13 June 2024
Capita
plc (“Capita” or the “Company”)
Capital
Markets Presentation
Capita, a
leading provider of business process services, will host a Capital
Markets presentation this afternoon for institutional investors and
analysts. The presentation will set out the Group’s strategic
themes of “Better Efficiencies, Better Technology, Better Delivery,
Better Company” and the key strategic priorities for its two
divisions – Capita Public Service (CPS) and Capita Experience (CE),
as well as setting out the Group’s updated medium-term
targets.
The
Company is prioritising business sectors where Capita has strong
expertise, wins today and sees material opportunities in the
future. They are Public Services, Contact Centres and Pension
Solutions. We are managing for value some areas of the Group,
including our closed book life & pensions, mortgage services,
networks and standalone software activities.
Delivery
of the Group’s strategy will be accelerated through a number of key
initiatives across both CPS and CE, including:
-
Restructuring
and right sizing the organisation to reduce costs; drive efficiency
and cash flow
-
Introduction
of targeted, standardised, repeatable product propositions to
capitalise on shifting demand – e.g. the announcement of
CapitaContact with AWS on 10 June
-
Development
of core market propositions for selective service
offerings
-
Partnerships
with technology hyperscalers to address industry trends and client
demands
Capita
Public Service is a
leading Business Process Services and IT Services, software and
managed services partner to the UK Public Sector, operating in an
addressable market of £16.4bn which is growing at around 4% per
annum. CPS’s vision is to improve the productivity and citizen
experience of public services through using technology enabled
services, supported by our partner ecosystems.
Demand for
our services across the Public Sector is shifting towards digitally
enabled services, to improve productivity for the Government and
improve citizen user experiences. To capitalise on this, CPS has
identified four key propositions to drive sustainable growth:
Digital Business Services; Citizen Experience; Workforce
Development and Place. These propositions offer substantial sales
potential across public sector client groups in the UK, through
enhanced repeatability and cost-efficient delivery, particularly in
the areas of modern, technology-enabled Public Sector Business
Process Outsourcing and National Preparedness.
Capita
Experience is one of
Europe’s leading customer experience businesses operating in four
countries: the UK, Ireland,
Germany and Switzerland, with global delivery centres in
South Africa and India, serving leading brands in the Telco
& Media, Utilities, Retail and Financial Services sectors. The
core contact centre business is implementing a significant
reorganisation and digitisation to close the margin gap with its
peers in the market and improve its competitive position as it was
historically slow to introduce standard omni-channel and
multi-language capability offerings and traditionally implemented
limited off/near shoring which has resulted in a relatively
high-cost base and EBIT margins of less than 1%.
The
addressable contact centre market in EMEA is currently £28.0bn
with growth
of around
4% per annum, providing significant opportunity for our business in
the medium-term. The division also delivers Pension
Solutions in the UK,
a higher growth and higher margin business, in a market worth
£3.0bn which is projected to grow by 3% per annum.
The call
and contact centre industry is evolving rapidly through
technological advancement and shifting consumer expectations. The
introduction of Gen AI offers the potential to deliver lower cost
solutions and improve human agent productivity, which plays to the
strengths of Capita, a people-centric business augmented by
technology. Similarly, in Pension Solutions there is a growing
demand for automation and digital platforms.
Our growth
and margin improvement in CE will be underpinned by:
-
More
off/nearshoring of operations
-
Standardised
omni-channel and multi-language offerings
-
Integration
of Gen AI internally and externally for customers
-
Repeatable,
modular and scalable solutions to support channel and industry
expansion, and quick market entry including nine new customer
service bundled offerings launching during 2024
-
Targeted
offerings in specific service lines
-
Expanding
the call centre portfolio in adjacent markets in EMEA over time,
using existing infrastructure
Driven by
the execution of this strategy, the Company is announcing
improved medium-term
targets for the
Group as follows:
-
Low to
mid-single digit revenue growth
-
6%-8%
EBIT margin
-
65%-75%
operating cash conversion
-
Net
financial debt leverage of ≤1x
-
Continued
reduction in lease liabilities from property
rationalisation
Underpinning
margin expansion across both divisions is the Group’s efficiency
programme which is expected to deliver £160m of annualised cost
savings by Q2 2025, of which £90m has already been actioned. Capita
expects to reinvest around £50m of these savings, over the period
to the end of 2025, on an annualised basis in driving growth
through technology and ensuring price competitiveness.
Adolfo
Hernandez CEO, Capita said:
“Today
we are outlining our plans to enable Capita to become a better
company with an improved financial performance generating
cash-backed profits. We have strong foundations on which to build,
and our priority is on delivering swift and far-reaching business
improvement rather than a fundamental change in our market focus.
We are becoming a leaner and more agile business, delivering
services with much greater use of technology, particularly through
partnerships with the hyperscalers. Our technology strategy will be
organic, with low capital intensity and will be principally funded
through partial reinvestment of our previously announced £160m cost
saving programme and refocussing of the business towards more
profitable customer solutions.
The
joint go-to-market solutions with
technology hyperscaler
partners such as Microsoft, AWS, Salesforce and ServiceNow will
drive market differentiation, ensuring a large proportion of
higher-margin repeatable deals with improved cost predictability,
as demonstrated with the recent collaboration with AWS on
CapitaContact. Through optimising our commercial processes, we will
ensure a growing and prioritised sales pipeline, with greater
visibility to deliver in-year revenue.
We are
developing a culture across the Group focused on creating a better
company that supports improved profitability and sustainable cash
generation. Our £160m of efficiency savings are a good starting
point and remain on track to be implemented by Q2
2025.
EBIT
margins will improve to 6%-8% over the medium-term, leading to
sustainable free cash flow generation from 2025
onwards.”
No
additional material information on trading or outlook will be
disclosed at this afternoon’s event. There is no change to 2024
guidance which, as set out previously, is for adjusted revenue to
be broadly in line with 2023, for improved EBIT margins vs 2023 and
for a free cash outflow of £70m-£90m.
The
presentation will be webcast at 2pm
on 13 June 2024. The link to the
webcast is:
https://webcast.openbriefing.com/capita-cmd24/.
For
more information, please contact:
Investor
enquiries
Helen Parris, Director of Investor Relations
Tel: 07720
169 269
Email:
IRteam@capita.co.uk
Stephanie Little, Deputy Head of Investor
Relations
Tel: 07541
622838
Email:
IRteam@capita.co.uk
Media
enquiries
Capita
external communications
Tel: 0207
654 2399
Email:
media@capita.co.uk
About
Capita
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
41,000 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.