Trading and Civil Service Pension Scheme Contract Update

Adolfo Hernandez, Chief Executive Officer, Capita said:

“We have made good progress in the first half, with strong momentum in contract extensions and wins, and taking further steps to simplify the Group. We are also advancing the use of technology and AI to improve delivery for clients.

We recognise the service on Civil Service Pension Scheme has not been good enough, we are working closely with the Cabinet Office on all aspects of the scheme, and this remains our number one priority. The wider Group continues to perform robustly, and we are confident in the actions we are taking to build a simpler, more focused Capita.”

Civil Service Pension Scheme and Outlook

We note the Ministerial Statement made by the Paymaster General on 6 July 2026 and at the Public Accounts Committee on 8 July 2026 regarding the Civil Service Pension Scheme contract.

We continue to work at pace to resolve the operational issues in collaboration with the Cabinet Office. Despite the progress made to date, we recognise the service has not been good enough, particularly for members waiting on bereavement, retirement, and quotation cases, and we are sorry for the distress and inconvenience experienced by those members. We now have the processes, automation and technology in place to work through the backlog.

We remain committed to working through the backlog as quickly as possible, protecting members, and ensuring new cases are processed within contractual service times.

Efforts to restore service levels on this contract mean that the Pension Solutions division will incur a number of additional costs in 2026, but we are committed to improving the service on the Civil Service Pension Scheme contract in the second half of 2026. This includes surge resource costs and remediation costs on Civil Service Pension Scheme contract and the likely impact from costs against KPI performance. As we continue to focus our efforts on the Civil Service Pension Scheme contract, we are seeing some impact to services delivered in our pension business, including the higher margin pension consulting business, and cost efficiencies have not been delivered in line with the phasing previously assumed.

We are taking mitigating actions across the wider Group to offset some of the impact referred to above. Compared to our previous expectations we now expect a £25m – £40m adjusted operating profit impact in 2026, from the items outlined above, post the impact of the mitigating actions.

We expect this to have a total cash flow impact in 2026 of £35m – £50m as a result of the adjusted operating profit impact noted above and additional investment required. The investment will benefit our broader customer base within the Pension Solutions division, as automation and technology in place on this contract will be used for other clients within our Pension Solutions division as we continue to modernise our delivery.

Reflecting the impact of the above, we now expect the Group to be free cash flow positive for the full year 2027.

Public Service continues to deliver a strong performance and has had a number of significant wins so far this year which will go live in 2027. While the adjusted operating margin performance continues to be strong in the division, we now expect Public Service revenue to be broadly consistent with the prior year, with adjusted operating profit also broadly flat.

Trading Update

We continue to make progress against our strategic objectives and in the six months to 30 June 2026, the Group delivered adjusted revenue¹ growth of 1.6%² with a strong revenue performance in Public Service and Pension Solutions which delivered growth of 2.4%² and 24.7%², respectively. The margin performance in Public Service continues to be strong as we transition and hand back the previously announced lower margin contracts, which we expect to continue into the second half.

Innovation and solutions delivered with our technology partners are improving the Group’s contract bid performance. In the first six months of 2026, the Group secured contracts with a TCV of £998m, up 15% from 2025, representing the strongest sales performance in H1 since 2021 in the Public Service division.

Significant wins secured in the first half include the Synergy Business Process Services contract, which commences in summer 2027, and a client in the Defence & National Preparedness vertical in Public Service. Both of these contracts are material new business scopes for the Group. In addition to these was a significant renewal in our Pension Solutions business.

Our delivery continues to be strong and stable and in Public Service, we have maintained an average KPI performance around 90% across 2026.

In June, the Group extended and increased its revolving credit facility (RCF) to £325m, replacing the previous RCF (£250m) and additional committed facility (£75m), extending the expiry date of the facility from December 2027 to June 2029 (including the option for two additional one-year extensions). This provides the Group further optionality on its transformation journey.

The Group is making good progress on the separation activities for the previously announced private sector contact centre disposal. We expect this transaction to complete ahead of the Group’s half year results.

This disposal is a significant strategic step and will allow us to unlock a material overhead reduction as we remove further complexity from the Group. We have commenced our simplification as the disposal separation activities continue, and as at 30 June, we have now taken action which will deliver £8m of annualised cost savings, against our target to deliver £40m of annualised cost savings by the end 2027, with an associated cost to achieve the full savings of c.£20m.

We are seeing significant progress and evolution with our hyperscaler and technology delivery partners. This year to date we have agreed a multi-year agreement with Snowflake to provide a Data Management and Intelligence layer into Capita’s AI Catalyst Stack and achieved Snowflake Select Partner status. We also launched the first European BPO Storefront on AWS Marketplace, and most recently launched the Group’s Forward Deployment Orchestrator. The Forward Deployment Orchestrator helps clients run AI-enabled processes safely and effectively after go-live, with a clear focus on adoption, performance and measurable operational results. These are further important milestones as we continue on our journey to be the first truly AI-led business process outsourcer.

We look forward to further updating the market on the progress we are making against our strategic objectives at the Group’s half year results on 4 August and our Investor Update later this year.

Proforma Financial Data²:

¹ _{‘Private sector contact centre disposal’ comprises the private sector contact centre business being sold (which will be presented as a discontinued operation in the Group’s results in accordance with IFRS 5), and income and costs related to services the private sector contact centre business received from the Group and which will continue post disposal under transitional service arrangements (which will be presented in business exits within continuing operations). Following disposal, the Group will continue to provide certain services to, and receive certain services from, the disposed business under commercial service arrangements. Income and costs arising from the provision of services under these arrangements post disposal will be recognised in adjusted results, and as such where those services are provided prior to disposal, they also remain in the Group’s adjusted results.}