REG-Capita Plc: Full Year Results 2024
05/03/2025 07:15
Capita plc
Full Year Results 2024
Growing momentum against our strategic priorities; full year results in line
with guidance and market expectations
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
Financial highlights
Reported results Adjusted 1 results
31 December 2024 31 December 2023 Reported YoY change 31 December 2024 31 December 2023 Adjusted 1 YoY change
Revenue £2,421.6m £2,814.6m (14.0)% £2,369.1m £2,575.8m (8.0)%
Operating (loss)/profit £(9.9)m £(52.0)m 81.0% £95.9m £90.9m 5.5%
Operating margin (0.4)% (1.8)% 140bps 4.0% 3.5% 50bps
EBITDA £166.2m £144.5m 15.0% £186.1m £196.5m (5.3)%
Profit/(loss) before tax £116.6m £(106.6)m n/a £50.0m £40.9m 22.2%
Basic earnings/(loss) per share 4.54p (10.60p) n/a 2.11p (0.20p) n/a
Operating cash flow* £86.3m £81.2m 6.3% £72.0m £82.7m (12.9)%
Free cash flow* £(122.7)m £(154.9)m 20.8% £(122.3)m £(123.6)m 1.1%
Net debt £(415.2)m £(545.5)m £130.3m £(415.2)m £(545.5)m £130.3m
Net financial debt (pre-IFRS 16) £(66.5)m £(182.1)m £115.6m £(66.5)m £(182.1)m £115.6m
* Adjusted operating cash flow and free cash flow exclude the impact of
business exits (refer to note 10).
1. Refer 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 (link below) 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/
For further information:
Capita
Helen Parris, Director of Investor Relations T +44 (0) 7720 169 269
Stephanie Little, Deputy Head of Investor Relations T +44 (0) 7541 622 838
Madeleine Little, Group Head of External Communications T +44 (0) 7860 343 604
Capita press office T +44 (0) 2076 542 399
Brunswick
Dan Roberts & Jonathan Glass T + 44 (0) 2074 045 959
LEI no. CMIGEWPLHL4M7ZV0IZ88.
Chief Executive Officer's review
Introduction
Since joining Capita as CEO at the start of 2024, I have spent significant
time engaging with key stakeholders of the Group, including customers and
colleagues across all Capita geographies. I have seen the high value that we
deliver consistently to customers, the criticality of our services and the
skills and passion of our teams when it comes to delivering better outcomes on
behalf of our customers. This is a great foundation to work from.
2024 has been a very busy year learning about the business, actioning many
initiatives which will be key for Capita’s business and financial
improvement journey, and building new, strong partnerships with technology
hyperscalers. This culminated in June with the launch of our new strategy,
which redefines our focus to deliver a Better Capita underpinned by our
strategic themes of Better Technology, Better Delivery, Better Efficiency and
Better Company.
In short, our value proposition needs to be more competitive and
differentiated, through a lower cost base, automation and innovation. We are
removing unnecessary costs to put us in a position to fund our profitable
growth. Better Capita means becoming more efficient and spending less,
digitising our offerings by having more standardised and repeatable
propositions, strongly leveraging technology partnerships, being more precise
in our delivery, and evolving governance and our culture.
Our first medium-term financial target is to improve the adjusted operating
margin1 of the Group to between 6% and 8%, with sustainable positive free cash
flow, excluding the impact of business exits1, and adjusted revenue1 growth to
follow. I am therefore very pleased to report that we improved our adjusted
operating margin1 from 3.5% in 2023 to 4.0% in 2024. We expect this to
increase further in 2025 as we see the positive impact from our cost reduction
programme which continues to progress well.
In June we set out other medium-term financial targets to deliver: getting
smaller to get stronger to then be able to deliver low to mid-single digit
adjusted revenue1 growth per annum; positive free cash flow, excluding the
impact of business exits1, from the end of 2025, with operating cash
conversion of 65% to 75%; maintaining net financial debt leverage of ≤1x;
and, importantly, a continued reduction in lease liabilities from the
Group’s ongoing property rationalisation.
There is still a lot to be done in 2025, but I am pleased to say that many of
the changes made during 2024 are now beginning to bear fruit. We are making
good progress in taking actions which will deliver our medium-term targets,
but we recognise there is more to do to improve the Group’s financial
performance.
One of the achievements I am most proud of in 2024 is the improvement that we
saw in our customer net promoter score across all areas of the business, with
the Group score improving to +28 points, up from +16 points in 2023, one of
the highest scores the Group has seen in a number of years. This is a critical
achievement for us given the nature of our business.
A key priority for me is to support and accelerate Capita’s transformation
by embedding artificial intelligence and generative (gen) AI into both our
internal operations and teams and into our offerings and customer delivery
processes on behalf of our customers. We are not a technology company but we
are building and leveraging our deep partnerships and solutions with
technology hyperscalers such as Microsoft, AWS, ServiceNow and Salesforce to
co-create solutions built around specific client needs, that we both know well
and have strong leadership in, to fully leverage and complement Capita’s
reach, domain and sector knowledge. I’m pleased with the progress in this
area to date, for example, in 2024 we developed and launched a number of
products at speed that are already delivering for initial clients and these
will be rolled out to a number of clients in 2025 and will be embedded in our
contract tenders moving forward.
As we look forward to 2025 and beyond, we will continue with the same areas
and themes unveiled at the Capital Markets Day in 2024, such as: finding
additional efficiencies; improving our sales effectiveness; increasing
differentiation of our services, products and value propositions through
innovation, further automation, and higher quality of delivery; and continuing
to build a better Capita, with and for our colleagues, after a challenging
year of changes and difficult decisions.
I am increasingly confident in the progress and potential of our business
improvement journey and the feedback we are receiving from our customers.
Our key strategic pillars
Better technology – partnering with hyperscalers
With gen AI driving a significant technological revolution globally, a
critical part of our strategy moving forward is to enable our customers to
take advantage of its possibilities, deploy it in their business processes and
do it safely, ethically and supported by a national trusted partner like
Capita. This will transform how we deliver complex processes at scale and will
enable us to leverage our deep understanding of our customers' business
processes. To accelerate this and leverage their wealth of capabilities and
deep investments in AI, we are partnering with hyperscalers to extend their
basic solutions with our expertise and data to deliver solutions that will
improve productivity and reduce delivery costs. For example, AI is providing
greater choice in servicing methods, reducing average handling times for
customer calls and increasing first time resolutions in our contact centres.
Partnering with hyperscalers while leveraging our process and sector knowledge
is enabling us to offer best in class technology, both cost effectively and
swiftly, ensuring we remain competitive in a rapidly changing market.
The adoption of AI across the Group will be the cornerstone of our operational
evolution and in November we welcomed Sameer Vuyyuru to the Executive Team as
Chief AI and Product Officer. Sameer’s role will focus on driving product
innovation and delivering scalable and repeatable products and AI solutions
that deliver better outcomes for clients and Capita.
The key principle for our AI solutions is to augment and amplify humans. We
are enhancing roles by removing repetitive tasks and streamlining workflows,
allowing our people more time for human-centric tasks that require human
empathy and judgement. We are already delivering a range of solutions across
the contract portfolio, with a number of further solutions being designed in
collaboration with our hyperscaler partners. Our new technology platforms are
already creating a better employment experience and greater job satisfaction
as delivery teams provide a more productive and personalised experience to
clients and their customers.
For example, earlier this year, following a successful design and pilot we
launched the CapitaContact platform with the London Borough of Barnet in the
Local Public Service part of Capita Public Service. This gen AI-powered
contact centre solution leverages Amazon Connect to provide a simplified
customer experience for a wide range of queries. Overall, our progress in
technological and AI enablement positions Capita very well to meet our
customers’ evolving requirements. For example, the UK Government’s
priorities, as outlined in the recent budget and subsequent Blueprint for
Modern Digital Government, are clearly focused on making people’s lives
easier, establishing firmer foundations, achieving smarter delivery and
driving higher productivity and efficiency. Examples this year of our
innovations in our Public Service business include the Capita Accelerate tool
embedded in the Recruiting Partnering Project for the British Army, for which
we have a number of potential other use cases, and our virtual wards capacity
which reduces the strain on hospital beds and in-person treatment and
therefore has the potential to reduce NHS waiting lists.
In the Contact Centre business, we have developed AgentSuite: a cutting-edge
gen AI customer experience solution comprising two components, Agent Assist
and Call Sight. These provide real time sentiment analysis, AI generated
prompts to aid call handlers and reduce post-call administration time with
automatically populated call notes. In the Contact Centre business, around 50%
of agents are now utilising AI and gen AI technology in their day-to-day
roles.
Within our Pension Solutions business we are transforming user experience with
the creation of our new digital pensions platform. Incorporating technology
from Microsoft Dynamics and Amazon Connect it will provide an improved and
fully personalised experience for the pension member. This product will become
part of our core offering for all future pension administration contract
tenders.
We are also standardising and centralising high-volume, low-complexity sales
processing across the Group through an enabling optimised sales (EOS) project.
This will result in a scalable platform, integrated with Salesforce, to drive
business value and aid growth in the long term.
In addition, I am very pleased with our recent announcement in January 2025,
that the Group would be one of the first companies in Europe to use
Salesforce’s Agentforce AI for complex business tasks. Agentforce is a
sophisticated AI system that creates ‘Agents’ capable of performing
automated tasks and engaging in user conversations. Our initial release will
introduce the Capita Career Assistant, an AI bot to aid our recruitment
process, helping potential applicants find suitable jobs, and automating parts
of the hiring process like matching skills, screening applications, scheduling
interviews, and updating records. Through 2025, this solution will expand
upstream to address additional steps in high-volume recruitment. For an
organisation like Capita that hires around 10,000 colleagues each year this
offers significant quality, speed, cost and candidate experience benefits. It
is our intention to deliver this managed platform to customers who face
similar challenges with high-volume recruitment.
We know our customers entrust us to hold, manage and process some of their
most valuable and sensitive data and we are taking a responsible approach to
AI to deliver leading and safe AI solutions working with trusted partners with
appropriate governance as we continue to invest in our cyber security across
the year. All AI adopted by Capita must adhere to our AI principles
(inclusive, trustworthy, transparent, accountable, secure, governed and
adaptive), which govern the secure, fair and ethical use of AI. Our principles
reflect our values and incorporate worldwide recognised guidelines as well as
compliance with the EU AI Act. We have further launched a gen AI oversight
committee, ensuring human oversight of all critical decisions and appropriate
ethics review at Executive level. We are committed to providing continuous
training to colleagues across the organisation on the responsible use of AI.
Better delivery – a consistent approach
Delivering consistently and effectively for our customers is a key part of
making a Better Capita. Delivering the right service the first time means a
better service to the customer and reduced excess cost to us.
Across 2024, the Group maintained its KPI performance with an average
performance above 90%. In areas where KPI performance was not met during the
year, we implemented specific remediation actions to ensure we meet the high
standards our customers expect.
As mentioned earlier, we saw our customer net promoter score improve across
all areas of the business with the Group score improving to +28 points, up
from +16 points in 2023. There was a particularly strong performance in the
Experience businesses which saw a 19-point improvement. Areas where clients
suggested improvement included further understanding of the Group’s approach
to AI and digital offerings, as well as some improvements to systems and
processes, which was somewhat expected and our existing plans will address.
Operational highlights in 2024 included:
• In Public Service, as part of the division’s contract
to deliver Royal Navy training, we partnered with Metaverse VR to deliver
eleven new Warship Bridge Simulators across three Royal Navy locations in the
UK, more than doubling the Navy’s simulator capacity;
• Also in Public Service, on the Standards and Testing
Agency contract, we printed and delivered 11 million test papers to schools
for SATs week, hitting every milestone on time, including the marking and
delivery of 99.9% of scripts;
• In Pension Solutions, we saw the number of members
engaging with pensions via digital channels increase by more than 200%,
allowing more efficient communication, while reducing our costs to deliver;
• In our Contact Centre business, across our delivery
centres we handled more than 32 million calls for clients in the UK, Ireland,
Germany and Switzerland; and
• To support future delivery and growth in the Contact
Centre business, we opened two new global delivery centres in Bulgaria and
South Africa. This expansion will enable the division to meet the increasing
demand for multilingual services to broaden our market opportunities.
While our contract delivery has been largely consistent across 2024, there
were two specific historic contracts where we encountered delays from our
original planned mobilisation dates. They both had significant impacts on 2024
revenue and profit performance but will benefit 2025.
In the Contact Centre business, certain delivery issues have led to the
reduction of volumes on one particular contract. Action was taken to remediate
this swiftly and we have the opportunity to regain volumes in the future.
We've made good progress with the business areas we identified within our
manage for value category at our Capital Markets Day in June 2024. In
September 2024 we completed the disposal of Capita One, realising net proceeds
of c.£180m and in December 2024 we announced the disposal of the Group's
mortgage servicing business assets, a transaction which we expect to complete
in Q2 2025.
In 2024, we agreed a number of transition agreements for contracts in the
closed book Life & Pensions business unit, within the Regulated Services
division, where we've seen continued volume reductions as expected. There is
now one client remaining and we are actively engaged in discussions to resolve
the challenges in this business. The division continues to have a cash cost to
the Group of around £20m per annum.
Better efficiencies - moving at pace
At the start of the transformation, the Group established a programme
management office to deliver the company-wide transformation and associated
cost efficiency savings with the transformation split into three waves:
funding the journey; back to basics; and building for the future.
In March 2024 we announced targeted cost savings of £160m to be delivered by
June 2025, to help deliver a medium-term Group adjusted operating margin of 6
– 8%. So far, we have taken actions which will deliver annualised cost
savings of £140m. The majority of these savings have been achieved through
efficiencies and synergies in our processes and technology, property
rationalisation, and organisational changes that align with the business we
need to become.
During 2024, based on the positive results from the increasing use of AI and
gen AI at the heart of this transformation, we continued to identify
significant cost opportunities within the Group. As announced in December
2024, this enabled us to increase our cost reduction target from £160m to up
to £250m to be delivered by December 2025, with a further £55m cash cost to
achieve these savings to be incurred in 2025.
A proportion of the additional targeted savings will be delivered via natural
employee attrition as we further simplify the business, particularly within
the Contact Centre business where, in line with peers, employee attrition has
historically been higher. For example, in December 2024 attrition was 29% on a
12-month rolling basis, compared to 16% for the rest of the Group. The
additional savings will be achieved though further simplification and
centralisation of internal processes and are expected to help offset the gross
£16m of in-year incremental employers' National Insurance Contribution (£20m
on an annualised basis) in 2025.
These savings provide further confidence in the delivery of our medium-term
margin target and we expect to generate positive free cash flow from the end
of 2025. We continue to expect a reinvestment of c.£50m of the savings across
2025, which will drive growth through technology and ensure the Group’s
ongoing price competitiveness moving forwards.
Better company - launching our culture change programme
This year I have spent a significant amount of time meeting colleagues across
the geographies in which we operate, and I have seen first-hand the passion
our colleagues have for the work they do. I am very impressed by that passion,
and the skills and experience that our team bring to bear. Our colleagues, and
the skills and talent they have, are a key enabler of our transformation and
business improvement journey and they are highly valued by our customers.
With a major ongoing transformation programme, and many difficult decisions
around pay reductions and reorganisation, this year was understandably
difficult for our people. This was reflected in the Group’s eNPS score which
reduced by 29 points to -33 points (in particular recommending Capita as an
employer to friends and family). More pleasingly we saw employee engagement, a
more reflective measure during a transformation, of 64%, just a 3-point
reduction on the prior year and 81% of employees feel they can be themselves
at work. I am also pleased to see that the Group’s rolling 12-month
voluntary attrition at the end of December has reduced to 21.7% compared with
25.3% in the prior 12 months which, as previously outlined, will help deliver
a proportion of our recently announced cost savings target.
Following completion of, and feedback from, our Group-wide culture survey in
2024, we have embarked on a multi-year culture improvement journey across all
levels within the organisation aiming to build a culture in which everyone is
united in achieving Capita’s goals, while nurturing their individual career
aspirations. As part of this journey, during the year we launched our
leadership playbook and development programme which will help us nurture and
develop talent through all levels of the organisation. This journey will be
based on both local and Group led initiatives to ensure a personalised and
tailored experience for all colleagues.
In 2025, our people agenda is a key priority and we have a plan to further
improve the employee value proposition.
Total contract value and growth
Across 2024, we focused on both improving the Group’s cost competitiveness
and on maintaining rigour around bidding processes to ensure that contracts
were bid at an acceptable margin. We expected revenue reductions while we
strengthened capabilities and improved margins to enable profitable growth in
the future.
As a result, we saw a lower level of contract bidding activity and the Group
saw its total contract value (TCV) won reduce to £1,513m from £2,952m in
2023. With the lower TCV, the Group’s book to bill reduced to 0.6x from 1.1x
in the prior year, with 0.7x in Public Service, 0.7x in the Contact Centre
business and 0.8x in Pension Solutions.
As a first step for future growth, the Group’s renewal rate across 2024
improved strongly to 92%, up from 51% in 2023, following some material losses
in 2023 which were lost on price. Public Service delivered an 87% renewal
rate, up from 40% in the prior year, with Experience (across its three
sub-divisions) at 95%, up from 61% in 2023. The Group’s high renewal rate
underlines our strong client relationships and consistent delivery of
high-quality solutions. Maintaining a high renewal rate, while ensuring our
margin target is met, is a priority looking forward.
There is a major opportunity to increase the Group’s win rate on new and
expanded scopes of work, which in 2024 reduced to 18% from 69% in 2023. In
addition to greater focus on rebuilding the sales pipeline and a rejuvenated
suite of AI/digital solutions, as we continue to improve efficiencies as part
of the Group’s cost reduction programme, we will become more price
competitive which together will improve the Group’s win rate on new and
expanded scopes of work. Across all opportunities the win rate by value was
32% (2023: 62%), 23% in Public Service and 62% in Experience.
Significant contract wins in the year included the renewal of two European
telecoms clients, one with an expanded scope, with a TCV of more than £250m
TCV, a further extension on the Data Communications Company Licence with a TCV
of £135m and a renewal with the Royal Mail in Pension Solutions with a TCV of
more than £50m following a competitive tender. There were expansions of scope
with contracts with the Royal Navy and in Local Public Service.
The total unweighted pipeline across all years, as of 31 December 2024 was
£11,121m, an increase from £10,329m at 31 December 2023, despite the
unsuccessful outcome on the material opportunity to deliver the Armed Forces
Recruitment Programme with the Ministry of Defence in 2024, which was lost on
price and a bid we priced to deliver the highest quality, without risk to our
Armed Forces. We will continue to deliver the Recruiting Partnering Programme
for the British Army to the contract transition date in 2027.
Within the Group, there are material opportunities across 2025 with the
Department for Work and Pensions, framework opportunities with the Crown
Commercial Service and a number of UK-based utility companies.
Of the total unweighted pipeline of £11,121m, more than £5bn relates to
opportunities with a significantly higher technology and AI/gen AI underpin
including material opportunities with the Home Office, HMRC and Transport for
London.
We have seen a number of early successes so far in 2025, with the renewal of
the Gas Safe Register contract with a TCV of £89m and further expansion of
scope with the Royal Navy in Public Service.
The Group’s order book, as measured by IFRS 15, was £4,241m, at 31 December
2024, a reduction of £1,642m from £5,883m at 31 December 2023. This
reduction reflected £809m order book additions, indexation and scope changes,
offset by £1,838m revenue recognised and a £225m reduction from business
disposals and contract terminations. In 2024, we won a number of material
contracts which are framework agreements which do not meet the accounting
criteria for order book recognition, and these contracts resulted in £388m
being derecognised from the order book.
Financial results - revenue and operating profit
Adjusted revenue1 declined 8.0% to £2,369.1m (2023: £2,575.8m). The decline
reflected the continued impact of prior year losses including Electronic
Monitoring Services and our focus on exiting lower margin services, the
non-repeat of the one-off benefits from the Virgin Media O2 contract
transition, and a commercial settlement within the Regulated Services business
in 2023. The telecommunications vertical of the Contact Centre business also
saw lower volumes in 2024. This was partially offset by volume improvements in
Public Service contracts including with Transport for London and the benefit
from indexation.
Reported revenue declined 14.0% to £2,421.6m (2023: £2,814.6m) reflecting
the above contract movements and impact of business exits including the Capita
One disposal.
Adjusted operating profit1 increased by 5.5% to £95.9m (2023: £90.9m), as
the c.£90m positive impact of the cost reduction programme more than offset
the revenue reduction seen across the Group, including the non-repeat of
one-offs from the prior year. The Group adjusted operating margin1 improved to
4.0% from 3.5% in 2023.
Reported operating loss was £9.9m (2023 loss: £52.0m), largely reflecting
£27.9m of costs to deliver the Group’s successful cost reduction programme
and a £75.1m goodwill impairment recognised within the Contact Centre
business.
Financial results - free cash flow and net debt
Free cash flow excluding the impact of business exits1 was an outflow of
£122.3m (2023 outflow: £123.6m), reflecting the reduction in cash generated
by operations and the cash cost to deliver the ongoing cost reduction
programme which was partially offset by a reduction in cash flows related to
the 2023 cyber incident and pension deficit contributions.
Free cash outflow1 for the Group was £122.7m (2023 outflow: £154.9m),
including the inflow from businesses exited, or being exited of £14.1m in
year offset by £14.5m pension deficit contributions triggered by disposals.
Net financial debt (pre-IFRS 16) was £66.5m (2023: £182.1m) benefiting from
net proceeds realised on the disposal of Capita One and Fera of £223.9m which
more than offset the Group’s free cash outflow across the year.
Net debt, including the impact of property leases accounted for under IFRS 16
was £415.2m in 2024 (2023: £545.5m). Our IFRS 16 lease liability was
£348.7m (2023: £363.4m) reducing with property rationalisation programme and
monthly lease payments. The lease asset receivable related to the lease
liability was £95.7m (2023: £70.3m), reflecting the successful sub-letting
of property the Group is not utilising.
Outlook
As we look forward to 2025 and beyond, we will continue to focus on the same
areas and themes unveiled in June’s Capital Markets Day. The continued
growth of AI and what it can do for organisations and the UK Government AI
plans align well with our strategy. As we continue to transform, we expect to
see adjusted revenue1 in 2025 to be broadly in line with that of 2024, with
growth in Public Service and Pension Solutions, offset by revenue reductions
in Contact Centre and Regulated Services, as we continue to actively exit
contracts in this business.
I am increasingly confident in the progress and potential of our business
improvement journey, the capabilities and engagement with our hyperscaler
partners, the feedback we are receiving from our customers, all of which
creates a strong foundation for 2025. Similarly, we are also focused on
building a better Capita with, and for, our colleagues.
As we continue to see the benefit from our cost reduction programme we expect
to see a small increase in the Group adjusted operating margin1 overall, with
good margin improvement in Public Service and Contact Centre, maintaining
double digit margins in Pension Solutions, offset by a reduction in margin in
Regulated Services as we exit contracts.
With the costs to achieve material cost savings heavily weighted to H1, we
expect a free cash outflow before the impact of business exits1 of between
£45m – £65m including a £55m outflow to deliver the cost reduction
programme, with an improved cash conversion1 of 55% to 65%. We expect the
group to be free cash flow positive, before the impact of business exits1 from
the end of 2025. Reflecting the free cash outflow, we expect net financial
debt to increase. We expect to see a reduction in the Group’s IFRS 16 lease
liability as we continue our property rationalisation programme and make cash
lease payments.
1. Refer to alternative performance measures (APMs) in the Appendix.
Divisional performance review
The following divisional financial performance is presented on an adjusted1
basis. The calculation of adjusted figures and our KPIs are contained in the
APMs in the Appendix to this statement.
