Capita Stock

Good afternoon, and welcome to this webinar from Yellowstone Advisory. Today's company presenting is Capita, and we're delighted to have with us Adolfo Hernandez, the Chief Executive Officer; and Pablo Andres, the Chief Financial Officer, who will give an update on performance following the publication of the half year results.

Before we start, I'd just like to go through a few points of admin. Hopefully, you can all see a poll on the screen. It will be really helpful if you could respond to that. And the format today is presentation followed by Q&A. [Operator Instructions] I'm just looking at the poll results, which I'll keep up a little bit longer, but we've roughly got about 3/4 of the people on the presentation today who are shareholders and 25%non-shareholders.

So following that introduction, I'm now going to hand over to Adolfo Hernandez, to start today's presentation. And could I ask you, Stephanie to share the Capita presentation for today.

Good afternoon, everyone. Great to see you again after our last meeting back in March, you have seen, but probably by now. I think it's been another very busy period, extremely busy operationally, extremely busy in terms of media attention.

But in the context of everything that we have to resolve and everything that we were set out to do, I think it's been a good period where we have made significant progress operationally and strategically, and we're the #1 operational priority being the resolution of the CSDS situation and our commitment to give the members the experience they deserve.

It has been very important that the team that was working on that, which is what they've done over this period and the team that was working on the rest of the business, which is building that better Capita have succeeded in making progress in delivering a great service with massive SLAs of 90%, 94%, improving the efficiencies, developing our people and leveraging technology very deeply.

As you can see on that slide, I'm not going to pick them all up. There is enough to report on across all of them. I think the important thing is that this is a snapshot. This is a snapshot of the journey we decided and we committed to start just over 2 years ago, right, which is we're going to build a better Capita that continues to do the great things that we do, providing the great service, we're providing for the fabric or society, but manage to do it better, manage to build more and leverage existing technology, be more efficient as a company, deliver better and then as a result, build a better company, a better company for our employees, a better company for our customers and also a better company for our shareholders.

So as you can see, if I just sort of got a way around it. From a technology perspective, we have really reshaped our technology and innovation. I think this is now -- we are in a space where we have more repeatable capabilities across the business. We are leveraging AI at the core of many of those capabilities. We're leveraging our hyper scaler partners. And I think towards the end of 2025 and the beginning of 2026, the emphasis really pivoted from experimenting with this technology to really getting it into adoption. Adoption internally and adoption externally for our customers. And as you will see later on, we are really staying the use of all this innovation across our core operations. We're already seeing and we are sharing some significant productivity improvements. We're making better decisions faster.

And ultimately, what matters the most, we are delivering a better service to our customers. And what is different is this is not about technology for technology's sake. This is technology that has to be deployed to deliver impact, has to deliver social value, and it has to deliver improvements in how our services are enjoyed. On the efficiency side, we reported in March that we have seen better execution with the GBP 150 million reduction. When we announced the sale of the call center we said this opens are the opportunities for further efficiencies. We're going to be a lighter business. We're going to be a sharper business, a simpler business that is going to command less overhead. We are going to be asking ourselves to be moving another GBP 40 million on top. And even though we only completed the transaction on Monday this week, I announced in March, completed -- announced on Monday, we've already been able to deliver GBP 80 million of that GBP 40 million.

So from a delivery perspective, as I said at the beginning, we were clearly challenged with the CSPS contract. And I have gone about it right this time on the issues that we have with the data with the backlog with the systems, with the mismatch. But I think what is really, really important is that we have moved the system from the -- in a situation of having to deal with the crisis, focusing on dealing with urgent cases through the beginning of Q1 because that's what members really needed and then to adjust the functionality and building the automation so that we could move into a capacity phase, capacity defined as you get more cases out of the door than you get in the door and then you start progressively working down each of the backlog into a standardized normal backlog that this service used to run with acute service to members.

And that's what we are committed to do and I'm glad that we're sort of moving along of the steps, and now we have seen moving from the sort of functionality to capacity and now being well in capacity and now working down the backlog and the stock that we have to deal with the flow of cases that come in, but also be able to get into stock of cases that have been built over many years.

Just to remind ourselves that in spite this contract, and I don't want to believe that the problem is real and [indiscernible] apologize [indiscernible]. Despite all of this, the pensions business, if you exclude this, delivers at 94% KPI rates.

That's extremely high if you look at the rest of our public sector business delivers over 90%. So it's very, very high and it sort of proves that this CSPS contract is certainly the exception and one that we are totally committed to overcome. Also on deliveries, it's important to move from cost cutting to growth, and we said in 2025, we have changed the engine. We have changed the policy. We have changed the go-to-market strategy. And we can see that it continues to work with contract value now over GBP 1 billion. So that's 15 percentile of what we have at the end of the year, and the unweighted pipeline continues to grow.

So we're seeing that the pipeline grows, we're seeing that the total contract values continue to grow and we continue to improve our win rates, which is the ultimate test of what you're getting. And that, all of these deals, yes, admittedly many of them are multi-annual. Many of them will take a few months or quarters to move from signature on to revenue on profit, but we are filling the funnel with those new contracts that we're very, very excited about delivering for them.

And then on the company side, we have stable, high employee engagement, which is super critical to do the transformation that we're doing. We couldn't be doing it without the great help, support and passion of our colleagues. We have continued to increase internal mobility. We do have a lot of really good talent, really well capable employees and we are helping them very good internal mobility to grow opportunities, but also helping them with increased data and AI literacy so that they can be upskilled, so that they can be effectively enhanced how they build that.

So I'm really proud of the work that we are collectively doing and how they work day in and day out on delivering that better Capita. Obviously, we had a number of one-offs, very significant, very painful and I just want to make sure everyone that management remains absolutely focused on translating this operation of strategic progress that we're making into ultimately that financial set of results, totally committed to the expansion of the operating margin, totally committed to generation of free cash flow.

But we strongly feel that after everything that has been done over the last couple of years, including this last period, we're getting one step closer and as you would see now when Pablo takes us through the numbers, we just -- we're just getting there, just been messy, a messy way to get there.

But it was quite a complex situation that we were facing in a couple of years ago with outstanding historical issues with technical debt, outstanding issues with the ITO, we had many, many years of history of close [indiscernible] pension that needed to be addressed.

We have to address the contact center underperformance. Now we have to address the situation on CSPS. But as a management team, we are and will continue to work through the CSPS until we have that great company that we're working so hard, so very hard as a team to build.

So Pablo, maybe take us now through the numbers, and then I'll come back to give another update.

Perfect. Thank you, Adolfo. I'm going to canter through the numbers that have been available for a while. We'll pick up on the main themes, and then we will be able to have more time for Q&A. But at the end of the day, what the numbers are showing is we continue with revenue growth, and I will go into each division to speak in more detail.

The operating margin has been mostly affected by the civil service pension scheme contract. And in terms of cash conversion broadly in line with what we would expect for this time of the year. So going into business by business, though public, which is the first one. And public has been growing by 2.4%. It's been very successful in terms of pipeline, having the biggest level of wins in H1 since 2021 and progressing really strongly.

Operating margin, as you can see, remains around 8%, and this is despite of having done some accounting reallocations of central overhead costs that get allocated based on revenue profit and headcount and with the pensions business having gone from a profit to losses, where those costs have ended up here.

What I'm trying to say with that is actually that the operating margin without any accounting and moving off costs would have even been 8.4%. So this business performing really well in terms of top line, in terms of 90% operational KPI performance as Adolfo said.

And in terms of cash conversion, at the year-end, we said that we have had some tailwinds and that we were higher than expected in this business. And at the half year, what we are seeing is the tailwinds from the year-end unwinding and the investment on mobilization of contracts that we guided in March that was going to come through.

Other than that, we expect to see strong cash conversion in this business by the end of the year and continue delivering. If we go to the next one, which is the pensions business, the pensions business is, as you can see on the chart below, is heavily affected by the impact of the civil service pension scheme contract. GBP 14 million directly and the collateral impact on other and consulting business that we have around GBP 3 million as redirected some of the resources to support on this contract.

Other than that, the business has continued growing strongly. Not all of that growth of 24.7% related to the civil service. There's another around -- between the 5% and 10% of the growth is related to underlying growth of the business and the operating profit sees the impact of the civil service.

Other than that, the business has continued performing well. Operating cash flow in this one at the year-end, we had a delayed milestone that came in late. But at the same time, in the first half, we have been invested -- investing in the technology solutions for the civil service pension scheme contract, but that investment has been offset by the tailwind of the delayed payment from December and some additional tailwinds of phasing of cash at the half year.

Otherwise, when we guided in the results that we would expect a GBP 10 million deterioration between profit and cash, it's literally remaining to what we will see in the operating cash flow in this division related to the civil service pension scheme contract.

This is 12% of the group revenue. If we look at the -- if we move on and then we look at liquidity and net debt, it's been a good first half for the group. We have been extending the RCF facility in a little bit of every year. This time, we had GBP 250 million RCF facility. We have a GBP 75 million bridge. We've put them together for GBP 325 million and we've put it in place for 3 years, plus two 1-year extensions attached to it, which gives a much more solid foundation, more sustainable, much more comfortable with that.

In addition, we were able to actually renegotiate the covenant of the interest cover ratio from 4x to 3x that gives the group a much stronger position and has allowed us also to renegotiate the covenants with the U.S. private placement lenders to bring them to a lower place.

It's also to mention that in July, we issued a further GBP 41 million notes of U.S. private placement notes that we have used to actually repay the GBP 84 million of maturities that we had in July. Net debt to EBITDA was 1.6x at the 30th of June, which reflects the cash outflows we have had from what I have been speaking about.

Then on the next slide, I wanted to speak a little bit about the order book. And the reason for this is, I'm speaking about the biggest and best TCV in the H1 that we have had for many years. But then the question is always, but where can I see it and when is it going to land?

And the challenge with this business is that the larger contracts tend to be a long process from winning to becoming revenue like the synergy contract we announced will become revenue in Q4 2027, even though we are already starting to mobilize. And I wanted to, therefore, show how from the pipeline we have had around 11% is expected in H2.

We have one 14% in '27, 21% in '28 and the rest beyond. And I think that at the Capital Markets Day, I will focus on explaining how the pipeline is expected to convert so that people can understand better the revenue and how solid the revenue is in this company.

But before we were waiting for them what I wanted also to make a point here is that of the GBP 900 million of revenue we have booked in H1, 76% of that revenue was in the order book and an extra GBP 100 million which is almost another 10% is related to recurrent framework agreements that we've got contracted for a while.

So almost 5% is coming from recurrent solid signed contracts with customers and only 15% is specific wins that we have to deliver. As we look forward instead of awards, we will see eventually how capital starts every year with more than 2/3 -- well over 2/3 of revenue secured before we go into this year, which again supports the length of our contracts, how solid they are and the strength of our order book.

Other than this one, we have a slide for the outlook. And on the outlook, basically, what we said is we expect to see revenue broadly overall flat. This is mostly driven by some losses from the public business that are expected to be seen through in the second half, given that most of that pipeline, we have won is not within 2027 but beyond.

Operating margin is going to continue solid, in line with previous guidance. And with the impact of the civil service pension scheme contract, but with public, which is 80% of the business remaining strong.

Free cash flow will be in line with the guidance we provided on the 9th of July with the impact of GBP 35 million to GBP 50 million related to the civil service pension scheme contract and strong performance in public service, I mentioned earlier, unless that will be the result of the free cash outflows for the group based on the one before and business exits.

So other than that, I will hand back over to Adolfo.

Okay. Thank you, Pablo. Just sort of first real quick summarize some of the additional dynamics. Pablo when over some of the numbers. I think you can see that the revenue growth, the strong win rate, the TCV performance in both divisions, right, continues to demonstrate that there is strength, there is momentum and the core of the business is moving in the right direction. If you look at the public sector, as you see, we have the best first half performance in several years. And we had a really good start to the second half with the TFL win GBP 425 million that we announced on Monday. On the pension side, similar story. Obviously, TCV grew disproportionally high over 100% growth of the TCV over last year and have a pretty high win rate of about 99%.

I talked earlier on the intro just framing the performance in that business, the ability to deliver good service at 94% KPI. But obviously, there is a lot of work that needs to be done still on this CSPS as discussed. So I just keep reminding that, that business pension solution serves flawlessly 7 million scheme members, and this is something that we do well for a living. So we will get out of this challenge. So if we go to the next slide, you can see sort of some numerical update on the civil service scheme. I would just sort of try to capture these for those of you who are new.

Obviously, we're working on it. Obviously, we have a service certification plan that has been worked together with a cabinet office. You've got the progress that's been made on yield health service, the quotes and then on payments. The focus, as I said earlier, which is making ensure that the historical improvement that we have already seen over the last few months continues into the future and that the capacity is used to ease into a more normalized service. That's probably little more I'd say at this stage in this. So let's move on to the change. I did refer earlier to -- this is a snapshot of the journey that we set out to do 2.5 years ago. The first part was to go and say, okay, where do we want to be? Where do we want to get to over the medium term? Where can Capita exceed, where can Capita win, where can Capital be successful.

So we set out the goal to become the most AI-led and enabled business process service company that we're going to be able to help regulate the industries and the public sector deliver good value for money in these services at scale. That was the North Star.

Together, we defined 3 stages, right, 3 different ways, not necessarily sequential. There is a big amounts of overlap, but at a given point in time, there's more emphasis in one of waves than the others. First wave, we were oversized, inefficient. We needed to cut cost, find a way to do what we were doing with less and doing it better and getting those efficiencies.

So we talked earlier around the GBP 250 million plus GBP 40 million and that's sort of comprehensive realignment simplification, delayering and just making sure the company sort of became nimbler. And we could fund the rest of the journey.

The second wave was about fixing the basics. What were we doing that we could do better and we should do better in terms of, okay, some of our innovation and how are we going to be deploying tech, how are we managing our people, where was our people strategy, how do we grow on work and optimize our operating model. Our operating model was the result of where the company had been for the past 10 years, it's a collection of different units. So we needed to sort of build something that was right and suitable for the future. And that sort of was the third phase.

The third phase is seeding for the future, what do you do organizationally, what do you do in terms of capabilities, what type of people do you need to have, what type of culture do you want to build and just feel that sort of blueprint for the future so that you are relevant for, so you are successful and well fitted for the next decade.

That's in the journey. Trust me, it feels like it's been the hell of a long journey, but we sort of only presented that journey 2 years and 2 months ago. And I think we are well underway. So on the next slide, please. I wanted to dwell a little bit more on the topic of simplification because I think this is sometimes overlooked. Not having so many divisions I think is critical.

Simplification is one of the best possible ways to create value. We are a much focused, much more focused business now. We can deliver our vision. We've got the ability now to cross-sell much better. We've got a lot less overhead. We've got rid of some things that were getting on the way from us optimizing properly. We have now an easier to understand business. We have now an easy to run business. We've got our business now when we can get operational leverage, when we can get tech sharing.

And over time, we believe that this more simple business will be easier to buy you. So a lot of the simplification work that has gone into the last couple of years will be setting us well. So let me just quickly go to the next slide because there, I wanted to have just a quick discussion on where we are with the government. There's been a change of government, another change of Prime Minister and government. And every time there is a change, there's a lot of questions about how that affect you.

So first and foremost, we're super excited about the changes, the energy and the themes that the government is talking about in these early, early days, right? I think it's just very clear and it's been talked by everybody, the public sector needs to boost productivity in many areas. It lacks the in-house skills or the scale and then doing it with somebody and doing it leveraging AI and some of the new [indiscernible], which is probably the only valuable way to do this. But for these to be valuable, it has to be well embedded into the process. It has to be done with somebody that really understand the business process, that is supposed to be optimized. We've been doing this for 40 years. We are the #1 provider in the seats, so software and IT services category and BPS provider to the government. And we understand the public sector much better than any other tech company, and we understand how to leverage AI much better than any other business process outsource.

So there is a sweep spot where Capita can and will help government run those transform services. And we believe that our deep public sector domain expertise apply to everyone of the areas. We probably be the single biggest differentiation that we talk. You can't sell a multi-decade experience when you run complex regulated end-to-end operations at scale easily. Either you have it or you don't have it.

And we've done that and we derisk the path to get there and we're doing this on the days of a very good collection of long-duration contracts that we will be making.

Next slide, please. So I wanted to talk to you about -- because I noticed a topic of AI and where are we and where is it going? So AI is just developing. This is early days. Now if anybody claims that they have the solution, and they know where this is going to be 5 years, I suspect they will be wrong. Even the largest and most valuable companies out there today, they are pivoting and they're changing.

We've gone from the end of '23 chat [indiscernible] tools that were productized, then we move into, yes, we need to have agents towards the end of '24 and in '25 that I asked the agents need to be orchestrated. And a lot of this period narrative was people are less relevant. AI is going to wipe them all out.

But now everybody, everybody circle back to the fact that not only you need to have a human in the loop but in many areas, particularly if it is governance intensive. You need to have a human in charge. And I think if you've been following us for the last couple of years, you will hear that I have been doing that for the last couple of years.

This is a great unique opportunity for Capita. This is going to be AI empowering humans that are either in the loop or are in charge. And this is extremely relevant for us because that's what we do, having the people, having the expertise. And what we're doing now is enabling them with the AI and [indiscernible]. So that's the way the market has moved.

I think if you go into the next thing that you see where our offerings have been moving, right, following the marketing or with the market right from June 2024 when we set out the strategy to our first agents being delivered and in production in the summer. And then what we did launching the ideation and top creation entity called the Catalyst Labs so that we could trap all of the ideas and bring them up to valuable ideas and then productize them and then deploy the use cases all the way into production and now we're close to 500 of them.

If you look at the future and it is in the next slide, I think what it's going to show you is that we are going to be building heavily on these capabilities that we build. We have learned a ton, we learned about what works and what doesn't work. We have learned that success here is not about just tech. You could install tech and do nothing and nothing changes. You have to deploy tech, you have to look at the business process.

You have to reimagine the business process. You have to change it. You have to train people. You have to give them tools and then you have to stay on, right? I mean when you stay on, that gives you a chance to iterate again and create a much better solution. So I think that the future of outsourcing is going to be more of a future of -- you are going to be -- we call it a forward deployed orchestrator.

When you stay with a business service and you orchestrate the people the data and the agents that you need every point in time to deliver a better solution. But obviously, they are after the possible changes because there's too much innovation, the regulatory requirements change.

So you stay and we aim to stay with these contracts and stay with these processes and sell our capable colleagues so that they stay and continue to orchestrate and improve the business service. The next slide just gives you a little bit more color on where this is paying off.

