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Despite TClarke (LSE:CTO) showing some positive signs of increased pricing power, revenue and profits, there are issues that we need to keep an eye on.
We have yet to see large profits coming through.
They say they are held back by the old low-margin contracts only now being completed. But can we be sure that the recently-signed contracts really are offering high margins? I guess we’ll just have to take the director’s word for it.
They play with the accounting numbers
Reported profits last year were only £0.1m whereas they want us to pay attention to the profit before tax on the underlying business of £3.7m.
The main reason for the difference is the removal of the loss incurred in discontinued businesses. This was the Bristol and Cardiff branches.
But something odd happened there: on a turnover of £5m these areas racked up costs of £8.4m – suspiciously high don’t you think?
Lucky for the directors that the loss from discontinued operations of £2.7m does not enter the summary statistics for the firm.
This emphasis on underlying earnings may be linked to the next point.
Remuneration for the Board
In 2014 total Board remuneration was £1m. In 2015 it jumped to £1.7m. Odd for a company that reported basic eps only just scraping above ze………..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
