Capita H1 2025 Earnings Report

Capita EPS Results

• Actual EPS: GBX 21.63
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Capita Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Capita Announcement Details

• Quarter: H1 2025
• Date: 8/5/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, August 5, 2025
• Conference Call Time: 4:00AM ET

Capita (LON:CPI) provides consulting, digital, and software products and services to clients in the private and public sectors in the United Kingdom and internationally. It operates in two divisions: Public Service and Capita Experience divisions. The company offers solutions for finance and accounting, procurement, property and infrastructure, travel and event, and workplace administration. It also provides customer experience transformation, contact management, collection and debt management, complaint handling, customer experience system and software, acquisition and retention, and data and analytics. In addition, the company offers licensing and support, support, digital policing, and engineering practice; learning and development services; education service and local education authority software; solutions for central and local government services; and business process services. Further, it provides pension administration and software, pensions consulting, and data solutions; finance software, automation, and management information systems solutions; cloud, cyber security, digital connectivity, IT services, robotic process automation, and workplace IT solutions; and actuarial, defence, financial, healthcare, housing, legal, public safety, retail, retail banking, utility, and welfare and employability services. The company was formerly known as The Capita Group plc and changed its name to Capita plc in January 2012. Capita plc was founded in 1984 and is based in London, the United Kingdom.

Capita H1 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Better Capital strategy gained momentum with the launch of AI Catalyst Labs, 212 AI use cases live, and a €4.4 bn tech pipeline positioning Capita for growth.
• Positive Sentiment: Operational efficiencies reached £205 m of the £250 m target, running at £10 m/month and supported by a new cost-discipline operating system to prevent cost creep.
• Positive Sentiment: Capita Public Service delivered 3.8% revenue growth, 110 bps margin expansion to 8%, a 53% increase in TCV wins and an 81% win rate, prompting an upgrade to mid-single-digit growth guidance.
• Negative Sentiment: Contact Centre revenues fell 20% and margin slid to –4.1% due to telecoms volume declines, offshoring impacts and delayed cost-saving benefits, resulting in €11 m H1 losses.
• Positive Sentiment: Pension Solutions saw TCV nearly double and a 94% win rate on new contracts as digital pension adoption grew, setting up mid-single-digit revenue growth and margin improvement in H2.

Presentation

[Adolfo Hernandez, CEO & Director at Capita]

Good morning. Great to see a really good video, wasn't it? Just a couple of minutes. Just seeing it yesterday for the first time.

[Adolfo Hernandez, CEO & Director at Capita]

I thought, wow, that's good. Amador Fernandez, for those of you who have another opportunity to meet. Good morning to everybody, everybody in the room, full room. And those of you dialing away from remotely from home and your offices. We're going to spend the next forty minutes, Pablo and I, our CFO, covering the highlights of the first half of the year.

[Adolfo Hernandez, CEO & Director at Capita]

And we're going to do it as always going to do a very brief introduction, then I'm to hand over to Pablo. Pablo is going to go through the numbers and then I'll get back and I'll take you through strategy executions and plans going forward. So just by way of recap, just over a year ago, we did a Capital Markets Day in June where we presented our new strategy, a strategy that wasn't predicated on changing what Capita did. We were very happy and we were hearing from our customers what we do really matters, matters every day, matters to millions of citizens and consumers all over Western Europe. What we do is really good.

[Adolfo Hernandez, CEO & Director at Capita]

It was the how we did it that we needed to work on. And we set out on a really simple strategy, which was we're going to build a better capital. And that better capital was going to be predicated on making changes in four key areas: better technologies, better efficiencies, better delivery and building a better company. And I'm really pleased to see that as we have gone executing, we are now getting very granular into the execution. So the strategy remains the same thirteen months after we unveil it.

[Adolfo Hernandez, CEO & Director at Capita]

We continue to work on the better and the four betters. And then underneath, we have been able to map the six areas of where we have to work to truly get there. And this has been a lot of work that we've been doing over the last six to nine months related to execution, pure sheer execution. And then underneath that, we have come out and worked with the company to come up and create the new culture, a new high performance culture underpinned by new values that are necessary to create a different way of working to build that better capital. What is really particular and important about these values is that they were not created top down.

[Adolfo Hernandez, CEO & Director at Capita]

This is not the CEO or the executive team or the Board waking up one day and saying, these are going to be the new values. This has been a grassroot exercise that we've done asking all of our colleagues to participate and actually getting input from over 10,000 people to come and describe what are the values that we need to be successful in the near future. So we are connecting the strategy of building that better capital with better financial returns delivering better outcomes for our customers into the execution priorities of the four betters. We've got the actions and everything powering through our values. And we feel now that we've got a truly connected ecosystem to start gathering speed as we get into this inflection point of growth into next year.

[Adolfo Hernandez, CEO & Director at Capita]

So what about the first half? Well, I always say this is never a boring day in Capita. And it hasn't been a boring day in the first half. I think it's been brutal execution. But we're happy with the solid results we got out of the first half.

[Adolfo Hernandez, CEO & Director at Capita]

If you look across the four better, as you read through the release we set out this morning, we've seen significant areas of improvement across all four. So I'm just calling out a few here across each of them, because I think they're important. On the technology front, right, besides saying a year ago that this was going to be important, working with the hyperscalers was going to be critical, We've managed to translate that into action now, launching earlier this year the capital the AI Catalyst Labs, which I'm going to talk about a little bit later and getting some real output out of this. Over two twelve use cases for AI, some agents live. We've seen some real examples already at work.

[Adolfo Hernandez, CEO & Director at Capita]

It's quite important. Looking to the future, the over CHF4.4 billion in tech related pipeline that we've been able to build, a pipeline that we feel that we're in a very, very well positioned way to go and address. If I look at the efficiencies, one years point ago, we used to talk about CHF40 million to CHF60 million. When I joined in March when I joined and then six weeks later in March, I said, no, we're to do 160,000,000 Then we said we're going to do $250,000,000 As of today, we're over $2.00 5,000,000 I think we have executed really well. We built a cadence of roughly 10,000,000 pounds per month of efficiencies that this team is working really, really hard finding really painful and hard ways to go and deliver.

[Adolfo Hernandez, CEO & Director at Capita]

But we understand that is the only way forward. We're really pleased with where we are. And most importantly, as we're doing this, the thing that I'm the most proud about is that we are creating a culture. So now we are thinking about efficiencies in ways we were not thinking about it before. And we have created an operating system to stop the cost to creep back in unless it's part of our reinvested policies.

[Adolfo Hernandez, CEO & Director at Capita]

And if it's part of reinvesting, it has to go through a very thorough business case and milestone systems. On the delivery, I think last time I was standing here, I talked about customer satisfaction going up even though we were going through a very difficult transformation. And I remember six months ago saying to you that is the foundation. In my experience, when you start delivering well for your customers, that's the first step to start getting to growth. I think if you go through the release today, you see a number of leading indicators.

