Welcome to our half-year results. As usual, I'm going to make a short safety announcement. We are not expecting a fire alarm, so if it goes off, it's a real thing. So please make your way through calmly down to the stairs and into reception, and then marshals will show you the way. Thank you very much. I'll hand over to Adolfo. Thank you.
Good morning, everyone. Thanks for your time here today, as always. Also thank you to those of you who are joining us remotely to go over the first half results. In the room, somewhat unusual, I have two CFOs. I have Tim here. He's current CFO, who's going to be doing this for the last time. I want to use the opportunity to thank him for the hard work and the massive turnaround that he's done over the years and leaving the company. You only have to look at the balance sheets, as an example, and a much better place than the way he found it. He's not gone just yet. He's here with me today, and we're going to be doing the roadshow together.
Also together with Pablo Andres, our incoming CFO, who's been now with us a few weeks, working with Tim and Tim's team to ensure a very smooth handover. So it's somewhat unusual. I get two for the price of one. So since joining the company six months ago, I think you've heard me saying how important it was for me to really get underneath the operations and embed myself into what we do, how we do it, who we do it for, and really trying to understand the challenges that we have, but also the great assets that we have and understand the opportunities, but also face all of those challenges. And you've also heard me saying, and I feel even stronger now, six months in, than I did in the past, I'm blown away by what this company does. I mean, day in and day out.
I was traveling up in the North of England and Scotland last week, visiting new operations in what we do, water utilities, or what we do for the Royal Navy. I'm really blown away by the caliber of our colleagues, the complexities of the programs we run, and how important it is for this company or for national security or for everything that we do really, really matters. That puts a lot more pressure on me as CEO and the executive team to really translate that value into the financial results that we should have been able to prove over the last few years. It is in that context that I think this first period, this first six months, shows that progress that we're proud of. Early days, there's a ton of things to do, but we're definitely getting there.
As I said, our to-do was sort of how do we build that better company, right? How do we build that better company that just does the great things that we do in the countries where we operate, but also get great financial returns for it? I sort of tried to simplify the four vectors of the execution, which is getting those better efficiencies, spending better, spending less, spending more intentionally, and making sure that we run the company as a really well-oiled machine. It's about getting those better technologies internally so that we run much better, much more efficiently, and we really take advantage of what technologies have to offer.
But most importantly, that we embed those technologies that are out there, that are moving at the fastest speed ever, and we embed them into our solutions so that we get that acceleration in our value proposition creation, and we can create better solutions at lower cost with more innovation, more differentiated, and start opening a new future of growth in the market. The third one is around better delivery, because it doesn't matter how well you deliver, and I think we deliver very well as a company, but today's achievement has to become tomorrow's baseline. We have to keep raising the bar. When you're in the business of delivering really complex business processes, you have to aim to be better and better and better. So that remains a priority. And last but not least, we are a very people-rich business.
We have a lot of colleagues who are critical to our future, and we need to make sure we build a better company with them and for them so that we keep reducing attrition, so that we keep developing people, so that we can get more internal mobility, internal progression, and that people want to come and join Capita and build their careers there. I think as we do these four things, which might sound simple, but as we do these four things together, we will get those financial results that we need to show that. On the next slide, you've got a summary of the momentum. It's been super busy six months. It doesn't feel like six months. It's been absolutely crazy in terms of things that we've had to do. This is not about just me being a new CEO.
I can attest that for hundreds of thousands of people in the company, it's been super busy. We're excited about the progress we made. We've increased the operating profit, operating margin by 45%. We've progressed well with cost reductions. Only three months ago, four months ago, I was here saying, no, we're not going to reduce 60. We're going to reduce 160. We're going to get that done by the end of June 2025. I'm standing here on August 2nd and saying we've already executed 100 of the 160. We are going to be pushing with drive, with determination to make sure that we really find those costs where they are, and we re-engineer the process and how we're doing things so that we get the benefit of the simplification as well as the financial benefit.
We have reestablished the relationship with the hyperscalers, not only at the relationship level, which is important, but also at skilling our people, getting certifications. More importantly, somewhat ahead of my expectations, we've got solutions joined to market already. I think you can read about many of them over the last few days and weeks as an announcement that we brought to market where we are really jointly engaging and selling. Only a couple of days ago, we brought our first two Gen AI, true inside-out Gen AI, right from their inception on the agent suite. If you get a chance to read about them, they're very excited. I'll be talking a little bit more about them later because they're really now demonstrating some wowing figures and return. We launched the culture program.
Culture is something that the team was already working on prior to my arrival because it was a very important cohesive strategy. We certainly accelerated since we arrived, but the executive team identified it as a priority early in January. Since then, we've been launching the program, running workshops with the colleagues, and we're actually changing the way we operate, changing the way we behave, because ultimately, culture is just a collection of behaviors so that we have more of the behaviors we want going forward to build that company. We also announced the disposal of Capita One. When we did the Capital Markets Day back in June, we talked about some assets being on the Managed for Value category. That was important because not everything there, actually most of the things there are not there for sale.
