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Roger - looking at the 1 year chart there are two peaks that cleared down on 4th May and 2nd August. Depending on when any potential bidders purchased shares then these dates would set a "worst case" (for them!) price they'd have to offer. Of course they could have bought only on the dips so this is all irrelevant, but perhaps that previous May peak means next week might bring us some good news...who knows?
I suspect that the next news will instead be of a consolidation, then we'll see soon after how serious DC and pals are for the next phase.
In my view this share is impossible to call at the moment, with pretty much every option from complete wipe-out to massive returns still being on the table. For what it's worth I'm staying in (although I've already pencilled in a total loss on this one) and have all my fingers and toes crossed.
If DC was planning on buying everyone out then I believe he wouldn't be allowed to offer 1p a share. The Takeover Panel rules specify that he'd have to offer at least the maximum price per share he paid for any shares in the previous 12 months, which I suspect is significantly north of 1p.
A much more likely outcome would be to build a big enough stake to effectively control any vote, then simply de-list entirely. Once off the exchange any remaining investors would probably take whatever amount they were offered, however low, just to get some cash back.
It's a 1% reduction overall, but around 6% of their existing allocation. 6 months ago they disposed of 5% worth, so there's nothing here that looks unusual based on history.
On the one hand this would seem to suggest they don't think the SP is going to go up any time soon, on the other hand they might selling to simply release liquidity to fund other initiatives and don't have an opinion either way.
As an after thought, it's probably just a co-incidence but this disposal does take their holding to just below 15%. I can't see any obvious immediate benefit from that, so it's almost certainly a co-incidence and nothing important. However, if Schroders were to drop their holding below 15% in the coming days/weeks then that would be triggering alarm bells (the good kind!) for me with regards to the possibility of a potential PE takeover.
The announcement seems to reinforce the view that any new Labour government wouldn't expend political capital and time in ripping up existing contracts but would instead use contract renewals to affect change. This is the preferred outcome for any incumbent suppliers as it gives them a clear target date they can plan around to exit. As a consequence they will probably be a temptation to reduce service levels as much as possible in the final year any of those contracts in order to take every penny of profit possible - not great news for the customers but maybe welcome to shareholders.
I'm interested to see what the UK PLC balance sheet will look like after taking on all these liabilities. At some point it's going to reach worrying levels, and any adverse market reaction could then cause real issues...although I'm sure there's some smoke and mirrors that will be performed to hide it all (a bit like they did with the bank bailouts)
A share I've been keeping an eye on for a while now as an indicator to future CABP revenues is PZ Cussons (they make Imperial Leather soap) because they have complex investment in Nigeria and use FX trading to generate profits from Naira fluctuations. Unfortunately the wheels came off that strategy with the massive devaluations last year and their profits and SP were decimated - every 10% drop of the Naira cost them 23million it is estimated. However it looks like they may have turned a corner and today's results announcement seems to have been taken well by market, with the SP back on the rise this morning ->
https://www.proactiveinvestors.co.uk/companies/news/1046002/pz-cussons-to-sell-st-tropez-and-assess-nigeria-options-1046002.html
In the RNS from this morning, PZC mention that they've been able to withdrawn significant cash from Nigeria and put it back into USD/GBP:
"...in the first ten months of this financial year, the Group has repatriated approximately £35 million of cash from Nigeria and expects to repatriate a further £15-20 million before the end of May. This improvement has been underpinned by fiscal policy changes in Nigeria, providing improved access to US Dollars..."
Hopefully this is a sign that the Government truly has removed all restrictions and also that companies are now confident enough in the medium-term policies/stability to make informed FX decisions, all of which should only be good news for CABP with their exposure to the Naira markets.
Assuming there are public spending cuts (this is not a given due to Labour's track record of tax/borrow and spend spend spend, also don't forget the new £800m AI/drone slush fund that's floating around and should still be there next parliament to fund things), then how would this work in practice?
Does the government refuse to honour existing contracts and demand suppliers renegotiate? That's possible but would be tricky legally and there's a risk CPI could just say "OK, cancel the contract we're withdrawing all our staff from site" with complete loss of service followed by redundancy which is tricky politically. Or would Labour just go straight to playing the nationalisation card? That's very risky for the UK PLC reputation and Starmer isn't Corbyn. Therefore, I don't see in-flight contracts as being at significant risk because of any government budget constraints.
