Tclarke Regulatory News (CTO)

TClarke plc

Interim Results for the six months ended 30 June 2016

TClarke plc ("the Group" or "TClarke"), the Building Services Group, announces its interim results for the six months ended 30th June 2016.

Business Highlights:

· Replenished £320 million forward order book, with fully committed projects (30th June 2015: £320m).

· Year on year net cash position improves by £10 million.

· Good progress with target sectors including Healthcare, Intelligent Buildings and Residential.

· On site at some of the most significant London schemes, including Bloomberg London, London Wall Place, Principal Place, Project Nova, Rathbone Square and Westfield London.

· Opportunities for growth remain attractive, despite EU referendum uncertainty.

· Commitment to training, 60 new apprentices begin training across the UK from September.

Financial highlights:

· Revenue from continuing operations £121.6m (H1 2015: £107.3m)

· Operating profit - underlying1,2 £2.2m (H1 2015: £2.1m)

· Operating profit - reported1 £2.1m (H1 2015: £2.0m)

· Profit before tax from continuing operations1 £1.7m (H1 2015: £1.6m)

· Net cash £1.3m (H1 2015: net debt £8.7m)

· Earnings per share - continuing operations1 3.33p (H1 2015: 3.10p)

· Earnings per share - continuing operations (diluted)1 3.24p (H1 2015: 3.03p)

· Earnings per share - basic 3.00p (H1 2015: 1.85p)

· Earnings per share - diluted 2.92p (H1 2015: 1.81p)

· Interim dividend per share 0.5p (H1 2015: 0.5p)

· Forward order book £320m (H1 2015: £320m)

1 Prior period 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.

New contracts secured since our previous announcement include:

· BAe Systems at Samlesbury, Training Academy and a facility for aircraft components.

· Deutsche Bank, Victoria.

· Exeter University, Tremough Campus, Sports Centre and Nursery.

· Hounslow Civic Centre.

· Rolls Royce Legacy Facility, Sunderland. 

· Sheridan Park, Durham Students Accommodation.

· South Shields Town Hall, Edwardian Block.

· The Dukes Residential Development, Ferniegair, Hamilton.

· White City Place, former BBC offices at White City 

Mark Lawrence, Chief Executive commented:

"We are pleased to be presenting a solid performance based upon our strategy of targeting quality projects and clients and are excited about current bidding opportunities that will give us good revenue opportunities into 2017 and beyond."

-ends-

Date 2nd August 2016

For further information contact:

TClarke plcMark Lawrence Martin Walton Alex Dent

Group Chief Executive Finance Director Company SecretaryTel: 020 7997 7400 Tel: 020 7997 7400 Tel: 020 7997 7400

www.tclarke.co.uk

N+1 Singer (Financial Adviser and Broker)

Sandy Fraser

Rachel Newton

Tel: 020 7496 3000

www.nplus1singer.com

Capital Access Group

Simon Courtenay

Tel: 020 3763 3400

www.capitalaccessgroup.com

Trading

The Group's results are in line with the Board's expectations for the period. The last year has seen the net cash position improve by £10 million from a net debt of £8.7 million to a positive net cash position of £1.3 million. In addition, the Group has access to £13m of banking facilities.

The underlying operating profit for the six months was £2.2 million (2015: £2.1 million), with revenues of £121.6 million (2015: £107.3 million). Operating margins were slightly lower at 1.7% (30th June 2015: 1.9%), reflecting the mix of work and stage of completion with a number of significant schemes having only recently started on site.

Demand for our services continues to be strong with opportunities across the Group encouraging and we have seen excellent levels of activity within our estimating teams. A number of notable schemes are currently being bid which will provide good revenues for 2017.

Although we note the comments of certain UK based developers, it is too early to evaluate any impact as a result of the EU referendum decision. In common with all businesses we await more clarity on the terms and timing of the UK's exit from the EU. Our management teams remain focused on achieving our stated aims and strategies.

TClarke does procure materials from the EU and items such as cable are quoted in dollars however currency fluctuations should not affect any current projects due to the method we use to lock in prices with our supply chain. We remain vigilant to pricing risks with current tenders and future works.

