Helen, good afternoon. 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 I'm busy 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. Then the last time I was in this room, though 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? Maybe 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. For those of you in the room or on the webcast who you might remember that I started talking about some of these very good themes that were emerging early on, only seven weeks in, about a 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, and 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 arrival of technology, that made me think this is a great opportunity, for us going forward. Now, it's only four and a half 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.
I've traveled to most of the countries where we operate, spent 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 was one striking lesson that I've learned, just the one, over this four and a half 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 UK 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 world, or 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 transportation, or delivering low emission zones. What we do really, really matters. 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 ed profits. The great work we do daily, this is simply not showing in the numbers. I think you look at the disappointing financial performance of the last few years, and it's 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 much better company for our shareholders.
And we are going to be executing, and we're gonna take you through four key vectors of how we're going to deliver that Better Capita. We're gonna be looking at efficiencies, how do we do things better, and what we do. We're gonna be looking at changing how we go about technology and taking full advantage of what the technology opportunities and capabilities bring to bear today. We're gonna double down on delivery. We have to be excellent at delivering. Not excellent at delivering and then recovering when it's been required. We need to be better at delivering right first time. And we have to build a better environment for our colleagues, who work 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.
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-backed profits. So you will hear from me about observations, plan, the strategy, the what we're going to do. Then you'll hear from Zenia, our Chief Strategy and Transformation Officer, who will talk about execution, delivery, and efficiencies. Next to that, we're gonna hear from Manpreet, our CTO, who's gonna talk about technology and some of the things that we're doing there, and the step change we're bringing 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.
Then we will move to each of the divisions. The two divisions are gonna be presented by the respective CEOs, Richard and Corinne. Then to bring us home, our CFO team will just talk about what this all means in terms of numbers. After that, we will take some questions and answers, both from the floor and the webcast. 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 gonna 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. 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 gonna turn into a much better company. As shareholders, potential shareholders, institutions, why should you care about this? What are the key messages that we're gonna share with you today? So first and foremost, this company is built on really strong foundations, 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 gonna 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 gonna 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 gonna share with you what choices we've made and how we made those choices, 'cause I think the choices are gonna 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, and a good opportunity for us to intercept new growth vectors, and to also do things in a more efficient manner and expand margins. This is a critical point in the industry. Then last but not least, we are resetting the relationships with the hyperscalers, the market, the world's leading companies in innovation, who've got billions and billions in investments going into R&D, data centers, capability development. They are building exceptional platforms to build on, and I should know that well because I just joined from one of them.
I'm really excited about what Amazon, AWS, Microsoft, Salesforce, ServiceNow, just to name the, the leading ones, are actually building and are enabling us to go and build on top. 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%-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 growth vectors and also accelerate growth.
So let me talk a little bit about our vision and how we're doing things today, and start opening the kimono. Our vision is that we will be the trusted partner for our customers, whether they're in the Public sector or they're in the, in the enterprise, private sector, to come and run really complex business challenges. That's what we do well. These are gonna be business challenges that we're gonna run for them to give them efficiencies, to give them a better service, and we're gonna deliver that through this 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 two 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 two.
More targeted, more focused. Both respective CEOs are gonna talk about them, but let me just give you some key pieces of data. So Public, to my left, goes to market through three subdivisions, going through three different markets, local government, then you've got this whole central government side, and then to the right, you got defense, learning, fire, and security. Three 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 two 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, very successful business in pension solutions. 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. Richard is gonna share 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're following anything between 8-10 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 we're planning to get out of there. She will talk about the work that she's been putting in place since she joined 18 months ago, and most importantly, what we are looking to build in the future. So a very key priority for us to expand that margin opportunity, and, and we know how to do that. Then you've got pension solutions, as you see, I said earlier, smaller business, successful, profitable, growing, where we still can do better. And 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, and 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 gonna be some common themes, but each of them is getting their individual attention. And then to the right, you also see this closed book life and pensions and mortgages space, which is non-core activity. So non-core activity that we're 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 charts, they 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 of the group and the range of our aspiration in the medium term, and similar for the operating cash conversion. So what does this say is that we've got work to do. We know where the work is. It's, 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. You know, 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 exciting 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 parts of the central government or part of local government, or they are 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 experiences. They need these technologies to deliver a better citizen experience if you're in a council or you are serving from the central government, and they need help. They do need help with the adoption of these technologies. With technology, there is always this formula, the 10, 20, 70 formula, and depends where you put in the bucket. So let me just group 10 and 20 is all about the core technology, the getting the basic training, formulating the 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 gonna be bringing to market. That's gonna be changing the competitive dynamics of this market, and I think it's going to be changing them in our favor. As I have been seeing all of these technologies play out, whether they was sort of basic automation, and robotics, or it was just moving on to smarter uses of CRM or getting data and analytics and insights and data tracking all the way to GenAI. And I was seeing this from AWS, I was seeing customers adopting them all over the world, and successfully. I got really excited about what this could do, in the lens and the world of Capita.