They are just to manage for value and find a better way to find value. But Capita One was a clear one where it just didn't sit with the going forward strategy of working with hyperscalers. So we're glad that we got that done. We did it quickly. And I think we did a good deal. And so we're expecting to complete by the end of August and get net proceeds of GBP 180 million. So with that, we are reaffirming the medium-term guidance that we shared with everyone back in June. Apologies. And we're also confident that we will be able to get to our 2024 goals in terms of margin and free cash flow conversion. So there is a lot to go through. There is a lot of materials.
We are going to sort of give you an overview on the strategy, on the execution, the technology, and a number of things. But before we do that, I'm going to ask Tim to come on and just take us through the numbers, please.
Thanks, Adolfo. Good morning, everyone. As Adolfo has just said, we've seen a 45% improvement in operating margin and are on track to deliver GBP 160 million of cost savings by June 2025. As noted on this slide, and consistent with prior presentations, our results are shown on an adjusted basis unless stated otherwise. Turning to the next slide for our financial highlights. Revenue was down 9% compared with the first half of 2023.
This reflected previously announced contract handbacks and losses in public service and the benefit of 2023's one-offs in experience from a commercial settlement in the closed book life and pension business and deferred income releases. We've seen substantial improvement in operating profit, profit before tax, and EBITDA, reflecting the benefit from the ongoing cost reduction program offset by the non-recurrence of the one-offs in experience in 2023. We delivered a significant increase in operating cash flow driven by a step-up in cash-backed EBITDA with a reduced impact from non-cash deferred income releases in the period. The free cash outflow of GBP 52 million reflects the improved operating cash flow, lower pension deficit contributions, and cash costs of the cyber incident offset by GBP 20 million of cash costs incurred in the half in delivery of the cost reduction program.
Net financial debt leverage was in line with the 2023 year-end ratio at 1.1 times. On the next slide, we show the reconciliation between adjusted and reported profit before tax. We saw a swing from 2023's reported loss of GBP 68 million to a profit of GBP 60 million in the first half of this year. The business exits credit of GBP 36.7 million includes disposal profits of GBP 38 million, primarily from the sale of our Fera joint venture, which completed in January 2024, marking the end of the portfolio program announced in 2021 and which delivered over GBP 500 million in disposal proceeds since launch. As announced previously, exceptional costs arising from March 2023's cyber incident have been excluded from adjusted profit. The GBP 0.4 million benefit in HY 2024 includes an expected insurance recovery of around GBP 3 million.
The cumulative total net costs incurred with respect to the cyber incident to date are in line with the estimate of around GBP 25 million given in the middle of last year. In the first half of 2024, we also recognized costs of GBP 8.2 million in relation to our ongoing cost reduction program, taking the cumulative costs recognized across H2 2023 and H1 2024 to around GBP 62 million, made up of property and impairment charges of GBP 28 million, and redundancy and other costs of GBP 34 million. Now turning to the divisional performance and looking first at public service. The division saw a revenue decrease of 2.8% driven by the ending of some contracts in local public services, Scottish Wide Area Network, and electronic monitoring. We also saw the non-repeat of temporary contract activity, which benefited 2023's performance on the Royal Navy training contract.
These negative impacts were partly offset by contract indexation and volume increases elsewhere in the portfolio, for example, on the TfL contract. Despite the revenue decline, we saw strong improvements in operating profit, EBITDA, and operating cash flow as a result of the ongoing cost reduction program, which delivered a step change down in overheads in the division. Moving on to Experience on the next slide. The division's revenue decrease reflects the HY 2023 one-off deferred income benefit from the new VMO2 contract and the commercial settlement in closed book life and pensions. In addition, we saw the impact of previously announced contract losses within the financial services business, including the Co-op Bank exit triggered in 2022, as well as lower activity levels in our U.K. businesses. This was partly offset by contract indexation and continued growth in our Pension Solutions business.
Operating profit fell by GBP 14 million, half on half, reflecting the non-repeat of H1 2023 GBP 30 million of one-off credits, partly offset by reduced dividend overheads in 2024 from the ongoing cost reduction program. We saw a small reduction in operating cash flow, but a step up in cash conversion, reflecting an increase in cash-backed EBITDA, half on half. So moving on to sales activity in the half. Across the group so far this year, we've seen a lower level of bid activity, reflecting the phasing of market opportunities and a more focused approach to business development. Our total contract value secured was down 29% compared with the first six months of 2023. And while our renewal rate was strong at 95%, our win rate on new and expanded scopes was only 34%.
As we've outlined before, in this initial phase of the transformation journey, our primary focus is on improving operating margin and delivering positive free cash flow with less emphasis in the short term on revenue growth. We're being more commercially disciplined and mindful of not chasing revenue, which doesn't deliver an appropriate margin. CPS saw bid wins in defence, learning, fire, and security, with further expansion on the Royal Navy training contract with a TCV of GBP 81 million and with the Ministry of Defence. Capita Experience saw success within the TMT vertical with the renewal of two contracts with two major European telecoms providers, one with an expanded scope. The two contracts combined have a TCV of more than GBP 250 million. In July, the Pension Solutions business within CE renewed a contract with the Royal Mail Statutory Pension Scheme with a TCV of GBP 48 million.
