Tclarke Regulatory News (CTO)

TClarke plc - Results for the year ended 31st December 2015 in line with expectations

1 Prior year restated to show Bristol and Cardiff operations as discontinued 

2 Underlying profit is profit from continuing operations adjusted for amortisation of intangible assets and non-recurring costs

3 Underlying earnings is calculated by dividing underlying profit after tax by the weighted average number of shares in issue

· Record revenues of £242.4m.

· Underlying profits ahead of expectations.

· Total dividends for the year maintained at 3.1p.

· Net cash increased to £6.7m with £8.0m of unused overdraft facilities.

· Replenished quality order book of £300m.

· Excellent opportunities for forward growth and future profitability.

A balanced range of project work:

Mark Lawrence, Chief Executive commented:

"Our first class team has the knowledge, skills and reputation to continue to be regarded as one of the best contractors in the sector. This key advantage helps to drive our business forward and deliver value for our shareholders.

The Company is focused on improving performance and margins throughout the Group. We remain alert to any challenges that we may face, yet we approach the future with confidence and enthusiasm. The future for the Group remains solid".

-ends-

Date: 22nd March 2016

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Chairman's statement

Strong performance

I am pleased to report that in the year ended 31st December 2015 Group revenue increased 16.6% to £242.4m (2014: £207.9m) year on year, and underlying profit before tax rose to £3.7m (2014: £0.6m) despite tough market conditions and competition within the industry, with underlying earnings per share at 7.11p (2014: 0.85p).

The net cash position also improved to £6.7m (2014: £5.3m). The Board proposes a final dividend of 2.6p (2014: 2.6p) for the year ended 31st December 2015, maintaining the total dividend for the year at 3.1p (2014: 3.1p), reflecting the Board's continued confidence in the Group and commitment to shareholders.

Board Governance

Having been involved with the Company as a Non-Executive Director for many years now, I am delighted to assume the post of Chairman. It is a role I relish and I have recently established a very active programme for the Non-Executive team, visiting our offices and projects across the UK, with different members of the Executive board, meeting staff and clients, seeing projects close up and spending enough time to get into the deeper issues. It has been extremely valuable in informing our views when probing business plans with the Executive team.

I would like to welcome Mike Robson to the Board of Directors. Mike joined the Company as a Non-Executive Director in November and took over from me as Chair of the Audit Committee given his depth of financial experience. The Board made good progress in enhancing corporate governance procedures in 2015 and remains committed to delivering against our objectives.

TClarke also announces that Danny Robson, an Executive Director of the Company, will be leaving the business to pursue other business interests. Accordingly, Danny's resignation was accepted by the Board on 21st March 2016.

When TClarke acquired DGR, Danny committed to work with us for a period of three years to diversify and enhance the Group's earnings profile by building our mechanical capabilities in London. The Board is therefore grateful for the six years he has committed to TClarke and wish him well in his new ventures. Following the successful integration of our London Mechanical and Electrical business units we have established a strong leadership team to further take advantage of opportunities that meet our strategy.

Our People

What continues to impress me, more perhaps than anything, is the involvement and loyalty that our people across the UK feel for the TClarke brand. It is as true in Cornwall and Falkirk as it is in London. There is immense pride in the work we do and in what the Company is all about, and this is most obvious in the switched-on attitude to safety. Safety is taken very seriously and rather than talk about the good things they do, people on our visits talk about their need to avoid complacency.

Business Agility

TClarke's business agility was demonstrated by the increase in mechanical contracting in London taking advantage of rising demand, in the strong entry into the design and build sector and the successful targeted tender process across our regional businesses; all of which resulted in exceptionally strong order books as we entered 2016.

2015 saw the further integration of our regional businesses with shared systems, resources, marketing and buying power and an improved focus on meeting client needs. As part of this process, the review of our regional businesses involved some tough decisions. In 2015 this included the closure of our Bristol and Cardiff operations which had not been delivering the necessary results to drive the business forward. This has been disclosed as a discontinued operation and incurred a loss for the year of £2.7m (2014: profit £0.1m). Although this was a difficult decision, the outcome ensures that resources can be better targeted towards those sectors and geographies where we can achieve greater value for stakeholders.

