Tclarke Regulatory News (CTO)

TClarke plc

Results for the year ended 31st December 2011

Highlights:

·; Group revenue £183.8m (2010: £179.0m)

·; Underlying operating profit* £4.8m (2010: £7.3m)

·; Underlying operating profit* margin 2.6% (2010: 4.1%)

·; Underlying profit before tax* £4.3m (2010: £7.0m)

·; Profit before tax £4.9m (2010: £5.7m)

·; Earnings per share 9.69p (2010: 8.91p)

·; Earnings per share - diluted 9.64p (2010: 8.91p)

·; Earnings per share - underlying* 7.34p (2010: 12.44p)

·; Forward order book £190m (2010: £190m)

·; Final dividend per share 2.0p (2010: 4.25p)

·; Total dividend per share 3.0p (2010: 8.50p)

*Underlying profit consists of profit from continuing operations adjusted for amortisation of intangible assets, net profits on the disposal of property assets and non-recurring costs, being restructuring costs, acquisition expenses and long term employee benefits arising from prior acquisitions.

Project Wins:

·; 20 Fenchurch Street, Walkie Talkie Tower, London

·; Bluewater Winter Garden Refurbishment, Kent

·; Brent Civic Centre, London

·; Canadian Estate, Bulford

·; Chiswick Park Building 6

·; Forth Road Crossing Contact and Education Facility, Edinburgh

·; HSDU Colchester Hospital

·; Imperial Tobacco, Bristol

·; Nazareth House, Plymouth

·; Redcar Vertical Pier and Redcar Leisure and Community Centre,

·; Royal London Hospital Phase Two, London

·; Royal Mail, Sheffield

·; Springfield Nuclear Fuels, Five Year Term Contract, Preston (preferred bidder)

·; Thameslink Enabling Works. London Bridge

·; The Place, London Bridge

·; West Dorset District Council Office Relocation

Mark Lawrence, Chief Executive, commented:

"Our markets remain challenging, but we are pleased with the group's performance, which demonstrates the resilience of TClarke. The Board is encouraged that the mix of our business has broadened in line with our strategy of widening the range of services we offer. The group has strengthened its balance sheet, continued to deliver a profit and remains committed to paying our shareholders an appropriate dividend.

Looking ahead, we are well positioned. In uncertain times the strength of our reputation is shining through. We are trusted by our clients and we continue to work alongside the top-tier of developers on many of the highest profile projects in the UK. As a result, our order book is strong and we are pleased with the diversity of our revenues. We have an encouraging number of opportunities to tender for projects across the full range of our eight target sectors. In conclusion, we remain optimistic that we will continue to drive the business forward."

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Chairman's statement

TClarke has delivered financial results for the year that show underlying revenue and profit before tax in line with the board's expectations.

Group turnover increased by 2.7% to £184 million (2010: £179 million) as the group maintained its declared strategy of only securing contracts at commercially acceptable levels. The underlying operating profit of £4.8 million (2010: £7.3 million), was delivered despite continued margin pressure across the group. Scotland remained loss-making for the year but delivered an improving performance which we intend to build upon.

The forward order book has remained resilient and at 31st December 2011 totalled £190 million, unchanged on the previous period. Of this £115 million is scheduled for completion during 2012.

After accounting for profit on the sale of property assets, amortisation of intangible assets and non-recurring costs, reported pre-tax profit fell by 14% to £4.9 million and earnings per share were 9% higher at 9.69p (2010: 8.91p) reflecting the tax impact of the property sale.

The group remains debt free and had positive net cash balances at 31st December 2011 of £0.6 million (2010: £7.2 million). The board has always had and continues to have a strict attitude towards cash management. We expect to see an improving cash position during the course of the normal business cycle despite pressures from clients, contractors and suppliers.

Continuing the group's stated policy the board proposes a final dividend for the year of 2p (2010: 4.25p), giving a total for the year of 3p (2010:8.50p). The final dividend will be paid on 18th May 2012 to shareholders on the register as of 20th April 2012.

Outlook

We stated in August 2011 that the outlook is very much similar to that of a year ago and this still remains the case. In this context it is particularly pleasing to report that we have secured some of the most significant projects that have come to market particularly in the London commercial sector. It is also pleasing that we secured targeted projects that are away from our traditional M&E contracting in line with the group's strategy.

As evidenced by the resilience of our order book tendering activity and opportunities remain high across the group, and the broader prospects are encouraging despite the testing short term challenges.

