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I still cant understand why the SP dropped so sharply from the 20s to the present 13+ soon after the results in March. Market knows what was coming but, yet reacted very negatively. But the consolation is none of the big shareholders have dumped their holdings.
To me, the most important positive thing that came along with the results is the £100 mn cost cut. With the £60 already announced it is £160mn. What amazed me was that this guy, AH, just two months into working at CPI to announce this reflects his sharpness in his assessment of the group 's working, identifying problem areas and coming up with this cost reduction, within this short period of time. In contrast JL took 5 years to come up with the £60 mn . That makes the difference. I even suspect that this £60 also would have been on the initiative of AH, because AH was already into CPI from about July 2023. Imagine £ 60 was saved for 5 years we would be having £300 mn in our kitty. Fast forward 2026, we are going to have £ 500 + mn in our system.
£160mn doesn't end in savings alone. How about the coat saving on the overall base cost. We will be less by more than 5%, which will enable CPI to quote competitively and enhance the prospects of contract wins and higher margins. All sounds great. GLA.
"I still cant understand why the SP dropped so sharply from the 20s to the present 13+ soon after the results in March"
Read again the result , you will understand lot better. we are heading towards 11p or may even test 9p before the result. FTSE at record high... On a heavy market correction, this share unlike others will have to fall sharply. No wonder , gradual increase in short positions confirm that..
Good luck!
Imo it was because the increased cash outflows resulted in an increase in debt, similarly to HY and really to be expected.
Similar story this year with increased outflow costs associated with savings, last year pension deficit, other investment costs.
Hopefully the guidance for 24 is an underestimation and may get some improvement H2, but more than likely into 25.
Not sure the June capital markets will boost us much short term.
This is a mother----ING dog.
Thank you JG & ISE for your valued inputs.
Still, the market looked at the past and reacted but the major and largest shareholders holding their nerves and looking into the future, which my feeling is good. GLA.
Major shareholders generally have diversified portfolio's, hence they don't have much impact if they lose on one investment. But for retailers like us, its mostly a huge loss..
Anyway, CPI lost over 50% of its value since march and now on a record low.. They need to turn their business into profit, for that they need to bring back their reputations. Its not happening anytime soon. its been hovering close to 10p for a while now... I wont be surprised if falls below 10p in the next few weeks.
That probably will be the best entry point I think.....
DYOR.
Good luck!
I believe that the June statement is going to be a real indicator of where this company is going. If we get a positive statement with clear goals & timelines I’m happy to hold but if we get more of the JL type b…..t ( which I don’t believe we will with AH) then we are ‘all doomed’ as Fraser would say.
Even with a positive statement the markets may well not give an upside & want to wait to see actual profits.
By time we get to June the £ to $ rate will probably be about 1.185... I can't see the June statement being a radical positive game changer and Capita is either going to look ripe for poaching or... perhaps it could be looking precarious as an ongoing business.
@Savage
I think you are wrong - I think the June statement could well be the game changer assuming the new CEO strategy is well received.
Remember that the new CEO strategy was the game changer at RR and we all know how that played out and a similar thing could easily happen here.
Any announcement that the business is performing better than forecast (back in March) and clear sight of FCF would set a proverbial rocket under the SP too.
Agree "the June statement could well be the game changer" - just not in a good way lol
Lol - Just tuned in to see what the word on the street is .......and guess what....... same sh*t another day!
King Canute keeps pushing the tide back (Not)
So many French Connection wits here!
DYOR
US economy
Stock markets fall after sharp US growth slowdown
Commerce department says gross domestic product growth decelerated to 1.6% at start of year as consumers slowed spending
Yes US is doing really well said the blindman to his dog!
One thing for sure most markets are unstable at the mo!
If you invest it has to be for the long term as short term bets are very risky.
DYOR
Super interesting how media outlets present the data as "US manufacturing sector contracted in April" because... that data is based on the PMI survey which is not hard evidence of a slowdown, it's just a survey on the opinions of company managers. When the hard data releases land it'll support the dollar some more yet!
PMI surveys, whilst not hard data, is a very good leading indicator of where that part of the economy is trending. However, IMO, the key driver for the negative print (below 50) on the PMI, is the prices paid index, which is running pretty hot at over 60, versus a circa 55 expected print.
Personally, I really like today's Mfg PMI print. Along with a marked slowdown in another leading indicator JOLTS data from this morning, its just showing that the job market isn't running as hot as the BLS' labour data indicates. And that should temper inflation expectations and you can see crude oil selling off big as a consequence - OK a big build when a small draw was expected in today's EIA weekly report didn't help. But that's all good for inflation (both CPI and Fed preferred PCE should show this up in June when May's data is reported ) to moderate and BOE to act quicker than the Fed and set the UK economy off on a better (upward) trajectory. All of this points to a rewarding long play in CPI. IMO. Also, I'd keep shorting BT to make more money.
What relevance is all this talk of US markets and pound/dollar strength, Capitas revenue is virtually all from the uk, only 288M is earned outside uk and only 6M of that is outside Europe. I don’t get all this talk about US.
It's the big picture, OkeyDokey, the big picture. In the investing world, this maxim runs very true - when the US sneezes, the rest of the world catches a cold. And all said and done, if the US economy hits a soft patch or worse a recession, the inevitable drawdown will take the US market and by extension the UK market, down with it. And if you follow global economies and how economic data newsflow from key economies impact oil prices, you'll know that the US economy is inevitably the biggest driver. And oil is inevitably a big driver on inflation as it has multiple cost touch points in the global economy (both business and personal spend), and inflation is a key driver (certainly post-Covid) for where interest rates go.
Put all this together -- bad US economic data = lower oil prices = lower inflation = interest rate expectations for central banks comes down = rate cuts = good economy = good for stock prices broadly. And Capita is very dependent on a good economy to fire on all cyclinders. Simples, I'd say.
UK was the main Zone for Capita business, however that is changing. That is why there is so much potential. Just look at the recent contact wins. Look at the Enterprise contract wins! Look and see how the business is changing!
Once the business overheads are reduced and the new management team onboarded things will accelerate towards profitability!
DYOR
Capita AGM on Tuesday 21 May 2024 at 10.30 a.m.
Can AGM makes a difference to the share price?
Very little I would imagine in this case.
IF they are reduced, not 'once.' 'Accelerating towards profitability' seems optimistic in the extreme. GL