The Board proposes a maintained interim dividend of 0.5p (2015: 0.5p). This will be paid on 7th October 2016 to shareholders on the register at 9th September 2016.

Order Book

Our forward order book, which reflects only contracts where we have a firm commitment to proceed, was fully replenished and at the period end stood at £320 Million (£320 Million 30th June 2015). The Group has secured the majority of its planned revenues for 2016. Additional revenue opportunity is being targeted in London and the South West where we have some spare capacity however we are confident that planned Group revenues for the year will be in line with expectations. 

We work across a number of sectors and, although margins vary by sectors, they are showing cautious signs of improvement but we still have to be disciplined to avoid bidding wars driving prices down to unsustainable levels.

Operational Review

The Group is managed in four operational areas, London & South East, Central & South West, North and Scotland, providing nationwide coverage from 14 locations across the UK.

We focus on repeat customers and framework contracts in the following key markets  

· Design & Build

· Facilities Management

· Healthcare

· Intelligent Buildings

· M&E Contracting

· Mission Critical

· Residential & Hotels

· Prefabrication

· Transport

TClarke - London & South East 

The London and South East division remains the largest of our four operating divisions and includes our combined M&E London business as well as Colchester, Sittingbourne and Harlow, our prefabrication facility. 91% of targeted revenues for 2016 for this region are now secured.

Notable completions during the period include the New Tate Modern Gallery and Riverwalk House, the luxury residential scheme in Westminster.

We are active on a number of high profile London schemes including, 100 Bishopsgate, Bank and Victoria Underground Stations, Bloomberg London, London Wall Place, Principal Place and we are nearing completion at Project Nova, Victoria.

Recently secured projects include: Cannon Bridge; Deutsche Bank, Victoria; Hounslow Civic Centre; and Paddington Link, Paddington Station. In addition, we have secured works at two of the buildings at Stratford which form part of the London International Quarter.

Importantly for future revenues there are a number of schemes which we are actively bidding and two in particular where we have signed a Pre-Construction Services Agreement (PCSA) where we expect decisions will be made before the end of the year to take the schemes forward to construction.

TClarke - Central & South West

Operating from our offices at Derby, Huntingdon, and Peterborough in the East, to Plymouth and St Austell in the West, our Central and South Western business is able to target a vast range of construction and facilities management opportunities across the region. Overall 96% of targeted revenues for 2016 for the region are now secured, although the units operating from Plymouth and St Austell have some spare capacity.

Our Healthcare business which is managed from Huntingdon continues to strengthen its market presence across the UK in close partnerships with companies such as GE, Phillips and Siemens where we act as principal contractor on highly complex installations.

Our Derby office is currently undertaking a number of residential schemes across the southern part of the country, including schemes at Fulham Reach and Hendon, and continues to see no shortage of future opportunities in this market.

As previously advised we discontinued our operations at Bristol and Cardiff from the start of 2016 with all outstanding contractual obligations being assumed by TClarke South West. Further losses of £0.1m have been incurred in the period as we close out these contracts.

TClarke - North

The North division operates from three locations, Chorley, Leeds and Newcastle. 98% of targeted revenues for 2016 for the North are now secured.

Our team at Leeds was recently involved with the extension at Great Yorkshire Showground, the Yorkshire Event Centre which created the largest single events space across Yorkshire and the North East, at 4.320m2 of open span space, the size of nearly four Olympic Swimming pools.

We have enjoyed a long term relationship with the John Lewis Partnership and are currently involved with a number of their projects across the UK including the flagship John Lewis store in Leeds which opens later this year.

We continue to work extensively for BAe Systems at Warton and Samlesbury. At Samlesbury we are involved with two significant projects for a Training Academy and a facility which will manufacture aircraft components. We see further opportunities with BAe Systems in its operations at Barrow-in-Furness.

As part of our stated strategy for growth in the Manchester area we are pleased to have secured office fit out projects and work packages at Manchester Airport.

Veale-Nixon has been our local brand operating from Newcastle since it was acquired by the TClarke group in 1961, from September this year it will also adopt the TClarke name. Following this all our UK operations will now be branded TClarke. This change will allow further development opportunities for the Newcastle office and a more streamlined approach going forward right across our Northern Region

TClarke - Scotland

In Scotland, we operate from our main office in Falkirk and a regional office in Aberdeen. Targeted revenues for 2016 are now secured.

