Tclarke Share Discussion Threads

[cc2014] 05/4/2018 18:03

At the end of December 2017 FTSE was 7800 and has fallen 7.5% since then.

CTO closed on the bid at 78.75 on December 31st and is today is 81.2, up 3.1%.

[ivancampo] 05/4/2018 16:13

It won't re-rate if no one buys it and no one is. Ridiculous spread too.

[edmundshaw] 04/4/2018 08:44

Nice analysis CC! :-)

[cc2014] 03/4/2018 11:30

The latest RNS states a objective of an underlying margin of 3% in the medium term. They don't say what the medium term is but I interpret that to mean somewhere between 2 and 3 years.


So, worst case. 3 years to get to 3% margin, 3% turnover growth, P/E 6
Current turnover £311m * 1.03^3 = £340m
£340m at 3% margin gives a profit before interest of £10.2m and £9.4m after interest
If we use a really low P/E of 6 this would give a valuation of £45.7m or 109p per share, some 31% higher than it is today at 83p. This is pretty close to the N+1 Singer note Rivaldo refers to of 106p per share although I don’t have access to it and don’t know what calculations they do.

Best case scenario, 2 years to get to 3% margin. 6% turnover growth. P/E 10
£311m*1.06^2=£350m
At P/E of 10 gives market valuation of £78.6m or 187p per share.

In both scenarios dividend is now 3.5p (4.2%) and given that it went up 0.3p this year I think it's safe to say it's guaranteed it will go up 0.3p in 2018 and that given the cash flow it will move higher. I’ve ignored the fall in interest costs in the above calculation as the cash balance increases but this would add to the valuation too.

So, how do-able is the 3% margin. Currently it looks like this:
Revenue Profit Margin
London & SE 177.6 8.5 4.8%
Central & SW 62.6 -1.8 -2.9%
North 48.0 2.4 5.0%
Scotland 23.0 0.8 3.5%
Group -2.6
Total 311.2 7.3 2.3%

To get to 3% we need a profit of £9.3m, an additional £2m. If we look solely at Central & SW the loss in June interims was £2.2m, but ending the year at a loss of only £1.8m suggesting it’s now turning a profit. The finals say this “Looking forward, South West has its budgeted turnover secured for 2018 with good quality jobs. As a result, the region is expected to be profitable in the current period”.

It would seem that this would produce the additional £2m on it’s own or alternatively you might view the £0.4m profit in the second half of the year could be doubled giving an improvement of £2.6m.

We should note the additional £0.25m additional contribution to the pension scheme will have to be found too but however I look at this the 3% margin doesn’t look too challenging and whilst the directors are renowned for under-promise and over-deliver it seems the 3% margin might be done in 2018 especially if you consider the general margin improvements being reported by the sector. I will curb my enthusiasm and suggest there will always be a problem job somewhere in the company and thus the 3% won’t be achieved this year but a two year time horizon does seem very do-able.

Finally I note the company is retaining about £5m cash a year after payment of corporation tax and dividend (if no further significant investment or acquisition) which is going to give net cash of around £23-25m within 2 years. I would guess part investment in the future and part dividend growth.


I'm holding and will be doing so for a number of years. I must apologise for my day to day analysis of the trades. I'm a day-trader by nature and made much of my wealth from understanding the trade patterns. It's hard to give it up! In the meantime I'll carry on researching. If anyone can find a trade as good as this one feel free to email me. Thanks

[edmundshaw] 28/3/2018 21:26

Relax CC, watching daily L2 and individual buys and sells will not help you make better investment decisions unless you are on the point of selling, so why??? Better spend the time on some research...

[cc2014] 28/3/2018 16:44

No point in saying anything as once again it couldn't hold onto the gains.

Tbh I don't expect much until after Easter

[rivaldo] 28/3/2018 15:25

Good to see a couple of AT (institutional) trade buys making a difference, moving the price up 2p.

[igoe104] 28/3/2018 15:24

whats going on here ? , dare I say it....

[ivancampo] 28/3/2018 11:17

Drip drip drip

[ivancampo] 27/3/2018 15:01

How big is this overhang? Why is this not being addressed?More sells than buys so far after these results and outlook.

[ottrott] 27/3/2018 11:36

Operating Margin:

.........H1.....H2
London...4.4%...5.2%
SW......-9.3%...1%
North....3.8%...6.4%
Scotland.3.9%...3.0%
Total....2%.....4.3%

Think there could be considerable upside to EPS if progress maintained.

[rivaldo] 27/3/2018 11:16

Good summary CC2014.

N+1 Singer see 106p as intrinsic value here, but they forecast 13.2p EPS this year rising to 14.1p EPS next year - with an almost 5% dividend yield.

CTO's peer group trades on a P/E of 9.7. Which to me would suggest a fair price target of around 130p or so.

Especially given CTO's almost £12m cash pile and the transformation of CTO's services into high quality M&E/digital installation work.

