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Huge moves overnight by US dollar strengthening rapidly against Japanese Yen... However, I don't think Japan will be alone in facing down this issue and UK £ imo will face some trouble on this front in the imminent future too... Does a weaker £ aid Capita? How much of it's earnings are drawn in from business abroad in earned foreign currency?
Another takeaway over target getting ready
Capita is looking rather ripe for a takeover bid, I agree with that...
@SK at what level?
Do you think it would have been wise for RWC to have sold with this in mind?
And finally, what are your views on a potential share consolidation ?
Hi Trisor, I think it's very possible RWC may have been selling to counter losses on its other investments, perhaps. Either that or it may be their opinion CPI has further yet to fall, and they may have decided to either limit their exposure to those further falls or on positioning themselves to repurchase the sold share holdings for a cheaper SP? - Once thing I am more certain of... Given RWC selling 1% off I think they don't see a bid being immediately forthcoming.
As for prospects of a possible share consolidation for CPI - I think it'd be a highly risky move as it could trigger a massive fire sale by those with their triggers already hovering over the sell button... it'd prove hard to put that back into the bottle because so far as I can see the only 'hope' out there for CPI is the leadership that Adolfo Hernandez has brought to the table and many appear to agree that it'll take significant time to turn the tanker into calmer waters.
Thanks SK-you seemed to indicate that this was ripe for a takeover bid-if that occurs at what level would you imagine would be acceptable to shareholders/the Board
Most welcome... well I think CPI is already ripe for a takeover bid right now, that's because I can't see that another 1p-3p off the SP would make all that much difference to any takeover offer price which would have to offer something extra than the current price range to current holders but... I have to say that I don't think RWC share that view because else why sell the 1% they just offloaded? They appear to be betting a takeover bid will not be imminent with their recent move to unload.
Sorry meant to add that a takeover bid could prove acceptable to existing shareholders at anything north of 28p. Anything less and I think it'd be rejected on the pinned hopes of AH making a turnaround and shareholders seeing better returns for a longer wait.
Thank you for your input SK. Im getting to the point where Im praying for that kind of bid as nothing is moving the price and the powers that be at Capita are not doing anything to try to move it whether by updates, news on wins however small or anything else. Holding this is like holding a firework. Might be a roaring success /beautiful spectacle, might blow off half your body!
I empathise with your situation Trisor and what I'm about to say probably doesn't help you here but.... being honest the factor which weighed on my decision to avoid investing in CPI in the end was I couldn't see good probability for either short or mid-term gains.
I only saw potential for dipping in for a very long term hold and right now I saw greater potential for mid-term gains in another equity. I'm keeping a close eye on CPI though because I'm open minded of the potential for that to change and I could take a position if it does.... Signals I'm looking out for in priority order: 1. General Election UK - if this happens very soon I will very likely take up a position but... it has to be soon, longer it takes the higher the odds I won't be buying in. 2. Better than anticipated results at the next CPI results, I'd only make an investment before seeing the results if a GE comes beforehand. 3. Significant uptick in UK GDP with simultaneous reduction in unemployment figs (unlikely to happen). 4. USA interest rate cut before BoE (unlikely to happen).
Nothing has changed for the worse (except the SP!) since AH came in. He’s made some positive statements, invested in the company & announced £100m savings + potential to improve margins further. Not bad in 4 months.
I hope that the June statement will give an impetus & a clear sense of direction (sadly lacking under JL). My worry is that return to FCF could be put off to 2026 but I think that’s unlikely.
We have £60m saving announced by JL, £100m by AH, from next year £20m saving from pension, £25 m not going to data leak.
I reckon there will be a£50m spend on AI etc but even so the above should show profit in 2025
Zuckerberg has gone large betting on AI for Meta... It hasn't helped their SP...
