Capita Share Discussion Threads

[feelthepain] 02/5/2018 20:45

Can anyone help please? A couple of questions.

I am currently down over 50% on these shares.

I have 1,971 shares valued at todays close at £3,890
by my calculations for every 2 shares I can purchase 3 new shares at 70p.
so 1,971/2*3*£0.7= £2,069

If I don't take up the right issue the price the price will be massively diluted by the RI and my shares will now be worth much less say with a price of "1.22 per share would now be worth only £2,404.

So I either have to participate in the RI or sell now or take the hit and lose almost another £1,500

Am I correct in my thinking?

Next question, I use YouInvest does anyone know exactly how the RI is worked. Is it through the broker, is it direct with Capita, do I have to ensure I have enough cash with the broker before a certain date otherwise I miss out. Mainly asking as it takes a few days to transfer from bank to broker.

Sorry for the long question but its important stuff as far as I can see.

[57eady eddie] 02/5/2018 18:01

I'm getting mixed messages. I've got a short spread bet at the moment. Not massive numbers by any stretch of the imagination. However, the price keeps creeping up. Is it likely to fall at some point with this Rights Issue at 70p? Is anyone in a similar position? The deadline for applications for the RI is tomorrow from what I remember, but will it kick in later than this (June?)

[60000 muppets] 02/5/2018 09:33

Not long now and the shorters will need to buy the NP stock to deliver onwards.
10,000 shares short = 15,000 NP at 50-75p premium = £7.5-£10 k.
Nice !!!!

[kingston78] 29/4/2018 17:31

Kitchen sink approach is actually an accounting trick that has been used by many people especially by new management. Its purpose is to write off and make a provision for future losses as much as possible now so that when the situation turns out not as bad as originally thought in the next two years, they will write back the unutilised provision to the Profit and Loss account. Management will claim credit for doing a good job because they have "managed" the business "well" such that not all provision becomes necessary.

On the other hand, however, they will make further provision if they find themselves in a difficult situation in the next two years, blaming previous management for all their ills.

There are not many truly great business leaders. Most of them are ordinary. There are many unsung heroes in middle management who actually know the businesses better and steady the ship on a day to day basis. Their ideas and opinions may not be taken on board or appreciated. New management would speak to many people internally on a fact finding exercise. Not all ideas are new ideas or the new management's ideas. These come from existing members of staff.

[kingston78] 29/4/2018 12:53

There is no yield because there will be no dividend for at least 3 to 4 years.

[hotshot6] 28/4/2018 20:41

when the rights issue goes through in june what will the share price be?

[davidbennett] 28/4/2018 13:25

This looks like it could be opportunity of the year. Kitchen sink job by the new CEO who has a reputation for a no nonsense approach to business and added to that he has sunk a load of his cash in at current levels.
Give this 2 years (Jon Lewis is quoted as saying that is how long it will take to turn Capita round) and this will be on a 5% plus yield with a share price more than double where we are now. No brainer.

[only who?] 26/4/2018 18:19

Some juicy 1.5m trades at the close.

[kingston78] 26/4/2018 13:00

Delving into Capita's balance sheet further, the shareholders fund deficit of £930 million consists of mainly two large elements; that is a Share Premium account of £501 million and negative Profit and Loss Reserve of £(1,517) million.

Many companies would apply to the court to sanction eliminating the share premium account and transfer the amount to the Profit and Loss Account to speed up the restoring process of paying a dividend again. Until and unless the P&L Reserve is positive the company is not permitted by law to pay a dividend.

How many years will Capita earn a post-tax retained earning to make up the P&L deficit of £1,517 million. Even after allowing for the share premium account, we are talking about £1 billion deficit (and that is after paying any tax in the future).

This sums up my opinion that it is a long struggle for Capita from here.

[only who?] 26/4/2018 12:39

So basically things will get worse before they (might) get better?

[kingston78] 26/4/2018 12:23

Murillo, Thank you for pointing me in the right direction. I have just briefly looked at Capita's group balance sheet.

It is absolutely awful. I have done a quick calculation. As at 31/12/2017 Capita had a NET LIABILITY of £930 million even after taking into consideration of intangible fixed assets of £1,812 million. By all measures the company is bankrupt if it is not supported by lenders.

My suspicion has been proved correct that it had a negative balance sheet. It also delayed payment to suppliers to flatter the NET DEBT at the year-end (though the bottom line would not change arithmetically). Had it paid its suppliers promptly its net debt position would have gone through the roof.

Moreover, the Company still retains intangible fixed assets of £1,812 million. That is the basis why I said that Capita was likely to impair this further in next year's account despite having already used a kitchen sink approach to make all sorts of provision to flatter future years' earnings.

How is the Net rights issue proceeds of £662 million going to cover the NET LIABILITY of £930 million? It will take a few years of good performance to right the current situation. It will not be able to pay a dividend whilst its P&L Reserve is in deficit.

[fenners66] 26/4/2018 09:13

The whole point of buying businesses and consolidating them to gain efficiencies is sharing back office functions etc.
So when they sell the same under performing businesses they then perversely have to add to the headcount as those same businesses need their own back office and costs .... making them even less attractive with novice staff.

