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Tipped in SCSW according to the ADVFN forum although a takeover would be nice...
What's with the huge rise this am?
Share tip or takeover?
The half a billion revenue target may seem somewhat challenging for TClarke given that it’s more than double that achieved in 2020 and some 50% higher than in the peak year of 2019. However, the company has an excellent reputation in the industry, with 90% of turnover in 2020 coming from repeat clients, with a range of growth opportunities available across its five man sectors. Pipeline bid opportunities are said to typically exceed £1 billion. There is decent earnings visibility already, with £288 million of the 2020 year-end order book due to be recognised in 2021 and £168 million in 2022 and beyond.
Analysts at Cenkos have a fair value price model which suggests a share price of 150p to 160p is justifiable for TClarke over the next 12 to 24 months, up from the current 131.5p. They are looking for earnings per share to recover to 15.4p in the current financial year, rising to 21.1p in 2022. If met, that puts the shares on attractive looking multiples of just 8.5 and 6.2 respectively. The historic dividend yield is a modest 3.3% but there is clear scope for increases in the payment if these forecasts are met, especially given that management have stated they continue to be fully committed to a progressive dividend policy.
While construction is highly cyclical industry, the UK is currently seeing a resurgence in activity. The recent UK Construction PMI Total Activity Index reported a rapid rise in new business volumes during May, with output growth accelerating to its strongest since September 2014. What’s more, new order volumes increased at the fastest pace since the survey began just over 24 years ago.
One company looking set to benefit from this is TClarke (LON:CTO), a specialist engineering company focussed on delivering complex, technical engineering solutions to key projects across the five sectors of Infrastructure, Residential and Hotels, Facilities Management, Engineering Services and Technologies.
Engineering Services is the largest division, making up almost 40% of revenues in the last financial year. One of TClarke’s flagship projects here is the KGX1 at Kings Cross where it is working on delivering a major office for Facebook. Elsewhere, the company is working on a 950,000 sq ft premium office development in the City of London, providing services such as installing CCTV, power generators, wiring and lighting.
TClarke was another company facing a challenging year in 2020, with revenues falling by 31% to £231.9 million after the effects of the pandemic lockdown disrupted operations and supply chains. From mid-March to the end of July there were multiple site closures or sites operating with much reduced numbers. That forced underlying pre-tax profits down from £9.2 million to £5.1 million. However, the company remained cash generative, with net cash at £10.2 million at the period end and the dividend was able to be maintained.
Attracting the attention of investors, in the results management set out details of an ambitious plan to grow the business to £500 million of revenues within three years, while maintaining operating margins at current levels of 3%. To achieve this, TClarke has aligned its resources to match the anticipated growth in revenues, with a number of areas expanded including the core Engineering Services business with capabilities also increased in technology and infrastructure. The company intends to grow market share organically by winning and delivering larger scale opportunities across all sectors throughout the UK and will continue to target Data Centres in Europe on a selective basis.
The most recent news was a May update that revealed trading in the first four months of 2021 was positive and in line with expectations. Encouragingly, the forward order book now stands at a new record level of £472 million, up by 3.5% since the end of December, driven by project wins in technologies (data centres) and infrastructure (healthcare).
I do work with Back up UPS systems and Generators ( data centres ) hospitals, airports etc
Thing is with the HTM’s in healthcare systems are regularly tested ( on load ) proof of concept etc
So it’s a nice earner , so long as they keep the client happy
I was on a site recently for a cable spike in preparation for a cable diversion
Unfortunately the HV Switch had lost some sf6 gas
( good job the AP did not switch off ! )
https://ibb.co/zf8gZJt
I think this share has legs maybe even a takeover!
I have just been reading on Simply Wall Street and their in depth analysis and forecasts have CTO's fair value of £2.55!!!!! Lets hope this great rise continues for us all. Good luck everyone :)
Nice to get off to a great start, Bing! Welcome.
Just seen that Simon Thomson in Investors Chronicle recommended it on the 16th, though the email didn't come through to me till this morning. Hence the jump, probably.
Afternoon guys,
Been looking in from time to time to see if anyone was still here.
A friend said to me a few weeks back to take a look here, didn't say much, I bought some last Tuesday, seemed a good buy, dividend coming up, and plans for £500m, why not.
Hi QD.
I thought the exact same. The trading volume has significantly increased compared to our usual levels. Ex-divi is only 3 days away so that could be playing a part, however, I've never seen this level of trading volume with CTO so maybe something else is happening that we're unaware of.
..... anyone know why?
And with the target to reach £500m annual revenue in 3 years, which suggests an appreciable upside for the sp.
So, the positives are that CTO generated profit in 2020, despite lockdowns, COVID outgoings and a 3.7m one off restructuring cost, which will inevitably save money and increase future profits. The forward order book is at a record high, and this does not account for delayed, uncompleted work in 2020 due to lockdowns etc. They have kept the dividend and appear extremely optimistic about the future, with record revenues of 500m anticipated.