The board is focused on delivering value for our customers and shareholders. The strategy that we outlined last year indicated we would target other sectors in the wider building services markets and that this repositioning will assist with future growth and profitability when the upturn arrives.

On behalf of the board I thank our shareholders, employees, clients and suppliers for their continued loyal support. Our long standing reputation, financial strength, and the quality and commitment of our people across the UK continues to differentiate TClarke from its competitors. The continuing unstinting efforts from the executive team and our people do not go unrecognised.

Russell Race

Chairman

20th March 2012

Business review

Overview

Through its core skills and reputation TClarke remains a market leader in its chosen markets. In very challenging conditions we have a healthy forward order book supported by the newer strategic capabilities that we have recently added to our service offering. This has helped to develop TClarke as a more rounded building services provider, improving the group's resilience. As a nationwide organisation we can focus on the key growth opportunities across our markets.

The continued integration of the group builds upon our reputation for quality work delivered by excellent people.

In 2011 70% of the group's revenue was delivered by businesses that trade under the TClarke brand, this will increase to over 80% during 2012 with the rebranding of our businesses in Accrington, Sittingbourne and St Austell.

Reporting into our Group Management Board, the three integrated reporting divisions; Scotland, the North and the South of England support our eight target business sectors. This improves our ability to quickly identify and exploit commercial opportunities across the group and equally as important, to manage our businesses in a more consistent and cohesive manner.

The Group Management Board has recently been strengthened with the addition of Andy Griffiths, Commercial Director of TClarke London; Gary Jackson, Managing Director of TClarke Scotland and Danny Robson, Managing Director of DGR Mechanical Services ("DGR").

TClarke South

The South Division is the largest of our three operating divisions and includes the London business.

In the capital we have secured some of the most significant schemes that have come to market and whilst price remains the most influential factor, financial strength, reputation and quality of people plays an equally important part. When a client decides on a project award, it is these secondary factors that differentiate TClarke from its competitors.

DGR has been fully integrated within the group with both DGR and TClarke London now operating out of our new central London Head Office. This successful integration has meant we now offer our clients in London mechanical services that complement our electrical capabilities, whilst the DGR brand itself continues to maintain and build its own relationships with clients and contractors.

In a departure from the infill acquisitions which we have historically undertaken, during the period we have invested in two key strategic TClarke offices in Cardiff and Plymouth; these share common resources including local management from our established businesses in Bristol and St Austell. Both locations have secured encouraging work volumes for 2012.

TClarke North

Our Northern businesses delivered a robust performance for the year securing a number of projects particularly in the public sector.

D&S Engineering Facilities, which is now trading as TClarke North West, once again made a valuable contribution to the group and through cross-selling has introduced other group companies to its key clients, which led to significant project wins and the prospect of future opportunities across the UK. Like other areas of the country the North is not immune to the current climate within the construction sector however we are confident the division will continue to maintain and build upon its market share.

TClarke Scotland

Whilst Scotland remained loss making for the year as a whole, it delivered an improving performance which we intend to build upon. Our business in Scotland suffered as a result of the continuing weak economic environment together with a fiercely competitive contracting market.

The management has responded by restructuring parts of the business with the appointment of Gary Jackson as Managing Director, who was previously Director of the successful Plumbing Division.

The division continues to reduce its cost base and remains focused on margin improvement. In common with all the group's operations the business does not target non-commercial profit margins in the general construction sector. Our focus in Scotland has been on sectors where it is believed there are opportunities both in terms of margin and future works with particular attention to residential, engineering and IT led projects.

Operational review

We are working in a number of ways to deliver the business vision which is to be recognised nationwide as a top five contractor in the building services sectors in which we operate. We continue to focus on eight key sectors in building services which offer growth potential, and this has helped the group to broaden the range of services that we offer.

Mechanical and electrical contracting remains at the centre of the business but the seven other sectors now provide over 40% of the group's revenue and provide the foundations for future growth and most importantly recurring revenues.

Intelligent buildings

Our Intelligent Buildings division represents an investment in engineering capability and in resources nationwide. 

TClarke provides the complete Information and Communication Technologies service (ICT), integrating all the data and communications, building management, lighting control, fire, security, access and AV systems delivered on internet-based systems on any scale.

Having previously completed the structured cabling network for the London 2012 Olympic Stadium we are now involved with schemes for Detica / BAE Systems at a number of their UK locations. In London at The Emirates Air Line, we have been appointed to undertake the complete ICT installation and associated service for the first urban cable car system of its kind in the UK.

