HOPE FOR 2012

web: www.tclarke.co.uk
Company was preferred bidder on the London Olympic Stadium

Mark Lawrence, Chief Executive commented:
" The year has proved to be challenging, but the group is in good shape. I am pleased that we have maintained our leading position in many of our markets, despite increased competition and pressure on margins. Financially the group is in good shape with a significant cash balance at the year end of 23 million. This has given us the resources to consider further opportunities to grow by acquisition. We remain focused on shareholder value and we have maintained the total dividend for the year at 13p.
" Today we have also announced the acquisition of D&S (Engineering Facilities) Limited for a total cash consideration of up to 11.6 million. This acquisition widens the range of services we can offer clients. It will give us the platform from which we can build a broader national facilities management business that compliments our existing activities. The acquisition is expected to be earnings enhancing and we are confident that it will flourish as part of T.Clarke.
" Looking forward, there are some signs of a recovery in commercial property markets. In London we are encouraged by a number of new projects getting underway, which could lead to good opportunities. In the regions we have restructured the management of our operations which should improve the performance in the future. I am also pleased that our order book, which stood at 160 million plus 40 million of contracts under negotiation at the 31st December 2009, is robust with some very encouraging prospects to grow from here. We are looking to the future with cautious optimism."

XSTEFFX - do you still follow these ?

NO, BUTSOON I HOPE.

The order book at building services group T Clarke (CTO) was £230m at the year end against £190m a year ago with 55 per cent of 2013 expected revenue secured.

Interim Results

Highlights:
Group revenue £109.8m (30th June 2013: £114.7m)
Underlying operating profit £1.2m (30th June 2013: £1.2m)
Profit before taxation £0.2m (30th June 2013: £0.8m)
Profit before tax margin 0.7% (30th June 2013: 0.7%)
Earnings per share 0.32p (30th June 2013: 1.23p)
Earnings per share - underlying 1.58p (30th June 2013: 1.50p)
Forward order book £275m (30th June 2013: £225m)
Interim dividend per share 0.5p (2013: 1.0p)

Bit of a dog, skinny. Hope you didn't get caught?

I've never held - but have watched for sometime.

Interesting stock this. I'll post some research for you all in due course but in simple terms it's a Mechanical and Electrical Contractor who also does a bit of facilities maintenance. As such it lags the recovery in the sector as it's one of the last trades in any new build or refurb - you can't put the wires or pipes in until you've put the walls or steels up first!

Order book has improved dramatically and profitability should just flow naturally

This is my biggest holding by a long way. I've been collecting stock over the last 20 months and am now going to patiently wait.

This company has a market cap of about £32m. Obviously you have done your research CC, but to have your biggest holding in such a small company comes with a certain amount of risk. Hope it goes well for you.

Now banging its head against the top of the recent trading range.

Interims next week...

Sorry interim statement next week. Someone thinks it's going to be good. Got my wish of it breaking up out of a very tight trading range.

CC - any chance of you posting as per 10 above?

Bit of background. As we ran up to 2008 the city boys became more and more unhappy with the level of dividend from CTO and pressurised the management to pay out more. It fell out of favour as the management resisted (somewhat). As it turns out keeping hold of that cash was really important as the recession hit.

As we stand now we have imho a stock where there is evidence that turnover and margins have picked up but no-one has really noticed. If you read the last few accounts and interims the underlying profitability is masked by a couple of legacy contracts which people took fright over.

One of these caused a technical breach of banking covenants. It was a badly worded RNS which cause the collapse to 40-50p where I collected a lump of stock. The technical breach was caused by a contract from about 2008 which CTO inherited on acquisition of a business. This went to arbitration with settlement awarded against CTO but the whole cost was covered by their insurance. They then on advice of insurers appealed the decision and the settlement went up not down and exceeded their insurance. Thus technical breach. The excess payable by CTO was declared at £800k which in terms of a company with an underlying profitability of £2m is annoying but was never going to hurt them as they would remain cash flow positive.

From memory the RNS was clarified a day later but by then it was too late for sentiment and the share price. Great for me though as I collected a bundle under 50. Even got some from 42.5.


So, basically for me this is simple. Company with long term solid consistent performance up to the recession paying good dividends then struggles through the recession but still maintains some profitability. City boys fail to understand M&E sector is last to recover and don't forward forecast profitability well enough.

Cash got a bit tight towards the end of the recession but bank facilities very clear in all interims and finals and more than sufficient for needs. Requirement for cash drops as profitability flows through to bottom line. Expect directors to cautiously increase dividend while they strength the balance sheet.