This value proposition has value in market. This role is being understood and is transforming into a richer pipeline that continues to grow and a richer TCP book that continues to grow and our ability to win more deals on an 84% win rate, I think is made up of 82% of new scopes and then 100% win rate in opportunities that we tendered. We have had a number of significant wins and you can see there at the beginning of the first half of 2026. And we've also started the rest of 2026, the second half with significant win that we just announced on Monday.

A think [indiscernible] I think we've won by the end of July, the same or slightly more than we've won in the whole of 2025 put together. [indiscernible]. And in terms of differentiation, right, which is where we go next, right, how do we keep that differentiation is I think is staying true to our motto, true to the position that we can, we will play in the market, which is staying close to the process, staying close to the people.

If you look at the data from BCG, you will say 70% of the value, right, is going to be coming simply more to the people and the process. And only a small amount is going to be around the other -- under technology and that's what we're good at, and that's what we're saying in and not -- we couldn't afford, as you guys know very well, but we are not in the business of building anything that is in the right level of memory implementations, chips implementations or architectures or data centers or LLMs or other items or what they call it different machines or platforms.

That is not our business. Our business is to see above that and evaluate what works best for what particular public service or regulated service, orchestrate it, put the governance around that, that is required to make sure that the data is used properly, that we know what agent has been created for what purpose, how do we manage an agent from the cradle to the grade. And ultimately that we look at the art of the possible to reimagine those processes and that we stay -- we don't hit and run, we stay, we manage, we improve and we manage and we keep improving.

And there will be very few other players who will have the capabilities to do that. So very excited about the move, the position where we're in. And I think on the coming slide, you sort of see a more detailed view of what I call this forward deploy orchestrator that to me sort of depicts what the future outsourcing model looks like. It keeps some things from the old 40-year rollout sourcing, which is you observe business model, you deploy your teams back in the day, you would have done a lot of offshoring to low-cost locations.

You would done a lot of labor arbitrage and then you just sort of manage the teams and you operate it. In this new world, it will respect some of the basics around observability of the business process, then you are going to be reimagining what you're going to build, you're going to be deploying those new tools in that. Then you are going to the orchestrating the people and the processes and the agents and one, I mean you're going to be operating.

And then you're going to see that a lot of the staff, a lot of the steps will be machine free then but the most important one, right, is going to be the human review and action, and that will be based on the skills that people have built. So really excited about where the market is going. This is not a journey for 6 months or for 12 months and you're looking for everybody to get there, all of our customers to get there and all of our customers to start procuring in 2027 this way. That is not the case. But this is where the market is going, this is where the opportunity is going to be. It's not immediate, but this is the place to go to if you want to build a strong company for the next decade.

And this is the place where we are committees and setting our future as we are starting to finish the lease of cleaning up that we need to do. So I'd like to, at this point, thank you for the patience and the support. I know it will continue to be a bumpy ride, it's just been a lot of fixing, it's a complex story. It's not linear. It has lot of ups and downs. They are not always easy to explain, but this is what it takes to take what we took on and to build what we were trying to build.

So with this, let me pause here and change over to Q&A.

Thank you very much, Adolfo and Pablo for that presentation. And we are going to go into Q&A. [Operator Instructions] We have had a lot of questions come in ahead of time and quite naturally quite a few of them are on the civil service pension scheme. So it's an area where I'm going to start with. I'm also going to amalgamate some of those questions because they're quite similar. So Stephanie, do you want to, just before I start, stop sharing the screen so that individuals can see us here and Pablo, maybe you could turn your camera on.

So the first question we have here is it's clear that the civil service pension scheme had many issues before Capita took it over, but Capita has contributed to a difficult situation. Does Mr. Hernandez have concerns that the severe days in payments to recipients could lead to either the contract being withdrawn or that capital may be the subject of litigation by those affected?

I fully understand why this question will be asked. My concern as the CEO now is to make sure we support the key intensions wholeheartedly, that they have access to the best and the brightest we have in the group, that they have access to the technology that they need, the automation that they need, the testing capability that they need, that we cover for them financially, and we do disproportionate high investments in there to solve the issue, right?

We need to do that, and I need to marshal the resources of the whole company under way of everybody to just do what it takes to get this one right. Then there is another threat will start, which is what do we do with this? How much of it was it our fault? How much of it was somebody's fault? But right now, we are in the solution time. I think as everybody knows, this was a distressed service. It was a distressed service. It came the way it came. But right now, my attention and the attention of the vast maturity of my team is resolution.

There are naturally a couple of follow-up questions to that. So in view of the delays and negative publicity relating to the CSTS contracts and labor's announcement to in-source more, how do you see the public sector section developing over the next 12 to 24 months?

Yes. Excellent question. I think it's a question like I need to give you a wider answer because there's just no one single thing. You could be looking at the test, right, that the outsourcing test, that is now mandatory or will be mandatory from next year, everything above GBP 1 million, right? And I think that is good, right?

As a tax payer, I think the government should check everything that we're doing. Are we doing it the right way? What is the right delivery channel? I think that's absolutely fine. What I think is there is a great amount of services that might just sort of end up being in-sourced, but I do believe that given the complexity of what we do, right, the very complex middle office and back office operations that we manage in public service at scale and with a lot of skill and a lot of experience where we can optimize the cost delivery.

I would like to believe that the answer in most of those cases will be it is actually better to do with somebody who has the experience, the skills and the scales and it will be cheaper and it will be better value for money there. As we do these type of solutions, we're also going to be supporting out of the group growth initiative by the Prime Minister, right? We do hire regularly our people in the Northern England.

We have thousands of our colleagues there. We have built a very good capability to build consortia, integrating SMEs, local SMEs that have expertise and this is something that we been doing there. Social value has been something that the company has done well and where we tend to score well because how we see that is becoming more important in the scoring system of the future, and we're doing a lot in terms of employability, a lot of jobs are in the U.K.

So I'd like to believe a number of these things will be very favorable for us. The #10 North of relevering or whichever way you want to call it, fundamentally is going to translate on having political leaders in new centers and the buying centers are going to be well funded.

They're going to be well funded. They have the right transpiration for improving the services of their other cities or towns or areas and we're going to have probably more funding than in some cases, experience doing employability services or assessment services or operational services.

And that's an area where we feel a lot of reputation and a lot of capabilities. So I believe that will also help us expand our addressable market. Now we've got the AI news so cabinets and we've got this high priority of using AI and leveraging AI to drive public sector productivity, which again is something that is very core to what we are serving.

And then there is the whole thing about buying British and helping. So in general, yes, every government has to take and make some decisions. But I think if I look at what it is, I think it represents a very good playing field for us to continue to work with them, helping them build a better Britain.

Specific question on some numbers here relating to the CSPS. So the CSPS cost an extra GBP 14.2 million in half 1. Is this same extra cost expected in the second half?

We haven't given specifically the split between H1 and H2. What we did say on our trading update in -- on the 9th of July is that in terms of P&L, the civil service was going to cost out of what we had expected a further GBP 25 million to EUR 40 million.

So one can argue that almost half of it is already booked in H1.

Okay. Thank you, Pablo. Two more questions on the CSPS. What lessons have been learned and what measures put in place to ensure the implementation of the synergy contract will not suffer from similar operational shortcomings as has been the case in the execution of the CSPS contract?

I can understand the rational of the question. So it's not just only versus CMT. Synergies are very different things. Synergy is the managing of the backbone of HR and finance system for DWP, the government departments and it's a solution stack that is being built by IBM or Apple.

So it's a very different thing than legacy super complex defined benefit administration with a lot of assistance that was already distressed. So they are 2 different worlds, right, and 2 different realities. But it's certainly, as underscored is when you're testing a system, you have to insist, one has to insist that a year transition and you get -- have to get access to the real data. You cannot test a system with synthetic data. So you have access to the real data, so when you build some capabilities and some automations, you're actually building it for the right data that you're going to inherit but definitely been there.

We have what we've seen sort of doing tripartite when we are exiting contracts and we are running off. So right now, we're running off of the Army recruitment program, and we're doing a tripartite always with [indiscernible], the army and ourselves. We're rolling off each extensions and we do a tripartite there with DFE at TCS and ourselves.

So I think having had those things are really important. There are a number of other operational reviews, lessons learned. There's a number of exercises, as you can imagine, we have undertaken and undertaking, and they would all feeding a resource of deal governance, Things have changed after remind everybody. This was a 2022, 2023 deal. It proceeds a lot of people, but we're still committed to just fix it, which is the most important thing that we own it now, and we will get it over the finish line.

Okay. And the last question on the CSPS before we move on to other areas. How much reputational damage has the failure of the CSPS contract caused Capita? The learning framework contract was lost as a result of the CSPS failure. Is that a bad omen for the future?

So I think there's 2, 3 different things in that question. So yes, if I say to you the reputation and it has been neutral or positive, I will be lying to you and you'll be taking me for someone disingenuous. Of course, it is, right? I don't -- I think the story has probably labeled that it was yours. I think everybody has completely forgotten what it was like.

A number of things, and there's a number of stories and -- so yes, reputationally, yes, it's not good. It's not good at all, right? But ultimately, one of the things that make actually the country great is that it has really solid and robust processes, including the procurement process.

That is well documented, is really well executed by the commercial offices of the government, but is very clear on how every deal has to be managed and valued and ultimately, if you come out on top being the preferred supplier, yes, surely, there's going to be questions, okay, what are you doing about this? Can you handle it? You have the bandwidth to deal with this and to deal with that?

Of course there's going to be questions. But if you come and talk, so far, what we've got is these contracts have been signed and in progress, right? We have the U.K. HSA signed, I think, it was last week. We announced the FL. We have synergies in February. We have army collected training area in July. So the these things are there. So ultimately, I said to my team before you needed to do a very good job to win, now you need to do a better job to win. That's okay. So I'm all for raising the bar and is really proving our customers that we know how to do this. As we have on the other 90% of KPIs that are green, right? It improves the fact that you get something growing just sort of time is everything.

But the reality is we have to spend the vast majority of the time talking about something that is 7% of the revenue when all the other programs that we do day in and day out, they are performing really well. And I think we're delivering great value and great value for money.

Thank you. Some tricky questions there on the CSPS So, thank you for answering them so honestly and clearly. Moving on to some other topics that have come in here. So the name Capita is considered a liability by some, including some of your shareholders. And there have been some suggestions that if the company wants to rebrand that would create some shareholder value immediately. Is that something you are considering?

I consider anything that will increase value creation 100%. However, I do believe that a rebranding without fixing the basics is the right strategy. So we're getting to a point where when we -- I have addressed the CSPS, we have addressed everything else.

We are in a situation where our profits continue to grow at this time, backed by free cash flow. When the company is normal, then we can look at, given the feature that we're going to, how do we want to present ourselves, represent ourselves, what's the value in the brand, are there better options? I'm open for -- I'm totally not discounting it.

But right now, it's not the time for a rebrand. Right now, it's time to rolling up our sleeves and getting all the operational improvements and the operational improvements translated into financial results. Once we are there, we can pause and reflect as to what's the best way we got ourselves going forward.

Okay. Thank you. Next question on the pipeline. Regarding the unweighted pipeline, would you kindly clarify what this is and is not translating slowly given the investments in pivot, especially considering your position as a trusted brand.

So about a years and bit ago, we changed our sort of go-to-market model, the go-to-market compass. We became a lot more restricted as to what we wanted to do. And we land it there because we saw there was a market. But most importantly, because we have the capabilities, we've done it. We've done frequently. We've done it well.

We've delivered a good service, delivered quality and delivered money and we make money. So there was tick, tick, tick for a few things. And those are the things that we focus on. So we narrowed the focus of the type of opportunities that Capita would be going after.

If anything, this is probably the time in our history where we're going after less and less and less different types of opportunities, very narrow in 5 different value propositions and five only. Now it's a good market for those sites, and we are a very legitimate player, and we know how to lead and we can improve our capabilities in those 5 areas.

So what we do is we looked at the deals with priority time. We established okay, how well does it fit our criteria. Do we believe we can differentiate ourselves? Do we believe we have the right to win? Is it financially something that we believe is going to be attractive? What is the risk profile of that opportunity? What's our level of resourcing? What's the timing?

So we look at all of these things and we sort of qualify deals. [indiscernible] Obviously, the deals have a TCV and I would just remind everybody, is that whole TCV that goes into the pipeline, even if it's a 10-year, and the 10-year value is what goes into the pipeline, which is why it appears sort of disproportionate EBIT.

I actually care less about the size of that than I care because I want it to be big, but I care more about the trajectory. Are we moving towards the market base in our space? Is the market moving away from us? And the fact that it keeps adding, whether it's 5% or 15% in a period or is it less but are we in a growing pipeline market? The answer is yes. So in a strange way, we've said we're going to do fewer things, and we're going to do them really well and it helped us uncover that there is a whole lot of stuff there that we are qualifying in.

There are things that fall into this space that we don't go after because you simply -- we just don't believe it are we winning there or we might be in a part of the government where we can't really do that work or the micro insight at a given point in time with another very large project, and I think we have to just sort of be careful.

But is it good for governance process driven by our growth team. And yes, it's working well. And ideally you will see you first get the pipeline then you convert it to win and that turns into TCV, we see that we need to be annualized. Then you have to onboard it. And then eventually, some of them, maybe 3, 4 quarters later, some of it a little bit faster, it will translate into revenue and into profit.

So it would always be a lag between the pipeline and the TCV because it's long sales cycles. And then there is a lag between getting it from TCV into revenue and margin.

Okay. Thank you. I think we've got time for one more question before I ask for a couple of concluding remarks. So here's the last one. Based on reasonable assumptions you can make today, can you provide a range as to what free cash flow could look like in 2027? What is the business strategy and target with regarding reducing debt, returning cash to shareholders running of the business?

Awesome. I was here in the [indiscernible] as you were in the previous question. I was wondering if something could be worse. So no, I cannot put a profit forecast for the company right now. We are going to update consensus with what has come up over the last couple of day, but 2 things. Number one, consensus for 2027 is probably unchanged. So Pablo, how do you believe positive free cash flow can be next year?

Rather than a profit forecast, I'm going to do with you together basic months. If I take from the half year results, EBITDA of GBP 60 million for the first half, multiply x2, GBP 120 million. You add the sales service pension scheme impacting the year, which is GBP 40 million, half in the first half, half in the second. Okay, we're on GBP 160 million. The savings that we have promised, 50% of the GBP 40 million savings we have said. You are already on GBP 180 million EBITDA. A conversion of 20% to 25%, GBP 150 million and then let's do just a double of each of the remaining of the line items. CapEx GBP 15 million, take GBP 30 million out of the GBP 150 million. Interest paid GBP 20 million, take GBP 40 million out, leases GBP 11.5 million, take GBP 23 million out. If you do that, GBP 150 million, you take GBP 30 million, GBP 40 million and GBP 23 million out, you're down to GBP 57 million as free cash flow before business exits.

Is that far away from the consensus we've been seeing before? No, it's growth in the regional postal code. To do that, we have to take business exits close to like [indiscernible], and we have also some receivables from the sale of the contact centers of them. So that is broadly the postal code of how I can see that the numbers are real and will follow, but we will update consensus on the website so that everybody comes to the details.

Brilliant, what a great answer to the last question, Pablo. Thank you for that. Now Adolfo, could I just ask you to say a couple of concluding remarks before we close today's webinar.

So let me finish where I just started, which is I think thanking everybody for being here today, and thank you for the support. It's been a very messy first half. One with severe problems and challenges that we have discussed slightly but one as well. When you look at the underlying or the rest of Capita, the progress has been significant. I think we are fortifying the foundation. I think this bridge that Pablo just took us through sort of highlights where we are. I know this is not for the faint of heart. I know this is just -- what we do is really complex. There's always going to be things coming left, right and center, but it's come much better, much better [indiscernible], much better managed simpler business now. and then we are getting there.

I guess is sometimes like when people have a personal prices, you always get the sort of posttraumatic growth. I'd like to be positive here as the CEO, and I believe as an organization, we are going to be coming out of this, not changed because we don't need to change.

But I think we're going to come out strong. And we're going to just be way sharp and more focused, not because before we going need to be. It's just because it's a painful reminder of what happens when for whatever reason, whether it's our fault or not our fault or nobody's fault, you end up in the wrong place. So we're staying the course. We're driven to build that AI-enabled business process services company that will be one of the best partners for improving the U.K. services. And it's hard, but we are committed to make it happen. So thank you.

Well, thank you, and thank you for taking the time to speak to your retail investors. And as investors leave today, could I ask them to complete the survey form that they'll see as they exit today's webinar. It's very much appreciated by management.

So thank you for attending, and thank you for presenting and we hope to see you soon.

All right. Thank you, team, for putting together this wonderful little video summary about what we've been doing for the last 6 months. Good morning, everyone, everybody here in the room, everybody watching this remotely. Thanks for taking your time. I fully appreciate there's a lot out there today happening on the street, a lot of reporting news, and you chose to be here with us. So we will do our utmost to make sure that you don't get disappointed. I'm here with Pablo. We're going to cover the first half. We're going to cover, obviously, the numbers. We're going to cover the strategy. We're going to give you an update on operations and where we are.

But before I do so, I wanted to just say the journey is well underway,right? We set out a couple of years ago, it was a deep root and branch transformation of a great company that was doing great things. It was managing really critical fabric for the country, but it needed work done to it. And we set out with that ambitious agenda to build that better Capita, dealing with efficiencies, dealing with delivery, dealing with, effectively, technology and bringing it at the core to build a better company. And we remain fully, fully committed to build that AI-led business process services company that will be fundamental for the critical services delivery in this country for the next decade.

So let's start by summarizing some of the numbers. Obviously, you have the disclaimer there for your consumption. So you see on the left the adjusted numbers. You see on the right some of the operational and strategic translation. So I'm going to pick more on the side on the right because Pablo is going to double-click at length on there. We're also going to cover a lot of them in detail throughout the presentation. So I'm just going to pick up a few because I think they are relevant. So starting with the top line, technology.

2 years ago, just over 2 years ago, when I joined, I said one of the reasons why I joined was because I believe technology in its sort of AI incarnation this time with automation and data have the potential to fundamentally transform this industry. And it was going to level the playing field and companies like Capita could really emerge from where they were to a very different position in the future. There was nothing wrong with what we were doing; is how we were doing it that could be worked on. And I think if you look at that top line, you see that the progress keeps being reporting period after reporting period, very solid. The number of agents, used to think we talked about 2 years ago. Now we're talking to nearly 500 deployed throughout the operation. And some of them, we were announcing the formation of the Catalyst Lab or we were announcing the formation of the Catalyst Stack. Now they're being deployed. We talked about alliances and getting into commercial agreements with hyperscalers.