The weighted pipeline for the group has decreased to GBP 1.9 billion from GBP 2.8 billion at this point last year. However, last year's number reflects the Disabled Students' Allowance and Functional Assessment Services contracts, which were in last year's pipeline and where we had been selected as preferred bidder, with signature taking place shortly after last year's half-year date. Looking to 2025, the group's unweighted pipeline at GBP 5.7 billion is at the highest level it has been for a number of years at this point of the year, which gives us confidence in our market opportunity. So the next slide sets out the detail behind the free cash flow outflow in the period. EBITDA increased 5%, reflecting the GBP 13 million improvement in operating profit for the group, offset by an GBP 8 million reduction in depreciation and amortization.
This reduction in D&A is driven by a low level of capital investment in prior periods and the ongoing rationalization of the property portfolio, which decreases the right-of-use asset depreciation charge. We saw a GBP 34 million improvement in working capital period-on-period, mainly driven by a reduction of around GBP 40 million in the level of deferred income releases in 2024. Within the GBP 20.4 million of non-cash and other adjustments, provision spend of around GBP 15 million, including GBP 8 million in respect to the closed-book life and pensions contracts, was broadly in line with that incurred in the first half of last year. However, within this line in 2023, there was a benefit of around GBP 30 million adjusting for the non-cash effect of net new provisions established through EBITDA in that prior period.
We made GBP 6.3 million of pension deficit contributions in the half before the impact of business exits and a further GBP 14.5 million of accelerated deficit contributions triggered by the portfolio disposal program. In aggregate, the deficit contributions paid in the first half satisfy the funding commitment agreed with the scheme trustees, and we do not expect to make any further deficit contributions in the second half of 2024 and beyond. We incurred a further GBP 6 million of cash costs in relation to 2023 cyber incident and just shy of GBP 20 million of redundancy and other costs in respect of the ongoing cost efficiency program. Capital expenditure principally reflects our continued investment in cybersecurity and technology. The small reduction in net capital lease payments is driven by the ongoing property rationalization process offset by inflation-linked rent increases.
Despite the free cash outflow exceeding business exits of GBP 51.9 million, overall net debt reduced by GBP 23.6 million in the half, reflecting disposal proceeds received mainly from the completion in January of our exit from the Fera joint venture. Turning to the next slide, which shows the group's liquidity position and net debt. Our revolving credit facility was undrawn at 30th of June, which, when combined with our unrestricted cash balances, provided the group liquidity of GBP 293 million, a similar level to that seen at 30th of June and 31st December last year. We saw a small reduction in net financial debt in the period, reflecting the net cash inflow I talked about on the previous slide. The net financial debt to EBITDA ratio remains slightly above our medium-term target of around one times at the end of the half.
As we have no debt maturities in the second half of the year, the expected net proceeds of around GBP 180 million from the Capita One disposal that we announced last month should result in a step-up in liquidity by the end of 2024. In the bottom left-hand quadrant of the slide, we've replicated the graphic we used at the Capital Markets Day event to explain our current capital allocation priorities. And given these priorities, we consider that the expected proceeds from the Capita One disposal will provide optionality around funding to address the investment and leverage reduction areas, and further guidance on this will be given at the time of our year-end results. Now turning to the next slide for guidance on the full year 2024 outlook from a financial perspective.
For revenue, we expect a slower rate of revenue attrition in the second half in the Experience division, leading to that division delivering a high single- to low double-digit percentage reduction for the year as a whole, with Public Service expecting a full year revenue broadly in line with 2023. The net effect of these divisional revenue trends should see the group as a whole reporting a percentage revenue decline in the low to mid-single-digit range. On operating margin, we continue to expect a modest improvement on the 3.5% delivered for the 2023 full year, reflecting the continued benefit of the ongoing cost reduction program offset by the impact of this year's bonus and salary review recognition and the full release of the bonus accrual that took place in the second half of last year.
On an underlying basis, our adjusted operating profit and free cash flow guidance remain unchanged, although the GBP 70 million-GBP 90 million outflow that we talked about at the year-end results becomes GBP 90 million-GBP 110 million on a pro forma basis when adjusted for the Capita One disposal. As we said at the full year results, 2024 free cash flow guidance is after taking account of an estimated GBP 50 million of restructuring cash costs arising from the ongoing cost reduction program. Finally, as I mentioned earlier, the expected proceeds in the Capita One disposal will reduce the group's leverage, and as a result, we're expecting minimal net financial debt by the end of the year. Now, as Adolfo said, this is my last Capita Results announcement before I hand the CFO reins to Pablo, and in fact, as I'm retiring, it will be my last ever-listed company results announcement.
Yep, after 22 years of doing the same job, I'm finally handing in my CFO badge. Now, what I would say is there's still much work to be done to get this group delivering the financial returns that our investors have been patiently waiting for over the last few years. But I can say that our funding position is in much better shape than the GBP 430 million of net financial debt and GBP 180 million of pension scheme deficit that I was talking about in my first results announcement just 3 years ago. So with that, I'll hand back to Adolfo for the rest of the presentation. Thank you.