[Adolfo Hernandez, CEO & Director at Capita]

You see that growth on the TCV around the group, which is great. But if you look at some of our businesses, they're growing faster than the group. Pensions is an 88% growth. If you look at our public service, it's growing TCV north of 50%. So we're starting to see that.

[Adolfo Hernandez, CEO & Director at Capita]

We're seeing good win rates. We're seeing improvement on the book to bill ratio. So we're starting to see real momentum on the delivery. And on the company side, on the employees, I said to you last year, we care mostly at this stage of the transformation about engagement. Engagement is critical because we are changing the how we do pretty much everything in the company.

[Adolfo Hernandez, CEO & Director at Capita]

That's staying roughly flat. And what we're starting to see a jump on employee Net Promoter Score as the changes, no matter how painful they have been, they're starting to take hold in the organization and people starting to say actually this is turning into a better place. So really proud of this sort of set of results. There is work to do. We expect a much better improved financial performance.

[Adolfo Hernandez, CEO & Director at Capita]

But I think if we look at where we are just thirteen months after we unveiled the strategy, I think this is solid progress. I'm going to let Pablo to take us through the numbers quickly and I'll be back to talk about execution.

[Pablo Andres, CFO at Capita]

Thank you, Adolfo. Good morning to everyone. And I'm going to cover the, as usual, the financial performance year to date and speak about some of the operational improvement made during the last six months. On this slide, we can see the group adjusted consolidated results, which have a number of moving parts and understates the improvement that we've seen in Capita Public Service that you can see in the bridge below delivering strong margin progression. Revenue saw a 3.7% reduction, which is a mix of growth in our larger segment, which is Capita Public, offset by revenue decline in the contact centers that is now 24% of total revenue.

[Pablo Andres, CFO at Capita]

Operating profit has declined year on year by 21.8 or €12,000,000 primarily reflecting €10,000,000 of contract handbags in the regulated segment. The earlier timing of the pay award this year the reinvestment in the business and all of this partially offset by strong cost savings. Free cash outflow was 26,000,000 outflow, improving by 50%, of which €22,000,000 were payments related to our cost reduction program together with an improved operating cash flow in the first half. From a housekeeping perspective, we completed our one for 15 share consolidation, the share premium cancellation generating distributable reserves and we extended the maturity of our €250,000,000 RCF to the 2027. The next slide shows the customer reconciliation between our adjusted and reported result.

[Pablo Andres, CFO at Capita]

You can see that the main reconciling items were business exits, including our mortgages services due to exiting Q3 and the P and L costs of the ongoing cost reduction program. Moving on to Public Service, which is our largest segment and where we have made the most progress to date with 110 bps margin improvement to 8%. Revenue grew by 3.8. This was the best revenue growth seen for a number of years in the division, reflecting the go life of both Health Assessment Advisory Service and Disabled Students Allowance contracts and expanded scope within our Royal Navy contract training contract. Operating profit increased 21% to fifty seven million euros We were able to offset the flow through of the cessation of contracts, the larger than usual growth in staff costs driven by the earlier timing of the annual pay award this year and the increased NII costs through the cost efficiency program.

[Pablo Andres, CFO at Capita]

Cash conversion was in line with the prior year. This slide, though, does not show the tangible progress made delivering our strategy, given that the financials are usually lag indicators. So the next slide shows some more tangible examples of the progress made. Public Service is now 62% of the group's revenue. As you can see, we have maintained our strong operational KPI performance at 94%.

[Pablo Andres, CFO at Capita]

Total contract value wins were up 53%, including Education Authority of Northern Ireland, Gas Safety Register and NHS England on our Primary Care Support England contract. We have also had significant improvements on our win rate, particularly on midsized deals that are a strategic priority, with total win rate across the division of 81%, up from 39%, driven by a recently optimized growth function. As we look to H2 and onwards, our unweighted divisional pipeline has grown over by €1,000,000,000 and innovation and adoption of AI is accelerating with 90% of bids now including AI in the scope of the solution. Examples of progress from our technology investment were the Silver Town Tunnel document verification solution, the go live on our debt collection with Appian, opening further opportunities with local councils. Finally, and not covered in this slide, you may have seen an announcement a few weeks ago that Ofgem are investigating SmartDCC, a capital subsidiary which is not consolidated due to the arm's length requirement under the license terms and conditions.

[Pablo Andres, CFO at Capita]

The investigation relates to its compliance with license conditions related to historic procurement activities. DSCC has been subject to the UFGN price control every year and our results have always included the impact of this review. Turning into Contact Centers. In the Contact Center segment, we have seen 20% revenue decline, partly driven by the annualization impact of the decline of volumes we saw in the 2024 in our telco vertical. We have also seen the impact of other known losses and volume reductions as we work with our customers driving volumes to our nearshore and offshore delivery centers, reducing revenue with some higher initial costs whilst becoming more efficient and competitive.

[Pablo Andres, CFO at Capita]

Margin deteriorated in the first half to minus 4.1% with €11,000,000 losses, driven by the impact of revenues already explained, partially offset by the results of management action taken to rightsize the cost base, which has not yet fully delivered the expected outcome. Operating cash flow was €1,400,000 inflow in the H1 twenty twenty five compared to a €13,300,000 inflow for the prior year, reflecting positive timing of €8,000,000 in cash receipts this year as well as the usual phasing of significant cash receipts from a large customer that delivers inflows for the year in H1. Turning to some operational metrics. Contact centers are now 24% of the group revenues. We have continued investing to transform the cost base of the business, shifted volumes to our offshore and nearshore centers and invested in AI enabled solutions, becoming more competitive in the marketplace whilst increasing our customer satisfaction to four out of five CSAT in our South African global delivery center.

[Pablo Andres, CFO at Capita]

After many years of revenue reduction and low wins, we saw renewal rates of 84%, with 100% in The UK, including Southern Water renewal with a TCV of €92,000,000 with expanded scope alongside renewals with Borgay and Centrica. We are focused on growing our midsized contract pipeline, where we are making good progress to date and we are being more selective on large scale deals. There is more work to do to grow the pipeline and crystallize new wins. From a technology perspective, we rolled out AI driven gamification across 4,600 agents. And we now have AI solutions rolled out in 30 clients to 6,000 of our colleagues, allowing improved margins in free contracts.

[Pablo Andres, CFO at Capita]

I encourage you to look at the appendix in Pages forty nine and fifty, showing a long list of contact center technology projects that are either already live or in proof of concept to go live that will keep us competitive and allow us to grow. Moving on to pensions. Pension Solutions revenue was probably flat. The decline in operating profit reflects lower interest rates, offsetting the progress made in the cost savings program. We expect good margin improvement in the second half, driven by revenue growth from key contracts and cost savings.

[Pablo Andres, CFO at Capita]

Cash conversion was 70%, reflecting mainly timing of payments from software development activities in our civil service pension scheme contract that we expect to even out in the second half of the year. Pension Solutions now is 7% of the group revenues. TCV nearly doubled from H1 twenty twenty four, driven by the increased win rate of 94%. Material wins in the first half of the year included Scottish and Newcastle pension plan and the Seven Trent pension scheme, giving us confidence on a positive H2 and a robust full year for the segment. We maintained strong delivery for existing clients with an SLA of 95%.

