Capita's (LSE:CPI) recovery hinges on landing two priorities in the second half of this year, and if the firm can, analysts at Shore Capital see upside for the outsourcing group.
The broker, which repeated a Buy rating after Tuesday's earnings, in a note, argues that fully restoring service levels on the Civil Service Pension Scheme (CSPS) contract, alongside continued success winning new work, would let Capita move past 2026's setbacks and enter 2027 unencumbered, in line with its target to turn free cash flow positive, excluding business exits, next year.
Capita has already cut its 2026 adjusted operating profit outlook by £25m to £40m and reduced expected free cash flow guidance by £35m to £50m after CSPS delivery failures drove surge resourcing costs, remediation spending and KPI penalty exposure; the company's first-half contract wins totalled £998m, up 15% year-on-year, providing what Shore Capital frames as an offsetting growth signal.
Shore Capital said it continues to see sum-of-the-parts value in Capita, adding that a shift to sustained positive cash generation and continued strength in total contract value wins would help de-risk its Buy call.
