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Well, the market has shrugged off this 'terrible' RNS, for now at least. Just popped above the 15p mark
Predicting a finish in the blue today here......
Doing nothing always seems to work for me on bad news days which it appears were priced in :)
I'm sceptical about why they even bothered with this RNS. It wasn't necessary, nor did we have one at this point in previous years. No compelling event. So why bother? Still kitchen sinking? Keeping the door open for a few more buy-ins? Seriously, why bother?
IMHO DYOR
Another Buy reiteration by Shore Capital. They're still bullish on this.
Same old crapita after an update, down, oh well another 6 months to wait
They should start calling their updates ‘downdates’.
At the AGM this was discussed-the official reason was transparency and getting this out before capital markets day
Did anyone attend the AGM & if so is there any info apart from the official statement that gives more details of current/future situation
I attended the AGM. There were a number of concerned shareholders making comments. The board accepted that performance wasnt good enough but there would be a big efficiency drive and costs cutting and looking at all contracts with a view to make low margin contracts work. More to follow on AI and other tie-ups. Acknowledgment that other similar companies were making money. Generally upbeat on contract wins
Quite frankly I think they accepted things werent great but I felt a determination to turn things around . Many asked about dividends/complained there wasnt one. And it was noted by the board. Despite getting a metaphorical punch in the nose, board approached shareholders and had a chat. They weren't given an easy ride at all. And if they didnt know before the disappointment and frustration of average Joes like us they certainly understood it by the end
I was expecting reported revenue to drop
I was expecting reported revenue to drop after all the disposals but to see adjust revenue drop was a shocker. Adjusted revenue I expected to hold flat or atleast be higher to show that underlying business is growing but its declined. With cost cutting in January suppose to help margin but drop in revenue likely to impact profits negatively for this period sadly imho
Lol makes me laugh when people say predicting a finish. its all pointless. yea tomorrow i predict it could go up 2 p, next day i predict its down 2p etc. none of it mattres. its a pretty worthless company
Thanks Trisor much appreciated. I think the June update will be the make or break.
Hopefully it will be positive & realistic with positive cash flow forecast for 2025 but if this is delayed past 2025 I think many will bail out
Personally, I don't see why the June update is make or break for CPI. It's AH's first opportunity to lay down what the cost cuts will look like. He should be in a position to quantify the volume of savings and indicative EBITDA margins from 2024 onwards assuming a flat revenue profile this year.
The first actual set of profitability numbers will come from the H1 results in August and that will the first of many data points to show progress or otherwise for CPI - that is key for the market, not next month's update.
For all those who focused on the fact that they didn't expect a revenue decline in the stated first 4 months of 2024 - I really don't know what you smoke when you read up financial reports. Here's a snippet from the March earnings results release with the stars indicating their statement about revenues accruing later in the year.
"For 2024, as a whole, on an adjusted basis, we currently expect that revenue will be broadly in line with 2023, and that operating profit margin and free cash flow will show modest improvement year on year.
We expect the ***** Public Service division to deliver revenue growth in 2024 reflecting the significant contracts won in 2023 moving into their operational phase later this year ***** whereas we expect the Experience division to show a reduction in revenue reflecting the non-recurrence of 2023’s closed book Life & Pensions commercial settlement coupled with ongoing revenue attrition in the rest of the Life & Pensions business.
Notwithstanding our revenue expectations, the cost reduction programmes being implemented in 2024 are expected to result in a modest improvement in adjusted operating profit margins and free cash flow, albeit in the latter case, the cash flow benefit in the year will be reduced as a result of the redundancy and other costs required to deliver the cost reduction programmes.
We will be setting out our vision, strategy and associated medium-term targets in detail at a Capital Markets Day in June 2024."
None of what was announced today was different from what was stated in March - additional clarity was provided and the upswing in revenue will accrue in H2. This is still transition year, but I'd expect the market to pay attention and start to slowly rerate the share over the course of the remainder of the year, post the update.
The stock market is a great mechanism to transfer wealth from the impatient to the patient....
