Capita (CPI) Trading Update summary

Trading and operating performance

• Adjusted operating profit margin up by approximately 50bps in 2024, mainly from cost reduction initiatives.

• Adjusted revenue declined about 8% for the eleven months to 30 November 2024, reflecting exits from lower margin service lines and prior year headwinds.

• Cost savings target increased to up to £250m by December 2025, with £140m annualised savings already actioned.

• Free cash outflow expected at £120m–£140m in 2024, with positive and consistent free cash flow anticipated from end of 2025.

• Net financial debt to adjusted EBITDA (pre IFRS 16) expected to be less than 1.0x at 2024 year-end.

Strategic priorities and transformation

• Focus remains on improving operating margin to drive free cash flow and adjusted revenue growth.

• Accelerated adoption of AI and generative AI is central to cost efficiency and service delivery transformation.

• Voluntary employee attrition of around 21% aids cost savings and reduces redundancy needs.

• Exiting low-margin businesses, including the sale of Capita One and planned sale of Mortgages Asset Services.

• Pipeline of AI solutions with hyperscaler partners valued at over £5bn, supporting future growth.

Segment performance and outlook

• Capita Public Service revenue down 0.9%, impacted by prior contract losses and delayed mobilisations, but offset by higher volumes in some contracts.

• Capita Experience revenue fell 16.3%, mainly due to prior year contract transitions and losses in Contact Centre business.

• Pension Solutions grew 6.7% on volume growth and indexation; Regulated Services declined 25.8% due to contract exits and prior year settlements.

• 2024 expected to see high single-digit revenue decline, with margin improvements and stable operating profit outlook.

• Additional cost savings in 2025 expected to offset increased National Insurance costs and support further margin improvement.