Capita (LSE:CPI) reported a 31.6% decline in adjusted operating profit for the six months to 30 June, as additional costs on the Civil Service Pension Scheme (CSPS) contract offset savings from its 2025 cost reduction programme.
The UK outsourcing and business process services group said adjusted revenue rose 1.6% to £906.4m, up from £892.2m a year earlier, driven by growth in Public Service (up 2.4%) and Pension Solutions (up 24.7%), partly offset by a planned withdrawal from Regulated Services.
Chief executive Adolfo Hernandez said the CSPS problems remain "our immediate priority", adding: "We are confident that we have the right processes, technology and leadership in place to achieve service levels and deliver for members."
Capita expects a £25m to £40m adjusted operating profit hit and a £35m to £50m free cash flow impact from the CSPS contract in 2026, after wider Group mitigating actions. The company completed the disposal of its private sector contact centre business on 31 July, a move it says will simplify operations and unlock further cost savings. It secured £998m of total contract value in the first half, 15% ahead of the prior year, with its unweighted pipeline strengthening to approximately £24.4bn from £18.6bn in December. A £425m renewal with Transport for London was signed in July.
Capita reiterated full-year financial guidance and expects to deliver positive free cash flow, excluding business exits, in 2027. The Group will outline refreshed strategic ambitions and medium-term financial targets at its Capital Markets Event on 4 November.
News Intelligence what this means for the company
Capita's adjusted operating profit collapsed 31.6% in H1 2026 as the Civil Service Pension Scheme contract bled costs, a problem the CEO now frames as the "immediate priority." The company held full-year guidance and reported record contract wins (£998m, up 15% year-on-year), but expects the CSPS contract to cost £25m–£40m in adjusted operating profit and £35m–£50m in free cash flow in 2026, and now expects positive free cash flow only in 2027 rather than 2026—a material delay that undercuts the turnaround narrative.
The CSPS contract remains a live drag on profitability and cash generation, with no resolution timeline disclosed. Contract pipeline strength (£24.4bn unweighted, up 31% since December) and the completed sale of the private sector contact centre business offer some offset, but the profit guidance hold masks a deteriorating cash position and pushes positive free cash flow out by a year—a setback for a company betting on operational recovery.
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