Good morning, and a warm welcome to everyone, and thank you for your interest in Capita and our 2020 half year results presentation. Of course, before we begin today's formal material, I draw your attention to the legal text on slide two. I'd like to start today by paying tribute to our extraordinary colleagues and the dedication they have shown throughout the COVID-19 crisis. Our people have consistently gone above and beyond for our clients, their customers, citizens, and each other, often in the face of risk and operational challenge. 95% of our colleagues have continued to deliver for our stakeholders through the pandemic, some as key workers in the field, some in the office, while thousands of others have been balancing the demands of family life while working from home.
The professionalism and unwavering commitment of our colleagues has allowed us to navigate through these exceptionally challenging times and made me very proud to be the CEO leading this business. I want to publicly thank colleagues for their support and commitment. This has been a very challenging six months for Capita, our colleagues, and for many other companies. Throughout the first half, we have continued to make progress with the transformation, focusing on improving client services, retaining existing contracts, and reducing costs through restructuring and efficiency programs. In the extraordinary circumstances created by COVID-19, we have taken decisive action to ensure the well-being of colleagues, sustain service delivery to our clients, and protect the business. We've had very positive feedback from our clients in the private and public sectors, and at this point, I would like to extend a thank you to them.
Our clients have been collaborative and supportive, and we have in turn demonstrated agility and responsiveness as a strategic partner. This has deepened relationships, and clients are now acknowledging a different Capita, and one that has outperformed a number of our competitors with respect to service continuity through the pandemic. However, COVID-19 has hit during a pivotal year for Capita, and our short-term focus has rightly shifted from targeting revenue growth and sustainable free cash flow to managing our way through the economic challenges that it has created. Moving on to the financials, and Patrick, of course, will go into these in more detail. Both revenue and profit have reduced, partly as expected and partly due to COVID. We have acted to manage our costs and cash, which means that free cash flow has increased, liquidity is strong, and net debt is down.
We were compliant with our lending covenants on the 30th of June. We came into 2020 with plans well advanced to dispose of the specialist services portfolio and refinance some of our debt. COVID, of course, has delayed both. Several of the specialist services businesses have been significantly impacted by the crisis, so this disposal process is now on hold. On the back of the portfolio analysis we did in 2019, we quickly recalibrated our disposals program and brought forward the disposal of Eclipse and our Education Software Solutions as communicated on June the 19th. As we accelerate the simplification and strengthening of Capita, you can expect us to announce further non-core disposals in the coming months, and proceeds from these will be used as a priority to ensure we have sustainable levels of debt and that we meet our pensions liabilities.
For the remainder of the year, we expect COVID-19 to continue to impact revenue negatively, particularly our transactional and volume-related work. We anticipate revenues in the second half to be broadly flat with those in the first. We're continuing to take cost and cash action, which when combined with the holiday accrual reversal, will benefit the second half. Based on our current planning assumptions, we expect to meet our covenants at the full year. This is a familiar slide to many of you and serves as a quick reminder of our strategy, which is underpinned by three imperatives: to simplify, to strengthen, and to succeed. Without the work we have done over the past two years across all three, we do not believe we could have delivered as effective an operational response to COVID-19 as we have.
We have a management team who are now established in their positions and are taking clear, decisive action on operations, growth, and cost. They're also being supported in those actions by stronger functional leadership and superior insights generated by our investment in platforms like Salesforce and Workday. Our commitment and investment in contract delivery has been rewarded by both renewals, increases in scope, and new work. GBP 400 million of the revenues we booked in the H1 came in the form of growth opportunities from existing clients. We are still behind our 2018 schedule, and the impact of COVID-19 means that we now have to prioritize a stronger balance sheet while sustainable cash flow generation is still one to two years away. Let me now pass you on to Patrick to go through the numbers.
Thank you, Jon. May I add my welcome to that offered by Jon. These are unusual and uncertain times, and they provide a very particular backdrop for our half year results. As Jon said, 2020 was always going to be a key proving year for Capita. In March, we explained that the transformation was going to take longer and cost more than had been expected at the outset. Since 2018, we had invested heavily in our growth capability and were ready for the year ahead. We were expecting revenue growth for the first time in several years. In March, we knew that our balance sheet was in need of attention, and our plans for asset disposals and a public market bond issue were well advanced.