Positives:
Sector improving
Order book at an all time high and rising
Legacy contract issues depressing the share price dealt with
Cash position fine with lots of headroom on bank facilities
Margins so low as the only way is up
Dividend 4%

Negatives
Up front costs on new large projects coming onstream may depress profit this year (depending on how they account for them)
Pension fund deficit is bigger than you would like but there is a plan agreed with trustees and frankly if profitability picks up cash flow would be such that this becomes irrelevant in about 2 years
A lump of goodwill on the balance sheet which I'm not sure I like. Accounting principles are fine on it and it has no cash impact but I'd prefer they slowly write it off over say 30 years.
New large projects coming onstream likely to suck out cash


Our you could look at this way. In 2006 when the share price was 250p, turnover was £186m, profit was £7m and dividend was 11p.
Turnover likely to be £225m+ this year. Profits at say £2-3m this year then increasing rapidly. Balance sheet will repair itself as profits convert to cash in due course.

And finally I like the way it's slowly diversifying away from pure construction to add some multi-year maintenance contracts to its portfolio. I hope they do alot more of this as it's creates long term shareholder wealth.

Speculatively if they could do more facilities maintenance they could be rated more like Mitie or Mears. This would be very interesting indeed but that isn't going to happen unless the management make it so.

Finally I believe the share price has been depressed by Henderson (check) selling out. They have been dripping shares into the market for the last 2 years but have accelerated in the 3-4 months. I think they have very few left. I've been collecting these for ages and have had to trade very carefully to collect stock without shifting the price. There was a buyer down at 75/76 for ages and I wonder whether they got frustrated and moved up to 80 as they felt they weren't getting enough.

If you want to trade this WNTS run the show on this one 90% of the time. They are extremely clever and know what they are doing. Very patient too.

I know this sector having worked in M&E for 8 years and I would go so far as to say that given the shortage of decent M&E contractors even if the directors were completely incompetent margins would pick up through natural macroeconomic effects. I don't think they are incompetent of course - they have steered a path through the recession and come out the other side in reasonable shape. I do wish they perhaps had more vision outside of strict M&E hard nosed new build large projects but I see some of that coming - for example the London underground framework

Interim statement tomorrow. I'm not sure this set of interims will excite as the large projects are only just starting to begin but I'm holding for a number of years

ok - so just to be clear it's trading statement tomorrow not interims.

Good move into the close. Someone clearly wanted in or out before tomorrow's statement and left it to end of the day. It will be interesting to see tomorrow if there is any follow through.

CC

good luck and so far has work for you, I was trading this stock a couple decades ago but many changes for the company since. When I looked a couple weeks ago, I found there was still too many negatives things on the balance sheet

1 - Low margins on high sales means also large administrative expenses that eats most of the operating profits.
2 - Pension fund deficit is far too large
3 - not paying any tax yet, when they will have to, then will eat on the profits.
4- the profit forecast is bullish, but even so the PE is over 20 ( at interim stage the EPS was 1.96p )

Positive
1 -Paying a good dividend ( hardly covered last Year ), not so good as the share price is rising now
2- Order book increasing
3 - the best is the NAV, 56p and increasing

The Breakout on the chart is on
RNS as said before on the order book much the same as at Interims £320M but margins will improve for 2016 / 17 as bidding has been for better returns.............


TClarke sees improvement in core markets

Building services group TClarke says its underlying performance for the year continues to be in line with the board's expectations, reflecting the steady improvement in its core markets.

As expected, net debt has reduced during the second half of the year and as at the end of October stood at £6m (30 June 2015: £8.7m) in line with internal forecasts. The Group's order book as at 30 September was 15% higher year-on-year and maintained at the level of £320m reported with the interim results. Of the current forward order book, £190m represents work secured for 2016 and £50m for 2017 and beyond.

It says: "More pleasingly, we can see a significant improvement in the quality of our order book as we work through the majority of contracts awarded during the down-cycle. We are increasingly confident that this will be reflected in a material increase in our operating margin during 2016 and 2017.

"The improving quality of our order book is a function of our strategies of focusing on those business units and regions with the greatest potential to impact our future performance, especially London; aligning ourselves with high quality contractors; and bidding only on those contracts that offer appropriate returns."

The group also announced that Mike Robson has been appointed as an independent non-executive director and joined the group on 18 November 2015.

I'm happy enough with the trading statement. It's the margin improvement I'm most interested in and I'm pleased to see a clear statement that this is improving. Clearly some of it was already in the price.

Thanks for the info CC, away most of last week - so I've missed a decent rise.

I'll have a proper read this week.

It appears CTO was "tipped" by Glen Arnold around 11/11/15 in his subscribers newsletter

Paul Scott is doing an interview with CTO on 25/11/15 and has a write up here:

http://www.stockopedia.com/content/small-cap-value-report-20-nov-2015-idea-cto-hal-cog-112515/

I'm holding for the long term as I don't think the share price is going to move dramatically until the improved margins as promised by the directors actually appear and that won't be confirmed until final results published in March or April.