Good morning. I'm Adolfo Hernandez. I'm the Group Chief Executive at Capita. Thank you very much for making it to this busy room today, but also thank you very much to those of you who are listening or watching remotely as we present the 2024 financial results. These are my sort of first full set of results as such. I joined the company an eternity ago, it seems. It's only the middle of January of 2024. Besides sort of doing the normal reporting, I'm still hoping to share some more of my learnings and recommendations and things that we're doing over this past year. Also in the room, we're going to have Pablo, our new CFO, who took over from Tim Weller in the summer. He's had a very busy six months of induction into the company. I'm just really excited to get going with this.
Before we do that, I'd like to sort of draw your attention to the disclaimer slide and start with a little recap of the Better Capital slide, because I think it's a good framework to remember. As I said, when I joined back in January, I went into a very ambitious onboarding plan. I traveled extensively to meet our colleagues, our customers, our operations, our call centers. I really wanted to get under the skin of what we did at Capita and how we did it and why we did it and how much money we made or not, as the case might be. I really wanted to understand where we were winning and why and how often and why we were not winning and why and where we were making money and where we were delighting customers.
We did a true 360-degree analysis of the company. We formulated, as an executive team and the board, a strategy that we signed off at the beginning of May. We came out with a capital markets update back in June, where we just sort of presented what we wanted to do with Capita. For many of you who might be new to the Capita story and you might have not been there, let me just quickly recap that part of my wow on the onboarding was to see the strength of the relationships and the customers and the understanding of the business processes that our colleagues had. That was a really solid foundation. It was something I was hoping to find, but there's never certainty until you really get there. That was a really strong foundation.
The disappointment was, at the time, we hadn't managed to translate that value, that great work we did, into financials. The financial performance was very disappointing. When we said we wanted to build a better Capita, it was about building on the strong foundations the company had, really just making sure that we get a more operationally focused Capita, more tech-enabled Capita, a leaner, nimble Capita, building a better company for and with our colleagues, and one that was able to produce financial results that were commensurate with the great work we did. That was the strategic agenda that we embarked upon. We've been super busy. 2024 has been, I think you can call it, a deep root and branch transformation of Capita. It's been a pivotal year, a very foundational year.
I'm really looking forward to sharing with you now everything that we've done in these sort of four pillars: the technology, the efficiencies, the delivery, and the better company. Before we do that, I think it would be more appropriate if we let Pablo introduce himself, run us through the numbers, and then I'll come back and do the rest of the session. Bear with me a second, and Pablo will take us through the numbers.
Thank you very much, Adolfo. Good morning to everyone and to those of you in the room. Actually, thank you for making your way across to Paddington. Starting by introducing myself, Pablo Andres, joined Capita in July, August 2024, and born in Spain, as you can see. I have been in finance roles in the U.K. for 20 years already, the most relevant and recently at G4S. Throughout my career, I have enjoyed working in exciting transformational roles where I can apply my energy and transparency to drive shareholders' value.
When I looked at Capita from the outside, what attracted me was a company that was close to finishing its restructuring with a new CEO, with the right strategy and the experience to transform it, and the opportunity to be a key member of the team delivering that strategy and delivering the value I know this business is capable of. Now that I'm on the inside, actually, what I have observed, even with more clarity, is that the ability that Capita has to deliver this transformational strategy is huge. It has a high-caliber and hard-working team willing to succeed together. I believe we can help this business to achieve its potential. The first thing I have done is expand the segmental reporting. I thought that the increased transparency would allow stakeholders to better understand the performance of each business and the intrinsic value of each business.
I'm also seeking to provide further clarity on other areas, such as key changes in operating profit by segment and working capital by segment, separating deferred income and CFA to show cash-backed profits. I trust that by starting with the actions above, the market will better understand our business and will be able to measure our progress as we deliver our strategy. Now, moving into the financial highlights, the group revenue declined by 8%, reflecting the impact of prior year contract losses and delayed mobilizations, the exit of low-margin contracts together with the progress we have made exiting close-book life and pensions, and the reduction of volumes in the contact center telecoms vertical. Operating profit increased by 5.5%, reflecting in-year savings of GBP 90 million from our cost efficiency program, offset by the revenue reductions I have described and the non-repeat of positive prior year one-offs of around GBP 34 million.
This delivered 50 basis points operating margin improvement in 2024. Free cash flow was an outflow of GBP 122 million, similar to 2023. However, it reflects the end of the pension deficit payments and costs associated with the cyber incident, costs of GBP 45 million in delivering our cost efficiency program and a more sustainable approach to working capital management. We have delivered ahead of schedule annualized cost savings of GBP 140 million. Our net financial debt gearing has reduced to 0.5 times EBITDA. Our lease debt, including sublease receivables, is around GBP 250 million. Now, moving on to the profit reconciliation.
As you can see, the key items between our adjusted profit and reported profit are the GBP 171 million gain on the disposal of Fera and Capital One, the investment in our cost reduction program of GBP 28 million, following GBP 54 million of P&L costs in the prior year, and goodwill impairment of GBP 75 million. Goodwill impairment relates to the contact center business and is mostly driven by the lower revenue base for the projections made in 2024, including lower volumes in our telecoms vertical, which are expected to remain subdued in 2025. Now, before we dive into the detailed segment by segment, I thought it would be helpful to show the overall picture of the group with the most material items in each division. The table shown on this slide shows adjusted performance for each of the divisions and a summary of the key movements within each division.
I am not intending to cover financial performance here in this slide. I will provide the details in the following slide. However, in here, what you can see is, firstly, public service, which had a significant top line and profit headwinds during 2024, but has made overall good progress on margin, supported by cost-saving initiatives. This business delivered an EBITDA of GBP 126 million with a 73% cash conversion. The contact center business has had a more difficult year with the impact of prior year contract losses and one-offs and the reduction of volumes related to the telecoms vertical during the year. All of this together has eliminated the benefit of the cost savings, with results showing a net loss of GBP 6 million.
