Capita (CPI) CMD 2024 summary

Strategic vision and transformation

• Comprehensive transformation program focuses on efficiency, technology, delivery, and culture, aiming to simplify operations, reduce costs, and drive growth through digitalisation and partnerships with hyperscalers.

• Business structure simplified from 11 to 2 divisions, with clear segmentation into star positions, transformation potential, and manage-for-value, each with tailored action plans.

• Emphasis on leveraging generative AI, automation, and technology partnerships (AWS, Microsoft, Salesforce, ServiceNow) to drive innovation and operational excellence.

• Standardised, repeatable solutions and a strategic go-to-market approach target high-growth, high-margin segments while managing or exiting less attractive markets.

• Transformation is self-funded through operating margin expansion and cost savings, with no equity raise planned.

Operational and financial initiatives

• Targeting GBP 160 million in annualised cost savings by mid-2025, with GBP 90 million already delivered and GBP 50 million earmarked for reinvestment in growth.

• Major cost savings achieved through organisational redesign, automation, procurement rationalisation, and process digitalisation.

• Focus on standardising and scaling repeatable solutions, launching nine new bundled offerings in 2024, and expanding omni-channel, multi-language capabilities.

• Medium-term financial targets: EBIT margin of 6%-8%, 65%-75% operating cash conversion, low- to mid-single digit revenue growth, and net financial debt leverage ≤1x.

• 2024 guidance: revenue broadly in line with 2023, modest EBIT margin improvement, and free cash outflow of £70m–£90m; positive free cash flow expected from 2025.

Business unit performance and growth plans

• Public Services division is profitable and growing, focusing on standardised, tech-enabled propositions and international expansion.

• Capita Experience division is restructuring for efficiency, expanding into new geographies, and deploying AI-driven solutions in contact centres and pensions.

• Pension Solutions business is growing at double digits with healthy margins, leveraging digital platforms and targeting major new contract wins.

• Non-core and underperforming activities are managed for value, with potential exits or partnerships considered.

• Culture transformation and employee engagement initiatives are reducing attrition and improving internal mobility, supporting operational goals.