For new contracts/renewals there will however obviously be pressure to reduce the price. If CPI was still run by JL then I would say there's a big risk here as he'd bid with no thought for the company long-term health, but AH knows how to run a company and he will only bid if he can still make a tidy return. This means CPI may lose some of their low margin contracts (assuming cost is the customer's only decision metric), but their competitors will then be at risk of running a loss-making service as they will inherit all the problems CPI had. Don't forget, those same competitors will also be feeling the pinch and will be under pressure so may just decide taking on an ex-CPI contract is not a sensible idea. Other competitors such as Fujitsu also have other problems to worry about.
From a CPI point of view, losing contracts can also be revenue positive - a) you TUPE all the staff costs (including pensions) off your books onto the new supplier, b) depending on office ownership there may be a debt/liability reduction or chance to generate rental revenue, and c) the new supplier pays you "handover" fees for knowledge transfer etc. I've worked on several contracts like this, and the final year profits from the transfer fees alone often exceeded the actual normal profit for the contract.
My view is that losing contracts only really becomes a problem if a) you are still stuck with all the costs, and b) your reputation is in tatters such that you can't win any new business.
As I mentioned above, the key here is that AH is in charge and not JL. I am sure AH knows how to run CPI much more effectively than JL ever pretended to. Or at least that's what I hope as I'm long on CPI - 1.4m shares at just over 17p which I stupidly didn't sell at 22p when I had the chance as I believed all the BS that JL was peddling.
At the end of the day you need to ask yourself which company is the market going to like more: The 3 billion revenue org making 1%, or the 2 billion revenue org making 10%?
Without wanting to get too carried away....that is a 5% share of a market that is only growing, so those revenue numbers could turn out to be even higher!
Take a look at the transcript from the recent results announcement which has a few clues:
https://cabpayments.com/site/assets/files/10774/cab_payments_fy23_results_26mar24_transcript_final.pdf
There's lots of good info in there, especially around the drop off in Naira revenue (around £10 million) and what the expected impact that will have going forward.
Around page 12 is where the analysts start asking for any predictions for FY24 and the current suggested figure seems to be around £147 million. The reply from CABP to that number is "...we don't see any reason at this juncture to modify or encourage that consensus up nor down, for that matter..."
They have the 40 out of 80 new clients from last year who haven't booked any revenue yet, and if they all come on line this year then that's going to be good news. However, I'm not sure if the current 147 million figure already includes them all in its assumptions.
My guess is that the EU license impact is already baked in to the 147 figure, but not the US one, so the US license is likely to have significant upwards impact on revenues.
I've also posted earlier about the huge turnaround in Naira flows in first few months of this year now that the central bank has eased up their interventions, so it will be key to see how this impacts CABP in the revised much more consolidated market (the central bank shut down thousands of dodgy currency traders). I have a sneaking suspicion CABP are going to do very well out of it.
Bottom line then is around £147 million revenue with EBITDA of £66 million, but there's potential for those numbers to be significantly higher if everything falls into place.
Interesting that BT was the one announcing this in the RNS and not the new CEO...another example of comms from the company not being quite what you might expect.
I guess as BT put all the work into it over the previous months it was only fair to let him take the glory rather than the new guy walking in and getting all the praise without any effort.
Hopefully though the next RNS that comes out will be from NK and will give a clear message the company has moved on and he is the one delivering on the next stage of growth, and there's no impression of having an ex-CEO hanging around who is engaged in any "back seat driving".
Onwards and upwards with the SP!
Apologies, the link got truncated in previous message, here's the full link:
https://cabpayments.com/site/assets/files/10774/cab_payments_fy23_presentation_final-1.pdf
Going back over my notes from this morning's results webinar & slide deck, I made the following observations:
1. My BT concerns seem well placed. He didn't really inspire confidence and I thought lacked focus about the message. He lost his place at one point in prepared notes which didn't surprise.
2. RH (the CFO) seemed to be better although again some of the wording was a bit questionable (e.g. growth in core is not "potentially hidden" it's just "hidden"!). He did do a follow up to clarify some of the statements which I thought helped though.
3. Analysts in the room weren't openly hostile, but you got a sense they had identified some specific areas of concern that were being brushed over, so will be interesting to see if their guidance is lowered here as none of them seemed 100% satisfied with answers.