[Pablo Andres, CFO at Capita]

And we saw strong momentum from our investments in digital pension solutions with 100,000 members signing up to our digital solution, 15 GenAI agents being produced and a strong uptake on our data analysis and cleansing offering. Moving on to our Related Services business. This is an area we announced at the Capital Markets Day that we're managing for value. We made continued progress on exits in the period, agreeing an exit with our mortgages software business, which has provided a €19,000,000 revenue one off through the release of deferred income and a net €6,000,000 profit and cash termination fee. We continue in active dialogue with the last customer from our closed book Life and Pensions business, seeking an orderly exit from this segment.

[Pablo Andres, CFO at Capita]

We continue estimating that this segment will generate €20,000,000 cash losses per year on an ongoing basis, running the services for the last customer. On cash flow, operating cash flow for H1 was 56000000%, showing an improvement from the prior year. Timing of deferred income and working capital remained broadly in line with prior year with slightly higher deferred income and lower adjustments from provisions. We discussed at the year end the significant relative impact of timing of receipts in a large company like ours, where large receipts can cause significant swings in cash flow performance. When I look at H1 operating cash flow, my view is that for the group as a whole, we landed in a broadly balanced position with no significant swings distorting the delivery from the business.

[Pablo Andres, CFO at Capita]

In terms of cash spent in our cost reduction program, we spent €21,500,000 in the first half, lower than our initial expectations, driven by timing and delivery in this of savings in the contact center business. To date, we have delivered $2.00 €5,000,000 savings and we remain on track to deliver the full €250,000,000 savings with the previously announced cost of delivery of €55,000,000 for the full year. In terms of cash flow and net debt, our free cash outflow has improved to €26,000,000 reflecting the increase in our cash generated from operations, which includes slower than planned investment in savings, timing of CapEx investment and the reduction in lease payments. Closing net debt was €412,000,000 for the half, including $8,687,000,000 euros of financial debt and €325,000,000 of IFRS 16 lease liabilities. And as I explained in the full year results, does not include €94,000,000 of swap led lease receivables.

[Pablo Andres, CFO at Capita]

Turning into liquidity and net debt. As announced in July, we have extended our RCF maturity a further twelve months. And in line with the full year 24x position and half year 24 position, this facility remained undrawn. This has given us a total liquidity of €380,000,000 at the half year, including the $9,594,000,000 euros of debt issued in March 2025. Net debt to EBITDA remains below the one times target.

[Pablo Andres, CFO at Capita]

Finally, looking at the guidance for the remaining of the year, our outlook remains unchanged for revenue, operating margin, cash flow and debt. In terms of revenue, we have upgraded Capital Public to mid single digit revenue growth, driven by annualized benefits of new contracts and the strong H1 sales performance offsetting contact center guidance that has been lowered to a mid teen revenue reduction, reflecting continued volume reductions mainly in the telecoms vertical and the impact from losses and offshoring activities. We continue to expect Pension Solutions to grow mid single digit revenue, driven by growth with existing clients. And in regulated services, we continue to expect a further revenue decline as we hand back contracts. In terms of margins, we continue to expect overall modest improvement with Public Service margin improvement driven by the continued cost savings and revenue growth Contact Center margin reduction reflecting revenue headwinds and timing of cost savings Pension Solution margin at higher than the group average expected to remain stable.

[Pablo Andres, CFO at Capita]

And finally, Related Services expected to see a decline in margin given the ongoing exits. In terms of free cash outflow before impact of business exits, we continue to expect between 45,000,000 to €65,000,000 outflow for the full year, of which €55,000,000 relates to the cost reduction program and an improved cash conversion of 55% to 65%. We still expect to be free cash flow positive from the 2025. Thank you. With this, I'll hand back over to Adolfo.

[Adolfo Hernandez, CEO & Director at Capita]

All right.

[Adolfo Hernandez, CEO & Director at Capita]

Thank you, Pablo. Very thorough presentation of the numbers. So let me just quickly move into strategy and execution to show you what is it that we're doing, but most importantly why we are excited about the opportunity of what's coming forward. When joined eighteen months ago, one of the things that I used to say having spent many years in the world of tech and have knowing fairly well what was possible, I talked about my deep belief that the BPO market was going to be fundamentally transformed by tech as a whole, particularly with the advancements around data and AI. What back in the day seemed like, yes, he might be right.

[Adolfo Hernandez, CEO & Director at Capita]

I think eighteen months on, it's very clear that that's definitely happened. And I am really pleased that as an executive team and as a Board, we took on the challenge to move very, very quickly in that direction. And really just harness that opportunity of seeing the shift from the traditional BPO market that sort of CHF 50,000,000,000 market today to what's going to become CHF 55,000,000,000, but with a very different makeup. We're going to see the AI enabled services the 10,000,000,000 of today moving to 300% growth. And I think therein lies the opportunity and the challenge for our company in this sector.

[Adolfo Hernandez, CEO & Director at Capita]

And for us is the opportunity that we're thriving for. How do we become better at the blue, at the traditional, because many customers will still need services that will lend themselves to very little AI and that's going to be a continued significant market in Western Europe of €25,000,000,000 where we want to be really good. But more importantly is how do we build, deploy and harness the capabilities of AI to a, migrate existing services to be more efficient and provide a better service through the injection of AI and b, build brand new services on the back of AI. Because we've seen that there is more adoption. And I think you're reading about it, if you look at it in the private sector and the private sector is the test bed for adoption and for innovation.

[Adolfo Hernandez, CEO & Director at Capita]

So traditionally, certainly adopting a lot of things faster. And as we have seen in Korean's world, the call center business is our test bed for innovation when it comes to AI. But when you look at our largest market, the public sector now from the Prime Minister down through government funds, the AI playbook, a fully funded plan coming by the government, also the adoption, the work that DCIT is doing, the work that the independent individual government departments are doing, it is all about injecting AI in the public sector as well. And it's less about cost cutting, it is more about delivering a better service. It's about working down the backlogs.

[Adolfo Hernandez, CEO & Director at Capita]

It's about being faster to deliver citizens value. So two very different dynamics in private and in the public sector. But what we've seen is the adoption is not going to be linear. There are going to be challenges when it comes to adoption. So if I look at the public sector, one of the things that public sector is dealing with now is how do we procure this, right?

[Adolfo Hernandez, CEO & Director at Capita]

This is not the standard procurement that has happened for a while and we are having many conversations with civil service to just help them shape possible ways to go to market with these innovations that they're really trying to drive as an agenda item. But beyond that, there's some more generic barriers to adoption, which I believe are turning into great opportunities for capital. Number one, skills. There's a lot of technology. You could sell a lot of technology.

[Adolfo Hernandez, CEO & Director at Capita]

You could sell our technology to a lot of our customers, both in the private and the public sector. But these people, these users, these management teams will need to be trained. They will need to be trained on the art of the possible. They will have to be managed through skills. They have to be certified.