When you go out and check, you know, McKinsey talks about 70%, of, of people who've responded to the survey are really well underway, one way, whether it's just one project or two projects, right? The remaining 30% is they're not denying it, they're just getting ready. That it 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, they're 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. 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.
It 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 company, this industry has been using for the last 20-30 years. We will have, yes, that dynamic, because we have to manage that. We have the deep expertise and deep understanding of business processes that we already have, and we will enhance it with technology. That will help our growth ambitions and our profit ambitions. 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?
You know, some of you might be, maybe said, "Well, you know, why did you join, and what were you thinking about when you joined?" And I just said: You know what? I, I was excited about this. I was excited about what we do, the mission, the... But I really wanted to understand the detail of, 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 webpage, it's quite difficult, to look into it. So as an incoming CEO, I wanted to peel back the onion.
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, what, what, why are they with us? From former customers, why did they leave us? Current employees, former employees, market actors, our competitors, hyperscalers, look at our finances, and put all of that in. 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. 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 wouldn't be surprised that I came back and says, "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, you know, the double S 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 take them in your handout. But there were clear feedback from customers in terms of what they wanted about our offering, the simplification.
It's very clearly, when you looked at how we were engaging in the marketplace, our go-to-market model wasn't working, and we hadn't made enough choices. We were 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 we'll never get reused and repeated. 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 had too much complexity, we had too much cost. We were not reusing stuff. We were bearing all the cost and everything that we were doing, the internal complexity.
A lot of the cost out that should have happened, going from 11 divisions down to 2, probably didn't happen, so we were saddled with cost and complexity and ultimately, underperformance. So that's what came out. Interestingly enough, 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 one 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're sort of labeling that into sort of activities, you know, call it service lines. Service lines that are provided from somewhere within the Capita family.
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 between what happens in one division and what happens on the other one, unbeknown to the teams, who sometimes met for the first time in the workshop to talk about the capability. Then we were able to group these 60 capabilities around themes, right? Try to see what is it that we would do. 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 is 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 bars to enter the gates of our condition? What is the financial profile? Are we making money? Can we grow? You know, what you would expect us to do at that level of granularity. Then, as a result, we said, "Okay, what do we have?" So what we have is three 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.
There's a number of examples, like the 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 teams is doing in pensions. There's a number of examples of how far our revenue is there. There is a second bucket. There 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. With a little bit of transformation, certainly by changing how we do things more than what we do, we could actually move them from transformation to star.
Clearly, if you remember the chart three or four 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 a priority, but there is a number of them there as well. So again, nearly a third of our businesses in that middle area, and we are determined, and we've got plans to sort of move them to the key area, to the star. And then to the far right, we got the manage for value.
They are a collection of things that, you know, it doesn't have to be like, wrong, they just don't fit in what we're trying to do at large. Some of them, which we're just gonna have to partner, with some people to help us because they, 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, just need action.
I think what we are showing through this exercise, 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, and 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, just quick overview on the how.
So we, as a management team, believe there is, like, a three waves here, right? Three 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 get-- you go after the low-hanging fruit, you create the capacity so we can fund the journey. And that's, that's what we're doing right away. You, you heard about the GBP 60 million + GBP 100 million cost take out. This is why it's so important to do that. We need to create that capacity. The second thing that we're gonna do, the second wave, is about getting the basics right.