COVID-19 struck. As soon as it was clear that the virus was likely to come to the U.K., bringing unprecedented and unpredictable economic effects, we took action and started planning further steps that might be necessary as the crisis developed. We have described this process in previous market updates. It is important to remember that going through these results, the sheer scale of change that we were forced to make to maximize the chances of successfully navigating the crisis. At this point, I would like to remind you that from now on, we will be presenting our results on a post IFRS 16 basis. The key impacts of this change, which we have explained previously, are higher debt and slightly lower PBT. As usual, this first slide summarizes the key financial metrics for the group.
Revenue is down 5% due to known and expected contract losses and 4% due to COVID. As a result, profit is also lower, the reduction being exacerbated by lower margins on some contract renewals and partly offset by cost savings, including those actions taken specifically in response to COVID-19. From March onwards, we have had a near obsessive focus on cash conservation, working hard to stay close to our clients so that we could accurately forecast receipts, producing daily cash collection reports, but planning for the risk of customers paying later or not paying at all. In fact, customers have in the main been very supportive, and as a result, net debt is lower by GBP 257 million, and our available liquidity has been increased to GBP 704 million at the 30th of June.
However, we have maintained our commitment to paying suppliers on time, and in the first half, our payment performance averaged 95% within 60 -days. I've separated out the pre-COVID revenue effects to remind you that our plans to drive revenue this year were both ambitious and fundamental to our planned success. This was the half year in which the full effects of the local government contract handbacks were felt. These and other losses, such as BAE Systems and the Defence Infrastructure Organisation, were only partially offset by new wins. The majority of revenue growth was previously expected in the second half. Capita has a resilient base of long-term private and public sector contracts, providing software and services on which our clients and their customers rely.
The main impact of COVID-19 has been on our transactional businesses, such as travel and events, resourcing, and face-to-face training, as well as those framework contracts that are volume-based, such as the payment services software we use to collect the congestion charge. We have, however, seen some good wins as we have responded to support government efforts to deal with this crisis, including NHS call center work and support for the DWP. Turning to cost savings, we use a structured and disciplined approach to identifying and executing on cost reduction. The approach works using horizontal work streams such as property or automation, while driving delivery accountability through the divisions. On a recurring cumulative basis from 2018 to the end of 2020, our cost base is expected to be some GBP 317 million lower than it otherwise would have been.
At the onset of COVID-19, we set a target of GBP 100 million of savings through incremental actions. We are on track to achieve this, although it is too early to tell exactly how much of these will recur into 2021. This slide highlights the volatility in the profit and loss account, some of which is technical in nature. I will take my time to walk you through it. It is another reminder of why we are continuing to improve our disclosure on cash from trading operations as another measure that helps follow the underlying performance of the business. We are providing more analysis on divisional movements. Contract wins increased profit by GBP 18.8 million in the first half, including GBP 6 million of start-up loss on the DFRP contract, which was signaled in advance.
One of the features of our rigorous recording of growth cost reductions is that it highlights the need for continued focus on indirect semi-fixed and fixed costs. There will always be an inherent delay in reducing these costs in response to a revenue reduction. As managers, rightly, we want to avoid removing capability that might be required if and when revenue bounces back. This has been starkly highlighted in Q2, when in some sectors such as travel, we saw the fastest ever peacetime contraction in activity. Put simply, people just stopped traveling. For example, in Capita, we spent GBP 4 million on travel in January and only GBP 200 thousand in June, a 95% reduction. Of course, while this is a loss of income in our travel and events business, on the other side of the equation, this is reflected as a cost saving.
We have separated the cost savings to show the impact of those that were planned in response to known revenue losses and those that were implemented as part of our COVID-19 response. Other costs are made up of inflation, which includes a commitment to the real living wage, depreciation, and the run costs of new systems. The net impact of all of these changes would have seen profits of around GBP 70 million, which, given an expected second half weighting to revenue and cost savings, would have been broadly in line with our expectations. The big unexpected item is the non-cash holiday pay accrual, which has several compounding facets. In the past, we have not been able to accurately assess the level of holiday pay across the company. The recent investment, as Jon mentioned, in the new HR system Workday, gives us total visibility across the group.