Public Service
Markets and growth drivers
Public Service is the number one strategic supplier of Software and IT
Services (SITS) and business process services (BPS) to the UK Government.
The division is structured around three market verticals: Local Public
Service; Defence & National Preparedness (including Learning); and Central
Government, delivering to their respective client groups.
Following a review of the industries served by Public Service, the
division’s core addressable market size is c.£25bn2, growing at
approximately 4% per annum. Digital BPS continues to be an area of fast
growth, with traditional business process outsourcing currently shrinking.
This trend is expected to continue, reflecting the UK Government's recent
announcement on the use of AI in government processes to ensure delivery of
high-quality, cost-effective services to its citizens.
Public Service operates in highly fragmented markets with a variety of
services offered. Competitors within the market include but are not limited
to: Atos, G4S, Sopra Steria, CGI, Tata Consulting Services, Serco, Accenture
and Maximus.
Strategy and better technology
The division has identified four key propositions that offer substantial sales
potential across the public sector client groups in the UK, through enhanced
repeatability and cost-efficient delivery, particularly in the areas of
modern, technology-enabled business process outsourcing and National
Preparedness. These are Digital Business Services; Citizen Experience;
Workforce Development; and Place.
Looking ahead, there is a significant opportunity to drive productivity and
efficiency in line with the UK Government’s strategy of integrating AI into
public services. We are working with technology hyperscalers to co-create
solutions based on our public sector process knowledge, blending together
offerings which are both technology and people driven.
The division is focused on building standardised repeatable propositions,
leveraging the scale of our hyperscaler partners while using our sector
specific domain knowledge and expertise. This will in turn reduce cost to
serve and improve market impact. We have a number of AI and gen AI products
embedded in clients across the division, including the use of Capita Contact
and Capita Accelerate, a natural language processing tool that we are using to
analyse candidates' medical records to allow a faster processing time.
Our two client advisory boards, covering all sectors in which the division
operates, continue to help us enhance customer centricity, improve strategic
decision making, aid innovation and strengthen client relationships. We will
continue to build on their use in 2025.
Operational performance and better delivery
Across the year, the division's average KPI performance was consistent at 94%.
The division’s standalone cNPS (customer satisfaction) performance was +28
points with specific positive feedback around account management and sector
experience. An area of improvement was digital innovation and transformation,
which will be a key area of focus for 2025 as we look to embed technology more
consistently across the division.
The division saw a £15m cash overspend associated with the delayed
mobilisation of two contracts over the year, which also impacted revenue
growth. One of these contracts went live at the end of 2024.
Operational highlights across the year included:
• On the Standards and Testing Agency contract, we printed
and delivered 11 million test papers to schools for SATs week hitting every
milestone on time, including the marking and delivery of 99.9% of scripts;
• On the division’s contract to deliver Royal Navy
training, we partnered with Metaverse VR, to deliver eleven new Warship Bridge
Simulators across three Royal Navy locations in the UK, more than doubling the
Navy’s simulator capacity; and
• Our British Army Recruitment Site won best 'Recruiting
Website' at the RAD Awards with the site generating a 100% increase in
registration conversion.
Our consistent delivery has been a key factor in expanding existing scopes
with clients such as Transport for London and the Royal Navy. Looking to our
long-term growth ambitions, we are exploring expansion into international
markets using our existing infrastructure. We believe we can increase the
division's addressable market and accelerate growth, particularly in the
Defence and National Preparedness vertical.
Growth performance
In 2024, Public Service won TCV of £928.7m down 49.5% from that won in 2023.
The decline was in part driven by lower levels of contract activity during a
year of political transition, and the benefit in 2023 from contract award
dates moving from 2022 into 2023.
We saw a further extension on the Data Communications Company Licence with a
TCV of £135m and expansions with the Royal Navy and in Local Public Service.
The division's book to bill ratio was 0.7x.
The total unweighted pipeline for Public Service at 31 December 2024 was
£8,149m, an increase from £7,474m despite our unsuccessful armed forces
recruitment bid, which we lost on price. The year end weighted pipeline stood
at £1,206m, broadly similar to that in 2023 of £1,247m.
The divisional order book at 31 December 2024 was £2,923.4m, a decrease from
£3,546.0m in the prior year, reflecting the revenue recognised in the period
which more than offset wins in the period.
Financial performance
Divisional financial summary 2024 2023 % change
Adjusted revenue 1 (£m) 1,387.2 1,399.9 (0.9)%
Adjusted operating profit 1 (£m) 89.1 69.6 28.0%
Adjusted operating margin 1 (%) 6.4% 5.0%
Adjusted EBITDA 1 (£m) 125.6 111.4 12.7%
Operating cash flow excluding business exits 1 (£m) 92.1 88.5 4.1%
Order book (£m) 2,923.4 3,546.0 (17.6)%
Total contract value secured (£m) 928.7 1,840.1 (49.5)%
Adjusted revenue1 decreased by 0.9% to £1,387.2m, reflecting the cessation in
previous years of contracts in Local Public Service and Central Government.
Revenue growth was impacted by a more disciplined approach to bidding and the
delayed mobilisation of two contracts in the division. These offset additional
volumes in our Transport for London contract and the benefit from indexation.
Adjusted operating profit1 increased 28.0% to £89.1m, delivering an adjusted
operating margin of 6.4%, as the division saw the positive benefit of the
Group’s cost-reduction programme which offset the impact of contract losses
and the £15m profit impact from the conclusion of project work in 2023 and
the impact of Ofgem’s price control determination on the Smart DCC contract.
Operating cash flow excluding business exits1 increased 4.1% to £92.1m with
operating cash conversion of 73.3% (2023: 79.4%) impacted by the delayed
mobilisation and more sustainable approach to working capital management.
Outlook
For 2025, we expect the division to deliver low to mid single digit revenue
growth driven by the annualised benefit of new contracts, with growth expected
across all Public Service verticals in 2025.
We expect a modest improvement in adjusted operating margin driven by revenue
growth and continued benefit from the cost reduction programme.
1. Refer to alternative performance measures (APMs) in the Appendix.
2. TechMarketView.
Capita Experience
Following a review of the Group’s offerings, Experience will now report
under three segments, reflecting the different market sectors and end product
offerings of its component parts: 1. Contact Centre; 2. Pension Solutions; and
3. Regulated Services, which includes closed book Life & Pensions.
1. Contact Centre
Markets and growth drivers
Contact Centre is one of Europe’s leading customer experience businesses
with a top three market share across EMEA, managing millions of interactions,
with customers in the UK, Ireland, Germany and Switzerland and services
delivered across these geographies and also in India, South Africa, Poland and
Bulgaria.
The division is structured around the market sectors it serves: Financial
Services; Telecoms, Media & Technology; Energy & Utilities; and Retail. The
European customer experience market is worth £33bn2 with the market expected
to grow at 4%2 per annum.
Our competitors are mostly global and include entities such as
Teleperformance, Concentrix & Webhelp, Tata Consulting Services and Foundever.
The customer experience landscape is evolving at pace driven by changing
technology and shifting consumer expectations. Customers demand an omni
channel experience, multilingual support, and a flexible service model
spanning onshore, nearshore, and offshore operations.
Strategy and better technology
Contact Centre is a customer experience business driven by data and technology
powered by people, operating as a leading regional player with global quality
standards.
This year, it launched nine customer service bundles including areas such as
retail and collections, offering repeatable, modular and scalable solutions
that can be easily tailored to markets needs and requirements, while providing
quicker market entry. Since the launch, we have seen an increase in demand,
particularly in the retail market, which has driven an increase in pipeline
origination areas since the launch.
A key tool launched for the Contact Centre business in 2024 was AgentSuite,
combining two elements of Agent Assist and Call Sight which provide real time
sentiment analysis, AI generated prompts to aid call handlers and reduce post
call administration time with call notes automatically populated. This tool
will be used for the majority of our clients in the future, and we have seen
significant productivity benefits from the early adopters of this technology.
We also launched Sanas, a noise cancellation and harmonisation technology
which allows for clearer communication during traditional voice calls,
improving agent confidence and customer satisfaction.
At the end of the year, around 50% of agents within the Contact Centre
business were using our AI and gen AI solutions with significant further
rollout to clients underway for 2025.
At the start of 2025, the Contact Centre business announced a partnership with
GetVocal AI to drive further improvements in customer experience for clients.
GetVocal AI provides virtual agents that will handle a range of customer
interactions, with the oversight of experienced Capita agents who are ready to
step in for complex queries, vulnerable customers or escalation.
With a 2024 operating loss of £5.9m, there is a significant opportunity for
Contact Centre to improve its margins to be in line with those of its peers.
The division is implementing a significant reorganisation, including
delayering internal management structures and a digitisation plan to reduce
costs.
A key element of the division’s reorganisation is increasing the use of
offshore and nearshore service delivery to meet client needs. In 2024 we
opened two new global delivery centres in Bulgaria and South Africa. This
expansion enabled the division to meet the increasing demand for multilingual
services and will broaden our market opportunities going forward. The Contact
Centre business also increased its offshoring use from 45% to 60% in the
operational support function, which is closely aligned to peer benchmarks.
Operational performance and better delivery
Across the year, the division’s average in-month KPI performance was
consistent with 2023 at 93%. The division’s standalone cNPS performance was
+38 points an improvement of 19 points from the prior year with positive
client feedback received on the division’s account management and
transparency of teams communication. While delivery and client sentiment has
remained strong across the majority of the portfolio, certain delivery issues
have led to the reduction of volumes on one particular contract. Action was
taken to remediate this swiftly and we have the opportunity to regain volumes
in the future.
Operational highlights for the year include:
• To support future delivery, we opened two new global
delivery centres in Bulgaria and South Africa;
• We were awarded Best Network Customer Service for our
work with Tesco Mobile;
• We handled more than 32 million calls for clients in the
UK, Ireland, Germany and Switzerland;
• During peak season in South Africa our teams managed 3.2
million customer contacts; and
• Our teams won a number of awards across 2024 including
Accomplished Leader and Emerging Leader at the CGA Global Women in Leadership
Awards. We have also been nominated for awards such as Employee Engagement at
the UK Customer Satisfaction Awards.
These achievements underscore our focus on operational excellence,
scalability, and the delivery of quality customer experiences. As we continue
to expand our global footprint and enhance our capabilities, we are well
positioned to drive even greater value for our clients and their customers.
Growth performance and key wins
In 2024, Contact Centre won contracts with a value of £432.1m down from
£746.5m in the prior year, as we saw a reduction in bid activity across the
year. Material wins included two renewals with major European telecoms
clients, one with an expanded scope, with a combined TCV of more than £250m
and with Tesco Mobile in the UK. The division’s book to bill was 0.7x. There
has been a strong start to 2025 with renewals across all geographies we
operate in.
At 31 December 2024, the division's unweighted pipeline was £2,243m, a
decrease from £2,538m at the same point in 2023. The weighted pipeline was
£295m, down from £429m in 2023. Increasing the divisional pipeline is a key
area of focus in the medium term.
The order book at 31 December 2024 was £644.6m, a decrease from £1,399.6m
at 31 December 2023, reflecting the revenue recognised in 2024 and the fact
that the material contracts secured in 2024 are framework agreements that do
not meet the IFRS 15 accounting criteria for order book recognition.
Financial performance
Divisional financial summary 2024 2023 % change
Adjusted revenue 1 (£m) 650.9 797.6 (18.4)%
Adjusted operating profit 1 (£m) (5.9) (4.0) (47.5)%
Adjusted operating margin 1 (%) (0.9)% (0.5)%
Adjusted EBITDA 1 (£m) 34.3 44.0 (22.0)%
Operating cash flow excluding business exits 1 (£m) 0.1 20.9 (99.5)%
Order book (£m) 644.6 1,399.6 (53.9)%
Total contract value secured (£m) 432.1 746.5 (42.1)%
Adjusted revenue1 decreased 18.4% to £650.9m, reflecting a number of prior
year losses and the non-repeat of the one-off benefit from the Virgin Media O2
contract transition in 2023. The division also saw lower volumes in the
Telecommunications vertical which are expected to remain subdued in 2025.
Adjusted operating loss1 increased 47.5% to £5.9m as the successful cost
savings and reduced overheads did not offset the prior year impact of the
one-off benefit from the Virgin Media O2 contract transition and lower volumes
in the Telecommunications vertical.
Operating cash flow excluding business exits1 decreased 99.5% to £0.1m
reflecting the decline in EBITDA and the benefit from payment phasing on the
Virgin Media O2 contract in 2023.
Outlook
We expect a high single-digit revenue reduction in the Contact Centre business
in 2025, reflecting previously announced contract losses and subdued volumes
within the telecommunications vertical.
We expect a full year margin improvement as the division benefits from
continued cost savings.
1. Refer to alternative performance measures (APMs) in the Appendix.
2. NelsonHall.
2. Pension Solutions
Markets and growth drivers
Pension Solutions is our pension administration and consulting business, with
a focus on defined benefit schemes. It administers over 400 public and private
sector pension schemes based in the UK in a market worth £3.6bn2 and with a
projected £1bn of total contract value expected to come to market in the next
three years.
A key pensions industry trend is the increased member demand for a seamless
user experience with tailored offerings from increased automation and
self-service options around customer needs for a 24/7 service offering and
Pension Solutions is well positioned to benefit from this.
Pension Solutions also provides consulting, actuarial and data services to its
clients via its 500 expert pension consultants, which accounts for c.1/3 of
its revenue.
Strategy and better technology
Pension Solutions has a roadmap to further improve and digitise operations
with the launch of Capita Digital Pension Solutions which we expect to go live
later in 2025. This tool, which utilises Capita Pension's existing
infrastructure and Microsoft Dynamics, uses data to provide a
hyper-personalised member experience. We are also piloting a number of AI
based solutions to provide efficiencies and speed up member experience.
This is a step change in our service offering and will help the division to
expand into adjacent segments. Changes in legislation will provide future
opportunities to expand our share in the UK market.
Operational performance and better delivery
The KPI performance for Pension Solutions was 94% (2023: 86%). We saw further
improvements in the division's cNPS with a 25 point improvement to -3 points.
This year Pension Solutions continued to increase its reach, completing 4.5
million transactions for members and 39 successful scheme implementations onto
the Pension Solutions Hartlink digital platform and infrastructure.
Our digital pensions tool is already modernising how pensions are managed. In
2024 we saw the number of members engaging with pensions via digital channels
increase by more than 200%, and in 2025 we will be transitioning all clients
to paperless communications which we expect to allow for more efficient
communication, while reducing our costs to deliver.
Growth performance
In 2024, Pension Solutions secured contracts with a TCV of £144.9m, down
55.8% from 2023, reflecting the material Civil Service Pension Scheme win in
2023. The book to bill for the division was 0.8x. In 2024, we saw contract
success with the renewal of the Royal Mail Pension Scheme with a TCV of £53m.
The total unweighted pipeline for the Pension Solutions business at
31 December 2024 was £689m an increase from £231m in 2023, reflecting our
focus on pipeline replenishment and increased tender opportunities.
The order book at 31 December 2024 was £441.3m, a small decrease from
£461.8m at 31 December 2023, reflecting the revenue recognised in 2024 which
was not offset by wins in 2024.
Financial performance
Divisional financial summary 2024 2023 % change
Adjusted revenue 1 (£m) 179.0 170.3 5.1%
Adjusted operating profit 1 (£m) 28.1 25.9 8.5%
Adjusted operating margin 1 (%) 15.7% 15.2%
Adjusted EBITDA 1 (£m) 34.1 31.2 9.3%
Operating cash flow excluding business exits 1 (£m) 33.3 21.9 52.1%
Order book (£m) 441.3 461.8 (4.4)%
Total contract value secured (£m) 144.9 327.6 (55.8)%
Adjusted revenue1 increased 5.1% to £179.0m, reflecting volume increases
across a number of clients including the Pension Insurance Corporation (PIC)
contract and the benefit from indexation.
Adjusted operating profit1 increased by 8.5% to £28.1m reflecting revenue
growth and benefit from the cost reduction programme. The division delivered
an adjusted operating margin of 15.7% (2023: 15.2%).
Operating cash flow excluding business exits1 increased by 52.1% to £33.3m,
driven by improved billing cycles.
Outlook
In 2025, we expect to see mid-single digit revenue growth across Pension
Solutions driven by growth with existing clients, and the margin for the
division stable.
1. Refer to alternative performance measures (APMs) in the Appendix.
2. External market research including ONS, House of Commons Library and
Pensions Policy Institute.
3. Regulated Services
Regulated Services includes a number of ‘manage for value’ businesses
where we are exploring exits. The largest of these is the closed book Life &
Pensions business, for which we are making good progress exiting this
business, with one client remaining and transition agreements for all other
clients.
As expected, we have seen continued volume attrition within the closed book
Life & Pensions business, although our delivery remains strong with KPI
performance across 2024 of 98%. This year we agreed the hand back conditions
for a number of clients, which will be transitioned over the coming years, and
we expect to see a reduction in revenue as these are transitioned. We now have
one remaining client and are actively engaged in discussion to resolve the
challenges in this area. The division is forecast to have a cash cost to the
Group of around £20m per annum in future years.
Financial performance
Divisional financial summary 2024 2023 % change
Adjusted revenue 1 (£m) 152.0 208.0 (26.9)%
Adjusted operating profit 1 (£m) 12.6 33.1 (61.9)%
Adjusted operating margin 1 (%) 8.3% 15.9%
Adjusted EBITDA 1 (£m) 18.4 39.9 (53.9)%
Operating cash flow excluding business exits 1 (£m) (13.7) (5.7) (140.4)%
Order book (£m) 231.4 438.0 (47.2)%
Total contract value secured (£m) 7.2 38.1 (81.1)%
Adjusted revenue1 decreased 26.9% to £152.0m, reflecting the non-repeat of
the commercial settlement in the prior year, the impact of contract exits, and
volume reductions as expected.
Adjusted operating profit1 decreased 61.9% to £12.6m reflecting the
non-repeat of the £24m commercial settlement in the prior year.
Operating cash outflow excluding business exits1 increased 140.4% to an
outflow of £13.7m, driven by the non-repeat of one-offs in the prior year,
including a receipt on a contract termination.
Outlook
As noted, this is an area where we are actively exploring exits, therefore we
expect to see a continued revenue and profit decline as we hand back and
transition contracts in this area.
1. Refer to alternative performance measures (APMs) in the Appendix.
Chief Financial Officer's review
This preliminary announcement is extracted from Capita's financial statements
for the year ended 31 December 2024 and the basis of its preparation can be
found in the notes to the financial statements in this announcement.
Overview
Adjusted revenue1 decline of 8.0% reflects the impact of contract losses in
prior years, the cessation of lower margin service lines, and the reduction in
volumes in the Contact Centre telecommunications vertical.
Public Service revenue reduction reflects the continued impact of previously
announced contract losses, delayed mobilisations of two contracts won in 2023,
the double digit profit impact from the conclusion of project work in 2023 and
the impact of Ofgem’s price control determination on the Smart DCC contract,
and a more focused approach to bidding which impacted current year revenue and
profit. These factors offset additional volumes in our contract with Transport
for London, and the benefit from indexation.
In Experience, the revenue reduction in the Contact Centre business reflects
the one-off benefit from the Virgin Media O2 contract transition in 2023, the
impact of prior year contract losses, and lower volumes in the
telecommunications vertical. The revenue growth in the Pension Solutions
business reflects volume increases across a number of clients, including the
Pension Insurance Corporation contract, and the benefit from indexation. The
revenue reduction in the Regulated Services business reflects the one-off
benefit from the prior year commercial settlement, and progress being made on
contract exits as we resolve legacy issues and look to exit the closed book
Life & Pensions business.
The 5.5% step-up in adjusted operating profit1 reflected the benefit from the
ongoing cost reduction programme, more than offsetting the impact of the
revenue trends noted above and the non repeat of one-offs from the prior year.
Adjusted basic earnings per share1 increased to 2.11p (2023: loss per share
0.20p) reflecting the increase in adjusted operating profit1, reduction in the
net finance costs excluded from adjusted profit, and the adjusted current tax
charge of £10.3m compared to the adjusted tax charge of £47.4m in the prior
year. The adjusted tax charge in 2024 reflects the changes in the accounting
estimate of recognised deferred tax assets, and a lower current income tax
charge reflecting fewer current year losses carried forward.
The decline in reported revenue of 14.0% reflects the reduction in adjusted
revenue1 noted above, and the impact of businesses exited during 2024 and
2023.
The reported operating loss of £9.9m (2023: loss £52.0m), reflects the
improvement in adjusted operating profit1 detailed above, and lower costs
incurred in resolving the March 2023 cyber incident (2024: £1.0m; 2023:
£25.3m) and to deliver the significant cost reduction programme that
commenced in the second half of 2023 (2024: £27.9m; 2023: £54.4m), offset by
the increased goodwill impairment charge (2024: £75.1m; 2023: £42.2m).
The reported profit before tax of £116.6m (2023: loss £106.6m), reflects the
improvement in reported operating profit detailed above, the gain from
business exits in the year of £170.9m (2023: loss £23.2m) and reduced net
finance costs of £46.3m (2023: £52.2m).
The increase from a reported basic loss per share to a reported basic earnings
per share reflects the swing to a reported profit before tax noted above,
compounded by the reduction in the reported income tax charge. The reduction
in the reported income tax charge reflects the reduction in the adjusted tax
charge noted above, and a smaller change in the accounting estimate of
recognised deferred tax assets.
Cash generated from operations excluding business exits1 decreased, as
expected, from £26.5m to £16.2m, driven by the impact of mobilisation
delays, a more sustainable approach to working capital, and an increase in
cash costs to deliver the cost reduction programme, partly offset by a
reduction in the direct cash cost of the 2023 cyber incident and pension
deficit contributions.
Free cash flow excluding business exits1 in the year ended 31 December 2024
was an outflow of £122.3m (2023: outflow £123.6m). This reflects the
reduction in cash generated from operations, partly offset by lower net
capital lease payments, following the rationalisation of our property estate,
and lower tax outflows.
The improvement in free cash flow1 reflects the above reduction in free cash
outflow excluding business exits, and a reduction in pension deficit
contributions triggered by disposals, partly offset by the outflow from those
businesses being exited.
In January 2024, we completed the disposal of the of the Group’s 75%
shareholding in Fera Science Limited (Fera), realising gross proceeds of
£62m. The Group received net cash proceeds of c.£50m reflecting the total
proceeds less cash held in the entity when the disposal completed on 17
January 2024, and disposal costs. This was the final disposal of the c.£500m
Board-approved Portfolio programme which was launched in 2021.
In June 2024, we held a Capital Markets Day outlining the Group's strategic
themes and prioritised business sectors going forward. During the event, some
areas of the Group were identified as being “managed for value”, and we
outlined the options being pursued, including exploring potential exits.
Standalone software activities were identified as part of the Group's
activities that are being "managed for value", and on 9 July 2024, we
announced we had agreed the sale of Capita One, a standalone software
business. The Group received net cash proceeds of c.£180m reflecting total
proceeds less cash held in the entity when the disposal completed on 4
September 2024. The net cash proceeds provide the Group with additional
resources to strengthen its financial position and further reduce
indebtedness, as well as funding for its transformation journey.
In November 2023, we announced the implementation of a cost reduction
programme expected to deliver annualised efficiencies of £60m from Q1 2024.
In March 2024, we announced that we had identified additional cost saving
opportunities expected to deliver an additional £100m of annualised cost
savings by mid-2025. In December 2024, reflecting on the progress made ahead
of schedule with £140m annualised savings already delivered, and increased
confidence in the level of efficiencies that can be delivered, the cost
reduction target increased from £160m to up to £250m by the end of 2025. We
anticipate reinvesting around £50m of the total savings back into the
business to enhance the Group’s technology, service delivery and pricing
proposition.