Basics right in, in some of our offerings, getting some of the basics right in delivery, so that we don't make mistakes, we don't trip ourselves in delivery. Getting basics right in offices, in procurement, in a number of our internal processes, 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, the Capita Contact offering for the future, we launched it on, on Monday. It's perfectly possible that we may be doing things already to build for the future, but the focus today is largely on, on the quick wins that help us fund that journey. And Zenia will talk more about this, but I just wanted to sort of, to reiterate that we're well underway.
We have already actioned 90 out of the combined 160 millions. We talked about some reinvestment over time that will be up to GBP 50 million. This is over effectively a 12-month horizon, still until the end of the first half. Just to enable the strategy, the other 100 will be net savings. Zenia 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 at multiple levels, and we're also looking at sort of a lot of areas that are not known, with just standard, basic - 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 had 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 non-financial 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 to 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 a pass of these, and then we'll keep doing that at future events, 'cause 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 prize for all of this journey, I think, is to take us much closer to that conversion from social value in everything that we do, to economic value. And I think we've 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 this 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, Zenia Walters, who will take us through the efficiencies part, and very importantly, how we are executing and what we are doing to make sure that we really execute and deliver on time. Zenia and I go a long way back. Some of you, I know, used to work with both of us at SDL. She didn't have enough of the experience, so she joined Capita all of four and a half months ago, and since then, you haven't stopped. So, Zenia, please.
Thank you. Thank you, Adolfo. It goes without saying, I'm delighted to be reunited with Adolfo and excited to be part of the journey going forward. For those of you who don't know me, Zenia Walters, I joined Capita six months ago, same day as Adolfo, I think January the 16th. I'm a chartered accountant by trade. I sort of qualified with Price Waterhouse, which probably shows you that was some 30 years ago, but chartered accountant by trade, 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 at have required large-scale transformation and restructuring. So I'm well-versed in leading and driving transformation change and delivering shareholder value. 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 roadmap 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 three waves, which Adolfo alluded to: 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 you can see from the announcement on your desk, we've created a joint solution with AWS, our contact center solution called Capita Contact. 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 at this program at pace and at scale. So we can deliver cash-backed cost savings that stick and are sustainable. Although moving at 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.
That's why we've engaged very closely with Scott, our HR director, and the wider team, to make sure that our colleagues are at the heart of our program going forward. We've shared with you the three work streams, and this aligns everyone to the end game and the journey. There's multiple work streams that underpin each of these three 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. 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 and are in flight at the moment. 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, we've extracted clauses around benchmarking, SLAs, right to counsel without cause, et cetera. 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 processes 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 a third. How are we going to do that? We're going to embed P-Cards, purchasing cards, and also use EDI, so electronic data interchange. So put simply, that's actually taking invoices automatically into the accounting system with minimal manual intervention.
Not only will that make us more efficient, but it'll 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 a 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 tracked 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 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. 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, 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 two waves. We announced Wave One, GBP 60 million cost out back in November 2023, and Wave Two, and the Wave One, GBP 60 million of annualized cost savings for this year, and Wave Two, 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 two 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 One, and we've delivered some quick wins from the Wave Two 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've delivered the savings. Given 70% of our cost base is people-related, it'll 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... Oops, sorry. Moving on to my last slide, this maps the core initiatives by timeline.
We look at our journey from both a top-down and a bottom-up to ensure the roadmap 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 to deliver our cost out targets 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, Zenia. Impressive. I love precision. I love precision in execution, the programming, and I like the granularity of the plan that you have presented, but that the executive team is owning and driving. And if 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 this 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 over 14 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, you know, 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, you know, 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 cyberattack occurs somewhere in the world every 39 seconds.... We have had a focus on cyber from well before the incident. We've been running a multi-year 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 places us ahead of the industry benchmark.
