Full Year Results 2024

Capita plc CEO Adolfo Hernandez said:

"2024 has been a transformative year for Capita as we position ourselves to take advantage of the tremendous opportunities that lie ahead. On joining the business a year ago, it was clear to me from my time in the technology industry that AI brings the potential to revolutionise how we deliver services to our customers. Everything we have seen since has only strengthened that belief. It was also clear that we needed to do much more to bring our costs down to enable the company to be more competitive.”

"Today’s results show progress on both fronts. We have accelerated our cost cutting, while nearly doubling our customer net promoter score. We have put in place a strong new management team dedicated to harnessing the transformative potential of AI and struck encouraging new collaborations with hyperscalers to bring cutting edge technology to some of the most important challenges our customers face.”

"Our 'Better Capita' strategy - focusing on Better Technology, Better Delivery, Better Efficiency and Better Company - is bearing fruit but we must redouble our efforts to ensure this great business delivers the financial performance it is capable of.”

2024 Financial Results

• Adjusted revenue¹ declined 8.0% to £2.4bn (2023: 1.1% growth), reflecting the impact of prior year losses, volume reductions in the Contact Centre business and cessation of lower margin service lines
  • Public Service division adjusted revenue1 decreased by 0.9%,
  • Experience division now reporting under three segments: 
    • Contact Centre adjusted revenue¹ decreased by 18.4% principally due to volume reductions in the telecommunications vertical
    • Pension Solutions adjusted revenue¹ grew 5.1% reflecting increased volumes and benefit from indexation, and
    • Regulated Services adjusted revenue¹ decreased 26.9% as we make good progress exiting the closed book Life & Pensions business.
• Adjusted operating profit¹ increased 5.5% to £95.9m (2023: £90.9m), as the positive impact of the cost reduction programme of c.£90m more than offset the revenue reduction seen across the Group
• Reported operating loss of £9.9m (2023 loss: £52.0m) reflecting the £27.9m cost associated with our successful cost reduction programme and non-cash goodwill impairment of £75.1m recognised in the Contact Centre business reflecting lower volumes in the telecommunications vertical
• Reported profit before tax of £116.6m (2023 loss: £106.6m) boosted by the disposal of Capita One and Fera 
• Free cash outflow, excluding the impact of business exits1, of £122.3m (2023 outflow: £123.6m), including the final pension deficit payments, reduced costs associated with the cyber incident, the cash cost associated with the Group's cost reduction programme and a more prudent approach to working capital management
• Net financial debt (pre-IFRS 16) of £66.5m (2023: £182.1m), with net financial debt/adjusted EBITDA¹ (both pre-IFRS 16) ratio of 0.5x
• Following repayment of £53.6m of US private placement loan notes in January 2025, in March 2025, the Group issued £94.2m equivalent of US private placement loan notes across three tranches maturing between 2028 and 2030 with an average interest rate of 7.4%, to extend our funding maturity profile and underpin the Group's transformation strategy

Continued momentum to deliver positive free cash flow from the end of 2025

• Delivered annualised cost savings of £140m ahead of plan
• Underpinned by December 2024 announcement that total cost reduction target increased from £160m to up to £250m by December 2025, driven by increasing use of AI and generative AI which will fundamentally improve our operating model

Renewal rate significantly improved

• Total contract value won £1,513m (2023: £2,952m), reflecting lower level of contract bidding activity and focus on improving the Group’s cost competitiveness.
• Customer net promoter score improved to +28 points, up 12 points from 2023.
• The Group’s renewal rate grew to 92%, up from 51% in 2023, underlining strong client relationships and consistent delivery of high-quality solutions.

*Adjusted operating cash flow and free cash flow exclude the impact of business exits.

¹Refer to the alternative performance measures (APMs) in the Appendix.

Outlook for 2025

Adolfo Hernandez said: “In 2025, the Better Capita strategy we set in 2024 continues. Our strategy strengthens our future prospects and confidence in our medium-term targets. We have leading market positions and are a critical supplier to the UK Government. We have long term customer focused relationships that are increasingly moving from transactional to more strategic.

"We have strong technology partnerships with hyperscalers, which offers low risk access to new products and markets. We have a strong contract pipeline with £5bn of opportunities with an AI/technology underpin, are building a portfolio of reference cases for AI and have a proven ability to deliver large, complex, critical and selective bespoke services. Embedding technology and innovation will become a key growth driver, which combined with our cost saving programmes to drive further efficiencies will make Capita more competitive and aid its return to growth.”

Financial guidance for 2025

• Expect adjusted revenue¹ to be broadly in line with 2024 overall, with growth in Public Service and Pension Solutions offset by reduced revenue in Contact Centre and conscious decline in closed book Life & Pensions as we look to exit that business
• Small increase in adjusted operating margin¹, due to continued progress with the efficiency programmes, partly offset by agreed exits from closed book Life & Pensions contracts
• Free cash outflow, before the impact of business exits¹ of £45m – £65m, including a £55m outflow to deliver the cost reduction programme, with cash conversion 55 - 65%. We expect the group to be free cash flow positive, before the impact of business exits¹ from the end of 2025
• Medium term targets unchanged. Deliver an adjusted operating margin¹ of 6-8%, operating cash conversion of 65% to 75% and delivering low to mid-single digit adjusted revenue¹ growth per annum

This announcement contains inside information.

Investor presentation

A presentation for institutional investors and analysts hosted by Adolfo Hernandez, CEO and Pablo Andres, CFO, will be held at the Novotel, 3 Kingdom Street, Paddington London W2 6BD at 09:00am UK time, 5 March 2025. There will also be a live webcast which will subsequently be available on demand. The presentation slides will be published on our website at 07:00am and a full transcript will be available the following day.

Participant webcast: https://webcast.openbriefing.com/capita-fy24/
 

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