SK -for now. AI is the future as is blockchain and the re-writing of the Internet on the blockchain with the use of smart contracts
I'm not sure how Capita is 'ripe for a takeover bid'. All of the most lucrative bits of this business (i.e. those with growth potential) have been sold off. Let's not forget that the original turnaround plan was for Capita to offload the parts of the business they are now left holding. These leftovers might be saleable post-administration, but it's hard to see anyone wanting to pay good money for them at the moment.
Capita's only hope now is to slowly haul its behind into profitability, while not making any major blunders (which, as everyone knows, is a big ask with this company). That may be achievable, but it might also require further fundraising, which will drag the sp even lower.
Think folk getting way ahead of themselves on the speculation front; the new guy hasn’t come in to see it taken away in months. The takeover of Capita would be far from simple and I don’t see it on the cards at this point
RR - Should the SP head sub 10p then my bet would pivot on the spot towards it heading rather quickly into administration. I don't think there will be enough economic activity to offer CPI much by way of support. Tough times are coming.
SK- if there is a global stock market crash this could go sub 10. Otherwise I don’t think so
Trisor, I don't think there will be a global crash, a correction perhaps but because USA economy is very strong the Fed should only need to carry out a little trimming of bank rates to gently support the strong economy. I don't think they'll need to make rounds of steep cuts to keep the wheels turning...
Conversely UK is looking very weak, many more cuts will be needed to support businesses and demand but the weak £ will prevent BoE from delivering the number of cuts required to properly support the economy. When BoE makes even a small cut the inflations will return with considerably more gusto than anyone anticipates. BoE will be stuck between a rock & hard place, the result being a whole heap of pain as few will feel any benefits from MPC decisions.
SK-I disagree -if there is no global crash then the UK will be fine. Even if there is one, generally everything recovers within a year to 18 months. Capita has little debt institutional debt to deal with and has long term contracts, some with options. Many of the clients they do business one are very solid institutions many backed by the government. If anything Capita is a strong recession play. Please can you elaborate, given my points, why you feel Capita will be going bust because Im seeing things in quite a different way and its useful to have the opposite view
Hi Trisor, Capita is currently losing money YoY, if the trend continues it'll weaken the market capitalisation value of the business, which has already suffered considerably due to YoY revenue reductions from nearly £5bn in 2015 down every single year hitting just £2.81bn for 2023. CPI may well have long term contracts but... there's little evidence they're proving to be lucrative, as else Revenues at the very least would have stopped falling.
So imo CPI has to generate some entirely new business, take some business off from its competitors, or make gargantuan efficiency gains with enough magnitude that as a bare minimum the revenues stabilise. Naturally this is way way easier to achieve in a growing economy... now Chancellor Hunt said at the despatch box when he presented his budget figs said OBR expects UK economy to grow 0.8% this year and 1.9% next year... problem is that is not happening. Growth has fallen short and debt is higher too. So the cards are sadly imo very stacked against CPI and other struggling businesses too. It's less of a problem for businesses with better financials.
USA economy is booming - ADP says private company payrolls increased by 192,000 in April, more than the 175,000 which economists expected. - Pay also up by 5%
If BoE MPC thinks UK £ can go up against the US $ on rates then A.Bailey will be making a grave error of judgement!
Its really amusing you think the US economy is booming!
Trisor: OECD forecasts US and Canada as the fastest growing G7 economies next year, both growing 1.8%.
Meanwhile... UK will be worst performer in G7 next year with growth of just 1% - terrible state of affairs and CPI relies on growth just as any other business does.
Savage Im not certain you are understanding Capita completely.
1. We have long term contracts
2. We are looking abroad to diversify
3. Companies and institutions prefer to outsource to someone they can trust as it costs them less and allows them to concentrate on their core businesses
I would also point out that growth figures are an average for each subsection .
Finally 1.7% is not booming. The US's debt is increasing by about 3 trillion a year. That debt has to get serviced
Almost right
Germany is forecast lower than UK common link is manufacturing. Hey Ho! but wait for 3 months for the next report!
UK is reducing its debt so we will see some improvement!
Like I said before its difficult trading in the markets at the moment! You will get wild swings in the market. Long term investing makes sense but DYOR.