Now we have been the first Western European BPS company open a store on the AWS Marketplace where customers can come and buy some of the solutions that we offer. We did talk about our intention to become a more efficient company. And it was that well, can you do that on a people business? Can you do that when you have so many contracts where you're stuck to certain levels of staffing. I think we've proven over the last couple of years that we've been able to take GBP 250 million out of the cost line. And we committed that following the divestiture of the commercial call center business, we would take another GBP 40 million between 2026 and 2027, and we're already well underway to go and deliver that.

On delivery, I know that we've had a very challenging period with CSPS. This is obviously not the experience that we would like members to have. This is not the experience we have liked government departments to feel. And this is definitely not something that we would have liked our shareholders to have to go through. This is something that we got to -- I'm going to cover in a minute. But if you were to park it to the side, not because it's important, but not important, but because I want to give you the perspective, we continue to deliver KPIs north of 90% across the rest of the business. So the rest of the business is working really, really well. As you will see later, even in the Pensions division, if you were to exclude CSPS, the KPIs are close to 95%.

So we are delivering -- we're delivering well. And we're also managing to translate that into a good conversion. And you'll see later, we talked about the market. We talked about the pipeline that we're finding in that market, structurally growing market. But most importantly, it's not about finding the right pipeline if you're able to convert it into TCV. So pleased with the 15% growth in TCV, pleased to have started the period strongly as you saw yesterday on the announcement of TfL. And we're just very excited about what we've got to go and do in the second half.

Obviously, you saw the release yesterday about the completion of the call centers. We announced the transaction end of March. It's now completed. The new company, Elios, is operating as of yesterday, and it's done. And then now we can focus on what we have doubled down on. And as a company, obviously, we still have work to do on the financials. Let me be very clear. We are not happy with the current financial performance. But we have done everything that we should be doing in terms of inputs to deliver the financial performance results in 2027. We're very, very pleased with where we are with the work we're doing with our team. Our attrition is pretty much a very recent low of 17% as a group. It used to be north of 30%. And if you sort of were to remove the call center team that has just left, I think the public sector team is around 14% and the pensions team's attrition is under 10%.

So you are going to find this is a motivated new culture, a well-retained team that is willing to fight and win. And when we make mistakes, we don't make many, but sometimes we make them, we roll up our sleeves, and we will do what it takes to get our customers on the right side of resolution. So if I was to quickly look by division, so you can see that both the sort of the revenue growth, the TCV, the KPI performance across both of our remaining divisions, it's good, it's solid. They're both performing. You can see revenue growth, you can see the TCV growth, and you can see very high delivery performance. You're also seeing high renewal rates, and that speaks to the quality of the service better than anything else that we've got out there.

I mean you can see over the period that we've been extremely busy in terms of delivery, escalation management, but also winning new contracts and innovating across both divisions.

But let me just quickly zoom out and put the journey in context. I know we are talking about today the first half of 2016 (sic) [ 2026 ]. So it's right that we double-click there. But I don't want anybody to lose sight of what we set out to do. We set out to do a multiyear deep root and branch transformation of the company, and we talked about three distinct waves that form part of it. The first one was about creating the space to fund the journey. The second one was about fixing the basics and the third one was about investing and building the future. And I always said we're going to be doing a bit of everything at the whole time because you can't do this sequentially. But I also said there was going to be times where we're going to be more focused on one thing than the other. So it's normal that at the beginning, we were more focused on the create the space. And I think we've done that. And the large part of the restructuring is largely behind us because we've done that part.

That has given us the financial whereabouts, the capability to reinvest and get some of the fixes done. We've done a lot of work on the technology front. We've done a huge amount of work with the hyperscalers, done a huge amount of work on the agentification of the processes that we've been running for a long time. We've been doing a huge amount of work in terms of increasing the AI and data literacy of our leaders and our company. We've done a huge amount of work in building trial and testing and optimizing and redesigning our internal processes and mechanisms to go after opportunities as they emerge.

So as we look at the future, we feel that the divestiture of the call center business gives us an opportunity to further simplify the operating model to really get us to operate and get the efficiency, the scale and the operational leverage and the operational gearing that will get us to this sort of 200 basis points improvement in performance that we expect by 2027.

And I want to quickly talk about simplification because simplification sometimes can be seen as a collection of press releases, right? And to me, simplification is not just the sale or the closure or the commercial agreements. I mean I think simplification is a way of thinking, right? It's a way to create value in the company. It gives us the ability to be more focused, to be sharper, to get efficiencies, to get operational leverage. And it's basically effectively build a business that is easy to run, easy to read, easy to value and is one that we are going to be able to scale a lot better.

So as you can see there, we've been taking a lot of steps to make sure that we get some of the things that we're getting underway to do that, but there is more work to do, right? We still have work to do on the operational side of things, but very happy to report, obviously, the progress on the exit yesterday, but also the closure of closed book Life & Pensions being in the right place.

So Pablo is going to come in and talk about the numbers. I'll quickly come back and talk about markets, AI, defensibility, CSPS in more detail, but let me just quickly go through the numbers first, and then we'll do that, and we'll take some questions at the end. Thank you.

And thank you, Adolfo, and good morning to everyone. And as Adolfo has said, the first half of 2026 has been massive progress in building the better Capita. We have now completed the sale of the private contact centers. We have delivered solid performance in the public business and strengthened our liquidity position. At the same time, our profitability in the half was impacted by the cost remediating the Civil Service Pension Scheme contract as announced earlier in July. And this has had a collateral impact on the allocation of our central costs that remain consistent with prior periods based on revenue, profit and headcount, with public and retained contact centers taking a material impact with higher share of those costs.

The recently sold private contact center business is presented as full IFRS 5 discontinued operation, which has allowed us to present clearer comparatives for the prior period. And before I start with my slides, a reminder that these numbers are on an adjusted basis.

So my first slide shows financial highlights for the first half with revenue growth and a resilient liquidity position, but with margin and profit impacted by the pension remediation costs. Looking at revenue, we delivered revenue of GBP 906 million, up 1.6%, with growth in public and pensions business, partially offset by the non-repeat of a GBP 19 million prior year contract exit benefit in the regulated business.

Operating profit was GBP 32 million, down 32%, reflecting the additional cost on the CSPS contract and the non-repeat of a GBP 6 million benefit from the prior year contract exit. This was partially offset by the cost reduction program savings. Profit before tax was GBP 12.5 million, down from GBP 29 million, reflecting the lower operating profit and higher finance costs from a higher average net debt. Our cash conversion was 96%, down from 112%, reflecting continued investment in the CSPS contract and mobilization costs. This also reflects the non-repeat of favorable timing at the year-end and the completion of a major contract milestone in public service last year.

Free cash flow remained positive at GBP 3.5 million after capital expenditure, net lease payments and interest. And our net financial debt to EBITDA pre-IFRS 16 was 1.6x at the 30th of June. Moving on to a reconciliation between adjusted and reported metrics. Business exits of GBP 2 million includes costs related to the disposal of the private contact centers. The simplification program line reflects GBP 4 million of costs as the business transitions to a simpler operating model following the sale of the private contact centers. And the finance line reflects our hedging valuation movements, which brings us to a reporting profit before tax from continuing operations of GBP 4.1 million.

Moving on to Capita Public Service. This is our largest division, representing 80% of group revenue, and it has continued with solid performance in the first half and has had very strong wins and pipeline performance. Revenue grew 2.4% to GBP 729 million, with increased volumes in our local and regional partnerships, transactional business and on the Disabled Students' Allowance contract as well as growth on the Transport for London contract. This was partially offset by the flow-through of prior year contract losses and lower recoveries on the Smart DCC contract.

Operating margin remained strong at 7.9%, absorbing an impact of 0.5% from the central overhead cost allocations I mentioned due to the reduced profits in the pensions business. And this operating margin was underpinned by cost savings that allowed us to continue investing in our AI hyperscaler partnerships, whilst we saw some negative timing on insurance recoveries. Cash conversion was 50%, reflecting the timing of cash receipts on a major program milestone in the prior year and the unwind of favorable timing differences from year-end 2025 and mobilization costs.

Moving on to Pension Solutions. Revenue growth was 24.7%, up to GBP 107 million, reflecting the impact of the Civil Service Pension Scheme contract and increased volumes on our existing contracts. And whilst the underlying business performed well, the operating loss of GBP 3.6 million was mainly driven by the additional cost on the CSPS contract that also impacted lower consulting revenue. Cash conversion was 270% with the investment in the CSPS system in the first half, offset by the receipt of a 2025 delayed milestone payment and favorable timing in working capital.

Moving on to the retained contact center. Revenue declined 6% to GBP 67 million, reflecting lower project work and the accounting impact of the extension of a major contract. Operating profit reduced to GBP 1.2 million with a flow-through of the lower revenue from projects, higher cost allocations and continued investment in AI and hyperscaler partnerships. This was partly offset by the savings from the cost reduction program in 2025. And cash conversion was again very strong in the half, driven by the usual receipt profile on a major contract.

We now move to the group's cash flow. Operating cash conversion was 96% in the half, down from 112%, driven by the usual receipt profile of a major contract in H1 and the benefit from the year-end timing differences in public. The reduction year-on-year on deferred income and CFA reflects the timing of cash received on a major contract milestone payment last year and the investment on the CSPS contract and Synergy contract. Noncash and other adjustments were a GBP 2 million inflow, including movement in provisions and other noncash items. Below operating cash flow, we incurred GBP 2 million of cash costs on the simplification program and a further GBP 2 million on the final payments from the 2025 cost reduction program. And this left cash generated from operations, excluding business exits, of GBP 51 million.

Continued with the remaining of the cash flow going down to net debt movement. From cash generated from operations that we had GBP 51 million, we then have capital expenditure of GBP 15 million, reflecting our continued investment in contract delivery, new technology solutions and cyber capabilities. Interest paid of GBP 20 million, up from GBP 19 million, reflecting higher average interest -- higher average net debt during the period and capital lease payments of GBP 11 million. All of this resulted in free cash flow, excluding business exits, of GBP 3.5 million.

And turning to net debt. Net financial debt pre-IFRS 16 was GBP 200 million, up from GBP 143 million at the end of 2025. Our IFRS 16 lease liabilities were GBP 299 million, including GBP 15 million of private contact center leases that have now exited the group and excluding the GBP 94 million lease receivable asset.

In terms of the group's liquidity position, in June, we extended and increased our revolving facility to GBP 325 million, replacing the previous GBP 250 million RCF and the additional GBP 75 million bridge facility. And we extended the maturity to June 2029 with the option for 2 additional 1-year extensions. This leaves us with a total liquidity of GBP 351 million at the half year, comprising GBP 278 million of available committed facilities and GBP 73 million of net cash.

In July, we also issued GBP 41 million equivalent of U.S. private placement loan notes maturing in July 2029 and repaid GBP 84 million of USPP maturities. Our financial net debt ratio, both pre-IFRS 16, was 1.6x at June compared to 1x at the end of 2025.

We then have inserted a slide on the order book because with the strong performance on sales in H1, I thought it would help you go through the profile on how this converts into future revenue. Our order book increased to GBP 4 billion, excluding the GBP 425 million extension to TfL announced yesterday. And it is around GBP 250 million higher than at the end of 2025, with the growth led by both public and pensions business. It covers approximately 76% of our H1 revenue base with a further GBP 100 million in H1 that came from well-established framework agreements.

Additions in the half include the wins of the Synergy and Army Collective Training System contracts, a renewal with a major client within Pension Solutions and expanded scope on the Primary Care Support England contract. And as you can see in the pie chart, of the GBP 957 million won in H1, 11% flows in year, 14% in '27, 21% in '28 and the rest flows beyond, which reflects the long cycles from win to revenue on large contracts existing on this business.

And finally, moving on to the outlook. On revenue, we expect the group to be broadly flat, mostly from public service revenue, reflecting the impact of previously announced losses and the revenue profile of the wins in '26 that flows mostly in future years. On margin, we remain in line with our previous guidance with a reduction reflecting the additional cost of the CSPS contract and residual overheads as the business transitions to a simpler operating model. On free cash flow, we expect an outflow before business exits of between GBP 35 million and GBP 50 million with solid performance in the public service business and reflecting the increased cost in the Civil Service Pension Scheme contract.

Under net debt, we expect an increase, reflecting the free cash outflow before business exits, the outflows from the disposal of the private contact center and the closed book Life & Pensions. And with this, I will hand back over to Adolfo.

Thank you, Pablo. Good overview of the numbers. I think it certainly highlights the areas where we've done well, the areas where we've done very well and the areas where we still have opportunities for improvement because everything that we do is absolutely critical. But ultimately, our challenge and how we should be judged is on our ability to translate the strategic and the operational improvements into financial results.

I wanted to go and turn now into the markets because I think it's important to highlight a number of things. First, we play in structurally growing and very resilient markets. If you look at our core in the context of our size, but you most importantly look at the headroom that we still have, speaks of opportunity. Our markets in both sort of the wider public sector, central government, defense, local and regional authorities, regulated entities at large, it is a stable market. It is growing and is reasonably resilient. And I think if you look at the different positions where we play, this speaks of a constant growth where we have opportunity to grow the market, but also I think as we're showing with our effective winning machine, we have an opportunity to also increase share of the overall market.

So -- some people have asked me, are you concerned at all now that you have sort of refocused the company? Are you just have now a smaller pond I were to drink? I actually think it's the opposite. We are going to be more targeted, more intentional, more focused, but the opportunity is there to be taken. And all of this data is validated by a number of external companies. And I think we're starting to see this already in the numbers, right? That sort of intentionality makes it clear what you're trying to do. You prepare for that, you equip for that, you train your people, you're very selective on what you go after. So you tend to win more often, so you grow your TCV, and that's where we are. Critically, there is a lag in time between winning in TCV and revenue, but that is a nice problem to have.

Second, I wanted to talk about the specific of our position as a strategic supplier to the U.K. government. So following the divestiture of the commercial private call centers, if you look at the data provided by TechMarketView, we will be #1 in the category of SITS, right, software and IT services. And this is a position that we've built over many, many years because the reality is that there isn't anybody out there who's able to match the skills, the depth and the breadth of the services that we provide to the public sector as a whole across all the areas.

We are in a very good position because we know the private sector. We know the business processes. We know the nuances of delivering and orchestrating a citizen experience and a citizen service across multiple data silos, against multiple systems, against multiple regulations and legislation, much better than tech companies do. But at the same time, and this is really important, we are better at deploying AI capabilities and innovating than most of the traditional BPOs are.

So our ambition of being that AI-led business process services partner to the public sector and regulated industries is validated not only by the market opportunity, but also by our history and our capabilities that we're keeping to build. So we will keep building on that expertise. We will keep building in marrying those 2 expertises, understanding the business process, understanding the ultimate citizen experience, understanding that ultimate pension member or trustee experience and then rolling it back into a process, rolling it back into automation, rolling it back into agentification where at all possible. But our experience, our depth of relationships with the hyperscalers, the capabilities that we have in the team and our approach to do this is, I think, second to none.

I also wanted to talk to you about the public interest test because this has been something that has come out over the last few weeks and has attracted attention and rightly so. I think rightly, the government has come up with this policy for the public interest test, where it says every transaction, every deal that is above GBP 1 million should be tested. Is it better done in-house? Is it better done by a government department? Or is it better done by industry? And I think this is the right thing to do. We've got to make sure as taxpayers that we're getting the right value for every investment that we make and that, that investment is made in the right possible channel.

And I think the stated intention is to start with facility management, with cleaning services, security and a number of others. I believe this is going to be putting pressure on the sector, and it will be putting pressure on Capita. But the level of pressure that's going to put on Capita is going to be smaller than others. Remember, we did the change and dispose the call center, the front office capability because we wanted to focus on middle office and back office complex, very complex, very critical services to the fabric in this country. And in that level of complexity, when you're orchestrating people, processes across sometimes providing a service to multiple departments, we're having to deal with a lot of different systems, a lot of different data sets, a lot of different policies.

That level of complexity requires a skill and a scale that is not in long supply inside the government. At the time, where the government has stated an ambition to reduce some of its population. So I believe this is good. This is good for the industry. It's good for the country. But I believe -- and I accept the challenge to prove that delivering with our SMEs, delivering the social value, delivering our innovation, delivering on our experience and being a U.K.-based provider, we should structurally benefit from this push.

Now let's look at the priorities from the new government. And I think if you look at the new government, I think most of us are quite excited to see the level of energy and determination that the new government has come out with ideas and some of them that really are going to fundamentally drive some change in the kind of United Kingdom that we are going to build. But if you sort of go and look beyond the energy and you look at the initiatives and the areas that have been highlighted as priorities, I see they represent great opportunity for Capita. In Number 10 North, the whole concept of devolution, I think that effectively expands our addressable market.

It gives us a capability to engage with newly funded buying centers in other parts of the country that are going to need the experience of deploying these services -- they're going to need the help from somebody who knows and has the experience in transforming local administration. We have people who have the capability to help them provide citizen services that have that multi-program and effectively help them onboard and effect change. This is more than just buying new technology. And I believe our learnings and our experience across both local government and the central government departments will be very relevant and very useful through devolution.

We've also got this mantra that the Prime Minister had talked about good growth. And I think a lot of that is around building. And I think if you look at our capabilities around planning and what we can do around benefits, these are areas that we're very comfortable with where we have a lot of experience. We heard about skills, training, recruitment. All of these areas play squarely into our learning and development capabilities, what we do in terms of assessment already the capabilities that we've been doing employability services, things that are not new to us. This is not us having to scratch our head and see how we provide those services and how do we help the government to drive that. We do this today, and we do this for a living.

We talked about AI adoption and the government has been talking about looking at AI as a driver for public sector productivity. This is something that we are not trying to latch on now. We've been at this now for a couple of years, and I'm going to cover the credentials, the capability that we've built since then. Look at welfare, social reform, again, this is very close to what we've already been doing with FAS, PIP, HAAS and a number of other assessment services we provided to market. And then again, there is they want to pay an attention to the U.K. SMEs, U.K.-based skills and U.K.-based companies. So we're hoping that structurally Capita can benefit from that.

So overall, I think the agenda is squarely there. It's a natural place where we have an ambition to win. I think we have the credibility to win. And we're very, very pleased to see the very early days of agenda drive. It will be important to see the funding when the budget is put out there. It will be important to see the sequence in which these investments will be made by the new government, but we're ready to help. We are aligned and capable.

I talked earlier about simplification. And I think I made the point that simplification is not just divestitures or a reorganization. For me, simplification is a value driver. If you take a little bit of distance, just a little bit of distance and you look at the remaining of the group, you're going to see that what we do is fundamentally one of these five things. And that we provide a service to the citizens or we're providing some sort of assessment services or we're providing services related to the workforce of a particular company, the government area or we're providing operational services or we are delivering pensions administrations.

