in India.

Neelam recently stepped down from the

Board of Skylo Technologies Inc. and

asa member of Koninklijke Philips NV

Supervisory Board, having served for

themaximum term of 10 years.

Other current appointments:

Non-Executive Board Member of ICICI

Bank Limited and Yatra Online Inc. She

mentors and advises young startup

companies and is on the board of

Capillary Technologies.

Janine Goodchild

Appointed: July 2022

Key skills and experience: Janine

isaregistered adult nurse and lead

clinical trainer inthe Capita team which

assesses personal independence

payment claims on behalf of the

Department for Work and Pensions.

Janine joined Capita in January 2016.

Janine’s previous experience includes

working in the banking industry

withincorporate actions, asset

reconciliations and within employee

training and development.

Other current appointments: None.

Directors who served during the

year2022

Sir Ian Powell stepped down from the

Board on 10 May 2022 at the conclusion

of the Company’s 2022 AGM.

Matthew Lester, Lyndsay Browne and

Joseph Murphy retired from the Board

on30 June 2022.

On 3 February 2023, the Company

announced that John Cresswell had

decided to step down fromthe Board

witheffect from 31 March 2023.

Key to committees

Audit and Risk

Nomination

Remuneration Committee chair

Environmental, Social and Governance

John Cresswell

Appointed: November 2015

Key skills and experience: John has

substantial experience in leading and

growing organisations asCEO and

executive director. He qualified as a

Chartered Accountant, has a BSc in

Economics and Politics, and attended

the advanced management programme

at Harvard Business School. Previously,

he was CEO of Bibby Line Group and

Arqiva, and held a number of executive

director roles on the board of ITV plc.

Other current appointments: Chair of

JMurphy and Sons Ltd; Chair of Bio4gas

Holdings Limited and an Operating

Advisor with Lazard Asset Management.

Corporate

governance

Capita plc

Annual Report 2022

Corporate governance statement

appointment ofJanine to the ARC continues to demonstrate how the Group values diversity of

perspective andthat this is considered more important than a purely compliance-driven approach

to the Code. Janine was not appointed as a member of the RemCo recognising the strong views

ofshareholders relating to the independence of RemCo members given the more than 20%

ofvotescast against the re-election of Lyndsay at the 2022 AGM, as detailed on page 76.

Except for Janine’s membership of the ARC, which does not comply with provision 24 of the Code,

the Company currently complies with all relevant provisions of the Code set out in sections 1 to 5.

Board changes during the year

Nneka Abulokwe and Brian McArthur-Muscroft were appointed as independent Non-Executive

Directors on 1 February and 1 June 2022 respectively. Sir Ian Powell stepped down as Chairman and

David Lowden was appointed as his successor on 10 May 2022. Georgina Harvey, was appointed

as SID on 1 July 2022. Matthew Lester, chair of the ARC, resigned from the Board on 30 June 2022.

Lyndsay Browne and Joseph Murphy non-executive employee directors resigned from the Board on

30 June 2022 having served their three-year term. Janine Goodchild was appointed Employee

Non-Executive Director on 1 July 2022. Further information on Board changes is set out on page 87.

Board changes after year end

There have been no changes to the Board since 1 January 2023.

On 3 February 2023, the Company announced that John Cresswell had decided to step down

fromthe Board with effect from 31 March 2023. John joined the Board in 2016 and has made

asignificant contribution during this period.

Board composition

Composition of the Board at 31 December 2022 and at the date of this report is shown in the

following table.

Board composition at 31 December 2022

Executive directors Independent non-executive directors Employee non-executive director

Jon Lewis David Lowden

Janine Goodchild

Tim Weller Georgina Harvey

Brian McArthur-Muscroft

John Creswell

Neelam Dhawan

Nneka Abulokwe

1. Independent on appointment in accordance with the Code.

2. On 3 February 2023, the Company announced that John Cresswell had decided to retire as a director and would step down from the Board with

effect from 31 March 2023.

Corporate Governance Code

Capita plc and its subsidiaries (the Group) are committed to maintaining high standards of

corporate governance. The UK CorporateGovernance Code 2018 (the Code) applies to accounting

periods beginning on or after 1 January 2019 and is available from theFinancial Reporting

Council’s website, www.frc.org.uk.

Throughout the accounting period towhich this report relates, the Company complied with all

relevant provisions set out in sections 1 to 5 of the Code except:

• Provisions 24 and 32 (audit and remuneration committees respectively to comprise independent

non-executive directors) as Joseph Murphy (member of the Audit and Risk Committee (ARC)

until30 June 2022) and Lyndsay Browne (member of the Remuneration Committee (RemCo)

until30June 2022), were both non-executive employee directors and therefore not considered

independent. However, the Board considered that the value of the employee perspective brought

by Lyndsay and Joseph to Board meetings should be replicated on those two committees. Lyndsay

and Joseph resigned from the Board on 30 June 2022, having served their three-year term.

• Provision 12 (appointment of a senior independent director). Following David Lowden’s

appointment as Chairman on 10 May 2022 and until the appointment of Georgina Harvey

assenior independent director (SID) on 1 July 2022, the Company did not have a SID.

• Following the appointment of David as Chairman, and the establishment of the ESG Committee,

the Nomination Committee undertook a review of Committee membership and considered who

should be appointed as members of each Committee and who should be appointed as SID. The

Nomination Committee considered the skillset of each Director, to ensure that each committee

has the appropriate skillset, balance of experience and diversity and that all members have

sufficient time available to devote to the committees of which they are members. This review

culminated in the appointment of Georgina Harvey as SID on 1 July 2022, given her experience

as RemCo chair and her engagement with shareholders in this role, and the Committee

membership which is detailed on page 85.

• The RemCo comprises solely independent non-executive directors, while the ARC, which

ischaired by Brian McArthur-Muscroft, comprises John Cresswell and Neelam Dhawan, all

non-executive directors, and Janine Goodchild, employee non-executive director. The formal

Committed to high

standards of governance

Corporate

governance

Capita plc

Annual Report 2022

Corporate governance statement

continued

Role of the directors

Chairman

The Chairman is responsible for leadership of

theBoard and ensuring its effectiveness on all

aspects of its role. This includes setting the

Board’s agenda and ensuring that adequate time

isavailable for discussion of all agenda items, in

particular strategic issues. The Chairman should

also promote a culture of openness and debate,

byfacilitating the effective contribution of non-

executive directors in particular and ensuring

constructive relations between executive and

non-executive directors. The Chairman is

responsible for ensuring that the directors

receiveaccurate, timelyand clear information,

andshould ensure there is effective

communication with shareholders.

Senior independent director

The SID acts as a sounding board for the

Chairman on Board-related matters, chairs

meetings in the absence of the Chairman, acts

asan intermediary for other directors when

necessary, leads the evaluation of the Chairman’s

performance, leads the search for anew Chair,

when necessary, and is available toshareholders

who wish to discuss matters which cannot be

resolved otherwise.

Non-executive directors

The non-executive directors constructively

challenge and help develop proposals on

strategy.They scrutinise the performance of

management inmeeting agreed goals and

objectives, and monitor the reporting of

performance. They satisfy themselves on the

integrity of financial information and that financial

controls and systems of risk management are

robust and defensible. They areresponsible for

determining appropriate levels of remuneration

ofexecutive directors and have a prime role in

appointing and, where necessary, removing

executive directors, and in succession planning.

Executive directors

The executive directors are responsible for the

day-to-day running of all aspects of the Group’s

business. This responsibility is different from the

Chairman’s role in running the Board. The role

ofCEO is separate from that of Chairman to

ensurethat no one individual has unfettered powers

of decision making.

Employee non-executive directors

Employee non-executive directors are appointed

from the workforce to contribute an employee

perspective to Board discussions. Thisis

akeyelement of the Board’s approach to

employeeengagement.

The Board

Role of the Board

To promote Capita’s long-term sustainable success, generating value for shareholders and contributing

to wider society.

Matters reserved for the Board

• Strategy and

management

• Structure and capital

• Financial reporting

• Internal controls

• Major contracts

• Shareholder

communication

• Board membership

Nomination

Committee

• Board and committee

composition

• Succession planning

• Diversity

• People strategy

Audit and Risk

Committee

• External audit

• Financial reporting

• Risk management

and internal controls

• Internal audit

Remuneration

Committee

• Remuneration policy

• Remuneration

principles

• Incentive design and

setting of targets

• Executive and senior

management

remuneration

ESG Committee

• Approval of ESG

strategy

• Oversee and monitor

Capita’s net zero

emissions strategy

Read more on page 86. Read more on page 90. Read more on page 99. Read more on page 88.

Corporate

governance

Capita plc

Annual Report 2022

Corporate governance statement

continued

Any director’s absence from Board or committee meetings was previously agreed with the

Chairman of the Board or relevant committeeand the CEO. Where possible the Chairman or

committee chair will contact the director who is unable to attend the meeting to obtain their

comments on Board and committee papers prior to the meeting.

During 2022, the following formal director meetings took place:

• The Chairman held one-to-one individual review sessions witheachexecutive director and each

non-executive director.

• The non-executive directors met without executive directors.

• The directors met without the Chairman, ledbytheSID.

Board leadership

There is a clear division of responsibility between the running oftheBoard by David Lowden

asChairman and responsibility fortherunning of the Group’s business by Jon Lewis as CEO.

David Lowden as Chairman has held meetings comprising solely the non-executive directors.

BothDavid andGeorgina are available to meet with significant shareholders when requested.

Governance and strategy

The Group recognises the contribution made by good governance totheCompany’s success,

andchanges made at both Board and Executive Committee level demonstrate the importance of

embedding the right structures with the right people to deliver the Group’s strategy.The connection

between governance and delivery of strategyisreflected throughout this Annual Report.

In addition to their statutory duties, the directors must ensure that theBoard focuses effectively on

all its accountabilities.

Section 172 of the Companies Act 2006 requires directors to act in awaythey consider, in good

faith, would be most likely to promote the success of the Company for the benefit of shareholders

as a whole. Indoing so, the directors must have regard (among other matters) to:

• the likely consequences of any decision in the long term

• the interests of the Company’s employees

• the need to foster business relationships with suppliers, clients andothers

• the impact of the Company’s operations on the community and theenvironment

• the desirability of the Company maintaining a reputation for high standards of business conduct

• the need to act fairly towards all shareholders of the Company.

Board meetings and attendance

During 2022, the Board held seven scheduled meetings. Additional ad hoc meetings were held as

required. In 2022, this included meetings to approve the disposal of Pay360 Limited and the related

shareholder circular.

Attendance of the directors at Board and committee meetings is shownbelow; the maximum

number of meetings a director could attendis in brackets.

Board

Audit and

Risk

Committee

Remuneration

Committee

Nomination

Committee

ESG

Committee

David Lowden

7(7) 2(3) 1(3) 6(8) 3(3)

Jon Lewis

7(7) n/a n/a 0(3) n/a

Tim Weller 7(7) n/a n/a n/a n/a

Georgina Harvey 7(7) 3(3) 6(6) 8(8) 3(3)

Brian McArthur-Muscroft

4(4) 4(4) 3(3) 4(4) n/a

John Cresswell

6(7) 6(6) 3(3) 8(8) 3(3)

Neelam Dhawan

7(7) 5(6) 6(6) 8(8) n/a

Nneka Abulokwe

6(6) 6(6) 5(5) 7(7) 3(3)

Janine Goodchild

2(3) 2(3) n/a n/a 2(3)

Sir Ian Powell

3(3) n/a n/a 3(4) n/a

Matthew Lester

4(4) 3(3) 2(3) 3(5) n/a

Lyndsay Browne

4(4) n/a 3(3) n/a n/a

Joseph Murphy

4(4) 3(3) n/a n/a n/a

1. David Lowden was a member of the ARC and RemCo, until his appointment as Chairman on 10 May 2022. He recused himself from one

Nomination Committee meeting which considered the appointment of a successor to Sir Ian Powell as Chairman due to his interest in the

matter. He also recused himself from one RemCo meeting which considered his remuneration as Chairman.

2. Jon Lewis was appointed as a member of the Nomination Committee on 1 July 2022. However, due to prior scheduled business commitments,

he was unable to attend three meetings.

3. John Cresswell was unable to attend one Board meeting and Neelam Dhawan one committee meeting due to a prior commitment.

4. Nneka Abulokwe, Brian McArthur-Muscroft and Janine Goodchild were appointed to the Board on 1 February, 1 June and 1 July 2022

respectively.

5. Janine Goodchild was unable to attend one Board, ARC and RemCo meeting due to Capita-related and other commitments made prior to her

appointment.

6. Sir Ian Powell stepped down from the Board on 10 May and Matthew Lester, Lyndsay Browne and Joseph Murphy resigned from the Board on

30 June 2022.

7. Matthew Lester was unable to attend one RemCo and two Nomination Committee meetings due to prior commitments.

Meetings held outside the normal schedule need to be flexible andareoften held by telephone

orvideoconference.

Corporate

governance

Capita plc

Annual Report 2022

Corporate governance statement

continued

• Financial reporting, including the approval of the Annual Report, half-yearly report, trading

statements, preliminary announcement forthe final results and dividend, treasury and

accountingpolicies.

• Internal controls, ensuring that the Group manages risk effectively byapproving its risk appetite

and monitoring aggregate risk exposures.

• Contracts, including approval of all major capital projects and major investments.

• Ensuring satisfactory communication with shareholders.

• Board membership and other appointments, including changes tothe structure, size and

composition of the Board, and succession planning for the Board and senior management.

Board of directors’ induction and training

Following appointment to the Board, all new directors receive an induction tailored to their individual

requirements. They are encouraged to meet and be briefed on the roles of key people across the

Group andhave open access to all business areas and employees to build upan appropriate level

of knowledge of the business that extends beyond formal papers and presentations to the Board.

All directors havereceived an appropriate induction for their roles within Capita, including some or

all of the following:

• The nature of the Group, its business, markets and relationships.

• Meetings with the external auditor, lawyers, brokers and relevant operational and functional senior

management.

• Board procedures, including meeting protocols, committee activities and terms of reference, and

matters reserved for the Board.

• Overviews of the business via monthly performance reviewreports.

• The Group approach to risk management.

Ongoing training and briefings are also given to all directors, including external courses as required.

Tailored induction programmes were prepared for Nneka Abulokwe, Brian McArthur-Muscroft and

Janine Goodchild to ensure they were properly equipped to fulfil their roles.

The Board determines the strategic objectives and policies of the Groupto best support the delivery

of long-term value, providing overallstrategic direction within an appropriate framework of rewards,

incentives and controls. The Board is collectively responsible for thesuccess of the Company

anddirectors’ roles are set out above. Following presentations by executive anddivisional

management, andadisciplined process of review andchallenge by the Board, cleardecisions on

policy or strategy areadopted, and the executive management are fully empowered toimplement

those decisions.

Stakeholder interests and the matters listed above are factored into allBoard discussions and

decisions. For more information, please referto the stakeholder engagement section on pages 47

and 48.

Board independence

Non-executive directors are required to be independent in character andjudgement. All

relationships that may interfere materially with this judgement are disclosed as required under the

conflicts of interest policy, see page 77. The Board has determined that, except for the employee

non-executive directors, all the non-executive directors whoserved during the year were

independent and that, before and uponappointment as Chairman, David Lowden met the criteria

ofindependence as outlined in the Code.

Board composition is a deliberate balance of newer and longer-standingmembers, and reflects the

ongoing review and refreshment ofBoard membership to ensure a balance of skills and experience

appropriate for the broad nature of Capita’s businesses. The experience and breadth of tenure of

the non-executive directors means the Board is well positioned to advise, challenge and support

executive management as the Group progresses its growth strategy.

The Board believes that each of the non-executives has retained independence of character and

judgement and has not formed associations with management or others that may compromise

theirability to exercise independent judgement or act in the best interests of the Group. The Board

is satisfied that no conflict of interest for any director requires disclosure, see page 77.

Matters reserved for the Board

A formal schedule of matters reserved for the Board has been adoptedand these include, but are

not limited to:

• Strategy and management, including responsibility for the overall leadership of the Group,

setting the Group’s purpose, values and strategy, and monitoring alignment with culture.

• Structure and capital, including changes relating to the Group’s capital structure and major

changes to the Group’s corporate structure, including acquisitions and disposals, and changes

totheGroup’s management and control structure.

Corporate

governance

Capita plc

Annual Report 2022

Corporate governance statement

continued

Company Secretary

All Board members have access to independent advice on any mattersrelating to their

responsibilities as directors and as members ofthe various committees of the Board at the Group’s

expense. The previously separate roles of Chief General Counsel and Group Company Secretary

were combined in the appointment of Claire Denton as Chief General Counsel and Group Company

Secretary on 1 March 2022. Claire is available to all directors and is responsible for ensuring that all

Board procedures arecomplied with. Claire has direct access and responsibility tothe chairs of the

standing committees and open access to all directors, and has been appointed as Secretary to the

Audit and Risk, Remuneration, Nomination and ESG committees.

Claire will meet regularly with the Chairman of the Board and theChairs of the ARC and RemCo,

andbrief them on areas of governance and committee requirements.

Shareholder engagement

There is an active engagement programme with the Company’s investors. The executive directors

meet regularly with institutional investors to discuss and obtain feedback on the business,

performance, strategy and corporate governance, and address any issues of concern.This is

undertaken through a combination of roadshows, groupor one-to-one meetings and attendance

atinvestor conferences. David Lowden also met with existing institutional shareholders both prior

toand following his appointment as Chairman on 10 May 2022.

Georgina Harvey, Chair of the RemCo, engaged with shareholders to discuss remuneration prior

tothe 2022 AGM. The investor relations team has day-to-day responsibility for managing investor

communications and always acts in close consultation with the Board. All members of the Board,

including thenon-executive directors, receive a report on any significant discussions with

shareholders and anonymous feedback that followstheannual and half-yearly presentations to

investment analystsand institutional investors. Analyst reports concerning Capitaare circulated

tothe directors and the Board is kept informedofchanges in the share register.

Principal decisions

Principal decision*

Impact on long-term

sustainablesuccess Stakeholder considerations Further details

Disposal of Pay360

Limited: following a

strategic review the

Board decided to

dispose of its Pay360

payments solutions

business, a non-core

business. The disposal

of Pay360 required

shareholder approval

which was sought at a

general meeting held on

1November 2022.

Strategy: the disposal of

Pay360 was expected to allow

the Company to strengthen its

balance sheet by reducing its

indebtedness, improve the

Group’s liquidity and pension

funding position and support

the Group’s strategy to build a

more focused sustainable

business for the long term.

Principal risks: the

strengthening of the Group’s

balance sheet as a result of the

disposal has assisted in

reducing two of Capita’s

principal risks: (i) to execute its

medium-term strategy; and (ii)

maintain financial stability.

Our people, customers and

suppliers: the strengthening of the

Group’s balance sheet has supported

the Group’s strategy to build a more

focused sustainable future providing

more stability for our colleagues,

customers and suppliers.

Investors: the disposal of Pay360,

anon-core business, has contributed

to the ability of the Group to focus on

its core business and to progress its

growth strategy by strengthening the

balance sheet and improving liquidity.

The Company believes that this will

improve the prospects of the Company

and will benefit shareholders.

Shareholders voted 99.99% in favour of

the disposal of Pay360 at the general

meeting held on 1 November 2022.

pages 30

and171.

Appointment of David

Lowden as Chairman

Governance: the chairman is

critical in ensuring the

effectiveness of the board in all

aspects of its role.

Principal risks: the

appointment of a chairman with

the appropriate skills and

attributes is essential to the

delivery of our strategy.

All of our stakeholders: all of our

stakeholders have an interest in the

delivery of our strategy and the way it

is delivered. David Lowden, Chairman

has a critical role in ensuring that our

strategy is delivered in line with our

purpose and values.

Nomination

Committee

report on

page87.

Establishment

ofBoard ESG

Committee

Strategy: to provide additional

and strategic focus on ESG

matters.

Principal risks: the ESG

Committee will have an

increased focus on people,

attraction and retention,

culture, wellbeing, health and

safety, and climate change.

Our people, customers, suppliers,

investors: all of our stakeholders are

concerned by the issues that will

receive increased focus by the ESG

Committee on behalf of the Board.

ESG

Committee

report on

pages 88

and89.

* Principal decisions are those that are material to the Group and/or significant to any of our key stakeholder groups.

Corporate

governance

Capita plc

Annual Report 2022

Corporate governance statement

continued

toquickly and easily access and maintain their shareholding online. Shareholders can also contact

Link by email at shareholderenquiries@linkgroup.co.uk. Link also provides a telephone helpline,

0371 664 0300, calls are charged at the standard geographic rate and will vary by provider. Calls

outside the UK will be charged at the applicable international rate. Lines are open between 9.00am

and 5.30pm, Monday to Friday, excluding public holidays in England and Wales.

Business relationships

Details regarding relationships with suppliers, clients and others, together with further cross

references, are provided in the engaging with stakeholders section on pages 47 and 48.

Remuneration Committee

Details of the RemCo and its activities are given in the directors’ remuneration report on pages 99

to 122.

Risk management and internal control

The Board monitors the Company’s risk management and internal control systems and carries out

an annual review of their effectiveness. The ARC report contains further details. The monitoring and

review includes all material controls, including financial, operational and compliance controls. This

process is regularly reviewed by the Board. The Group’s key internal control procedures are fully

documented within the strategic report on pages 54 to 56.

Furthermore, through the operation of the risk governance process, the directors confirm, for the

purposes of provision 28 of the Code, that they have carried out a robust assessment of the

emerging and principal risks facing the Group, including those that would threaten its business

model, future performance, solvency or liquidity. A description of those principal risks, what

procedures are in place to identify emerging risks, and an explanation of how these are being

managed or mitigated, is set out on pages 54 to 63.

Other statutory and regulatory information

Strategic report

The Company is required to prepare a fair review of the business of the Group during the financial

year ended 31 December 2022 and of the position of the Group at the end of the financial year, and

a description of the principal risks and uncertainties facing the Group (known as a strategic report).

The purpose of the strategic report is to enable shareholders to assess how the directors have

performed their duty under section 172 of the Companies Act 2006 (duty to promote the success

ofthe Company). The information that fulfils the requirements of the strategic report can be found

on pages 1 to 64. Details of the Group’s business goals, strategy and business model are on

pages2 to 7.

Shareholder meetings

Shareholders are encouraged to attend the AGM. However, given the situation with the Covid-19

pandemic at the beginning of 2022, the Company understood that many shareholders would not

wish to attend the 2022 AGM in person. Consequently, the 2022 AGM was held as a combined

physical and electronic meeting.

It is intended that the 2023 annual general meeting will be held as a physical meeting only and the

Board looks forward to meeting and welcoming shareholders to the meeting. Directors, including

chairs of the various committees, are expected to be present at the 2023 AGM, and will be available

to meet with shareholders and answer any questions.

The Chairman and SID are normally available to meet with Capita’s significant shareholders.

2022 voting outcome

At our 2022 AGM, the Board was again pleased that the majority of resolutions were passed with a

high level of support from shareholders. The Board has considered the votes against resolution 11

the re-election of Lyndsay Browne (24.36%). Lyndsay was appointed as an employee non-

executive director in July 2019 and was a member of the RemCo. As an employee non-executive

director Lyndsay was not considered independent. In order to better understand the reasons for

these votesagainst, the Board contacted shareholders who voted against this resolution and

considered the views of proxy voting agencies as to voting recommendations (where these had

been made available to the Company).

In addition, following the establishment of a Board ESG Committee in June 2022, the Board

reviewed the membership of all committees to ensure that each committee has the appropriate

skillset, balance of experience and diversity and that all members have sufficient time available

todevote to the committees of which they are members.

Lyndsay resigned as an employee non-executive director on 30 June 2022, having served her

three-year term. Recognising shareholders’ views with regards to independence, Janice Goodchild

who was appointed as an employee non-executive director on 1 July 2022, was not appointed as

amember of the RemCo. However the Board continues to believe in the importance of bringing the

contributions of its employees into committee meetings and considers that the value of the employee

perspective brought by Lyndsay was of considerable value to this committee. Consequently, Janine

may be invited, at the discretion of the RemCo Chair, to attend meetings and contribute to discussions.

Shareholder communications

In addition to the AGM, shareholders can access up-to-date information through the Group’s

website at www.capita.com. Shareholders can also view their holdings by using the Signal

sharesshareholder portal, a service offered by Link Group, the Group’s registrar, at

www.capitashares.co.uk. The Signal shares portal is an online service enabling shareholders

Corporate

governance

Capita plc

Annual Report 2022

Corporate governance statement

continued

Group activities

Capita is a purpose-led and responsible business which exists to create better outcomes for all

itsstakeholders. Our strategy is to simplify and strengthen in order to succeed. Capita’s business

model is based upon being a leading provider of business process services driven by data,

technology and people. We deliver innovative solutions to simplify the connections between

businesses and customers, and between government and citizens. We partner with clients to

transform their businesses and services. A review of the development of the Group and its business

activities during the year iscontained in the strategic report on pages 1 to 64. The operational and

financial performance ofits divisions are detailed on pages 16 to 25.