[cc2014] 27/3/2018 09:15

Mark Lawrence, Chief Executive commented:

"I am pleased to report that TClarke is in an excellent position. We are focused on the future and have a clear strategy to deliver on our five key strategic markets. We are confident that this will enable us to continue to drive improving returns for our shareholders, as is demonstrated by our setting ourselves the medium term target to increase underlying operating margin to 3%.

Underlying this, TClarke shows strong and improving cash generation, rigorous risk control, excellent revenue visibility, a balanced quality order book and improving profitability. This financial and strategic strength is allowing us to invest for future growth in our markets, driven by investments in infrastructure and the digital world."



On reading the results I really like how Mark Lawrence has grown into this role over the last 7 years. The accounts show significantly more detail and transparency than they did when he started and this set brings a step up in terms of forward facing statements.


For example that's a clear commitment to a margin improvement to 3% and I favour this far more than a wide open statement that things will improve. It allows him to drive the business and the large shareholders will hold him to it. I also like the clear statement around financial rigour, which reinforces the message from last time and clearly tells the market that what happened at Carillion and Interserve isn't going to happen here.

I also applaud the move to reorganising into five strategic markets and the statement that this will allow more metrics to be reported to stakeholders. He's changing the way the business is run to give him and us more measures of it's success. This will help drive profitability and allow the large institutions which we are lacking on the share register to understand the business much more easily.

I also like the quietly understated get on do things approach and don't shout about them. Hidden away down the bottom somewhere I see they have got the employees to agree to increase their pension contribution to the defined benefit scheme from 8% to 10%. I suggest this must have taken some skill as staff will have seen their salaries drop in the immediate term.


Turning to the numbers, I see an underlying profit before tax of £6.3m with a loss of £1.8m in Central and SW which they say won't re-occur. That would suggest next year a profit in the range £8-10m depending on how you see the margin improvement. £8m would exceed the current broker forecasts so I expect this will be raised in the next week once reviewed.

All in all I'm happy. It's the usual T.Clarke under-promise and over-deliver we have become so used to.

[its the oxman] 27/3/2018 08:44

Nice results , good chance of breaking through 90p now if the wider market can put together a few more up days.

[cc2014] 27/3/2018 08:38

It will be in the accounts Dean but I'm not sure it really matters as give or take a little bit it will be the same every year.

[ivancampo] 27/3/2018 08:38

Perhaps now the Directors will put their money where their mouth is and help soak up the overhang.Can't be far away from that elusive re-rating.Good news.

[deanowls] 27/3/2018 08:33

How much of that is advance payments?

[igoe104] 27/3/2018 07:39

All good stuff, the Cash pot is 11.7 million now, so a acquisition could be on the cards soon ? The big question now is can the S/P get over £1.20 now where it should be at least ?

[rivaldo] 27/3/2018 07:16

Very good results, slightly ahead of N+1 Singer's expectations in all respects - PBT, EPS and dividend.

12.37p EPS compares to forecast 12.14p. The 3.5p dividend is slightly ahead of 3.46p forecast.

Above all, the record order book and extremely confident outlook bode very well:

"Outlook

2017 was another very good year for TClarke. Our current and forward order book is fully replenished with high-quality projects, many of which are business critical for our clients.

The strength of our order book is evidence of our significant market share and we are maintaining our discipline and focus to deliver sustained margin improvement across all our regions. The Board is confident that the Group is well placed to meet profit expectations for the year ahead and our commitment to sustained performance growth is such that the Board has set a medium term target to increase the underlying operating margin to 3%."

[ivancampo] 23/3/2018 15:55

0.2p spread, if you were going to buy, now is the time.

[cc2014] 23/3/2018 11:34

M&E specialist Vaughan Engineering is facing administration after suffering a £650,000 hit on two Carillion projects.

Around 160 staff at Vaughan Engineering’s three British offices in Edinburgh, Warrington and Newcastle were told yesterday that their jobs were under threat as the firm prepared to file for administration.

Not good for the employees. Accounts for March 2017 showed turnover of £38m and a loss of £2.6m. Balance sheet shows they were insolvent in March 2017.

[ivancampo] 23/3/2018 11:00

IG also has a serial seller looking at their buy/sell stats.

[cc2014] 23/3/2018 10:15

I'd say we are fine. He's collected 80k now and still there. In addition there's another 25k on the bid at 78 so that would suggest two parties collecting stock.

Without seeming to get overenthusiastic I would consider their strategy of sitting back and collecting stock at a "low" price a rather good one. Hopefully they are here for the long run and won't be flipping for a few pence.

[ivancampo] 23/3/2018 09:30

Yes ,looks like we've finally got a market - fingers crossed for the biggest possible volume

[cc2014] 23/3/2018 09:06

Well big 5k buy iceberg at 78. He's got 60k so far this morning.

Obviously a trade war between US and China is as good as reason as any to sell CTO. !