The negatives, imo, are the increased debt to profits ratio, and I suppose the general uncertainty that all sectors are facing. The quotes below stood out to me:
"In common with many businesses throughout the UK, TClarke faced significant and unprecedented challenges in 2020. It is therefore particularly pleasing that TClarke has remained profitable and our average daily net cash balance was positive throughout 2020. It is also a year in which emerging opportunities for top line growth allows us to announce a three year plan to deliver £500m of revenue whilst maintaining our margins.
As we look forward the opportunities for growth before us are of a considerable scale, we are extremely well positioned to take advantage of opportunities particularly in Data Centres, Healthcare and Smart Building Technologies.
Swift and effective management responses and actions in response to the pandemic have positioned us strongly for the future. Our forward order book stands at a record £456m, an increase of 13% on the year. This increase is not represented by work delayed from 2020. It results from new projects, many from existing clients who value our stability, our relationship with them, and our proven ability to deliver quality.
As I look forward into 2021 and beyond, I am optimistic. TClarke is very strongly placed to continue to grow and deliver outstanding performance and results. This comes from the success of its strategies and deliveries, the quality of its products, services and methods, and from the strength and depth of its client relationships."
Two toes in the water now! The yield alone makes this a 'no brainer' (eight times what I'm getting in my bs account) plus there's the added possibility of making a capital gain thrown in as well (imho of course).
Hi I'm new to board also. Been watching this share for some time and have invested quite heavily in T clarke over last 10 years. Sad to say to date it has never been a stellar performer but looks to have a little better potential recently. However would like to see directors showing more faith thru buying shares. Also have also noted Regents Gas continued support and wonder if they are a predator in wait. That would really set this share price alive??
Welcome to the CTO club, Nicton.
Onwards and upwards from here :)
Have been watching from the sidelines for a while but couldn't resist any longer this morning so a toe in the water at long last.
Competitor Morgan Sindall, +12.5% on very positive outlook. Market asleep on CTO.
Agreed it is cheap, which has little to do with it's solid fundamentals, but more to do with the lack of demand for the shares. I guess it's not exciting enough for many traders/investors, if you look back over the past 5 years it has generally traded within a range of 75p-125p. I bought back in here last September and although up almost 20%, it's been one of my slowest movers.
There is no questioning the quality of their business, as they keep winning fabulous high profile contracts, but I feel to really see a big move in the SP, they need to attract more institutional investment, but perhaps at the moment they are too small and the stock is too illiquid.
Cenkos' forecast today is for 15.4p EPS this year, with a 4p dividend, against a 92.4p share price.
CTO have £10.2m net cash against a £40m m/cap, and most importantly the order books are still rising and now total £456m.
One to squirrel away in the SIPP
Nice contract win yesterday - and the link with Morgan Sindall bodes well going forward:
Https://www.tclarke.co.uk/tclarke-wins-major-engineering-services-project-at-royal-devon-and-exeter-hospital/
"TClarke wins major engineering services project at Royal Devon and Exeter Hospital
2/2/21: Strong Growth in infrastructure continues with our success working alongside Morgan Sindall Construction to deliver an extension and improvements programme for the Emergency Department for this Devon hospital.
The works, which are phased to allow for continued operation of existing facilities, involve a new three storey 3,500 square metre building, including teaching facilities, eight new resuscitation bays, new plant room and a specialist children’s emergency department, with paediatric bays and a separate reception area.
Along with the Emergency Department improvements we have also been selected to work with Morgan Sindall Construction to deliver a new 4 storey plant room to serve the ICU.
Rob Faro, Director, UK South, commented:
“We have spoken about our ambitions to grow our healthcare business and we are delivering against those ambitions. TClarke has the specific capabilities that the NHS is looking for, including our substantial in-house offsite manufacture operation, expertise in smart and digital buildings, leadership in engineering towards net zero carbon and our proven strength and agility as a supplier.
“Congratulations once again, to our expert healthcare teams who are steadily building success upon success. We take nothing for granted and we will keep on working hard to earn and deserve these successes. This is another excellent project for us, delivering a facility of great value for local people.”
Brian Rice, Regional Director for Morgan Sindall commented:
“We have worked closely with TClarke over the last couple of years to design and plan these complex works at Royal Devon and Exeter Hospital, their attention to detail, engineering expertise, knowledge of healthcare environments, ability to deliver outstanding value and approach to open book collaboration is second to none and we are delighted to have them as part of our team”."
I bought some of these back today on the dip.
Cenkos' forecast today is for 15.4p EPS this year, with a 4p dividend, against a 92.4p share price.
CTO have £10.2m net cash against a £40m m/cap, and most importantly the order books are still rising and now total £456m - CTO apparently already have secured work underpinning 95% of this year's revenues.
That's a very solid place to be going forward.
Hopefully Simon Thompson will feature CTO again soon, and I seem to remember SCSW cover CTO too.
Very positive update.
Excuse the rubbish written in my previous post, should have written 'for three shares' and not '@ 3p'; senility more advanced than I imagined!
So far today, there has been 26 trades marked @ 3p (plus a few @ 2p as well). Has anyone got any idea what it's all about?
Thank you for that info, Scooby.
That is excellent news. I wonder why they haven't updated us with an RNS? I should stop being lazy and check their website, I just assumed that any news update would have made its way to us via an RNS.
Definitely a good time to top up then. Lets hope it's the excellent news that we know this company usually delivers.