Our business in Scotland has successfully secured and will be delivering various projects within the M&E services market by the end of year. The first quarter of this year saw the successful delivery of The Lyell Centre, at Heriot Watt University, Edinburgh. The final quarter of the year will see the delivery of Irvine Leisure Centre, Ayrshire. Other current projects include Levenmouth College, Fife and Roslin Primary School, Edinburgh.

Intelligent Buildings, which is a central part of our operations throughout UK, is delivered from our offices in Scotland. The industry's confidence in our team's ability has secured projects at London Wall Place, Rathbone Square, Riverwalk House, and a nationwide security upgrade project for British Land at various locations including Cheltenham, Colchester, Doncaster and Inverness.

TClarke Scotland's strong Electrical and Plumbing experience and presence in the Residential market continues to grow positively year on year, with over 600 new homes delivered this year, and an expectation of over 1200 by year end. Key projects include:

· Cala Homes, Ten Brunswick Road, Edinburgh

· Barratt Homes, The Botanics, Glasgow

· Avant Homes, Hawthornden, Midlothian

· Taylor Wimpey, Garioch View, Inverurie.

Other strong areas of our business include Facilities Management, where we continue to develop new relationships and deliver nationwide framework projects and Engineering & Fabrication where we are involved in delivering bespoke engineering solutions for high security clients.

Pensions

Uncertainty in the financial markets in the run up to and beyond the EU referendum has caused a significant fall in bond yields, which in turn has impacted on the valuation of the group's pension scheme obligations. An actuarial loss of £6.6m, net of tax, has been recognized in reserves during the period, with the pension scheme deficit increasing to £21.9m (30th June 2015: £15.7m). The triennial valuation of the pension scheme, as at 31st December 2015, is in progress, and we continue to explore our options with our professional advisers.

Summary and Outlook

Whist there is some inevitable uncertainty, our order book has been fully replenished demonstrating our continued ability to secure landmark projects with blue chip clients. Our cash position continues to strengthen and with several contracts having just commenced we expect this to be sustained. The Board's confidence in the future of the business is demonstrated by its decision to maintain the interim dividend. Our long term client relationships leave us well positioned and looking forward we can see a number of opportunities.

Notes to the condensed consolidated financial statements for the six months to 30th June 2016

Note 1 - Basis of preparation

TClarke plc (the 'company') is a company incorporated and domiciled in the United Kingdom. The consolidated interim financial statements comprise the condensed financial statements of the company and its subsidiaries (together the 'Group').

These interim financial statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' ('IAS 34) as adopted by the European Union, and the Disclosure and Transparency Rules ('DTR') of the Financial Services Authority. They do not include all the information required for the full annual financial statements, and should be read in conjunction with the financial statements of the Group as at and for the year ended 31st December 2015.

The information for the year ended 31st December 2015 does not constitute statutory accounts but has been extracted from the Group's statutory accounts for that year. The statutory accounts for the year ended 31st December 2015 have been delivered to the Registrar of Companies and a copy has been made available on the company's website at www.tclarke.co.uk. The auditors' report on those accounts was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The interim financial statements have not been audited or reviewed by the company's auditors.

Accounting policies

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 2015.

Taxes on income in the interim periods are accrued using the estimated effective tax rate that would be applicable to expected total annual earnings.

Estimates and financial risk management

The preparation of interim financial statements requires the directors to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities at the reporting date and the amounts of revenue and expense 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.

In preparing these interim financial statements, the significant judgements made by the directors in applying the Group's accounting policies and the key sources of uncertainty together with the Group's financial risk management objectives and policies were the same as those that applied to the financial statements as at and for the year ended 31st December 2015. The principal risks and uncertainties continue to be those which are set out on pages 28 - 30 of the Group's annual report and accounts for the year ended 31st December 2015, under the following headings: Political, economic and market conditions; Financial strength; Reputation; Winning new work; Health and safety; Contract delivery; People and skills; Supply chain; and Pensions.

