Capita Shares Slide as Pension Scheme Woes Overshadow Trading Update

Shares in Capita (LON: CPI) tumbled on Thursday after the outsourcing group warned that ongoing problems with its Civil Service Pension Scheme contract will hit profits and cash flow harder than previously expected, overshadowing otherwise solid underlying trading.

In a combined trading update and contract statement, Capita said issues within its Pension Solutions division—stemming from service failures on the Civil Service Pension Scheme—are now expected to reduce 2026 adjusted operating profit by £25m-£40m, with a cash flow hit of £35m-£50m, even after mitigating actions elsewhere in the Group. As a result, Capita pushed back its target for positive free cash flow, before business exits, to 2027.

The admission follows a Ministerial Statement from the Paymaster General and testimony at the Public Accounts Committee highlighting the scheme’s service failures, particularly delays affecting bereavement, retirement and quotation cases. CEO Adolfo Hernandez acknowledged the service “has not been good enough” and said resolving it remains the company’s “number one priority.”

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The profit warning comes despite otherwise encouraging figures: adjusted revenue grew 1.6% in H1, contract wins reached £1bn TCV—the strongest H1 performance since 2021—and the group extended its revolving credit facility to £325m through 2029. The disposal of its private sector contact centre business also remains on track to complete ahead of half-year results on 4 August.

However, investors appear focused on the deteriorating pension contract, which has weighed on Capita’s turnaround narrative for months. With cost efficiencies slipping and higher-margin pension consulting business also affected, markets are questioning management’s ability to control costs, sending shares sharply lower in early trading.