[Adolfo Hernandez, CEO & Director at Capita]

You'll need to have a proper managed skills platform, which is something we have been doing in Capita very well for many years. The second thing is the tech. Every day you read about a new model, every day you read about a new application, every day you read about a new agent. Who can keep up with all of that innovation? Who can test all of that innovation, who can ensure that the innovation works on the right place, that it has the right controls, that has all the right implementation parameters that are acceptable in a regulated industry.

[Adolfo Hernandez, CEO & Director at Capita]

So I think the role that we can play there on the pretesting certifying prioritizing and identifying what technology is better suited for what particular business problem. I think that's unique for Capita. And then obviously we've the data maturity. I think if you look at both what we have in the local public sector, what we have in central government departments, what we have also in the private sector, data maturity is a challenge. So we had Pablo talking about data cleansing services and offerings and some of the work we're doing with our newly onboarded partners in the data sprays, Snowflake and Databricks towards that address.

[Adolfo Hernandez, CEO & Director at Capita]

How do we help our customers clean and build and structure and protect the data that they would need to build AI capabilities on top? So it's a big shift, and this is why I've spent so much time on this particular slide, but I believe it is a transformational shift for the BPO market and the single biggest opportunity this company has had for many, many years. So as we do that, we're to do, in short, the sort of Navy much better and continue to do it really, really well, defend our positions and grow our positions on the not so AI rich services, but built more and more of the capabilities on the dark pink, so that we can go and disproportionately take share in that market as the market growth. Which brings me to a little self assessment on this is one of the key slides I shared at Capital Markets Day. We did the strategic review that was done by OC and C.

[Adolfo Hernandez, CEO & Director at Capita]

They categorized our services offerings, packetized them into where do we build star positions over the years. Star positions, places where we win often, we win well, we deliver well, we have a strong reputation, we have good demonstrable skills, expertise and differentiation. And we have to just do more of. And I think you're starting to see through some of the numbers that Pablo shared, we're to see a lot of that progress in particular around pensions, around the public sector. There is now real clear evidence that we're doubling down on that space and we're doing really well.

[Adolfo Hernandez, CEO & Director at Capita]

We had a number of areas we identified as transformation potentials, good markets, nothing wrong with the market, but there was something that needed to be improved in our execution. And that's all the areas where we I think we're making a lot of progress in most of them. And I think in contact center, as Pablo reflected on, we are applying the right medicines. We are doing what we should be doing in this market. There is nothing wrong with that market.

[Adolfo Hernandez, CEO & Director at Capita]

If you look at the market leaders, they're getting above 10%, 10% to 15%, 17% net margins in that space. But they started a lot earlier. They transformed the business a lot earlier. But we are four or five years late to do that transformation and it's taking us a little bit longer to catch up. But we have seen already on those accounts where we deploy the tools and the solutions that we've created, we are already seeing significant operational improvement in average handling time going down, increasing the first call resolution time, increasing CSAT, increasing Net Promoter Score.

[Adolfo Hernandez, CEO & Director at Capita]

We've seen account margin already improving, but it will take a while until that cascades through the P and L. But it's definitely an area where we needed to do more work. And then we got the managed for value bucket, which I wanted to sort of double click on a little bit because there's a lot of nuance. Remember, managed for value was there are areas where we just simply are in the wrong place. Either we had the wrong play we were in the wrong place or we had the wrong offering altogether.

[Adolfo Hernandez, CEO & Director at Capita]

And it was going to need some work, right? There was going to be some more transformational work like it was the exit of Capital One. And then full transformations like the one we're doing for example on our networking services. We're going from the traditional system integrator role that we did of a lot of third party equipments and trying to provide networking services to our clients as part of larger outsourcing contracts to now fully migrating to effectively what it is networking on the cloud type services and deep partnership with AWS. So that it becomes a more soft offering on the cloud with very cost efficient security from the outset asset light, CapEx light networking services.

[Adolfo Hernandez, CEO & Director at Capita]

So that's just been strike. Similarly, on IT managed services, it was heavily manual when we started with managing we were managing our service internally heavily manual and we're managing our customers heavily manual and that was an absolute inefficiency. Since then, we have already moved over 25,000 employees for ticketing inside capital. And now that we've got our experience with ServiceNow as client zero, we are now migrating our existing contracts over to that as we did in the call center business with Amazon Connect where we have been migrating most of our customers' telephony stacks over to that platform. Obviously, there is still work to do on closed book like on pension.

[Adolfo Hernandez, CEO & Director at Capita]

As Pablo mentioned, we continue on the hand back of the agreed exits, but there is still one more that we're working on to agree and move forward. But overall, as you look at that sort of bucket of managed for values taking quite a bit of management time, but it's important to see that execution it's happening. From energetic and apologies for those of you who might be fluent in the topic, but I thought would probably be good to give you the capital perspective of why AI, what type of AI, what's our role on AI and why is it relevant ultimately to the value creation of AI for capital. So I think if you look at three different types of AI, you've got sort of the predictive AI that started a little bit earlier. It doesn't mean that it's age.

[Adolfo Hernandez, CEO & Director at Capita]

If anything, a lot of value still today derived from predictive AI. It's a capability of getting existing data that the company has and getting to work together so you get early insights and actionable insights. Again, it might be less sexy, it might be something that we got really good at a few years ago, but do not underestimate the raw and sheer power of that tool. And we continue to invest in that area. So for example, you look at CallSight, which is a Gen AI based tool that we've deployed there to get real time visibility of the quality of every single call that we make on behalf of our customers.

[Adolfo Hernandez, CEO & Director at Capita]

No longer sampling maybe 5% of the calls, now we can do 100% of the calls, just a particular example. Then you've got the generative AI, which is the ability to generate content based on content. So that could be generating code based on existing code. It will be generating answers based on knowledge basis. And that's something that became very prominent with the arrival of GPT -four back in December 2023.

[Adolfo Hernandez, CEO & Director at Capita]

And there we've seen a lot. Obviously, the ability to use all the content you have to generate new content is to be an opportunity not to use, right? It's no longer just getting data to give you insights and now getting sheer values of content, whether it's in the knowledge space or in the actuation space is to get you to the next best action or the next best content. We're already deploying that. We talked about the five clients where we deploy this, for example, the agent assist tool and the capital accelerate as we're doing it with recruitment program and a number of others.

[Adolfo Hernandez, CEO & Director at Capita]

So definitely a play. But definitely the next frontier is not only I'm going to predict data based on existing data, not only I'm going to generate new content based on existing content, but actually now I'm going to act. And this is sort of the agentic AI wave. It's the sort of the programming of the activities and the actions that will happen. So it's a more automated, it's a more independent, it can be as independent as you want it to be.

[Adolfo Hernandez, CEO & Director at Capita]

We have decided in Capita that we don't want it to be 100% independent. We work in regulated industries. A lot of the public sector, very sensitive materials, lot of financial institutions, lot of regulated industries. We want to specialize in a human in the loop type of agentic capability, everything that has to be customer frencing. Internally, for some of the work that we do internally that is purely efficiencies driven that maybe we can just have less of a human in the loop.

