Heavy competition for contracts continues to erode margins at building services group T Clarke, which led to a slump in first-half earnings on modestly lower sales and forced the company to warn that full-year profits would be "significantly lower than originally expected". This news prompted broker N+1 Brewin to slash full-year EPS estimates from 6p to 3.4p, almost two-thirds lower than the 9.69p reported last year. Investors were equally ruthless as a further 12 per cent was wiped off the company's market value after the warning.
While the company's longstanding reputation as a provider of quality work still secures T Clarke some of the most significant projects coming to market - previous work includes the Shard, the Emirates Cable Car and the Olympic Stadium - market conditions remain challenging. Sector overcapacity in building services is still pushing contract prices down, with no end in sight just yet. True, two competitors have entered administration in recent weeks - Rotary and Airedale Mechanical - but that hardly does much to inspire confidence in the rest of the industry for the time being.
Certainly, T Clarke's ability to grow its order book to £230m from £190m six months ago highlights the long-term potential of its diverse business range. In the short term, however, T Clarke's underlying operating profit margin has fallen to 1.7 per cent (from a skimpy 2.7 per cent a year ago).
T CLARKE (CTO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 44p | MARKET VALUE: | £18.0m | |
| TOUCH: | 43-45p | 12-MONTH HIGH: | 81p | LOW: 35p |
| DIVIDEND YIELD: | 6.9% | PE RATIO: | 5 | |
| NET ASSET VALUE*: | 58p | NET CASH: | £0.7m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 92.6 | 1.37 | 2.38 | 1.0 |
| 2012 | 90.7 | 0.45 | 0.79 | 1.0 |
| % change | -2 | -67 | -67 | - |
Ex-div: 12 Sep Payment: 12 Oct *Includes intangible assets of £23.9m, or 58p a share | ||||