In Scotland we are retained to undertake the installation of Smart Home Technology for a number of house builders such as Cala Homes, Mactaggart & Mickel, Miller Homes, Ogilvie Homes and Persimmon.

As our reputation grows in this sector we expect to benefit from further opportunities within our main M&E packages and from securing stand alone ICT contracts.

Facilities management

Our Facilities Management (FM) business is more than a maintenance function; it involves all types of business support processes including the care of offices, commercial or institutional buildings, such as hospitals, office complexes, arenas and schools and across complex industrial sites for major clients. We assist clients to ensure they can operate, maintain and expand their businesses efficiently.

Across the UK over £20 million of our revenue for 2011 was from FM and other framework type projects and we entered 2012 with a secured order book of £21 million.

Progress within FM is benefiting from our national coverage. We have a long association with BAE Systems and Springfield Nuclear Fuels in the North West. Recent clients in the North region include Leeds Northern School of Dance; Leeds Grand Theatre; Siemens; and the Court Service in Crewe, Blackpool and Chester.

In the Midlands and the East of the UK we have secured term contracts for Defence Estates, Luminus Group and Peterborough City Council.

In London and the South East we have contracts for Credit Suisse, Dungeness Power Station, Imperial College, ITV plc, the London 2012 Olympic Stadium and Manston Airport.

As we promote the group further, each current project we complete in other sectors becomes an opportunity for our FM Business.

Green technologies

Sustainable development is at the core of today's buildings and whilst green technology is still relatively young in the marketplace its solutions have quickly become adopted as part of the mainstream requirements of any new design. This is seen as a key growth opportunity for the group.

TClarke has the ability to deliver fully integrated green solutions - including all the mechanical, electrical and technology elements. As an example we completed photovoltaic installations at three solar farms covering 11 acres for Vogt Solar at St. Nicholas at Wade and Ebbsfleet, Kent and at Durrants, Isle of Wight.

Rail

Our Rail and Transport Division provides M&E engineering services from design through to construction throughout the UK on a number of key transport projects.

In London we completed projects for the DLR including Cutty Sark Station and the East Route. At London Bridge Station we have been involved with three projects; The Main Station Concourse; New TfL Bus Station; and most recently we commenced our works on the Thameslink enabling package. 

We have commenced our onsite works at Victoria Underground Station, a scheme that extends to 2018. Our most unique and visual transport project will be the completion of The Emirates Air Line cable car system which is currently under construction in East London, where we are undertaking the M&E as well as the full ICT installations. 

In Scotland we have ongoing contracts at Waverley Station, Edinburgh and Gilmour Street Station, Paisley. 

Looking forward we see opportunities to build upon our current portfolio of projects including Crossrail and HS2, and our current forward order book it in excess of £20 million.

Utilities and technologies

In the medium term we see considerable potential in the utility industry and in the technology sector, focusing on large scale data centres.

Within the group, we have in recent years been successfully involved with projects for British Energy/EDF and Springfield Nuclear Fuels. In 2011 we completed the third phase of a major data centre in Slough, Berkshire.

£7 million of revenue was delivered by this part of the business during 2011. Should we secure any one of the major data centres that we are targeting then we expect this revenue to rise significantly.

Manufacturing

Our manufacturing facilities include workshops in Essex, Yorkshire and Scotland which are utilised by all the companies within the group. 

TClarke has the in-house capability to manufacture and prefabricate elements of an installation on every scale as well as to deliver high-quality bespoke engineering components. 

This capability gives us four key advantages. Firstly, it allows us to play our role in setting and meeting demanding project timescales by introducing off-site prefabrication. Secondly, this capability can be extremely significant in helping clients to meet sustainability targets in manageable and readily measurable ways. Thirdly, these facilities are central to our ability to innovate and improve the speed and value of what we do. Finally, prefabrication allows us to improve the quality of the work and the health and safety of the working environment for our operatives. 

These advantages have been fully utilised and demonstrated at The Shard, Europe's tallest building where we provided the prefabricated multi-service modules. In addition we have recently secured a similar contract for The Place, London Bridge, a 428,000 sq. ft. of office space in a 17 storey building. 

Our workshops in Scotland have the high-spec engineering skills necessary to build bespoke replacement equipment for companies such as First Engineering.

Residential and hotels

TClarke offers a complete service of design, installation, commissioning and maintenance for the residential market. We also offer a one-stop shop for the full range of electrical, ICT and mechanical services required. Our projects range from bespoke high-spec private homes to new-build housing estates, student accommodation, housing association developments and major hotel groups and brands. 

