Capita plans to cut costs by £250m with the help of AI as workers leave

Capita has raised its cost-savings targets after claiming its adoption of artificial intelligence was an early success as human workers voluntarily leave the business.

The outsourcing group, which manages the BBC’s license fee, told shareholders on Tuesday it wants to cut £250m in costs by the end of next year, well above its previous target of £160m.

This follows a strategic restructuring, announced in June, which has seen Capita reduce costs and refocus its energies on core segments to bolster financial performance and cash generation.

Capita said the “increasing use of AI and generative AI” was “at the heart of this transformation”, and its early successes have “increased our confidence in the level of efficiency that can be achieved”.

Boss Adolfo Hernandez, who joined in January, added that he was “encouraged by customer reaction” to Capita’s suite of AI solutions, which “will help drive profitable revenues from 2025”.

The group, which employs 40,000 workers worldwide, also highlighted a voluntary employee attrition rate (or rate of employees quitting) of “around 21 percent.”

Capita said this level of voluntary staff turnover “contributes to these savings” and “reduces the need for redundancies”.

It also helps the group ensure it can “rebalance new hires” and implement “incremental training of our colleagues and investment in key growth areas”.

Capita said: ‘By combining people, processes and technology to develop scalable and repeatable products, we can drive efficiency for our customers and become more competitive.

“The progressive adoption of AI in the delivery of solutions to our customers will allow us to continue to focus on efficiency in the future following the usual model.”

capita shares sank 8.4 percent to 15.98 percent in early trading, having lost about 30 percent over the past year. They are down more than 90 percent from their January 2020 levels.

Adam Vettese, market analyst at eToro, said: “Given the extent of the share price decline in recent years, investors may be somewhat skeptical that AI is a magic wand to solve all the problems and reaction This morning’s share price would seem to indicate this is the case.

“It is far from an overnight solution in Capita and it appears there is still a long way to go.”

Capita on Tuesday also maintained its annual performance targets, with revenue falling year-on-year following the sale of some assets, but management is “increasingly confident” of meeting its medium-term operating margin target of 6-8 percent.

Hernandez added: ‘As we approach the end of my first year as CEO of Capita, I am very encouraged by the progress we have made on our strategic priorities, even though the impact of the previous year’s headwinds was greater than originally expected.

“Our goal is to become a better business, ‘get smaller to get stronger and in better shape to then grow’ and be more selective about not chasing and exiting existing lower margin contracts.”