The UK economy may be showing the first signs of life after several years in intensive care, but it might be some time before building services company T Clarke (CTO) sees the benefit. For example, these half-year results showed few signs that intense competition within the industry is about to ease. The resulting margin pressure meant underlying operating profits fell by a further 20 per cent to just £1.2m even though revenues rose by over a quarter.
Management cited problems with converting bids into solid contracts during the half. However, despite this problem, the forward order book was still a healthy-looking £225m, down by only £5m on 12 months ago. The more fundamental issue was the intense competition for the few major building projects clustered around London. This had a direct impact on T Clarke's divisional results where, for example, the important southern division saw revenues climb 50 per cent to £91.3m, but margin pressure meant it generated no profits.
The northern division fared slightly better even though revenues fell by more than a quarter as the prior period benefited from a number of one-off contracts. Despite this, underlying profits actually rose 11 per cent to £1m. However, the Scottish unit only managed to break-even on falling sales.
Management said that trading will remain challenging and that margin pressure is likely to continue. As a result, broker N+1 Singer forecasts flat pre-tax profits of £2.4m and EPS of 4.2p.
T CLARKE (CTO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 55.25p | MARKET VALUE: | £22.9m | |
| TOUCH: | 54.75-56.25p | 12-MONTH HIGH: | 63p | LOW: 39.25p |
| DIVIDEND YIELD: | 5.4% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 59p* | NET CASH: | £7.7m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£000) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 91 | 450 | 0.79 | 1.00 |
| 2013 | 115 | 751 | 1.23 | 1.00 |
| % change | +27 | +67 | +56 | - |
Ex-div: 11 Sep Payment: 11 Oct *Includes intangible assets of £23.5m, or 57p a share | ||||
