Capita Share Discussion Threads

[ibuyland] 29/3/2018 10:26

The balance sheet is not going to be repaired with £700mn, it will take more than double that or turning the £1.6bn bond holders into equity, which would give them 60% of the company at todays market cap. They are going to have to write off at least £1.5bn in goodwill.

Even the board cant really decide the future when you have a share price dwindling away, the rights issue price must keep moving lower everyday, and re-calculations everyday.

[ltcm1] 29/3/2018 10:18

As I see it shareholders are being asked to bail out the financial shortfall over the last eight years, as opposed to being invited to a new investment that will bring future profits.

Yes the balance sheet will be repaired but where are future profits to come from exactly???

[kingston78] 29/3/2018 10:07

Many people, including businessmen, investors and even some less experienced accountants, do not understand financial statements or their implications.

Most people would understand the Profit and Loss Account, to varying degrees, how well a business has traded. I am telling you again that it is the Balance Sheet which is more important because it governs the ability of how a company is able to trade. In simple English, a company with a strong balance sheet (liquid funds, current assets, NOT intangibles which are dubious) can weather a storm.

If I explain from another angle the problem of companies with huge intangible fixed assets, which mainly is represented by Goodwill, and in some cases by Patents and Trade Marks. When you buy a company with net assets of £5 million and pay the seller £12 million you will book a Goodwill of £7 million in your balance sheet. In layman's term you are effectively buying future earnings of £7 million from the new business for the goodwill. It will be the Post Tax profit that matters because this will work out the payback period.

Many people misconceive by using the fashionable EBITDA. This is rubbish invented in 1990's for loss making start-up companies. We all pay interest and taxes and ultimately depreciation by replacing old assets in the future. Pre-tax profit and Post-tax profit are better and more conservative traditional measurements.

A solid company does not need fancy accounting tricks. It is weak companies that use all types of financial ratios that try to show them in a better light. In the end, as we all know CASH IS KING. This holds true throughout centuries and in the future.

[abbotslynn] 29/3/2018 09:52

Hanging in just

[ibuyland] 28/3/2018 23:21

KPMG were the accountants for Conviviality as well as Carillon and Capita and all begin with a C, and all are, and have been technically insolvent for a while. Capita had £2.7bn in goodwill, that's now worth zero. That assumption is based on the fact that they are now unveiling a new 5 year transformation strategy, which means all the money on acquisitions which is wrapped up in goodwill, hasn't worked and that goodwill provided no value.

They may not make it.

[kingston78] 28/3/2018 22:12

I have mentioned on this board about Conviviality, a company with a market cap of £800 million only several months ago. Its shares were suspended at 101 p recently when discovering accounting errors, a sudden £30 million VAT bill to pay which had been inadvertently forgotten and not included in the cash flow forecast, and deteriorating trading conditions. It was hoping to secure £125 million by placing shares with institutional holders (that is a minimum amount to fix short term problems). Words got around the City that the company was trying to issue new shares at 10 p each (90% discount to then suspended price), but now there are no takers. It is likely to formally go into administration as soon as tomorrow (Thursday 29th March 2018).

You wouldn't imagine that a company capitalised at £800 million only a few months ago is now going bust. The problems lie with incompetent operational and financial management. OK, quite often operational managers mess things up by making wrong strategic decisions, however, the finance people must get the numbers right. Not in this case. What sort of accountants has Conviviality got? Funnily enough the company FD spent more than £100,000 of his own money to buy shares in the company a few days before suspension.

Some investors doubled up to average down, and have now lost everything in Conviviality. Remember some well known fund managers who have increased shareholdings in Capita? There is an investment rule that is tried and tested that you should average up but never average down.

[ibuyland] 28/3/2018 19:02

hxxp://www.euronews.com/2018/03/28/ba-opts-to-keep-two-call-centres-in-house-dashes-capitas-hopes

[kingston78] 28/3/2018 10:53

When you owe a lot of money it is the lenders who are worried. They will do whatever is practicable so as to allow them to make a minimal provision for bad debt in their own accounts.