That is it. Why is this relevant? Well, first of all, now that you're doing a number of things that you understand well, you can leverage all of your operational capabilities, whether they are people-based capabilities or IT systems capabilities or they can be AI and agentification capabilities. You get operational leverage across all of it. We have stated our intention to go after the GBP 40 million additional opportunities that this offers because we can remove overhead. So they will be margin accretive. We're also going to be able to get operational leverage and cross-selling of those capabilities because we now have the abilities and we're doing this for your workforce, would you like us to go and help you with operational services or a number of other combinations.

So the recipe remains the same, combining operational experience, skills, people who know how to orchestrate and deliver the experience. But unlike the old Capita, where we were doing 50-plus things and we used to call 50-plus capabilities. Now we're focused on these 5, and that is just going to really help. So market competitive. A number of you have asked me over the last couple of years, are you going to be a prey to AI? Is AI going to help you? So I'm just sort of trying to give you my perspective why I think our position is well defined, well protected. And while we have to work on it every day, we like our hand. We really like our hand.

So if you look at the chart on the left, you'll see the data from BCG that pretty much says that 70% of the value derived from AI is derived through people, people who are happy or able to understand that capability on and understand the process and they're able to really nuance the delivery of a particular service who are not only good to deal with the happy path that can be automated, but they have the skill and the experience to deal with the unhappy path of a service provision that needs that human intervention. That's 2/3. Yes, there is technology, brilliant. Yes, there are algorithms and there is going to be technology prowess, but that's a mean to an end.

If you look at what's happening on the wider industry in prior events, I'll show you sort of the AI stack. And I always talked about these trillions of dollars that are going into building the bottom layers of the stack is going into memory, it's going into processors, it's going into the system scales. It's going into these huge clouds. It's going into these huge data centers. It's going into building these applications, these layers, these LLMs, brilliant. The more, the merrier because we can go and build on it, build on top of it our capabilities. We are not tied to any particular architecture. We're not tied to any particular LLM. We're not tied to any particular data lake or analytics structure. But we're sitting on the top with the depth of the process, with the people, with the understanding that is required to deploy technology there and get that ultimate outcome that a regulated industry, a government department, a local administration, part of the -- our forces really need to deploy.

And you cannot buy your way through trillions into long-term expertise and deep understanding of a process. That is the one thing you just cannot. You've seen many of the investments are now going into what's called forward deployed engineers because they do recognize that, yes, you can throw the tech at it, but it's not going to stick unless you understand what the tech is for. And this is something that we've been working and I'll cover.

So we are an early mover but we are derisked. And I'm going to just sort of tell you, so if I'll take you through the end of 2023 phase missing here, which was the shock when ChatGPT came about and everybody is like, oh, what was all of this with chats. And then there was this phase of, oh, this is coming, this anxiety, what's going to happen with AI overall. And then we sort of moved to, okay, can we build vertical moats, vertically integrated, can we build horizontal platforms? What is going to be the operating model -- there's all these players coming up, the pressure on the SaaS companies to defend their business models.

But then what has really started to sink in towards the half -- the later half of last year, it was there's going to be a lot of orchestration required, orchestration of agents, orchestration of multiple agents. And then ultimately, it's a realization where the whole narrative in the industry has changed back from humans are irrelevant to now humans are absolutely critical to work in this workflow. That's sort of been the journey we've been on and many of you have been writing about. And our journey sort of maps that.

And I think if you look at from our ambition when I first came in to the early deployments when we started to do an agent suite in the summer of '24 to forming the Catalyst Lab that we could get this ideation and integration with the platforms, then the use cases, the Catalyst stack to start mapping, okay, there are trillions of dollars in R&D going into R&D and build-outs going into this space, how do we build it into a stack that makes sense to our customers? And then how do we go and move into the AI-led BPS or BPO company? How do we rewrite that story.

And then now the forward deployed orchestrator is different from the forward deployed engineers, and I'll talk about it in a minute. So I think if you start looking at this, I think we are moving clearly. Yes, there is a lot of augmentation. And as a matter of fact, the vast majority of what we do today is augmenting our colleagues' capabilities through AI. But the shift is going to be from augmentation to orchestration. And I think it's the human on the loop, right, which is the new expected model is kind of like the market has moved towards where Capita is and Capita was and Capita has a legitimacy to keep adding value in the future.

Because remember, we are not in retail, we are not in a number of businesses that do not have the same level of regulatory pressure. We are in regulated industries. We are in very critical government departments with very critical citizen service provision close to the user in the local councils and the governance aspect, which is something that is not new to us, is absolutely critical.

So why am I bullish? As I said earlier, we moved early, but we are derisked. We haven't had to put a lot of money into it, but we've already built a number of capabilities in the organization, and we got some credibility. But most importantly, it's because we are on the right side of the market. We are not either trying to create a market or trying to chase after a market. The market is there. It's growing. Yes, there are adoption issues. Yes, there are adoption challenges. Yes, we've got many challenges with government procurement to buy these type of solutions in a transitional phase. Yes, it's still very top-down driven in some organizations. Yes, all of these things are true. But at the same time, it's true that it's moving and it's moving towards us.

So find the market, select the pipeline, close the pipeline, deliver the revenue, deliver the margins. So we're sort of moving from that left to right. And I think the numbers start to show. I think Pablo covered them. I would probably talk about just a couple of them. I mentioned the KPI performance, and I think it's really important to keep reminding everybody about everything else that we do, the media intensity, the political intensity around CSPS have been intense. It has been brutal. And sometimes, we could all collectively make the mistake of thinking that that's everything that we do at Capita, and that is normal.

That is not normal. We're delivering very, very well. And we're renewing extremely well. We're winning new business really well. And I think as you've seen the lots of momentum, we continue to win through these motions because we are not failing at building the best possible propositions. We're not winning because of any other reason. There is -- there are robust procurement processes and if you win as a result of that procurement, you tend to get the order. But I did talk about, yes, we get over 90% right. We got one terribly, terribly wrong for which I will apologize once more because it's not the experience that anybody wanted. We didn't want it for the members. We didn't want it for ourselves. We didn't want it for our shareholders. We didn't want it for the employees. But that's where we got.

I've talked enough about the challenges over the last few months. There's obviously a lot of complexity that was inherited. Some of it was known, some of it was not known and some of it might have been known but not fully understood and some of it, it was worse than we thought. It doesn't really matter. We are where we are. We inherited the service, and we decided to do everything we could right from the outset to do the best possible thing for people that needed it the most.

So we didn't necessarily chase SLAs. We chased urgent cases. We did the best we could for a variety of months so that we could just sustain that sort of social pressure. And we actually did fairly well in some areas like payroll. You never heard about it. We even did a significant payroll to all the retired civil servants in the country ahead of us taking over the contract because it was required and it was the right thing to do. And it's continued to happen solidly since then.

There were issues with some of the automation. We didn't have the right automation for the data we inherited, some of it arrived late. There was a number of things that we've had to catch up with the vast majority of it throughout the second quarter of the year. And a lot of this is actually coming towards the end of May and June, throughout June. But I think as you can see there at the bottom in particular, you can see the 4 key processes and the 4 key areas of pain where collectively, we're still letting members down. And you can see that this has moved from a, what is it going on, to, can you get the automations to work? Can you deal with the data, doesn't matter what quality the data is in, to do you have a capacity in the system?

And the answer is yes. We do now have the capacity in the system. The capacity across the processes exceeds the inflow. So that excess capacity is now being directed to reduce the amount of cases, and we made some commitments to solve that over the next few months. So extremely painful, something that shouldn't have happened is our #1 operational priority. From me down, everybody in my executive team and everybody who's required, we will do what it takes to get it there, but it's now turning the corner. And I think the financial update last week as the dust settled and we got a clear picture sort of reflects that. It will still remain an operational reality in the second half.

You know how these things are politically from a media perspective, expected to be intense. But operationally, we are in a very, very, very different place, and that will, over time, move into the right direction.

I've talked about the Catalyst stack and the Catalyst lab already, so I won't cover it. I just wanted to put there a number of hyperscaler highlights because I think if you go back 2 years and you see what we've been saying around the hyperscalers, what this slide shows is the strategic depth of the relationships that we have with them now that go beyond a commercial alignment, go beyond some go-to-market capabilities. Now you're starting to see those capabilities being well entrenched and well embedded either internally in our functions as we reduce our cost to operate and we become more efficient or in our customers as we improve the quality of the service we provide, the quality of the MI we provide or we reduce the cost to serve.

And then there is also some go-to-market capabilities like in areas like AWS and Salesforce that will get us there. So it's a good progress. But what are you starting to see here is, yes, there is also for customers, but it's also internally. And this is an effort that we put in this year, which is what we talked about, customer zero.

And customer zero is -- well, we need to build the technology. We need to run it ourselves. We need to have a reference. Obviously, we will have the benefit of doing it to ourselves first. Back in the day, 10 years ago in tech, we used to call this flying your own jets, right? And this is kind of what we're trying to do now is say, okay, where can we deploy this first and then how we capture it, replicate it and then just get a scale out. And we've just given you a number of initiatives that we are already using internally, whether it's the assessment benefits or whether we're talking about quality and compliance, extremely critical in the markets we go after.

And a very important one, which is the AI registry. And I like to talk about the AI registry as the zoo, right? It's okay to have one agent. It's not enough. You'll end up having to have several agents. You probably end up having tens of agents or hundreds of agents. So the question is no longer whether you can build an agent. The question is no longer whether you can build 10, 20, 30, 100 agents. The question is whether you can manage the agents. The question is whether you know who built the agent for what purpose, whether you know for every single agent, what data are they using?

How do you make sure that are there not 3 different people, 3 different departments building the same agent, whether the return on investment of the agent is the one, whether the agent should be retired and has it been retired properly. So how do you manage that zoo, right? You have animals in the zoo, all of them in their own domains. They all have their own jail. They all have their own feeding medical scheme. It is the same with agents. And we built that AI registry where we now have full control and governance on how to do that.

It's not just the technology, it's knowing what technology you need to build, you need to know about what operational processes. And I believe that skill of understanding, orchestrating, managing the life cycle of the agents will become the #1 priority in deployment of agentic AI in regulated industries, and we're way ahead of the pack in terms of having built that capability internally for us as customer zero and now very happy to be taking it to market.

And the best way to take it to market is this new capability we've announced is the deployment orchestrator. Which is not the same as the forward deployed engineer that you're reading about from Anthropic, OpenAI and a number of the consulting companies. Their thesis is you go in, you understand, you build and you move out as the forward deployed engineer. Our ambition is to leverage what we've been doing for 40 years, which is observe a business process, deploy that sort of new business process, orchestrate the business process and then operate it. That's been what we've been doing for 40 years in the analog world.

So we've taken that very same logic into the agentic world. And we will look at the business process. We will reimagine the business process and then we will orchestrate it and then we'll manage it, but we will do that with agents. So instead of building an agent, deploy and running away, our proposition to our customers is we will work with you. We will look at your business processes. We will optimize it. We will build an agent. We will stay. We will run it with you. We will help you train people. We will help you embed it into the operating culture. We will make sure you get the usability. And because these things are never static, if it needs improvement, we will drive the improvement for you. Otherwise, you're going to get a tons of agents, you drop them in, no training, no development, no change in the process, won't be used and you will be wasting your money.

So this sort of FDO model, I think, is a very legitimate extension to what a business process outsourcer, we call it now a business process services company, adds value into deployment and creating value for government departments who have to do this at scale, local authorities, different parts of the army. And this sort of operate and own versus build and exit. It's our space. Not everybody is going to want this, but we believe our public sector customers and our regulated customers will very much value this model going forward.

So just to conclude, I'm extremely proud, but I really, really, really proud, and I wish I could give it more time in this call about the work our colleagues do. I mean, their determination, their drive, their ability to cope with the change that is happening around them in the market, inside Capita, how they wake up every day passionate about delivering when it's easy, but most importantly, when it's difficult. The team is superb. They're motivated. They're really fighting every day on behalf of our customers.

And I just sort of wanted to give you some highlights of some of the things that we've been doing and they've been doing and then we've been getting credit for as we build that better company that values that customer orientation as our first value in the company.

Above and beyond that, I wanted to highlight three things. From a governance perspective, responsible AI is critical. We've been evolving our governance models so that we have now an AI charter where we hold ourselves accountable, both internally and externally for what gets done, how does it get done, what gets tracked for what purposes, traceability and everything is done with accountability, security and transparency in mind. And we created the process, the gating factors and the guardrails to ensure that, that works. That is a very important piece of work as you embark into this journey. And we have built it on top of our experience dealing with complexity around governance in this area.

The second one is the skills. I wish we could do more. I wish we did do more, but I take a lot of pride in how much we've already done to increase the literacy in AI and data across the company. You can never do enough, super important. And I think where we're seeing whether it's the number of apprenticeships that we're doing or the number of assets that are being consumed, the number of bottom-up initiatives that have been driven is fantastic. I think this is -- we've given them a sense of what we're trying to do. We've given them the enablement and then we let them go and build.

And then we talk about attrition. We talked about that 17% blended. But once you allow public sector around 14%, pensions just on or under 10% is really, really good. And then there is a use case around employability. I think it's a really important case. I think, is a pretty good time. I think we know that as a country, we're facing a lot of issues with employability and the challenges that a generation has. But we've got work going on employability across multiple areas.

It's just not -- they're not in the education segment. You've got the special education needs. We've got veterans. You've got people who just left jail. We've got work that we're doing with the families of serving members of the forces. And this is something that we're very proud about and our colleagues are very proud about as we support it to create joint value.

So just to conclude with our -- we like to call it the strategy house. It's everything that we're doing on one page. Starts with our values that were created by our colleagues, by management last year. Then we build on the strategic initiatives that I think you can all recognize from the narrative in this session. Obviously, the 4 betters that are there. And ultimately, this is to unlock value, deliver on our vision and deliver on the financial objectives that we are committed to, to deliver that improved financial performance.

So in summary, we are working and we're privileged to work on structurally strong, growing and stable markets. The market is moving our way. We've built capabilities. We are sort of ahead of the pack, derisk, but we're leveraging on everything that we've been doing for decades. We now have a simpler group. We have what I call manageable leverage of everything in the go-to-market, on the delivery and on the investment in tech. I think that's important. We also have to fix CSPS. Very clear that, that remains a key and absolute priority to get there. But everything else that we do, we're going to keep winning as we are, and we've got to keep delivering well as we are, and we're going to keep building this better company that ultimately will generate the financial returns that we have all waited for.

So with that, let me conclude the update. Thank you for your attention, and then I'll sit down there with Pablo to do some Q&A.

Mark Howson from Singer. Just a quick one on CSPS. Are you still confident that you'll get the scheme back up to normal levels of claims by about September, October? Is that where you're running at the moment?

So we stated 2 goalposts, one by September, which is sort of more what we call the flow. And then there is another goalpost in October, which is sort of make progress on the stock. There is a caveat there. Obviously, we need to do that with the cases that we don't have dependencies on and dependencies is third parties, maybe lack of data about particular employability or employment records of somebody because the employment records are not there or there's a probate that needs to be done.

So there's a number of things that we cannot resolve initially. So those goalposts are excluding those. And then we've also started a parallel piece of work with the Cabinet Office to figure out how we can jointly work on making those unworkable cases, turn them into workable cases. Ultimately, they all need to be addressed.

Kai from Canaccord. One for Pablo and one for Adolfo, I don't know if that's okay. So for Pablo, just on the guidance range for the cost and free cash flow impact, which was quite wide relative to your profitability. I'm just wondering at which point in the year would you know which end of the range are you most likely to come in? And what are the puts and takes for you to be within that range? That's the first one.

Adolfo, the second one was on the public interest test, which I believe or I understand kicks in April next year and creates quite a bit of additional admin burden for the departments awarding contracts. I'm just wondering, if you think about your potential bookings profile, would you expect possibly a bit of a rush to award -- to get awards out before that deadline and then maybe a bit of a pause? Or I'm just kind of wondering how you think that might impact bookings over the next 9, 12, 18 months.

Thanks, Kai. So yes, the guidance is quite wide. But if you consider actually how much we departed from the original guidance from March to July, you will understand that we can only be prudent at this stage and guide towards a broad enough range. And there are a number of things. Number one is continue the timing at which we are planning to deliver September, October, as Adolfo was mentioning, assume that there are no new surprises, assuming that all of the macro environment around us from customers to pensions to everything remains on track.

Then we've always said that there is a commercial discussion to be had at some point. The timing of that may impact that. A portion of that range is us making assumptions on commercial recoveries, et cetera. So I think that it will be by the Capital Markets Day, where we have a stronger view on whether we have been able to progress at pace operationally and whether we see that further commercial discussions are going to be within this year or slipping into the next year and because we cannot make accounting assumptions on them unless they are signed.

And on the second question, I think normally, you always see a bit, right? So there's always going to be some people could fall on one side of the deadline or the other side of the deadline. So there will be a little bit, of course. But the reality is most of the stuff that we go for is a long sales cycles, long engagements, very complex in nature, very long-term processes. So I just don't think that's the kind of work you would rush, right, to be on that.

Yes, there is going to be -- yes, there's going to be a little bit more work that the government department might have to do to sort of prove that. There is going to be work that we need to do to prove the social value, but it's something that we're already doing as part of our proposal. So yes, there might be a little blip there somewhere, but I don't think that's going to be a factor that's going to change the shape of the business.

Roddy Davidson from Singers. Just very interested in the hyperscaler partnerships. You talked about the progress you've made there, how they're developing. So kind of 2 questions. One, just wondering if you would highlight any of those as being potentially particularly impactful going forward?

And also whether there are any other tech relationships that you're building at present that we perhaps don't know about?

Yes. I think they will all be impactful. The reason why they are highlighted is because they play a critical role somewhere in the value chain of our AI Catalyst Stack, whether it's on the data and on the analytics, whether it's on the observability of the service, whether it's on the orchestration of agents or whether it's the fabric. So they're all relevant. Otherwise, they wouldn't be there.

There is a growing amount of work that we're doing with Anthropic, as you would imagine. But at the moment, obviously, we can use Anthropic through AWS and through Azure. But that's in terms of a new name that will become important in the second half would be Anthropic.

It's James Lockyer from Peel Hunt. There are stats out there that suggest sort of less than 30% of AI investments are actually seeing ROI, but you've generated at least GBP 250 million, of which I imagine some of that was AI. Could you talk us a bit more through that? Any helpful ROI stats would be useful there.

Secondly, in Knowledge Industries, there are a couple of reasons why people haven't often seen an ROI in their investments. Culturally, people disengage if they're worried about their jobs and companies are often over-indexed in savings instead of incremental revenues from those more productive employees. How do you think about those 2 elements around cultures and incremental revenues?

