Tclarke Regulatory News (CTO)

T. Clarke PLC

Preliminary Results for the year ended 31 December 2010

Respectable Results in Challenging Markets

Highlights

·; Respectable results achieved in challenging market conditions.

·; Strong balance sheet with net cash and bank deposits of £7.2m (2009: £23.2m)

·; Dividend for the year 8.5 pence per share (2009: 13.0 pence)

·; Robust forward order book £190m (2009: £160m)

·; Two new acquisitions which are performing well

·; Restructured into three divisions: South (including London), North and Scotland

Scotland

·; Revenue of £21.2m (2009: £17.4m)

·; Operating loss of £1.4m (2009: operating profit £0.8m) is after restructuring costs of £0.1m (2009: £nil)

North

·; Revenue of £58.4m (2009: £50.2m)

·; Operating profit of £1.9m (2009: £0.6m) is after acquisition expenses £0.2m, amortisation of intangible assets £0.3m and restructuring costs of £0.1m (2009: goodwill impairment £0.8m and restructuring costs of £0.1m)

South

·; Revenue from continuing operations of £99.5m (2009: £108.0m)

·; Operating profit of £5.1m (2009: £5.2m) is after acquisition expenses £0.1m, long term employee benefits arising from acquisitions £0.1m and restructuring costs of £0.4m (2009: restructuring costs £1.2m)

New contracts secured include:

·; Stratford City Holiday Inn, London 

·; Park House, London

·; Rothschild Head office, London

·; Waitrose stores, Jersey 

·; ITV Yorkshire 

·; Gateshead Leisure Centre

·; Wellingborough Medical Centre, Northamptonshire 

·; Oxford Aviation Academy, Stockport, Greater Manchester

Contracts completed during the year included:

·; John Lewis Home Stores at Croydon and Tunbridge Wells 

·; Speedo World Headquarters, Nottingham

·; One New Change, Cheapside

·; Ravensbourne College of Design and Communication

·; Southend Swimming and Diving Centre at Garon Park,

·; Brixham Fish Market;

·; Northern Ballet, Leeds

Contracts in progress during the year included:

·; Westfield Shopping Development, Stratford City

·; London 2012 Olympic Stadium 

·; Deutsche Bank, London

·; Aspire Defence, Aldershot, Bulford, Larkhill, Tidworth and Warminster

·; HMP Buckley Hall;

·; Midlothian Community Hospital Community Hospital.

Mark Lawrence, Group Chief Executive commented:

 " The market that we operate in has continued to be challenging. However, we have made good progress to reposition the Group to enable us to offer a wider range of services to our clients. Both our recent acquisitions have made a useful contribution to the Group's performance.

 Looking forward, we are well positioned to benefit from the recovery in our markets. Despite the backdrop of a tough trading environment, we remain confident that the Group will maintain its industry leading position. Our strategy to create a broader platform will underpin our potential to deliver long-term growth in earnings and dividends."

-ends-

Date: 18th March 2011

For further information contact:

Annual Report & RNS

Chairman's statement

Financial results headline statement

Whilst Group turnover held up well and the order book was built during the course of 2010, the difficult trading conditions which affected results during 2009 continued to impact our results during the financial year just concluded. The underlying operating profit of £7.3m was impacted adversely by prevailing margin pressure across the Group and by specific trading issues in Scotland. After accounting for restructuring costs, acquisition expenses and amortisation of intangible assets, pre-tax profit fell by 21% to £5.7m. Earnings per share were 11% lower at 8.91p (9.86p for continuing operations). Cash management and conservation has remained a key priority during 2010, but the very low level of interest rates meant that very little income was derived from our cash holdings. In light of the reduced earnings and the slow pace of recovery from recession, it has been thought prudent to reduce the recommended final dividend and to align the overall dividend payment for the year more closely with the underlying earnings.

Business performance overview

Operating profits in London and the North held up well under the pressures which the entire construction sector faced during 2010. Our Scottish subsidiary encountered difficulties with a specific large contract. It also had to bear the brunt of the bad weather in December when many sites were forced to close for a considerable period.

