Capita plc (CPI) Earnings Call Transcript & Summary

Helen. Good afternoon, everyone. Thanks for making it here today. I know it's quite an eventful day. A lot of things in the media and BC out there. So truly appreciate you taking the time to be a couple of hours with us this afternoon. Whether you're here in the room, or you're watching this through the webcast live. And the last time I was in this room, they're in a similar, I guess, presentation was back on March 6, when we were sharing with you the 2023 results. I think at the time, I had been all of what, 7 weeks in the company. I had to present the 2023 results. But I think the most important part was to have the opportunity to share with you all some of my early findings and observations from the business and from all the meetings and travel that I had done into the operations. And for those of you in the room or on the webcast, you might remember that, I started talking about some of these very good themes that we're emerging. Early on, early 7 weeks in, strong foundations that this company had been built on over decades of building deep relationships with an exceptional list of customers. That was really striking. That was certainly one of the first wow. Very closely linked to that, I talked about the skilled colleagues and the very passionate colleagues that I was encountering as I was traveling through our operations. People who are working day in and day out on behalf of our customers, really making the difference, and they live in really complex processes. But I also talked about opportunities, the opportunities for us to do better, which we definitely needed to do. And then opportunities that were happening in the market, particularly with the river of technology that made me think this is a great opportunity for us going forward. Now it's only 4.5 months into the role now, just a couple of months after I was here. And my observations do remain very consistent. I think over this period of time, I've had the opportunity to engage with many of you. I've spent time with hundreds of customers, thousands of our colleagues have traveled to most of the countries, where we operate, spend time with our key stakeholders and I have learned a lot, and I continue to learn a lot from my team and from our customers and from our shareholders. But if there is one striking lesson that I've learned just the one over this 4.5 months is the huge amount of value that this company does every single day. What our colleagues do day in and day out, really matters to tens of millions of people in the U.K. and internationally. Whether we are engaging with citizens on behalf of local government, or we are helping in the healthcare area or we are helping recruit and train the men and women that keep the country safe, or whether we're providing technical support for consumers in the telecommunications, well, we're providing upselling services or credit information, consumer credit services in places like Germany or utilities work that we do across many different areas or enabling transport, transportation or delivering low emission zones, what we do really, really matters. And personally, as an incoming CEO, I think it's a huge responsibility, and I think it's a privilege, and I'm really humbled to have the opportunity to do this. But with that responsibility comes also here the mandate. And I think I have a very clear mandate to deliver on with the Board and the executive team. And it is to translate all the huge social value that we create every single day into cash back profits. The great work we do daily, which is simply not shown in the numbers. I think you look at the disappointing financial performance of the last few years and is very clearly a gap between what we do daily and the value we're able to extract from it. So we are committed, and I believe we have found a way to become a better company, a better company for our customers, of course, a better company for our colleagues, but also very importantly, a very -- a much better company for our shareholders. And we are going to be executing, and we're going to take you through 4 key vectors of how we're going to deliver that better Capita. We're going to be looking at efficiencies, how do we do things better and what we do. We're going to be looking at changing how we go about technology and taking full advantage over the technology opportunities and capabilities bring to bear today. We're going to double down on delivery. We have to be excellent at delivering, now excellent at delivering and then recovering when it's being required. We need to be better at delivering right first time. And we have to build a better environment for our colleagues who worked day in and day out for them to develop, feel happy with the work they do and to grow their careers in a really acceptable culture at Capita. And this is what the CMD is all about. It's about giving us a platform as an executive team to share with you why we believe that Capita is really well positioned to deliver on that challenge of translating the social value into those cash back profits. So you will hear from me about observations, plan, the strategy that what we're going to do. Then you hear from Xenia, our Chief Strategy and Transformation Officer, will talk about execution, delivery and efficiencies. Next to that, we're going to hear from Manpreet our CTO, who's going to talk about technology and some of the things that we're doing there and the step change we're being in there. Scott, our Chief People Officer, will take you through culture and why it's so important in a people-centric organization, very people-dependent to build the right culture to drive that change. And then we will move to each of the divisions. The 2 divisions are going to be presented by the respective CEOs, Richard and Corinne. And then to bring us home, our CFO, Tim, will just talk about what it all means in terms of numbers. And after that, we will take some questions and answers both from the floor and the webcast. And then those of you who want to stay later for some casual drinks, also point out that there is some demonstrations and some of the technologies we're going to show here, so you'll be able to ask more questions and look at some stuff. So interesting and challenging time. Let me just show what Capita is all about. [Presentation]