In the first half of the year, the number of days of holiday taken has been reduced as a result of the lockdown. This will change in the second half. Finally, as part of our COVID response, we have offered senior management additional holiday entitlement in return for salary reductions. The accrual itself will not repeat in H2 and will reverse by around GBP 10 million-GBP 15 million, depending on the actual amount of leave taken. This slide provides a breakdown between the divisional operating profits of GBP 122.7 million, which is GBP 75 million lower year -on -year, and the group support services, which have increased by GBP 30 million, together making up the PBT decline of GBP 88 million. As is our practice, we have excluded certain items from our adjusted results. These items are lower than last year because of the gain on the sale of Eclipse and lower restructuring costs.
I will discuss the divisional performance in a moment, but have provided further analysis on the makeup of the group support services costs in the table on the right. We have taken action to reduce the negative impact of all three of these categories in the second half by around GBP 25 million. This table shows the composition of numbers by division. As a reminder, in anticipation of the disposal program, certain business units were moved out of and into specialist services. Some details of these changes were included in our pre-close trading update, and more details are available on our website. I have, for the first time, included specific slides on each division. This is part of the program to provide more granularity and transparency in our results. In future, more of the discussion will be focused at the divisional level. For today.
I'm going to skip through these at pace, but would be happy to take questions at the end. Software is the only division to show revenue growth. However, the sharp reduction in payment services revenue in Q2 has had a significant impact on margins. Despite this, the software division contributes GBP 77 million of free cash flow, only GBP 5 million down on H1 2019. People solutions. Some contract losses and COVID-19 impacts on transactional revenue have hit revenue and margins. The speed with which transactional revenue fell off in Q2 meant that the management team were unable to respond quickly enough, resulting in a 30% fall in margins. Plans are in place to tackle this in the second half. In customer management, revenue has held up well despite volume declines in existing contracts, with new work from current clients and some public sector contracts arising from the pandemic.
The contractual asset impairment of GBP 6 million and inflationary pressures such as the introduction of the real living wage reduced profits by GBP 12 million. Cash conversion, however, was improved by timing differences on accrued income, some of which will reverse in the second half. The long-signposted reduction in local government contracts came through this half. There were also COVID impacts in transactional businesses such as Entrust, which among other services, arranges outward bound activities, which as you can imagine, did not take place this year. The margin impact of these were offset by cost reductions, with only the GBP 6 million first half year one loss of DFRP falling to the bottom line. Cash from operations improved by GBP 24 million, benefiting from favorable working capital movement on local government, DFRP and SDA.
The Technology Solutions division has been hardest hit by margin erosion as some high margin legacy contracts roll off and higher depreciation from investments on other contracts flows through. There has been some offset from higher activity levels through COVID as clients have reorganized their operating models. However, improved contractor working capital and lower CapEx have mitigated the impact on free cash flow. The Specialist Services division is much reduced with, for example, the life and pensions business and Axelos having been moved out, and it has suffered from a significant COVID impact. Again, the speed and scale of revenue shrinkage have meant that management has not been able to respond quickly enough, but each business is being reviewed and will be structured to be fit for the future. I've combined all the cash flow information onto a single slide.
I covered the contractor working capital and capital expenditure movements in the divisional slides. Adjusted free cash flow has improved, as Jon mentioned, with the figure including GBP 77 million of accelerated customer receipts. We have taken action across almost every line of the cash flow, and I'll summarize some of these on the next page together with the COVID-19 cost actions referred to earlier, so you can see on a single slide the impact of the actions we have taken. During a period when we saw a dramatic economic contraction, we focused on conserving as much cash as possible to protect against unknown risks. This took the form of cost reductions and cash management activities. This slide shows that the cost actions have delivered GBP 57 million of P&L benefits, with more to come in H2, and those that are not P&L focused generated GBP 304 million of cash in H1.
It also explains our current expectations on which will reverse and when. For the first time, we are presenting net debt, including the impact of IFRS 16. The table on the right shows how this builds up and confirms that the bulk of the reduction was in financial debt rather than lease debt. On a like for like pre-IFRS basis, headline net debt to EBITDA was inside our target range of 1-2 times at 1.9 times. The board has not formally reviewed the target range, but taking account of IFRS 16, the range would increase arithmetically to around 1.7-2.7 times, and we were at 2.7 times. We will keep our leverage target under review as the economic circumstances develop, and our balance sheet strengthens following the asset disposal. We were compliant with all debt covenants at the 30th of June.
