Tclarke Regulatory News (CTO)

TClarke plc

Half Year Results for the six months ended 30th June 2019

TClarke plc ("the Group" or "TClarke"), the Building Services Group, announces its half year results for the six months ended 30th June 2019.

Business Highlights: 

·; Revenue up 12% to £171.3 million.

·; Underlying operating margin increased to 2.9% from 2.6%.

·; Cash of £3.6 million.

·; 14% increase in interim dividend to 0.75p per share (30th June 2018: 0.66p per share).

·; £370 million forward order book maintained (30th June 2018: £370 million).

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.

3 2019 EBITDA calculated in accordance with IFRS16; 2018 has not been restated in accordance with the standard

Mark Lawrence, Chief Executive, commented

"The Board is pleased with these results which demonstrate that TClarke is in excellent shape. The success of our strategy of targeting repeat work for blue chip clients, balanced with sensible growth, focusing on improving margins and seeking new markets aligned to our core business, is firmly reflected in our results.

Looking ahead, the Board is confident that the Group will deliver a performance for the full year in line with current market expectations. We remain very selective about the quality of the work that we take on and despite some competitive pressures, our order book has been maintained at £370 million.

September will see our annual intake of apprentices commencing their training with TClarke and yet again the business is making this important investment in our future workforce. We wish the 50 apprentices joining us across the UK all the success for their future years with TClarke."

Date: 1st August 2019

For further information contact:

TClarke plcMark Lawrence Trevor Mitchell David Lanchester

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) RMS Partners

Sandy Fraser Simon Courtenay

Rachel Hayes Tel: 020 3735 6551

Tel: 020 7496 3000

www.nplus1singer.com

Trading

The Group has had a strong first six months of 2019 and the results we have delivered are in line with the Board's expectations for the period.

Underlying operating profit for the six months was £5.0 million (2018: £4.0 million), with revenues of £171.3 million (2018: £153.5 million). Underlying operating margin across the Group improved to 2.9% (2018: 2.6%).

TClarke has reorganized into three Operating Regions; UK North, UK South and London. Both London and UK South have reported strong underlying operating margins for the first six months of 4.3% and 3.8% respectively.

At 30th June 2019 the Group had cash of £3.6 million and unutilised bank facilities of £25 million. The half year net cash position reflects the Group's typical working capital profile and the cycle of our contracts, with absorption of cash during the first half of the financial year a normal pattern.

Dividend

The Board proposes an increased interim dividend of 0.75p (2018: 0.66p). This will be paid on 4th October 2019 to shareholders on the register at 6th September 2019.

Order Book

Our forward order book, which only reflects contracts where we have a firm commitment to proceed, has remained resilient and of high quality, standing at £370 million (2018: £370 million). Revenues secured for delivery in the current year total £327 million, representing 96% of our expected revenue for the year. £182 million is secured for 2020 and £34 million for 2021 and beyond.

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. Our new subsidiary, TClarke Europe is actively tendering Data Centre opportunities in Europe, leveraging our UK Data Centre knowledge and track record.

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

·; Infrastructure

·; Residential & Accommodation

·; Facilities Management & Frameworks

·; Technologies

·; 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 (Eton and Intelligent Buildings) and our off-site prefabrication facility at Stansted.

Operating margins improved to 4.3%, continuing the strong performance in London over the last three years.

We are on site at a number of high-profile London schemes including

·; 22 Bishopsgate

·; 100 Bishopsgate

·; 1 Bishopsgate Plaza

·; Battersea Power Station

·; KGX1 at Kings Cross

·; 1 Triton Square

·; The Minories Hotel

·; South Bank Place

·; The Peninsular Hotel.

TClarke - UK South

UK South operates from our offices at Birmingham, Derby, Kimbolton, Peterborough, Portishead, Plymouth and St Austell, and is able to target a vast range of construction and facilities management opportunities across the region. During 2018 we added a specialist air conditioning capability, which has increased the range of services we can offer to clients.

Our strategy of targeting medium sized projects has produced a strong first half performance, with profits increasing by 75%.

Current Schemes include:

·; Dyson Technology Centre, Wiltshire

·; Aspire Defence, accommodation upgrade programme

·; Bath Spa University, new Art & Design campus

·; Various John Lewis and Waitrose Stores

·; Hendon, residential development

·; Colston Hall, concert venue redevelopment, Bristol

TClarke - UK North

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

Underlying operating profit has fallen by £0.3 million partly due to the investment in the Liverpool and Manchester offices ahead of securing work in those areas. We are actively pursuing a number of exciting opportunities in those areas which are due to commence at the end of 2019 or early 2020.