On an underlying basis, through the benefit of our further efficiencies and strategy, this business should be able to deliver market-comparable margins as we execute our strategy set out in the Capital Markets Day. Our pensions business is an attractive, growing business. It's managing defined benefit schemes and pension consultancy services. It is winning new mandates and improving margins. It's delivering solid cash conversion with an EBITDA of GBP 34 million.
Finally, regulated services. It is made up of businesses we identified in the Capital Markets Day as managed for value. It includes our closed-book life and pensions business that we have signaled our intention to exit. We made good progress during the year with one remaining customer to agree exit terms. We are working hard to agree a resolution. As previously disclosed, we expect overall cash outflows of GBP 20 million per annum until we exit this segment.
Finally, we have the cost of running the PLC separately reported, with its working capital showing the reduction of usage in the factoring facility this year. Now, moving into the details for each segment and starting with Capita Public Service. Revenue saw a reduction of 0.9%. As we saw the impact of contract losses in previous years, we exited some low-margin contracts, and we had a more disciplined approach to bidding at appropriate margins.
We also faced the impact on the revenue line from the delayed mobilization of two contracts won in 2023, and these were mostly offset by new wins and indexation. Operating profit increased by almost GBP 20 million, or 28%. This was mainly driven by the results of our cost reduction program, partially offset by the previously announced contract losses and the impact of GBP 15 million that we had in the smart DCC business.
The year-on-year impact into the smart DCC was mostly driven by project work that concluded in 2023 and the 2023-2024 off-gen price determination that delivered significant cost disallowances. During the year, we have tightened our commercial and operating controls in the smart DCC business, ensuring a more robust evidence trail is kept, supporting the efficiency of all costs, as well as meticulously documenting all activities undertaken at the request of our client.
Cash conversion during the period reduced to 73%, mainly reflecting the overspend on the contracts that had a delayed mobilization and a more sustainable approach to working capital management. On to the contact centers. Before I dive into 2024 performance, though, you will recall that at the Capital Markets Day, we gave indicative margin for contact centers in 2023 at 0.7% positive, reflecting significant opportunity versus our peers.
You will see in the slide that the margin for 2023 has been restated to a negative 0.5%. This has been updated following a more detailed calculation of overhead allocations. Most importantly, this does not change the key message. We have lots of work to do, and there is a significant opportunity in this business to get margins in line with peers. Going back to the top, then, revenue in 2024 saw a decline of 18%, reflecting previously mentioned one-off benefit of our VMO2 contract, prior year contract losses, and lower volumes within our telecoms vertical that are expected to remain subdued in 2025.
Operating losses were GBP 6 million compared to GBP 4 million losses in the prior year, as prior year losses of GBP 4 million benefited from the exit of the previous Virgin Media O2 contract that delivered a one-off accelerated deferred income release of GBP 10 million and a further deferred income of GBP 8 million. Without this, the business would have made losses of GBP 22 million in 2023. During the year, we delivered material cost savings by significantly reducing our footprint in property and increasing our nearshore and offshore activities through the opening of the new global delivery centers in Bulgaria and South Africa. However, these savings were partly offset with the reduction of volumes, the continued investment on new technology products with our hyperscaler partners, and on a year-on-year basis, the non-repeat of the 2023 one-offs.
Operating cash flow was close to nil during the year, reducing from GBP 20 million in the prior year that benefited from timing of payments with VMO2. Moving on to our pensions business in Capita Experience. During 2024, revenue increased by 5.1%. We saw volume increases with clients like Pick, together with some benefit of indexation. Operating profit improved by 8.5%, supported by the savings from our cost reduction program and operational leverage from growth.
Cash conversion also improved to 98% as we worked hard to improve our billing cycles to drive what should be a more appropriate level of cash conversion for this business. Turning the page to our largest remaining managed for value business, regulated services is mostly our close-book life and pensions business, where we have made significant progress agreeing to exit contracts during 2024, including the agreement to exit a client signed last month.
We will deliver these exits over the coming years. Exits are now agreed with all but one customer, with whom we remain in active dialogue. As a result of these exits, as expected, we saw a decline in revenue and profit in 2024. Additionally, you'll remember that 2023 included a GBP 24 million one-off commercial settlement and a cash one-off from a contract termination. Cash consumption of this business during 2024 was GBP 14 million, reflecting payments from customers as we exit them. We continue to expect cash cost of around GBP 20 million per annum. As you well know, this is one of our highest priority areas to resolve. We have made huge progress during 2024 and the beginning of 2025. We have good engagements in discussions to exit our last customer. We will provide an update when we get to our resolution.
Moving on now to cash flow on the next slide. Our EBITDA was GBP 186 million, GBP 10 million lower than the previous year. This was mainly driven by lower depreciation and amortization due to the continued progress in our property rationalization program. We then see the net of deferred income and CFA 2024 showing a more normalized level of around GBP 50 million compared to GBP 100 million in previous years. Other working capital shows a GBP 53 million negative outflow, reflecting a more sustainable working capital management approach in 2024 and the non-repeat of payment phasing on the Virgin Media O2 contract in 2023. Non-cash and other adjustments include mainly movement from provisions that get us to operating cash flow of GBP 72 million in 2024.
Operating cash conversion in the round mostly reflects the reduction of DI and CFA to a more normalized level and the adjustments to a more sustainable working capital in 2024. I expect cash conversion in 2025 to be around 55%-65%. We then have the end of the pension deficit contributions, remaining costs associated with the cyber incident, and the cost to achieve our cost reduction program that delivered GBP 140 million of annualized savings in 2024, well ahead of schedule. All of this left us with GBP 16 million of cash generating from operations, excluding business exits. Now, turning to the remaining parts of the cash flow and net debt, we start at the top where we left it in the prior slide with a GBP 16 million cash generated from operations. We then invested GBP 50 million in Capex, in contract delivery, cyber, and new technology solutions.