We have continued to work consistently through the year to develop T. Clarke as a more rounded building services provider. As part of our strategy we have made two important acquisitions. These have enabled us to broaden the range of services we are offering to our clients. Since joining the Group, we are very pleased that the performances of DGR and D&S have been solid and they have made a useful contribution to our profitability. We have worked hard to ensure that Group companies share best practice and a common approach to the market place.

Considerable detail is contained within this report on the way in which we are seeking to shape the markets in which we operate rather than being driven by events. The present recession is undoubtedly the severest seen for many years and T. Clarke is fortunate both in its ongoing financial strength and the quality of its staff. I would like to express thanks on behalf of the Board for the sterling efforts which the executive team and our staff have put in during the last year.

Board changes

In June of 2010 Victoria French left the business and we wish her well for the future. We welcome her replacement Martin Walton to the position of Finance Director and Company Secretary. Martin has been with the Group for over three years as Group Financial Controller. He has played a major role in improving the Group's financial controls and simplifying the reporting structure, including the development and implementation of a new IT platform to help manage our internal controls and management reporting.

Strategic focus

A very clear medium term strategy for the business has now been developed. It is one that builds on T. Clarke's reputation for quality work delivered by excellent people. This enables us to focus on a truly integrated, nationwide organisation around the key growth opportunities in the market today.

The construction industry is changing rapidly. T. Clarke has transformed itself from an Electrical contractor with major regional presence, into a nationwide Building Services organisation adding powerful mechanical and ICT (Information Communications Technology) capabilities. The company today can point to the benefits of this strategy, as our reputation and track record in fields such as intelligent buildings, green technologies, rail and facilities management becomes substantial and new profit opportunities emerge.

Whilst doing this, we have retained a clear sense of who we are. T.Clarke today is as proud of its people and their work as ever. The commitment to training, health and safety, apprenticeships and consistent quality of work is renewed and expanded as the Group gains momentum with further accreditations and reputations in new sectors. At the same time there is an absolute clarity at the highest level that T.Clarke will not trade on reputation and heritage alone. Our future success will depend on our ability to enter these new markets with conviction and real energy, displaying our desire to offer the most compelling combinations of value and quality. This means introducing our company and approach to new people and showing longstanding clients a range of nationwide capabilities about which they may not have known.

Organisational developments to deliver the strategy

In 2010, reshaping of the organisation took place. Strategic acquisitions in the form of DGR and D&S were made to create an immediately credible and suitably high quality full-service solution - just as the industry clearly requires.

After acquiring D&S, we rationalised our north-west presence. From the 1st January 2011, and (following on from the rebranding in Scotland) three more existing subsidiaries were rebranded T. Clarke. Aylward EMS Ltd, based in Huntingdon and Anglia Electrical Services based in Kings Lynn came together as one business under the name of T. Clarke East. Meanwhile, T. Clarke Midlands, based in Peterborough was expanded to incorporate Mitchell and Hewitt based in Derby.

The integration of the Group has become more apparent and across the country the picture is one of genuine integration - of systems, approach, response to opportunity and leadership. However, we have not rushed to re-brand local businesses with local names and reputations. We've worked on a sensible case-by-case basis.

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.

Take a fresh look at T.Clarke

T.Clarke has remained a market leader throughout this year. In evidently very difficult market conditions we have kept a healthy forward order book and developed new strategic capabilities that we believe will rapidly deliver value for us and our shareholders. We are now saying to our clients 'take a fresh look at T.Clarke - our value proposition is compelling'. The fact that we can say this with confidence is in the largest part due to the quality and commitment of more than 1,300 of our people, and I thank them, our clients and suppliers for their continued loyal support.

Outlook

The difficult conditions which we have faced during the last two years show little sign of immediate easing, but I have no doubt that our team will make the most of opportunities as they arise. We remain committed to providing the highest quality of service to our clients together with the best possible return for our shareholders.