Okay. So this is Capita. This is the Capita that we are committed to build, and this is the Capita that we believe we're going to turn into a much better company. Shareholders, potential shareholders, institutions, why should you care about this? What are the key messages that we're going to share with you today. So first and foremost, this company has built a really strong foundation starting from our customers, primarily around our customers and the passion and the skills and the uniqueness of our employees bring to bear. Second, the strategy that we are executing on today is a strategy that we can execute with the current capital structure. We are convinced this is something that we can self-fund out of operating margin expansion, better profile of cash flow generation, but also putting more focus into what we do and what we don't do. Third, and we're going to go through that in quite a lot of detail. There are significant opportunities for us to expand margins in the operations. The opportunities are everywhere. There are more in some areas, and we're going to talk about that. I think you saw the RNS early this morning, in particular, in the Capita Experience division, but there are opportunities everywhere. Fourth is around choices. We've made a lot of choices, and I'm going to share with you what choices we've made, and how we make those choices because I think the choices are going to allow us to double down on positions where we're particularly strong, where we have a right to win to win often to win well to deliver well and to build a healthy business. Fifth is we believe that the technology trends that are happening today as we speak, favor this market and favor the players like Capita. They present significant opportunities for us to change what we do, how we do it, a good opportunity for us to intercept new growth vectors and to also do things in a more efficient manner and expand margins. And this is a critical point in the industry. And then last but not least, we are resetting the relationships with the hyperscalers, the market, the world's leading companies in innovation. We've got billions and billions in investments going into R&D, data centers, capability development, you are building exceptional platforms to build on. And I should know that well because I just joined from one of them, and I'm really excited about what Amazon AWS, Microsoft Salesforce, ServiceNow, just to name the leading ones are actually building and are enabling us to go and build and top. And as a result of that, we will get a lot of benefits. Now the medium-term targets are probably the ones that are more relevant here. We believe we have a plan and a way and a set of tools and the relationships that will take us from the current 4% to 6% to 8% over the medium term that will help us improve our cash flow conversion. And that as we reposition ourselves and initially, we become a little bit smaller to get leaner, to get stronger, then we will be in a position to intercept those prospectives and also accelerate growth. So let me talk a little bit about our vision, and how we're doing things today and start opening [indiscernible]. Our vision is that we will be the trusted partner for our customers, whether they're in the public sector, or they are in the enterprise, private sector to come and run really complex business challenges. That's what we do well. These are going to be business challenges that we're going to run for them to give them efficiencies, to give them a better service. And we're going to deliver that through these technology that augments the core of what we do, which is the people, the colleagues who have the expertise at home. And we go to market now through 2 divisions. This is a significant simplification from what we had years ago where we would operate 11 divisions. So we've gone from 11 down to 2, more targeted, more focused. Both respective CEOs are going to talk about them, but let me just give you some key pieces of data. So public to my left, it goes to market through 3 subdivisions going to 3 different markets, local, government, then you've got this whole central government side. And then to the right, you've got defense, learning, fire and security. 3 distinct markets, roughly in similar sizes, very similar margin profile, and it's over 500 customers, and that's Richard leading that team. And the core customer experience, we have 2 elements. We have the traditional call center business, and this is the business that we've been talking about a business that needs attention because; a, we're falling behind our competitors; but b, the opportunity is huge. And then we've also got a growing business, a very successful business in pension solutions. And I'll show you in a second some of the financials so that you can start to sort of see them side by side. To simplify the slides and given that most of the Capita public segments are very similar, we left them sort of grouped together. But what you can see there in the public sector, Capita is already performing not far away from our competitors and our peers in this industry. We're doing a very good job, but we can do better, and we will do better. And Richard is going to show some of the key motions that he's putting into place not only to catch up with our peers, but also to go past that. Undoubtedly, the big reveal here is the traditional call center opportunity, right? Where we following anything between 8 to 10 points behind our peers. And that represents the largest opportunity for us for operating margin expansion. Corinne will talk about briefly how we got there. More importantly, how are we planning to get out of there. She will talk about the work that she's been putting in place since he joined 18 months ago, most importantly, what we are looking to build in the future. So a very key priority for us to expand that margin opportunity, and we know how to do that. Then you've got pension solutions, as you see, as I said earlier, smaller business, successful, profitable, growing, where we still can do better. It's mostly going to come through digitization of the offering. We believe our offering is very attractive with one of the largest providers. But I think as we start deploying some of the solutions that we will demonstrate outside later, we showed you a little video earlier, that will just help us propel the value proposition forward and keep driving that. So some very good and different stories and most importantly, very different action plans for every part of the business. There are going to be some common themes that each of them is getting their individual attention. And then to the right, you also see the closed book life and pensions and mortgages space, which is non-core activity. So non-core activity that we were talking about in the past, that we're managing for exit. In a given period, it can generate a profit, if there is a one-off event, but at large, as you can see on the bottom of the chart, that represent a cash drag to the business, and we're managing to do that. And then you also see for reference on the far side, right-hand side of the chart, the current EBIT margin performance, the group and the range of our aspiration in the medium term and similar for the operating cash conversion. So what has this assay is that we've got work to do. We know where the work is if we have peeled the onion back, we are sharing more, I think for the sake of transparency of where the opportunity is, and where we're trying to do as a leadership team. So what are we trying to do from a strategy perspective? Well, from a strategy perspective, the first thing that we've done is go and look at the market. Keeping it simple, I know both Richard and Corinne will talk about the respective markets. We operate in a growing market of GBP 40 billion, addressable market for us. What's really excited about this market is that the single biggest driver of growth in this market for years to come is going to be the adoption of technology. Our customers, whether they are part of the central government or part of local government or their telcos or utilities or financial services institutions or any others or pension providers, they really want to adopt these new technologies. They need these new technologies to give them productivity jump. They need these new technologies to do more with less or more with the same. They need these technologies to build new end user experience. They need to -- this technology is to deliver a better citizen experience if you have a cancer or you are serving from the central government, and they need help. They do need help with the adoption of these technologies. And with technology, there is always this formula, the 10/20/70 formula and it depends on what you put in the bucket. So let me just group 10 and 20, it's all about the core technology, but given the basic training, formulating sort of the strategy. But then the remaining 70 is always services. Is that deployment, that management, that onboarding, that deployment and sustaining opportunity that comes with it. And that's our sweet spot. It's combining the expertise of our people that are delivering the service with the capabilities that these new technologies are going to be bringing to market. There's going to be changing the competitive dynamics of this market. I think it's going to be changing them in our favor. As I have been seeing all of these technologies play out, whether there was sort of basic automation and robotics, or we're just moving on to smarter use of CRM or getting data and analytics and insights and later tracking all the way to GenAI. And I was seeing this from AWS, and I'm seeing customers adopting them all over the world successfully. I got really excited about what this could do in the lens and the world of Capita. When you go out and check McKinsey talks about 70% of people who've responded to the survey are really well underway. One way where there is just 1 project or 2 projects, right? And the remaining 30% is you're not denying it, they're just getting ready. And that reflects very much the conversations I have had with the Capita customers. They're in different stages of adoption. They have different concerns. They have different limitations. There are different obstacles that we have to help them overcome. But a trusted partner like Capita, who they've been trusting for decade, is a natural choice. And that has fundamental implications for us in the market. It would allow us to offer new services that we can't do today. It would allow us to deliver these new services better, more efficiently, would allow us to get some leverage across building common blocks and common platforms across different capabilities. Very importantly for anybody who follows the traditional BPO market, it will give us a really powerful tool to compete beyond the traditional labor arbitrage that this industry has been using for the last 20 to 30 years. We will have yet that dynamic because we have to manage that. We have the deep expertise and deep understanding of business process that we already have. And we will enhance it with technology. That will help our growth ambitions and our profit ambition. So I'm really, really excited about this. And certainly, one of the key reasons why I decided to come and drive that execution from this side. So how do we get started? Some of you might said, why did you join? And what were you thinking about when you joined? And I just said, you know what, I was excited about this, excited about what we do, the mission that -- but I really wanted to understand the detail of Capita. I think you would all agree with me that Capita is not an easy company to understand from the outside. It doesn't matter how many annual reports you read, and how many times you go to the web page. It's quite difficult to look into. So as an incoming CEO, I wanted to peel back the onion in detail, in a lot of detail, it's just in my nature, and go down and get internal information, but get independent external information from current customers, why are they with us? From former customers, why do they leave us? Current employees, former employees, market actors, our competitors, hyperscalers, look at our finances. And to all of that in, and it's a great work that OC&C Strategy Consultants did with us over several months to really just build that 360-degree view of the lay of the land. And obviously, there's like -- there's not enough trees to print the amount of the documentation we got out of that. But we did summarize some of the key findings on this slide. So let me start by the Capita today and some of the strong assets. You're going to be surprised that they came back and said, you've got a really strong base with customers. That really comes loud and clear there. You've got scale and expertise in really complex projects. What you do is really difficult, and you actually have that scale and the skill, [indiscernible] the less there. And then you've also got colleagues who are doing this really, really well, day in and day out. That's all in your favor. That's your tailwind. Now on the other side, there are a number of areas for improvement, and I don't plan to take you through all of them. You can read them and you tell them in your handout. But there were clear feedback from customers in terms of what they wanted about our offering, the simplification is very clearly, when you looked at how we were engaging in the marketplace, our go-to-market model wasn't working. We haven't made enough choices. We were taking -- trying to do too many things. And we were trying to do many things from a technology standpoint, first of a kind and sadly only of a kind. Things will never get reuse and repeat it. So all the innovation cost would have to be absorbed by a single contract, just to name a few. Then understanding the financial implications became really easy. So this is why we've been posting this financial disappointing performance. We just have too much complexity with too much cost. We were not reducing staff. We were bearing all the costs and everything that we've been doing, the internal complexity, a lot of the cost out that should happen going from 11 divisions down to 2 probably didn't happen so we were lagged with cost and complexity and ultimately, underperformance. So that's what came out. Interestingly enough, and I wanted to share this one because I think it's very telling. We did another exercise, which was, okay, not just look at the divisions. Let's just not look at the subdivisions, let's just not look at the contracts inside of each of the division, but just go 1 level down and look at the capabilities, what is it that people do inside a contract? What are the capabilities? What are people doing day in and day out. And we sort of labeling that into sort of activities, call it, service lines. Service lines are provided from somewhere within the Capita family. And we were starting to look at them horizontally, which I think is one of the first few times where we've done this in Capita because these things happen in different contracts, and there's a lot of commonality within what happens in 1 division and what happens on the other one and be known to the teams who sometimes met for the first time in the workshop to talk about the capability. And then we were able to group these 60 capabilities around themes, right, try to see what is it that we would do. And most importantly, we were able to then double-click into each of the capability. Why do we win? Where do we win? Why do we lose? Where? Who's our competitor? What is the potential of that market? Where do we have defensible advantage? Where do we have technology assets that sort of raise the bar to enter the gates of [indiscernible]. What is the financial profile? Are we making money? Can we grow? What you would expect us to do at that level of granularity. And then as a result, we said, okay, what do we have? So what we have is 3 clear buckets of capabilities and service lines. First bucket is what we call star positions. No surprise, these are nearly half of what we do. It's critical. It's complex. We do it well. We win often. We deliver well, very often, and you would expect us to be doing really well there. And there's a number of examples at a very complex and mission-critical training program. We do for the Royal Navy as part of the Selborne program, or running one of the largest, if not the largest, low-emission zones programs in the world or the great work that our team is doing in pensions. There's a number of examples at how far revenue is there. There is a second bucket. That is what we call transformation potential. Good markets, good dynamics, good opportunities. We actually win there more times than not, but we could win more often. And certainly, we could deliver better. And with a little bit of transformation, certainly by changing how we do things more than what we do. We can actually move them from transformation to star. Clearly, if you remember the Chart 3 or 4 charts ago on the financial performance, call center is a prime example of that. We do it. We play at scale, but we failed to extract the economic value of that opportunity. No surprise that the first delivery with a major hyperscaler with Amazon and AWS, which is you have, I think we've printed the press release came out to target that particular opportunity because it is our priority, but there is a number of them there as well. So again, nearly 1/3 of our business is in that middle area, and we are determining that we've got plans to sort of move them to the key area, to the star. And then to the far right, we've got to manage for value. There are a collection of things that it doesn't have to be like wrong. They just don't fit in what we're trying to do are large. Some of them which we're going to have to partner with some people to help us because they can do better, and then we take it in partnership to our customers who need those capabilities. Prime example is what we can be doing there in areas like networking and IT managed services. There are some areas where we actually have to fundamentally and radically transform how we deliver those service lines to make them work. There are others where we just need to have some commercial discussions with customers and then there might be others where we need to do a strategic review. It's a whole collection of things that need action. And I think what we are showing through this excise, hopefully is that, we've gone and got the data. We've analyzed the implications of the data. We've made decisions as a management team, and we're acting on those decisions. We're actually being quite transparent as it is what we're doing because we believe from this refocusing of Capita, we will get simplification. We will get cost reduction. We will actually be better in front of our customers. And it would be much easier for our colleagues to go and deliver at scale in a way that when you put it all together, delivers that margin expansion opportunity that we talked about. So quickly now moving to delivering on the how, now that we've got the what to squeak overview on the how. So we, as a management team, believe there is like 3 waves here, right? 3 different motions, that while they are depicted sequentially, certainly in terms of intensity today, they're actually happening in parallel at different intensities. So the first one is about creating momentum very quickly. You create the space. You go after the low-hanging fruit, you create the capacity, so we can fund the journey. And that's what we're doing. By the way, you heard about the GBP 60 million plus GBP 100 million cost takeout. This is why it's important to do that we need to create that capacity. The second thing that we're going to do the second wave is about getting the basics right. Basics right in some of our offerings, getting some of the basic right in delivery so that we don't make mistakes. We don't treat ourselves in delivery, getting basics right in offices, in procurement, in a number of our internal process, in our approvals, in our governance. And then the third wave is all about building the future. Now as I demonstrated, as we have just launched the Capita contact offering for the future, we launched it on Monday, especially possible that we may be doing things already to build for the future. But the focus today is largely on the quick wins that help us fund that journey. And Xenia will talk more about this, but I just wanted to sort of -- to reiterate that we're well underway. We have already actioned GBP 90 million out of the combined GBP 160 million. We talked about some reinvestment over time that will be up to GBP 50 million. And this is over effectively a 12-month horizon still until the end of the first half. And just to enable the strategy. The other GBP 100 million will be net savings. Xenia will show you some charts as to where it's coming from, but you would expect a big chunk of it comes from the areas where we have the largest margin expansion opportunity. We're also tackling organization, efficiencies and multiple levels. And we're also looking at sort of a lot of areas that are known with just standard getting the basics right, like real estate and what do we have there, procurement efficiencies and a number of others. So we'll cover that in a couple of slides. So leading indicators, I wish we have been able to do more work on this. But again, with the aim of being transparent, we'll sort of show the current thinking of the kind of nonfinancial leading indicators that we aim to be tracking and reporting on to show progress on the strategic vectors that I shared earlier before they fully manifest themselves through the P&L. And you see some of them. We've got them. We've got good control of them. We know where the baseline is. My ambition would be that when we come to the first half results, we'll do pass the days, and then we'll keep doing that at future events because this is a really important part of the dialogue and assessing the momentum that the company has and that we're building behind the execution. So the price for all of this journey I think, is to take us much closer to that conversion from social value and everything that we do to economic value. And I think we just sort of signaled where our medium-term ambitions are, which I shared with you earlier, we believe this is something that we're really well positioned to go and achieve. And then hopefully, as we go through these with the rest of my colleagues, that's something that you start to perceive as well. So let me now quickly hand over to our Chief Strategy and Technology Officer, Xenia Walters, who will take us through the efficiencies part and very importantly, how we are executing and what are we doing to make sure that we really execute and deliver on time. Xenia and I go a long way back. Some of you, I know, used to work with both of us at SDL, you didn't have enough of the experience, so she joined Capita all of 4.5 months ago. And since then, you haven't stopped. So Xenia, please?