[Adolfo Hernandez, CEO & Director at Capita]

But when it comes to external, it's very important that we do that. And you see massive investment being made by hyperscalers to deliver on those capabilities. Very important things, very few, actually hardly anybody is delivering endpoint agents. What they're doing is creating productivity environments, development environments where anybody who understands our business process can map up and create that particular agent. So I think if you look at that from a capital perspective, we don't have to worry about any of this because that's already coming.

[Adolfo Hernandez, CEO & Director at Capita]

All we have to worry about is for what we do really well, what we've been doing for forty years is understanding that customer expertise, understanding what the business process is and then just go and map it, map it to the right agentic platform or to right data platform at any point in time. And I actually think, I really want this sort of sentence to sink in, is, I think in the future, my vision is that we will be very well at orchestrating agents and humans to work together to deliver those outcomes. And I'm going to show you some examples really where we are orchestrating multiple agents. But if you think about the concept of multiple agents independently with humans in the loop and then Capita creating that master capability to do that. We're blessed.

[Adolfo Hernandez, CEO & Director at Capita]

I think we were blessed and lucky that we don't have to do anything that is in the bottom part of the stack. There are trillions of dollars of investment going into sorting out the enabling layers of AI, whether it's on the microprocessor level, at the computer architecture, data layer, all the way to the application layer. There is a lot of money, a lot of billions. It's probably the first wave of investment that I see in my tech years where everything is in the tens of billions or the hundreds of billions. Otherwise, you don't even grab the headlines.

[Adolfo Hernandez, CEO & Director at Capita]

Fortunately, we don't have to do anything like that. All we have to do is leverage all of that investment and understand what is it that we do well. In mapping those customers that we know well, the business processes to the existing capabilities that are coming there every day. It's ensuring that we select the best, more suitable, more secure, more agile, more price effective solution at any point in time. And I think is that how do you use all of these tech innovations with a human in the loop?

[Adolfo Hernandez, CEO & Director at Capita]

How do you create the guardrails that are important? Working with our customers to understand what is it the compliance requirements that they have? What data needs to be made available under what circumstances, what actions need to be locked for what purposes, how do you audit, how do you limit all of these agents. And I think that is at the core of what we do because that's what we've been doing for decades. And I think that's where the delivering of a managed outcome, not only with people as we have in the past, but a managed outcome leveraging people and leveraging tech becomes the secret source for us.

[Adolfo Hernandez, CEO & Director at Capita]

And we are going to be doing this across the whole of capital. Bear with me with this slide because I was trying to just explain a number of concepts, which I think are very important and it will be very important going forward. If you look at what we deliver for customers, you could oversimplify it by saying we do front office work, everything that touches the end user, citizen, consumer. There is middle office work, which is sort of doing some reconciliation with some processing that needs to happen to support the front office. And then there is some stuff that happens somewhat disconnected from the front office, but they go deep into process and systems, right?

[Adolfo Hernandez, CEO & Director at Capita]

You will find that in some customers, we do all three. But in general, maybe oversimplifying a bit, everything that we do in customer experience, both in contact centers and pension solutions is very front office heavy with a thin veneer of middle and back office, depending. So for example, think of the work that we do for water utilities, You will find in the water utility firm, which we engage with e mail and call centers. And then we will do some work around payments. We will do some work, given them connections and disconnections of consumers.

[Adolfo Hernandez, CEO & Director at Capita]

And in some areas, we might even take responsibility to notify leaks and things like that. But that's sort of a very thin veneer. But most of the innovation at the moment is on the front office. So in Koreans world, we're looking at how do we get productivity out of the agents, how do we get them to do a better service, how do we get them to have better data. We have to look we're looking at quality assessments of 100% of the calls, as I talked about.

[Adolfo Hernandez, CEO & Director at Capita]

Now we're looking at from a sales and an outbound perspective, how do we give them the tools that they can be more effective and converting leads. So that's kind of the work. If you look at our public sector business, it's actually the opposite. A lot of what we do is middle and back office. And in many of our customers, there is a front office citizen engagement.

[Adolfo Hernandez, CEO & Director at Capita]

So a lot of what we do is really complex middle and back end processes that will have a very different AI investment profile, somewhat different tools, but we will apply some of the same tools when it comes to citizen support. And in every one of these interactions, we are going to be working with the human in the loop, right? We will not let agents lose when it comes to medical assessments or when it comes to social assessments or when it comes to deliver different things. But we might just get the agents to provide some solutions. So this is important because I think what you're going to see over months and years to come, the profile of investments are going to be different.

[Adolfo Hernandez, CEO & Director at Capita]

The profile of opportunities is different. In today's world, as you can see from Pablo's world, we've seen more traction on the capital public services and the work in the middle and the back office through a big automation, big streamlining of middle and back office. We're doing a lot of the test bed both in digital pensions and in call centers. Digital pensions, we're already seeing the pull through. That's working call centers.

[Adolfo Hernandez, CEO & Director at Capita]

We're seeing the pull through at an account level, but not yet at a divisional level. This gives you so in the front office, we talked about agent suites, something like we do and we're already doing on Southern Water, 17% improvement array on average handling time. Similar work that we're doing now in the Department of Work and Prevention, where we're looking at proof of concept to do cold transcript and just getting some of the quality done there. So that's very typical sort of front office activations. In the video, heard about the discount verification scheme that we put together for Transport for London on the SilverTowne Tunnels.

[Adolfo Hernandez, CEO & Director at Capita]

How do you deal with all of these neighborhoods where there's so many different cases as to why you might qualify for a discount? There's so many documents that need to be verified and you need to look at fraud. And so traditionally, that would have been a purely human looking at all the documents one by one and then eventually in a few days coming back. Now we've got that capability built in. So that is the technology that does the fraud verification, the document correlation and it can do that.

[Adolfo Hernandez, CEO & Director at Capita]

And then on the back office, if you think about a concept like the debt collection, how do you go about collecting debt? How do you identify the most likely to pay? How do you prioritize the right payers? How do you build a workflow associated? We're getting the best possible yield of our your debt collection efforts.

[Adolfo Hernandez, CEO & Director at Capita]

So there's something that is already working in Bexley and where we've got a good pipeline of authority. So it's trying to show you sort of that AI is a lot more than just talking to chat GBT4 and getting there. So this is technology at work today solving customer problems. And the final thing is, how is that going to benefit capital? How are we ultimately going to get the financial return?

[Adolfo Hernandez, CEO & Director at Capita]

So if you think about the foundational layer of what we know, the people we got, the process, the experience, all of those projects have worked out generating data, right? The data we've got lenders to start working on automation, automation opportunities. And the automation opportunities will give us two benefit. They'll give us one internal benefit, which is because it's automated, you'll do less manual work, because you do less manual work. Our colleagues benefit from a better work experience because they don't have the tedious retyping and typing things in two or three screens.