Results and dividends

The Group’s reported profit before tax amounted to £61.4m from continued operations

(2021:£285.6m). As previously announced, the directors do not recommend the payment

ofafinaldividend (2021: nil). The total dividend for the year was nil (2021: nil). The employee

benefittrust, which holds shares for the purpose of satisfying employee share scheme awards,

haswaived its right to receive future dividends on shares held within the trust.

Conflicts of interest

Under the Companies Act 2006, directors are under an obligation to avoid situations in which their

interests can or do conflict, or may possibly conflict, with those of the Company. A policy and

procedures are in place for identifying, disclosing, evaluating and managing conflicts so that Board

decisions are not compromised by a conflicted director. The Company’s Articles give the Board

power to authorise matters that give rise to actual or potential conflicts. Procedures are reviewed

annually to ensure they are operating effectively.

All conflicts of interest are reviewed annually by the Board and included in year-end attestations by

the directors. None of the directors of the Company has a material interest in any contract with the

Company or its subsidiary undertakings, other than their contracts of employment.

Corporate governance report

The corporate governance statement as required by Rule 7.2.1 of the Financial Conduct Authority’s

Disclosure Guidance and Transparency Rules (DTRs) is set out on pages 71 to 84.

Management report

For the purposes of Rule 4.1.5R(2) and Rule 4.1.8R of the DTRs, this directors’ report and the

strategic report on pages 1 to 64 comprise the management report.

Post-balance sheet events

The following events occurred after 31 December 2022, and before the approval of these

consolidated financial statements, but have not resulted in adjustment to the 2022 financial results:

Committed bridge facility

In February 2023, the Group entered into a committed bridge facility of £50m with three of its

relationship banks providing additional liquidity from 1 January 2024. The committed bridge facility

has an expiry date of 31 December 2024 and is subject to covenants, which are the same as those

in the revolving credit facility (RCF). Both the RCF and the £50m bridge facility incorporate

provisions such that they will partially reduce in quantum as a consequence of specified

transactions including disposals, equity-raises or other refinancing.

Election to apply FRS 101 – reduced disclosure framework

The Parent Company continues to apply UK GAAP in the preparation of its individual financial

statements in accordance with FRS 101 and these are contained in section 7 of the financial

statements on pages 215 to 227. FRS 101 applies IFRS as adopted by the UK with certain

disclosure exemptions. No objections have been received from shareholders.

Appointment, reappointment and removal of directors

Directors are appointed and may be removed in accordance with the Articles of Association

(Articles) of the Company and the provisions of the Companies Act 2006. All directors are subject

toelection at the first AGM after their appointment and, in accordance with Provision 18 of the

Code, to annual re-election thereafter. A resolution to elect or re-elect each director will therefore

beproposed at the AGM on 11 May 2023.

No person, other than a director retiring at the meeting, shall be appointed or reappointed a director

of the Company at any general meeting unless they are recommended by the directors.

No person, other than a director retiring at a general meeting as set out above, shall be appointed

or reappointed unless between seven and 35 days’ notice, executed by a member qualified to vote

on the appointment or reappointment, has been given to the Company of the intention to propose

that person for appointment or reappointment, together with notice executed by that person of his/

her willingness to be appointed or reappointed.

Corporate

governance

Capita plc

Annual Report 2022

Corporate governance statement

continued

option schemes since the end of the financial year to the date of this report. 37,102 shares have

been allotted under the Company’s share option schemes since the end of the financial year to the

date of this report.

The share price at 31 December 2022 was 24.26p. The highest share price in the year was 38.94p

and the lowest was 19.89p.

The Company renewed its authority to repurchase up to 10% of its own issued share capital at the

AGM in May 2022. During the year, the Company did not purchase any shares (2021: nil).

Viability statement

This statement is detailed in full on page 64. The directors have assessed the viability of the

Groupover the three-year period to 31December 2025, taking into account the Group’scurrent

position and the potential impact of the principal riskssetout in the strategic report. Based on this

assessment, thedirectors have a reasonable expectation that the Group and Parent Company

willbe able to continue in operation and meet their liabilities as they fall due over the period of the

viability assessment.

Going concern

The Group’s business activities, together with the factors likely to affectits future development,

performance and position are set out inthestrategic report on pages 1 to 64. The financial position

of the Group,itscash flows, liquidity position and borrowing facilities are described on pages 26 to

32. In addition, section 4 in the financial statementson pages 188 to 202 includes the Group’s

objectives, policiesandprocesses for managing its capital, its financial risk management

objectives, details of its financial instruments and hedgingactivities, and its exposures to credit

riskand liquidity risk.

In determining the appropriate basis of preparation of the financial statements for the year ending

31 December 2022, the directors are required to consider whether the Group can continue in

operational existence for the foreseeable future, being a period of at least 12 months from the date

of approval of the financial statements.

The Board monitors closely the Group’s funding position throughout the year, including monitoring

compliance with covenants and available facilities to ensure it has sufficient headroom to fund

operations. In addition, to support the going concern assumption, the Board conducts a robust

assessment of the Group’s financial projections for the foreseeable future, considering also the

committed facilities available to the Group. The Board has considered risks to the projections under

a severe but plausible downside. This includes adverse impacts arising from: revenue growth falling

materially short of plan; operating profit margin expansion not being achieved; additional inflationary

cost impacts which cannot be passed on to customers; unforeseen operational issues leading to

contract losses and cash outflows, increased interest rates, reduction in deferred cash

Major shareholders

At 31 December 2022, the Company had received notifications in accordance with the DTRs that

the following were interested in the Company’s shares:

Shareholder

Number of

% of

voting rights at

31December

2022

Number of

sharesdirect

Number of

sharesindirect

Schroders plc 321,365,363 19.08 – 321,365,363

RWC Asset Management LLP 286,449,316 17.01 286,449,316 –

Marathon Asset MGMT Limited 126,900,867 7.5 3 – 126,900,867

Veritas Asset Management LLP

83,131,892 4.98 – 83,131,892

BlackRock Inc. 74,230,358 4.45 – 74,230,358

Invesco Ltd 70,883,236 4.24 – 70,883,236

Vanguard Group Inc. 64,670,000 3.84 64,670,000 –

Veritas Funds PLC 55,009,900 3.30 – 55,009,900

Jupiter Asset Management Limited 53,573,060 3.21 – 53,573,060

Odey Asset Management LLP 51,459,613 3.05 51,459,613 –

1. Includes the holding of Veritas Funds PLC.

On 10 January 2023, notification in accordance with the DTRs was received from RWC Asset Management LLP that it held directly 286,050,563

shares, being 16.98% of voting rights. At 24 February 2023, no further notifications had been received under the DTRs in relation to interests in the

Company’s shares.

Directors’ interests

Details of directors’ interests in the share capital of the Company are listed on page 117.

Share capital

At 24 February 2023, the number of ordinary shares of 2

⁄

p each in issue, fully paid up and quoted

on the London Stock Exchange is detailed in the table below:

Number of

% of issued

sharecapital

Issued shares 1,684,273,523 100%

Treasury shares 0 0%

Total voting rights 1,684,273,523 100%

Employee Benefit Trust (EBT) shares

9,263,250 0.55%

1. Shares held in the Employee Benefit Trust are used for satisfying employee share options.

During the year ended 31 December 2022, no new ordinary shares were issued, and options

exercised pursuant to the Company’s share schemes were satisfied by the transfer of shares the

EBT (8,770,217 shares). No new ordinary shares have been allotted under the Company’s share

Corporate

governance

Capita plc

Annual Report 2022

Corporate governance statement

continued

Disabled persons

As part of the Group’s commitment to create a workplace that fully reflects the diversity of

thecommunities we serve, and a working environment inwhich no one feels excluded, full

consideration is given to all suitable applications for employment regardless of a candidate’s

disability, age, gender, religion or belief, sexual orientation or race. Colleagues who declare

adisability are supported with reasonable adjustments made throughout the hiring process,

theworkplace or job content so no opportunity, including training and career development,

isinaccessible. Opportunities also exist for employees of the Group who become disabled to

continuein their employment with any reasonable adjustments being made or tobe retrained for

other positions in the Group. Demonstrating our commitment to ensure that both applicants and

colleagues with disabilities and those with long-term health conditions have the opportunity to fulfil

their potential and realise their aspirations, the Group became a Disability Confident Employer

Level 2, in April 2022. We are currently finalising plans to achieve Level 3 status in 2023.

Employee development and engagement

Actions taken during the year regarding the consultation of and provision of information to UK

employees are described in the people section on pages 33 to 36. Communication with employees

in relation to Capita’s financial performance is detailed in the remuneration report on page 103.

Capita has an established UK employee share purchase plan designed to promote employee

shareownership and to give employees the opportunity to participate in the future success of

theCompany. An international share incentive plan is available to employees in Ireland.

Further information on employee development, consultation and engagement is included in the

people and responsible business sections on pages 33 to 36 and 37 to 45 and the stakeholder

engagement section on pages 47 and 48.

Political donations

The Group did not make any political donations or incur any political expenditure during the year

(2021: nil).

Greenhouse gas emissions

Details of the Group’s greenhouse gas (GHG) emissions, including metrics andmethodology, are

set out in the table on page 80 and on page43 of the strategic report.

consideration in respect of completed disposals; non-availability of the Group’s non-recourse

receivables financing facility; and unexpected financial costs and penalties linked to incidents such

as data breaches and/or cyber attacks.

To mitigate these, the Board has considered the mitigations, under the direct control of the Group,

that could be implemented to address the financial impact should these risks materialise. These

mitigations include reductions in capital expenditure, materially reducing and/or removing in full

bonus and incentive payments and significantly reducing discretionary spend. Taking these

mitigations into account, the Group’s financial forecasts over the going concern period demonstrate

liquidity headroom and compliance with all covenant measures throughout the going concern

period to 31 August 2024.

Therefore, after careful consideration and reflecting also the Board’s confidence in the expected

benefits from the completion of the transformation, and its ability to implement the above mitigations

should the severe but plausible downside materialise, coupled with the potential to obtain further

financing beyond its existing committed funding facilities, the Board has concluded that the Group

and Parent Company will continue to have adequate financial resources to discharge their liabilities

as they fall due over the going concern assessment period.

Accordingly, the directors have formed the judgement that it is appropriate to prepare the

consolidated financial statements on the going concern basis. The Board’s assessment is set out

inmore detail inSection 1 of the consolidated financial statements.

Auditor review

The auditor has reviewed:

• the statements regarding going concern, see page 78;

• the longer-term viability statement, see page 64; and

• those parts of the statement of compliance with the Code relating to:

– directors’ and auditor’s responsibilities

– the ‘fair, balanced and understandable’ statement

– confirmation of robust risk assessment, and monitoring and review ofeffectiveness of risk

management and internal control systems

– ARC composition, role and responsibilities.

Further details are in the auditor’s report, on pages 124 to 141.

Corporate

governance

Capita plc

Annual Report 2022

Corporate governance statement

continued

GHG emissions (tCO

e) and energy use (kWh) for period 1 January 2022 to 31 December 2022

Period Data source Current reporting year 2022 Comparison reporting year 2021 Comparison reporting year 2020

Region

UK and

offshore

Global

(excluding UK

and offshore) Total

UK and

offshore

Global

(excluding UK

and offshore) Total

UK and

offshore

Global

(excluding UK

and offshore) Total

Energy used to calculate emissions (kWh)

Gas and fuel Energy Bureau, UK est energy, FSC burn, int.est

energy, Capita Europe

58,561,431 2,443,394 61,004,825 65,139,586 1,726,618 66,866,204 73,668,847 1,871,964 75,540,811

Electricity & district heat 65,813,485 15,405,065 81,218,550 93,211,777 26,513,142 119,724,918 81,491,440 16,112,463 97,60 3,902

Business travel, cars SAP expenses 12,211,0 32 3,836,579 16,047,610 12,502,976 2,271,999 14,774,974 46,912,511 3,351,543 50,264,055

Total energy used (kWh) 136,585,947 21,685,038 158,270,986 170,854,338 3 0,511,75 8 201,366,097 202,072,798 21,335,969 223,408,768

% of total energy used 86% 14% 100% 85% 15% 100% 90% 10% 100%

Emissions from combustion of gas and fuel forheating

tCO

e (Scope 1)

Energy Bureau, Capita Europe

9,281 405 9,686 11,620 320 11,941 15,594 592 16,186

Emissions from combustion of fuel in company vehicles

tCO

e (Scope 1)

Fleet, FSC, fleet Germany, India, South Africa

1,851 67 1,918 1,845 71 1,916 1,695 86 1,782

Emissions from fugitive refrigerant gas tCO

e (Scope 1) Fugitive refrigerant gas

445 0 445 1,466 0 1,466 1,011 0 1,011

Emissions from purchased district heat tCO

e (Scope 2) Energy Bureau, Capita Europe

34 264 298 40 157 198 45 136.60 181

Emissions from purchased electricity (location based)

tCO

e (Scope 2)

Energy Bureau, UK est energy, int. est energy,

Capita Europe, South Africa, India

12,827 8,012 20,839 23,891 6,853 30,744 18,938.58 9,239.43 28,178

Emissions from purchased electricity (market based)

tCO

e (Scope 2)

Energy Bureau

2,247 1,836 4,083 10,328 8,132 18,460 12,513 11,0 0 9 23,522

Emissions from business mileage, air, rail, tube tram

andlight rail, taxi, bus, coach, ferry, hotel, waste. tCO

(Scope 3)

SAP, Agiito

4,857 1,244 6,101 3,860 640 4,500 6,829 1,052 7,881

Total gross tCO

e Scope 1 and 2 (location based) 24,438 8,748 33,186 38,863 7,4 01 46,264 37,28 4 10,055 47,338

Total gross tCO

e emissions (location based) 29,294 9,992 39,287 42,722 8,042 50,763.93 4 4,113 11,107 55,220

Total gross tCO

e emissions (market based) 18,680 3,552 22,233 29,119 9,163 38,282.35 37,6 4 3 12,740 50,383

Intensity ratio: gross Scope 1 and 2 tCO

e (location

based) per £1M turnover

8.1 2.9 11.0 10.0 2.3 12.3 11. 2 3.0 14.2

Intensity ratio: gross Scope 1 and 2 tCO

e (location

based) per headcount

0.77 0.48 0.66 0.91 0.39 0.73 1.01 0.54 0.85

Methodology: Carbon emissions have been calculated following the GHG protocol using the operational control approach. Estimated energy figures have been used for buildings where direct meter data is not available, using Cibse guide F benchmarks

(orprevious years’ consumption outside UK if available). Any fuel figures provided in litres have been converted into kWh or tCO

e using Gov.UK and Defra conversion tables. Mileage provided has been converted into tCO

e using Defra conversions for

therelevant engine size and fuel type. kWh figures for air, rail, taxi and other public transport have been omitted as not practical to convert from passenger km or passenger fares but CO

e emissions have been calculated using Defra conversion factors.

Scope 1, Scope 2 and Scope 3 business travel are verified to ISAE 3000 by Corporate Citizenship in each year.

Corporate

governance

Capita plc

Annual Report 2022

Corporate governance statement

continued

The size of the available commitment will be right-sized each time the Group either refinances,

raises funds through disposals, or raises equity with the RCF including mandatory cancellation

mechanisms that determine the amount of the cancellation in each case. The commitments are

subject to a minimum value of £180m regardless of the quantum of receipts.

The RCF expires on 31 August 2024 and was undrawn at 31 December 2022 (31 December 2021:

£40m drawn).

US private placement loan notes and euro fixed-rate bearer notes (private placement loan notes)

provide the Group’s core funding, and to mitigate the risk of needing to refinance in challenging

conditions, these have been arranged with a spread of maturities to November 2027. The bank

facilities and private placement loan notes all include provisions that would require repayment in

theevent of a change of control, which are typical of these arrangements.

Finally, certain property and assets used in the Group’s operations are funded by lease

arrangements. From time to time, the Group may act as lessor to third parties.

Various other financial instruments, such as trade debtors and trade creditors, arise directly from

the Group’s operations. In respect of trade creditors, the Group’s standard supplier payment terms

are to pay micro-businesses (less than 50 employees) within 14 days, SMEs (less than 250

employees) within 30 days, and larger organisations within 60 days. The Group aims to pay its

suppliers on time in accordance with agreed contractual terms.

The Group’s customers are offered credit terms that are consistent with market practice. The Group

uses a non-recourse invoice discounting facility to mitigate the risk of late customer payment and

toprovide working capital funding at an economically favourable rate versus the RCF. The value of

invoices sold under the arrangement at 31 December 2022 was £36.9m (2021: £3.9m). In addition,

the Group’s German business uses an invoice discounting arrangement relating to a specific

customer contract, and the value of invoices sold under that arrangement at 31 December 2022

was £7.5m (2021: £12.5m).

As set out in note 6.2 (contingent liabilities), the Group has provided, through the normal course of

its business, £34m letters of credit, performance bonds and guarantees (2021: £28.7m). £12.5m of

these were issued by our banks and, within this group, some are subject to security terms where

the bank can demand cash collateral in the event the guarantee facility is cancelled.

Exposure to movements in interest rates and foreign exchange rates arise through the Group’s

operations and where financial instruments are transacted at floating rates of interest or in non-

operational currencies. These exposures are managed through derivative transactions, primarily

cross-currency interest rate swaps and forward foreign exchange contracts.

Energy efficiency action 2022

We invested in energy-efficiency measures across our estate in 2022 to deliver savings below.

Building plant upgrades and initiatives tCO

e reduction per annum

Replacement LED lighting 5.6

Replacement chillers and air conditioning units 70.1

Motor speed drives (VSD) 5.0

Upgraded building management controls 49.5

Lift motor drive and controls 5.9

Replacement heating plant 48.9

Total tCO

e reduction 185.1

Our virtual meetings initiative resulted in further reductions in business travel CO

. Post pandemic,

travel emissions began to climb in 2022 but remained significantly below our short-term SBTi target

for 2030. We have set a 2035 net zero target to augment our short term 1.5°C science based

targets for greenhouse gas reduction. This target covers our full value chain and has been verified

by SBTi. In 2022 we set net zero targets for functions and divisions, linked to incentive plans,

todrive progress against our net zero milestones and plan. Capita reached the CDP ‘A’ list for

thefirst time in 2022.

Financial instruments

The main financial risks the Group is exposed to are: insufficient liquidity; significant increases in

interest rates; adverse movements in foreign exchange rates; and the insolvency of debtors (credit

risk). The management of each, and the related financial instruments, are described below.

Liquidity remains a key area of focus. The Group monitors the risk of a liquidity shortage through

itsbusiness plan and liquidity cycle forecasts and analysis, taking into consideration the maturity

ofboth the Group’s financial instruments and the forecast cash flows from operations.

The Group does not rely on sources of funding that are not contractually committed. Its policy is to

hold cash and undrawn committed facilities at a level sufficient to fund the Group’s operations and

its medium-term plans, and to maintain a balance between continuity of funding and flexibility

through the use or availability of multiple sources of funding.

The Group’s committed bank facilities provide liquidity for the cash fluctuations of the business

cycle and an allowance for contingencies. At 31 December 2022 the RCF commitment was

£288.4m (£385.7m at 31 December 2021) and was subsequently reduced to £284.7m on 4 January

2023 following receipt of proceeds from disposals.

Corporate

governance

Capita plc

Annual Report 2022

Corporate governance statement

continued

There are a number of significant client agreements which contain provisions relating to change

ofcontrol, which in some cases could present a right of termination of the contract.

Rights and restrictions attaching to shares

Under the Company’s Articles, holders of ordinary sharesare entitled to participate in the receipt

ofdividends pro rata totheir holding. The Board may propose and pay an interim dividend and

recommend a final dividend in respect of any accounting period outof the profits available for

distribution under English law. A final dividend may be declared by the shareholders in general

meeting byordinary resolution, but no dividend may be declared in excess oftheamount

recommended by the Board.

At any general meeting, a resolution put to vote shall be decided on apoll, and every member who

is present in person or by proxy shall have one vote for every share of which they are the holder.

No person holds securities in the Company carrying special rights withregard to control of the

Company. The Company is not aware ofanyagreements between holders of securities that may

result inrestrictions on the transfer of securities or on voting rights.

Restrictions on transfer of shares

The Company’s Articles allow directors to, in their absolute discretion, refuse to register the transfer

of a share in certificated form unless the instrument of transfer is lodged, duly stamped, at the

registered office ofthe Company, or at such other placeas the directors may appoint and(except in

the case of a transferby a recognised person where a certificate has not been issuedin respect of

the share) is accompanied by the certificate for theshare to which it relates and such other

evidence as the directors may reasonably require to show the right ofthetransferor to make

thetransfer. They may also refuse to register anysuch transfer where itis in favour of more than

four transferees or inrespect of more than oneclass of shares.

The directors may refuse to register a transfer of a share in uncertificatedform in any case where

the Company is entitled torefuse(or is exempted from the requirement) under the

UncertificatedSecurities Regulations to register the transfer.

Annual general meeting

The 2023 AGM of the Company will be held at 65 Gresham Street, London, EC2V 7NQ on 11 May

2023. Details of the meeting format and the resolutions to be proposed are setout in the Notice of

Meeting, which is sent to shareholders with the 2022 Annual Report and includes notes explaining

the business to be transacted. TheNotice of Meeting is also available on the Company’s website at

www.capita.com.

In May 2022, shareholders granted authority for the Company to purchase up to 168,427,352

ordinary shares. This authority will expire atthe conclusion of the 2023 AGM. No shares were

The Group is not generally exposed to significant foreign currency transaction risk. The principal

exceptions relate to service delivery based in India and South Africa, and committed costs relating

to the purchase of cloud software services in USD. These exposures are managed through forward

foreign exchange contracts, including non-deliverable forward contracts, which fix the GBP cost of

highly probable forecast transactions denominated in INR, ZAR and USD. Further details of the

Group’s financial instruments can be found in note 4.5 to the consolidated financial statements on

pages 196 to 201.

In respect of credit risk, the Group trades only with parties that are expected to be creditworthy. It is

the Group’s policy that all clients who wish to trade on credit terms are subject to credit verification

procedures. In addition, receivable balances are monitored on an ongoing basis with the result that

the Group’s exposure to bad debt is not significant. Credit risk also arises from financial assets such

as cash, deposits and the mark-to-market value of derivative instruments where positive. The risk of

default is managed by limits on the exposure to any counterparty, and with reference to the public

ratings of each.

Directors’ indemnities

As permitted by its Articles, the Company has indemnifiedeach director in respect of certain

liabilities and coststheymight incur in the execution of their duties as a director. Qualifying third-

party indemnity provisions (as defined in section 234 ofthe Companies Act 2006) were in force

during the year and continueto remain in force. The directors’ indemnities will be available for

inspection at the AGM together with directors’ service contracts.

Powers of directors

The business of the Company is managed by the directors who aresubject to the provisions of the

Companies Act 2006, the Articles of the Company and any directions given by special resolution,

including the Company’s power to repurchase its own shares.

The Company’s Articles may only be amended by aspecial resolution of the Company’s

shareholders.

Change of control

All the Company’s share schemes contain provisions in relation to achange of control. Outstanding

options and awards would normally vest and become exercisable on a change of control, subject to

the satisfaction of any performance conditions at that time.

Capita has borrowing facilities provided by banks and has issued loan notes to financial investors.

The borrowing facilities contain change of control provisions under which the banks may require

immediate repayment in full on a change of control of Capita plc. The loan notes issued by Capita

contain similar change of control provisions which are likely to require the Group to offer to prepay

the notes in full if there is a change in control of Capita plc.

Corporate

governance

Capita plc

Annual Report 2022

Corporate governance statement

continued

• Assess the Group and Parent 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 intend either toliquidate the Group or the

Parent Company 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 Parent Company’s transactions and disclose with reasonable accuracy at any time

the financial position of the Parent Company and enable them to ensure thatits 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 Group and to prevent anddetect

fraud and other irregularities.

Under applicable law and regulations, the directors are also responsible for preparing a strategic

report, directors’ report, directors’ remuneration report and corporate governance statement that

comply with that law and those regulations.

The directors are responsible for the maintenance and integrity of thecorporate and financial

information included on the Company’s website. Legislation in the UK governing the preparation

and dissemination of financial statements may differ from legislation in otherjurisdictions.

purchased during 2022. A resolution to renew this authority will be put to shareholders atthe

2023AGM.