Thank you. Thank you, Adolfo. It goes out to say, I'm delighted to be reunited with the Adolfo and excited to be part of the journey going forward. For those of you who don't know me, I'm Xenia Walters, I joined Capita 6 months ago, same day as Adolfo, I think, January 16. I'm a chartered accountant by trade. I sort of qualified with Pricewaterhouse, which probably shows you some 30 years ago. But chartered accountant, and I've served as a CFO in both public companies and private equity-backed companies across a number of different industries and sectors. But with a common theme that all the companies I've worked have required large-scale transformation and restructuring. So I'm well versed in leading and driving transformation change and delivering shareholder value. So let me start by setting the scene. Our company-wide transformation program here at Capita is both broad and deep in scale, and it goes well beyond just cost reduction. Our road map is aligned to operationalizing our business strategy, but also delivering long-lasting business outcomes that stick to increase our shareholder value. As Adolfo mentioned before, we're looking at the business from both a vertical lens and a horizontal lens because that has identified multiple work streams within each of the business units, but also going across the functions. And that's allowed us to unlock opportunities around revenue, margin expansion and cash generation. We segmented these into multiple work streams that have fallen into the 3 waves, which Adolfo alluded to, back to basics -- sorry, fund the journey, back to basics and building for the future. And it's important to note that these don't need to run in sequence and they will and they should overlap. So by way of example, build for the future is all about generative AI and our hyperscaler partnership programs. And as you can see from the announcement on your desk, we've created a joint solution with AWS, our contact center solution called CapitaContact. So that's something which we've accelerated and brought forward. The breadth and depth and criticality of our program is why we've partnered with BCG, experts in transformation, but that's allowed us to actually go up this program at pace and at scale. So we can deliver cash-backed cost savings, that's stick and are sustainable. Although moving up pace is critical, we've ensured we have gone slower at the start because success or failure really depends on bringing our colleagues with us. And that's why we've engaged very closely with Scott, our HR Director, and the wide team to make sure that our colleagues are at the heart of our program going forward. So we've shared with you the 3 work streams and this aligns everyone to the end game and the journey. There's multiple work streams that underpin each of these 3 waves, and you'll see this on the next slide. It is important to emphasize that we, as a team, have operated as one unit working towards the same goal, and we're all aligned. The clarity of actually having an end game and the journey that is widely understood by all of our colleagues in Capita, together with celebrating quick wins has actually allowed us to build the right momentum and get positive engagement. And that's been really important in terms of going forward at pace. As you can see, there's a huge amount of detail here, and this isn't an exhaustive list, but it gives you a flavor of the type of initiatives that we are working on are in flight at the moment. And these will contribute towards our sustainable cost out program. Just to give you a bit of color around a couple of examples. In terms of procurement, we've got over 18,000 vendors within Capita. We've used AI to interrogate our vendor contracts. And through that interrogation, with extracted clauses around benchmarking, SLAs, right council without clause, et cetera. And with those clauses, that's allowed us to invoke negotiations with our suppliers so we can rightsize our services and reduce our cost base. In addition to that, we're looking at our long tail of vendors to rationalize our suppliers and actually consolidate our volumes so we can actually get better pricing going forward. In terms of process improvement and digitalization, we're looking at common end-to-end process within our functions and business units. And we're removing duplication and harmonizing shared platforms, shared processes, shared data, shared policies. A good example of this is purchase to pay, so we process about 300,000 invoices a year manually. Our objective is to reduce this down by 1/3. How are we going to do that? We're going to embed P cards, purchasing cards, and also use EDI, electronic data interchange. So put simply, that's actually taken invoices automatically into the accounting system with minimal manual intervention. Not only will that make us more efficient, but it will give us better insight around what we are spending our money on and also driving further cost savings. We've got lots of initiatives, but it's really important that you understand that every initiative that we have has got an owner. It's got an owner. It's got detailed execution plan. It's got milestones, it's got savings, it's got cost to achieve. And in terms of rigor and governance, every single initiative is loaded and trapped in our cloud-based platform called key. So we've got one version of the truth that all this information goes into, and we're all looking at the same data set. On a weekly basis, Adolfo and the executive team review every single initiative with their owner to ensure we maintain velocity, and we deliver on our results. Every single initiative goes through its stages of maturity. So from the initial idea of that initiative, it then goes through the stages of qualification, planning and execution. Execution means we've delivered the P&L benefit and the cash benefit. So to date, we've executed GBP 90 million of cash back savings. We've also set up a transformation management office and that's allowed us to create the right governance and drumbeat to ensure that our cost-out program goes at pace. And we also have a comprehensive people agenda, which Scott will take you through around our colleagues being at the heart of our program. We're very agile and nimble in prioritization -- in prioritizing our initiatives. And I think it's really important that the tight cadence and also the close teaming has allowed us to actually go up pace and pivot and double down where we need to. In terms of our cost-out targets, we've got 2 waves. We announced Wave 1, GBP 60 million cost out back in November 2023. And Wave 2 -- and the Wave 1, GBP 60 million of annualized cost savings for this year, and Wave 2, which is a further GBP 100 million of annualized cost savings to be delivered by June 2025. So in total, that's GBP 160 million of annualized cost savings to be delivered by the second half of next year. The pie chart on the left hand side shows you roughly where these cost savings are going to land. So in absolute terms, it's broadly 50-50 between CPS and Capita Experience. But because Capita Experience is the smaller of the 2 trading divisions, we'll see a bigger impact and benefit in Capita Experience. Of the GBP 160 million of savings, we've made very, very good progress. We've delivered GBP 90 million of cash back savings, reflecting the vast majority of the Wave 1, and we've delivered some quick wins from the Wave 2 program. We are, as a team, very confident of delivering the further GBP 70 million of cost savings to get us to GBP 160 million. You can see on the right-hand side, the principal areas where we delivered the savings. Given 70% of our cost base is people related, it come as no surprise that 83% of our savings has come from organizational design, so reducing our spans and layers, but also taking manual workload and automating that. Moving on to my last -- sorry, moving on to my last slide. This maps the core initiatives by time line. We look at our journey from both a top-down and a bottom-up to ensure the road map of change is well designed. And we've got the right coordination and sequencing of events. We've got a lot going on, so coordination is key. But also, it's important that we understand the milestones and also the dependencies and risks are well understood and mitigated. You can see that by the second half of this year, we're in full swing and we'll be able to give you a progress update when we announce our half year results in August. The speed with which we are delivering our program of cash back cost savings, coupled with the clear line of sight and the detail that we have behind each initiatives gives us real confidence on our ability to deliver our cost-out target of GBP 160 million. I hope you can see that in a short space of time, we've done a lot. There's still a lot to do, but we have a lot of opportunity. So on that note, let me hand you back to Adolfo.