Partner of Choice

As the construction sector becomes increasingly complex and as digital technologies drive innovation, I am proud to say that TClarke is increasingly seen as the partner of choice. This fact is proved many times over in this report and it is a massive achievement in competitive markets. As well as providing value for shareholders, this firm is a leading provider of high quality long-term engineering careers, distinctive and British with roots in communities across the country.

Outlook

As we exit the recession, and market conditions continue to improve, our Executive team is focused on taking advantage of market opportunities as they present themselves to grow the business and deliver increased value to shareholders.

I would like to take this opportunity to thank our employees across the UK, together with our clients and shareholders for their continued support and I look forward to a successful year ahead.

Iain McCusker

Chairman

22nd March 2016

Chief Executive Officer's review

2015 was a year of progression; still marked by some bumps, but also by increased demand for our services, which was reflected in the improved quality of our order book, first in London and then also in the regions. As markets have improved, our simple message 'TClarke has the resources you need to deliver your project' has become steadily more compelling.

Trust in TClarke

Our clients need certainty around project delivery and we have deliberately chosen to align ourselves with clients and contractors who share our vision for high quality installations where we can deliver full service packages, which ensures accountability, responsibility and control. Together with our collaborative partners, we add value to contracts, where safety is fully enforced and high quality is the shared focus.

Although the London market has led the upturn in demand, it is also extremely good to report our best ever forward order books across the regions. This is highly significant, since it also allows us to be more focused and selective in seeking further work which will, in turn, help us to deliver better value for our stakeholders. I am delighted by many of the projects we've delivered and won in 2015 and am particularly pleased to see our Northern region winning work with Overbury, who we have collaborated with for many years in the London region.

Investing in our people

When preparing this report, I have again been struck by the truth that everything we offer to the market depends upon our people. Our brand reputation is not a marketing gambit, it is something real that people on construction sites earn every day by being switched on, hard-working, open and highly capable. We believe in investing heavily in our workforce in order to maintain our skilled resource of people.

We have brought together our training portfolios across the Group and reorganized our training procedures under what we have branded the 'TClarke Academy'. Alongside our industry-leading apprenticeship schemes, the TClarke Academy provides an in-house training capability which ensures consistency of operations throughout our Group. This allows our people to learn new skills so that we can build strong teams and our employees can develop their careers within TClarke.

We have always had a strong commitment to providing apprenticeships and our unrivalled commitment continues - in 2015 the Group took on a total of 75 new apprentices across the UK.

Our apprenticeships are highly prized because they lead to real jobs and real careers. I know this personally, having completed an apprenticeship within TClarke myself in 1987. It is a matter of great pride for me to see so many people starting as apprentices with us and then moving up through the business, developing new skills, showing huge commitment and endeavour and being rewarded with great opportunities.

Our daily priority is safety

Health and safety is paramount to our business and our safety performance remains strong. I am very proud of the work we do, on site every day across the UK, where TClarke people take an active approach on safety. Our investment in safety in 2015 continued at the same high level - and that will not change. Safety is this firm's number one daily priority.

Outlook

Our first class team has the knowledge, skills and reputation to continue to be regarded as one of the best contractors in the sector. This key advantage helps to drive our business forward and deliver value for our shareholders.

The Company is focused on improving performance and margins throughout the Group. We remain alert to any challenges that we may face, yet we approach the future with confidence and enthusiasm. The future for the Group remains solid.

Mark Lawrence

Chief Executive Officer

22nd March 2016

Financial review

Accounting policies and segmental reporting

The Group's consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. There have been no significant changes to accounting policies during the year ended 31st December 2015.

As previously disclosed, the Group has revised its segmental reporting this year to split the South region into two distinct geographic regions, London & South East and Central & South West, enabling the management of the two business segments to focus better on their distinct markets whilst continuing to support the wider activities of the Group. During 2015 we took the strategic decision to close our underperforming businesses in Bristol and Cardiff, and realign our operations in the South West to focus on key relationships to drive opportunities. Prior year information has been restated to reflect these changes.

Underlying Group performance

Overview

Revenue from continuing operations increased by 16.6% to £242.4m (2014: £207.9m), and underlying profit before tax increased by £3.1m to £3.7m (2014: £0.6m), with recovery gaining momentum in our markets. London & South East, Central & South West and the North all delivered improved underlying margins, and net underlying overheads as a percentage of revenue fell to 9.3%. We move into 2016 with a replenished £300m order book improving in quality.

