Capita plans to cut costs by £250 million using AI as employees leave
Capita has stepped up cost-cutting targets after finding early success in embracing artificial intelligence, as human workers voluntarily leave the company.
The outsourcing group, which manages the BBC’s license fee, told shareholders on Tuesday that it aims to save £250 million in costs by the end of next year, well above its previous target of £160 million.
It follows a change in strategy announced in June, which will see Capita reduce costs and refocus its energies on core segments to strengthen financial performance and cash generation.
Capita said the “increasing use of AI and generative AI” was “at the heart of this transformation”, and that its early successes “have increased our confidence in the level of efficiencies that can be achieved”.
Boss Adolfo Hernandez, who joined in January, added that he was “encouraged by customer response” to Capita’s suite of AI solutions, which will “help drive profitable revenue momentum from 2025 onwards”.
The group, which employs 40,000 workers worldwide, also highlighted a voluntary turnover rate – or the percentage of employees who resign – of “around 21 percent”.
Capita is “getting smaller to become stronger and fitter and then grow,” says boss Adolfo Hernandez
Capita said this level of voluntary staff turnover ‘contributes to these savings’ and ‘reduces the need for redundancies’.
It will also help the group ensure it can ‘balance new hires’ and deliver ‘incremental training of our colleagues and investment in key growth areas’.
Capita said: ‘By combining people, processes and technology to develop repeatable, scalable products, we can increase efficiency for our customers and make us more competitive.
“The gradual adoption of AI in the delivery of our customer solutions will enable us to continue to focus on efficiency improvements on a ‘business as usual’ basis going forward.”
Capital shares fell 8.4 percent to 15.98 percent in early trading, after losing about 30 percent over the past year. They are down more than 90 percent from January 2020 levels.
Adam Vettese, market analyst at eToro, said: ‘Given the extent of the share price decline in recent years, investors may be somewhat skeptical that AI will be a magic wand to solve all problems and this morning’s share price reaction seems to point out this is the case.
“It is far from an overnight solution at Capita and there appears to be a long way to go.”
Capita also maintained annual performance targets on Tuesday, with revenues down year-on-year following the sale of some assets, but management is ‘increasingly confident’ of achieving its medium-term operating margin target of 6 to 8 per cent .
Hernandez added: “As we approach the end of my first year as CEO of Capita, I am very encouraged by the progress we have made on our strategic priorities, despite the impact of the previous year’s headwinds being greater than originally expected.
‘Our focus is on becoming a better business, ‘getting smaller to get stronger and fitter and then growing’ and being more selective in not pursuing and terminating existing contracts with lower margins.’
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