Analysts at HSBC have penned an open letter to those seeking the role of chief executive at troubled outsourcing group Capita PLC (LON:CPI) - the missive also forms the basis of an upgrade to the bank's rating for the stock.
They kick-off by warning: “Under the stewardship of Rod Aldridge, Paddy Doyle, and Paul Pindar, Capita grew and changed rapidly. It became complex. As new CEO of Capita this complexity will be your foe.”
READ: Capita says overall trading in line with expectations, has shortlist of “strong candidates" for CEO job
Simplifying revenue recognition (and enacting broader accounting changes), streamlining the constituent businesses and delivering cost savings will help with the turn-around, they add.
So will learning to navigate the local and national political landscape, with government backing key to the massive public-sector contracts from which Capita has traditionally made a great deal of its money.
New Capita boss will be rewarded by the market for simply outlining a “solid plan”
“Capita is a good business, it creates process solutions for the public and the private sector, and there will be demand,” the HSBC analysts contend.
“Focus on de-cluttering, simplifying, and understanding the risks inherent in long contracts, and complex accounting.
“Understand remuneration structures of bid teams, what are you paying them to do? You can sustainably improve the business and the market’s perception of it.”
They conclude by saying the new Capita boss will be rewarded by the market for simply outlining a “solid plan”.
“If you deliver upon it, with solid simple execution, this will be sustained,” they go on.
So fervent are they about Capita's potential the team at HSBC upgraded its recommendation to ‘buy’ and upped its price target to 820p a share from 590p.
“We think reflects our more conservative estimates, the political risk, and the level of execution skill that will be required,” the analysts say.