Liquidity as at 31 December 2024 was £397.2m, made up of £250.0m of undrawn
revolving credit (RCF) and £147.2m of unrestricted cash and cash equivalents
net of overdrafts. In June 2023, we extended the maturity of the RCF to 31
December 2026 and the RCF of £250.0m was not drawn upon at 31 December 2024
(2023: undrawn).
Net financial debt (pre-IFRS 16) decreased by £115.6m to £66.5m at
31 December 2024, resulting in a net financial debt to adjusted EBITDA1 (both
pre-IFRS 16) ratio of 0.5x, as a result of the benefit from the disposal
proceeds from Capita One and Fera. This is in line with the Group’s medium
term target ratio of ≤1.0x.
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 across the maturities of 7.4%. The proceeds will be used
to refinance the H1 2025 private placement maturities valued at £75.9m and it
will also enhance the future maturity profile of the Group’s debt and will
offer medium term funding to underpin the Group's transformation strategy.
Summary of financial performance
Financial highlights
Reported results Adjusted 1 results
31 December 2024 31 December 2023 Reported YoY change 31 December 2024 31 December 2023 Adjusted 1 YoY change
Revenue £2,421.6m £2,814.6m (14.0)% £2,369.1m £2,575.8m (8.0)%
Operating (loss)/profit £(9.9)m £(52.0)m 81.0% £95.9m £90.9m 5.5%
Operating margin (0.4)% (1.8)% 140bps 4.0% 3.5% 50bps
EBITDA £166.2m £144.5m 15.0% £186.1m £196.5m (5.3)%
Profit/(loss) before tax £116.6m £(106.6)m n/a £50.0m £40.9m 22.2%
Basic earnings/(loss) per share 4.54p (10.60p) n/a 2.11p (0.20p) n/a
Operating cash flow* £86.3m £81.2m 6.3% £72.0m £82.7m (12.9)%
Free cash flow* £(122.7)m £(154.9)m 20.8% £(122.3)m £(123.6)m 1.1%
Net debt £(415.2)m £(545.5)m £130.3m £(415.2)m £(545.5)m £130.3m
Net financial debt (pre-IFRS 16) £(66.5)m £(182.1)m £115.6m £(66.5)m £(182.1)m £115.6m
* Adjusted operating cash flow and free cash flow exclude the impact of
business exits (refer to note 10).
Adjusted results
Capita reports results on an adjusted basis to aid understanding of business
performance. The Board has adopted a policy of disclosing separately those
items that it considers are outside the underlying operating results for the
particular period under review and against which the Group’s performance is
assessed internally. In the directors’ judgement, these items need to be
disclosed separately by virtue of their nature, size and/or incidence for
users of the financial statements to obtain an understanding of the financial
information and the underlying in-period performance of the business. In
general, the Board believes that alternative performance measures (APMs) are
useful for investors because they provide further clarity and transparency of
the Group’s financial performance and are closely monitored by management to
evaluate the Group’s operating performance to facilitate financial,
strategic and operating decisions.
In accordance with the above policy, the trading results of business exits,
along with the non-trading expenses (including the income statement charges in
respect of major cost reduction programmes) and gain or loss on disposals,
have been excluded from adjusted results. To enable a like-for-like comparison
of adjusted results, the 2023 comparatives have been re-presented to exclude
2024 business exits. As at 31 December 2024, the following businesses met
this threshold and were classified as business exits and therefore excluded
from adjusted results in both 2024 and 2023: Fera, Capita One, Mortgage
Services, Capita Scaling Partner, and a further business from Capita Public
Service.
Reconciliations between adjusted and reported operating profit, profit before
tax and free cash flow excluding business exits are provided on the following
pages and in the notes to the financial statements.
Adjusted revenue
Capita Public Service £m Capita Experience
Adjusted revenue 1 bridge by division Contact Centre £m Pension Solutions £m Regulated Services £m Total £m
Year ended 31 December 2023 1,399.9 797.6 170.3 208.0 2,575.8
Net (reduction)/growth (12.7) (146.7) 8.7 (56.0) (206.7)
Year ended 31 December 2024 1,387.2 650.9 179.0 152.0 2,369.1
Adjusted revenue1 reduced 8.0% year-on-year. The adjusted revenue1 was
impacted by the following:
• Public Service (0.9% reduction): the continued impact of
previously announced contract losses, such as Scottish Wide Area Network and
Electronic Monitoring, the delayed mobilisations of two contracts won in 2023,
the double digit profit impact from the conclusion of project work in 2023 and
the impact of Ofgem’s price control determination on the Smart DCC contract,
and a more focused approach to bidding impacted the current year. These
factors are partly offset by additional volumes in the division’s contract
with Transport for London, and the benefit from indexation;
• Experience:
◦ Contact Centre (18.4% reduction): reflecting the one-off
benefit from the Virgin Media O2 contract transition in the prior year, the
impact of prior year contract losses, and lower volumes in the
telecommunications vertical which we expect to remain subdued in 2025;
◦ Pension Solutions (5.1% growth): reflecting volume increases
across a number of clients, including Pension Insurance Corporation contract,
and the benefit from indexation; and
◦ Regulated Services (26.9% reduction): reflecting the one-off
benefit from the prior year commercial settlement, and the progress being made
on contract exits as we resolve legacy issues and look to exit the closed book
Life & Pension business.
Order book
The Group’s consolidated order book was £4,240.7m at 31 December 2024
(2023: £5,882.6m). During 2024 two European telecommunications contracts were
extended in the year with the contracts being recognised as framework
contracts, which resulted in £388.1m being derecognised from the order book.
Additions from contract wins, scope changes and indexation in 2024 totalled
£808.8m, including expanded scope on the Royal Navy Training contract within
Public Service and extension of the Royal Mail Statutory Pension Scheme
contract in Pension Solutions, were offset by the reduction from revenue
recognised in the year (£1,837.8m), contract terminations (£74.6m) and
business disposals (£150.2m). Terminations primarily represent a contract
exit within our close book Life & Pensions business in Regulated Services.
Adjusted operating profit1
Capita Public Service £m Capita Experience Capita plc £m
Adjusted operating profit 1 bridge by division Contact Centre £m Pension Solutions £m Regulated Services £m Total £m
Year ended 31 December 2023 69.6 (4.0) 25.9 33.1 (33.7) 90.9
Net growth/(reduction) 19.5 (1.9) 2.2 (20.5) 5.7 5.0
Year ended 31 December 2024 89.1 (5.9) 28.1 12.6 (28.0) 95.9
Adjusted operating profit1 increased in 2024 driven by the following:
• Public Service: strong improvement reflects the successful
implementation of the cost reduction programme, offset by the flow through of
previously announced contract losses, and the double digit profit impact from
the conclusion of project work in 2023 and the impact of Ofgem’s price
control determination on the Smart DCC contract;
• Experience:
◦ Contact Centre: non-repeat of the 2023 one-off noted above
(£10m), the flow through of revenue decline, lower volumes in the
telecommunications vertical and continued investment in technology; partially
offset by an underlying margin improvement from lower overheads, including
reduced property footprint, from delivery of the cost reduction programme;
◦ Pension Solutions: improved profit driven by savings from
the cost reduction programme and volume growth;
◦ Regulated Services: the one-off benefit from the prior year
(£24m), the agreed exit of three clients resulting in reduced profit in 2024,
and the 2023 and 2024 benefit from accelerated deferred income recognition;
and
• Capita plc: reflects benefits from the cost reduction
programme.
Adjusted profit before tax1:
Adjusted profit before tax1 increased year-on-year to £50.0m (2023: £40.9m)
reflecting the above improvements in adjusted operating profit1 and reduced
net finance costs excluded from adjusted profit of £45.9m (2023: £50.0m).
Lower net finance costs reflect reduced debt levels following proceeds
received for business exits in the year and as a result of cost reduction
initiatives.
Adjusted tax charge
The adjusted income tax charge for the year was £10.3m (2023: charge
£47.4m). The reduction is mainly as a result of the changes in the accounting
estimate of recognised deferred tax assets which had less of an impact in 2024
compared to 2023, and a lower current income tax charge as a result of fewer
current year losses to be carried forward.
Operating cash flow excluding business exits1
Capita Public Service £m Capita Experience Capita plc £m
Operating cash flow excluding business exits 1 by division Contact Centre £m Pension Solutions £m Regulated Services £m Total £m
Year ended 31 December 2023 88.5 20.9 21.9 (5.7) (42.9) 82.7
Net growth/(reduction) 3.6 (20.8) 11.4 (8.0) 3.1 (10.7)
Year ended 31 December 2024 92.1 0.1 33.3 (13.7) (39.8) 72.0
Operating cash conversion 1 year ended 31 December 2023 79.4% 47.5% 70.2% (14.3)% (143.0)% 42.1%
Operating cash conversion1 year ended 31 December 2024 73.3% 0.3% 97.7% (74.5)% (151.3)% 38.7%
Operating cash flow excluding business exits1 and operating cash flow
conversion1 reduced in 2024 driven by the following:
• Public Service: operating cash conversion1 impact by the
delayed mobilisation and more sustainable approach to working capital
management;
• Experience:
◦ Contact Centre: operating cash flow excluding business exits1
reduced reflecting the decline in EBITDA. 2023 also included a benefit of
payment phasing on the new Virgin Media O2 contract which did not recur in
2024;
◦ Pension Solutions: improvement in operating cash conversion1 driven
by improved billing cycles;
◦ Regulated Services: decline in operating cash conversion1 reflects
the decline in operating cash flow excluding business exits1 due to the
one-offs in the prior year, including receipt on a contract termination; and
• Capita plc: the movement in the usage of the Group’s
non-recourse trade receivables financing facility.
Cash generated from operations and free cash flow
Adjusted operating profit 1 to free cash flow excluding business exits 1 2024 2023 £m
£m
Adjusted operating profit 1 95.9 90.9
Add: depreciation/amortisation and impairment of property, plant and equipment, right-of-use assets and intangible assets 90.2 105.6
Adjusted EBITDA 1 186.1 196.5
Working capital (105.6) (107.7)
Non-cash and other adjustments (8.5) (6.1)
Operating cash flow excluding business exits 1 72.0 82.7
Adjusted operating cash conversion 1 39% 42%
Pension deficit contributions (6.3) (30.0)
Cyber incident (5.0) (20.1)
Cost reduction programme (44.5) (6.1)
Cash generated from operations excluding business exits 1 16.2 26.5
Net capital expenditure (49.5) (52.6)
Interest/tax paid (41.3) (45.1)
Net capital lease payments (47.7) (52.4)
Free cash flow excluding business exits 1 (122.3) (123.6)
Operating cash flow excluding business exits1 reflect the impact of
mobilisation delays and a more sustainable approach to working capital.
Cash generated from operations excluding business exits1 reflects the above
operating cash flow excluding business exits1, the direct cash flow impact of
the cyber incident (£5.0m), the cash cost of delivering the cost reduction
programme (£44.5m), and final pension deficit contributions in respect of the
Group’s main defined benefit pension scheme (HPS) (£6.3m).
The pension deficit contributions are in line with the deficit funding
contribution schedule previously agreed with the HPS Trustee as part of the
2020 triennial valuation. In aggregate, including accelerated pension deficit
contributions resulting from business disposals, the Group has made pension
deficit contributions of £20.8m in the year. Given the healthy funding
position of HPS in its latest funding valuation (as at 31 March 2023), and the
Group having paid all outstanding deficit contributions in 2024, there are no
further agreed deficit contributions to be paid at this time.
Free cash flow excluding business exits1 for the year ended 31 December 2024
was an outflow of £122.3m (2023: outflow £123.6m) reflecting the reduction
in cash generated from operations, partly offset by lower net capital lease
payments, following the rationalisation of our property estate, and lower tax
outflows.
Reported results
Adjusted to reported profit
As noted above, to aid understanding of our underlying performance, adjusted
operating profit1 and adjusted profit before tax1 exclude a number of specific
items, including the amortisation and impairment of acquired intangibles and
goodwill, the impact of business exits, and the impacts of the cyber incident
and cost reduction programme.
Adjusted 1 to reported results bridge Operating profit/(loss) Profit/(loss) before tax
2024 £m 2023 £m 2024 £m 2023 £m
Adjusted 1 95.9 90.9 50.0 40.9
Amortisation of acquired intangibles (0.2) (0.2) (0.2) (0.2)
Impairment of goodwill (75.1) (42.2) (75.1) (42.2)
Net finance costs — — (0.1) (2.2)
Business exits (1.6) (20.8) 170.9 (23.2)
Cyber incident (1.0) (25.3) (1.0) (25.3)
Cost reduction programme (27.9) (54.4) (27.9) (54.4)
Reported (9.9) (52.0) 116.6 (106.6)
Impairment of goodwill
In preparing the consolidated financial statements at 31 December 2024, the
Group undertook a detailed impairment review, following which a goodwill
impairment of £75.1m was recognised in respect of the Contact Centre cash
generating unit (CGU). As noted above the Contact Centre business has seen a
reduction in adjusted revenue1, increase in adjusted operating loss1, and
reduction in operating cash flow excluding business exits1. These trends
reflect the one-off benefit from the Virgin Media O2 contract transition in
the prior year, and the impact of prior year contract losses, both of which
were reflected in the financial projections used for impairment testing
purposes previously, and lower than expected volumes in the telecommunications
vertical in the second half of the year, which are expected to remain subdued
during 2025. The profit and cash flow impact of these items was partially
offset by an underlying margin improvement from lower overheads from delivery
of the cost reduction programme.
The Contact Centre business also saw a reduction in bid activity across 2024,
and although there has been a strong start to 2025, the business is expecting
a high single-digit revenue reduction in 2025. In addition, the material
contracts secured in 2024 are framework agreements, which enable the customer
to both ramp up and ramp down volume, providing both an opportunity but also a
risk to the business’s forecast. Whilst delivery and client sentiment has
remained strong across the majority of the portfolio, certain delivery issues
have led to the reduction of volumes on one particular contract.
There is a significant opportunity for the Contact Centre business to improve
its margins, to be in line with those of its peers, and is implementing a
significant reorganisation, including delayering internal management
structures and a digitisation plan to reduce costs. A key element of its
reorganisation is increasing the use of offshore and nearshore service
delivery to meet client needs. In terms of its digitisation plan, the forecast
for the business assumes an increase in the use of its new AI and generative
AI solutions, such as AgentSuite, with significant rollout to clients underway
for 2025. There is a risk with the assumed rollout of these new technology
solutions, such as the pace of technological change, which brings increased
uncertainty in delivery, and therefore a risk to the business’s forecast.
To reflect these risks, for the purposes of the impairment test, the business
plan cash flow projections have been risk adjusted in the Contact Centre CGU
from 2025 onwards. This has resulted in the impairment noted above.
Business exits
Business exits include the effects of businesses that have been disposed of or
exited during the period and the results of businesses held-for-sale at the
balance sheet date.
In accordance with our policy, the trading results of these businesses, along
with the non-trading expenses and gains/(losses) recognised on business
disposals, were classified as business exits and therefore excluded from
adjusted results. To enable a like-for-like comparison of adjusted results,
the 2023 comparatives have been re-presented to exclude the 2024 business
exits.
At 31 December 2024 business exits primarily comprised of the disposal of:
• the Group’s 75% shareholding in Fera Science Limited which
completed on 17 January 2024, and which completed the Board-approved Portfolio
business disposal programme; and
• the Capita One standalone business which was identified as a
“managed for value” activity and which completed on 5 September 2024.
In addition to the above disposals, the Group intends to exit its corporate
venture business, Capita Scaling Partner, in Capita Experience, and the
trading results and non-trading expenses of this business has been excluded
from adjusted results. The Capita Scaling Partner business manages the
Group’s investments in start-up and scale-up companies. Four of these
investments were sold during the year, realising a net loss of £7.1m.
Following the decision to exit this business and the losses realised on
disposals during 2024, the Group has evolved its approach to valuing the
remaining investments to take into account recent experiences, and to better
reflect expected disposal proceeds. This has crystallised a net impairment
loss of £4.6m. The Group will seek to maximise value from the remaining
Capita Scaling Partner investments, which at 31 December 2024 had an
aggregate carrying value of £4.8m, including loans receivable by Capita of
£0.7m.
Cyber incident
The Group incurred residual exceptional costs associated with the March 2023
cyber incident. These costs comprise specialist professional fees, recovery
and remediation costs, and investment to reinforce Capita’s cyber security
environment. A charge of £1.0m has been recognised in the year ended
31 December 2024, which is net of insurance receipts. The cumulative total
net costs incurred in respect of the cyber incident are £26.3m. Further
insurance receipts are anticipated but did not meet the criteria for
recognition at 31 December 2024. No provision has been made for any costs in
respect of potential claims or regulatory penalties in respect of the incident
as it is not possible, at this stage, to reliably estimate their value.
Cost reduction programme
The Group implemented a multi-year cost reduction programme in November 2023
to deliver savings of £60m by Q1 2024. The programme was extended in March
2024, to deliver further savings of £100m by mid-2025. In December 2024,
reflecting on the progress made ahead of schedule with £140m annualised
savings already delivered, and increased confidence in the level of
efficiencies that can be delivered, the cost reduction target increased from
£160m to up to £250m by the end of 2025.
A charge of £27.9m has been recognised in the year ended 31 December 2024
for the costs to deliver the cost reduction programme. This includes
redundancy and other costs of £30.5m (2023: £23.3m) to deliver a significant
reduction in headcount, partly offset by a credit of £2.6m reflecting the
successful exit of a number of properties which had been provided for in the
prior year (2023: charge of £31.1m arising from the rationalisation of the
Group’s property estate with impairment of right-of-use assets and property,
plant & equipment, and provisions in respect of onerous property costs). The
cumulative cost recognised since the commencement of the cost reduction
programme is £82.3m (2023: £54.4m), which is included within administrative
expenses.
The cash outflow in 2024 in respect of the cost reduction programme was
£44.5m (2023: £6.1m), which is included within free cash flow and cash
generated from operations excluding business exits1. The cumulative cash
outflow since the commencement of the cost reduction programme in the second
half of 2023 is £50.6m. The additional cost reduction initiatives announced
in December 2024, along with those already announced, are expected to result
in cash costs during 2025 totalling an estimated £55m.
Further detail of the specific items charged in arriving at reported operating
profit and profit before tax for 2024 is provided in note 5.
Net finance costs
Net finance costs decreased by £5.9m to £46.3m (2023: £52.2m), primarily
attributable to reduced debt levels following proceeds received for business
exits in the year and as a result of cost reduction initiatives.
Reported tax charge
The reported income tax charge for the year of £36.2m comprises a current tax
charge of £17.8m, reflecting non-deductible goodwill impairments and
non-taxable gains on business exits, plus a deferred tax charge of £18.4m
arising from changes in the accounting estimate of recognised deferred tax
assets and business exits. The prior period charge of £74.0m comprised a
current tax charge of £30.2m, reflecting non-deductible goodwill impairments
and unrecognised current year tax losses, plus a deferred tax charge of
£43.8m, reflecting the changes in the accounting estimate of recognised
deferred tax assets. The reduction in the reported income tax charge reflects
the reduction in the adjusted tax charge noted above, and a smaller change in
the accounting estimate of recognised deferred tax assets.
Free cash flow1 to free cash flow excluding business exits1
Free cash flow 1 to free cash flow excluding business exits 1 2024 £m 2023 £m
Free cash flow 1 (122.7) (154.9)
Business exits (14.1) 15.0
Pension deficit contributions triggered by disposals 14.5 16.3
Free cash flow excluding business exits 1 (122.3) (123.6)
Free cash flow1 was slightly higher than free cash flow excluding business
exits1 reflecting free cash flows generated by business exits, partly offset
by pension deficit contributions triggered by the disposal of certain
businesses.
Movements in net debt
Net debt at 31 December 2024 was £415.2m (2023: £545.5m). The decrease in
net debt over the year ended 31 December 2024 reflects the free cash outflow
noted above offset by the net cash proceeds from the disposal of Fera and
Capita One in the year, and the continued reduction in the Group’s leased
property estate.
Net debt 2024 £m 2023 £m
Opening net debt (545.5) (482.4)
Cash movement in net debt 197.4 (9.0)
Non-cash movements (67.1) (54.1)
Closing net debt (415.2) (545.5)
Remove closing IFRS 16 impact 348.7 363.4
Net financial debt (pre-IFRS 16) (66.5) (182.1)
Cash and cash equivalents net of overdrafts 191.4 67.6
Financial debt net of swaps (257.9) (249.7)
Net financial debt/adjusted EBITDA 1 (both pre-IFRS 16) 0.5x 1.2x
Net debt (post-IFRS 16)/adjusted EBITDA 1 2.3x 2.4x
Net debt does not include finance lease receivables, which at 31 December
2024 were £95.7m (2023: £70.3m) reflecting the successful sub-letting of
property the Group is not utilising.
Net financial debt (pre-IFRS 16) decreased by £115.6m to £66.5m at
31 December 2024, resulting in a net financial debt to adjusted EBITDA1 (both
pre-IFRS 16) ratio of 0.5x as a result of the benefit from the disposal
proceeds from Capita One and Fera. Over the medium term, the Group is
targeting a net financial debt to adjusted EBITDA1 (both pre-IFRS 16) ratio of
≤1.0x.
The Group was compliant with all debt covenants at 31 December 2024.
Capital and financial risk management
Liquidity remains an area of focus for the Group. Financial instruments used
to fund operations and to manage liquidity comprise US private placement loan
notes, revolving credit facility (RCF) and overdrafts.
Available liquidity 1 2024 £m 2023 £m
Revolving credit facility (RCF) 250.0 260.7
Less: drawing on committed facilities — —
Undrawn committed facilities 250.0 260.7
Cash and cash equivalents net of overdrafts 191.4 67.6
Less: restricted cash (44.2) (46.0)
Available liquidity 1 397.2 282.3
In June 2023, the Group extended its RCF to 31 December 2026. The RCF is for
£250.0m and was undrawn at 31 December 2024 (2023: undrawn).
In addition, the Group has in place non-recourse trade receivable financing,
utilisation of which has become economically more favourable than drawing
under the RCF as prevailing interest rates have increased. The value of
invoices sold under this arrangement at 31 December 2024 was £23.4m (2023:
£35.2m). Also in 2024, the Group implemented a new credit card facility, the
outstanding balance of which was £5.2m at 31 December 2024 (2023 £nil).
At 31 December 2024, the Group had £191.4m (2023: £67.6m) of cash and cash
equivalents net of overdrafts, and £269.3m (2023: £262.5m) of private
placement loan notes.
In March 2025, the Group issued £94.2m equivalent of US private placement
loan notes across three tranches: £50m maturing 24 April 2028, USD13m
maturing 24 April 2028 and USD43m maturing 24 April 2030, with an average
interest rate of 7.4%. The notes rank pari passu with the existing
indebtedness of the Group and include financial covenants at the same level as
those under the revolving credit facility and existing US private placement
loan notes. Additionally, the placement requires the Group to refinance or
extend the Group’s revolving credit facility, which matures on 31 December
2026, by 31 December 2025.
Going concern
The Board closely monitors the Group’s funding position throughout the year,
including compliance with covenants and available facilities to ensure it has
sufficient headroom to fund operations. In addition, to support the going
concern assumption, the Board conducts a robust assessment of the projections,
considering also the committed facilities available to the Group.
The Group and Parent Company continue to adopt the going concern basis in
preparing these consolidated financial statements as set out in Section 1 to
the consolidated financial statements.
Viability assessment
The Board's assessment of viability over the Group’s three-year business
planning time horizon is summarised in the viability statement.