[Adolfo Hernandez, CEO & Director at Capita]

These things are so as a result of that, we say they have a better work experience. They have a better work experience and more likely to stay, they're more likely to stay, we'll have lower attrition and we have lower attrition, we have lower cost of attrition. So that improves our internal productivity numbers and our numbers. But then obviously externally, it allows us to build repeatable offerings, things that we can reuse in other parts of the portfolio. We don't have to be bespoke.

[Adolfo Hernandez, CEO & Director at Capita]

We don't have to have innovation cost of one every single time. That will give us obviously a much better productivity. And I think as we get all of these value flowing through, we are a cheaper provider, because you're a cheaper provider, you win more, because you win more, you build more understanding of processes, you get more data. And this is where the flywheel starts gathering speed. And this is how you start making money.

[Adolfo Hernandez, CEO & Director at Capita]

So this is more than AI is an ingredient and it is a lot more than AI is justified. This is the flywheel of how we are going to become one of the leaders in business process enable AI with a human in the loop. And there, we couldn't do this without our hyperscaler partners. I remember when I started talking about them eighteen months ago, there was some talk about are they really going to really help you? Yes, they are being absolutely critical fundamental to everything that we do.

[Adolfo Hernandez, CEO & Director at Capita]

I've talked about the ServiceNow. We've talked about the work. You saw some video there from Darren on co pilot. We're going now to 260,000 monthly co pilot interactions inside Capita. We're saving now about nine thousand hours of work per month inside the company and just growing very, very quickly, just to name a few.

[Adolfo Hernandez, CEO & Director at Capita]

As we go forward into the second half, I'm really excited about the stuff that we've got. I'll call out, we have been selected by AWS to be the EMEA reference partner to launch something that is the process to agent automation. You see the P2A program. So that will give us the ability to shape what goes into the offering and be able to be one of the first movers there. And then similarly, there is a lot of interest from Microsoft Co Pilot adoption program for the public sector and some of the work that we're going to be doing to build some hyperscaler base offerings in some areas.

[Adolfo Hernandez, CEO & Director at Capita]

So good progress, really excited about what's coming forward. And then talked about the catalyst, something that we launched in February, an internal capability where we have recruited a lot of external people who came from this world to engage first internally and then now with customers on where can we adopt these things. So we are doing interviews. We're getting ideas. We're getting submissions.

[Adolfo Hernandez, CEO & Director at Capita]

Over 300 ideas have been submitted already. They get validated. They get prioritized. They get technified where it makes sense. We already have 70 agents there.

[Adolfo Hernandez, CEO & Director at Capita]

And we're just getting started. Many customers have expressed interest and are already engaging with the Catalyst Labs to look at, okay, help me out. Do you know this process? What could we do? What is the art of the possible?

[Adolfo Hernandez, CEO & Director at Capita]

And you saw earlier from Salesforce talking about the AI recruitment agent based on agent force. Just think about this was an idea we had in November, December that we went live with the early version May. And we already have 10% of all the engagement of our recruitment going through it, which is really important to see that the 19,000 candidates have already engaged in that very little time with part of the solution. The solution continues to be built up. By the end of the year, we expect it to be 100% of the internal candidates.

[Adolfo Hernandez, CEO & Director at Capita]

And then again over time once we got this to work at scale internally, we'll be taking out to market. So all moving very quickly delivering already. As you can see there are some benefit in the few weeks to recruiters who are seeing the benefit. It will get a lot more sophisticated. I talked about earlier my vision of Capita being the best orchestrated for agents and humans.

[Adolfo Hernandez, CEO & Director at Capita]

I think if you look at what we've got on the left that gets pretty this is something that we're doing in the government space where you have a multi agent capability where multiple agents talk to each other. So you have a generalist agent, you have a specialized agent and you have a QA agent and a human, all of them talking to each other, that when this particular work in assessment is performed, a human is assisted with our recommendation in real time when it comes to rules, policies, but also to a particular specialized knowledge all the way down to performing quality checks, Super important, very applicable everywhere. So they're bit more mundane, but equally important as we do fire assessments and this is a part of the work that we do in fire service assessment. Very important for productivity, they're very long pages. They need to be submitted.

[Adolfo Hernandez, CEO & Director at Capita]

They need to be addressed. They need to be verified. You need to be validated. You need to make sure you check against standards. And you need to make sure that you do it timely and consistently.

[Adolfo Hernandez, CEO & Director at Capita]

And we've already got that going on. And then we've got another one in the pensions world, which is really important is how do they improve the outbound response to the inbounds. So how do you catalog understand what's coming in? How do you start bucketizing the points of the information, the areas of information? How do you start drafting responses?

[Adolfo Hernandez, CEO & Director at Capita]

You can have the responses sent automatically. You can have the responses being caused through a human. And it's effectively just is your pulse and your ability to get really good response times to your customers with a human in the loop. So you're starting to see all of these things already working in different parts of catheter. Pablo talked about efficiencies.

[Adolfo Hernandez, CEO & Director at Capita]

I will only just say that we remain very committed to it. It was 190,000,000 at the June, two zero five million at the July. We've got a run rate of about €10,000,000 a month historically. Yes, it is hard. It is hard for our colleagues.

[Adolfo Hernandez, CEO & Director at Capita]

It is requiring a lot of sacrifices, a lot of hard work. But we're now finding that sort of £10,000,000 per month run rate and we will continue to do that in multiple areas. And I think mostly is in the areas of fixing the basics, right? So how do we look at all the processing efficiencies? That's the EOS project.

[Adolfo Hernandez, CEO & Director at Capita]

How do we do more shared service centers? And then how do we go, particularly now into the enterprise data platform space. How do we go and get more sophisticated around the data that we've got, where we've got it, so that we can drive savings and efficiency when it comes to quality, it managed to manage information and a number of others. We will continue tackling legacy, very important, because I think we still have legacy in the system, moving legacy to the cloud. And I talked to you about the process to agent work that will be happening in the second half as well as the culture around cost efficiency.

[Adolfo Hernandez, CEO & Director at Capita]

On delivery, Pablo touched on most of this. It's important to see momentum across all the key areas when it is TCV growth or when we're looking at win rates or when we're looking at the pilot, the book to bill or when we're looking at the size of the pipeline, again some of the great wins and then we got also some good opportunities going into the second half. Talked about in the interim, very important to me, the values, the high performance culture that we're trying to build as we transfer into this new world. I'm in love with the four values. I think they really tell the story of who we want to be and what kind of behaviors from me down we all have to display every day.

[Adolfo Hernandez, CEO & Director at Capita]

This is the customer focus, the innovation, the delivering together both internally and with our partners and the sense of inclusion. As I said, I think we just started to see early signs that it's catching on with the organization. I'm very pleased by that because that works hand in hand with a very contentious topic, which is, is it humans or is it AI? And I am very clear, this is both. This is humans working with AI.

[Adolfo Hernandez, CEO & Director at Capita]

There's a lot of things that humans do a lot better than machines and there are machines that do things a lot better than humans. But how do we get them to work together? So a lot of what we've done is been first this information, then is sharing the successes then see they're seeing that actually their work becomes a lot more palatable. But most importantly, you have to invest in your people. And we have been investing all the way down from the leadership team where we got 600 people taking the leadership and the management academies all the way down to data academies, AI academies.