As described earlier, we have been very focused on conserving cash and maximizing liquidity. This has resulted in improved liquidity as we enter the second half. We have since added a further GBP 56 million through an additional backstop facility as the GBP 150 million original facility naturally reduced on the sale of Eclipse. These two facilities fall away pound for pound on the execution of disposals or a successful refinancing of our near-term maturities. Liquidity will fall in H2 as some of the H1 actions unwind. However, we are actively developing further short-term mitigations in case they should be required. A look to the future. As Jon will cover in his next section, there are many reasons to be positive about the future. However, the economic landscape remains uncertain, with the potential return of lockdown restrictions as a result of a second wave. We are not, therefore, providing detailed guidance.
However, based on the modeling we have done, before the impact of ESS or any further disposals, we expect revenue to be flat to slightly down in H2 on H1 and 9%-10% down for the full year. Further cost savings and the non-recurrent and partial reversal of the holiday pay accrual will be tailwinds to H2 profit. The unwind of some H1 cash management actions will return net debt towards 2019 levels, pending the impact of any further mitigations. Now I will hand you back to Jon.
Patrick. In this next section of the presentation, I will provide more details on our response to COVID-19 as well as our overall transformation. As we already stated, COVID has been a huge challenge, and we took action very early, setting up a pandemic planning team. We did this in February to coordinate our response to the crisis. Our focus was as following. The welfare of colleagues, which remains paramount. Sustaining service delivery to our clients, enabling them to continue to trade while protecting our revenue. Managing costs and husbanding cash, given the unprecedented uncertainty. Using a programmatic approach, the programmatic approach outlined on this slide, we've been able to keep colleagues safe and establish operational stability while minimizing the revenue impact. As I've already stated, 95% of our colleagues have remained engaged in serving our clients through the crisis, which is why COVID impacted revenues by just 4%.
We very quickly adapted our delivery models. Today 50,000 of our colleagues are now working remotely. Nearly 60% of our office facilities remain closed, while there is strict evaluation and enforcement of safety measures in offices that remain open. We have communicated to colleagues who remain able to work from home that we will not reopen their office facilities until the new year. COVID-19 has taught us a great deal about how we can evolve to a hybrid working operating model. Through our new normal work stream, we are actively leveraging these learnings to reimagine our future property footprint and technology solutions. As a services company, we're only as good as our ability to deliver or exceed our contractual commitments.
In this example from our customer management business, you can see that over the course of a couple of weeks, we not only moved a large number of existing colleagues to working remotely, but recruited an additional 3,000 people who also work remotely to deliver on new government contracts. We have recently served our one millionth customer on a government contract that only started three months ago. Customer satisfaction has actually increased over the period, as has productivity. Facts that have not gone unnoticed by our clients, both public and private. To combat the impact on revenue, we also took swift and decisive action to protect profit and preserve cash, as Patrick has outlined. At the end of March, we set out a GBP 100 million saving program over and above our ongoing cost transformation savings. We are on track to deliver with GBP 57 million secured in the first half.
We have reduced discretionary spend to the bare minimum, in particular around travel, marketing, and professional service fees. We have taken difficult decisions to make significant savings in people costs, such as furlough for some of our colleagues, salary cuts, the withdrawal of this year's bonus scheme, and a shift from using external contractors to using reallocated internal resources. We have made property savings to date of around GBP 4 million from temporarily shutting 168 of our 294 office properties. We have recently started to target another round of cost savings in group and functional cost centers. We are now working on making these savings sustainable as we look at addressing new behaviors and new ways of working. For example, we have already decided to permanently close 25 of our properties around the country, specifically reducing our Central London footprint and leveraging our regional centers.
This alone will deliver property savings by 2022 of around GBP 20 million. The transformation of Capita, as we stated in March, is taking longer and costing more than we originally thought, but we are making progress. We have reestablished a reputation for operational delivery, earning the right to target revenue growth with a resultant profit and cash margin uplift. We've made good progress on fixing our more challenging contracts. At the most senior levels, our public sector stakeholders have been particularly complimentary about the speed with which we have done this and met contractual obligations. You will be familiar with the three large underperforming contracts that we have highlighted before, and profit and cash on these is now significantly improved. The next step is to execute what I call grinding up the margins, and there are three elements to this.