Pensions
The latest formal valuation for the Group’s main defined benefit pension
scheme (HPS), was carried out as at 31 March 2023. This identified a statutory
funding surplus of £51.4m. Given the funding position, the Group and the HPS
Trustee agreed that no further deficit contributions from the Group would be
required other than those already committed as part of the 31 March 2020
actuarial valuation. In accordance with the schedule of contributions put in
place following the 31 March 2020 actuarial valuation, the Group has paid
£6.3m of regular deficit funding contributions in 2024 and £14.5m of
accelerated deficit reduction contributions triggered by the disposal of
Trustmarque in 2022.
The valuation of the HPS liabilities (and assumptions used) for funding
purposes (the actuarial valuation) is specific to the circumstances of the
HPS. It differs from the valuation and assumptions used for accounting
purposes, which are set out in IAS 19 and shown in these consolidated
financial statements. The main difference is in assumption principles being
used which are a result of the different regulatory requirements of the
valuations. Management estimates that at 31 December 2024 the net asset of
the HPS on a funding basis (ie the funding assumption principles adopted for
the full actuarial valuation at 31 March 2023 updated for market conditions at
31 December 2024) was approximately £80.0m (2023: net asset £81.0m) on a
technical provisions basis. The HPS Trustee has also agreed a secondary more
prudent funding target to enable it to reduce the reliance the HPS has on the
covenant of the Group. On this basis, at 31 December 2024, the funding level
was around 100%.
The net defined benefit pension position of all reported defined benefit
schemes for accounting purposes increased from a surplus of £26.8m at
31 December 2023 to a surplus of £37.9m at 31 December 2024. The main
reason for this movement is the payment of the above deficit funding
contributions.
Consolidated balance sheet
At 31 December 2024 the Group’s consolidated net assets were £195.7m
(2023: net assets £114.9m).
The movement is predominantly driven by the reported profit before tax for the
year as explained above, partially offset by the actuarial loss on the
Group’s defined benefit pension schemes.
Share premium reduction and share consolidation
The Board is tabling two additional resolutions to the shareholders at the
April 2025 Annual General Meeting, which if approved, will cancel the entire
amount standing to the credit of the Company’s share premium account and
consolidate the existing ordinary shares at a ratio of 15 for 1, which would
involve every 15 ordinary shares of 2 1/15 pence held by a shareholder being
consolidated into one ordinary share of 31 pence. The first resolution is
being proposed to optimise the structure of the balance sheet and increase the
Company’s distributable reserves. The Board believe that consolidation of
the Company’s ordinary shares will improve marketability of its shares to
investors.
1. Refer to alternative performance measures in the Appendix.
Viability statement
In accordance with provision 31 of the UK Corporate Governance Code published
by the Financial Reporting Council (FRC) in July 2018, and the FRC Guidance on
Risk Management and Business Reporting, the Board has assessed the viability
of the Group over the three-year period to 31 December 2027.
Period of assessment
Assessing the Group’s viability over a three-year period is aligned with the
period of the Group’s business planning process. The Board believes that a
three-year period provides sufficient clarity to consider the Group’s
prospects and facilitates the development of a robust base case set of
financial projections against which the Group’s viability can be assessed.
Capita’s strategic plan and priorities
The Group’s financial performance has not been where it needs to be. At the
Group’s Capital Markets Day in June 2024, the Executive Team announced
forward-looking strategic priorities to improve both operational delivery and
financial performance, alongside introducing the strategic themes of Better
Technology, Better Delivery, Better Efficiencies and Better Company.
The Group’s value proposition needs to be more competitive and
differentiated, through a lower cost base, automation and innovation.
Unnecessary costs are being removed to put the Group in a position to fund its
profitable growth. In short, Better Capita means becoming more efficient and
spending less, digitising the Group’s offerings by having more standardised
and repeatable propositions, strongly leveraging technology partnerships,
being more precise in delivery, and evolving governance and culture.
The Group is prioritising business sectors where Capita has strong expertise
and sees material opportunities in the future. They are Public Service,
Contact Centre and Pension Solutions. Some areas of the Group are being
managed for value, including Regulated Services, which primarily comprises the
closed book Life & Pensions business.
The Group’s medium-term targets, set at the Capital Markets Event in June
2024, are as follows:
• Grow adjusted revenue at low to mid-single digit per
annum.
• Improve adjusted operating margin to between 6% and 8%.
• Deliver positive free cash flow, excluding the impact of
business exits, from the end of 2025, with operating cash conversion of 65% to
75%.
• Maintaining net financial debt leverage ≤ 1x.
• Continued reduction in lease liabilities from the
Group’s ongoing property rationalisation.
The base case financial projections
In its assessment of the Group’s viability, the Board has considered the
following:
• Adjusted revenue reduction in 2024 of 8.0%.
• Adjusted operating margin improvement from 3.5% to 4.0%
in 2024.
• Free cash outflow, before the impact of business exits,
of £122.3m, and operating cash conversion of 38.7% in 2024 (2023: £123.6m
and 42.1% respectively).
• The £140m of annualised cost savings delivered, ahead
of schedule, by 31 December 2024 from the cost reduction programme, and the
announced increase in total annualised savings of up to £250m by the end of
2025.
• The revolving credit facility committed until 31
December 2026 (and assumed to be renewed and/or extended as required under the
terms of the March 2025 private placement loan notes (see note 14) for the
duration of the viability period) and the US private placement debt with
maturities over the period to 2030.
• Agreement with the Trustees of the Group’s main
defined benefit pension scheme that no further deficit recovery contributions
are required from the Group in 2025 and beyond.
The foregoing elements provide the backdrop to the three-year business plan
approved by the Board in February 2025. The main assumptions underpinning the
base case financial projections in the Group’s business plan are set out
below:
• Further adjusted revenue growth beyond 2025 broadly in
line with market trends in each of the two core divisions.
• Operating profit margin expansion over the business plan
period reflecting the benefit of operating leverage coupled with ongoing
efficiency delivery.
• Delivery of further cost savings.
• A transition to positive free cash flow from the end of
2025.
• The cessation of pension deficit contributions with
effect from 2024.
The most material assumptions, from a viability assessment perspective, relate
to the delivery of adjusted revenue growth, operating profit margin expansion,
and delivery of cost savings.
Principal risks
The Board and the Audit and Risk Committee monitor the principal risks facing
the Group, including those that would threaten the execution of its strategy,
financial performance, liquidity and compliance with debt covenants. The
potential financial impacts of the principal risks crystallising have been
taken into account when modelling sensitivities to assess the viability of the
Group. The Group’s risk review is set out in strategic report within the
2024 Annual Report and Accounts and outlines the Group’s principal risks,
including mitigating actions and future mitigations.
Viability scenarios
The three-year base case financial projections were used to assess debt
covenant compliance and liquidity headroom under different scenarios. This
analysis included assessing the financial impact of potential adverse
financial impacts from the crystallisation of the principal risks and in line
with those considered in the severe but plausible downside case for the going
concern assessment (refer to section 1 of the consolidated financial
statements).
The risks applied have not been probability weighted but rather consider the
impact should each risk materialise by applying a ‘more likely than not’
test.
Mitigations
These wide-ranging risks are unlikely to crystallise simultaneously and there
are mitigations under the direct control of the Group, including reductions or
delays in capital investment, and substantially reducing (or removing in full)
bonus and incentive payments, that can be actioned to address a combination of
risk crystallisations that may occur under a stressed scenario. The Board has
considered these mitigations in its viability assessment, however it
acknowledges that a sustained use of the mitigations identified above could
have an adverse impact on the Group being able to achieve its strategic
priorities.
Conclusion
Reflecting the Board’s expectations of improving financial performance, as
set out above, and its confidence in the Group’s ability to extend its
revolving credit facility beyond its December 2026 maturity, the Board has a
reasonable expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the period of the viability
assessment.
Forward looking statements
This full-year results statement is prepared for and addressed only to the
Company's shareholders as a whole and to no other person. The Company, its
Directors, employees, agents and advisers accept and assume no liability to
any person in respect of this trading update save as would arise under English
and Welsh law. Statements contained in this trading update are based on the
knowledge and information available to Capita’s Directors at the date it was
prepared and therefore facts stated and views expressed may change after that
date.
This document and any materials distributed in connection with it may include
forward-looking statements, beliefs or opinions, or statements concerning
risks and uncertainties, including statements with respect to Capita’s
business, financial condition and results of operations. All statements other
than historical facts included in this announcement may be forward-looking
statements. Those statements and statements which contain the words
“plan”, “target”, “aim”, “continue”, “hope”, “may”,
“will”, “would”, “could”, “should”, “anticipate”,
“believe”, “intend”, “estimate”, “expect” and words of similar
meaning, or, in each case, their negative or other various or comparable
terminology, reflect Capita’s Directors' beliefs and expectations and
involve risk and uncertainty because they relate to events and depend on
circumstances that may or may not occur in the future and which may cause
results and developments to differ materially from those expressed or implied
by those statements and forecasts.
No representation is made that any of those statements or forecasts will come
to pass or that any forecast results will be achieved, and projections are not
guarantees of future performance. You are cautioned not to place any reliance
on such statements or forecasts. Those forward-looking and other statements
speak only as at the date of this trading update. Capita undertakes no
obligation to release any update of, or revisions to, any forward-looking
statements, opinions (which are subject to change without notice) or any other
information or statement contained in this trading update. Furthermore, past
performance cannot be relied on as a guide to future performance.
No statement in this document is intended as a profit forecast or a profit
estimate and no statement in this document should be interpreted to mean that
earnings per Capita share for the current or future financial years would
necessarily match or exceed the historical published earnings per Capita
share.
Nothing in this document is intended to constitute an invitation or inducement
to engage in investment activity. This document does not constitute or form
part of any offer for sale or subscription of, or any solicitation of any
offer to purchase or subscribe for, any securities nor shall it or any part of
it nor the fact of its distribution form the basis of, or be relied on in
connection with, any contract, commitment or investment decision in relation
thereto. This document does not constitute a recommendation regarding any
securities.
Consolidated income statement
For the year ended 31 December 2024
Notes 2024 £m 2023
£m
Revenue 4 2,421.6 2,814.6
Cost of sales (1,905.1) (2,222.5)
Gross profit 516.5 592.1
Administrative expenses (including goodwill impairment of £75.1m (2023: £42.2m)) (526.4) (644.1)
Operating loss 4 (9.9) (52.0)
Share of results in associates and losses on financial assets 9 (11.8) —
Finance income 1 6 10.0 8.7
Finance costs 1 6 (56.3) (60.9)
Gain/(loss) on disposal of businesses 9 184.6 (2.4)
Profit/(loss) before tax 116.6 (106.6)
Income tax charge 7 (36.2) (74.0)
Total profit/(loss) for the year 80.4 (180.6)
Attributable to:
Owners of the Company 76.7 (178.1)
Non-controlling interests 3.7 (2.5)
80.4 (180.6)
Earnings/(loss) per share 8
– basic 4.54p (10.60)p
– diluted 4.41p (10.60)p
Adjusted operating profit 5 95.9 90.9
Adjusted profit before tax 5 50.0 40.9
Adjusted basic earnings/(loss) per share 8 2.11p (0.20)p
Adjusted diluted earnings/(loss) per share 8 2.05p (0.20)p
1. Finance income and finance costs have been separately disclosed for the
current year, with the prior year re-presented on the same basis. Previously
these were presented as net finance expenses.
Consolidated statement of comprehensive income
For the year ended 31 December 2024
2024 £m 2023 £m
Total profit/(loss) for the year 80.4 (180.6)
Other comprehensive income/(expense)
Items that will not be reclassified subsequently to the income statement
Actuarial loss on defined benefit pension schemes (11.8) (68.2)
Tax effect on defined benefit pension schemes 2.8 15.9
Loss on fair value of investments — (0.1)
Items that will or may be reclassified subsequently to the income statement
Exchange differences on translation of foreign operations 0.2 (2.9)
Exchange differences realised on business disposals — 0.2
Gain/(loss) on cash flow hedges 9.9 (8.5)
Cash flow hedges recycled to the income statement (2.8) (2.0)
Tax effect on cash flow hedges (1.8) 2.6
Other comprehensive expense for the year net of tax (3.5) (63.0)
Total comprehensive income/(expense) for the year net of tax 76.9 (243.6)
Attributable to:
Owners of the Company 73.2 (241.0)
Non-controlling interests 3.7 (2.6)
76.9 (243.6)
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated balance sheet
At 31 December 2024
Notes 2024 £m 2023 £m
Non-current assets
Property, plant and equipment 68.5 80.0
Intangible assets 79.8 90.0
Goodwill 11 372.4 495.7
Right-of-use assets 180.7 208.5
Investments in associates — 0.2
Contract fulfilment assets 257.5 257.0
Financial assets 99.0 97.2
Deferred tax assets 7 111.6 140.3
Employee benefits 42.9 32.7
Trade and other receivables 10.0 12.3
1,222.4 1,413.9
Current assets
Financial assets 20.6 28.1
Income tax receivable 7.0 11.6
Disposal group assets held-for-sale 9 0.1 38.1
Trade and other receivables 335.3 350.7
Cash 253.6 155.4
616.6 583.9
Total assets 1,839.0 1,997.8
Current liabilities
Overdrafts 62.2 95.0
Trade and other payables 353.2 425.9
Disposal group liabilities held-for-sale 9 0.1 9.7
Income tax payable 3.8 1.3
Deferred income 435.4 501.3
Lease liabilities 42.9 51.1
Financial liabilities 88.2 10.8
Provisions 12 81.4 101.6
1,067.2 1,196.7
Non-current liabilities
Trade and other payables 6.7 8.5
Deferred income 30.5 36.2
Lease liabilities 305.8 312.3
Financial liabilities 183.2 267.5
Deferred tax liabilities 7 7.0 7.2
Provisions 12 37.9 48.6
Employee benefits 5.0 5.9
576.1 686.2
Total liabilities 1,643.3 1,882.9
Net assets 195.7 114.9
Capital and reserves
Share capital 35.2 35.2
Share premium 1,145.5 1,145.5
Employee benefit trust shares (0.3) (0.7)
Capital redemption reserve 1.8 1.8
Other reserves (9.5) (15.0)
Retained deficit (972.8) (1,053.8)
Equity attributable to owners of the Company 199.9 113.0
Non-controlling interests (4.2) 1.9
Total equity 195.7 114.9
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated statement of changes in equity
For the year ended 31 December 2024
Share capital £m Share premium £m Employee benefit trust shares £m Capital redemption reserve £m Retained deficit £m Other reserves £m Total attributable to the owners of the parent £m Non- controlling interests £m Total equity £m
At 31 December 2022 34.8 1,145.5 (4.2) 1.8 (843.2) (4.5) 330.2 22.5 352.7
Loss for the year — — — — (178.1) — (178.1) (2.5) (180.6)
Other comprehensive expense — — — — (52.4) (10.5) (62.9) (0.1) (63.0)
Total comprehensive expense for the year — — — — (230.5) (10.5) (241.0) (2.6) (243.6)
Share-based payment — — — — 5.5 — 5.5 — 5.5
Tax effect of share based payment — — — — 0.3 — 0.3 — 0.3
Reclassification 2 — — — — 15.9 — 15.9 (15.9) —
Purchase of non-controlling interest — — — — 1.4 — 1.4 (1.4) —
Exercise of share options under employee long term incentive plans — — 3.9 — (3.9) — — — —
Shares issued 0.4 — (0.4) — — — — — —
Dividends paid 1 — — — — — — — (0.7) (0.7)
Changes in put-options held by non-controlling interests — — — — 0.7 — 0.7 — 0.7
At 31 December 2023 35.2 1,145.5 (0.7) 1.8 (1,053.8) (15.0) 113.0 1.9 114.9
Profit for the year — — — — 76.7 — 76.7 3.7 80.4
Other comprehensive (expense)/income — — — — (9.0) 5.5 (3.5) — (3.5)
Total comprehensive income for the year — — — — 67.7 5.5 73.2 3.7 76.9
Share-based payment — — — — 6.0 — 6.0 — 6.0
Tax effect of share based payment — — — — (0.2) — (0.2) — (0.2)
Elimination of non-controlling interest on disposal of businesses — — — — — — — (9.1) (9.1)
Exercise of share options under employee long-term incentive plans — — 1.0 — (1.0) — — — —
Parent Company shares purchased — — (0.6) — — — (0.6) — (0.6)
Dividends paid 1 — — — — — — — (0.7) (0.7)
De-recognition of put-options held by non-controlling interests — — — — 8.5 — 8.5 — 8.5
At 31 December 2024 35.2 1,145.5 (0.3) 1.8 (972.8) (9.5) 199.9 (4.2) 195.7
1. No dividends were declared, paid or proposed in 2024 or 2023 on the Parent
Company’s ordinary shares.
2. During the prior year it was identified that the non-controlling interest
(NCI) proportion of a goodwill impairment charge, which was recognised in the
year ended 31 December 2018, had not been previously allocated within the
result for that year attributable to NCI. The NCI proportion of the impairment
has been reclassified to the NCI reserve in the prior year.
Share capital – The balance classified as share capital is the nominal
proceeds on issue of the Parent Company’s equity share capital, comprising
2 1/15 pence ordinary shares.
Share premium – The amount paid to the Parent Company by shareholders, in
cash or other consideration, over and above the nominal value of shares issued
to them less issuance costs.
Employee benefit trust shares – Shares held in the employee benefit trust
have no voting rights and no entitlement to a dividend.
Capital redemption reserve – The Parent Company can redeem shares by
repaying the market value to shareholders, whereupon the shares are cancelled.
Redemption must be from distributable profits. The Capital redemption reserve
represents the nominal value of the shares redeemed.
Retained deficit – Net profits/(losses) accumulated in the Group after
dividends are paid.
Other reserves – This consists of the foreign currency translation reserve
deficit of £11.0m (2023: £11.2m deficit) and the cash flow hedging reserve
surplus of £1.5m (2023: £3.8m deficit).
Non-controlling interests (NCI) – This represents equity in subsidiaries not
attributable directly or indirectly to the Parent Company.
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated cash flow statement
For the year ended 31 December 2024
Notes 2024 £m 2023 £m
Cash generated from operations 10 16.0 8.7
Income tax paid 1 (4.0) (8.1)
Income tax received 1 5.1 0.6
Interest received 8.0 6.2
Interest paid (50.3) (47.7)
Net cash outflow from operating activities (25.2) (40.3)
Cash flows from investing activities
Purchase of property, plant and equipment (16.6) (28.8)
Purchase of intangible assets (33.5) (32.8)
Proceeds from sale of property, plant and equipment and intangible assets 0.3 0.1
Proceeds from disposal of associates and joint ventures 0.3 —
Additions to originated loans receivable (0.5) —
Changes to investments at fair value through other comprehensive income — (0.1)
Proceeds from sale of investments held at fair value through profit and loss 1.4 —
Capital element of lease rental receipts 5.9 6.0
Deferred consideration from sale of subsidiary companies 20.0 1.9
Total proceeds received from disposal of businesses, net of disposal costs 9 249.1 96.8
Cash held by businesses when sold 9 (25.2) (33.4)
Net cash inflow from investing activities 201.2 9.7
Cash flows from financing activities
Dividends paid to non-controlling interests (0.7) (0.7)
Purchase of Parent Company shares by the Employee Benefit Trust (0.6) —
Capital element of lease rental payments (53.6) (59.1)
Proceeds on issue of private placement loan notes — 103.5
Cost of cross-currency swaps — (1.6)
Repayment of private placement loan notes — (121.0)
Proceeds from cross-currency interest rate swaps 3.4 8.5
Repayment of other finance — (0.5)
Debt financing arrangement costs — (5.4)
Net cash outflow from financing activities (51.5) (76.3)
Increase/(decrease) in cash and cash equivalents 124.5 (106.9)
Cash and cash equivalents at the beginning of the year 67.6 177.2
Effect of exchange rates on cash and cash equivalents (0.7) (2.7)
Cash and cash equivalents at 31 December 191.4 67.6
Cash and cash equivalents comprise:
Cash 253.6 155.4
Overdrafts (62.2) (95.0)
Cash, net of overdrafts, included in disposal group assets and liabilities held-for-sale — 7.2
Total 191.4 67.6
Cash generated from operations excluding business exits 10 16.2 26.5
Free cash flow excluding business exits 10 (122.3) (123.6)
1. Income tax paid and income tax received have been separately disclosed for
the current year, with the prior year re-presented on the same basis.
Previously these were presented as net income tax paid.
The accompanying notes are an integral part of these consolidated financial
statements.
Notes to the consolidated financial statements
For the year ended 31 December 2024
1.1 Corporate information
Capita plc is a public limited company incorporated in England and Wales
whose shares are publicly traded.
These consolidated financial statements of Capita plc for the year ended
31 December 2024 were authorised for issue in accordance with a resolution of
the directors on 4 March 2025.
1.2 Basis of preparation, judgements and estimates, and going concern
(a) Basis of preparation
These consolidated financial statements have been prepared in accordance with
UK-adopted International Accounting Standards (UK-IFRS) and the Disclosure and
Transparency Rules of the UK's Financial Conduct Authority.
These consolidated financial statements are presented in British pounds
sterling and all values are rounded to the nearest tenth of a million (£m)
except where otherwise indicated.
These consolidated financial statements have been prepared by applying the
accounting policies and presentation that were applied in the preparation of
the company’s published consolidated financial statements for the year ended
31 December 2023.
(b) Adjusted results
IAS 1 Presentation of Financial Statements permits an entity to present
additional information for specific items to enable users to better assess the
entity’s financial performance.
The Board has adopted a policy to disclose separately those items that it
considers are outside the underlying operating results for the particular year
under review and against which the Group’s performance is assessed
internally. In the Board’s judgement, these need to be disclosed separately
by virtue of their nature, size and/or incidence, for users of the
consolidated financial statements to obtain an understanding of the financial
information and the underlying performance of the Group. In general, the Board
believes that alternative performance measures (APMs) are useful for investors
because they provide further clarity and transparency of the Group’s
financial performance and are closely monitored by management to evaluate the
Group’s operating performance to facilitate financial, strategic and
operating decisions. Accordingly, these items are also excluded from the
discussion of divisional performance in the strategic report. This policy is
kept under review by the Board and the Audit and Risk Committee.
Those items excluded from the adjusted income statement are: business exits;
amortisation and impairment of acquired intangibles; impairment of goodwill;
certain mark-to-market valuation changes that impact net finance costs/income;
the costs associated with the cyber incident in March 2023, and the costs
associated with the cost reduction programme.
The Board considers free cash flow, and cash generated from operations
excluding business exits, to be alternative performance measures because these
metrics provide a more representative measure of the sustainable cash flow of
the Group.
The Board considers APMs to be helpful to the reader, but notes that APMs have
certain limitations, including the exclusion of significant recurring and
non-recurring items, and may not be directly comparable with similarly titled
measures presented by other companies.
A reconciliation between reported and adjusted operating profit and profit
before tax is provided in note 5, and a reconciliation between reported cash
generated from operations and cash generated from operations before business
exits together with the calculation of free cash flow as an APM is provided in
the appendix.
(c) Judgements and estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires the directors to make judgements and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingencies at the date of the financial statements and the
reported income and expense during the presented periods. Although these
judgements and assumptions are based on the directors’ best knowledge of the
amount, events or actions, actual results may differ.
Given the level of judgement and estimation involved in assessing the future
profitability of contracts, it is reasonably possible that outcomes within the
next financial year may be different from management’s assumptions which
could require a material adjustment to the carrying amounts of contract
fulfilment assets and onerous contract provisions.
The impact of climate change has been considered in the preparation of these
consolidated financial statements across a number of areas, including our
evaluation of the critical accounting estimates and assumptions which are
consistent with the risks and opportunities set out in the strategic report in
the Annual Report. None of these risks had a material effect on the critical
accounting estimates and assumptions or on the consolidated financial
statements of the Group.
