IAmShareCrazy
31 Jan 2018
Short Huge debt pile, huge volume sell off, big hedge fund involvement and bad sector.
Dictum de dicto
31 Jan 2018
Re: Dont rub in in Just caught the Sky News headline on Capita reminding everyone that it sits at a 15 year low. But what is more alarming is that HMG minions running around telling everyone that '...there are no parallels with Carillion.' You always know there is a problem when they tell you there isn't one. I wonder how long it will take to recover to anywhere near the somewhat higher values of the past. As a veteran of transformation work I can guarantee that in a company of Capita's size it will take a darn site longer than two years to successfully undertake and embed a programme. If it does survive the next few months I can't see any meaningful creation of shareholder value for years, and it will need to start paying dividends to get that particular KPI moving.
Johandesilva
31 Jan 2018
Re: Dont rub in in Hi BillMy paper losses here are not large at all and when the dust settles I can add some more several times my investment. I certainly do not think this is Carillion and glad you agree.The mentions of debt and pensions in CPI, I believe must have had a knocked Woody's other stock Alcoholics Anonymous where I am far more exposed too but far more comfortable given the margins and potential.
Dictum de dicto
31 Jan 2018
Another Guardian article Just out by the looks of it.[link]
Dictum de dicto
31 Jan 2018
Re: Dont rub in in True, the £700m is underwritten. But if they have to rely on what is basically emergency funding what does that say about the company? I'll be waiting on the edge of my seat to see who actually stumps up. Whatever they ask you can bet that current shareholders will be the ones hammered most. With a marcap approaching £1.2bn and a rights issue of £700m it doesn't take rocket science to work out the dilution impact.Also agreed on the kitchen sink scenario. It's a classic year zero format where everything bad is in the past and the future under this new regime is all rosy. Notwithstanding current risks whether or not Capita is worth sticking with depends on future prospects, and I just don't see them. There are indeed some good people working for it and there are some half decent businesses but as long as they have the long arms of Capita around them I don't see them thriving at all. Perhaps a managed break-up of the group would be a way out rather than the status quo. Smaller, more agile operators might just have a chance of thriving, especially without the Capita name and over-reliance on public sector work.There is a lot of drama about Capita but the problem is that it can too easily become a self-fulfilling story of doom. It's still a no from me although good luck to you. I'm afraid I've been burnt too many times to believe the jam tomorrow story. I guess we will find out whether Capita has found a bottom on Thursday.
Heorot
31 Jan 2018
Re: Dont rub in in You win some, you lose some. I got out of Capita with a good profit in 2013 at 947p but then used some of the proceeds to buy Carillion. Got completely wiped out with Carillion. Capita may be a contrarian long punt now for some but I won't be investing again any time soon.
schwee
31 Jan 2018
Re: Dont rub in in I read what you have to say about the RI being underwritten so in theory CPI should get their £700m less the bloodsuckers' fees. However B&B were in this position ten years ago, but the underwriters were let off the hook for reasons never explained, setting a terrible precedent.Let us hope history does not repeat itself.