Thank you, Tim. Certainly a lot better. Right, so how are we going to make it even better going forward? So let me just recap for those of you who may be new to Capita. How do we go to market?
How do we operate in this new simplified Capita? So at a highest level, we go to market through two divisions, the Capita Public Service division and the Capita Experience division. Within the Capita Public Service division, we've got three different segments. We've got the Local Government segment, we've got the Defence, Fire, Security and Learning segment, and then we've also got the Central Government. So similar size, give or take, in the businesses. Obviously, each of them with very targeted propositions to the buyers in terms of what we have to do. They're not exactly we don't do the same everywhere, but we're starting to build more common blocks that are relevant across the portfolio. Similarly, on experience, two very distinct components. On the one hand, we have a £100 million business in contact centers. It's one of the very large European operators.
We provide services out of the U.K., Ireland, Germany, Switzerland. We have operation centers supporting that in South Africa, India, Poland, Bulgaria, and others. So some fully fledged contact center operations delivering across verticals like telecommunications, media. We've got utilities as large, both energy and water. We've got financial services, retail. So what you would expect from a big call center operator. And then we've also got a growing and profitable business, the pensions business, Pension Solutions that Tim mentioned a couple of times. So that's kind of where the main activity of the group is. But when I joined, I commissioned a piece of work, strategic piece of work to OC&C Strategy Consultants to help us build an outside-in view of the business. I really wanted to understand from a 360 analysis perspective, where did we operate? Where do we have capabilities? Where do we have service offerings?
I wanted to understand each of them in the context of the capability for the future. Which markets were we operating for each of the offerings? What was the competition like? How often do we win? How well do we win? What capabilities do we have? What differentiation did we have? What's our ability to deliver? What's the financial profile? And going forward, where do we see the opportunities for each of the capabilities? It was a really complex exercise, which I'm probably doing a total disservice by trying to capture it here in just in the one slide. As the output of that, and I think that's sort of the telling thing, we were able to bucketize our capabilities on what we take to market in the previous segments across these three buckets. Star positions, they sort of roughly 45% of our revenue.
These are things that we do well. We do often, we win, we are a market leader, we deliver well, and we make decent financial returns. So we're going to be doing a lot more of that. We've been very intentional. We want to do a lot more of that. And then you've got there a number of examples of some of the work that we do on low emission zones. Here in London, what we do in terms of training programs, very advanced training programs for the Royal Navy. What we do in pensions, administration, and the capabilities we build there, that's something that we want to do a lot more of. Then there is a bucket in the middle, which is sort of roughly that sort of 30% of revenue.
This is stuff that we do, but we could do better, but it's certainly the right things to do. Right? So we just need to be transformed because there are good spaces for us to be in where we have a right to win, where we are winning, but we are not winning as often as we should. And when we win, we deliver well, but we could be delivering better. And I think a good area that I think it was highlighted in that context was contact center. We built a really strong position in the market, but we need to sort of transform how we do that. And Corinne, when we were in capital markets, they took us through the plan of what she's been doing for the last 18 months since she came on board to sort of re-engineer, retool that.
If you look at what we've been doing as an example for the last six months in terms of offerings, you will see that that's been one of the target areas where we've been bringing a lot of innovation, like the Capita Contact offerings on the back of Amazon Connect to really enable us to onboard agents 50% faster, to be able to get a 30% productivity increase and rolling that one out. The announcement early in the week of the GenAI-based tools for call centers, the Capita Agent Suite, goes exactly to that area. You see us targeting that transformation potential because it definitely is a really good space for us to be, but we've got work to do.
And then we've got the Managed for Value bucket, which are areas where the acquired capabilities, our customers need us to do some of those capabilities or not most of those capabilities, but the financial return for us to date has been unsatisfactory. So we have to go and find the way to get value out of those offerings. In one particular case, Capita One, the best way to get the value and ensure that that could continue was outside the company, because it strategically wasn't fit, but everything else that we've got on the portfolio, we're looking at it through the lens of how do we generate value all the way from partnering to overhauling some of those capabilities. And you've got a number of services there. I think there are going to be opportunities to improve and create value out of that bucket going forward.
I think this is an important backdrop to everything that you'll be hearing from us. I've also said that, A, this is going to be a multi-year transformation to get those financial returns. I believe we will get those. I am very confident based on what I see that there is a really good path to get there. But we have to be systemic about how we go about this. So we like to think about three different waves, which, by the way, they are not sequential, which you could sort of represent it in 3D. They need to happen sort of in parallel, but the intensity is going to change over time.
So the first wave as such is the one that sort of creates this pace, the one where we get those first early wins, and it just gives us the ability to just go and get with the rest of the business. That's kind of what we're doing today at large. A lot of cost transformation, re-engineering, transformation. It's all of that program that Xenia Walters took us through when we were together here in the Capital Markets Day. And the one that we're happy to report a significant progress on, the GBP 100 million out of the GBP 160 million already be in action. Then there is also back to basics because the best way to get agility into the business is just to do quick re-engineering on how we do things, how we operate from the go-to-market, sales excellence, procurement, facilities.
