Member Info for Trenners

@JG68 Yes - I'd like to see JL and Adolfo take a million shares each as well - JL has always had short arms and deep pockets though but perhaps we've got more chance with Adolfo - but not until Q4 when he joins - I guess

@JG68 - I agree with everything you say ....nothing to fear here ... Capita is not going bust but, instead, is a relatively safe investment (albeit during a slightly longer term than we had hoped).

Can't see any point selling at these levels but it's a solid hold from me .... This won't be giving me any sleepless.nights due to its recurring revenue order book which appears increasingly profitable

Hi NoFear

Thanks for your good wishes. Always good to have different opinions on this board and, as it turns out, your opinion to 'not buy at super inflated prices' proved correct.

Too late for me to salvage anything from this carnage now - just a question of waiting for the patient to gradually recover.

I was buoyed by Helen's reply though and what she said made a great deal of sense AND if Jon Lewis is well liked inside the Cabinet Office (quite likely) then I think those stakeholders calling for his head should be careful what they wish for.

I'm glad - for the time being :) - we are both on the same side of the CPI debate

Best wishes Trenners

..... and here is Helen's response in full .....

Thank you for your email and interest in Capita. I understand your frustration and disappointment re the share price reaction. I would re-iterate that we said there was no change to our FY and medium term expectations. We are growing at the fastest rate for many years and have a strong contract pipeline, strong customer and reputational KPIs and positive employee NPS and employee engagement.

The market disappointment is around cash flow generation and net debt levels.

If we look at H1 22 versus H1 23 per slide 9 of Friday’s presentation we had an outflow of c£17m in H1 22 and outflow of £53m in H1 23– the main differences are c £9m cyber (we told the market in May), £5m repayment of furlough (announced 18 months ago), additional capex of £15m (announced in March 23). The remaining difference is £7m of working capital outflow – equivalent to 1 days trading. All of these should have been known and adjusted for ahead of H1 (except the £7m). We expect a similar performance in H2 – remaining cyber costs, additional capex etc. From 2024 many of these disappear ie non recurrence of cyber and an expected step down in the pension deficit payments to zero from the current £30m.

The cash outflow has increased debt and although we have made good progress on disposals, the proceeds were/will be received after 30 June. As a result we expect lower net debt and lease liabilities for the FY. These are both areas we are concentrating on clarifying with shareholders and potential investors.

Our institutional shareholders are not asking for Jon to step down early – they recognise the importance of his relationships with customers, including the cabinet office amongst others and recognise a managed handover to Adolfo is in the best interest of all stakeholders. We expect Adolfo to join as CEO during Q4.

As my dad used to say - only 2 hopes of getting a quick bounce back here - Bob Hope and No Hope.

Until the dust settles we are going to flirt with the low 20s (if we are lucky) .....

Once the dust settles we might get back to somewhere near a more sensible valuation of 25p plus ..... but that's not going to be for a few weeks.

I don't think Schroders are going to be big sellers here- why create a large, 60% or more, unless they are forced to? Like the rest of us - they are going to have to sit on their hands for a while!

@Aim - absolute nonsense - Schroder often sell a few and then they often buy a few of them back too .....

Schroder selling A FEW is nothing to worry about

@Beachfeont - I agree that this will likely drift along until the trading update in December (if we get one this year) or, if not, then it's March 2024.

However, a new CEO (with a well received strategy), new IIs, new sales wins, positive financial news about the hack, substantial director purchases (from old or new CEO) could all have a very positive effect

At the end of the day - we've either got to take the 25% plus loss of sit it out.

I have been looking at switching some of my CPI holding into BT (who would have thought that old stalwart is also 25% down on its early May price) so I have a diversified approach to recovery but with us languishing at just above 20p - that idea is a non starter for now ..

However - if we get back to nearer 23p with the BT share price still around £1.15 or less - then I think a partial switch makes sense for diversification, dividend and recovery.

That's my plan - but we need to see a minimum of 22.5p here first before I can even consider that (unless BT was to plummet back to £1 - which last happened in Sept 2020)

@beachfeont - I think you are right to feel pessimistic as any lth (me included) have watched our investment decline by over 30% in a week.

But - ignoring exceptional items - this business is growing revenue and profit and isn't going to go bust anytime soon!

In fact - the nature of their multi year contracts given them a little more certainty than other businesses (as long as those contracts are profitable - which they look to be).

I've no idea where this SP will bottom or what is going to trigger the reversal but I do not that what goes down quickly usually goes up quickly too.

20.34p is not a price to be selling at (even if the SP ends up in the teens) because it's not worth the risk and the underlying business is worth a lot more than this.

I've been holding these since 2020 (in some quantity or another) and I'm quite happy to hold into 2024 and beyond although - given an opportunity - I would want to reduce my exposure (but then I am holding 500,000 of these and notionally lose £5000 every penny we drop).

Time to baton down the hatches and wait for the storm to pass ... And pass it will ....

Getting out at 24p or even 23p last Friday is looking more sensible now and it looks like GoCPI made the right call.

Well done GoCPI and I wish I had followed you!

