Tclarke Share Discussion Threads

[cockerhoop] 08/10/2014 13:38

Was really surprised by the drop on opening as I also saw it as mostly positive.

Outlook statement was as upbeat as I can remember in recent times suggesting the promised margin improvement is in sight finally. Order book also creeping upwards.

I'm a little concerned that nearly 10% of the order book is with the Mission Critical Prime Contractor that the previous issue was with.........I hope both sides have learnt from the problem contract!

[cc2014] 08/10/2014 12:31

Missed all the fun early on as I was in a meeting until 11:15. Things look tasty now.

News looks nothing but good to me as all issues are out the way and now understood. In particular I expected the mission critical contract issue to drag on far longer than this.

And a very clear statement about cash too which should soothe some minds

Now the difficult bit for me. I must keep my finger off the sell button for some considerable time.

[cc2014] 20/8/2014 13:34

Well nearly a week since my last post and the price is still struggling to get through 50p. I remain suspicious that there's one seller sitting in the background quietly dripping stock in to meet what appears to be more buying than selling. Certainly such a seller if they exist isn't in a hurry and happy to let the stock slowly drift up.

[grahamburn] 14/8/2014 19:34

Or, if it was an online deal, the buyer didn't try harder themselves (eg through a fill or kill deal).

[coolen] 14/8/2014 16:08

The 50p trade was sloppy dealing.

The trade was done at 10 o'clock when the notional price was 46-49.25.

The buyer was technically larger than the "market size" so it seems as if the automated systems penalised him.

Looks as if there was no attempt by the poor guy's dealer to pick up a phone and deal sensibly.

[cc2014] 14/8/2014 13:37

I've been watching the trades and the bid/offer spread and as usual it seems impossible to understand what's going on.

Someone this morning paid 50p a share for 62,729 shares which no matter how you look at it must be a buy as the trade can't be delayed from over a week ago and yet right now the offer is sitting at 47.5p which is about as low as it's been for a few days.

It makes little difference to me as I shall be holding for a while but psychologically it would just be nice to see it the right side of 50p

[coolen] 11/8/2014 13:35

I might be wrong, but isn't the guy who runs Miton an ex-Henderson fund manager ?

If so, the recent large deals between Henderson and Miton may be his own stock (in a sense).

[hvs] 11/8/2014 13:19

Very well analysed and put.

Margins can only improve in MHO

[cc2014] 11/8/2014 13:15

I did some research at the weekend and it appears to me that Henderson have probably reduced their shareholding to Nil. Certainly the only place Diverse/Miton can have got them from was Henderson in that volume.

Henderson have been reducing their shareholding for some time. At one point they have 18% of CTO and clearly have fallen out of love with it. It would appear to me that Henderson had a pre-planned action plan on results day which was to get rid of their shares at a significant discount to the market if they didn't like what they saw - thus the immediate drop down to around 50p. Certainly they didn't take much time to think about it so it must have been thought out beforehand.

I am of the view that the shares are not in overhang now and will go up or down depending on supply and demand. Certainly I've just bought some more and it took 15 minutes to get an order filled at a not particularly good price.

I am guessing that today will be last day of any significant sales. All the bad news is out there and those that read their IC over the weekend and have a mind to sell will probably do so today. Of course many won't fancy taking a loss and will sell into any rise but that's just the rotation from weak holders to strong holders.

The RNS on Friday confuses me. I think it is meant to reassure the market but perhaps could have been better written. Certainly the debate seems to be around a technical breach of an overdraft which (at year end) they weren't using anyway and even if there is a detrimental cash flow impact of £600k, that can be generated in 2-3 months anyway so hardly a reason for it to be seen as worthy of a drop in share price of this magnitude.

I am rather hoping I have the balls to stay in this for a number of years rather than selling out far too early. I think it may be some years before we see the likes of 13-14p dividend again (lol - I'm dreaming here but occasionally these things do happen) but everything is dependent on a pick-up in margin in this sector

[gargoyle2] 09/8/2014 09:02

The CFO should be fired for that, imo. It seems that the Event of Default under the banking facilities was not the damages award itself, but simply the failure to notify the bank promptly. You would have thought the CFO would know the banking documentation backwards. It sounds like its his negligence that has caused the default.

[grahamburn] 08/8/2014 17:14

The RNS just released is not encouraging:
_____________________________

TClarke plc (the "Group")

Clarification regarding banking facilities

The Group's interim results announcement issued on 5 August 2014 contained a comment in the Chairman's statement and in note 3 to the financial statements concerning a possible breach of the Group's obligations under its banking facilities in relation to the notification of a court judgment received against a subsidiary company.

Having sought further clarification from its advisors the Board considers that the Group's failure to inform the bank of the award of damages against the subsidiary company in a timely manner is an event of default under its banking facilities. However, whilst the bank reserves its rights in relation to this matter, it has confirmed that it remains supportive and has no current intention to withdraw the banking facilities as a consequence of the award.

A further update on progress with the claim will be provided in due course.
_____________________________

It implies that the "possible breach of the Group's obligations under its banking facilities" is just a technical one, rather than material. However, to get to that stage, having already mentioned the possible issue in its results on Tuesday, does not inspire confidence in the Board or its advisors.

[goliard] 08/8/2014 15:03

I gave 20p as an example. They will want a good discount if it is required, but we can only speculate as to what it will be.

I was involved in a fund raising for a company where all the II had agreed to the price and then on the last day before announcing one of them (hedge fund) said they would only do it if the price was cut another 10%. We all went mad, but in the end the company had to agree. The hedge fund made a great profit on the placing shares and sold them all a few weeks later. Clever move.

