Tclarke Regulatory News (CTO)

TClarke plc

Half year results for the six months ended 30 June 2022

TClarke posts record half year results as it closes in on £500m revenue target

TClarke plc ("the Group" or "TClarke"), the Building Services Group, announces its half year results for the period ended 30 June 2022.

Business Highlights:

· First half year revenues exceed £200m for the first time

· 2.9% operating margin achieved

· Interim dividend increased by 67%

· Full year 2022 revenues now expected to be circa £450m, ahead of market expectations

· Record forward order book of £586m as at 30 June 2022

· Bonding capacity increased to support £500m per annum revenues

· Bank facilities extended to August 2026

Earnings per share is calculated by dividing profit after tax by the weighted average number of shares in issue

Trading

Trading has continued to be strong for the first six months of 2022 with revenue up 49% compared with the corresponding period last year. Revenue growth has been experienced by all regions but has been particularly strong in London where revenues at £125.1m are 72% higher than in 2021. This growth is expected to continue throughout the rest of 2022 with revenues for the full year now expected to be circa £450m.

The growth in revenues has been supported by maintaining our operating margin close to target levels at 2.9%; again driven by the London business. London's operating margin for the first six months of the current year is 4.6% (2021 1.4%), UK South operating margin is 2.8% (2021 3.7%) and UK North operating margin is 2.7% (2021 3.7%). After deducting group costs of £2.0m the overall Group operating margin during the period is 2.9% (2021 1.7%).

Cash and Facilities

Good financial discipline is at the centre of our operations. Net cash is £7.2m as at 30 June 2022; an increase of £5.2m compared with 30 June 2021. Average month end net cash during H1 2022 is £3m.The principal cash movements are detailed in the banking facilities section of this report.

In support of our growth strategy we have now put in place banking facilities with NatWest comprising a £25m revolving credit facility (RCF) which extends to August 2026 and a £5m overdraft facility.

Many of our clients demand performance bonds to be in place as part of the contract requirements. Due to the strength of the business TClarke has at its disposal one of the largest bonding capacities when compared to our recognised peer group. This too has recently been increased to provide for a total bonding capacity of £65.1m.

Dividend

The Board proposes an interim dividend of 1.25p per share (2021: 0.75p per share) to be paid on 30 September 2022 to shareholders on the register at 2 September 2022. TClarke has a progressive dividend policy and is also rebalancing the split between the interim and final dividend. As a result the interim dividend now proposed has been increased by the full amount of the expected increase in total dividend for 2022.

Net Assets

Group net assets have increased by £8.6m in the six months to 30 June 2022 and now stand at £35.1m. This is principally due to the increase in retained earnings and the post-tax reduction in pension deficit.

Order Book

Our future confidence is underpinned with the success of the Group's forward order book which has been replenished and expanded and now stands at a new record of £586m. This is an £83m increase compared to the position at 30 June 2021. In addition, TClarke has many target projects and opportunities with our pipeline of current bids exceeding £1bn.The split of the order book is as follows:

Outlook

TClarke is moving rapidly towards achieving its 2023 £500m annual revenue target whilst maintaining its operating margin. The Board expects based upon the performance to date, revenues to exceed current expectations for 2022 at circa £450m for the full year.

Mark Lawrence, Chief Executive, commented

"With the current economic conditions, the business is rightly cautious, however the strategy we follow is of a disciplined tendering approach with early engagement with our supply chain partners and our clients which is ensuring we are not exposed to unnecessary risks. 

The record half year revenues and forward order book along with the current visibility of future workloads in our target revenue streams mean TClarke now expects to deliver £450m revenue in 2022 and achieve its £500m target in 2023."

-ends-

Date: 14 July 2022

For further information contact:

Operational Review

The Group is managed in three operational areas, London, UK South and UK North, providing nationwide coverage from twenty locations across the UK.

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

· Infrastructure

· Residential & Hotels

· Facilities Management

· Engineering Services

· Technologies

TClarke - London

London is the most significant of our three operating divisions and includes our combined engineering services London business, our London technology business and our off-site prefabrication facility at Stansted.

The growth in revenue has been primarily driven by our success of our data centre offering. Having successfully delivered a major data centre in the first half of the year, we expect to continue to deliver on the remaining (and larger) live data centre projects in the second half of the year.

Our core Engineering Services have also continued to perform strongly, delivering a number of high profile shell and core commercial and hotel developments, which is reflected in the 3.2% increase in operating margin from the same period of 2021.

TClarke - UK South

UK South operates from our offices at Birmingham, Derby, Oxford, Kimbolton, Newport, Peterborough, Portishead, Plymouth and St Austell, and is able to target a vast range of construction and facilities management opportunities across the region.

