The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
They made £130m savings. £73m from transformation and £60m from Covid (lower travel, property and payroll)
Yet with all those savings for PBIT to drop from £120m down to £30m and blame mix now begins to demonstrate that this company is very much being badly mismanaged.
The announcement from the CEO was not very encouraging. I reckon they may have to get rid of him.
The free cashflow outlook is an absolute disaster........thats like announcing all the nails in the coffin !!!!!!!
Financial outcome
Adjusted revenue1 in the first half has declined by 9% to £1,652.2m (H1 2019 £1,815.5m). Around 4% of this (c.£80m) relates to revenue lost due to the impact of COVID-19, mainly in transactional businesses and those where client end-markets were severely affected. We managed to offset this partially with Government contracts to support the Department for Work and Pensions ('DWP') in particular and which benefited half-year revenue by £32m. The remainder of the decline was expected, representing the impact of contracts lost in the second half of 2019, specifically local government contracts.
Adjusted profit before tax1 for the half year was £30.1m (H1 2019 £117.8m) on a post-IFRS 16 basis. The decline is due firstly to the net change in margin from revenue losses and wins from 2019, as we lost high contribution and margin contracts and renewed or won lower margin work, as well as the impact of revenue losses from COVID-19. We partially offset this with £129.5m of cost savings: £72.6m from our ongoing transformation programme and £56.9m in additional cost savings specifically as a result of COVID-19, such as lower travel and property costs and payroll savings, some of which are expected to continue into 2021. There is also a £42.6m non-cash charge for holiday pay accrual which is as a result of high levels of untaken holiday for our 60,000 colleagues; this is expected to reduce significantly in the second half. The loss relating to the start-up of the Defence Fire and Rescue Project ('DFRP') is £6m at the half year and is still expected to be around £20m on a full year basis. This contract is going well to date and over its lifetime is forecast to generate good profit and cash flow.
Adjusted cash from trading operations was £193.3m (H1 2019 £187.8m) as the improvement in underlying cash conversion along with cash preservation and profit protection measures offset the negative impact of COVID-19 and contract losses, as well as positive impact from contractual working capital. Adjusted free cash flow1 during the first half year was £176.0m (H1 2019 £30.1m), which in addition to the above impacts reflects the expected year on year reduction in capital expenditure and £77m of advance customer receipts. Further cash benefits including £117m of deferred VAT and £33m from a receivables financing facility, put in place for additional risk management, have contributed to a positive movement in headline net debt of £256.6m. Net debt at 30 June 2020 was £1,096.6m (31 December 2019 £1,353.2m), helped by these cash preservation initiatives, with covenants compliant with gearing ratios at 1.5x for the US notes and 2.1x on the Euro notes. Liquidity at 30 June was £704.1m.
Here you go......
H1 2020 Financial outcome
• Adjusted revenue1 decreased by 9% to £1,652.2m (H1 2019 £1,815.5m), mainly due to 2019 contract losses and COVID-19 impact
• Adjusted profit before tax1 of £30.1m (H1 2019 £117.8m); decline resulting from change in profit mix from prior year revenue losses, net impact of COVID-19 and £42.6m non-cash accrual for untaken holiday
• Reported loss before tax of £28.5m (H1 2019 profit £31.2m)
• Adjusted cash from trading operations2 of £193.3m (H1 2019 £187.8m); Adjusted free cash flow £176.0m (H1 2019 £30.1m); improved operating cash flow and a £77m benefit from early customer payments
• H1 covenants achieved: gearing ratios at 2.1x for Euro and 1.5x for US notes; net debt of £1,096.6m (31 December 2019 £1,353.2m); liquidity of £704.1m; includes £117.3m benefit from VAT deferral scheme
Lets wait until tomorrow, see what that brings
No point continually blaming the market. This company is meant to be announcing results but the lead up is all a bit flat.
Im sure someone there knows something already!!
This went up last week.....then true to form its lost approx 10% since then.
Its disappointing for this to happen running up to results. You would hope it would have been better today :-/
Maybe there's been a leak !! Im sure someone knows something somewhere !!!
@try2buylow
I think the sentiment of the ESS sale is probably part of the issue. Its either being seen as a stress sale or simply an own goal.
We will just have to wait to see what Monday brings. Hopefully todays performance wasnt due to any leaks!!
@try2buylow
I think you're insight is focussed on all the right areas.
The share price has dropped for ages now. £13 is mind boggling. To think of the losses from £1.60 down to 22p is frightening.
So many must have got badly burned in those drops. I can only imagine that's the sentiment now. At this rate has this spaceship got any rocket fuel left?
As far as todays volatility there must be some leaks circulating today for it to be acting like it is!!!
@Directive22 and hamm67
The ESS news has been out ages ago. CPI want £500m for it, so why on earth would anyone then go and pay £750m for it in this market !!!
Maybe no one earth but maybe someone from the moon might I guess!
@eatstocks
Yeah doesnt look pretty all round today but its disappointing to see this slip. Theres not much scope to continue going downward from here. Other stocks have some scope.
What does France and Netherlands travellers have to do with this stock. Nothing really !!!
The TFL is an extension of work during 2021 -2026. It wont affect H1 at all. The weird thing is its one for the future and when it was awarded the share price moved up a bit only to then start retracting again to where it is now !!
Its just weird as it cannot hold onto any gains !!
The TFL contract extension shouldnt really be affected by Covid issues should it?
Priced at this end of the market this share shouldnt be so volatile anymore !!!! Its really weird how this stock behaves :-(
@trytobuylow
Has there been any leaks? Internally they would have already known how this year has been doing each month.
Lets see where it ends up today but the last 2 days have not been good in the run up to the announcement !!!!
@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?
Guys Im looking at this sector and others for decent long term recovery plays. JDW feels a bit toppy given no one knows where Covid 2nd wave is heading.
This one looks like it could rebound to 220 in short time maybe? Any major reasons why its dropped off recently ?
JDW is one of those that can really continue to bounce back. Its very tempting to invest big in thid but this talk of a 2nd wave is a major worry. This is one of those stocks that can get wiped out as well !!!
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 !!!!!!