The longer-term prospects for the Group are encouraging. A number of large scale commercial developments in London have been started and this bodes well for the future. However, in the short-term, 2011 will be challenging not only for T.Clarke but for the wider construction sector. The Board remains confident in the resilience of the business and we believe the Group will benefit from the wider range of services that we now offer to our clients. We believe our excellent operational capabilities and financial strength supports our improved strategy and will underpin the delivery of long-term growth in the future.

Business review

A fresh focus on value

We are pleased to present respectable results achieved in challenging market conditions. Throughout 2010 we reported that the markets in which we operate have been extremely difficult and trading in the fourth quarter was particularly challenging. The diversity and strength of the Group has however contributed to the overall performance.

T.Clarke's reputation for 'never letting down' is the foundation of our success and it will remain so. The bedrock upon which we have built that foundation is the quality and commitment of our people. Therefore in order to stay as a market leader and attract new opportunities we need to move on from being known as an outstanding electrical contractor and become more widely recognised as a Building Services Contractor. We are certain that by presenting our significant capabilities and demonstrating the value our services represent, clients will lead increasingly to more bidding opportunities.

A fresh vision

Our business strategy is driven by a desire to deliver a successful model for growth. Our vision is to be recognised as a top five building services contractor in all the sectors in which we operate. T.Clarke's focus is to retain and enhance its traditional reputation for delivering good value, total trustworthiness and excellent work quality.

T.Clarke aims to be known across the construction industry as a true nationwide operator, offering all the advantages of nationwide coverage and scale but retaining the genuine regional identity, relationships and market understanding it has today. In doing this T.Clarke will provide a more compelling proposition and be better positioned for growth. To achieve this vision, we will focus our energies on industry sectors and market opportunities with significant growth and profit potential. We will organise ourselves so that we have the capabilities to maximise the Group's potential.

Substance behind the vision

In 2010 we worked effectively to broaden the business. This involved investments in new people, new capabilities and in an internal organisation to create a true nationwide operation.

During 2010 the Group invested £17m in two strategic acquisitions. The Board is pleased to report that both businesses are trading in line with expectations and making positive contributions to the Group.

D&S Engineering Facilities, acquired in March 2010, provides a wide range of facilities management services to a blue-chip UK client list. It was acquired as part of our strategy to broaden our range of services and to provide its customers with a comprehensive offering in this sector. D&S focuses on the maintenance and care of its customers' buildings and engineering activities, principally in the North West of England where it employs 150 people.

D&S was a significant acquisition, which firmly established T.Clarke in the FM market. We are pleased to report the business has integrated well with the rest of the T.Clarke Group. We believe opportunities will be realised in the shorter term to build the scale of our FM operations across the UK.

DGR, acquired in August 2010, has an impressive portfolio of clients and experience across a wide range of sectors, including Education, Transport, Banking, Residential and Commercial Developments.

DGR offers to clients the full range of Mechanical Services, notably in:

• Mechanical & public health services packaged solutions

• Prefabricated pipe work packaged solutions

• Gas System Certification (Gas Safe - Commercial & Domestic)

• Heating and ventilation installation

In 2009 it was awarded the multi service pipe work installation for The Shard development at London Bridge which, when completed in 2013, will be London's tallest building at 310m.

During 2010 we brought in a number of highly experienced executives from outside T.Clarke to join our business. Senior management, including Ian Clenaghan, Danny Robson and Stuart McKay, have vast experience in various areas of the industry. The expert new teams and successful integration with our business units and divisions can create real synergies which differentiates us from our competitors, presenting a strategic advantage in the near future.

This policy of bringing 'fresh talent' into the heart of the organisation will continue wherever it can deliver strategic advantage for us.

Market Developments

The broader market picture is complex. Cyclical factors and the remnants of the 2008 financial crisis continue to have a major effect on the construction industry across the country. This has been one of the worst recessions in construction in living memory. Nevertheless there are a large number of significant positive trends for us. These include the upswing in the rail and power industries, where major new projects and upgrades will be taking place across the country, the rapid emergence of ICT (Information Communications Technology) as an integral and driving component within building services, and the shift of green technologies from peripheral to mainstream.