And then third question, when you were at SDL, the asset that compounded with AI wasn't the MT engine or WorldServer. It was actually the client-specific translation memory there. Every job made the next job cheaper. What's the equivalent at Capita? And presumably, the answer is process and case data from 20 years' worth of contracts. But on a government contract, who owns that data? And can you use it to make the next bid cheaper?

Okay. Excellent questions. So yes, the equivalent of that is effectively the training data that you can use for the provision of the service. And that can be historical data or it can be current data. So for example, if you are on the front end of a citizen service, it might be the real-time live transcription that happens on a particular call and an engagement. It could be the sentiment analysis of that particular citizen.

If you are engaging out there, it might be the policy. So how many policies there are, for example, around road user charging in TfL, right? So every particular contract will have a number of data assets, whether they are policy, whether they are recommendations and whether live data assets that become the core of the foundation of the service.

The level of access that we have to data varies account by account, varies contract by contract. And then it varies business process by business process because, for example, we talked about assessment services and our own training, for example, that doesn't require any data -- it requires data, but it's data that we governed, right? If we wanted to go into somebody's medical records that requires working with the right authorities as you would expect. So I can't give you -- it's not like the SDL industry where everybody had the same asset, and it was just about getting that asset and apply it on there. But it's a sort of a more nuanced thing, which again, I think it plays to our differentiation. Is that nuance is that case-by-case, process-by-process expertise that we have that is part of our moat because this is not something that you build once, scale and you can serve all of our contracts. They're all a million times different. So on that.

In terms of the AI ROI, the way I look at AI, AI is an ingredient to the service. We don't do AI for the sake of tech. We're not building AI and we have AI discrete cost and then AI discrete margin. I think it would be the wrong way to go about it. That's more of a product company. We are a services company, an outcome company that has to deliver a working outcome. And there is transformation. There is operational capabilities. There are people capabilities. There is going to be a supply chain, there is SMEs, there is building a consortium. You got all of these things and then you've got AI and technical operations as part of the ingredient.

What AI and automation at large and good data practices will give you it's a more modern solution. It will give you an ability to do things faster. So if you look at the work that we do, for example, with Snowflake and be able to build much better MI and real-time data about the service that is being provisioned. That translates into a better service. And if you build a better service and you build a better proof of concept, you're more likely to get the customer to believe, so you get increased win rates and then it's less of just price, right? So I think the value comes indirectly, which is why I don't see in the immediate future an ability to track it or wanting to track it because that would be a crazy metric.

Chris Berry, Peel Hunt. I've got 3 questions. What do you still need to do operationally to be in a position to deliver market rates of growth? I mean I know that may well vary across the 5 offerings you have. And when do you think you might get there?

Secondly, as you scale up the agents from 500 to 1,000, et cetera, what's the greatest challenge? Is it governance, technology or people, that sort of thing? And finally, the increase in the unweighted and the weighted pipeline is quite large. Just really trying to understand the factors behind that. Is it what's going into the funnel? Is it your views on conversion or what you're taking on?

Yes. So on scaling the agents, it's not about scaling the number of agents. It's about scaling the impact that the agents have. And I think there was the question you made earlier is about the culture, right? So building the agent is great. Nearly everybody, actually, probably all of us in this room could build an agent in a weekend, right, without knowing to code.

Most of our employees know how to build an agent. But is the agent relevant? Is the agent going to effect and leverage something in the business process? It's going to be grounded? Is it going to be safe? Is it going to be governed? So it's not a silver bullet there, Chris. It's like a collection of lead bullets, right? It needs to be safe. It needs to serve a purpose. You need to have the operating team willing to use it. They need to see an immediate benefit. And the benefit that we're seeing is if it makes their life easier, that is in the operations for us, the real measurement. If it adds value to you because you're doing something because it allows you to populate your responses faster because it creates a better quality because it checks what you're going to do before or because it gives you faster relapse times, and particularly, most people go like, yes, give it to me.

So you need to take all of these lead bullets so that you drive the adoption. We had to solve the fabric challenge last year because it's how do you build that fabric with effectively a system of record of all the agents because it's a governance question, right? And there's also a financial question. We had 200 ideas coming out of the Catalyst Labs, right, of which we've only progressed about 20 of them at scale. So they need to be analyzed. So you need to have that. We've actually -- by the way, we created our own agent CLIVE that deals with the Catalyst Lab, right? It's a Catalyst Lab ideation, verification engine or something like that.

So when people submit is an agent that is processing that, and then there is a number of humans. So my learning is a lot more about management, culture and understanding what is it that you're ultimately trying to fix. If somebody is not getting a better service or a cheaper service or a better experience or we are not reducing our cost, it's probably not worth doing and having that discipline. And then the other thing that we've learned is sometimes you take a step forward and you take 2 backwards. And sometimes you got friction, right? You've got to have that willingness to have that friction. You want to have the issues out in the air because as I showed the sort of when you look at the 2-year path, it looks like it was linear, and it looks like it was always the plan to go that way. No, it wasn't. It's been like step by step, conflict by conflict and question by question.

So a lot of it is in the culture of the organization and in the management team to be willing to have that back and forth. Very different to run a company with that type of culture than it was to run a more linear command and control culture. I think that for me is the single biggest inhibitor and why a lot of the AI efforts are failing in a lot of places. They just build them -- buy the tech and give them the licenses and then just hope that things improve just by osmosis. That's not the way it happens. And then it's in a regulated space and it's a government process, then less so.

So you had something on the market, the pipeline as well. I just think what I just explained explains part of it. Richard and his team have done a pretty good job of defining the value proposition, narrowing the focus, making sure we are very driven in terms of what we go after. We have a clear value proposition. And the market is moving towards what we do and how we do it. So there are more things that would get qualified in, in terms of suitability, then we will go and look at do we have the resources, right because everything that move is an opportunity for us and everything that is an opportunity for us is an opportunity for us now.

So we're actually having to discount a lot of things, and we are putting more focus on where we believe the probability of winning this sort of the PWin is a good one. And then we will look at can we differentiate and then can we command the right levels of margin in that. But the market is moving that way. So even though we've been more restrictive and we're opting out of more things in a perverse way, our market is growing and our TCV is growing, which is a good place to be.

Vasia Kotlida from Barclays. The book-to-bill is back to positive. Within this, do you have evidence of wins that utilize AI-enabled BPO?

There is a page in the appendix where we're using a number of references, which we didn't cover for time. But you'll see there some use cases on how it's been used to reduce the size of particular customer centers by still keeping a high-value team to deal with the unhappy paths, but we have now tech dealing with the happy path, you're looking about assessments, quality. So there's a number of examples referenced in the appendix.

Joseph Spooner from Shore Capital. You talked about the kind of the culture change that happens in your organization to accept the technological change. But on the customer side, are you seeing kind of that equally replicated? Is there as much -- you're kind of working across all levels of government from local to central and other public areas in between. Is that kind of enthusiasm to adopt this new technology broad across that spectrum? Or are you seeing kind of willingness to do this in kind of certain pockets, but more resistance elsewhere?

I think we're in early days. We are in early days. If you look at the narrative, if you look at our pensions customers, this is pretty much the who's who of the FTSE 100. You wouldn't find one single CEO of those companies who doesn't have an aggressive AI strategy. And then down is happening. But then when it comes to the day-to-day operations, say, on pensions administrations, the appetite is different in intensity and it's different by domain.

So some of them are very happy to start innovating on triaging of inbounds and understanding how that works. So we got an offer that we've done on inbox and inbound triaging. Others are more happy for us to innovate with them on traceability, particularly traceability of members. So if you get that variety of -- and others, by the way, they want to go all the way in and go and build digital pensions and they want to get full mobility and fully automated members' journey and fully automated digital trustee journeys.

And then in the public sector, it's the same. You've got what probably is different in the public sector is most people that care just is about the service. So tell me what service you're trying to deliver and then it's up to us to go and do that. There are different government departments. Some government departments have a little bit more muscle and they would say, well, I think I can do this myself and the jury is out, whether they can do it or they can do it in time or they can do it in budget. Or this, they say, no, I don't have it. So just it would be great to do some innovation with you.

Again, you'll see from the government down, right from the top from the cabinet down that this has been adopted if you listen to Antonia Romeo as the Cabinet Secretary or the Cabinet Office, all they're talking about is now AI to drive public sector productivity. I think as you translate that down into the organization, Director General, maybe some of the realities of contracting and procurement are getting still underway. Some of them are still early days.

So I don't think we're anywhere where we will be in the next couple of years. But what I know 100% is the journey has started, different intensity, different departments, but it's definitely on getting there. And I'd rather be there before our customers are than have to chase after them for the next 2 years.

And just on the market sizing slide that you showed. On the pension side, I think you kind of sized the defined benefit opportunities there. Would there ever be an opportunity for Capita to expand that out into the defined contribution space as well?

It's definitely a question that we have there. We do a little bit of defined contributions as well. But yes, the vast majority of our business is defined benefits. The vast majority of it, despite all the noise is actually in the private sector and it's working really, really well. There is still a lot of activity in the defined benefit space. There is still a lot of particularly insurance companies getting into the space. There is a lot of transformation. There is still a lot of regulation coming in. There is a lot of what we call change, change will still drive a significant amount of consulting activities.

So there is opportunities for us to be very successful there. We are building the digital version, right, of digital DB, of which CSPS is one of them. Once we stabilize that and then we'll decide where do we take this business next.

I do have some online. Okay. First one, I think, for you Adolfo, it comes from David Brockton at Deutsche Numis. The growth in the unweighted pipeline looks very encouraging. Please, can you share any large new contract opportunities that sit in there?

If you sort of go to that sort of Slide 17, I think there are a number of them that are highlighted. There is the PCSE, a primary care solution. That's a large one and that is out there. There is some -- a couple of large deals in the defense space around operational and people services that are very relevant. And there is also some -- there's a large opportunity in the Home Office space as well that is relevant. And well, I was actually there was a huge one, which is the Transport for London, which we closed and announced on Monday.

So this is a process where we win some and then add our numbers. But yes, it's -- we're making progress. I think the single biggest challenge that we have now is how do we translate the win into revenue and margin. Just a good opportunity. I have to keep reminding everybody that it just takes a while because of the contracting, then you've got the transition, you've got the mobilization, you got to the ramp-up.

So it's kind of like a first world problem, but it's still a problem, right, until we transition those into revenue and margin. But if you don't win them, then you have a big, big problem. So I think we're on the right side of the challenge.

And then there's a couple of questions on CSPS. The first one is, what is the case backlog today for CSPS? And then the second question really for Pablo is, what would the financial performance have looked like for Pension Solutions in the first half without CSPS? So that's the impact on growth and margins. And I also had another question in, which was what were the losses so far on CSPS? And can you recover any of those costs? And then lastly, on pensions, how much profit typically comes from interest on client balances?

So the answer to the first one is relatively short. We updated -- jointly updated with the Cabinet office a couple of weeks ago. And I think those are good numbers. These obviously, the numbers have gone down because they keep moving daily and a couple of weeks, but we haven't got any other public numbers that we've got aligned with the Cabinet Office to share, and it would be irresponsible for me to do in isolation.

In terms of CSPS, if you look back at when we announced the win of this contract, we said it would be around GBP 300 million TCV over 10 years. So it's around GBP 30 million per annum. You can say GBP 15 million for the first half. And that shows that there is underlying growth in the pensions business, not driven only by the CSPS contract. The losses that it has contributed, it's not something we've been explicit about, but actually what we show clearly in the bridge is the impact of the contract on the profitability of the business, GBP 14 million.

And we show the collateral damage on the consulting business where we have not been able to drive it as hard as we can as we redirect the resources that is broadly in the GBP 3 million bucket on the right of the bridge. And in terms of loss and can we recover, it is part of the commercial discussions that will take place at the right moment. It is true that we inherited a very complex and large backlog larger than expected and that the customer is open to having a conversation at the right moment at the right time. I think the focus right now is to deliver the service. And then after that, everything will follow.

And then interest on client balances.

Interest in -- it's one that I'm always quite not keen to get into the detail of the interest because the reason is that different contracts get negotiated with the customer based on we'll pay this fee and you will take a proportion of the interest. And therefore, it's something that on one side, it depends on the contracts and which ones share interest and which ones don't. And at the same time, there are a number of levers when interest goes down that we are applying with technology and with further development that offset it. So I would say actually that interest is not being a factor that I have had to call out in the bridge because we've got a number of offsetting elements.

There were no further questions online.

Okay. But if there's no further questions, thank you again for your interest, the support and having stayed here a little bit longer to go over these first half results. Thanks very much. I'm looking forward to seeing you all in November.

Good morning, everyone. Thanks for taking the time to be here with us today. I'm here with Pablo, and we are just going to give you an update on the transaction we announced this morning for the disposal of our contact sector business, the commercial Contact Centre business.

So a transaction that we talked about in this morning's release at 7:00 a.m, and we just aim to give you an overview of both the strategic intent behind the transaction and also the financial nature of the transaction, but also the impact it will have on a going-forward basis, both strategically for the group and financially.

So I'm going to start with a disclaimer, which I would hope you can read at your leisure. I would also add that there is a section of this webcast that you're watching that has had to be re-recorded due to some technical problems on the Teams platform, but everything remains consistent and everything is aligned with the RNS that we released this morning.

So let me first start by sharing my excitement about this transaction. This is a significant opportunity for us because if I look back the last couple of years, we've made a lot of progress to date in terms of transforming the business. We are a leaner business. We are more innovative. We're winning more, and we've done a significant transformation of the parts of the business.

Similarly, we've done a big transformation of our Contact Centre business -- it's also better equipped now. It's also now retaining customers, is delivering high-quality solutions and it's also got a high customer value proposition. But it is on a different journey, and it's going to need a little bit more time.

So as we go through all of this, we decided that it was probably the right time for the businesses to go in the separate ways because at the same time, our contracts and pensions business required a lot of middle and back office capabilities, and that's something that we do really well in a space where we win often.

It's a high-quality business. We win well, we deliver well. We make money, and we are successful. And in the Contact Centre requires in the commercial space, a different set of dynamics now, a different set of capabilities that I think are going to be best served under different ownership.

So we have found a good partner to do this, a specialist in carve-outs that is going to ensure good operational continuity for our colleagues, for our customers and something that someone with whom we've worked in the past. So we believe that overall, it's good value in the transaction. It's going to be good for our shareholders. It's going to be good for our customers. It's going to be good for our employees and it's definitely going to put us closer to deliver our version and of building a better capita.

So let me just start by asking Pablo to quickly cover the nature of the transaction, and I'll be back to talk about its impact. Pablo, please?

Thank you very much, Adolfo. Good morning to everyone. And I'll briefly cover the terms of the deal as set up in the following slides. So we announced this morning the sale of the private Contact Centre business. The purchaser is Inspirit Capital and the current consideration is comprised of a number of elements.

First, a headline sale price of GBP 1 with GBP 6.5 million of cash left in the business for normal working capital needs. Second, a potential consideration of up to GBP 61 million that has been agreed, of which GBP 11.5 million are payable based on future cash availability in the sold perimeter and up to GBP 50 million earn-out based on future financial performance.

And third, there is also a value sharing mechanism if the business is sold before 5 years. The table at the bottom of the slide helps to explain the perimeter sold. The first column shows the 2025 results for contact centers as announced a couple of weeks ago with GBP 17 million losses for the full year.

The second column shows the perimeter sold prepared under the same basis, where you can see it contributed GBP 35 million of losses for Capita in 2025 as well as cash outflows of GBP 16 million. The third column shows the retained contracts excluded from the sale perimeter that, as you can see, were profitable, contributing GBP 17.9 million profits to the group as well as GBP 23.1 million of positive free cash flows.

And on the fourth column, we include GBP 36.4 million of group costs retained, including GBP 25 million of overhead costs to be offset by the GBP 40 million savings program we have announced this morning and GBP 11 million of the retained leases.

So continuing with the details of the transaction on the next slide. Total net leases of GBP 26 million are transferred with the perimeter, including GBP 18.1 million of lease liability of operational facilities and the sublet by capita of a further operational facility for GBP 8.1 million.

The group will retain 3 large underutilized properties with a lease liability of GBP 65 million and a P&L and cash cost of around GBP 10 million per annum. This GBP 10 million is half of the GBP 20 million of underutilized property cost I mentioned at the year-end, and we have the possibility to restructure these leases going forward.

GBP 25 million of group overhead costs were allocated to the perimeter sold in 2025. This will be more than offset by the announced GBP 40 million savings program, and they will be delivered by the end of 2027. Transaction, restructuring and separation costs of GBP 20 million will be incurred this year with broadly half related to costs related to the transaction itself and half to complex separation costs that capital will fund for a maximum of GBP 10 million.

And finally, completion is expected before half year results, subject to regulatory approvals. I will now hand back over to Adolfo for him to provide further context on how this transaction supports our strategy to become the first AI-led BPO and accelerates value creation for the group.

Thank you, Pablo. This is to go through the transaction. Let me just sort of say a little bit more about the capita going forward, right, and what's enabled and what's unlocked through this transaction besides a very strong and supporting partnership for the commercial contact centers in the future.

We remain on the same strategy, right? The strategy remains to be becoming the AI-led business process outsourcer that we've been embarked upon. What's going to fundamentally change is the fact that we are going to be focusing more on the very complex middle and back office opportunity. That is a growing market. It's a market that's got complexities and complexity for us is good because it gives us differentiation given our expertise, but it will allow us to target our AI services capabilities into that.

Plus, we're building it on strong businesses, strong capabilities, strong skills and strong contract basis that we already have there today. And remember, sort of the vast majority of what's staying is public sector and its pensions, which is 2 well-performing businesses. Through the simplification of the business and then once we've deal with the stranded costs, we're going to see a 200 bps improvement in the operating profit from 2027.

To get there, we're going to have to take GBP 40 million out, and that's a combination of stranded costs from the departing group and then the simplification opportunity that we have above that as we will be a more focused and simple business. So we remain committed, and I think we've proven over the last couple of years that we know how to go after this.

So we will be executing this flawlessly again. And then I think the important part of this is that it is just doubling down on what we're already doing well, doubling down on the businesses where we win well, we win often and we know how to monetize and just move more of the business there and then just relying on a partnership for the more nuanced complexities of the front office. So that's that one.

So how do we look like in the future? So if we go to the next slide, you can see there some of the positions that we have today put through the lens of this new future, right? So you can see a number of examples of middle office and back office on the left-hand side. You can see the remaining perimeter. You can see the pensions administration will be part of public, will be part of the regulated private sector.

