Tclarke Share Discussion Threads

[cc2014] 18/5/2016 12:58

hmm. Someone is absorbing all these sells at just over 87 including the larger one which got pushed through ISDX so it can get reported as a buy not a sell

[sspurt] 18/5/2016 10:35

Good stuff profdoc. We need more pushback on directors remuneration which has for many years been increasingly taking the michael. Looks like things are beginning to move our way at long last but there is a hell of a way to go. I am trying to do my bit both at a couple of private companies I am involved with ( where exactly the same exec remuneration nonsense is to be found) and with two institutions which don't even bother to vote at AGM's but which have now had a boot firmly applied to their posteriors from yours truly. Sharesoc doing a good job too. Might be worth alerting them to the CTO situation.

[cc2014] 16/5/2016 13:18

Once again trying to move up on low volume. It seems the sellers at 88 are now exhausted. Just need a few more buys to attack that 89/90 area

[cc2014] 13/5/2016 13:15

Winterfloods seem to be messing around on L2. Usually means their position is not flat. I sense they are struggling to get sellers to fill their buy orders but time will tell.

We seem to be getting closer and closer to the magic 90

[ivancampo] 13/5/2016 08:30

Hopefully you shamed a few into spending a few quid.

[profdoc] 12/5/2016 17:20

TClarkes’ AGM – Non-executives out-witted by guile of executives
At Friday’s AGM the non-executive directors did not have a satisfactory answer to my linked questions: “Director̵7;s remuneration rose from around £1m to £1.7m in a year of very modest basic earnings (£0.1m or 0.13p per share) and with a market capitalisation of only £33m. Why? I’d like to link that question with the observation that if you create two columns of numbers, one with basic earnings per share (the statutory one) and one with “underlying221; earnings per share you find that for 2005-7 the numbers are identical, but since then there has been a wide divergence. Could it be that there is some accounting manipulation to ensure bonuses?”
(Previous Newsletters on TClarke: 5th – 11th Nov, 19th Nov, 26th Nov 2015 and 20th – 22nd April 2016)
I was aware that they would answer that the bonuses for the executives were justified by the rise in “underlying/adjusted” earnings. This is what the 2015 remuneration report says of the bonuses:
“We believe in rewarding our executives based on their performance and on the value created for our shareholders. The variable elements of executive remuneration are focused on simple and transparent measures of profit before tax, EPS growth and key strategic objectives. Our bonus and long-term incentive structures are based on challenging targets….
………;. I am pleased to report that the underlying profit before tax target was indeed met in 2015 and, under the terms of the remuneration policy, a bonus would be payable to directors. However, the Remuneration Committee recognises that the discontinuation of the Bristol and Cardiff operations affected the overall results of the Group. To be equitable to both the executive directors and shareholders, the Remuneration Committee has decided to award the executive directors 50% of the bonus payable.”

If you have a team of directors who every year for at least four years cleverly report much higher eps calculated after adjustments than those that are reported under normal accounting rules, and then you base large bonuses on the “adjusted̶1; earnings then a bad smell is going to be detected.
Fair enough, companies do have years when they have to jettison a bad division here or incur exceptional expenses there. But to report exceptionals every year, and to then base bonuses on a number that pretends the exceptional loss never happened is to stretch credulity.
Being in the building trade myself I’m aware of the technical phrase for people who push their luck too far in charging for their efforts: We call it “Taking the P*SS”.
To be fair I’ll present the answers they gave:
1. The board is bigger by one person this year compared with last year. I accept this as a contributory factor to the rise in remuneration.
2. The executives have done a sterling job in closing down the Bristol/Cardiff operations thus saving shareholders money in the future. I asked whether they thought that shareholders had lost a lot of money on the Bristol/Cardiff operations (those discontinued ones). At first, I did not get a straight answer. Eventually they acknowledged that shareholder wealth had been diminished by many millions by the failure in Bristol/Cardiff. So, I said, at the same time as shareholders lost massively the directors are paid a bonus, with the bonus based on ignoring the amount of money they lost for shareholders in Bristol/Cardiff? Yes, that is OK came the reply, because they have now stemmed the losses. Who was in charge when the awful decisions were made to build-up the Bristol/Cardiff offices? Isn’t it their job to manage Bristol/Cardiff in the normal course of their duties, and, if necessary, to manage a closing down. For this they receive large salaries – why add bonuses?
3. If we do not pay them well they will go and work for a competitor. Oh, that old one. Any non-executive worth his salt plans for this ultimatum years ahead of time. At the very least you make sure there is a well-defined succession plan, with able and ambitious middle managers waiting to get the chance to prove themselves as executive directors. They can be moved onto the Board should the other executive directors fall under a bus, or try the game of “I’ll move if you don’t pay me more.”
4. They did not receive bonuses in the recession, therefore they should receive something now. Firstly, they are very well rewarded on basic pay – see below. Second, shareholders have not yet seen profits coming their way – in the last two years the company has on average broken-even if you count the discontinued operational losses as real losses to shareholders, which they are.
Unless there is a change in the remuneration policy shareholders will find over the next few years the directors will suck an undue amount from them. Here are the basic salaries and bonus amounts to be taken if they reach targets (we already know about the low level of rigour non-executives enforce):
£’000s Fixed pay In line with expectations Maximum
Mark Lawrence £340k £410k £898k
Mike Crowder £315k £375k £791k
Martin Walton £267k £319k £682k
Here is what the executives got in 2015, a year of virtually no increase in shareholder wealth:
Shares held
Mark Lawrence £436k 39,607
Mike Crowder £398k 31,607
Martin Walton £338k 29,607
Danny Robson £333k n/a
Non-executives
David Henderson (2015) £37k n/a
Iain McCusker (2016) £49.5k 2,000
Beverley Stewart (2016) £45.5k 21,000
Tony Giddings £45.5k 2,000
Mike Robson £45.5k 2,000
So they are generous to the NEDs, as well – that would not be linked to the generosity to the executives, would it? You may think so, but I could not possibly comment.
I have been told by the Chairman (after the meeting) that they will re-examine remuneration policy. I do hope they will put the interests of shareholders at the heart of the discussion.
Why have the directors bought so few shares in the company?
Blank stares and mumbling was the response.
Last year turnover in Bristol/Cardiff was £5m but costs were much larger at £8.4m. How can that be?
Apparently, a customer defaulted, but it was rubbish business anyway. The high costs were not accounting “kitchen-sinking” into the “discontinued operations” then? How could you think of such a thing!