First, leaning out the operating model on our existing contract portfolio to drive productivity and efficiency. Second, we are taking a more rigorous approach to contract extension and renewal, ensuring improved commercial terms and when in the public sector, adherence to the Outsourcing Playbook. Third, we're ensuring that the scope, margin, and risk profile of new contracts aligns with our strategic ambition and that they meet our targeted economic hurdles. Let me touch on each of these in a bit more detail. We were never going to be able to grow this business unless we addressed existing contract delivery and associated reputational issues. Our priority, therefore, was to ensure delivery against our existing contractual commitments. This has clearly taken more time and cost more money than we originally foresaw.
However, we have now achieved this objective, and I would again like to thank our colleagues for the huge contribution they have made to making this happen. Cost of poor quality, a key metric, is materially improved, and our KPI performance across the business is the highest it has been through the transformation. One of the reasons why we have a high renewal rate and why we have been able to grow our revenues with existing clients. As one senior civil servant stated recently, Capita is now seen as a very committed and dependable strategic supplier that delivers against its contractual obligations. Cash burn associated with legacy contracts has reduced significantly, and we have reduced the number of cash negative contracts amongst our largest 30 by over a half in the last three years.
We have more work to do, but we have de-risked a major part of the legacy contract portfolio. Our focus on and investment in program management has meant that our execution on new scopes of work has not been plagued by the execution and cost overrun issues of the past. The Ministry of Defence, for example, is delighted with our execution on the Defence Fire and Rescue project, where even COVID-related issues have failed to delay the program, and importantly, we are delivering on the bid contract margins. In summary, our operational muscle, fundamental to our business model, is far more evolved than it was two years ago. This investment on our part is starting to pay dividends on revenue generation. We spoke in March about our focus on account management and execution of Transport for London.
This clearly helped in their recent decision to award us the GBP 355 million congestion charge annual extension. Patrick mentioned the cumulative cash savings generated by our ongoing transformation program give us the opportunity to raise margin and cash generation through the leaning out of our operating model. We're organizing the business more effectively, consolidating and eliminating layers of overhead, and increasing the use of shared service centers. For example, we continue to consolidate our software development capabilities into a single function, our digital development center, with common state-of-the-art development tools and processes. We're also progressing the consolidation of internal IT support into a single shared service function with significant cost benefit. We're also using technology to drive efficiencies, and examples would be the use of robotic process automation internally on invoice processing, financial reporting, and the issuance of contracts of employment.
Of course, externally on things like pensions administration for our PCSE contract with NHS England. On the back of our work to better define our market offerings, what we call our client value propositions, we're also building a growing pipeline of opportunities that reflect our strategic intent to deliver consulting, transformation, and digitally enabled services. This has resulted in us winning more of the right sort of work as evidenced on this slide, work that reflects our strategic and margin objectives. These contracts have an increasingly strong digital content, typically leveraging our investment in proprietary digital platforms such as our Omiga Digital platform in the mortgage origination space, or third-party solutions such as Microsoft's Azure platform in the work we're doing for TfL to migrate their solutions to the cloud.
Our customer experience contracts are increasingly benefiting from our leverage of the Amazon Connect and AWS platforms, technology that was key to the execution of COVID-related contracts for government. We're also leveraging our consulting expertise to pre-position for higher value scopes of work. This has been an extremely difficult time to build a consulting business, but I'm pleased with the growth this business is demonstrating this year. Consulting is also starting to deliver on its goal of engaging Capita at much more senior levels within our client base, as evidenced by the strategic nature of engagements we have won in both the private and public sectors. In summary, we have won some sizable contracts this year, but just as importantly, they speak to strategic direction, margin objectives, and we believe they will be significantly lower risk over their term due to the improved governance we have put in place.
Now before we talk about the performance of the software division, I should remind you of our strategic plans for our software portfolio. As announced in June, we're now aligning software solutions and future development activities to our transformation and digitally enabled services strategic objectives. We continue to work to prepare our standalone commercial off-the-shelf software businesses for disposal. The Eclipse Legal Systems business has now been sold, and the process to dispose of our Education Software Solutions business was launched at the end of July. It remains on track. ESS is an excellent business, and we are encouraged by the interest it is receiving. We will announce further software disposals over the coming months as we accelerate the simplification of the portfolio. I want to emphasize, however, that software platforms and digital components that support our digitally enabled services remain deeply strategic and core.
