Outsourcer Capita earmarks cost savings for AI war chest
Capita has outlined plans to reinvest cash saved during recent cut backs into artificial intelligence-powered tech.
It came as the outsourcing giant, which administers the BBC licence fee, told shareholders it expects 'broadly flat' sales this year, but with stronger margins thanks to cost cutting efforts.
After expanding its cost-cutting target by £90million to £250million last December, Capita said it had now achieved £185million in annualised savings.
It is ploughing much of the spare cash into artificial intelligence products, such as the recently established Capita AI Catalyst Lab, which has already identified over 200 use cases across the company.
Capita has also become one of the first businesses across Europe to use Salesforce's Agentforce to help recruit new staff more quickly.
Adolfo Hernandez, chief executive of Capita, said interest in agentic AI solutions has 'grown exponentially'.
He added: 'We are reinvesting a portion of our efficiency savings into new technology solutions, particularly those underpinned by AI, and we are focused on bringing these technology solutions to more clients.'
Capita's adjusted turnover declined by 4.5 per cent in the five months ending May.
Sales rose by 2.3 per cent in its public service division, thanks to central government work and by 6.4 per cent in the firm's regulated services business, partly due to a one-off termination exit fee.
But they slumped by 21.1 per cent in its contact centre arm owing to weaker volumes on telecommunications-related contracts.
Nonetheless, the London-based group won £969million worth of contracts during the period, a 24 per cent jump on the same time last year.
These included a £97million deal from the Royal Navy to provide training services, a £92.4million extension with Southern Water, and a £107million contract for IT services in Northern Irish schools.
Capita is known for managing the London Congestion Charge scheme on behalf of Transport for London and running recruitment campaigns for the British Army.
Mark Crouch, market analyst for eToro, said: 'Growth remains elusive, and competitive pressures in public sector outsourcing are intense. But with sentiment at a low base, Capita may now offer contrarian appeal.
'And with early signs of operational discipline and tech investment bearing fruit, investors may want to revisit this long-overshadowed name.'
Capita shares were 4.6 per cent higher at 261p on Tuesday morning, taking their gains over the past year to approximately a quarter.
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