And you can see sort of the light blue positions that we already have traditionally where we're strong across that spread. You're also seeing the dark blue ones, which are the one -- the current AI capabilities that we've got. And you've got an emerging shaded gray set of capabilities that we are building that we will be able to double down in going forward.

So this is going to be narrowing the focus to go deeper and by going deeper and be more intentional, accelerate growth. In numbers, so we go to the next slide, I wanted to give you just a quick picture of the before and after. So you can see the adjusted results overly simplified on the left-hand side.

You can see the changes that you will be seeing on the business going forward. We talked about the -- moving from the 5.2% to 7.2% by 2027. Obviously, we see opportunity to do more in the future, but that would be too premature to address now. We also see that we will have opportunities in the medium term to go and reduce the leverage. That will be slightly bigger as a result of this transaction.

But it's going to be a very resilient model, a very cash back profit growth model in a significant addressable market in a space where we have proven we have the right to win and we have the capabilities to win. So very excited about what this does. We plan to share a lot more details on all of this and what it means on the strategy and new targets and things like that at a Capital Markets Day that we are going to do on the 17th of June. So please mark your calendars.

We will sort of unveil a lot more details about this. And I think if I was just to summarize now on the final slide before we open to Q&A, is that sort of the thought that we are on our evolution to become that better capita. But these moves enables an acceleration of that journey, right?

I think we're going to have a more reliable, more predictable, we're going to be more intentional with our growth platform. We are going to be equally dogged, but we're going to be more focused on the AI and Agentic first with a human in the loop strategy in the selected markets.

We will continue to have the cost discipline that we built into the business. But now we add further simplification and further focus into it. So it gets us to the right place. It will also allow the Contact Centre business is really important for our colleagues in that business, for our customers in that business.

They will allow them to leverage what we've done with them over the last couple of years. It will allow them to move now more specifically into the opportunities of Contact Centre, and they might make some more contact center-specific sort of investments and I think the opportunity there is also going to be great for them. So all in all, I think it's a win-win solution.

It works for everyone, and I'm glad we were able to bring it to a close. And with that, I think we go over to Q&A. And Steph, I think you've got a number of questions.

Yes. So we've had some pre-submitted questions already. So first up for Pablo from David Brockton at Deutsche Numis. Please, can you give any insights into how the performance conditions are structured for the deferred contingent consideration?

Yes. I mean I will not be able to articulate too much detail on that. But at the end of the day, the performance -- the contingent consideration is based on delivering the business plan that we have for 2026 and for 2027, and they would be payable, therefore, at the beginning of the next period.

And then from Kai Korschelt at Canaccord. Do you anticipate any regulatory concerns?

No, we don't have any -- to me, it is more administrative process. There is nothing hairy or special in the business that we're selling or material even from a regulatory perspective.

And then could you please provide more details on the GBP 40 million in cost savings?

GBP 40 million in cost savings addresses 2 things. On one side, we have GBP 25 million that I would call brutally stranded costs that were allocated to the Contact Centre, and this organization is no longer that big without GBP 500 million of revenue. And therefore, it's just rightsizing.

However, from GBP 25 million to GBP 40 million, that is the true benefit in a way financially for this organization because Capita used to be a massive conglomerate. We've tackled the cost base hard over the last few years to bring capital to a sustainable footing, but still contact centers and the rest of public were quite interlinked, whereas pensions is more of a stand-alone basis.

By removing the contact centers from our day-to-day trading, therefore, it's not only the GBP 25 million of allocations that were being consumed by the Contact Centre, it is that we can unravel the big corporate piece we have and take further cost out. And those costs are actually quite material in the context of the EBIT of the business left.

So I think that, that is one of the true financial benefits of these transactions in addition to focusing better on public, derisking our Contact Centre environment, et cetera.

And we have a few from Chris Bamberry at Peel Hunt. So the total contingent consideration is up to GBP 61.5 million. What would a reasonable expected outcome range be?

Listen, in the projections that we were putting out earlier, et cetera, I'm being very prudent, and I will see them as they come. However, on the small print, you will read that actually GBP 11.5 million is based on liquidity in the business. So I would expect that, that is not subject to achieving our business plan. It's just the business continuing and generating normal liquidity to be able to pay that. And the other GBP 50 million will be based on delivering the business plan.

The retained leases and the future opportunity to deliver significant cost savings from the leases. Could you expand on that?

Yes, sure. So we spoke about GBP 20 million cash of lease -- of underutilized leases that were going with the perimeter. I would say that half of them were in 3 large properties and half of them were in the normal utilization of the day-to-day of the contact centers. The half of the day-to-day are gone. And the 3 that we're keeping are 3 large specific buildings that we've been looking at them for a while.

They account for 65 million leases. There is an opportunity at the right moment to work with the landlords to work with other companies and find ways to replace that IFRS 16 debt by potentially financial debt at similar levels, but with the benefit of not having to pay rent and rates, security, maintenance, et cetera, which generally account for half of the cost of carrying the leases.

So that is something we will look at in due course. I will want to see first the financial performance, the earn-out elements, see how it is trading before we execute everything. But again, that will be part of what we consider in the funding structure of the company going forward, in the capital allocation, et cetera. So we have an opportunity, but I don't want to rush it.

And then of the GBP 40 million annualized cost savings, what are the anticipated in-year savings across 2026 and 2027? And how do you expect the phasing of the GBP 20 million of cash costs to deliver the savings?

Listen, we're working through the plans right now. We've been working for a while, but there's still a lot to do. So my view at this stage is if you assume that completion is on the 1st of July, divide them in 3, lots of 6 months, and that is a good starting assumption.

Of course, our next crusade is to accelerate them and bring them as fast as possible. Some can be delivered earlier, but some are subject to actually the factual simplification of the group and cannot be accelerated. So for the moment, say 1/3, 1/3, 1/3 every 6 months, and we will be working hard to accelerate.

We've also had some questions from James Rosenthal at Barclays. Both for Adolfo, I think. To what extent can you retain expertise and capabilities you need to serve your existing contracts? And how does this impact your ability to bid for new contracts going forward?

Yes, very good. So I think it's a 2-part answer. So we are not letting go of all of our Contact Centre capabilities. We do -- we continue to do big Contact Centre work and actually quite modernizing accounts like the BBC or some of the work that we do on primary care support England and some of the work that we do across the citizen support space.

Similarly, we've been deploying these advanced call center features also in our pensions business solutions. So the capability will remain, but the capability will just be a capability that will be an entry point and it will be an ingredient of a larger opportunity that will have materiality around the middle and the back office.

I think in the existing Contact Centre business, it's a Contact Centre business that focuses on the Contact Centre, whereas now the Contact Centre is going to be an ingredient and a much better thing. The tech capability, the agent suite capabilities that we built, everything -- all of that will remain with us or the hyperscaler investments, all of that remains as part of the Capita Group, and we will be supporting the Contact Centre business through arrangements and after the separation.

And then beyond the overhead reductions mentioned, does this unlock more resource for the existing group through the OpEx or CapEx budgets that would be reallocated to public service and pension solutions?

I think what we're going to be is more intentional, right? I think if you sort of look at what we had to deal with a couple of years ago, right? You had some areas that needed clustering, some areas that needed a push, some areas that we needed to manage for exit, some areas that we needed to support growth and to get everything to a platform where we had optionality, right? We have been executing on our optionality, right?

And now effectively, what we got left is areas that we know that we do those things well, and we will be able to be a bit more intentional, right? We put more money into the digital pension space. That was a conscious effort because we see the opportunity, right?

In the past, we did more in defense. So now there is less around propelling a business or recovering a business. This is more about how do we drive profits and cash generation, delivering better outcomes in a more defined space. We will get also better assets, asset leverage because a lot of the things that we're going to build are going to be more common. And so we'll have to build less things and we can build better things.

So strategically from a product capability as well -- as well as financially, as Pablo talked about, it's quite a simplification.

And then some questions from Joe Spooner at Shore Capital. What is your confidence level in the GBP 40 million falling through to profit?

The GBP 40 million of savings falling through to profit, absolute confidence, like the same as we delivered the GBP 250 million savings before the end of December. We announced them in the pre-close trading statement that we had already hit them. On the GBP 40 million, we will not fail, absolutely not.

And then what are your plans with the elements of the Contact Centre that have been retained in the group?

So if you think about this, there is a variety probably the flagship that everybody will understand would be like the BBC, which one could argue why it was that with contact Centre, where we actually -- where we do Contact Centre, we manage the TV license, we manage enforcement. We manage a lot of the back office that has to do with that.

So that actually, in nature, it was already a public sector-like contract. It had -- goes to government procurement. So it was just arguably in the wrong bucket for historical reasons. So all we've done is just sort of bring it to where it rightly becomes. And it's a contract that we extended just before Christmas until 2030. And we're just going to try to keep running it really well and keep expanding it really well as we do with other contracts.

That's the final question.

Okay. Thank you. Thanks for the questions. Thanks for the support. I think you know that both Pablo and I and the Board and the executive team would have liked this to maybe have happened a little bit earlier. It's happened a couple of weeks after the results. But I think as you know and appreciate, these things are extremely complex, tricky.

There is a lot of moving parts. But hopefully, even if it has been a 2-part story, all the pieces are falling into place. And obviously, we remain available through our IR team to give you any information we can. However, please mark the day Capital Markets Day just 3 months out, we will give you a lot more details and a lot more of a cleaner picture of Capita going forward.

But it's just going to be more of the same, just simpler, faster and more intentional. Thanks very much.

All right. Good morning. I hope you enjoy that wonderful video with the highlights of what has been another interesting, challenging and very busy year for us at Capita in 2025. For those of you who haven't had the opportunity to meet, I'm Adolfo Hernandez, I'm the Group Chief Executive. Today, even though I have a number of colleagues from my executive team, the only one who's going to be presenting is Pablo, our CFO. And we're going to be taking you through the 2025 results, but also we're going to give you an update on the operational progress that we made and the strategy. And then we'll do through both of them, and then we'll go and take some Q&A. Please have a look at the disclaimer at your leisure while I just flick over and just get quickly started with a little bit of a summary.

If you were here in a similar room about 2 years ago, you might remember that when I joined literally just over 2 years ago now, I was very clear about the size, scale and complexity of the transformation we were facing in Capita. It was a business that had lost focus. It was a business that was carrying too much complexity. But at the heart of it, it was a business that was generating a lot of social value, but it had failed to sustainably translate that social value into economic value. That was my thesis 2 years ago. And then we set out quite an ambitious plan to do a deep root and branch transformation of the business that would allow us to get the good Capita into a better Capita that was able to translate the value that we provided every day, improve it, but also translate it into financial outcomes. We set out on our Capital Markets Day and what we call our 4 betters strategy. It was about building this better technology at the very core to enable everything else that we were going to be doing in the company.

We talk about better efficiencies to make us a simpler business, a lighter business, more profitable business, more competitive business, translate all of those to the technology and the efficiencies into a better delivery, better for our customers, delivering better outcomes. And in the process of doing this, working with our colleagues to build that better Capita. So that was the journey. The journey is still current. And I think -- let me just say this from the outset, 2025 has been a critical and pivotal year in terms of our journey to get there. We are way closer than we probably thought we would be at this time 2 years ago, but we haven't finished our job. There is still a lot of work to do. There are some areas in our business, as you can see that still need attention. But if you look at the biggest picture, we're actually doing really well.

So let me just go through some of the specifics. Let me just take to them in that sequence. Let me start with technology because when I stood up here 2 years ago, having joined from a hyperscaler, my thesis was and a deep belief at the time is that this new wave of technology that we've been blessed with had the potential to fully transform society and businesses all over the world. But if you look in a sort of micro into our business process outsourcing, everything that had to do with business process outsourcing could and should be at the forefront of that AI transformation. So we got going very, very quickly because we believe that the combination of very complex workflows and managing processes and process expertise and automation and mixing it really well could really be our competitive advantage.

We really got going. And as you will see through the presentation, AI is no longer a vision or a concept inside Capita, but it is a reality. I'll give you some numbers about the agents that are already been at work. I'll take you through some of the examples. This is happening today. So that's really important. We've also built hyperscaler partnerships, not ticking the box partnerships, not we buy from them just partnerships, but partnerships that are intentional that are strategic and that they are long term. And each of them has been designed to attain a particular area of differentiation somewhere in the value chain, and I will be taking you through those. So 2 years on, we've made a significant amount of progress there.

We've also moved the business significantly to the cloud, and that continues to be a key priority for me. We need to get that, what I call cloud edge thinking in how we deploy systems, how we manage systems, how we provide for security, confidentiality and really how we run operations internally. And then crucially, we have taken all of this technology, and we have managed a unique way to deploy this technology in very complex real-time workflows that are running society and do that in a responsible, governed and secured way with the judgment of a human in the loop the whole time. So this goes way more than just selecting. It's just sort of selecting and figuring out how you actually make it work in reality, and we've done that. So that technology piece actually underpins all the others because it has enabled us to go much further and faster on cost efficiencies, where we're pleased to report we achieved our GBP 250 million stretch target.

And that obviously has been cascading through with our 140 bps improvement in operating margin and taking us as a group to 5.2%. But there are parts of the business that are already at or significantly above our expectations if you look at our public sector business that is already sitting at 8.3%. So from a delivery perspective, just a couple of things. We have to look back and we have to look forward. What do I mean by looking back? We had a lot of long-standing legacy issues that we have to work through.

So we had an issue that was a decade-plus old around closed book life and pensions that we finally find a solution for at the end of 2025. We had an outstanding process ongoing with the ICO since March 2023. So it was really important to be able to bet those things that were costing us not only money, resources, but a lot of management time and it's actually made the company now a lot leaner, clearer and much easier to predict. But when I talk about looking forward, looking forward in delivery is looking at what is it that you're building? What are the size of your pipeline? Are you growing the pipeline? But most importantly, are you converting the pipeline in the right places? Are you converting it at the right margin.

And I think if you look at the size of our pipeline, that nearly doubled to GBP 20 billion. The size of our total contract value closed in the year, up by 36%. Our win ratio now nearly doubled to over 60%. And our Net Promoter Score, our customer Net Promoter Score continues to improve through all these changes, through all of these difficulties, we have the highest ever customer Net Promoter Score since we started measuring in 2018. So from a delivery perspective, I think all of my colleagues in Capita will be very proud for the work that has been done and has been achieved. And as a whole, we're building a better company. It's a lot of change. It is very taxing for our colleagues, continues to be reorganizations, realignments of management, changes in how the work needs to be done, but more pervasive introduction of AI into everything changes the constant.

And throughout all of this change, employee engagement continues to stay at a high level, and we see an improvement in employee Net Promoter Score. So I cannot thank my colleagues enough for the great work and the patience and the dogged determination to help us turn this business around. So Pablo is going to now take us quickly through the financials, and I'll be coming back and I'll be addressing some of these topics a little bit later, and then we'll do the Q&A. Pablo, please?

Thank you, Adolfo, and good morning, everyone. And as Adolfo has said, 2025 has been a pivotal year for building that better Capita. And it's not only that we made tangible progress against our strategy, but we actually delivered a material improvement on our financial performance. So before I start with my slides, though, a reminder, numbers in the presentation are prepared on an adjusted basis, unless otherwise stated, and the adjusted basis now includes our closed book life and pensions business within business exits after the handback agreement we reached in December with Royal London. So starting with the financial highlights of the year, what this slide shows is that we delivered broadly in line with the expectations we had set. Margin, profit and cash conversion all improved materially year-on-year, reflecting the delivery of the cost reduction program and strong execution in Public Services.

Looking at revenue, we have seen strong growth of 4.5% within Public Service, reflecting contract wins and growth in a number of key contracts. And this division is now 2/3 of the group adjusted revenue. However, this growth was offset by a 7.5% decline in our Contact Centers business. The group's operating margin increased by 140 basis points, reflecting the in-year benefit from the cost reduction program and improved contractual performance in our public business. Profit before tax improved by 84%, reflecting improved operating profit, reduced depreciation from our reduced property footprint and reduced financing costs.

The group's cash conversion improved to 74% with a material improvement in our underlying cash generation and solid cash conversion in public business, whilst we invested in our civil service pension scheme contract. And our free cash outflow halved to GBP 54 million outflow, and it includes GBP 53 million outflow related to the cost reduction program as well as the GBP 40 million settlement with the ICO, which obviously leaves us in a very solid position to deliver positive free cash flows into 2026 as we had promised.

Moving to the reconciliation between adjusted and reported. Business exits of GBP 102 million includes the exit agreement we reached with Royal London in December, where we agreed the handback of the last evergreen loss-making contracts resolving one of the largest legacy issues of the group. Goodwill impairment is wholly related to the contact center business where despite the progress made in cost savings and improving the competitiveness of our offerings, the business has seen continued contract losses.

Financial performance on the contact centers is not where it should be. And they are expected to remain loss-making in 2026, even if we expect an improving profit trajectory during the year. We continually assess all options to improve this business and to maximize value for our shareholders. The cost reduction program line includes the GBP 56 million invested in the year to fully deliver the GBP 250 million cost savings program. And the cyber incident line mostly reflects the P&L cost of the settlement with the ICO.

Moving on to the group's cash flow. Operating cash conversion has improved to 74%, reflecting strong cash conversion and favorable timings in public, partially offset by increased contract fulfillment assets in pensions and other includes mainly termination of leases and payment of provisions. We have continued to make progress in reducing the structural headwinds on cash conversion. We expect deferred income headwinds of around GBP 30 million this year on working capital, reducing thereafter to become a more normal business. The cash flows for the cost reduction program and cyber are also including below operating cash flow and cash generated from operations, excluding business exits, was GBP 73 million.

Continuing with the remainder of the cash flow and net debt movement, CapEx has remained broadly consistent with the prior year, reflecting our continued investment in contract delivery and in our cyber and data capabilities. Interest was broadly in line with prior year and lease payments reduced by GBP 7 million, showing progress on our property rationalization contract. And all of this resulted in a free cash outflow before business exits of GBP 54 million. Our net debt increased, reflecting the cash outflow for the year, and we continued making progress reducing our lease footprint, reducing by over 10% our net lease debt year after year, in line with our guidance.

Moving on to the group's liquidity position. As mentioned previously, in July, we extended our RCF. And in February 2026, we entered into a GBP 75 million committed facility that gives us ample liquidity to manage upcoming maturities. Our financial net debt to EBITDA at the year-end was 1x, in line with our target range.