Thank you, Xenia. Impressive. I love precision. I love precision and execution and the programming and like the granularity of the plan that you have presented that the executive team is owning and driving. And strategy is fundamental execution definitely trumps strategy. So then that's just a little bit of a preview of that. Now the other enabling part to deliver all of these is a swift step change in technology. And then who better to tell you about that change than our CTO, Manpreet, who is going to join us on stage and just share some thoughts on some of the key initiatives that we're driving and how they are relevant to this strategy execution.

Thank you, Adolfo. Before I get started on talking about technology, I thought I'd give a quick introduction. I've been with Capita for just about 4 years now. I joined initially to build our capability in India. And over time, I worked in various roles across most parts of the business. And I've been the CTO for the last 3 years. Prior to Capita, my experience lies in outsourcing and technology transformation largely across various organizations. Moving on to talking about security and data. A topic that's rather close to my heart and one that matters to us all significantly. Given the experience we have and the amount of time we have spent recently talking to customers about how we can work with them, and how we can support them. The threat landscape we are all faced with is currently unprecedented. And the rise of AI and nation-state activity is increasing the risk daily. This is a global problem. And if you look at the daily headlines, they're worryingly common. It doesn't matter who you are or where you are or the business you are or the sector that you are in, the stakes are high for companies and people alike. To paint a picture, a cyber attack occur somewhere in the world every 39 seconds. We have had a focus on cyber from well before the incident. We've been running a multiyear cyber transformation and data management program that aims to improve our maturity and reduce our operational risks. Collaborating with specialist partners, that aims to improve our maturity and reduce our operational risks. We have focused on adopting Microsoft security products while building a security-conscious culture across the organization. There's a lot of detail on this slide, but in summary, there is no single answer to the challenge of cybersecurity. This needs to be tackled holistically, and we need to think about culture, governance, responsible AI, security, versus productivity as a balance and comprehensive tech protection. In March 2023, we experienced a major cyber incident that disrupted some of our operations and impacted our customers. Capita responded quickly and effectively to the incident. And with the support of its operations teams and strategic partners restored service to its customers swiftly. Capita has achieved a strong increase in cyber maturity from the position over the last 18 months, as measured by the NIST Cybersecurity Framework with a target that paces us ahead of the industry benchmark. And a framework is continuously reviewed and updated to address emerging threats as well as factors in industry best practices using a risk-based approach. We're starting to use generative AI to help us predict and react better to security situations. Moving firmly on to generative AI. I just want to start with, this is not replacing rather it's augmenting people generative AI does not replace descriptive, predictive or prescriptive analytics either, it complements it. It is important to understand that generative AI is not the best fit technology for everything. And traditional machine learning will always be more efficient in multiple dimensions. For example, in a personalization of outcome or action during a customer conversation, you leverage machine learning outputs to then be activated with generative AI-powered channels. And the adoption framework follows a deploy, reshape, reimagine framework and talking of deploying generative AI in everyday tasks such as upskilling HR colleagues or enhancing our software development methodology. We have already been working with Microsoft Copilot for a few months now, speeding up the production of code and improving its quality. Moving on to reshaping. It's about the way we conduct business and evolving processes in customer service through real-time agent assistance. And it's about helping improve decision-making and by providing data insights and predictions, but then enhancing the customer conversation by providing personalized recommendations. And lastly, reimagining. Reimagining the services we provide and creating new lines of service and new operating models that are brought to the market. And we have been having think big sessions with the hyperscale partners such as AWS and Salesforce. Capita is driving innovation, by identifying opportunities and deploying generative AI solutions. We have a clear strategy when it comes to the adoption of generative AI, and we remain focused on ethical considerations for Capita and for our customers. The main key areas of focus for Capita are customer interaction and experience through agent enablement, agent optimization and, of course, operational excellence and enhancing our internal processes. We have the opportunity to reimagine the type of work and to optimize on our technology capabilities to provide high-quality services by using value-add modern technology solutions working with our partners. We're currently live with multiple projects working with clients and enhancing the processes. And some use cases you will hear about later from my colleagues, Corinne and Richard, that are across the 2 spectrums of AI, and that's around specialist tasks and content generation. And that's the agent suite and Capita accelerate. By unlocking and maximizing the impact of AI, the shape of future work can be reimagined. Capita have remained focused on our strategic partnerships with 4 of our hyperscalers over the last year. Microsoft, ServiceNow, Salesforce and AWS, and they're part of a strategy to accelerate the use of new technology tools and new platforms. And we have been focused on defining a value proposition and dividing -- and driving generation activities in the market for demand. This is a step change from approach we've had in the past where we've tended to build bespoke and custom solutions with the advancements in technology and micro services enabled with AI, there is a need for a shift towards leveraging and building and -- integrating rather than building -- sorry, leveraging and integrating rather than building. What this does is, this enables speed to market, but also improves on quality of outcome, and it allows us to respond to customer needs at pace while giving us the ability of rapid scalability. We have and we continue to invest in colleague training and enablement for this new way of working, which ensures that colleagues will have the opportunity to be able to work with newer technologies that are in-demand skills. The Microsoft partnership focuses on Cloud & AI solutions, building on the Azure AI platform. At the moment, we are focused on building a digital pension solution on the Dynamics platform. The ServiceNow partnership aims at service transformation, where we are building a platform for supporting customers that need efficient incident management to start with. Our Salesforce partnership offers business growth and innovation. Our AWS partnership leverages cloud capabilities and competencies to drive productivity. Contact Center as a Service is a key element in driving our partnership with AWS, which we have strengthened with the recent launch of CapitaContact. This provides us with an opportunity to replace or augment legacy solutions while we can also target white spaces. And I will end with this film on CapitaContact. [Presentation]

Thank you very much, Manpreet, very helpful, and promises are great, there is nothing like seeing a product, and it's obviously something that is out there. I think it just highlights the size of the opportunity. I mean, if you keep referring you back to the operating margin expansion opportunity in the call center, no surprise that this is the area we've prioritized with the market leader in this area being AWS and combining the best of the capabilities and ours, but as Manpreet rightly highlighted, this is just one of the others that we're going to be bringing to market. So watch this space. This is definitely going to be transforming what we do and how we do it, so very excited about that. And if I said earlier, that the strategy is great and then execution trumps strategy, culture draws both of them. Culture, how do you get that to really happen in that scale? How do we get that and with 41,000 colleagues at speed, how do we get their minds behind this transformation and get them to be fully behind it. And this is something that is keeping us really busy as a leadership team. And Scott, our Chief People Officer, is going to join me on stage briefly to share some thoughts on what is it that we're doing and why are we doing it, and what are we going to do next? Thanks, Scott.

Thanks, Adolfo. Good afternoon, everybody. Hope you're all well. As Adolfo says, my name is Scott Hill. I'm the Chief People Officer here at Capita. I've been with the organization for about 5.5 years now. First 3 years of that, I spent leading various HR teams in 1 of those 11 divisions that Adolfo spoke to. So I got to know the business incredibly well. And about 2 years ago, I joined the executive team as the Chief People Officer. During that time, I've been blessed to be involved with a huge number of really fantastic people interventions, where I think as you've heard from Adolfo, from Xenia and Manpreet, nothing is more important than our cultural transformation journey. And that's why I want to spend a little bit of time talking to you about for a few moments. It's a hugely important part of executing our plans, creating the right environment for our people. Our biggest asset will fundamentally underpin our success. The good news is that's well underway. We've been working on this for some time through the delivery of our career path framework, remaining committed to being a responsible business. And by using some of the technology that Manpreet spoke to, improving our internal processes and systems to allow our colleagues to spend more time doing what really matters, delighting our customers. And throughout that, we've always remained focused on cost consciousness. So as I say, we've made some really good progress through transforming our culture, evidenced by our employee Net Promoter Score, which has seen a 40-point improvement since 2019. And although still negative, over the medium term, ultimately, our goal is to get that to a positive eNPS in line with the benchmark for our industry. Albeit recognizing that some of the tough decisions we've had to make recently in order to start the turnaround of our financial performance may impact that employee Net Promoter Score in the short term. Across 2022 and in early 2023, the group saw inflated levels of attrition, caused partly by the macro labor market post COVID, where globally, we saw the tightest recruitment market in the generation, colloquially known as the great resignation, but also driven by the large reorganization that Capita undertook during those years. Attrition was particularly high within Capita Experience in excess of 30%. This is very costly to our business, not only financially, but also in terms of delivery to our customers. So we took a number of actions in order to reduce attrition. Group-wide, we launched across company-wide interventions, such as the career path framework, global inductions and meaningful investment in management and leadership capability. Using again some of that better technology, we improved our reporting, so we could identify the hot spots in our organization, and we're able to address them real quickly and specifically. And what was really powerful were local action plans, plans owned by Corinne and Richard that delivered interventions right to our frontline colleagues, making a real difference. So since January 2023, we've seen our group voluntary attrition on a 12-month rolling forecast basis reduced from 30% to now slightly under 22%. Clearly, there is still more to do, but this level of attrition is significantly more sustainable for our group. And in this slide, we summarize a detailed timetable which will further accelerate our journey to where we want to be. I'm not going to talk them through all in detail, but it gives you a feel for the work that we're undertaking. So why is all this important? Having the right culture is something that benefits the group from a financial and a delivery perspective. There's material financial cost attached to high attrition. Recruitment fees, training costs, and clearly, the impact it has upon contract delivery. Low attrition reduces these costs and in turn, means our teams can focus on what really matters, adding value to our customers. Also, within the labor markets, employees are increasingly looking for an employer that prioritizes culture. By having the right culture, we'll be able to attract the talent that we need as an organization. And really importantly, social value, this plays an increasingly important part in both private and public sector contracts. But how do we get there? We have a set of detailed guiding cultural principles and an action plan to ensure we create an embedded culture that will enable the achievement of the corporate goals. As you can see from this slide, we've already completed some actions such as engagement with our senior leaders and design of our leadership playbook. We'll be launching this playbook shortly and completing an all-colleague survey to further understand the journey. But ultimately, our goal is that Capita's workplace culture will create an environment where trust, collaboration growth and respect are at the forefront. Our colleagues will feel valued, heard and know that their contributions make a difference to customers and society. Leadership is transparent, accountable and approachable, and we will create a cycle of continuous improvement and job satisfaction. Ultimately, Capita's culture will be one where everyone is united in achieving the organization's goal of being a better company while also nurturing their individual aspirations. And with that, I'll hand back to you, Adolfo.