The directors consider that each of the resolutions is in the best interestsof the Company and the

shareholders as a whole, and recommend that shareholders vote in favour of all of the resolutions.

For other general meetings the notice given would be 14 clear workingdays.

Cross-references

For the purposes of LR 9.8.4R, the following information is located assetout below:

Listing Rule Subject Page no.

9.8.4 (1) Capitalisation of interest 196

9.8.4 (12–13) Shareholder waiver of dividends 77

Directors’ responsibilities in respect of the Annual Report and the

financialstatements

The directors are responsible for preparing the Annual Report and theGroup and Parent Company

financial statements, in accordance withapplicable law and regulations.

Company law requires the directors to prepare Group and Parent Company financial statements

foreach financial year. Under that lawthey are required to prepare the Group financial statements

in accordance with UK-adopted international financial reporting standards (IFRSs) and the

Disclosure Guidance and Transparency Rules of the UK’s Financial Conduct Authority, andhave

elected toprepare the Parent Company 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 Group and Parent Company

and of theirprofit or loss for that period. In preparing each of the Group and Parent Company

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, for the Group financial statements, whether they have been prepared in accordance with

UK-adopted IFRSs.

• State, for the Parent Company financial statements, whether applicableUK Accounting Standards

have been followed, subject toany material departures disclosed and explained in the Parent

Company financial statements.

Corporate

governance

Capita plc

Annual Report 2022

Corporate governance statement

continued

Directors’ responsibility statement

We, the directors of the Company, confirm that to the best ofourknowledge:

• The financial statements, prepared in accordance with the applicable set of accounting standards,

give a true and fair view of the assets, liabilities, financial position, and profit or loss of the

Company and theundertakings included in the consolidation taken as a whole.

• The strategic report includes a fair review of the development and performance of the business

and the position of the Company and the undertakings included in the consolidation taken as

awhole, together with a description of the principal risks and uncertainties thatthey face.

• The Annual Report and Accounts, taken as whole, are fair, balanced and understandable, and

provide the information necessary for shareholders to assess the Company’s position and

performance, business model and strategy.

The directors’ report on pages 1 to 122 has been approved by the Board.

On behalf of the Board.

Claire Denton

Chief General Counsel and Company Secretary

2 March 2023

Capita plc

Registered in England and Wales No. 2081330

Corporate

governance

Capita plc

Annual Report 2022

Committees

Membership

Membership of the Company’s standing committees at 31 December 2022 is shown below:

Nomination Audit and Risk Remuneration ESG

David Lowden C – – C

Jon Lewis X – – –

Georgina Harvey X – C X

Brian McArthur-Muscroft X C X

John Cresswell X X – X

Neelam Dhawan X X X

Nneka Abulokwe X – X X

Janine Goodchild – X – X

Changes to Committee membership

Following the establishment of the ESG Committee on 30 June 2022, the Nomination

Committee reviewed the membership of the Company’s standing committees on behalf of the

Board to ensure that each committee comprised members with the appropriate skillset and

diversity and that all members had sufficient time to devote to the committees.

Prior to this review John Cresswell, Neelam Dhawan and Nneka Abulokwe were members of all

of the standing committees. David Lowden stepped down as a member of the Remuneration

and Audit and Risk Committees upon his appointment as Chairman on 10 May 2022.

Frequency of meetings and attendance

During 2022, the Nomination Committee met eight times, the Remuneration Committee six

times, the Audit and Risk Committee six times and the ESG Committee three times. Attendance

of directors at committee meetings is shown in the table on page 73.

Terms of reference

The terms of reference of the Nomination, Remuneration and Audit and Risk committees

were reviewed in June 2022 upon the establishment of the ESG Committee, to ensure that

relevant matters are now considered by the ESG Committee, when appropriate matters are

considered in conjunction with other committees.

Committee terms of reference were also reviewed in December 2022 to reflect updates

ingood governance practices. These are summarised below and the Nomination,

Remuneration, Audit and Risk and ESG committee terms of reference are displayed in

fullinthe investor centre at www.capita.com/investors/corporate-governance, together

withasummary of matters reserved for the Board.

Terms of reference Brief description of responsibilities

Nomination Committee

• Reviews composition of the Board.

• Recommends appointment of new directors.

• Ensures plans are in place for orderly succession to both the Board and

senior management positions.

• Oversees development of diverse pipeline forsuccession.

Audit and Risk Committee

• Reviews accounting policies and contents offinancial reports.

• Monitors internal control environment.

• Considers adequacy, effectiveness and scope of external and internal

auditprogramme.

• Oversees relationship with external auditor.

• Monitors risk profile and obtains assurance that principal risks have been

properly identified and appropriately managed.

Remuneration Committee

• Sets policy for Board and senior management remuneration.

• Approves individual remuneration awards.

• Agrees changes to senior executive incentiveplans.

ESG Committee

• Oversees the development of the Group’s ESG strategy, monitoring

itsperformance in relation to ESG matters.

• Considers the adequacy of the Group’s ESG policies and processes.

• Oversees and monitors the Group’s progress against its net zero

emissionsstrategy.

• Oversees and supports stakeholder engagement on ESG matters.

Disclosure Committee

• Responsible for the appropriate identification and management of inside

information, including any decision to delay public disclosure.

Committees

The committee met eight times in 2022

and the members’ attendance record is

shown on page 73. The Chief General

Counsel and Group Company Secretary

acts as Secretary to the committee and

is available to assist committee

members as required, also ensuring the

distribution oftimely and accurate

information. Thecommittee reports and

makes recommendations to the Board in

relation to its activities. It is authorised

under its terms of reference to obtain the

advice of independent search

consultants. The committee’s terms of

reference can be found on Capita’s

website at www.capita.com/investors/

corporate-governance.

We are committed to making sure we have the

necessary skills, expertise and diversity on the Board

to help support the delivery ofCapita’s strategy.”

David Lowden, Chair, Nomination Committee

Nomination Committee

time allocation (%)

1 20% Board appointments

2 10%

Employee director appointment

3 55% Succession planning

4 10% Diversity

5 5% Governance

Corporate

governance

Capita plc

Annual Report 2022

Nomination Committee Report

Responsibilities and activities

Key responsibilities

• Identify and nominate appropriate candidates

for appointment to the Board, having due

regard to the provisions of the Code and, in

particular, the balance of skills, knowledge

and experience on the Board and the

diversity of its composition.

• Keep the structure and size of the Board, its

committees and the leadership needs of the

organisation under review and ensure that

plans are in place for orderly succession and

appointment to the Board.

• Review the time commitment and

performance of non-executive directors.

• Oversee development of a diverse pipeline

forsuccession.

Activity in 2022

• Succession planning for the Chairman.

• Recruitment and appointment of two

independent non-executive directors.

• Overseeing the process of the appointment

ofa new employee director and reviewing

andrecommending the appointment of the

preferred candidate to the Board.

• Review of diversity and inclusion activities

and measures.

• Reviewing succession planning for members

of the Executive Committee.

• Consideration of the contributions and

effectiveness of the non-executive directors

seeking re-election at the 2022 AGM.

• Reviewing committee membership and

appointment of the SID.

Nomination

Committee report

The time allocation chart is provided for guidance only and other

matterswere also considered by the committee.

1. The 2018 Code defines senior management as the Executive Committee and the Group Company Secretary.

Corporate

governance

Capita plc

Annual Report 2022

Nomination Committee Report

continued

Structured development plans are implemented to support individuals in improving their skills and

experience. The depth of the framework means talent can be identified and nurtured at an early

stage and, combined with the approach to Board appointments, means the pool of possible future

candidates for Board roles is sufficiently wide and diverse.

Board appointments during the financial year

During the year the committee considered the following Board appointments, recommending the

appointment of the preferred candidate to the Board. External search agencies Spencer Stuart and

Lygon Group (Lygon), were engaged to assist in identifying suitable candidates for these Board

positions. These firms have no other connection with the Company or individual directors.

Nneka Abulokwe who has significant experience of business and technology innovation was

appointed to the Board on 1 February 2022, with Spencer Stuart assisting the committee.

The committee considered succession planning for the role of chairman. Lygon evaluated potential

external candidates against David Lowden, the Company’s SID and strong internal candidate.

Thecommittee considered a number of potential external candidates, before concluding that

Davidwas the strongest and preferred candidate for the role. Following this process the committee

recommended to the Board that David should succeed Sir Ian Powell when he stepped down as

Chairman at the conclusion of the Company’s 2022 AGM on 10 May 2022. David was appointed

asChair designate on 22 March 2022. Sir Ian and David did not participate in these discussions.

Georgina Harvey and John Cresswell, committee members, co-chaired the committee meeting

which considered the appointment of Sir Ian’s successor.

As part of its succession planning agenda, the committee engaged Lygon to identify candidates

with strong current financial experience. This concluded in the appointment of Brian McArthur-

Muscroft to the Board on 1 June 2022 and as Audit and Risk Committee chair on 1 July 2022.

Brianis a chartered accountant and chief financial officer for Qontigo.

The committee considered, and recommended, the appointment of Janine Goodchild as employee

non-executive director. Janine is a Lead Clinical trainer in the Capita team which assesses personal

independence claims on behalf of the Department for Work and Pensions. Janine joined Capita in

January 2016 and was appointed to the Board on 1 July 2022.

Board evaluation

Details of the annual board evaluation process are provided in the Chairman’s report on page 68.

David Lowden

Chair

Nomination Committee

2 March 2023

Diversity and inclusion

Capita’s diversity and inclusion policy, which includes the Board, is based on a commitment

tocreating an environment where diversity is valued and respected. We believe that business

success is a direct result of the experience and quality of its people. Inherent within this approach

isan acceptance and embracing of diversity in all its forms and an endorsement that the entire

workforce, including the Board, be representative of the communities in which Capita operates.

Keyaims of the policy are to ensure equality, diversity and inclusion in the workplace and to

promote a culture where everyone is treated with respect and dignity.

Further information on actions taken to address diversity, inclusion and wellbeing across the

workforce is on pages 39 and 40 of thestrategic report.

Gender and ethnicity balance

The FCA has introduced a requirement for premium listed companies to disclose against a target

of40% female representation and ethnicity (at least one director of colour) on boards of premium

listed companies in respect of accounting periods beginning on or after 1 April 2022. During 2022,

we made further progress on gender and ethnicity balance at both Board andsenior management

levels, and we have already exceeded the FCA’s target for female representation at Board level, but

there is still more to do throughout the organisation.

At 31 December 2022, female representation on the Board andamong senior management

was44%

and female representation among senior management

and direct reports was 35%. At31December

2022, ethnically diverse representation on the Board and among senior management

was 22%.

Appointment process

Board appointments are made on merit, taking account of the specific skills, experience, knowledge

and independence needed to ensure a rounded board. We ensure 40% female representation on

recruitment shortlists and, where appropriate, seek to include candidates who may not have listed

company experience but who possess suitable skills and qualities. We only engage executive search

firms that have signed up to the voluntary code of conduct on gender diversity and best practice.

Skills and experience

We are committed to making sure we have the necessary skills, expertise and diversity to help

support the delivery of Capita’s strategy.

During 2022 a Board skills matrix was debated to assist in ensuring the balance of skills and

experience of the Board matched the future needs of the business.

Succession planning and Board composition

A formal succession framework is in place for the CEO, CFO, Executive Committee and the

twomanagement layers beneath. The purpose of the framework is to apply a fair, objective and

consistent methodology to identify future potential career paths for individuals within the Group.

The committee received

reports on the following

themes during the year:

• cyber and information

security

• IT resilience

• internal controls

• securing contracts and

extending existing contracts

• risk of failing to deliver on

our contractual obligations

toour clients

• attracting, developing

andretaining our people

• anti-bribery and corruption,

including details of matters

raised under the Group’s

Speak Up policy

• privacy

• legal update.

We have continued to make progress in

delivering on our environmental, social

and governance (ESG) objectives.

To enhance how we serve and respect

our stakeholders, including society

andthe environment, we have also

established an ESG committee to the

Board. This committee was established

on 30 June 2022 and met three times

during 2022. David Lowden has been

appointed as ESG Committee chair.

Other members of the committee are

Georgina Harvey, Nneka Abulokwe,

John Cresswell and Janine Goodchild.

ESG Committee

time allocation (%)

1 25% Governance

2 25% Employee-related issues

including diversity and inclusion

3 20% Net zero

4 15% ESG-related bonus targets

5 15% Strategy

Corporate

governance

Capita plc

Annual Report 2022

ESG Committee report

ESG

Committee

report

The committee oversees Capita’s conduct

as a responsible business and validates

through ESG principles our approach to

being a purpose-led business.

Responsibilities and activities

Key responsibilities

• Oversee the development of the Group’s

ESG strategy and monitor its performance

in respect of ESG-related matters on

behalf of the Board.

• Consider the adequacy of the Group’s

ESG-related policies.

• Oversee and monitor the Group’s progress

against its net zero strategy.

• Liaise with the Audit and Risk Committee

regarding the Company’s Speak Up policy.

• Receive, review and approve the Group’s

people strategy on behalf of the Board.

Activity in 2022

• Reviewed the terms of reference

ofthecommittee.

• Reviewed Capita’s progress towards

itsnetzero target.

• Received awareness training on net zero.

• Received a presentation on the Group’s

HSEframework and divisional/functional

compliance, including wellbeing matters.

• Reviewed diversity and inclusivity data.

• Considered Capita’s ESG strategy

andgovernance structure.

• Received an update on Capita’s

peopleplan.

• Reviewed and recommended to RemCo

ESG bonus-related targets for 2023 and

reviewing and approving the outcome of

ESG bonus-related targets for 2022.

• Received a report on ESG indices and

how Capita is performing.

The time allocation chart is provided for guidance only and other

matterswere also considered by the committee.

Corporate

governance

Capita plc

Annual Report 2022

ESG Committee report

continued

highest standards of target setting methodology. At that date, only 134 companies had net zero

targets verified by SBTi, showing the level of commitment and authenticity required.

Task Force on Climate-related Financial Disclosures

The committee has reviewed and considered the disclosures made within this annual report which

are consistent with the TCFD recommendations.

The Group’s HSE framework and wellbeing of our colleagues

The health and safety and the wellbeing of all our colleagues is a priority for the committee.

Thecommittee received presentations from the Senior Medical Officer detailing Capita’s HSE

framework, noting the improvements that had been made to the Group’s HSE compliance during

2022 and from the Group Head of Wellbeing and Occupational Health, which explained the wide

variety of global wellbeing support tools and activities that we provide for all our colleagues to help

them manage their own wellbeing as well as supporting colleagues through challenging times. Our

employee assistance programmes are a fundamental support service available to all colleagues

providing 24/7 counselling and advice.

ESG-related bonus targets

This committee worked closely during the year with the Remuneration Committee on ESG-related

bonus targets, both reviewing the outturn of the ESG-related targets included in the 2022

management bonus plan and reviewing ESG targets for the 2023 management bonus plan, making

recommendations to the Remuneration Committee. These include traditional measures such as

employee engagement together with targets that address broader societal concerns, such as

climate change and D&I, consistent with the Board’s responsibility to all stakeholders. Further

details are provided in the Directors’ remuneration report on pages 99 to 122.

Other matters

During the year the committee also addressed a range of other strategic and current issues

including the results of our employee survey, gender pay gap information and D&I, and discussed

the initiatives that are being undertaken by Capita in these areas.

Details of the progress made by our responsible business team and the challenges that the Group

faces are detailed on pages 37 to 46 of this report. This includes details of our continuing

commitment to be a real living wage accredited employer in the UK, our adherence to the UK

Prompt Payment Code and other matters that will be considered by the committee during 2023,

including Capita’s focus on delivering an increasingly positive, consistent employee experience.

David Lowden

Chair

ESG Committee

2 March 2023

Establishment and role of the committee

The committee oversees Capita’s conduct as a responsible business and validates, through ESG

principles, our approach to being a purpose-led business.

The committee monitors progress against our responsible business strategy, ensuring that we

remain focused on supporting the United Nations’ Sustainable Development Goals (UNSDGs) as

well as addressing the issues where we can have the biggest impact – through our own operations

and the products and services we provide to our clients.

This committee provides a forum within which all components of Capita’s responsible business

strategy can be considered in-depth on a regular basis, and provides for a joined up approach

across Board committees. The committee has a rolling agenda based upon our ESG strategy

andmapped against the Ten Principles of the UN Global Compact, in support of achieving the

UNSDGs by 2030.

The committee will work closely with the Nomination, Remuneration and Audit and Risk

Committees on ESG-related issues, including in relation to diversity and inclusion (D&I), employee

engagement, ESG-related bonus targets, Capita’s Speak Up policy and TCFD compliance.

In addition to the attendance of committee members, the following individuals have a standing

invitation to attend meetings: Jon Lewis, CEO; Caitlin Kinsella, Director of Employee Engagement,

D&I and Responsible Business; and Dr Charles Young, Senior Medical Officer. Caitlin and Charles

act as advisers to this committee. The Chief General Counsel and Company Secretary or their

nominee act as secretary to the committee.

This committee is supported by an ESG working group comprising key individuals in the Group who

are responsible for ESG-related matters. Members of the working group are invited to committee

meetings to share their perspectives and insights on key issues and external developments. These

discussions ensure the Committee stays alert to current and emerging trends and any potential

risks arising from sustainability issues.

Focus of the committee

Following its establishment in June 2022, the committee has focused on the following matters.

Net zero target

Capita is committed to being net zero by 2035 and this has been an area of focus for the

committee, which has received presentations on our progress towards net zero from Richard

Walker, Head of Environment.

The committee was proud to note that, through the dedication and professionalism of our

colleagues, Capita was included in the 2022 Carbon Disclosure Project ‘A’ list, a universal global

measure that scores companies and cities based on their journey through disclosure and towards

environmental leadership.

In addition, on 4 January 2023, Science Based Targets initiative (SBTi), the globally recognised

body for climate-related target setting, verified Capita’s 2035 net zero target as compliant with the

The Audit and Risk Committee’s terms

ofreference set out in full therole,

responsibilities and authority of the

committee and can befound on the

Company’s website at www.capita.com/

investors/corporategovernance.

The terms of reference are reviewed

annually and updated asrequired.

Following the decision by the Board and the

committee atthe end of 2021 to focus on optimising

the current finance reporting systems, programmes

have been established to deliver further improvements

to the group risk and control framework, including

financial controls.”

Brian McArthur-Muscroft, Chair, Audit and RiskCommittee

Audit and Risk Committee

time allocation (%)

1 50% Risk management,

internal control & compliance

2 40% Financial reporting

(incl. external audit)

3 5%

Private meetings with auditors

4 5% Governance

Corporate

governance

Capita plc

Annual Report 2022

Audit and Risk Committee Report

Role and responsibilities

The committee is responsible for carrying out

the audit functions as required by DTR 7.1.3R

and assists the Board in fulfilling its oversight

responsibilities in respect of the Company

andthe Group. The committee’s key

responsibilities are:

Financial reporting

To review the reporting of financial and other

information to the Company’s shareholders and

to monitor the integrity offinancial statements,

including the application of key judgements in

determining reported outcomes, to ensure they

are fair, balanced and understandable.

Risk management, internal control

andcompliance

To review and assess the adequacy of systems

of internal control and risk management, and

monitor the risk profile ofthe business.

Internal audit

To approve the annual internal audit plan,

review the effectiveness of the internal

auditfunction and review all significant

recommendations, and ensure they are

addressed in a timely manner.

External audit

To review the effectiveness and objectivity

ofthe external audit process, assess the

independence of the external auditor and

ensure appropriate policies and procedures

arein place to protect such independence.

Effectiveness

To report to the Board on how it has discharged

its responsibilities.

Audit and Risk

Committee Report

The time allocation chart is provided for guidance only and other

matterswere also considered by the committee.

Corporate

governance

Capita plc

Annual Report 2022

Audit and Risk Committee Report

continued

Committee membership and attendance

Until 30 June 2022, all non-executive directors and Joseph Murphy, employee non-executive

director, were members of the committee. Following a review of committee membership by the

Nomination Committee in June 2022, the committee comprises myself as chair, together with John

Cresswell and Neelam Dhawan, non-executive directors and Janine Goodchild, employee non-

executive director. Although not considered independent under the UK Corporate Governance

Code 2018 (Code), Janine brings valuable insights from the employee perspective into committee

discussions and the Board considered that it was important from an employee engagement

perspective for both Joseph and Janine formally to be a member of the committee despite their lack

of independence.

I joined the committee on 1 June 2022 and was appointed as committee chair on 1 July 2022 with

Matthew Lester stepping down as a director and chair of the committee on 30 June 2022. I was

also invited to attend the April 2022 committee meeting as an observer. This, together with the

one-month handover between Matthew and I, ensured that there was a seamless transition of the

committee chair. Prior to my appointment as chair I also met with KPMG, our external auditor, and

members of our Group Finance and Internal Audit teams, as part of my induction programme.

I would like to thank Matthew for his leadership of the committee. During his five-year tenure as

committee chair, Matthew enhanced the committee’s focus on financial controls and the

identification and management of the material risk factors that Capita continues to face.

The committee is required to include at least one financially qualified member, with this requirement

fulfilled by myself since my appointment as a committee member and by Matthew until his

retirement from the committee.

All other committee members are considered to be financially literate given their qualifications and

experience. John is a chartered accountant and has substantial experience in leading and growing

organisations as CEO and executive director. Neelam has held senior positions in Hewlett-Packard,

Microsoft, Compaq and IBM with responsibility for areas including strategy and corporate

development. Janine’s previous experience includes working in the banking industry within

corporate actions and asset reconciliations.

As announced on 3 February 2023, John will step down from the Board and as a member of the

committee on 31 March 2023. On behalf of the committee, I would like to thank John for his

significant and valuable contribution to the committee’s deliberations. Georgina Harvey, Senior

Independent Director and Remuneration Committee Chair will be appointed as a member of the

Committee upon John’s departure.

Risk and control framework

The committee continued to fulfil its role of supporting the Board in its review of the integrity of the

Group’s financial reporting, monitoring the effectiveness of the Group’s system of risk management

and internal controls, and overseeing the activities of the group’s internal audit function and its

external auditor.

As noted below, further progress was made in strengthening the Group’s controls. In addition, as in

the prior year, a key control questionnaire process was completed across the Group where every

business leader attested to compliance with key controls. This enables management to focus

attention on control areas that need improvement.

Further detail on the risk management and internal control environment is set out later in this report

on page 97.

Controls improvement

Following the decision by the Board and the committee at the end of 2021 to focus on optimising

the current finance reporting systems, programmes have been established to deliver further

improvements to the Group risk and control framework, including financial controls. These

programmes have focused on the simplification of finance activities and controls, continuing to

embed the enterprise risk management framework, and further rationalisation of the overly complex

legal structure. Key improvements in 2022 include: strengthening key system access controls;

refining key policies, supporting standards, and communications; and continuing to mature risk

management within our functions and divisions. In addition the legal entity rationalisation

programme progressed well during the year with the number of legal entities in the Group being

reduced by 37. At 1 January 2023, the Group had 180 legal entities compared with 369 legal entities

in July 2018. The rationalisation programme is ongoing and the number of legal entities will further

reduce during 2023. Further improvements to the Group risk and control framework are planned for

2023, taking into consideration the Government’s proposed audit and governance reforms.

The Board and the committee also recognise the UK Government’s proposed reforms in respect of

fraud prevention and reporting. Elements of the Group’s existing control framework are targeted at

detecting fraud, bribery, corruption and criminal tax evasion. These include Capita’s Code of

Conduct and supporting mandatory training, a delegation of authority matrix applicable to all

employees, and segregation of duties within key systems and processes to prevent fraud. These

controls are supported by a Speak Up policy which enables whistleblowing within the Group and a

Financial Crime function dedicated to identifying, preventing and investigating where fraud

concerns have been raised.

Programmes have been established to deliver further

improvements to the Group risk and control framework.”

Corporate

governance

Capita plc

Annual Report 2022

Audit and Risk Committee Report

continued

Financial reporting

Accounting judgements and significant accounting matters

As part of the process of monitoring the integrity of the financial information presented in the

half-year results and the Annual Report and Accounts, the committee reviewed the key accounting

policies and judgements adopted by management to ensure that they were appropriate. The

significant areas of judgement identified by the committee, in conjunction with management and

theexternal auditor, together with a number of areas that the committee deemed significant in the

context of the financial statements, are set out in the tables on pages 93 to 95.