It's about building a leaner and somewhat meaner organization that allows us to get the basics at the right level. How do we do MI dashboarding? How do we effectively become just a company that can run faster and that enables additional savings and enables a better service provision? And the last bucket is about building the future, right? It's how do we see what the portfolio of services and capabilities needs to be over years to come. So we intercept not only current growth waves, but also anticipate where the next adjacent growth waves are going to be and make sure that we are there ready with tools. And I think, for example, some of the work that we are doing on GenAI and the launch of the Agent Assist family, the Agent Suite family, and Insights, it just plays right into that space, right?
So that you get GenAI literally working in for and around our advisors and managers to deliver those type of capabilities. This is just one of the first few ones. So think about all of these in that sequence. I'd like to address now the topic of the change of government because I know this has been obviously a very important topic in the country, and I get questions asked often. So first of all, let me sort of reassure you that we have been engaged with the shadow government as it was then, proactively, creatively. And we have had a very good set of constructive discussions over many months trying to understand A, what they were planning, B, come back with some ideas, and then C, figure out how we could help with the policy.
But if you sort of look at the areas that were highlighted in the King's Speech a couple of weeks ago, then you find that many of the areas that come through as points of action are very aligned, not only where we're Capita is trying to do, but also where Capita is doing today well. And many of these offerings are actually my first bucket, right? It's in the star positions that we've built. So when we look at things that the government is trying to do and you look at whether it's the productivity of the Civil Service and how can we drive productivity up, how can we use better tools to go and do that, I believe we have a value proposition. If we look at the pressure in hospitals, it will take a while to build and resource a lot of these new hospitals.
But we are coming to market with solutions for virtual wards that can extend the care out of traditional buildings, hospitals into the home. Just to name a few, if you look at what they're trying to do in terms of new build, new houses, and you look at our planning offerings and the services we're providing today and we've been providing to councils of all colors over the years, those are things that are core capabilities for us. So we're excited to be working with, excited to work always with any government implementing policy because I think that's something we do very well. So we're excited to see the journey that we're on in areas like national security, sustainability, and a number of the others that we mentioned.
So the other question I get asked a lot is, well, are you going to get this intermediated by going so much into technology and working with hyperscalers? Are you leaving money on the table? Are you sure? And in short, yes, I am sure. I'm very, very sure. I come from that world, and this is the best thing that could have ever happened to Capita. This is all about the first place is growing the addressable market. It makes our market bigger. By the time we're really tooled up and we've got those capabilities, those relationships, and those tools, we will be able to address things that would only have been a pipe dream a few months ago for Capita.
Most importantly, in the context of the win rates that we published this morning, it will allow us to win more often because we will have a better value proposition. We will have more value propositions faster. We will be able to come to market with the very latest set of technologies and solutions. And it won't be back to the old days of Capita where, okay, we will solution engineer through committee in a waterfall fashion, and it will take us a whole year, and then we'll go through three to six months of governance to do that. And by the time you get there, the whole thing is gone. We are going to be very agile because these companies provide innovation.
They are investing, and I think everybody's had a good read this week at the huge amount of tens, if not hundreds, of billions that they're investing in CapEx and investing in capabilities and large language models and NVIDIA GPUs and data centers to provide all of those intelligent services out there that all we have to do all is orchestrate and put and serve in the context of our customers' business processes, which we know best. So this is a tremendous opportunity for us to reduce CapEx, to reduce our cost of sales, to reduce the time to market. So really, really excited about what this brings and certainly one of the areas that will be more transformative for the Capita of the future. In terms of sort of examples, you should try to bring some of them to life.
Look at, again, this is one of the strategic areas I mentioned earlier is the call centers, right? It's the size of what we do and our impact across customers. We handle over GBP 100 million transactions per year, just to give you an idea of the volumes of what we do. So everything that we can do to move the dial on a single transaction, on a single day, on a single advisor, it makes a huge difference. By the time we roll down, by the time we've done it at volume, at scale, and in its full intensity and potential, it is truly transformative. So we came out first a couple of months ago with Capita Contact offering. So this is one that we built with AWS and is based on Amazon Connect, and we did it with Barnet County Council.
We've been running a program with them, and we've seen some significant productivity gains, reducing number of days by half, reducing onboarding, brings in all the integration, the analytics, all the telephony, a somewhat basic task management workflow. So it really just gives you that concept of a call center in a box that then compounded with what we can do for understanding customer stream and operation teams understanding requirements and how to run this is just really a really powerful combination. Earlier in the week, we announced the Capita Agent Suite, a fully GenAI-based solution, but this one is multi-platform. It's really important to see. This one sits above the hyperscalers. So it can work, and it's currently being deployed on top of Amazon Connect, but it could equally be deployed on top of Genesys.