T.Clarke is well positioned for the upturn, particularly in the London commercial sector. This is seeing significant activity with several large office development schemes progressing. The newly positioned Group, offering a wider range of services, is well positioned to win a number of these new projects in the forthcoming year. We expect to see the benefit as soon as 2012.

South

In London we completed the developments at One New Change, Cheapside and the Ravensbourne College of Design and Communication, Greenwich Peninsular. We are nearing completion on the 2012 Olympic Stadium and Westfield's new shopping centre, Stratford City, due to open in the autumn of 2011.

Current projects in London include; Deutsche Bank, ITV, Park House, Rothschild's, The Pinnacle, The Shard and Victoria Station.

Other notable completions in the South include Southend Swimming and Diving Centre at Garon Park, which will be used as a training base for the British Olympic diving team prior to the London 2012 games; the regeneration of Brixham Fish Market; John Lewis Home Stores at Croydon and Tunbridge Wells.

Current projects include three Waitrose stores on the Island of Jersey, the first of which opened in January 2011; a number of work packages at the army bases at Aldershot, Bulford, Larkhill, Tidworth and Warminster.

Our new ECO Solar division based in the South West is now in operation and specifically aimed at providing customers with energy saving solutions, including for example solar photovoltaics. The Government's feed-in-tariff scheme enables customers to earn a good return on their investment in green technology. Going forward we are exploring a number of opportunities particularly with schools, colleges and housing associations.

The North

The contracting scene in the North has also seen increased competition and margin pressure. However the division has maintained market share and had success with several public sector projects.

Notable completions include Bellbird Primary School, Sawston; Benfield School, Newcastle; Calderdale Leisure Centres; Cambridge Genetics Research Station, Cambridge; Derby University; Gateshead Leisure Centre; Harrogate Library; Longbenton School; Northern Ballet, Leeds; RAF Marham, Norfolk; Rolls Royce, Hucknall; Speedo World Headquarters, Nottingham.

Current projects include; ITV Yorkshire; HMP Buckley Hall; Shirley Primary School, Chesterton.

Recently Secured Projects include Campsmount Technology College, York; 3 Primary Schools in Sheffield; Gateshead International Stadium;Oxford Aviation Academy, Stockport, Greater Manchester; Roecroft Lower School, Bedfordshire;Tynedale Media Centre, Northumberland; Wellingborough Medical Centre, Northamptonshire.

Scotland

Recognising the importance of our Scottish operations we rebranded our Scottish business T.Clarke Scotland from 1st March 2010 to support and underscoreits position as an integral part of the Group. Since the rebranding, the business has been able to bid for and secure an ever improving quality of work allowing us to make progress expanding our operations in Scotland, despite the problems we experienced in December due to the extreme weather conditions.

Going forward we are working on a number of residential schemes for developers such as Barratt Homes; Cala Homes; David Wilson Homes; Mactaggart & Mickel Persimmon Homes; Taylor Wimpey.

Other notable projects in progress; Collegelands Office Development, Glasgow; The State Hospital, Carstairs; CCTV installation Aberdeen University, Kings Buildings.

Market Opportunities

For all the cyclical trends set out above we view it as extremely important to be positioned correctly in areas where we see the most opportunity for growth, so that at the right time profitability can be best realised.

Going forward we are focused on eight key sectors in building services that offer good growth potential namely:

·; Intelligent buildings

·; Facilities management

·; Green technologies

·; Rail

·; Utilities and technologies

·; Manufacturing

·; Residential and hotels

·; Mechanical and electrical contracting

In order to take maximum advantage of the opportunities that emerge, we recognise that T.Clarke cannot rely on its past record of achievement. We need to do more than do a good job on each project we win, we also need to step forward consistently, with innovations that deliver increased value to clients and with a market presence that tells our full story accurately and with energy right across the industry.

In 2010 our strategy has been to develop the business platform necessary to deliver what the market demands. Going forward, despite increased competition and continued pressure on margins, we will set out to present our case as effectively as we can and earn our place on tender lists in the areasof business we know to have the greatest growth potential and where we feel we are best placed to win those tenders.