In the residential sector we completed over 400 new homes in Scotland worth around £9 million and expect similar levels in 2012. In progress at Temple Quay, Bristol, the Eye which has 72 apartments over 12 floors. 

In the hotel sector we completed Congham Hall Hotel, Grimston and are currently working on schemes at The Hogs Head Inn, Alnwick, and Premier Inn, Ealing.

Mechanical and electrical contracting

On 13th September 2011 Europe's largest urban shopping centre, the 1.9 million sq. ft. Westfield Stratford City, opened to the public. Adjacent to Stratford City, the 2012 Olympic Stadium, two highly recognisable projects that we are proud to have been associated with which will be seen around the world this summer.

Whilst M&E contracting remains central to the group, and underpins the business, right across the UK we are trusted on the most complex and large scale projects. Clients and Contractors see us as integral to their success; we anticipate their needs and deliver on commitments we make.

Our highly skilled workforce supported by technically experienced engineers, set high standards and to which we continually innovate and improve - we thrive on challenge and accomplishment.

Across the London skyline there are many examples of the quality projects that we have secured, which are at various stages of completion:

·; Brent Civic Centre

·; Deutsche Bank

·; Eltham Hill Technology College

·; Freshfields Bruckhaus Deringer

·; JP Morgan

·; North East Quadrant at Regent's Place

·; Park House

·; Royal London Hospital

·; Southfields School

·; Tate Modern 2

·; The Shard

·; The Place

·; 20 Fenchurch Street (The Walkie Talkie)

·; 100 Bishopsgate.

Whilst across the UK our regional businesses have an equally impressive work bank of projects;

·; Accrington Academy

·; All Saints Academy, Dunstable

·; Bellbird Primary School, Sawston

·; Benfield School, Newcastle

·; Bath RU Hospital, Bath

·; Bedford Academy, Bedford

·; Collegelands Office Development, Glasgow

·; College of West Anglia, Kings Lynn

·; De Warenne Academy, Doncaster

·; Fife Renewables Innovation Centre, Fife

·; Imperial Tobacco, Bristol; INTO Newcastle University

·; Jesus College, Cambridge

·; Nazareth House, Plymouth

·; Normanton Fire Station

·; Oxford Aviation New Training Facility

·; Royal Mail Parcel Centre, Sheffield

·; The Vertical Pier, Redcar

·; Welsh Ambulance Service Trust, Bridgend

·; Wyvern School, Ashford Kent

·; York University.

Whilst M&E contracting remains central to the group, and underpins the business, right across the UK we are trusted on the most complex and large scale projects. Clients and contractors see us as integral to their success; we anticipate their needs and deliver on commitments we make.

Our highly skilled workforce supported by technically experienced engineers, set high standards that we continually innovate and improve upon - we thrive on challenge and accomplishment.

Mark Lawrence

Group Chief Executive

20th March 2012

Financial review

Summary of financial performance

Group performance

The group continued to trade profitably in spite of the challenging economic conditions. Turnover increased by 2.7% to £183.8m (2010: £179.0m), including full year contributions from D&S Engineering Facilities (now rebranded TClarke North-West) and DG Robson Mechanical Services, both of which were acquired in 2010.

Profit before tax was £4.9 million (2010: £5.7 million), including a £2.1 million profit on the sale of land and buildings and after deducting £0.5 million amortisation of intangible assets (2010: £0.3 million) and £1.0 million non-recurring costs (2010: £1.0 million).

Underlying operating profit was down 34% to £4.8 million (2010: £7.3 million), representing an underlying

operating margin of 2.6% (2010: 4.1%). Underlying profit consists of operating profit, as adjusted for: amortisation of intangible assets, profit on disposal of land and buildings and non-recurring costs.

The net finance cost was £0.5 million (2010: £0.3m), including a £0.4 million non-cash pension scheme finance charge (2010: £0.3 million).  

Tax expense was £0.9 million (2010: £1.7 million), giving an effective tax rate of 18.4% (2010: 29.8%). The main reason for the difference between the effective tax rate and the standard UK corporation tax rate of 26.5% was the impact of the property sale, with allowable indexation reducing the taxable gain significantly. Excluding the property sale, the effective rate of tax would have been 29.4%.

