Member Info for Savage_KeyboardR

AimMaster2018 - I think the folks who will have benefitted are those who sold on the SP rise this morning, and who buy that stock back again once the drop has bottomed out, perhaps post RL taking up their options and after further selling/shorting has completed the full cycle of driving SP down. Maybe... All super interesting learning for me sat on the side-lines watching how this stock moves. One day in future there will be a different stock I can take a plunge with shorting, perhaps! For now I don't have sufficient coin to take such risks haha!

IMO

"I think what some on here are saying is that SP will go up if RL take the share option, and I can sort of see this happening, because it is an endorsement of Capita from RL, and because the balance sheet will be in better shape so less interest cost / lower risk / lower discount rate etc etc."

less interest cost / lower risk / lower discount rate...

Well sort of because as I'd pointed out - LTH's also need to consider they've been diluted, and for some they may well have bought more shares (to average down) in what is now a smaller business, plus one with future ongoing balance sheet costs kicked down the road. Also RL will have ~5% voting rights (assuming they uptake the options, I'm sure they will do).

So any investor will have to make their mind up on if they think it's a net good or net bad deal for themselves really.

DYOR - IMO

Apologies TargetPractice - yes, the issuance of ~5% more shares, should cause SP to drop by that amount (unless there is net market buying activity covering the difference).

Yes: in 'normal' case of share issuance you would expect the share price to drop by 5% to account for the dilution and therefore mcap to stay the same. I agree with this.

What will determine the mcap ultimately here is whether or not the market perceives the deal done to be good for CPI business or bad for CPI business. I'd imagine in a few days we shall know! But.... I wouldn't jump quick on todays SP rise being a sign the story is all over... RL may not have taken up their options yet... plus LTH's + II's still have time to consider how they respond to the RNS's today too.

DYOR - IMO

Ultimately this is what has happened for LTH's, today vs yesterday:

1) 4.96% of the business has been gifted to Royal London (assuming they uptake their options).

2) Liabilities once imminently due have been kicked further down the road ahead.

3) CPI still likely (IMO) to be looking at ~£2bn FY2025 Revenues.

Therefore, IMO LTH's have today been celebrating the following:

A) Having their investment holdings diluted.

B) Welcomed, with open arms, a future in which further outgoings will appear on balance sheets at each set of annual results for next 5yrs.

C) Seemingly don't mind the business has again become smaller (the full scale only to be revealed once FY2025 results become published).

IMO - DYOR

TargetPractice: you stated: "f they take this then the company becomes 5% bigger mcap which means at the current SP we're almost at £500m and within touching distance of getting back into the FTSE 250 at the next reshuffle."

This statement is incorrect I believe. Should Royal London exercise their options (presumably they will do so) then the shares in issue will increase by the number they take up. MCAP can only rise if the SP rises relative to the qty of shares in issue. i.e. if the shares are issued but the SP remains exactly the same, then existing holders will have been diluted by 4.96% (the same as the options offered to Royal London).

DYOR - IMO

Trenners - it's a near 5% stake, not near 4%.

I agree about the takeover potential of CPI - I've always thought AH selling off assets, to keep the wheels turning, would inevitably make CPI ripe for someone launching a takeover bid at some point. Assuming Royal London takes up the options (I'd imagine they will do) they'd be holding a decent qty of voting rights should a bid be incoming down the line.

🔴

Guardian reporting there could be new laws to emerge, aligns with what I'd pointed out in my post below this one: https://www.theguardian.com/business/2025/dec/12/new-laws-to-be-considered-after-harrowing-stories-from-ex-vodafone-franchisees

LordLewis - Precisely why I had already been accumulating a large stake here, well ahead of this most recent TU - I'm content with holding and adding further too.

Carrington - Is that what the 🤖 posted?! Hahaha! I can't read their drivel as blocked them ages ago.

The text you've indicated they posted is taken from one of my posts on the CPI discussion board! Hilarious as the 🤖 can't even come up with their own original content! haha!

Hypothetically... if CPI market cap is £1bn in 5yrs time... then those Royal London's shares would be worth £49.6mil

Florence141414 - I see your projection of £2.2bn revenues as being considerably more fair than projections others have made up till now!.. At least you're recognising the challenges, with your figure there!

However, I disagree and I think the revenues are much more likely to land around the £2bn flat mark, for reasons I've already outlined on here previously. The 2x RNS today IMO backup my prior estimate. Although, it might now be possible for £2.1bn to be achieved with these accounting tweaks and offer of share options having been made to Royal London. £2.2bn and above though... Well I just don't think that is plausible. DYOR - IMO

Summary:

4.96% of CPI is to be issued to Royal London (diluting existing holders - if options exercised, presumably it will be):

"Under the agreement, Capita will pay Royal London an initial payment of approximately £22.47m. The agreement provides an option, exercisable by either Royal London or Capita, for that initial payment to be settled through the issue to Royal London of 5,670,909 ordinary shares2, representing approximately c.4.96% of the Group's issued share capital. This option may be exercisable on or before the close of business on the fourth business day after the date of this announcement. If this option is exercised, the newly issued shares will be subject to customary lock-up arrangements during the migration period, which is expected to last five years."

£100mil of 'front-end loaded costs' payable over next 5yrs:

"we expect a free cash outflow of £20m per annum during the five year migration period (equating to £100m in total across the migration period), which is expected to be front-end loaded."

£30m of future liability obligations created:

"Capita will also pay Royal London a further contribution towards its costs, consisting of three payments, each of £10m, on the first, second and third anniversary of the migration completion. The migration is expected to take five years, so these payments are expected to take place in 2031, 2032, 2033."

I get why AH has tried to get this deal over the line, as it kicks the can on some pretty heft outgoings, into the future - presumably hoping future incomes can help soften the fiscal blow. However, AH could be kicking that can into future years which may prove to be even tougher for CPI... given the widespread macroeconomic turbulence. DYOR - IMO

The 🤖 is back - Just in time to watch the SP rally!

I don't work for shorters either, as I'm just a Private Investor 👍

I've been transparent at every stage 👍 - as I said neither short nor invested here 🙂

As i said before literally zero impact for me here 👌😎 - neither short nor invested here thankfully! 🙂

They either believe in the turnaround play... or they believe they're capable of selling the exercised options for an optimum return. Either one or both can be true. Though it puts Royal London in position of choosing which route they opt to follow.

I.e. tbh it's much more of a downside risk for current LTH's

Of course they will exercise them, after all that's why they would have been given them through the deal negotiations 👌

Not if Royal London exercise their options IMV - as them doing so would act to remove a large cost from the 2025 accounting process but... the same act serves to dilute LTH's to the tune of 4.96%.

Thereafter the SP will trade freely, as always, so is completely down to what value investors view CPI as having; based on the buy vs sell usual trading on the open market.

DYOR - IMO