We paid our interest and taxes for GBP 41 million, and we saw the steady reduction of lease payments at GBP 48 million as we continue our property rationalization program. All of this resulted in free cash flows, excluding business exits, of GBP 122 million outflows. We expect this number to become positive from the end of 2025 through the delivery of our strategy and cost savings. We now continue below free cash flow, excluding business exits. We generated GBP 258 million from trading and proceeds on the disposal of Fera and Capital One. Other cash flows and non-cash movements reflect our new leases of the London headquarters and the global delivery center in South Africa. Our closing net debt was GBP 450 million. That includes GBP 66 million of financial debt, GBP 349 million of IFRS 16 lease debt.
Let's not forget that the headline net debt excludes GBP 96 million of sublet lease receivables shown in the balance sheet. Liquidity and net debt is on our next slide. As you can see, the year-end position shows almost GBP 400 million of total liquidity, including GBP 250 million of the RCF available for use. Considering the maturities in 2025 and 2026, including those we paid in January, we have announced this morning the issuance of a $94 million US private placement, which strengthens our maturity profile to deliver our strategy and transformation at a cost below that of our RCF currently. We expect net debt to EBITDA to remain below one times at the end of 2025. Now, turning to our summary for 2025 outlook, you will see we are providing quite a bit of granularity on this slide.
In terms of revenue, we expect the group to be as a whole broadly flat, with low to mid-single digit growth in public service, mid-single digit growth in pensions, offset by high single digit reductions in contact centers driven by the volume reductions described previously and the continued conscious reduction in our closed-book life and pensions. We expect operating margin of the group to show modest improvement in 2025, with progress both in public and contact centers through the delivery of the cost efficiencies, stable margin in pensions, and a significant deterioration in regulated services as we make progress on agreed exits and continue our negotiations with our last customers, with closer alignment with profit and cash flows than in previous years.
In terms of free cash flows, we are pushing hard in H1 with our efficiency program to ensure we deliver the committed annualized savings of GBP 250 million from the end of 2025. For 2025, we expect cash conversion of around 55%-65%, delivering a free cash outflow before business exits of GBP 45 million-GBP 65 million. This number already includes GBP 55 million associated with the investment on delivering the efficiency program this year. That means that we will be turning into a positive free cash flow from the end of this year. We have also continued with housekeeping activities this year. Subject to relevant approvals, we will be completing a 15 for 1 share consolidation and a share premium reduction. Summarizing based on everything I have seen since joining Capita, we remain confident on delivering the medium-term targets as set out in the Capital Markets Day. With this, I will hand over to Adolfo.
All right. Thank you. Thank you, Pablo. Yeah, very thorough. Certainly welcome the additional sort of transparency, housekeeping, and definitely the focus on the different business units. I think it's good to see everything and see everything with the right numbers so that everybody can see what it is that we're trying to drive and where. I think it does highlight both the progress that we've made in 2024, but very importantly, what I said at the top, the mandate we have to do better. I think there's still a significant opportunity to get to, first of all, to that medium-term guidance and then go from there.
In terms of plan, and again, sort of for those of you who have just sort of joined Capita, Capita's story, obviously, we are one of the largest business process services providers in the U.K., Ireland, and Central Europe. What we do is deliver extremely complex outcomes for our customers. If it's complex and it requires business process understanding and excellence, if it requires the best possible technology, and if it requires the best possible humans in the loop, that combination is what we do to deliver those outcomes in the countries where we operate.
We will do that, whether it is delivering to the citizens of local government, or whether it is providing services in partnership with central government departments, or helping across national preparedness, defense space, or addressing hundreds of millions of queries from end users and consumers in telecommunications, utilities, financial services, or dealing with vulnerable citizens across the board. We're extremely proud of what we do. What we do is an integral part of the social fabric of the countries where we operate. We aim to continue doing just that, but doing better and getting a better financial return for it. A year ago, I stood here, and one of the things I was saying with you is, when I'm joining from the tech industry, I've got very much of a tech career. In my last assignment before coming here, I was at Amazon Web Services.
As I said, I was sharing to everybody what I had seen in the tech world led me to believe that technology was going to fundamentally transform this market. If there was one market where we were going to see a significant reconstitution of components and value creation, it was this market. As you probably said a year ago, I think nobody now would doubt that. I think a year later, it is very, very clear that is the way this industry is going. I am very pleased that we made that call a year ago and that we really went and doubled into that approach because that is just there. We have seen probably more change in the makeup, the strategic makeup of the BPS market in 12 months than we have probably seen in the last 12 years put together. It is definitely happening now.
As we have embarked upon this transformation, we're taking advantage of saying, okay, what do we know about our business processes from our customers? Let's try to map those business processes into tech opportunities, whether it is user registration to use new services, whether it is processing of our medical records, whether it is getting automation of debt collection, whether it is driving efficiencies and supporting better calls and better experience in our call centers. There is a lot that we know about our business processes. Let's just map that into tech, into AI, into augmentation. The second thing that we needed to do is not just do it for the sake of a PowerPoint and not for the sake of just ticking a box, but deploying it at scale so that it matters.
It's still early days, but what you're going to see later, right by the end of this year, over half of the revenue of our call center will be supported and augmented by AI. We're doing this not just to prove that it works, but to really have a material impact in our operations. The other thing that I said a year ago was I didn't believe we could, we should, and we wouldn't build all of these technologies ourselves. Coming from the world of tech, understanding what a hyperscaler technology partner can do, understanding the sort of the wagon of innovation, the click and the fast innovation that they do, the amount of very general purpose innovation that they bring, it didn't make sense to build it. What we needed to do was to partner, select, and orchestrate the best experience based on them.
I think you're going to see a lot of what we've done in terms of hyperscaler partnering and repurposing our tech efforts and organizations and talent to sort of add that orchestration level and bringing in our Capita special source on top of the partnering solutions. It was really important to start shifting from service as FTE to service as software. This industry has been service as FTE, and it's been about labor arbitrage for way too long. Now, as we have embedded into recruitment, and we've been looking at high-volume recruitment as an opportunity, I mean, last year alone, we hired 10,000 people. We do a lot of high-volume recruitment, and a lot of our customers do high-volume recruitment.
