Everything in the article and regarding selling off assets are looking up beat.
I presume the 2 major drags on the share price are:
2. Funding (notably selling off assets cheap because of Brexit)
I also wounder where the growth will come from. Will Capita put a stop to growth through acquisition? If so Capita will need to grow the hard way, through profits in a sector where margins are somewhat fixed to a narrow range.
Or will growth in the share price come from re-instating the dividend in a couple of years? The dividend cut must surely result in some very good profits after restructuring costs?
"The embattled outsourcing giant Capita is plotting a £700m fire sale of assets alongside a heavily discounted rights issue intended to raise a similar sum.
The new chief executive of the former FTSE 100 favourite is understood to be working on a more aggressive than expected review that could lead to the sale of six or seven businesses.
Jonathan Lewis, who overhauled the oil services company Amec Foster Wheeler, admitted in January that Capita needed a rescue cash call.
Delivering a profit warning that almost halved the market value to £1.1bn, Lewis said Capita had underinvested and relied on acquisitions to fuel growth.
The company has contracts ranging from army recruitment to customer services for Tesco Mobile. It is wrestling with a debt pile that totalled £1.2bn at the end of last year and a reported £381m pension deficit...................
"Lewis said in January that two businesses would be sold Constructionline and ParkingEye as part of non-core disposals. It is understood Capita has now identified six or seven businesses, worth up to £700m, that could be sold in stages. With the rights issue, this would allow Capita to raise up to £1.4bn of fresh capital. The company has had more than 120 approaches from potential bidders interested in its offshoots.................
"Lewis has insisted Capita is not in the same position as Carillion, pointing out it has £1bn of cash and bank facilities. Its shares closed last week at 168p. A year ago they were trading at 518.6p...."
If I walked up and down the street with a £10 note and offered to sell it for £100, people would suggest I should be locked up. Well, particpating in a rights issue at around the current price amounts to the same thing. Don't do it!
"A look under the bonnet of the LSE:AA.:AA has revealed what many shareholders must have thought for some time - that the roadside recovery business is in urgent need of a jump-start of its own.New CEO Simon Breakwell's immediate plans for a ..."
"Asset manager Mike Deverell tells Holly Black how he plans to preserve gains ahead of a larger stockmarket correction.Ten months after inception, our long-term growth portfolio is up almost 9% (to end January). Mike Deverell of Equilibrium Asset ..."
""Anyone know if we can participate in a rights issue?"
JDS - yes of course, all holders can - it is their right. That's the point of rights issues! But you can also choose not to take them up..."
I had Barclays back when the banks were in a mess and they suddenly issued lots of new discounted shares to some middle eastern wealth source without giving existing shareholders the chance to join in. I went off Bob Diamond a bit because of that but now sometime wonder if we should ask him back.
I am sure that you are right and in this case, it being a rights issue, we will get the option, it can't be easy for them to set the price.
When all else around you is a sea of red and Capita is royal blue it is more than a dcb.
It was grossly oversold on anyones book at 157p.
I hinted it back then that always the danger with shorting is that the big boys play invisible on this and other stocks and you never know what is going on and before you know it you are 40 points to the better and the margin calls start arriving. These get into oversold territory and then the big boys turn long and top up to average down.
The company has got its money. That's what underwritten means. Don't be surprised is it goes higher still. The CEO kitchen-sinked things so that there was bigger upside than downside risk. It has friends.
"Shares in outsourcer Capita surged as a blog post on the Woodford Investment Management website suggested that its low valuation could make it a big target. In a blog dated 2 February, Neil Woodford said:
"There are of course buyers of corporate assets that are not disciples of the momentum school of investing - I suspect that other businesses and private equity buyers will be circling Capita as I write."
Thanks for sharing the above link contrarianstyle. I am keeping the faith that Woodys style will come back. After weighing up the pros and cons of this "reset" I am happy to hold confident it will not go bust but transform.
"... its hard t find a bottom to the endless bottom. I have gone into a few' tanked shares' only to see them tank ever more. "
Yes, KLM (okay, perhaps Emirates??) - but the bottom is not endless, it only feels that way. But, as is typically the case, we will probably only recognise it when it's been and gone...
Make no mistake, the prevailing sub-asset class - I would call it "UK-focused Value" - is in a full-blooded bear market, as KLM neatly describes - getting ever cheaper... and then going down some more. I too have put money in here and there, only to see it eroded further... I am generally holding off for now, taking some small solace that my biggest holding is also just about my best performer - GBP cash!
But, most importantly, I remain optimistic - and reading Woody's latest (hair-shirt) reflections (thanks to Contrarian for posting), there is much that chimes strongly with me, as selectively highlighted below:
"... Capita represents many of the things that this market loathes at the moment it is exposed to the UK economy, it has a recent record of disappointment, it is an outsourcer... Markets are being driven by momentum. Valuation is irrelevant it simply does not matter in the stock market at the moment... Whilst the stock market remains totally preoccupied with momentum and insensitive to valuation, we should all expect the environment to remain as challenging... as it has been since early summer last year. I will underperform in such market conditions as I have done before. Equally, however, we should expect rationality to return in an unpredictable way, as it has done always in the past..."
