Tclarke Share Discussion Threads

[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.

[a0148009] 05/8/2014 09:33

The management is inept always slipping on banana skins constantly disappointing
often gives inaccurate guidance, just look at the ten year chart and still no bids for the company. Margins wafer thin and now got themselves in a fine mess and stupidly trying to imply everything is OK by paying a dividend. Wish someone would take them out of their misery.

AO

[cc2014] 05/8/2014 09:30

Nothing new really apart from issues from the past. Bought some more. Drop seems significantly overdone to me.

One of my buy traders at 51.6p has been delayed

[grahamburn] 05/8/2014 09:27

Probably a good deal more than a "couple of extra electric sockets" in this case!

[this_is_me] 05/8/2014 09:25

There are always contract disputes in the construction business. It is like buying a house and the builder demanding a fortune for a couple of extra electric sockets.

[goliard] 05/8/2014 09:11

Possible breach of banking covenants, massive pension liability, claims against them that exceed insurance limits... so they pay another interim dividend!! Simply incredible. Probably an over reaction this morning, so some recovery expected, but what about next week, or next month?

I keep saying it, but these guys are just one RNS away from an emergency placing or right issue and then it will really tank. For anyone holding you just have to hope that they can keep enough cash to avoid that, but paying a dividend with all this uncertainty is complete madness.

[this_is_me] 05/8/2014 09:02

Seems a daft reaction to the RNS - bought in this morning.

[grahamburn] 05/8/2014 08:58

Not too sure about bid rumours happening whilst there are still open-ended insurance cost liabilities, contract disputes and a potential breach of banking covenants.

Having said that, the order book looks encouraging especially when coupled with the comment that new contracts are being negotiated without the limitation of fixed price terms.

[kneecaps2] 05/8/2014 08:43

Yes a massive over reaction these shares will bounce when the bid rumours start again, which they surely will

[mrphil] 05/8/2014 08:19

Blimey, surely this drop is a bit of an over reaction?

[a0148009] 05/8/2014 08:13

As ever always flatters deceive.

AO

[cc2014] 31/7/2014 13:18

Interesting stock movement leading me to wonder what's going on. Stock has fallen on nearly no volume and spread has widened at same time. Usually suggest MM's are trying to shake out stock but who knows.

As to margins being super-thin this is the construction industry exiting a really deep recession and that's the way it is. As confidence grows the spare capacity will disappear and margins will go up.

I'm in for a number of years and will take the rough with the smooth. I'm not worried about the downside as at some point profits will appear leading to cash and a £8m overdraft and a £5m RCF will be more that enough in any set of likely circumstances.

[hvs] 30/7/2014 08:44

I is in no hurry.

[coolen] 29/7/2014 23:46

PugUgly (above) correctly identifies problems for 2013/2014.

CTO operate on 1% pre-tax margins, so there's no cushion for trading discomforts.

As usual, expect the results next Tuesday to contain promises of "visions for the future" and "platforms for growth", albeit for next year, or the year after.

Short term, the divi decision may help the share price

[hvs] 29/7/2014 17:19

U sees I is NOT OXBRIDGE.

[goliard] 29/7/2014 17:18

No. It's just the nicest thing that I can think to call you because of your inane ramblings and poor grammar. I'll let you know if you ever deserve to be described as anything better.

[hvs] 29/7/2014 16:47

lol !!!!!!

Now its upset.

[goliard] 29/7/2014 16:38

For once you are right. It is not a case of being quiet. IDIOT.