Current Schemes include:

·; Springfields Nuclear Fuels

·; BAE systems at Samlesbury and Warton.

·; Sedburgh new leisure centre, Bradford

·; Maiden Castle Sports Centre, Durham University

·; Forth Valley College, Falkirk

·; Various residential schemes for Cala Homes, Taylor Wimpey, Barrett Homes

Pensions

An actuarial loss of £2.6 million, net of tax, has been recognised in reserves during the period, with the pension scheme deficit increasing to £26.1 million (30th June 2018: £18.9 million). The increase in the deficit is the result of the discount rate falling by 0.6% to 2.4%; 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 currently being undertaken.

Banking Facilities

The Group has a £10 million overdraft facility, repayable on demand, and a £15 million revolving credit facility expiring 31st August 2022. At the half year point, these facilities were unutilised and remain available to support the Group's work flows and funding demands during the course of the year.

Summary and Outlook

TClarke has made a strong start to the year and we are pleased to report that we continue to expect revenues and profits for 2019 to be in line with current market expectations. To put those in context, for the year ending 31st December 2019, these are forecast to be revenues of £340 million, underlying EBIT of £10.2 million, underlying PBT of £9.3 million and underlying EPS of 17.5p.

Our long-standing client base, particularly in the London market, is frustrated by the ongoing political uncertainty and we are seeing some new schemes being held back as a result. Despite this, we remain busy and there are many active discussions with our clients indicating that schemes could be accelerated once the political situation becomes clearer.

The strength of TClarke has been our focus for delivery across a broad range of target markets. We are investing in new geographical regions in the UK, in particular Manchester and Liverpool, leveraging our UK Data Centre knowledge and track record entering European markets in addition to promoting our broader Technologies offering.

In conclusion, the Board remains cautiously optimistic about the Group's future prospects and we look forward to updating shareholders on the progress that we make during the second half of the financial year.

Notes to the condensed consolidated financial statements for the six months to 30th June 2019

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 2018 were approved by the Board of Directors on 26th March 2019 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 2018.

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 2018.

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 2018. The principal risks and uncertainties continue to be those which are set out on pages 31-33 of the Group's annual report and accounts for the year ended 31st December 2018, 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

Our banking facilities comprised a £15 million revolving credit facility committed to 31st August 2022, all of which was undrawn at 30th June 2019, and a £10 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.

To support the Group's operations we also have available bonding facilities of £40.1 million, of which £22.5 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.

IFRS 16

IFRS 16 was adopted by the Group from 1st January 2019. In accordance with the standard, the Group now recognises a lease liability reflecting future lease payments and a 'right of use asset' for almost all lease contracts, whereas, previously a distinction was drawn between finance leases and operating leases depending on whether substantially all the risk and reward of ownership have been transferred to the lessee.

The quantitative impact of the initial application of the standard is outlined on page 83 of the Group's annual report and accounts for the year ended 31stDecember 2018.

The group has elected to adopt the modified retrospective approach whereby the standard is applied from the beginning of the current period and, as a result, prior-period financial information is not restated.

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 and UK North, reporting to the Chief Executive, who is the chief operating decision maker. This segmentation differs from that which was present in the most recent annual accounts in which there were four geographical segments. Prior period information has been restated in accordance with the current reporting segment lines.

Note 3 - Taxation expense

The effective income tax rate applied for the period is 20.0% (30th June 2018: 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 2018 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 - Interim dividend

An interim dividend of 0.75p per share (30th June 2018: 0.66p) was approved by the board on 31st July 2019 and has not been included as a liability as at 30th June 2019. The shares will go ex-dividend on 5th September 2019 and the dividend will be paid on 4th October 2019 to shareholders on the register as at 6th September 2019. 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 2019 interim dividend, may do so by contacting Link Asset Services on 0371 664 0381. The last day for election for the interim dividend reinvestment is 13th September 2019 and any requests should be made in good time ahead of that date.

Note 6 - 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

At 30thJune 2019, the Group had unused overdraft facilities of £10 million (30th June 2018: £5 million) and had drawn down £Nil (30th June 2018: £5 million) of its £15 million committed three year Revolving Credit Facility.

Note 7 - 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 2018. There have been no material changes in these relationships in the six months ended 30th June 2019 that have materially affected the financial position or performance of the Group during that period.

Note 8 - 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

1st August 2019