For balance - while Woody's piece makes much sense all round, at least some smacks of wisdom after the event... and while he has been undoubtedly hamstrung by his investment style (and my own) being out of favour, he has compounded this with at least a couple of cases too many of outright bad stock selection....
"But seem to be on my own these days by respecting Woodford ... Cant forget the money he made me in his old funds."
I am with Ripley, I retain plenty of respect for Woody - and I am old enough to remember when he has been villified in the past, only to surge back strongly as the prevailing market mood changes. No guarantee he will once more, of course, but I wouldn't bet against it...
And respect is one thing, but I draw the line there... I don't make a habit of lionising any fund managers, or indeed (generally) paying the chunky fees which most of them command. They all have their blind-spots and bloopers, and very few manage more than periodic "days in the sun"... Woody has had more than his fair share, but his next one - if indeed he can pull it off - may yet be his greatest?
I heard a rumour that the "new" CEO has already started to hire in the "old boys" from AMEC. No doubt they are all on nice retainers, houses paid for in London and 12 month golden parachutes all round (just like they were rumoured to have had with AMEC). Filling their bank accounts there, while the staff and shareholders had months of misery heaped upon them. Masters of the universe indeed.
Surely a good place to start a "turnaround" would be firing the current management (saving maybe £500K per head) BEFORE hiring in more "dross" managers (aka your pals)? Better still, just get some quality "administrators" in ASAP while there is till something left to sell, salvage or spin off. One would have thought a "turnaround expert" would know the basics of salvage?
Ongoing SFO investigations at AMEC.....still not resolved?
Indeed Bill, but as you say its hard t find a bottom to the endless bottom. I have gone into a few' tanked shares' only to see them tank ever more. Perhaps 'buy the winners not the losers' - but I can't have ALL my money in RDS can I (albeit they have slipped a bit after latest results)?
KLM??? O dear, possibly the least-friendly airline I have ever used ( for various personal reasons I won't go in to...).
Bill 1703 (see Lloyd's Bank for fuller answer), There is nothing wrong with Intangible Assets (per se) so in Unilver's case they are not a problem. Here (Unilever) Shareholders' Funds are 60,285 million and Goodwill is 16,881 million, giving a net figure of 43,404 positive. It is only a problem (as in Capita's case) when shareholders' funds less goodwill is negative. Hope this helps.
Capita already have the money in the bank that's the genius of it. The turnaround specialist seems to have some serious backing.
On that basis and on all the other measures announced its probably oversold.
Its struggling today on the short side and it looks like any further profit margin has now gone. Holding Institutions seem to be using computer programs to buy up any available stock along with the longs.
Additionally any institutions hedging will be closed and long gone before any PI's get to hear and then sadly it normally results in a short squeeze and margin calls.
When it starts to stabilise the wise ones normally bank and wait for the next profit warning elsewhere.
You know what I've read that Times article on Capita and the CEO and put some money on the table.
I don't think any CEO in the land that overlapped in the same sectors as Carillion would not have thoroughly reviewed their business. Lewis was already on the case and I note with distinction the words in the Times article that he is something of a "turnaround specialist"
He has amongst several priorities identified that in the present climate refocusing the business and getting to grips with debt is a priority.
# Their is cash on the balance sheet
# The dividend has suspended for now
# The RI already has underwriting in place (meaning they will get their money)
# That there are plans afoot to offload certain non-core businesses. I also note the comments that they "could raise many hundreds of millions from disposals if we wanted to."
I also like the analysts summary that he had kitchen-sinked things.
"City analysts described the plans as kitchen-sinking and said that while Capita would look very different in the future, it would survive."
1 month chart suggests probably overdone.
First of probably a few purchases and a 6 to 12 month time frame.
I doubt spread betters alone are responsible for the fall here.
No doubt institutions that may take part in the fund raising have taken out hedging shorts here.
By the time the sub 100p placing price is announced they can close positions when the market takes it lower which it nearly always does and they will have made enough money to derisk their taking part in the placing.
CFDs aid liquidity, those holders that don't wish to sell up their shares CFD and spread bet account holders will do so for you!
This share won't stop at 100p, its gaining momentum and expect 80% of the current value to disappear from the market cap.
There will be brave investors who pile in at the bottom but it will be a high risk investment.
PS For all those who may be looking for a non IG account, Prospreads offer a Spread betting account with Direct Market Access. This looks like a very good opening trade (short)
Spread betters dream? That assumes people have the foggiest clue which way a stock will move. Down yesterday up today, how is anybody spread betting supposed to know which way the wind will blow tomorrow.
Spread betting is for most people a loss making exercise, certainly over the long run. What can be one persons dream is another persons nightmare. And sooner or later with the margins and financing costs for most even the dreams turn sour.
New CEO has certainly thrown everyone else under a bus here to create a turnaround situation/story for his tenure. His share options are going to worth a fortune in a few years time.
An opportunity for the brave investor to get onboard I suspect.
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