Bill1703
31 Jan 2018
Re: Dont rub in in "The company needs to raise cash, if the share price keeps falling then raising £700m from shareholders will become increasingly difficult. Without this money who knows if the company can even survive. Hence the company is in what I would call a downward spiral, the more the shareprice falls the less likely it is it will raise the money it needs..."I will not try to suggest that everything is rosy in the Capita garden - far from it - but there is more than a touch of melodrama about a couple of comments here.The company already has underwriting in place for £700m, which immediately calls foul to suggestions they have "zippo" chance of raising it. And as JDS says, there are some decent, cash generative operations and contracts here - a lot of the FCF outflow items projected for the current year are one-off and non-underlying in nature (but still real cash, of course). Of course people will simplistically cite Carillion and run screaming to the hills, but we shouldn't stretch the analogy - lest we forget, it was the construction rather than outsourcing operations that ultimately floored Carillion (albeit that some weakness in the latter didn't exactly help).There are two, overwhelming observations here. First, the real problem has been correctly - and refreshingly directly - nailed by the new CEO... as I posted in detail around a year ago, Capita spent far too much money (and time) buying far too many businesses over a period of several years, with the result that they never devoted enough focus on assimilating and integrating a sprawling empire over which they would probably have lost control of anyway, in the end. Such is the way of empire building... and human nature. This is why we are here today - not the downturn in various outsourcing markets, which has merely helped to exposed the former.Second - and I'd have to do far more forensic digging to quantify it - but this all looks like a classic and proper new-CEO kitchen-sinking. No half measures... if in doubt, kick it out. It means a bigger SP hit than it might be - but that is fine for the new CEO, suddenly his "in-price" becomes £2 or so, not the £4-5 he inherited. It makes a dramatic difference to his chances of "success"... "delivering value", or however he chooses to style it. Same with the divi... not so hard to grow "his" divi if he passes the old one entirely. We always said, as per previous discussions on these pages, that a new CEO - and what he/she might do - was one of the key residual "risks". And so it has come to pass... this all may sound a bit cynical, and it might still be - only time will tell. But it does make a massive difference to the risk/reward for the new CEO - as always, shareholders should ask the question... "cui bono?" And then, very possibly, align themselves accordingly and likewise...
numberbiter
31 Jan 2018
Re: Dont rub in in Joha,There is no intention to 'rub anything in'; all we are trying to do is help you reduce your losses. I will give you the facts and you can make your own judgement. All figures are in £'million and taken from Capita's 2016 published accounts.Net Assets 408.2Goodwill (2,175.6)Liabilities exceed assets by (1,767.4). This assumes that goodwill has no value, but other Intangible Assets (578.6) have the value stated.Net debt (1,931.6)This 2016 Balance Sheet is very similar to Carillion's Balance Sheet of the same year. On top of this net debt, there is a pension scheme deficit. In July 2017 Carillion's directors were making the same favourable noises as Capita's directors are now. The fact is that in both cases, in accounting terms, the company is bust.Holding on to this share, in my view is like having a bet at 6/4 when the true odds are 10/1.
Mikeclayton2
31 Jan 2018
Re: Prudential Oh I forgot to mention my only involvement with capita is I get my pension payslip from them, so too does my missus and she is in the civil service pension scheme (employment services) that must be a big earner for capita. Although tempted to buy on a number of occasions I haven’t, so so lucky.
Mikeclayton2
31 Jan 2018
Prudential They announced on 16 January 2018 that they were leaving Capita - some may have bailed out then - hindsight eh.
Dictum de dicto
31 Jan 2018
Carillion contracts I wonder if HMG will let them have one of these to help them out?[link] list below sets out contract packages currently being offered for potential sale as part of Project Rome. This will be updated periodically and further packages of contracts may be available in the following weeks. Contract Package 1 - Facilities management contracts with corporate, governmental and public sector customers nationallyContract Package 2 - Facilities management contracts in Northern IrelandContract Package 3 - M40 maintenance contactAny party interested in participating in Project Rome that has not already expressed its interest should provide us with their details by completing the form below.
Dictum de dicto
31 Jan 2018
Re: Dont rub in in I also had a small investment in Carillion but decided to get out before it finally failed. It's tough taking a loss (I lost on both) but it's better than losing everything. I came to the conclusion that it was a sell during today. It was a choice, hang on and hope or bail out and accept it was a poor investment. I chose the latter having learning that most of what boards say is BS. Suffice to say the SP dropped even further after the sell.In summary - the case for taking the hit on the chin:- No dividends.- They need the £700m to survive a transformation and there is a zippo guarantee that they will get it. Even if they do existing shareholders will be punished even more than they have been - the dilution disease.- I'm not convinced they will get what they need from selling bits off. I can guarantee their current assumptions will be too optimistic.- Future prospects look very grim indeed. Sentiment is very much against public sector outsourcing and I'm pretty sure that every CEO of every local authority will now regard letting a contract to Capita as a brave and high risk move. - There are far better prospects out there with lower risks and higher returns. Think about taking the loss and moving on. It hurts but it's better than losing everything. I've been in the latter situation several times in the last ten years and now have a far more clinical approach. You can get up if you are just knocked down but you are out of the match if you are knocked out.Good luck, whatever your decision.