That's exactly why they are happy buying full priced shares to take a stake because they know they have a strong hand afterwards. It is only the PI that gets shafted in a placing.

If they don't need to raise funds then none of this will matter, but if they do need to then why would the II pay more than they have to? If they do breach covenants then it could easily be a 50% discount, but if it is more orderly, then hopefully it would be less.

It is the people with the money who set the price, no matter what anyone says to the contrary!

[cc2014] 08/8/2014 14:59

Well bought some more. MM delayed my trade again.

[ridicule] 08/8/2014 14:22

I do not know why you think they would only pay 20p goliard? My point is that the 4 RNS's showing some big stake increases by institutions yesterday were done around 48-50p. A lot of companies do a book build to secure a good placing price but I do not see 20p as an option. Moreover, they have not declared they are in default on their Senior debt with the bank so it would not be s crisis fund raising were there to be one.

[goliard] 08/8/2014 09:20

I'm not sure I see how that is correct ridicule. If they raise £2m (just a guess) then the II can say, 'ok, we will do that at 20p'. They get a great deal and you get stuffed with 20% dilution and probably a 30% drop in capital value. It's the percentage ownership and percentage discount to the current price that matters rather than the actual number of shares in issue that matters.

If they had 10x as many shares in issue now the impact of the placing would be identical as they would just have to issue 10x as many shares.

If it were a rights issue then not as big a deal, but still negative to capital value.

[ridicule] 08/8/2014 09:05

goliard, There are just 41 million shares in issue!! I wish all my investments had such a low number. If they do a placing, which is by no means certain,the 4 RNS announced institutions already paid circa 50p yesterday and, with the increasing order book CT have, a placing will not go very cheaply. The FD has provided for £600k in the accounts for the disputes they currently face. I do not see a severe dilution on the facts available.

[goliard] 08/8/2014 08:57

If they do a placing then the institutions can demand a low price and are well placed to severely dilute PIs to the institutions advantage. I understand why the institutions are happy enough, but PIs will get stuffed if this happens.

[ridicule] 08/8/2014 08:52

Sell advice in Investor's Chronicle. This is not supported by the Institutional stake increases announced yesterday and I am staying put.

[cc2014] 07/8/2014 13:10

The trade pattern is looking much nicer now with some big trades out the way and the stock seems to have come off the bottom.

Hoping that's the end and a gradual climb up from here

[coolen] 05/8/2014 23:49

I read that 1m trade as a "cross" between fund managers, although it is not marked as such.

If so, it may indeed suggest a placing is being formulated, either of new shares or an institutional convertible loan with warrants (more likely, methinks).

As per my previous post, CTO presently have few cushions to absorb these knocks.

[cc2014] 05/8/2014 13:27

Anyone have a view on the 1m trade at 52p this morning representing 1.25% of the share capital.

It's reported as a buy so by my usual logic it must be a sell?

[cc2014] 05/8/2014 13:18

As far as I read this the underlying position remains stable and is slightly improving. The order book is improving and there is some slight pick-up in margin. As long as the economy continues to go forward the fortunes of TCO will follow with it.

Set against this we have
1. Contract dispute from 2007 which if I understand things correctly TCO have taken a charge of £600k in the books this time (no cash impact yet). It doesn't say whether this amount is "their best estimate" or a worse case scenario which is frustrating
2. The mission critical contract. I assume this is only an opportunity in both bottom line and cash as no profit has been taken on it yet.
3. The cash position which isn't great but doesn't worry me too much. They have an £8m overdraft available and in this industry growth is cash positive as payments are usually received on 30 days but suppliers are on more (varies depending on whether they are trade, subcontract or payroll)
4. Pension deficit. Simply being resolved over the next 15 years. A bit of a drag on the P&L but it's understood.

Suspect share price will go nowhere once it's stabilised until we get news on items 1 or 2 above or a very clear statement about margin improvement

[goliard] 05/8/2014 11:21

ridicule, I can't disagree much with what you have said except a placing might be a bit of a worry if it was at a steep discount and only to a few institutions. A rights issue, whilst annoying given dividend payments, would be more palatable for PIs as long as they had the cash to take it up and the company looked like it would survive.

Good luck with your investment.

[ridicule] 05/8/2014 10:30

Goliard, I am broadly in line with the points you make but I am much less scared of a rights issue or a placing since there are only 42 million shares in issue. With an increased order book and margins predicted to improve within 18 months, they remain a Company in transformation. Notwithstanding, Scottish independence, that Division is delivering an impressive performance and lessons learned there are likely to be read across to the other divisions.

The outstanding liability you say is enormous looks like circa £600k on reading the FD's report.

Would I buy these now if I had no holding? No! Would I sell at a substantial loss given that I do have a holding? No! Would I buy more to average down? Not until the two ongoing issues are resolved.

The pension liabilities are a worry, but the £11.5m is based on all pensions being met today and this is only an accounting convention, not a real near term liability and that is why they can take until 2029 to balance the pension book. The most important aspect of the pension pot is, how much is 'final salary' and how much is 'money contribution'? I need to do some digging on this.

I agree due diligence on the acquisition with the liability looks very poor and the Chairman was far too vague on this point.

[goliard] 05/8/2014 09:44

This-is-me - this is a huge claim for them. It is so big that they have had to notify lenders that they might default and it is bigger than their insurance will cover. Also, if I am not wrong, they bought this company, but only found out the full extent of the problem afterwards and yet don't seem to have any provision to claw back the loss from the seller because it was their decision to appeal the original award.

Just look at the pension provision too. Nasty ticking time bomb.