Member Info for Hexam

JG - I don’t think you can get to a FCF conversion so readily especially as revenue is not the only reason for the miss on FCF. They actually gave two themselves:

“Expect a free cash outflow2 of £120m-£140m in 2024 as a result of lower revenues AND a more sustainable approach to working capital management.”

There will be other factors as well that they haven’t mentioned (as expenses etc won’t have been exactly in line with expectations) which could be plus or minus.

So it’s probably less than 20% but what exactly is impossible to tell. The key thing is that they missed guidance by a fair bit whatever the reason.

"If last year was 2.8b and we are say 9 % down by year end -that should leave as at 2.55 odd which is worse than the £2.66b predicted

However if you bear in mind that the revenue for capital was I recall circa 60m a year (about 3 years revenue say) then in theory we are just about there or thereabouts on a 5% revenue decline. "

I'm really not sure what you are trying to say here. All the figures they have given are in terms of 'adjusted revenue' which does not include the normal revenue from any business exits (including Capita One) nor would it ever include the proceeds from any business sale itself.

The adjusted revenue for 2023 was £2.64bn but that I think would have included Capita One (£55m revenue) so needs to be reduced further to say £2.58bn. An 8% drop takes that down to around £2.37bn (assuming there are no other 'new' business exits to allow for apart from Capita One).

So basically CPI is now around a £2.3 to 2.4bn revenue business (though reported revenue will be a bit higher for any revenue in the year from the exited businesses) and they have missed their target by at least 3% if we take the 'mid-single' digit as the guidance (and more obviously if we take the 'low single' digit). The lost revenue from Capita One is on top of this (note - the fall in total reported revenue will be much higher than 8% falling from over £2.8bn to around £2.4bn or so).

Of course that is judging against the mid-year outlook. The original outlook was '2024 revenue expected to be broadly in line with 2023'.

In short I'm not sure what you are getting at by 'we are just about there or thereabouts' as if the results aren't that bad - or perhaps I'm misunderstanding your point?

Thanks for those kind words Stupmy and I certainly remember the TUI days with fondness. A lot was going on and I think all the posters (or at least most) were decent sorts who genuinely just wanted to share information and try to understand better what was happening - just what these boards should be for. Unfortunately oversized egos, political ranting or people just talking their own book often gets in the way of that (and we've seen plenty of that here just today)!

I'm not sure CPI will go down as far as 14.1p but it's certainly possible as it's not far away already and clearly sentiment is not with the company at the moment. My view though is simply that it is priced for failure as the mcap is so low now that any sort of positive profit outlook is bound to send the sp much higher. So either I will lose all my money or will (eventually) be well rewarded but my patience is wearing thin as one set of bad results keeps following another and getting back to 'positive' territory gets pushed back some more.

If you do get in at around 14p then I'll think you'll do well (even if only for a trade) but it's a very frustrating stock and any profits may not be quick in arriving. It is also not too big to fail and it won't take too many more years of poor performance for it to do so. So there's plenty of risk but (for now) I still think they can turn it around under the new management.

I'm still in TUI and finally in profit (along with all my other travel stocks - especially IAG) and these are the type of businesses I like to go for (where there is a clearish path to much better profitability than the sp would suggest). For Capita the path is there but less clear and with some big obstacles in the way. I tend to stay clear of energy companies, mining stocks etc. as they are too much of a gamble for me so companies like ENQ and HBR wouldn't interest me much (beyond a small punt) but thanks for the offer! I'm also not a 'trader'. I'll just stick to companies with more 'predictable' fundamentals and trying to find ones I think are undervalued in the long term. It's seems to work for me - though not all the time and hopefully CPI doesn't turn out to be one of those!!

"@Hezam "jox talking about himself in the third person is so funny"

Hezam talking about JO's post when JO sent his post clearly to AimMaster is funnier"

That wasn't my quote - it was somebody else's. I wasn't responding to you at all but to that poster instead (and quoting them). Learn to read properly. Could try to at least get my name right whilst you're at it as well.

Savage - they are targeting positive cash flow in 2026 so it’s a case of whether you believe in their business case or not and so whether they will miss this target or not. You obviously don’t which is fair enough but I am more optimistic that they will though I wouldn’t go as far as to say confident.

If they can’t turn around the business by then though after all the promises and the actions taken then for me it will time to throw in the towel. If they do achieve the £250m savings though it SHOULD be enough but this is Capita and there always seems to be another excuse just waiting around the corner.

Badger - you can’t really equate the £11m ‘profit’ with the £250m cost saving so easily. The fall in revenue means over £200m loss of income which has to be matched by over £200m lower expenses in order just to stand still. Obviously some of those lower expenses will automatically happen with the drop in revenue (true variable costs) and sit outside the quoted £250m - but some won’t and certainly more than the £11m implied by the margins (if those are the correct numbers).

Decreasing revenues means the remaining business has to work much harder to maintain profitability as fixed costs become bigger in proportion to the business - hence the need to cut them so much.