Instead of going about it in the traditional way, we have gone with AI agentic, and we have created a software capability on the back of Agentforce to create that type of innovation. When we're doing now beat generation, we're doing beat generation on the back of AI. When we're looking at providing user registration services for new services that are going live, for example, in Transport for London, we're doing that now. Instead of just throwing hundreds and hundreds of people in there, we're just doing it with tech and lesser people that are more equipped. That's part of our implementation. Human in the loop AI, I believe this is sort of a term that was coined by MIT. I believe it describes really, really well the future of this industry.
Because even though the press would love to arbitrate that there are startups, that there are capabilities that are going to be agents that are going to take over the world, the reality is that it's always going to require to have a human in the loop. Let's let technology do what technology does best: fast processing of information, high-volume information, automation, repetitive tasks. Let's just make sure that we've got the right humans with the expertise, the empathy, and getting the two of them working for one another to deliver that. I think in Capita, we've got a big advantage there. We've got to build this at scale. These things can't be examples. They have to be the menu. You've heard me talking about the menu, and the menu is growing. Sameer Vuyyuru , our Chief AI and Product Officer, is on the back.
We're going to be talking about him and the mission he's taken on. We're going to be building this at scale. This is going to be the full menu. This is happening to us, is happening to all of our industries, probably happening more to those that have a high content on professional services than it's happening to others. I'm really, really excited because this is going to recreate the value chain. I believe that by doubling down early on and doing it with purpose and intention, we're going to be really well positioned. The next sections are going to show you some early fruits, some early green shoots, some early validations of what we're doing. Obviously, this will take time.
We can't expect to see 12 years of change materializing into the financials, as I talked, 12 years of the old world's materializing into the financials in one year. I am confident that we're starting to see now that as we start looking at the business over a compounded three-year view, we're going to start seeing that evolution there.
The other thing that's happened in the market, particularly in our largest and most important market, which is the U.K. public sector, is over the last couple of months, we've seen certainly from the Prime Minister down everywhere in government, an absolute drive to not just distrust AI as it probably was until recently, by looking at AI as a key enabler to solve some of the challenges that we've got to deliver citizen service, to deliver the services that the civil service is trying to do, and to do that within the new realities of the budget situation in the government. I think the playbook, the AI playbook, is ambitious. It's still up to play for. It needs to be mapped into particular legislation and projects and this work to do in contracting. It's certainly a fantastic start.
I think one that should help us move the country forward and one where I believe that as a national trusted partner, a sovereign trusted partner for the government, we're in a better position to leverage going forward. Quickly back on the four betters. I mentioned Sameer sat in the back. Sameer joined us from Amazon in November. He's inherited, and he's putting together a new organization. His job is to deliver this AI as a service to our organization and do that at scale. He's inherited the best of the people that we already had in Capita. We did have a lot of people. They were just buried into contracts. They were buried into different organizations. They were somewhat hindered back by our sort of broken approach in the past to go about these things. He's also bringing in successful entrepreneurs.
He's bringing people from Amazon, people from Salesforce into the organization to really just go and orchestrate people who are cloud native, people who are digitally native, and people who've been working on AI already and are able to orchestrate all of these solutions, working in a very agile form, somewhat different from the rest of Capita, leaning closer to the customer, a lot more faster cycles, less bureaucracy, a lot more faster innovation, and always thinking back from what is the customer value and working backwards from what is the customer value and in there.
I think he's got, which it's got a big job, but he's got the easiest job in the planet because all he has to do is to choose from the best of the sort of $1 trillion investment innovation that hyperscalers are putting out there and figuring out what is relevant to each of our customers' business process, when and how and why. We are hoping that we will be able to de-risk a lot of what we do in there. As a good example of the de-risking and acceleration of AI, when I mentioned an announcement we made last week of the Capita AI Catalysts as a process where Sameer's and Sameer's team will go into customers initially and will do for free exploration pilots on where AI can have a transformational effect and start running those.
If they are successful, then we can go and transform into a project. Really excited about what we're doing there. Obviously, we didn't wait for Sameer to arrive. We did a lot of work since the beginning of the year. I've mentioned the privilege it has been to be one of the first companies in Europe working with Salesforce on the Agentforce implementation. We said we'd not stop there. We've launched the Capita Contact Solution on top of Amazon Connect. We've done the catalyst with many of them. We've launched AgentSuite, which we presented in July. Corinne, who's also at the back of the bar, is busy deploying across all the call centers. It's something that we built with Amazon as well on top of the Bedrock platform. We're deploying aggressively Copilot internally, 1,500 people, growing up to 5,000.
We've created some sort of internal tech venture with groups and operations. Teams can come and pitch on how they think they're going to use Copilot internally. What benefit are they going to get? What is the return on investment? Based on that return on investment, we will fund them the project. We will give them the technology. We're really just making sure that this innovation, this fever, sort of happens not only top down, but it's also happening bottoms up. We're really quite encouraged for what we're seeing there. Very importantly, in the area of IT managed services, a lot of our customers have big, complex, heterogeneous, and sometimes out-of-date IT stacks. IT managed services is very important.
Very pleased to report that not only we've now moved our internal IT operations onto ServiceNow, but we're now in a position as well to take the market-leading platform to market to do managed ITMS for our customers on top of ServiceNow. This is just a few examples. You've got a quote there from Zara and Seth, which is to show you that this is happening. Some of you might be saying, you know, where do I see this at the operations? If Corinne was here, as in here versus the back of the room, she'll be quickly telling you, I'm really, really busy deploying all of these in contact centers, right?
