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@try2buylow
Thanks for such an insightful post!
The financial transformation would just be part of it as the CEO was meant to be embarking on a company wide transformation. It sounds like all those system costs were written off. A half finished system would have no onward value so the auditors would be right to label it sunk costs with no future benefit.
The bigger picture is now slowly becoming clearer now the facts are coming out!!!! Do you know what restructures they have planned? I can see them selling off divisions to focus on core activities as part of a continued transformation but dont know how intrinsically integrated divisions are in this company.
How much PBIT do you think they will announce next week?
Bertles, there was a posting on here back in April saying that SAP development has been canned(!)& costs have been written off in favour of developing an all encompassing system that will also forecast.
Page 19 of the YE19 presentation fesses up to that part of the £159 "significant restructuring" in development of the new system (copied below). Operating profit is brought down to 0 by that figure (loss before tax to (64)). Perhaps the CFO was shrewd enough to what to write cost off as he know the CEO hadn't an appreciation of how the market would focus on audited figures ahead of the profit he thinks about (& hence dumped his shares asap). It is a sorry tale without selling shares as the auditors have agreed with him that what he spent on development of their replacement for SAP does not have continuing benefit for the business even before it has been used.
The aim of the finance transformation is to improve the Group’s financial reporting systems, processes and controls, by
increasing standardisation, automation and the quality of available data. The new financial systems were due to go live in
the second half of 2019. While progress was made, we took the decision to defer the go-live as more work is required on
the core processes and procedures before the system can effectively be implemented. We have reviewed the costs
capitalised and assessed that £12.3m is impaired, representing areas that we expect to redesign before going live. The
carrying value of the investment at 31 December 2019, post impairment, is £58.6m. Further impairment may arise should
there be a material change to the Group’s operating model ahead of any go-live. This impairment is included within
significant restructuring.
Uddin - my estimate for revenue H1 = 1.66m, H2 = 1.74m so Y20 = 3.4m. Other predictions are at 3.5m (YE19 was 3.647 ?). 355m over 5 years is 2% of revenue pa in all. The service that has been extended doesn't add good news, its just not bad of having lost that bit, I don't know what the figure is for that, say half. If the 900 new jobs & extension of scope were 1% it would explain why the SP hardly moved although we feel it is excellent IMO that the company has kudos in retaining & extending the relationship. IMO the RNS just saying that results will be announced is worth more to big money pricing their commitment to the share as they have an absence of guidance.
What they will really pay for simplicity & predictability at the bottom line of the audited P&L. My latest forecast has good enough operational results but it won't earn a SP hike. The first step is to let them know what to expect. In the near term my latest YE 20 predication is for a repeat of YE19 if head office, exceptional , systems own goals & other write offs haven't settled down except that if ESS is taken off them it'll make all the difference & by an odd coincidence nearly repeat YE18 (which went down better SP wise = 100-120 ish).
Just to add to that most transformations in a company this size would revolve around an ERP platform. Not sure what ERP CPI use but probably SAP ?
Maybe someone here who works there can confirm what they use ?
SAP consultants cost a packet so if its been axed then I would expect huge savings in H1 !!!!!
Also given they announced the transformation had gone tits up H2 last year. I would expect many of those transformational projects to have been canned. Contractors etc would probably have been axed if they had any sense !!!!!!
If you read the 25/6/20 in detail pretty much all the news is already out.
The upto £50m saving is an arbitrary figure that I would expect to see. Thet have said 60% of the staff are working from home. There is no excuses not to be seeing a ton of overhead savings, meetings, travel, office costs etc Add to that 10,000 furloughed staff not generating expenses etc
Given the FY2019 results CPI should have been really focussed on all sorts of cost savings anyway!!!!
Hi Bertles,
Where did you get the £50m saving from.
Thanks
Also I think analysts will have a sharp eye on Capita's liquidity and cashflow. That seems to be the noose around thier neck !!
Also a sharp eye on the CFO if he buys/sells. It seems thats by far the most accurate indicator where this share is headed !!!!!!!
Just to add to that if its anything less than £200m then I suspect the reaction maybe negative.
£100m - £125m - share will probably collapse
£125m - £175m - share will probably may slip/hold on a sliding scale
£175m -£200m - share may gain some support/indifferent
£200m + is really where CPI need to land to really get support
I think H1
Turnover £1.7Bn (down £175m)
PBIT £115m (LFL)
+ £45m Savings
+ £6m Furlough
+ upto £50m Covid related & overhead savings
I would expect to see +£200m PBIT at least !!!!
https://polaris.brighterir.com/public/capita/news/rns_widget/story/xo3m5mx
https://www.londonstockexchange.com/news-article/CPI/notice-of-results/14648472
Phew, they've done the right thing