Capita Share Discussion Threads

[ltcm1] 03/4/2018 09:29

But Neil Woodford says Capita is a fantastic investment which is why he has upped his stake to 10% here.

He also has Capita in his Income fund so must be expecting the dividends to come rolling in soon.

Looks like the market MUST be wrong!!!

[bookbroker] 03/4/2018 08:35

Appears to be a company in very serious trouble, a falling share price makes it very difficult to set a price for the rights issue, the underwriters are constantly having to reajust their pricing model to cover themselves!

[ltcm1] 02/4/2018 14:58

Does anyone here think things might have been so awful at Capita the Chairman took a flyer when he said the RI was fully underwritten???

I read yesterday one in four applicants for high paid jobs award themselves a masters they never did.

Could something like that be going on here or is that totally outlandish???

[ltcm1] 31/3/2018 12:54

It just seems strange in this age that the wheels are turning so slowly. What with social media being so powerful now it's a dangerous game if the process takes so long. It is something that needs reform imo.

It could be a hard sell now investors have had a few weeks to cool off. You wonder if not getting that BA contract might further sway people from investing. Perhaps they thought that deal was in the bag and it backfired on them.

[kingston78] 31/3/2018 11:14

If new money is raised by way of placing, which is permitted if it meets all the criteria, the Company can just go ahead without a prospectus. A Rights Issue open to all shareholders requires a prospectus, which is a heavy and lengthy document that needs due diligence. It takes time to prepare. That is why I said that it would be announced at the same time as the audited accounts. The timescale has actually taken longer than I expected by three weeks.

There will be pro-forma accounts, incorporating the proceeds of the rights issue by using the Balance Sheet at 31/1/2018. That will tell investors what the Balance Sheet would look like. I suspect that the amount to be raised will be a minimum of £700 M fully underwritten, and up to a further £300 M if taken up. Some fund managers will subscribe for it.

In some respects Capita is like Conviviality. The money raised is not for an acquisition or special project but for paying down the debt. This is the crux of the matter. It is money going down the drain for the company to survive to fight another day. Some people don't want to throw good money after bad. But some people see it as an opportunity to buy at a lower price (not cheaper price- see the distinction). Mind you, there will be no dividend for several years.

A certain well known Income Fund has been excluded from the UK Income Fund Index because it performed so poorly last year. I am sure that it will subscribe for loads of Capita's new shares.

[ltcm1] 31/3/2018 09:40

If they announced this £700m RI was fully underwritten then it should have been rolled out in 14 days.

The delay suggests the deal may be less solid than the company are suggesting. For it to be underwritten the due diligence must have been done.

This delay is allowing the opportunity for a downward spiral to take place. It is undermining confidence and greed is giving way to fear amongst investors. It's basic common sense that when you have to do something like this the very last thing you want is a long cooling off period.

It becomes a situation where the lower the price becomes the less likely it is to work.

[kingston78] 30/3/2018 22:55

I doubt that Lewis had found out all the ills of the company. The worst is yet to come by impairing much of the intangible assets to an estimated net realisable value of the businesses to be disposed of. The net worth of the year-end balance sheet would have been negative anyway by adopting IFRS 15, and now I think it will be negative by even more (a lot more). One may wonder after taking into account of £700 million rights issue the balance sheet could be worth zero, and yet the value of the company will be at £1.6 to £1.7 billion [£960 million market cap currently plus £700 new money].This is my rough prognosis.

Would you value a business at £1.6 billion if its shareholders fund (net worth in the balance sheet) is zero? In my opinion its share price has further to fall.

Lewis tried to make an impact. He was speaking the truth. If the Group did not restructure it would go the path of Conviviality, which suddenly found itself running out of cash; or in the same way as Carillion, for which some contracts were partly to blame for its demise. All along, I am talking about cash, cash and cash.

Significant borrowings are bad. They are only good in textbook where money supply is cheap and plentiful and trading conditions are favourable. Some businessmen don't learn the lession. They know the Profit and loss Account but not the Balance Sheet.

[eisler] 30/3/2018 19:30

I wonder of Lewis regrets kitchen sinking this so strongly? Potentially wrecking the RI and making CPI appear toxic.

[ltcm1] 30/3/2018 13:56

This poor fellow Trollwatch has lost a ton of cash on Neil Woodford funds. He now is exhibiting paranoid delusions.

Talking of Woodford, does anyone think the beleaguered fund manager is crazy enough to fire a third bullet at Capita and up his stake???

I mean if it falls to 130 say, that makes the argument he gave for buying more recently even more compelling. He might even do an RM2 and end up owning the company! (Only joking). But firing a third bullet would be gutsy.

[cryptotrade] 29/3/2018 20:24

Wow £1.38 They are stuffed. Lying management, debt, fraud doomed. Sell sell sell.

