jevanss25

CAPITA - BUY (long term)

Long
LSE:CPI   CAPITA PLC ORD 2 1/15P
Capita's shares took a tumble today after earnings revealed;

The Bad;

£28.5mln for the first 6 months of the year (vs a £31.2mln profit for first 6months of 2019)
-9% revenue
There is also a concern on the groups ability to handle it's debt obligations (which the above has reinforced)

However;

Shares are already down 80% since covid

Capita are on course to sell their Education Software Solutions (ESS) business for as much as £500 million - which will strengthen the balance sheet significantly

Dig a little deeper into the earnings and a £42.8mln hit for untaken holiday is shown- clearly a short term covid impact

Investors have ignored the £355 million of contracts for the London traffic charging schemes awarded to the group last week

Rewind 2 years earlier - Capita had a few scandals with government contracts (army recruitment probably the largest) - a new management team has taken over and Capita has now won £80 million of contracts to help various government departments deal with the impact of the pandemic - the CEO acknowledged this renewed faith in Capita from the government "the government now regards us as a reliable, committed, strategic supplier, and that was confirmed to by a senior civil servant in the last two months"

Costs within the group look set to fall (which is of extra significance due to Capita's shift to lower margin operations) - this is evidenced by the decision not to renew leases on 25 of its 250 offices as the group look to make working from home more permanent


Comment: Shares up 15% today ;)
Comment: Rumours of a takeover bidby CVC have once again lifted shares - up 9%
Comment: Still in this
A few positions got stopped out as per the chart however I re-entered at around 25.88 (multiple positions).
Some have hit TP1 today as per the chart however most are still in play looking for the bigger gains