It could equally be deployed on top of the Microsoft platforms or a number of others. So that one actually opens up the market for us, and it gives us sort of two flavors. Think about it in two flavors. We've got the flavor of how do we drive one part of it, which is the Agent Assist, which is how do we drive the productivity up for an agent? How do you make the life easier? And I was down on day three when we started deploying it in one of our operations in the north of England. And you could just see the level of excitement by the agents. You really don't need to look at PowerPoints. Just go and sit with the agents there.
You just see how this thing is working next to them, and you see how steps that would take a long time all dramatically are crafted on the fly. You could also see those who are not using the tool yet saying to me, like, when can I go next? I'd like to use that. And that's really telling. The second part of that is a management information in real-time intelligent management information system for management, line management, and maybe the customers over time to really be able to look at the operations and be able to optimize on quality. All of this is about reducing average handling time. All of this is about reducing the non-productive task associated with the other engagement so you can have more engagements every day so that you can have better engagements every day.
So you drive up your net promoter score, customer satisfaction, you drive out your productivity, and you get productivity and efficiency gains. So the other question that I get to ask in this context is, what does it do to the business model? Right? Are you sort of cannibalizing yourself? I get that question asked. So what we tried to do here is just said, okay, what it does, we're certainly transforming our business model as a result. And transformation is the right thing to do. What you can't do is pretend it's not happening. It's much better to just go and transform it and get fully ahead of it. So if you see what we've got today, the legacy systems that got us this far, it's mostly a voice-based system, which obviously is harder to differentiate if you don't have a huge scale.
We have a large scale, but we're not a worldwide player. We have fully transitioned to an omnichannel model offering that is integrated. It opens up a lot of avenues in terms of what you want to do in call diversion, call handling. Where do you prioritize the human touch, the highly empathetic work that some of our agents are doing to be deployed and let some of the more transactional stuff to be done at the technology level? You definitely move from just being very people-intensive and only being able to scale through people to be able to scale through a mix of people and technology, which obviously brings a lot of productivity and leverage. Time is money. If it takes you 20% more time, it's just got 20% more cost that will be working.
At an agent level, at an advisor level, our colleagues will get more job satisfaction because they will be doing what they do best, which is the engagement with the customer. They will have to do less of what they hate most, which is copy and paste, typing, and just doing all of these things time and time again during a call and after the call. So in terms of, they will be working with some of these modern tools, and that will obviously get us a happier set of colleagues. It will help with retention. The cost of attrition is very high in this business. Everything that we can do in terms of the cost of retention will also flow into the line. Lower barriers to entry today.
I think you could say, well, if all you've got is a voice operation, you're always permanently exposed to anybody coming and trying to be your voice for less. Obviously, as we introduce these tools into our offerings and our capability, the barriers to entry for our competitor are way higher. This is not definitely something that I think is going to come out and do it cheap. It's going to cut it because you've got to be able to match the level of analytics, insights, and optimization we will be to do in real time, and customers will be able to see in real time. So there's definitely changing the competitive dynamic. And then I think is the important transition. All of that is about ultimately will result into a better company. It'll be more profitable. We have better technology.
Obviously, we're going to get better efficiencies and such. We'll have better financials. Just apologies, I know I'll be late, but it's important people understand how deep the impact is of these partnerships and how deep and far-reaching the improvements are and will be from these platforms as we fully roll them out. On the culture side, just thank my colleagues, all my 41,000 colleagues for having taken on the challenge to translate that social value of what we do daily into financial performance. It's taken a lot of grit for everybody. It's taken a lot of determination. It hasn't been easy. We've had to make collective sacrifices. But I can tell you, I travel around the operations. I think there is something that is reigniting. People want to be part of this journey. They believe in this company, and they are engaging. We've launched a program.
I could talk about the culture program and what we do in terms of bottoms up and talk down a lot. I'm not going to. But we're starting to see some internal metrics that show we are working in the right direction. And our Chief People Officer, Scott Hill, in the back of the room. So if anybody wants any details later, I'm sure he'll give you all of them over a coffee. So a lot of work to do, but a lot of work has been done. So just as a reminder, this is a slide I use at the Capital Markets Day in terms of what is the investment case for Capita. So I talked about the foundations in terms of the customer, very deep customer relationship, long-standing customer relationships, sector knowledge, understanding of the business process that has been built by colleagues in this company over decades.
That is a really solid foundation and one that continues to impress me every week, even six months in. I think team made a very good case in terms of we have a self-sufficient strategy that we can fund from what we are doing and how we're doing it. And I think that's important in terms of de-risking, in particular, because we still see significant opportunities for cost reductions, for efficiencies. And we have opportunities to do a lot more with less by doing it differently. And the whole drive and transformation will continue to be there. We're being more intentional. You saw the three buckets, the strategic positions, the transformation, and the Managed for Value. Not everything is equal. This is not. So we are giving it that distinct focus on the go-to-market. We're being selective.
We're paying a price on the top line in the short term, but it's the right thing to do over the medium to long term, just the selectivity of what businesses do we want to be in, in what financial profile, what type of tooling, what type of business makeup we're going to do. Then hopefully I made a good case in terms of using technology and partnerships as a key enabler for us going forward. Then obviously we have our operating margin ambition of expanding from the current 4.1% in the period to 6%-8% and continue to improve the EBITDA conversion into cash and obviously becoming cash flow positive from 2025. While once we've done with all of these sort of getting smaller to get fitter to then get bigger and start growing again as the opportunities are there. So really interesting journey ahead.