[ltcm1] 29/3/2018 15:11

Or you could say it is a predictable push down in a holiday market. Just saying today's move might not be a reliable one, even if the direction of travel might be correct.

[kingston78] 29/3/2018 14:44

You need to understand that the fees associated with the proposed rights issue could be in the region of £50 million, firstly because it is fully underwritten and secondly because of huge amount of diligence work undertaken by many professionals, including a lengthy audit. If my assumption is correct it will leave only £650 million.

I think that there was a lot of window dressing at the year-end at 31/1/2018, such that cash was conserved by delaying payment to suppliers, who must by now have tightened their credit terms of business. Credit insurance cover is likely to have been withdrawn or reduced from suppliers.

Other commitments abound, the £650 million will be used up very quickly before any actual disposal of some businesses take place.

The case for Conviviality is extreme where it was valued at £800 million only three months ago when its shares were trading above 400 p, suspended at 101 p, offered new shares to institutional investors at 10 p, then reduced to 5 p apparently but there was still insufficient demand.

You will wonder at what price Capita’s rights issue will be priced at for the new shares. I always thought that it would be priced at between 100 to 120 p before the bad news of Conviviality emerged, but now I am lowering my sight for it to be priced below 100 p a share.

[ibuyland] 29/3/2018 14:21

Now at all time lows, no support levels, with the market cap now at £900mn. Rights issue is going to be bigger than the market cap of the company.

[ibuyland] 29/3/2018 14:07

That price drop now means that everybody in the RI has to do the sums again, and they are all getting at least another 8% less now.

[ibuyland] 29/3/2018 13:43

I wonder if the sunday papers have the whole story.

[eisler] 29/3/2018 13:23

7-8% off in a day - basket case of a share. 100 by end of April.

[ibuyland] 29/3/2018 13:22

Its going to 30p sooner than you think.

[kingston78] 29/3/2018 13:10

Many companies are in distress. They are all competing for new capital from investors and lenders. Some call it a day by packing it in completely. I reckon this is all due to the excesses of the last decade on cheap debt. Companies and banks have never had it so good. Both parties are now paying the price.

I don't know how many billions that banks have been fined worldwide for their malpractices.

There is only a limited appetite for investors to stump up for rights issue to fix the balance sheet of so many companies. Banks are more cautious than ever. Interest rate is going up. This is the worst time for weak companies.

As in nature the strongest and fittest will survive. The less able will fall to predators.

[kingston78] 29/3/2018 12:52

Operation and Finance go hand in hand. Finance people are normally of the conservative type, and they are the ones who should advise senior directors who might become over ambitious or aggressive in their business plans. A Finance Director is only as good as his Financial Controller acting as his right hand man. The right hand man knows the details probably more than his superior. It is therefore important for companies (private or public) to have a very good accountant on board.

I don’t know how accountants and auditors are trained nowadays. I have not come across many accountants who I would say are bright and sharp. Computerisation actually makes them less sharp, and some of them appear to lack a grasp of basic accounting and business principles.

It is really a sad state of affairs that if the internal people don’t know about their business and financial affairs. How do you expect brokers and investors to make an investment decision? In the case of Conviviality, brokers were still recommending the shares when the price dropped from £4 to £3. More to the point, the Finance Directors bought more than £100,000 worth of shares a few days before the company’s share suspension at 101 p. Now it is calling in the administrators.

No businesses collapse as rapidly as Conviviality. Worsening trading condition only plays its part to some extent, but the lack of financial discipline is the main culprit. How could they forget a £30 million tax bill that was due, and not included in their cash flow forecast? All the flowery words in its previous annual reports mean nothing. It is not the only company that is misleading the public.

Independent executives may have business experience but usually lack accounting and finance knowledge. They rely on the Finance Director. All hell breaks loose if he is not up to the job. I suppose personality plays a large part to determine who has more influence in the boardroom.

[ibuyland] 29/3/2018 11:03

Convivality, Carillion and Capita, all begin with a C and all had KPMG as their auditors.

[eisler] 29/3/2018 11:01

Senior managers are now being made redundant - so the new 'People Director' is starting to make his mark. No divis for the next few years and a £1Bn rights issue is too little, too late, I'm afraid.

[kingston78] 29/3/2018 10:40

Future earnings per share will fall. Not only will there be less profit from a slimmed down operation (after planned disposal), but there will be a greater number of share in issue.

Dividend per share will fall or non-existent for several years.

The company will start all over again to build a sustainable and bigger business. I reckon it will take 5 years to steady the ship and a further 5 years to grow the business organically and by sensible acquisition. You just have to look at the banking sector. It has been 10 years since the 2008 financial crisis, and they are still battered.