Capita (LON:CPI) executives used the company’s 2025 results presentation to outline progress on a multi-year turnaround, pointing to improved margins, a larger pipeline, and growing use of AI-enabled delivery, while acknowledging continuing problems in the Contact Centre business and a difficult start to the Civil Service Pension Scheme (CSPS) transition.
Management said 2025 was “pivotal” in the turnaround
Group Chief Executive Adolfo Hernandez said that, when he joined just over two years ago, Capita had “lost focus” and carried “too much complexity,” generating social value but failing to translate it into sustainable economic value. He described 2025 as a “critical and pivotal year” in the company’s “Four Betters” strategy, which focuses on better technology, better efficiencies, better delivery, and becoming a better company.
Financial performance improved as cost savings flowed through
Chief Financial Officer Pablo presented the 2025 results primarily on an adjusted basis, noting that adjusted reporting now includes the closed book Life and Pensions business within “business exits” following a hand-back agreement reached in December with Royal London.
Pablo said Capita delivered results “broadly in line with the expectations” it had set, with margin, profit, and cash conversion improving year over year. The group achieved its GBP 250 million cost savings “stretch target,” which Hernandez said helped drive a 140 basis point improvement in group operating margin to 5.2%. Hernandez added that Public Service was at 8.3% margin.
According to Pablo, profit before tax improved 84%, driven by higher operating profit, lower depreciation (linked to a reduced property footprint), and reduced financing costs. Cash conversion improved to 74%, supported by stronger underlying cash generation, though Capita invested in mobilization for the CSPS contract. Free cash outflow halved to GBP 54 million, which Pablo said included a GBP 53 million outflow related to the cost reduction program and a GBP 40 million settlement with the Information Commissioner’s Office (ICO). He said those outflows leave the company “in a very solid position” to deliver positive free cash flow in 2026.
Divisional results were mixed: Public Service strength, Contact Centre decline
Management said growth in Public Service offset weakness elsewhere. Pablo reported:
- Public Service: Revenue grew 4.5%, supported by contract wins and growth in key contracts, and now represents around two-thirds of group adjusted revenue. Operating margin improved 190 basis points, helped by revenue growth and GBP 43 million of in-year savings. Cash conversion was 89%, helped by strong cash generation and favorable year-end receipt timing. Pablo cited total contract value (TCV) of nearly GBP 1.2 billion and customer Net Promoter Score (NPS) up 9 points to 37, with operational KPI performance at 93%.
- Contact Centre: Revenue declined 17.5%, reflecting lower volumes in telecommunications, contract losses, and further offshoring to service delivery centers. Capita delivered nearly GBP 50 million of cost savings, but Pablo said this only partially offset volume reductions and losses. The business also faced structural issues including around GBP 10 million losses in Germany and approximately GBP 50 million of P&L costs from underutilized properties. Goodwill impairment was “wholly related” to Contact Centre, and Pablo said the division is expected to remain loss-making in 2026, though with an improving profit trajectory.
- Pensions: Revenue grew 4.5% due to indexation, contract expansions, and the December go-live of the CSPS contract. Operating margin improved 30 basis points, with cost reduction benefits offsetting reduced interest rate income. Cash conversion halved due to GBP 26 million invested in building the CSPS solution and a delayed GBP 5 million milestone payment that moved into early 2026; Pablo said absent those items, cash conversion would have been around 90%.
Pipeline and win-rate improved; executives discussed drivers and AI economics
Hernandez said Capita’s pipeline nearly doubled to GBP 20 billion, total contract value closed rose 36%, and the win ratio “nearly doubled to over 60%.” He also said the company recorded its highest customer NPS since it began measuring in 2018. On employee metrics, he said engagement remained high and employee NPS improved, with attrition down to 17% from 21.7% the prior year and “north of 30%” in earlier periods.
In response to analyst questions, Hernandez attributed pipeline growth in Public Service to three go-to-market levers: tighter targeting of what to pursue, a value proposition combining Capita’s delivery expertise with AI enablement, and expanded opportunity access through hyperscaler partnerships. However, he cautioned that public sector growth tends to be “continuous” rather than a “hockey stick,” given procurement and mobilization timelines.
On the economic benefits of AI, Hernandez said Capita is seeing value through cost reduction (supporting bid competitiveness) and lower costs to architect and serve, which can improve solution pricing and competitiveness. As evidence, he pointed to a higher win rate, 36% growth in TCV conversion, and pipeline growth, while noting Capita does not manage the business through an “AI P&L” category.
CSPS service issues and Contact Centre turnaround remained key discussion points
Hernandez addressed operational issues following Capita’s takeover of the CSPS service in December, apologizing for service quality and stating that while Capita did not originate all problems, it would “own the resolution.” He said the company inherited a significant backlog—nearly three times normal levels—alongside “12,000 members that were owed money,” “15,000 inbox emails” unopened, and “20 million datasets either missing or wrong or incomplete.” Hernandez said call volumes on day one “collapsed” infrastructure, but performance had improved to “over 90% of the calls being responded and addressed…within thirty seconds,” and portal issues had been addressed. He said Capita remained committed to March milestones and to restoring normal service levels in partnership with the Cabinet Office.
On Contact Centre, Hernandez reiterated the business missed a market shift from “voice-only” to omnichannel and AI-enabled contact center solutions. He said Capita has been “catching up” by building an integrated omnichannel offering and incorporating AI capabilities such as routing and sentiment analysis. While he said contract “bleeding” had slowed compared with 2020–2023, structural issues—particularly Germany and legacy property costs—continue to weigh on performance. Pablo said Capita continually assesses “all options” to improve Contact Centre and “maximize value” for shareholders.
Looking ahead, Pablo guided to 2026 positive free cash flow of GBP 20 million to GBP 40 million, low single-digit revenue growth (Public and Pensions growth offset by continued Contact Centre decline), a small margin reduction due to Contact Centre challenges and mobilization of large contracts, and cash conversion of 70% to 80%. Management said performance should improve in the second half as Contact Centre turnaround efforts progress and mobilization costs reduce.
About Capita (LON:CPI)
Capita is a modern outsourcer, helping clients across the public and private sectors run complex business processes more efficiently, creating better consumer experiences. Operating across 8 countries, Capita’s colleagues support primarily UK and European clients with people-based services underpinned by market-leading technology. We play an integral role in society – our work matters to the lives of the millions of people who rely on us every day.