Really excited about the opportunities over the next few years. I really believe we're on the right journey. We're on the right path. And I think this first period, it's just proven to be some early wins. It's getting some early momentum. And yeah, very pleased to be here where we are. And I think just looking forward to the second half and periods to come. And I think with that said, we're going to stop here and just do Q&A.
Hi there. It's James Rose, Barclays. I've got two pleas, and if I could do them one at a time if that's okay. The first is on Capita Experience.
If we look at your pipeline of opportunities and rebids there and map out the timings versus the changes you're making in that division to make it more price competitive to add in the capabilities, at what point would you expect that win rate to start ticking up and to see revenues holding and growing in that division?
I can tell you already, and Corinne is here, I can tell you already the engagement with our customers today already is different. The level of value proposition differentiation that we've been able to bring in front of customers over the last 60 days is very different. They have sometimes not seen this type of innovation before. They certainly haven't seen it from Capita. We are offering them, and some of them are getting started, and many of them are already underway.
So we are already feeling that it's starting to make an early difference. Some people said to me, "Well, you're never going to get customers to agree to the GenAI and their data." Well, they are, and they're already engaging. And actually, at the moment, we got more customers who want to do it than our own ability to ramp up because we are building up this capability. So I think it was in March or I think it was probably in March, I said, "I was looking at 2024, the year where we're going to start building some of these capabilities. We're going to be doing proof of concept. We're going to be learning. We're going to be ramping up." And I would expect in that 2025 is when all of these solutions will start materializing into increased win and making more.
So I think that we are well on the way to sort of meet that expectation.
Very clear. Thanks. And the second one is just more broadly on sort of balance of revenue and cost. I mean, so over sort of years gone by, I mean, as revenues have come down and we've seen attrition, you've obviously needed to take more and more cost out to keep up with that. Bearing in mind the revenue outlook for the second half is a bit weaker now, is your current cost savings and efficiency program sufficient to deliver the sort of FY 2025 ambitions you still have out there? Have you already planned for revenue to get perhaps a little bit worse before it gets better?
Short answer, yes. Longer answer is look at what's happening in 2024. So we have seen revenue attrition in the first half of the year.
We expect a lower rate of revenue attrition in the second half of the year. We have detuned our revenue expectations in today's results announcement, but the profit remains the same. Candidly, we have as a group been chasing revenues that have not been creating bottom line and in particular not creating bottom line cash flow. That we are deliberately stopping. The medium-term guidance of low to mid-single-digit revenue growth, 6%-8% margin, and positive free cash flow from 2025 onwards, that remains the same. So longer answer, but still the answer is yes.
Okay. Thanks very much.
Morning, Chris Bamberry. A couple of areas of questions, please. Just looking at the reduction in the full year revenue gains, could you give us a feeling of what the kind of split between the delays are and the importance of the change in bid approach, more margin-focused?
When we look at those delays, when are we expecting the contracts to start? When do you think they're now going to start? And what's the risk of further delays on that front? Thank you.
Probably about 50/50 between the two in terms of what has changed from where we were 2-3 months ago versus where we are now in terms of full year expectations. Around half of that change arises from the refocused bidding activity. There was a significant contract that actually between the trading update that we gave back in April and now that we were bidding for that we've lost, which would have flowed through into revenues quite quickly, that hasn't come through. We lost that on price. And then the delayed implementations, we've flagged those a couple of times at events, including most recently at the Capital Markets Day.
In one case, we expect revenues in the current year. In another case, that will probably fall into 2025. So it has shifted significantly from where we originally expected in 2023.
And secondly, obviously, you've lowered your revenue guidance, but you've maintained the profit guidance, which would imply that you're delivering the cost savings faster than expected. But you've not changed your guidance on what the cost of that will be this year, that GBP 50 million in the cash flow or the delivery time. So we're just trying to reconcile those.
Yeah. I kind of go back to the answer I gave previously. A lot of this revenue that isn't coming through wouldn't have created a bottom line benefit in the current year. And it's a slightly sad thing to say, but genuinely, we have had a significant proportion of revenues.
Look at how much revenue sits in the Managed for Value bucket we identified at the Capital Markets Day. We very clearly are prioritizing cost out, margin improvement, generating cash flow. No company can be wholly indifferent to revenue, but it most certainly is the third priority. You are seeing the effect of that. Losing the revenues that have come out of 2024 is not changing our profit guidance. We have made good progress on the cost out program, but we are not changing the guidance we're giving on the GBP 160 million, the timing of it, the cost to achieve. When I've gone, the team might outperform those expectations, but at the moment, we're not changing any of our guidance around that particular component.
Thank you very much.
Good morning. It's David Brockton from Deutsche Numis.