Fair, balanced and understandable

At the Board’s request, the committee considered whether the half-year results and the Annual

Report and Accounts were fair, balanced and understandable, and whether the information

provided was sufficient for a reader of the statements to understand the Group’s position and

performance, business model and strategy. The committee reviewed both the narrative and

financial sections ofthe reports to ensure they were consistent and gave a balanced view of the

performance of the business in the year and that appropriate weight was given to both positive and

negative aspects. The committee also considered whether the full-year announcement was

presented clearly.

The committee considered whether the Annual Report and Accounts enables readers to

understand the Company’s financial position and prospects, as well as assess its going concern

status and longer-term viability.

To encourage effective communication, in addition to the above members, the Chairman, CEO,

CFO, Chief General Counsel and Company Secretary, Director of Group Financial Control and

Group Chief Accountant are invited to attend committee meetings along with certain members

ofthe senior management team, the Director Internal Audit and Risk and representatives from

KPMG, the Group’s external auditor. Opportunity exists at the end of each committee meeting

forthe representatives of the internal and external audit teams to meet with the committee in the

absence of management and both have access to the committee should they wish to voice any

concerns outside formal meetings.

Committee performance was assessed as part of the Board evaluation, see page 68 for more

information. The Board is satisfied that the combined knowledge and experience of its members

issuch that the committee discharges its responsibilities in an effective, informed and challenging

manner and that, as a whole, the committee has competence relevant to the sector in which the

Company operates. The Chief General Counsel and Company Secretary, or their nominee, acts

asSecretary to the committee and is available to assist the members of the committee as required,

ensuring that timely and accurate information is distributed accordingly.

How the committee operates

The committee has an annual forward agenda to cover the key events in the financial reporting

cycle, specific risk matters identified by the committee and standing items that the committee is

required to consider in accordance with its terms of reference. The annual agenda is supported by

planning meetings held in advance of each committee meeting, led by me and attended by the

CFO, members of the Group Finance team and the Director of Internal Audit and Risk. I will also

meet with the external auditor prior to committee meetings. Their purpose is to identify key issues

impacting the business that may require consideration by the committee. Reports are received from

Group functions, including risk and internal audit, as appropriate. New sales wins and their contract

terms are reviewed from a risk and accounting perspective as appropriate. Additional reports are

provided as may be required. Ireport to the Board the key matters of discussion and make any

significant recommendations asnecessary.

How the committee discharged its roles and responsibilities in 2022

The committee held six scheduled meetings during the year and attendance at each meeting is

shown on page 73. Meetings are planned around the Company’s financial calendar.

Corporate

governance

Capita plc

Annual Report 2022

Audit and Risk Committee Report

continued

Significant issues in relation to the financial statements considered by the Audit and Risk Committee

Going concern and viability assessment

Matter considered

Consideration of the going concern assumption and viability of the Group and Parent Company is the

responsibility of the Board. The committee conducted an assessment as part of its support role, given the

inherent judgements required to assist the Board evaluate the resilience of the Group.

Action

The committee considered the projections within the business plan, agreed by the Board in January 2023, and

the key assumptions underpinning the future cash flow and profit forecasts. The committee received reports

from executive management and KPMG (as part of their standard reporting to the committee in the course of

performing their duty as statutory auditor) concerning the going concern and viability assessments, including

the key risks identified. These included details on the key assumptions, the forecasting process including

historical forecasting accuracy, the committed facilities available, and the mitigations within direct control of the

Group. The committee also considered the risks identified and appraised the severity and plausibility of these

in setting the downside scenario (see section 1 to the consolidated financial statements for details).

The committee reviewed the disclosures presented in section 1 of the consolidated financial statements

together with the viability statement on page 64 to ensure there was sufficient detail provided to explain the

basis of preparation and the Board’s conclusion.

Outcome

The committee is satisfied that the analysis presented by executive management and KPMG provides enough

detail to allow a robust assessment of relevant risks and mitigations to be undertaken. This supported full

discussion of the severe but plausible downsides and allowed the committee to recommend to the Board that

the going concern assumption be applied and the viability statement be approved.

The committee is satisfied that section 1 to the consolidated financial statements and the viability statement

onpage 64 include proportionate disclosures to inform users of the assessments undertaken by the Board.

Revenue and profit recognition

Matter considered

There is significant risk on long-term contracts related to revenue recognised from variations or scope changes,

where significant judgement is required to be exercised by management. There is a risk that revenue may be

recognised even though it is not probable that consideration will be collected, which could be due to

uncertainties over contractual terms and ongoing negotiations with clients.

Judgement is also required when customers request scope changes to determine if there is a contract

modification or a contract termination followed by a new contract. Contract terminations can lead to the

immediate recognition of any deferred income being held for recognition in future periods.

Action

The committee received regular updates on all major contracts during the year and specifically reviewed the

material judgements as part of the half-year and year-end close process. The committee has also considered

the recognition of onerous contract provisions, where appropriate, and the lifetime profitability of contracts.

To aid the reader, the company has included a detailed explanation of the Group’s accounting for long-term

contracts (see note 2.1 to the consolidated financial statements).

Outcome

The revenue recognition policy includes disclosure of the significant judgements and estimates in relation to its

application and the committee is satisfied that these have been properly disclosed. The committee is satisfied

that the disclosures given within the accounts are sufficient to gain a proper understanding of the methodology

of accounting for revenue across the Group, including the recognition of deferred income at the balance sheet

date. The committee reviewed the disclosure and concluded that these provide information that is helpful to

allow a fuller understanding of the application of IFRS 15 to the Group’s contracts.

Corporate

governance

Capita plc

Annual Report 2022

Audit and Risk Committee Report

continued

Contract fulfilment assets

Matter considered

The adoption of IFRS 15 led to the recognition of contract fulfilment assets (CFAs). Judgements are involved in

assessing whether the costs incurred on a contract or an anticipated contract meet the capitalisation criteria as

set out under the standard.

In addition, the amortisation of these assets involves estimation of the expected life of the contract, and when

acontract is in the early years post-inception and undergoing major transformation activities, the CFAs are at

heightened risk of impairment. Judgements are involved in assessing whether the costs incurred on a contract

or an anticipated contract meet the capitalisation criteria as set out under the standard.

Action

The committee has considered and challenged the significant judgements and estimates involved in

determining the carrying value of CFAs.

As part of the review of all major contracts, the committee has also considered the recoverability of CFAs.

Outcome

The committee is satisfied that appropriate judgements and estimates have been made in determining the

carrying value of CFAs and the extent of impairment of CFAs recognised in these statements is appropriate.

The committee is satisfied that the accounting policy note provides sufficient clarity as to the policy adopted

and that the disclosures provide information to allow a reader to understand the risks associated with different

stages of a typical long-term Capita contract.

Impairment of goodwill and Parent Company’s investment in subsidiaries, and recoverability of receivables from subsidiary undertakings in the Parent Company

Matter considered

The Group carries significant asset balances in respect of goodwill related to its acquisition activity. In addition,

the Parent Company carries a material balance of investment in, and receivables from, subsidiaries in its

financial statements. The impairment and recoverability assessments require the application of judgement

concerning future prospects and forecasts.

Action

The committee has reviewed the robustness of the impairment model and challenged the appropriateness of

assumptions used to calculate and determine the existence of impairment.

The committee has also reviewed the robustness of the assessment of recoverability of receivables from

subsidiary undertakings in the parent company, and challenged the appropriateness of assumptions used to

calculate and determine any provisions required.

Outcome

The committee is satisfied with the impairment of goodwill recognised in these financial statements in respect

of certain businesses within the Group’s Portfolio division.

The committee is also satisfied that the assumptions, methodology and disclosure in note 3.4 to the

consolidated financial statements are sufficient to give the reader an understanding of the action taken and the

sensitivities within the goodwill balance to any further impairment risk.

Of particular importance to the committee was the inclusion of sufficient disclosures regarding the events

andcircumstances that have led to the impairment charges recorded in the year and the analysis showing

sensitivity of the goodwill valuation to changes in key assumptions.

The committee also considered that any impairment of investment in subsidiaries, or any provision

againstamounts receivable from subsidiaries, at the parent company level were appropriate and properly

accounted for.

Corporate

governance

Capita plc

Annual Report 2022

Audit and Risk Committee Report

continued

Pensions

Matter considered

The measurement of the defined benefit liabilities in respect of defined benefit pension schemes operated

within the Group is a complex area, relying on assumptions on inflation, mortality, corporate bond yields,

expectations of returns on assets and several other key inputs. There is a risk that any one of these could lead

to misstatement of the Group’s liabilities in respect of pension obligations and the pension charge or movement

recognised in the income statement or statement of comprehensive income.

Action

The committee reviewed the disclosure as presented in the accounts. The committee also challenged the key

assumptions and reviewed the sensitivity to changes in some of the key assumptions on a standalone basis as

well as in the context of defined benefit schemes across other external benchmarks.

Outcome

The committee is satisfied that the estimation of the Group’s pension liabilities and the narrative that

accompanies them gives the required level of information for a reader of the accounts to determine the impact

on the Group of its pension obligations.

Deferred tax assets

Matter considered

The Group carries significant deferred tax assets. The recoverability assessment requires the application of

judgement concerning future prospects and forecasts.

Action

The committee reviewed the disclosure as presented in the accounts. The committee also challenged the key

assumptions and reviewed the sensitivity to changes in some of the key assumptions on a standalone basis as

well as in the context of defined benefit schemes across other external benchmarks.

Outcome

The committee is satisfied with the amount of deferred tax recognised in these financial statements.

The committee is also satisfied that the assumptions, methodology and disclosure in note 2.6 to the

consolidated financial statements are sufficient to give the reader an understanding of the approach taken

andthe sensitivities within the assumptions that could reasonably give rise to a material derecognition of

deferred tax.

Corporate

governance

Capita plc

Annual Report 2022

Audit and Risk Committee Report

continued

Auditor independence

The committee has a responsibility to put in place safeguards to auditor objectivity and

independence and the key measures are:

• The CFO monitors the independence of the auditor as part of the Group’s assessment of auditor

effectiveness and reports to the committee accordingly.

• The CFO must approve all audit-related engagements – further details are set out in the section

below on audit-related services. The committee reviews audit-related fees twice a year and

considers the implications for auditor objectivity and independence.

• The auditor must confirm its independence to the committee every six months.

Ensuring conflicts of interest are avoided is a fundamental criterion in the selection of any third-party

auditor. Such conflicts may arise across public and private sector clients, and in key supplier

relationships. They are a key factor in the award process for an external audit assignment.

Audit-related services and fees

The Company’s policy on auditor independence describes the services that may be procured from

the auditor, namely audit and audit-related services only. To avoid the perception of a conflict of

interest, the provision of non-audit services is not permitted. Audit-related services include those

required by laws and regulations, or where it is more practical for the external auditor to perform

theservice (eg reporting accountant role related to certain public company transactions). KPMG

continues to perform the review of interim results which, although technically classified as a

non-audit service, relates closely to the audit.

Under the policy, which is reviewed annually, executive management has discretion to engage the

auditor for audit-related services but the nature of such assignments and associated fees must

bereported regularly to the committee. All assignments require approval from the CFO. Where

executive management has any concern that a proposed assignment might threaten the auditor’s

independence, this is discussed with the committee chair.

Total non-audit fees during the year were £1.6m, and related to the review of interim results and

services as reporting accountant for the disposal of Pay360 Limited. Further details are provided

innote 2.3.2 to the consolidated financial statements.

External auditor performance

The committee discussed regularly the performance of KPMG during the year and was satisfied

that the level of communication and reporting was appropriate. These discussions included a review

of the effectiveness and quality of the audit process, audit planning and a formal post-audit evaluation.

Other issues considered in relation to the financial statements

Materiality

Materiality is important in determining the risk attached to any judgement. The committee considers

the audit materiality set by the external auditor to ensure that the committee is informed of individual

items above a certain threshold that are most likely to have an impact on the financial statements.

The committee reviews the external auditor’s report and the individual items that breach the

materiality thresholds and assesses their relative impact on the reported statements. These are:

income statement, statement of comprehensive income; balance sheet; statement of changes in

equity and cash flow; as well as the notes to the accounts.

The committee requests further clarification from the external auditor, the CFO and Director

ofFinancial Control as to the nature of these items and also their relative importance in the

financialstatements.

After having made such enquiries, the committee is satisfied that materiality has been applied

correctly in the accounts.

Disclosure of information to the auditor

The directors who held office at the date of the approval of this directors’ report confirm that, so far

as they are each aware, there is no relevant audit information of which the Company’s auditor is

unaware; and each director has taken all steps that they ought to have taken as a director to make

themselves aware of any relevant audit information required for the audit and to establish that the

Company’s auditor is aware of that information.

Statutory auditor

The committee provides a forum for reporting by the Group’s auditor (KPMG) and it advises the

Board on the appointment, independence and objectivity of the auditor and on fees earned for

bothstatutory audit and audit-related work. The committee discusses the nature, scope and

timingof the statutory audit with the auditor and, in making a recommendation to the Board on

auditor reappointment, performs an annual, independent assessment of the auditor’s suitability

andperformance.

The external auditor attends meetings of the committee and provides updates on statutory

reporting, audit-related services and fees, and ongoing audit items.

The auditor has the opportunity to raise concerns in private session with the committee and

separately with the chair. Specifically, the committee asks the auditor if discussion of business

performance in the strategic report is consistent with the auditor’s overall impression of Capita.

Anymaterial discrepancies are discussed (refer to the independent auditor’s report).

Corporate

governance

Capita plc

Annual Report 2022

Audit and Risk Committee Report

continued

meeting until the conclusion of the next general meeting at which accounts are laid before the

Company, and its remuneration will be determined by the committee.

Review of risk management and internal control

Responsibility for reviewing the effectiveness of the Group’s risk management and internal control

systems is delegated to the committee by the Board. The principal risks and risk management

processes are set out on pages 54 to 63.

Effectiveness and efficiency of risk management

During the year, the committee completed a robust assessment of the principal risks, including

deep-dive reviews on four of the 13 principal risks. The assessment also considered any emerging

risks that would threaten its business model, future performance, solvency or liquidity. The

assessment process included regular engagement with the Executive Committee members

accountable for the management of risk falling under their remit. As part of each deep dive, the

committee reviewed existing controls and further risk reduction actions to ensure they were valid

and effective in reducing the overall risk level.

The committee received reports on the following themes during the year:

• Cyber and information security;

• IT resilience;

• Internal controls;

• Securing contracts and extending existing contracts;

• Risk of failing to deliver on our contractual obligations to our clients;

• Attracting, developing and retaining our people;

• Anti-bribery and corruption, including details of matters raised under the Group’s Speak Up policy;

and

• Privacy.

The enterprise risk management framework and control environment continues to be enhanced

and embedded across Capita in the revised operating model. The committee concluded that risk

management processes and the system of internal controls were adequate and there were no

material weaknesses requiring specific disclosure. The committee reported the conclusions to the

Board to support the annual confirmation that a robust assessment of the principal risks had been

carried out.

Effectiveness and efficiency of financial controls

Detail on the status of internal financial controls is in the internal control and risk management

section of this report and can be found on page 54. As detailed on page 54 further improvements

tothe Group risk and control framework, including financial controls were delivered during the year.

The formal evaluation comprises separate assessments by both management and the committee

of the auditor’s role, activity and performance including:

• Calibre and risk profile of the audit firm;

• Audit governance, independence and objectivity;

• Audit scope and strategy;

• Audit team and relations with management and business; and

• Audit communications and resolution of audit issues.

Financial Reporting Council: audit quality inspections

Each year, the Audit Quality Review team (AQR) of the FRC issues a report that sets out the

principal findings arising from the audit quality inspections conducted in the previous calendar year

across a sample of audits for all major audit firms. The AQR’s objective is to monitor and promote

improvements in the quality of auditing. The reports highlight improvements required to promote

audit quality, and areas of good practice. The FRC publishes separate reports on the individual

firms, including KPMG.

The committee received a presentation from the KPMG lead audit partner on the findings from the

FRC Audit Quality Inspection Report for KPMG.

External auditor reappointment

Following a robust and rigorous audit tender process in 2018, the committee and Board

recommended the reappointment of KPMG LLP as the Group’s auditor and this was approved by

shareholders at the 2019 AGM. KPMG was first appointed in 2010, initially as KPMG Audit plc.

The lead audit partner is rotated on a five-yearly basis. Robert Brent the lead audit partner rotated

off the audit team following the completion of the 2021 audit in March 2022 with Ian Griffiths

replacing Robert in this role. Ian was appointed following a robust process. Ian attended committee

meetings prior to his appointment as lead audit partner as part of ensuring a smooth transition of

the change in lead audit partner. There are no contractual obligations which restrict the committee’s

choice of auditor.

Under the requirements of the Statutory Audit Services Order and the EU Audit Directive and Audit

Regulation, the provision of audit services should be retendered every 10 years. The complex

nature of the Group requires that a knowledge base is built up year on year by the incumbent to

ensure that the external audit is conducted with a proper understanding of the Group’s operations

and the nature of the risks that it faces. This is an important factor in ensuring audit quality. The

Group has complied with the provisions of the Statutory Audit Services Order.

A resolution to reappoint KPMG as the external auditor of the Company will be put forward at the

forthcoming annual general meeting. If approved, KPMG will hold office from the conclusion of this

Corporate

governance

Capita plc

Annual Report 2022

Audit and Risk Committee Report

continued

Anti-bribery and corruption

Capita has a Group-wide anti-bribery and corruption policy, which complies with the Bribery Act

2010. Procedures are reviewed periodically to ensure continued effective compliance in Group

businesses around the world.

Code of Conduct and Speak Up

During the year, the Company refreshed its mandatory Code of Conduct training and relaunched its

Speak Up policy. The Speak Up policy provides a framework for concerns to be raised in a

responsible and effective manner. To ensure that concerns are addressed in a manner independent

of a worker’s business area, concerns can be raised through a facility provided by an independent

third-party provider. Where concerns are raised, they are escalated to named contact points within

Capita for further assessment and investigation.

As part of the relaunch, a 12-month Speak Up communication plan was prepared to raise

awareness of this policy and stimulate engagement with employees. The number of reported cases

has increased following the relaunch, although reported cases are still considered to be low in

certain jurisdictions given the size of Capita. The Chief General Counsel and Company Secretary

and members of the Business Integrity team are scheduled to visit some of Capita’s international

sites during 2023 to reinforce and embed the Speak Up policy in these businesses.

This is an area of focus for the committee, which receives a report and update on the current level

of reported cases at every meeting. Oversight of these arrangements is a matter reserved to the

Board and it receives updates on the operation of the policy from the committee chair.

Privacy

In December 2022, the privacy function was restructured to form a central team with a managerial

reporting line to the Data Protection Officer of Capita plc, while retaining the existing operational

alignment of the current privacy teams to the divisions, TSS and shared services, ensuring that

privacy is managed where data is created while ensuring that Capita’s privacy policies and

standards are implemented consistently throughout the Group.

The privacy teams across Capita continue to provide privacy assurance, training and support to

business units in line with the requirements of data protection legislation. Throughout 2022, there

were a number of new initiatives undertaken by the central privacy team aimed at raising privacy

awareness throughout Capita including targeted training and regular meetings with key stakeholders.

Brian McArthur-Muscroft

Chair

Audit and Risk Committee

2 March 2023

The committee concluded that the Group risk and control framework, including financial controls

could be relied upon to be materially effective, noting that further improvements to the Group risk

and control framework are planned for 2023 to ensure that financial controls are appropriately

efficient for a Group of the scale and complexity of Capita.

Internal audit

The Group internal audit function has an administrative reporting line to the CFO and an

independent reporting line to me as Chair of the committee. The function has in place a co-sourcing

arrangement which adds expertise and breadth to the work of the in-house audit team. The function

is led by the Director Internal Audit and Risk who is also responsible for the Group’s unregulated

risk function. Regulated business risk is the responsibility of the CEO, Experience.

The three-year plan approved by the committee in June 2021, which focuses on key business risks

and processes, formed the baseline for audit planning in 2022. Conducting audits over these risks

and processes provides better insight into how risk is being managed and provides comparison

across business units. The plan is structured to be flexible; to provide assurance over core

‘business as usual’ activities aligned to our principal risks; and, to offer continued support for

ongoing change activities.

Throughout the year, the Group internal audit function provides written reports to the committee on

the work carried out to date and the in-flight work to be completed, together with oral updates. An

annual report is provided each year summarising the key matters arising. Reports set out strengths

and weaknesses identified during the work, together with any recommendations for action.

Insights from 2022 audits have continued to identify consistent themes including: lack of defined

policy and procedures over key processes; risks being managed through the experience of our

people and existing knowledge; roles, responsibilities and accountabilities not always clear; and

lack of evidence to demonstrate monitoring and reporting of control activity.

In all cases, management responded with appropriate actions to mitigate the associated risks. The

committee reviews management’s response to the matters raised and ensures that any action is

commensurate with the level of risk identified, whether real or perceived.

As a result of the consistent themes identified during audits a plan was presented and approved by

the committee during 2022 to address these issues and further improve the Group’s financial

controls framework. The committee will receive regular updates on the progress of this project.

Through regular interaction between the committee and the Director Internal Audit and Risk, as well

as reports received from the function, the committee can assess and satisfy itself that the Group’s

provision of internal audit is effective.

Our remuneration policy continues to work well,

supporting our strategy to build a more focused

andsustainable business for the long term.”

Georgina Harvey, Chair, Remuneration Committee

Remuneration

Committee membership

and attendance

All members of the committee are

independent non-executive directors.

Following a change to the non-executive

employee director during the year, this role

now attends committee meetings by

invitation, rather than being a member of

the committee. The number of formal

meetings held and the attendance by each

member is shown in the table on page 73.

The committee also held informal

discussions as required. The Chief

General Counsel and Company Secretary

acts as secretary to the committee and is

available to assist the members of the

committee as required, ensuring that

timely and accurate information is

distributed accordingly.

The committee’s terms of reference set out

the role, responsibilities and authority of

the committee and can be found on the

Company’s website at www.capita.com/

investors. These are reviewed and

updated where appropriate, on an

annualbasis.

Corporate

governance

Capita plc

Annual Report 2022

Directors’ remuneration report

Directors’

remuneration report

This report is split into three sections:

• The annual statement summarises how

the committee discharged its roles and

responsibilities in respect of 2022 and

the proposed implementation of the

directors’ remuneration policy for 2023.

• A summary of the directors’

remuneration policy (the policy) which

was approved by shareholders at the

2021 annual general meeting (AGM). No

changes are proposed for 2023. A new

policy will be put to shareholders for

approval at the 2024 AGM.

• The annual report on remuneration sets

out the remuneration arrangements and

incentive outcomes for the year under

review and explains how the policy will

be operated for 2023.

The directors’ remuneration report,

excluding the policy, will be subject to an

advisory shareholder vote at the 2023 AGM.

1 11% Governance

2 12% Executive director and executive

committee remuneration

3 30% Annual bonus plan

4 23% LTIP/RSA

5 10% Wider workforce/gender pay gap

6 5% Shareholder consultation/feedback

7 9% Committee time only

Remuneration Committee

time allocation (%)

The time allocation chart is provided for guidance only and other

matterswere also considered by the committee.

Corporate

governance

Capita plc

Annual Report 2022

100

Directors’ remuneration report

continued

Committee activities

The key workstreams of the committee during the year included:

• Agreeing the vesting percentage in respect of the 2019 LTIP awards for the performance period

ended 31 December 2021.

• Agreeing annual bonus awards under the annual bonus plan for the year ended 31 December 2021.

• Agreeing appropriate 2022 RSA levels under the 2021 Capita Executive Plan.

• Agreeing the design and targets for the 2022 annual bonus.

• Determining the remuneration arrangements for senior management leavers/joiners.

• Consideration of executive pay arrangements and alignment with those for the wider workforce.

• Ongoing workforce engagement in respect of executive remuneration and considering feedback.

• Receiving progress updates in respect of a review of wider workforce strategy on pay and

progression (career path framework).

In addition, the committee has ensured that the remuneration policy and practices are consistent

with the six factors set out in Provision 40 of the 2018 UK Corporate Governance Code (the Code):

Clarity – our policy is well understood by our senior management team and has been clearly

articulated to our major shareholders and representative bodies (both on an ongoing basis and

during the detailed consultation exercise in respect of the last policy review).

Simplicity – the committee is mindful of the need to avoid overly complex remuneration structures,

which can be misunderstood and deliver unintended outcomes. A key objective of the committee is

to ensure our executive remuneration policies and practices are straightforward to communicate

and operate.

Risk – our policy has been designed to ensure that inappropriate risk-taking is discouraged and will

not be rewarded via: (i) the balanced use of both short-term incentives and long-term share awards;

(ii) the significant role played by equity in our incentive plans (together with in-employment and post-

cessation shareholding guidelines); and (iii) malus/clawback provisions and the committee’s ability

to use discretion to adjust vesting levels.

