Tclarke Regulatory News (CTO)

TClarke plc

Half Year Results for the six months ended 30th June 2020

TClarke plc ("the Group" or "TClarke"), the Building Services Group, announces its half year results for the six months ended 30th June 2020.

Business Highlights: 

· Net cash £7.5million; an increase of 108%.

· Underlying operating profit of £2.2million.

· Underlying operating margin 2.1%

· Restructuring programme completed yielding cost savings of £4million per annum.

· Renewed and extended bank facilities of £25million with maturity 31 August 2024

· Order Book increased to £402million (30th June 2019: £370million).

1 Underlying profit is operating profit before amortisation of intangible assets and non-underlying items.

2 Underlying earnings per share is calculated by dividing underlying profit after tax by the weighted average number of shares in issue.

Mark Lawrence, Chief Executive, commented

"TClarke has successfully remained profitable throughout the first half of this year.

The Group took early and decisive action to both protect and reposition our business and maximise the many opportunities available in the technology, data centre and infrastructure market sectors.

The business has paid strict attention to cash collection and our cash position has improved to £7.5million after the cost of our restructuring programme. Our banking facilities of £25million have been renewed with the RCF being extended to August 2024.

Our order book is strong and we have no shortage of opportunities in Data Centres and Infrastructure. Since the beginning of April we have bid £600million of opportunities.

All of the above demonstrates that TClarke is a stable, safe and dependable choice for our customers.

Date: 21st July 2020

For further information contact:

TClarke plcMark Lawrence

Group Chief Executive

Trevor Mitchell

Finance Director Tel: 020 7997 7400

www.tclarke.co.uk

Cenkos Securities plc (Corporate Broker)

Max Hartley (Corporate Finance)

Nick Searle (Sales)

Tel: 020 7397 8900

www.cenkos.com

RMS Partners

Simon Courtenay

Tel: 020 3735 6551

Trading

The Group has continued to trade in line with the update issued on 28th May 2020. The Group had a strong first three months of 2020 maintaining its 3% underlying operating margin on a turnover of £70million. Quarter 2 saw turnover drop to £36million as the result of many sites closing. Despite the drop in turnover the Group has achieved a small profit for the period from April to June. TClarke has also completed a restructuring programme to enable it to remain one of the most stable and resilient businesses in the sector. Annualised savings of £4million have been realised at a cost of £3.0million which is included in non underlying items in the Income Statement.

Underlying operating profit for the six months to 30 June was £2.2million (2019: £5.0million), with revenues of £106.1million (2019: £171.3million). Underlying operating margin across the Group was 2.1% (2019: 2.9%).

TClarke has three Operating Regions; UK North, UK South and London. Both London and UK South have reported good underlying operating margins for the first six months of 3.2% and 3.1% respectively. UK North reported a loss of £0.2million for the period due to a significant number of sites, particularly in Scotland, being closed for more than three months. Many of these sites have now reopened and the region is expected to return to profitability for the remainder of the year.

At 30th June 2020 the Group had cash of £22.5million having drawn down its RCF of £15million. In addition the Group has a £10million unutilised overdraft facility available to it. The half year net cash position of £7.5million is after incurring restructuring costs of £3.1million and a £2million investment in GOOEE, a smart buildings solution. The strong cash position means that TClarke is well placed to take advantage of a number of data centre opportunities that are currently being bid.

Dividend

TClarke recently paid the final dividend for 2019 of 3.65p per share on 17th July 2020. The Board proposes to consider dividends for 2020 once the results for the year can be forecast with reasonable certainty.

Order Book

The Group's forward order book, which only reflects contracts where we have a firm commitment to proceed, has remained resilient and of high quality. At 30 June the order book stood at £402million (2019: £370million).

Operational Review

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

TClarke's focus is on repeat customers and framework contracts in the following key markets  

· Technologies including data centres

· Infrastructure

· Residential & Accommodation

· Facilities Management & Frameworks

· M&E Contracting

TClarke - London 

London is the most significant of our three operating divisions in terms of size and profitability and includes our combined M&E London business, our London technology business and our off-site prefabrication facility at Stansted.