TClarke South

Revenue from our South operations increased to £117.1 million (2010: £111.8 million), including a full year contribution from DG Robson Mechanical Services. Operating profit was £1.7 million (2010: £4.8 million), representing a profit margin of 1.5% (2010: 4.3%). Underlying operating profit before amortisation of other intangible assets and non-recurring expenses was £2.7 million (2010: £5.5 million). The South incurred restructuring costs, with the merger of our Peterborough and Derby operations and the realignment of our direct workforce in London to match our workloads.

TClarke North

Revenue from our North operations increased to £49.7 million (2010: £46.0 million), including a full year contribution from TClarke North West. Operating profit was £1.9 million (2010: £2.2 million), representing a profit margin of 3.8% (2010: 4.7%). Underlying operating profit before amortisation of other intangible assets and non-recurring expenses was £2.2 million (2010: £2.7 million).

TClarke Scotland

Revenue in Scotland decreased to £17 million (2010: £21.2 million), but the division reported a reduced operating loss of £0.7 million (2010: loss £1.4 million) and a reduced underlying operating loss of £0.6 million (2010: £1.3 million). Further restructuring costs were incurred to enable the division to focus on its core strengths in the residential market and profitable growth areas such as IT and engineering led projects.

Earnings per share

Basic earnings per share were 9.69p (2010: 8.91p), and diluted earnings per share were 9.64p (2010: 8.91p). Underlying earnings per share after adjusting for amortisation of intangible assets, non-recurring costs and profits arising on property disposals and the tax effect of these items, were 7.34p (2010: 12.44p).

Dividends

The board is proposing a final dividend of 2.00p (2010: 4.25p), making a total dividend for the year of 3.00p (2010: 8.50p), which is covered 2.5 times by underlying earnings. The final dividend will be paid, subject to shareholder approval, on 18th May 2012 to those shareholders on the register at 20th April 2012. The dividend will go ex-dividend on 18th April 2012. A dividend reinvestment plan (DRIP) is available to shareholders.

Cash flow and funding

The group had positive cash balances of £0.6m at 31st December 2011 (2010: £7.2m) and apart from £0.2m outstanding under finance leases (2010: £0.3m) the group had no debt. The group is funded by share capital and retained reserves and there are no plans to change this structure.

Cash outflow in the year was £6.6 million (2010: £5.4 million, including net outflow of £7.5 million on acquisitions). The main reason for the cash outflow in 2011 is adverse working capital movements, with clients and contractors continuing to stretch their payment terms and suppliers seeking to shorten their payment terms. In spite of the short term challenges this situation presents, the group's £8.0m overdraft facility provides the flexibility we need to cover the short-term cash flow fluctuations that inevitably arise in the contracting sector.

Pension obligations

In accordance with IAS 19 'Employee Benefits', an actuarial loss of £1.0 million has been recognised in the year, with the pension scheme deficit increasing by £0.9 million to £10.0 million (2010: £9.1 million).

A triennial valuation of the pension scheme as at 31st December 2009 showed a deficit of £7.9 million which represents a funding level of 71.5%. The group has put in place a deficit reduction plan to eliminate the deficit over a number of years, with total employer contributions remaining at 16% of pensionable salary for three years, rising to 18% thereafter. The group has provided security to the pension scheme in the form of a charge over property assets with a market value of £3.1 million.

Accounting policies

The group's accounting policies are consistent with the accounting policies applied in previous years, except that the group has adopted the valuation basis in respect of its property assets as at 31st December 2011. A valuation surplus of £0.8m net of deferred tax was recognised in the year. The group's property assets had a market value of £4.7m at 31 December 2011, supported by an external valuation.

Goodwill

Following recent acquisitions a significant part of the group's net assets are represented by goodwill in the underlying businesses. The board has undertaken a rigorous impairment review as at 31st December 2011. In spite of the current economic pressures the underlying businesses remain strong, and the carrying value of the remaining goodwill is supported by detailed budgets and projections.

Net assets

Net assets excluding goodwill and other intangible assets are positive £1.9 million (2010: negative £0.3 million), and the group's net current assets are positive £3.7 million (2010: £0.6 million).

Summary and prospects

The economic outlook for the sector remains challenging, but the steps we have taken to reshape the business over the last two years have provided a solid base on which to build. Our order book across the country remains strong and, and as confidence returns to the construction market, we are well placed to take advantage of future opportunities as they arise.

Martin Walton

Finance Director and Company Secretary

20th March 2012

Principal risks and uncertainties

The principal risks and uncertainties faced by the group and the controls and mitigating factors in place are as follows:

Market conditions

The markets in which we operate have been extremely difficult. Public sector cutbacks and low levels of confidence in the private sector have restricted the opportunities available within the construction sector generally, increasing market competition for the remaining work. Our diversified businesses across the country mitigate against this risk, with no overreliance on any one sector. We are also actively seeking to further develop relationships with key clients and contractors to build on our financial strength and reputation.