(d) Going concern
In determining the appropriate basis of preparation of the financial
statements for the year ended 31 December 2024, the Board is required to
consider whether the Group and Parent Company can continue in operational
existence for the foreseeable future. The Board has concluded that it is
appropriate to adopt the going concern basis, having undertaken a rigorous
assessment of the financial forecasts, key uncertainties, sensitivities, and
mitigations as set out below.
Accounting standards require that ‘the foreseeable future’ for going
concern assessment covers a period of at least twelve months from the date of
approval of these financial statements, although those standards do not
specify how far beyond twelve months a Board should consider. In its going
concern assessment, the Board has considered the period from the date of
approval of these financial statements to 30 June 2026 (‘the going concern
period’), which aligns with a period end and covenant test date for the
Group.
The base case financial forecasts used in the going concern assessment are
derived from the 2025-2027 business plan as approved by the Board in February
2025.
The going concern assessment considers the Group’s sources and uses of
liquidity and covenant compliance throughout the period under review. The
value of the Group’s committed revolving credit facility (RCF) was £250.0m
at 31 December 2024.
Financial position at 31 December 2024
As detailed further in the Chief Financial Officer’s review, at 31 December
2024 the Group had net debt of £415.2m (2023: £545.5m), net financial debt
(pre-IFRS 16)1 of £66.5m (2023: £182.1m), available liquidity1 of £397.2m
(2023: £282.3m) and was in compliance with all debt covenants.
1.2 Basis of preparation judgements and estimates, and going concern continued
Board assessment
Base case scenario
Under the base case scenario, the Group’s transformation programme and
completion of the Portfolio non-core business disposal programme in January
2024 together with the disposal of Capita One in September 2024, has
simplified and strengthened the business and facilitates further efficiency
savings enabling sustainable growth in revenue, profit and cash flow over the
medium term, whilst acknowledging the expected free cash outflow for 2025.
When combined with available committed facilities, this allows the Group to
manage scheduled debt repayments. The most material sensitivities to the base
case are the risk of not delivering the planned revenue growth and further
efficiency savings being delayed or not delivered from the Group's previously
announced cost reduction programme.
The base case projections used for going concern assessment purposes reflect
business disposals completed up to the date of approval of these financial
statements. The liquidity headroom assessment in the base case projections
reflects the Group’s existing committed financing facilities, including the
£94.2m of US private placement loan notes issued in March 2025 (refer to note
14), debt redemptions, and the intended renewal or extension of the Group’s
RCF by 31 December 2025 to meet the requirements of the 2025 US private
placement loan notes. The base case financial forecasts demonstrate liquidity
headroom and compliance with all debt covenant measures throughout the going
concern period to 30 June 2026.
Severe but plausible downside scenario
In considering severe but plausible downside scenarios, the Board has taken
account of the potential adverse financial impacts resulting from the
following risks:
• revenue growth falling materially short of plan;
• operating margin expansion not being achieved;
• targeted cost savings delayed or not delivered;
• unforeseen operational issues leading to contract losses and
cash outflows;
• sustained interest rates at current levels;
• non-availability of the Group’s non-recourse trade
receivables financing facility; and
• unexpected financial costs linked to incidents such as data
breaches and/or cyber-attacks.
The likelihood of simultaneous crystallisation of the above risks is
considered by the directors to be low. Nevertheless, in the event that
simultaneous crystallisation were to occur, the Group would need to take
action to ensure there is sufficient headroom for debt covenant purposes. In
its assessment of going concern, the Board has considered the mitigations,
under the direct control of the Group, that could be implemented including,
but not limited to, reductions or delays in capital investment, and
substantially reducing (or removing in full) bonus and incentive payments. The
Board has also assumed that the intended renewal or extension of the Group’s
RCF by 31 December 2025 to meet the requirements of the March 2025 private
placement loan notes is successful. Taking these considerations into account,
the Group’s financial forecasts, in a severe but plausible downside
scenario, demonstrate sufficient liquidity headroom and compliance with all
debt covenant measures throughout the going concern period to 30 June 2026.
Adoption of going concern basis
Reflecting the forecasts, coupled with the Board’s ability to implement
appropriate mitigations should the severe but plausible downside materialise,
the Group and Parent Company continues to adopt the going concern basis in
preparing these consolidated financial statements. The Board has concluded
that the Group and Parent Company will be able to continue in operation and
meet their liabilities as they fall due over the period to 30 June 2026.
2 Preliminary announcement
A duly appointed and authorised committee of the Board of Directors approved
the preliminary announcement on 4 March 2025.
The financial information set out above does not constitute the Group's
consolidated financial statements for the years ended 31 December 2024 or
2023 but is derived from those financial statements.
Statutory accounts for 2023 have been delivered to the Registrar of Companies
and those for 2024 will be delivered in due course. The auditor has reported
on those financial statements.
Their report for the accounts of 2024 was (i) unqualified, (ii) did not
include a reference of any matters to which the auditor drew attention by way
of emphasis without modifying their report and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act 2006.
Their report for the accounts of 2023 was (i) unqualified, (ii) did not
include a reference of any matters to which the auditor drew attention by way
of emphasis without modifying their report and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act 2006.
Copies of this announcement can be obtained from the Company's registered
office at 2 Kingdom Street, London, W2 6BD, or on the Company's corporate
website www.capita.com/investors.
It is intended that the Annual Report and Accounts will be posted to
shareholders late March 2025. It will be available to members of the public at
the registered office and on the Company's Corporate website
https://www.capita.com/investors from that date.
1. Refer to the alternative performance measures (APMs) in the Appendix.
3 Contract accounting
At 31 December 2024, the Group had the following results and balance sheet
items related to long-term contracts:
Notes 2024 £m 2023 £m
Long-term contractual revenue 4 1,871.7 2,104.0
Contract fulfilment assets (non-current) 257.5 257.0
Accrued income 132.7 138.3
Deferred income 465.9 537.5
Onerous contract provisions 46.2 43.3
Background
The Group operates diverse businesses. The majority of the Group’s revenue
is from contracts greater than two years in duration (long-term contractual),
representing 77% of Group revenue in 2024 (2023: 75%).
These long-term contracts can be complex in nature given the breadth of
solutions the Group offers and the transformational activities involved.
Typically, Capita takes a customer’s process and transforms it into a more
efficient and effective solution which is then operated for the customer. The
outcome is a high quality solution that addresses a customer’s needs and is
delivered consistently over the life of the contract.
The Group recognises revenue on long-term contracts as the value is delivered
to the customer, which is generally evenly over the contract term, regardless
of any restructuring and transformation activity required to deliver the
services to the customer. Capita will often incur greater costs during
contract transformation phases with costs diminishing over time as the target
operating model is implemented and efficiencies realised. This results in
lower profits or losses in the early years of contracts and potentially higher
profits in later years as the transformation activities are successfully
completed and the target operating model fully implemented (the business as
usual (BAU) phase). The inflection point is when the contract becomes
profitable.
Non-current contract fulfilment assets are recognised for those costs
qualifying for capitalisation. The utilisation of these assets is recognised
over the contract term. The timing of cash receipts from customers typically
matches when the costs are incurred to transform, restructure and run the
service. This results in income being deferred and released when the Group
delivers against its obligations to provide services and solutions to its
customers.
Assessing contract profitability
In assessing a contract’s future lifetime profitability, management must
estimate forecast revenue and costs to both transform and run the service over
the remaining contract term. The ability to accurately forecast the outcomes
involves estimates in respect of: costs to be incurred; cost savings to be
achieved; future performance against any contract-specific key performance
indicators (KPIs) that could trigger variable consideration or service
credits; outcome of any commercial negotiations; and impact of inflation on
the cost base and the indexation of revenue.
The level of uncertainty in the estimated future profitability of a contract
is directly related to the stage in the life-cycle of the contract and the
complexity of the performance obligations. Contracts in the transformation
stage are considered to have a higher level of uncertainty because of:
• the ability to accurately estimate the costs to deliver the
transformed process;
• the dependency on the customer to agree to the specifics of
the transformation: for example, where they are involved in certifying that
the new process or, the new technical solution, designed by Capita meets their
specific requirements;
• the requirement to deliver the key transformation milestones
in accordance with timelines agreed with the customer; and
• the assumptions made to forecast expected savings in the
target operating model.
Those contracts which are in BAU tend to have a much lower level of
uncertainty in estimating future profitability.
Recoverability of non-current contract fulfilment assets and completeness of
onerous contract provisions
Management first assesses whether contract assets are impaired and then
further considers whether an onerous contract exists. For half and full year
reporting, the Audit and Risk Committee specifically reviews the material
judgements and estimates, and the overall approach to this assessment in
respect of the Group’s major contracts, including comparison against
previous forecasts.
The major contracts are rated by management according to their financial risk
profile, which is linked to the level of uncertainty over future assumptions.
During 2024 the process to determine which major contracts the Audit and Risk
Committee review was updated to provide better focus, and at half year, the
Audit and Risk Committee review those in the high or medium risk categories,
and at full year those material by virtue of their size relative to the Group
are also reviewed if not already identified.
An assessment of which contracts are major contracts is performed twice a
year. Other contracts are reported to the Audit and Risk Committee as deemed
appropriate. These contracts are collectively referred to as ‘major
contracts’ in the remainder of this note.
In the following paragraphs, the amounts disclosed for the current period are
only in respect of those major contracts that the Audit and Risk Committee
have reviewed (ie those major contracts which are in the high or medium risk
categories or material by virtue of their size relative to the Group). The
prior year amounts in relation to major contracts are as previously presented,
and as such reflect the major contracts reviewed by the Audit and Risk
Committee for that year end. The prior period amounts are therefore not
directly comparable to those disclosed for the current year.
The major contracts contributed £1.0 billion (2023: £1.1 billion) or 42%
(2023: 42%) of Group adjusted revenue. Non-current contract fulfilment assets
at 31 December 2024 were £257.5m (2023: £257.0m), of which £119.3m (2023:
£125.1m) relates to major contracts with ongoing transformational activities.
The remainder relates to contracts post transformation and includes non-major
contracts.
As noted above, the major contracts, both pre- and post-transformation, are
rated according to their financial risk profile. For those that are in the
high and medium rated risk categories the associated non-current contract
fulfilment assets were, in aggregate, £67.8m at 31 December 2024 (2023:
£52.8m). The recoverability of these assets is dependent on no significant
adverse change in the key contract assumptions arising. The balance of
deferred income associated with these contracts was £95.9m at 31 December
2024 (2023: £109.5m) and is forecast to be recognised as performance
obligations continue to be delivered over the life of the respective
contracts. Onerous contract provisions associated with these contracts were
£35.3m at 31 December 2024 (2023: £37.3m).
Following these reviews, and reviews of smaller contracts across the business,
non-current contract fulfilment asset impairments of £0.7m (2023: £3.4m)
were identified and recognised within adjusted cost of sales, of which £nil
(2023: £nil) relates to non-current contract fulfilment assets added during
the period. Additionally, net onerous contract provisions of £18.0m (2023:
£9.4m), were identified and recognised in adjusted cost of sales with a
further £4.1m (2023: £nil) excluded from adjusted cost of sales as part of
business exits.
3 Contract accounting continued
Given the quantum of the relevant contract assets and liabilities, and the
nature of the estimates noted above, management has concluded it is reasonably
possible, that outcomes within the next financial year may be different from
management’s current assumptions and could require a material adjustment to
the carrying amounts of contract fulfilment assets and onerous contract
provisions. However, as noted above, £119.3m (2023: £125.1m) of non-current
contract fulfilment assets relates to major contracts with ongoing
transformational activities; and, £67.8m (2023: £52.8m) of non-current
contract fulfilment assets and £35.3m (2023: £37.3m) of onerous contract
provisions relate to the highest and medium rated risk category. Due to the
level of uncertainty, combination of variables and timing across numerous
contracts, it is not practical to provide a quantitative analysis of the
aggregated judgements that are applied, and management do not believe that
disclosing a potential range of outcomes on a consolidated basis would provide
meaningful information to a user of the financial statements. Due to
commercial sensitivities, the Group does not specifically disclose the amounts
involved in any individual contract.
Certain major transformation contracts have key milestones during the next
twelve months and an inability to meet these key milestones could lead to
reduced profitability and a risk of impairment of the associated contract
fulfilment assets. These include contracts with the City of London Police,
BBC, Transport for London, Health Assessment Advisory Services and the Civil
Service Pension Scheme.
Additional information, which does not form part of these consolidated
financial statements, on the results and performance of the underlying
divisions including the outlook on certain contracts is set out in the
divisional performance review.
4 Revenue and segmental information
The Group’s operations are managed separately according to the nature of the
services provided, with each segment representing a strategic business
offering a different package of client services across the markets the Group
serves. Capita plc is a reconciling item and not an operating segment. A
description of the service provision for each segment can be found in the
strategic report in the Annual Report. Inter-segmental pricing is based on set
criteria and is either charged on an arm's length basis or at cost.
The tables below present revenue for the Group’s operating segments as
reported to the Chief Operating Decision Maker (‘CODM’). The Group
comprises two trading divisions – Capita Public Service and Capita
Experience – and in prior periods the CODM viewed these as two operating
segments because the CODM reviewed operating results to assess their
performance and make decisions about allocation of resources at this level.
Capita Public Service goes to market through three subdivisions – Local
Public Service; Defence, Learning, Fire and Security; and Central Government
– however, the CODM views these subdivisions as one operating segment.
Capita Experience also comprises three subdivisions – Contact Centre;
Pension Solutions; and Regulated Services. Following the completion of the
exit of the non-core businesses in the Portfolio division, and the review of
the Group’s strategy conducted in 2024, the CODM now reviews the operating
results for each of these three subdivisions in this division separately, and
therefore each subdivision is now an operating segment. Comparative
information has also been re-presented to reflect the change in operating
segments and to reflect businesses exited during 2024.
Adjusted revenue, excluding results from businesses exited in both years
(adjusting items), was £2,369.1m (2023: £2,575.8m), a decline of 8.0% (2023:
increase 1.1%).
Capita Public Service £m Capita Experience
Year ended 31 December 2024 Notes Contact Centre £m Pension Solutions £m Regulated Services £m Total adjusted £m Adjusting items £m Total reported £m
Continuing operations
Long-term contractual 1,148.4 408.4 127.9 148.7 1,833.4 38.3 1,871.7
Short-term contractual 162.0 220.3 51.1 — 433.4 9.5 442.9
Transactional (point-in-time) 76.8 22.2 — 3.3 102.3 4.7 107.0
Total segment revenue 1,387.2 650.9 179.0 152.0 2,369.1 52.5 2,421.6
Trading revenue 1,409.9 676.7 179.8 153.8 2,420.2 51.8 2,472.0
Inter-segment revenue (22.7) (25.8) (0.8) (1.8) (51.1) 0.7 (50.4)
Total adjusted segment revenue 1,387.2 650.9 179.0 152.0 2,369.1 — 2,369.1
Business exits – trading 9 — — — — — 52.5 52.5
Total segment revenue 1,387.2 650.9 179.0 152.0 2,369.1 52.5 2,421.6
Year ended 31 December 2023
Continuing operations
Long-term contractual 1,148.0 550.2 120.5 203.3 2,022.0 82.0 2,104.0
Short-term contractual 195.9 231.2 49.8 1.6 478.5 24.9 503.4
Transactional (point-in-time) 56.0 16.2 — 3.1 75.3 131.9 207.2
Total segment revenue 1,399.9 797.6 170.3 208.0 2,575.8 238.8 2,814.6
Trading revenue 1,422.2 830.8 170.7 209.4 2,633.1 267.1 2,900.2
Inter-segment revenue (22.3) (33.2) (0.4) (1.4) (57.3) (28.3) (85.6)
Total adjusted segment revenue 1,399.9 797.6 170.3 208.0 2,575.8 — 2,575.8
Business exits – trading 9 — — — — — 238.8 238.8
Total segment revenue 1,399.9 797.6 170.3 208.0 2,575.8 238.8 2,814.6
4 Revenue and segmental information continued
Geographical location
The Group generates revenue largely in the UK and Europe. The table below
presents revenue by geographical location.
2024 2023
United Kingdom £m Rest of Europe £m Other £m Total £m United Kingdom £m Rest of Europe £m Other £m Total £m
Revenue 2,150.3 271.3 — 2,421.6 2,526.0 282.5 6.1 2,814.6
Order book
The tables below show the order book for each division, categorised into
long-term contractual (contracts with length greater than two years) and
short-term contractual (contracts with length less than two years). The length
of the contract is calculated from the service commencement date. The figures
represent the aggregate amount of currently contracted transaction price
allocated to the performance obligations that are unsatisfied or partially
unsatisfied. Revenue expected to be recognised upon satisfaction of these
performance obligations is as follows:
Capita Public Service £m Capita Experience
Order book 31 December 2024 Contact Centre £m Pension Solutions £m Regulated Services £m Total £m
Long-term contractual 2,843.1 426.1 431.2 226.1 3,926.5
Short-term contractual 80.3 218.5 10.1 5.3 314.2
Total 2,923.4 644.6 441.3 231.4 4,240.7
Capita Portfolio £m Capita Public Service £m Capita Experience
Order book 31 December 2023 Contact Centre £m Pension Solutions £m Regulated Services £m Total £m
Long-term contractual — 3,381.1 1,236.3 444.3 430.6 5,492.3
Short-term contractual 37.2 164.9 163.3 17.5 7.4 390.3
Total 37.2 3,546.0 1,399.6 461.8 438.0 5,882.6
The table below shows the expected timing of revenue to be recognised from
long-term contractual orders at 31 December 2024:
Capita Public Service £m Capita Experience
Time bands of expected revenue recognition from long-term contractual orders Contact Centre £m Pension Solutions £m Regulated Services £m Total £m
< 1 year 807.6 182.9 84.3 95.0 1,169.8
1–5 years 1,545.3 225.0 168.2 120.1 2,058.6
> 5 years 490.2 18.2 178.7 11.0 698.1
Total 2,843.1 426.1 431.2 226.1 3,926.5
The Contact Centre order book reduction reflects two European
telecommunications contracts that were extended in the period with the
contracts being recognised as framework contracts. This resulted in £388.1m
being derecognised from the order book.
Prior year comparative information is not presented for the expected timing of
revenue recognition because it is a forward looking disclosure and therefore
management does not believe that such disclosure provides meaningful
information to a user of the consolidated financial statements.
The order book represents the consideration that the Group will be entitled to
receive from customers when the Group satisfies its remaining performance
obligations under the contracts. However, the total revenue that will be
earned by the Group will also include non-contracted volumetric revenue,
future indexation linked to an external metric, new wins, scope changes, and
anticipated contract extensions. These elements have been excluded from the
above tables because they are not contracted. Additionally, revenue from
contract extensions is excluded from the order book unless they are pre-priced
extensions whereby the Group has a legally binding obligation to deliver the
performance obligations during the extension period. The total revenue related
to pre-priced extensions for major contracts included in the tables above
amounted to £309.0m (2023: £513.8m1). The amounts presented do not include
orders for which neither party has performed, and each party has the
unilateral right to terminate a wholly unperformed contract without
compensating the other party.
Of the £3.9 billion (2023: £5.5 billion) revenue to be earned on long-term
contracts, £3.1 billion (2023: £3.4 billion1) relates to major contracts.
This amount excludes revenue that will be derived from frameworks,
non-contracted volumetric revenue, non-contracted scope changes and future
unforeseen volume changes from these major contracts, which together are
anticipated to contribute an additional £0.8-£1.0 billion (2023:£0.5-£0.7
billion1) of revenue to the Group over the life of these contracts.
The Group performs various services for a number of UK Government ministerial
departments and considers these individual ministerial departments to be
separate customers due to the limited economic integration between each
ministerial department. Revenues of £325.8m from one customer in Capita
Public Service represented more than 10% of the Group’s total revenues
(2023: £317.6m from one customer from the Capita Public Service division
represented more than 10% of the Group’s total revenues).
1. The prior year amounts in relation to major contracts are as previously
presented, and as such reflect the major contracts reviewed by the Audit and
Risk Committee for that year end (refer to note 3). Consequently, the prior
year amounts are not directly comparable to those disclosed for the current
period.
Deferred income
The Group’s deferred income balances solely relate to revenue from contracts
with customers. Revenue recognised in the reporting period that was included
in the deferred income balance at the beginning of the period was £492.2m
(2023: £599.0m).
Movements in the deferred income balances were driven by transactions entered
into by the Group in the normal course of business during the current and
prior year, other than accelerated revenue recognised of £9.2m (2023:
£9.9m), which primarily related to an early termination of contracts in the
Regulated Services business in Capita Experience.
4 Revenue and segmental information continued
Segmental profit
The table below presents profit by segment.
Capita Public Service £m Capita Experience
Year ended 31 December 2024 Notes Contact Centre £m Pension Solutions £m Regulated Services £m Capita plc £m Total adjusted £m Adjusting items £m Total reported £m
Adjusted operating profit/(loss) 5 89.1 (5.9) 28.1 12.6 (28.0) 95.9 — 95.9
Cost reduction programme (11.3) (5.3) (0.8) (0.5) (10.0) — (27.9) (27.9)
Business exits – trading 9 — — — — 6.4 6.4
Total trading result 77.8 (11.2) 27.3 12.1 (38.0) 95.9 (21.5) 74.4
Non-trading items:
Business exits – non-trading 9 — (8.0) (8.0)
Other adjusting items 5 — (76.3) (76.3)
Operating profit/(loss) 95.9 (105.8) (9.9)
Interest income 6 10.0
Interest expense 6 (56.3)
Share of results in associates and losses on financial assets 9 (11.8)
Gain/(loss) on business disposal 9 184.6
Profit/(loss) before tax 116.6
Supplementary Information
Depreciation and amortisation 35.8 39.3 6.0 5.2 1.7 88.0 1.9 89.9
Impairment of property, plant and equipment, intangible, right-of-use assets and goodwill 0.7 0.9 — 0.6 — 2.2 84.0 86.2
Non-current contract fulfilment assets utilisation, impairment and derecognition 57.2 5.1 3.9 0.8 — 67.0 1.3 68.3
Net onerous contract provisions — 0.3 — 17.7 — 18.0 4.1 22.1
Capita Public Service £m Capita Experience
Year ended 31 December 2023 Notes Contact Centre £m Pension Solutions £m Regulated Services £m Capita plc £m Total adjusted £m Adjusting items £m Total reported £m
Adjusted operating profit/(loss) 5 69.6 (4.0) 25.9 33.1 (33.7) 90.9 — 90.9
Cost reduction programme (7.0) (35.9) (0.5) (0.9) (10.1) — (54.4) (54.4)
Business exits – trading 9 — — — — 12.2 12.2
Total trading result 62.6 (39.9) 25.4 32.2 (43.8) 90.9 (42.2) 48.7
Non-trading items:
Business exits – non-trading 9 — (33.0) (33.0)
Other adjusting items 5 — (67.7) (67.7)
Operating profit/(loss) 90.9 (142.9) (52.0)
Interest income 6 8.7
Interest expense 6 (60.9)
Gain/(loss) on business disposal 9 (2.4)
Profit/(loss) before tax (106.6)
Supplementary Information
Depreciation and amortisation 40.3 45.5 5.3 6.7 3.6 101.4 7.4 108.8
Impairment of property, plant and equipment, intangible, right-of-use assets and goodwill 1.5 2.5 — 0.1 0.1 4.2 65.4 69.6
Non-current contract fulfilment assets utilisation, impairment and derecognition 57.8 6.1 4.3 5.6 — 73.8 10.7 84.5
Net onerous contract provisions — 1.6 — 7.8 — 9.4 — 9.4
4 Revenue and segmental information continued
Geographical location
The table below presents the carrying amount of non-current assets (excluding
deferred tax, financial assets and employee benefits) by the geographical
location of those assets.
