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Thanks both for taking time to post your thoughts, and I'm curious to read/learn more... hopefully some others on here will post their take/viewpoints too.
Assuming there are public spending cuts (this is not a given due to Labour's track record of tax/borrow and spend spend spend, also don't forget the new £800m AI/drone slush fund that's floating around and should still be there next parliament to fund things), then how would this work in practice?
Does the government refuse to honour existing contracts and demand suppliers renegotiate? That's possible but would be tricky legally and there's a risk CPI could just say "OK, cancel the contract we're withdrawing all our staff from site" with complete loss of service followed by redundancy which is tricky politically. Or would Labour just go straight to playing the nationalisation card? That's very risky for the UK PLC reputation and Starmer isn't Corbyn. Therefore, I don't see in-flight contracts as being at significant risk because of any government budget constraints.
For new contracts/renewals there will however obviously be pressure to reduce the price. If CPI was still run by JL then I would say there's a big risk here as he'd bid with no thought for the company long-term health, but AH knows how to run a company and he will only bid if he can still make a tidy return. This means CPI may lose some of their low margin contracts (assuming cost is the customer's only decision metric), but their competitors will then be at risk of running a loss-making service as they will inherit all the problems CPI had. Don't forget, those same competitors will also be feeling the pinch and will be under pressure so may just decide taking on an ex-CPI contract is not a sensible idea. Other competitors such as Fujitsu also have other problems to worry about.
From a CPI point of view, losing contracts can also be revenue positive - a) you TUPE all the staff costs (including pensions) off your books onto the new supplier, b) depending on office ownership there may be a debt/liability reduction or chance to generate rental revenue, and c) the new supplier pays you "handover" fees for knowledge transfer etc. I've worked on several contracts like this, and the final year profits from the transfer fees alone often exceeded the actual normal profit for the contract.
My view is that losing contracts only really becomes a problem if a) you are still stuck with all the costs, and b) your reputation is in tatters such that you can't win any new business.
As I mentioned above, the key here is that AH is in charge and not JL. I am sure AH knows how to run CPI much more effectively than JL ever pretended to. Or at least that's what I hope as I'm long on CPI - 1.4m shares at just over 17p which I stupidly didn't sell at 22p when I had the chance as I believed all the BS that JL was peddling.
At the end of the day you need to ask yourself which company is the market going to like more: The 3 billion revenue org making 1%, or the 2 billion revenue org making 10%?
@Savage
Certainly not too big to fail .....if it can't turn a profit (soon) then it's almost certain to fail ... as you can't keep losing money forever!
It's more that we don't need to win NEW contracts to survive (in a downturn) because we have a lot of business already contracted and being delivered! But is it profitable? Who knows? I hope it's profitable business but the market is expressing doubt!
Most companies live (or die) by the need to achieve short term sales forecasts (usually quarter on quarter) but the very nature of our signed, long term, contracts give us an element of stability (in a volatile world).
I just think the amount of signed contracts being delivered should protect us from short term volatilities.
"a lot of the stuff done by Capita has got to be done by someone / something " - aka the too big / too important to fail argument... wonder where we've heard that one before?... If cuts are demanded, then cuts there will be, all said imo of course and DYOR.
@Savage
The great thing about CPI is that isn't not reliant on winning more contracts (during any downturn in the economy) with almost £3billion/annum contracts already won).
Others have said that CPI did pretty well whilst the last Labour Government were in power and there is no reason why they shouldn't thrive with the next Labour Government too.
Finally - a lot of the stuff done by Capita has got to be done by someone / something (like running ULEZ or collection the BBC license fee) - so (to quote Buffet) - some of those contracts create a moat around Capita (in that they are best places to continue delivering them) ....
All we need here is FCF from the £3billion revenue then we will be flying!
ONS latest release on the state of UK PLC makes for a sobering read:
https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/bulletins/publicsectorfinances/march2024#revisions
It's difficult to imagine how this dreadful financial state does not end up with savage public spending cuts in the near to mid term future... Given CPI's reliance on continued Gov spending surely there will be fallout for CPI arising from accumulated poor economic management of the UK Gov coffers?
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Thanks Voli
@Culley:
From the Capita Investors homepage:
Capital Markets Event 13 June 2024
Is there a date announced in June for the update?
Simple’s ,agreed
Looking deeper into XW being selected within the the top ten CTOs, worldwide, does it not mean that she has achieved/ accomplished a lot within the short period - less than 3 months . So when hear from AH in June we will know not only strategic plans and directions but also the level of performance , that is miles ahead. GLA.
Capita CTO
Part of a series of changes planned by AH. He is working on the lower tiers who stays and who goes! First announcement in June second in August! The shorters are getting their shares in now. This can’t last much longer!
1st meeting June second in August!
Change is coming!
Steady as she goes!
Thank you Culley 01. Btw, Xenia was the CFO at SDL with AH. Many may know about it.
In the linked in pages of these senior exe. Ah,XW some useful information is available as to their initiatives with AWS, Service now etc.
If you also have a look at career opportunities in Capita, they seem to be looking for a whole wave of specialist system designers/engineers, particularly in the Pensions unit.
https://www.capita.com/careers/all-roles?combine=&field_job_location_details_country_code=All&field_remote_only_value=1&page=1
Is she a new appointment at same time as AH, can't remember noticing too much whenever it was until now ?
Good post Kularatnam, we keep talking about AH but of course AH & Xenia are a very strong team with track record
Https://technologymagazine.com/top10/top-10-chief-transformation-officers
I got bored of waiting and put my CPI funds into ARCM. Might be able to find some more for CPI if it hits my target though.
Few fair sized buys going through and they're just dropping this at will.
Expecting 11s unfortunately
Savage - Source? The DOW futures run 24/7
Broomtree, do you have a source you can share?
Savage - not something I use but the DOW has recovered 350 points since 4 am …. We will know shortly
Https://edition.cnn.com/markets/fear-and-greed - I don't agree, when I checked this around 7.30am the scoring was 34 and right now it's 32 (lower being worse).
Savage - US Futures improving relax!
Will be well up soon, Iran Israel will calm down