Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
".. yet the surprising thing is that none of this was unexpected. We knew that last year was a sh*t show at the f**k factory. What is surprising is that the market is reacting as if it was surprised! I guess some people must have been betting on something magical happening to the numbers between December a now."
Capitalizer - I think it's the revenue and FCF forecast for 2024 that has spooked the market. Dividends are now best case 2025, and RBC's bearish note has all but come to fruition. Unlike August 2023 when the results were completely out of the blue and were shiite, this time around there are silver linings, IMO. Yes, quite a few were pumping this alongside the naysayers with their usual views too, but it was a tossup as to which way the outlook for 2024 would go and AH decided to kitchen sink it. Naysayers got it right from a stock reaction viewpoint.
1. Larger cost cuts coming and may even be accelerated - we'll know when we get the CMD update in June. AH said in the video that there are still lots of unwanted cost overheads in the business and it's sitting largely within the Experience division.
2. The new strategy director and AH will have a big say in how they want to restructure Capita and hopefully pull off what JL couldn't achieve in his failed 6 years leading CPI. We'll have to see what their growth strategy is - ultimately it needs to translate to the bottom-line though.
3. The wild card for the Experience division is a UK economic recovery. That has been a major headwind in 2023 and I can see they're actually projecting negative revs growth, maybe in the 5 to 10% range, in 2024. That may yet recover if rate cuts are in place and business spend comes back in 2024 - but that's a H2 story for me.
Personally for me it isn't a time to sell, unlike on the H1 2023 results day when it was and I did. Good luck with whatever you do.
Culley - that's about right I'm afraid. An acknowledgement that the turnaround is still ongoing is a slap to the face of JL after his big announcement last year that it is all done and dusted - Unfortunately, it's more jam tomorrow. Save more costs and get rid of him now!!!
The problem child is the Experience division in the face of a recessionary UK economy. Unfortunately, this is another lost year for CPI, albeit the planned cost cuts are a positive.
@TerryM1 - what's your take on today's annoucements - more cuts needed and an incomplete turnaround. Even 30p at this time seems optimistic as long as there's no revenue growth..
This is, for me, full-on kitchen sinking. At least AH has acknowledged in the report that the turnaround isn't complete and that is a good starting point. There are plenty of cuts coming and I can wager they will be in the Experience division. I would've been bearish if they didn't announce any more cost cuts on the back of those results, but pleasantly surprised by the value of additional cost cuts announced. These level of cost cuts are welcome and I won't be surprised if the markets take a positive view of today's annoucement/s - the Experience division is the dog and is a direct reflection of the no-growth economy that the UK is.
These results are exactly as I'd have expected -- shiite 2023 and a big reason why, Sharehead, the SP is where it is now. However, the additional £100m cost cuts in 2024 are encouraging and the markets will like this. What this means is that prognostications of 50p valuations in 2024 are but a pipe dream, but may come to fruition once revenue starts growing again in 2025. These results possibly justify a between 30 and 40p valuation in 2024, but is still a show me story for valuations to meaningfully break out higher. Additional colour on AH's strategy in June will be welcome and he has shown that he's willing to take the bull by the horns and cut even heavily at the start of 2024 - this should've been done ages ago by the now confirmed waste-of-space JL.
P.S: Not to rub it in, Sharehead, but all this talk of AIdoing something/anything for CPI's shareprice is just shiite. All that really matters is cold hard financials and we're now possibly looking at 2025 for some dividend resumption, if the economy plays ball.
As expected, last year's FCF and profits were shiite. An additional £100m cost cuts - AH means business I suppose as this Woke shiite under JL just wasn't sustainable. ANother year of negative FCF because of £50m payouts for layoffs this year, dividends are best case next time this year, but that is much needed. Experience division will be getting a proper haircut I'd imagine.
"VOTE MOULDING OUT AT AGM" - Let's be real, that's never going to happen. We'll have to live with his endearing vision of his being the Kong that takes on the City and comes out on top. Maybe we can hope that the UK macro OR a US listing helps out, but that's our best hope (after Kong).
I'm spending my time away from watching the screen with an ever depreciating portfolio value. I'm spending this valuable time watching over and over the THG production of Kong crushing the City and knowing that I'm in very safe hands with Mouldy and his master vision of creating shareholder value by taking on the City. Take heart chaps, this will come good soon. You only need to listen to his resident PR team on this board and only have positive thoughts!!! Negativity is not on and isn't tolerated.
And yet it is at these levels and that is the cold hard reality. The market could care less for your and my opinions - its the hard financial numbers that could be incoming that's as much as the market wants to know and will base the share price. The SP is currently reflecting multiple failures in delivering numbers and until that changes, we're not going anywhere on a sustainable basis.
My hope is that this change starts Wednesday, but then my hope could be misplaced.
