'Time to baton down the hatches and wait for the storm to pass ... And pass it will ....'
Back on the bicycle for me and no looking at the SP. If aim et al can get it lower, double up. We all deserve yachts and dividends for berthing costs imo
' The danger of a value trap presents itself when the stock continues to languish or drop further after an investor buys into the company.'
Think we have to give it a couple of weeks yet LoL
https://www.investopedia.com/terms/v/valuetrap.asp
JG68, I think it is the timing and interest rates to blame. The underlying is still very much positive. This time last year I was looking forward to the dividend to fund berthing fees for a yacht from profits. And now, the prospect of no dividend for another couple of years.
At some point they had to step more formally onto a digitalisation strategy and glide path and be less reliant on disposals. Contracts are clunky instruments hence the difficult wording and changes in senior staff imo
'Surely the large holders aren't going to put up with this for much longer.'
Can only be temporary, surely. The BoD are bound by statutory obligations and it's a serious offence to give misleading statements. If they say the continuing business is improving, revenues and profits are up, I believe it.
'That is a very poor metric: how many of Capita's employees *could* go anywhere else?'
If I was acquiring CPI it would be a key metric. More outsourcing contracts = more employees. No doubt Adolpho will introduce 'scientific' improvements..
'Goodwill'
The adjusted revenues and profitability for the continuing businesses have improved. In so so far as the goodwill adjustment relates to 'discontinued' business, its no longer transformation and therefore a one off. Higher interest rates will impact on valuation ie discounted future cashflows and true for the whole industry andcompetition. As for the balance of goodwill, consider the number of employees, the single biggest asset CPI has. Apparently very happy and not going anywhere.
The general trends are good imo. JL leaving transformation behind and Adolpho moving operate and execute against the continuing business forward. Disposal proceeds are in second half and capex/ working capital requirements over a dividend is 'soft' kitchen sinking imo
' I do agree we need a year with a clear set of accounts simply showing trading figures, profits etc uncluttered by exceptional. However this might have to wait until 2024 or 2025'
We thought we were at a watershed. Post transformation and interest rates continuing to rise. Working capital and capex is needed to grow a new CEOs digitalisation strategy. That capex spend outweighs what was always a speculative dividend and business sales need to borrow money at higher rates. Long term contract losses continue to drag. Come on Adolpho, you need a big contract win before year end or borrow JLs slippers!
Very funny. Of course statutory accounting is all historic cost accounting. The money is already spent. The underlying business is tracking up and its another couple of years before rising from the ashes. Helens appointment and JLs exit make me think its up for sale. I dont know what an offer might be but not 22p if the underling business is positive
Thanks for the forensic analysis. I suppose its the tipping point we are waiting for that pushes the SP over 30 and beyond (buzz lightyear)!
November debt pay down triggers a rerate?
Growing cashflows support a dividend and value?
Major contract wins confirm return to growth?
Large workforce is 'an off balance sheet asset' and a stepping stone for a bid from a large player?
In any event, the continuing businesses look to be going concerns. Any contracts coming up must be cost plus or loss making for the competition imho
"I am pleased with the progress we have continued to make across Capita so far this year.
“Our performance has been in line with our expectations. We have increased adjusted revenue, profit and free cash flow; and further reduced debt and strengthened the balance sheet.
“Operationally, we have remained strong, continuing to deliver successfully for our many clients in both the public and private sectors.
“As our reputation for delivery and digital transformation services increases, we have secured a series of important contract wins and renewals, as well as growing the amount of work won with new clients.
“We are well positioned for growth in the second half of the year and beyond; and our full-year commitments remain on track.
Which revenue number for what purpose?
adjusted revenue should be used to assess the future outcome where revenue is growing ie revenue less any revenue relating to businesses that have been disposed of, or exited during the year or prior year; or, are in the process of being disposed of, or exited....
Revenue growth in contractual and transactional business is good. Costs are the easiest thing for a management to control as they are under their direct control so earning look like they will deliver in H2 as they said. Getting more revenue is up to the customers/3rd parties, so thats the improvement over the outlook they gave. They said that prior year long term contract losses would drag but they appear to have done better than they outlooked. So yes, solid results building toward £2 end of 2023 or bid by another party who bolt CPI on for economies of scale imho
I thought the results were slightly better than they outlooked (confirmation) and now looking to big debt reduction end of year. ii's then begin rerating . No idea what the SP will be next week or next year. But will be higher imho!