Capita Group — AI driving transformation in 2025

Capita Group (LSE: CPI)

Last close As at 05/03/2025

GBP0.13

−0.30 (−2.28%)

Market capitalisation

GBP225m

More on this equity

Research: Industrials

Capita Group — AI driving transformation in 2025

FY24 was a transformative year for Capita Group. With a new CEO and CFO, the company made good progress on its ‘Better Capita’ strategy. Capita is at the forefront of the significant opportunity arising from leveraging modern technologies, such as AI, to improve operational efficiencies, scalability and profits. During FY24 Capita began leveraging leading hyperscalers within AI, enabling it to lead the shift to a ‘service-as-software’ business model, redefining the support services industry. Capita also delivered £140m of annualised cost savings through its accelerated cost reduction strategy in 2024, to create better efficiencies across the wider group. Management confirmed in December 2024 that it had increased its total cost reduction target to £250m by end-December 2025, up from £160m by end-June 2025 previously, primarily driven by increases in the use of AI and generative AI, fundamentally improving its operating model.

Andy Murphy

Written by

Andy Murphy

Director of content, industrials

Industrials

QuickView

6 March 2025

Price 12.88p
Market cap £219m
Price Performance
Share details
Code CPI
Listing LSE

Shares in issue

1,701.3m

Net cash/(debt) at FY24

£(415.0)m

Business description

Capita is a UK-based company that provides consulting, transformation and digital services, delivering innovative solutions, working across both the private and public sectors.

Bull points

  • Significant growth potential arising from AI solutions.
  • Increased focus on cost savings and operational efficiency.
  • Contract renewal rate improvement (92% at FY24) and a strong unweighted pipeline (£11bn with £5bn underpinned by AI).

Bear points

  • Highly competitive digital services industry.
  • Dependence on client contracts.
  • Uncertainty surrounding delivery associated with roll-out of new technology solutions (AI).

Analysts

Andy Murphy
+44 (0)20 3077 5700
Harry Kilby
+44 (0)20 3077 5700

EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.

FY24 results overview

Adjusted revenue declined 8% y-o-y to £2.4bn, a reflection of prior year losses, volume reduction in its Contact Centres and exits of lower-margin service lines (Regulated Services). Adjusted operating profit increased 5.5% y-o-y to £95.9m, due to the positive impact of the cost reduction programme. Reported PBT (£116m) was boosted by the disposal of Capita One and Fera, while adjusted PBT was £50.0m (FY23: £40.9m). Net debt/EBITDA (pre-IFRS 16) was 0.5x for FY24 and management guidance is for it to remain below 1.0x at FY25. Capita’s reduced year-on-year total contract value won for FY24 of £1,513m (FY23: £2,953m) reflects lower levels of contract bidding activity to improve the group’s cost competitiveness.

2025 outlook: Strengthening future prospects

Capita has a strong unweighted contract pipeline with £11bn of opportunities; of this £5bn is underpinned by AI. Guidance for FY25 adjusted revenue is broadly in line with FY24, with a small increase in adjusted operating margin (FY24: 4%). Management guided towards positive free cash flow (before the impact of business exits) from end-2025. Capita’s medium-term targets are unchanged: an adjusted operating margin of 6–8%, operating cash conversion of 65–75% (guided at 55–65% for FY25) and delivering mid-single-digit adjusted revenue growth year-on-year.

Valuation: 49% discount relative to peers

Capita trades on an FY25e P/E of 5.2x (based on consensus estimates), a 49% discount to peers. We see room for upside as it completes its cost reduction programme and increases the speed at which it integrates AI into its offering.

Source: LSEG Data & Analytics, Edison Investment Research. Note: Adjusted to reflect business sales or exits during the year or prior year, or which are in the process of being sold or exited.

Consensus estimates

Year end Revenue (£m) EBITDA (£m) PBT (£m) EPS (p) P/E (x) EV/EBITDA (x)
12/23 2,575.8 196.5 40.9 (0.20) N/A 3.2
12/24 2,369.1 186.1 50.0 2.11 6.1 3.4
12/25e 2,344.0 197.5 57.0 2.48 5.2 3.2
12/26e 2,406.0 224.0 86.3 3.65 3.5 2.8

General disclaimer and copyright

This report has been prepared and issued by Edison. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright 2025 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or sol icitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

More on Capita Group

View All

Latest from the Industrials sector

View All Industrials content

Research: Consumer

Greggs — Performing well in a challenging market

FY24 was a good year for Greggs as its long-term strategy to grow revenue, coupled with more favourable input cost inflation, provided better profit growth than in FY23. In common with many consumer companies, the environment has deteriorated through the back end of H224 and into the start of FY25. Greggs’ value perception continues to improve and it has maintained overall value share of the market, suggesting wider weakness. We reduce our FY25 and FY26 PBT estimates by c 2% and c 9%, respectively, to reflect more conservative growth assumptions and operating margin headwinds.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free