Predictability – our incentive plans are subject to annual individual limits, with our share plans also

subject to a share dilution limit.

Annual statement

Dear shareholder,

I am pleased to present the directors’ remuneration report for the year ended 31 December 2022.

Capita has delivered material progress in delivering our strategy to build a more focused,

sustainable business for the long term despite the current economic headwinds and cost-of-living

crisis. With this in mind, the committee’s focus in 2022 has been centred on:

• Operating our remuneration policy as approved by shareholders at the 2021 AGM; and

• Colleague wellbeing and development: establishing Capita pay principles, development of the

career path framework incorporating job sizing and market informed job pay ranges.

Details of the committee’s approach to remuneration in 2022, and the proposed implementation

ofthe policy for 2023, are set out below.

How the committee operates

The committee has an annual agenda covering the key planning and decision events in the annual

remuneration cycle. Each meeting is supported by an agenda-setting discussion held in advance

with the committee Chair, Chief People Officer and Group Reward Director, to identify issues

affecting remuneration that may require consideration by the committee. Regular reports, including

updates on corporate governance and regulatory developments, are received from the committee’s

adviser. At each committee meeting the members may receive other reports and presentations

covering wider workforce arrangements which include the annual pay review, incentive scheme

arrangements, gender pay and ethnicity reporting, engagement on how executive remuneration

aligns with wider company pay policy, salary proposals for members of the senior team and

approval of remuneration packages for new members of the executive committee.

Following the establishment of the ESG committee during the year, the ESG committee is

responsible for making recommendations to the committee in respect of setting and assessing

ESG targets in the annual bonus.

Corporate

governance

Capita plc

Annual Report 2022

101

Directors’ remuneration report

continued

After consideration of the progress made by Capita during 2022 in respect of the delivery of the

strategy and individual performance, the committee believes that a 60% of maximum annual bonus

award to the CEO and CFO for 2022 are both proportionate and appropriate.

Consistent with the shareholder approved remuneration policy, 50% of the bonus awards will be

deferred into Capita plc shares for three years.

2020 LTIP award

The LTIP award granted to Jon Lewis in April 2020, which is due to vest in April 2023, will vest

at15% of the maximum opportunity as a result of the strong performance against the customer

satisfaction and supplier targets (which are considered to be critical underpins to the performance

and improvement of the business) over the three years to 31 December 2022. Further details in

respect of this performance assessment and the estimated pre-tax value of the awards at vesting

are set out on page 115.

Total remuneration

The committee is satisfied that total remuneration awarded to the CEO and CFO in respect of 2022

was appropriate when Capita’s strategic progress and the stakeholder experience more generally in

2022 are considered.

Proportionality – there is a clear link between individual awards, delivery of strategy and ourlong-

term performance through performance conditions or underpins applied to the annual bonus plan

and RSAs. Inaddition, the significant role played by incentive/at-risk pay, together with the structure

of the executive directors’ service contracts, ensures that poor performance is not rewarded.

Alignment to culture – our executive pay policies are fully aligned to Capita’s culture, including

elements of fixed pay (executive director pension provision is aligned with the workforce) and

through the use of performance metrics that measure how we perform against our financial and

non-financial KPIs. RSAs further increase alignment to Capita’s responsible business strategy by

offering a narrower range of value outcomes.

Remuneration for 2022

A summary of the approach to remuneration in 2022 was as follows:

• The base salary level for the Chief Executive Officer (CEO) was increased by 3.17% from

1January 2022 (his first salary increase since appointment in 2017). The Chief Financial Officer

(CFO) did not receive a salary increase given his recent appointment to the Board in May 2021.

• The annual bonus operated in line with policy, with a maximum potential of 200% of salary for the

CEO and 175% of salary for the CFO. The bonus was based on revenue, profit before tax and

free cash flow (all equally weighted and totalling 80% of maximum bonus), with 20% based on

strategic/individual objectives.

• RSAs were granted under the Capita Executive Plan in April 2022 at 100% of salary for both the

CEO and CFO. Further details of the 2022 RSAs are set out in the annual report on remuneration.

Annual bonus for 2022

Following a review of performance against the annual bonus targets by the committee, annual

bonuses of 60% of maximum were awarded to the CEO and CFO in respect of the year ended 31

December 2022. Revenue performance was between threshold and target and PBT and free cash

flow performance were both between target and stretch. However, following a review of the broader

stakeholder experience when assessing performance against the financial targets that were set,

and noting the utilisation of an invoice discounting facility to a greater extent than had been

assumed in the business plan, the committee exercised negative discretion post year end to reduce

the free cash flow element to a target payout. Strategic/individual objectives were considered to

have been met to a significant extent. Further details in respect of this performance assessment

and the application of negative discretion are set out on pages 112 to 115.

Corporate

governance

Capita plc

Annual Report 2022

102

Directors’ remuneration report

continued

Remuneration policy for 2023

Following shareholder approval of the policy at the 2021 AGM and support received at the 2022

AGM, no policy changes are being proposed at the 2023 AGM. See pages 104 to 109 for a summary

of the current approved policy. A new policy will be put to shareholders for approval at the 2024 AGM.

Implementing the policy for 2023

The committee’s intended approach to the implementation of the policy for 2023 is set out below.

Fixed remuneration: the committee is mindful of the need for pay restraint at senior management

levels in the current economic environment. As such, and consistent with the approach adopted for

the majority of senior executives across Capita, executive directors will not receive an increase in

salary in 2023. No changes will be made to benefit provision and executive directors will continue

toreceive a workforce-aligned pension allowance (5% of salary) in line with other employees.

2023 annual bonus: maximum annual bonus potential will continue to operate at 200% (CEO) and

175% (CFO) of salary. The financial performance metrics will be based on revenue, profit before tax

and free cash flow (all equally weighted and totalling 80% of maximum bonus). The remaining 20%

of maximum bonus will continue to be based on strategic/individual objectives incorporating ESG

targets. To the extent that the threshold profit before tax target is not met, the committee will

consider whether it is appropriate to pay out a bonus under the strategic/individual objectives and

may exercise discretion to reduce pay out under these elements (including to zero) if considered

appropriate.

2023 RSAs: the 2023 RSAs to be granted to executive directors in March 2023 will:

• be set at a maximum of 150% of salary for the CEO and 100% of salary for the CFO;

• normally vest after three years from grant subject to: (i) continued employment; (ii) satisfactory

personal performance during the relevant vesting periods; and (iii) a positive assessment of

performance against two underpins (see below); and

• deliver shares that, once vested, may not normally be sold until at least six years from the grant

date (other than to pay relevant taxes).

Use of discretion

The committee retains the right to exercise discretion to override formulaic outcomes and ensure

that the level of bonus and/or share award payable is appropriate. It may also use its judgement

toadjust outcomes to ensure that any payments made reflect overall Company performance and

stakeholder experiences more generally. Where discretion is exercised, the rationale for this

discretion will be fully disclosed to shareholders in the relevant annual report. A summary of the

discretion exercised by the committee over the last three years, is set out below:

2020 2021 2022

Annual bonus In light of the impact of Covid-19,

the annual bonus plan was

withdrawn for 2020 for the

executive directors (plus the

executive committee and selected

senior managers) before the

targets were agreed.

The committee did not consider

further application of downward

discretion to be necessary or

appropriate in 2021 following a

review of Group and individual

performance, the general

stakeholder experience and

noting discretion exercised in

2019 and 2020.

Annual bonus awards for the

CEO and CFO for the year ended

31 December 2022 were reduced

from 69% to 60% of the maximum,

see page 115.

Share awards 2020 LTIP award levels were

reduced by around 70%

compared with normal grant

levels. In addition, and to reflect

underlying financial and

operational performance, the

committee applied downward

discretion when assessing the

vesting of the 2018 LTIP.

2021 RSA levels were reduced

from the normal policy grant level

by around 17%.

The 2022 RSA level for the CEO

was reduced from the normal

award level of 150% of salary to

100% of salary, see page 116.

Board changes in 2022

Nneka Abulokwe was appointed as a non-executive director on 1 February 2022. David Lowden

was appointed Chairman on 11 May 2022 following Sir Ian Powell’s resignation as Chairman and

non-executive director on 10 May 2022. Georgina Harvey was appointed Senior Independent

Director on 1 July 2022 following David Lowden’s appointment as Chairman.

Brian McArthur-Muscroft was appointed non-executive director and Janine Goodchild was

appointed employee non-executive director on 1 June 2022 and 1 July 2022 respectively.

LyndsayBrowne andJoseph Murphy stepped down as employee non-executive directors and

Matthew Lester stepped down asnon-executive director on 30 June 2022.

Corporate

governance

Capita plc

Annual Report 2022

103

Directors’ remuneration report

continued

During 2022, the committee has continued to evolve the process of engaging with the workforce on

how executive remuneration aligns with wider company pay policy, in compliance with the Code. A

session was held with the chairs and co-chairs of the Capita employee network groups in mid-2022.

In addition, a further session was held with a cross-section of employees from different levels,

divisions and territories within the Capita Group in December 2022. Both sessions were chaired by

Georgina Harvey and covered the work of the committee, how executive remuneration is linked to

performance, strategy on workforce pay and progression and how Capita executive pay policy links

to wider company pay policy including how each element of the remuneration package cascades

down the business. These sessions provide an opportunity for questions and answers and the

provision of feedback is encouraged. Further workforce engagement sessions will take place

during2023.

Concluding thoughts

As Capita continues to make material progress under our new, simpler, more client-focused

divisional structure, the committee is satisfied that the remuneration policy has operated as

intended to help ensure that the senior management team is appropriately retained and

incentivised. The committee will continue to listen to the views of our shareholders in respect

ofremuneration and, as such, welcomes all input as it starts to consider its approach to reviewing

the policy at the 2024 AGM.

I hope you find this report to be clear and helpful in understanding our remuneration practices and

that you will be supportive of the advisory vote to approve the annual report on remuneration.

Finally, I would like to thank our shareholders for their ongoing support.

Georgina Harvey

Chair

Remuneration Committee

2 March 2023

In respect of the underpins for the 2023 awards:

• underpin 1: Capita’s TSR over the three years ending 31 December 2025 must be positive for any

RSAs granted to executive directors to vest; and

• underpin 2: the committee must be satisfied with the underlying performance of Capita and that

there have been no environmental, social or governance issues resulting in material reputational

damage. If this is not deemed to be met, the committee will consider a reduction to the final

vesting level of the RSAs (including to nil).

While the committee had originally intended to move to a more market standard approach to

underpinning performance by the sole operation of underpin 2, a share price underpin will be

retained for the 2023 RSAs. In addition, the committee will consider values at vesting to ensure

theyare reflective of Capita performance over the vesting period.

The actual number of shares under award will be determined just prior to the date of grant and full

details will be in the RNS issued immediately following grant.

Shareholder views

The committee engaged with our major shareholders and the main representative bodies during

2022 in advance of the AGM. Support was strong with a 98% vote in favour of the report at the

2022AGM. That said, the committee did note concerns from a number of shareholders and proxy

agencies regarding the annual bonus awards for 2021 in light of the furlough support received.

Inresponse to the feedback received, and as stated in the RNS announcing the 2022 AGM voting

results, Capita has committed to repay all furlough support taken during 2021 no later than the first

half of 2023.

Employee engagement

In 2022, Jon Lewis regularly communicated with all employees, including on our 2021 financial

results. Employees are able to submit any questions about the Company, including in relation

tothedirectors’ remuneration policy and report, pay and benefits, both online and during live

employee briefings.

Following the appointment to the board of a new employee non-executive director during 2022,

itwas determined that this role would no longer be a member of the committee to avoid any

independence issues. However, the new employee non-executive director attends committee

meetings by invitation and is therefore able to provide colleague perspective on remuneration

totheBoard.

Corporate

governance

Capita plc

Annual Report 2022

104

Directors’ remuneration report

continued

Consideration of shareholder views

The Company is committed to maintaining good communications with shareholders. It considers

the AGM to be an opportunity to communicate with shareholders, giving them the opportunity to

raise any issues or concerns they may have. In addition, the committee seeks to engage directly

with major shareholders and the main representative bodies, should any material changes be

proposed to the policy.

Consideration of our people

When determining executive director remuneration policy and practices, the committee reviews

workforce remuneration and related policies and the alignment of incentives and rewards with

culture to ensure that workforce pay and conditions are taken into account when setting the pay

ofexecutive directors and senior management.

Directors’ remuneration policy

This part of the remuneration report sets out a summary of our remuneration policy which was

approved by shareholders at, and took effect from, the 2021 AGM. The full policy approved by

shareholders at the 2021 AGM is presented in the Annual Report 2020. No changes to the policy

are proposed for 2023. The information provided in this section of the remuneration report is not

subject to audit.

Responsibilities and activities of the Remuneration Committee

The committee is responsible for determining and agreeing with the Board the remuneration policy

for the executive directors, executive committee members and the Chief General Counsel and

Company Secretary role, including setting the overarching principles, parameters and governance

framework and determining each remuneration package. In addition, the committee reviews

remuneration for the wider workforce and related policies and the alignment of incentives and

rewards with culture. The committee also sets the Chairman’s fee.

In setting the remuneration policy for the executive directors, executive committee members

andthe Chief General Counsel and Company Secretary role, the committee ensures that the

arrangements are in the best interest of both the Group and its shareholders, by taking into account

the following general principles:

• To ensure total remuneration packages are simple and fair in design so that they are valued

byparticipants.

• To ensure that total remuneration strongly reflects performance.

• To balance performance-related pay between: the achievement of financial performance

objectives and delivering sustainable performance; creating a clear connection between

performance and reward; and providing a focus on sustained improvements in profitability

andreturns.

• To provide a significant proportion of remuneration in shares, allowing senior management

tobuild a significant shareholding in the business and, therefore, aligning management with

shareholders’ interests and the Group’s performance, without encouraging excessive risk taking.

Corporate

governance

Capita plc

Annual Report 2022

105

Directors’ remuneration report

continued

Remuneration policy table

The following table sets out the key aspects of the policy.

Base salary

Purpose and link to strategy Operation Maximum opportunity Performance framework

To attract and retain

talentby ensuring base

salaries are sufficiently

competitive.

Normally reviewed annually in December, with any changes usually effective in

January. The committee may award salary increases at other times of the year

ifit considers it to be appropriate. The review takes into account:

• Salaries in similar companies and comparably-sized companies

• Remuneration policy

• Economic climate

• Market conditions

• Group performance

• The role and responsibility of the individual director

• Employee remuneration across the broader workforce.

There is no prescribed maximum monetary annual

increase to base salaries. Any annual increase in

salaries is at the discretion of the committee, taking

into account the factors stated in this table and the

following principles:

• Salaries would typically be increased at a rate

consistent with the average salary increase

(inpercentage of salary terms) for the broader

workforce.

• Larger increases may be considered appropriate in

certain circumstances (including, but not limited to,

a change in an individual’s responsibilities or in the

scale of their role or in the size and complexity of

the Group).

• Larger increases may also be considered

appropriate if a director has been initially appointed

to the Board at a lower than typical salary.

Individual and business performance are

considerations in setting base salaries.

Benefits

Purpose and link to strategy Operation Maximum opportunity Performance framework

Designed to be consistent

with benefits available to

employees in the Group.

Benefits include car allowance, private medical insurance, travel and property

hire. Executive directors can also participate in all-employee share plans.

The committee has discretion to add additional benefits which are not currently

provided, such as relocation expenses.

Benefit provision varies between different executive

directors. While there is no maximum level set by the

committee, benefits provision will be set at a level the

committee considers appropriate and be based on

individual circumstances.

Participation in the Company’s HMRC-approved

all-employee share plan will be limited by the

maximum level prescribed by HMRC.

Not performance-related.

Pension

Purpose and link to strategy Operation Maximum opportunity Performance framework

Consistent with benefits

available to employees

inthe Group.

Pension contributions are paid into the Group’s defined contribution scheme

and/or as a cash allowance.

5% of salary. Not performance-related.

Corporate

governance

Capita plc

Annual Report 2022

106

Directors’ remuneration report

continued

Annual bonus

Purpose and link to strategy Operation Maximum opportunity Performance framework

Performance measures

are selected to focus

executives on delivery of

the Group business plan

for the financial year.

The bonus measures and targets are reviewed annually to ensure that bonus

opportunity and performance measures continue to support the business plan.

Stretching targets are set at the start of each financial year.

Performance against targets is reviewed following completion of the final

accounts for the period under review.

50% of any bonus earned (net of tax) is normally delivered in shares deferred for

three years, with the remainder delivered in cash or deferred shares at the

executive director’s discretion.

An additional payment may be made at the time of vesting in respect of dividends

that would have accrued on deferred shares during the deferral period.

Malus and clawback provisions apply to all annual bonus and deferred bonus

share awards for a period of up to three years after the determination of the

annual bonus.

200% of salary. Performance is normally measured over a one-year

period relative to challenging targets for selected

measures of Group financial, strategic and/or

individual performance.

The majority of the bonus will be determined by

measure(s) of Group financial performance

A sliding scale is set for each Group financial measure:

50% of the bonus will be paid at target performance,

increasing to 100% for maximum performance.

Any bonus payout is ultimately at the discretion of the

committee, and the amount of any bonus that would

be determined based on performance may be

reduced if the committee believes this better reflects

the underlying performance of Capita over the

relevant period.

Restricted share awards

Purpose and link to strategy Operation Maximum opportunity Performance framework

Designed to reward and

retain executives over the

longer term while aligning

their interests with those

ofshareholders.

To link reward to

longer-term performance.

To encourage share

ownership.

Awards will normally vest after three years from grant and, once vested, shares

may not normally be sold until at least six years from the grant date (other than

to pay relevant taxes).

Dividends or dividend equivalents may accrue over the vesting period and any

holding period but only to the extent awards vest.

Malus and clawback provisions apply to awards for a period up to the fifth

anniversary of grant.

150% of salary. Vesting will be subject to: (i) continued employment;

(ii) satisfactory personal performance during the

relevant vesting periods; and (iii) a positive

assessment of performance against one or

moreunderpins.

In addition, the committee may reduce the extent to

which an award vests if it believes this better reflects

the underlying performance of Capita over the

relevant period.

Shareholding guidelines

Purpose and link to strategy Operation Maximum opportunity Performance framework

To align interests of

management and

shareholders and promote

a long-term approach

toperformance and

riskmanagement.

Shareholding guidelines require executive directors to reach a specified

shareholding. Executive directors are required to retain 100% of any shares

from deferred bonus awards, RSAs (or LTIPs as granted under the previous

policy) on vesting (net of tax) until the guideline level is achieved.

Post-cessation guidelines apply to share awards granted following the 2020

AGM. In determining the relevant number of shares to be retained post

cessation, shares acquired from own purchases, any buyout awards and share

awards granted prior to the 2020 AGM will not be counted.

In employment: 300% of salary (CEO); 200% of

salary (CFO).

Post cessation: 100% of the relevant guideline

between cessation and the second anniversary of

cessation (or the actual shareholding if the guideline

has not been met at cessation).

Not performance-related.

Corporate

governance

Capita plc

Annual Report 2022

107

Directors’ remuneration report

continued

Non-executive director (NED) fees

Purpose and link to strategy Operation Maximum opportunity Performance framework

Market competitive fees

are set so as to attract and

retain non-executive

directors with required

skills, experience and

knowledge so that the

Board can effectively carry

out its responsibilities.

Reviewed periodically by the Board. Fee levels set by reference to market rates,

taking into account the individual’s experience, responsibilities, time

commitment and pay decisions for the broader workforce. NED fees comprise

payment of an annual basic fee and additional fees for further Board

responsibilities such as:

• Senior independent director

• Audit and Risk Committee chair

• Remuneration Committee chair

• The Chairman of the Board receives an all-inclusive fee.

Additional fees/allowances may also be paid for intercontinental travel for

business purposes where appropriate. No NED participates in the Group’s

incentive arrangements or pension plan or receives any other benefits other

than where travel to the Company’s registered office is recognised as a taxable

benefit in which case a NED may receive grossed-up costs of travel as a benefit.

As per the executive directors, there is no prescribed

maximum monetary annual increase. Fees are

limited to an aggregate annual sum of £1m increased

only to take account of the effect of inflation as

measured by the retail price index or such index

asthe directors consider appropriate or such

otheramount as the Company may by ordinary

resolution decide.

Not performance-related.

The annual bonus performance measures are Group financial, strategic or individual measures which are selected annually to be consistent with

key priorities for the Group.

Targets are normally set on sliding scales that take account of internal strategic planning and external market expectations for the Company.

Only modest rewards are available for achieving threshold performance with maximum rewards requiring substantial outperformance of

challenging strategic plans approved at the start of each year.

The committee operates share-based arrangements for the executive directors in accordance with their respective scheme rules, the Listing

Rules and the HMRC rules where relevant. The committee, consistent with market practice and the scheme rules, retains discretion over a number

of areas relating to the operation and administration of the plans. These include (but are not limited to) the following:

• Who participates

• The form in which the award is granted and settled (eg shares, nil cost options, cash)

• The timing of the grant of award and/or payment

• The size of an award (up to individual and plan limits) and/or a payment

• Discretion relating to the measurement of any performance target/underpin and pro-rating of awards in the event of a ‘good leaver’ scenario or a

change of control or reconstruction of the Company

• Determination of whether or not a person is characterised as a good leaver (in addition to any specified categories) for incentive plan purposes

• Adjustments required in certain circumstances (eg share capital variation, rights issues, demerger, corporate restructuring, special dividends)

• The ability to vary or substitute any performance condition(s)/underpins if circumstances occur which cause it to determine that the original

condition(s) have ceased to be appropriate, provided that any such variation or waiver is fair, reasonable and not materially less difficult to

satisfy than the original condition (in its opinion). In the event that the committee were to make an adjustment of this sort, a full explanation

would be provided in the next remuneration report

• The ability to reduce the vesting level of awards (including to nil) where the Committee determines it is appropriate to do so.

The committee reserves the right to make any remuneration payments and/or payments for loss of office (including exercising any discretions

available to it in connection with such payments) notwithstanding that they are not in line with the policy set out above where the terms of the

payment were agreed: (i) before the policy set out above came into effect, provided that the terms of the payment were consistent with the

shareholder-approved directors’ remuneration policy in force at the time they were agreed; or (ii) at a time when the relevant individual was not a

director of the Company and, in the opinion of the committee, the payment was not in consideration for the individual becoming a director of the

Company. For these purposes payments includes the committee satisfying awards of variable remuneration and, in relation to an award over

shares, the terms of the payment are ‘agreed’ at the time the award is granted. The committee retains discretion to make minor amendments to the

policy set out in this policy report (for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation)

without obtaining shareholder approval for that amendment.

Corporate

governance

Capita plc

Annual Report 2022

108

Directors’ remuneration report

continued

If a new executive director were to be appointed on a permanent basis, the committee would seek

to align their remuneration package with other executive directors in line with the policy table.

However, flexibility would be retained to make ‘buyout’ awards or payments in respect of

remuneration arrangements and contractual terms forfeited on leaving a previous employer. In such

circumstances, the committee would look to replicate the arrangements being forfeited as closely

as possible and, in doing so, would take account of relevant factors including the nature of the

remuneration and contractual terms, performance conditions and the time over which they would

have vested or been paid.

If appropriate, a new appointee’s incentives in their year of joining may be subject to different targets

than for other executive directors. The committee may also agree that the Company will meet

certain relocation and incidental expenses, as it considers appropriate.

The maximum level of variable remuneration which may be granted (excluding awards to

compensate for remuneration arrangements and contractual terms forfeited on leaving the previous

employer) to new executive directors in the year of recruitment shall be limited to 350% of salary

(the maximum limit permitted within the policy table).

The initial notice period for a service contract may be up to 24 months, which is longer than that

stated in the policy of a 12-month notice period, provided it reduces to 12 months within a short

space of time.

For an internal appointment or an appointment following the Company’s acquisition of or merger

with another company, any incentive amount awarded in respect of a prior role may be allowed to

vest on its original terms, or adjusted as relevant to take into account the appointment. Any other

ongoing remuneration obligations or terms and conditions existing prior to appointment may

continue.

The committee retains discretion to make appropriate remuneration decisions outside the standard

policy to meet the individual circumstances of recruitment when:

• An interim appointment is made to fill an executive director role on a short-term basis.

• Exceptional circumstances require that the Chairman or a non-executive director takes on an

executive function on a short-term basis.

In the event of the appointment of a new non-executive director, remuneration arrangements will

normally be in line with the structure set out in the policy table for non-executive directors. However,

the committee (or the Board as appropriate) may include any element listed in the policy table or

any other element which the committee considers is appropriate given the particular circumstances

excluding any variable elements, with due regard to the best interests of shareholders.