Operating margins were 3.2% in spite of a number of sites closing for 3 months.

TClarke - UK South

UK South operates from our offices at Birmingham, Derby, 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.

Our strategy of targeting medium sized projects has produced a strong first half performance in the current trading environment.

TClarke has just completed the Nightingale Hospital Exeter. The hospital is a 116 bed Hybrid Hospital. The hospital has all of the facilities that you would expect from a hospital and will provide intensive care and step-down care to patients across 5 separate wards.

TClarke delivered the complete M&E infrastructure package including HV, LV distribution, Water and Gas distribution, Medical Gasses, Generators, UPS, Ventilation, Heating and Cooling along with the fit out of the modular buildings over a period of just six weeks.

TClarke - UK North

UK North division operates from seven locations; Liverpool, Manchester, Leeds, Newcastle, Falkirk, Aberdeen and Dumfries.

An underlying operating loss of £0.2million was recorded mainly as a result of sites over large parts of the North West and Scotland being closed from March. Many of these sites have now reopened; Scotland in particular is securing a number of new opportunities through our reputation and ability to resource work for this year.

Pensions

An actuarial loss of £6million, net of tax, has been recognised in reserves during the period, with the pension scheme deficit increasing to £29.9million (30th June 2019: £26.1million). The increase in the deficit is the result of the discount rate falling to 1.6%; the effect of which has been partially offset by investment performance in the period exceeding the long term assumption. 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 £1.5 million for the current year, and will remain at this amount until the review of the next triennial actuarial valuation of the scheme at 31 December 2021.

Banking Facilities

At this important time the Group successfully renewed and extended its banking facilities on the same terms. The Group has a £10million overdraft facility, repayable on demand, and a £15 million revolving credit facility expiring 31st August 2024. At the half year point, the RCF was fully drawn down. The entire overdraft facility was unutilised. The gross cash balance was £22.5million at 30 June 2020 and therefore the Group has up to £32.5million available to support the Group's work flows and funding demands during the course of the year.

As previously stated, the strength of the Group means that it does not envisage using any of the government backed loan schemes.

In addition the Group has £40.1million bonding facilities in place of which £23.1million were unutilised at 30 June 2020.

Summary and Outlook

TClarke has taken immediate and decisive action to both protect its business and position it to take advantage of the opportunities arising in a post COVID world. TClarke remains financially strong with net cash of £7.5million at 30 June and banking facilities of £25million.

The current market uncertainty particularly around productivity achievable for the remainder of the year means that it is not possible to provide accurate market guidance at this time. However, the Board expects the Group to remain profitable for 2020 and is cautiously optimistic for 2021 as a result of the secured order book and the number of exciting opportunities currently being tendered.

Notes to the condensed consolidated financial statements for the six months to 30th June 2020

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 31st December 2019 were approved by the Board of Directors on 19th March 2020 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 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 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 31st December 2019.

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 2019.

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 2019. The principal risks and uncertainties continue to be those which are set out on pages 28-31 of the Group's annual report and accounts for the year ended 31st December 2019, under the following headings: Political, economic and market conditions; Financial strength; Reputation; Winning new work; Contract delivery; People and skills; Health and safety; Supply chain; Pensions; and Cyber security.

Going concern

The Group has renewed and extended its banking facilities on the same terms. The Group has a £10million overdraft facility, repayable on demand, and a £15 million revolving credit facility expiring 31st August 2024. At the half year point, the RCF was fully drawn down; the overdraft facility was unutilised. As with all such facilities the overdraft is subject to annual review and is repayable on demand.

To support the Group's operations the Group also have available bonding facilities of £40.1 million, of which £23.1 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 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 20.0% (30th June 2019: 20.0%).

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 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. Further details of these schemes are given in note 19 of the 2019 annual report and financial statements.

C. Underlying earnings per share

Underlying earnings per share represents the profit for the period for the period adjusted for amortisation of intangible assets and non-underlying 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 5 - 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.

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 22 to the Group's financial statements for the year ended 31st December 2019. There have been no material changes in these relationships in the six months ended 30th June 2020 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' as adopted by the European Union 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

21st July 2020