4. There was repeated talk of 83 new customers signed up, but no detailed explanation as to why 50% of those haven't done anything yet, what the wort-case timelines are to monetize them, or if this slow adoption really is "business as usual" or if there's actually some concern that these customers are customers in name only. This seemed to concern the analysts too.
5. Talk of customers moving up in to Top 20, but is this just another way of saying other customers drop out of the Top 20 because they spend less? They weren't able (or willing) to name the Top 5/10 corridors explicitly (45% of revenue) which was a concern. Is that hiding something?
6. Naira disruption to revenue (28m down to 18m) was offset by interest rate gains (10m up to 32m), but very little detail on impact for 24 when we know world is returning to lower interest rates. They did refer to it as "a drag" on 24, but 22 NII levels will leave a 22m hole in the bottom line, which is a full on RuPaul in my book.
7. Paraphrasing, but it sounded to me like the West African and Central African currencies had problems because the previous overly generous arrangements were amended to reflect reality.
8. Reduced dependence on Nigeria is sensible (was about 7%, expected to be under 5% in 24) but not enough made of potential for growth in similar developing areas such as Latin America.
9. Cost control mentioned as key but didn't really land the message, or why the need for yet more sales people to grow business. I wanted to see specifics about exactly what all these new staff are doing, and their success metrics.
10. ESG also mentioned as key, but numbers don't look great until you exclude Niara again. Yes it might now be 35% rather than -43%, but 35% of what? Needs $ figures too.
Overall it was adequate (I liked the EU/US stuff and the capital slides), but it really lacked "punch". It all feels a bit "smoke and mirrors". The lack of commitment to dividends even with huge FCF and reserves continues to raise alarm bells for me.
The slides are available on CABP Investors site->
https://cabpayments.com/site/assets/files/10774/cab_payments_fy23_presentation_
Are these results actually significantly better than what they announced in October when it dropped to 48p? I'm not seeing anything massively different other than a firmer timeline for EU and US licenses.
So the fact that it hasn't dropped back to 50p instantly might suggest that any drop this morning is just going to be noise to trigger weak hands.
Probably best course of action is to hold and see how the day develops.
After reading the RNS I'm not surprised it's dropping. The sooner the CEO goes away and they get somebody who can open their mouth without putting their foot in it the better. Of the many annoying phrases in the RNS, this has to be one of the most delusional and shameless narcissistic notes I've read in a while...
"We did finish 2023 on a disappointing note, with negative surprises in two of our important markets. While we are not dependent on a short-term recovery here, we expect these to be important markets for us over the medium term. These changes highlighted a requirement for the Group to be increasingly proactive and influential at the highest level across the world, not only predicting change, but helping to shape effective regulation in the markets we serve."
In other words, in my new role and special advisor I'll be the one doing all the important stuff.
I really don't like the way they phrase some of the things that get put in these announcements.
Are these surprises something new vs. the outlook at IPO time, or surprises vs. the outlook after the October announcement disaster?
In other words, are these two new surprises (in which case why no heads up in at any time in past 3 months), or just ones we already know about (in which case calling them a surprise is a rather naive choice of words).
They'd better have a decent explanation for this at 9.30, and also I want to see some projections for 2024. On the plus side, there's a firmer timeline for both the EU and US licenses now.
The Full Year results are published tomorrow and from what I can see there's no unexpected surprises left in there as all the bad news has been communicated already, and the 25% growth figure re-iterated recently is above the best case scenario announced in October even though the Nigeria market was way trickier at end of 23 than anyone could have predicted.
Thinks look to have massively turned around in Nigeria so far this year, so surely the guidance for 24 is going to be significantly higher than for 23, and that's got to have a positive impact on SP/capital re-allocation?
Assuming all the above is correct, then it doesn't seem sensible to me to be shorting this stock on Tuesday morning as there's potential for a large upswing in the SP back up towards IPO price.
What am I missing here that the shorters are factoring in to their calculations? They must still think there's a reason why the SP is going to drop further to make the short position worth the risk? e.g. refusal of banking licenses, bigger competitor entering key markets, closure of Nigeria market to 3rd parties entirely etc.
Or have they all actually got out already and gone long, but just not got around to telling anyone yet?
