Capita maintains expectations after weaker first half

(Sharecast News) - Capita reported a fall in first-half profits and revenue on Tuesday, amid continued weakness in its contact centre business, though the company said it remained on track to meet full-year expectations and was making solid progress towards its cost-saving and strategic goals. For the six months ended 30 June, adjusted revenue declined 4% year-on-year to £1.15bn, while adjusted operating profit fell 22% to £42.6m.

That reflected lower volumes in the contact centre segment, the non-repeat of prior-year contract gains, and the timing of the group's pay award and increased National Insurance costs.

Adjusted operating margin dropped to 3.7% from 4.5%, while adjusted earnings per share declined 35% to 21.63p.

On a statutory basis, Capita swung to a pre-tax loss of £9.5m from a £60m profit a year earlier, including £23.4m in costs tied to its cost reduction programme and the impact of prior-year business exits.

Free cash outflow improved to £26.1m from £52.5m, driven by better operating cash flow and reduced capital expenditure.

Net financial debt before IFRS 16 rose 48% to £87m.

"We are pleased to see good signs of momentum in the ongoing transformation of Capita, with a particularly strong performance in our public sector business, underscoring our important role in bringing innovation and fresh thinking to the challenge of delivering efficient public services," said chief executive Adolfo Hernandez.

Capita Public Service, which now accounted for 62% of group revenue, grew 4% year-on-year, supported by contract wins and expanded scopes.

In contrast, contact centre revenue fell 20% due to previously-disclosed contract losses and subdued demand from telecoms clients.

Contract value won across the group rose 17% to £1.04bn, driven by strong public sector demand.

The London-listed group's pipeline included £4.4bn in higher-technology opportunities.

Hernandez also highlighted customer interest in Capita's AI-driven solutions, including its new 'AI Catalyst Lab' and 'Agentforce AI' recruitment tools.

He reiterated that the company was on track to deliver £250m in annualised cost savings by December, with £205m achieved by the end of July.

Despite the mixed financial performance, Capita confirmed that its full-year guidance remained unchanged.

Adjusted revenue was expected to be broadly flat, with mid-single-digit growth in public service and a mid-teens revenue decline in contact centre.

The group said it also expected a modest improvement in margin and positive free cash flow from the end of 2025.

"The operational performance and momentum we have seen in the first half of the year gives confidence in our delivery of the second half," Hernandez said.

At 1009 BST, shares in Capita were up 5.55% at 295p.

Reporting by Josh White for Sharecast.com.