Our 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, you know, 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. The adoption framework, you know, 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, you know, 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 our 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 their processes. Some use cases you will hear about later from my colleagues, Corinne and Richard, that are across the two 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 four of our hyperscalers over the last year, Microsoft, ServiceNow, Salesforce, and AWS. 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 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 microservices enabled by AI, there is a need for a shift towards 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 and 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 up 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 Capita Contact. 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 Capita Contact.
Contact centers are the cornerstone of our business for both the Public and private sectors. They serve millions of citizens and customers, delivering access to vital information and critical services. However, the model today is heavily dependent on people to deliver the service. This is often complex, bespoke, and expensive. Collaborating with AWS, we have developed a cloud-based contact center solution that leverages the power of GenAI to provide a scalable, flexible and secure platform for customer service. Focused on the private sector, mid-market, and government, Capita Contact is able to quickly deploy customer experience solutions to meet real-time demands such as peak, crisis, or short-term campaigns. Capita Contact, powered by Amazon Connect, offers omni-channel experience, including voice, chatbot, SMS, and conversational menu routing in a single agent interface, increasing first-time call resolution and customer satisfaction.
The platform enables agents to provide faster, more accurate, and empathetic responses to customers, improving both customer satisfaction and employee NPS. Utilizing the AWS functionality to analyze conversation summaries and transcripts, it spots trends and provides automated insights to help coach agents on how to improve. With automated quality assurance dashboards, managers get unprecedented insights, so they can focus on coaching and developing agents that need more support. One of our Public sector clients, London Borough of Barnet, is already seeing the benefits. Advisors can now answer inquiries across multiple different services without the need for in-depth training, due to the use of agent step-by-step guides that direct an agent to the right information to resolve a caller's query. Instead of multiple customers' calls to different agents, it can all be completed in one seamless interaction.
Here's an example of a customer notifying the council that he's moving house and leaving the borough. When the call comes through, the Agent Assist functionality provides real-time information and scripts to support the conversation and guide the agent to the right resolution for the caller. Relevant information and forms can be sent via SMS for quick completion. The customer also needs to cancel his parking permit, which typically would mean speaking to another agent. But with Capita Contact, the same agent can not only resolve this inquiry, but provide added value information, such as ensuring the customer doesn't cancel his permit until the day he leaves the property, or he won't be able to park. As a result, processing times for complex queries is being reduced by up to half, from first contact through to resolution, from 7-10 days, down to 2-3 days.
Customers are happier using their preferred voice or text-based channel or digital self-service. Interactive voice response has improved vulnerable and repeat caller experience. For agents, live customer information and real-time AI-generated suggestions make each interaction simpler and more efficient. Automated conversation summaries and sentiment analysis has improved compliance and overall agent performance, delivering consistent quality and increased first contact resolution. For the onboarding of contact center colleagues, we estimate it'll take 50% less time, while staff attrition will reduce by 10%-15% versus the industry norm. For Capita, we gain operational efficiency, and our cross-sector data insights help continuously improve our contact center operations. We'll generate greater customer value and create long-term partnerships while enhancing our margins. With Capita Contact, we're evolving and improving the customer service agent and revolutionizing the customer experience industry.
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, and 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 their capabilities and ours. But as Manpreet rightly highlighted, this is just one of the others that we're gonna be bringing to market. So watch this space, 'cause it's definitely going to be transforming in what we do and how we do it. So very excited about that.
If I said earlier that our strategy is great, and then execution trumps strategy, culture draws both of them, right? Culture, how do you get that to really happen at scale? How do we get that forward with 41,000 colleagues at speed? How do we get their minds behind this transformation and get them to be fully behind it? This is something that is keeping us really busy, as a leadership team. Scott, our Chief People Officer, is gonna join me on stage briefly to share some thoughts on what is it that we're doing and why we're doing it, and what we're gonna do next. Thanks, Scott.
Thanks, Adolfo. Good afternoon, everybody. Hope you're all well. As Adolfo says, my name's 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 one 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. But I think, as you've heard from Adolfo, from Zenia, and Manpreet, nothing is more important than our cultural transformation journey, and that's what I want to spend a little bit of time talking to you about, for a few short 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.