London & South East

Revenue from our London & South East operations increased by 36.6% to £129.1m (2014: £94.5m), generating an underlying profit of £1.5m (2014: loss £1.4m). Underlying operating margin increased to 1.2% (2014: negative 1.5%), as contracts let during the recession reached completion and the benefits of the recovery, evident in our increasing order book in recent reporting cycles, began to feed through into profit and margins.

Central & South West

Revenue from our Central & South West operations increased by 3.1% to £56.9m (2014: £55.2m), with the region benefitting from strong client relationships and repeat business. Although revenue growth was modest, the improved profitability supports our strategy of concentrating on good quality opportunities with well-respected clients and principal contractors, and expansion of our facilities management and healthcare capabilities. Underlying operating profit improved to £0.9m (2014: £0.5m), with underlying operating margins improving to 1.6% (2014: 0.9%).

North

The North generated £41.8m revenue (2014: £43.4m), with 2014 having benefited from some significant add on projects for one of our principal facilities management clients. Underlying operating profit increased to £1.9m (2014: £1.6m). This represents an underlying operating margin of 4.5% (2014: 3.7%), with the region continuing to benefit from strong client relationships and repeat business.

Scotland

Scotland's revenue was £16.2m (2014: £18.3m), and underlying operating profit was £0.3m (2014: £0.6m), representing an underlying operating margin of 1.9% (2014: 3.3%). Scotland experienced a slow start to 2015, a knock on effect of the uncertainty caused by the independence referendum and resource constraints in the region's core residential market. Activity picked up in the second half of the year, and the region has a strong order book for delivery in 2016.

Exceptional and non-underlying items

Exceptional and non-underlying items comprise £0.2m (2014: £0.2m) amortisation of intangible assets. There were no other exceptional or non-underlying costs during the year (2014: £1.2m exceptional claim settlement costs).

Finance costs

Net finance costs were £0.9m (2014: £0.7m), including a £0.6m (2014: £0.5m) non-cash finance charge in respect of the pension scheme. Net interest on bank loans and overdrafts increased to £0.3m (2014: £0.2m), reflecting increased use of our banking facilities during the year with a number of significant London projects requiring up front working capital funding.

Taxation

As a wholly UK based group, our tax charge is dependent on UK corporation tax rates. Our cost base includes a hard core of expenditure that is not deductible for tax purposes, which has the effect of pushing up our effective tax rate during periods of low profits (or reducing the effective rate on losses). For 2015, the effective tax rate was 20.1% (2014: 12.5% on reported loss).

Discontinued operations

On 19th November 2015 the Group announced its intention to discontinue its operations in the Cardiff and Bristol areas. The Group's activities in these areas ceased and the closure of Cardiff and Bristol offices was successfully completed by 31st December 2015, with the remaining employees and any outstanding contractual commitments transferring to our TClarke South West operation. The Bristol and Cardiff operations have been reported as discontinued operations for the year ended 31st December 2015, and the previous year's results have been represented accordingly.

Earnings per share

Basic earnings per share from continuing operations was 6.66p (2014 - loss: 1.78p), and basic earnings per share after discontinued operations was 0.13p (2014 - loss: 1.58p).

Basic underlying earnings per share after adjusting for amortisation of intangible assets and non recurring costs and the tax effect of these items, was 7.11p (2014: 0.85p).

Dividends

The Board is proposing a final dividend of 2.60p (2014: 2.60p), leaving the total dividend for the year maintained at 3.10p (2014: 3.10p). The dividend is covered 2.5 times by underlying earnings.

The final dividend will be paid, subject to shareholder approval, on 13th May 2016 to those shareholders on the register at 15th April 2016. The dividend will go ex-dividend on 14th April 2016. A dividend reinvestment plan (DRIP) is available to shareholders.

Cash flow and funding

The Group's net cash balances improved to £6.7m at 31st December 2015 (2014: £5.3m) after deducting the £5.0m (2014: £5.0m) outstanding under the revolving credit facility.

