Capita (lon:cpi)
Capita – £700millon Cash Call, Why Should We?


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Title: Capita – £700millon Cash Call, Why Should We?
Company: CPI - Capita
Share Price Then: 182p
Author: Ian Smith
Date: Sat 03 Feb 2018
Comments: All of the experts are telling us that Capita is not another Carillion and the new CEO has identified the issues and has a plan for the future.

The trouble is that plan for the future seem to be to sell some businesses, suggest that previous management was bad and it is going to get better in the future and by the way can we have £700 million please.

Now this sounds a lot like Interserve and I have to wonder if institutional investors are going to say, that is a third of the current Capita market capitalization and we have had enough especially as dividends are going to be cancelled in hopefully the short term.

Stopping dividends may force some supportive funds out of the share as they are obligated to invest in dividend yeilding share, forcing the price even lower and out of the FTSE 250 and even lower because of that.

A £700m investment doesn’t wipe out Capita’s debts, it would still owe about £400 million. I am expecting an Interserve cash call for about £350 million soon so its time for some more big decisions, are these companies worth saving?

Although £400 million seems okay on pre tax profits of £200-£300 million I suspect that many may be cautious about the real world meaning of such a figure.

This is all after a big debt reduction resulting from selling Capita Asset Services for £888 million.

Many pundits were predicting a £500 million rights issue to save Carillion but this never came about and it is possible that the same will be case here.
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