Capita plc

For the first half of 2026, Capita reported revenue of GBP 906 million, up 1.6%; operating profit of GBP 32 million, down 32%; and profit before tax of GBP 12.5 million, down from GBP 29 million. Cash conversion was 96%, free cash flow was positive at GBP 3.5 million, and net financial debt to EBITDA pre-IFRS 16 was 1.6x at June. By division, Public Service revenue rose 2.4% to GBP 729 million with a 7.9% operating margin, Pension Solutions revenue rose 24.7% to GBP 107 million with a GBP 3.6 million operating loss, and retained contact center revenue declined 6% to GBP 67 million with operating profit of GBP 1.2 million. The order book increased to GBP 4 billion excluding the GBP 425 million TfL extension, and H1 wins totaled GBP 957 million. For the full year, management expects group revenue to be broadly flat, margin to remain in line with previous guidance but lower than before due to CSPS costs and residual overheads, and free cash flow before business exits to be an outflow of GBP 35 million to GBP 50 million. Net debt is expected to increase, reflecting the cash outflow and disposal-related outflows.

Adolfo Hernandez framed the quarter as evidence that Capita’s multiyear transformation is progressing, with a stronger technology focus, simplification, and an AI-led service model at the center. He said the company has already taken GBP 250 million out of costs and is working toward another GBP 40 million of savings after the call center divestiture, while stressing that the group is now more focused on five core service areas rather than 50-plus capabilities. His tone was confident about the market opportunity and the company’s positioning with government and regulated customers, but he was clear that CSPS remains the major operational issue and that current financial performance is still not where management wants it to be.

Pablo Andres said H1 revenue of GBP 906 million was supported by growth in public and pensions, but profit was hit by the additional cost of remediating CSPS and by non-repeat items from the prior year. He noted operating cash conversion of 96% versus 112% last year, free cash flow of GBP 3.5 million, and net financial debt of GBP 200 million pre-IFRS 16; he also highlighted total liquidity of GBP 351 million after the revolving facility was increased to GBP 325 million and extended to June 2029. He tied the outlook pressure to CSPS costs, residual overheads, and cash outflows from business exits, and said the range on free cash flow and costs remains broad because management still needs more operational visibility and may have commercial recoveries later in the year.

Analysts focused first on CSPS, asking when claims processing would return to normal. Management said September is the target for improving flow and October for progress on the stock, excluding cases with third-party dependencies, and that work with the Cabinet Office is underway to turn currently unworkable cases into workable ones. Questions also centered on the public interest test and whether it might pull contract awards forward before April next year; Adolfo said there may be some timing noise, but he does not expect it to materially change the business shape because most of Capita’s work has long sales cycles and complex procurement. Another theme was AI ROI and the role of data: management said AI is embedded as an ingredient in service delivery rather than a standalone revenue line, and that the benefit shows up indirectly through better service, higher win rates, and stronger propositions, not through a discrete AI margin metric.