The board remains committed to the principal that we will not bid for work below commercially acceptable rates. The board continues to make conservative assessments of final accounts from project completions and the likely outcome for a number of ongoing projects. We have aligned our cost base to reflect workloads; further realignments could be undertaken if considered appropriate to reflect changes in the prevailing market conditions.

Contractual and operational risk

We are continually assessing and managing operational risks through the bidding stage to the final commissioning of an installation and handover to the client. We have experienced teams of estimators and all bids are reviewed by a Director and checks are carried out to avoid incorrect or non-competitive pricing.

At any time there may be several hundred contracts in progress across the country. Inadequate supervision would result in poor quality and low productivity, both of which would result in loss of reputation and profit. Our contract engineers, supervisors, surveyors and skilled trades people receive regular training to meet our demanding standards.

Failure to deliver projects to time, quality or budget, and contractual disputes that can arise over the scope and valuation of contracts, may make the ultimate outcome of contracts uncertain. Our business information systems monitor profit and cash flow throughout the life of a contract, and regular review meetings are held at the contract and business unit level to monitor progress and address issues as they arise.

Cost inflation

Commodity prices of copper and steel are major component parts within our industry. In addition, UK prices of materials that we procure could be adversely affected by any weakness of sterling. The majority of projects we secure do not allow for the recovery of increased labour and material costs. We have in place formal supplier framework agreements across the UK to manage and where possible mitigate this risk, with prices locked in through procurement at the beginning of a contract wherever possible.

Credit and counterparty risk

The group's main financial assets are contract and other trade receivables and cash and bank balances. These assets represent the group's main exposure to credit risk, which is the risk that a counterparty will fail to discharge its obligations resulting in financial loss to the group. The group may also be exposed to financial and reputational risk through the failure of a subcontractor or supplier.

The financial strength of counterparties are considered prior to signing contracts, and are reviewed as contracts progress where there are indications that a counterparty may be experiencing financial difficulty. Procedures include the use of credit agencies to check the creditworthiness of existing and new clients, and the use of approved suppliers lists and group-wide framework agreements with key suppliers.

Liquidity risk

The group manages liquidity risk by maintaining adequate reserves and banking facilities, monitoring cash flows and by matching maturity profiles of financial assets and liabilities within the bounds of its contractual obligations.

The group arranges banking facilities and places surplus cash on deposit only with large UK financial institutions.

Cash flow interest rate risk

The group is exposed to changes in interest rates on its bank borrowings and deposits.

The group's financial instruments comprise cash and cash equivalents, bank deposits, overdraft facilities, contract and other trade receivables, trade balances and similar balances arising directly from operations. Surplus cash is placed on instant access, short-term on long-term deposits at fixed or floating rates, taking into account future cash requirements based on short and medium term cash projections. The group does not trade in speculative financial instruments.

Acquisitions

Our strategy is to be able to offer the complete range of building services across the UK. We will sensibly consider appropriate opportunities that can advance this strategy both in terms of geographical coverage and services offered. Acquisitions involve a degree of risk; we aim to mitigate this via due diligence prior to acquisition, ensuring effective local management are in place and by the implementation of group reporting and internal control procedures.

Going forward in the shorter term we believe future growth will be best achieved by building upon the existing group structure and the services offered and by expanding our existing businesses into areas where we do not have a local presence as demonstrated by the recent creation of offices in Cardiff and Plymouth.

People

Alongside the acquisition of practical capability, we have deliberately set out to acquire high calibre people in key roles from outside the organisation to bring us fresh insights and energy in order to deliver our strategy.

Providing a consistently high quality service to our clients is only possible with the right people and attracting and retaining high calibre staff is key to our success. This is achieved through a remuneration system linked to performance and through strongly embedded training schemes throughout the group and by providing opportunity and encouragement to help our people reach their full potential.

The group remains committed to providing the best training for all members of staff and draws on the expertise of its people from all group companies across the UK. However as a result of the current market conditions we have and will continue to align our business at all levels to match our current expectations.

We have continuous dialogue with the trade unions and continue to review our policies and procedures in managing this risk.

Health and safety

Failure to manage health, safety and environmental risks could cause serious injury or loss to employees or third parties and expose the group to significant financial and reputational loss and litigation.