Thank you, Scott. Really uplifting. And certainly, we have a lot of work to do on this front, but it's the single biggest amplifier that we're going to get on value. It's getting our wider leadership team and everyone in the company running through that evolution. And we're really excited about the early signs and the levels of engagement of the team, but this is not something that we plan to slow down at all. If anything, we're going to accelerate. So we get it now to the sort of second block, short to slightly shorter block, where you're going to see this in action in front of the divisions where sort of the rubber hits the ground. And first, we're going to hear from Richard, he's the CEO of Public, who's been doing the role for all of like 7 months now...

Feels longer.

Feels a lot longer, and he's going to take us through that. So Richard, please?

Thanks, Adolfo. Good afternoon, everybody. I joined Capita in January 2021, from Centrica Group with a mission to bring together all the elements of defense and security into one market vertical. And I took over as CEO of the Public Services Sector or division in October last year. Prior to joining Capita, as I said, I was at Centrica, where I was the Chief Business Transformation and Digital Officer driving the customer experience transformation within the consumer businesses in Centrica. Prior to that, I was the Managing Director for Strategy Transformation and Operations in BT Group. And even earlier than that, I had a 20-year career as a soldier in the British Army. So to Capita Public Services today or for short CPS. We are a trusted partner in business process services for the U.K. public sector. Our teams manage day-to-day operations and processes behind the scenes playing a critical role in ensuring that public services run smoothly across the U.K. Currently, we serve over 500 clients, delivering vital services across the country in the 3 market verticals that you see on the left of the slide. And we're doing it very well. Our strong performance is reflected in the stats you see on the right of the slide in our KPIs and consumer -- customer Net Promoter Scores. So to the 3 market verticals. We work with most local authorities in the U.K. and their residents, supporting schools, providing back-office services to support local government and assessing and paying benefits. And you saw in Manpreet's short video there about customer -- CapitaContact, that in action and the sort of services we deliver for local government. In defense, learning, fire and security, we develop modern technology-enabled recruitment and learning solutions for the armed forces, fire services and civilian national resilience. Our work here is instrumental in helping keep the U.K. safe. And for central government clients, we manage national complex contracts. These range from welfare assessments to overseeing the TFL road user charging scheme through to supporting operations for primary care providers in England. Across our 3 verticals, we have a long-standing relationship with an impressive list of satisfied clients who we treat and respond with as partners. As you can see from the numbers, our addressable market size is GBP 16.4 billion, growing at 3.6% per annum. Our target market is growing, giving us the opportunity to grow with it. But here's the brilliant part. CPS isn't just about paperwork and process, it's about changing lives. Behind me are some of the customer references that we've recently received. For over 40 years, we've partnered with the public sector to tackle society's biggest challenges. From helping tens of thousands of students a year to access higher education through the disabled students allowance, opening the doors of the world to the U.K.'s young people through the cheering scheme, recruiting the brave women and men who protect our nation undertaking gas inspections to keep people safer in their own homes. Training sailors and submarines for the Royal Navy and playing a part in delivering the nuclear deterrent, to managing the world's largest ultra-low emission zone for transport for London, which is reducing the impact of air pollution in London. We're part of the fabric of the U.K.'s public services, invaluable to society, entwined in the U.K.'s population. That's something that my teams and I are hugely proud of. So the journey so far, in the last few years, we've been working to create a sustainable operating model for the division that will allow us to enable to deliver services that our clients want at the quality and price they expect. We've made good progress. We've simplified our operating model. We have strong client relationships, which help us to win new work and expand scopes of work. Our customer Net Promoter Score is strong, and we've addressed challenging contracts. But yet our cost to serve still remains too high, and this is where we've identified necessary step changes. As a result, we are implementing a series of initiatives as part of the program that Xenia walked you through. We've restructured our client groups to be much more client-focused and enable cross-sell building on our domain knowledge and expertise. We are also building innovative lower-cost solutions with hyperscalers in health, education and the Department of Work and Pensions. In turn, margin improvements are flowing through. Initiatives from this program means that we are well underway with delivering the annualized savings targets to date within the division, with a line of sight to our annual target. This drives our ability to deliver more for less for our customers. All of the above is helping us to close the gap with our competitors. There's still work to do, but simplifying CPS, partnering with hyperscalers to make our services more tech-enabled offering end-to-end delivery solutions and driving a reduction in overhead are all vital parts of that process. So to the future. As we look forward, our plans to drive growth revolve around creating standardized repeatable propositions developing our accounts deeper and further and exploring international markets, and I'll touch on that latter point a bit more in a moment. The most significant event that's happening in our market right now is the general election. And regardless of the outcome and having digested at pace this morning, the Labor Party manifesto and over the last couple of days, the conservative manifesto, we see 2 major policy themes and of opportunity for us regardless of who wins. There will be further market growth in BPO, driven by the need to improve productivity and efficiency and an evolving national preparedness market, focused on preparing the U.K. in the face of growing geopolitical instability. In this area, CPS is well positioned to support through assessing readiness in the event of a crisis, providing training and supplying the data to make informed proprietary decisions. The growth in our market stems from public sectors need to improve productivity, reduce backlogs and deliver 24/7 easier-to-access more efficient citizen services. Public sector organizations are also grappling with a skill shortage and with it, the costs and risks associated with running critical services and processes on legacy IT, which in turn drives their need for digital transformation. So demand for our services is growing. However, it's shifting towards digitally enabled shorter in length and lower price services that can be delivered at pace. To give you an example of change in action, in order to meet these customer requirements and to catch up with our main competitors, we've packaged our offerings into 4 core propositions, which are shown on this slide. These propositions are based on our expert domain knowledge, standardize repeatable capabilities and scalable technologies. They can be delivered at pace and cost effectively and thus improve our margins. Moving to standard repeatable solutions is a really big shift for us, as historically, our strengths have been to respond to government tenders by developing heavily bespoke solutions and services. However, we can see the opportunities in each of these propositions across our 3 market verticals. Our relationships with strategic partners will be essential to that success. As Adolfo outlined, we're actively developing and refining these propositions with partners in support of our growth. So the division's medium-term priorities are to unlock the growth opportunities and drive our strategy by driving these 5 key priorities, building those standard repeatable propositions that I just outlined, expanding across government by taking up opportunities presented to us by our current international customers, as well as the national preparedness market opportunity. We are building on our relationships and experience within local government. We see an opportunity to develop our services, particularly in support of the care sector. Rightsizing, which is being delivered through our transformation program and to expand our reach, we're exploring targeted international opportunities in particular, in the area of complex training modernization and delivery and initially looking to opportunities in the Middle East, where we're being drawn by our Royal Navy customer and by our existing relationships with some of those Middle Eastern countries. This will give us further potential over the medium term. And finally, exploiting tech-enabled efficiencies. Now I have an example that I'd like to share because we've developed a new solution that reduces the amount of time it takes to process up to 30,000 applicants medical records as part of the army recruiting process. [Presentation]

And when you take that with our latest pilot, which is servicing digital medical records that come directly from GPs in the community, we believe that we're going to take 3 weeks -- whole 3 weeks out of that recruitment cycle. The chief of the general staff is absolutely delighted with the rapid process gains that we're making and this downstreaming of technology. So in summary, we developed long-standing relationships with satisfied customers who view us as partners and want to continue to work with us in the future, unlocking opportunities to expand and deepen what we do for them. CPS's strength lie our ability to blend our capacity to deliver at scale in complex environments, with our extensive domain knowledge of the U.K. public sector and business processes built over 40 years. The needs of our customers are constantly changing, and we understand what we need to do to change as a division in order to be agile and remain in lockstep with their needs. We have a proven track record of helping turn policy into practice and delivering high-performing user-friendly citizen services. Behind all this is our expert and dedicated employees, we don't just see this as our job. It's a service and we're really passionate about it. As a result, we've developed long-standing relationships with satisfied customers who view us as partners and want to continue to work with us in the future. So Adolfo, back to you.