[Adolfo Hernandez, CEO & Director at Capita]

We've got 10,000 content modules being accessed. So this is we're just getting started. It's fundamental to our value proposition that yes, there is an impact of AI in jobs in certain areas, but that can be negative, but also positive, right? Enhancing some of the existing jobs and creating other jobs. So excited about catching that opportunity.

[Adolfo Hernandez, CEO & Director at Capita]

And then something that you would expect us to do really well because we've been doing this for forty years, which is managing well the deployment of this, managing the ethics associated with AI. How do you manage to make sure that the same level of compliance that we have to security, national security, regulatory requirements, ethics are captured from the AI perspective. So on what we've done is rather than create something ad hoc, we're building existing solid capital processes. We've enlarged them to also cater for the same levels of control and governance to include AI based solutions. So we're in a position to have the same level of conversation and reassurance to our customers.

[Adolfo Hernandez, CEO & Director at Capita]

And then last but not least, bringing up a good old slide from the past because I said this is what we're going to do. And I think this is what we're doing. I talked about three different waves of transformation. I talked about funding the journey. I talked about fixing the basics.

[Adolfo Hernandez, CEO & Director at Capita]

And I talked about investing for growth. And I did say, they're not sequential. They're going to happen in parallel with a bit more of one at a given point in time. So we continue to be heavy on the cost transformation to fund the journey, but we are already moving into the innovation in terms of ways of working fixed and the basics. And as you have seen already building capabilities and seeing early signs when it comes to investment for growth.

[Adolfo Hernandez, CEO & Director at Capita]

All of these three things have to happen in parallel. They are not it's not trivial. Sometimes it's complex to drive this amount of change in the organization. But I am pleased and proud of how the management team, the leadership team and the executive team are driving this. So to Pablo's point, good progress, solid progress in some areas.

[Adolfo Hernandez, CEO & Director at Capita]

In some areas, the financials are already telling the story and particularly proud of seeing two of our three operating groups already ahead of the operating margin ambitions with one to work on. But I think as I look into the second half priorities is the focus on that third one that is missing, which is contact centers, which obviously needs to be there. We continue to work on manage for value and they're the last remaining bits that we need to solve. And then we're just cracking on with the cost savings, the reinvestment and just building on this refresh culture. I also like to take the opportunity recently to thank all of our customers who have supported us as we continue to go through the transformation, our patients, shareholders and our colleagues who are working through really hard, very difficult months of transition in the company.

[Adolfo Hernandez, CEO & Director at Capita]

But I think hopefully all three stakeholder communities would agree that we are in that journey to build a better capital at the time when it mattered the most, which is at an inflection point in the market that we're trying to leverage. So thank you very much. And now we'll take any questions. Helen or thank you.

[David Brockton, Equity Research at Deutsche Numis]

Good morning. It's David Brockton from Deutsche Numis. Can I ask a few questions? Firstly, starting with the contact centers, you touched on how the peers are generating 10 to 15% margins. With the cost savings that you're pushing through and the AI that you're now implementing within that business, are you confident that even on the scale of this business that you have, which is lower than some of those bigger peers that you can achieve a comparable margin? And do you see a read to that now?

[Adolfo Hernandez, CEO & Director at Capita]

I think if you look at what they have going for them, right, you look at technology investments tick, we can do that. Moving to offshoring, near assuring and get that value proposition, yes, we're doing it at a revenue cost, but we're doing it because it's right for our customers and it's right for profitability. If you look at the industry specialization of the offerings, we're already doing that as well. So the only one where I can't tick is scale, right? We do have a call center business that is mostly Western European with two really good delivery capabilities of extremely large one in South Africa and one in India and then I've got some near assuring in Eastern Europe.

[Adolfo Hernandez, CEO & Director at Capita]

That appeals really, really well for customers who are just like that, right? Corinne always says, we're really good at selling to customers who are like us, right? If there's a global player who needs global solutions, somebody who needs delivery out of Central America or delivery out of The Philippines, we are not in that bracket. So what we're seeing today is for customers where we look like them or they look like us, we can actually match that performance. The answer is yes.

[Adolfo Hernandez, CEO & Director at Capita]

But we are not there yet. So it's going to take us a while to get to that. I would say, first, I need to get that business to 6% to 8% and then to see what's the art of the possible, because these are the guys have the scale and they started four to five years ago.

[David Brockton, Equity Research at Deutsche Numis]

And then the second question area relates to the cost savings. I think you referenced that there was a slower phasing of that through the first half. Can you just touch on why that was the case? And then secondly, when you unveiled the $250,000,000 you talked about reinvesting 50 Can you give an update on where that reinvestment is please?

[Adolfo Hernandez, CEO & Director at Capita]

Sure. So as you get going, the transformation has gets harder and you need to be more intentional. As technology evolves and we see the art of the possible on AgenTik AI, remember nobody was even mentioning AgenTik, not once when we were in the same place a year ago. So as these solutions become apparent, you start looking at the art of the puzzle, you start looking at okay, how do I map this? So all of a sudden that has opened different windows, we would have gone the wrong way.

[Adolfo Hernandez, CEO & Director at Capita]

So we're now evaluating differently. And we also have to execute these changes also in a responsible manner with regards to our customers. So you take all of these three themes combined, we have decided just to be more paused. But don't get me wrong, we're two zero five versus two fifty. So we are actually in a really good place.

[Adolfo Hernandez, CEO & Director at Capita]

And I think Pablo and his team are actually being very intentional as checking that every investment that we make of cost to achieve is proper is the right investment and we got the insurance around it. So that sort of speaks to what we were there. The reinvestment of 50,000,000 I think if you sort of look at this presentation and compare it with the presentation we had a year ago, you will see a lot of it is around this area of the working with the hyperscalers, building the innovations, bringing in new teams, getting the AI capabilities. There's been areas where we have to fortify execution capabilities as well in the business as usual business, so that we can protect the sort of the Blue Navy base. There were also some red projects last year where we have to invest in them to get them out of the red space.

[Adolfo Hernandez, CEO & Director at Capita]

So that sort of is the space where most of the money has gone to.

[David Brockton, Equity Research at Deutsche Numis]

So has the 50,000,000 been reinvested or have you only done

[Adolfo Hernandez, CEO & Director at Capita]

the plan is by the end of the year, it will be reinvested.

[David Brockton, Equity Research at Deutsche Numis]

Thanks.

[James Rose, Equity Research Analyst - European Business Services at Barclays]

Hi, it's James Rose from Barclays. I've got two please. The first is on public. It's good to see book to bill back over one times. But I think within that, could you comment on how much TCV or your win rates are on the business, which has that higher technology underpinning?

[James Rose, Equity Research Analyst - European Business Services at Barclays]

Since are you winning more of what you want to win? And then the second one is on contact centers. Could you elaborate a little bit on why revenues are behind your expectations from the start of the year? And I think there's a broader question there as well. As the market is changing and AI is being deployed, how does that affect revenues in that broader business?