The first half of the year has seen good revenue growth compared to 2021, with strong performances in both our Security and Climate divisions. Our new Oxford office is now fully operational having started to trade in the first half of the year and is expected to deliver a profit in its first full year. Our expectation is for margins to recover during the second half of 2022, back to the UK South's normal operating margin of circa 3.7%.

TClarke - UK North

The UK North division operates from five principal locations; Liverpool, Manchester, Leeds, Newcastle and Eurocentral Scotland.

The North West has made the most significant contribution to the £1.0m operating profit including the successful delivery of a major engineering services project in Manchester. The operating margin has decreased by 1% compared to 2021 due to the business mix in the first half of the year. Our expectation is for the UK North to maintain an operating margin of circa 2.7% in the second half of 2022.

Pension Obligations

In accordance with IAS 19 'Employee Benefits', an actuarial gain of £5.5m, net of tax, has been recognised in reserves during the period, with the pension scheme deficit decreasing to £15.9m (30th June 2021: £24.5m). The decrease in the deficit is largely the result of the discount rate increasing to 3.82% (30th June 2021: 2.0%), partially offset by the hedging strategy employed by the scheme. In accordance with the Group's agreed deficit reduction plan, described in detail in the most recent annual report, the annual deficit reduction contribution is set at £1.5m for the current year, and will remain at this amount until the review of the output of the triennial actuarial valuation of the scheme which is currently in progress.

The scheme is closed to new members and the Group continues to meet its ongoing obligations to the scheme.

Banking Facilities and Cash Flow

The Group has recently renewed its banking facilities, which now comprise a £5m overdraft facility (previously £10m), repayable on demand, and a £25m revolving credit facility ("RCF") (previously £15m) expiring 31st August 2026. At 30 June 2022 the Group had drawn down £5m (2021: £15m) of the RCF and the overdraft facility was unutilised. The gross cash balance was £11.9m, resulting in net cash of £7.2m. The Group therefore has up to £37.2m available to support the Group's working capital flows and funding demands during the course of the year. The Group has £65.1m bonding facilities in place of which £26.3m were utilised at 30 June 2022.

The net cash figure of £7.2m is £5.2m higher than at the same time in 2021 reflecting profit for the period and other non-operating cashflows, as set out below:

Net Assets and Capital Structure

The Group is funded by equity capital, retained reserves and bank facilities, and there are no plans to change this. Shareholders' equity is £35.1m; an increase of £16.1m compared to 30 June 2021.

Notes to the condensed consolidated financial statements for the six months to 30 June 2022

Note 1 - Basis of preparation

TClarke plc (the 'Company') is a company incorporated and domiciled in the United Kingdom. The nature of the Group's operations and its principal activities are set out in Note 2 below and in the interim management report. The consolidated interim financial statements comprise the condensed financial statements of the Company and its subsidiaries (together the 'Group'). 

These condensed interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The statutory accounts for the year ended 31 December 2021 were approved by the Board of Directors on 08 March 2022 and 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 any statement under section 498 of the Companies Act 2006.

These condensed interim financial statements for the half year ended 30 June 2022 have been prepared in accordance with the UK-adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct 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 31 December 2021.

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 31 December 2021.

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 2021. The principal risks and uncertainties continue to be those which are set out on pages 26-29 of the Group's annual report and accounts for the year ended 31st December 2021.

Going concern

The Group has recently renewed its banking facilities, which now comprise a £5m overdraft facility repayable on demand, and a £25m revolving credit facility ("RCF") expiring 31st August 2026. At 30 June 2022 the Group had drawn down £5m (2021: £15m) of the RCF and the overdraft facility was. The gross cash balance was £12.2m, resulting in net cash of £7.2m. The Group therefore has up to £37.2m available to support the Group's working capital flows and funding demands during the course of the year.

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 three regional divisions; London, UK South & UK North, reporting to the Chief Executive, who is the chief operating decision maker.

Note 3 - Taxation expense

The effective corporation tax rate applied for the period is 19.0% (30 June 2021: 19.0%).

Note 4 - 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 two categories of dilutive potential ordinary shares: share options granted under the Company's SAYE schemes, and conditional share awards granted under the Long-Term Incentive Plan. Further details of these schemes are given in note 18 of the 2021 annual report and financial statements.

Note 5 - Notes to the consolidated statement of cash flows

B. Cash and cash equivalents

Cash and cash equivalents comprise cash at bank less bank overdrafts.

Note 6 - 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 21 to the Group's financial statements for the year ended 31 December 2021. There have been no material changes in these relationships in the six months ended 30 June 2022 that have materially affected the financial position or performance of the Group during that period.

Note 7 - Pension commitments

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

Statement of Directors' responsibilities

The Directors confirm that the condensed interim financial statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

· an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

· material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

On behalf of the Board

Iain McCusker - Chairman

Mark Lawrence - Chief Executive

Trevor Mitchell - Finance Director

14 July 2022