Because where there is my support staff that are already using these, I plan to have by the second half over 5,000 agents already being augmented in the day interactions with customers by GenAI through the use of the AgentSuite and having that at play across 20 campaigns. I refer to an excess of GBP 350 million of revenue of call centers already being augmented to do that by the end of the year. This is a really important thing. We are seeing value already, as you can see from customers, customer scientists, our customer scientists see that it really works. Very importantly for us is also our colleagues are starting to see the value. They can see how the quality of their engagement, the day-to-day, is improving, how they are just doing more high-value work. When you talk to them, they absolutely love it.
Those who still don't have it are now just lobbying internally to also get their own AI assistant, which is a fundamental change for some of this sort of fear and stuff that you read in the press. Really impressed about what we're doing. Similarly, in our public sector business, Richard's also been really busy. We've been talking about how we've been using AI and simulation and some of the great work we do for the Royal Navy. We've been talking about some of the work we're doing for number plate recognition and some of the work that we do for user registration for Transport for London.
Probably less known, some of the great new work that we've been doing with local public authorities, where we have created an APM-based automation that allows you to effectively have a very efficient workflow to enable a local authority to go after that very unpopular task called HDET and give us that responsibility. It's an outcome-based service fully delivered by Capita on the back of this technology, which we're quite hopeful for. Similar, when you're dealing with something as critical as medical records in this particular case, in the context of recruitment, how you're able to remove, going from 29 days- 12 days, really removing a lot of elapsed time and cost and inefficiency out of the system by deploying digitally trusted, and I'm going to underline the word trusted, because not everybody could do the technology, but can you do it?
Trusted and verified extraction of medical records and getting sort of digital consent so your information can securely move from the source, normally your GP practice, to the target, in this particular case, army recruitment, safely, securely, and efficiently. It's also happening in pensions, right? Because pensions is another market that is changing, is moving. As we said, we see there is more potential opportunity if the government brings some additional legislation there. Already, the move to digital is there, is very real. We've got now over 1 million people who are engaging on the online portal. We've got, say, a 137% increase in online engagement as a whole.
Most importantly, we've created a new tool called Digital Mover that actually allows over 6 million people to stay in touch with their address and their pension and sort of avoid a number of problems that have been associated with sort of discontinuity. Going forward, we are building now a very digital pension front end on the top of Microsoft Dynamics Platform that is going to give us the ability to bring everything in. That's it. And the Dynamics Platform, we're going to be able to do profiling. We're going to be able to do a lot of AI out of the box, Copilot, a number of things, mobility, mobility apps to really make sure that we bring a really good experience not only for the digital trustees, but also for the end members. We're very excited about the work that we're doing here.
We see a lot of acceleration. By the way, a lot of the Capita digital pension platforms are now also going to be built on Amazon Connect for telephony. Again, we're bringing in the best of the different hyperscalers to get that benefit. I was with a customer recently, a couple of weeks ago, and they were just telling me how in awe they were, how the efficiency was of running now this platform on top of Amazon Connect, the amount of information that they had, how much the customer service productivity had gone up, and the insights that we're getting. Really excited about this. All of these things that I'm talking about are already making it into our go-to-market. They're a standard practice and a standard component of our value proposition as we engage new customers.
A lot happening in AI, a lot happening to take advantage of once-in-a-generation opportunity, and a lot happening in the time where this BPS segment is changing. This will look like it was not anything by the time we are done with 2025. We have a really aggressive agenda, really disrupting agenda here for 2025. It is an area that I am spending a lot of my time on because I believe it is going to unlock a lot of the old locked-away value in Capita. To do that, we also need to create space, right? We were already spending too much money. I stood here a year ago, and I said we were spending GBP 2.6 billion in cost to generate GBP 2.6 billion in revenue. That does not add up. Certainly, when you then need to create the space to do these things.
We increased the 60 million target to 160, and then the 160, we've increased it to 250. We were going to do the 160 by June this year. We ended up doing 140 by December, as you heard from Pablo. Net-net, we're ahead of time, and we're ahead of quantum. We're doing it because it's the right thing to do. We're doing it because as we're doing it, we're learning that there are opportunities to be nimbler, period. There are opportunities to just reorganize. There are opportunities to look at things differently. We are looking everywhere, everywhere, from applications. Where do they sit? What is the model of the applications? What's on the cloud? What's not on the cloud? What's the organization level? What is the management ratio? We're looking at absolutely everything.
This is one area where we're not going to let go because I think our customers are demanding us continuous improvement in our pricing. We need to be more competitive every year. This is not something that is just us talking. This is our customers asking us. We have to become a lean organization. As you become leaner, and this is something that I learned in Amazon, frugality makes you creative, right? It will force us to think about things in a way that we haven't done that before. It will force us, and it's already making us question some of the sacred cows because we just simply don't have the time or the money to waste. We're going to be very, very driven on that. On this one, I have to say the new employee count at the end of the period is 34,500.
That just includes a number of moves, as you can see in the Fera disposal. You see the Capital One disposal. We had 2,000 people left the business and their terminations. We hired close to 10,000 people this year as well. We've had about 9,000 people attrition. There is a lot of movement in people. Net-net, we're getting smaller to get fitter, to build the capabilities that we will need in the future. There is not everything about cost-cutting. It's a significant part. I think as we go to deliver that growth in profit and cashback profits, there is a lot of things that are in the mix. I just wanted to sort of highlight a number of things that we're doing. The sales pipeline is getting a lot of attention by our divisional CEOs, Corinne and Richard.
We have now a pipeline of approximately GBP 11 billion, of which, and this is an important number, of which GBP 5 billion have a technology or AI or a hyperscaler underpin. That's a significant number. The focus now is to focus on the right ones. I think Capita has had somewhat of an unscattered approach in the past that is expensive and is highly inefficient, and it just doesn't yield the right numbers. We're being more focused on where we're going after because we've got the opportunity to really increase a number of what I call important win rates in the mid-size deals in public sector. We've only won in like one in two. We've got to do better than that.