Malus and clawback

Malus and clawback provisions apply to all incentive awards granted to executive directors. These

provisions permit the committee to reduce or recover bonus awards (including deferred shares) for

up to three years after the determination of the annual bonus and to reduce or recover RSA awards

(and LTIP awards granted under the previous policy) up to the fifth anniversary of grant. The

potential circumstances in which malus or clawback provisions can be applied include:

• material misstatement of a Group company’s financial results

• a participant deliberately misleads relevant parties regarding financial performance

• serious misconduct or conduct which causes significant financial loss

• overpayments due to material abnormal write-offs of an exceptional basis

• an error was made, or inaccurate or misleading information was used to determine the value

ofanaward

• reputational damage

• material failure of risk management

• corporate failure or the occurrence of an insolvency event.

Application of our remuneration policy

When determining executive director remuneration policy and practices, the committee

reviewsworkforce remuneration and related policies, and the alignment of incentives and

rewardswith culture.

Share awards are granted to senior management in order to encourage a high level of employee

share ownership albeit remuneration is more heavily weighted towards long-term variable pay for

executive directors than other employees. This is to ensure that there is a clear link between the

value created for shareholders and the remuneration received by the executive directors. The

committee did not consult with employees formally in respect of the design of the policy, although

the two employee non-executive directors at that time (one as a committee member and one by

invitation to the committee) were involved in the committee’s discussions.

Directors’ recruitment and promotions

The committee takes into account the need to attract, retain and motivate the best person for each

position, while at the same time ensuring a close alignment between the interests of shareholders

and management.

Corporate

governance

Capita plc

Annual Report 2022

109

Directors’ remuneration report

continued

In respect of RSAs/LTIPs, unvested awards will normally lapse on the earlier of notice being given/

received and cessation. However, the committee has discretion to allow awards to instead continue

to vest on the normal vesting date (or earlier at the discretion of the committee) to the extent any

performance conditions/underpins attached to the relevant award are satisfied at vesting. In such

cases awards will, other than in exceptional circumstances, be scaled back on a time pro-rated

basis and post-vesting holding periods would normally apply.

In the event of a change of control, all unvested LTIP awards/RSAs would (unless rolled over)

vest,to the extent that any performance conditions/underpins attached to the relevant awards

havebeen achieved. Awards would normally be subject to time pro-rating (unless the committee

determines otherwise).

Unvested deferred share awards would vest in the event of a change of control (unless rolled over).

Shares held within the share ownership plan will be removed from the plan or exchanged for

replacement shares in accordance with the scheme rules and HMRC guidelines.

Non-executive directors’ terms of engagement

Non-executive directors are appointed by letter of appointment for an initial period of three years.

Each appointment is terminable by three months’ notice on either side. At the end of the initial

period, the appointment may be renewed by mutual consent, subject to annual re-election at

theAGM.

Employee non-executive directors’ terms of engagement

Employee non-executive directors are appointed by letter of appointment for an initial period of two

to three years. Each appointment is terminable by one month’s written notice on either side. At the

end of the initial period, the appointment may be renewed by mutual consent, subject to annual

re-election at the AGM.

Inspection of service agreements/letters of appointment

The service agreements and non-executive directors’ letters of appointment are available for

inspection during normal business hours at the Company’s registered office, and available for

inspection at the AGM.

Directors’ service agreements and payments for loss of office

The committee regularly reviews the contractual terms of the service agreement to ensure these

reflect best practice.

The service contracts for executive directors are for an indefinite period and provide for a 12-month

notice period. They do not include provisions for predetermined compensation on termination that

exceed 12-months’ salary, pension and benefits. There are no arrangements in place between the

Company and its directors that provide for compensation for loss of office following a takeover bid.

All directors are appointed for an indefinite period but are subject to annual re-election at the annual

general meeting.

In circumstances of termination on notice, the committee will determine an equitable compensation

package, having regard to the particular circumstances of the case. The committee reserves the

right to make payments in connection with a director’s cessation of office or employment where the

payments are made in good faith in discharge of an existing legal obligation (or by way of damages

for breach of such an obligation) or by way of a compromise or settlement of any claim arising in

connection with the cessation of a director’s office or employment. Any such payments may include,

but are not limited to, paying any fees for outplacement assistance and/or the director’s legal and/or

professional advice fees in connection with his cessation of office or employment. The committee

has discretion to require notice to be worked or to make payment in lieu of notice or to place the

director on garden leave for some or all of the notice period. Any payment in lieu of notice will be

reduced for any period of time worked post notice being given or received.

The annual bonus may be payable for a good leaver (as defined in the plan rules) in respect of the

period of the bonus plan year worked by the director; there is no provision for an amount in lieu of

bonus to be payable for any part of the notice period not worked. Bonus payments would normally

be paid at the normal payment date.

On cessation, an executive director’s share plan entitlements will be determined in accordance with

the rules of the relevant plan.

Unvested deferred share awards will normally lapse on the earlier of notice being given/received

and cessation. However, the committee has discretion to allow awards to instead continue to vest in

full on the normal vesting date (or earlier at the discretion of the committee) for a good leaver (as

defined in the relevant plan rules).

Corporate

governance

Capita plc

Annual Report 2022

110

Directors’ remuneration report

continued

Shareholder voting at the AGM

The 2022 directors’ remuneration report will be presented to shareholders at the 2023 AGM. At the

2022 AGM, the actual voting in respect of the ordinary resolution to approve the remuneration

report for the year ended 31 December 2021 is set out below together with the vote on the current

remuneration policy approved at the 2021 AGM.

Votes

cast for

Votes cast

against Abstentions

Directors’ remuneration report, other than the part

containingthe directors’ remuneration policy, for the

yearended 31 December 2021

1,148,723,621 23,356,565 3,956,217

98.01% 1.99%

Directors’ remuneration policy (2021 AGM) 1,254,719,423 3 7,105 , 242 108,597

97.13% 2.87%

1. A vote abstained is not a vote in law and is not counted in the calculation of the proportion of votes ‘for’ and ‘against’ a resolution.

Policy implementation for 2023

Details of the committee’s intended approach to the implementation of the policy for 2023 is set out

in the annual statement.

Fees for the Chairman, senior independent director, non-executive directors and

employee non-executive director

A summary of the fees for 2023 are as follows:

Annual fee from

1January 2023

David Lowden, Chairman £290,000

Georgina Harvey, Senior Independent Director and Remuneration Committee Chair £85,500

Brian McArthur-Muscroft, Audit and Risk Committee Chair £75,000

Nneka Abulokwe £64,500

John Cresswell £64,500

Neelam Dhawan £64,500

Janine Goodchild £64,500

Following a review of the Chairman’s fee, including his anticipated time commitment, David Lowden

was appointed on an annual fee of £290,000. This is lower than the fee of his predecessor, Sir Ian

Powell (£325,000). Fees for non-executive directors, the senior independent director and committee

chairs are unchanged from 2022.

Annual report on remuneration

This part of the remuneration report has been prepared in accordance with The Large and Medium-

sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended) and

paragraphs 9.8.6R and 9.8.8 of the Listing Rules. The annual report on remuneration will be put

toan advisory shareholder vote at the 2023 AGM. The information on pages 110 to 122 has been

audited as indicated.

FIT Remuneration LLP was appointed by the committee during 2020 to provide independent advice

on executive remuneration matters. During the year, the committee received independent and

objective advice from FIT primarily on market practice, governance updates, the operation of the

remuneration policy, shareholder/proxy feedback and voting in respect of the 2022 AGM and

remuneration-related disclosure within the accounts. FIT’s fees were £79,653 (excluding VAT)

during 2022 for its services (charged on a time plus expenses basis). The fees were considered

appropriate for the work undertaken. No other services were provided to the Group by FIT.

FIT is a founding member of the Remuneration Consultants Group and, as such, operates

voluntarily under the code of conduct in relation to executive remuneration consulting in the UK. The

committee considers FIT’s advice on remuneration to be independent and objective, and there is no

connection with the Company or individual directors.

The committee also consulted with the CEO, CFO, the Chief People Officer and the Group

RewardDirector to provide further information to the committee on the performance and proposed

remuneration for the executive directors and other senior management, but not in relation to their

own remuneration.

The work of the committee is detailed in the annual statement.

Corporate

governance

Capita plc

Annual Report 2022

111

Directors’ remuneration report

continued

Directors’ remuneration earned in 2022 – single-figure table (audited)

The table below summarises directors’ remuneration received in 2022 (with prior year comparators).

Base salary

and fees

Benefits

Pension

Annual bonus

LTIP

RSA

Total

remuneration

Total fixed

remuneration

Total variable

remuneration

David Lowden

2022 213,447 839 – – – – 214,286 214,286 0

2021 75,000 – – – – – 75,000 75,000 0

Jon Lewis

2022 748,000 17, 9 8 6 37,4 0 0 897, 6 0 0 66,986 – 1,767,972 803,386 964,586

2021 725,000 18,837 36,250 359,020 46,308 – 1,185,415 780,087 405,328

Tim Weller

2022 545,000 18,399 27, 2 5 0 572,250 – – 1,162,899 590,649 572,250

2021 299,337 9,588 14,967 135,296 – – 459,188 323,892 135,296

Georgina Harvey

2022 80,250 – – – – – 80,250 80,250 0

2021 75,000 – – – – – 75,000 75,000 –

Brian McArthur-Muscroft

2022 42,875 – – – – – 42,875 42,875 0

2021 – – – – – – – – 0

Nneka Abulokwe

2022 59,125 193 – – – – 59,318 59,318 0

2021 – – – – – – – – 0

John Cresswell 2022 64,500 – – – – – 64,500 64,500 0

2021 64,500 – – – – – 64,500 64,500 0

Neelam Dhawan

2022 64,500 25,599 – – – – 90,099 90,099 0

2021 53,750 4,000 – – – – 57,750 57,75 0 0

Janine Goodchild

2022 32,250 – – – – – 32,250 32,250 0

2021 – – – – – – – – 0

Former Directors

Sir Ian Powell

2022 128,951 16 – – – – 128,967 128,967 0

2021 325,000 – – – – – 325,000 325,000

Gordon Boyd

2022 – – – – – – – – 0

2021 513,010 1,309 – – – – 514,320 514,320 0

Patrick Butcher 2022 – – – – – – – – 0

2021 – 905 – – – – 905 905 0

Matthew Lester

2022 37,50 0 – – – – – 37,500 37,50 0 0

2021 75,000 – – – – – 75,000 75,000 0

Baroness Lucy Neville-Rolfe

2022 – – – – – – – – 0

2021 62,163 – – – – – 62,163 62,163 0

Gillian Sheldon

2022 – – – – – – – – 0

2021 13,750 896 – – – – 14,646 14,646 0

Andrew Williams

2022 – – – – – – – – 0

2021 23,292 902 – – – – 24,194 24,194 0

Lyndsay Browne

2022 32,250 – – – – – 32,250 32,250 0

2021 64,500 – – – – – 64,500 64,500 0

Joseph Murphy

2022 32,250 – – – – – 32,250 32,250 0

2021 64,500 – – – – – 64,500 64,500 –

Corporate

governance

Capita plc

Annual Report 2022

112

Directors’ remuneration report

continued

Annual bonus for 2022 (audited)

The annual bonus for 2022 was operated at normal levels (200% of salary for the CEO and 175%

ofsalary for the CFO). The bonus was based on a combination of revenue, profit before tax (PBT)

reported free cash flow (all equally weighted and totalling 80% of maximum bonus) and strategic/

individual objectives (20% of maximum bonus). For each performance measure, 25% of bonus was

payable for achieving the threshold target; 50% was payable for achieving target performance; with

100% of the bonus payable for achieving the maximum target. Details of performance against the

financial and strategic/individual targets are set out below.

Financial targets (80% of the bonus)

Weighting (% of

maximum bonus)

Threshold target

(25% vests)

Target

(50%vests)

Stretch

(100%vests)

Actual

performance

Achievement

against financial

performance

weighting

Revenue 26.67% £2,785m £2,932m £3,079m £2,846m 35.3%

PBT 26.67% £62m £70m £79m £74m

72.3%

Free cash flow 26.67% £14m £23m £32m £29m 50.0%

Financial measures

bonus payout 80% 42%

1. Excluding the impact of 2022 disposals (and planned disposals which have met the criteria to be excluded as business exits)

2. Actual PBT performance includes a c.£4.9m accrual in respect of the Board’s decision to repay UK Government furlough support in 2023 that

was received by Capita during 2021 (effectively reducing the PBT payout from c.100% to c.72% of this part of the bonus award.

3. Following a review of the broader stakeholder experience when assessing performance against the financial targets that were set in respect of

the year ended 31 December 2022, and noting the utilisation of an invoice discounting facility to a greater extent than had been assumed in the

business plan, the committee exercised negative discretion post year end to reduce the free cash flow element from a c.83% payout for this part

of the award to a target payout (ie a 50% payout for this part of the bonus award).

1. Benefits include all taxable benefits as defined by paragraph 11(1) of the regulations. This includes private medical insurance, company car

allowance, work travel and the value of matching share awards under the UK all-employee share scheme.

2. David Lowden was appointed Chairman on 11 May 2022 following the stepping down of Sir Ian Powell as Chairman and non-executive director

on 10 May 2022. David stepped down from the position of senior independent director on his appointment as Chairman. Fees for 2022 reflect

the change in roles and are shown on a pro-rata basis.

3. Details of the performance assessment and vesting of the 2020 LTIP award held by Jon Lewis are set out on page 115. The impact of share

price movements on his awards, based on the average three-month share price to 31 December 2022 (25.23p), is as follows:

Face value of awards expected to vest, based on the share price at grant (1,770,000 shares x 15% x 32.72p) £86,872

Expected value of awards at vesting (1,770,000 shares x 15% vesting x 25.23p) £66,986

Impact of share price movements on vesting values £19,886

The 2019 LTIP awards have been restated in the table above in respect of the prior year from £98,811 (based on a three-month average share

price to 31 December 2021 of 44.34p) to £46,308 (based on a share price of 20.78p as at the 21 March 2022 vesting date). RSAs granted to

JonLewis and Tim Weller in May 2021 and April 2022 with performance underpins, will be disclosed in the year ending just prior to the normal

vesting date.

4. Tim Weller was appointed CFO on 12 May 2021. His remuneration for 2021 is shown from the date of his appointment to 31 December 2021,

albeit reflecting a period of unpaid leave. The benefits figure for 2022 includes an element of backdated car allowance (£1,342) which was

underpaid in 2021.

5. Georgina Harvey was appointed Senior Independent Director on 1 July 2022 following David Lowden’s appointment as Chairman. Fees for

2022 reflect the change in role part way through the year.

6. Brian McArthur-Muscroft was appointed as a non-executive director on 1 June 2022 and replaced Matthew Lester as Chair of the Audit and

Risk Committee on 1 July 2022. Fees for 2022 are shown from 1 June 2022 to 31 December 2022 and reflect his appointment as chair of a

committee from 1 July 2022.

7. Nneka Abulokwe was appointed as a non-executive director on 1 February 2022. Fees for 2022 are shown from 1 February 2022 to

31December 2022.

8. Neelam Dhawan was appointed as a non-executive director on 1 March 2021. Fees for 2021 are shown from 1 March 2021 to 31 December

2021. Neelam is based outside the UK and receives an allowance for physical attendance at a Board meeting. This is shown in the benefits

column.

9. Janine Goodchild was appointed as employee non-executive director on 1 July 2022. Fees for 2022 are shown from 1 July 2022 to 31

December 2022. In addition to her fee as an employee non-executive director, she received earnings from the Group as an employee

amounting to £24,421 for the period 1 July 2022 to 31 December 2022.

10. Sir Ian Powell stepped down as Chairman and non-executive director on 10 May 2022. Fees for 2022 are shown from 1 January 2022 to

10May 2022 and include an element of accrued holiday pay.

11. Gordon Boyd stepped down from the Board and as interim CFO on 12 May 2021 following the appointment of Tim Weller. Reflecting the

interim nature of Gordon’s role, he received a base salary (£100,000 per month) but was not eligible for any variable remuneration and did not

receive pension contributions. The figures disclosed for 2021 are for the period 1 January 2021 to 12 May 2021 and include an element of

accrued holiday pay.

12. Matthew Lester stepped down as a non-executive director on 30 June 2022. Fees for 2022 are shown from 1 January 2022 to 30 June 2022.

13. Baroness Lucy Neville-Rolfe stepped down as a non-executive director on 14 December 2021. Fees disclosed for 2021 are for the period from

1 January 2021 to 14 December 2021.

14. Gillian Sheldon stepped down as a non-executive director on 28 February 2021. Fees disclosed for 2021 are for the period from 1 January

2021 to 28 February 2021 and include an element of accrued holiday pay.

15. Andrew Williams stepped down as a non-executive director on 11 May 2021. Fees disclosed for 2021 are for the period from 1 January 2021

to11 May 2021.

16. Lyndsay Browne and Joseph Murphy stepped down as employee directors on 30 June 2022. Fees for 2022 are shown from 1 January 2022

to30 June 2022. In addition to their fee as an employee non-executive director, both received earnings from the Group as an employee

amounting to £54,763 for Lyndsay Browne and £35,605 for Joseph Murphy for the period from 1 January 2022 to 30 June 2022. As part of his

participation in the Capita share ownership scheme Joseph Murphy received 504 matching shares (£135). The value of the matching shares is

the sum of the cost of purchase over the period 1 January 2022 to 30 June 2022. The figures for earnings and matching shares for 2021 are

disclosed in footnote 7 of the single figure table in the 2021 report.

Corporate

governance

Capita plc

Annual Report 2022

113

Directors’ remuneration report

continued

Strategic/individual objectives (20% of the bonus)

Achievement against the strategic and individual objectives represented 20% of the total annual bonus opportunity for each executive director. The objectives were focused on ESG measures

incorporating customer, employee, diversity & inclusion and net zero and an individual role-based measure. The objectives and targets were aligned for both executive directors.

Jon Lewis and Tim Weller

Objectives

Weighting

(% of maximum bonus) Assessment

Score

(% of maximum bonus)

Customer – cNPS

Deliver improvement in

customer net promoter

score (cNPS) for Capita

Group (excluding Portfolio)

by the end of 2022.

Threshold Target Maximum Actual

Maintain score +2 point improvement +4 point improvement +8 point improvement (max)

Following a review of cNPS in respect of the year ended 31 December 2022, which remains key to the delivery of Capita’s strategy, the committee noted

asignificant improvement compared with the year ended 31 December 2021. As such, the committee was satisfied that this objective was met in full.

Employee – eNPS

Deliver improvement in

employee net promoter

score (eNPS) for Capita

Group by the end of 2022.

Threshold Target Maximum Actual

+2 point improvement +5 point improvement +10 point improvement +15 point improvement (max)

Following a review of eNPS in respect of the year ended 31 December 2022, the committee was pleased to see a material improvement when compared

withthe 2021 outcome. As such, the committee was satisfied that this objective was met in full.

Diversity & inclusion

Meet/exceed Group

diversity & inclusion

hurdles. NB, If neither

threshold target was met,

there would have been no

payout for this objective.

4% Achieve minimum of 11% ethnic minority (including 2% Black)

Threshold Target Maximum Actual

11% (including 2% Black) +4 point improvement +8 point improvement

13.9% ethnic minority

(including 3% Black) (below target)

Achieve minimum of female average representation across senior/middle management in the UK

Threshold Target Maximum Actual

38% +4 point improvement +8 point improvement +4 point improvement (target)

In assessing this target, the committee noted that both hurdles were achieved with 13.9% ethnic minority (including 3% Black) and 41.8% female average

representation across senior/middle management in the UK. Performance against the targets for the Inclusion Index was at target with a +4 improvement.

The committee therefore considers this objective to be partially met.

Corporate

governance

Capita plc

Annual Report 2022

114

Directors’ remuneration report

continued

Objectives

Weighting

(% of maximum bonus) Assessment

Score

(% of maximum bonus)

Net zero

Ensuring all divisions and

functions have plans in

place which achieve the

following: (i) ensure

reporting on carbon

emissions is built into the

monthly performance

review process (and an

equivalent functional/

executive committee

process) to raise

awareness and familiarise

all colleagues with the net

zero challenge; (ii) agree

baseline data and set

targets for 2023 as part of

the business planning

process; and (iii) agree

and start to deliver ‘no

regret’ changes to reduce

carbon emission in 2022.

Threshold Target Maximum Actual

Emissions reporting established in

themonthly performance review/

functional equivalent routine by

yearend and 2023 targets set

As for threshold but to include a

detailed and executable plan for

2023–25 (first phase of net zero)

As target but to include

demonstrablereduction in

Capita’scarbon footprintduring

theyear

Met in full

In assessing this target, the committee noted that emissions reporting had been successfully established in the monthly performance review process,

adetailed and executable plan had been developed for 2023–25, and Capita’s overall carbon footprint reduced by 16,323 tonnes CO

e. As such, the

committee was satisfied that this objective was met in full.

Debt reduction

Contribute to debt

reduction through the

successful execution of

the 2022 divestment plan.

Target Maximum Actual

Divest in accordance with the

desired timeline andwithin the

agreed price range

Divest in accordance with the

desired timeline and deliver at the

top end of the agreed price range

Met in full

In assessing this target, the committee noted the proceeds received from the divestment programme (together with the sale of Pay360) which were

consistent with the Board’s desired timelines and which resulted in a significant strengthening of Capita’s balance sheet and reduced net debt position

ahead of market expectations. As such, the committee was satisfied that this objective was met in full.

Total 20% 18% (out of 20%)

Summary of total 2022 bonus awards

Jon Lewis Tim Weller

% of maximum % of salary % of maximum % of salary

Total financial 42% 42%

Strategic/individual 18% 18%

Total (%) 60% 120% 60% 105%

Total bonus (£) £8 97,6 0 0 £572,250

Corporate

governance

Capita plc

Annual Report 2022

115

Directors’ remuneration report

continued

The TSR performance period runs for three years from the date of grant (16 April 2020) and

therefore has not yet concluded. Based on performance to 31 December 2022, Capita’s TSR

performance against the FTSE 250 constituents (excluding investment trusts) was below median

and therefore 0% of this part of the award is expected to vest. Actual vesting will be assessed at the

end of the three-year performance period and any change in the vesting outcome and value of the

LTIP 2020 for the purposes of the single figure of remuneration will be shown in next year’s report.

While employee engagement has improved significantly during 2022, it fell below the threshold set

for the 2020 LTIP award resulting in zero vesting for this element. However, performance against

the customer NPS and supplier targets (which are considered to be critical underpins to the

performance and improvement of the business) were very strong over the performance period.

A20point positive swing in cNPS delivered full vesting of this element. In addition, adherence to the

supplier prompt payment code exceeded the target set (with a record level of suppliers paid in less

than 31 days) resulting in maximum vesting of this element.

Based on the customer and supplier performance, the committee believes that the 15% vesting is

appropriate due to progress made in improving customer satisfaction and supplier payment scores.

In addition to noting that the 2020 LTIP award was reduced by 70% compared with normal award

levels as a % of salary (which together with the subsequent share price decline has significantly

impacted the estimated vesting value) and progress made in respect of the customer and supplier

targets (both critical to the delivery of Capita’s strategy), the committee also considered Capita’s

underlying performance over the three-year performance period. In this regard, it noted the material

progress that has been made in delivering the strategy including the performance of the disposal

programme, the significant strengthening of the balance sheet and strong operational delivery.

Based on the above outcomes, the estimated vesting of the long-term incentive for Jon Lewis in

2023 is:

Awards granted

Shares vesting based

on performance

(15%of maximum)

Dividend

equivalentshares

Total shares

expectedto vest

Estimated value

atvesting

Jon Lewis 1,770,000 265,500 – 265,500 £66,986

1. No dividend equivalent shares are payable on the 2020 LTIP award.

2. Based on the average three-month share price to 31 December 2022 of 25.23p.

As noted on page 89, Capita established an ESG committee during 2022. One of the ESG

committee’s responsibilities is to review performance against ESG metrics in the MBP and to

makerecommendations to the committee on outturn. Following a review of financial and personal

performance and the ESG committee recommendations by the committee post year end, annual

bonuses of 60% of the maximum (reduced from 69% of the maximum following the committee’s

decision to reduce the free cash flow performance to a target performance level). This equates

to120% of salary for the CEO and 105% of salary for the CFO. Consistent with the shareholder

approved remuneration policy, 50% of the bonus awards will be deferred into Capita plc shares

forthree years.

