March 10 (Reuters) - British outsourcing firm Capita said on Tuesday it expects a slight decline in adjusted operating margin in 2026, citing continued weakness in its contact centre division and
UK's Capita shares tumble as outsourcer warns of margin decline
Capita Faces Margin Pressure Amid Contact Centre Weakness and Rising Costs
By Nithyashree R B
March 10 (Reuters) - British outsourcing firm Capita warned on Tuesday that its profit margin would decline in 2026 due to weakness in its contact centre division and higher costs tied to new project launches, sending its shares down 15%.
Contract Losses and Revenue Declines
The company, which provides support services to the UK public and private sectors, had seen contract losses and revenue declines in some key units as clients delayed spending amid a tough economic backdrop.
Contact Centre Division Performance
Its contact centre division, which provides call centre and broader digital customer support, saw adjusted revenue fall 17.5% in 2025 and is expected to be loss-making in 2026.
Transformation of the Call Centre Market
The call centre market is currently in transformation, CEO Adolfo Hernandez told Reuters, with AI playing a growing role.
"We were coming from a position of underinvestment in the past. We've been catching up and actually overtaken in some areas," said Hernandez, who has been in the role since 2024 and previously worked for Amazon Web Services.
Impact of Synergy Contract and Operating Margin
The company's adjusted operating profit margin is also expected to take a hit from startup costs for the Synergy contract, in which Capita will provide tech-enabled back-office services for public servants across four major UK government departments.
Capita's shares fell 15% and were headed for their worst day since March 2024.
AI for Public Sector and Future Outlook
AI FOR PUBLIC SECTOR
Analyst Perspectives on Capita's AI Strategy
Despite the challenges, analysts believe that Capita is well-placed to benefit over time from the artificial intelligence boom.
"We continue to believe Capita can be the conduit for pushing AI solutions into the still very inefficient UK public sector," analysts at RBC Capital Markets said in a note.
AI-Enabled Revenue and Contract Pipeline
Capita said two-thirds of its revenue was now "AI-enabled", with the company deploying tools like document fraud detection and AI-powered call centre agents that helped it reduce deployment times from six weeks to 10 days.
Its pipeline of potential contracts had nearly doubled to 19.8 billion pounds ($26.6 billion), driven by customer demand for AI solutions, it said.
Revenue Growth Expectations
Capita expects low-single-digit adjusted revenue growth in 2026 after revenue fell 1.2% last year.
($1 = 0.7438 pounds)
(Reporting by Nithyashree R B and Yadarisa Shabong in Bengaluru; Editing by Sumana Nandy and Keith Weir)