9% drop in revenue is a large decline. Alongside 9% drop in tcv. Seems like nothings has really changed. Looks like it will take time imho
Yes, not so good for short-term long traders!!!
Aim
With the reduction in headcount comes the exit from certain services. This will of course reduce revenue. This is required as Capita changes its focus. This was to be expected. Capita needs to change its business focus. Certain business units had run their course and would have needed investment. Better to focus on new business areas.
You know it makes sense!
Shorts had their chance so it's hard to feel sorry for them.
Hopefully we've hit a turning point and the SP begins to recover with profitability in the not so distant future.
"With the reduction in headcount comes the exit from certain services."
@Simpiles, this sounds good, as well as right to me. If I was a betting man, I'd think that these 'cut' services, particularly the low margin ones, will be in the Experience division, along the lines of the closed book life and pensions business unit. I'm not expecting miracles in 2024, but do expect the market to start to front-run some of the improvements that should accrue to CPI in 2025.
Aim is a short term trader and I wouldn't count on her as one of my leading lights on CPI's trajectory, but will acknowledge that Aim sussed out JL's (and TW's) ineffectiveness when they announced the initial job cuts last November, and possibly also the debt raise mid last year.
I won't be surprised if CPI hangs around/drifts a bit from these levels until more clarity can be had next month, but I like the focus/commitment to SHs from the current top honchos at CPI. Ineffective Weller not withstanding.
Go
This affects all parts of the business. Services that are sold across the board. Still waiting on some of the senior management to go , but isn't that always the case. I expect the CTO to go later this year you can ‘t be CTO and CEO of Capita India there is a conflict there!!
We need someone with Vision!
One third of the way there! Once this is complete costs will be reduced.
Following yesterdays trading update statement the line which I find most staggering is this:
"For the full year 2024, we continue to expect the Group’s adjusted revenue1 to be broadly in line with 2023."
Now for one... lets hypothetically say revenue is in line with 2023... then effectively that's a drop anyway because of the elevated levels of inflation but staying level is overly ambitious imo.
They're pinning too much on the cost reductions side imo and that's because whilst costs may well be reducing their contract win rates and the values of contracts being won are both simultaneously falling too... it's a tragically punishing combination.
I think the recovery will take much longer and I think that'll become obvious in the next couple of updates. I'm sure many have faith in AH but... to turn this around in 2024 he'll have to turn water into wine and I just don't see that happening what with the context of the wider macroeconomic challenges directly colliding with his turnaround vision.
Cheers, Simpiles. I always wondered why someone on the ExCo (CTO) would be located in India and what the value-add in terms of driving technology transformation when you're not in the UK could be. I'm not being callous, but it does sound like an obvious place if you need fat trimming.
Got to wait and see what next month brings. I, for one, look forward to hearing internal cost cuts tidbits from you. The experience division revenues should sort themselves out once growth returns to the UK/European economies - rate cuts will help, and it looks like the ECB will be the first to cut though next month.
And the resident Gaslighter is still at it!!!
Go
It was a cost saving exercise one head two hats.
During his period as CTO Capita spent very little on Investment. That needs to change, hence the need for a Leader in the new tech world!
There is a change in direction and technology!
These are things that Capita wanted to do but did not have the funding for. This is the reason for such large changes at Board level. Its all about leadership and communication.
In fairness to JL some of these changes were planned but have been delayed because of the Cyber incident. Capita used to have one of the largest engineering workforces in the UK. Going forward it will be a lot smaller!
Working in the IT industry for many years Capita had some of the best engineering and technical staff!
Capita is a long term investment.
DYOR
I'm not sure anyone has implied that the turnround will be achieved in 2024. I dont expect any real positives until August update in 2025. The best case scenario then will be a material positive and tangeable impact of the cost cutting, currently underway, with more to follow. In addition more contract wins and increased revenues. It's all very frustrating but the choice is stick with it and gamble on recovery or take a hit (personally that would be huge at the current price) and bail out.