(Reuters) -Britain’s Capita on Tuesday flagged a free cash outflow of 120 million pounds to 140 million pounds ($152 million-$178 million) in 2024 as the outsourcing firm’s exit from low-margin contracts dents revenue, sending its shares sharply lower.
Shares in the FTSE Small Cap company fell as much as 11% to a more than four-month low of 15.50 pence in morning trade.
The company said additional cash restructuring costs of 50 million pounds would impact free cash flow in the first half of 2025, with positive and consistent free cash flow expected by the end of next year.
At half-year end, Capita’s free cash outflow, excluding business exits, was 51.9 million pounds.
Capita also said it expects a high-single digit adjusted revenue decline for 2024 after guiding to a low to mid-single-digit percentage reduction in August, but retained its annual operating profit outlook on improved margins.
CEO Adolfo Hernandez said the group is focusing on being more selective in contracts while exiting lower-margin ones.
The company said it expects cost savings to jump to 250 million pounds by December next year from a current annual target of 160 million pounds, thanks to the use of AI in its services.
It added that voluntary employee attrition of around 21% will aid further cost savings and reduce the need for job cuts.
The FTSE small cap firm said adjusted revenue fell about 8% in the 11 months to Nov. 30.
The company serves the public and private sectors and operates in eight countries, catering to the defence, learning, local public service and fire and security segments, among others.
The London-headquartered company said an upcoming rise in national insurance contributions in Britain will result in an annual cost of about 20 million pounds.
Earlier this year, Capita unveiled plans to focus on its core segments of public services, contact centres and pension services businesses, and on cost-cutting steps worth about 100 million pounds.
($1 = 0.7875 pounds)
(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Abinaya Vijayaraghavan, Eileen Soreng and Jan Harvey)