Market Conditions

The Board reported throughout 2010 that the markets in which it operates have been extremely difficult The Board has continued to take conservative assessments of final accounts from project completions and the likely outcome for a number of ongoing projects and repeatedly stated that it believes that the outlook for 2011 will continue to be challenging.

During the current recession we moved quickly to align our cost base to a reduced workload. Further reductions could be undertaken if considered appropriate to reflect the market conditions. We enter 2011 with our business in great physical and financial shape and able to respond to future challenges and opportunities as they present themselves.

Operations

At the beginning of the year we introduced a new Group Management Board. Our businesses are now managed in three divisions: Scotland, the North and the South of England. This improves our ability to quickly identify and exploit Commercial opportunities across the Group and equally as importantly, to manage our businesses in a more consistent and cohesive manner.

We are working in a number of ways to deliver the business vision of being recognised nationwide as a top five contractor in all the building services sectors in which we operate.

True nationwide capability 

T.Clarke now has a truly nationwide building services operation covering the full range of mechanical, electrical and Information Communication Technologies (ICT) services for the whole construction lifecycle of design, commissioning, installation and maintenance.

In 2010 we were engaged on projects that demonstrated that capability, ranging from major maintenance projects for British Energy/EDF to Marylebone and London Bridge stations in the rail sector to the ICT infrastructure for the Olympic Stadium as well as in numerous other projects. 2010 also saw the launch of our photovoltaic capability in the Green Technologies sector, and the launch of our Intelligent Buildings Division as a fully operational nationwide service.

Building the T.Clarke brand

The development of a unified operation and market offering has been mirrored by the increased presence of a unified brand across the country. The move during the course of the year to bring our Scottish operations under the main brand has been continued with operations in the East and Midlands being rebranded T.Clarke. Where it makes commercial sense in local market conditions, we have continued to trade under longstanding and well-recognised names of regional businesses.

Going forward, in the short term we believe future growth will be best achieved by building upon the existing Group structure and the improved service offering and by expanding our existing businesses into areas where we do not have a local presence. In particular we believe there are opportunities in and around Inverness, Plymouth and the West Midlands. In early 2011 we opened an office in Cardiff serving South Wales as a branch office of our Bristol operations.

Financial Review

Summary of financial performance

Group performance

The Group's performance during 2010 reflected a respectable performance in challenging trading conditions. We remain profitable, with profit before tax from continuing operations falling to £5.7 million (2009: £7.3 million), and we have invested significantly in the business to reshape it for the future, with two strategic acquisitions in the year and the consolidation of some of our regional operations into larger business units.

The Group's revenue from continuing operations increased by 2% to £179.0 million (2009: £175.5 million), including £16.3 million from new acquisitions. Revenue on a like for like basis was £12.8 million lower than in 2009.

Operating profit from continuing operations decreased by £1.3 million to £6.0 million (2009: £7.3 million), representing an operating margin of 3.4% (2009: 4.2%). Underlying operating profit before acquisition expenses, goodwill impairment, restructuring costs, amortisation of intangibles and long term employee benefit costs arising from acquisitions, fell by £2.1 million to £7.3 million (2009: £9.4 million).

The net finance cost was £0.3 million (2009: £nil), including a £0.3 million pension scheme finance charge (2009: £0.2 million).

Tax expense was £1.7 million (2009: £2.3 million), giving an effective tax rate of 30.5% (2009: 31.3%). The main items giving rise to the difference between the effective tax rate and the standard UK corporation tax rate of 28% are goodwill impairment charges and acquisition related expenditure.

T. Clarke - South

Revenue from our South operations decreased by £8.5 million to £99.5 million (2009: £108.0 million), including £3.9 million from acquisitions. Operating profit was £5.1 million (2009: £5.2 million), representing a profit margin of 5.1% (2009: 4.8%), including £0.6 million from acquisitions. Underlying operating profit before acquisition expenses of £0.1 million (2009: £nil), long term employee benefit costs arising from acquisitions of £0.1 million (2009: £nil) and restructuring costs of £0.4 million (2009: £1.2 million) fell by £0.7 million to £5.7 million (2009: £6.4 million).