2024 2023
United Kingdom £m Europe £m Other £m Total £m United Kingdom £m Europe £m Other £m Total £m
Non-current assets 922.6 25.0 21.3 968.9 1,112.6 14.1 17.0 1,143.7
5 Adjusted operating profit and adjusted profit before tax
IAS 1 Presentation of Financial Statements permits an entity to present
additional information for specific items to enable users to better assess the
entity’s financial performance.
The Board has adopted a policy to disclose separately those items that it
considers are outside the underlying operating results for the particular year
under review and against which the Group’s performance is assessed
internally. In the Board’s judgement, these need to be disclosed separately
by virtue of their nature, size and/or incidence, for users of the
consolidated financial statements to obtain an understanding of the financial
information and the underlying performance of the Group. In general, the Board
believes that alternative performance measures (APMs) are useful for investors
because they provide further clarity and transparency of the Group’s
financial performance and are closely monitored by management to evaluate the
Group’s operating performance to facilitate financial, strategic and
operating decisions. Accordingly, these items are also excluded from the
discussion of divisional performance in the strategic report. This policy is
kept under review by the Board and the Audit and Risk Committee.
The Board considers APMs to be helpful to the reader, but notes that APMs have
certain limitations, including the exclusion of significant recurring and
non-recurring items, and may not be directly comparable with similarly titled
measures presented by other companies.
Those items excluded from the adjusted income statement are: business exits;
amortisation and impairment of acquired intangibles; impairment of goodwill;
certain mark-to-market valuation changes that impact net finance costs/income;
the costs associated with the cyber incident in March 2023, and the costs
associated with the cost reduction programme.
The items below are excluded from the adjusted results: Operating profit/(loss) Profit/(loss) before tax
Notes 2024 £m 2023 £m 2024 £m 2023 £m
Reported (9.9) (52.0) 116.6 (106.6)
Amortisation and impairment of acquired intangibles 0.2 0.2 0.2 0.2
Impairment of goodwill 75.1 42.2 75.1 42.2
Net finance costs 6 — — 0.1 2.2
Business exits 9 1.6 20.8 (170.9) 23.2
Cyber incident 1.0 25.3 1.0 25.3
Cost reduction programme 27.9 54.4 27.9 54.4
Adjusted 95.9 90.9 50.0 40.9
1. Adjusted operating profit increased by 5.5% (2023: increased 36.5%) and
adjusted profit before tax increased by 22.2% (2023: increased 13.5%).
Adjusted operating profit of £95.9m (2023: profit £90.9m) was generated on
adjusted revenue of £2,369.1m (2023: £2,575.8m) resulting in an adjusted
operating margin of 4.0% (2023: 3.5%).
2. The tax charge on adjusted profit before tax is £10.3m (2023: £47.4m
charge) resulting in adjusted profit after tax of £39.7m (2023: £6.5m loss).
3. The adjusted operating profit and adjusted profit before tax for 2023 has
been re-presented for the impact of business exits during 2024 and the change
in adjusting items. This has resulted in adjusted operating profit decreasing
from £106.5m to £90.9m and adjusted profit before tax decreasing from
£56.5m to £40.9m.
Amortisation and impairment of acquired intangible assets: the Group
recognised acquired intangible amortisation of £0.2m (2023: £0.2m). These
charges are excluded from the adjusted results of the Group because they are
non-cash items generated from historical acquisition related activity. The
charge is included within administrative expenses.
Impairment of goodwill: the Group carries on its balance sheet significant
amounts of goodwill which are subject to annual impairment testing and when
any indicators of impairment are identified. Any impairment changes are
reported separately because they are non-cash items generated from historical
acquisition related activity. The charge is included within administrative
expenses.
Net finance costs: net finance costs excluded from adjusted profits relate to
movements in the mark-to-market value of forward foreign exchange contracts to
cover anticipated future costs and therefore have no equivalent offsetting
transaction in the accounting records, also refer to note 6.
Business exits: the trading result of businesses exited, or in the process of
being exited, and the gain or loss on disposals are excluded from the Group's
adjusted results. Note 9 provides further detail regarding which income
statement line items are impacted by business exits.
Cyber incident: The Group has incurred exceptional costs associated with the
March 2023 cyber incident. These costs comprise specialist professional fees,
recovery and remediation costs and investment to reinforce Capita’s cyber
security environment. A charge of £1.0m, net of insurance receipts, has been
recognised in the year ended 31 December 2024 (2023: charge of £25.3m).
Cumulatively the net costs incurred total £26.3m and are included within
administrative expenses. Further insurance receipts are anticipated but did
not meet the criteria for recognition at 31 December 2024. Refer to note 13
contingent liabilities.
Cost reduction programme: The Group implemented a multi-year cost reduction
programme in November 2023 to deliver savings of £60m by Q1 2024. The
programme was extended in March 2024, to deliver further savings of £100m by
mid-2025. In December 2024, reflecting on the progress made ahead of schedule
with £140m annualised savings already delivered, and increased confidence in
the level of efficiencies that can be delivered, the cost reduction target
increased from £160m to £250m by the end of 2025.
The Group exercises judgement in assessing whether the actions being taken to
deliver these savings are exceptional as opposed to business as usual, and
therefore whether or not the costs to deliver the savings should be excluded
from the Group's adjusted results. The assessment considers the nature of the
activity being undertaken, in particular, whether it was anticipated in the
original bid to win a customer contract. Investment in new technology that
supports the delivery of customer contracts are considered business as usual
and are not excluded from the Group’s adjusted results.
5 Adjusted operating profit and adjusted profit before tax continued
A charge of £27.9m (2023: £54.4m) has been recognised in the year ended
31 December 2024 for the costs to deliver the cost reduction programme. This
includes redundancy and other costs of £30.5m (2023: £23.3m) to deliver a
significant reduction in headcount, partly offset by a credit of £2.6m
reflecting the successful exit of a number of properties which had been
provided for in the previous year (2023: charge of £31.1m arising from the
rationalisation of the Group’s property estate with impairment of
right-of-use assets and property, plant & equipment, and provisions in respect
of onerous property costs). The cumulative cost recognised since the
commencement of the cost reduction programme is £82.3m (2023: £54.4m), which
is included within administrative expenses.
Refer to note 10 for the cash flow impact of the above.
6 Net finance costs
The table below shows the composition of net finance costs, including those
excluded from adjusted profit:
2024 £m 2023 £m
Finance income
Interest income
Interest on cash (2.3) (1.9)
Interest on finance lease assets (5.6) (4.1)
Net interest income on defined benefit pension schemes (2.1) (2.7)
Total finance income (10.0) (8.7)
Finance costs
Interest expense
Private placement loan notes 1 20.0 16.3
Bank loans and overdrafts 8.5 14.1
Cost of non-recourse trade receivables financing 3.4 3.7
Interest on finance lease liabilities 22.4 22.3
Discount unwind on provisions 1.6 2.3
Total interest expense 55.9 58.7
Finance costs included within business exits
Interest on finance lease liabilities 0.3 —
Finance costs excluded from adjusted profits
Non-designated foreign exchange forward contracts – change in mark-to-market value (0.4) 3.2
Fair value hedge ineffectiveness 2 0.5 (1.0)
Total finance costs excluded from adjusted profit 0.4 2.2
Total finance costs 56.3 60.9
Net finance costs included in adjusted profit 45.9 50.0
Total net finance costs 46.3 52.2
1. Private placement loan notes comprise US dollar and British pound sterling
private placement loan notes, and the euro fixed rate bearer notes which were
repaid during 2023.
2. Fair value hedge ineffectiveness arises from changes in currency basis, and
the movement in a provision for counterparty risk associated with the swaps.
7 Taxation
Income tax charge
The reported income tax charge for the period is £36.2m on reported profit
before tax of £116.6m (2023: reported income tax charge of £74.0m on
reported loss of £106.6m), and an adjusted income tax charge for the period
of £10.3m on adjusted profit before tax of £50.0m (2023: adjusted tax charge
of £47.4m on adjusted profit of £40.9m). This includes £0.2m (2023: £nil)
relating to Pillar Two current income taxes. The most significant reconciling
items, explaining the difference from the standard UK corporation tax rate of
25.0% for the period (2023: 23.5%) are non-taxable profits on disposal of
businesses, non-deductible impairments, changes in the accounting estimate of
recognised deferred tax assets and unrecognised losses, and other temporary
differences carried forward.
The forecast future adjusted effective tax rate, before and assuming no
material changes to tax laws in the jurisdictions in which Capita operates, is
expected to be broadly similar to the UK corporation tax rate, with an
increase for taxable profits in higher tax rate jurisdictions.
The major components of the income tax charge are set out below:
2024 2023
Consolidated income statement Total Included in Not included in Total Included in adjusted profit 1 £m Not included in adjusted profit 1 £m
reported adjusted adjusted reported
£m profit profit £m
£m £m
Current income tax
Current income tax charge/(credit) 15.3 13.6 1.7 26.2 26.4 (0.2)
Adjustment in respect of prior years 2.5 2.5 — 4.0 4.0 —
Deferred tax
On origination and reversal of temporary differences 19.5 (4.7) 24.2 43.9 17.1 26.8
Effect of changes in tax rate on deferred tax balances — — — (0.4) (0.4) —
Adjustment in respect of prior years (1.1) (1.1) — 0.3 0.3 —
Total charge 36.2 10.3 25.9 74.0 47.4 26.6
1. To enable a like-for-like comparison of adjusted results, the 2023
comparatives have been re-presented to exclude the businesses classified as
business exits during 2024 from adjusted profit. Refer to note 9.
Consolidated statement of comprehensive income and consolidated statement of changes in equity 2024 £m 2023 £m
Deferred tax movement on cash flow hedges 1.8 (2.6)
Deferred tax movement in relation to actuarial changes on defined benefit pension schemes 7.0 3.3
Current income tax movement on defined benefit pension scheme contributions (9.8) (19.2)
Deferred tax movement in relation to share-based payments 0.2 (0.1)
Current income tax deduction on the exercise of share options — (0.2)
Total credit (0.8) (18.8)
7 Taxation continued
The reconciliation between the total tax charge and the accounting profit
multiplied by the UK weighted average corporation tax rate is as follows:
Total tax Current tax
2024 £m 2023 £m 2024 £m 2023 £m
Profit/(loss) before tax 116.6 (106.6) 116.6 (106.6)
Notional charge/(credit) at UK corporation tax rate of 25.0% (2023: 23.5%) 29.2 (25.1) 29.2 (25.1)
Adjustments in respect of current income tax of prior years a 2.5 4.0 2.5 4.0
Adjustments in respect of deferred tax of prior years b (1.1) 0.3 — —
Non-deductible expenses/(non-taxable income) – adjusted 5.0 0.2 5.0 0.2
Non-deductible expenses – business exit c* 2.7 4.9 2.7 4.9
Non-deductible expenses – specific items — 1.7 — 1.7
(Profit)/loss on disposal of businesses d* (46.1) 0.6 (46.1) 0.6
Pillar Two income taxes 0.2 — 0.2 —
Non-deductible goodwill impairment e* 18.7 9.9 18.7 9.9
Difference in rate recognition of temporary differences — (0.4) — —
Tax provided on unremitted earnings f (0.5) 0.2 — —
Attributable to different tax rates in overseas jurisdictions g (0.5) (4.3) (0.1) (2.9)
Movement in unrecognised temporary differences 26.1 82.0 — —
Fixed asset temporary differences — — 4.2 5.7
Current tax impact on other temporary differences — — (3.5) (0.4)
Carry forward of losses in current period h — — 5.0 31.6
At the effective total tax rate of 31.0% (2023: (69.4)%) and the effective current tax rate of 15.3% (2023: (28.3)%) i 36.2 74.0 17.8 30.2
Tax charge reported in the income statement 36.2 74.0 17.8 30.2
* These £(24.7)m (2023: £15.4m) of reconciling items relate to the
reported tax charge only, with no impact on the adjusted tax charge. Further
details are given below.
a The £2.5m prior year charge adjustment includes: (i) £1.1m charge which
has a corresponding impact within deferred tax of prior years; and, (ii) a
£1.4m charge to adjust for finalisation of submitted tax returns and
withholding tax claims in Ireland for which there is no opposite deferred tax
credit in relation to the temporary difference true-up because these are
unrecognised.
b Adjustments in respect of deferred tax of prior years mainly relate to
£1.1m of charges which have a corresponding impact within current income tax
of prior years.
c* Business exit: relates to non-deductible closure costs associated with the
sale of entities. Refer to note 9 for further details.
d* Relates to the gain/loss on disposal of entities in the current year.
Refer to note 9 for further details.
e* Relates to the goodwill impairments as detailed further in note 11.
f Movement on the deferred tax liability recognised on the unremitted
earnings of those subsidiaries affected by withholding taxes.
g Mainly relates to withholding tax and tax payable at rates which are lower
than the UK such as Switzerland and Ireland.
h Relates to the carry forward of losses and non-deductible interest in the
period.
i The current tax charge of £17.8m (2023: £30.2m) results in an effective
current tax rate of 15.3%, which is different from the UK statutory rate of
tax of 25% predominantly due to a non-taxable gain on the profit on disposal
of businesses during the year, non-deductible goodwill impairment,
unrecognised losses and interest disallowance carried forward, and expenses
not deductible for tax purposes, including non-qualifying depreciation and
capital related costs. The impact of differing overseas tax rates is covered
in footnote g.
Deferred tax
Deferred tax relates to the following:
Credited/(charged) to
At 1 January £m Income OCI and Other movements 2 £m At 31 December £m
statement changes in
£m equity
£m
Deferred tax assets
Fixed assets which qualify for tax relief 87.2 (8.5) — (0.9) 77.8
Provisions and other temporary differences 11.3 (1.3) (1.8) — 8.2
Pension schemes 1.8 (3.4) (7.0) — (8.6)
Share-based payments 1.5 — (0.2) — 1.3
Tax losses 1 36.7 (6.0) — — 30.7
138.5 (19.2) (9.0) (0.9) 109.4
Jurisdictional netting 1.8 2.2
Net deferred tax assets 140.3 (19.2) (9.0) (0.9) 111.6
Deferred tax liabilities
Acquired intangibles (0.1) — — — (0.1)
Contract fulfilment assets (0.2) 0.1 — — (0.1)
Unremitted earnings (5.1) 0.7 — (0.2) (4.6)
(5.4) 0.8 — (0.2) (4.8)
Jurisdictional netting (1.8) (2.2)
Net deferred tax liabilities (7.2) 0.8 — (0.2) (7.0)
Net deferred tax 133.1 (18.4) (9.0) (1.1) 104.6
1. Mainly trading losses available to shelter future profits and deferred
interest.
2. Other movements includes business disposals.
7 Taxation continued
The main movement in the net deferred tax asset is the income statement tax
charge arising on the change in the accounting estimate of deferred tax.
On 6 April 2024, it was announced that the free-standing tax charge that
applies to authorised surplus payments to sponsoring employers of a registered
defined benefit pension scheme will reduce from 35% to 25%. This was
substantively enacted retrospectively from 11 March 2024. Therefore, for the
purpose of recognising deferred tax on the pension scheme surplus, withholding
tax at 25% (2023: 35%) would apply for any surplus being refunded to the
Group at the end of the life of the scheme. Corporation tax at 25% would apply
for any surplus expected to unwind over the life of the scheme. Management
have concluded that the corporation tax rate should apply to the recognition
of deferred tax on the pension scheme surplus, reflecting the Group’s
intention regarding the manner of recovery of the asset.
Deferred tax assets are recognised only to the extent that it is probable that
future taxable profits will be available against which the assets can be
utilised. The recoverability of deferred tax assets is supported by the
deferred tax liabilities against which the reversal can be offset and the
expected level of future taxable profits available to offset the assets when
they reverse.
The recognition of deferred tax assets at 31 December 2024 has been based on
the forecast accounting profits in the 2025-2027 business plan approved by the
Board. This is the same plan used to derive forecast cash flows for the
goodwill impairment test (refer to note 11). A long-term growth rate of 1.6%,
as used for impairment test purposes, has been applied to the years beyond
2027. A reducing probability factor has also been applied to future profits
for the potential decrease in reliability of forecasts extrapolated for later
years, such that profits beyond seven years of the balance sheet date have not
been considered probable for the purpose of assessing deferred tax asset
recognition.
Unused tax losses make up a significant proportion of the temporary
differences available to be utilised in future periods. These losses mainly
arose due to the historic adoption of IFRS 15, previous Covid-19 related
downward pressures on profits and tax deductible restructuring costs, cyber
costs and pension contributions. Based on the forecast accounting profits,
management have concluded that some of the deductible temporary differences
and unused tax losses are not recognisable due to uncertainty in their
recoverability. There is a decrease in the amounts previously recognised in
respect of deferred tax assets and an increase in unrecognised temporary
differences arising during the year. The impact of this is a debit to the
income statement of £18.4m, and a debit to OCI and changes in equity of
£9.0m. This is included in the movement in unrecognised temporary differences
of £26.1m in the tax reconciliation table above, which also includes
unrecognised current year temporary differences (mainly losses) of £5.7m. The
reported income statement charge includes £26.0m change in the deferred tax
asset estimate due to the reduction in future taxable profits on disposal of
taxable subsidiaries, reflected in the tax arising on business exits (see note
9).
Deferred tax asset recognition depends on the reliability of management’s
forecasts and the assumptions that underlie them. Management have considered
the severe but plausible downsides applied to the base-case projections for
assessing going concern and viability, to gauge sensitivity and identify a
reasonable possible alternative result. This scenario identified a further
potential reduction in recognised deferred tax assets of approximately £7.6m.
The Group has unrecognised tax losses and other temporary differences that are
available for offset against future taxable profits of the companies in which
the losses or other temporary differences arose but have not been recognised
because their recoverability is uncertain. The table below shows the amounts
split between UK and non-UK jurisdictions.
2024 £m Gross Amount 2023 £m Gross Amount
UK:
Tax losses 667.6 628.7
Other temporary timing differences 239.2 140.2
906.8 768.9
Non-UK:
Tax losses 64.0 67.4
Other temporary timing differences 12.4 11.2
76.4 78.6
Total 983.2 847.5
The £135.7m increase in unrecognised tax losses and other temporary
differences reflects the decrease in amounts previously recognised in respect
of deferred tax assets, and unrecognised temporary differences arising during
the year due to: deferred interest; tax deductible cost reduction programme
expenses; and pension contributions.
Assets have no time expiry, but some losses are subject to specific loss
restriction rules. £41.8m (2023: £28.8m) of the losses were incurred by
companies acquired by the Group and are not a result of the Group’s trading
performance.
Dividends received from subsidiaries are largely exempt from UK tax but may be
subject to dividend withholding taxes levied by the overseas tax jurisdictions
in which the subsidiaries operate. The gross temporary differences of those
subsidiaries affected by such potential taxes is £45.6m (2023: £48.4m). A
deferred tax liability of £4.5m (2023: £5.1m) has been recognised on the
unremitted earnings of those subsidiaries affected by such potential taxes
because the Group is able to control the timing of reversal and it is
anticipating dividends to be distributed. The earnings remitted during the
year have resulted in a reduction in the closing deferred tax liability.
8 Earnings/(loss) per share
Basic earnings/(loss) per share are calculated by dividing net profit/(loss)
for the period attributable to ordinary equity holders of the Parent Company
by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings/(loss) per share are calculated by dividing the net
profit/(loss) for the period attributable to ordinary equity holders of the
Parent Company by the weighted average number of ordinary shares outstanding
during the year plus the weighted average number of ordinary shares that would
be issued on the conversion of all the dilutive potential ordinary shares into
ordinary shares.
2024 2023
pence pence
Basic earnings/(loss) per share – reported 4.54 (10.60)
– adjusted 2.11 (0.20)
Diluted earnings/(loss) per share – reported 4.41 (10.60)
– adjusted 2.05 (0.20)
The following tables show the earnings and share data used in the basic and
diluted earnings/(loss) per share calculations:
2024 2023
£m £m
Reported profit/(loss) before tax for the period 116.6 (106.6)
Income tax (charge)/credit 7 (36.2) (74.0)
Reported profit/(loss) for the period 80.4 (180.6)
Less: Non-controlling interest (3.7) 2.5
Total profit/(loss) attributable to shareholders 76.7 (178.1)
Adjusted profit before tax 1 for the period 5 50.0 40.9
Income tax (charge)/credit 7 (10.3) (47.4)
Adjusted profit/(loss) for the period 39.7 (6.5)
Less: Non-controlling interest (4.1) 3.1
Adjusted profit/(loss) attributable to shareholders 35.6 (3.4)
1. Definitions of the alternative performance measures and related key
performance indicators (KPIs) can be found in the Appendix.
2024 2023 m
m
Weighted average number of ordinary shares (excluding Employee Benefit Trust shares) for basic earnings per share 1,690.4 1,680.9
Dilutive potential ordinary shares:
Employee share options 50.1 —
Weighted average number of ordinary shares (excluding Employee Benefit Trust shares) adjusted for the effect of dilution 1,740.5 1,680.9
At 31 December 2024 no (2023: 35,795,731) options were excluded from the
diluted weighted average number of ordinary shares calculation because their
effect would have been anti-dilutive. Under IAS 33 Earnings per Share,
potential ordinary shares are treated as dilutive when, and only when, their
conversion to ordinary shares would decrease earnings per share or increase
loss per share from continuing operations.
The earnings per share figures are calculated based on earnings attributable
to ordinary equity holders of the Parent Company and therefore exclude
non-controlling interest. The earnings per share is calculated on a total
reported and an adjusted basis. The earnings per share for business exits and
specific items are reconciling items between total reported and adjusted basic
earnings per share.
There have been no other transactions involving ordinary shares or potential
ordinary shares between the balance sheet date and the date on which these
consolidated financial statements were authorised for issue.
9 Business exits and assets held-for-sale
Business exits
Business exits are businesses that have been sold, exited during the period,
or are in the process of being sold or exited in accordance with the Group's
strategy. None of these business exits meets the definition of ‘discontinued
operations’ as stipulated by IFRS 5 Non-current assets held-for-sale and
discontinued operations, which requires comparative financial information to
be restated where the relative size of a disposal or business closure is
significant, which is normally understood to mean a reported segment.
However, the trading result of these businesses, non-trading expenses, and any
gain/loss on disposal, have been excluded from adjusted results. To enable a
like-for-like comparison of adjusted results, the 2023 comparatives have been
re-presented to exclude the businesses classified as business exits during
2024.
Assets held-for-sale
The Group classifies a non-current asset (or disposal group) as held-for-sale
if its carrying amount will be recovered principally through a sale
transaction instead of continued use. For this to be the case, the asset (or
disposal group) must be available for immediate sale in its present condition
subject only to terms that are usual and customary for sales of such assets
(or disposal groups) and its sale must be highly probable. For the sale to be
highly probable, the appropriate level of management must be committed to a
plan to sell the asset (or disposal group), and an active programme to locate
a buyer and complete the plan must have been initiated. Further, the asset (or
disposal group) must be actively marketed for sale at a price that is
reasonable in relation to its current fair value, and the sale should be
expected to be completed within one year from the date of classification.
Based on the above requirements, individual businesses will only reach the
criteria to be treated as held-for-sale where the disposal is seen to be
highly probable and expected to complete within the following twelve months.
At 31 December 2024 one business (the Group’s mortgage servicing business)
was deemed to have met this threshold. At 31 December 2023 one business (the
Group’s 75% shareholding in Fera Science Limited (Fera)) was deemed to have
met this threshold.
2024 business exits
Business exits at 31 December 2024 primarily comprised the following business
disposals:
Business Disposal completed on
Fera 17 January 2024
Capita One 5 September 2024
In addition to the above disposals, as disclosed in the 2023 Annual Report,
the Group decided to exit a business in Capita Public Service during 2023.
