Member Info for Jinny122

Its not improbable that SERCO got its trading update and financial position out to the public asap to allow it to disclose the same info to potential takeover interests and also boost its SP value.

The rush to release an unscheduled positive update, may indicate imminent news. Otherwuse profit taking (after a 16% rise on friday) will erode its SP again and dilute its % interest in any all-share merger.

If no news by monday, then best to write off the Serco-Cpi hypothesis.

Bertles, solid points.

The Ceo made a HUGE mistake in so publicly criticising the brand (early 2018) after he took over in Dec 2017.

It toxified the brand and made clients reluctant to have their businesses associated with capita.

Which in turn made a mockery of Ceo's strategy to move up the value chain to rub shoulders with likes of Cognizant, Accenture, Atos etc..

Distancing itself from its core base of expertise (i.e. low value backoffice outsourcing) in order to chase blue ribbon contracts has been disastrous.

Serco simply needs to re-focus capita on its core base and remind it of who it is. Job done

Bertles, agreed.

Their strategy was purely selling businesses and chucking oodles of the cash at pipedreams and hope for the best. The 'best' hasnt magically materialised and money has ran out.

So here we are...

Cpi management have zero hope of defending a hostile takeover, absolutely zero hope.

Their only defence will be to argue about price.

Hopefully the BODs are thinking the same at both companies .. we can only hope.

A liberated Cpi will generate more profit than Serco and has much higher margins (10%+ vs. Serco's 4%). But Serco clearly has a more resilient and diversified business.

Split could be 52.5% /47.5% Serco / Cpi on that basis

Coould argue that post-combination, Cpi's value will multi-bag as it'll have resolved the debt issue and have a great chance to find growth opportunities va cross-selling/ piggy-backing Serco to enter new markets etc..

Combined market value closer to £4bn+

Reg, a 60%/40% ownership split Setco/Cpi makes sense for an all-share. As you say, Cpi is worth far more to a fellow outsourcer than to a Private equity outfit with little to no synergy potential

Reg, plus it offers the GOLDEN chance to ditch the name C**R**apita for good, and all the historic baggage that goes with its poor delivery performance.

Rename it to Serco Consulting or similar

Reg, Yep, a £7bn revenue behemoth, same size as G4S which is a global leader.

Serco is hugely diversified internationally, while Cpi is largely UK centric. Huge entry point for Cpi to international markets using Serco's contact book

Reg, good find. They wont be happy at all with their Cpi investment.

All share offer also allows Serco to fully clear Cpi debt by flogging ESS et al and with its own cash.

Imagine Cpi revenues (£3.2bn) added to Serco's (£3.9bn) on a debt free basis. Huge potential.

Pretty sure Cpi could internally cross sell digital services to Serco at much lower cost than other providers. Also a major differentiator for Serco in biddibg for contracts

Schroders may have been aggressively stake build ing to play king makers here as the largest shareholder.

For all we know, Schroders may have approached Serco to offer support for a take out. Especially after the expected ESS disappointment

An all share Serco bid would provide long term upside for Schroders recoup some Cpi losses

Stability to Serco SP ahead of an all-ahare bid for Cpi?? - hypothetical but not improbable.

Cpi totally on its knees when compared to Serco ( MCap about 4X that of Cpi now).

Serco/Cpi combo makes sense: well diversified income streams, improved balance sheet, and Serco can flog ESS et al by itself from position of strength (think what a combined MCap will be)

Cant see ESS being sold at a big discount, will weaken the business and not make sufficient dent on debt.

Interesting that Serco rushed out an unscheduled positive update to the market today, nothing was due till Feb 2021

This has to be in the running as one of the worst managed companies in the FTSE 250.

Promised turnaround: Didnt materialise

Promised debt reductions since 2017: Didnt materialise

Promised sales growth: Didnt materialise

Promised free cashflow generation: Didnt materialise

Promised ESS disposal value range: Didnt materialise

Share price: In a collapsed state

Meanwhile Serco this morning reported booming business and miniscule net debt.

Prediction: Takeover imminent

No other palatable alternative options, which are:

1. Sell the ESS golden goose at a discount, and still struggle on with debt and pensions but with much reduced earnings power.

2. Rights Issue, but faith has likely been totally lost in management and its strategy (which blew £2 Billion with nothing to show)

3. Do nothing

...Before finalising or announcing results and outlook I assume.

Any thoughts on this?

NOVE, very valid points imo.

The undisputable fact is this, putting aside what opinions may or maynot be: A restructuring expert was put in in September 2019 to turn this around. A year later, it hasnt been possible and is infact going backwards. Not a single material action has proved possible.

Proof if ever one was needed.

Question to those more informed (Theo, NOVE, others...)

With the disastrous biy at 114.1p, now down close to 50% in less than 2 month. Can management look investors in the eye and convince them it is a good idea to buy more Metro shares in a placing or rights issue?

Of the supposed new strategy plan being 'worked on' since September 2019, what has actually been implemented to move the dial?

What is the go forward message here from management? What exactly will make things get better in future to support any new investment request?

Looks a prime takeover sitting duck imho, company has nothing to clutch to but price if it tries arguing against an approach

Since Dec 2017:

Asset Management Services: £888m sale proceeds received, was to be used to pay down debt

Rights issue: £700m proceeds received, was to be used to pay down debt.

Supplier Assessment Services: £160m sale proceeds received, was to be used to pay down debt

Parking Eye: £235m sale proceeds received, was to be used to pay down debt

Legal services: £56m sale proceeds received

Grand Total: £2.03billion, all spent in less than 3 years BUT debt in Dec 2020 will be roughly the same as at start point in Dec 2017.

What happened???