[Adolfo Hernandez, CEO & Director at Capita]

Okay. Let me take it and then Pablo can chime in. On the first one, on CPS, where we have seen this the biggest uptick. So first of all, as you can see the TCV at 53% is way ahead of the group's average. So first thing there.

[Adolfo Hernandez, CEO & Director at Capita]

Second thing is we've seen the biggest uptick in what we call the midsize deals. You might remember a year ago when we presented the strategic review that OC and C did with our team that was identified as one of the single levers of work where we have traditionally not engaged really well as a company. And we took an action a year ago and now it's already flowing through. Many of them those tend to be shorter sales cycles and they tend to have a technology underpin. So as such, you're already seeing it at work.

[Adolfo Hernandez, CEO & Director at Capita]

With CE, the contact centers, issue is not AI. AI is actually part of the solution. Structurally, the issues that we have seen, we have seen offshoring as you offshore, yes, you save cost, but you reduce revenue. We've had the annualization of the telecoms business that has come through it. We've had some known losses that are now going through the P and L.

[Adolfo Hernandez, CEO & Director at Capita]

And actually, I'm looking at AI as part of the solution. So if you look at Koreans Get Work Plan effectively there is some menu of medicines that we apply account by account. Where we look at things like what are we going to do on average handling time, whether that is our priority, what are we doing in terms of first call resolution, what that's our priority in terms of tech, what we're doing in terms of gamification, is in tech, what we're doing with digital agents, there is in tech, what we're doing with offshoring or nearshoring. So we are using AI as part of the solution. And this is one of those where the financial numbers are telling a story and the operational numbers that we're seeing and the early indicators are telling a very different one.

[Adolfo Hernandez, CEO & Director at Capita]

But I don't think there's going to be any there is an opportunity, certainly a massive opportunity to leverage AI for call centers. And if I look at our peers in the industry, they've all sort of been flattish or growing. They all have 12 to 15%, 17% net margin in those areas. So there is no reason why over time we can't get it to be much better than it is today. And then we will get to the scale question in the future. Thank you. Anything else?

[Helen Parris, Director - Investor Relations at Capita]

Thank you. I've got a few questions online. First couple of for Pablo around cash flow, which is, do you have an early view of what the free cash flow run rate could be for 2026? Is it possible to give an indication on that metric once the severance headwinds are out of the way and more costs are removed from the business? That's the first part.

[Helen Parris, Director - Investor Relations at Capita]

And the second part is probably related, which is what would it take to get cash conversion higher than the 55% to 65% rate that we've guided for this year and that you're currently expecting?

[Pablo Andres, CFO at Capita]

Perfect. Thank you very much, Helen. So in terms of views of cash flow for 2026, I mean, we've got on the website where consensus is. It is in the around the £20,000,000 free cash flow. Excluding any other investment, we're not continuing with any headline so far on big restructures.

[Pablo Andres, CFO at Capita]

It will become part of our business as usual. And I've got nothing to say to that number at this stage. So and then in relation to cash conversion, higher to 55,000,000 to 65,000,000 this year. That is where we expect it to land. But cash conversion of this business is going to improve, and it's going to be a matter of over time.

[Pablo Andres, CFO at Capita]

So I think I explained to the half year results that one of the things that we're carrying in this business is the consequence of IFRS 15 adoption back in 2017, I think it was, where we are forced to spread the big transformation of the large contracts of the life of the contracts, fine. And to spread it, when you spend the money, you create an asset for the transformation you've built and done. And when you get the cash from it at the beginning, too, you book deferred income. And what happened is that the asset was written off because the contracts were not profit making. And we got the lag of a deferred income flowing into revenue and profit every year since then.

[Pablo Andres, CFO at Capita]

That used to be around €100,000,000 up to 2023. 2023 was 100,000,000 2024 was €80,000,000 And I suggested that it would go down to €50,000,000 €50,000,000 and then continue to tail down to €30,000,000 New contracts with transformation come with a deferred income, but also with a contract asset and both broadly depreciate amortized over the life of the contract. The issue is this historical legacy that is slowly coming down.

[Helen Parris, Director - Investor Relations at Capita]

Okay. Thank you. So I have a final question, think, which I think you partly addressed, but maybe you'd like to just put to bed. So can any information be given regarding the Ofgem investigation? And also what could be the financial implications for Capita?

[Pablo Andres, CFO at Capita]

Let's see. In relation to Ofgem investigation, we've got very little to say. Let's see, Ofgem, we spoke about it at the year end results. Ofgem is subject every year to pricing control review by the regulator the BCC business, sorry. And we've been going through it year after year after year after year.

[Pablo Andres, CFO at Capita]

This is a specific point in relation to historical purchasing procedures in that company. The company has its own board. It's self regulated and independent from Capita as required by the license conditions. So other than that, we know that the company DCC will collaborate with the OpGen and provide everything that is needed, but we've got nothing else we can add to that.

[Adolfo Hernandez, CEO & Director at Capita]

Just for those who don't follow that, we say as part of that governance, these processes have all been audited in the past. And obviously, they're there. And as an industry the procurement processes are guided and followed the government procurement process. So it's a standard well audited governed entity and just looking forward to its resolution.

[Helen Parris, Director - Investor Relations at Capita]

Thank you, sir. I have got one more question popped up from Chris Banbury. The contact center renewal rate was better in The UK than elsewhere. What were the were there any particular reasons behind that?

[Adolfo Hernandez, CEO & Director at Capita]

I think we're doing a good job for the contact center customers. I mean, you look at not only the renewal rate, but if you look at CSAT four out of five, the preliminary data that we got around customer NPS significantly improving. If you look at the menu of options that now we give them with what do they want to do in The UK, what do they want to do near shore, what do they want to do offshore. If you look at the pilots, the quality of the pilots that they see already, they see that, okay, we got this menu that I was talking about earlier. Many of The UK customers are already looking into those and they're driving those.

[Adolfo Hernandez, CEO & Director at Capita]

So people sell out, well, when you get such a high renewal rate speaks about the quality of the relationships, of the account management, of the delivery, of the innovation, of the ride sharing strategy. And I think we are on to something, which unfortunately is not showing in the numbers just yet. But there is no other way to get the financials in right until you get the operations right, you get the customer satisfaction right. And we are seeing that already and that's one of the indicators.

[Helen Parris, Director - Investor Relations at Capita]

Okay. Thank you. There's no further questions online.

[Adolfo Hernandez, CEO & Director at Capita]

Any other questions in the room? If not, Okay. I wasn't quite sure. So once again, thank you very much. I think this concludes our first half twenty twenty five results session.

[Adolfo Hernandez, CEO & Director at Capita]

Thanks to all of you watching remotely and all of you in the room. Thank you.

Participants

Executives

• Adolfo Hernandez, CEO & Director
• Pablo Andres, CFO
• Helen Parris, Director - Investor Relations

Analysts

• David Brockton, Equity Research at Deutsche Numis
• James Rose, Equity Research Analyst - European Business Services at Barclays