We have over 80 different software tools, services, and platforms distributed across our divisions. Examples include Capita One for government customers, the Hartlink Pensions platform in People Solutions, our revenue and benefits platform in government services, and our regulated mortgage software in customer management. We continue to invest in such platforms. Our new digital grants distribution solution is a great example of how we can combine our digital capabilities with our deep understanding of the benefits and grants distribution market to deliver a more efficient and flexible solution. We developed the solution on the Salesforce platform in just six months, and we have just signed our first high-profile anchor client. This solution also highlights how we can use our domain expertise gained from years of outsourcing activity to build differentiated solutions on third-party platforms. In the first half, the software division has delivered a strong response to COVID-19.
97% of our SLAs are being delivered and in excess of 97% of our software colleagues in the U.K., Ireland, and India are working from home with no drop in productivity. The division showed modest revenue growth year-over-year. Order intake has grown in the last six months. We have got better at going to market with products that have been invested in over the past two to three years. Key contract wins were our healthcare services solution with NHS Wales and our Capita One Cloud solution in local government. Our recent win for our identity checking solution, Optimize Verify, part of our Pay360 family, to a major insurance company is also encouraging for the second half. The People Solutions division had lagged the other divisions in this transformation but is now making encouraging progress.
Investment in fixing contracts has resulted in superior client KPI performance, reduced service credit costs, and significantly improved client relationships, which in turn have resulted in a much higher contract renewal rate in the first half than in the first two years of this transformation. I expect the pensions administration business, where we are the U.K. market leader, to be a good example of where we can grind margins up. We've earned the right to negotiate this with clients. We have invested more than GBP 10 million over the last two years to address service delivery issues in this business, and KPIs have improved significantly. We've been able to renegotiate commercials and extend scopes with a number of key clients. We've also identified scope to improve our growth and margin prospects as new business unit leaders get their feet under the table.
This is particularly true of our learning business. We have identified market opportunities from COVID-19 in pensions consulting, agile resourcing, and digital ways of learning. We were also pleased to secure major wins from the Teachers' Pension Scheme and civil service apprenticeships, these being offset by losses in HR solutions and resources. Our customer management division responded exceptionally well to the multi-country COVID-19 challenge, quickly moving 70% of colleagues to working from home, 98% of colleagues in the case of our operations in India. We were pleased to secure contracts to deliver COVID-19 work for the U.K. and Irish governments for NHS and DWP in particular, where our investment in digital platforms and the resultant services performance, we were able to deliver marked us out. This, again, has positively impacted client perceptions and opened up additional long-term opportunities.
We've been able to maintain high levels of service delivery, which is helped by low attrition rates, and our commitment to pay not less than the real living wage from April 1st this year. High volumes in areas like financial services and utilities are helping us to drive the shift to digitalization, encouraging our clients to embrace the deflection of voice calls to chatbots, apps, and websites for quicker and cheaper resolution of customer need. We secured significant wins with Irish Water, a new client for us, and for a U.K. retail bank, as well as a two year framework extension from a major European telecoms client. At the beginning of the year, government services restructured to focus on six primary segments, examples being defense, education, and transportation, where we can leverage our existing expertise and experience.
This resultant client-centric model has allowed the division to become an extremely effective interface with government, including winning and accessing work for other Capita divisions. The division responded very effectively to COVID, helping government to maintain critical national services. To date this year, we have been awarded GBP 80 million in total contract value for government-related COVID work. In addition to expected revenue reductions as a result of local government handbacks in 2019, COVID constraints did result in a temporary drop-off of some transactional volumes in education, our Entrust business, for example, and science and welfare, our Fera business. This has, however, been substantially mitigated by wins of new work. Despite the COVID constraints, we've also made strong progress with project execution. Highlights include the on-time delivery of technology and services on Defence Fire and Rescue, and continued successful delivery of new services for Transport for London.
Overall, our investment in enhanced program delivery is paying dividends with an anticipated 30% reduction in cost of poor quality in the division and an increase in customer satisfaction. By the end of 2020, we expect to have all of our historically problematic programs on a sound footing, delivering on their contract KPIs. As you can see on this slide, we have made particularly good progress in building our pipeline of opportunities with government, as we expect government in particular to invest more in digital solutions as part of the broader reform agenda. Technology solutions is a key component of Capita's future, with its strong network and IT services foundations, and now its investment in future technologies.
