RE: How much is baked in?18 Aug 2024 20:42
The sale of Capita One has been common knowledge for some time now, so in theory this sale it is already 'baked in' to Capita's current share price. However, there will be investors who have lived under a rock (or on holiday) and will be surprised by Capita's upcoming RNS on the completion of the sale of Capita One, so an uptick in Capita's share price can be expected immediately after the announcement. If Capita's share price rises after the RNS is a moot point, as any uptick is unlikely to be sustained for a decent period of time, and will most likley revert to type.
Capita's recent profit was mainly due to asset sales (...that old chestnut). Notwithstanding AH's admirable efforts to turn Capita around (which will take time), Capita's falling revenues (...with each business sale made, Capita's revenues continue to fall), low margins and low profits has kept its share price subdued. Although Trenners mentioned 'Capita's turnover is £2.5 billion' (and falling), it matters not. Turnover is vanity, profit is sanity - this simple rationale will continue to keep most investors away from Capita.
Unless or untill Capita sustainably turns around its fortunes, investors will seek out and invest in 'safe bets' i.e. companies that generate higher growth opportunities (increasing revenues), margins (greater than Capita's 2-6% margins) and profits (without the need to sell assets to boost profit).
That said, if the Capita One sale does proceed and the funds banked; and AH decides to use some of the proceeds to reduce debt, then this would be viewed as a positive step, as it signals to stakeholders and investors that Capita seeks to become debt-free over time. This needs to be carefully balances, as AH knows he must retain as much cash as possible in the business for obvious reasons. As for some of the proceeds allocated as dividends to Capita shareholders - it 100% will not happen, forget it.
IMO & DYOR
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