Moving on to the business and starting with Capita Public Service. This is our largest division and has delivered strong improvements across all metrics. We are pleased with the progress made, and we are well positioned to deliver further growth with our AI-enabled BPO strategy. Revenue grew 4.5% with continued momentum from divisions, from the division's strong H1 performance, reflecting the annualized benefit of go-live of prior year contracts won as well as additional extension and scope expansions enabling AI solutions with a strong customer base. Operating margin improved by 190 basis points, reflecting the revenue growth and the related profit flow-through as well as GBP 43 million of in-year savings, allowing us to reinvest on our AI solutions and mitigate the national insurance contribution increase.

Cash conversion was 89%, reflecting our strong cash generation during the year and some favorable timing on receipts at year-end. Let's turn to the page with key achievements from the Public division. And 2025 has been a strong year, both financially and operationally. We had award-winning performance in Army applications, and we made great progress on our HAAS contract. We have also seen significant growth, including TCV1 of nearly GBP 1.2 billion as well as a number of contract extensions that allowed us to deploy innovative AI solutions. We have seen strong delivery on the contracts within the division, and this is reflected by customer NPS increasing by 9 points to 37 and consistent operational KPI performance at 93%.

Finally, the division has delivered improved efficiency driven by our Catalyst lab with a number of successful rollout of Agentic Assistant, including those in our HAAS contract and in our TFL contracts. Moving on to the Contact Center. Revenue declined by 17.5%, reflecting lower volumes in our telecommunications vertical, contract losses within the division and further offshoring to our new service delivery centers. We delivered almost GBP 50 million of cost savings during the year, but these were only able to partially offset the impact of volume reductions and losses. We have made good progress with our existing customers, delivering a compelling product with AI solutions and excellent service delivery centers in South Africa and India.

We have a number of structural issues that we are addressing, such as around GBP 10 million losses in Germany, approximately GBP 50 million of P&L costs of underutilized properties and the need to accelerate growth with our refreshed product offering. Moving on to pensions. Revenue growth was 4.5%, reflecting indexation and expansions of existing contracts and the go-live on the civil service pension scheme in December. Operating margin increased by 30 basis points, reflecting the growth I've just mentioned as well as delivery of our cost reduction program, offsetting the reduction of interest rate income. Cash conversion halved, reflecting GBP 26 million invested in building the civil service pension scheme solution, of which GBP 10 million is expected to be recovered over the life of the contract rather than through milestone payments.

We also had the delayed timing of a GBP 5 million milestone payment, which slipped to the second working day of 2026. Without these last 2 elements of GBP 10 million and GBP 5 million, cash conversion would have been around 90%. And now moving on to the outlook. First of all, we are still expecting to deliver positive free cash flow in 2026 of between GBP 20 million and GBP 40 million, which reflects the nonoccurrence of the cost reduction program and the ICO settlement. On revenue, we expect to see low single-digit growth with good growth in Public and Pension Solutions, offset by continued decline in contact center.

On margin, we expect to see a small reduction, reflecting the challenges faced by the contact center and the mobilization of large contracts won in public and pensions that were well priced and will deliver good margins and cash in the future. We expect cash conversion to be between 70% to 80%, underpinning our positive free cash flows in 2026. And in terms of phasing, we expect revenue margin and cash to improve, particularly in the second half as we make progress in the turnaround of the contact centers and mobilization costs in pensions reduce. And with this, I will hand over to Adolfo for him to continue.

Thank you, Pablo. All right. So with that backdrop on the numbers, let me just quickly take you back, give you a little bit of context on the journey we started 2 years ago. I think going back to the theme of the introduction, I made a very conscious decision that I wanted to be decisive right at the beginning. And you might remember me talking about the 3 waves that we were going to use to drive this. It's going to be an initial wave around creating space, right, which is the cost efficiency phase. There was going to be another wave that was around fixing the basics and getting our innovation, how we operate it and just sort of really effectively getting us to do the right things the right way. And then there was going to be a third one that was around building the future that would be both the operating model, but also our growth strategy.

So that was the sort of the big 3 waves that we got there. And I think as you can see there, we're tracking nicely against all 3. We're probably done most of what we wanted to do on the first one, attaining our GBP 250 million savings, being able to reinvest GBP 50 million to just really give us the capabilities that we needed into both the fixing the basics, all of the innovation work that we've done around AI, the work that we've done around our teams, culture principle. And now we are moving more of the focus towards the right-hand side of the chart, right? So you're starting to see more us looking at building more simplified operating models, building further an identification layer to run the business, and you're starting to see more and more of the work that we need to do in terms of reshaping more value proposition. So this growth that we are seeing in the business and this growth in pipeline, this improvement of win rates, this improvement of conversion can continue further into the future. But that has to be looked at in the context of the market.

And it is a market that if you look at it in Europe, it's a GBP 50 billion business and where roughly from pretty much 0 in 2023, it went up to 20% in 2025. So that's the sort of the AI penetration. That is what components of the existing services business had a flavor of AI inside, which is very, very unique to have seen such a big jump of that scale so quickly. But it's actually if you sort of look at it further and you fast forward into 2027, so a couple of years out from now, we're expecting that to be 50% of the market. So what does that mean really? Because you can think, well, the big numbers, what does it mean? So there's a number of implications. Number one, people-only services will continue to exist, right? There's still significant parts of the industry that are highly analog and physical.

So we shouldn't discount that they're still going to have people-only services. However, the mix, it's going to change. There's going to see more and more introduction of AI technologies, automation and data facilities to make those people-based services more efficient. So is this area of what I call the new hybrid, whereas maybe over the past decade, it was really easy to say, well, this is a people services opportunity. This is an IT services opportunity. This is something else, consulting or integration. Everything is blending now. So we're starting to see more hybrid outcomes that are being solved. So that requires a number of things. So all the delivery mechanisms have to be adapted in companies. What do you go after has to be sharpened. So the whole go-to-market model needs to be readjusted so that you're very clear as to the type of opportunities you're after.

The tools and mechanisms that you use to convert those opportunities need to be adapted. But most importantly and crucially, the teams need to be educated. It's an important huge skills management and change management issue to go and take advantage of that. And then for a company like Capita, this really means that we have to be now able to orchestrate outcomes not only based on people that are deployed in processes, not only managing tech, but now having to orchestrate across different pools of people, different pools of systems and different pools of data and provide an orchestration that is secure, that is real, that is being deployed into very complex workflows.

So the nature of how we do things is going to be changing. It's actually really changed a lot in the last couple of years. And some people would say, well, how do you sort of differentiate? What's your value proposition? I get a lot of time being asked that question. So I'm just taking a little bit of time to sort of take you through this because I think it's a fundamental point on the Capita strategy. A lot of people think that getting [indiscernible] done is basic automation, you just get a few tools and just get a little bit of Gen AI tools, and that's it, I'll do it because the world is simple, all the workflows are straight, and there is absolutely nothing else, but happy paths. Let me tell you something, we do this for a living, whether it's revenue operations, traffic management, dealing with vulnerable customers, doing advanced bespoke training for forces, doing emergency services, recovering debt. There is one thing we've learned is that processes are not simple.

Processes are super complex. Processes have a lot of unhappy paths. And the reality is that you need to have the skill and the ability to orchestrate all of these complexities to orchestrate across all of these different systems because our customers' infrastructure is not built on one single system. It's not built on one single data lake. It's not built on one single application. It's not built on one single Agentic fabric. So our role as the master orchestrator of outcomes who understands the nuances in day-to-day complex, regulated mission-critical environment is second to none. And the ability to have always human judgment in the loop is not only nice, but it's an absolute must in the industries that we serve.

It might not be in others, but in the ones that are relevant to us, it is an absolute must. So all about accountability, security and human-in-the-loop judgment is critical. So the next question that sometimes becomes is like, okay, where do you invest, right? Everybody -- how can you keep up? Everybody is investing so much. If you tally it all up, we've seen over -- the next couple of years, north of $1 trillion in investment in data centers, in LLMs, in applications, everybody is going crazy. How are you going to keep up? Well, we are not because we don't have to. Our position in the value chain is that we get to understand what it is that everybody else is building. We get to test it. We get to see what is good for, what is the real applicability in real customer environments. We get to orchestrate it, and then we will get to build a solution for a customer real-world problem, selecting whatever component is out there.

And for me, this is not a competitive threat. For me, this is a blessing. All of this is available for free. I don't have to invest hundreds of millions of pounds in CapEx. We've got the innovation clip and pace of hyperscalers, which we don't need to build in Capita. And then we've got the ability to combine all of this beauty with our colleagues and train them and deliver those absolute outcomes. So the integration of those components safely in a governed way is an absolute differentiator. And that will take us into creating a different value architecture. On the hyperscalers, I talked at the beginning about different ways of being with the hyperscalers. I was in one. I know how value is created, and I know how people just go and get a tick in the box so that they can put it in the slides. In my time at a hyperscaler, I learned very quickly that value is only derived if you go all in. There can't be plan B, and that's exactly what we've done.

We have been very intentional, extremely intentional about who do we do what with and at what cost and where do this goes in the future. And then you can read there the great progress that we've had with all of them. I'm extremely proud and thankful and appreciative of the partnerships we're building with these hyperscalers. The amount of work that they're doing upfront to enable some of these to build the pipeline, to test the solutions, to do the prototyping to help us really bridge that gap that they have from standard extremely advanced, nevertheless, [vanilla technology], and for us to be the last mile to take them into the sort of very complex, very nuanced business processes and workflows. And that's kind of where we're doing that. So we're actually seeing a lot of really good results.

And the most important thing is all of these things work together are underpinning our competitiveness, underpinning our value proposition, are underpinning our ability to intercept new deals in the market, grow the pipeline and actually address it because that will get enhanced by everything else that Capita is really good at, understanding the contracting, understanding the process, understanding the onboarding, the mobilization, all of these very nuanced things. So the question you might be saying, how are you doing this? How do you bring it to life, right? This is like a big undertaking. Well, our innovation team came up with a construct this year in 2025. By the way, it doesn't mean to scare you, but there's no way to simplify it. Just keep it there for reference, just sort of mind my words here. This is a catalyst. This is, call it, the Capita agentification engine. And this is different in 2 ways.

This is not born out of tech looking for a solution. This is born in the business process. The first thing that we do is we observe our customers' business process. We understand the business process. And we figure out what are we trying to solve here? Where is the opportunity? Where do we have bottlenecks, where do we have inefficiencies? What needs to be addressed? And we work with our customers in defining that business process transformation. Then we'll come back and understand that there are a number of things that will need to be built. And then we will go and build it, whether it's low code, [indiscernible] code, pro code, we will go and build the orchestration that is required to deliver that business process. Once you've done that, you need to integrate it and we have an integration layer and then you need to run it securely on a data layer.

So what is unique is, as I said, number one, it starts from the business and it goes down to the tech. And the second thing that sort of makes it unique is that it's 100% flexible and open in every layer. So we don't have to stick to one particular vendor, one particular hyperscaler. We can choose who is best for what at a given point in time and everything is totally portable. And then some of you have been asking me, well, that's really great about tech. What about people? How are you managing all of this with people? How do you get that innovation happening with people? So for that, at the beginning of '25, we actually built our innovation engine, right? It's the Catalyst lab, right? So we have the identification engine, the catalyst stack, and we've got the innovation engine, which is the catalyst.

So what the catalyst does is creates an agentified way for everybody in the organization who is a specialist in a business process and who cares about improving the outcome to send an idea. If I do this, we can deliver a better service. [indiscernible], we can save some cost to serve. If I do this, we can save our customer money. If I do this, so we've had over 400 of, if I do this, bottoms up, specialist up. This is not Pablo and I figuring out where we add value. This is coming all the way up. And then things get understood, prioritized, validated, tested, deployed and scaled. So there is an absolute process that we've got that. So I said, we've got the 400 ideas. Now we're going into 40 pilots that's along in 9 months, and we've already got 12 solutions coming out of that. And then you've got a number of examples there, which customers this is working.

So this is just the hyperscalers, it's understanding the hyperscalers, and understanding how to deploy. This is where the catalyst stack comes and then getting the organization, this is a 30,000 people organization to figure out how they can add value to their customers through that. And the result is there to be shown, right? So you look at it, AI is no longer a concept. It's not a vision. It's not a strategy, it's not -- it is a reality. It is really happening. We are industrializing slowly but surely. We are not done. It's not everywhere. It's not to the intensity that I would like, but we certainly move the needle significantly in a short period of time. And as you can see, we're doing it across all the areas where we operate, the front office, the middle office and the back office. And we've got real solutions in each of them that are happening.

And most importantly, as we go and see how much of this is pervasive in our opportunities, we're actually now seeing it's about 2/3 of our revenue contains elements of this in the solution. And I would expect this to continue because what this is actually doing is creating a new shareholder value created model for a business process outsourcer, is how does a traditional business process outsourcer operating a lot of high OpEx, high CapEx very much FTE-centric only solutions where everything is manually done and hard coded to a particular process that tends to sort of run to the bottom. How does it move to a very different model where the cost is variable, where you get to be more outcome-based and where you actually can move from legacy and you can have sort of real-time rewriting and recoding of business processes.

So capturing value in real time rather than capturing value every time you deploy a new application that normally they tend to be dated and invaluable by the time you do that. And moving from an FTE-based sort of model than to a human in the loop is a very different one. So we do believe this is a fundamental element of our strategy. It has impact on our efficiencies. It impacts on the quality of what we deliver, how we deliver it and also the type of company that we're building. And sort of the proof is in the pudding, right? So if you look at a number of the metrics I've already covered, customer Net Promoter Score continued to improve to an all-time high, whether you look at our pipeline growing, our conversion growing, our win rate growing and you look at the progress we continue to make as we have started to deploy this strategy in each of the divisions, it is there. So that was a good set of 2025 and just sort of pointing out that we also had a good start to 2026.

Now it would be disingenuous for me to stand up today and not comment on the civil service pension scheme. So I'll just take a couple of minutes and update you on what it is. So I think it's really important that I start by acknowledging that -- it's in the wrong sequence, but minor detail. Let me start by acknowledging that the civil servants are not getting the service and the quality and the attention they deserve. And that is bad, and this is something that we're truly sorry for. And while we do not have originated all of the problems, I have made it my personal priority and the company mandate that we will own the resolution. This is something that we are totally committed to address and fix to get the civil servants, the attention, the service and the quality that they work so hard for.

But I also wanted to sort of talk to you about when we took over in December, this was already a very deteriorated project and service. There was a number of things that -- which sort of warn that. I'll probably just give you one example. Ahead of us taking control of the project in December 1, we had to step in and process a payroll run ahead of us taking because otherwise, it wouldn't have been possible for civil servants to get paid in November. So we have to put our machine in there at the service of the civil service so that the civil servants could process that last payroll run from the previous delivery. So that sort of gives you an idea. It is public knowledge that they had a significant number of disputes with the workforce, did have union recognition, and there was a lot of industrial action, which is something we have addressed ahead of taking over as well.

The backlog that we inherited was nearly 3x the normal numbers expected. There was 12,000 members that were owed money. There were 15,000 inbox e-mails from members that were unopened and unread. And each of them is a case. Each of them is a difficult situation. Each of them is people in difficulties. And then the data quality that came across was poor. We had 20 million data sets either missing or wrong or incomplete. Now you might think, well, is that complex? Well, if you think about it, it's 1.7 million members. Every member has 100 data points, and they can be touching 50 different processes. Now I'm not expecting you to do the numbers here, but that's about 70 million possible combinations. It does matter.

A lot of people decided to call on day 1. That sort of collapsed our infrastructure, and we've been working really hard in partnership, and I cannot stress that enough the support and the partnership from the cabinet office to jointly work on through these issues. This was always going to be a 2-stage go-live. It was going to be December and March. And obviously, we're sort of caught through the volume, the complexity of the cases between December and March. We now have over 90% of the calls being responded and addressed to within 30 seconds. The portal issues have now all been addressed. And there is a huge amount of focus that we put in with our colleagues of the cabinet office through February to address the urgent cases. And then we've got more work to do on different areas. We are committed also to hit our milestones in March, et cetera, so that we are in a position to address the different buckets of this complexity as we deal with it.

Now there is a question that people said rightly, didn't you know? Well, there is only so much you know until you get the keys. There is only so much you know until you actually get the full access to the systems, to the cases. There's only so much you know until you get a chance to look at the data and it's complexity. We didn't know the exact numbers of cases. We knew it was high, and we remember sort of sharing our fear with the cabinet office and with the ministers that we were going to get a lot more cases than we were expecting. We resourced up ahead of it. What we couldn't see certainly was the complexity or the longevity or the delays with the cases. A case is not always a case. There are many, many, many cases that have been outstanding for 6, 9 months, very complex, very difficult situation.

So no, we did not know fully. And we've been operating under a crisis volume and environment over the last couple of months that had just sort of made it challenging to get there. The most important message is here, 2 things. Number one is we're working through it, and it's actually working now, as I said. And we are committed to get all of this to the normal SLAs. And we are committed to keep doing this in partnership with our new colleagues that have to it in and the cabinet office, and we will get this to a situation where the civil servants get the service they deserve, okay? And I think this is something that we want to make true for the whole of Capita. When customers hit a problem, yes, it's good to understand where the customer -- where the problem originated, but I think something that Capita needs to be known for is that we will own the fixing. We will restore the quality of the outcome first, and then we will do whatever recalculations we need to do with our customers.

So -- and I think that sort of explains -- now if I got to manage that, that sort of explains why the tenure of our customers is so long. And you can see there that within our top 10 customers across the group, 7 of them have been customers for longer than a decade. It speaks of -- once Capita is in there at large, we do a pretty good job. We listen to them. We take their problems to heart. We might not get it right first time, we might not always get it right, but we will do whatever it takes to get it right. So that speaks to both on the longevity, but also on the diversification of our business across the different divisions.

And speaking of divisions, just quickly, I wanted to be more transparent on the Net Promoter Score because we talk about the blended. So I want you to see the different businesses on different trajectories, you can see the improvement -- the marked improvement we saw last year on our contact center business, improving the value proposition, the innovation there. We see a steadier ramp over the last couple of years from our civil -- from our central government business. And then we've sort of seen also an improving but more challenged opportunity from our pensions business. So with that, let me quickly jump to the better company. We talked earlier about sort of stable employee engagement. We talk about improvement on the employee Net Promoter Score. And you've got -- you can read through all of this. I think for me, the bit that is -- really stands out is the work that we did both on the values and the culture last year.

You can modernize the tools as much as you want. You can modernize your deliverable, your mechanisms as much as you want. If you don't manage to change the emotional fabric and the culture of the company, you're going to be held back. And I think the work that our teams have done, both in the transformation teams and in the people area to sort of drive that mental transformation, drive the culture, drive how do we get mid-management enable, mobilized, the training we put in there in terms of tech, the management training, the leadership academies, the work that we're doing with Multiverse in terms of AI training, it's really enabling that fabric so that whatever we do on the capital stack, whatever we do on the Catalyst lab, whatever we do in that lever just comes into a fertile ground that takes advantage of that.