Thank you, Richard. Really reassuring to see, I guess, first, that we're running at a very meaningful business in the public sector. That is a profitable growing business. But equally excited as Richard, if not more about the opportunities that are opening up, and I think he did a fabulous job at capturing and join what's out there for us to go and grab over the next few years. So the next chapter is looking into capital experience. And I know it's probably going to gather a lot of attention given some of the financial numbers that we disclosed this morning. But this is an area where we believe we have significant opportunity as a group to expand operating margin over the next few years, getting a lot of attention, a lot of focus, as you saw earlier with some of the developments. And we're all working together with Corinne and her team to deliver it. As I said, Corinne joined the company 18 months ago to come and take a hard look and fix this division. So I know she's going to tell us what she found, and what she's doing about it.

Thank you. Thank you so much, Adolfo. Good morning, good afternoon, everyone. Good morning. Good morning in the U.S. but not here. So today, I will clearly focus on Capita Experience, the true principal core division that we have, which are Contact Center and Pension Solutions. So I'm just going to repeat what Adolfo just said, we have at Capita Experience not performing very well in the past years in terms of margin. Our margin is clearly far away from where our peers are. But we took the commitment to change that. In September 2023, I launched with the division wide reorganization, to do what? To simplify our operation to reduce our cost to serve and to become much more competitive in all of our geographies. As you can see here, we have 4 market verticals: telco, media and tech, energy and utilities, retail and e-commerce and financial services. We deliver in 4 geographies: U.K., Ireland, Switzerland and Germany. These 4 geographies represent only 16% of the addressable market of GBP 38 billion. What we have done so far, we are doing a significant reorganization that we started mid of 2023. But by doing that, we do not impact negatively the operations. And we continue to perform very well. I will just give you an example in our telco industry. In 2023, we renewed 4 of our largest contracts, VMO2 for 5 years, where we deliver now most of the business offshore from our center in India and in South Africa. We have also renewed for 9 years, one of our clients, telco clients in Switzerland. And here, we have been awarded as the single source. So meaning we deliver 100% of their customer experience from Switzerland, but also from our nearshore operation in Bulgaria and in Poland. We have another telco client in Germany, where we renewed for 2 years. And last but not least, freenet, we gave them our confidence for the next 7 years. All these contracts represent 38% of our total revenue in 2023. Let's see what our clients say about us, okay? So we are delivering for our clients and their customers. However, the quality of our service delivery is not yet reflected in our margin. Our service delivery is not yet reflected in our margin. And I will address this point later. We have a very solid client base with well-known brands, but in the past year, we added only a few new clients. We have learned from our mistakes. We have learned our lesson, and we know why we have lost deal. We clearly, we lost our deal for last -- lack of competitiveness. We lost our deal because we were not able to digital -- to transform the digital -- with digital capability with our clients. And we lost our deal as well because we are lacking in terms of innovation. But at the same time, as we are fixing our problem, we are also focusing on strengthening our foundation and increase the stickiness with our current clients. And this is the best experience that we can have here is the customer -- the voice of our customer. As Adolfo said, I joined Capita in November '22. I spent 100 days meeting clients, advisers and our people in our different geographies to understand this organization, I should say the complex organization, as Adolfo said as well. In the middle of 2023, I found a new team with a mix of internal talent and external talent. And since April, what we are doing we are just embarking in a journey to fix the inefficiency of our contact center operation. As you can see in the blue box here is what we addressed in 2023. We moved from an inefficient division with a high cost to serve. You will not believe me if I was saying something else. With limited multilingual capabilities, high attrition, Scott spoke about that with low productivity, minimal omnichannel usage and adoption, high overhead, heavy legacy lease property and in IT system as well. And on top of that, one of our European entity not performing as planned. As I speak now, we continue to transform our contact center division at pace. We have a leaner organization today. We are removing unnecessary span and layer which has so far resulted in decreasing of several hundreds of people. We have a culture mindset rooted in Lean Six Sigma to optimize our businesses. Today, everyone is being equipped to become a game changer. We are a data-driven organization. We have a clear portfolio of capabilities and services that we can build at scale and develop at scale. We are a tech-friendly organization with an adoption of technology and GenAI as well. But the most important, we have 95% SLA adherence in our center of excellence everywhere in the world. And for the first time, post-COVID, today, we are receiving more rewards from our clients that we are paying penalty. On top of that, we continue to transform our footprint, and we are much more healthier footprint in terms of geographies and in terms of property. The good point is that since the beginning of the year, we have built the momentum. We are starting to see improvement in our competitiveness by lowering our cost to serve and deploying GenAI. Our short-term ambition is to see incremental basis point improvement. What I want to tell you today is that our future looks brighter than ever. Our ambition for 2025 and beyond include the deployment of our GenAI solution at scale. The expansion of our business into adjacent geographies by leveraging our strong client base, the creation of new offering and entry into new industry. Everything you will deliver today, we do it, we do it repeatable, and we do it scalable. By the end of 2025, we expect to have healthy business, utilizing GenAI to increase our competitiveness and support the transformation of delivery services to our clients. Clearly, we missed some step in the past. Today, we'll not miss the GenAI transformation for us and for our clients. As Manpreet mentioned, we are developing human-to-human augmented capabilities through a set of GenAI solution. With Agent Assist, our frontline people can find information faster and answer better the question to the customers. With Call Insight (sic) [ Call Sight ], we support agent to summarize the call at the end in one click, and we collect as well a massive amount of data to improve the customer experience in the future. With [ Sanas ], we improved the quality of the call by lowering the accent in real time of our people and considering the background noise. It's a true innovation. We are piloting this solution with a number of utility telco and retail customer today. Every single solution that we do today are designed to streamline operations, enhanced service delivery and improve the agent experience. Thanks to our innovative way of working, we improved the most relevant contact center metrics. For example, we reduced the average call handling time by 20%. We increased the first call resolution between 15% to 20% (sic) [ 30% ], and we are just at the beginning of the journey. Our focus on digitization and operational efficiency is clearly paying off. We were setting the stage to continue growth and success. We are changing the perception and reality of this business. Our transformation is not only in contact center, but we also brought our transformation expertise to our Pension Solutions business. Pension Solutions is smaller in scale, but much better in terms of margin than the contact center. As you can see, it has grown rapidly in the past years, and the margin is much better than what I said, the contact center. We are growing double digit with healthy margin. And you can see that we have GBP 1 billion TCV opportunity, which is coming to the market in the near future. And this billion is in defined contribution. And defined contribution, guess what, is our sweet spot. We won several DC contracts in the past 24 months. With our highly specialized skill sets, substantial experience and first-rate client portfolio. We are a leading provider in the U.K. Here, the technology is becoming a game changer and this technology will allow us to win major deals. As we look ahead, our focus remains on innovation and customer satisfaction. With the team, we are clearly committed to providing seamless pensions experience that meet the evolution and the need of our clients and their customers. We have also several strategic initiatives there, including the digitalization, the expansion into new markets, and we will continue to drive the growth and the success within our Pension solutions business. Let's play the video. [Presentation]

This is what we do in Pension. Let's conclude now. For the 2 core businesses that I spoke earlier, we have set ourselves a clear milestones. This includes our target for digital transformation, customer engagement and operational efficiency. Each goal is aligned with our overachieving mission to deliver exceptional value to our clients, their customers and our shareholders. As a team, our vision is to be a leading regional player and first choice partner for national and international company in the contact center and to be market leader in pension solution in the U.K. Thank you. Adolfo, back to you.

Thank you, Corinne. Thank you for the overview, 2 very distinct businesses, obviously, in very different part of their journey. I think both of them full of opportunities, and we're equally excited about both of them for very different reasons. Now just to sort of bring us home, what does this all mean in terms of numbers and sort of just sort of grounding where we are today, where are we going, and what does this all mean over the medium term. We have our CFO, Tim, who is just going to bring us home. And then right after Tim, we're going to open for Q&A, both from the room and those of you who are on the webcast. Thanks for hanging in there.