I don’t think it is the revenue miss that is spooking the market so much as the cash flow miss (and outlook saying it is another year before it even turns positive which means it won’t be until 2026 when they expect to report positive cash flow numbers).

"jox talking about himself in the third person is so funny"

And I thought only NF was as pretentious as to do that. He also has a habit of saying he's done things after he has done them - another hindsight Harry. Twins?

Yes, but my outlook is increasingly more in hope than expectation. I'm giving them the benefit of doubt for one more year (though admittedly that's exactly what I said last year)!

The cash flow guidance of £90-£110m outflow was already a worsening of the original guidance of £70-£90m so it is a miss on top of a miss. And whilst it is good that they are now targeting more savings (£250m) at least some of these additional savings are needed just to stand still as the revenue is falling more than expected.

The market doesn't like missed targets hence the bashing it is giving the stock today. It's not just the short term impact of those missed targets on the current financials but the weakening of the credibility of any future targets they have set. So will we really see positive FCF reported in 2026? I think we will but clearly the market reaction suggests many others are running out of patience.

Trisor - sorry, but I didn’t think it would be another year. Both the revenue and cash flow outlook are worse than they were forecasting. They will show cash outflow in 2025 so 2026 is the earliest we will see positive cash flow reported.

I’ve been invested several years now but it still seems to be a case of ‘just around the next corner’. So until the better numbers do actually arrive I think nothing much will happen sp wise here.

I think the initial poor market reaction though is a little overdone - though not too surprising.

Must admit I’m a bit disappointed by the update. The improvement in expected savings is good but it seems we have to wait another year for cash flow to turn positive as those savings have to offset a higher fall in revenue.

So I think the company - and the sp - will pretty much keep treading water for most of 2025 until the jam tomorrow gets closer to being today.

For anybody wanting to read the unmangled RNS:

https://www.londonstockexchange.com/news-article/CPI/trading-and-operating-update/16814680

…well that didn’t work. This site obviously doesn’t like the ‘less than’ symbol. It should read:

“Progress exiting managed for value businesses. Completion of Capita One disposal in September 2024, c.£180m net proceeds received, providing funding optionality. 2024 year-end net financial debt to adjusted EBITDA, pre IFRS 16, expected to be ‘less than’ 1.0 ‘times’ [EBITDA]”

Trisor - you’re better off reading the RNS on the official LSE site not here where it mangles, and gets mangled by, punctuation. The bit missing is the less than 1.0x (EBITDA):

“Progress exiting managed for value businesses. Completion of Capita One disposal in September 2024, c.£180m net proceeds received, providing funding optionality. 2024 year-end net financial debt to adjusted EBITDA, pre IFRS 16, expected to be

I meant £ not $…

Fair dos FED - I think you’re very much on the optimistic side and of course no guarantee they get to £1.5bn (and note that’s a pre-return GMV number).

Nothing wrong with optimism though!

I’d put current value around $150-200m even allowing for decent future growth.

At the end of the day though it’s worth whatever somebody is willing to pay for it which could be way different to any ‘theoretical’ number that either of us comes up with.

FED - this is BOO's own guidance from the H1 results where they state a target of double digit EBITDA margin for Debs. Elsewhere they define EBITDA margin as a percentage of revenue (NOT of GMV). An EBITDA margin of 10% revenue is equivalent to 3% of GMV currently and will be lower than this as the marketplace element grows and Revenue as %GMV falls further - maybe 2%? I agree the 'double digit 'could mean higher than 10% (of revenue) - but not by that much. Even at an unlikely 20% that would still only mean about 4% of GMV in a few years time.

"· Debenhams: target +£1.5bn GMV pre returns with double digit EBITDA margin

· Youth Brands: +£1.8bn GMV pre returns combined today. 6-8% EBITDA margin target

· Karen Millen: premium, high margin brand. Double digit EBITDA margin target"

"2% margin on GMV will be laughable."

It's pretty much what BOO are targeting medium term (and more than they have just reported for 2024). I'm not laughing.

Because you stated something which is wrong. Revenue is revenue and there are rules around what is included in it as it is a statutory number. GMV, like EBITDA, Free Cash Flow etc. is a not a statutory measure and there are no standard rules for these and some companies report such measures and some don't. Very clearly does not report GMV but it HAS to report revenue and abide by the rules when it does so. 'All sales' presumably just means all products.

Stop trying to mislead just to try to save face and if you want to look at a company that does report both GMV and revenue then look at ebay. You won't see a 10% of GMV profit margin there (or on any other marketplace). But if you believe BOO can somehow achieve this on their marketplace business then so be it. You're only fooling yourself though.

Nope Bfd/T4G that’s revenue not GMV.

FED - I believe the quoted 5-20% is the cut (commission) as a % of the price of the product for marketplaces. On that 5-20% I agree the gross margin is 100%.

In any event the double digit EBITDA margin target for BOO is a percentage of revenue. As a percentage of GMV it equates to around 2% as by then revenue will be around 20% of GMV (it is currently 31%).