Can I ask a few please, and I'll do them one at a time as well. In terms of the GBP 100 million of annualized savings that you've already achieved to date, can you just set out in respect of the balance, the sort of GBP 60 million, where that resides in terms of sort of real estate procurement, sort of simplification? And is there anything more challenging about achieving the final GBP 60 million that we should be aware of? That's the first question.
I mean, just in terms of challenge of achieving any targeted cost reduction program, it gets incrementally harder as you go through the program. So there is no question that the first, well, I think we started with GBP 40 million target actually that we communicated in the middle of last year.
We then upped it to 60 in the run-up to the year-end and then increased it to 160 with the full year results. The lion's share of the first wave was overhead reduction, reducing some of the layers, increasing the spans of control. And that has continued. As you know, in terms of real estate, that's actually been an ongoing program for a number of years. It's an inevitable byproduct of us reducing our headcount and also the push to offshore more resources. So that has continued. But in Adolfo's slide, there is an analysis of where the GBP 100 million has come from. And you can see that most of that is headcount. Most of that is the organization design work. And what you will see over time is the—I can't remember which way around it was.
I think it was actually the lower bars on that, which are the more complex areas, will increase as a proportion. It gets incrementally harder, there is no question. One of the reasons why we're not changing our guidance on the cost out and the phasing of the cost out program.
And then secondly, sort of almost related to it as well, can you just touch on whether you're already reinvesting some of the savings as you intend to do, or is that a later sort of function? And also actually one going as well, can you quantify the in-year saving that you've already achieved this year?
Yeah. On the in-year savings, around GBP 40 million delivered in the first half of the year.
Clearly, that will increase in the second half, probably another kind of 15 or 20, I guess, in terms of the impact across the full year of the savings. The reinvestment question. So what we said at the Capital Markets Day was that by the end of 2025, we would expect it to have reinvested around GBP 50 million of the total GBP 160 million. That is quite a long-term time frame. You can see from what Adolfo has outlined that there's a lot of activity going on to create the future of Capita. That at the moment is not creating a big financial drag on the business. And therefore, a precise answer to your question is actually we're not reinvesting much of the savings at this moment in time. And actually, if you remember what we said about the original GBP 60 million, all of that was going to drop to bottom line.
So none of that would be invested. It's 50 of the additional 100 is to be invested. We haven't started delivering on that extra 100. So we stick with what we said, which is by the end of 2025, we will have reinvested the 50.
Thanks. And sorry, one last one. Just in respect of the medium-term targets, I think those exclude the Managed for Value element. Correct me if I'm wrong. But could you maybe just set out how we should think about the sort of the returns that side of the business could generate over the medium term?
Yeah. Actually, the revenue growth, the margin targets, the getting to free cash flow, even though we have sold a high margin, highly cash-generative business in Capita One, those medium-term targets have changed. So you could argue that actually the targets exclude the Managed for Value bucket.
It doesn't actually make a lot of difference. There is so much potential in the rest of the areas of the group that we are confident of delivering, almost no matter what is done with the Managed for Value bucket.
Hi, morning. This is Manish from Barclays. I just had a question, Adolfo, on your win rates and, of course, your weighted pipeline and the reduction of the same. Do you have any general guidance on what those reasons are, why that win rate has come down, external factors or competitive tendering? And the second part of my question was, in terms of the addressable market share that you spoke about, do you have a sense of the size of market share that Capita today has? And in 2025, what those can be in terms of the addressable market?
So no, I can't give you a precise answer on the second one. Across the business, I know some areas like the government space. Obviously, we know they're in our prime positions. I think there's a study that was public a few months ago that showed we had about 20% market share. But I can't give you the mix because it's very tough compare. So if you look at Corinne's business, the contact center business, it operates just in some geographies and not in the rest. So it's very difficult to sort of do a like-for-like comparison. I think we addressed the—so if you look at the win rate in the period, a lot of the bidding has been done on the capabilities we had in 2023, right? Capabilities and what we know how to do in 2023, somewhat adjusted for cost improvement, but not enough, right?
So that led us to where we are. So you can't do that. We've learned that the areas where we've been taxed by our customers was like there was price, and price is a function of cost, which is by addressing cost, we'll be addressed price, and then we'll address the price competitiveness. Innovation is a lot of some of the areas and the solution design. They were just sort of very much sort of just people and process-centric. There was not enough technology. And then hopefully, I show you a very different future going forward. So I expect that one very quickly going to be addressed. And that always sort of drags us against - we're always the preferred quality provider very often. And we are always the sort of preferred known trusted partner, right? So the moment we address the other two, the win rates will go.
In the world that I come from, if you're getting something that is a new logo, you should aim to get at least north of 30%-35% for a new logo. And I like to have retentions and renewals very high, right? 80%-90%. If you want them and you're there and you deliver and we do all the right things and we are cost competitive, the easiest thing for our customers should be to extend with us. In some areas, we're attaining that. In some areas, we're not. So the averages here don't tell the full story. But what it does say is that we need to improve it. And what I presented earlier is the plan on how to improve it.
Thank you.
Okay.
Okay.
Well, since there's no questions neither in the room or online, let me thank you all for your continued support and look forward to working with you over periods to come. Thank you and have a good day.
Thank you.