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 a 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 hotspots in our organization and were able to address them really quickly and specifically. 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 twelve-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.
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. 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. 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 and embed a 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 the 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. With that, I'll hand back to you, Adolfo.
Thank you, Scott. R eally 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 of 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, 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, 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 gonna hear from Richard. He's the CEO of Public Service, who's been doing the role for all of, like, seven months now.
Feels longer.
Feels a lot longer, and he's gonna 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 for 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 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 UK 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 UK. Currently, we serve over 500 clients, delivering vital services across the country in the three 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 customer net promoter scores. So to the three market verticals. We work with most local authorities in the UK 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 Capita Contact, 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 three 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 forty 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 UK's young people through the Turing 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 submariners 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 UK's Public services, invaluable to society, entwined in the UK's population. That's something that my teams and I are hugely proud of.
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 Zenia 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 for 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 Labour Party manifesto, and over the last couple of days, the Conservative manifesto, we see two major policy themes 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 preparatory decisions. The growth in our market stems from Public sector's 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 skills 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, we in order to meet these customer requirements and to catch up with our main competitors, we've packaged our offerings into four core propositions, which are shown on this slide. These propositions are based on our expert domain knowledge, standardized, 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 three 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 five 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. Right sizing, which is being delivered through our transformation program. And to expand our reach, we're exploring 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, 'cause 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.
For many organizations, recruitment processes involve countless hours of manual work. In roles where a clean bill of health is essential, clinical screenings of applicants' medical details can be time-consuming and expensive. Recruiting for the armed forces adds more technical complexity, given the rigorous security standards that need to be met. Accelerate is our solution to this. It's built on our defense-specific on-premise screening tool, utilizing a specialized medical language model approved by the UK's Ministry of Defence. When applicants want to join the British Army, they are comprehensively screened for health conditions. Primary healthcare records are over 100 pages long on average and can extend up to 3,000 pages long. This process is essential for assessing suitability against the British Army's criteria, but it can take over an hour for a clinician to read each one.
By utilizing optical character recognition and natural language processing technology, Accelerate scans records for clinical conditions and summarizes the findings. For the British Army, Capita is deploying Accelerate to scan 30,000 records a year. Accelerate groups flagged clinical conditions together in a structured summary that's inserted at the beginning of the official scrutiny support document. This alerts clinicians that they need to review each condition, and with hyperlinks added to each listed condition, they can instantly jump to the relevant pages at the touch of a button. The tool enables clinicians to make a fast and efficient medical assessment each and every time. One clinician said, "Accelerate is a really helpful tool, and I found it reduces errors and avoids missing conditions that can get buried under hundreds of pages.
I had a case where I had to review a whole healthcare record without Accelerate, and I really missed it. It made me realize how beneficial Accelerate is for an effective recruitment process." Importantly, the Army is delighted with the improvements we're making, too. When combined with other digital innovations we're introducing, we'll be delivering step changes in better candidate experience and reduced processing times. Accelerate has reduced cost and shortened processing times by 30%, cutting the time a clinician takes to process a medical report from just over an hour down to 40 minutes. Accelerate has also created additional capacity in the clinical assessment team. Now, clinicians' time is freed up to assess more applications, including reservists and officers, and the potential is limitless. Besides the armed forces, the specialized language model we've created can be applied to any sector that uses large volumes of unstructured data.
With Accelerate, we are delivering better outcomes for our customers by combining the very best of what we have to offer: innovative technology to enable clinical experts, our unique understanding of defense, and our large and complex operational process capabilities.
And when you take that with our latest pilot, which is servicing digital medical, medical records that come directly from GPs in the community, we believe that we're going to take 3 weeks, a 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've 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 strengths lie in our ability to blend our capacity to deliver at scale in complex environments, with our extensive domain knowledge of the UK 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've 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 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 showing what's out there, what's out there for us to go and grab, over the next few years. The next chapter is looking into Capita Experience. And I know this is probably one that's gonna 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 and 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 gonna tell us what she found and what she's doing about it.
Thank you.
Thank you.
