Capita reaffirms outlook despite sales slide

(Sharecast News) - British outsourcing giant Capita reiterated its full-year guidance on Tuesday, despite seeing sales slide during the first half. The firm said adjusted revenues in the five months to 31 May were 4.5% lower.

Within that, public service revenues rose 2.3%, after growth in central government contracts helped offset previously announced losses in electronic monitoring.

But sales in the contact centre division slumped 21.1%, weighed down by subdued volumes in telecommunications, while pension solutions was 1.1% lower.

However, Capita said it remained confident of achieving full-year targets for broadly flat revenues and an improved operating margin, driven primarily by a £250m cost-cutting programme.

It continued: "We are on track to deliver the cost reduction programme by December 2025, and continue to expect the margin benefit to be weighted to the second half, reflecting the contact centre revenue reduction and cost pressures in the first half, driven by the timing of the group's pay review and additional National Insurance contributions."

Capita employs around 34,000 people, with clients in the UK and Europe.

The group also reiterated its commitment to using artificial intelligence more widely.

Adolfo Hernandez, chief executive, said: "In recent months, client interest in agentic AI solutions has grown exponentially. We are reinvesting a portion of our efficiency savings into new technology solutions, particularly those underpinned by AI."

As at 0930 BST shares in Capita were flat at 249.4p, having pared back earlier losses.

Robin Speakman, analyst at Shore Capital - which has a 'hold' rating on the stock - said: "While Capita continues to address its need to reduce operating costs, we note the challenges of pay awards and employment taxes, particularly in the UK, and remain cautious on the outcome through [the] 2025 and 2026 full years.

"We still see an encouraging at sales pipeline, though remain cautious on how government public spending plans pan out in actual contract volumes."