Capita (CPI) Investor Update summary

Strategic priorities and transformation

• Focus on building a more efficient, agile, and technology-driven organization to improve financial returns and deliver better outcomes for all stakeholders.

• Emphasis on automation, organizational streamlining, and leveraging technology in both internal operations and customer offerings.

• Aggressive culture transformation and adoption of a Virtual First policy to enhance work-life balance and operational flexibility.

• Targeting EBIT margin improvement to 6%-8% and positive free cash flow by 2025, with a medium-term goal of 65%-75% operating cash conversion.

• No further major divestments planned after Capita One; focus remains on optimizing existing portfolio and cost base.

Financial performance and outlook

• Achieved a 45% improvement in operating margin by June, with £100 million of £160 million targeted annualized cost savings already delivered.

• Free cash flow positive expected from 2025, with dividend resumption considered after reinvestment and leverage optimization.

• Capita One disposal proceeds provide flexibility to reduce high-cost debt and improve leverage.

• Operating cash conversion targeted at 65%-75% medium term, supported by reduced upfront transformation spend and smoother cash flows.

• Deferred income mainly relates to legacy contracts, with ongoing reduction as contracts mature.

Market environment and growth opportunities

• Anticipates supportive policy and funding in defense, NHS digital transformation, and local government planning, aligning with core service strengths.

• Green shoots in the experience division expected to impact results in 2025, with operational improvements preceding financial gains.

• New digital offerings, especially GenAI-based Agent Suite, have received strong customer interest and are expected to drive future growth.

• Enhanced collaboration with hyperscalers is expanding market opportunities, including international prospects.

• Sales pipeline visibility has improved, with technology-driven solutions opening new markets and earlier engagement in opportunities.