". I’m thinking 50p test in the next few months"
Unless this one is blockbusters report with a Utopia level FCF forecast and I can't see that happening in this report, IMO, 50p is a bridge too far. We'll need a confirmation that CPI is on a sustainable FCF trajectory and I'd think that the market needs validation from AH's first half year report to see if he's actually delivered to vindicate that level of SP. We'll need a solid report on Wednesday and an outstanding report in August for the SP to really go above the 50p level. It could get there eventually, but the market needs multiple data points validation and I can't see that coming on Wednesday. Steady progress is more than welcome.
"We already know what 2023 looks like: a series of unfortunate incidents. All we can hope for this week is no fresh surprises plus a rousing growth oriented vision from AH. "
The first is spot on IMO, Capitalizer. However, if the second bit in your statement above were to happen on Wednesday, rest assured this won't tread water till H1 results in August OR till this time next year. If the market does get to hear even a bit of positive outlook on cost control/margins, the SP should rally. Under 36 hours for the big reveal.
"the only way to get rewarded by the market is to tell the market that you are leaving then it will reward you by hiking your SP 20%/30%"
@Crafty - Can you please not tell your big boss that you'll forego some of your hard earned stock options here if he actually grown a pair and make his intentions clear that he intends to list on the NYSE/Nasdaq? Let him know it may be a bit painful to regularly put out proper financial updates, but it's highly rewarding for him and us lot. And we'll be eternally grateful to you!!
Please give this a serious consideration.
@Jackbob - "If net debt is £210m at 2023YE, cash at hand is therefore £390m or 49% of M.cap." That's not how it works. Net Debt just means --- Total Debt (Excluding lease liabilities) Minus cash on hand. At the end of 2022 Gross debt was £679m and cash on the balance sheet was $473m. Net of hedging gains of £24m is how you ended up with £180m net debt on the balance sheet. This has now moved up to £210m. Assuming that the Gross debt held at £679m, cash on hand would've decreased to circa £445m.
From 2022's AR - "Net debt before lease liabilities and adjusted for the impact of hedging was £181m (2021 net cash: £44m). The increase in net debt year on year is driven by the investment in property, plant and equipment, leases and intangible assets in the period totalling £176m."
End of 2023 net debt will be circa £210m as worked out from the 1.8 multiple of the adjusted EBITDA number from the January update. The biossance acquisition will be a big chunk of that delta!!
It's a good thing to cut jobs/costs as needed, particularly if there are efficiencies gained - Meta's year of efficiency was 2023 and we know the outcome. Revenue growth jumped on the back of changed focus of advertising in 2023 to measurable success, and the cost cuts massively helped with profits. Can we grow revenues in 2024 - I sure hope so particularly if there are rate cuts. To me that's the missing piece. The market isn't convinced and hence the drawdown in the SP whenever there's a chance. Maybe Mad Mouldy's only hope for salvation is the macro helping him and that is the hope for us lot too. An NYSE listing will most certainly help, but I don't think he has it in him to move away from the hardly any forecasting work he does on the LSE. Anyway, the only thing to do here for us is to be patient and wait for either of the above 2 to happen - Mad hat is not going anywhere and an MBO/Bid isn't likely with him at the helm. Who knows where we can go in the near term though!!
Let's not worry about CRafty - must be racking up plenty of free stock options from Mad Moulders. Possibly 30 options per reply and 100 options per a proper promotion post. At this rate, Crafty will overtake my holding in the not too distant future. ROFL.
I'll leave the incessant posting to the naysayers as well as the uber positive holders, the PR team included. Good luck chappies.
"Agreed, but this has always been the case, JL chose to ignore this and sold off the family silver just to keep going without solving the underlying problem." -- This is spot on, IMO, and is the biggest reason why we're at 20p and not at 50p or higher.
@Culley01 - you're broadly right and I suppose at what point you invest in depends on your outlook for both the economy as well as where the new leadership may take this. I've placed my bets, and it is a bet that AH will turn out to be better at running CPI than JL was, and we have some historical precedence for this. We will soon know though and the downside of waiting till the signs are almost all too clear is that the SP may have bolted upwards by then.
@TerryM1 - I think enough has been said about JL and all his past failings, and I do agree there have been too many to mention, and the outcome of these is why the SP is where it is at now - multi-decade, if not all-time lows. Cost cuts were kicked off a good 12 to 18 months too late, IMO. However, if you're looking at CPI as an investment now the only thing that really matters is what the new CEO can or will do with this remaining business and what levels of profitability (FCF) it can generate in the coming HYs and FYs. That's what the market wants to know and that's all I'm keen to hear about in the upcoming update.
I may give AH the benefit of doubt till the H1 2024 results, but if there's no progress by that time I'll be out for good. Who knows, he may just surprise us on the 6th??
"So where has all the money gone from sales from 1 January 2019 to now?
By the by; NOTHING that any of us idiotic Pilgrims write on here will in the slightest way have an effect on the share price. They are simply the musings of fools...."
On that account, there's no point in anyone responding to your musings, Kipper? ;-) Backward looking metrics are not a basis for stock investments and all that..
Anyway, 2 more trading days and we then might have an initial answer to the business/FCF outlook question under AH.