Capita is a modern outsourcer, helping clients across the public and private sectors run complex business processes more efficiently listed on the premium segment of the London Stock Exchange. The company is a constituent of the FTSE All Share index and at the current share price of 19.5p has a market capitalisation of £332m.
Half year results to 30 June 2024 were published on 2 August 2024 and we were delighted to welcome CEO Adolfo Hernandez and Deputy Head of Investor Relations Stephanie Little, to a Yellowstone webinar to talk about the company’s prospects. A recording of the webinar is available here.
Adolfo has been the CEO for 7 and a half months now and a lot has been achieved in this short time as they build a better Capita. In discussions with stakeholders it’s clear that Capita does a good job in many areas and really matters to society but this has not delivered the appropriate financial returns. Capita is now working to build a better company and deliver the required financial returns. Key components are becoming more efficient, using technology better internally and using technology to add more value to customers as well as more consistent delivery of contracts. Executed well this will result in a better company – better for staff, customers and shareholders. And of course this will deliver a significant improvement in financial performance – the targets are 6-8% EBIT margins; 65-75% operating cash conversion and positive free cash flow from 2025; and low-mid single digit sustainable revenue growth.
In the first half of 2024 Capita demonstrated good progress against their strategic priorities. Operating margins improved 45%, annualised cost savings of £100m have been delivered and the company is on track to deliver the £160m of targeted cost savings by June 2025. When Adolfo joined the company, the target was cost savings of £60m and he raised the target to £160m and Capita has already made good progress towards achieving this. Relationships with hyperscalers, such as AWS and Microsoft, have been re-established so that they are no longer simply customers but partners and can leverage each other’s strengths to develop new products and win new business. Capita One has been sold for net proceeds of £180m moving the company expect minimal net financial debt by the year end (excluding lease liabilities). All of this couldn’t have been achieved without changes to the culture of…
