Capita scales back revenue targets, but margin guidance unchanged

(Sharecast News) - Shares in Capita rose on Friday after the outsourcing provider held on to its margin targets despite lower revenue guidance for its public service and contact centre divisions, while reporting a big increase in its contract pipeline. The company said that its adjusted revenue performance over the second half so far has been "broadly consistent" with its first-half performance.

The larger Capital Public Service division, which accounts for 63% of group revenues, saw a 4.0% adjusted top-line improvement over the year-to-date, though growth moderated slightly in the second half due to client delays.

The company now expects Capita Public Service full-year growth to be slightly below the mid-single-digit improvement signalled at its half-year results in September, despite forecasts being upgraded at the time.

Meanwhile, the Contact Centre arm (23% of group revenue) saw a 18.3% year-to-date reduction in adjusted revenues due to previously announced contract losses and volume reductions. Capita expects this division to register a high-teen-digit reduction in full-year revenues, compared with earlier guidance of a mid-teen-digit fall.

Nevertheless, all guidance on margins, free cash flow and debt remains unchanged, the company said.

Capita also reported a a significant increase in its unweighted contract pipeline over the second half, with total contract opportunities across all divisions now valued at £16.5bn, up 41% from the half year and the highest level for "several years".

The company said it has made progress against its strategic priorities laid out at the start of the year, including delivering its targeted £250m of annualised cost savings, launching the AI Catalyst Stack to operationalise AI at scale, and signing the final transition agreement for the remaining closed book Life & Pensions contracts.