Long-term incentive awards due to vest in 2023 based on performance

to31December 2022 (audited)

The performance assessment in respect of the 2020 LTIP awards

held by Jon Lewis is as follows:

Performance measure Weighting

Threshold

(25%vests)

Target

(50%vests)

Stretch

(100% vests) Result

Vesting

(% of maximum)

Relative TSR 75% Median TSR

performance

vs the

constituents

of the FTSE

250

(excluding

investment

trusts)

Pro-rating

vesting

between

median and

upper

quartile

performance

on a straight

line basis

between

25% and

100%

Upper

quartile TSR

performance

vs the

constituents

of the FTSE

250

(excluding

investment

trusts)

Below

median

Responsible business scorecard:

Customer 10% 3 point

positive

swing in

NPS

6 point

positive

swing in

NPS

9 point

positive

swing in

NPS

20 point

positive

swing

10%

Employee 10% 3 point

positive

swing in

NPS

6 point

positive

swing in

NPS

9 point

positive

swing in

NPS

Below

threshold

Suppliers adherence to

prompt payment code

5% – Maintain

current

Exceed

current

Exceed 5%

1. The awards are subject to an underpin requiring the assessment of the underlying financial and operational performance of Capita over the

performance period.

Corporate

governance

Capita plc

Annual Report 2022

116

Directors’ remuneration report

continued

RSAs granted in 2022 (audited)

RSAs were granted under the Capita Executive Plan in April 2022 as follows:

Name of director

Number of shares

awarded

Face value of

RSA

Percentage

of salary

Jon Lewis 3,481,985 £748,000 100%

Tim Weller 2, 5 37,0 0 8 £545,000 100%

The CEO’s award level was reduced from 150% to 100% of salary to reflect the prevailing share

price at grant and noting the decision to continue to operate a TSR underpin for these awards

(which was significantly underwater at the date of grant). No reduction was made to the CFO’s

award level given Tim Weller’s recent recruitment and noting that the challenging TSR underpin

wasnot originally intended to apply when the CFO’s remuneration package was agreed in 2021.

RSAs granted to executive directors in 2022 will normally vest after three years from grant subject

to: (i) continued employment; (ii) satisfactory personal performance during the relevant vesting

periods; and (iii) a positive assessment of performance against two underpins (see below). Once

vested, shares received may not normally be sold until at least six years from the grant date (other

than to pay relevant taxes).

The underpins for the 2022 awards are as follows:

• underpin 1: Capita’s TSR over the three years ending 31 December 2024 must be positive for any

RSAs granted to executive directors to vest; and

• underpin 2: the committee must be satisfied with the underlying performance of Capita and that

there have been no environmental, social or governance issues resulting in material reputational

damage. If this is not deemed to be met, the committee will consider a reduction to the final

vesting level of the RSAs (including to nil).

Directors’ interests and shareholding guidelines (audited)

Executive directors are expected to hold 200% (300% for the CEO) of salary in shares in the

Company. The guidelines include shares held beneficially and also shares within the deferred

annual bonus (DAB) plan that have been deferred over the three-year period, RSA awards which

are not subject to performance conditions/performance underpins and share awards which have

vested but not yet been exercised. Any shares in the DAB, RSA awards which are not subject to

performance conditions/performance underpins and vested but unexercised LTIP awards used

forthis are calculated net of tax. Share awards that are subject to performance conditions are

notincluded.

The remuneration policy adopted in 2021 incorporated post cessation shareholding guidelines

which require executive directors to retain 100% of the relevant guideline (or the actual shareholding

if lower at cessation) until the second anniversary of the date of cessation.

Corporate

governance

Capita plc

Annual Report 2022

117

Directors’ remuneration report

continued

Beneficially

held interests at

31 December 2022

Beneficially

held interests at

31 December 2021

Interests in share

incentive schemes,

awarded without

performance

conditions at

31 December 2022

Interests in share

incentive schemes,

awarded without

performance

conditions at

31 December 2021

Interests in share

incentive schemes,

awarded subject

to performance

conditions/underpins at

31 December 2022

Interests in share

incentive schemes,

awarded subject

to performance

conditions at

31 December 2021

Interests in share

option schemes where

performance/vesting

conditions have been

met but not exercised at

31 December 2022

Interests in share

option schemes where

performance/vesting

conditions have been

met but not exercised at

31 December 2021

Percentage of

shareholding target

requirement at

31 December 2022

David Lowden 150,000 75,000 – – – – – – –

Jon Lewis 1,414,538 795,303 868,456 516,029 7,4 21,0 8 5 5,721,886 738,877 1,183,666 25%

Tim Weller 270,689 262,854 327,276 – 3,619,703 1,082,695 – – 10%

Georgina Harvey 6,000 6,000 – – – – – – –

Brian McArthur-Muscroft 0 – – – – – – – –

Nneka Abulokwe 0 – – – – – – – –

John Cresswell 65,500 20,500 – – – – – – –

Neelam Dhawan 0 – – – – – – – –

Janine Goodchild 0 – – – – – – – –

Sir Ian Powell

100,000 100,000 – – – – – – –

Matthew Lester

49,18 6 49,186 – – – – – – –

Lyndsay Browne

11,241 11, 240 – – – – – – –

Joseph Murphy

14,431 11,379 – – – – – – –

1. Calculated using the closing share price on 31 December 2022 (24.26p).

2. Ian Powell and Matthew Lester’s beneficially held interests are shown at the date of their resignations on 10 May 2022 and 30 June 2022 respectively.

3. Lyndsay Browne and Joseph Murphy’s beneficially held interests are shown at the date of their resignation on 30 June 2022.

Between the end of the 2022 financial year and 1 March 2023, Jon Lewis and Tim Weller acquired 2,488 shares under the Capita share ownership plan, increasing their beneficial interest in ordinary

shares of the Company to 1,415,782 and 271,933 respectively. Although Capita does not have a formal policy on hedging shares, executive and non-executive directors attest annually they have not

pledged any shares held in the Company.

Corporate

governance

Capita plc

Annual Report 2022

118

Directors’ remuneration report

continued

The performance targets and underpin for the 2020 LTIP award are as follows:

Performance underpin

Performance

measure Weighting

Threshold (25%

vests) Target (50% vests) Stretch (100% vests)

Assessment of

the underlying

financial and

operational

performance of

Capita over the

performance

period

Relative TSR 75% Median TSR

performance vs

the constituents

of the FTSE 250

(excluding

investment

trusts)

Pro-rating

vesting between

median and

upper quartile

performance on

a straight line

basis between

25% and 100%

Upper quartile

TSR

performance vs

the constituents

of the FTSE 250

(excluding

investment

trusts)

Responsible business scorecard:

Customer 10% 3 point positive

swing in NPS

6 point positive

swing in NPS

9 point positive

swing in NPS

Employee 10% 3 point positive

swing in NPS

6 point positive

swing in NPS

9 point positive

swing in NPS

Suppliers

adherence to

prompt payment

code

5% – Maintain current Exceed current

Unvested restricted share awards

Name of director 2021 award 2022 award

Jon Lewis 2,169,100 3,481,985

Tim Weller 1,082,695 2,5 3 7,0 0 8

There are no performance targets attached to the RSAs. However, vesting is subject to: (i)

continued employment; (ii) satisfactory personal performance during the relevant vesting periods;

and (iii) a positive assessment of performance against two underpins (see below).

The underpins for the 2021 awards are as follows:

• underpin 1: Capita’s TSR over the three years ending 31 December 2023 must be positive for any

RSAs granted to executive directors to vest; and

• underpin 2: the committee must be satisfied with the underlying performance of Capita and that

there have been no environmental, social or governance issues resulting in material reputational

damage. If this is not deemed to be met, the committee will consider a reduction to the final

vesting level of the RSAs (including to nil).

Share plans (audited)

DAB plan

A deferred award is the deferred element of an individual’s annual bonus. Any deferral is made

onagross basis into deferred shares or as a (net of tax) restricted share award. The deferred

shares are held for a period of three years from the date of award. This part is not subject to

performance conditions.

Unvested DAB deferred/restricted awards at 31 December 2022

Name of director 2022 award

Total

Jon Lewis 868,456 868,456

Tim Weller 327,276 327,276

1. As a result of no bonus award for 2019 performance and no bonus operated for 2020, there were no deferred bonus awards in 2020 or 2021.

2. The value of the 2022 deferred award granted on 25 March 2022 was included in the annual bonus value in the 2021 single-figure table (and is

included in the comparative figures for 2021 in the table on page 111). This award is due to vest on 25 March 2025.

Unvested LTIP award

Name of director 2020 award

Jon Lewis 1,770,000

Details of the performance targets and expected vesting in respect of the 2020 award are set out on

page 115.

Corporate

governance

Capita plc

Annual Report 2022

119

Directors’ remuneration report

continued

Board changes

Sir Ian Powell and Matthew Lester stepped down from the Board on 10 May 2022 and 30 June

2022 respectively. No payments were made or are payable outside of their normal annual fees up

tocessation. Lyndsay Browne and Joseph Murphy stepped down from the Board as employee

non-executive directors on 30 June 2022. No payments were made or are payable outside of their

normal annual fees up to cessation. However, they both remained employees and so continued to

receive earnings from the Group as employees.

Payments to former directors (audited)

No payments were made to former directors.

External appointments for executive directors

During the year Jon Lewis served as a non-executive director for Equinor ASA. He received and

retained fees of NOK 764,271 for the period from 1 December 2021 to 30 November 2022. Tim

Weller is a non-executive director of The Carbon Trust for which he receives an annual salary of

£17,000. The committee acknowledges these roles can benefit Capita through broadening Jon’s

and Tim’s knowledge and experience.

The underpins for the 2022 awards are as follows:

• underpin 1: Capita’s TSR over the three years ending 31 December 2024 must be positive for any

RSAs granted to executive directors to vest; and

• underpin 2: the committee must be satisfied with the underlying performance of Capita and that

there have been no environmental, social or governance issues resulting in material reputational

damage. If this is not deemed to be met, the committee will consider a reduction to the final

vesting level of the RSAs (including to nil).

Satisfaction of options

When satisfying awards made under its share plans, the Company uses newly issued, treasury

orpurchased shares as appropriate.

Dilution

All awards are made under plans that incorporate the overall dilution limit of 10% in 10 years. The

estimated dilution from existing awards, including executive and all-employee share awards, was

approximately 4.26% of the Company’s share capital at 31 December 2022.

Executive directors’ service agreements

Executive directors Date of joining the Company Notice period

Jon Lewis 1 December 2017 12 months

Tim Weller 12 May 2021 12 months

Non-executive directors’ terms of engagement

Non-executive directors Date of joining the Board Expiry date of currentappointment

David Lowden

1 January 2021 9 May 2025

Georgina Harvey

1 October 2019 1 July 2025

Brian McArthur-Muscroft 1 June 2022 31 May 2025

Nneka Abulokwe 1 February 2022 31 January 2025

John Cresswell 17 November 2015 16 November 2024

Neelam Dhawan 1 March 2021 29 February 2024

Sir Ian Powell

1 September 2016 10 May 2022

Matthew Lester

1 March 2017 30 June 2022

1. David Lowden was appointed Chairman on 11 May 2022 and stepped down from his role as senior independent director. Sir Ian Powell stepped

down from the Board as Chairman and non-executive director on 10 May 2022.

2. Georgina Harvey was appointed Senior Independent Director on 1 July 2022.

3. Matthew Lester stepped down from the Board on 30 June 2022.

Corporate

governance

Capita plc

Annual Report 2022

120

Directors’ remuneration report

continued

Percentage change in remuneration levels

The table below shows the change in base compensation, benefits and annual bonus for the Board directors in the 2022 and 2021 financial years, compared with the average for all employees of the

Company (Capita plc):

2022 2021 2020

Base

salary/fees

Taxable

benefits

Annual

bonus

Base

salary/fees

Taxable

benefits

Annual

bonus

Base

salary/fees

Taxable

benefits

Annual

bonus

Executive directors

Jon Lewis

3.2% -4.5% 150% 14.3% 5.1% 100%

-12.5% -36.9% –

Tim Weller

0% 23% 132% – – – – – –

Gordon Boyd

– – – 0% 100% – – – –

Patrick Butcher

– – – – -100% – -12.5% -10.8% –

Non-executive directors

David Lowden

286.7% 100% – – – – – – –

Georgina Harvey

14% – – 14.3% – – -12.5% – –

Brian McArthur-Muscroft

– – – – – – – – –

Nneka Abulokwe

– – – – – – – – –

John Cresswell 0% – – 14.3% – – -12.5% – –

Neelam Dhawan

0% 540% – – – – – – –

Janine Goodchild

– – – – – – – – –

Sir Ian Powell

0% 100% – 14.3% – – -12.5% -100% –

Matthew Lester

0% – – 13.9% – – -12.5% – –

Baroness Lucy Neville-Rolfe

– – – 14.3% – – -12.5% – –

Gillian Sheldon

– – – 14.3% 100% – -12.5% – –

Andrew Williams

– – – 14.3% 100% – -12.5% – –

Lyndsay Browne

0% – – 14.3% – – -12.5% – –

Joseph Murphy

0% – – 14.3% – – -12.5% – –

Employee population

5% 7.4% 38.1% 2.8% 4.4% 123.2% 5.5% 20.6% -35.2%

1. The percentage change shown for the directors is based on the single figure information disclosed on page 111. The increase in salary/fees shown

as the comparative for 2021 is due to the voluntary reduction taken by executive and non-executive directors in 2020 in response to Covid-19.

2. Jon Lewis did not receive a bonus in 2020 as the bonus plan was cancelled in response to Covid-19. The increase in 2021 is therefore shown

as 100%.

3. Tim Weller was appointed to the Board on 12 May 2021. Comparative figures for 2021 are therefore unavailable. His salary, benefits and

annual bonus for 2021 have been annualised to show an approximate percentage change since 2021. The increase in benefits is due to

abackdated payment for car allowance (£1,342) which was underpaid in 2021.

4. Gordon Boyd received a base salary of £100,000 a month for the period of his appointment as interim CFO (16 November 2020 to 12 May

2021) and was not eligible for any variable remuneration or pension contribution. On an annualised basis his salary therefore did not change

between 2020 and 2021.

5. Taxable benefits for Patrick Butcher reduced from £15,252 in 2020 to £905 in 2021.

6. David Lowden was appointed Chairman in May 2022. His fee for 2022 has been annualised to show the percentage change since 2021

following his change in role which has a significantly increased time commitment and associated fee. David was appointed to the Board during

2021, comparative figures for 2021 are therefore unavailable.

7. Georgina Harvey was appointed Senior Independent Director in July 2022. Her fee for 2022 has been annualised to show the percentage

change since 2021 following her change in role.

8. Brian McArthur-Muscroft, Nneka Abulokwe and Janine Goodchild were appointed to the Board during 2022. Comparative figures for 2022

aretherefore unavailable.

9. Neelam Dhawan was appointed to the Board during 2021. Comparative figures for 2021 are therefore unavailable. Her fee for 2021 has been

annualised to show the percentage change since 2021.The increase in benefits is due to additional fees payable for physical attendance at

board meetings as Neelam is based outside the UK.

10. Sir Ian Powell and Matthew Lester stepped down from the Board during 2022. For comparative purposes, their 2022 fees have been

annualised to show the percentage change since 2021.

11. Baroness Lucy Neville-Rolfe, Gillian Sheldon and Andrew Williams stepped down from the Board during 2021. Comparative figures for 2022

are therefore unavailable.

12. Lyndsay Browne and Joseph Murphy stepped down from the Board during 2022. For comparative purposes, their 2022 fees have been

annualised to show the percentage change (in fees as a non-executive employee director) since 2021.

13. The employee population information shown is for UK employees employed in the Capita plc entity.

14. Taxable benefits were £0 in 2021 but £839 and £16 for David Lowden and Sir Ian Powell in 2022 respectively. Taxable benefits were £0 in 2020 but

£1,309, £896 and £902 for Gordon Boyd, Gillian Sheldon and Andrew Williams respectively in 2021. The increases are therefore shown as 100%.

Corporate

governance

Capita plc

Annual Report 2022

121

Directors’ remuneration report

continued

The committee recognises that the 2022 ratios are higher than last year. The CEO’s single figure of

remuneration for 2022 is higher than the figure for 2021 (c.49% increase) for the following reasons:

• The CEO received a base salary increase of 3.17% (his first salary increase since appointment

in2017).

• The 2022 single figure includes an annual bonus of £897,600 (60%) of maximum). This compares

with an annual bonus award of £359,020 in 2021.

• The value of the 2020 LTIP vesting outcome (included in the 2022 single figure) is higher than the

adjusted 2019 LTIP vesting outcome (included in the revised ratios for 2021).

The pay ratios have fluctuated since reporting commenced in 2019, primarily as a result of

variability in incentive outcomes for the CEO.

Capita is committed to offering its employees a competitive remuneration package. Base salaries

for employees, including our executive directors, are determined with reference to a range of

factorsincluding market practice, experience and performance in role. Due to the nature of his role,

the CEO’s remuneration package has higher weighting on performance-related pay (including the

annual bonus and historical LTIP) compared to the majority of the workforce. This means the

payratios are likely to fluctuate depending on the outcomes of incentive plans in each year. The

committee also recognises that, due to the nature of the Company’s business and the flexibility

permitted within the regulations for identifying and calculating the total pay and benefits for

employees, the ratios reported above may not be comparable to those reported by other

companies. For these reasons, the committee considers that the median CEO pay ratio is

representative of the UK employee base.

Gender pay gap reporting

The Company’s 2022 gender pay gap data will be available on the government website

https://gender-pay-gap.service.gov.uk from April 2023.

Relative importance of the spend on pay

The table below shows the spend on employee costs in the 2022 and 2021 financial years,

compared with dividends:

2022

£m

2021

£m

change

Employee costs 1,758.1 1,767.1 -0.51%

Dividends – – –

CEO pay ratio

The table below compares the single total figure of remuneration for the CEO with that of the

Group’s employees who are paid at the 25th percentile (lower quartile), 50th percentile (median)

and 75th percentile (upper quartile) of its UK employee population.

Year Method

25th percentile

pay ratio

50th percentile

pay ratio

75th percentile

pay ratio

2022 Option B 76:1 56:1 36:1

2021

Option B 49:1 38:1 24:1

2020

Option B 61:1 44:1 29:1

2019 Option B 41:1 25:1 14:1

1. In accordance with the regulations, the 2021 CEO single figure has been updated to reflect the value of the LTIP based on the share price atthe

vesting date. The 2021 pay ratio figures have therefore been adjusted accordingly.

2. In accordance with the regulations, the 2020 CEO single figure has been updated to reflect the value of the LTIP based on the share price atthe

vesting date. The 2020 pay ratio figures have therefore been adjusted accordingly.

The 2022 remuneration figures for the employee at each quartile were determined with reference

tothe financial year ending 31 December 2022. Due to the complexity of Capita’s corporate and

workforce structure, Option B was used to calculate these figures. The committee believes that

thisapproach provides a fair representation of the CEO to employee pay ratios and is appropriate

incomparison to alternative methods, balancing the need for statistical accuracy with internal

operational constraints.

A full-time and full-year equivalent total pay and benefits figure for 2022 was calculated for each

quartile point employee using the single figure methodology. This was also sense checked against

a sample of employees with hourly pay rates either side of the identified individuals to ensure that

the appropriate representative employee was selected. No adjustments were made to the total pay

and benefits figures (other than the approximate up-rating of pay elements where appropriate to

achieve full-time and full-year equivalent values) and no components of pay have been omitted.

The table below sets out the 2022 full-time equivalent salary and total pay and benefits for the three

identified quartile point employees:

2022 25th percentile (P25) Median (P50) 75th percentile (P75)

Salary £22,354 £29,878 £46,260

Total pay and benefits £23,188 £31,821 £48,707

Corporate

governance

Capita plc

Annual Report 2022

122

Directors’ remuneration report

continued

RSA vesting percentages will be shown in respect of the estimated/actual value at vesting in

respect of the year ending just prior to the vest date.

Year

CEO – single

figure of total

remuneration

Annual bonus

(vs max

opportunity)

Long-term

incentive (vs max

opportunity)

2022 £1,767,9 72 60% 15%

2021 £1,18 5,415 24.8% 12.5%

2020 £1,196,582 0% 60%

2019 £789,678 0% 0%

2018 £2,014,209 85% 0%

2017 £741,376 0% 0%

2016 £682,958 0% 0%

2015 £2,520,428 50% 71.4%

2014 £2,558,998 100% 67. 2 %

2013 £2,326,250 75% 54.5%

Note: the vesting percentages for the long-term incentives are averaged between the LTIP and the

DAB vesting rates for 2013 and 2015. For 2014, this is the actual vesting for the LTIP as there is no

DAB maturity in 2014. Note: figures for 2013 are based on remuneration for Paul Pindar. Figures

for2014–2016 are based on remuneration for Andy Parker. Figures for 2017 are based on

remuneration paid to Andy Parker as CEO until 15 September 2017, to Nick Greatorex as interim

CEO from 16 September 2017 to 30 November 2017, and to Jon Lewis as CEO from 1 December

2017. In accordance with the regulations, the 2021 and 2020 CEO single figure have been updated

to reflect the value of the LTIPs for each year based on the share price at the vesting date (rather

than an estimate of the share price at vesting).

Approval of the directors’ remuneration report

The directors’ remuneration report was approved by the Board on 2 March 2023.

Georgina Harvey

Chair

Remuneration Committee

2 March 2023

Performance graph and CEO pay

The following chart compares the value of an investment of £100 in the Company’s shares with an

investment of the same amount in the FTSE All-Share Index and the FTSE 350 Support Services

Index over the past 10 years, assuming that all dividend income is reinvested. The FTSE 350

Support Services has been chosen as the appropriate comparator as Capita is a constituent

ofthisindex.

Capita Group FTSE All Share Index FTSE 350 Support Services Index

Total shareholder return rebased at 100

31 Dec 2231 Dec 2131 Dec 2031 Dec 1931 Dec 1831 Dec 1731 Dec 1631 Dec 1531 Dec 1431 Dec 1301 Jan 13

£0

£50

£100

£150

£200

£250

£300

£350

The total remuneration figures for the CEO for 2022 and the previous nine years are shown in the

table below based on the single-figure methodology.

The annual bonus payout and LTIP award vesting level as a percentage of the maximum

opportunity are also shown for this year.

Financial

statements

Financial

statements

Capita plc

Annual Report 2022

123

KPMG LLP’s Independent Auditor’s Report

To the members of Capita plc

KPMG LLP’s Independent

Auditor’s

Report

To the members of Capita plc

WHAT OUR OPINION COVERS

We have audited the Group and Parent Company financial statements of Capita plc (“the Company”) for the year

ended 31 December

2022 included in the Annual Report, which comprise:

Group (Capita plc and its subsidiaries) Parent Company (Capita plc)

The consolidated income statement, consolidated statement of

comprehensive income, consolidated balance sheet,

consolidated statement of changes in equity, consolidated cash

flow statement and related notes, including the accounting

policies in section 1 to 6 to the Group financial statements.

The company balance sheet, company statement of changes in equity

and the related notes, including the accounting policies in section 7 to

the Parent Company financial statements.

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 believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit

opinion and matters included in this report are consistent with those discussed and included in our reporting to the Group Audit and Risk

Committee (“ARC”).

We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements

including the FRC Ethical Standard as applied to listed public interest entities.

1. OUR OPINION IS UNMODIFIED

In our opinion:

▪ the financial statements of Capita plc give a true and fair view of the state of the Group’s and of the Parent Company’s affairs

as at 31 December 2022, and of the Group’s profit for the year then ended;

▪ the Group financial statements have been properly prepared in accordance with UK-adopted international accounting

standards;

▪ the Parent Company financial statements have been properly prepared in accordance with UK accounting standards,

including FRS 101 Reduced Disclosure Framework; and

▪ the Group and Parent Company financial statements have been prepared in accordance with the requirements of the

Companies Act 2006.

KPMG LLP’s Independent Auditor’s Report

To the members of Capita plc

2. OVERVIEW OF OUR AUDIT

FACTORS

DRIVING OUR

VIEW OF RISKS

Going concern remains a key audit matter. In

FY21, the risk was focussed on the adequacy of

disclosures around the material uncertainty. In

FY22, the risk has changed to now reflect the

judgement taken in reaching the conclusion of no

material uncertainty, and adequacy of the

accompanying disclosures.

The risk level remains stable for revenue

recognition reflecting the volume and magnitude of

contractual changes in the period. This KAM is

focussed upon variations or modifications for the

Group’s long-term contracts, for which accounting

can involve significant judgement.