Our divisional reorganization at the end of 2019 also included technology solutions absorbing the management of internal IT. This has been critical to our own capability at Capita to move to working over the crisis, deploying laptops at very short notice and quadrupling our VPN capability, for example. Our customers remain loyal and retention rates are high. We are seeing increasing demand for new digital capabilities such as cloud migration, cyber security, and automation. We're also continuing to deliver cost opportunities through consolidating service desks and individual business entities. As Patrick mentioned earlier, specialist services has been hard hit by COVID-19, particularly reflecting the more transactional nature of some of the bigger businesses. In particular, travel and events and enforcement. We're tracking the recovery across all 11 distinct businesses, some of which are likely to recover well into next year.
We're therefore taking the opportunity to restructure those businesses where we think the model needs to change, examples being travel and events as they come out of the crisis, so that they come out of the crisis leaner and fitted for the future. This should allow them to maintain and even increase margins even if revenue is lower. Our plan is still that we will divest these businesses as and when appropriate. As Patrick highlighted, due to COVID-19, we are taking decisive action to preserve cash in the short term, with over GBP 300 million of benefit in the first half. Some of this benefit is expected to unwind in the second half. As we face GBP 500 million of further debt repayments over the next two years, we have taken action to strengthen the balance sheet.
We have sold Eclipse, and the proceeds from ESS will also be used to address debt and pension liabilities and reducing gearing. Additional non-core, non-strategic software disposals will be announced in coming months, and we will revisit the option to raise new debt and to dispose of the special services businesses when appropriate. In summary, it has been a challenging first half for Capita, with COVID emerging during a pivotal year of a complex company transformation. Our response has been robust and decisive, demonstrating our improved operational capability. We've looked after our colleagues, continued to deliver for our clients, we've protected revenue in the process, and we've executed a range of cost and cash management actions. COVID has set back our expected return to growth and delayed our plan to reduce debt through disposals and a refinancing, creating short-term pressure on the balance sheet.
We've therefore accelerated our simplification strategy, identifying a number of other disposals to address this pressure and provide future resilience. The board remains confident in our strategic goals, and we continue to make progress on the transformation. Thank you for listening, and Patrick and I would now like to open it up for questions.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, you can withdraw your question by pressing star two. Alternatively, if you've joined us via the web, you can press the Request to speak flag icon. Our first question comes from Robert Plant from Panmure Gordon. Robert, please go ahead.
Thanks. Morning, Jon and Patrick. At the time of the June statement on the conference call, you said the guidance was flat sequentially for second half revenues. It's now flat to slightly down. Has the outlook deteriorated slightly since June, and if so, in which areas? Thank you.
I'll give a broad response to that, and then Patrick can get into some of the detail. We're being cautious. We're worried about a second wave. I think our assumptions on the economy are that it is going to be more a Nike swoosh than a V or even a symmetrical U. Given the dependency of some of our transactional businesses, in particular learning enforcement, travel and events, et cetera, on economic recovery, we've taken a more prudent view.
There's no real specific highlights. If you remember, I think we actually said that we expected revenue in the first half to be 10% down, and it was nine percent down, and this is all in the roundings of small percentages. Revenue in the first half was a tiny bit better than we thought, and therefore it's flat to slightly down. The simple message is that revenue is broadly equal, 50/50, as is normally the case.
Great. Thanks.
Our next question comes from Sylvia Barker from JPMorgan. Sylvia, go ahead.
Hi. Good morning, everyone. Thank you for taking the question. A similar question to Rob to start off with. You also said that the margin guidance for H2 is a mid to high single-digit margin. Obviously, the accruals will be moving around. Could you maybe kind of comment on that and if anything's changed? In the going concern statement, there's discussion around certain circumstances where the headroom will be limited in June 2021. Can you just clarify, do some of these scenarios include kind of an option where you have sold ESS for GBP 500+ million and you still have limited headroom, or does the ESS kind of disposal fully offset that?
Finally, just on the contingent liability that you've mentioned, is this related to past services with a contract that you still have or the customer that you still have contracts with, or is it fully kind of in the past? Thank you.
Sylvia, thanks very much for your questions. I'll let Patrick talk to margins and contingent liabilities in a minute. I want to be crystal clear on the going concern. The disposal of ESS addresses, it cures the covenant headroom issue that the material uncertainty speaks to.