For an example of what is possible when you effectively control your costs, contrast Capita's recent results announcement with those of Computacenter:
· Gross invoiced income of over £10bn, up 11.4%, driven by strong growth in Technology Sourcing and solid growth in Services, with gross profit up 10.2%
· Excellent cash generation driven by effective inventory management with adjusted net funds increasing by £214.7m to £459.0m
· Proposed final dividend of 47.4p, increasing the full year dividend by 3.1% to 70.0p
· Given the strength of our balance sheet we continue to evaluate a number of capital allocation options
That last statement is somewhat intriguing. Considering the current market cap of CPI of around £225m, and all CCC's spare cash just lying around, I wonder if they would be thinking something really left-field like making a cheeky bid at say 40p?
Either way, I think CCC gives a great demonstration of the potential for CPI if they can just get a grip on their costs.
My understanding is that a US banking license can't be issued if any one party controls more than 25% of the shares. That's why CABP can't be private, and why people believe that Helios will be reducing their 45% ownership to 25% this year.
However, it's likely that Helios assumed they would be able to dispose of that 20% at near/above the IPO price. That's clearly not going to happen without some major shareholder returns first, which of course is unlikely without the US baking license. So a catch 22 situation.
Now, from a Helios point of view there's a few possible plays from here:
1. Declare a special dividend, big up 2024 prospects and get the share price up to £1.80 or so. Sell the 20% for less than Helios wanted but it's better than nothing. Then CABP go full steam ahead on the US license. The cash starts flowing in, and the share price heads north of £5 by 2025/2026 ready for Helios' exit plan.
2. Build the share price back up through dividends, new customers, expansion into new markets i.e. grow through traditional methods. Once the share price is back up to £3+, Helios reduce their holdings and CABP goes ahead with US banking licence. This all takes time and outcomes are not guaranteed however before the 2025/2026 exit.
3. Helios finds a wealthy external organisation that really values the services CABP can provide to them i.e. another bank such as Santander, and they buy the 20% at a figure somewhat closer to the £3. Helios would have to offer them something in return to justify paying over the odds, but it's doable. Just like Option #1, the US license goes ahead and share price climbs ready for full exit.
4. Pivot, scrap the US banking license plan and take the company private again. Helios would then "just" be getting the returns they had previously and they would have all that IPO money so wouldn't have done too badly out of things really. However, to do that CABP would basically be throwing away their entire strategy, which would mean the CEO's position would be untenable. They'd have to fire him and replace him with somebody new for sure...oh wait... Another thing they'd have to do would be get over 50% of shareholders to back the de-listing, so they'd need somebody with at least 5% of shares to add to their 45%...oh wait...The question of how to then exit in 2025/2026 is tricky, but a full sale to another PE or to another bank would be a possibility.
My belief up to now was that Option #1 was the most probable outcome to recover from here.
However, I'm starting to think Option #4 might be looking like a very attractive Plan B to Helios right about now. The slightly reassuring thing is that CABP were FTSE 100 and I think all parties have aspirations to return. Option #4 is the sort of thing you'd see on an AIM stock not FTSE 100, and investors have long memories if they get burned, so this would be a risky move if CABP and Helios want to return to the big leagues in the future.
It's squeaky bum time f
Https://www.reuters.com/markets/currencies/nigeria-sees-surge-forex-inflow-overseas-remittances-rise-2024-03-08/
ABUJA, March 8 (Reuters) - Foreign exchange inflows to Nigeria rose to $2.3 billion in February, the central bank said on Friday, fuelled by renewed interest from foreign investors and a rise in overseas remittances.
Africa's largest economy has been experiencing crippling dollar shortages that have pushed its naira currency to record lows in recent weeks and forced the central bank to devalue the naira twice in less than a year.
Central Bank of Nigeria (CBN) spokesperson Hakama Sidi Ali said foreign investors bought at least $1 billion of Nigerian assets last month, bringing total receipts of portfolio inflows to $2.3 billion. That compares with $3.9 billion for the whole of 2023.
CBN data also showed overseas remittances more than quadrupled to $1.3 billion in February, compared with $300 million a month earlier, Sidi Ali said in a statement.
"All the different measures we have taken to boost reserves and create more liquidity in the markets have started to pay off," CBN Governor Olayemi Cardoso said in the statement.
The CBN's series of measures to boost forex liquidity include limiting how much banks can hold in foreign currency, capping their net open positions at 20% of shareholders' funds, and outlawing street-trading of foreign currency.