Richard's got the mandate and the plan, working with his team to improve the win rate on these mid-size deals, which are important for the profile of our business. Similarly, Corinne has the mandate to improve the win rate in the areas of call centers. I think it's important as well to just think that you need to do that, but at the same time, we need to deliver well. We talked about the 2023 projects that became part of 2024. It just doesn't help when you don't deliver, when you mobilize late, when you have issues. We've had north of GBP 20 million headwind for bad projects from 2023- 2024.
We have to, say, really focus because I think as you win more and better and you win more margin discipline as you make less mistakes, if you win in the right places, obviously, we've got the opportunity to compound that with less cost and more innovation, higher differentiation that yields an improved margin. Obviously, it's sort of real margin, real profit backed by cash. Actually, as I look at this, I look at it and I am confident, right? We have to make this space, and we are making this space. We have to fix the basics, and we're fixing the basics. At the same time, you have to build the future. These are sort of the three waves of any successful transformation.
I think hopefully from this narrative and some of these proof points, you see we are doing all three things at the same time. We talk about the importance of customers and delivering to customers and winning. I will let you read that at your leisure, but I'm going to highlight one number, which I think is, for me, extremely important. It's probably the one thing I'm the most proud about, and I think our team is feeling good about, which is the improvement on the customer net promoter score, right?
At times of change, at times of uncertainty, at times of people reductions, at times of news in the media, when you are introducing a new value proposition and you get a new team, it's really important that one learns how to protect the customer franchise, that one really gets close, that really customers sense that there is intensity, customers see that there is innovation, customers see that there is value, there is good hand-holding. I'm really pleased to see that we nearly double our customer net promoter score in arguably really difficult situations. I'm really hopeful that we will continue to do that as we go forward. We talked about the importance of some of the poor win rates that we need to do there. We started well with a number of deals, already won early in the year.
There's a lot to play out for and certainly encouraged by the focus that our divisional CEOs have on the winning space and winning the right things. To that example, I thought I would just share two examples of two what would have been bad stories that we turn into good stories. The one on the left is in the public sector. The one on the right is in the call centers, just to sort of give you a flavor, right? The one on the left is a project that wasn't going too well, where we weren't successful. We had an opportunity to retender for a variety of reasons. We retender, introducing the new value proposition of Capita. We introduced a lot more automation and capabilities and workflows in the backend. We introduced some hyperscaler, some of our consumer tech into the front end.
We put up a valid, more cost-competitive, and we won the retender as we were hoping. Really, really well done by the team. Really proud of them. Similarly, client B in the call center business, a loss-making contract, one that we couldn't just get it to work under the old way of doing these contracts. We found a way to terminate the contract and walk away. As the customer came out to market, we reengaged, but we reengaged with them now on the basis, okay, now that there is no contract, this is how we would do it. This is how you would do it in 2024. We engaged with them with more innovation, automation, gamification, offshoring, putting in the right blend of ingredients that you would do today, and we won it. It might be examples. It might just be two.
I think it's just indicative that while it's still very early days, it's starting to work. Manage for value. I think, Pablo, you covered it really well. I just want to put it there graphically in the bucket. We've done the disposals. We talked about Capita One and mortgage already signed but not completed. We talked about the very important reduction of these eight evergreen contracts that we had just two years ago down to just one now. Eight to one. We need to work and get that one resolved. Both on network-managed services and on IT-managed services, we're doing some work, transformational work at the core still, just to figure out what is the best partnering opportunity. The bottom one, obviously, the partnering is with ServiceNow. We're still defining who we're going to do that in networks.
As important as everything is around technology, efficiencies, delivery, and customers, none of this would be possible without our colleagues. We have a really unique blend of skills in the company, multiple countries, multiple locations, multiple processes, a lot of very different job families. It is really important that they sort of come together and they feel they want to go and fight every single day for this change, for this strategy, and for their customers. I think you got there a number of metrics. The ones that I'm sort of calling out in difficult times geopolitically is diversity. I think diversity and inclusion is something that stands out for us that we believe in. I think the numbers show that we are a good employer and that we are fostering and driving diversity and inclusion practices and something that we're really proud of across the board.
There is learning. I think the great work that we're doing in terms of learning and opening and creating data academies and AI academies and the work that we're doing with apprenticeships, opening to a lot of people. Now we're going to have 1,500 people enroll in management academies. It is important for everyone in the workplace to learn. It is critical for everyone in Capita to develop their career towards this new one. We're putting a lot of investment into this and definitely to see that. There are a couple of other numbers there. Obviously, net promoter score has gone down, which I do understand. Times of changes, at times of layoffs, at times of discontinuity, at times of difficult decisions with regards to salary increases and all of these things. It's hard to recommend your best friend to come and join you.
When you look at engagement, and engagement is the one that really matters to me in this part of the transformation, it is holding high. I think ultimately our attrition has gone down from being in the 30s to then go down to 30, to then down to mid-20s, and is now in the early 20s. It is definitely going in the right direction. There is a lot more work to do. We owe a lot to our colleagues, but I think they are starting to understand that it needs to be balanced. I actually quite like also the internal mobility, 20% up. It is important that there are job opportunities inside the company. As you can see, this has been a busy year. I do not know how it comes across, but it has just been a lot going on.
It's been a really pivotal year, one where we're putting a lot of the foundational work upon which we're going to be building this new Capita that is going to take advantage of what the future is bringing to this segment. As I said, this deep root and branch transformation, we are looking into everything, every single business process, every single area. There is no area that we're not inspecting because I think it's important. I think we've made a lot of progress across technology, efficiencies, delivery, and building a better company. There is still a lot more to do. This is year one, and it's not going to just be immediate. You'll be asking, what about 2025? What are you going to be doing? I think you've got it up here.