T. Clarke - North

Revenue from our North operations increased by £8.2 million to £58.4 million (2009: £50.2 million), including £12.4 million from acquisitions. Operating profit was £1.9 million (2009: £0.6 million), representing a profit margin of 3.2% (2009: 1.1%), including £0.6 million from acquisitions. Underlying operating profit before acquisition expenses of £0.2 million (2009: £nil), goodwill impairment of £nil (2009: £0.8 million), amortisation of intangibles of £0.3 million (2009: £nil) and restructuring costs of £0.1 million (2009: £ 0.1 million) increased by £1.0 million to £2.5 million (2009: £1.5 million).

T.Clarke - Scotland

Revenue in Scotland increased by £3.8 million to £21.2 million (2009: £17.4 million), but the division reported an operating loss of £1.4 million (2009: profit £0.8 million) after restructuring and rebranding costs of £0.1 million, reflecting the tough market conditions particularly in the electrical residential market. Scotland in particular was also adversely impacted by the severe weather conditions shortly before year-end.

Property

The property division, which owns the freeholds of most of the buildings in use or formerly in use by the Group, contributed an operating profit of £0.4 million (2009: £0.7 million, including £0.3 million from property disposals).

Acquisitions

The Group made two acquisitions in the year, D&S (Engineering Facilities) Limited on 18th March 2010 for £11.6 million cash and DG Robson Mechanical Services Limited on 24th August 2010 for £5.6 million (including £2.0 million in new shares and contingent consideration fair valued at £0.5 million. The maximum contingent consideration payable is £0.8 million).

The two acquisitions in the year have performed in line with our expectations. D&S Engineering Facilities, based in the North-West, contributed revenue of £12.4 million and profit before tax of £0.6 million, after £0.3 million amortisation of intangible assets. DG Robson, based in Brentwood, Essex, contributed revenue of £3.9 million and profit before tax of £0.6 million. Acquisition expenses amounted to £0.3 million, and the Group also incurred a £0.1 million charge in respect of a long term employee benefit arrangement arising on the acquisition of DG Robson.

Discontinued operations

JJ Cross Limited, based in Preston, was closed during the year, therefore this company's operations have been reclassified as discontinued operations and the comparatives restated accordingly. Loss from discontinued operations after tax was £0.4 million (2009: £1.0 million). Discontinued operations in 2009 also included GDI Electrical Company Limited, closed in 2009, and Kestrel Electrical Systems Limited, which was sold to its management in 2009.

Earnings per share

Basic earnings per share were 8.91p (2009: 10.03p). Earnings per share from continuing operations were 9.86p (2009: 12.53p), and underlying earnings per share from continuing operations after adjusting for goodwill impairment, amortisation of intangible assets, acquisition expenses, long term employee benefit costs arising from acquisitions and restructuring costs and the tax effect of these items, were 12.44p (2009: 16.93p)

Dividends

As announced in January the board has decided to rebase the dividend and is proposing a final dividend of 4.25p (2009: 8.75p), making a total dividend for the year of 8.5p (2009:13.0p). The dividend per share is covered by earnings 1.05 times (2009: 0.8 times).

The final dividend will be paid, subject to shareholder approval, on 20th May 2011 to those shareholders on the register at 26th April 2011. The dividend will go ex-dividend on 20th April 2011. A dividend reinvestment plan (DRIP) is available to shareholders.

Cash flow and funding

Net cash outflow in the year was £5.4 million (2009: £17.8 million), including net outflow of £7.5 million on acquisitions. The Group had positive net cash balances at 31st December 2010 of £7.2 million (2009: £23.5 million including £10.6 million held on deposit). The net cash outflow from operations of £2.9 million (2009: £2.6 million) arises in part due to the timing of payments and receipts over the life cycle of projects, but also reflects the tough trading conditions with employers and contractors seeking to stretch their payment terms. We have also been able to negotiate favourable settlement terms with a number of our key suppliers.