@Crowman - I think what you say makes a lot of sense and, I too, have CPI buyer's remorse and want out of this when the exit looks right (which isn't at 22p I should add).

I'm eyeing a switch into BT (assuming the BT share prices continues to languish) when we / if we hit 24.5p or 25p here. I know that means I crystallise a 12.5% loss but BT (at anything under £1.20) will readily make up that loss whilst paying me a 6% dividend.

Much will depend on the direction of travel in CPI this week though (and BT for that matter) as if CPI fall and BT rally then the idea of switching won't stack up and I'll hold here.

Like you though - I won't be around here for 38p - and, to be honest, 38p looks a long way off now (at least March 2024 and possibly August 2024).

Our only other hope of getting to 38p quicker is a) hack costs get covered by insurance so the £25million loss is substantially reduced, b) large director buys (from JL and/or Adolfo) at these levels, c) some more big sales wins, d) a takeover bid.

@Culley - I get that you are unhappy (as am I) but did you decide to bail or hold or average down as the share price dived on Friday?

I was surprised to see GoCPI saying he was going to sell as I would have thought, with his user name, he would be the last to sell.

I decided to average down as I think 22p just doesn't reflect anywhere near the progress that this business has made over the last 3 years (when it was trading substantially higher) and that comments also applies to a share price of 24p (which is pretty much the most that could have been salvaged in last week's carnage).

I'm hopeful things can stabilise a bit now and then we can get back to, at least 28p, over the rest of this year (if not sooner). However I appreciate that a 28p share price is by no means a given as this share is traded so aggressively.

@Xenor - £42m loss due to the removal of some goodwill from the balance sheet and £25m loss due to the hack.

But one must assume that a large percentage of the hack loss is covered by cyber insurance payout and the £42m is just a goodwill balance sheet adjustment.

The fact is that they are profitable on their day to day business (which wasn't always the case) but these are the latest set of accounting adjustment to turn profit into loss!

Well I've just bought some more too - at 22.34 - nothing to fear here - business is sound and focusing in the right areas.

@Capitalizer - but £42m of that loss was a goodwill adjustment and £25m was attributable to the hack (and that should be covered by insurance once the my pay out) ...

My point is that the business is profitable and almost debt free (which isnt omething that couldn't be said in the past) ....

And doesn't deserve a 15% bashing based on those result imho ..... I still think this will be back to 25p plus within days although I acknowledge that will not be enough to save our FTSE250 entry .....

Although - since entering FTSE250 this share has only travelled downwards!

What a huge over reaction!

For me the key thing to learn was that the hack is covered by insurance. Fears over the hack caused this to drop from 38p down to about 26p - that uncertainty has gone.

Balance sheet - excluding leases - is virtually debt free.

Sales pipeline is good and they are still winning business.

I know lots of people of unhappy about bo dividends ... But driving the share price back to a non COVID vaccine available price of 23p, after the progress made since 2020, is just ridiculous.

When the dust settles I'd expect these to return to the late 20s and possibly early 30s now that the hack uncertainty has been removed.

Well I don't think CPI has performed too badly today - market is well down and being a high BETA share - i would have expected to be down too.

However for a large part of the day we've either been breakeven or up - and that to my shows confidence on a market down day.

I'm not expecting a massive breakout tomorrow but will be disappointed if we don't finish a lot closer to 30p than we are today!

All this talk of Adolfo - he's got a good track record working in a cutting edge IT business (AWS) which has grown from nothing over the last 15 years or so ....

CPI have been transitioning more towards IT and AI services and Adolfo looks a fabulous fit.

We don't need JL (the turn around king) because the turn around is complete as will be confirmed on Friday.

JL is coming up to pensionable age and the last thing we need is a pensioner running a dynamic IT business like Capita ....

So as Lesley Crowther used to say .... ADOLOF ... Come on down!

I've added more CPI today because I think The Price is Right😁

@AIM - but surely they've got some form of cyber insurance - I can't believe a business like Capita would not have this covered via an insurance policy given the amount of data they are holding on behalf of their clients.

Yes - they might get fined - or they might not - but I think any fine will be minimal (because they always are) and if it was going to be substantial you'd expect to hear some huffing and puffing from the ICO by now .

I'd be very surprised if these are under 30p come Friday lunchtime!

I, personally, would like to see a small bullish run now up to the results day (like we usually see with CPI and especially as we approached results in August 2021 when we moved 10% between Tuesday and Friday and then exploded upwards for the next 6 days).

I think concern of the hack has definitely held us back and if Friday brings clarity to this issue then we should head back upwards again.

I also agree that, surely, CPI had insurance to cover a cyber attack given they are looking after data for so many organisations!

@Nofear - you should change your name to full of fear!

So you had a fabulous entry at 27.97p and the company issues two really positive RNSs in the week when we expect fabulous H1 results - and you panic and sell up. Absolute genius (you are not).

JL stepping down would signal the transformation is complete - the placing of the finance is also a good omen too.

Why on earth would you dump everything today? Very odd!

I think we are on the cusp of another major bull run in CPI and you will look back and regret cashing in so quickly.