Dictum de dicto
31 Jan 2018
Guardian view; 'CurtaIns for Capita?' I'm not a big fan of the Guardian but I think they nailed it here:[link] sensible public authority, whether council, NHS trust, or Whitehall department, would let a contract to a company over which hang as many question marks as hang over Capita. After Carillion, it has simply become too unreliable, too risky and – once you have factored in the necessary insurance in case of failure – too costly.'And....'Council chief executives have day jobs; they can’t spend hours reading the Financial Times and consulting analysts. Even if they did, City wide boys were tipping Capita’s shares as a “buy” as late as this Tuesday, which just shows how little outsiders know about the minutiae of company finance.'Echoes my views completely. As for profits:Carillion FY 2016:Total revenue £5.2bnProfit before tax £178.0m FCF £36m circa (not divulged - see this calc)[link] if you look at the (opaque) cash flow statement for 2016 Carillion generated an increase of only about £12m YoY. And Capita HY 2017Revenue £2,066mProfit before tax £195mFCF £179mPerhaps nor quite as bad as Carillion but desperately close. Have they stalled paying suppliers as well? I bet many will be spooked by today, especially if they have already been burnt by Carillion. Just imagine, you're a supplier to both and this happens. You can imagine that Accounts Payable will be fielding a lot of calls over the next day or two. Everyone will want their money out quickly. I'm expecting to see a few complaints about slow paying appear in the press before long if it is indeed a Carillion situation. It looks to me like the rights issue is more like a survival issue. If they can't raise the cash (not a given, given sentiment in the OS sector these days) then it could indeed be curtains for Capita. They probably don't have enough internally generated cash to see them through a major transformation initiative. Will we see HMG give them a major contract in the next two or three months. If so then we will be certain it's 'son of Carillion' given its track record. I wonder how many public sector local authorities will be renewing contracts with them this year with this hanging over the company? As you can guess from the above I decided to bail. It's just not worth losing the lot on the back of a transformation plan which has the odds stacked against it. I'll give it a 50% chance of survival today but if the SP drops further over the next few days I just can't see it hanging on. How on earth will they raise £700m with a SP barely a fraction of what it was a couple of years ago, and who will be dumb enough to invest? Once bitten....Good luck if you stay in. I think you'll need it.
pyueck
31 Jan 2018
Re: Dont rub in in Johandesilva - I am not trying to rub it in. I was invested in Carillion and I shut my ears to anything I didn't want to hear. Yes the directors are doing the right thing, stop the dividend, try to transform the business, try to sell off and simplify the business and launch a rights issue.However don't be under any illusion, the update today was a big flashing red warning light, the business is burning through cash and needs to raise money urgently. Ignore that at your peril. As I said in my previous post the long term restructuring is a 5-10 year job, for management the key focus has to be on keeping the lights on for the next 12 months.The company needs to raise cash, if the share price keeps falling then raising £700m from shareholders will become increasingly difficult. Without this money who knows if the company can even survive. Hence the company is in what I would call a downward spiral, the more the shareprice falls the less likely it is it will raise the money it needs. As Carillion proved, unless this company has a watertight business plan that will show why it will go from a cash haemorrhaging machine to a cash generating one, the banks are unlikely to plug the gap. Add to that the long term risk that government outsourcing seems to be out of political favour (especially if corbyn gets in which the bookies say is likely) then you are looking at a pretty dire outlook.This is a punt, maybe stability will return. But after Carillion I don't want to put any more of my money into these sort of stories.