Higher forex inflows have continued in March, Sidi Ali said, driven by increased investor interest in short-term sovereign debt after the CBN hiked its key interest rate by 4 percentage points to 22.75%, the highest in around 17 years to tame soaring inflation.
At the CBN's Open Market Operation auction on March 6 when it sold securities worth 1.053 trillion naira, bids from foreign investors accounted for 79% of the total, or $530 million, Sidi Ali said.
Reporting by Elisha Bala-Gbogbo; Editing by Leslie Adler
thanks smoothoperator , that statement is probably what's driving these sa and advfn posts which all seem to be a copy & paste of each other based off one persons view of what they think may or may not happen. they could of course be spot on, or completely wide of the mark. who knows?
my read on this is that there's nothing here though to suggest that helios' exit strategy on cabp is different to that of any other pe on any other company i.e. invest -> build the company value up -> sell and take huge profits -> repeat on next company. there's also nothing to suggest it's a pre-requisite to any license or approvals, or that any 3rd party has mandated they exit by a certain date. the dates they give are also somewhat flexible (targets not deadlines) and are not specific as to actual date (is it before jan 1st? before financial year end? before end of calendar year?).
the only pre-reqs i could find to get the us licence side of things through were a) have to be publicly traded (tick) and b) no one party can have overall control i.e. 25% or more of shares (not done yet). i may be wrong on both of these though, as surely there are privately held banks that are licensed? i'm not close enough to us banking regulations to work out how all their rules are implemented in reality, but i'm sure there's a well rehe****d process that cabp are following and helios are well aware of any potential impacts to their holdings and have planned accordingly, ensuring they obtain maximum value for their investment at all times.
one other point that interests me around this discussion is how all of this might also apply to the eu license? doesn't the eu generally mirror the us requirements around banking? i believe cabp were clear that they wanted (expected) to get the eu license sorted by end of 2023, so if there is a similar ownership requirement in the eu there must surely have been a plan to fix all of this before then? does the share price drop mean that the original disposal plan is now out of the window and we won't see eu or us license progress any time soon? i strongly suspect that won't be the case, as they specifically mentioned the importance of eu and us in their recent press release, which makes me think either plan a is about to be completed or they have switched to a very cunning plan b.
i'm really looking forward to results day where hopefully we'll get some clarity on where we are with both of these license application processes, and if there's any significant new markets they are planning to enter this year as i still think south america is a huge untapped area for them.
I've seen various people mention this requirement for Helios to exit their position to get CHIPS but is this actually true, and if so does it mean "fully exit" or "reduce"?
My understanding of the process CAB need to go through is:
1. US banking registration
2. Get clearance from Fed
3. Apply to CHIPS for electronic transfer license
So which one(s) of these steps is it that requires Helios to "exit"?
I've dug around and the admission criteria for CHIPS (basically the US version of CHAPS) which can be found here and can't find anything specific with their criteria->
https://media.theclearinghouse.org/-/media/New/TCH/Documents/Payment-Systems/CHIPS_Rules_and_Administrative_Procedures_03_01_2024.pdf?rev=2192b9738b3a4775b2f7f13a32bcc321
However, I believe the only important number is actually concerned with the US banking registration and the 25% ownership rule which once you go over you're deemed to have control, so this is the number that Helios (or indeed anyone else) has to stay under if CAB is to be a public US bank.
So if the requirement forms part of step 1 then it's a bit odd to be having a timeline of selling by end of 2025 and therefore only being able to begin step 2 at that point, let alone step 3, as this would not seem to align with their stated goals about getting this done as a priority. Unless the "full exit" by the end of 2025 is completely unrelated to the US applications and has been miscategorised.
There's also a big assumption here for the ownership clause requirement in that Helios would have to gradually/carefully sell their extra 20% of shares (to get their current 45% below 25%) at the current price on the open market, rather than just off-loading to one or more other PE firms at IPO price with a short RNS at some point in the next few weeks/months. If they wanted to do that, what's to stop them? And if those lucky PE firms had also recently been building a 9.99% stake below £1 then they would be able to average their holding right down so they would also have a fairly good deal...
Assuming the Banking registration is then granted soon after that has completed, then the fed and CHIPS stages should be straightforward and the SP should skyrocket, at which stage Helios would just sit on the remaining 24.99% as the SP continues upwards through 2024/2025, selling off in a managed way at far in excess of IPO prices be end of 2025.
Bottom line, I don't see any concern for LTH around this.