Capita (CPI) Investor update summary

Operational and strategic progress

• Significant operational and strategic progress achieved, with a focus on resolving the Civil Service Pension Scheme (CSPS) issues and improving service delivery across the business.

• Technology and innovation have been reshaped, with AI adoption at the core and productivity improvements already visible.

• Efficiency initiatives include a GBP 250 million cost reduction, with an additional GBP 40 million targeted after the contact center sale; GBP 8 million already delivered.

• Employee engagement remains high, with increased internal mobility and upskilling in data and AI literacy.

• Management is committed to translating operational progress into financial results, focusing on margin expansion and free cash flow generation.

Financial performance and outlook

• Revenue growth continues, with the public division growing 2.4% and achieving the highest H1 wins since 2021.

• Operating margin remains solid at around 8%, despite CSPS-related impacts; public division would have achieved 8.4% without cost reallocations.

• Pensions business affected by GBP 14 million direct CSPS impact and GBP 3 million collateral impact, but underlying growth remains strong.

• Liquidity strengthened with a GBP 325 million RCF facility and renegotiated covenants; net debt to EBITDA at 1.6x as of June 30.

• Outlook expects flat revenue, solid operating margin, and free cash flow in line with previous guidance, with CSPS impact of GBP 35–50 million.

Contract wins, pipeline, and market positioning

• Contract value now exceeds GBP 1 billion, up 15% since year-end, with a growing unweighted pipeline and improved win rates.

• 76% of H1 revenue secured in the order book, with an additional 10% from recurrent framework agreements, ensuring strong revenue visibility.

• Recent significant wins include TfL (GBP 425 million), Synergy, UKHSA, and Army's Collective Training Service.

• Focused go-to-market strategy narrowed to five value propositions, improving qualification and conversion of pipeline opportunities.

• Pipeline growth is prioritized over size, with a lag expected between pipeline, TCV, and revenue due to long sales cycles.