The Group has no long term debt apart from hire purchase and finance lease contracts. The Group is funded by share capital and retained reserves and there are no plans to change this structure. The Group has negotiated a new £5 million overdraft facility with its bankers, National Westminster Bank plc, to cover the short term fluctuations in cash flow that inevitably arise in the contracting industry.

Pension obligations

In accordance with IAS 19 'Employee Benefits', an actuarial loss of £1.3 million has been recognised in the year, with the pension scheme deficit increasing by £0.8 million to £9.1 million (2009: £8.3 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 had previously provided security to the pension scheme in the form of a charge for the greater of £1.5 million or half the market value of the Group's head office property, and the Group is intending to increase the charge to 100% of the value of this property.

Accounting policies

The Group's accounting policies are consistent with the accounting policies applied in previous years, except that the Group has adopted IFRS 3 (revised) Business Combinations during the year, the main impact of which has been that acquisition related expenses are charged to the income statement when incurred rather than being capitalised as part of goodwill. The Group has chosen not to apply the standard retrospectively, and therefore the standard was applied for the first time to acquisitions arising during 2010.

Summary and prospects

2010 was a tough year, as expected, and the outlook for 2011 remains challenging. Nevertheless the strategic acquisitions we made during the year and the reshaping of the business to provide a platform for our nationwide business service offering, have placed the business in a strong position to take advantage of the opportunities that still exist in the market. 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.

Consolidated income statement

for the year ended 31st December 2010

Consolidated statement of financial position

as at 31st December 2010

Consolidated statement of cash flows

for the year ended 31st December 2010

Consolidated statement of changes in equity

for the year ended 31st December 2010

Notes to the preliminary financial statements

Note 1 - Basis of preparation

T.Clarke 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 and have been prepared on the historic cost basis.

The financial information does not constitute the company's statutory accounts for the year ended 31st December 2010 or 2009 but is derived from the audited financial statements for the year ended 31st December 2010. Statutory accounts for the year ended 31st December 2009 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 31st December 2010 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 2009 or for the year ended 31st December 2010.

Except as described 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 2009.

IFRS3 (Revised) 'Business combinations'.

Much of the basic approach to business combination accounting required under the previous version of IFRS3 'Business combinations' has been retained in this version of the standard. However in some respects the revised standard may result in very significant changes to the accounting treatments previously adopted, including:

·; the requirement to write off all acquisition costs to profit and loss instead of including them in the cost of investment (which will have a consequent effect on the value of goodwill recognised);

·; the requirement to measure all identifiable intangible assets at their fair value;

·; an option to gross up the statement of financial position for goodwill attributable to non-controlling interests (formerly known as "minority interests") on a combination-by-combination basis;

·; contingent consideration in an IFRS3 (Revised) business combination will also now fall within the scope of IAS39 and be measured initially and subsequently at fair value with remeasurement differences being recognised in profit or loss. Changes in the value of contingent consideration in a business combination falling within the scope of the old IFRS3 continue to be treated as adjustments to goodwill.

There are also some significant changes in the disclosure requirements of the revised standard, and numerous consequential amendments to other standards.

The revised standard does not require the restatement of previous business combinations and, in consequence the group's acquisitions during 2010 of 100% interests in D&S (Engineering Facilities) Limited and DG Robson Mechanical Services Limited are the first business combinations to fall within the scope of IFRS3 (Revised).

The principal effect of the adoption of IFRS3 (Revised) on those acquisitions is the recognition of £299,000 of acquisition expenses in the "other expenses" line within the income statement. This has reduced basic earnings per share by 0.74p.

Change in presentation

The statement of financial position has been re-presented to disclose the deferred tax asset arising on the retirement benefit obligation within deferred tax assets in both the consolidated and parent company financial statements, and to disclose amounts due to customers under construction contracts separately on the face of the statement of financial position. Previously the retirement benefit obligation had been shown net of the related deferred tax asset in the financial statements and amounts due to customers under construction contracts were included within trade and other payables. This change in presentation has the effect of increasing gross assets and liabilities by £2,318,000 as at 31st December 2009 in the consolidated and parent company financial statements but does not affect net assets, profit or other comprehensive income.

