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TClarke (LSE:CTO) suffered in the Great Recession, but generally continued to produce profits, and always sent dividends to shareholders.
The directors made the decision to take the hit on profit margins when tendering for work, which kept the business ticking over and kept the employees in work (the CEO and the MD were once apprentices at TClark and I imagine have a high degree of loyalty to the people at the coalface – more loyalty to them than to shareholders?).
You can get some idea of the margin hit in the following table – but note the recent recovery:
| Turnover | Operating margin | |
| 2006 | £186m | 3.6% |
| 2007 | £194m | 4.2% |
| 2008 | £220m | 6.5% |
| 2009 | £176m | 4.2% |
| 2010 | £179m | 3.4% |
| 2011 | £184m | 2.9% |
| 2012 | £194m | 0.9% |
| 2013 | £217m | 1.5% |
| 2014 | £227m | 0.6% |
| 2015 | £242m | 2.1% |
| 2016 | £279m | 2.5% |
On a turnover of £279m and an operating margin at the same level achieved in the last property surge, say 4%, this company will make £11m in operating profit, or 27p per share (current share price 80p, and has 22p of net cash).
Profit margins vary across TClarke’s regions:
Regional numbers for 2015
| Revenue | Operating Margin | “Underlying” Profit Before Tax | |
| London and South East | £129m | 1.2% | £1.5m |
| Central and South West | £57m | 1.6% | £0.9m |
| North | £42m | 4.5% | £1.9m |
| Scotland | £16m | 1.9% | £0.3m |
Regional numbers for 2016
| Revenue | Operating Margin | “Underlying” Profit Before Tax | |
| London and South East | £143m | 2.4% | £2.7m |
| Central and South West | £68m | 1.5% | £1.0m |
| North | £54m | 3.4% | £1.9m |
| Scotland | £21m | 2.9% | £0.6m |
Note the rise in turnover in every region. Also note the doubling of operating margin in the largest region.
What are its prospects?
This is a cyclical business; when commercial building in the major cities of the UK falters TClarke’s profits will…………………. To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
