Capita (LON:CPI) reported first-half revenue growth and a larger order book, while costs associated with remediating the Civil Service Pension Scheme (CSPS) contract reduced profitability and prompted the company to maintain a cautious cash-flow outlook.
Chief Financial Officer Pablo Andres said adjusted revenue rose 1.6% to £906 million in the first half of 2026. Growth in the Public Service and Pension Solutions businesses was partly offset by the absence of a £19 million benefit from a contract exit recorded in the prior year in the regulated business.
CSPS costs weigh on Pension Solutions
Pension Solutions revenue increased 24.7% to £107 million, supported by the CSPS contract and higher volumes on existing contracts. However, the division reported an operating loss of £3.6 million, primarily due to the costs of addressing operational problems on the civil service pension contract, as well as lower consulting revenue as resources were redirected.
Andres said the financial impact of CSPS on the division’s profitability was £14 million in the first half, with a further roughly £3 million impact related to consulting activities. He said any potential cost recovery would be subject to future commercial discussions with the customer, while the immediate focus remained on restoring service performance.
Adolfo, speaking for Capita, said the company now had capacity across key processes exceeding incoming case volumes. The company is targeting progress on processing new cases by September and on reducing eligible backlog cases by October, excluding cases dependent on third parties, missing employment data or probate matters.
“We also have to fix CSPS,” Adolfo said, calling the contract the company’s “number one operational priority.” He said Capita had inherited significant complexity and had initially prioritized urgent cases over service-level metrics.
Public Service growth and contract wins
Capita Public Service, which accounted for 80% of group revenue, recorded a 2.4% increase in revenue to £729 million. Growth was driven by local and regional partnerships, transactional services, the Disabled Students’ Allowance contract and Transport for London work. Its operating margin was 7.9%, including a 0.5 percentage-point impact from central-cost allocations associated with lower profitability in pensions.
The group’s order book rose to £4 billion at the end of the first half, excluding a £425 million Transport for London extension announced the day before the presentation. The order book was around £250 million higher than at the end of 2025.
Capita won £957 million in total contract value during the half, including the Synergy and Army Collective Training System contracts, a Pension Solutions renewal and expanded work on Primary Care Support England. The company said 11% of those awards are expected to convert to revenue in the current year, with most of the remainder scheduled for 2027 and beyond.
Management said total contract value grew 15% and stressed that the business continued to deliver key performance indicators above 90% outside the CSPS contract. Adolfo said Pension Solutions’ KPIs would be close to 95% excluding CSPS.
Contact-center sale and liquidity actions
The company completed the sale of its private contact-center business, which now operates as Elios. Capita said the disposal allows it to focus on its remaining public-sector, regulated-services and pensions operations and pursue a simpler operating model.
Andres said the group had already removed £250 million from its cost base over the past two years. It expects to deliver a further £40 million of cost reductions between 2026 and 2027 following the contact-center disposal.
Free cash flow was positive by £3.5 million in the first half, after capital expenditure, lease payments and interest. Net financial debt before IFRS 16 rose to £200 million at June 30 from £143 million at the end of 2025, while the debt-to-EBITDA ratio increased to 1.6 times from 1.0 time.
During June, Capita increased and extended its revolving credit facility to £325 million, maturing in June 2029 with two potential one-year extensions. Total liquidity stood at £351 million at the half-year point, comprising £278 million of committed facilities and £73 million of net cash. In July, the company issued the equivalent of $41 million in U.S. private-placement loan notes and repaid $84 million of maturing U.S. private-placement debt.
Outlook and AI strategy
Capita expects group revenue to be broadly flat for the full year, primarily due to the timing of Public Service contract wins and previously announced contract losses. It maintained its margin guidance, while forecasting a free-cash-flow outflow before business exits of between £35 million and £50 million as CSPS remediation costs continue.
The company also expects net debt to increase, reflecting the anticipated cash outflow, disposal-related costs and the closure of its closed-book life and pensions operations.
Management emphasized its efforts to position Capita as an AI-led business process services provider for government and regulated industries. Adolfo said the company had deployed nearly 500 AI agents, developed an internal AI registry to govern their use, and expanded partnerships with hyperscalers including AWS, Microsoft Azure, Snowflake, Salesforce and Anthropic.
Rather than treating AI as a stand-alone profit stream, Adolfo said Capita views it as an ingredient in delivering better service, operational efficiency and customer outcomes. The company plans to offer a “forward deployment orchestrator” model, under which it would help customers redesign, deploy, operate and manage AI-enabled business processes over time.
About Capita (LON:CPI)
Capita is a modern outsourcer, helping clients across the public and private sectors run complex business processes more efficiently, creating better consumer experiences. Operating across 8 countries, Capita’s colleagues support primarily UK and European clients with people-based services underpinned by market-leading technology. We play an integral role in society – our work matters to the lives of the millions of people who rely on us every day.