The risk associated with impairment of goodwill is

deemed as increased, with impairments

recognised at both 30 June and 31 December

within the Portfolio CGUs. There is inherent

uncertainty in forecasting of future cash flows,

which are the basis of recoverability. In particular

for CGUs, measured as value in use on a disposal

basis, the estimated disposal proceeds.

The risk associated with capitalisation and

recoverability of contract assets is heightened due

to economic uncertainties, including inflation,

which could significantly impact contract

assumptions which drives the assessment of asset

recoverability and onerous contract provision.

For the Parent Company, recoverability of

investments in, and amounts due from, its

subsidiaries remains a KAM owing to the

materiality of these balances and the estimation of

the underlying cash flow forecasts. We note that no

direct investments are held within subsidiaries in

the Portfolio division.

Key Audit Matters

(“KAMs”)

Vs FY21

Item

Going Concern

➔➔ 

4.1

Revenue Recognition

➔➔

4.2

Impairment of Goodwill



4.3

Capitalisation and

Recoverability of contract

assets



4.4

Recoverability of the Parent

Company’s investments in,

and amounts due from, its

subsidiaries.

➔➔

4.5

We continue to perform procedures over litigation and claims

provisions, defined benefit pension obligations and the

presentation of items excluded from adjusted profits.

However, the level of estimation uncertainty associated with

litigation and claims is lower than last year. Whilst we

consider defined benefit obligations to be a significant risk,

the completion of the triennial valuation and additional

contributions made in FY21 means we no longer consider it

a KAM. There is a reduced level of judgement associated

with the volume and value of items excluded from adjusted

results, which are set out in note 2.4 and 2.10 in the accounts.

We have therefore not assessed any of these as one of the

most significant risks in our current year audit and, therefore,

they are not separately identified in our report this year.

AUDIT

COMMITTEE

INTERACTION

During the year, the ARC met six times. KPMG are invited to attend all ARC meetings and are provided with an

opportunity to meet with the ARC in private sessions without the Executive Directors being present. For each Key Audit

Matter, we have set out communications with the ARC in section 6, including matters that required particular judgement

for each. The matters included in the Audit and Risk Committee Chair’s report on pages 93 to 95 are materially consistent

with our observations of those meetings.

OUR

INDEPENDENCE

We have fulfilled our ethical responsibilities under,

and we remain independent of the Group in

accordance with, UK ethical requirements

including the FRC Ethical Standard as applied to

listed public interest entities.

We have not performed any non-audit services

during FY22 or subsequently which are prohibited

by the FRC Ethical Standard.

We were first appointed as auditor by the

shareholders for the year ended 31 December

2010. The period of total uninterrupted

engagement is for the 13 financial years ended 31

December 2022.

The Group engagement partner is required to

rotate every 5 years. As these are the first set of

the Group’s financial statements signed by Ian

Griffiths, he will be required to rotate off after the

FY26 audit.

The average tenure of partners responsible for

component audits as set out in section 7 is 3 years,

with the shortest being 1 and the longest being 6.

Total audit fee (including interim

review)

£6.1m

Audit related assurance services

£1.55m

Non-audit fee as a % of total audit

and audit related fee %

20.3%

Date first appointed

18 August 2010

Uninterrupted audit tenure

13 years

Next financial period which

requires a rotation

2030

Tenure of Group engagement

partner

1 year

Average tenure of component

signing partners

3 years

Financial

statements

Independent

auditor’s report

Capita plc

Annual Report 2022

124

KPMG LLP’s Independent Auditor’s Report

To the members of Capita plc

2. OVERVIEW OF OUR AUDIT

FACTORS

DRIVING OUR

VIEW OF RISKS

Going concern remains a key audit matter. In

FY21, the risk was focussed on the adequacy of

disclosures around the material uncertainty. In

FY22, the risk has changed to now reflect the

judgement taken in reaching the conclusion of no

material uncertainty, and adequacy of the

accompanying disclosures.

The risk level remains stable for revenue

recognition reflecting the volume and magnitude of

contractual changes in the period. This KAM is

focussed upon variations or modifications for the

Group’s long-term contracts, for which accounting

can involve significant judgement.

The risk associated with impairment of goodwill is

deemed as increased, with impairments

recognised at both 30 June and 31 December

within the Portfolio CGUs. There is inherent

uncertainty in forecasting of future cash flows,

which are the basis of recoverability. In particular

for CGUs, measured as value in use on a disposal

basis, the estimated disposal proceeds.

The risk associated with capitalisation and

recoverability of contract assets is heightened due

to economic uncertainties, including inflation,

which could significantly impact contract

assumptions which drives the assessment of asset

recoverability and onerous contract provision.

For the Parent Company, recoverability of

investments in, and amounts due from, its

subsidiaries remains a KAM owing to the

materiality of these balances and the estimation of

the underlying cash flow forecasts. We note that no

direct investments are held within subsidiaries in

the Portfolio division.

Key Audit Matters

(“KAMs”)

Vs FY21 Item

Going Concern



➔



4.1

Revenue Recognition



➔

4.2

Impairment of Goodwill



4.3

Capitalisation and

Recoverability of contract

assets



4.4

Recoverability of the Parent

Company’s investments in,

and amounts due from, its

subsidiaries.



➔

4.5

We continue to perform procedures over litigation and claims

provisions, defined benefit pension obligations and the

presentation of items excluded from adjusted profits.

However, the level of estimation uncertainty associated with

litigation and claims is lower than last year. Whilst we

consider defined benefit obligations to be a significant risk,

the completion of the triennial valuation and additional

contributions made in FY21 means we no longer consider it

a KAM. There is a reduced level of judgement associated

with the volume and value of items excluded from adjusted

results, which are set out in note 2.4 and 2.10 in the accounts.

We have therefore not assessed any of these as one of the

most significant risks in our current year audit and, therefore,

they are not separately identified in our report this year.

AUDIT

COMMITTEE

INTERACTION

During the year, the ARC met six times. KPMG are invited to attend all ARC meetings and are provided with an

opportunity to meet with the ARC in private sessions without the Executive Directors being present. For each Key Audit

Matter, we have set out communications with the ARC in section 6, including matters that required particular judgement

for each. The matters included in the Audit and Risk Committee Chair’s report on pages 93 to 95 are materially consistent

with our observations of those meetings.

OUR

INDEPENDENCE

We have fulfilled our ethical responsibilities under,

and we remain independent of the Group in

accordance with, UK ethical requirements

including the FRC Ethical Standard as applied to

listed public interest entities.

We have not performed any non-audit services

during FY22 or subsequently which are prohibited

by the FRC Ethical Standard.

We were first appointed as auditor by the

shareholders for the year ended 31 December

2010. The period of total uninterrupted

engagement is for the 13 financial years ended 31

December 2022.

The Group engagement partner is required to

rotate every 5 years. As these are the first set of

the Group’s financial statements signed by Ian

Griffiths, he will be required to rotate off after the

FY26 audit.

The average tenure of partners responsible for

component audits as set out in section 7 is 3 years,

with the shortest being 1 and the longest being 6.

Total audit fee (including interim

review)

£6.1m

Audit related assurance services

£1.55m

Non-audit fee as a % of total audit

and audit related fee %

20.3%

Date first appointed 18 August 2010

Uninterrupted audit tenure

13 years

Next financial period which

requires a rotation

2030

Tenure of Group engagement

partner

1 year

Average tenure of component

signing partners

3 years

Financial

statements

Independent

auditor’s report

Capita plc

Annual Report 2022

125

KPMG LLP’s Independent Auditor’s Report

To the members of Capita plc

MATERIALITY

(ITEM 6

BELOW)

The scope of our work is influenced by our view of

materiality and our assessed risk of material

misstatement.

We have determined overall materiality for the

Group financial statements as a whole at £6.0m

(FY2Y1: £6.0m) and for the Parent Company

financial statements as a whole at £5.5m (FY21:

£5.5m).

A key judgement in determining materiality was the

most relevant metric to select as the benchmark, by

considering which metrics have the greatest bearing

on shareholder decisions.

Consistent with FY21, we determined that Group

revenue of £3,014.6m, normalised by excluding

revenue in relation to business exits of £168.8m,

as disclosed in note 2.8, remains the benchmark

for the Group, of which it represents 0.21% (FY21:

0.20%). This reflects the continuing volatility in

profit before tax from continuing operations, with

total revenues providing a more stable measure

year on year. Total revenue is also a significant

focus for management and external stakeholders.

Materiality for the Parent Company financial

statements was determined by reference to total

Company assets and represents 0.15% of the

Company's total assets (FY21: 0.15%).

Group Group materiality

GPM Group performance materiality

HCM Highest component materiality

PLC Parent Company Statutory materiality

LCM Lowest component materiality

AMPT Audit misstatement posting threshold

GROUP

SCOPE

(ITEM 7

BELOW)

We have performed risk assessment and planning

procedures to determine which of the Group’s

components are likely to include risks of material

misstatement to the Group financial statements,

the type of procedures to be performed at these

components and the extent of involvement

required from our component auditors around the

world.

Of the Group’s components we subjected 15

(FY21: 22) to full scope audits and performed

specific risk-focused audit procedures over

litigation and claims provisions on 1 component

(FY21: 1).

The components within the scope of our work

accounted for the percentages illustrated opposite.

In addition, we have performed Group level

analysis on the remaining components to

determine whether further risks of material

misstatement exist in those components.

We consider the scope of our audit, as

communicated to the Audit and Risk Committee, to

be an appropriate basis for our audit opinion

Coverage of Group financial statements

2022 2021

Total Revenue 81% 86%

Total profits and losses 79% 86%

Total assets 89% 90%

THE IMPACT

OF CLIMATE

CHANGE ON

OUR AUDIT

We have considered the potential impacts of climate change on the financial statements as part of planning our audit.

This included the business sectors the Group operates in, the assets and liabilities the Group holds on its balance sheet,

and the ways in which the Group maintains and develops its client relations and supplier engagement and manages its

people.

As part of our audit, we have made enquiries of management to understand the extent of the potential impact of climate

change risk on the Group’s financial statements. We have performed a risk assessment of how the impact of climate

change may affect the financial statements and our audit. Taking into account the nature of the Group’s operations, our

assessment is that the climate related risks to the Group’s business, strategy and financial planning did not have a

significant impact on our key audit matters.

We have also read the Board’s Task Force on Climate-related Financial Disclosure (TCFD) statement in the front half of

the annual report and considered consistency with the financial statements and our audit knowledge.

0.3

0.4

5.5

4.8

3.9

6.0

0.3

0.6

5.5

4.8

3.9

6.0

AMPT

LCM

PLC

HCM

GPM

Group

Materiality levels used in our audit

FY21 £m FY22 £m

KPMG LLP’s Independent Auditor’s Report

To the members of Capita plc

3. GOING CONCERN, VIABILITY AND PRINCIPAL RISKS AND UNCERTAINTIES

The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Parent

Company or to cease their operations, and as they have concluded that the Group’s and the Parent Company’s financial position means

that this is realistic. They have also concluded that there are no material uncertainties that could cast significant doubt over their ability to

continue as a going concern from the date of approval of the financial statements to 31 August 2024 (“the going concern period”).

GOING CONCERN

An explanation of how we evaluated management’s assessment of going concern is set out

in the related key audit matter in section 4.1 of this report.

Our conclusions

Our conclusions based on those procedures described in section 4.1 of this report are:

▪ we consider that the directors’ use of the going concern basis of accounting in the

preparation of the financial statements is appropriate;

▪ we have not identified, and concur with the directors’ assessment that there is not, a

material uncertainty related to events or conditions that, individually or collectively, may

cast significant doubt on the Group’s or Parent Company's ability to continue as a going

concern for the going concern period;

▪ we have nothing material to add or draw attention to in relation to the directors’ statement

in section 1 to the financial statements on the use of the going concern basis of

accounting with no material uncertainties that may cast significant doubt over the Group

and Parent Company’s use of that basis for the going concern period; and

▪ The related statement under the Listing Rules set out on page 64 is materially consistent

with the financial statements and our audit knowledge.

However, as we cannot predict all future events or conditions and as subsequent events may

result in outcomes that are inconsistent with judgements that were reasonable at the time they

were made, the above conclusions are not a guarantee that the Group or the Parent Company

will continue in operation.

Summary of our conclusions

We found the directors’ use of the going

concern basis of accounting without any

material uncertainty for the Group and

Parent Company to be acceptable.

DISCLOSURES OF EMERGING AND PRINCIPAL RISKS AND LONGER-TERM VIABILITY

Our responsibility

We are required to perform procedures to identify whether there is a material inconsistency

between the directors’ disclosures in respect of emerging and principal risks and the viability

statement, and the financial statements and our audit knowledge.

Based on those procedures, we have nothing material to add or draw attention to in relation

to:

▪ the directors’ confirmation within the Corporate Governance statement on page 97 that they

have carried out a robust assessment of the emerging and principal risks facing the Group,

including those that would threaten its business model, future performance, solvency and

liquidity;

▪ the risk management and internal control disclosures describing these risks and how

emerging risks are identified and explaining how they are being managed and mitigated;

and

▪ the directors’ explanation in the viability statement of how they have assessed the prospects

of the Group, over what period they have done so and why they considered that period to

be appropriate, and their statement as to whether they have a reasonable expectation that

the Group will be able to continue in operation and meet its liabilities as they fall due over

the period of their assessment, including any related disclosures drawing attention to any

necessary qualifications or assumptions.

We are also required to review the viability statement set out on page 64 under the Listing

Rules.

Our work is limited to assessing these matters in the context of only the knowledge acquired

during our financial statements audit. As we cannot predict all future events or conditions and

as subsequent events may result in outcomes that are inconsistent with judgements that were

reasonable at the time they were made, the absence of anything to report on these statements

is not a guarantee as to the Group’s and Parent Company’s longer-term viability.

Our reporting

We have nothing material to add or draw

attention to in relation to these

disclosures.

We have concluded that these

disclosures are materially consistent with

the financial statements and our audit

knowledge.

Financial

statements

Independent

auditor’s report

Capita plc

Annual Report 2022

126

KPMG LLP’s Independent Auditor’s Report

To the members of Capita plc

3. GOING CONCERN, VIABILITY AND PRINCIPAL RISKS AND UNCERTAINTIES

The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Parent

Company or to cease their operations, and as they have concluded that the Group’s and the Parent Company’s financial position means

that this is realistic. They have also concluded that there are no material uncertainties that could cast significant doubt over their ability to

continue as a going concern from the date of approval of the financial statements to 31 August 2024 (“the going concern period”).

GOING CONCERN

An explanation of how we evaluated management’s assessment of going concern is set out

in the related key audit matter in section 4.1 of this report.

Our conclusions

Our conclusions based on those procedures described in section 4.1 of this report are:

▪ we consider that the directors’ use of the going concern basis of accounting in the

preparation of the financial statements is appropriate;

▪ we have not identified, and concur with the directors’ assessment that there is not, a

material uncertainty related to events or conditions that, individually or collectively, may

cast significant doubt on the Group’s or Parent Company's ability to continue as a going

concern for the going concern period;

▪ we have nothing material to add or draw attention to in relation to the directors’ statement

in section 1 to the financial statements on the use of the going concern basis of

accounting with no material uncertainties that may cast significant doubt over the Group

and Parent Company’s use of that basis for the going concern period; and

▪ The related statement under the Listing Rules set out on page 64 is materially consistent

with the financial statements and our audit knowledge.

However, as we cannot predict all future events or conditions and as subsequent events may

result in outcomes that are inconsistent with judgements that were reasonable at the time they

were made, the above conclusions are not a guarantee that the Group or the Parent Company

will continue in operation.

Summary of our conclusions

We found the directors’ use of the going

concern basis of accounting without any

material uncertainty for the Group and

Parent Company to be acceptable.

DISCLOSURES OF EMERGING AND PRINCIPAL RISKS AND LONGER-TERM VIABILITY

Our responsibility

We are required to perform procedures to identify whether there is a material inconsistency

between the directors’ disclosures in respect of emerging and principal risks and the viability

statement, and the financial statements and our audit knowledge.

Based on those procedures, we have nothing material to add or draw attention to in relation

to:

▪ the directors’ confirmation within the Corporate Governance statement on page 97 that they

have carried out a robust assessment of the emerging and principal risks facing the Group,

including those that would threaten its business model, future performance, solvency and

liquidity;

▪ the risk management and internal control disclosures describing these risks and how

emerging risks are identified and explaining how they are being managed and mitigated;

and

▪ the directors’ explanation in the viability statement of how they have assessed the prospects

of the Group, over what period they have done so and why they considered that period to

be appropriate, and their statement as to whether they have a reasonable expectation that

the Group will be able to continue in operation and meet its liabilities as they fall due over

the period of their assessment, including any related disclosures drawing attention to any

necessary qualifications or assumptions.

We are also required to review the viability statement set out on page 64 under the Listing

Rules.

Our work is limited to assessing these matters in the context of only the knowledge acquired

during our financial statements audit. As we cannot predict all future events or conditions and

as subsequent events may result in outcomes that are inconsistent with judgements that were

reasonable at the time they were made, the absence of anything to report on these statements

is not a guarantee as to the Group’s and Parent Company’s longer-term viability.

Our reporting

We have nothing material to add or draw

attention to in relation to these

disclosures.

We have concluded that these

disclosures are materially consistent with

the financial statements and our audit

knowledge.

Financial

statements

Independent

auditor’s report

Capita plc

Annual Report 2022

127

KPMG LLP’s Independent Auditor’s Report

To the members of Capita plc

4. KEY AUDIT MATTERS

WHAT WE MEAN

Key Audit Matters are those matters that, in our professional judgement, were of most significance in the audit of the financial

statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us,

including those which had the greatest effect on:

▪ the overall audit strategy;

▪ the allocation of resources in the audit; and

▪ directing the efforts of the engagement team.

We include below the Key Audit Matters in decreasing order of audit significance together with our key audit procedures to address those

matters and our findings from those procedures in order that the Company's members, as a body, may better understand the process by

which we arrived at our audit opinion. These matters were addressed, and our findings are based on procedures undertaken, for the

purpose of our audit of the financial statements as a whole. We do not provide a separate opinion on these matters.

4.1 GOING CONCERN (GROUP AND PARENT COMPANY)

Financial Statement Elements Our assessment of risk vs FY21

Our findings

Going concern disclosures with no material

uncertainties – section 1 to the Group financial

statements.



➔

In FY21, the risk was focussed on the

adequacy of disclosures around the

material uncertainty.

In FY22, the risk has changed to now

reflect the judgement taken in reaching

the conclusion of no material uncertainty,

and adequacy of the accompanying

disclosures.

FY22: We found the Group's

judgement that there was no

material uncertainty to be

disclosed, to be balanced.

We found the going concern

disclosure in section 1 without

any material uncertainty to be

proportionate.

FY21: We found the going

concern disclosure in section

1 with a material uncertainty to

be proportionate.

Description of the Key Audit Matter Our response to the risk

Disclosure quality

The financial statements explain how the Board has formed a

judgement that it is appropriate to adopt the going concern basis of

preparation for the Group and Parent Company.

That judgement is based on an evaluation of the inherent risks to the

Group’s and Parent Company’s business model and how those risks

might affect the Group’s and Parent Company’s financial resources

or ability to continue operations over a period to 31 August 2024

from the date of approval of these financial statements (the ‘going

concern period’).

The risks most likely to adversely affect the Group’s and Parent

Company’s available financial resources over this period include,

but are not limited to, the following:

• An inability to achieve the growth targets in the Group’s

business plan;

• Increases in staff attrition, impacting upon ability to

deliver services or secure new opportunities;

• Adverse impact from inflationary pressures, such as

interest rates; and

• A significant unexpected downturn in performance in

one of the Group’s businesses.

There are also less predictable but realistic second order impacts,

such as business disruption in the event of a cyber incident, or

adverse changes in UK Government policy.

The risk for our audit was whether or not those risks were such that

they amounted to a material uncertainty that may have cast

significant doubt about the ability to continue as a going concern.

Had they been such, then that fact would have been required to

have been disclosed.

We considered whether these risks could plausibly affect the liquidity or

covenant compliance in the going concern period by assessing the directors’

sensitivities over the level of available financial resources and covenant

thresholds indicated by the Group’s financial forecasts taking account of

severe, but plausible, adverse effects that could arise from these risks

individually and collectively.

Our procedures to address the risk included:

Assessing transparency: We assessed whether the matters included in

the going concern disclosure give a full and accurate description of the

directors’ assessment, including the judgements made, identified risks and

mitigating actions.

Our sector experience: We assessed the projections and assumptions by

reference to our knowledge of the business and general market conditions

including the potential risk of management bias. We critically assessed

whether economic headwinds in particular inflation risks, have been

sufficiently factored in the forecast cash flows, along with the risks and

uncertainties associated with the Group’s customers, suppliers and

workforce.

We considered the risk factors as set out by the Board in the Principal Risks

section of the annual report and accounts, and where relevant assessed

whether these were sufficiently taken into consideration in the projections

prepared to support the base case and the downside risks applied.

Test of detail: We critically assessed the cash flow forecasts by considering

the appropriateness of key assumptions used in preparing those projections,

with a specific focus on the revenue growth

and cost inflationary

assumptions. We evaluated these via enquiries with each of the divisional

Finance Directors, the Chief Executive Officer, and Chief Financial Officer,

and inspected the Board’s plans and associated papers.

Historical comparisons: We assessed the ability of the Group to accurately

forecast by comparing historical results to forecasts for key metrics. We

KPMG LLP’s Independent Auditor’s Report

To the members of Capita plc

assessed the most recent years’ performance against budget, including

sales growth and cost reductions and challenged the assumptions over the

going concern period based on historical performances.

Funding assessment: We read the revolving credit facility (RCF)

agreement to understand the terms including covenant requirements and

any restrictions in the use of funds. We also read the Bridge facility

agreement entered into in February 2023 which will provide additional

liquidity from 1 January 2024. We re-performed the key financial covenants

calculations for 30 June 2023 and 2024 and 31 December 2023, assessing

compliance at these dates.

We considered the adjustments made in the adjusted EBITDA for the

covenant calculations, considering the appropriateness compared to the

loan agreements and historical accepted practice with the current lenders.

In addition, we inspected the correspondence between the Company and

the private placement lenders that set out the proposed items to be excluded

in the adjusted EBITDA definition and compared these against the items

included in the covenant calculations.

We evaluated the refinancing risk, including renewal of the RCF and

additional sources of debt finance. This included consideration of the

previous RCF extensions secured, the additional bridging facility signed in

February 2023 and potential factors which remain outside of the Group’s

controls, including debt market conditions at the time of the fund raising.

Sensitivity analysis: We critically challenged the downside sensitivities to

ensure that these represented severe but plausible scenarios based on our

knowledge of the business, the associated risk exposure and we considered

the most recent trading results to form a holistic view of the Group. We

assessed those risks and challenged whether the risks applied reflected

progress to date in delivering organic growth and the ongoing effects from

inflation based on the impacts experienced by the Group during the year.

We assessed identified risk assumptions to ensure that they reflected a more

likely than not chance of occurring under the downside scenarios. We also

challenged the mitigating actions, to identify whether these were reasonable

and within the direct control of the Group.

Evaluating directors’ intent: we evaluated the achievability of the actions

the directors consider they would take to improve the position should the

risks materialise, which included reductions in discretionary spend and

capex investment, taking into account the extent to which the directors can

control the timing and outcome of these. This included consideration of the

nature and quantum of historical cost savings delivered and the feasibility of

implementing these over the going concern period.

Communications with Capita plc’s Audit and Risk Committee

Our discussions with and reporting to the Audit and Risk Committee included:

▪ Going concern period of assessment

▪ Assessment of the level of refinancing risk faced by the Group

▪ Assessment of the risk and potential mitigations in the downside case, including directors’ intent should risks materialise

▪ Assessment of historical forecasting accuracy and current performance

Areas of particular auditor judgement

We identified the following as the areas of particular auditor judgement:

▪ The ability of the Group to secure a further extension or refinancing of the RCF ahead of its expiry in August 2024

▪ The level of severity in the downside assumptions and if proposed mitigations are executable and within control of the Company

Our findings

We found the Group's judgement that there was no material uncertainty to be disclosed, to be balanced.

We found the going concern disclosure in section 1 without any material uncertainty to be proportionate (FY21: we found the going concern

disclosure in section 1 with a material uncertainty to be proportionate).

Financial

statements

Independent

auditor’s report

Capita plc

Annual Report 2022

128

KPMG LLP’s Independent Auditor’s Report

To the members of Capita plc

assessed the most recent years’ performance against budget, including

sales growth and cost reductions and challenged the assumptions over the

going concern period based on historical performances.

Funding assessment: We read the revolving credit facility (RCF)

agreement to understand the terms including covenant requirements and

any restrictions in the use of funds. We also read th

e Bridge facility