Following its closure in 2010, the operations of JJ Cross Limited have been reclassified as discontinued operations and the results for the year ended 31st December 2009 have been re-presented accordingly. This change in presentation has decreased turnover for the year ended 31st December 2009 by £2,038,000 to £175,540,000, increased profit before taxation by £474,000 to £7,284,000 but has had no effect on the profit for the year attributable to equity holders.

Note 2 - Segmental information

The group is organised into geographic segments reporting to the Chief Executive, who is the chief operating decision maker.

For management and internal reporting purposes the group was organised into two operating divisions, London and UK Regions, and an internal property division until 31st December 2009, and the group reported segmental information on that basis.

Following a strategic review, from 1st January 2010 for management and internal reporting purposes the group has been reorganised into three regional divisions; South, North and Scotland, and an internal property division. Segmental information has been presented on this basis for the year ended 31st December 2010, and information for the year ended 31st December 2009 has been restated.

The segmental information for the year ended 31st December 2009 has been restated to exclude the results of operations reclassified as discontinued operations at 31st December 2010.

All assets and liabilities of the group have been allocated to segments apart from the retirement benefit obligation, tax assets and liabilities and assets and liabilities relating to discontinued operations.

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:

The following amounts are included in profit from operations:

The following amounts are included in profit from operations:

Note 3 - Taxation

Note 4 - Discontinued operations

During 2010 the group wound down and closed the operations of JJ Cross Limited, based near Preston, Lancashire. In accordance with IFRS 5 these operations have been classified as discontinued operations and the comparatives for 2009 have been restated to show income generated and expenses incurred by these operations within loss on discontinued operations in the income statement. The income and expenses of Kestrel Electrical Systems Limited, which was sold in 2009 and GDI Electrical Company Limited, which was closed in 2009, were classified as discontinued operations in the 2009 financial statements.

The post-tax loss from discontinued operations was determined as follows:

Note 5 - Earnings per share

The earnings per share figure represents the profit for the year divided by the weighted average number of ordinary shares in issue. The number of ordinary shares for the purpose of this calculation is 40,433,184 (2009: 39,947,889). The profit for the year is as follows:

Underlying earnings per share

Note 6 - Dividends

The directors are proposing a final dividend of 4.25 p (2009: 8.75 p) per ordinary share totalling £1,760,000 (2009: £3,495,000). Subject to approval at the Annual General Meeting, the final dividend will be paid on 20th May 2011 to shareholders on the register as at 26th April 2011. The shares will go ex-dividend on 20th April 2011.  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 2010 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 2011 and any requests should be made in good time ahead of that date.

 Note 7 - 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 8 - 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 9 - Acquisitions

On 18th March 2010, the company acquired the entire share capital of D&S (Engineering Facilities) Limited for £11,600,000 and on 25th August 2010, the company acquired the entire issued share capital of DG Robson Mechanical Services Limited for £5,586,000. The fair value of the consideration is as follows:

The assets and liabilities recognised at the date of acquisition are as follows:

DGR had contracted to pay certain employees future bonuses in respect of their past services to the company prior to the acquisition, totalling £750,000. These bonus arrangements include limited vesting conditions which nevertheless mean that they fall to be treated as post acquisition expenses of the group and will be charged to the income statement over the vesting period, which is the two years following the acquisition.

The impact of the acquisitions on the results of the group was as follows:

The group incurred acquisition costs of £299,000 comprising £161,000 on the acquisition of D&S and £138,000 on the acquisition of DGR, which have been expenses and reported in other expenses in the reporting period.

Note 10 - Related party transactions

The remuneration of key management (including directors) was £4,367,000 (2009: £5,335,000), including termination payments of £228,000 (2009: £544,000). Pension contributions in respect of key management (including directors) were £531,000 (2000: £542,000). 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 11 - Subsequent events

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

Note 12 - Annual General Meeting

The Annual General Meeting will be held at The Riverside Room, Savoy Place, 2 Savoy Place, London WC2R 0BL on Friday 13th May 2011 at 12 noon.