Capita Share Discussion Threads

[lonrho] 18/1/2018 14:29

yes balance sheet doesn't look great but the balance sheet in no way represents the value of capita,that is based on the value of future discounted cash flows. EBITDA to net debt of say 2.2 is nowhere near the bank covenants and is not regarded as a distressed level.

[nigelpm] 18/1/2018 13:36

This has got one of the most hideous balance sheets I've seen in a while.


Capita : Net liabilities at end June 2017 were £668.3m (H1 2016: £552.9m). This includes significant deferred income balances recognised on the adoption of IFRS 15, as explained in Appendix 2.

Net debt at end June 2017 was £1,596m (H1 2016: £1,901m). This included £1,568m outstanding private placement bond debt, of which £90.3m matures in the next 12 months and the remainder at various maturities to 2027. In addition, we have £620m of bank debt which matures in 2018 and 2019, and an undrawn £600m revolving credit facility of which £81m matures in August 2020 and £519m in August 2021.

At 30 June 2017, our net debt to annualised EBITDA1 ratio was 2.9 and annualised interest cover1 was 7.8 times. Following the receipt of proceeds from the disposal of our Asset Services businesses and expected cash flow in the second half of the year, we expect leverage to fall to around the bottom of our 2.0 to 2.5 times range at the end of 2017. Subject to the completion of this disposal, we may choose to unwind our receivables financing which was a balance of £120m at 30 June 2017 and, in conjunction with the impact of IFRS 15 upon contingent obligations under bonds and guarantees, this may result in leverage being around the middle of our range.

Going to need strong support from the banks.

[ven1979] 18/1/2018 10:34

Yes, dividends and increase in share price looks as a good opportunity to buy at these levels

[tim 3] 18/1/2018 09:41

Good news on the Marks and Spencer contract.

[asagi] 18/1/2018 09:29

I bought shares this am. I figure that if the dividend is maintained at next results the shares will rise.

Asagi (long CPI)

[ven1979] 17/1/2018 23:53

I think it's a good entry for long term investment

[tim 3] 17/1/2018 09:41

Its through support again anyones guess where it goes now.

[blueball] 17/1/2018 09:37

Stay short.

[eisler] 16/1/2018 20:40

A positive statement from the Jonathan Lewis wouldn't go amiss - no news will definitely raise concerns. Expecting HMG to announce some kind of stress tests for major contractors. CPI simply isn't another Carillion and will benefit from the removal of a major competitor. No panic here, already well oversold!

[essentialinvestor] 16/1/2018 13:56

Mean reversion will ultimately kick in, timing that is extraordinarily difficult.

The combination of ultra low rates, QE and governments spending significantly
more than the annual tax take, are powerful forces.

UK national debt is nearing £1.9 Trillion, in 2005 it was approx .5 Trillion,
so there has been a huge price paid for some of this economic expansion
coupled with the impact of the financial crisis.

[tim 3] 16/1/2018 13:51

Good points Minerve.

[minerve] 16/1/2018 12:20

EI

I think you are right in your assessment.

I think Woodford is playing this right personally and I am also employing the same methodology. Buying into turnaround business at value rather than overpaying for shares that will most likely never meet theirs.

I think investors are too scared ATM. Although there is risk here I would expect the government to make sure (behind closed doors) that the risks of another outsourcer getting into trouble are minimised or else May might as well give the keys to no 10 to Jeremy now.

Government contracts represent less than 50% of Capita's business, last time I looked, so today's announcement is dissapointing. Hope there are not more to follow.

[tim 3] 16/1/2018 12:10

Good points EI.

I also wonder if he is not guilty of a trait that is so prevalent on these boards,being afraid to admit he was wrong and taking a loss.

Whatever way you look at it,and you might argue that its with hindsight but thats why we trust people like him to root out value,cpi was clearly not value over £10 and was a mistake and a significant one at that.It is highly unlikely to see those valuations again any time soon.The same could be said of PFG.

[fabius1] 16/1/2018 12:09

EI - I think that is fair comment. He may yet be proved right, being a fundies man, but he is appears to be flirting with the 'far side' of investing at the moment.

PS - For the record, I am patiently waiting for GSK/BAB to test support.

[essentialinvestor] 16/1/2018 11:09

Hi Tim, his longer term record is exceptional as you rightly say.


I think what may have happened is QE has pushed some of his more "natural"
holdings, for example ULVR, RB. etc, to levels he was not prepared to pay,
or was uncomfortable holding. So instead he focussed on where he saw value,
however some of these have turned out to be value traps.

By not paying for high PE and perhaps also more reliable earnings profiles,
he inadvertently went out on the risk spectrum with holdings such as PFG.

It's ironic as a probable assumption was he was doing the very opposite
and reducing risk by avoiding rich valuation, on which he may have expected some mean
reversion.

That's my very rudimentary take, and just speculation on my part.

[tim 3] 16/1/2018 10:48

Hi EI

As a previous big fan of his and respecting he is a long term investor I am seriously starting to doubt some of his decisions.

Not only was he saying it was overdone when it was around £6 but he has been adding as recently as October and they have dropped a further 20% since then.

He is also heavily invested in PFG another disaster area.

[essentialinvestor] 16/1/2018 10:24

How many times did Neil Woodford state his view the CPI sell off was overdone?.

[tim 3] 16/1/2018 10:14

Thanks eurotechie you are right those figures look awful and the similarities are scary,might give it a miss.

[tim 3] 16/1/2018 10:11

And more bad news lets see how it behaves around £4.

If 390 goes all bets are off!

[eurotechie] 16/1/2018 08:04

In theory, Capita should be able to pick up some additional contracts and 1 less comptetitor helps. However, looking at the company fundamentals, a profit margin of 1% doesn't fill me with much confidence. The figures barely look any better than Carillion's!

[tim 3] 15/1/2018 23:09

Tempted again £4 looks fairly good support and coupled with the Carillion news could be the bottom unless of course we get more negative updates from the company...

A positive chart (even if it is just support in this case) backed by good news always gets my attention.

[eisler] 14/1/2018 21:42

Some nice juicy opps for CPI coming up I think

[dealy] 13/1/2018 07:58

It's cheap anyway so adding in at minimum a crisis of confidence at carillion should boost the shares considerably

[eisler] 12/1/2018 16:42

Guessing the Carillion situation has had a +ve effect on share price today? Any opps to pick stuff up?