As well as the committed £5.0m revolving credit facility, which is committed until 31st March 2017, the Group has in place an £8.0m overdraft facility, renewable annually. Interest on overdrawn balances is charged at 2.75% above base rate, and interest on balances drawn down under the revolving credit facility is charged at 3% above LIBOR, fixed for the duration of each drawdown (typically three to six months). The Group was compliant with the terms of the facilities throughout the year ended 31st December 2015 and the Board's detailed projections demonstrate that the Group will continue to meet its obligations in the future. During the year the Group arranged an additional short-term £3m overdraft facility with Royal Bank of Scotland to provide additional working capital during the start-up of phase of some significant London projects; this facility remained unused and was allowed to expire in January 2016.

Cash inflow generated by operating activities was £2.7m (2014: £5.0m), enabling the Group to continue to invest in resources to meet the increasing demand for our services.

Net assets and capital structure

The Group is funded by equity capital, retained reserves and bank loans, and there are no plans to change this structure. Shareholders' equity increased by £0.7m during the year to £19.6m (2014: £18.9m).

At £23.0m (2014: £23.2m), goodwill and intangible assets arising on previous acquisitions represent a significant proportion of the Group's total assets of £109.4m (2014: £103.2m). The Board has undertaken a rigorous impairment review in respect of the intangible assets at 31st December 2015 and concluded that no impairment is necessary.

Financial risk management

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 is considered prior to signing contracts and 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.

Pension obligations

The last triennial valuation of the pension scheme as at 31st December 2012 showed a deficit of £11.5m, which represents a funding level of 68%. The Group has put in place a deficit reduction plan to eliminate the deficit over a number of years, with total employer contributions rising from 18% of pensionable salary for the year ended 31st December 2014 to 20.7% for 2015 and 2016, 21.7% for 2017 through 2019, and 22.7% thereafter. Employer contributions amount to approximately £1.3m per annum. The Group has provided security to the pension scheme in the form of a charge over property assets up to a combined market value of £3.1m. The scheme is closed to new members and the Group continues to meet its ongoing obligations to the scheme.

The next triennial actuarial valuation, as at 31st December 2015, is underway and is expected to show a further deterioration in the funding level due to market related factors. The results of this valuation and its impact on future funding will be known towards the end of 2016.

In accordance with IAS 19 'Employee Benefits', an actuarial gain of £2.2m, net of tax, has been recognised in reserves, with the pension scheme deficit decreasing by £2.9m to £13.4m (2014: £16.3m). The decrease in the deficit is primarily due to an increase in the discount rate applied to scheme liabilities, driven by higher bond yields.

Martin Walton

Finance Director

22nd March 2016

Consolidated income statement

for the year ended 31st December 2015

* Restated to disclose the Bristol and Cardiff operations as discontinued

Consolidated statement of financial position

as at 31st December 2015

Consolidated statement of cash flows

for the year ended 31st December 2015

Consolidated statement of changes in equity

for the year ended 31st December 2015

Notes to the preliminary financial statements

Note 1 - Basis of preparation

TClarke plc (the 'Company') is a company listed on the London Stock Exchange and domiciled 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 ('IFRSs') as adopted by the European Union, IFRS IC 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 2015 or 2014 but is derived from the audited financial statements for the year ended 31st December 2015. Statutory accounts for the year ended 31st December 2014 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 31st December 2015 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 2014 or for the year ended 31st December 2015.

The following standards, interpretations and amended standards have been applied for the first time for the financial year beginning 1st January 2015.

Annual Improvements 2011-2013 Cycle: Amendments to various standards and interpretations under the Annual Improvements 2011-2013 Cycle are applicable for the first time for the year ending 31st December 2015, but none of these amendments has had a significant effect on the financial statements.

Note 2 - Significant judgements and sources of estimation uncertainty

In the application of the Group's accounting policies the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities at the reporting date and the amounts of revenue and expenses incurred during the period that may not be readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The estimates and assumptions that have the most significant impact are set out below.

Revenue and margin

The recognition of revenue and profit on construction contracts is a key source of estimation uncertainty due to the difficulty of forecasting the final costs to be incurred on a contract in progress and the process whereby applications are made during the course of the contract with variations, which can be significant, often being agreed as part of the final account negotiation. The directors also take into account the recoverability of contract balances and trade receivables and allowances are made for those balances which are considered to be impaired.

