Capita raises cost-saving target as it turns to AI to drive change
Shares in the firm were down by a tenth on Tuesday after it hiked its savings target to £250 million from a previous £160 million.
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Your support makes all the difference.Outsourcing firm Capita has unveiled fresh cost-cutting plans worth £250 million as it targets savings from the use of artificial intelligence (AI) and staff leaving voluntarily.
Shares in the firm were down by a tenth on Tuesday after it hiked its savings target from a previous £160 million.
Capita is a major contractor for the Government and local authorities, and also manages the licence fee for the BBC and runs recruitment for the British Army.
The company said it had spotted more opportunities to cut costs and make the organisation more efficient.
Part of this is set to come from it ramping up the use of AI, including generative AI, to speed up certain tasks.
This includes the use of AI for its contact centres and local government customers, which has already resulted in average handling time reducing by around a fifth, Capita said.
It also revealed early signs that adoption of the technology had helped it to win new customer contracts.
Furthermore, Capita said it sees voluntary employee attrition – meaning when staff choose to leave the company – of about 21% each year.
This reflects the natural movement of people such as in call centre support roles where there tends to be a higher average turnover.
But Capita said it will help contribute to its savings target, reducing the need for redundancies and ensuring it can balance the level of new hires.
It is understood that the firm could decide not to replace about 1% to 2% of roles after staff leave.
Last year, it announced plans to cut around 900 jobs as part of the cost-reducing plan.
Capita also revealed that it was expecting about a £20 million annual hit from the rate of employer national insurance increasing next year, but that it expects additional savings to offset these costs.
The business reported that revenues, on a like-for-like basis, were about 8% lower in the 11 months to the end of November, compared with the previous year.
This was partly driven by contract losses announced last year and delays in kickstarting two new contracts.
The use of AI and generative AI has been credited with speeding up their own transformation as well as forming a suite of solutions to be offered to customers next year
Looking ahead, Capita said it expects to see its yearly sales decline by about 7% to 9%. Adolfo Hernandez, Capita’s chief executive, said the firm was “encouraged by the customer reaction to our suite of AI solutions”, while it was also being more “selective” over the client work it agrees to.
“We have implemented a significant proportion of our efficiency programme, and today have outlined further savings which will result in further improvement to operating profit margins,” he said.
Adam Vettese, market analyst at investment platform eToro, said: “The use of AI and generative AI has been credited with speeding up their own transformation as well as forming a suite of solutions to be offered to customers next year.”
But he added that investors “may be somewhat sceptical that AI will be a magic wand to fix all the issues” facing the firm.