Capita Share Discussion Threads

[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

[1retirement] 25/4/2018 12:32

Citytrader, I make the dilution at being ~0.75%, so hardly earth moving. But I agree with your point that its an awful lot of shares they are being granted for nil cost, based on their own calculated turnaround targets (albeit those targets have to be agreed by shareholders).

[frazboy] 25/4/2018 12:22

No *reported* reduction in the short position here yet but I can't help but think that this upwards and onwards rise is due in large part to technical factors.

Does anyone know for sure, what the situation is for any large institution holding a short position? As they've sold the shares which they borrowed, I presume they'll have to buy them back, in addition to the shares over which they would have held rights, because the no-brainer for the institution lending them the stock is to take up their rights in full. Anyone got any first hand experience of this?

[citytrader66] 25/4/2018 10:53

jeez the new CEO Jonathan Lewis just got awarded over a million shares awarded under "Long Term Incentive Plan 2017". hes not been in the role that long?! plus other directors awarded free shares. adds up to quite alot of dilution for investors.

[sandeep67] 25/4/2018 10:19

Marles. I don't think this happened with PFG as they listed the ex rights separately. Am I missing something?

[kingston78] 24/4/2018 22:28

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).

Capita and other companies focus on the Profit and Loss Account and briefly mention about current trading and net debt at end of last financial year. They barely touch on the Balance Sheet that would reveal the strength and weakness of a company. Years ago we had to report a brief version of the Balance Sheet in addition to the Profit and Loss Account. It would appear that the level of reporting is now lower than 20 years ago on preliminary results.

Turning to the brief year-end results of Capita, one could tell the horror and extent of write off and provisions totalling £851 million. That is shocking (which I did anticipate). It has written off almost as much as its market capitalisation not long ago when it almost sank to 120 p before a steady and then speedy recovery.

I am not slating off the new CEO. I just do not share his optimism that things will go according to his business plan; at least not as smoothly as planned. The business world is tough and Capita's competitors at the higher end will defend their market share. The forecast free cash flow of £300 million by 2020, even if achieved, tells you how bad the company's situation is. Meanwhile the company will be getting a net rights issue proceeds of £662 million, using investors' money to buy tomorrow's earnings. Whilst different in nature and definitely with a purpose and focus, it is in some way no different from the previous management buying new businesses (and their future earnings) using borrowed money. It is a case of safer equity now against riskier debt previously. In the end the ordinary shareholders pay for the price of mistakes made by the management (current or former).

[marles] 24/4/2018 21:48

Wonder 4 If current price 180p and a 3 for 2 at 70p then new number shares = 3*70 + 2*180 = 570 p then divide by 5 new shares = 114p each. No guarantee this price will be reached as the market decides on a fair price from day to day but if you are short with a spread betting firm you need to be careful. The RNS gave a theoretical ex rights price based on 160p closing value last Friday which I think was 106p. Price seemed to scoot up to 160p at the close rather conveniently last Friday afternoon so ex rights price calculated to be over 100p!!

With shorting you need to be careful with rights issues and a deeply discounted one may not help you as you may have the rights taken up against you. You have until May 4 but after that you will find your short position may increase rather like longs are being asked to stump up extra cash.

The rights issue is deeply discounted because the underwriters would not underwrite at any higher price than 70p.They would have thoroughly analysed the balance sheet before deciding 70p was enough!

[pal44] 24/4/2018 18:56

Does not make sense RI discounted. Who benefits ?

[kingston78] 24/4/2018 10:02

The situation at CPI will become worse before it becomes better in 3 years time. That is essentially the message to investors. The fees to advisors amount to £39 million on the rights issue, leaving only £662 million net to the company. It will cost them loads of money by making some staff redundant. Whilst the plan is sound on paper it is never easy to implement successfully or on time. New management is realistic about it; that is why this is a medium term plan, backed by some faithful investors who had actually also backed the old management. Those backers had made a wrong judgement call. They are now hoping for the best.

I have not seen the company’s balance sheet yet. In my previous calculation it would be in negative territory.

[kingston78] 24/4/2018 09:50

A drugs company backed by investor Neil Woodford saw its share price crash yesterday after announcing the failure of a new treatment. Prothena, which is nearly 29% owned by a fund controlled by Woodford, saw its share price plunge by 70%, wiping more than £717 million from its market capitalisation. The news is another blow for Woodford who saw his fund shrink by a fifth or £1.6 billion in the first three months of the year. Woodford said “Despite the disappointment that we feel, that our investors feel, and indeed the company feels more acutely, there is a lot of value in Prothena.” That speaks volume of that man’s mentality and attitude towards investing.

[only who?] 24/4/2018 08:47

Back to 160 again today?

[wonder4] 24/4/2018 08:35

Apologies for being a dunce, but is the price actually going to fall back to 114p on the eights issue? What does ‘technically’ fall back mean? And what do I have to do with my short position to keep it in place? Am minded to sell my long. Thanks

[marles] 23/4/2018 21:40

Shorters may well be closing before rights issue deadline to avoid having to deal with the hassle of trying to buy the rights back as deadline early May.Short term I think the bulls have it although the share price will technically fall after the rights issue is completed eg at 180p current ex rights price would be 114p. The fact the rights are 70p says a lot though as this is a steep discount. The turnover of billions sounds good but real profits seem modest and not sure it is much of a recovery play.Since the rights are underwritten I guess the deal is done.

A lot of big numbers thrown around mainly involving debt or goodwill impairment and a lot of spin. Market seems accepting after a good presentation by Lewis but he better start delivering soon.

[bench2] 23/4/2018 20:24

Directors all buying stock this afternoon , chart looking good .

[only who?] 23/4/2018 18:06

Deceased feline levitation.

[abbotslynn] 23/4/2018 17:54

Nice upward movement today £££;

[1retirement] 23/4/2018 17:36

Everything screams south but it heads north.........crazy, but who would judge the market.

[only who?] 23/4/2018 15:57

Underlying 2 + 2 = 5

[dealy] 23/4/2018 15:29

Glad to see Fenners suffering today

[dexdringle] 23/4/2018 15:26

.......yes, but the share price falling from over £10 to under £2 is a reflection of the fact that the market knows things aren't going too well ?