[fenners66] 26/4/2018 09:10

As I said the other day 'underlying', 'underlying', 'underlying', 'underlying', 'underlying',.... oh by the way lost over £half a Billion......

[fenners66] 26/4/2018 09:09

And the award of 1 million shares was not conditional on the share price rising say 10% from when he arrived....

[only who?] 26/4/2018 08:12

Murillo: Take your point, but when Lewis arrived the share price was around 400, so he hasn't been a huge success so far even if he 'assessed the situation' quickly. Did that take special skills when Capita was already falling apart?

[murillo] 26/4/2018 00:25

Kingston 78

The full set of statutory accounts (extending to 208 pages with the consolidated balance sheet on page 93 and innumerable notes thereafter) was, as notified in the RNS on 23 April 2018 at 14:45, then published on the Capita website. I do not warrant the content but there is no doubt it is there.

[kingston78] 26/4/2018 00:03

Murillo, a full set of statutory accounts contain numerous pages including all sorts of notes and disclosure. These are normally polished up much later after the preliminary announcement, with photos and various statements from different directors (operations and financial).

A preliminary announcement of the results is an abridged version of the audited statutory accounts highlighting the Profit and Loss Account, and accompanied with a brief highlight of the balance sheet and current trading.

I find the announcement by Capita lacks details on the balance sheet. I know the accounts have been audited, but can you tell me what assets and liabilities of Capita looked like at the year-end? The directors have not mentioned it.

My guess is that Capita had a negative worth at the year-end after the huge write-offs. The proceed from the rights issue together with the proposed disposals will not be enough to strengthen the company sufficiently for it to move forward. Profit forecast and cash flow forecast are often wrong. Mark my words, and when you look back in a few years time you might wonder as to why Capita could not produce any sufficient profits or cash flow to pay a decent dividend by 2020. Further write offs and provisions will be required in next year's accounts, and the company will fool investors by pointing to the "UNDERLYING" results. That is the most famous word in their whole announcement. It is used to deceive people.

I don't care whether it is underlying or non-underlying;the bottom line counts. Some executives are acting like politicians.

[murillo] 25/4/2018 23:58

"Only Who?

"25 Apr '18 - 15:56 - 2816 of 2819

"Good to see the directors rewarded for failure"

The major potential beneficiary of these awards is (rightly) Jon Lewis, the new CEO. He is not being "rewarded for failure" as so far he hasn't failed. On the contrary, he arrived (on 1 December 2017), assessed the situation and announced £700m rights issue with profit warning (on 31 January 2018) and then delivered audited results and underwritten £700m rights issue (on 23 April 2018).

He has invested £250,000 of his own money by buying 138,500 shares at £1.7915 on 23 April 2018 and undertaken to take up his rights at the further cost of £145,245, a total of nearly £400,000. He has skin in the game and (provided the performance targets for the LTIP share awards are reasonable), as a buyer at £1.98 after the January profit warning who will obviously take up the rights, I have no objection to the award, which (as is the intention) will incentivise him for the benefit of all shareholders.

[murillo] 25/4/2018 23:19

"kingston78

"24 Apr '18 - 22:28 - 2808 of 2818

"I don't know the standard reporting requirement for a listed company nowadays when announcing preliminary results (not a full set of audited statutory accounts, but an abridged version). ..."

These are (for better or worse) final audited accounts, not preliminary results - do keep up!

[60000 muppets] 25/4/2018 17:41

Meanwhile the share price rises and any shorters still have to deliver 1.5 times their short position in nil-paid stock, should they not close prior to record date.

[only who?] 25/4/2018 15:56

Good to see the directors rewarded for failure.
Seems to me that the rise is just through short closing activity. Lots of ways to work out what CPI is 'worth' now, but not many charts have one bottom.

[kingston78] 25/4/2018 14:16

The financial position has not changed in the sense that it was public knowledge that there would be huge write offs and there would be a rights issue. The share price was falling gradually from 200 p down to almost 120 p, and yet the recent rise is very rapid.

This price action tells me two possibilities: one that the short positions have been closed and new or big existing holders adding a lot more shares to their holdings. I will not be surprised that there will soon be announcement on this front of exceeding 3%.

I don't think the rise is sustainable. Income Funds do not benefit. In fact they would have to sell their shares, as there will be no dividend for a few years. Capital growth? Hardly likely in the business front in the foreseeable future.

Whilst Tesco is in a totally business its share price has not gone anywhere in the last few years since new management moved in after the financial scandal.

It might be possible that as and when Capita becomes a lean and mean machine with a more focussed and sustainable business in five years time someone might bid for it.

[brain smiley] 25/4/2018 13:23

Capita has 667.35 million shares in issue with another 1 billion coming from the rights issue. Profit for 2018 is forecast at £285 million thus giving Capita a EPS of 17p. With a PE of 8 might only fall after rights to 136..

[mj19] 25/4/2018 13:17

Crazy rise