During 2024, the Group decided to exit its corporate venture business (Capita
Scaling Partner) in Capita Experience, and a further business from Capita
Public Service. The trading results and non-trading expenses of these
businesses have also been excluded from adjusted results.
The Capita Scaling Partner business manages the Group’s investments in
start-up and scale-up companies. Of these investments, during the year, two
associates were sold realising a net gain of £0.3m and two other investments
were sold realising a loss of £7.4m which are included within ‘share of
results in associates and losses on financial assets’ in the table below.
Also included is a net loss of £4.6m in relation to the revaluation of the
remaining Capita Scaling Partner investments and a loss of £0.1m being the
share of the results of the associates before they were sold. Following the
decision to exit the Capita Scaling Partner business in the first half of the
year and the losses realised on disposals in the second half of 2024, the
Group has evolved its approach to valuing the remaining investments to take
into account recent experiences, and to better reflect expected disposal
proceeds. The Group will seek to maximise value from the remaining Capita
Scaling Partner investments, which at 31 December 2024 had an aggregate
carrying value of £4.8m (2023: £17.8m), including loans receivable by
Capita of £0.7m (2023: £0.7m).
2024 2023 (Re-presented) 1
Income statement impact Trading Non-trading Total Trading Non-trading Total
£m £m £m £m £m £m
Revenue 52.5 — 52.5 238.8 — 238.8
Cost of sales (44.5) — (44.5) (160.0) — (160.0)
Gross profit 8.0 — 8.0 78.8 — 78.8
Administrative expenses (1.6) (8.0) (9.6) (66.6) (33.0) (99.6)
Operating profit/(loss) 6.4 (8.0) (1.6) 12.2 (33.0) (20.8)
Share of results in associates and losses on financial assets — (11.8) (11.8) — — —
Finance costs (0.3) — (0.3) — — —
Gain/(loss) on disposal of businesses — 184.6 184.6 — (2.4) (2.4)
Profit/(loss) before tax 6.1 164.8 170.9 12.2 (35.4) (23.2)
Taxation (1.7) (24.3) (26.0) 0.3 (27.6) (27.3)
Profit/(loss) after tax 4.4 140.5 144.9 12.5 (63.0) (50.5)
1. To enable a like-for-like comparison of adjusted results, the 2023
comparatives have been re-presented to include the businesses classified as
business exits during 2024.
Trading revenue and costs represent the trading performance of the above
businesses up to the point of being disposed or exited, and in the comparative
period also those businesses disposed of during 2023 (being: Resourcing,
Security Watchdog, PageOne, Software, Enforcement, and Travel).
Trading expenses primarily comprise payroll costs of £29.4m (2023: £152.4m)
and information technology costs of £15.8m (2023: £39.2m), and in the
comparative period, the de-recognition of non-current contract fulfilment
assets of £8.2m on the early termination of a customer contract for a
business in Capita Public Service that was first treated as a business exit in
2023.
Non-trading administrative expenses include: asset impairments of £8.7m
(2023: £25.4m); disposal project costs of £1.1m (2023: £5.6m); other costs
including staff and redundancy costs of £nil (2023: £2.6m); and, other
income of £1.8m (2023: £0.6m). The asset impairments include goodwill within
assets held-for-sale of £nil (2023: £18.1m); property, plant and equipment
of £0.2m (2023: £7.1m); intangible assets of £8.5m (2023: £nil); and,
right-of-use-assets of £nil (2023: £0.2m).
9 Business exits and assets held-for-sale continued
2024 disposals
During 2024 the Group disposed of two businesses: the Group's 75% shareholding
in Fera, and Capita One. During 2023 the Group disposed of six businesses:
Resourcing, Security Watchdog, PageOne, Software, Enforcement and Travel.
The gain/(loss) arising was determined as follows:
2024 £m 2023 £m
Property, plant and equipment — 0.3
Intangible assets — 8.6
Goodwill — 3.2
Right-of-use assets — 0.2
Income tax recoverable and deferred tax assets — 0.8
Trade and other receivables — 78.6
Cash and cash equivalents — 14.6
Disposal group assets held-for-sale 1 157.8 78.2
Trade and other payables — (36.6)
Deferred income — (3.9)
Lease liabilities — (0.2)
Capita group loan balances — (42.7)
Income tax payable and deferred tax liabilities — (1.1)
Disposal group liabilities held-for-sale 1 (82.9) (33.5)
Net identifiable assets sold 74.9 66.5
Non-controlling interests (9.1) —
65.8 66.5
Sales price:
received in cash 269.8 68.4
deferred receivable — 11.4
Less: disposal costs (19.4) (15.5)
Net sales price 250.4 64.3
Realisation of cumulative currency translation difference — (0.2)
Gain/(loss) on disposal of businesses 184.6 (2.4)
Net cash inflow
Proceeds received 269.8 68.4
Less disposal costs:
income statement charge (19.4) (15.5)
change in accrued disposal costs during the year (1.3) (8.1)
Settlement of receivables due from disposed businesses:
disposal of businesses in the period — 42.7
disposal of businesses classified as held-for-sale — 9.3
Total proceeds received net of disposal costs paid 249.1 96.8
Total cash held by businesses when sold
Cash held by businesses when sold — (14.6)
Cash held by businesses classified as held-for-sale (25.2) (18.8)
Total cash held by businesses when sold (25.2) (33.4)
Net cash inflow 223.9 63.4
1. 2024 balances in respect of disposal group assets and liabilities
held-for-sale relate to Fera and Capita One which were transferred to
held-for-sale on 31 December 2023 and 30 June 2024 respectively, prior to
their disposals in 2024. The 2023 balances relate to three businesses
(PageOne, Software and Enforcement) that were transferred to held-for-sale on
30 June 2023, and were subsequently sold on 31 July 2023.
Disposal costs of £3.5m, relating to businesses disposed of in the year, were
recognised in prior years and are excluded from the above gain on disposal of
businesses.
9 Business exits and assets held-for-sale continued
Disposal group assets and liabilities
At 31 December 2024, the mortgage servicing business was deemed to have met
the threshold to be treated as held-for-sale (2023: the Fera business was
deemed to have met the held-for-sale threshold).
2024 £m 2023 £m
Property, plant and equipment 0.1 5.1
Goodwill — 15.0
Trade and other receivables — 3.3
Accrued income — 6.1
Prepayments — 1.4
Cash and cash equivalents — 7.2
Disposal group assets held-for-sale 0.1 38.1
Trade and other payables — 2.1
Other taxes and social security — 1.6
Accruals 0.1 1.8
Deferred income — 3.6
Income tax payable and deferred tax liabilities — 0.6
Disposal group liabilities held-for-sale 0.1 9.7
Business exit cash flows
Businesses exited and being exited had a cash generated from operations inflow
of £14.3m up to the date of exit (2023: cash outflow of £1.5m). A
reconciliation of cash generated from/(used) by operations excluding business
exits, is included within note 10.
10 Cash flow information
Additional cash flow information
2024 2023
Notes Reported Excluding business exits 1 £m Reported £m Excluding business exits 1 £m
£m
Cash flows from operating activities:
Reported operating loss 5 (9.9) (9.9) (52.0) (52.0)
Less: business exit operating loss 9 — 1.6 — 20.8
Total operating loss (9.9) (8.3) (52.0) (31.2)
Adjustments for non-cash items:
Depreciation 66.5 66.4 79.5 77.9
Amortisation of intangible assets 23.4 21.8 29.3 23.7
Share-based payment expense 6.0 6.0 5.5 5.5
Employee benefits 8.5 8.5 7.7 7.7
Loss on sale of property, plant and equipment and intangible assets 1.7 1.7 0.7 0.7
Amendments and early terminations of leases (6.8) (6.8) 3.0 3.0
Impairment of assets held-for-sale — — 18.1 —
Impairment of non-current assets 86.2 77.5 69.6 62.3
Other adjustments:
Movement in provisions 2 (31.2) (29.9) 23.0 15.7
Pension deficit contributions (20.8) (6.3) (46.3) (30.0)
Other contributions into pension schemes (8.4) (8.4) (9.2) (9.2)
Movements in working capital 2 :
Trade and other receivables 16.4 18.3 (30.1) (4.1)
Non-recourse trade receivables financing (11.8) (11.8) (9.2) (9.2)
Trade and other payables (65.2) (60.6) (8.5) (5.5)
Deferred income (33.2) (46.4) (77.4) (80.5)
Contract fulfilment assets (non-current) (5.4) (5.5) 5.0 (0.3)
Cash generated from operations 16.0 16.2 8.7 26.5
Adjustments for free cash flows:
Income tax paid 3 (4.0) (4.0) (8.1) (4.2)
Income tax received 3 5.1 5.1 0.6 0.6
Interest received 8.0 7.9 6.2 6.2
Interest paid (50.3) (50.3) (47.7) (47.7)
Net cash outflow from operating activities (25.2) (25.1) (40.3) (18.6)
Purchase of property, plant and equipment (16.6) (16.3) (28.8) (26.4)
Purchase of intangible assets (33.5) (33.5) (32.8) (26.3)
Proceeds from sale of property, plant and equipment and intangible assets 0.3 0.3 0.1 0.1
Capital element of lease rental receipts 5.9 5.9 6.0 6.0
Capital element of lease rental payments (53.6) (53.6) (59.1) (58.4)
Free cash flow 1 (122.7) (122.3) (154.9) (123.6)
1. Definitions of the alternative performance measures and related key
performance indicators (KPIs) can be found in the Appendix.
2. These movements exclude items that have been adjusted for elsewhere within
the cash flow statement. For example, balances transferred to held-for-sale or
relate to a business disposal. As such these movements may not directly agree
to the year-on-year movements within the balance sheet.
3. Income tax paid and income tax received have been separately disclosed for
the current year, with the prior year re-presented on the same basis.
Previously these were presented as net income tax paid.
Cyber incident: In relation to the exceptional cyber incident costs referred
to in note 5, the net cash outflow during the year ended 31 December 2024
was £5.0m (2023: £20.1m) and is included within free cash flow excluding
business exits, and cash generated from operations excluding business exits.
The cumulative net cash outflow since the incident in the first half of 2023
is £25.1m.
Cost reduction programme: In relation to the implementation of the cost
reduction programme detailed in note 5, the cash outflow during the year ended
31 December 2024 was £44.5m (2023: £6.1m), and is included within free cash
flow excluding business exits, and cash generated from operations excluding
business exits. The outflow in the current year was less than the expected
outflow included in the 2023 Annual Report of £50m due to a delay in the
timing of some payments. The cumulative cash outflow since the commencement of
the cost reduction programme in the second half of 2023 is £50.6m. The cost
reduction initiatives are expected to result in cash costs during 2025
totalling an estimated £55m.
10 Cash flow information continued
Free cash flow and cash generated from operations (alternative performance
measures - refer to Appendix)
The Board considers free cash flow, and cash generated from operations
excluding business exits, to be alternative performance measures because these
metrics provide a more representative measure of the sustainable cash flow of
the Group. Comparative amounts have been re-presented.
These measures are analysed below:
Free cash flow Cash generated/(used) by operations
2024 £m 2023 £m 2024 £m 2023 £m
Reported (including business exits) (122.7) (154.9) 16.0 8.7
Business exits (14.1) 15.0 (14.3) 1.5
Pension deficit contributions triggered by disposals 14.5 16.3 14.5 16.3
Excluding business exits (122.3) (123.6) 16.2 26.5
A reconciliation of net cash flow to movement in net debt is included below.
Business exits: the cash flows of businesses exited, or in the process of
being exited, and the proceeds from disposals, are disclosed outside the
adjusted results. The 2023 results have been re-presented for those businesses
exited, or in the process of being exited, during 2024 to enable comparability
of the adjusted results.
Pension deficit contributions triggered by disposals: the Trustee of the
Group’s main defined benefit pension scheme (HPS) has an agreement with the
Group that if there is a future deficit in the scheme, the Group will
accelerate the payment of future agreed deficit contributions on a pound for
pound basis in the event of disposal proceeds being used to fund mandatory
prepayments of debt. The Trustmarque disposal in March 2022 resulted in an
accelerated deficit contribution of £14.5m being paid during 2024. The
disposal of Pay360 and Capita Translation and Interpreting in the second half
of 2022 and Resourcing in 2023 resulted in accelerated deficit contributions
of £16.3m being paid during 2023. Given the healthy funding position of HPS
in its latest funding valuation, the Group has paid all outstanding deficit
contributions at this time.
Reconciliation of net cash flow to movement in net debt
Year ended 31 December 2024 Net debt at 1 January £m Cash flow Total Non-cash movement £m Net debt at 31 December £m
movements
£m
Cash, cash equivalents and overdrafts 67.6 124.5 (0.7) 191.4
Private placement loan notes (267.0) — (4.9) (271.9)
Unamortised transaction costs on debt issuance 4.5 — (1.9) 2.6
Carrying value of private placement loan notes (262.5) — (6.8) (269.3)
Cross-currency interest rate swaps 13.6 (3.4) 2.0 12.2
Fair value of private placement loan notes (248.9) (3.4) (4.8) (257.1)
Other finance (0.1) — — (0.1)
Lease liabilities (363.4) 76.3 (61.6) (348.7)
Total net liabilities from financing activities (612.4) 72.9 (66.4) (605.9)
Deferred consideration payable (0.7) — — (0.7)
Net debt (545.5) 197.4 (67.1) (415.2)
Year ended 31 December 2023 Net debt at 1 January £m Cash flow movements £m Total Non-cash movement £m Net debt at 31 December £m
Cash, cash equivalents and overdrafts 177.2 (106.9) (2.7) 67.6
Private placement loan notes (289.5) 17.5 5.0 (267.0)
Unamortised transaction costs on debt issuance 4.0 5.4 (4.9) 4.5
Carrying value of private placement loan notes (285.5) 22.9 0.1 (262.5)
Cross-currency interest rate swaps 24.8 (6.9) (4.3) 13.6
Fair value of private placement loan notes (260.7) 16.0 (4.2) (248.9)
Other finance (0.7) 0.5 0.1 (0.1)
Lease liabilities (397.5) 81.4 (47.3) (363.4)
Total net liabilities from financing activities (658.9) 97.9 (51.4) (612.4)
Deferred consideration payable (0.7) — — (0.7)
Net debt (482.4) (9.0) (54.1) (545.5)
Overdrafts comprise the aggregate value of overdrawn bank account balances
within the Group’s notional interest pooling arrangements. These aggregate
overdrawn amounts are fully offset by surplus balances within the same
notional pooling arrangements.
At 31 December 2024, the Group’s £250.0m committed revolving credit
facility was undrawn (31 December 2023: undrawn).
11 Goodwill
At 31 December 2024, the carrying value of goodwill was £372.4m (2023:
£495.7m). The decrease is primarily due to a £75.1m impairment of the
Contact Centre cash generating unit (CGU) and the disposal of Capita One
(£47.0m).
Cash-generating units
In line with the determination in the second half of the year that the Capita
Experience division comprises three operating segments: Contact Centre,
Pension Solutions and Regulated Services (refer to the divisional
performance), the Group has reviewed the historical assessment of CGUs and the
allocation of goodwill. Reflecting the way management now exercises oversight
and monitors the Group’s performance, the Board concluded that the lowest
level at which goodwill is monitored is at the divisional level for Capita
Public Service, and at a sub-divisional level for Capita Experience in line
with the aforementioned operating segments, and goodwill has been reallocated
to these groups of CGUs (hereafter referred to as CGU) accordingly.
Where possible, goodwill was reallocated to the new CGUs by transferring the
goodwill balance created on acquisition of the business to the CGU in which
the business now primarily resides under the new organisational structure. In
some cases, it was not possible to clearly determine a single CGU in which the
acquired business now primarily resides, and in these instances the relevant
goodwill was allocated to the CGU that best reflected the original balance.
The opening goodwill balance as at 1 January 2024 has been reallocated to
these CGUs for comparable purposes.
Carrying amount of goodwill allocated to CGUs:
Capita Public Service £m Capita Experience
CGU Contact Centre £m Pension Solutions £m Regulated Services £m Total £m
At 1 January 286.4 148.6 60.7 — 495.7
Transfer to assets held-for-sale 1 (47.0) — — — (47.0)
Impairment – excluded from adjusted profit — (75.1) — — (75.1)
Exchange movement — (1.2) — — (1.2)
At 31 December 239.4 72.3 60.7 — 372.4
1. Transfers to disposal group assets held-for-sale in the year ended
31 December 2024 is in respect of Capita One that was transferred at 30 June
2024 and subsequently sold during the second half of the year.
The impairment test
The Group’s impairment test compares the carrying value of each CGU with its
recoverable amount. The recoverable amount of a CGU is the higher of fair
value less cost of disposal, and its value in use. As the Group continues to
implement the Group-wide cost reduction programme first announced in November
2023 and referred to in note 5, and continues to be committed to evaluating
additional cost savings opportunities, it has been determined that at
31 December 2024, fair value less costs of disposal will generate the higher
recoverable amount.
The valuation of CGUs under fair value less costs of disposal assumes that a
third-party acquirer will undertake a similar plan to derive similar benefits
in the business going forward. The enterprise value of each CGU is dependent
on the successful implementation of the cost reduction programme.
Fair value less costs of disposal for each CGU has been estimated using
discounted cash flows. The fair value measurement was categorised as a Level-3
fair value based on the inputs in the valuation technique used. The costs of
disposal have been estimated based on the Groups’ significant disposals in
recent years.
In 2024, the Contact Centre business has seen a reduction in its adjusted
revenue1, increase in its adjusted operating loss1 and reduction in its
operating cash flow excluding business exits1. These trends reflect the
one-off benefit from the Virgin Media O2 contract transition in the prior year
and the impact of prior year contract losses, both of which were reflected in
the financial projections used for impairment testing purposes previously, and
lower than expected volumes in the telecommunications vertical in the second
half of 2024, which are expected to remain subdued during 2025. The profit and
cash flow impact of these items was partially offset by an underlying margin
improvement from lower overheads from delivery of the cost reduction
programme.
The Contact Centre business also saw a reduction in bid activity across 2024,
and although there has been a strong start to 2025, the business is expecting
a high single-digit revenue reduction in 2025. In addition, the material
contracts secured in 2024 are framework agreements, which enable the customer
to both ramp-up and ramp-down volume, providing both an opportunity but also a
risk to the business’s forecast. Whilst delivery and client sentiment has
remained strong across the majority of the portfolio, certain delivery issues
have led to the reduction of volumes on one particular contract.
As detailed in the strategic review, there is a significant opportunity for
the Contact Centre business to improve its margins to be in line with those of
its peers, and it is implementing a significant reorganisation, including
delayering internal management structures and a digitisation plan to reduce
costs. A key element of its reorganisation is increasing the use of offshore
and nearshore service delivery to meet client needs. In terms of its
digitisation plan, the forecast for the business assumes an increase in the
use of its new AI and generative AI solutions, such as AgentSuite, with
significant rollout to clients underway for 2025. There is a risk with the
assumed rollout of these new technology solutions, such as the pace of
technological change, which brings increased uncertainty in delivery, and
therefore a risk to the business’s forecast.
To reflect these risks from the perspective of a market participant
perspective, and taking account of the historical performance of the business
and inherent uncertainty in forecasting, for the purposes of the impairment
test, the business plan cash flow projections have been risk adjusted in the
Contact Centre CGU from 2025 onwards.
Forecast cash flows
The cash flow projections prepared for the impairment test are derived from
the 2025-2027 business plan approved by the Board, which are prepared on a
nominal basis. Key assumptions in the business plan include the delivery of
planned revenue growth and the benefits that the cost reduction programme is
anticipated to deliver. As noted above, for the purposes of the impairment
test, the business plan cash flow projections have been risk adjusted in the
Contact Centre CGU from 2025 onwards.
The going concern severe but plausible downside scenarios have taken account
of the potential adverse financial impacts resulting from the following risks,
which include the key assumptions noted above:
◦ revenue growth falling materially short of plan;
◦ operating margin expansion not being achieved;
◦ targeted cost savings delayed or not delivered;
◦ unforeseen operational issues leading to contract losses
and cash outflows; and
◦ unexpected financial costs linked to incidents such as
data breaches and/or cyber-attacks.
11 Goodwill continued
As such, the below sensitivity analysis includes assessing the impact of these
crystallising on the impairment test performed.
Forecast cash flows have been adjusted for movements in deferred income and
contract fulfilment assets. An adjustment has also been made to the 2025 cash
flows to reflect the assumed build-up in working capital to reach a normalised
working capital position for each CGU.
Allocation of central function costs
The Board has considered an appropriate methodology to apply when allocating
central function costs. The methodology applied for the 2024 impairment test
was aligned to that applied in reporting segmental performance (refer to note
4). The remaining Group related costs of Capita plc, which have not been
allocated as part of segmental reporting, are allocated to CGUs for impairment
testing purposes based on 2025 forecast earnings before interest, tax,
depreciation and amortisation (EBITDA).
Long-term growth rate
The long-term growth rate is based on economic growth forecasts by recognised
bodies and this has been applied to forecast cash flows for years four and
five (2028 and 2029) and for the terminal period. The 2024 long-term growth
rate is 1.6% (2023: 1.7%).
Discount rates
Management estimates discount rates using nominal pre-tax rates of comparator
companies for each CGU. The discount rates reflect the latest market
assumptions for the risk-free rate, the equity risk premium and the net cost
of debt, and which are all based on publicly available external sources.
The pre-tax discount rates applied to the Contact Centre cash flows for 2024
was 11.2% (2023: 9.2% being that used for the aggregated Capita Experience
group of CGUs at 31 December 2023).
Sensitivity analysis
The impairment testing as described is reliant on the reliability of
management’s forecasts and the assumptions that underlie them; and on the
selection of the discount and growth rates to be applied. To gauge the
sensitivity of the result to a change in any one, or combination of the
assumptions that underlie the model, a number of scenarios were developed to
identify the range of reasonably possible alternatives and measure which CGUs
are the most susceptible to an impairment should the assumptions used be
varied. The most material sensitivities to the cash flow forecasts are the
risk of not delivering the planned revenue growth and efficiency savings from
the Group's cost reduction programme.
The table below shows the additional impairment required (with all other
variables being equal) through: an increase in discount rate of 1%, or a
decrease of 1% in the long-term growth rate (for the terminal period) for the
Contact Centre CGU; or, through the severe but plausible downsides applied to
the base-case projections for assessing going concern and viability, without
mitigations, for 2025 to 2027, and the long-term growth rate (1.6%) applied to
the 2027 downside cash flows to generate projected cash flows for 2028, 2029,
and the terminal period. We have also considered the impact of all the
scenarios together, which is also a reasonable possible alternative.
1% increase in discount rate Long-term growth rate decrease by 1% Severe but plausible downside Combination sensitivity
£m £m £m £m
Contact Centre (23.2) (17.4) (18.1) (55.1)
Comparison to share price and market capitalisation
The company’s market capitalisation indicates an enterprise value that
continues to be significantly less than the Group’s sum-of-the-parts CGU
valuation based upon the model prepared for impairment testing purposes at
31 December 2024. The directors gave consideration as to why this might be
the case and the reasonableness of the assumptions used in the impairment
model, and whether these points could indicate additional indicators of
impairment in respect of the Group’s goodwill balances.
The factors considered included: the differing basis of valuations (including
that third parties value the services sector on income statement multiples
versus long-term view using a discounted cash flow for the basis of impairment
testing under accounting standards), sum-of-the-parts view and the multiples
achieved on recent disposals, general market assumptions of the sector which
can ignore the liquidity profile and specific risks of an entity, and other
specific items impacting the market’s view of the Group at the moment,
including the on-going cost reduction programme.
