Capita looks vulnerable in the wake of Carillion’s collapse

At this stage nobody knows how much wreckage will emerge from the liquidation of Carillion (LON:CLLN). But far-sighted hedgies are looking at what could go on at Capita (LON:CPI). Here, at 397p, CPI is capitalised at £2,650 million as against tangible net liabilities of £3,200 million. This is too much of a gap and, were it to emerge that CPI has been signing up long-term contracts which, in reality, are not as profitable as the market supposes, there could be an almighty crash. Certainly, CPI cannot be regarded as investment grade material until the rubble and smoke attending CLLN has cleared. That will not be soon.


Inevitably, some will say in support of CPI that the sell argument is induced by the anti-outsourcing mood of the moment. This is partially fair. But the real problem is debt on a vast scale.

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As regards Monday’s reference to Caribbean (LON:CIHL) not being the beneficiary of major debt settlement payments by the Government of Belize, I am informed that part of the payout sum goes to CIHL not just Midway.