Very good. As the oldest member of the team, I have 2 privileges. Number one, is I get the shortest walk, and number 2 is, I don't get let loose on the clicker. So afternoon, everyone. Before focusing on the medium-term financial improvements we're targeting, I'd just like to recap on the 2024 financial outlook that we outlined at the results announcement back in March. As we said then, 2024 is a transitional year as we put in place the building blocks we've outlined today, underpinning a materially improved financial performance in 2025 and beyond. Consistent with the AGM trading update we gave for the 4 months to the end of April, we continue to expect 2024 revenue to be broadly in line with 2023. But we expect to show a modest increase in adjusted EBIT margins as we realize a bottom line benefit from our ongoing efficiency programs. Reflecting the GBP 50 million cost required to deliver the efficiency program that Adolfo and Xenia talked about earlier, we continue to expect GBP 70 million to GBP 90 million of free cash outflow this year. But of course, we do expect a very different picture once we get beyond 2024. Now those familiar with the 2023 results presentation, recognize this slide in which we outlined the nonrecurring cash outflows primarily from pension deficit contributions and cyber incident costs, which hit the 2023 group performance, and how these will reduce moving forward. The cessation of these cash flow drags is a key underpin to the confidence we have in delivering positive free cash flow from 2025 onwards. In addition, moving forward, the group's free cash flow will benefit from our ongoing cost reduction program. With around GBP 50 million of the GBP 160 million of efficiencies to be reinvested in driving growth through technology and ensuring we remain price competitive. By mid-2025, we expect to see a net annualized bottom line benefit of over GBP 100 million through cost savings alone. Before the impact of any other moving parts such as contract wins, the cessation of pension and cyber cash flow drives together with the net benefit of our cost savings program should see the group transitioning to positive free cash flow generation from 2025. Now everything you've heard so far today supports the confidence we have in the more ambitious medium-term targets outlined in the slide. Whilst we detune slightly the revenue growth targets, reflecting current market trends, both the margin and cash conversion targets represent a step up from our previous guidance. For the group as a whole, we're forecasting low to mid-single-digit revenue growth per annum, reflecting anticipated growth in both divisions. As Adolfo said earlier, we're focusing on areas where we see the greatest revenue growth and margin potential. But in the short term, we're looking to manage for value, certain low margin or low growth areas as we prioritize chosen market segments. As I mentioned earlier, this year, our revenue will remain broadly flat, but we would expect to see organic growth beginning to return from 2025 onwards. All the initiatives the team have talked about today will help improve our EBIT margin performance to a target of 6% to 8% over the medium term, with a particularly strong improvement expected in the Capita Experience business. As I just said, we expect the group to transition to free cash flow generation from 2025 onwards with a normalized operating cash conversion of around 65% to 75% over the next 2 to 3 years. As the group moves into being free cash flow generative, this, alongside the continued property portfolio rationalization should see the group continuing on its debt reduction journey. Our leverage target remains for the net financial debt-to-EBITDA ratio to be at or below 1x. This slide puts some more flesh on the bones on the drivers behind the improvement we expect in the 3 key financial measures. Firstly, we'll focus on being more efficient to improve the group's EBIT margin performance to our target of 6% to 8%, which would be more in line with our peers. We've already talked to the benefit of our cost reduction program, we'll have on the group's margin performance, but also a benefit from revenue mix and the focus on standard and repeatable deals. Our better use of technology, along with the simplification of the group's technology organization, we'll reduce our costs, while making us more competitive in the market. We also affect a margin benefit from the managing for value of our underperforming activities, which Adolfo outlined earlier. The margin improvement will self-evidently help improve the group's cash flow generation. From 2024 onwards, we expect less of a deferred income cash flow drag than that which you've seen historically with the annual noncash deferred income release being in the order of around GBP 50 million or so over the next 2 to 3 years. With the cessation of cash flow drags from cyber and pension deficit contributions from 2025 onwards and allowing for capital investment and property lease costs which we anticipate will run at around 40% of EBITDA over the next couple of years and the 20% of EBITDA impact we saw in 2023 from the interest and tax, we would indicate a pro forma initial free cash conversion percentage was somewhere between 5% and 15% of EBITDA. We would, of course, expect higher cash conversion rates over the longer term as we see the benefit of revenue growth and operating leverage. Finally, our focus will be on growing revenues once the business has been transformed from the wider initiatives we've outlined today. In the short term, the reduction in our exposure to less attractive markets in both divisions may dampen reported growth. But once we are through this process, and we've reinvested for growth. We expect to revert to low- to mid-single-digit percentage organic revenue growth. Finally, looking at the group's capital allocation priorities, and how this plays into our current funding position. First of all, on the left-hand side of the chart, we set out the hierarchy we've been working to and expect to continue to work to in respect of capital allocation. The prioritized order we apply in respect of capital allocation is, firstly, to make the operating capital investment needed to deliver our strategy. Secondly, to ensure we're optimally financed from a debt and leverage perspective in line with the medium-term target I talked about earlier. Thirdly, and importantly, recognizing our shareholders have not yet seen any improved returns and financial benefit from the strength in group will be looking to recommence dividend payments once we are sustainably generating positive free cash flow. And finally, and I recognize this may seem a distant prospect considering the journey the group has been on. They may come a point in the future when the group either organically or inorganically generate sufficient surplus funds to contemplate alternative investor returns above a traditional dividend stream. So moving to the right hand side of the slide, what does this hierarchy mean in practice given our current funding position? The chart on the top right shows the group's historical and forward-looking debt maturity profile. As we discussed at the year end results announcement back in March, we have no maturing debt in 2024 and the extension of the revolving credit facility to 2026 and GBP 100 million private placement issuance that both took place in the middle of 2023 have significantly extended our funding maturity profile. This is a much less daunting maturity profile looking forward at that which Capita was confronted with over the last 4 years. Whilst we made significant progress over the last few years scaling back our property footprint with lease liabilities, reducing by GBP 200 million since 2019, we still had lease liabilities of over GBP 360 million at the end of 2023. This underscores the importance of the ongoing work to continue to reduce our property footprint referenced to Xenia's slides earlier. Then turning to financial debt. Net financial debt was GBP 182 million at 31st December 2023, comprising net cash of GBP 68 million and GBP 250 million of gross debt made up of the private placement in the chart I've just talked about. We have around GBP 80 million worth of debt, which matures in the first half of 2025. During the second half of 2024, we need to decide whether to refinance this maturity to further debt issuance, whether we simply pay the debt down is around existing liquidity headroom, coupled with potential funds realized from the managing for value, which Adolfo talked about earlier. Given the relatively high interest rate environment, which means we are like to end up paying a similar rate on any new debt to the 9% we saw in respect to the 2023 issuance. It may well be that we decide to go for gross debt reduction rather than refinancing. I'd expect that we'll be in a position to provide an update on our thinking on this point at our half year results in early August. One final point, which Adolfo mentioned earlier, but it's worth me underlining is that to be clear, everything we've talked about today is based on a self-sufficiency principle. We currently see no reason why we would need to raise equity to fund our business improvement journey. So with that, I'll hand back to Adolfo.

Thank you. Thanks very much. Okay. It's a good overview of where we've been on a variety of financial metrics, and where we're aiming to go and I guess the rails with which we'll have to operate while team gets settled on the chairs for the Q&A, just quickly to say that we are not starting today. From January, this business has been super busy engaging in everything we've been doing today. I just wanted to share some of the key metrics of the things that we are doing is happening year-to-date across the different parts of the business, both internally and externally. And I wanted to sort of recap and obviously, we didn't know that the Labour Party was going to launch the slogan called "Better Britain" this morning. I swear to you, we had this Better Capita in place for many weeks now, but it's just sort of one of these things that happened. But yes, there are 4 vectors to make that Better Capita that I talked about at the beginning around efficiencies, technology, delivery and bidding a better company. And ultimately, what's going to be a better return -- financial return, first of all, over the medium term to come and leave those years of financial underperformance behind and start working on the sort of the key takeaways. Remember, the 6 key takeaways, the strong foundations that the business is built on the solid opportunity for margin expansion. The self-sufficiency and so funding that Tim just alluded to, the reset of the relationship with the hyperscalers, the arrival and the opportunities that the new technology brings. And then very, very consistently focusing on the right segments of the market, not chase revenue growth for the sake of chasing revenue growth, being a lot more selective on where we want to play. And as a result of all of these put together, we will deliver on that improved expectation. So while I'll get myself over there, Helen and Steph will start taking questions from the audience, put your hand up, introduce yourself, please. And then we'll be getting those that come from online.

Good afternoon. It's David Brockton from Deutsche Numis. Can I ask 2 questions, please? The first one in relation to experience, you've clearly set out the opportunity in contact centers where margins are very low. Can you just touch on whether that underperformance is consistent across the regions of that division. And as you implement more offshore and more technology, presumably into existing contracts, how quickly can you do that? That's the first question. Maybe I'll stop there. I'll do the one after.

Yes. So in terms of the consistency of underperformance, there are a couple of countries where we do quite well in experience. Sadly, the larger country we operate in, the U.K. is not one of them, which is why mathematically, you end up with that low margin. And similarly, one of the countries we're operating in Europe is challenged as well. So it's a mixed bag. Clearly, we have a set of initiatives that launched a while back that Corinne is continue to drive through that in particular will benefit the U.K. operation and the efficiency we get from those will help us on that journey to get to the margin that we've set out as a target. You will notice that in the medium term, that is still shy of where our competitors are. But I think this is a position where we just need to turn it around from where it is at the moment. And we have a very clear line of sight to how we'll get there.