[cc2014] 09/5/2016 13:07

I think the 22.5k buy at 88.375 and the 32.5k trade at 87.0 probably tell the story.

I would assume the latter is delayed and although shown as a sell is probably a buy

[cockerhoop] 09/5/2016 11:04

Tiny spread currently 88.33-88.63!

[ivancampo] 09/5/2016 10:51

Why is the price higher now than on Friday? Was 85.75-86.75 then, something 's happened, all large trades are always reported late. I expect we will see evidence of the in coming days.

[spooky] 09/5/2016 10:36

How can you tell that there are big chunks being moved in the background, there isn't exactly a lot of trading today.

[ivancampo] 09/5/2016 10:10

Looks like big chunks being moved in the background, finally going to break into the 90's and beyond imminently.

[cc2014] 06/5/2016 13:04

I'm astonished at the volume today. Usually volume picks up as people have an opinion whether good or bad.

On the upside the price does seem to be slowly rising and the spread is starting to narrow. It looks to me like SNGR and WNTS are slowly moving the price up looking for sellers which aren't appearing.

I think once the spread comes down a bit further those sitting on the sidelines may start to act.

the 400 trade at 88 is really odd. Someone put 400 on the market to sell at 88p and they get filled instantly. I'd love to see what would happen if further volume was placed there.

[sspurt] 06/5/2016 09:45

Jeez..400 shares traded so far. I hope the boyz are working on that stock overhang.

[cc2014] 06/5/2016 07:58

Usual very cautious and reserved statement from directors. Everything on track. Turnover up, margins ups. Hope to see this through 90 today

[ivancampo] 06/5/2016 07:08

Could you get a better update?

[cc2014] 03/5/2016 13:30

All a bit frustrating. Winterfloods clearly have a few to shift yet. Interserve going well today but no pick up here.

[gargoyle2] 29/4/2016 14:04

12k at 85, 15k at 87.5

[ivancampo] 29/4/2016 13:40

I've just added 3k more. Is the order book showing many on offer, CC2014?

[cc2014] 29/4/2016 12:54

Buyers still nibbling away but no attack on the volume at 85 on the order book yet. Might have to wait until next week for this.

[cc2014] 28/4/2016 13:19

I would suggest it worthwhile doing some benchmarking of director pay in this sector (remember it is fairly specialised - we are talking only 5-6 companies of this size and capability in M&E). I know one of the competitors directors takes out over £2m in a good year and they are half the size of CTO.

I suspect this is part of the reason Danny Robson left. The company are probably simply not able to offer him what he can generate himself by running a company with a smallish turnover of say £10-15m. Of course why he would want to work at all is worth considering.

Trading statement next week. 6th May from memory. I don't expect the share price to hang around here if the continued pattern of the directors cautious optimism and over-delivery of such continues in that statement

[gargoyle2] 28/4/2016 11:51

profdoc, thanks for 'revealing' yourself! I haven't read your whole piece, but I do agree that the interests of the directors are not at all aligned with those of shareholders. The CEO is on a pretty tidy packet (package of GBP 300k, as far as I recall), with hardly any shares despite having been at the company for 20 years odd. having said that, I hold a fair few here and would be looking to add either here or lower.

[ramridge] 28/4/2016 10:18

Hi prof -
What you might have missed is that the company has moved into profit with net cash £6.7m, net debt free, positive OCF and FCF. Net cash is near 20% of market value.

If they manage to up their op. margin, operational gearing should kick in and flow straight into a more than proportionate increase in eps.
Current prospective PE is 10.5 . With increased margins, this could drop down well below 10.

All IMO

[profdoc] 28/4/2016 09:53

Thank you for giving my piece some attention, but I don't think I have that power.
I'm not that negative about the company! I just have a habit of looking for disconfirming evidence as well as confirming evidence.
I did finish the piece with
"Conclusion:
I’m not totally convinced by the sustainability of margins in the next recession. And I’m not convinced that the directors have aligned their interests with those of shareholders.
However, the shares are cheap relative to past earnings and relative to earnings in the forthcoming rise in commercial property activity.
So, I’ll be holding for 2-3 years yet, I expect."
CC2014: I'm always interested in hearing about what I might have missed. Could you elaborate please.
Glen

[ramridge] 28/4/2016 09:36

Hi Guys -
I am new to this forum - bought a small holding yesterday. Key attraction is the great entry point at the moment and generally good fundamentals.
The one negative to me ( and this was one of the points made by the good professor) is the wafer thin operating margin of 1.8%.
I did an analysis of this sector to see how their margin compares with others. Well, the weighted average for the sector is 4.9% (after throwing out some outliers). So they really need to write profitable business.
On balance good enough for at least a trade, if not longer term investment.
All IMO