- Year-end forward order book hits a record £534mn, up 17 per cent year on year
- £6.5mn operating profit on revenue of £189mn in second half on margin of 3.3 per cent
- £100mn record revenue run rate in fourth quarter of 2021
- Group on track to deliver £410mn of revenue in 2022, rising to £500mn in 2023
- Data centres to contribute a third of 2022 forecast revenue of £410mn
Buoyed by a record order book, and a tender bid pipeline worth £1bn, building services contractor TClarke (CTO:140p) is on course to hit its £500mn revenue target for 2023, up from £327mn in 2021.
Key to achieving the ramp up of revenue will be securing larger projects outside of London, data centres, UK healthcare projects, and developing innovative smart building solutions which bring recurring revenue streams.
The rapid growth in demand for data centres is a key pillar of TClarke’s growth strategy, underpinned by the needs of cloud storage, more devices connected to the internet (IoT), gaming, streaming services, ecommerce, 5G networks, and the working from home revolution. Brexit and the switch to new UK specific data protection legislation has led many organisations to open or expand data centre facilities, too. In fact, Arizton Advisory and Intelligence predict the UK data centre market to reach £6bn by 2026, a point not lost on several large-scale developers which have entered the market in the last 12 months.
At the end of 2021, TClarke was active on five data centre projects with an aggregate value of £150mn. One contract is worth £100mn, the majority will be delivered in 2022, while the same client has a similar sized contract starting early next year. Chief executive Mark Lawrence is confident of securing that award and is targeting another three potential new contracts worth £250mn. The group is also tracking data centre bidding opportunities worth £900mn and a pipeline of project opportunities that build out well into 2026.
TClarke is benefiting from the mini-boom in high-end hotels, too, having landed contracts including the Peninsular hotel on London’s Hyde Park Corner, and a raft of smart building projects such as the Apple fit out at Battersea Power Station. The ability to deliver high-end engineering services on time and on budget helps explain why 90 per cent of 2021 revenue was from repeat clients. This has not gone unnoticed by the UK government. Last year, TClarke added 36 new education projects to its order book, secured £42mn of healthcare schemes and is preferred bidder on an additional £63mn of NHS projects.
Finance director Trevor Mitchell says that 2022 budgeted revenue of £410mn will be evenly split across the year, which mitigates risk. On this basis, Cenkos Securities expects underlying pre-tax profit and earnings per share (EPS) to both rise 41 per cent to £11mn and 21.1p. Following a 10 per cent hike in the dividend to 4.85p a share in 2021, Cenkos is pencilling in a conservative looking 5.1p a share payout in 2022. Even after factoring in investment in working capital, net cash per share is still expected to rise from 12.5p to 17.3p by the year-end.
TClarke’s shares have produced a 70 per cent total return since I first suggested buying (Alpha Research: ‘Profit from a buoyant earnings cycle’, 7 December 2018), and the share price rallied 42 per cent to a 11-year high of 186p after I covered the half-year results (‘Tapping into robust earnings momentum’, 20 July 2021). A return to those highs is well overdue. On a 2022 cash-adjusted price/earnings ratio of six and underpinned by a prospective dividend yield of 3.6 per cent, the shares are well worth buying.
■ Simon Thompson's latest book Successful Stock Picking Strategies and his previous book Stock Picking for Profit can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 to place an order. The books are being sold through no other source and are priced at £16.95 each plus postage and packaging of £3.25 [UK].
Promotion: Subject to stock availability, the books can be purchased for the promotional price of £10 each plus £3.25 postage and packaging, or £20 for both books plus £3.95 postage and packaging
They include case studies of Simon Thompson’s market beating Bargain Share Portfolio companies outlining the investment characteristics that made them successful investments. Simon also highlights many other investment approaches and stock screens he uses to identify small-cap companies with investment potential. Details of the content can be viewed on www.ypdbooks.com.