We have seen turnaround plans for other companies. There is nothing wrong with a 5 year plan from a business perspective, but it just illustrates the scale of the problems.

If you look at Tesco or RBS as examples, their share prices have gone nowhere over the last few years.

It is going to be an uphill struggle at Capita, given that some of the more talented employees may leave in the meantime. Moreover, if Capita wants to sell under- performing businesses, who are going to buy something that is under performing in the first place unless the price is attractive, ie low, or because there are some compelling commercial reasons for the purchasers to buy.

Another poor example of large acquisition is Micro Focus, who had spent many billions on Hewlett Packard Enterprises and now its share price has halved. This is destroying shareholder value completely.

Acquisitions based on debt carry a high risk. Potential buyers of any businesses beware.

[mj19] 28/3/2018 08:09

Being held up by institutions that are stuck in this one... madness what they can get away with

[ibuyland] 28/3/2018 00:09

I wouldn't be surprised to see the rights issue at 10p and a big fat shares option to the BoD, easier to get the price up from 10p, and they wont be losing much money if the price falls that far, they just blame the past management for everything.

Money for old rope.

[ltcm1] 27/3/2018 13:28

Just on the chart it does look like a big gap down is coming.

The thing is Capita is so big the Bod are more focused on keeping the thing going and serving the government than making profits. It doesn't seem likely they will take tough decisions, cancel contracts and lay thousands off. Letting the shareholders take the pain seems the least worst option to the board imo.

[dexdringle] 27/3/2018 09:19

Blimey. Cryptotrade posts something negative and the share price immediately leaps !

Cryptotrade, can you please post something really damning and see if we can get back to £2.......?

[tim 3] 26/3/2018 22:49

Yet another support gone,that charts looks horrible!

[blueball] 26/3/2018 20:34

Stay short.

[da vinci1] 26/3/2018 20:23

The share price is declining inexorably. They need to hurry up with the RI or it will hardly be worth proceeding with it!

[seastork] 26/3/2018 10:13

That's the beauty of this stock and tracking the changes in share price over the past 18-24 months, from heady heights of 1200p down to 150p. The falls have been constant and continuos with many people guessing for the bottom price (myself included) and the market still not content that the bottom has been found.
However, the company continues with business as usual, meeting it's clients needs and delivering service. It's the mark-up and overhead costs on delivery that has led to the recent profit warnings, debt and need to re-finance. New CEO is tackling bull by the horns and addressing these issues.
So what next? A rights issue to raise capital, already underwritten, with discount ratio to existing shareholders and re-structuring.
Personally, will remain invested, currently 60% down and will be looking to rights issue in earnest to increase holding and reduce price per unit. Not hocking the family silver to do so, but think there is more room for an upside rather than down.
Good luck to all.

[brad1] 23/3/2018 22:33

How anyone can put a reasonable value on this company is pure guesstimating. Too much debt with poor management! The only plus side is turnover, but this has become a behemoth that the management are unable to control. How some of these managers get into these roles with high pay is beyond belief. Probably a case of looking after ones own! It is about time that corporate pay is reined in to stop this massive drain on society. If rights issue is above £1 I would be surprised.

[frazboy] 23/3/2018 22:12

Here's a question for the keen CPI aficionados as opposed to the doom mongers/irrational optimists, can anyone try to put a valuation on the different parts of the business? I genuinely don't have a clue as to whether this company will come out all roses or is the next Carillion. Folk have stated that they sold the family silver last year for £880m, but what's left that they can flog for decent sums of cash without materially affecting future earnings?Any contributors to the discussion?

[tim 3] 23/3/2018 21:24

Not been communicated yet.

[kirk 6] 23/3/2018 21:18

What price is the rights issue?

[frazboy] 23/3/2018 12:52

Short positions are now over 5% although a quant fund (AQR) are the vast majority of that. Difficult to ignore that position though, they were heavily short when the price dropped from over 300p to ~200p a few months ago.

Interesting times.

[tim 3] 23/3/2018 00:08

I strongly suspect that it is being artificially held up and I don't usually believe that sort of stuff.