And then the second question, I guess also relates to greater technology, machine learning and AI across the business. Can you just explain the dynamic as to -- as that occurs, is there a, I guess, a risk, if you like, the size of the contracts that the business progresses are smaller and that could act to reduce the revenue growth of the business as those contracts rebid. And can you maybe touch on as you implement more standardization, how does that impact the stickiness of the customer base when it comes to renewal, does it increase it? Or does it reduce it?

So I think there's a lot packed into that question. So I'll just try to give you the most concise possible answer there. So repeatability only helps, right? Because repeatability means that we've been intentional about where we're building something. Why are we building it? How are we building it, which we take the technology, what architecture we are going to deploy, what -- how are we going to create our value veneer around it. We're going to test it, we can approve it and then we're going to take it to market. So by definition, you'll be able to sell more, faster, you're able to train your sales force much better. You'll be able to build better marketing, better collateral, better engagement, better demo points because you've been intentional about growth. And then you can also be more intentional about the delivery. So that will only benefit us. I think what these technologies at the core of this, don't forget, very people-centric and expert delivery that we do. All they do is just augment it and accelerate it and just make it more profitable. So I don't see at all that shrinking. If anything, that's a margin expansion opportunity for us.

Chris Bamberry, Peel Hunt. I've got 3 questions. I'll do the one at a time, if that's okay. You mentioned repeatability. Just trying to get an idea of the scale of that transformation there, where you are today and where you hope to get over the medium term. I don't know what percentage of your revenues now or some metric are currently on kind of repeatable scalable products, and where you'd hope took to get to?

So yes, we -- I can't give you that breakdown because we haven't looked at -- through that lens that you might have just found the only lens that we haven't looked at through as probably also to demonstrate earlier. But if you look at what we've got on the star position, a lot of that could be -- could have been -- could be or might be in the future, repeatable, right? So if you look at one that wasn't repeatable, but it could have been repeatable is the great work we're doing for transport for London in managing the congestion charge. Arguably, one of the largest, most complex projects in the world, been in place for a long, long time, somewhat it baffles me why we sort of stop there, right? I think the -- we're not going to rewrite history. But the potential is there. Once you build the capability on the concept that you need technology, you need camera, you need a number of recognition, you need a call center, you need a number of online charging. Once you build that architecture and you deploy this successfully, you should be able to take that going forward. Some of the programs that Richard was talking about on complex mission-critical training programs, for example, or large recruitment programs at scale, those are very repeatable, right? Some of the solutions already in play and being deployed, like accelerate is fully repeatable. Now with the CapitaContact on AWS solution. Just to give you an example, we have a fully repeatable experience that we can deploy across contact center. And again, remember, contact center is nearly GBP 800 million business in Corinne's world, but it also plays a significant role in Richard's world. And this is just the beginning. So I think as we identify where the big opportunities are, and we come quickly, we haven't spent 3 years developing this CapitaContact, right? This has been done in what I call cloud speed, right, building sprints. I like to believe that over the next 12 months, you're going to see a lot more of this, and they're going to be more pertinent to the most attractive segments that we have identified through our market analysis.

You obviously laid out a number of factors in getting to your 6% to 8% medium margin target. What are the kind of key factors are almost in getting, say, to the top end of the range as to the bottom, what's going to kind of determine where you land within that range?

The cost saving clearly gets you in the range. You can do the math on that. It's self-evident you get there. To be clear, not the whole GBP 160 million drops to the bottom line. As I said, there's GBP 50 million of reinvestment there, but you do get over GBP 100 million of bottom line benefit from the cost efficiency program. What gets you to the top end of the range? It's candidly, everything else we've talked about. Use of technology is continuing on that improvement journey, both internally and externally. It's also growing in the market. Where is the GBP 50 million going to go? Well, we talked about improving our competitiveness through use of that GBP 50 million, technology investment changing the propositions we bring to market getting more standardization, also price. Price should lead to greater growth. So there's a whole point here about the extent to which you grow faster on a fixed cost base should drive up the margins over the longer term. So you've got a range of things that are to move from the bottom end to the top end of the range, what gets you in the range is the stuff we are implementing now in terms of efficiencies.

And finally, you've been managed for value, potentially like you plan to do some exits, are those taken into account in your targets?

They are not taking account of in our targets. So the targets we've outlined in the same way as we've traditionally done it, is for Capita as it's currently constituted. To be clear, we deliberately used the phrase managed for value. And as Adolfo said, that includes a range of different alternatives in terms of how we will maximize the value of those non-core activities. Only one of those options is Access. So just to be clear, we're not saying that, that entire management value portfolio is going to be a set of activities that we're instantaneously going to try and exit. This is not portfolio too. But those are clear areas where we do not intend to put a lot of effort and a huge amount of drive into growing or seeking to transform. We know we can manage them for value and that is what we will do.

It's James Rose from Barclays. I've got 2, please. The first is your top line revenue targets, I think, are now more or less in line with the end market definitions you've -- and growth targets you've given there. Should we, therefore, interpret this, all the work streams you're doing are to bring Capita to in line with current market standards.

Put bluntly, yes. I mean if you look at what Capita has done for the last couple of years, we flatlined in revenue terms and the market has continued to grow. Part of the reason for our financial underperformance is we are not growing in line with the market. It will be a good performance if we do get to that point of growing in line with the market.

And to sort of follow on that a little bit as well. I mean on the McKinsey survey, there's 7% of that particular survey is still learning and haven't yet leveraged GenAI, which means that 93% already are. To what extent have you been left behind in that regard?

From my discussions with many, many, many, many of our customers, both across the private sector and government, most of them are just getting started, literally just getting started, just being educated, doing some trials. If you look at some of our markets, you could argue that some of them, I'm not the fastest movers in terms of technology adoption. They're not laggards necessarily, but they're not very early adopters, but they are seen internationally that some of their peers are starting to play in this time to look. I'm just trying to understand what the implications are. I have to do quite a lot of explanation in every one of our meetings. And I hear consistently, well, it would be great if we could participate of those benefits by working with someone who we trust, like yourself, so you can bring that into the current service and into the current offering. So at all, this is just getting started. This is why we are accelerating.

And the final one was on potential attrition risk over the next few years. Could you give us an idea of sort of major rebids you actually have over the next few years? And in particular, which parts of Capita do they appear within? Is it rebids where you actually have a star position, to use your own terminology? Or are they in areas which are under transformation, under management.

So we had a period where we have to renew a lot of the telecom contracts, and Corinne alluded to that. I think she just gave a number of examples and that sort of recently -- recent. We are obviously in the midst of tendering a number of contracts in government. And they, at the moment, happen to be in our star position. And there is some more work that is happening at the moment in terms of transforming some of the contracts that are particularly in local government. I don't know, Richard, do you want to sort of maybe add something there -- of the work we're doing there in the local government position to move.

Yes. So we're local government is, as you're aware, going through some degree of transition, some of the big unitary authorities are financially distressed. We're moving with our government clients some of which are trying to in-house their core activities and very keen though to give us their non-core activities. So what we're seeing actually is our revenues are staying flat, but our profitability is going up as they move their core activities back in-house that give us their non-core activities. And to go to central government, we've got 3 renewals, but 2 of which are -- look as if they're going to be extended for up to 3 years. So that's in army recruiting in the data communications company, the smart DCC, which supports the smart energy meters across the U.K. awaiting for Ofgem to confirm that. And the third one is the gas safe register that will be rebid later this year. So 2 of the 3 are going to extend, which isn't unusual in the current government environment.

Any other, if you [indiscernible].

I have one question online. It's basically trying to understand why in what way this transformation different to the one that was done by your predecessor?

Yes, it's an excellent question. I think if you look at what John had to deal with. It was a very different situation than the one we have today. At the time, I think the debt levels were like 90 times higher than they are today. The situation of the pensions was very different than it is today. 11 divisions, I think, arguably each of them doing their own thing. And coming in here. And if I could claim to use language properly. I would say what John was doing was really restructuring, right? It's restructuring and buying us a stable platform that could survive and we could operate. And what we're doing now is to take in that platform, that simplified platform and fully transforming it, not looking backwards, but now looking for the next decade. And I think that's the single biggest difference as I see it. Obviously, technology plays a much bigger role now for certain, maybe some material backgrounds there, but it's also -- the times have moved, right? So technology plays a more prominent role in society today and the advancements are there today are more reality we can do things in a different way than we could do a few years ago with everything was a stand-alone software, we just catch up and then by the time you catch up, you need to catch up again because you're falling behind. So I think all of these advancements of the cloud and micro services allows us to go after the opportunities in a different way, less CapEx driven, it's more sort of pay as you use. So I think it's just different market dynamics, but as a whole, it's just restructuring versus digital transformation.

I have no further questions online or they've already been answered.

Okay. I'll take this. Hopefully, the presentation was not only was long, but also it was extensive in terms of sharing knowledge and been transparent and addressing some of the big questions and the big themes head on. Obviously, we are here, we're going to be around here. And if you've got some time, we'll be delighted to catch up with you separately. Thank you for hanging in there. I know it's been a sort of hefty block of information, a lot to consume, and thanks for all the support over the years and most importantly, going forward, as we deliver that increased value. Thanks very much.