Yeah, I'm not quite sure where your high single-digit margin number came from. I think consensus for the second half is about GBP 128, GBP 125. That would call GBP 90 million or so of PBT for the second half. Revenue flex, that would be 5.5% or so. That's kind of what we're saying. I think we've talked through the moving parts first half to second half. The pay accrual disappears, a little bit of it reverses. We've got some more cost savings to come, and then a few other moving parts. I think on the contingent liability note, this was a contingent respect of past services, and as many companies do, we make wide use of this service from a particular supplier. They've come in and done a detailed review.
As is the market practice, we will settle that liability by agreeing to buy more from them in the future. We expect that that agreement will be consistent with our forward plans. In other words, it is no net increase cost to us in the future. We are simply disclosing it because it is a significant number.
Okay. Thanks very much.
Our next question comes from Rory McKenzie from UBS. Rory, please go ahead.
Yeah, morning all. It's Rory here. Just three for me, please. Your contract renewal rate is running at 70% at the moment. You said that's lower as you're choosing not to renew some contracts. How long should we expect it to remain at this lower rate? Can you quantify maybe the further contracts you might choose to exit? I guess, what's your midterm expectation for the renewal rates? Secondly, on the contractual working capital inflow of GBP 43 million that you saw in H1, is that largely just relating to the falling revenue, or have there been any within-contract improvements to be aware of in that? I've got a third one, but I'll take that after these.
Rory, thanks for your questions. I'll deal with the first one and then Patrick can address the second. Look, I think investors should see the very disciplined way in which we're deciding whether or not we wish to renew contracts based on alignment to strategic intent and the likely margin and risk profile is a good thing. We are now in a position where we're able to make those trade-offs. We've inherited a number of scopes of work that we probably don't want to continue to renew going forward. I think being disciplined in what we decide vis-a-vis scopes of work we want to undertake, and importantly, comprehending the risk profile associated with some of these things, is part of achieving one of our strategic goals, which is more sustainable long-term delivery of free cash flow. Look, that percentage will flex a little bit.
It'll probably come down a little bit further as we continue to wash out legacy contracts that we don't want to participate in. Over time, I would then expect it to climb again.
Okay. Turning to the contractual working capital, just to remind you that there are three components to contractual working capital. There is accrued income, deferred income, and what we call CFAs, Contract Fulfillment Assets. If you look at the inflow in the six months to June 2020, most of that was in the deferred income, and that was largely down to invoicing timing differences in the way that the deferred income is realized. We expect that in the fall, over the second half of the year, that inflow of GBP 44 million will reverse and become an outflow of about GBP 60 million-GBP 70 million. That compares with our expectations of about GBP 100, so there will be a reduced inflow. That full year position is more to the point that you've made, which is about the revenue growth being deferred in the first half.
The movements have much more to do with the timing of our invoicing as part of our cash management activities.
Bethany, we'll take one more question, please.
No problem. The last question, it comes from James Rose from Barclays. James, please go ahead.
Hi there. Morning. I wonder if we can talk about cash generation of the group, sort of putting COVID-19 aside and VAT movements aside for one moment. Where do you think you're standing versus where you imagined you'd be at the start of the year, versus perhaps some of the targets you've talked about originally? Bearing in mind some of the assets you're thinking of disposing of are some of the most cash-backed in the group, I'd appreciate your comments on what you think the long-term cash generation capability of the business is. Secondly, coming back on that contract renewal point as well. Is it fair to say if that continues for the longer term, then Capita could still be a smaller group in revenue terms, albeit at higher margins? Thank you.
Let me take the second one first. Absolutely. We are not wedded on a particular scale of revenue, are much more focused on sustainable free cash flow and margin improvement.
In terms of the cash flow for the year, as I pointed out on my slide, we've taken action on every single line of the cash flow. That has meant that sort of unpicking to work out what it might have been had COVID not hit us is a little difficult. If you look at the bottom line cash flow, i.e. the net debt movement, I think the main COVID thing that goes from this year to next year is the VAT deferral. I think we're hoping that by the end of the year, our position relative to our expectations will be improved by that VAT movement. Looking to the first half, I think we were as close as we could be to being where I thought we would be after adjusting for COVID. There are, as I said, a lot of moving parts in the first half.
Let's wrap it up there. We have a series of other calls we need to go on. Thanks very much, everyone, for your interest. We look forward to speaking to a number of you over the course of the next few days. Thank you.