Thank you so much, Adolfo. Good morning. Good afternoon, everyone. Good morning. Morning. Morning in the US, but not here. So, today, I will clearly focus on Capita Experience, the two principal core division that we have, which are contact center and pension solution. 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 a 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: UK, 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-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, Virgin Media O2 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, steady 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 said about us, okay? So we are delivering for our clients and their customer. 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 few new clients. We have learned from our mistake, we have learned our lesson, and we know why we have lost deal. We clearly lost our deal for lack of competitiveness. We lost our deal because we were not able to digitally transform the 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 a client, the voice of our customer. As Adolfo said, I joined Capita in November 2022.
I spent 100 days meeting clients, advisor, 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 formed 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, you, 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 omni-channel usage and adoption, high overhead, heavy legacy lease property, and in IT system as well.
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 and 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.
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 a 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, our 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, 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 improve the quality of the call by lowering the accent in real time of our people and canceling 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 operation and service delivery and improve the agent experience. Thanks to our innovative way of working, we improve the most relevant contact center metrics. For example, we reduce the average call handling time by 20%. We increase the first call resolution between 15%-20%, and we are just at the beginning of the journey.
Our focus on digitization and operational efficiency is clearly paying off. We are 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 solution business. Pension solution 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 1 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 set, substantial experience, and first-rate client portfolio, we are a leading provider in the UK. Here, the technology is becoming a game changer, and this technology will allow us to win major deals. As we look ahead, our focus remain on innovation and customer satisfaction. With the team, we are clearly committed to providing seamless pensions experience that meet the evolving needs 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.
Planning for retirement and choosing a pension is a significant process. Customers want more control over their pension schemes, and they expect better digital services to help them. In a world where things change fast, flexibility and speed matter, so being able to access information quickly and easily, whether on phones, laptops or by calling, is paramount. In response, we've created a new digital pensions platform that uses cutting-edge data insights to provide a hyper-personalized experience, evolving with customers from their first job to their retirement years. With our reliable and tested policy administration platform, Hartlink, as a foundation, we've built in technologies from our hyperscaler partners, such as Microsoft Dynamics. The biggest leap forward and a unique innovation in the market is our platform's ability to process real-time management information from all channels. This enables us to proactively manage member journeys.
Our new platform can handle the largest and most complex pension schemes, providing simple, fast and convenient digital solutions to daily needs across mobile, messaging or desktop. For more complicated queries, a skilled advisor is only a click or a call away. We're ready to help manage the pensions needs of millions of people across all stages of life. Our platform is already attracting significant interest from trustees and organizations. In 2025, it'll be implemented into the newly won Civil Service Pension Scheme, one of the biggest schemes in the UK. With over GBP 0.3 billion in contract value so far, we're setting the standard for pensions management. What are the benefits? Hyper-personalized experience. Tailored services adapt to individual customer needs and life stages. Data-driven insights. Advanced analytics provide informed guidance and proactive solutions. Customer focused.
We've designed our platform with the customer's journey in mind, ensuring a seamless and intuitive experience. Efficient and accessible. A user-friendly interface provides quick and easy solutions for everyday needs. Flexible and manageable. Because our platform evolves with customers throughout their lives, we're making the complicated world of pensions simpler and more enjoyable. With our new platform, we become so much more than just a service provider. We create lifelong connections with our pension partners and the members they serve.
This is what we do in pension. Let's conclude now. For the two core businesses that I spoke earlier, we have set ourselves a clear milestones. This include our targets for digital transformation, customer engagement, and operational efficiency. Each goals is aligned with our overachieving mission to deliver exceptional value to our clients, their customer, and our shareholders. As a team, our vision is to lead, 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 UK. Thank you. Adolfo, back to you.
Thank you, Corinne. Thank you for the overview. Two very distinct businesses, obviously, in very different parts 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 grounding the where we are today, where we're going, and what does this all mean over the medium term? We have our CFO, Tim, who's just gonna bring us home, and then right after Tim, we're gonna 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 two privileges. Number one is I get the shortest walk, and number two 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 four 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 programs that Adolfo and Zenia talked about earlier, we continue to expect GBP 70 million-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 will recognize this slide, in which we outline the non-recurring cash outflows, primarily from pension deficit contributions and cyber incident costs, which hit the 2023 group performance, and how these will reduce moving forwards. 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 drags, 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.