These are the six key priorities that the executive team is working with the senior leadership team and across the company on. We've got obviously our cost transformation and efficiencies. That's there to stay. We've got sales effectiveness, as we talked about, in terms of how do we generate the right deals, the right wins out of the existing opportunities, the product and innovation engine that has to be accelerated, then the underlying technology foundations everywhere else in the company that underpin our delivery and our day-to-day provision of services to our customers, the operating model that I've just described of how do we deliver to that strategy and how do we change both the front office, the tech office, and the back office. As we ramp up, how do we transform more and further the culture so the culture becomes a high-performance culture driving the business forward.
I think with all of these and all the things that we've built in, we believe that we're on a good path to reiterate our medium-term objectives and guidance of 6%-8% on operating margin, the free cash flow conversion, and the revenue to low to mid single digits on the later period. As a summary, I would just say, remember the BPS market, BPO market are changing. It's not incremental change. It's a structural change. Technology is going to be the biggest accelerator. It's going to be the biggest disruptor. We're doubling down on it. We started doubling down on it heavily a year ago. However, as important as technology is, it's the human in the loop that is going to drive the difference.
You need to get both things right because I think the human and the expertise in the business process, it was really differentiated. Technology on their own won't be enough, and it won't be trusted. I believe that we can orchestrate that value proposition really, really well. We have the trusted relationships with our customers, and they were hoping for more innovation, and now they're starting to get that innovation. Early days, modest financial progress in year one, but I think we're well on the way to build stronger foundations for a better business and a better Capita. With that said, I think we'll just open to Q&A.
Hi there. It's James Rose from Barclays here. I've got two, if I may, and if I can do them one at a time. The first is on the pipeline. You've got GBP 5 billion related with sort of AI-related projects in there. Is FY 2025 still a year of sort of preparation and internal focus, or are you now at the point where you can go to market with the right cost base, the right offerings, and do you expect much higher win rates and conversion of that pipeline?
I think it's both. I think we still have to do some work to prepare in some areas, but in some other areas, we're ready. I mean, we already have a more competitive cost base than we had a year ago, but not as competitive as we will have it in a year's time, right, as a function of what we announced. From a technology perspective, we've built a number of areas, right, and we're ready in a number of areas. I know that come summertime, we will have a lot more AI agents available that we're building as we speak that we will be able to take to market just then. We are in a much better place for certain segments today where we do really well, and I think we are well equipped. For others, there's still work in progress, and this is where Sameer and the team are working hard to get to.
Okay. Secondly, it's on the contact centers, and I appreciate the additional disclosure you've given there. It's a question around the long-term commitment you've got to the business and the long-term opportunities you see there. Your volumes have been struggling for a while. It doesn't really generate that much cash. It's competitive. Is it worth taking up so much of your time and your cost savings, or are there potentially other ways to realize value from that business?
Yeah. If you look at the contact center market, it's a market where people are making money, right? We just didn't. We didn't for what we discussed, I think, Kareem presented in Capital Markets today. We didn't do the right things at the time. We missed the boat on getting the right offshoring, near-shoring, in-country balance. We missed the boat on automation. We missed the boat on MI. We missed the boat in a number of somewhat foundational things, right? That market, it's been transformed the fastest, right? A lot of the dynamics in that market are now about call avoidance, customer intimacy, apps, and a number of things.
It proves an opportunity for us to play in the new market at the right time. Right now, I do not have to sort of, this is not a pie in the sky that I believe I can make money. What it is, is I believe we can at least catch up with our competitors. For the time being, all we are doing there is optimizing, injecting in these capabilities, injecting in these new ways of working, changing how we go about it to market. Right now, we have turned around. I think Pablo did a really good bridge, right? Something that he was adjusted was losing money significantly in 2023 to something that is just on the cusp in 2024. I believe we can still have a platform to make more money there.
Great. Thank you.
Morning, Chris Banbury, Peel Hunt. Three questions. Hi, James. Can take them in turn. Thank you. First of all, looking at the free cash flow, you came in towards the bottom end of the range at the GBP 120 million-GBP 140 million. What determined that, and how does that flow into your guidance for this year? I mean, I guess thinking about things like you went to more sustaining working capital position. Have you got there? And your thoughts on deferred income for this year as well would be great. Thanks.
Thank you, Chris. I'm going to say something which is not correct, but actually, landing free cash flow in these companies is like a lottery. In the last, it's a company with a very small free cash flow number or a very small profit number. Actually, we have GBP 2.5 billion revenue and expenses. In the last five days or the last four days, I think we collected GBP 50 million. Landing exactly a number of free cash flow is a matter of a lot of planning, a lot of working hard with our clients, but also on how the last days of the month end up panning out in a period like Christmas.
We landed in the place where I expected to, to be honest. I ended up comfortable. When I was saying in four days, GBP 50 million of receipts where you do not have control, it could very easily have swung into a different direction and made the headlines without actually it being a fundamental issue in the business. From that perspective, what I think we have been is taking a more conservative approach, not wanting to go hard in cash flow management.
I think that that leaves us exactly where we wanted to be when providing the guidance, which is from now on, it's business as usual. I think we've got the right platform to just continue through 2025. In terms of DI and CFA, that's another complex one. In the round over time, again, every contract that you win, every contract you lose, every changing contract can affect DI and CFA. It is true that we had a structural deficit of lack of CFA with a lot of DI.
That structural deficit is reducing from the GBP 100 million- GBP 80 million last year to GBP 50 million this year, which I consider that with lots of ups and downs inside, is broadly where it should be for 2024, 2025, perhaps 2026, to after that continue reducing. Yet again, it depends on the contracts you're managing. It's a live beast. In the round, it's exact by chance again in a way. It's where I believe it is structurally in the right place, subject to movements, but at the right new level.
Second question. What are the major rebids you have this year, and how confident are you in retaining them? The major rebids this year, what's the news?
A lot of the major rebids happened last year. We're dealing now with a number of extensions, some significant extensions, which I am very comfortable with the extensions. There was a number I didn't mention, I think, but you probably saw it there, the north of 90% renewal rate. I think when I say the best attack is a good defense, the first thing you have to do is just make sure that you rebid your base, you retain it really well because they know you, and then you have got the value proposition. From there, you can go on to win new business. I am fairly confident about the deals that we got on the rebid. A lot of the rebidding area, particularly in Kareem's world in contact center, happened last year.
