Capita PLC - What the numbers now say

Vince Julier - June 15, 2018

first examined Capita PLC back in February 2018, shortly after the group announced a suspension of its dividend, a 2018 profits warning and a launch of a £700 million rights issue. now takes a fresh look at Capita PLC see what the numbers say now.

used its advanced AI driven analytics platform to create a wholistic and predictive financial model of Capita PLC.

In February found that Capita’s total operating expense had a relationship to revenue of 1.11 times; that is, for every marginal £1 increase in revenue, total operating expense had increased by £1.11. This relationship was statistically strong and had been relatively constant over the prior 4 years while revenue had grown.

In addition, found that the relationship between a £1 increase in revenue resulted in an increase in current liabilities of £1.06 and a decline in current assets of £1.38. Both negatively impacted net assets. ’s predictive engine also estimated that shareholders’ equity was likely to decline by £1.1 billion, greater than the announced £700 million rights issue.

These relationships were determined through ’s unbiased, machine learning algorithms, which connect every line item of a financial statement together in a multi-layered way.

has re-examined Capita PLC given its recently published 2017 Annual Report, its £701 million rights issue, its management actions, and its 13% decline in revenues.

latest AI driven advanced analytical engine now includes more powerful analytical capability to generate further insights - both in the internal financial workings of a company and also how that company relates to its external environment.

The relationship between revenue and total operating expense, and other financial items, has changed. Now an increase in total revenue by £1 should translate to a total operating expense increase of only £0.9 and make a positive contribution to net income of £0.1. Operating cash should increase by £0.15, while total assets should increase by £0.8. A decrease in total revenue should have the reverse effect.

A latest addition to ’s capability is the ability to examine large quantities of external factors. This new powerful feature aims to give users a greater insight into the external factors that may affect a company’s future performance. For example, Capita’s revenue is most highly connected to changes in GDP and public-sector net borrowings. The future estimate of these ‘influencers’ can be used in the prediction of the future revenue of that company.

In addition, ’s engine now also generates its proprietary ‘predictability’ index. This index gives the reader a statistically relevant measure of the historic accuracy of a company predictive model. Capita, for example, scores highly on ’s predictability measure, giving a degree of comfort to ’s model accuracy.

creates individual, unique and predictive financial models for each company it examines, using advanced machine learning and web harvesting, to deliver unbiased, high-quality equity insights for investors, fund managers and researchers. Through our unique and powerful capability, we aim to support the asset management industry to:

• secure your business;

• empower your abilities; and

• protect your margin.

Contact us today if you are interested in seeing a demonstration and becoming a Development Partner or sign up to be part of our journey and receive our Newsletter.