While we detuned 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%-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%-75% over the next 2-3 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 of the drivers behind the improvement we expect in the three key financial measures.
Firstly, we'll focus on being more efficient to improve the group's EBIT margin performance to our target of 6%-8%, which is more in line with our peers. We've already talked the benefit of our cost reduction program will 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, will reduce our costs while making us more competitive in the market. We also expect 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.
For in 2024 onwards, we expect less of a deferred income cash flow drag than that which you've seen historically, with the annual non-cash deferred income release being in the order of around GBP 50 million or so over the next 2-3 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 the EBITDA over the next couple of years, and the 20% of the EBITDA impact we saw in 2023 from the interest and tax, we would indicate a pro forma initial free cash conversion percentage of somewhere between 5%-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, we, and we've reinvested for growth, we expect to revert to low- to mid-single-digit % 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 and 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 strengthened group, we'll 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, there may come a point in the future when the group, either organically or inorganically, generates 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 than that which Capita was confronted with over the last 4 years.
While 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 in Zenia's slides earlier. Then turning to financial debt. Net financial debt was GBP 182 million at December 31, 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 through further debt issuance, or whether we simply pay the debt down using our existing liquidity headroom, coupled with potential funds realized from the big managing for value, which Adolfo talked about earlier. Given the relatively high interest rate environment, which means we are likely 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 is 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.
Okay. Thank you. Thanks very much. Okay, so it's a good overview of where we've been on a variety of financial metrics and where we're aiming to go, and, and I guess the, the rails within 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 into everything we've been doing today. Just wanted to share some of the key metrics of the things that we are doing that's happening year to date, across the different parts of the business, both internally and externally. I wanted to sort of recap, and obviously, we didn't know that the Labour Party was gonna launch this 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 one of these things that happened. But yeah, there's the four vectors to make that Better Capita I talked about at the beginning, around efficiencies, technology, delivery, and building 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 six key takeaways, the strong foundations that the business is built on, the solid opportunity for margin expansion, the self-sufficiency and self-funding that team just alluded to, the reset of the relationship with the hyperscalers, the arrival and the opportunities that the new technology bring, 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. As a result of all of this 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 Broxton from Deutsche Numis. Can I ask two 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, and I'll do the second one after.
Yeah, 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 UK, is not one of them, which is why mathematically, you end up with that low margin. And similarly, one of our, the countries we operating in, 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's continued to drive through, that in particular, will benefit the UK 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.
Thank you. 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 that occurs? Is there a risk, if you like, that 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 rebase? 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? 'Cause repeatability means that we've been intentional about where we're building something, why are we building it? How are we building it? Which technology, what architecture we are going to deploy? What-- How are we going to create our value veneer around it? We're gonna test it, we're gonna prove it, and then we're gonna take it to market. So by definition, you'll be able to sell more, faster. You'll be 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're being 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 didn't see at all that shrinking. If anything, that's a margin expansion opportunity for us.
Thank you.
Good afternoon, Chris Bambury, Peel Hunt. I've got three questions. I'll do one at a time, if that's okay. You'd mentioned repeatability. Just to try and get an idea of the scale of that transformation there, where you are today and where you hope to get to over the medium term. I don't know, you know, what percentage of your revenues now or some metric are currently on kind of repeatable, scalable products and where you'd hope to get to.
Yeah, 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 I was able 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 stopped there, right?
I think the... for the... We're not gonna rewrite history. But the potential is there. Once you build the capability and the concept that you need technology, you need camera, you need number recognition, you need a call center, you need a number of online charging. Once you build that architecture, and you deploy it 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 are already in play and being deployed, like Accelerate is fully repeatable. Now, with the Capita Contact 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 100 million business in, in Carina's world, but it also plays a significant role in Richard's world. 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 Capita Contact, right? This has been done in what I call cloud speed, right? Building sprints. You know, I, I'd like to believe that over the next 12 months, you're gonna see a lot more of this, and that they're gonna be more pertinent to the, the most attractive segments that we have identified through our market analysis.
