Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
Four important stories from the past week: Capita, Purplebricks, BT and Vodafone
Outsourcer Capita (CPI) is seeking to avoid the fate of its doomed peer Carillion by taking steps to fix its balance sheet under new chief executive Jonathan Lewis.
In a kitchen sinking exercise, Lewis has cancelled the dividend, announced plans for a £700m rights issue, targeted disposals of certain businesses and also downgraded profit guidance.
If Carillion had taken similar actions 12 or 18 months ago it might have avoided liquidation, with Reuters analysis showing the company had paid out £727m to shareholders since it was created 19 years ago.
Shore Capital analyst Robin Speakman says: ‘Capita still faces significant challenges in its core UK market on contract pricing and with continuing hiatus in public sector services, in our opinion.’
Fund manager and Capita shareholder Neil Woodford believes it is now a takeover target for rivals or private equity buyers.
PURPLEBRICKS FIGHTS OFF CRITICISM
Online estate agent Purplebricks (PURP:AIM) has been hit by analyst criticism of its business model and media reports which have called into question its success rate for selling homes.
Jefferies analyst Anthony Codling says just half of the company’s customers in November 2016 sold their homes within 10 months while the company has regularly quoted success rates around and above 80%.
Codling also says there is a possibility that revenue may have been overstated. These criticisms have been ‘firmly’ refuted by the company.
FEARS OVER BT DIVIDENDS
A £14bn pension black hole, tightening regulation and an expensive-looking sports broadcast rights process are big reasons why BT (BT.A) investors are getting hot under the collar.
Watching its UK consumer arm go ex-growth in the third quarter to 31 December 2017 doesn’t help matters.
The main worry for shareholders is that these issues could squeeze BT’s future cash flows and limited its ability to keep paying its high-yielding dividends. BT’s share price has plunged to a five-year low of 241.55p, putting the full year to 31 March 2019 income yield at 6.7%, which looks attractive, but only if the group can afford to pay it.
VODAFONE IN TALKS OVER LIBERTY ASSETS
Confirmation of asset talks between Vodafone (VOD) and Virgin Media-owner Liberty Global have grabbed the market’s attention. Negotiations could see Vodafone invest up to €14bn to take ownership of various European assets from Liberty, particularly fixed-line and broadband assets.
Vodafone insists that it is not looking to launch a full takeover of the US-listed company. But it does raise an interesting question over the future of Liberty-owned Virgin Media in the UK; an asset that many analysts believe would add a useful fibre network as well as content to Vodafone. (TS/SF)