At TClarke, health, safety and environmental considerations are at the forefront of every working and management decision and one of the prime elements considered before any undertaking. This is achieved through our senior managers participating in a recognised safety leadership scheme and operatives receiving ongoing topical health, safety and environmental training.

We recognise that continual, 100% commitment around the clock is paramount for achieving a culture where all employees are themselves promoting best practice and look out, not only for their colleagues, but all 3rd parties who may be affected by any company operation. We acknowledge that there is no place in our health and safety systems for half measures and our ethos is to continue to evolve and improve upon existing standards, statistics and safe working practices. Equally important is our focus on minimising any impact on the environment caused by our business and we continue to monitor our progress in this area.

Information technology

The efficient operation of the group is dependent upon the proper operation, performance and development of its IT systems. Failure to manage or integrate IT systems or failure to successfully implement changes in IT systems could result in loss of control over business information, impact the group's ability to meet its contractual obligations and expose the group to financial loss.

Significant IT developments are subject monitored at board level and delegated to the Group IT Manager to implement, supported by IT specialists in the regional businesses.

Pensions

The group is exposed to funding risks arising from changes in longevity, inflation and investment assumptions in relation to its defined benefit pension scheme.

The defined benefit pension scheme is open to qualifying senior management and staff within the group. Following consultation with members, the group altered the structure of the scheme in 2010 from a final salary scheme with an accrual rate of 1/60th to a Career Average Revalued Earnings scheme with an accrual rate of 1/80th. The scheme remains open to new members. Ongoing funding and regulatory requirements are monitored in conjunction with external actuarial advisers and regular meetings are held with the pension scheme trustees.

Regulatory risks

The group is subject to complex and evolving tax, legal and regulatory requirements. A breach of laws and regulations could lead to litigation, investigations or disputes resulting in additional costs being incurred, civil and/or criminal proceedings and reputational damage.

The group monitors legal and regulatory developments in the areas in which it operates, and seeks legal or other specialist advice as appropriate. It is group policy to require that all subsidiaries, employees, suppliers and subcontractors comply with applicable laws and regulations. The group has a zero tolerance policy to bribery and corruption and has instigated a group-wide programme to raise awareness of the 2010 Bribery Act.

Consolidated income statement

for the year ended 31st December 2011

Consolidated statement of financial position

as at 31st December 2011

Consolidated statement of cash flows

for the year ended 31st December 2011

Consolidated statement of changes in equity

for the year ended 31st December 2011

Notes to the preliminary financial statements

Note 1 - Basis of preparation

TClarke plc (the 'company') is a company incorporated in the United Kingdom. The consolidated preliminary financial statements (the 'financial information') comprise the financial statements of the company and its subsidiaries (together the 'group') and are prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union, IFRIC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS and have been prepared on a going concern basis under the historic cost convention as modified by the revaluation of land and buildings.

The financial information does not constitute the company's statutory accounts for the year ended 31st December 2011 or 2010 but is derived from the audited financial statements for the year ended 31st December 2011. Statutory accounts for the year ended 31st December 2010 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 31st December 2011 will be delivered to the Registrar of Companies in due course and will be available on the company's website at www.tclarke.co.uk. The auditors have reported on those accounts; their reports were unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for the year ended 31st December 2010 or for the year ended 31st December 2011.

Except as noted below, the financial statements have been prepared using the accounting policies and presentation that were applied in the audited financial statements for the year ended 31st December 2010:

The group has changed its accounting policy in respect of land and buildings with effect from 31st December 2011 and these assets will henceforth be carried at fair value. The group's property assets represent a significant proportion of the group's assets and are held for the long term use of the group. The fair value of these assets are subject to considerable change over time, and the Board are of the opinion that carrying the group's property assets at fair value will provide more reliable and useful information to users of the financial statements.

The following new and revised IFRSs have been adopted in these financial statements, but their application has not had any material impact on the financial statements.

·; Amendments to IAS 32 'Financial instruments : Presentation-Classification of rights of issues'

·; IAS24 'Related party disclosures' (revised 2009)

·; IFRIC19 'Extinguishing financial liabilities with equity instruments'

·; Improvements to IFRSs (2010)

·; Amendments to IFRIC14 'IAS19 - The limit on a defined benefit asset, minimum funding requirements and their interaction'.

Note 2 - Segmental information

The group provides electrical and mechanical contracting and related services to the construction industry and end users.