Taking these points into consideration, the Board is comfortable that there is
no further impairment in respect of goodwill to be recognised at 31 December
2024, despite the continuing low market capitalisation of the Group.
12 Provisions
The movements in provisions during the year are as follows:
Cost reduction provision £m Business exit provision £m Claims and litigation provision £m Property provision £m Customer contract provision £m Other provisions £m Total £m
At 1 January 29.5 7.8 41.4 7.8 58.5 5.2 150.2
Reclassification between categories — — — — 0.2 (0.2) —
Provisions in the year 19.7 7.0 5.6 7.4 28.4 4.6 72.7
Releases in the year (5.0) (1.8) (11.4) (1.9) (6.4) (2.9) (29.4)
Utilisation (34.9) (6.6) (5.4) (6.9) (19.0) (1.7) (74.5)
Unwinding of discount and changes in the discount rate — — — — 0.4 — 0.4
Exchange movement (0.2) — — — 0.1 — (0.1)
At 31 December 9.1 6.4 30.2 6.4 62.2 5.0 119.3
31 December 2024 £m 31 December 2023 £m
Current 81.4 101.6
Non-current 37.9 48.6
119.3 150.2
Cost reduction provision: The provision represents the cost of reducing
headcount where communication to affected employees has crystallised a valid
expectation that roles are at risk and it is likely to unwind over the next
twelve months. Additionally, it relates to unavoidable running costs of
leasehold properties (such as insurance and security) and dilapidation
provisions, where properties are exited as a result of the cost reduction
programme. These provisions are likely to unwind over periods of up to four
years. Refer to note 5 for further details on the cost reduction programme.
Business exit provision: The provision relates to the cost of exiting
businesses through disposal or closure and the costs of separating the
businesses being disposed. These are likely to unwind over a period of one to
four years.
Claims and litigation provision: The Group is exposed to claims and litigation
proceedings arising in the ordinary course of business. These matters are
reassessed regularly and where obligations are probable and estimable,
provisions are made representing the Group’s best estimate of the
expenditure to be incurred. Due to the nature of these claims, the Group
cannot give an estimate of the period over which this provision will unwind.
Property provision: The provision relates to unavoidable running costs, such
as insurance and security, of leasehold property where the space is vacant or
currently not planned to be used, and dilapidation costs, for ongoing
operations, and not the cost reduction programme detailed in note 5 (where
such costs are included in the cost reduction provision). The expectation is
that this expenditure will be incurred over the remaining periods of the
leases which vary up to 22 years.
Customer contract provision: The provision includes onerous contract
provisions in respect of customer contracts where the costs of fulfilling a
contract (both incremental and costs directly related to contract activities)
exceeds the economic benefits expected to be received under the contract,
claims/obligations associated with missed milestones in contractual
obligations, and other potential exposures related to contracts with
customers. Customer contract life-time reviews are used to determine the value
of an onerous contract provision. The life-time contract review reflects the
forecast of the best estimate of external revenues and costs over the
remaining contract term. These provisions are forecast to unwind over periods
of up to five years.
The customer contract provision includes £43.9m (2023: £40.5m) in respect of
contracts in the closed book Life & Pensions business, which the Group is
seeking to exit, in the Regulated Services business in Capita Experience. The
closed books and contractual dynamics have led to onerous conditions to
service certain of these contracts. Management has been required to assess the
likely length of these contracts, given the pattern and experience of contract
terminations while also recognising the evergreen clauses (which potentially
allow the customer to extend the contracts indefinitely until the run-off of
the underlying life and pension books is complete). Accordingly, the Group
has, as in prior years, provided for the onerous contract conditions based on
the best estimate of the remaining contract terms and the period until the
final handover of services. At 31 December 2024, £35.4m of the provision,
which is in respect of contracts with the one remaining customer where an
earlier exit is not yet highly probable, was increased to provide cover for
the contracts to extend out to December 2029 (ie a five year rolling period),
reflecting the current best estimate of the remaining term and likely costs to
continue service delivery. The remaining £8.5m of the provision relates to a
contract where the earlier exit is highly probable at 31 December 2024, and
comprises an onerous contract provision for the remaining term and likely
costs to continue service delivery, and a provision to cover the cost to exit
the contract and handover these services.
Other provisions: Relates to provisions in respect of other exposures arising
as a result of the nature of some of the operations that the Group provides,
including supplier audit and regulatory provisions, and for which an outflow
of economic benefits is deemed probable. These are likely to unwind over
periods of up to five years.
13 Contingent liabilities
Contingent liabilities represent potential future cash outflows which are
either not probable or cannot be measured reliably.
The Group has provided, through the normal course of its business, performance
bonds and bank guarantees of £24.7m (2023: £22.5m). On adoption of IFRS 17
the Group had the option to apply either IFRS 17 or IFRS 9 for external debt
guarantees, of which the Group elected to apply IFRS 9. The Group accounts for
performance guarantees under IAS 37 as they do not meet the criteria to be
recognised as an insurance contract.
The Group is reviewing its position in respect of the contracts with the
remaining last customer for its closed book Life & Pensions contracts. The
outcomes and timing of this review, which are uncertain, could result in no
change to the current position, the continuation of contracts with amended
terms or the termination of contracts. If an operation is terminated, the
Group may incur associated costs, accelerate the recognition of deferred
income or the impairment of contract fulfilment assets.
13 Contingent liabilities continued
At the date of approval of these consolidated financial statements, we remain
in dialogue with the Information Commissioner’s Office (ICO) and are
responding to the ICO's information requests following the cyber incident in
March 2023. No formal action has been taken by the ICO in connection with the
cyber incident and there have been no preliminary findings regarding fault
that could lead to any potential regulatory penalty. The Group has received
notification of potential claims for damages by or on behalf of individuals
whose data may have been exfiltrated as part of the incident. The Group has
received only one substantive claim in relation to the cyber incident, which
was issued by Barings Law on 4 April 2024. The Group continues to vigorously
defend itself against this and any other claims which may be issued. At the
date of these financial statements, the Group do not consider future cash
outflows in relation to the one substantive claim issued by Barings Law to be
probable, and consequently no provision has been recorded. At the date of
approval of these financial statements, it is not possible to reliably
estimate the value of any existing, potential or future claim or penalty
against the Group.
The Group’s entities are parties to legal actions and claims which arise in
the normal course of business. The Group needs to apply judgement in
determining the merit of litigation against it and the chances of a claim
successfully being made. It needs to determine the likelihood of an outflow of
economic benefits occurring and whether there is a need to disclose a
contingent liability or whether a provision might be required due to the
probability assessment.
At any time there are a number of claims or notifications that need to be
assessed across the Group. The disparate nature of the Group’s entities
heightens the risk that not all potential claims are known at any point in
time.
14 Post balance sheet events
The following events occurred after 31 December 2024, and before the approval
of these consolidated financial statements, but have not resulted in
adjustment to the 2024 financial results:
Repayment of private placement loan notes
US dollar and British pound sterling private placement loan notes of USD74.3m
and £7.4m respectively were repaid at maturity on 22 January 2025, as per
their contractual values. Net of swaps the repayments were £53.6m.
Issue of private placement loan notes
In March 2025, the Group issued £94.2m equivalent of US private placement
loan notes across three tranches: £50m maturing 24 April 2028, USD13m
maturing 24 April 2028 and USD43m maturing 24 April 2030, with an average
interest rate of 7.4%. The notes rank pari passu with the existing
indebtedness of the Group and include financial covenants at the same level as
those under the revolving credit facility and existing US private placement
loan notes. Additionally, the placement requires the Group to refinance or
extend the Group’s revolving credit facility, which matures on 31 December
2026, by 31 December 2025.
Appendix - Alternative performance measures
The Group presents various alternative performance measures (APMs) because
internally the performance of the Group is reported and measured on this
basis. This includes key performance indicators (KPIs) such as adjusted
revenue, adjusted profit before tax, adjusted basic/diluted earnings per
share, free cash flow excluding business exits, and gearing ratios. In
general, the Board believes that the APMs are useful for investors because
they provide further clarity and transparency of the Group’s financial
performance and are closely monitored by management to evaluate the Group’s
operating performance to facilitate financial, strategic and operating
decisions.
These APMs should not be viewed as a complete picture of the Group’s
financial performance which is presented in the reported results. The
exclusion of certain items may result in a more favourable view when costs
such as acquired intangible amortisation, costs relating to the cyber incident
in March 2023, expenses associated with the cost reduction programme and
impairments of goodwill are excluded. These measures may not be comparable
when reviewing similar measures reported by other companies.
APM Closest equivalent IFRS measure Definition, Purpose and Reconciliation
Income statement
Adjusted revenue Revenue Calculated as revenue less any revenue relating to businesses that have been sold, or exited during the year or prior year; or, are in the process of being sold, or exited.
This measure of revenue is used internally in respect of the Group’s continuing business (being the Group’s continuing activities, which exclude business exits) and the Board believes it is a good indication of ongoing performance.
The table below shows a reconciliation between reported and adjusted revenue, as well as adjusted revenue reduction:
2024 2023
Reported revenue per the income statement £2,421.6m £2,814.6m
Deduct: business exits (note 9) £(52.5)m £(238.8)m
Adjusted revenue £2,369.1m £2,575.8m
Adjusted revenue (reduction)/growth (8.0)% 1.1%
Adjusted operating profit Operating profit Calculated as reported operating profit excluding items determined by the Board to be outside underlying operations. These items are detailed in note 5.
A reconciliation of reported to adjusted operating profit is provided in note 5.
Adjusted operating profit margin Operating margin Calculated as the adjusted operating profit divided by adjusted revenue.
This
measu
re is
an
indic
ator
of
the
Group
’s
opera
ting
effic
iency
.
The
table
below
shows
the
compo
nents
, and
calcu
latio
n, of
adjus
ted
opera
ting
margi
n:
2024 2023
Adjusted revenue a £2,369.1m £2,575.8m
Adjusted operating profit (note 5) b £95.9m £90.9m
Adjusted operating margin b/a 4.0% 3.5%
Adjusted EBITDA No direct equivalent Calculated as adjusted operating profit for the last twelve months before: depreciation, amortisation and impairment of property, plant and equipment, intangible assets and right-of-use assets; net finance costs; and the share of results in associates and losses on financial assets (other than those already excluded from adjusted operating profit).
The directors believe that adjusted Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) is a useful measure for investors because it is closely monitored by management to evaluate Group and divisional operating performance.
This measure has been calculated pre and post the impact of IFRS 16 to enable investors to understand the impact of the Group’s lease portfolio on adjusted EBITDA.
The table below shows the calculation of adjusted EBITDA:
Post IFRS 16 Pre IFRS 16
2024 2023 2024 2023
Adjusted profit before tax £50.0m £40.9m £58.0m £41.4m
Add back: adjusted net finance costs (note 6) £45.9m £50.0m £29.1m £31.8m
Add back: adjusted depreciation and impairment of property, plant and equipment £25.8m £30.7m £25.8m £30.7m
Add back: depreciation and impairment of right-of-use assets £42.2m £50.5m £—m £—m
Add back: adjusted amortisation and impairment of intangibles £22.2m £24.4m £22.2m £24.4m
Adjusted EBITDA £186.1m £196.5m £135.1m £128.3m
Adjusted EBITDA margin 7.9% 7.6% 5.7% 5.0%
Alternative performance measures continued
APM Closest equivalent IFRS measure Definition, Purpose and Reconciliation
Income statement continued
Adjusted profit/(loss) before tax Profit/(loss) before tax Calculated as profit or loss before tax excluding the items detailed in note 5, which include: business exits (trading results, non-trading expenses, and any gain/(loss) on business disposal); acquired intangible amortisation; impairment of goodwill and acquired intangibles; costs of the cyber incident in March 2023; and expenses associated with the cost reduction programme.
A reconciliation of reported to adjusted profit before tax is provided in note 5.
Adjusted profit/(loss) after tax Profit/(loss) after tax Calculated as the above adjusted profit or loss before tax, less the tax expense on adjusted profit or loss.
The table below shows a reconciliation:
2024 2023
Adjusted profit before tax (note 5) £50.0m £40.9m
Tax on adjusted profit (note 7) £(10.3)m £(47.4)m
Adjusted profit/(loss) after tax £39.7m £(6.5)m
Adjusted basic earnings per share Basic earnings per share Calculated as the adjusted profit or loss for the year after tax less non-controlling interests divided by the weighted average number of ordinary shares outstanding during the year.
The Board believes that this provides an indication of basic earnings per share of the Group on adjusted profit after tax.
For the calculation of adjusted basic earnings per share refer to note 8.
Adjusted diluted earnings per share Diluted earnings per share Calculated as the adjusted profit or loss for the year after tax less non-controlling interests divided by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would have been issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
The Board believes that this provides an indication of diluted earnings per share of the Group on adjusted profit after tax.
For the calculation of adjusted diluted earnings per share refer to note 8.
Cash flows and net debt
Cash flows generated/(used) by operations excluding business exits Cash generated/(used) by operations Calculated as the cash flows generated from operations excluding the items detailed in note 10 which includes: business exits (trading results, non-trading expenses) and pension deficit contributions which have been triggered by disposals.
A reconciliation of reported to cash generated/(used) by operations excluding business exits is provided in note 10.
Free cash flow and free cash flow excluding business exits Net cash flows from operating activities Free cash flow is calculated as cash generated from operations after: capital expenditure; income tax and interest; and the proceeds from the sale of property, plant and equipment and intangible assets; and the capital element of lease payments and receipts. Free cash flow excluding business exits has the same calculation but is excluding the impact of business exits.
Free
cash
flow
and
free
cash
flow
exclu
ding
busin
ess
exits
are
measu
res
used
to
show
how
effec
tive
the
Group
is at
gener
ating
cash
and
the
Board
belie
ves
they
are
usefu
l for
inves
tors
and
manag
ement
to
measu
re
wheth
er
the
Group
is
gener
ating
suffi
cient
cash
flow
to
fund
opera
tions
,
capit
al
expen
ditur
e,
non
-leas
e
debt
oblig
ation
s,
and
divid
ends.
A reconciliation of net cash flows from operating activities to free cash flow and free cash flow excluding business exits and a reconciliation of free cash flow to free cash flow excluding business exits are provided in note 10.
Alternative performance measures continued
APM Closest equivalent IFRS measure Definition, Purpose and Reconciliation
Cash flows and net debt continued
Operating cash flow and operating cash conversion No direct equivalent Operating cash flow calculated as reported/adjusted EBITDA less working capital and non-cash and other adjustments excluding business exits, pension deficit contributions, cyber incident and cost reduction programme.
Operat
ing
cash
conver
sion
calcul
ated
as
operat
ing
cash
flow
divide
d by
adjust
ed
EBITDA
.
The
Board
believ
es
that
this
measur
e is
useful
for
invest
ors
becaus
e it
is
closel
y
monito
red by
manage
ment
to
evalua
te the
Group’
s
operat
ing
perfor
mance
and to
make
financ
ial,
strate
gic
and
operat
ing
decisi
ons.
Reported Excluding business exits
2024 2023 2024 2023
Operating (loss)/profit £(9.9)m £(52.0)m £95.9m £90.9m
Depreciation £66.5m £79.5m £66.4m £77.9m
Amortisation of intangible assets £23.4m £29.3m £21.6m £23.5m
Impairment of assets held-for-sale £—m £18.1m £—m £—m
Impairment of non-current assets £86.2m £69.6m £2.2m £4.2m
EBITDA a £166.2m £144.5m £186.1m £196.5m
Add back: EBITDA element of cyber incident and cost reduction programme £28.7m £63.8m £—m £—m
Trade and other receivables (note 10) £16.4m £(30.1)m £18.3m £(4.1)m
Non-recourse trade receivables financing (note 10) £(11.8)m £(9.2)m £(11.8)m £(9.2)m
Trade and other payables (note 10) £(65.2)m £(8.5)m £(60.6)m £(5.5)m
Deferred income (note 10) £(33.2)m £(77.4)m £(46.4)m £(80.5)m
Contract fulfilment assets (non-current) (note 10) £(5.4)m £5.0m £(5.5)m £(0.3)m
Add back: Working capital element of cyber incident and cost reduction £0.4m £(8.1)m £0.4m £(8.1)m
programme
Working capital £(70.1)m £(64.5)m £(105.6)m £(107.7)m
Share-based payment expense (note 10) £6.0m £5.5m £6.0m £5.5m
Employee benefits (note 10) £8.5m £7.7m £8.5m £7.7m
Loss on sale of property, plant and equipment and intangible assets (note 10) £1.7m £0.7m £1.7m £0.7m
Amendments and early terminations of leases (note 10) £(6.8)m £3.0m £(6.8)m £3.0m
Movement in provisions (note 10) £(31.2)m £23.0m £(29.9)m £15.7m
Other contributions into pension schemes (note 10) £(8.4)m £(9.2)m £(8.4)m £(9.2)m
Non-cash element of cyber incident and cost reduction programme £20.4m £(29.5)m £20.4m £(29.5)m
Non-cash and other adjustments £(9.8)m £1.2m £(8.5)m £(6.1)m
Operating cash flow b £86.3m £81.2m £72.0m £82.7m
Operating cash conversion b/a 51.9% 56.2% 38.7% 42.1%
Available liquidity No direct equivalent Calculated as the sum of any undrawn committed facilities and the net cash, cash equivalents net of overdrafts, less any restricted cash. Restricted cash is defined as any cash held that is not capable of being applied against consolidated total borrowings (inclusive of cash required to be held under FCA regulations and cash represented by non-controlling interests).
2024 2023
Revolving credit facility (RCF) £250.0m £260.7m
Less: drawing on committed facilities £—m £—m
Undrawn committed facilities £250.0m £260.7m
Cash and cash equivalents net of overdrafts £191.4m £67.6m
Less: restricted cash £(44.2)m £(46.0)m
Available liquidity £397.2m £282.3m
Net debt Borrowings, cash, derivatives, lease liabilities and deferred consideration Calculated as the net of the Group’s: cash, cash equivalents and overdrafts; private placement loan notes; other finance; currency and interest rate swaps; lease liabilities; and deferred consideration.
The
Board
believ
es
that
net
debt
enable
s
invest
ors to
see
the
econom
ic
effect
of
debt,
relate
d
hedges
and
cash
and
cash
equiva
lents
in
total
and
shows
the
indebt
edness
of the
Group.
The calculation of net debt is provided in note 10.
Alternative performance measures continued
APM Closest equivalent IFRS measure Definition, Purpose and Reconciliation
Cash flows and net debt continued
Net financial debt (pre-IFRS 16) No direct equivalent Calculated as the sum of the Group’s: cash, cash equivalents and overdrafts; the fair value of the Group’s private placement loan notes; other loan notes; and deferred consideration.
The
Board
belie
ves
that
this
measu
re of
net
debt
allow
s
inves
tors
to
see
the
Group
's
net
debt
posit
ion
exclu
ding
its
IFRS
16
lease
liabi
litie
s.
2024 2023
Net debt (note 10) £415.2m £545.5m
Remove: IFRS16 impact £(348.7)m £(363.4)m
Net financial debt (pre-IFRS 16) £66.5m £182.1m
Gearing: net debt to adjusted EBITDA ratio No direct equivalent This ratio is calculated as net debt divided by adjusted EBITDA over a rolling twelve month period including business exits not yet completed at the balance sheet date.
The
Board
belie
ves
that
this
ratio
is
usefu
l
becau
se it
shows
how
signi
fican
t net
debt
is
relat
ive
to
adjus
ted
EBITD
A.
This measure has been calculated including and excluding the impact of IFRS 16 leases on EBITDA and net debt because the Board believes this provides useful information to enable investors to understand the impact of the Group’s lease portfolio on its gearing ratio.
The table below shows the components, and calculation, of the net debt / net financial debt (post and pre IFRS 16) to adjusted EBITDA ratio:
Post IFRS 16 Pre IFRS 16
2024 2023 1 2024 2023 1
Adjusted EBITDA £186.1m £214.6m £135.1m £146.2m
EBITDA in respect of business exits not yet completed £(7.7)m £8.2m £(7.7)m £8.2m
Adjusted EBITDA (including business exits not yet completed) £178.4m £222.8m £127.4m £154.4m
Net debt/net financial debt £415.2m £545.5m £66.5m £182.1m
Net debt/net financial debt to adjusted EBITDA ratio 2.3x 2.4x 0.5x 1.2x
1. To ensure consistent presentation of the ratios between years, the 2023
comparatives have not been restated.
New APM in the year Definition updated in the year Comparatives re-presented
Appendix - Covenants
The below measures are submitted to the Group’s lenders and the directors
believe these measures provide a useful insight to investors. The 31 December
2023 comparatives have not been re-presented because they are not required to
be re-presented for covenant purposes.
2024 2023 Source
Covenants
Adjusted operating profit 1 £95.9m £106.5m Line information in note 5
Add back: covenant adjustments 2 and amortisation £54.1m £64.1m
Adjusted EBITA a1 £150.0m £170.6m
Less: IFRS 16 impact £(8.8)m £(17.7)m
Adjusted EBITA (excluding IFRS 16) a2 £141.2m £152.9m
Adjusted EBITA £150.0m £170.6m Line item above
Add back: covenant adjustments 3 and amortisation £55.8m £70.9m
Covenant calculation – adjusted EBITDA b1 £205.8m £241.5m
Less: IFRS 16 impact £(51.1)m £(68.4)m
Covenant calculation – adjusted EBITDA (excluding IFRS 16) b2 £154.7m £173.1m
Adjusted EBITA (US PP covenants) a3 £150.0m £162.4m Adjusted for difference in exceptional items treatment
Adjusted EBITDA (US PP covenants) b3 £205.8m £233.3m Adjusted for difference in exceptional items treatment
Adjusted interest charge £(45.9)m £(50.0)m Line information in note 6
Add back: covenant adjustments 4 £2.0m £3.8m
Borrowing costs c1 £(43.9)m £(46.2)m
Less: IFRS 16 impact £16.8m £18.2m
Borrowing costs (excluding IFRS 16) c2 £(27.1)m £(28.0)m
5.1 Interest cover (US PP covenant) a3/c2 5.5x 5.8x Adjusted EBITA/Borrowing costs with adjusted EBITA including the impact of IFRS 16 and the borrowing costs excluding the impact of IFRS 16. Minimum permitted value of 4.0
5.2 Interest cover (other financing agreements) a2/c2 5.2x 5.5x Adjusted EBITA/Borrowing costs with both variables excluding IFRS 16. Minimum permitted value of 4.0
Net debt £415.2m £545.5m Line information in note 10
Add back: covenant adjustments 5 £44.2m £53.2m
Less: IFRS 16 impact £(348.7)m £(363.4)m
Covenant calculation - adjusted net debt (excluding IFRS 16) d1 £110.7m £235.3m
6.1 Adjusted net debt to post IFRS 16 adjusted EBITDA ratio (US PP covenant) d1/b3 0.5x 1.0x Adjusted net debt/adjusted EBITDA with adjusted net debt excluding the impact of IFRS 16 and adjusted EBITDA including the impact of IFRS 16. Maximum permitted value of 3.0
6.2 Adjusted net debt to adjusted EBITDA ratio (other financing agreements) d1/b2 0.7x 1.4x Adjusted net debt/adjusted EBITDA with both variables excluding IFRS 16. Maximum permitted value of 3.0
1. Adjusted operating profit excludes items that are separately disclosed and
considered to be outside the underlying operating results for the particular
period under review and against which the Group’s performance is assessed.
2. Covenant adjustments include adjustments for business exits, exceptional
costs, share-based payment and pension adjustments, and removal of profits
owned by minority interests.
3. Covenant adjustments include adjustments for depreciation and earnings
related to disposed entities.
4. Covenant adjustments include adjustments for interest income and interest
expense.
5. Covenant adjustments include adjustments relating to restricted cash and
cash in businesses held-for-sale.
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