Final question. Of the GBP 260 million of gross cost savings, how much do you actually expect to have delivered in year by the end of this year?
We are working through it. I am not going to commit to any single number right now. I am confident that we will deliver the full GBP 250 million, absolutely. It is work through. It's not as easy as the first phases of a transformation. It requires redesign of processes, redesign of IT, injecting GenAI into our processes. That is where I'm it's not as easy and therefore I don't want to commit to a number.
Thank you.
Thanks. It's David Broxhill from Deutsche Numis. Just one question area, please. In respect of the reinvestment of some of those cost savings, you're still earmarking GBP 50 million reinvestment. Do you now know and have you identified where that GBP 50 million will go? Can you give any more insight into it? Also, as you deploy that, how do you make sure it doesn't become GBP 75 million, GBP 100 million, or more?
The second part of the answer is really easy. It's management discipline, right? It will not become more than it needs to become. As a matter of fact, we will not invest, reinvest the GBP 50 million unless we're 100% sure that we're going to get the right return. A lot of the investment or the reinvestment is going to go into building those AI agent capabilities because that is what enables a better service delivery, more competitiveness, and then additional cost savings in the organization.
That is going to be a significant part in there to be able to get that scale. There is going to be deployment of those innovations or whatever we will do to go and then deploy it across call centers, operations, customers. It is what I would call last-mile deployment of innovation. There is going to be some commercial investment. There might be opportunities where we see that they might not just be ideal if we come with it, but we know we need to win them.
Because we have a good opportunity to be strategic about them, we can see how we can transform the cost base. We can see how we can inject. I want to have that ability also in the P&L. All three things together would sort of amount to a maximum of 50, provided everything has a positive return. I mean, you talked about the Copilot investment we've made that has a positive return. In a perverse way, most of the reinvestment is actually coming out with a positive at the other end as well, which is really good. Is that a question in the back?
Hi, Sam. It's Helen. I've got some questions online if I can forward them on. The first one is from Andy Brook at RBC, who's asking how much of a headwind is the army recruitment contract in terms of revenue and margin perspective when it drops out in 2027?
First of all, let me just put this out there. We're the only outsourced government contractor who knows how to do this because we're the only ones doing it today for someone, in the cases, the army. When we bid for that contract, and this was like in my first few weeks in the role, we had to make the decision very quickly. We made a decision to just bid for quality, not bid to win. There's too much at stake here. There's national preparedness. This is too important to the forces and too important to security.
It is too much risk for a company to just sort of go and bid to just win and then figure it out. This was not the contract where you just take a commercial risk. We price to the lever based on our knowledge. That obviously disqualified us and somebody else. That said, we are still working with the army on army recruitment, really joined really closely. In theory, the transition should go in 2027. I have to say in theory because this is a major undertaking, as you know, right? So far, the Royal Air Force and the Royal Navy are doing this themselves.
There is a significant amount of normalizing, figuring out, transitioning plan that needs to happen with them too, with us, with the forces. If it happens in 2027, that would be when it happens, but still to be seen when it will happen. It goes up and down based on scopes of work and additional pieces of things that we do. It could be anything between GBP 70 million and GBP 90 million from 2027, 2028, whenever it happens.
Okay, thank you. As you know, we have a number of retail shareholders. I think I'll just put this in one question, which is, could you reinstate really what our dividend policy is and when dividends could be restored?
Yeah, our dividend policy was set out very clearly in the Capital Markets Day, and it hasn't changed. First, we want to deleverage the company. Then we need to invest in the business. Only after those are done, we will consider dividends and capital returns.
Thank you. The final one from online is, could you update us on the international sales effort, which I think is probably a contact center-related question?
Yeah, there is, so let me just do two sides to it. From a public sector perspective, there is also an international corporation work that we are starting and where we're working with the forces who are sort of facilitating, enabling some engagement with friendly nations where they want to participate in some of the work that we're doing for them in the U.K. Some of our offerings are already offered internationally. Like you look at our fire service college, a lot of the service we provide out of our service college in the Cotswolds is for international firefighters as well there. There is that angle. There is an emerging angle.
Internationally, when it goes to Ireland, we're seeing probably better progress in Ireland than we have seen in Germany. We've had a good time. We have successful campaigns in Switzerland. Yeah, it's sort of varied. There is an international just sort of summary. It just depends. Some areas are going well and others are still challenged. Germany is still challenged. Switzerland is doing well and Ireland is doing well.
Thank you. Sorry, I've got a very detailed question here for you, Pablo. From Michael Brown, you said at the December R&S, I believe that the incremental GBP 90 million of cost savings will be H1 weighted. Is this still the case? That's the first part.
We're working hard to be able to deliver the full GBP 90 million. The more you action in the first half, the higher chances you get to deliver the GBP 250 million in total exit run rate. Yes, we're working hard in finding the solutions and putting them into implementation, ensuring that at least by June, we do have line of sight of how that builds month by month to deliver the year savings.
Thank you. Secondly, how much of the GBP 140 million cost savings identified in 2024 will annualize in full year 2025?
The full of them.
The full of them. Perfect. Finally, is it likely that full year 2025 will see the full exposure of the GBP 50 million reinvestment, or is it likely that this will be annualized number that falls into full year 2026?
Right now, the way the business models have been built is that they are assuming that this is flowing into the baseline for the next few years. It is something that we are figuring out as we speak, depending on where we choose to invest. If we invested on commercial terms in a contract that we think is the right thing to do, it will flow through. We are not taking an aggressive stand in our models or in our expectations, trying to say that we are going to bank it as a one-off. We will work through it and deliver what is right for the company.
Thank you. No further questions. Thank you.
Okay. With that, the case. Thank you very much for your interest. Thank you very much for the support. I look forward to seeing you at the next event. Thank you. This concludes the webcast.