Thanks. You obviously laid out a number of factors in getting to your 6%-8% medium-term margin target. What are the kind of key factors or elements in getting, say, to the top end of the range as to the bottom? What's gonna kind of determine where you land within that range?
The cost saving clearly gets you in the range. You know, you can do the math on that. It's self-evident, you get there. To be clear, not the whole 160 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. You know, it's use of technology. It's continuing on that improvement journey, both internally and externally. It's also growing in the market. You know, where's the GBP 50 million gonna 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. Now, price should lead to greater growth. So, you know, there's a whole point here about, you know, the extent to which you grow faster on a fixed cost base should drive up the margins over the longer term. So, you know, you've got a range of things that are moving you 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.
Finally, you operate within managed for value. It sounds to me like you're planning to do some exits. Are those taken into account in your targets?
They are not taken account of in our targets. So the targets we've outlined, in the same way as we've just 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 exits. So just to be clear, we're not saying that that entire, managed for value portfolio is gonna be a set of activities that we're instantaneously going to try and exit. This is not Portfolio two, 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.
You know, we know we can manage them for value, and that is what we will do.
Thank you very much.
Hi there, it's James Rose from Barclays. I've got two, please. The first is your top line revenue targets, I think, are now more or less in line with the sort of end market definitions you and growth targets you've given there. Should we therefore interpret that 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've flatlined in revenue terms, and the market has continued to grow. You know, 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.
To sort of follow on that a little bit as well, I mean, on the McKinsey survey, you know, there's 7% of that particular survey are still learning and haven't yet leveraged any AI, 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 and doing some trials. You know, if you look at some of our markets, you could argue that some of them are not the fastest movers in terms of technology adoptions. They're not laggards necessarily, but they're not the very early adopters. But they are seeing internationally that some of their peers are starting to play and are starting to look, and they're 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 yourselves, so you could 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.
The final one was on potential attrition risk over the next few years. Could you give us an idea of the sort of major rebids you actually have over the next few years? And in particular, which parts of Capita do they appear within? You know, 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 had to renew a lot of the telecom contracts, and Corinne alluded to that. I think she just gave a number of examples, and that's sort of 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 strong 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 wanna sort of maybe add something there of the work we're doing there to... 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, but give us their non-core activities.
... and if to go to central government, we've got three renewals, but two of which are, look as if they're gonna be extended for up to three years. So that's in army recruiting, in the Data Communications Company, the Smart DCC, which supports the smart energy meters across the UK, waiting for Ofgem to confirm that. And the third one is the Gas Safe Register that will be rebid later this year. So two of the three are going to extend, which isn't unusual in the current government environment. Great. Thank you.
Any other, maybe Nicole want-
Yes. So I have one question online. It's basically trying to understand why, or in what way this transformation is different to the one that was done by your predecessor?
Yes, 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. You know, 11 divisions, I think arguably each of them doing their own thing. And coming in here, and, you know, if I could claim to use language properly, I would say what John was doing was really restructuring, right? He was restructuring and buying us a stable platform that could survive, and we could operate.
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. I think that's, that's the single biggest difference as I see it. Obviously, technology plays a much bigger role, now, for certain. You know, maybe it's a matter of backgrounds there, but it's also the, the times have moved, right? So technology plays a more prominent role in society today, and the advancements that are there today are more reality. We can do things in a different way than we could do a few years ago, where everything was sort of standalone software. We just catch up, and then by the time you catch up, you need to catch up again because you're falling behind.
I think all of these advancements of the cloud and microservices allows us to go after the opportunities in a different way, less CapEx driven, is more sort of pay as you use. I think it's just different market dynamics, but as a whole, it's just restructuring versus digital transformation.
There are no further questions online, or they've already been answered. Thank you.
Okay, I'll take this. Hopefully, the presentation was not only was long, but also was extensive in terms of sharing knowledge and being transparent and addressing some of the big questions and the big themes head-on. Obviously, we are here, we're gonna be around here, and if you 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.