Morning Note: Market News and Capita
Market News
Iran latest: Donald Trump called for the evacuation of Tehran and is departing the G-7 summit a day early to return to DC. Stock futures fell, while Brent rose. Soon after Trum’s post, Iran’s Fars news agency reported explosions east of the city. The US proposed a meeting with Iran this week to try to reach a nuclear deal, Axios reported. Trump later said his early return to DC has nothing to do with a ceasefire.
Markets: US Markets ended in positive territory with the S&P 500 closing 6033.11 +56.14 (+0.94%). However, futures markets indicated most of this will be reversed on the Trump posts. European indices are broadly down between 0.75% and 1.5%.
G-7 round-up: The group pushed for de-escalation in the Middle East and said Iran can never have a nuclear weapon. Trump said he and Keir Starmer signed a trade deal, while he failed to reach an agreement with Shigeru Ishiba.
The BOJ plans to trim bond purchases by ¥200 billion ($1.34 billion) per quarter from next fiscal year. JGB futures slid and the yen erased losses. The central bank kept rates unchanged as expected.
UK: Chancellor Rachel Reeves is weighing reversing a decision to charge UK inheritance tax on the global assets of non-doms, the FT reported.
Corporate: Millennium is said to be in talks to sell a stake that values the hedge fund at roughly $14 billion. It’s working with Petershill Partners to find buyers for a 10% to 15% holding. Cantor Fitzgerald hired about 15 investment bankers and traders to expand in Germany. SoftBank raised around $4.8 billion through a sale of T-Mobile shares. Sabadell is considering selling TSB after receiving “expressions of interest.” Apollo’s Gamma plans to sell its stake in betting company Lottomatica.
Company News
Capita – Trading Update
On 17 June 2025, Capita plc released its trading update covering the five-month period ending 31 May 2025. The update highlights ongoing momentum in the development and deployment of AI-driven solutions, underpinned by sustained contract wins, while reaffirming its guidance for flat full-year revenue and an improved operating margin, supported by the cost reduction programme announced at its Capital Markets Day in June 2024.
Adjusted revenue for the period declined by 4.5% year over year, in line with market expectations. This decrease was driven primarily by a sharp 21.1% drop in the Contact Centre division, a result of previously flagged contract losses and continued subdued volumes across telecommunications contracts. Pension Solutions saw a more modest 1.1% decline, reflecting the completion of several short-term contracts which offset gains from new client wins. In contrast, revenue from the Public Services division grew 2.3%, buoyed by contract expansions within Central Government working to offset prior-year contract losses. Regulated Services, the division the group is actively exiting, surged by 6.4%, reflecting a one-off termination fee and deferred income from its Mortgage Software business, which more than offset the impact of contract handbacks.
Capita secured new business totalling £969 million in total contract value during the period, marking a 24% increase compared to the same five-month stretch in 2024. Growth was particularly strong within Public Services, where contract awards surged over 70% year over year, compensating for a 49% fall in Contact Centre wins. Notable wins included renewals with Southern Water and the Education Authority of Northern Ireland, along with the Primary Care Support England platform. The group also expanded its services to the Royal Navy and secured additional work within Pension Solutions.
A central theme of the update was the company’s accelerating investment in AI. Capita has introduced its first agentic AI solution, Agentforce AI, powered by Salesforce into its operations and become one of Europe’s first adopters, significantly speeding up recruitment processes. Internally, the group interacts monthly with Microsoft Copilot at scale, reinforcing its tech-driven transformation agenda. Capita’s AI Catalyst Lab has to date identified over 200 viable AI use cases, launching five pilot products and advancing another five to advanced testing. Efficiency gains from this programme are already materialising, with cost savings amounting to £185 million in annualised run rate, in advance of the £250 million target expected by the end of 2025.
Capita is reinvesting a portion of these savings into its technology and AI capabilities and is scaling up its skills base through the AI, Data and Technology Academy. This year alone, employees have completed over 10,000 digital learning courses, and more than 600 colleagues have undertaken management and leadership apprenticeships, reflecting the firm’s focus on long-term capability building.
In terms of cash flow, the group reiterated its expectation of returning to positive free cash flow by the end of 2025. It anticipates free cash flow outflows of approximately £45–£65 million for the full year, including £55 million related to delivering its cost reduction programme. The group also reaffirmed its medium-term adjusted operating margin target of 6–8%, noting that margin benefits will be weighted toward the second half of the year due to the timing of pay reviews and National Insurance costs.
Overall, the update presents a company in transition, streamlining its operations, exiting lower-margin contracts and refocusing on AI-led solutions while maintaining revenue stability and improving margins. Although adjusted revenue remains flat as projected, Capita’s strengthening performance in Public Services and its accelerating cost-savings trajectory offer signs of sustainable progress. The market will be watching closely for execution delivery in the second half of the year and further clarity at the H1 results presentation on 5 August.