For management and internal reporting purposes the group is organised geographically into three regional divisions; the South, the North and Scotland, and an internal property division reporting to the Chief Executive, who is the chief operating decision maker. The measurement basis used to assess the performance of the divisions is underlying profit from operations, stated before acquisition expenses, amortisation of intangible assets, goodwill impairment, long-term employee benefit costs arising from acquisitions, restructuring costs, equity settled share-based-payment expenses and net profits or losses arising from property disposals. All assets and liabilities of the group have been allocated to segments apart from the retirement benefit obligation, and tax assets and liabilities.

Following an internal reorganisation, with effect from 1st January 2011 the operations of our Derby office have been merged with those of our Peterborough office and included within the South division. Previously our Derby operations were reported as part of the North division. Comparative information has been restated.

All transactions between segments are undertaken on normal commercial terms. All the group's operations are carried out within the United Kingdom, and there is no significant difference between revenue based on the location of assets and revenue based on location of customers.

Segment information about the group's continuing operations is presented below:

Note 3 - Taxation

Note 4 - Earnings per share

A. Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the

weighted average number of ordinary shares in issue during the year.

B. Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The company has two categories of dilutive potential ordinary shares: share options granted under the Savings Related Share Option Scheme and conditional share awards granted under the Equity Incentive Plan.

For the share options, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. The options granted during the year are considered to be non-dilutive.

C. Underlying earnings per share

Underlying earnings per share represents profit for the year from continuing operations adjusted for goodwill impairment, amortisation of intangible assets, acquisition expenses, long-term employee benefit expenses arising from acquisitions, restructuring costs, equity settled share based payment expense and net profits on the disposal of property assets and the tax effect of these items, divided by the weighted average number of shares in issue. Underlying earnings is the basis on which the performance of the operating divisions of the business is measured.

Underlying earnings per share

Note 5 - Dividends

The directors are proposing a final dividend of 2.00 p (2010: 4.25 p) per ordinary share totalling £828,000 (2010: £1,760,000). Subject to approval at the Annual General Meeting, the final dividend will be paid on 18th May 2012 to shareholders on the register as at 20th April 2012. The shares will go ex-dividend on 18th April 2012.  This dividend has not been accrued at the balance sheet date. A dividend reinvestment plan is available to shareholders. Those shareholders who have not elected to participate in the plan, and who would like to do so in respect of the 2011 final payment, may do so by contacting Capita Registrars on 0871 664 0300 (Lines are open 8:30am - 5:30pm Mon-Fri. Calls cost 10p a minute plus network charges). The last day for election for the final dividend reinvestment is 26th April 2012 and any requests should be made in good time ahead of that date.

Note 6 - Pension commitments

The present value of the defined benefit obligation, the related current service cost and past service cost were measured using the projected unit credit method. The amount included in the consolidated statement of financial position arising from the group's obligations in respect of its defined benefit retirement scheme is as follows:

Note 7 - Notes to the statement of cash flows

b. Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments that are readily convertible into cash, less bank overdrafts, and are analysed as follows:

Note 8 - Related party transactions

The remuneration of the directors of the company was £813,000 (2010:£979,000). This includes termination costs of £nil (2010:£202,000) and pension contributions of £65,000 (2010:£99,000).

The remuneration of key management (including directors of subsidiary companies) was £4,491,000 (2010: £3,971,000), including termination payments of £38,000 (2010: £26,000). Pension contributions in respect of key management (including subsidiary directors) were £491,000 (2010: £359,000) and other long term benefits included in the remuneration charge were £375,000 (2010:£125,000). Sales of £63,000 (2010: £nil) were made to key management of which £12,000 (2010: £nil) was outstanding at 31st December and was settled after the year end.

Transactions between the company and its subsidiary undertakings, which are related parties, have been eliminated on consolidation and are not disclosed in this note. There were no other related party transactions requiring disclosure in the financial statements.

Note 9 - Subsequent events

There are no events subsequent to the reporting date which require disclosure in the financial statements.

Note 10 - Annual General Meeting

The 100th Annual General Meeting will be held at The Riverside Room, Savoy Place, 2 Savoy Place, London WC2R 0BL on

Friday 11th May 2011 at 12 noon.

Statement of directors' responsibilities in respect of the financial information

We confirm that to the best of our knowledge:

(a) the financial information, prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union, gives a true and fair view of the assets, liabilities and financial position and profit of the group; and

(b) the business and financial review includes a fair review of the development and performance of the business and the position of the group, together with a description of its principal risks and uncertainties.

On behalf of the board

Russell Race Chairman

Mark Lawrence Chief Executive

Martin Walton Finance Director

20th March 2012