Going concern

Our banking facilities comprised a £5 million revolving credit facility committed to 31st March 2017, which was fully drawn down, and an £8 million overdraft facility. The Group draws on the overdraft facility as and when needed to meet working capital requirements. As with all such facilities the overdraft is subject to annual review and is repayable on demand. The latest annual review was successfully completed in May 2016. The Group has commenced planned discussions with its bank concerning a replacement for the revolving credit facility when it falls due for renewal, and intends to have reached agreement on such a facility before the end of the year.

To support the Group' operations we also have available bonding facilities of £20.0 million, of which £9.8 million is currently unutilised.

After making appropriate enquiries the directors are satisfied that the Company and Group have adequate resources to continue their operations for the foreseeable future. Accordingly the Directors continue to adopt the going concern basis in preparing the financial statements.

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 four regional divisions; London and South East (which includes the Group's central operating costs), Central and South West, North, and Scotland, reporting to the Chief Executive, who is the chief operating decision maker.

The operations of the Bristol and Cardiff offices were reclassified as discontinued operations at 31st December 2015 and are no longer included in reportable segments. The comparative figures for the six months ended 30th June 2015 have been restated to reflect this change.

All assets and liabilities of the Group have been allocated to segments, apart from the retirement benefit obligation and tax assets and liabilities.

Note 3 - Taxation expense

The effective income tax rate applied for the period is 20.0% (30th June 2015: 21.8%).

Note 4 - Discontinued operations

A. Description

The Group' activities in Bristol and Cardiff were discontinued in the year ended 31st December 2015. The Bristol and Cardiff operations were reported as discontinued operations for the year ended 31st December 2015, and the results for the six month period ended 30th June 2015 have been re-presented accordingly. The remaining contractual obligations of these businesses were transferred to the expanded South-West division, and further work is being undertaken in 2016 to close out these contracts.

B. Financial performance

Note 5 - Earnings per share

A. Basic earnings per share

The earnings per share represent the profit for the period divided by the weighted average number of ordinary shares in issue.

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 share options and conditional share awards granted under the Equity Incentive Plan. Further details of these schemes are given in note 20 of the 2015 annual report and financial statements.

C. Underlying earnings per share

Underlying earnings per share represents the profit for the period from continuing operations adjusted for amortisation of intangible assets and non-recurring costs and the tax effects of these items, divided by the weighted average number of ordinary shares in issue. Underlying earnings is the basis on which the performance of the operating divisions is measured.

The underlying profit for the period is calculated as follows:

Note 6 - Interim dividend

An interim dividend of 0.5p per share (2015: 0.5p) was approved by the board on 1st August 2016 and has not been included as a liability as at 30th June 2016. The shares will go ex-dividend on 8th September 2016 and the dividend will be paid on 7th October 2016 to shareholders on the register as at 9th September 2016. A dividend reinvestment plan is available for shareholders. Those shareholders who have not elected to participate in this plan, and who would like to participate with respect to the 2016 interim dividend, may do so by contacting Capita Registrars on 0371 664 0381. The last day for election for the interim dividend reinvestment is 14th September 2016 and any requests should be made in good time ahead of that date.

Note 7 - Notes to the consolidated 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.

C. Borrowings

The Group's £5m committed three year Revolving Credit Facility was fully drawn at 30 June 2016.

Note 8 - Related party transactions

Transactions between the company and its subsidiary undertakings, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Full disclosure of the Group's other related party transactions is given in Note 23 to the Group's financial statements for the year ended 31st December 2015. There have been no material changes in these relationships in the six months ended 30th June 2016 that have materially affected the financial position or performance of the Group during that period.

Note 9 - Pension commitments

The present value of the defined benefit pension scheme and the related past and current service costs were measured using the projected unit method. The amount included in the balance sheet arising from the Group's obligations in respect of its defined benefit retirement scheme is as follows:

Statement of directors' responsibilities

The directors confirm that the interim management report includes a fair review of the information required by DTR 4.2.7 (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year) and DTR 4.2.8 (disclosure of related party transactions and changes therein). The directors also confirm that the interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union and present a true and fair view of the assets, liabilities, financial position and profit of the Group.

On behalf of the Board

Iain McCusker - Chairman

Mark Lawrence - Chief Executive

Martin Walton - Finance Director

2nd August 2016