The next focusIR Investor Webinar takes place tomorrow with guest speakers from WS Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
the last bunch of US investors from memory ran for the hills a while back, they treat growth companies very well - i certainly hope my US fund manager carries on investing in the likes of Amazon, Shopify and the like and steers well clear of Capita for all its promises that one day things will be better
why do you say they are undervalued? Earnings multiple for Capita hard to call given it is loss making and has missed several of its most recent targets, there is no dividend stream or likely to be for a few years yet - historically dividends were paid out of debt - interested in your views/approach to valuation and why you think the world has this one wrong?
Capita is per the table I just found still in the FTSE 250 (14th from bottom but still there)
@ Dave 1 Reference to Capita and the FTSE are somewhat misplaced, the FTSE 250 (or even the FTSE 350 given Capita's Market Cap now days) are not the same as the large internationals who make up the FTSE 100.
With regards who would be interested there are plenty of other Public Sector businesses out there such as Civica, Serco and the like who might want to play, they are better funded than they used to be by far. The main interested parties I imagine would be the larger PE investors, the reason ESS is up for sale is that it is large enough to contribute meaningful to Capita's cash requirements which are circa £500m in the short term and there are no tie ins with the rest of Capita which would deter a new investor. That said it is not the darling it once was and it will increasingly look like a fire sale as the bonds expire.
To repeat an earlier comment unless they strike a massively positive deal well above the £500m they went public with cant see how this moves the share price other than remove the threat that the bondholders push to take over the business. Profits and cash fall the moment ESS leaves and if the interest saved is more than the loss of operating cashflow then the business lurches into another period of cashflow shortfalls and new asset sales
I bet people said the same when it was at £1.70 when it had fallen from £12 Those long term holders you are accusing of not doing their research did not have the benefit of hindsight
You obviously have not done your research if you think selling off the most profitable businesses will result in a loss making group suddenly becoming a profitable and cash rich business The CEO says he will raise more debt to replace the debt being repaid and cash positive is maybe 2 years into the future
Happens a lot and how can 2.5m shares bought at 32p equate to £2.5m of share buys - think its just the market tidying up after a day of trading
its for hardware only Council managing the final solution so wont be much margin in that one
why are you surprised? there is no new news and the market therefore wanders which is why it is difficult to call a direction
share price movements so far would indicate the latter - by all means wait your time and it may come good but whilst you are invested here you maybe missing bigger things elsewhere unless this is the best thing you can find
Cloud version is only available to primary schools in any numbers and they dont spend big, secondary schools roll out has been pitiful If it does not sell how else does it finance the debt repayments given cashflow is not positive? They have got good money for what they have sold to date and there will be interest from PE and others but expect it to drag on a bit and probably come up short on expectations as time ticks towards those debt payments
Hi
Been dropping onto this page for a while now to see what collective wisdom I can glean from the posting. Having followed Capita since 2014 I have the following observations to make (ignore as you see fit)
Selling ESS is not a good thing, it is by far and away the most profitable business unit in Capita's most profitable division, replacing its profits with large revenue contracts which have historically yielded less than 5% and often 0% or even loss making is not going to happen - talk of future dividends is nonsense whilst there are bondholders that need paying off.
The CEO talks of raising more debt on better terms but see above your interest cover is much diminished so he is relying on a very soft debt market with Interest rates for good businesses.
The CEO is looking to show future growth hence the downbeat statements, the holiday pay accrual which they have never used before to make H1 and H2 look different, normally Capita insists you carry over very few days and take them or lose them by the following March. They have never adjusted the results when most holidays have been weighted H2 (August and December).
ESS requires investment it is not the same business it was 5 years ago, its dominance is threatened by the rise of the Academies and independently run schools, its base was and still is in the LEAs where Capita used to have a lot of support. ESS product for secondary schools is old and requires schools to run servers which they dont want to do
Large contracts do no equal large profits - CEO talks of getting loss making contracts back to break even and not bidding but they will still be taking on risky contracts because thats the public sector in the UK, they want zero risk and no accountability
This was a good company before it lost its way and relied on lots of acquisitions each year to cloud the lack of organic growth
My bet it will be broken up by the current management or taken over by a PE house and then broken up. Whether than equates to a market cap including debt of £1.6bn is the real question but with ESS gone expect profits to drop through the floor