So I think that's really, really pleased with that. I don't think it's unrelated, but we actually have now attrition at 17%. Many of you might remember, not the 21.7% of last year, but at times where this was north of 30%. So we're literally half there for a while. So this is a better place to be. It's not the place for everyone because of the amount of change. But if you like this space, if you like the change, if you like this transformation, there's a lot of people are finding this is a place where they can grow their careers and just modernize. So besides our financial commitments that Pablo very well captured on the financial outlook, it is clear we have work to do on the contact center. I think that's -- we have the other 2 groups. The businesses are humming not only from a value proposition, but execution perspective.

We've got good work on the value proposition and on the retention side of the contact center, but there is more work to be done there. And we are very committed to get that sort of sustainable cash back profit growth going into the periods to achieve and exceed our outlook. And we are going to be doing that literally through the same themes. We're going to be using the culture, our values as the foundation on how we operate. We established a number of strategic priorities for 2026. So you've got the 6 areas that we are chasing as a management team to go and deliver the 4 better that in turn is effectively going to deliver a better capital that's going to be in a better position to deliver better outcomes to our customers.

So this is sort of progress report too after 2 years. I think this has been pivotal. I think we're very happy to have exceeded and met all of our expectations, but we are very aware that there is more work to do that we own up in some areas of delivery, but also some of the work that we need to do in areas like the contact center. And yes, so pleased with the lap, but there is still a few more laps ahead of us, and we're committed to do that. So with that, I think this is the end of the presentation, and then we can move on to Q&A.

It's James Rosenthal from Barclays. I've got 2 questions, please, if I may. The first is on public service. The pipeline has doubled to a huge number. Could you talk us through what the step-up has been there? And as a leading indicator, should we be expecting strong growth from public sector over the next few years? And then secondly, on contact centers, can you talk us through how you can turn around that business? I mean I note that the weighted pipeline there looks quite low at the moment. And in the medium term, if that business does continue to struggle, do you still have a long-term commitment to owning it?

So let me start with the growth, and we call it the opportunity growth in the public sector. In any go-to-market model that you want to improve, you've got 3 levers, right? And I think we played all 3 levers really, really well. The first one is decide what you go after, right? Be very targeted, very intentional. Everything that moves is not an opportunity and everything that is an opportunity is not an opportunity for us and everything that is an opportunity for us might not be an opportunity for us today.

So Richard's team, just in front of you, has been extremely intentional on what do we go after, right? Second thing, lever number two, what value proposition do you take to market. And this is where the mix and the thesis of this presentation of combining the complex delivery, the understanding of the workflows, the mobilization, the contracting nuances, all of that expertise that Capita always had with the nuances of all of the sort of AI enablement acceleration that shaping that combined orchestrated value proposition is what drives a higher conversion rate, right? So you've got those 2 things that have actually been there. And then obviously, you got through the partnerships as well with the hyperscalers, you also get exposed to opportunities where we might not normally have seen, so we get ability to opt in and to opt out.

And then there was sort of the third question is does it automatically translate into huge growth I think anybody who's been in a -- selling to a public sector type business would have never mentioned huge growth. I think the public sector moves at a speed, had a set of processes, had a contracting liturgy, right? It's got a contracting environment, it's got some government procurement. So the speed at which things get done is lower than what we use in the more of the commercial sector. And then as Pablo rightly say, you win some of these very large deals, then you need to mobilize them. So it's more of like a continuous growth rather than a hockey stick. But what we see now is we have a healthy pipeline where we can be intentional as to which deals we go after with what value proposition, converting more and delivering better.

So that's on the public sector. On the contact center, remember 2 years ago, when I stood there, I said we missed the boat. We missed the boat over the last 5 years. We had a pretty good, very well-functioning voice-only contact center strategy and the world had moved on. So we've been sort of catching up with the value proposition, moving from voice-only phone calls to an integrated omnichannel contact center strategy. And then we've been together that omnichannel to be AI-enabled so that you can do routing, you can do sentiment analysis. You can get all these automations. So literally, we've been having to effectively do the last 5 years and the next 5 years in 2. And I think if you look at it in isolation, forget about the numbers for a minute, we saw for the last 2 years, we stopped the bleeding of contracts, in contact center, right?

The story 2020 to 2023 was all of how customer X left Capita, how customer Y left Capita, how customer Z left Capita. I think for the last couple of years, it's been customer X has retained or have extended or changed the scope. So we've actually marked a change. However, it hasn't changed the fundamentals of the business as a whole, as Pablo said, there are 2 structural big ticket items and the problems in Germany and the P&L cost associated with the legacy facilities. Those are making the business more complex to operate. But we remain committed to improving the operational performance, and we are going to get there.

It's Kai, Canaccord. Just to follow up on the contact center question we just had. So I guess, from an investor perspective, the sort of patience level in terms of how long will you give the business to, I guess, breakeven or become profitable before you may consider more strategic alternatives for the business would be my first question. Are we talking 1, 2, 3 years?

And then the second one was just around the generative AI benefits, and I guess, economic value creation and particularly the bit that accrues to shareholders. Do you have a few more proof points, perhaps recent contract wins on -- does this manifest itself in lower bids, higher margins, combination of both therefore, positioning you well for market share gains? How should we think about those economic benefits?

Okay. On the first one, Kai, we're actively focused right now on the improvement of the business. And I think it would be responsible for me to comment now and trying to predict the future. But we're very aware of where the business is, and we are 100% committed to improve the performance of the business and create shareholder value. On the second question on AI and proof points, I think there is one theme in the slides that I shared is that we do not build the engines, we fly the plane. And for some customers, we actually run the airline, right? And in that value proposition, we're actually seeing the value being created certainly on cost reduction, right? As we become leaner as an organization, we have to pass through less costs into our bids, so we can be more competitive, right? From the outset.

Second, when we build a solution on top, the cost of the solution, the cost to serve, the cost to architect goes down because you don't put just 400 people, say, you can maybe put 50 or 100 extended by some of these orchestration low code or pro code in there. So that actually gives you benefits when you are contracting because you've got a much better solution, cheaper, more innovative, and then you actually end up being more competitive. How do you see that we'll be more competitive? What proof points do you want to see? It's a higher win rate. We've nearly doubled the win rate. We've seen 36% growth on the TCV conversion. And the pipeline, okay, is not converted yet, but you already point in that direction.

And then there are different contracts in the commercial world, we can talk about sharing the benefit in the commercial world. Then there are some TCV contracts in the public sector that allows you to do some benefit sharing -- profit sharing in a different way. So we're actually seeing the benefits everywhere. What we don't have, actually, I'm glad. I don't have a category that is called the AI P&L, right? For us, it is one engine of the plane. There is a lot more that goes into flying that plane and running the airline. But I know how much we spent on the engines, and I know how capable they are, and I know that they fly and they keep the business up in the air, and it's definitely working as hopefully I was able to show.

James Musker, Singer. On the AI-enabled solutions, how repeatable are they across the customer base? Is it a unique solution to one exact customer? Or can it be copy and pasted across several?

There is a huge amount of repeatability. And this was harder than I thought it was going to be for reasons I am glad we encountered, right? So from the outside or early in my days, I thought, well, definitely everything can be a product. The reality is our customers' business processes and workloads are very nuanced. So the cookie-cutter approach that I was hoping for is not there. But we've done a lot of painful but really high-quality work in understanding at a higher level order what solutions are repeatable. So now we're in a position to say document verification, fraud detection, debt recovery, online learning, AI-assisted recruitment are repeatable buckets, whereas that 80% is common.

So this is what we've changed. Back in the day, if you needed a document verification document likely was that every system, every contract will be different. Now they will all be based on the same framework. They will all be based on the same technology. They will be 80% the same. It's the last mile, the last nuance that will be different. So I've just given you some examples of we got case management. We got intelligent document processing. So if you think about this, as I'm sort of giving you the names, these are key business processes that our customers need to inject. And those are the ones that the Catalyst lab is working with the divisions into productizing. It's not a product that you can put in a magazine, right? It's not that level of productization, but it's a high level of customization. We moved away from one of a kind -- I think this is one here.

Chris Bamberry, Peel Hunt. I've got 3 questions. Just going back to the headwinds in contact centers, Germany, the underutilized property. Could you give us a little bit more detail on what actions you're taking and what you think you might be able to achieve over the next 12, 24, 36 months type of thing? Secondly, looking at the margin guidance for this year, could you give us a little bit more granularity on the kind of building blocks? You've obviously got the annualization of the cost savings, there's mobilization costs, but other factors. And finally, in the pre-close, you talked about delays in decision-making in public sector. Just where we are with that now? And I guess, generally, what are customers saying to you in the current economic environment?

I'll leave the last one for you. And I'll take -- so contact centers, as we work through the different elements that we've been cleaning, it is now becoming clearer where the biggest areas to address are. Germany is a complex market. It's a complex labor market, and it's not that you can -- one that you can rush in rightsizing and projecting. So there are 2 stones there. One is working on the top line and make sure that we've got the right people. Two is working with our offshore facilities, nearshore facilities that we've got serving that market and then continue streamlining it. That's -- it's a very simple, but hard market to work through. The other one, leases -- leases are becoming more visible as we continue our offshoring and are moving our product proposition to our new service delivery service. Leases are a complex one, but there are opportunities always in the market to restructure leases with potentially economically beneficially options for the group. So basically, lease restructuring.

Those are on the table, those we can do. Now that the company is in a place where it is generating positive free cash flows, we have more optionality to decide what we can do with them. So that's in terms of Germany leases, contact centers, the big ticket items there. In terms of margin guidance, it's a little bit complicated. But at the same time, if I look at it from a cash perspective, we are saying that we're going to deliver GBP 20 million to GBP 40 million. We could deliver more, but we've got, say, GBP 10 million to GBP 15 million somewhere on in relation to mobilization costs.

We've got some timing of receivables that we have this year. It's, call it, 10, it's not material, but in such small numbers, they matter. And then this year, hopefully, we'll have the end of the big ticket items of deferred income, historical since. And this year, that will still be a drag. But all of that is going to clear. It's going to make a stronger company. And from 2027 onwards, we will start being a much stronger, cleaner company. That is the way I would look at them.

And then obviously, I think the point that Pablo made a couple of times as well on when you win a lot of these deals, it's good news, right? And they are -- and they create a lot of value. But there is obviously a mobilization phase at the beginning where they are short-term drag. So that's what we were -- in the guidance where we're saying actually, the good news is that we've won. For us, the good news is that we have to mobilize. There is a little bit more cost upfront is the nature of this business, but it is a very nice price to pay in the short term to get the medium-term and long-term value.

So I think that probably explains a little bit of the outcome. I think we've been clear enough on that point. In terms of what we're hearing from the market, the situation is complex out there, right? I don't need to remind anyone on the ups and downs of most of the countries, economies in Europe are challenges, what we're seeing now geopolitically with oil prices, the budget situation in the U.K. But if I look at all of this, I actually see that there is a need for solutions that allow you to reduce your expenditure and to spend your money wisely. And I think if you look at the value propositions that we're putting out in the market, all of them has the potential to say, actually, you don't need to pay 400, 500 people anymore.

You can actually get the job done with maybe with 150 if you put this orchestration, this acceleration there. You can actually get more value for your money. And if you're a government department, actually, you can actually get more citizen value being delivered for whatever budget it is that you have. Yes, there are some contracts that you could just been awarded, you haven't been able to sign. But this is normal mechanics of doing business in the public sector. And then some of them roll over one side of the period. There are going to be payments like this payment that Pablo mentioned, it landed on the 2nd of January or the 3rd of January rather than the 31st of December. So in smaller numbers, small movements one side of the calendar year might actually make it look like a bigger issue than it is.

Sophia Yu, I'm from ABN AMRO. So my question is on the hyperscaler partnership. So you did mention the hyperscaler-only strategy and then given the nuance and then the Capita's focus on identifying the correct solution for the right processes. My question is, does management view a certain sort of dependency on different hyperscaler tools? Is that a concentration risk?

No, I don't think it's a concentration risk at all. Everything that we're building is highly portable because of the concepts that we put in there in the catalyst stack. So every one of our workloads could run on AWS and it could run on Microsoft Azure, so it could run on the Google Cloud, everything that we're doing from a development perspective, when you want to get a reagentification layer, we're doing some ag agentification on Azure. We're doing some agentification on AWS Bedrock, and we're doing some agentification and agent for some MuleSoft. So actually, the market is giving us multiple options when we get now to advanced agents.

Now we've got Anthropic as well with Cowork. So if anything, the early challenge is to sort of keep up and got Matt in the back, right? Matt has to stay on top of everything that's been produced, categorize it, test it. Certainly, while that is a challenge, I prefer that challenge to be locked in with anybody and have a commercial disadvantage, which we don't have. I think there's a question from online.

[indiscernible] From Shore Capital. Slide 29, you pulled out the kind of the key customers per division there. How stable is that mix? Is there any of those key contracts that are up for renewal over maybe the next year or so? And then just on exceptionals, obviously, there's been a history of exceptionals. How confident are you that you can avoid that in '26? It sounds like there may be perhaps a bit of risk there around the leases.

Yes. So in terms of contracts, I think that, yes, the top 10 contracts are 70% of the relationships, but the level of extensions and the level of innovative work into each of these contracts is very significant. So I wouldn't look only at the angle of binary in or out, but also -- and then they do get replaced. So yes, within those top contracts, we do know that we have the recruitment contract that is a large one that is meant to be expiring at the end of 2026. That is probably the biggest one. Then we've got other renewals, extensions, other possible contracts, probably TFL is another big one that we've got there. Those are probably the biggest ones I can think of. DCC is one that eventually will transition into -- back into the government to public. So those are the biggest ones. Second question was in relation to...

Exceptionals...

Exceptionals. Listen, in terms of exceptionals, I think we are in a cleaner position. We've been cleaning the house. What we have had this year is actually the success in drawing a line under the loss-making business, the closed book Life and Pensions and providing for all of the future known losses. That's now ticketed and boxed. And we've written off the remaining of the goodwill of the contact centers given where the progression was going. We are not pointing out that any further restructuring programs. We've said we've done the GBP 250 million savings. That is done. The other big legacy item that was outstanding was the ICO that is done. So in a way, I think that we are now providing a much cleaner balance sheet to move forward.

Okay. So I got a few questions actually. So first, a batch from David Brockton at Deutsche Numis. So first one is, could you give a bit more color on the specific factors that are driving the contact center revenue decline and the expected decline in 2026? For example, is this further intense competition in telecommunications or broader weakness in other verticals?

So there are -- it's a multipart answer. This is multiple things. Obviously, telecommunications has been a key segment for us. Telecommunications, in particular, obviously, in the call center business only. Telecommunications tend to be more technically advanced and they've actually in-sourced a lot more of this, and many of them have started a strategy of trying to engage as little as possible with their customers, which obviously reduces the cost of serving, but it's actually now starting to create some problems in cross-selling. So that's a an industry-wide phenomenon. I think we started to see that one in '24 and it's sort of bottoming out, we believe now at the beginning of '26.

There hasn't been any recent losses that are moving out. So I think that's what we have to wash through the P&L, some particular losses. But at large, remember, the contact center is mostly like a framework business. There is no commitment to volumes. So if customers do something, like, for example, increase the rates significantly, we will see a spike on calls. We will see a huge amount of volume as we're seeing in our utilities at the moment. And then if something happens and the customers do something very different, we might see a reduction on calls. So it's that variability that makes it really hard for us to predict what is the right level of cost that we can have on the call center business. But as Pablo said, we've taken nearly GBP 50 million out of there. I think there is now a significantly shrunk our cost base that would allow us to a more modest revenue behavior to get to the point of profitability.

So then another question from David was there was a GBP 28 million -- this is for Pablo. There was a GBP 28 million cash outflow from the exited closed book Life and Pensions contracts in 2025. How should we think about ongoing cash outflow from this business over the next few years?

You don't want to take this one.

So listen, business exits right now will only have mostly closed book life and pensions exit with the Royal London that we announced. When we announced it, we said that this business would -- previously, this business would have lost GBP 20 million perpetual forever. What we now boxed is that this business is expected to lose GBP 20 million per annum for 5 years. That's it, and then not our repayment. So it's going to be GBP 20 million per annum. We guided that it was going to be more front-end loaded as more activity in the first years are going to happen.

So the guidance is therefore say, call it, 25% for the first year and then decreasing. That's the way I would look at it. And yes, this year, we had a peak. It was more the losses related to that contract and some additional contract termination or finalization of exits from the past that were cleared. And now we have a cleaner place to move into next year.

Then there's a question from James Vincent who says, if we look at 4:51 PM Serco, who produced free cash flow to revenue of 4.5%, should we be expecting a free cash flow to revenue return in a similar range, so 4% to 5%. And that would imply free cash flow of GBP 80 million to GBP 100 million on current revenues. Do you agree with that trajectory? If so, what is your timing horizons for achieving this?

Okay. So our guidance for 2026 is between GBP 20 million and GBP 40 million positive. Let's call it GBP 30 million. What do we have in this year? You said that constant revenue, take 10 out of mobilization costs, we're on GBP 40 million. Let's get the contact centers to generate some cash, GBP 500 million, 5%, GBP 25 million -- call it, GBP 20 million, okay? We're now on GBP 60 million. And then what else do we have? The deferred income historical drag that Capita had that you will recall in the past, I said it was GBP 80 million, then GBP 50 million, then GBP 30 million last year, then GBP 30 million this year and going forward, it now decreases. That GBP 30 million comes out. How much exactly next year, call it GBP 15 million and then disappearing or something like that. So it is absolutely within our reach to be at that level, if not more.

And Helen, if I may, Serco is a different business for a number of reasons. A major one is they started their transformation way earlier than we did. Second, they diversified geographically significantly into the United States and in particular, to defense and aerospace in the United States, which is a business that drives very different commercials and economic value. Just I think we are comparing things that are not always like-for-like.

Then I have a question that's synonymous saying when will the dividend return? Or when will there be share buybacks?

Good. Got the same answer that I have had so far, which is consistent with Capital Markets Day. We first want to deliver consistent positive free cash flows. And at that point, we will address how we go about it. So priorities remain the same: number one, reduce debt; number two, invest in the business. And after that, we will be looking at dividends and share buybacks or whatever is required. So we are going to deliver this year the first year of positive free cash flows, and we will be forming a view on how it works going forward.

Thank you. That was the final question online.

Okay. Well, if there is no further questions in the room or online, thanks, everybody, for your support, and thanks for being here in person or dialing in and looking forward to another good year in 2026. Thank you.