Non-underlying items

Non-underlying items are items of financial performance which the Group believes should be separately identified on the face of the income statement to assist in understanding the underlying financial performance achieved by the Group. The quantification, disclosure and presentation in the financial statements of non-underlying items requires judgement.

Discontinued operations

The judgement as to whether an activity that has ceased constitutes a discontinued operation requires an assessment of whether it forms a separate component of the Group's business and represents a separate major line of business or geographical area of operations that has been disposed of, has been abandoned or that meets criteria to be classified as held for sale.

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating unit giving rise to the goodwill, including the estimation of the timing and amount of future cash flows generated by the cash generating unit and a suitable discount rate.

Retirement benefit obligations

The costs, assets and liabilities of the defined benefit scheme operated by the Group are determined using methods relying on actuarial estimates and assumptions, which are largely dependent on factors outside the control of the

Group. Details of the key assumptions are set out in Note 8, and include the discount rate, expected return on assets, rate of inflation and mortality rates. The Group takes advice from independent actuaries relating to the appropriateness of the assumptions. Changes in the assumptions used may have a significant effect on the income statement, statement of comprehensive income and the statement of financial position.

Note 3 - 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 four regional divisions; London and South East, Central and South West, the North and Scotland, reporting to the Chief Executive Officer, who is the chief operating decision maker. The following changes have been made to reportable segments this year.

· London and South East, and Central and South West divisions were previously combined into a single 'South' division.

· The operations of the Bristol and Cardiff offices have been reclassified as discontinued operations and are no longer included in reportable segments.

The comparative figures have been restated to reflect these changes.

The measurement basis used to assess the performance of the divisions is underlying profit from operations, stated before amortisation of intangible assets and non-recurring items. All assets and liabilities of the Group have been allocated to segments apart from the retirement benefit obligation and tax assets and liabilities.

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:

Non-recurring costs

Exceptional claims settlement costs relate to damages and sub-contractor claims in respect of work carried out in previous years. These claims have been settled and no further costs are expected to arise. Further details are given in the 2014 annual report and financial statements.

Note 4 - Taxation

Note 5 - Discontinued operations

On 19 November 2015 the Group announced its intention to discontinue its operations in the Cardiff and Bristol areas. The Group's activities in these areas ceased and the closure of the Cardiff and Bristol offices was successfully completed by 31st December 2015, with the remaining employees and any outstanding contractual commitments transferring to our expanded TClarke South West operation. The Bristol and Cardiff operations have been reported as discontinued operations for the year ended 31 December 2015, and the previous year's results have been represented accordingly.

Note 6 - Earnings / (loss) per share

A. Basic earnings / (loss) per share

Basic (loss) / earnings per share is calculated by dividing the profit attributable to owners 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 three categories of dilutive potential ordinary shares: share options granted under the Savings Related Share Option Scheme and conditional share awards and options granted under the Equity Incentive Plan.

For the share options, a calculation is made 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 potential ordinary shares are considered to be non-dilutive for the year ended 31st December 2014 as the Group incurred a loss.

C. Underlying earnings per share

Underlying earnings per share represents profit for the year from continuing operations adjusted for amortisation of intangible assets and non-recurring items 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.

Note 7 - Dividends

The directors are proposing a final dividend of 2.60 p (2014: 2.60 p) per ordinary share totalling £1.1m (2014: £1.1m). Subject to approval at the annual general meeting, the final dividend will be paid on 13th May 2016 to shareholders on the register as at 15th April 2016. The shares will go ex-dividend on 14th April 2016. 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 2015 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 18th April 2016 and any requests should be made in good time ahead of that date.

Note 8 - 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 9 - 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 10 - Related party transactions

The remuneration of the directors of the Company was £1.7m (2014:£1.0m), including pension contributions of £0.2 (2014: £0.1m).

The remuneration of key management (including directors of subsidiary companies) was £3.6m (2014: £3.6m), including termination benefits of £0.2m (2014: £0.1m). Post-employment benefits in respect of key management (including subsidiary directors) were £0.5m (2014: £0.4m).

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 - Annual General Meeting

The 104th Annual General Meeting will be held at 200 Aldersgate, St Paul's, London EC1A 4HD on Friday 6th May 2016 at 10.00 am.